April 16, 1997

Oakland, California

SIGNALS™ provides detailed information on the regulations and activities of the US Federal Maritime Commission (FMC), and related developments in the ocean freight industry.

President Clinton Submits FMC Budget for Fiscal Year 1998 - No Changes in Funding
Public Law 104-291: Intermodal Safe Container Transportation Act - Effective 09Apr1997

Docket 94-31: Monitoring Reporting Requirements for Agreements - Reports Due 15Jun1997
Bureau of Enforcement Activity - February and March 1997
FMC Dockets and Rulings On The Internet - http://www.fmc.gov

DOT Exempts Ocean Freight Forwarders from Domestic Tariff Filing - Effective 30Mar1997
APL, Sea-Land and 67 Other Carriers File Tariffs With Shanghai Shipping Exchange S. 414: Ocean Shipping Reform Act of 1997 - Introduced in the US Senate 20Mar1997

Docket 96-20: FMC Sanctions Against Japanese Carriers - Delayed until 04Sep1997
Notable New/Amended Agreements Filed with FMC - February and March 1997

President Clinton Submits FMC Budget for Fiscal Year 1998 - No Changes in Funding

A budget of $14 million has been proposed by President Clinton to fund the Federal Maritime Commission for fiscal year 1998. This budget is unchanged from fiscal year 1997. President Clinton's budget proposal makes no reference to legislation recently introduced in the US Senate to amend the Shipping Act of 1984 and merge the FMC into an Intermodal Transportation Board beginning in January 1999.

Public Law 104-291: Intermodal Safe Container Transportation Act - Effective 09Apr1997

While the FMC has no statutory authority to enforce this new law, vessel operators and NVOCCs are well advised to amend their FMC tariffs to clarify carrier, shipper and consignee responsibilities for overweight containers and penalties arising from violations of it. The Intermodal Safe Container Transportation Act (ISCTA) is administered by the US Department of Transportation (DOT). It requires shippers to certify the weight and contents of all containers exceeding 29,000 lbs. (13,154 kgs.), including pallets and packaging, as of 09Apr1997.

The ISCTA certification must provide actual gross cargo weight, commodity description, container or trailer number, date and the name of the certifying party. Bills of lading may be used as certifications. Each intermodal carrier is required to forward the certification to the next carrier transporting the container. If the certified cargo weight is incorrect and the motor carrier is fined for operating an overweight vehicle as a result of that error, the motor carrier has a lien on the cargo until the shipper or owner of the cargo reimburses it for the overweight fine and all costs associated with the incident. By filing the following rule in its FMC tariff, a vessel operator or NVOCC may limit its liability for fines and penalties resulting from ISCTA violations:

Suggested FMC Tariff Rule No. 2-xxx Intermodal Safe Container Transportation Act Shipper/Consignee for container yard (CY) origin shipments shall be jointly, severally and absolutely liable for any fine, penalty or other sanction imposed upon Carrier, its agent or participating motor carrier by authority for exceeding lawful over-the-road weight limitations in connection with any transportation service provided under this Tariff and occasioned by any act of commission or omission of the Shipper/Consignee, its agent or contractors, and without regard to intent, negligence or any other factor. In the event Carrier pays any such fine or penalty and assumes any other cost or burden, arising from such an event, it shall be on behalf of and for benefit of the cargo interest and Carrier shall be entitled to full reimbursement therefore upon presentation of an appropriate invoice. Nothing in this Rule shall require Carrier, its agents or participating motor carrier to resist, dispute or otherwise oppose the levy of such a fine, penalty or other sanction and the Carrier shall not have any liability to the cargo interest should it not do so. Any charges incurred in re-handling of cargoes required to comply with maximum weight restrictions will be for the account of cargo.

Docket 94-31: Monitoring Reporting Requirements for Agreements - Reports Due 15Jun1997

By this docket the FMC lifted its stay of monitoring report requirements for agreements. The filing of quarterly monitoring reports for Class A, Class B, and those applicable to Class C agreements will begin with reports for the first quarter of 1997. These reports are due June 15, 1997. Under Section 15 of the Shipping Act of 1984, the Commission has directed all agreements to submit reports according to classifications recently determined by the FMC based on market share data. Each agreement will be notified in writing by the FMC of its classification for 1997.

Bureau of Enforcement Activity - February and March 1997

Docket 97-04: Ever Freight International Ltd., Sigma Express Inc., and Mario F. Chavarria dba Transcargo International, Order of Investigation and Hearing

Evidence collected by the Bureau indicates the above organizations may have committed violation of Sections 10(a)(1) and 10(b)(1) of the Shipping Act of 1994 in connection with shipments transported from Hong Kong to Los Angeles, CA and other ports and points under bills of lading issued by Ever Freight International Ltd. acting as an NVOCC. It appears Ever Freight failed to file applicable rates in its FMC tariff, and misdescribed the commodity on numerous shipments transported between March 1 and December 31, 1996. Sigma Express, an NVOCC, and Mario F. Chavarria, a licensed forwarder and NVOCC, acted as consignee or notify party for Ever Freight, issued arrival notices and collected freight charges due Ever Freight. The matter has been assigned to an FMC Administrative Law Judge who shall issue a decision in the matter and determine civil penalties, if applicable, by March 6, 1998.

FMC Dockets and Rulings On The Internet - http://www.fmc.gov

An enhancement to the Internet World Wide Web site of the Federal Maritime Commission makes available the full text of formal and informal dockets, as well as proposed and final rules issued since November 1, 1996. Web users will find the site at http://www.fmc.gov. These enhancements are part of the site's "Electronic Reading Room" which is accessible on the page "Public Information Available from the FMC."

DOT Exempts Ocean Freight Forwarders from Domestic Tariff Filing - Effective 30Mar1997

The Surface Transportation Board of the Department of Transportation has issued final rules amending 49 CFR Part 1319 to exempt ocean freight forwarders in the noncontiguous domestic trades from tariff filing requirements effective March 30, 1997. This action also applies to NVOCCs serving the US domestic trades between the mainland and Puerto Rico, Virgin Islands, Alaska, Hawaii, Guam, American Samoa and the Northern Marianas Islands. The Board removed the tariff filing requirement over the objections of vessel operators, including Crowley Maritime, who must continue to file tariffs for these trades.

APL, Sea-Land and 67 Other Carriers File Tariffs With Shanghai Shipping Exchange

The Shanghai Shipping Exchange (SSE) reports a total 69 carriers serving Shanghai and other open ports in Jiangsu and Zhejiang provinces in northeast China have now filed tariffs. Under regulations issued by the Chinese Ministry of Communications in late 1996 carriers "who fail to file freight rates with the SSE or do not enforce their filed rate shall be subject to a warning, or a fine up to no more than 50,000 RMB, or a penalty of suspension of the shipping service." Cargoes moving to and from the USA are exempt from SSE requirements. A compromise was reached in the dispute between the SSE and US flag carriers, American President Lines (APL) and Sea-Land Service. APL and Sea-Land have filed tariffs with the SSE, but have been granted an exemption from the membership requirement and SSE oversight on rate levels.

S. 414: Ocean Shipping Reform Act of 1997 - Introduced in the US Senate 20Mar1997

On March 10, 1997, Senator Kay Bailey Hutchison (R-TX) introduced this bill to amend the Shipping Act of 1984. Sen. John Breaux (D-LA), Sen. Slade Gorton (R-WA) and Senate Majority Leader Trent Lott (R-MS) are co-sponsors. The Ocean Shipping Reform Act of 1997 is very different from the shipping reform bill which was passed by the US House of Representatives in 1995, but failed to gain any consideration in the US Senate. Sen. Hutchison's new ship reform bill is a more modest and balanced proposal; it is not a proposal to radically deregulate the industry, or to put an end to ocean common carriage. Key provisions of the bill are:

Intermodal Transportation Board (ITB): Effective 01Jan1999 the new ITB would administer "all functions, powers and duties vested in the FMC." The FMC and Surface Transportation Board are merged in the ITB, which would include two former FMC Commissioners, or replacements with maritime experience.

Agreements: A maximum of five (5) calendar days notice will be allowed on independent actions by conference and agreement members on both tariff items and service contracts. Agreements would be prohibited from restricting the rights of members to negotiate individual service contracts with shippers.

Tariff Filing: Carriers would no longer file tariffs with the FMC, but would be required to publish and adhere to tariffs which "shall be made available electronically to any person, without time, quantity, or other limitation, through appropriate access from remote locations, and a reasonable charge may be assessed for such access. No charge may be assessed a Federal agency for such access...the Commission shall by regulation prescribe the requirements for accessibility and accuracy of automated tariff systems." Notice requirements for new and increased rates would be reduced, and newly manufactured automobiles would be exempted from tariff filing regulations.

Service Contracts: Independent carriers would be allowed to enter into confidential contracts, not filed with the FMC or its successor. Conferences and agreements would continue to adhere to regulations very similar to the current service contract filing requirements, including the filing of tariffs providing the essential terms of service contracts, and the "me-too" provisions of the Shipping Act of 1984.

NVOCCs: Non-Vessel Operating Common Carriers are redefined in the bill as Freight Forwarders, who must be licensed and bonded, but would no longer be required to file tariffs.

Controlled Carriers: Section 19 of the Merchant Marine Act of 1920 would be amended to empower the ITB to monitor tariffs of carriers controlled by foreign governments, and to prohibit unfair pricing practices.

Hearings on the bill were held on March 20th by the Senate sub-committee on Surface Transportation and Merchant Marine, which is chaired by Sen. Hutchison. FMC Chairman Hal Creel, Surface Transportation Board Chairman Linda Morgan, and eight (8) senior maritime industry representatives selected by the committee testified at these hearings. These hearings gave supporters and opponents of the bill the opportunity to raise their concerns. Representatives of US flag carriers spoke in favor of the bill; representatives of European and Japanese shipowners and US labor unions were opposed.

FMC Chairman Hal Creel, a former Senate staff member, delivered a carefully crafted speech at the Senate hearings in which voiced approval for much of the bill, but urged the Senate to retain an independent and well funded FMC, and to continue to require carriers to file service contracts with the FMC. Chairman Creel also asked the Senate to repeal Sections 6(g) and (h) of the Shipping Act of 1984, which limit FMC's authority over agreements, and to empower the FMC to initiate investigations of agreements which it deems "likely, by a reduction in competition, to produce an unreasonable reduction in transportation service or an unreasonable increase in transportation cost." Observers have noted this additional power, combined with FMC's existing power to impose fines, sanctions and cancel tariffs, would make the FMC a very powerful agency indeed.

Action on the Ocean Shipping Reform Act of 1997 by the Senate Committee on Commerce, Science and Transportation is expected in April or May. The opposition of labor interests is strong, and could prevent the bill from passing, but many observers believe the bill will succeed in the Senate, albeit with amendments. If it passes the full Senate, the bill must be introduced in the US House of Representatives, and gain approval by the House before it can be sent to President Clinton for approval and enactment. Many more months will pass before we know if this bill will indeed become law.

Docket 96-20: FMC Sanctions Against Japanese Carriers - Delayed Until 04Sep1997

This controversial docket has become the centerpiece of a trade dispute between Japan and the United States, and has led to strikes and job actions by dock workers in Japan. Intensive negotiations held in Washington, DC in early April between representatives of Japan's Ministry of Transport (MOT) and a US negotiating team led by Maritime Administration Chief A.J. Herberger were successful in delaying the countervailing sanctions against Japanese carriers which FMC had scheduled to take effect on April 14. These sanctions would have imposed fines of $100,000. each time a vessel of one of the big three Japanese containership operators, NYK Line, Mitsui OSK Lines and K-Line, enters a US port from any foreign port. In the "Memorandum of Consultation" signed by its negotiators, MOT promised immediate reforms in the licensing of terminal operators, and pledged to use its maximum effort to reform the "prior consultation" system used in Japan's harbor services industry. The FMC's suspension of the sanctions is contingent on the filing of progress reports by the Japanese carriers and US flag carriers. These reports are due on July 1 and August 5, 1997. The FMC Commissioner's reserved the right to impose the sanctions as of September 4, 1997 if these progress reports to do show concrete evidence of reforms.

In its February 26 ruling on this docket, the FMC stated the Government of Japan has created conditions unfavorable to shipping by discriminating against US carriers who wish to obtain licenses to operate stevedoring and terminal operations at Japanese ports, and by sanctioning the "prior consultation" requirements of the Japan Harbor Transportation Association (JHTA), which hamper carrier operations and increase terminal costs. In an effort to pressure the Japanese Government to take action on these issues, the FMC decided to impose countervailing sanctions of US$ 100,000. effective April 14. The sanctions, and their suspension, became part of the US Code of Federal Regulations CFR46-Part 586.2.

US flag carriers strongly supported the FMC sanctions, but agreed with the Commission's decision to suspend the sanctions in light of the reforms promised by Japan's Ministry of Transport. In comments filed with the FMC and quoted in the FMC's final decision on Docket 96-20, American President Lines (APL) and Sea-Land Service called the sanctions "an assessment which is far less than the economic impact on the US Carriers of the cumulative adverse effects of the prior consultation system, that is, the abuse of unbridled market power by the harbor services industry in Japan." APL and Sea- Land said that the need for changes in Japanese port practices is becoming more urgent due to difficult market conditions in the trans-Pacific trade in general and in the US-Japan trade. Port costs in Japan are among the highest in the world.

The JHTA and Japanese dock worker unions have responded defiantly to the threatened sanctions, and to attempts by the Japanese Government to negotiate a settlement which might involve deregulation of the country's harbor services industry. A one day strike by dock workers on 13Mar1997 shut down 50 ports and delayed 217 vessels in Japan according to the Ministry of Transportation. The Japanese Shipowners Association estimated losses of 72 million yen (US$590,000) caused by the strike. Additionally, dock worker unions have announced plans to stop working vessels on Sundays at many ports in Japan. This will force shipowners to divert vessels and reschedule port calls in Japan and other North East Asian ports. In addition to the Sunday boycott, Japanese dock workers have mentioned plans for another strike. It is not known how the JHTA and dock workers will respond to the reforms promised by MOT.

Just prior to the suspension of sanctions by the FMC, Japanese containership operators asked the US Court of Appeals to overturn the FMC's ruling on Docket 96-20. They told the US Court of Appeals the FMC exceeded its authority in levying the fines. In comments filed by their attorneys with the FMC, the carrier's stated that they are private companies, that they are not in a position to direct or control the policies and actions of Japan's Ministry of Transport, and that they "deplore a statutory application which would punish us irrespective of the lawful character of our carrier operations in the Japan/US oceanborne trades.'' The Japanese carriers indicated that they would be severely injured by the threatened sanctions. Based on 1996 vessel operations, during which sailings were said to have averaged 34 per month, imposition of the proposed $100,000 fee reportedly would cost them up to 4 million dollars per month in 1997. Immediately after the sanctions were suspended, the Japanese carriers asked the FMC to suspend the ruling indefinitely. The FMC did not agree, and refused to permanently suspend or withdraw its ruling until the conditions identified in Docket 96-20 "are substantially remedied, in a concrete and identifiable way."

Notable New/Amended Agreements Filed with FMC - February and March 1997

The FMC has given notice in the Federal Register of the filing of the following agreements under the Shipping Act of 1984. Copies of agreements can be retrieved from FMC's public files by interested parties who appear in person. Distribution-Publications provides retrieval services for all information made public by the FMC, including agreements.

Agreement No.: 217-011563              Federal Register Date: January 17, 1997
Title: The NOL/HMM Space Charter Agreement Parties: Neptune Orient Lines, Ltd., Hyundai Merchant Marine Co., Ltd.
Synopsis: This agreement authorizes Hyundai to charter vessel space to NOL in the trade between all ports in the Far East and South East Asia, on the one hand, and all ports on the U.S. Pacific Coast, including Alaska, on the other, and all inland and coastal points served via those ports.
Note: Notice was filed by FMC on February 25, 1997 requesting additional information from the parties to this agreement in order to complete the statutory review.

Agreement No.: 217-011565              Federal Register Date: February 4, 1997
Title: Hybur/Tropical Slot Charter Agreement
Parties: Hybur Ltd., Tropical Shipping & Construction Co., Ltd.
Synopsis: Under the proposed agreement, Hybur Ltd. will charter space abroad its vessels to Tropical Shipping in the trade between ports in Florida and ports in Belize.

Agreement No.: 202-010982-021.           Federal Register Date: February 14, 1997
Title: Florida-Bahamas Shipowners and Operators Association Agreement.
Parties: Tropical Shipping & Construction Co., Ltd., Pioneer Shipping Ltd., SeaXpress, Inc., CS Med Shipping (Bahamas) Ltd., Savoy Shipping Company, Crowley American Transport, Inc. Arawak Bahamas Line, Ltd., Kirk Line, A Division of Seaboard Marine, Ltd.
Synopsis: The proposed Agreement expands the geographic scope of the Agreement to include ports and points in the Cayman Islands, and to substitute Seaboard Marine, Ltd., for Kirk Line, a Division of Seaboard Marine, Ltd., as a member of the Agreement.

Agreement No.: 232-011566.              Federal Register Date: February 25, 1997
Title: NSCSA/Wallenius Line Space Charter Agreement.
Parties: National Shipping Company of Saudi Arabia (NSCSA) , Wallenius Rederierna AB
Synopsis: The proposed Agreement permits Wallenius to charter space from NSCSA, on its vessels operating in the trade from Livorno, Italy to U.S. Atlantic & Gulf Coast ports, and for the parties to coordinate vessel operations. The parties have requested a shortened review period.

Agreement No.: 217-011324-009.              Federal Register Date: March 14, 1997
Title: Transpacific Space Utilization Agreement.
Parties: American President Lines, Ltd., Kawasaki Kisen Kaisha, Ltd., A.P. Moller-Maersk Line, Mitsui O.S.K. Lines, Ltd., Neptune Orient Lines, Ltd., Nippon Yusen Kaisha Line, Orient Overseas Container Line, Inc., P&O Nedlloyd Limited, Sea-Land Service, Inc., Hapag-Lloyd Container Linie GmbH, P&O Nedlloyd B.V.
Synopsis: The proposed modification adds Hyundai Merchant Marine, Co., Ltd. and Evergreen America

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SIGNALS™ the newsletter of Distribution-Publications, Inc.
Vol. 1, No. 3A, April 16, 1997