The Federal Maritime Commission recently reached a compromise agreement with Mitsui O.S.K. Lines, Ltd. (MOL) in which MOL has agreed to pay $1,200,000 in civil penalties for alleged Shipping Act violations. MOL, a major vessel-operating common carrier headquartered in Tokyo, Japan, operates in the U.S.-foreign trades and globally. FMC Chairman Richard A. Lidinsky, Jr. commented on this action and said: "These penalties should serve as a reminder that the Commission’s hard-working Area Representatives and Bureau of Enforcement remain vigilant on the shipping public’s behalf. If you’re violating the law, sooner or later, we will find you, and the consequences can be serious."

The compromise agreement resolved allegations that MOL violated numerous provisions of the Shipping Act through activities that included: (1) misdescription of commodities; (2) unlawful equipment substitution; (3) providing transportation services to and entering into service contracts with unlicensed, untariffed, and unbonded ocean transportation intermediaries; (4) permitting use of service contracts by persons who were not parties to those contracts; and (5) providing transportation that was not in accordance with the rates and charges set forth in MOL’s published tariffs. Commission staff alleged that these practices persisted over a period of several years and involved numerous service contracts.

Under the agreement, MOL has furnished the Commission with information and substantive documentation regarding the service contracts and shipments at issue. MOL also agreed to provide ongoing cooperation with any further FMC investigations or enforcement actions with respect to these activities. The compromise agreement resulted from investigations conducted by the Commission’s Area Representatives located in Los Angeles, New York, and Washington, D.C. Staff attorneys with the Bureau of Enforcement negotiated the compromise agreement. In concluding this compromise agreement, MOL did not admit to any violations of the Shipping Act or FMC regulations.

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The Federal Maritime Commission recently announced the formation of an internal Container Freight Index and Derivatives Working Group. This group will gather information, research, analyze, consult with government agencies, and advise the FMC on issues arising from the use of freight rate indices in service contracts and index-based derivative transactions. The group is made up of FMC staff and is headed by Lowry Crook, Chairman Lidinsky’s Chief of Staff.

"Index-based ocean freight rates and derivatives have potential to be useful tools for shippers, intermediaries, and ocean carriers to increase rate certainty and manage risk," said Chairman Lidinsky. "It’s important that market participants have flexibility in structuring rates and hedging strategies. At the same time, I want to explore whether modest, common-sense standards are needed to ensure participants have adequate information and avoid manipulation."

The group will examine the potential statutory issues involved in shipping lines’ use of index-based rates, how such service contracts could be formatted to meet FMC rate requirements, and what safeguards may be needed to ensure indices referenced in service contracts are verifiable. The group will also examine transparency issues and the potential for index manipulation. The group is scheduled to provide an initial status report at the next FMC meeting on June 8, 2011.

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Carrier members of the Transpacific Stabilization Agreement (TSA), FMC Agreement No. 011223, serving the East Asia/USA trade lane will impose Peak Season Surcharges effective June 15 thru November 30, 2011, and increase several surcharges effective July 1, 2011. Bunker Adjustment Factors (BAF) calculated using TSA’s old monthly formula will increase on July 1 to US$ 1048 per 20ft ctr, US$ 1310 per 40ft ctr, US$ 1474 per 40ft hi-cube ctr, US$ 1658 per 45ft ctr, and US$ 29 per WM (LCL).

The group’s New Formula BAF for the July – September 2011 quarter is US$ 568 per 40’ ctr to US West Coast Ports and US$ 1107 per 40’ ctr to US East and Gulf Coast Ports, with other sizes as per formula. Inland Fuel Charges (IFC) for the July – September 2011 quarter are US$ 375 per ctr for shipments to IPI destinations served via West Coast Ports, US$ 188 per ctr for shipments to RIPI destinations served via East Coast Ports, and US$ 108 per ctr for shipments to Group 4 Points and to East Coast local store door points. The Currency Adjustment Factors (CAF) for the same period will remain at 20 percent for Japan.

The TSA Carriers have also filed Peak Season Surcharges (PSS) which will be effective June 15 thru November 30, 2011 as follows: US$ 320 per 20’ ctr, US$ 400 per 40’ ctr, US$ 450 per 40’ hi-cube ctr, and US$ 505 per 45’ ctr. The PSS amounts for LCL vary.

The TSA’s 15 carrier members are American President Lines, CSCL, CMA-CGM, COSCO Container Lines, Evergreen Marine, Hanjin Shipping, Hapag-Lloyd Container Line, Hyundai Merchant Marine, "K" Line, Maersk Line, Mediterranean Shipping, NYK Line, OOCL, Yang Ming Marine and Zim Integrated Shipping Services. The group’s web site at www.tsacarriers.org provides additional information.

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The Westbound Transpacific Stabilization Agreement (WTSA), FMC Agreement No. 011325, whose member lines serve the U.S. export trades from the USA to East Asia, announced increases to bunker and inland fuel charges effective July 1, 2011 as follows:

WTSA Bunker Adjustment Factors (BAF), effective: July 1, 2011 – September 30, 2011
Traffic to/from and via:

The Inland Fuel Charge (IFC) for July 1, 2011 – September 30, 2011 will increase to US$ 375 per ctr for rail and intermodal rail/truck shipments, and US$ 108 per ctr for local/regional truck shipments. Currency Adjustment Factors (CAF) for the same period will increase to 8 percent for Taiwan and 22 percent for Singapore.

WTSA is a voluntary discussion and research forum of 10 container shipping lines serving the trade from ports and inland points in the U.S. to destinations throughout Asia. The WTSA’s 10 member carriers are American President Lines, COSCO Container Lines, Evergreen Marine Corp., Hanjin Shipping, Hapag-Lloyd Container Line, Hyundai Merchant Marine, "K" Line, NYK Line, OOCL and Yang Ming Marine. For more info visit www.wtsacarriers.org.

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