The U.S. Federal Maritime Commission recently issued a Notice of Proposed Rulemaking to adjust the amount for the Chinese Bond Rider for licensed OTI-NVOCCs doing business with the People’s Republic of China. The proposed rule would increase the bond rider amount from US$ 21,000 to US$ 50,000. The new rule is intended to provide licensed OTI-NVOCCs with the ability to post a bond with the Commission that satisfies the equivalent of 800,000 Chinese Renminbi, for which the equivalent dollar amount has fluctuated since the regulation was first adopted by the Commission. The Commission also proposes to amend its regulations so that NVOCCs with branch offices may have rider amounts that vary to satisfy the level of coverage requested by the PRC, so long as their total coverage equals $125,000.

Last June, in response to a request by The People’s Republic of China, the Federal Maritime Commission opened an inquiry into the possible revision of the Commission’s regulations for the Optional Rider for Additional NVOCC Financial Responsibility. Back in April 2004, under FMC Docket 04-02, the Commission issued a rule that gave NVOCCs in the U.S. who also operate in China the option to increase their FMC bonds from US$ 75,000 to US$ 96,000 and use these bonds to satisfy part of the Chinese NVOCC licensing requirements. China requested that the Commission review its financial responsibility regulations set forth in 46 C.F.R. § 515.21 et seq. to increase the total amount of financial responsibility required for NVOCCs doing business in China from US$ 96,000 to US$ 122,000. China asserted that at the present exchange rate this increase is necessary to cover the RMB 800,000 required by Chinese regulations.

The FMC now seeks comments on this Proposed Rulemaking, which is issued under FMC Docket No. 11-09, and requests interested parties to submit comments by March 12, 2012 to Karen Gregory, Secretary 800 North Capitol Street, N.W. Room 1046, Washington, D.C. 20573-0001. Comments may also be submitted via email attachment to secretary@fmc.gov

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In November 2011, Federal Maritime Commission Chairman Richard A. Lidinsky Jr. initiated a Notice of Inquiry regarding Canadian cargo diversion in response to a request from two Washington state senators. In a letter addressed to Lidinsky, U.S. Senators Patty Murray and Maria Cantwell wrote of their concerns of high U.S. Harbor Maintenance Tax and its effect on U.S. ports’ competitiveness with ports in neighboring countries. Currently, ocean cargo shipped through U.S. ports is subject to this tax, and the more valuable the cargo, the higher the tax. Shippers can avoid the Harbor Maintenance Tax by routing cargo through Canadian or Mexican ports.

In response to this Notice of Inquiry, the Commission received over 70 responses, including comments from the Governments of Canada and Mexico, and numerous industry representatives. The Canadian government presented a fact-based submission underscoring the importance to both countries of the integrated North American economy and the strong Canada-U.S. trade relationship. It stressed U.S.-Canada economic linkages, the importance of strategic and collaborative infrastructure planning and investment and the importance of market-based trade policy. The Mexican government also responded, but its comments were listed as “confidential” and were not made available to the public.

Comments from shipping industry representatives emphasized that shippers’ decisions to route cargo through Canada and Mexico are often rooted in the need for efficiency, stability, and low-cost labor, rather than tax evasion.

Many shippers stressed that the U.S. Harbor Maintenance Tax represents very little of their bottom line. Robin Lanier, executive director of the Waterfront Coalition wrote: “Our members moving import freight through a U.S. maritime gateway pay the Harbor Maintenance Tax of 0.125% of declared value. The HMT does not represent a significant tax burden to many of our members.” Other shippers also noted the importance of diversification. “The ability to choose from among a variety of North American ports is essential to the success of our company,” wrote Michael Radak, senior vice president of Hanjin Shipping Company, Ltd.

The Commission is expected to review these comments over the coming months. The Commission’s next public meeting is scheduled for February 22, 2012.

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The Caribbean Shipowners Association (CSO), FMC Agreement No. 010979, recently announced a 2012 General Rate Increases (GRI) program and a Peak Season Surcharge (PSS). The CSO Carrier members cover the trade lanes between the United States and the Caribbean destinations of Anguilla, Antigua, Dominica, Grenada, Montserrat, Saba, Saint Barths, Saint Eustatius, Saint Kitts and Nevis, St. Lucia, Saint Maarten, Saint Vincent, Trinidad, Jamaica, Guyana, and Suriname.

The General Rate Increases (GRI), applicable to all contract and tariff rates, to and from all CSO Caribbean basin service destinations, will come into effect in three stages as follows:

2012 GRI Effective Dates:

The temporary Peak Season Surcharge (PSS) will also apply from Oct. 7, 2012 through Dec. 16, 2012 in the amount of US$ 150 per 20ft ctr, US$ 300 per 40ft ctr, and US$ 338 on all containers over 40ft for all shipments to Caribbean destinations. CSO noted stress on availability of containers and space to serve exports from United States may be expected to last through the 2012 peak season. CSO states this PSS will enable carriers to recover the higher costs caused by projected increased volumes, including equipment positioning, labor overtime, port congestion, cruise liners, and extra loaders. The members of the CSO include Bernuth, CMA CGM, Crowley, Seaboard, SeaFreight Line, and ZIM.

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Carrier members of the Transpacific Stabilization Agreement (TSA), FMC Agreement No. 011223, serving the East Asia/USA trade lane will maintain surcharges at current amounts through the January to March 2012 quarter.

The group’s New Formula BAF for the January to March 2012 quarter, with adjustment for slow steaming, is US$ 538 per 40’ctr to US West Coast Ports and US$ 1059 per 40’ctr to US East and Gulf Coast Ports, with other sizes as per formula. Inland Fuel Charges (IFC) for the January to March 2012 quarter are US$ 353 per ctr for shipments to IPI destinations served via West Coast Ports, US$ 177 per ctr for shipments to RIPI destinations served via East Coast Ports, and US$ 102 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 is 23 percent for shipments from Japan.

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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Carrier members of the Transpacific Stabilization Agreement (TSA), FMC Agreement No. 011223, serving the East Asia/USA trade lane have announced recommended interim rate adjustments in the form of two step General Rate Increases (GRIs) and/or other revenue initiatives between March 15, 2012 and May 1, 2012. These Carrier initiatives aim to restore 2011 rate levels leading into 2012 contract negotiations.

Within the past few days most of TSA Carriers have filed general rate increases (GRI) of US$300 per 40-foot container (FEU), effective March 15, 2012, in their FMC tariffs. According the news release issue by the group, this increase is intended to bring Asia-U.S. freight rates back up to near 2011 contract levels, establishing a baseline for upcoming contract negotiations. TSA cited recent investor filings and press reports affirming industry losses, and stress that a further increase is critical to carrier viability going forward.

The Agreement’s 2012-13 recommended guideline revenue program recommends a further increase in rates, or second GRI, of an additional $500 per FEU for cargo to the U.S. West Coast, and $700 per FEU for cargo on intermodal services to interior destinations and on all-water services from Asia to the U.S. East Coast effective May 1, 2012. The TSA Carriers also indicated that further additional revenue and cost recovery initiatives would be considered for later in the year, after a review of market conditions and outlook for the second half of 2012.

Rather than adopting a formal guideline increases, TSA carrier members have indicated they will individually pursue various approaches to interim cost recovery and revenue restoration from March 15 through May 1, 2012. Some of the member carriers are filing general rate increases (GRIs), others are using peak season surcharges (PSS), emergency revenue charges (ERC) or other mechanisms, depending on each carrier’s unique situation.

The TSA Carriers have reaffirmed the need for 2012 service contracts to apply per formula rate increases for all equipment sizes, and to provide for collection of full, floating fuel surcharges and other applicable cost-based ancillary charges. ‘The erosion in transpacific rates during 2011 has been well-documented and dramatic,” said TSA executive administrator Brian M. Conrad. “If carriers adopt a marginal increase that only partially offsets huge losses as costs continue to rise, the result is another 18 months of losses. This year in particular, rate recovery must be meaningful in order to maintain service levels and, ultimately, carrier viability.”

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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