FEDERAL MARITIMECOMMISSION

28th

Annual ReportforFiscal Year1989

TABLE OF CONTENTS

LETTER OF TRANSMITTAL v

MEMBERS OF THE COMMISSION vii

SENIOR COMMISSION OFFICIALS ix

I THE COMMISSION

A History 1

B Functions 1

C Organization 5

II THE YEAR IN REVIEW 7

A Section 18 Report 8

B Enforcement 9

C Restrictive Trade Practices 10

D Surveillance 11

E Tariff Automation 12

HI SURVEILLANCE AND ENFORCEMENT

A Surveillance 13

B Enforcement 16

IV DEVELOPMENTS IN MAJOR US FOREIGN TRADES

A Transatlantic 19

B Mediterranean 24

C Africa 26

D Transpacific 26

E Latin America and the Caribbean 29

F Middle East 32

G Worldwide 34

V AUTOMATED TARIFF FILING ANDINFORMATION SYSTEM

A Introduction and Background 37B Early Studies on Tariffs 38C First Step in Tariff Automation Issues 40D The Shipping Act of 1984 42E The Tariff Automation Task Force 42F Feasibility Study of Tariff Automation and

The ATFI Advisory Committee 46G Benefit Cost Analysis and

Procurement Authority 53H Inquiry on the Functionality of ATFI and

The Presolicitation Conference 54I Remote Retrieval 58J Contract Award and Beginning of ATFI 61

K Update on Remote Access March 1990 61

VI SECTION 18 STUDY

A Section 18 The Mandate for a

FiveYear Study of The Impact ofThe Shipping Act of 1984 67

B Executive Summary fromThe Section 18 Report 69

C Surveys 81D Section 18 Study Advisory Committee 81

VII THE FOREIGN SHIPPING PRACTICES ACT

A The Statute 85B Actions Taken Under This Statute 85

C Top Twenty US Liner CargoTrading Partners 86

VIII SIGNIFICANT OPERATING ACTIVITIES BYORGANIZATIONAL UNIT

A Office of the Secretary 91B Office of the Administrative Law Judges 95C Office of the General Counsel 101D Office of Equal Employment Opportunity 115E Office of Inspector General 117F Office of the Managing Director 121

G Bureau of Trade Monitoring 123H Bureau of Domestic Regulation 129I Bureau of Economic Analysis 147J Bureau of Hearing Counsel 149K Bureau of Investigations 153L Bureau of Administration 157

APPENDICES

A Organization Chart 181B Commission Proceedings 182C Carrier Agreement Filings and Status 183D Tariff and Terminal Agreement

Filings and Status 184

E Civil Penalties Compromised or Assessed 185F Field Investigations 186G Statement of Appropriations Obligations

and Receipts 187

FEDERAL MARITIME COMMISSIONWASHINGTON DC 20513

To the United States Senate and House of Representatives

Pursuant to section 103e of Reorganization Plan No 7 of 1961and section 208 of the Merchant Marine Act 1936 as amended I am

pleased to submit the twentyeighth annual report of the activities of theFederal Maritime Commission for fiscal year 1989

Additionally section VK of this report contains an Update onRemote Access March 1990 to comply with the request of Congressto be kept informed on developments of reasonable restrictions onremote access to the Commissions Automated Tariff Filing and

Information System CATFI

Sincerely

Jam CareyAc u Chairman

MEMBERS OFTHE COMMISSION

Edward J Philbin

Commissioner

Appointed 1984Term Expired 1989R California

James J CareyActing ChairmanAppointed 1981

Term Expires 1990R Illinois

Francis J Ivancie

Commissioner

Appointed 1985Term Expires 19920 Oregon

2 Vacancies as of September 30 1989

SENIOR COMMISSION OFFICIALS

Secretary

Chief Administrative Law Judge

General Counsel

Director Office ofEqual Employment Opportunity

Inspector General

Managing Director

Deputy Managing Director

Director Bureau ofTrade Monitoring

Director Bureau ofDomestic Regulation

Director Bureau ofEconomic Analysis

Director Bureau ofHearing Counsel

Director Bureau ofInvestigations

Director Bureau ofAdministration

Joseph C Polking

Charles E Morgan

Robert D Bourgoin

Mary A Jackson

Tony P Kominoth

Edward P Walsh

Bruce A Dombrowski

Austin L Schmitt

Robert G Drew

Robert A Ellsworth

Seymour Glanzer

Wm Jarrel Smith Jr

John Robert Ewers

I

THE COMMISSION

A HISTORY

The Federal Maritime Commission was established as an

independent regulatory agency by Reorganization Plan No 7effective August 12 1961 Prior to that time the FederalMaritime Board was responsible for both the regulation ofocean commerce and the promotion of the US MerchantMarine Under the reorganization plan the shipping laws ofthe United States were separated into two categoriesregulatory and promotional The responsibilities associatedwith promotion of an adequate and efficient US MerchantMarine were assigned to the Maritime Administration nowlocated within the Department of Transportation The newlycreated Federal Maritime Commission was charged with theadministration of the regulatory provisions of the shipping laws

The Commission is now responsible for the regulation ofoceanborne transportation in the foreign commerce and in thedomestic offshore trade of the United States The passage ofthe Shipping Act of 1984 brought about a major change in theregulatory regime facing shipping companies operating in theforeign commerce of the United States

B FUNCTIONS

The principal statutes or statutory provisions administeredby the Federal Maritime Commission are the Shipping Act of1984 the ShippingAct 1916 the Intercoastal Shipping Act 1933the Foreign Shipping Practices Act of 1988 and section 19 ofthe Merchant Marine Act 1920

The Conunissionsregulatory responsibilities include

o Reviewing and monitoring agreements of commoncarriers and other persons engaged in the USforeign commerce These agreements includeconference pooling joint service and space charteragreements

o Receipt and review of tariff filings but not theregulation of rate levels by common carriersengaged in the US foreign commerce

o Protecting shippers and carriers engaged in theforeign commerce of the United States fromrestrictive or non marketoriented rules and

regulations of foreign governments andor thepractices of foreignflag carriers that have anadverse effect on the commerce of the United States

o Protecting the rights of USflag shippingcompanies to transport cargoes in the US foreignoceanborne and foreigntoforeign trades

o Regulating rates charges classifications rulesregulations and tariffs of controlled carriers toensure that such matters are just and reasonable

o Regulating rates charges classifications practicesand tariffs of ocean common carriers in the

domestic offshore trades of the US

o Licensing international ocean freight forwarders

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o Issuing passenger vessel certificates evidencingfinancial responsibility of vessel owners orcharterers to pay judgments for personal injury ordeath or to repay fares for the nonperformance ofa voyage or cruise

o Investigating discriminatory rates chargesclassifications and practices of ocean commoncarriers terminal operators and freight forwardersoperating in the foreign andor domestic offshorecommerce of the United States

The 1984 Act is applicable to the operations of commoncarriers and other persons engaged in US foreign commerceIt exempts agreements that have become effective under theAct from the US antitrust laws as contained in the Shermanand Clayton Acts The Commission reviews and evaluatesagreements to ensure that they do not exploit the grant ofantitrust immunity and to ensure that agreements do nototherwise violate the 1984 Act or result in an unreasonable

increase in transportation cost or unreasonable reduction inservice

In addition to monitoring relationships among carriersthe Commission is also responsible for ensuring that individualcarriers as well as those permitted by agreement to act inconcert fairly treat shippers and other members of the shippingpublic The 1984 Act prohibits carriers from undulydiscriminating among shippers and other members of theshipping public The Act also requires carriers to make theirrates charges and practices publicly available in tariffs thatmust be on file with the Commission Carriers may only assessthe rates and charges that are lawfully on file with theCommission The Commission does not however have theauthority to approve or disapprove general rate increases orindividual commodity rate levels in the US foreign commerceexcept with regard to certain foreign governmentownedcarriers

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The Commission is authorized under the Foreign ShippingPractices Act of 1988 under section 19 of the Merchant MarineAct 1920 and under section 13b5 of the Shipping Act of1984 to take action to ensure that the foreign commerce of theUnited States is not burdened by non market barriers to oceanshipping The Commission may take countervailing action tocorrect unfavorable shipping conditions in US foreigncommerce and may impose penalties to address actions bycarriers or foreign governments that adversely affect theoperation ofUS carriers in the US foreign oceanborne tradesand that impair access of USflag vessels to ocean tradebetween foreign ports

The 1916 and 1933 Acts regulate the activities of commoncarriers and other persons engaged in the domestic offshoretrades of the United States In general they provide for tarifffiling and protect against unduly discriminatory practices in amanner similar to the 1984 Act In addition the 1933 Actprovides for a more comprehensive scheme of regulation toensure that the minimum and maximum rates and practices ofcommon carriers in the domestic offshore trades are just andreasonable

The Commission carries out its regulatory responsibilitiesby conducting informal and formal investigations It also holdshearings considers evidence and renders decisions and issuesappropriate orders and implementing regulations The

Commission also adjudicates disputes involving the regulatedcommunity the general shipping public and other affectedindividuals or interest groups

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C ORGANIZATION

The Federal Maritime Commission is composed of fiveCommissioners appointed for fiveyear terms by the Presidentwith the advice and consent of the Senate Not more than

three members of the Commission may belong to the samepolitical party The President designates one of theCommissioners to serve as Chairman The Chairman is the

chief executive and administrative officer of the agency

The Commissionsorganizational units consist of Officeof the Managing Director Office of the Secretary Office of theGeneral Counsel Office of Administrative Law Judges Officeof Equal Employment Opportunity Office of the InspectorGeneral Bureau of Economic Analysis Bureau of TradeMonitoring Bureau of Domestic Regulation Bureau ofHearing Counsel Bureau of Administration and Bureau ofInvestigations The Managing Director assists the Chairmanin providing executive and administrative direction to theCommissionsOffices and Bureaus These Offices and Bureaus

are responsible for the Commissionsregulatory programs orprovide administrative support

In fiscal year 1989 the Commission was authorized a totalof 224 fulltime equivalent positions and had a totalappropriation of13585000 The majority of the Commissionspersonnel are located in Washington DC with field offices inNew York San Francisco Los Angeles New Orleans MiamiHouston and Hato Rey Puerto Rico

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II

THE YEAR IN REVIEW

The Commission continued to have a high degree ofsuccess in addressing its various statutory responsibilities infiscal year 1989 Data collection and analysis for the Reportrequired by section 18 of the Shipping Act of 1984 wascompleted and the Report was submitted as directed onSeptember 20 1989 The Enforcement Program continued asa high priority with the focus remaining on major trade areasto detect commercial malpractices The Commissionsvariousinvestigatory efforts and enforcement actions resulted in recordpenalty collections and the disclosure of valuable informationon malpractice activities These along with the Agencyscontinual push for industry compliance programs helped todeter future malpractices and encourage fair competition in theforeign waterborne commerce of the United States

Additionally the Commission continued to combatunfavorable foreign government practices in certain tradesincluding the first case under the Foreign Shipping Practices Actof 1988 Agreement tariff and service contract filings werereviewed and analyzed to ensure statutory complianceRegarding tariffs significant progress was also made on variousaspects of the project to automate tariff filings ATFIincluding the awarding of a contract for the first two phases ofthe system

This Annual Report is essentially structured as an officebyoffice synopsis of each operating units activities andaccomplishments with separate chapters that deal with areas ofparticular importance This chapter is a brief summary ofcertain of the Commissionsmajor accomplishments during thepast year

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A SECTION 18 REPORT

This year culminated with the Commissionscompletionand submission of its Section 18 Report on the Impact of theShipping Act of 1984 Section 18 of the 1984 Act required theCommission to collect and analyze data on the impact of theAct on rates service independent carriers and majorregulatory proceedings and to report on 1 the advisabilityof a volumeandmass tariff system 2 the need for antitrustimmunity for ports and marine terminals and 3 the need fortariff filing and enforcement by the Commission

Data collection was completed in 1989 and included thethird in a series of surveys to the various segments of the oceanshipping industry These surveys helped to identify industryviews on the impact of the Act The Commission continued tomeet with representatives of the Departments of Justice andTransportation and the Federal Trade Commission regardingthe collection of data and also held a second meeting of itsSection 18 Study Advisory Committee

After completing its extensive research and analysis theCommission issued its Report on September 20 1989 asrequired by the 1984 Act The four topics for data collectionand analysis are covered in the first part of the ReportSeparate parts address the special topics on tariffs and portsThe Report also contains separate parts on service contractsand independent action and identifies provisions in the 1984Act which might benefit from clarification or technicaladjustment A detailed Executive Summary of the Commissions697page Report is contained in Chapter VI

The Departments of Justice and Transportation and theFederal Trade Commission were scheduled to release their

reports on the impact of the 1984 Act by November 20 1989All four reports will then be considered by the AdvisoryCommission on Conferences in Ocean Shipping when it conductsits comprehensive study of the ocean shipping industry

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B ENFORCEMENT

The Commissions enforcement program continued toemphasize trade malpractice programs that call for targetingagency resources on carriers commodities and malpractices thathave the greatest impact on the US ocean commerceThrough the collaborative efforts of all involved staffcomponents relevant data and information is developed andanalyzed investigation and monitoring is accomplished andthen the appropriate enforcement action is initiated

During fiscal year 1989 the Commissions intensifiedenforcement efforts in the Trans Pacific Trades MalpracticesProgram resulted in several major settlements Two majorsteamship lines serving the Pacific trades that were chargedwith unlawful rebating entered into settlement agreements withthe Commission one for 2550000 and the other for1225000 Each carrier also agreed to make disclosures of itsviolations Additionally an investigative initiative involving alarge number of NVOCCs alleged to be receiving rebatesresulted in settlements with 13 additional respondents in theTrans Pacific twelve importersexporters and one NVOCCThis effort was facilitated by the hearings held in connectionwith Fact Finding Investigation No 18 a non adjudicatoryproceeding which has provided compulsory process support forongoing investigations in the Trans Pacific Program

The Commission also continued to pursue its malpracticeprogram in the North Atlantic and was preparing to initiate atleast one other such program in FY 1990 These major

programs are combined with ad hoc enforcement actions whichinvolve malpractices uncovered in other investigations

These activities have enabled the Commission tocontinually increase its penalty collections over the past severalyears and to collect a Commission record 4733 million inpenalties in FY 1989 These penalty collections along with theCommissions focus on industry self policing programs and

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appropriate monitoring of past offenders serve as effectivedeterrents and a vehicle for uncovering repeat malpracticesThey are essential in enabling the Comnssion to meet itsoverall enforcement objectives of ensuring statutory complianceand creating equitable trade conditions in the US oceancommerce

C RESTRICTIVE TRADE PRACTICES

The Commission continued its active role in addressingrestrictive practices that create conditions unfavorable to USforeign shipping

After considering additional comments the Commissionissued a Final Rule finding that certain laws and decrees of theGovernment of Peru created unfavorable conditions in the

USPent oceanborne trade The Commission assessed feesfor each voyage made by specific Peruvianflag carriers butsuspended application of the fees because of the economic andpolitical conditions present in Pent

Based on the comments received in response to a Noticeof Inquiry the Commission determined that a resolution of theGovernment of Ecuador was discriminatory and createdconditions unfavorable to shipping in the USEcuador TradeThe Commission requested further comments and upon reviewissued a Notice of Proposed Rulemaking to adjust or meetconditions unfavorable to shipping in the trade created by theEcuadorian cargo reservation laws The proposed rule wouldimpose a fee of 100000 per outbound voyage from the USto Ecuador on Maritima Transligra SA an Ecuadorianflagcarrier

The Commission also continued to assess the impact ofthe laws regulations and policies of the Governments ofKoreaTaiwan and the PeoplesRepublic of China which may unfairlyburden or restrict the operations of certain ocean commoncarriers including US flag carriers Of particular concern to

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the Commission are indications that US flag and possiblyother carriers are prevented from conducting shipping andancillary activities in these trades The Commission issuedorders and notices regarding these possible impediments totrade in the USTaiwan and USKorea trades

During 1989 the Commission adopted a Final Rule toimplement the Foreign Shipping Practices Act of 1988 andamended its rules implementing section 191bof the 1920Act and section 13b5of the 1984 Act to add new sanctionsmade available to the Commission in proceedings under thosestatutes pursuant to the 1988 Act The Commission theninitiated its first investigation under the 1988 Act regardingcertain doing business restrictions of Taiwan authorities Thisinvestigation was pending at fiscal year end

D SURVEILLANCE

The Commissionssurveillance program is a logical andeffective adjunct to its enforcement activities Regularmonitoring of industry trends and concerted carrier activitiesenables the Commission to more readily identify practicescontrary to the shipping statutes

The Commission continued to refine its programs for theindepth review of selected critical trades in 1989 Theseprograms integrate a number of surveillance factors such asoperator market share data shipper identification review andanalysis of agreements and periodic reports of agreementparties etc

Among the major projects completed this past year werea comprehensive monitoring report on all major US foreigntrades specialized monitoring reports on the USChina andUSHong Kong trades a report on estimated operating costsand revenues for certain South American carriers an analysis oftrade data in the Ivory CoastUS inbound trade and trade

reports on the Far East Mediterranean and Caribbean areas insupport of the Commissionsenforcement program

E TARIFF AUTOMATION

The Commission continued to make extensive progress inits program to automate the filing of tariffs See Chapter V

After receiving much technical comment on two draftRFPs the Commission issued a final RFP in January 1989 toover 200 potential offerors on the bidders list Eight proposalswere received and evaluated for technical quality and costeffectiveness The contract for Phase I System Concept andPhase II System Design was awarded to Planning ResearchCorporation PRC of McLean Virginia teaming with DataExchange International DXF of Pittsburgh Pennsylvaniawhich had the best technical as well as the best cost proposalWork on the first phase began on September 5 1989 Thecurrent schedule calls for system development and testing tobegin in February 1990 the prototype operation to begin inApril 1990 and fullscale operation in January 1991 To avoidcompetition with private sector tariff services the ATFI designcontemplates restrictions on remote retrieval such as the abilityto retrieve only rudimentary information onetariffatatime

The FMC will need industry volunteers for the prototypeoperation especially filers of tariff data When the system isready for fullscale operation in early 1991 tariff filers will bephasedin for the changeover from their paper tariffs to theirelectronic tariffs becoming the tariffs officially in effect Forthe first few years it will probably be necessary to retain apaper system to ensure preservation of data and toaccommodate less sophisticated users This situation is

expected to continue until final refinement of the systemssoftware and the attainment of a higher level of computerutilization in the industry

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III

SURVEILLANCE AND ENFORCEMENT

A SURVEILLANCE

An integral part of the Commissionsadministration ofthe Shipping Act 1916 and the Shipping Act of 1984 is thesystematic surveillance of carrier activity and trade conditionsto ensure continuing compliance with statutory standards andthe requirements of the Commissionsrules The Bureau ofTrade Monitoring See Chapter VIIIG administers a varietyof surveillance programs designed to afford the Commission thenecessary degree of oversight in these areas

The 1984 Act provides for the statutory effectiveness offiled agreements following a brief waiting period unless a givenagreement is rejected for technical reasons or for failure toconform with the mandatory conference agreement provisionsin sections 5b and 5c or is contrary to the standards ofsection 6g of the Act Once an agreement becomes effectivethe Commission is responsible for maintaining surveillance overthe parties concerted activities in order to ensure compliancewith the standards of the 1984 Act To fulfill this statutoryresponsibility the Bureau of Trade Monitoring has continuedto direct its activities toward improving the breadth andeffectiveness of its monitoring programs

During fiscal year 1989 the Commission continued torefine its programs for the indepth review of selected criticaltrades These programs integrate a number of surveillancefactors including operator market share data cargo tonnagesof major moving commodities shipper identification relevanttariff rates and rate histories use of service contractsagreementdocument analysis the review of minutes of

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meetings of agreements and other agreement reports requiredby the Commissionsrules and investigation for existence ofpossible malpractices

A major focus during fiscal year 1989 was the preparationof the Section 18 Report on the Shipping Act of 1984 whichcontains an overview of the international shipping industry inthe areas of containerization intermodalism exit and entrypatterns in selected trades and export and import trends beforeand after the 1984 Acts passage The Section 18 Report alsocontains 1 changing trends in critical US trades namelyEurope Asia the Mediterranean South America andAustralia 2 the effect of the Transatlantic EnforcementInitiative 3 the number types and characteristics of servicecontracts 4 conference independent action activity 5 theissue of conference independent action on service contractsand 6 the activities of state controlled carriers operating inUS trades Finally the Section 18 Report includes an analysisof carrier agreements filed before and after the Acts passageincluding special reports on selected topics such as section6gof the 1984 Act loyalty contracts and neutralbody selfpolicing

During fiscal year 1989 the Bureau of Trade Monitoringproduced another in its series of periodic Monitoring Reportswhich provided timely analysis of emerging trends in agreementfilings conference market shares andUSflag participation inkey subtrades Additionally a number of other surveillanceprojects were completed including 1 extensive monitoringreports on the USChina and USHong Kong trades 2 adetailed analysis and recommendation regarding a complaintagainst a major transpacific conferencesfreightallkinds rates3 a preliminary analysis of the operational aspects of carcarriers and the significance of such carriers executing andfiling agreements with the Commission under the 1984 Act 4a report on estimated operating costs and revenues for certainSouth American carriers 5 an analysis of trade data in theIvory CoastUS inbound trade regarding an allegation ofgovernmentimposed restrictions affecting the carriage of

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certain cargoes 6 an analysis of the potential harm resultingfrom certain Taiwan laws and regulations as they applied to theintermodal operations of USflag carriers in Taiwan 7 arecommendation as requested by a petition that theCommission investigate the continued approvability of a rateagreement in the USGuam trade under the 1916 Act and8 special trade reports on the Far East Mediterranean andCaribbean areas in support of Commission enforcementinitiatives

Other projects during fiscal year 1989 included 1 themonitoring of activities of the parties to a discussion agreementin the Australian trades 2 analysis of reports from a majortranspacific conference on its costs of publishing independentactions on behalf of its members 3 addressing problemsexperienced by certain shippers associations in negotiatingservice contracts with conferences and 4 preparing a numberof carrier profiles to assist in determining the status of potentialcontrolled carriers

Major surveillance projects pending at the end of fiscalyear 1989 were 1 an economic impact analysis of theCommissions Transatlantic Enforcement Initiative 2 aprogram to systematically audit major agreements in UStrades 3 the development of trade profiles in key USsubtrades 4 a report on carrier itineraries in the transpacifictrades 5 the development of profiles on major carriers in theUS trades 6 the monitoring of a revenue pooling agreementin the US Mediterranean trade and 7 specific trade reportsdesigned to assist the Commissionsenforcement efforts

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B ENFORCEMENT

Under the Shipping Act of 1984 the Commission placedgreater regulatory emphasis on enforcement activity thanexisted under the predecessor statute The enforcement

functions are performed primarily by the CommissionsBureauof Hearing Counsel and Bureau of Investigations SeeChapter VIII J and K

The Trans Pacific Malpractice Program is an example ofa longterm program initiated by the Commission The purposeof this program is twofold 1 to obtain compliance with theShipping Act and 2 to establish an equitable tradeenvironment for carriers shippers and middlemen participatingin the Trans Pacific Trades The Trans Pacific programinvolves both informal and formal investigations of violationsof the Shipping Act These investigations already have resultedin individual and comprehensive settlements with shippers nonvessel operating common carriers vessel operating commoncarriers and freight forwarders Many of these entities provideddisclosures of additional Shipping Act violations In fiscal year1989 primarily as a consequence of the Commissionsinvestigation and enforcement efforts in the Trans PacificTrades the Commission collected the largest annual amount ofcivil penalties in its history a total of nearly 5 million It isanticipated that the TransPacific enforcement program willcontinue to have an important impact during the next fiscalyear and beyond

Another longterm program the Trans Atlantic Tradeenforcement initiative which began in 1987 continued through1989 Enhanced neutralbody self policing established throughthe program was implemented by participating carriersMembers of the Commission staff meet regularly with theparticipating neutral body and annually with the carriermembers The Commission is advised that this initiative is

having a substantial beneficial impact on the shippingcommunity

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To meet the needs of its expanded surveillance andenforcement role the Commission has continued to augmentits professional staff The Commission also continues to

provide training for professional employees at the White CollarCrime Training Program at the Federal Law EnforcementTraining Center in Glynco Georgia The Program focuses oninvestigation of fraud related offenses and offers an opportunityfor the exchange of ideas regarding investigative strategies andtechniques utilized by other Federal agencies Training alsohas been provided to enhance litigation and negotiating skillsessential to the Commissionsenforcement program

A joint support program between the Commission andBureau of Customs has resulted in interagency coordination ofeffort on matters of mutual concern This program wascontinued during 1989

The greater emphasis by the Commission on enforcementactivity continues to increase the number of investigations ofmajor violations conducted during the fiscal year which in turnresults in greater civil penalties See Appendix E It isanticipated that sustained enforcement activity will have anescalating deterrent effect on malpractices in the shippingindustry

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IV

DEVELOPMENTS IN

MAJOR US FOREIGN TRADES

A TRANSATLANTIC

Vessel overcapacity continues to characterize thetransatlantic trades Rate levels at least for most of 1989 andespecially for cargoes moving outbound to Europe arerelatively soft and carrier revenue and profit results arereportedly Lackluster In addition conference market sharecontinues to decline Concerning the latter trendAP MollerMaersk Line Maersk which entered the trade in April 1988and has since emerged as a major participant has stemmed theerosion to some extent in the eastbound direction where it

operates as a conference member but contributed to thedecline in the westbound direction where it operates as anindependent Conference market share has also declinedbecause of the March 1 1989 withdrawal of Orient OverseasContainer Lines OOCL from the eastbound ConferenceOOCL after years of providing service as a conference carrierin both directions of trade had begun operating as anindependent carrier in the North Europe to US East coasttrades with its December 1987 resignation from the westboundConference

These trade conditions and carrier strategies plus thecontinued growth of intermodalism in the US are majorreasons for a significant development in the transatlantic tradesduring fiscal year 1989 namely the creation of the USANorthEurope Rate Agreement USANE FMC Agreement No 202011241 and the North EuropeUSA Rate Agreement NEUSANo 202 011242 which both became effective July 11 1989USANE covers the trade from the 48 contiguous US states toNorth Europe the United Kingdom and Ireland and replaces

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the 3 previous conferences in the outbound trade the USAtlanticNorth Europe Conference ANEC the GulfEuropeanFreight Association and the Pacific Coast European ConferenceNEUSA covers the trade from North Europe the UnitedKingdom and Ireland to the 48 contiguous US states andreplaces 3 inbound conferences the North EuropeUSAtlanticConference NEAC the North EuropeUS Gulf FreightAssociation and the North EuropeUS Pacific FreightConference This latest change is the second major conferenceconsolidation in the trade since the passage of the Shipping Actof 1984 A previous restructuring effective October 12 1984involved the consolidation of nine individual outbound and

inbound rate making groups to form ANEC and NEAC

USANE and NEUSA are essentially the same in formcontent and membership as the conferences they replacedOne notable exception however is USflag carrier Lykes BrosSteamship Company Lykes which had been a conferencecarrier for its US Gulf service but an independent for its USEast coast service Lykes does not belong to either conferenceat present Both new agreements embody authority for a broadrange of rates and tariff types Each permits the concertedoffering of service contracts and loyalty contracts but prohibitsthese activities on the part of the individual members Itshould also be noted that while Maersk does not belong toNEUSA it does participate in Agreement No 1237 No203 011237 which authorizes Maersk and members of NEUSAto discuss among other matters rates and service This

agreement became effective May 29 1989 and was amendedJuly 16 1989 to reflect the creation of NEUSA

Because USANE and NEUSA are new it is too soon tomeasure their impact However current market share dataindicate that the parties do not dominate either leg of the USNorth Europe trade or any segment thereof and that theircompetitive impact will be limited by significant direct andindirect competition Furthermore although shortly after theirimplementation the two conferences imposed a September 11989 bunker surcharge and as detailed below a General Rate

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Increase GRI existing overcapacity should dampen theprospect of future rate hikes

Although the transatlantic conferences experiencedmarket share reductions two key cooperative workingarrangements the Eurocorde Discussion Agreement No 202010829 and Eurocorde 1 No 202010833 commonly knowncollectively as the Eurocorde agreements which authorizethe parties to meet and discuss their tariffs and other mattersdid not experience such an erosion The membership of theseagreements already consisting of the members of USANE andNEUSA and ten non conference carriers including thepreviously mentioned OOCL was increased with the additionof Independent Container Line Limited another non conferenceoperator Also although Lykes has not joined either USANEor NEUSA it has continued its participation in Eurocorde

A midJuly 1989 meeting between representatives of theEurocorde carriers resulted in a September 1 1989 GRIDepending on the subtrade the rate increase for a 20footcontainer ranged from 100 to 175 and for a 40footcontainer 150 to 250 Whether or not the rate increaseswill stick hinges greatly upon the willingness of the major nonconference carriers which traditionally have undercutconference rates eg Evergreen Marine Corp Ltd andMediterranean Shipping Co SA to continue their support ofthe increases

Besides the consolidation of the major transatlanticconferences some carriers have established service

rationalization arrangements as another means of dealing withthe extremely competitive nature of the trade The ability ofcarriers to share space and thereby increase their servicefrequencies without a large capital investment or addingcapacity makes rationalization particularly attractive Thefollowing are five examples of significant new servicerationalization agreements during fiscal year 1989

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The WiIhelmsenACLGCL Space CharterAgreement No217 011221 permits Wilhelmsen Lines AS Wilhelmsen tocharter vessel space to Atlantic Container Line BV ACE andGulf Container Line GCL BV GCL in the trade betweenNorth American Atlantic ports and points and European portsand points It also authorizes agreement on ports of call andthe frequency of those calls and allows agreement on generaladministrative and operational matters

The NOSACAutoship Space Charter Agreement No 232011225 permits Autoship Inc individually or as a member ofa joint service to charter space on the USflag vessel MVNOSAC RANGER which is operated by Norwegian SpecializedAuto Carriers NOSAC a joint service of Wilhelmsen LimitedAS KS NOSAC AS Co and KS Benargus AS Coand on any other USflag vessel which may be ownedchartered or operated by NOSAC in a common carrier service

The Canadian TransportStar Shipping Container SpaceCharter Agreement No 217 011238 provides for successiveoneway space charters by Star Shipping AS on CanadianTransport Co Ltd vessels in the westbound trade from portsin Northern Europe to ports on the West coast of the UnitedStates

The American Transport Line LtdTopgallant Lines IncSpace Charter Agreement No 232 011244 permits the partiesto charter space on each others vessels to interchangecontainer equipment and to rationalize sailings in the tradebetween ports in Northern Europe and ports on the USAtlantic coast

The EuroGulf International IncTecomar SA SpaceCharter Agreement No 217011245 authorizes each party tocharter space to the other with each providing six vessels withindividual capacities not exceeding 1300 TEUs The partieshave committed themselves to a minimum of onethird of thespace aboard each othersvessels in the trade between ports inNorth Europe and ports on the Atlantic and Gulf coasts of

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Florida and the US Gulf coast and the Gulf coast of Mexicoand between ports on the Atlantic and Gulf coasts of Floridaand the US Gulf coast and the Gulf coast of Mexico

Three other significant agreements have gone into effectduring the year The three are

The BBSLeif Hoegh Discussion Agreement No 203011222 authorizes Barber Blue Sea and Leif Hoegh andCompany AS to discuss rates charges classifications rulesand practices in the trades between US ports and points andports and points in all other foreign countries excludingJapan In addition the parties may charter space to and fromeach other

The American Auto CarriersAutoship Joint ServiceAgreement No 207 011226 authorizes American Auto CarriersInc and Autoship Inc to establish a joint service in the tradebetween US Atlantic ports and points and ports and points inEurope the United Kingdom Eire and the islands of theAtlantic

The TransAtlantic Carrier Association No 206 011243is an interconference agreement between USANE and NEUSAwhich permits the parties to take joint or individualimplementing action with regard to any subject matter mutuallycovered by their respective rate agreements In particular theparties may act on tariff content practices and servicecontracts relating to common Le twoway shippershousekeeping operations space chartering arrangements selfprlicing and employment of cargo containers rolling stock andancillary equipment

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B MEDITERRANEAN

The United States AtlanticMediterranean tradecontinues to be dominated by superconferences whichencompass virtually all the principal carriers and handle 90percent or more of the trades liner cargo The Mediterraneanto US Atlantic and Gulf subtrade is served by the SouthEurope USA Freight Conference SEUSA9No 202 010676which has a companion pooling agreement South EuropeUSAPooling Agreement No 212 010286 The correspondingoutbound subtrade is served by the United States Atlantic andGulfWestern Mediterranean Rate Agreement AGWM No202 011102 The members of AGWM established a poolingagreement during the 3rd quarter of fiscal year 1989 No 212011234 which authorizes them to pool revenue and to crosscharter space The inbound and outbound US PacificMediterranean subtrades are served by the

MediterraneanNorth Pacific Freight Conference No 202008090 During fiscal year 1989 as for several prior yearsthere were no significant individual nonconference carriers inany Mediterranean trade

The strength of the conferences however is compromisedby the ongoing problem of excess capacity in the trade Since1985 the USMediterranean trade has averaged 4050 percentin excess capacity Certain peculiarities of the Mediterraneantrade contribute to this situation Overland competition fromNorth European ports for example is intense and shippershave the flexibility of shifting their cargo toward or away fromMediterranean ports Consequently cargo originating in theMediterranean area and routed through North European portscontributes to the creation of excess vessel capacity in theMediterranean trade Moreover the Mediterranean is athrough route for carriers serving other destinations eg theIndian subcontinent Serving western Mediterranean portsadds little time or expense for a carrier which is providingservice to Middle and Near East destinations Thus a numberof through service carriers such as Evergreen adding to its

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aroundtheworld service and Barber Blue Sea adding to itsMiddle East service operate in the Mediterranean subtrades

Service contracts played a relatively minor role in thistrade during fiscal year 1989 compared to other trades sincethe oversupply of available cargo space has kept rates relativelylow Mediterranean shippers apparently do not view servicecontracts as a hedge against possible higher rates in the futureThe combined effect of North European ports as alternativesthe existence of a small number of independent carriers andexcess capacity has resulted in a high degree of conferenceresponsiveness to shippers particularly in terms of maintainingrequested rate levels

Citing a decline in cargo volume SEUSA imposed an 8percent GRI on both containerized and breakbulk freight formovements from Italy to US ports during 1989 Partiallyoffsetting this increase was SEUSAs decision to abolish its3percent currency adjustment factor Parallel to SEUSAsrateincrease was the MediterraneanNorth Pacific FreightConferences 10percent GRI The revenue pool agreementamong SEUSA members for movements from Italy to the USwas extended in principle until December 31 1990

Evergreen Costa Lines and Italian Lines entered into a5year slot charter agreement No 232 011184 in theMediterraneanUSAtlantic coast trade during fiscal year 1989It appears that the Italian carriers and the Italian Governmentboth benefit from this space charter agreement by assuringutilization of vessels built at Italian taxpayers expense Thethree partners of this agreement hold approximately 40 percentof the SEUSA pool With Italian Lines ending its relationshipwith Compania Trasatlantica Espanola the latter has joinedforces with Nedlloyd Line SeaLand and Trans Freight Linesin a space charter arrangement No 232011217 forming acompeting group inside the conference The implications ofthis regrouping are broad Since large capacity vessels will beused and since some of the carriers may operate through North

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European ports the arrangements impact on the trade maymake agreement on pooling quotas more difficult

C AFRICA

Trade with Africa continues to improve due primarily tothe increased competitiveness of US exports brought aboutby a decline in the value of the US dollar over the past fewyears US exports however face stiff competition especiallyfrom Western Europe which still has strong ties with its formercolonies and ships several times as much cargo to Africa as theUnited States does Also the economies of several Africancountries especially Ghana and Nigeria continue to recoverfrom the effects of drought that ravaged the continent earlierin the decade Increased agricultural production has resultedin more shipments of cocoa and coffee two of West Africasmain export commodities

Antilles and Africa Lloyd a new service which specializesin moving breakbulk and project cargo between the US Gulfand West Africa started operations at the beginning of thefiscal year

The Safbank Line Ltd and Lykes entered into a reciprocalspace charter and coordinated sailing agreement No 232011247 in the trade between the United States and SouthernAfrica The Agreement permits the parties to provide betterservice and to improve operating efficiency

D TRANSPACIFIC

Overall trade between the United States and the Far East

remains strong comprising approximately 30 percent of thevalue of US exports worldwide In the first eight months of1989 US exports to Japan South Korea Taiwan SingaporeHong Kong and the PRC increased over 1988 levels by 188

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percent 217 percent 189 percent 291 percent 153 percentand 259 percent respectively

A contributing factor to the growth in US exports wasthe sharp decline in the value of the US dollar from 1985 to1988 which led to improved price competitiveness for USgoods The South Korean won and the New Taiwan dollarcontinued to appreciate against the US dollar by 152 percentand 103 percent respectively for the period from January 1988to August 1989 The Japanese yen however while remainingrelatively constant for most of 1988 depreciated by 1098percent against the US dollar in the first eight months of 1989This shift threatens to erode the earlier progress made atreducing the US trade deficit with Japan

In addition to exchange rate fluctuations reasons forthe export growth to the Far East include lower tariff and nontariff barriers US exporters also benefited from an increasein the quality of US products and increased productivity bythe US work force in the manufacturing sector as well asstable labor costs compared to other industrialized nations

US imports from the Far East also grew in 1989accounting for approximately 40 percent of the value of totalUS imports In the first eight months of 1989 US importsfrom China and Japan grew by 404 percent and 82 percentrespectively over corresponding 1988 levels Among otherAsian trading partners such as Singapore Hong Kong andTaiwan the level of US imports for the first eight months of1989 decreased by 142 percent 42 percent and 24 percentrespectively

One reason for increased US imports is a continuedloyalty to Asian products Further since many Asian nationshave few natural resources the appreciation of their currencieshas made their purchase of raw materials and intermediategoods less expensive

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Average transpacific export rates which in 1986 were 25to 50 percent lower than freight rates for imports currentlystand at about 20 percent below import rates The significanceof this change is enhanced by the generally lower value ofexport cargo The shift means that exports are acquiring a newimportance to steamship lines that for the past decade haveconcentrated on the more profitable import trade In

anticipation of growing US exports liner carriers in the tradeintroduced 10 new ships during 1989 each with an averagecapacity of2200 TEUs

Despite the introduction of new vessels export growthhas led to a decline in outbound unused vessel space This inturn has led to a rise in the Transpacific Westbound RateAgreements TWRA rates on most commodities TWRAannounced that it will impose an estimated 10percent GRI onmost dry and refrigerated cargo effective April 1 1990

Unlike the outbound trade excess vessel capacity in theeastbound trade has led Asia North America Eastbound RateAgreement ANERA members to make increased use ofindependent action IA

In April 1989 the Commission instituted Fact FindingInvestigation No 18 an outgrowth of the transpacificmalpractice program instituted by the Commission in the fall of1987 which is aimed at uncovering rate malpractices in thetrade Both shippers and carriers are included in the programand violators are subject to civil penalties up to 25000 foreach offense Since the program began two years agoimporters shippers carriers and cargo consolidators have paidpenalties totaling more than 4 million The Commissionsgoal is to prevent practices that distort competition in thetrade

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Two new significant agreements in the transpacific tradewere filed during fiscal year 1989

In early March 1989 13 conference and non conferencecarriers filed the Transpacific Stabilization Agreement No 203011223 with the objective of reducing vessel capacity in theFar East to US trade by 10 percent later increased to 115percent to combat overtonnaging and declining rates The1year agreement provides that the parties must abide by anindividual maximum allowed capacity calculated according toa mutuallyagreed formula The total of all parties maximumallowed capacities for the year may not be reduced to less than85 percent of the total of all parties annual cargo capacity inthe trade prior to the agreement Any party exceeding itsallowed capacity will be assessed a penalty

The other significant new agreement in the transpacificwas the NYK PMO Discussion Agreement No 203 011248which became effective on September 17 1989 The agreementestablishes a cooperative working arrangement authorizing theparties Nippon Yusen Kaisha Line and Philippines Micronesia

Orient Navigation Company to enter into discussions andreach agreement on matters of mutual concern in providingstable efficient and economic transportation services in theagreement trade

E LATIN AMERICA AND THE CARIBBEAN

Major events during fiscal year 1989 included theexpansion of Zim Container Service the formation ofVenezuelan Container Service and the focusing of attention onthe Caribbean Basin Initiative

ZimAmerican Israel Shipping Co Inc expanded its ZimContainer Service Division into Central America in May 1989Zim Container Service entered into a connecting carrier contractwith Vencaribe Line a Venezuelan flag operator to carry cargo

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between Kingston Jamaica and ports in Honduras Guatemalaand Venezuela Zim Container Services ships will then carrycargo between Kingston and the Far East the United Statesand the Mediterranean Most of the transshipped cargo will bedestined for or originate in the Far East or the Mediterranean

Venezuelan Container Service was formed in November1988 when HL Boulton the majority owner of VenezuelanContainer Line acquired Marlago Line Venezuelan ContainerService operates two vessels sailing out of Miami to Venezuelaon a weekly basis and every two weeks from Charleston toVenezuela

Development in the Caribbean was considered byCongress this year In particular the future of the CaribbeanBasin Initiative CBI was deliberated The CBI was createdin 1983 to encourage economic development of beneficiarynations by allowing preferential treatment of many nontraditional products from these countries in the US marketTwenty two Central American and Caribbean countries arecurrently beneficiaries under the program The success of thisinitiative is expected to increase the flow of liner cargoesbetween the US and the Caribbean

In February 1989 a complaint was filed against theCaribbean Shipowners Association by a group of Florida freightconsolidators The freight consolidators charged that freightall kinds rate increases on the USBarbados route and lessthancontainer load and less than trailer load rate reductionson USSt Maarten route violate the Shipping Act of 1984The consolidators asked for reparations in the amount of250000 a month from the date the charges were imposedThe case was eventually dismissed at the request of thecomplainants

AS Ivarans Rederi Ivaran Lines or 7varan is a partyto two docketed proceedings currently before the CommissionDocket 8609 AS Ivarans Rederi v Companhia de NavegacaoLloyd Brasileiro et at and Docket 8722 United States

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LinesSAInc Petition for Declaratory Order Re The BrazilAgreements Both dockets involve cargo revenue poolingarrangements in the USSouth American trades in whichIvaran Lines participates

Ivaran seeks in the first docket to have the Commissiondeclare that the BrazilUS Atlantic Coast Agreement shouldhave been suspended because a major party to the agreementMoore McCormack Lines the corporate predecessor to UnitedStates Lines failed to make the required 40 railings in 1982On December 22 1988 the Commission ruled against Ivaranwhich has since appealed to the US Court of Appeals Districtof Columbia Circuit

The second docket involves a dispute between UnitedStates Lines and Ivaran as to the correct legal interpretationof provisions of two northbound BrazilUSpooling agreementsand how cargo carried under the agreements Alternate CoastPort Service provisions should be accounted for under theterms of the agreements concerned This docket is currentlybefore the Commission

With regard to agreements in the trade there was onesignificant development in fiscal year 1989 as well as twonoteworthy trends

The US Atlantic and Gulf Venezuela Freight ConferenceNo 202006190 reorganized itself as two conferences the USAtlanticVenezuela Freight Association No 202 006190 andthe US GulfVenezuela Freight Association No 202 011231Most of the independent carriers in the trade which with thecombined conference had been parties to the US Atlanticand Gulf Venezuela Freight Conference Discussion AgreementNo 203 011172 joined one of the two regional conferencesThe only members of the discussion agreement at present arethe two conferences

Two significant trends have become apparent in the LatinAmerican trades during the past fiscal year Five conferences

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and four discussion agreements in the trade have added spacechartering to their authority while eight conferences prohibitedtheir members from taking independent action to enter intoloyalty contracts

Two noteworthy agreements were filed in the LatinAmerican trades in fiscal year 1989

EuroGulf International Inc and Tecomar SA filed areciprocal space charter agreement No 217 011245 in the tradebetween US Atlantic and Gulf ports and ports on the Gulfcoast of Mexico The agreement also includes the tradebetween US Atlantic and Gulf ports and North Europe

Companhia de Navegacao Lloyd Brasileiro and EmpresaLineas Maritimas Argentinas SA filed a space charter agreementNo 217 011250 in the trade between US Atlantic and Gulfports and ports in Brazil Paraguay Uruguay and Argentina

F MIDDLE EAST

The Middle East trade which over the past decade hasexperienced limited growth in liner service due to risk of warpoorly developed infrastructures and lack of attractive cargocontinues to show signs of a reversal in market conditionsThe Port of Basra Iraqs largest port was reopened in early1989 after being closed for eight years because of the war withIran and work began on a billion dollar port developmentproject Further preparations are also underway in Iran toreopen the Ports of Abadan and Khorramshahr Plans for fullreconstruction of the two port cities were scheduled to becarried out once the Shatt alArab waterway is cleared of alldebris left over from the IranIraq conflict The United ArabEmirates a federation of seven small Arab principalitieslocated on the Persian Gulf reports that US exports rose fromapproximately 292 million to 395 million during the first five

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months of 1989 The boost in export sales represents a 354percent increase over the same period last year

In addition to the above other significant activities tookplace

SeaLand Service Inc a USflag carrier inaugurateddirect container service in MarchApril 1989 between Europethe Middle East and Asia The new service was made possiblethrough a space sharing agreement with Norasia Shipping ServiceSA a privatelyheld Swiss company The slotcharter

arrangement enables SeaLand to expand its presence in theMiddle East through the introduction of a direct service to andfrom Asia with 13 vessels 10 contributed by Norasia and 3 bySeaLand Reports indicated that SeaLand viewed the ventureas the final link in its effort to provide a global transportationservice

In April Thames Shipping Ltd a Londonbased carrierestablished a new liner service between the ports of New YorkBaltimore Norfolk and Savannah and Red Sea and ArabianGulf ports Common carrier services were however

subsequently discontinued by the line later in the year

In June Farrell Lines resumed container service from theUS Atlantic to Baghdad and Mosul Iraq The USflagcarrier intends to discharge full containers of Iraqbound cargoat Port Izmir Turkey from where the containers will betransported via truck to their final destinations

Further in September Hoegh Lines announced that itwas expanding the capacity of its North AtlanticMiddle Eastand Far East service by redeploying four of the containervessels previously used in the USAustralian trade scheduledfor termination in January 1990 to replace six older generalcargo ships in this trade area

The fiscal year also saw the filing of a newinterconference agreement in the trade The parties to the

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8900 Lines Agreement No 202 008900 and the West AsiaRate Agreement No 202 010748 filed an Inter ConferenceDiscussion Agreement No 206 011239 effective July 8 1989to permit them to discuss and agree upon rates terms andconditions of service and to exchange information concerningthe trade between the United States and the Middle East andIndian subcontinent

G WORLDWIDE

US exports continue to enjoy substantial growth as aresult of the relatively cheaper dollar increased efforts atexport marketing by domestic firms and improved qualitycontrol in US manufacturing processes However increasedexport traffic has not reduced the current trade deficit as muchas hoped because 1 there has been some rebound of theUS dollars value producing some braking effect on exportgrowth and 2 imports continue substantial growth due in partto aggressive marketing efforts by foreign suppliers and in partto the ingrained product preferences of US consumers

Elsewhere the last half of 1989 has seen the diminutionof political monopoly in Eastern Europe and along with it theintimations or even the first concrete steps toward marketoriented economies Although ultimately these developmentsshould lead to a substantial increase in world trade and the

opening of vast new markets the short term effect is likely tobe quite limited The most likely effects anticipated in theshort term are 1 increased participation as cross traders inUS trades by Easternbloc carriers and 2 increased activityby the Easternbloc carriers on the world charter market asthey seek new tonnage and replacements for obsolete vesselsduring a time of fiscal crisis for their home governments

Events in mainland China have further impeded thedevelopment of that potential market The trade alreadysuffered from inadequate physical structures routing and cost

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controls access to shoreside facilities inadequatedevelopmental capital etc Although carriers are proceedingoptimism is muted

US trades particularly with partners in the developedworld have seen the continued maturation of fully integratedintermodal systems Among other things this implies 1control of an entire cargo movement by a single entity fromorigin to destination 2 greatly increased potential forcompetition among multiple US ports for cargo tofrom thesame inland point or even between port areas in separatecoastal ranges 3 intermodal waterrail costs which approachunder the right conditions those of allwater transport and4 an increase in agreements involving asset sharing

While progress has been made in controlling excess vesselcapacity in some areas the problem persists due to thecontinuing entry of newlyconstructed tonnage on the worldscene This problem is expected to continue through 1990

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v

AUTOMATED TARIFF FILING AND

INFORMATION SYSTEM ATFI

A INTRODUCTION AND BACKGROUND

A freight tariff contains a carriersor conferenceslist ofrates charges and rules applicable to its transportation ofcargo A service contract is a special agreement betweenshippersand carriersthat applies in lieu of the freight tariffMutual commitments are made in a service contract with theshipper guaranteeing the carrier a minimum quantity of cargoover a period of time in consideration for a commitment bythe carrier to a certain rate and service level

Common carriers in the US oceanborne commerce andconferences of such carriers are required by law to file tariffsand service contracts with the Commission and to make thetariffs and essential terms of service contracts available to the

public in tariff format In order to prevent discriminationthere are substantial penalties for not filing and for notadhering to the provisions of a tariff or service contract

While the first regulatory ancestor of the FMC wasestablished in 1916 it was not until 1961 that carriers in theUS foreign commerce were required to file tariffs containingall the rates charges and rules applicable to their shipmentsThe number of tariffs and amendments filed with the FMC has

steadily grown until in fiscal year 1989 there were 798993tariff pages received and 5215 service contract filings in theUS foreign commerce At the end of the fiscal year therewere 4947 foreign tariffs on hand at the FMC

The enormous amount of paper to be processed by alimited number of employees led the Commission in the early

37

1980s to consider modern technology as a means of alleviatingthe paperwork burdens on both the government and theshipping industry as well as enhancing the effectiveness ofFMC regulation A systematic exploration of this subject areaby the Commission commenced with a series of studies andhas developed into a Commission proposal for an AutomatedTariff Filing and Infonnation System ATFI

B EARLY STUDIES ON TARIFFS

The Commission conducted a study beginning in 1981 toexamine the validity of the premises upon which the tariff filingrequirements of the 1916 Act were based The study containedthree parts

The first part concerned the internal use of tariff data inthe effectuation of non tariff programs such as agreementsformal decisions enforcement etc That analysis publishedon October 1 1981 was based upon an internal questionnaireIt concluded that tariffs are of critical importance to manyCommission statutory functions and that they could be moreeffectively used if the data were more accessible

The second part of the study published on December 91981 evaluated the impact of the tariff filing system on externalusers shippers and freight forwarders and was based on

interviews with 25 importers and exporters and 9 freightforwarders It revealed that these groups believed that publiclyavailable tariffs were a necessity and should be maintained atthe FMC Virtually all interviewees however agreed that thetariff system was too complex and could be simplified byimplementing percontainer rates a class system of ratescomputerized filing and classification based upon the USForeign Trade Schedule B Statistical Classification of Domesticand Foreign Commodities Exported from the United StatesSchedule B

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The third part of the study published in January 1983focused upon ten liner operations and five conferences Thissegment of the maritime industry opined that tariffs should bepublicly available and maintained at the FMC Unlike thoseinterviewed for the earlier part of the study however thecarriers and conferences stated that the marketplace determinesthe contents of tariffs A majority believed that the complexityof tariffs might be a necessary evil Several interviewees statedthat any program to simplify the tariff system should includetariff automation

The overall conclusion of the threepart study was thatretention of the requirement to file tariffs had widespreadsupport in the maritime industry but the system was in needof modernization particularly in the area of computerization

While conducting this threepart study the Commissionalso began an internal study of the impact of filing activityupon the Commission itself The internal study revealed thatduring a sixmonth period JulyDecember 1981 a total of212458 permanent filings were received at the CommissionThirty out of several hundred filers accounted for 47 percentof the total volume The internal study also found that basedupon first quarter fiscal year 1982 actual expenses theestimated annual cost of examining and maintaining the tarifffilings of the 30 major filers was 158000

With the results of these two studies in hand theCommission explored the issue of tariff automation Of

particular interest to the Commission was the industrysviewson the feasibility of possible methods for and implementationof an automated tariff system In early 1983 the FMCinterviewed seven carriers five conferences two freightforwarders twelve shippers and two transportation servicefirms

The report of this survey was issued in March 1983 andrevealed the overall belief of these parties that the tariff systemshould be automated and that implementation of an automated

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system was overdue Almost all interviewees said that therewas a likelihood that they would use an automated system if itwere more efficient and in the long run proved to be lesscostly than the existing system

The various respondents were themselves at differentstages of automation A few carriers were highly automatedand a number of conferences and shippers had madesubstantial commitments to automation Those respondentsthat were automated to some degree generally believed thatautomated tariffs would fit well into their systems

C FIRST STEP IN TARIFF AUTOMATION

ISSUES

Recognizing that there was a need and apparent industrysupport for tariff automation the Commissionsnext step wasto determine if any parties were interested in developing anappropriate system On November 14 1983 the Commissionpublished in the Commerce Business Daily a Notice of Inquiryentitled Sources Sought for Paperless Federal MaritimeCommission Electronic Filing Storage and Retrieval Systems forTariffs Of the 31 replies received 15 were considered to beresponsive or partly responsive to the notice ie indicatedinterest in being considered to develop the automated tariffsystem andor described their qualifications The commentsalso raised questions of both a legal and policy nature whichneeded to be resolved before proceeding with additional phasesleading to the eventual adoption of an electronic tariff systemThe major questions raised were

1 Does the filing and storage of tariff information witha private contractor off FMC premises comply with thestatutory requirement that tariffs be filed with the Commission

2 Can the Commission mandate 100 percent industrycompliance with electronic filing

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3 What is an appointed vendors right of ownershipto vendor developed software external to FMCsown data baserequirements

4 What copyrights are involved in tariff data

5 What will be the official agency record of tarifffiling the data electronically stored or the hard copy that iseither filed or produced from electronic filing How long willstorage be required To what extent will hard copy continueto be required

6 Will the contractor have monopoly control over theuse of the tariff information filed in the system

7 What will be the financial impact of a system oncarriers and other firms that already have tariff automation

8 What is the minimum term of any possible contractwith an appointed outside vendor

9 What is the economic and political viability of FMCas a free system user

10 What will be the number of outside vendors whichwill be ultimately selected

11 What will be FMCs programming demands on thecontractor

12 To what extent will there be a need to put presenttariff data into the electronic system data base How

data13 How will a system provide security for filed tariff

14 To what extent would a new system be compatiblewith other format standardizations

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D THE SHIPPING ACT OF 1984

On March 20 1984 the 1984 Act was enacted Even

though the continued need for various tariff requirements hadbeen questioned by certain government agencies and theprivate sector during hearings section 8 continued therequirements to file and abide by tariffs Service contractswere authorized as an alternative to a tariff While service

contracts were required to be filed confidentially with the FMCtheir essential terms had to be filed with the FMC in tariff

format for availability to the general public

E THE TARIFF AUTOMATION TASK FORCE

1984 to PRESENT

In August 1984 FMC Chairman Alan Green Jrappointed Vice Chairman James J Carey as head of a specialTariff Automation Task Force The Task Force gatheredadditional information and in January 1985 sent questionnairesto 17 ocean carriers 10 non vesseloperating common carriersNVOCCs 19 conferences 52 freight forwarders and 20

shippers The questionnaires focused on the use of tariff dataand suggestions to improve the process Sixtythree entitiesresponded Some of the results of these responses aresynthesized as follows

o Tariffs were used by virtually all usually on a dailybasis and mostly in paper form

o Most with the exception of shippers were satisfiedwith the current tariff form Those not satisfied

indicated a desire for an automated system

o Most of the respondents obtained data fromcommercial tariff services but many usedcarrierconference subscriptions Carriers were thepredominant users of FMC files while a large

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number of freight forwarders NVOCCs andshippers went directly to ocean carrier

representatives for tariff information Theyindicated that these sources met their needshowever those suggesting improvements generallyfavored automation which could provide more timelyand accurate data

o A majority of the respondents used publiclyavailable standardized commodity coding systemseg ScheduleA TariffSchedules ofthe United StatesAnnotated Standard International Trade

Classification Schedule B and Standard

Transportation Commodity Code Most respondentsdid not use standardized geographic coding systemsnor did they see a need for them

o Freight forwarder and shipper respondents showedthe greatest degree of willingness to use more thanone type of coding system

o Practically all ocean carrier and conferencerespondents believed that it would be advantageousto file data with the FMC in an automated fashion

The NVOCC respondents thought it might be tooexpensive

At about the same time as the 1985 industry surveys aninhouse survey was conducted at the Commission to ascertainits needs for tariff automation and perceptions about thisconcept The survey results included the following findings

o Most respondents in the FMCs operating bureausfelt that automated tariffs would increase the

quality of their work as well as their productivity

o Sixtytwo percent of the respondents felt that hardcopy was unnecessary if tariffs were accessible viamachine readable form Reasons cited for paper

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copies were the need for evidence in court exhibitsfor enforcement reports and a backup system incase of computer malfunction

o Forty percent said that a standard commodityclassification code would increase both their

efficiency and quality of work while an additionaltwentyone percent responded that it would increaseonly their efficiency but not their quality of workResponses were similar regarding a standardgeographic code

In August 1985 the Task Force issued a report entitledTariff Automation A Functional Analysis In addition todescribing the results of the 1985 industry and inhouse surveysthe report described the problems with manual tariff filing andreview and the FMCs need for automated filing and retrievalof tariff data The objectives of an automated system weredescribed as follows

o The automated system will operate in the privatesector to the extent possible

o The system will be financially self sufficient throughthe assessment of user charges for access to theinformation

o Access by the FMC will be without cost

o The integrity of the system will be insured by theFMC through the development and ownership ofsoftware which will control entry into the system

o A means will be constructed to minimize themonopolistic control of a single company operatingthe system and effort should be made to preserveexisting satellite companies now engaged indissemination of tariff data

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o Contractual arrangements for electronic filing maynot curtail the ability of the public to have accessto tariff documents now routinely available in publicdocument rooms or otherwise

The report recommended the conduct of a feasibilitystudy which would evaluate the technical alternatives availableand their costs including a market analysis of the demand fortariff information and the likelihood that the FMCscosts could

be recaptured The Task Force report developed two primaryoptions to be evaluated in the feasibility study a synopsis ofwhich follows

1 Multiple private sector data bases which wouldrequire FMC control or oversight regarding the acceptance oftariff filing within the data base controls to prevent tamperingwith the data and accessibility of the information in the database to the FMC and to the public through the FMCs publicreference facility Tariff Control Center This might requiresome sort of certification process This option would probablyinvolve the least cost to the FMC and minimum governmentinvolvement but legislative changes would likely be required toimplement it

2 Single data base one contractor designs and operatesa single data base of tariffs for the FMC After review andacceptance of the data tariff information would then be madeavailable to users for a fee a portion of which would offset thecost of the contract to the FMC Rather than grant thecontractor a total monopoly over tariff information howeverthe report indicated that it would seem more advisable for thecontractor to supply only the raw data perhaps on asubscription basis The purchasers of the data would save oninput costs to their system and obtain quicker access to theinformation in an electronicallyusable form Each purchasercould purchase electronic data design its own software forproviding the data in usable form and sell the data to otherusers Hard copy andor microfiche pages could also be madeavailable for sale by the contractor

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The report concluded that since the FMC lacked thetechnical expertise the feasibility study should be contractedout

Because the Commission also needed to ensure that all

future studies were unbiased thorough and accurate it hiredan industry consultant in August 1985 for technical assistanceThe contract provided that the consultant must remainindependent of the feasibility study contractor and could notbecome the contractor for the pilotoperating system

F FEASIBILITY STUDY OFTARIFF AUTOMATION and

THE ATFI ADVISORY COMMITTEE

The Commission next turned to the General Services

Administration GSA for assistance with the feasibility studyand entered into an interagency memorandum of understandingwith GSA on August 1 1985 Pursuant to this agreementfunds were transferred to a GSA fund and a Statement of

Work for the development of a feasibility study was draftedresulting in a contract for this task with a GSAapprovedcontractor

Early in 1985 the FMC determined the need andimportance of not only soliciting but also considering in apublic arena the opinions of all interests affected by thepossible automation of tariff filing For that purpose andpursuant to the provisions of the Federal Advisory CommitteeAct 5 USC app I 115 the FMCsATFI Industry AdvisoryCommittee was established

The Commissions first steps in the formation of theAdvisory Committee were to draft a charter and submit it tothe GSA Advisory Committee Secretariat with an explanationof the need for the Committee and the FMCs plan to obtain

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a balanced membership Thereafter candidates for membershipon the Committee were solicited by Federal Register notice ofApril 12 1987 50 Fed Reg 14453 Nominees were requiredto waive compensation for their services and acknowledge thatthey were ineligible to bid on any procurement solicitationsresulting from the work of the Committee

On November 11 1985 the FMC published in theFederal Register 50 Fed Reg 47447 its Notice of theFormation of the ATFIAdvisory Committee and announced thefirst meeting on December 6 1985 50 Fed Reg 50013FMC Commissioner Edward J Philbin was designatedChairman of the Committee The nineteen industry membersrepresented three ocean carriers three steamship conferencestwo NVOCCs three freight forwarders and the NationalCustoms Brokers and Forwarders Association three ports andthe California Association of Port Authorities two exportersand importers and the American Association of Exporters andImporters two information service firms and the InformationIndustry Association

FMC Chairman Edward V Hickey Jr opened the firstAdvisory Committee meeting on January 23 1986 by askingfor guidance on the following policy questions about anyproposed automated system

o Is it desirable that it operate in the private sector

o Can it be structured so as to be financially selfsufficient through the assessment of user chargesfor access to the information

o Is it possible to achieve costfree access to thesystem for the FMC

o Can the integrity of the system be ensured by theCommission through the development and

ownership of software which will control entry intothe system

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o What means can be devised to minimize the

possibility of monopolistic control by any singlecompany that might operate the system and tominimize interference with the operations ofcommercial companies currently engaged in thedissemination of tariff data

o Can the system operation be structured to maintainpublic access to tariff information now routinelymade available in public document rooms orotherwise

o Can system operation be structured to complementpublic access under the Freedom of InformationAct

o Can a system be structured so that the burdenimposed upon tariff filers to comply with thetechnical requirements of filing tariffs in anautomated system will be minimized

Chairman Hickey explained that four items were necessary toassure the integrity of FMCs statutory mandates

o The FMC is to retain final authority to reject filingsthat do not comply with agency requirements andis to determine the public availability of informationpursuant to the Freedom of Information Act andother statutes

o The system must permit the maintenance ofhistorical records that can be retained retrievedand reproduced for legal evidentiary purposes andto comply with requirements for retention ofgovernment records

o The system must obviate unauthorized modificationor tampering with data yet allow the identificationand authorized correction of errors

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o All fees for the use of the system filing retrieval ordata reproduction are to be reasonable and notprevent deter or impair full public use

The critical objectives of the Advisory Committee wereestablished as follows

o To allow each segment of the shipping industry toformulate and specify its needs and goals in theprocess of automating shipping tariffs

o To educate each segment of the shipping industryabout the needs and goals of the other segments insuch a process

o To investigate the possible applications of existingand foreseeable Automated Data Processingtechnology to accommodate such needs and goals

o Then if feasible to formulate the necessarycompromises of the needs and goals of eachindustry segment to design a system which isacceptable and beneficial to all industry segments

The Commission directed theAdvisory Committee to makean indepth and critical evaluation of the draft sections of theATFI Feasibility Study and to evaluate and comment on anyimplementation plan which may be formulated after completionof the ATFI Feasibility Study

The ATFI Advisory Committee met in three twodaysessions from January to November 1986 in which it activelyprovided input to and review of the reports of the FeasibilityStudy Contractor The final report of the Contractor entitledComprehensive Study of the Feasibility of an Automated TariffSystem FMC October 28 1986 detailed the basic functionalityfor tariff automation the necessary assumptions the concept ofa system alternative concepts of operation policy assumptions

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delivery alternatives costs and funding This report wasapproved in principle by the Advisory Committee with a fewsuggested changes In summary the tariff automationrequirements identified by the Feasibility Study are

1 Key Tariff Filing Requirements

a Electronically create and transmit tariff filings toFMC

b Provide fault tolerant filing e g backup computer

c Provide compatibility with existing systems to theextent possible

2 Key FMC Tariff Processing Requirements

a Accept electronically filed tariffs eg new tariffsessential terms amendments

b Provide tickler capability eg reminder to followup on a letter of criticism

c Perform computerassisted conformity check of tarifffilings eg syntactic validity associative edits

d Provide workload tracking functions eg trackstatus of new tariff filings

e Generate FMC communications eg letter ofrejection

f Route tariff filings

g Collect workload statistics eg number of newtariffs filed in a week

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3 Key Tariff Retrieval Requirements

a It is expected that any valueadded services builtinto this system will be for FMCs internal use exclusivelyThirdpart vendors will provide valueadded services to thepublic

b Retrieve current tariff information with differentkeys eg origin and destination

c Retrieve historical tariff information with differentkeys eg commodity code

d Link tariff information to other data sources

e Retrieve current tariff information in differentformats eg page

t Retrieve historical tariff information in different

formats eg entire tariff

g Provide computerassisted identification of filed dataeg subscription service

h Retrieve tariff information to support enforcementeg rerating

i Retrieve tariffs to support special studies eg rateindices

4 Key Functionality Requirements

a Accuracy eg amendments are properly applied tothe data base

b Timeliness eg quick turnaround on posting newrates

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c Security eg user identification and passwords

d Special analyses for FMC eg rate indices

5 Key Policy Assumptions

a FMC will provide public access to the system viaterminals in a public terminal room at the FMC FMC willmake copies of the data base available to thirdparty vendorswho could then resell the data or valueadded services on aretail basis

b FMC would not want the system to provide valueadded services directly to the public these services will beprovided by thirdparty services Any valueadded servicesprovided by the system would be available only to FMC userseg for enforcement purposes

c FMC would not want to restrict ownership rights tothe data base as a creative financing method

The functions and requirements of tariff automationidentified in the study have not changed and have become thebackbone of subsequent efforts to procure the ATFI systemThe system concept developed and recommended to theCommission by the Contractor had a total estimated cost of73 million and an estimated implementation time frame of 14months The cost estimate was based on a present valuecalculation for the fiveyear period and the implementationtime frame consisted of design and implementation phasesincluding training data conversion and testing The cost

estimates were considered conservative in the sense that theywere the costs for complete development ie building fromscratch Some of the commercial tariff services may haveexisting systems which could be adapted to meet a portion ofthe functional requirements ofATFL

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The Feasibility Study concluded

Tariff automation appears to offer significant benefits tothe maritime industry and to the FMC tariff automationappears to be politically feasible and the potential costsof tariff automation appear to be within the reasonablerange when balanced against the benefits that wouldaccrue and the practical limits in the budgetary process

The ATFIAdvisory Committee in approving the FeasibilityStudy in principle made two further recommendations whichthe Commission adopted

o First the FMC should proceed with tariffautomation as described in the study

o Second the Commission should conduct acostbenefit study of tariff automation to ensurethat the perceived benefits are not outweighed bythe costs of the impact of automation upon theindustry

G BENEFIT COST ANALYSIS and

PROCUREMENT AUTHORITY

In October 1987 a Benefit Cost Analysis was preparedby a commercial contractor and corroborated the economicfeasibility of the project This analysis was submitted to theOffice of Management and Budget

In December 1987 a delegation of procurement authorityfor the project was obtained from GSA

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H INQUIRY ON THE FUNCTIONALITY OF ATFIand PRESOLICITATION CONFERENCE

In December 1987 the Commission began to develop adraft request for proposals RFP which would yield commentfrom the vendor community on the project At the same timethe Commission sought public comment on the proposedfunctionality of the system in a Notice of Inquiry

The purpose of this outreach program was to ensurethat the regulated community and the potential user publicwere fully aware of the Commissions plans for tariffautomation Comments were requested from other thanpotential bidders on the basic functionality of the proposedATFI system This functionality as set forth in the Notice ofInquiry has remained constant throughout the project

The electronic ATFI system for which the FMC isseeking a prime contractor will be run on the contractorscentral computer with appropriate terminals at the FMCfor tariff review processing and retrieval The format oftariff data to be electronically filed is being developed inconjunction with the industry Transportation DataCoordinating Committee and will emphasize tariff lineitems visavis tariff pages as under the present systemTariff line items are basically equivalent to commodityrate items in current paper tariffs and can be amendeddirectly without having to issue an entire revised page

As recommended by the FMCs AdvisoryCommittee standardized commodity or geographic codingwill not be mandated at the beginning but the systemmust have the capability to provide for these functions atthe appropriate time The system will also include theessential terms of service contracts

Full implementation of the system will be in phasesto allow commercial firms time to adapt their operations

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Exemptions at least temporary will be granted to sometypes of tariff filers who are not economically able to usethe electronic system

The system will be as compatible as possible withexisting computer equipment through the use of softwarefor hill connectibility Filing of tariffs will be doneprimarily by using asynchronous terminals or

microcomputers dialing in with a modem to the FMCsdata base The filing software will provide online editchecks to ensure that the tariff information is correct and

that basic statutory provisions are complied with beforethe tariff can be officially on file Such edit checks forexample will be able to electronically identify impropereffective dates such as a rate increase on less than 30days notice Other problems for which rejection iswarranted such as unclear or conflicting tariff provisionswill still have to be handled by FMC staff and ifnecessary resolved at the Commission level The systemscomputer capabilities however will facilitate this processalso

The ATFI system will have appropriate securitymechanisms to protect the integrity of the data base

Tariff filers will be able to file and amend their

tariff materials by remote access directly to the ATFIsystem by carriers or conferences almost any time of dayThe carrier or conference will be able to screenscan its

tariff so that the appropriate item can be amendedCommercial tariff services can also continue to be usedby carriers and conferences for filing eg by direct inputinto the data base after creating tariffs on instructionfrom their clients or transforming their paper tariffs intoelectronic form The FMC will encourage commercialtariff services to assist small firms who may find itdifficult to file electronically

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Once the tariff data are officially on file the FMCwill download the entire data base in flat files

formatted onto computer tapes which will be sold to anyperson at the relatively inexpensive marginal cost ofdissemination This will satisfy the FMCs statutory dutyof providing copies of tariffs at a reasonable charge Inorder to keep up with a substantial number of rapidlychanging freight rates in the shipping industry howeverinterested persons must obtain these updated data basetapes frequently FMC will offer a subscription serviceto provide this capability

The FMC will not perform any valueaddedprocessing of the tariff data for sale to the shipping publicin competition with commercial tariff services It isexpected that those services will subscribe to the database tapes to facilitate their valueadded services TheFMC must however use the system to process tariff datainternally for investigative and other regulatory purposesand will continue to utilize appropriate and availablevalueadded services of commercial tariff firms for this

purpose

In order to carry out its other statutory function ofmaking tariffs and essential terms of service contractsavailable for public inspection the FMC will continue tohave a public reference room at its Headquarters inWashington DC Here interested persons can access aterminal on which information on a particular tariff willbe brought up on the screen and scanned to find thenecessary rates and rules Paper copies of tariff data willstill be available upon written request especially forcertification to courts and other tribunals for proceedingsinvolving disputes over historical tariff rates Inquiry onTariff Automation December 22 1987 52 Fed Reg48504

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Explained in the Notice of Inquiry and contained in thedraft RFP was remote access to the FMC data base by modemalmost any time of the day for retrieval of tariff information byany interested person This is described in the October 281986 Feasibility Study Final Report as follows

b Retrieval and Analysis by the Public

FMC would also allow remote access whereby amember of the general public could access the automatedtariff system from remote locations For example thesystem would enable a shipper on the West Coast toretrieve data from the automated tariff system using aterminal or microcomputer equipped with a device iea modem to enable data communications over publictelephone lines

However members of the general public would onlybe able to perform relatively rudimentary retrievals andessentially no analysis of the data Specifically membersof the public would only be able to retrieve one tariff ata time in its full format To retrieve a tariff the publicuser would have to specify the specific tariff of aparticular carrier that is desired the public user wouldnot be able to search by keys eg by route orcommunity

FMC has imposed these restrictions based on acareful analysis of applicable federal policies andprecedents FMC does not want to compete with thirdparty services for the provision of sophisticated retrievaland analysis of tariff data for shippers carriers andothers in the private market In the absence of tariffautomation ie the status quo FMC will make

available copies of tariffs to members of the public onlyif they can specify the particular tariff desired A userfee is assessed for this service FMC would not expandthese services after tariff automation is implemented

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However FMC would help ensure that thirdpartyservices can provide such services Pages IV8 and 9

While the Commission was waiting for public commenton the proposed features and functionality of the proposedATFI system a draft RFP was issued to the vendor communityFirms and individuals on the bidders list were requested tosubmit their questions on the proposed competitive acquisitionand to attend a presolicitation conference for an opportunityfor facetoface questioning

In April 1988 the Commission issued its Report on TariffAutomation Inquiry 53 Fed Reg 13066 and detailed itsrationale for the features and functions proposed for thesystem

I REMOTE RETRIEVAL

When the Commission was finalizing the RFP it hadbecome aware of concerns raised by both the HouseSubcommittee on Information Justice and Agriculture andOMB The concerns revolved around the functionality ofremote retrieval As stated earlier this feature would allowthe shipping public to dial via telephone modem for accessto an individual tariff of a carrier or conference It would giveaccess to one tariff at a time and would not provide forsophisticated searches The questions about this feature werebased on the perception that the Commission would competewith existing or intended valueadded services offered byprivate sector firms In June 1988 the Commissionacknowledged its commitment to tariff automation but placedthe development of the system on hold to resolve the remoteretrieval concerns 53 Fed Reg 22048

During the period June December 1988 the Commissionreassessed the functionality of the ATFI system especially inthe area of remote retrieval This process involved a dialogue

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with officials of Congress and the Executive Branch Technicalrevisions were made to the RFP to reflect new fundingexigencies and legal requirements In October 1988 theCommission issued to some 200 potential offerors a seconddraft RFP for comment on the technical revisions Howeverthe Commission remained concerned about the questions onremote retrieval and stated in the letter transmitting the seconddraft RFP

The remote retrieval issue has not been finally decidedAccordingly this draft RFP is issued with the remoteretrieval question still open That issue will be decidedin the final RFP

After much analysis and reconsideration the Commissiondecided in December 1988 to retain the functionality of thesystem with remote retrieval In its Second Report on TariffAutomation Inquiry the Commission stated

The controlling question is In designing thefunctionality of its ATFI system has the Commissionproperly considered and balanced competing interestssuch as 1 the systems utility to shippers carriers andother members of the shipping public and 2 the futurerole of privatesector information services TheCommission believes it has

In October 1986 a year before the Commissionheard of any complaints about remote retrieval itsprivatesector contractor issued A Comprehensive Studyof the Feasibility of an Automated Tariff System Thisreport accurately describes the proposed functionality ofthe ATFI system in terms sufficiently precise for privatesector firms to fully understand for the purpose ofsubmitting proposals This public report was consideredand discussed by the Commissions Industry AdvisoryCommittee at the time and there were no objections toremote retrieval

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More importantly with the approval of theCommission and the Advisory Committee the FeasibilityStudy Report suboptimized ATFIs public retrievalfunctions as an accommodation to privatesectorinformation firms

FMC does not want to compete with thirdpartyservices for the provision of sophisticated retrieval andanalysis of tariff data for shippers carriers and others inthe private market Page IV8

Accordingly the self imposed restrictions wouldallow the general public to perform only relativelyrudimentary retrievals of tariffs and essentially noanalysis of the data

In consideration of the statutory duties of theCommission and the available technology required for itto properly perform these functions the 1986accommodation appeared reasonable It still does

The shipping public should also benefit from thismodern technology by being allowed to obtain basic rawtariff data on a limited basis For more sophisticatedservices the utilization of thirdparty vendors both forfiling and retrieval is continued to be encouraged Anefficient tariff filing and retrieval network will promotefair competition and facilitate trade

Accordingly and after further analysis theCommission believes that it has sufficiently consideredall policies and conflicting interests involved in theproposed system and has struck a proper balance inretaining the functionality of ATFI as originally devisedin the Feasibility Study and as further refined in theRFP December 23 1988 53 Fed Reg 52785

See also Section K Update on Remote Access March1990 below

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J CONTRACT AWARD and BEGINNING OF ATFI

After receiving much technical comment on the two draftRFPs and after resolving the remote retrieval issue theCommission issued a final RFP in January 1989 to over 200potential offerors on the bidders list Eight proposals werereceived in March 1989 and evaluated for technical quality andcost effectiveness

On August 8 1989 the ATFI contract was awarded forPhase I System Concept including verification ofrequirements and Phase II System Design to PlanningResearch Corporation PRC of McLean Virginia teamingwith Data Exchange International DXI of PittsburghPennsylvania which had the best technical as well as the bestcost proposal Work on the first phase began on September 51989

The contract for the fiveyear system life also containsoptions for each subsequent phase ie development andtesting prototype operation and each of four years of fullscale operation which is scheduled to begin in December1990 If all options are exercised the contract is worth about46 M

K UPDATE ON REMOTE ACCESSMARCH 1990

Since the 1986 Feasibility Study See Sections F H andI above the FMCsAutomated Tariff Filing and InformationSystem ATFI has been designed to accommodate remotefiling and retrieval of tariff data through modems to and fromthe offsite host processor mainframe computer However toavoid competition with privatesector tariff services the design

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contemplates restrictions on remote retrieval such as theability to retrieve only rudimentary information onetariffatatime

Such a restriction has now been enacted into law 2bPub L 10192

The Commission shall impose reasonable controlson the system to limit remote access usage by any oneperson

Congress has explained this provision as follows

Concern has been expressed over the use andaccessibility of the ATFI system by all interested partiesIn particular the remote retrieval function will permitthe public to dial into the system by modem and obtaina particular carriers rates on a requested commodity ina given trade

At the present time no precise definition ofreasonable controls in the limiting of access can beoffered because the system has yet to be developedor implemented However the following non exclusivepossibilities are reasonable First members of the publiccould be limited to retrieving one tariff at a time in itsfull format and the use would have to specify the specifictariff of the particular carrier that is desired In thealternative specific limitations on access time could beimposed and automatic logoff would then occur Eitherlimitation or a combination of both could satisfy therequirement discussed herein HR Rep No 31101st Cong 1st Sess

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While the ATFI system has not yet been fullydeveloped the Committee expects that controls will bebuilt into the design These controls can be in the formof a limitation on access at any one time and a limit onthe total amount of time on the system with an automaticlogoff feature Some form of user identification willassist in preventing circumvention of the limitationfeatures and prevent a monopolization of the system bya single entity S Rep No 71 101st Cong 1stSess

Both the House Merchant Marine and Senate Commerce

Committees also requested to be kept informed ondevelopments on reasonable restrictions as early as Phase IIIDevelopment

In addition to the foregoing similar language wascontained in HR Rep 173 to HR 2991 Pub L 101162the FMC FY 1990 Appropriations Act

In implementing this system the Committee expectsthe Commission to develop procedures that will ensurethat ATFI will not compete with private sectorproviders of information services As the Commissions1986 Feasibility Study recommended remote access tothe system should be only rudimentary with essentiallyno analysis of the data In addition the proceduresgoverning the system should provide that the user be ableto access the system on a limited number of items beforeautomatic logoff

SRep No 101144 to HR 2991added the word unfairly otherwise

the language is identical

Phase I of the ATFI contract ATFI System Concept andPhase II System Design have now been completed Phase IIIDevelopment and Testing began in February 1990 and PhaseIV Prototype is scheduled to begin in April 1990 The ATFI

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Contractor working with the Commission staff has developedreasonable controls and procedures governing remote access toaccommodate the intent of Congress as described aboveThese however will be subject to further changes asdevelopment of the system progresses and even afterexperience during prototype and full operation

Preliminarily it is intended that there be automatic logoff for any kind of modem access after five or ten minutes ofinactivity This is similar to many types of electronic remoteaccess services

For remote retrieval of tariff data the design calls forspecification by the user of a particular tariff desired to beaccessed after consulting a table of contents at logon Toidentify the soughtafter Tariff Line Item TLI there will

also be various help functions such as commodity indexesbefore bringing up the item on the screen

Because tariffs will continue to have separate Rulessections governing the applicability of the rate these sectionsof the same tariff may also be accessed Moreover where thetariff filer has a separate Rules or BillofLading tariffinstead of an allinclusive section in the same tariff thesetariffs may also be accessed during the same session In orderto be able to accurately determine the applicability of a ratethese unique types of tariffs will be the only clarification to theonetariffatatime limitation

When the system first becomes operable in early 1991 itis intended that the retriever will be automatically logged offafter 30 minutes This should allow sufficient exploration of allthe applicable rules and perhaps another TLI if there was amistake in selecting the first TLI After experience this timelimit can be adjusted upward or downward

Software will be developed to assist in correcting as manyproblems as possible before tariffs are filed either interactivelyor by the batch process This should minimize errors and

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rejections In order that a carrier can determine that a filingsession has been successful however it will be allowed accessto only its own filing in the non public review file and toconsult a special message screen developed for this purposeThe fewer the errors the easier it is for all concerned

The system design will also provide for user identificationand monitoring of utilization so that action can be taken toprevent access abuses by any individual or group

If there are any further developments or changes to thecontrols and procedures governing remote access theCommission will continue to keep Congress promptly apprised

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VI

SECTION 18 STUDY

A SECTION 18 THE MANDATE FOR AFIVEYEAR STUDY OF THE

IMPACT OF THE SHIPPING ACT OF 1984

Calendar year 1988 was the last full year of the datacollection period outlined in section 18 of the Shipping Act of1984 Section 18 of the Shipping Act of 1984 hereafterreferred to as the Act directs the FMC for a period of fiveyears following its enactment March 18 1984 to collect andanalyze information concerning the impact of the Act upon theinternational ocean shipping industry In section 18aCongress specified that the information collected shouldinclude data on among other things 1 increases or decreasesin the level of tariffs 2 changes in the frequency or type ofcommon carrier services available to specific ports orgeographic regions 3 the number and strength ofindependent carriers in various trades and 4 the length oftime frequency and cost of major types of regulatoryproceedings before the Commission

Section 18b of the Act states that the FMC shall consultwith the Department of Justice DOJ the Department ofTransportation DOT and the Federal Trade CommissionFTC annually concerning data collection and that theseagencies shall at all times have access to the data collectedunder this section to enable them to provide commentsconcerning data collection Thus far the FMC staff has metwith the staffs of these agencies over a dozen times

The Act further specifies in section 18c that thefollowing three topics should be addressed

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o The advisability of adopting a system oftariffs based on volume and mass of

shipment

o The need for antitrust immunity forports and marine terminals and

o The continuing need for the statutoryrequirement that tariffs be filed andenforced by the Commission

Within six months after expiration of the fiveyear periodof data collection the Commission is to report the informationwith an analysis of the impact of the Act to Congress to theAdvisory Commission on Conferences in Ocean ShippingAdvisory Commission and to the DOJ DOT and FTC Thethree aforementioned agencies will also submit their ownanalyses on the impact of the Act 60 days after the FMCsubmission to the Congress and the Advisory Commission

The Advisory Commission is charged with conducting acomprehensive study of and making recommendationsconcerning conferences in ocean shipping The study shallspecifically address whether the Nation would be best servedby prohibiting conferences or by having closed or openconferences The Advisory Commission shall within one yearafter its establishment submit to the President and to Congressa final report containing a statement of findings andconclusions including recommendations for such

administrative judicial and legislative actions as it deemsadvisable

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B EXECUTIVE SUMMARY FROMTHE FMC SECTION 18 REPORT

1 Introduction

The Section 18 Report on the Shipping Act of 1984Section 18 Report or Report presents a detailed evaluation

including supporting data and analyses of the impact of theShipping Act of 1984 1984 Act on the international shippingindustry It is the product of a fiveyear study by the FederalMaritime Commission FMC or Conunission mandated byCongress in section 18 of the 1984 Act and addresses a set ofspecific issues that Congress believed would be important inassessing the regulatory reforms embodied in the 1984 Act Inparticular the Commission was required by section 18a ofthe Act to collect and analyze data on 1 increases ordecreases in the level of tariffs 2 changes in the frequency ortype of common carrier services available to specific ports orgeographic regions 3 the number and strength ofindependent carriers in various trades and 4 the length oftime frequency and cost of major types of FMC regulatoryproceedings These topics are addressed in Part One of theReport

Congress also identified three specific topics in section18c3of the 1984 Act that the Conunission should addressin its Report 1 the advisability of adopting a system of tariffsbased on volume and mass of shipment 2 the need forantitrust immunity for ports and marine terminals and 3 thecontinuing need for the statutory requirement that tariffs befiled with and enforced by the FMC These topics arediscussed in Parts Two Three and Four of the Report

The Report also addresses service contracts andindependent action IA in Parts Five and Six Finally PartSeven of the Report identifies certain provisions in the 1984Act that may require clarification or technical amendment

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This Executive Summary presents an overview of the 1984Acts impact and summarizes the Conunissionsfindings andconclusions

2 Overview

Under the 1984 Acts new agreement review process andstandard the Commission experienced a an increase in theaverage number of agreements and modifications filed eachyear b a reduction in average processing time peragreement and c a decline in the cost of proceedings beforethe Commission These changes freed more Commissionresources for expanded enforcement activity which broughtabout significant increases in penalty collections

These procedural improvements also enabled theCommission to devote more time to address foreigngovernment restraints on shipping The Commission institutedmore proceedings under section 19 of the Merchant MarineAct 1920 since enactment of the 1984 Act than at any othercomparable period of time These Commission actions havehad a positive influence on trading conditions in the USforeign commerce

The 1984 Acts reforms did not bring about the negativeconsequences that some observers predicted The creation ofsuperconferences and the increase in rationalizationagreements did not result in sharp rate increases curtailmentof shipping services or Loss of independent carrier competitionThe 1984 Act did not have a significant impact on rate levelsservice frequency or the strength of independent competitionThe US trades remained open and competitive

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The popularity of the IA and the service contractprovisions of the 1984 Act led to a disagreement aboutwhether common carriage obligations should be relaxed Inparticular major shippers have called for a greater role forcontract carriage These shippers would like Congress toestablish a clear distinction between common carriage undertariff rates and carriage under service contracts They woulda require that the terms of service contracts be keptconfidential and b prohibit conferences from restricting theright of their members to enter into service contracts

Carriers on the other hand assert that these steps wouldultimately undermine the tariff system the conference systemand the principle of common carriage in ocean shippingInstead they advocate continued filing and publication of theessential terms of service contracts and the availability ofthose terms to similarly situated shippers

3 Part One The Impact of the 1984 Shipping Acton the International Shipping

As required by the 1984 Act the Commission collectedand analyzed information on the Acts impact on rates serviceindependent carriers and regulatory proceedings In additionthe Commission conducted a series of annual surveys to solicitthe views of the maritime industry on the consequences of the1984 Act These survey results were supplemented by policypapers presented by industry representatives serving on theSection 18 Study Advisory Committee

The major conclusions to be drawn from this informationare as follows

a Data and Analysis on the Impact of the 1984 Act

1 The Commission experienced an increase in theaverage number of carrier agreements and modifications filed

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each year and a reduction in the average processing time peragreement

2 Changes in the agreement review process andstandard of review made easier the creation ofsuperconferences and the use of conference intermodalauthority

3 The 45day agreement effectiveness provision in the1984 Act decreased the average processing time foragreements to become effective to less than onethird of thatrequired for approval prior to the 1984 Act The total cost ofmajor proceedings declined as well

4 Following implementation of the 1984 Act therewas a decline in the number of major proceedings before theCommission coupled with a modest increase in the averagelength of those proceedings The Commission was abletherefore to concentrate its resources on more complexproceedings and other issues including enforcement cases andstrategies

5 Independent action rates and service contractsexpanded the commercial options available to the shippingpublic In some trades porttoport tariff rates became theexception rather than the rule

6 The main factors that explain freight rate structuresvalue tonnage distance direction stowage refrigeration didnot change appreciably as a result of the 1984 Act Wherechange was noted in the significance of the directionvariable ie outbound US versus inbound US the most

likely cause appeared to be trade flow imbalances rather thanprovisions of the 1984 Act

7 Quarterly rate data on the major movingcommodities in 18 US trades between 1976 and 1988 indicate

that fluctuations in the supply of and demand for liner shippingservices not IA and service contract provisions were the

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basic cause of the rate changes that occurred afterimplementation of the 1984 Act

8 A comparative study of rate stability in 18 UStrades before and after implementation of the 1984 Actindicates that only six USPacific trades experienced a decreasein rate stability However that decrease began in 1982suggesting that changes in the international economy were theprimary cause

9 A comparison of shipping capacity growth ratesbefore and after implementation of the 1984 Act showed thatof the six US trades studied North Europe the North Pacificthe South Pacific Italy Australia and Brazil three tradesexhibited no dramatic changes in growth two trades showedsignificant increases in capacity growth and one trade theAustralia trade showed a decrease in capacity growth Theseresults suggest that the prevailing economic conditions inspecific trades rather than particular provisions of the 1984Act were the important influences on the level of capacityprovided to shippers

10 A comparison of the largest US trade the Pacifictrade with the largest nonUS trade North EuropeFar Eastinvolving nine basic service parameters revealed broadlysimilar patterns of change during the 1984 to 1988 periodThese results further support the view that factors other thanthe 1984 Act were mainly responsible for changes in servicelevels

11 Data from the six trades studied indicate that nocontraction in the average number of direct ship calls occurredbetween 1984 and 1988 In fact the average number of callsmade annually in the US port regions studied increased slightly

12 As inland transport costs declined relative to allwater transport costs service concentration at the US rangeclosest to the foreign destination increased

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13 The relative strength of independent carriers asreflected in the proportion of total shipping capacity providedhas changed little since the implementation of the 1984 ActIn some individual trades such as the North Europe tradeindependents made significant market share inroads

14 Independent carriers made significant gains in termsof tonnage carried in the largest US trade ie the Pacifictrade

15 Comparisons of valuetotonnage ratios betweenconference and independent carriers show that in most UStrades conference cargo mixes yield a higher ratio But figuresalso show that independent carriers reduced the differencebetween their ratio and those of the conferences in most US

trades Independents appear to be increasing the proportionof high valued cargo in their cargo mix

16 The Brazil trade with its bilateral maritimeagreement revenue pooling agreements and cargo reservationlaws is characterized by high conference market share with noindependent action on rates

b Industry Views on the 1984 Act

The views offered by various industry segments affectedby the 1984 Act varied widely They varied both acrossindustries and within each industry A presentation of eachindustry groupsviews is contained in Chapter 7 To the extentthat consensus exists on some key points the following broadconclusions can be drawn

1 There is industry support for retaining an openconference system in the US trades Alternative approachessuch as prohibiting conferences or allowing closedconferences had little support

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2 A majority of the international ocean shippingindustry supported the proposition that tariffs continue to befiled with and enforced by the FMC

3 The revised agreement review process in the 1984Act has proven beneficial

4 The more controversial 1984 Act provisions are athe mandatory independent action provision and b theprovision permitting service contracts Generally shipperstended to endorse shorter notice periods for IA and theextension of IA to service contracts while carriers tended toprefer the opposite

4 Part Two Volume and Mass Tariff System

a In response to Commission surveys neither usersnor providers of tariffs favored a system of tariffs based solelyon volume and mass ie weight or measure or afreightallkinds system

b An analysis of the economic implications ofadopting a system of tariffs based on volume and mass suggeststhat such a system could cause distortions in the existingtransportation system

c Volume and mass tariffs might Lead to a simplersystem and therefore require less regulatory oversight Sucha system could also

1 Reduce the movement of lowvalued cargo in theUS trades

2 Increase the impact of IA on conferences

3 Create distortions in the choice of ports if Canadafor example does not impose a similar system and

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4 Complicate intermodal ratemaking

d Based on both data and theory it is difficult tomake a case for adopting a system of tariffs based on volumeand mass of shipment

e There was some support especially amongshippers for a lumpsum per container system This suggestssupport for a more simplified tariff structure

f There is little data to support the contention thatthe current rate structure results from conferences exercise of

monopoly power

5 Part Three Antitrust Immunity for Ports andMarine Terminal Operators

a The regulation of marine terminals was a reactionto the pricing policies of railroadowned marine terminals andtheir effects on competition among shipping lines The currentsystem of terminal control and coordination by state sponsoredpublic port authorities does not present similar threats tocompetition

b The need for antitrust immunity to lessen excessivecompetition depends on ones theoretical point of view Theneoclassical economic interpretation concludes that there is nostrong case for antitrust immunity On the other hand theAustrian economic view states that a case can be made for

granting antitrust immunity

c Public or quasi public agencies are not motivatedsolely by economic considerations and antitrust principlesbased on the traditional ideas of competition may not be fullyapplicable Interport conferences that include members fromtwo or more states generally are not successful in reducinginterport competition

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d There is no clear public benefit in allowing privatemarine terminal operators to collectively fix rates and chargeswithin a port Granting antitrust protection for such purposesmay not be necessary or economically justifiable

e The need to provide antitrust immunity for portauthorities and private terminal operators to allow parity withcarrier conferences is questionable Carriers bargainingstrength over terminal leases or services is generally due toportrelated geographical and logistical factors and theavailability of alternative portsofcall not to the carriers 1984Act antitrust immunity

f Public port authorities may enjoy protection fromUS antitrust laws even without 1984 Act antitrust immunityHowever not all ports may enjoy the same level of immunityThis could result in a nonuniform application of antitrustimmunity

g Whether to retain the current 1984 Act antitrustimmunity provisions dealing with marine terminals or to limitthem only to public port authorities or to remove themaltogether requires a value judgment that balances allregulatory concerns These include economic analysis antitrustpolicy state and federal regulatory responsibilities andestablished industry practices

6 Part Four FMC Tariff Filing and Enforcement

a The historical record reflects a continuing relianceon tariff filing and enforcement

b Based on annual survey responses a majority ofthe shipping industry favor the continuation of the existingtariff filing and enforcement system

c Surveys indicate that carriers believe they shouldcontinue to have the right to file excepted commodity rates

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but oppose IA on these rates Shippers are divided on thefiling issue but favor mandatory IA on excepted commodityrates

d Surveys of the tariff filing and enforcementpractices of foreign governments reveal a trend towardsincreased tariff regulation

e The Commission would find it difficult to meet its

legislatively mandated responsibilities in the absence of tariffrequirements

f Of the policy options considered only the existingsystem ensures a nondiscriminatory ocean transportationsystem

g The existing tariff filing and enforcementmechanism in an open conference environment can promotemarket efficiency ensure fair treatment of shippers by carriersand preserve just competition between carriers

7 Part Five Service Contracts

a Service contracts have had a significant impactupon the maritime community During the period of studycarriers and conferences filed 17103 service contracts andsubstantial amounts of cargo moved under those contracts

b Sixtynine percent of service contract filings wereby independents or individual conference carriers and 31percent were by conferences

c Evergreen Line filed more service contracts2333than any other carrier or conference The Asia North AmericaEastbound Rate Agreement ANERA had the second

highest total 1317 and the North EuropeUS AtlanticConference was third 1253

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d There was a wide variation in rates betweenservice contracts and tariffs for similar commodities carried byconferences

e Industry opinions are mixed on both the effects ofservice contracts and the extent to which the service contractprovisions of the 1984 Act should be amended

1 Since 1986 carriers have increasingly indicated thatservice contracts have had a positive impact on their firms

2 Shippers especially those who have successfullynegotiated them view service contracts favorably

3 Majority support existed in the maritime community for continuing to require that the essential terms of servicecontracts be made publicly available However a significantnumber of shippers prefer confidential contracts

4 Carriers oppose while shippers support requiringindependent action on service contracts

8 Part Six Independent Action IA

a IA allows conference members to offer lower rates

and more responsive service to shippers IA enhances thecompetitiveness and flexibility of conferences because themembers are able to compete both among themselves and withindependents If intraconference competition becomes toointense the ability of the conference to stabilize rates can bethreatened Although mandatory independent action may haveexpedited changes in tariff rates market conditions determinedtheir ultimate levels

b The large number of lAs taken by two conferencesin the Pacific trades the Transpacific Westbound RateAgreement TWRA and ANERA may reflect the level ofcompetition from independents in those trades The recent

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decrease in the use of IAs by TWRA carriers may beexplained by growing US exports that have served to reduceexcess shipping capacity Slowing imports may be the reasonfor the growing use of IA by ANERA carriers

c Mandatory independent action in conferenceagreements was not subject to as much debate as was thelength of the maximum IA notice period The current tendaymaximum period was opposed by carriers and supported byshippers While the tenday notice period may have facilitatedcarrier rate reductions it did not cause them The cause wasmore likely overtonnaging

d Service contract rates were affected by IA on tariffrates because tariff rates were often the basis for negotiatingservice contract rates

e It is difficult to formulate specific conclusionsconcerning IA on service contracts ie a members right toenter into individual service contracts because of the minimalamount of such activity under the 1984 Act The impact ofservice contract IA on the conferences ability to establishuniform rates in an overtonnaged market could last longerthan for IA on tariffs because a service contract effectivelydiverts at least a portion of a shippers cargo from othercarriers for the duration of the contract rather than for asingle voyage

9 Part Seven Technical AdjustmentsClarifications and Anomalies

The Commission has identified certain provisions of the1984 Act which are unclear or might create unintended effectsThese provisions are discussed in the Section 18 Reports finalchapter

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10 Endnotes

1 Position of the Shipper Study Group and Advisory Committee onAmendments to the Shipping Act of 1984 March 24 1989 pp 1920Submitted to the FMC by 22 US shippers

2 Ocean Common Carrier Position Papers on the Shipping Act of 1984March 20 1989 Submitted to the FMC by the 27 carrier members of FMCAgreement 203 0108511

3 Cross tabulation analysis revealed for example differences amongshipper views by size small medium large among carriers by affiliationindependent conference member and among private marine terminaloperators by commercial status independent company carrier affiliatedcompany

4 The Shipper Study Group and Advisory Committee advocated theelimination of antitrust immunity See Shipper Study Group paper ibidpp 710

C SURVEYS

Since 1986 the Federal Maritime Commission has sentsurveys to various industry groups seeking information andopinions on certain aspects of the Shipping Act of 1984 In1986 surveys were sent to carriers shippers ports and nonport marine terminal operators In 1987 freight forwarderswere added to the list of survey recipients The 1988 surveywas sent to all the above plus NVOCCs and shippersassociations The survey results of all three years were usedin the CommissionsSection 18 Report

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D SECTION 18 STUDY

ADVISORY COMMITTEE

The Federal Maritime Commission established an

Industry Advisory Committee to make continuingrecommendations on the conduct of the section 18 study Thecommittee is comprised of 32 members The members arerepresentatives from conferences ocean common carriers nonvesseloperating common carriers ocean freight forwarderscustoms brokers shippers shippers associations ports privatemarine terminal operators and other transportation servicefirms

The first meeting of the Advisory Committee took placeon March 10 1988 at the FMC headquarters building inWashington DC The second meeting was held at the sameplace in April 1989 The committee addressed the

Commissions data gathering efforts to date and had theopportunity to submit position papers outlining their views onthe impact as well as changes they wished to see made to the1984 Act

A synopsis of their views contained in these positionpapers follows

1 The Ocean Common Carrier Group recommendedessentially no changes to the status quo ie maintain FMCtariff filing and enforcement publicly available servicecontracts antitrust immunity for conferences and otherconcerted activities open conference system and mandatoryindependent action except that the notice period should belengthened from 10 to 60 days

2 The Shipper Advisory Committee and StudyGroup suggested that Congress should amend The Act to endconference antitrust immunity and also called for theelimination of port antitrust immunity The shippers supportedthe current tariff filing and enforcement regime should

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antitrust immunity be retained preferred confidential servicecontracts reduced notice period for IAs currently 10 daysand wanted mandatory IA extended to service contracts

3 The American Association of Port Authorities

main concern is antitrust immunity for ports and marineterminals The group advocated retention of currentlegislation visavis port antitrust immunity

4 The parties to the Marine Terminal OperatorAdvisory Commission Study Agreement were in favor ofexempting terminalcommon carrier service agreements fromregulation and filing under the Shipping Act of 1984 They didnot believe that stevedoring operations should be regulated

5 The National Customs Brokers and Forwarders

Association of America NCBFAA supported the statusquo regarding tariff filing and enforcement mandatory IApublic availability of essential terms and antitrust immunity forconferences although we would be required to reevaluate ourcurrent support for this system if it continues to cause majordifficulties

6 In addition to the views of freight forwarders submittedby the NCBFAA the Pacific Coast Council of CustomsBrokers and Freight Forwarders Associations IncPCC submitted their perspectives on the 1984 Act ThePCC believes that antitrust immunity for concerted carrieractivities should be discontinued and so should tariff filing andenforcement as well as service contract filing Service contractand loyalty contracts should be freely negotiated between theparties without government intervention The PCC also

believes that both NVOCCs and VOCCs should be subject tolicensing and bonding requirements to protect the shippingpublic from financial injury

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7 The Shippers Association Study Group was infavor of maintaining the tariff filing and enforcement role ofthe FMC but thought that the FMC should take a tougherstance on service contract abuses particularly when carriersconferences do not negotiate in good faith with shippersassociations They also believe that just as conferences aregranted exemption from antitrust laws shippers associationsshould enjoy a similar exemption

8 The Non VesselOperating Common CarriersNVOCCs supported current tariff filing and enforcementprovisions and mandatory IA However they believe that theyshould be permitted to offer service contracts to their shippercustomers and receive antitrust immunity if carriers weregranted exemption from antitrust laws Most importantlyNVOCCs should be licensed and bonded by the FMC

9 The Consultative Shipping Group urged the FMCto focus on the effects which IA and service contracts have hadon rates and rate stability In addition they thought that theCommission should study whether the detailed approach tothe regulation of liner conferences adopted by the US is anecessary feature of antitrust immunity

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VII

THE

FOREIGN SHIPPING PRACTICES ACTOF 1988

A THE STATUTE

The Omnibus Trade and Competitiveness Act of 1988enacted by Congress and effective with the Presidentssigningon August 23 1988 contains at Title X Subtitle A theForeign Shipping Practices Act of 1988 1988 Act

The 1988 Act directs the Commission to address adverse

conditions affecting United States carriers in USforeignoceanborne trades which conditions do not exist for carriers ofthose countries in the United States either under US law oras a result of acts ofUS carriers or others providing maritimeor maritime related services in the US

B ACTIONS TAKEN UNDER THIS STATUTE

On July 21 1989 the Commission initiated aninvestigation under the Foreign Shipping Practices Act of 1988of certain doingbusiness restrictions of Taiwan authoritieswhich appeared to adversely affect the intermodal operationsof US carriers serving the United StatesTaiwan trade OnNovember 16 1989 the Commission issued a Report andOrder which discontinued this proceeding based oncommitments which appeared to resolve certain shippingissues anticipated progress on other issues and the absence ofany request for specific sanctions against foreign carriers TheCommission also determined that continued monitoring of thetrade was appropriate in order to evaluate whether theanticipated further progress was achieved The Commission

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therefore stated that it would require the carriers serving thetrade who were parties to this proceeding to reportsubsequently on the status of shipping conditions in thetrade

C TOP TWENTY US LINER CARGOTRADING PARTNERS

Section 10002g1 of the Omnibus Trade andCompetitiveness Act of 1988 requires the Federal MaritimeCommission to include in its annual report to Congress a listof the twenty foreign countries which generated the largestvolume of oceanbome liner cargo for the most recent calendaryear in bilateral trade with the United States

The data which the staff used to derive the Commissions

list of top twenty trading partners were furnished by theBureau of the Census Census The Census data distinguishbetween liner tramp tanker and dry cargo service Censusdefines liner service as that type of service offered by aregular line operator of vessels on berth The itineraries andsailing schedules of vessels in liner service are predeterminedand fixed The data supplied to the Commission by Censusare intended to exclude all nonliner shipments in accordancewith this definition

The export data are compiled primarily from ShippersExport Declarations while the import data are compiled fromthe import entry and warehouse withdrawal forms Both typesof documents are required to be filed with US Customsofficials These data are subsequently forwarded to CensusBoth export and import statistics exclude shipments betweenthe US possessions shipments of mail or parcel post exportsand imports of vessels themselves and other transactions suchas military household goods shipments bunker fuels and othersupplies intransit shipments through the United States etc

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The most recent year for which Census data wereavailable to the Commission is calendar year 1988 The tablebelow indicates the twenty foreign countries which generatedthe largest volume of oceanborne liner cargo in bilateral tradewith the United States in 1988 The figures below representeach countrys total United States liner imports and exports inthousands of long tons

Top Twenty US Liner CargoTrading Partners 1988

Tons

Rank Country 000s

1 Japan 136832 Taiwan 77933 Republic of Korea 54184 Federal Republic of Germany 41895 Italy 29956 China PRC 29697 United Kingdom Incl N Ireland 27988 The Netherlands Holland 24439 Hong Kong 2159

10 France 210011 Belgium and Luxembourg 201012 Brazil 185013 Australia 179514 Spain 154715 Thailand 121316 Indonesia 120817 India 987

18 Singapore 967

19 Philippines 940

20 Sweden 891

Source US Department of Commerce Bureau of the CensusFigures listed above are based on monthly data provided byCensus and are subject to revision

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The top ten countries were the same in both 1987 and1988 The only differences in the top ten countries betweenthe two years are the rankings of China PRC and the UnitedKingdom In 1988 China PRC ranked sixth as opposed toseventh in 1987 The United Kingdom ranked seventh in 1988as opposed to sixth in 1987 The top 11 through 20 countrieschanged moderately between the two years Eight of thecountries listed in 1987 appeared again in 1988 Two countrieslisted in 1987 Venezuela and Saudi Arabia were replaced bySingapore and Sweden in 1988

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VIII

SIGNIFICANTOPERATINGACTIVITIES

BY

ORGANIZATIONAL UNIT

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A OFFICE OF THE SECRETARY

1 General

The Office of the Secretary is responsible for preparing theregular and notation agenda of matters subject to considerationby the Commission and recording subsequent action taken bythe Commission on these items receiving and processingformal complaints involving violations of the shipping statutesand other applicable laws issuing orders and notices of actionsof the Commission maintaining official files and records of allformal proceedings receiving and responding to subpenasdirected to the Commission and its personnel for testimonyandor records administering the Freedom of InformationGovernment in the Sunshine and Privacy Acts responding toinformation requests from the Commission staff maritimeindustry and the public authenticating publications anddocuments related to formal proceedings before theCommission and compiling and publishing bound volumes ofCommission decisions

The Secretarys Office also participates in thedevelopment of rules designed to reduce the length andcomplexity of formal proceedings and participates in theimplementation of legislative changes to the shipping statutesDuring fiscal year 1989

o The Office began to plan for a more comprehensiveautomated management system in anticipation of alocal area network being installed The local areanetwork would link offices throughout theCommission

o Substantial progress was made in developingautomated methods for the coding archiving andediting of materials to be included in publishedvolumes of Commission decisions The process

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culminated in the publication of Volume 23 of theCommissionsdecisions

o The Commission published its Section 18 Report onthe Shipping Act of 1984 The office coordinateddata gathering regarding cost Length and frequencyof proceedings for inclusion in that report Theoffice also coordinated the public distribution of thefinal report

o The Commission heard oral argument in 1 formalproceeding and issued decisions concluding 12formal proceedings Eleven formal proceedings werediscontinued or dismissed without decision

including determinations not to review

Administrative Law Judge orders terminatingproceedings One case was also remanded back tothe Administrative Law Judge The Commissionalso concluded 86 special docket applications 15informal dockets which involve claims soughtagainst carriers for less than 10000 and 13applications to correct service contracts During thesame period the Commission issued final rules inseven rulemaking proceedings

o Five rulemaking proceedings and five formalpetitions were pending before the Commission at theend of the year Final decisions in these matters areanticipated in fiscal year 1990

2 Office of Informal Inquiries and Complaints andInformal Dockets

This Office coordinates the informal complaint handlingsystem throughout the Agency A total of 1383 complaintsand information requests were processed in fiscal year 1989including those handled through the District Offices

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Recoveries to the general public of overcharges refunds andother savings attributable to the complaint handling activitiesamounted to 136743 Since 1981 this Office has helpedcomplainants recover over2300000

The Office coordinated meetings between maritimeindustry representatives and Commission officials and suppliedcopies of procedures dockets and other information requestedby the general public During fiscal year 1989 this Officeresponded to 674 such telephone requests and inquiries TheOffice maintained liaison with members of the Presidents

Consumer Affairs Council in which it participated throughoutthe fiscal year

In addition the office is responsible for the initialadjudication of reparation claims for less than 10000 that arefiled by shippers against common carriers by water engaged inthe foreign and domestic offshore commerce of the UnitedStates These claims must be predicated upon violations ofthe Shipping Act 1916 the Shipping Act of 1984 or theIntercoastal Shipping Act 1933 The vast number of claimsreceived under this program constitute shippers requests forfreight adjustments arising from alleged overcharges by carriersDuring fiscal year 1989 13 claims were filed During the sameperiod 14 informal docket claims were concluded There wereno pending cases at the close of the fiscal year

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B OFFICE OF

ADMINISTRATIVE LAW JUDGES

1 General

Administrative Law Judges preside at hearings held afterthe receipt of a complaint or institution of a proceeding on theCommissionsown motion

Administrative Law Judges have the authority toadminister oaths and affirmations issue subpenas rule uponoffers of proof and receive relevant evidence take or causedepositions to be taken whenever the ends of justice would beserved thereby regulate the course of the hearing holdconferences for the settlement or simplification of the issues byconsent of the parties dispose of procedural requests or similarmatters make decisions or recommend decisions and take anyother action authorized by agency rule consistent with theAdministrative Procedure Act

At the beginning of fiscal year 1989 32 proceedings werepending before Administrative Law Judges During the year135 cases were added which included five proceedingsremanded to Administrative Law Judges for furtherproceedings The judges held 17 prehearing conferences heldtwo formal oral hearings formally settled one proceedingdismissed or discontinued seven proceedings and issued nineinitial decisions in formal proceedings and 92 initial decisionsin special docket applications

2 Commission Action

The Commission adopted four special docket decisions76 special docket decisions became administratively final andfour formal decisions became administratively final

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3 Decisions of Administrative Law Judges inproceedings not yet decided by the Commission

United States LinesSAInc Petition for DeclaratoryOrder Re The Brazil Agreements Docket No 8722

This proceeding began when United States Lines SAInc USLSA petitioned the Commission for a declaratoryorder seeking to terminate a controversy among carriermembers of two revenue pooling agreements serving the USAtlantic and US Gulf trades from Brazil Although USLSAbelieved that revenue earned from USLSAs new intermodal

service to Gulf ports should be accounted for in the Gulfagreement another line Ivaran Lines believed such revenuesbelonged in the corresponding Atlantic pool The Commissionreferred the matter to the Office of Administrative Law Judgesfor development of a suitable evidentiary record and for initialdecision After the record was developed an initial decisionwas issued resolving the controversy in favor of USLSAauthorizing release of withheld pool payments and suggestingthat the agreements needed amendatory language in relation tomodern inland intermodal services

Port ofPonce v Puerto Rico Ports Authority Docket No885

This case was a complaint proceeding where the Port ofPonce initiated the action against the Puerto Rican PortsAuthority PRPA alleging that PRPA had violated sections16 First and 17 of the 1916 Shipping Act and the successorprovisions of the 1984 Act As the case progressed the issueswhich developed were

1 Was PRPA an other person and marine terminaloperator within the meaning of the Shipping Acts so that theCommission had jurisdiction The Initial Decision ID foundthat it did have jurisdiction since PRPA had the requisite

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degree of control respecting the use of the facilities at PonceFurther the ID rejected PRPAs contention that in collectingfees from ships calling at Ponce it was doing so solely fornavigational purposes and that the tariff filing was onlyinformational in character In doing so it noted that the tariffimposed charges for services that were nowhere defined withinits terms and that the tariff was ambiguous

2 Did the complainant have standing The ID decidedthat the complainant had standing and that a later joining inthe action by the Municipal Assembly and Mayor of Ponce didnot prejudice the respondentscase

3 Did the respondent violate section 17 of the 1916 Actand 10d1of the 1984 Act The ID held that it did becauseeven though PRPA did not operate or own the piers at Poncethe tariff filed by PRPA imposed fees for undefined reasonsfrom some vessels while exempting others discriminatorilyFurther the services for which the fees were collected werenever rendered to vessels at Ponce which vessels could bedenied the use of the port if the fees were not paid

4 Were section 16 First of the 1916 Act and sections1061112 of the 1984 Act violated The ID held theywere not noting that the evidence of record failed to establishthere was undue or unreasonable preference or advantage given

5 Should reparations be granted Ponce The ID deniedreparations because the fees were paid by the vessels not byPonce and because Ponce did not establish that specificexpenditures it made for port services would not have beennecessary had the services enumerated in PRPAs tariff beenprovided

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California Shipping Line Inc v Yangming MarineTransport Corp Docket No 8815

This was a very important case of first impressioninvolving service contracts and the ability to metoo them byshippers Section8c of the 1984 Shipping Act is the operativesection The questions presented under the facts of this casewere

1 Was the complainant entitled to metoo three servicecontracts given to others by the respondent The InitialDecision ID held that the complainant was a similarlysituated shipper and was entitled to metoo the servicecontracts because the respondent denied the metoo requestout of hand and did not establish that the complainant wasdifferent from the other shippers in terms of transportationfactors

2 Did the respondent properly deny the metoorequests because of coloading The ID held that under thefacts here where the respondent did not even raise the issueuntil after the complaint was filed it could not have properlydenied the metoo request because of any intent to coloadespecially where the evidence was devoid of any showing thatthe complainant would have had to coload to satisfy theservice contracts The ID held that the question of whether ornot coloading was illegal in service contracts as a matter oflaw was not in issue

3 Where a service contract is terminated by a carrierafter a metoo request is made can the metoo request bedenied The ID held that since the one service contract wasterminated after the complainant had made its metoo requestthe request could not be denied as to the one service contractwhere the law provides that the contract may be metooedanytime within 30 days of the filing of the contract with the

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Commission It held further that time limits in theCommissionsregulations do not change what the law requires

4 Did the denial of the metoo requests violate sections10b5and 10b12 of the Act The ID held that thosesections were violated because the metoo requests weredenied out of hand and were blatantly and unjustlydiscriminatory

5 Were reparations allowable The ID held that theywere and that the evidence established the amount of suchdamages However double damages were not awarded

6 Were penalties appropriate The ID held that inview of the violations of the Shipping Act and because therespondent had misled the Commission with factuallyinaccurate information a penalty of5000 was appropriate foreach of the three violations

Pueblo Internationa4 Inc v Tropical Shipping andConstruction Co Inc Docket No 8909

This was a complaint proceeding wherein it was allegedthat the respondent violated the Shipping Acts by failing to fileits schedule of rates by collecting improper rates and byunjustly discriminating against the complainant The issuebecame one of the jurisdiction of the FMC visavis thejurisdiction of theICC

Before hearing the parties filed a confidential settlementagreement which represented a binding agreement only as tothemselves The agreement is a commercial accommodationand is both a reasonable and acceptable resolution of the issuesand its acceptance is warranted under the Commission policyencouraging settlement rather than litigation

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Judges also issued initial decisions in Docket Nos

8710 8715 8729 889 8823 Special Docket Nos 1608 1644

1649 1651 1653 1655 1656 1657 1659 1660 1663 16641665 1667 1668 1669 1670 1671 1672 1673 1674 1675

1676 1677 1678 1679 1680 1681 1682 1683 1684 1685

1686 1687 1688 1689 1690 1691 1692 1692 Remanded

1693 1694 1695 1696 1697 1698 1699 1700 1701 1702

1703 1705 1707 1710 1711 1712 1713 1714 1715 1716

1717 1718 1719 1720 1722 1723 1724 1725 1726 1727

1728 1729 1730 1731 1732 1736 1737 1738 1741 1742

1743 1744 1745 1746 1747 1748 1749 1750 1754 17551763 and 1764 described under Decisions of the Commission

4 Pending Proceedings

At the close of fiscal year 1989 there were 58 pendingproceedings of which three were investigations initiated by theCommission The remaining proceedings were instituted bythe filing of complaints or applications by common carriers bywater shippers conferences port authorities or districtsterminal operators trade associations and stevedores

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C OFFICE OF THE

GENERAL COUNSEL

The General Counsel provides legal counsel to theCommission This includes reviewing for legal sufficiency staffrecommendations for Commission action drafting proposedrules to implement Commission policies and preparing finaldecisions orders and regulations for Commission ratificationIn addition the Office of the General Counsel provides writtenor oral legal opinions to the Commission its staff or thegeneral public in appropriate cases The General Counsel alsorepresents the Commission before the Courts and Congressand administers the Commissionsinternational affairs program

1 Decisions and Rulemakings

The following are adjudications and rulemakingsrepresentative of matters prepared by the General CounselsOffice

Matson Navigation Company Inc Application forSection 35 Exemption Petition No P588 24 SRR1518 January 27 1989

The Commission granted a petition filed by MatsonNavigation Company Inc Matson allowing Matson alimited exemption from the 30day notice requirements of the1933 Act so that Matson could put into effect on one daysnotice reductions in existing individual rates and rates on newtariff items The Commission found that this exemption wasnecessary in order to allow Matson to compete with carriersnot regulated by the FMC and should benefit shippers

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Tariff Filing Notice Periods Exemption Docket No893 24 SRR 1604 March 17 1989

The Commission amended its tariff filing regulations topermit all FMC regulated carriers providing poritoport servicein the Hawaiian domestic offshore trade to put into effect onone days notice reductions in existing individual commodityrates and rates on new tariff items This action followed the

Commissionsapproval of the aforementioned similar statutoryexemption for Matson in Petition No P588 The Commissionfound that a tradewide exemption should benefit shippersstimulate competition and avoid discrimination among carriers

Actions to Address Adverse Conditions AffectingUSFlag Carriers That Do Not Eristfor Foreign Carriersin the United States Docket No 8824 24 SRR1631 March 16 1989

The Commission adopted a Final Rule adding a new partto its regulations to implement the 1988 Act The new rulesets forth general procedures for investigatory proceedings toaddress adverse foreign conditions affecting USflag carriersthat do not exist for foreign carriers in the United States TheCommission also amended its rules implementing section191bof the 1920 Act and section 13b5of the 1984 Actto add new sanctions made available to the Commission in

proceedings under those statutes pursuant to the 1988 Act

Service Contracts Docket No 8816 24 SRR 1513January 12 1989

The Commission adopted a Final Rule to allow parties toservice contracts filed with the Commission to correct clericalor administrative errors in the essential terms of such contracts

Parties seeking relief must file requests within 45 days of thecontracts initial filing with the Commission Requests for

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correction must include a supporting affidavit a concurrence bythe other party and other relevant documents

Interpretations and Statements of Policy Docket No8817 24 SRR 1368 October 24 1988

The Commission adopted a Final Rule advising thatcommon carriers or conferences may not require a shippersassociation to obtain or apply for a Department of JusticeBusiness Review Letter prior to or as part of a service contractnegotiation process The rule was designed to help eliminateunnecessary impediments to the operation of shippersassociations and the negotiation of service contracts

Service Contracts MostFavored Shipper ProvisionDocket No 887 24 SRR 1351 November 1 1988

The Commission adopted a Final Rule prohibiting the useof mostfavored shipper clauses that permit changes to aservice contract rate to be based on unpublished offers of othercarriers However the Commission declined to prohibit clausesthat allow a contract rate to meet the published rates ofcarriers or conferences The Commission also declined to

adopt a rule that would address the use of de minimisliquidated damages and instead indicated that it would treatsuch matters on a casebycase basis

Hemisphere Navigation Co Inc v SeaLand ServicInc Docket No 8729 25 SRR 56 April 281989

Hemisphere Navigation Co Inc a non vesseloperatingcommon carrier had filed a complaint alleging that SeaLandService Inc had misrated 35 shipments to Puerto Rico byapplying motorwater rates set forth in a joint throughintermodal tariff filed at the Interstate Commerce CommissionICC rather than the lower rates set forth in Sea Lands

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allwater porttoport FMC tariff Following an Initial Decisionby an administrative law judge finding for Hemisphere theparties negotiated a settlement whereby SeaLand agreed topay reparations representing a substantial percentage of thesum originally sought by Hemisphere

The Commission approved the settlement finding it to bea reasonable compromise of the differences between theparties In addition the Commission advised that it mayexamine transportation services provided under intermodaltariffs filed with the ICC in order to adjudicate allegations bya shipper that the services it received in fact were porttoportservices subject to exclusive FMC jurisdiction and should havebeen assessed FMC tariffed rates The Commission concludedthat in discharging its responsibilities to protect shippers fromunreasonable carrier practices and to safeguard the integrityof the Shipping Acts tariff filing requirements the FMC doesnot improperly transgress upon the jurisdiction of the ICC

Atlantis Line Ltd v American President Lines LtdDocket No 8719 24 SRR 1391 October 31 1988petition denied 24 SRR 1641 March 17 1989

The Commission reversed the Initial Decision and found

that a disputed American President Lines tariff provisionNote N was clear and unambiguous and therefore deniedAtlantis reparations The Commission concluded that thediscount provided by Note N applied only to those containersshipped after the 100TEU minimum requirement had beenmet Atlantis subsequent Petition for Reconsideration wasrejected for failure to present any arguments or facts which hadnot been earlier considered by the Commission

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Actions to Adjust or Meet Conditions Unfavorable toShipping in the United StatesPeru Trade Docket No876 24 SRR 1619 March 21 1989

The Commission issued a Final Rule finding thatunfavorable conditions exist in the USPeru oceanborne tradeas a result of certain laws and decrees of the Government ofPeru Further in order to meet or adjust the unfavorableconditions found the Commission assessed fees for each voyagemade by specified Peruvianflag carriers However because ofthe economic and political conditions present in Peru theCommission suspended application of the rules sanctions

Investigation of Rebates and Other MalpracticesYangming Marine Line Docket No 872 24 SRR1252 Administratively Final FMC October 271988

The Commission initiated this proceeding to determinewhether Yangming Marine Line YML had violated the 1916Act or the 1984 Act by allowing shippers of cotton to Taiwanto obtain transportation at less than the rates shown in itstariffs or service contracts through the payment of secretrebates or through other unfair or discriminatory practices Anadministrative law judge issued an Initial Decision approving asettlement negotiated with YML by the CommissionsBureauof Hearing Counsel whereby YML agreed to pay 168667 tocease and desist from making payments or assessing charges oncotton shipments except in accordance with the provisions of itstariffs or service contracts and to provide the Commission withcertain documents and other information The Commission

permitted the Initial Decision to become administratively final

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American Trucking Associations Inc Petition to IssueOrder to Show Cause Petition No P888 25 SRR246 June 21 1989

The Commission denied a petition filed by the AmericanTrucking Associations Inc ATA alleging that certainpractices by carriers at Pacific Coast ports stemming from acollective bargaining agreement were identical to the unlawful50 Mile Container Rules formerly enforced at Atlantic andGulf ports ATA urged the Commission to issue an order tothe carriers to show cause why their practices under the laboragreement should not also be found unlawful The

Commission however found that unlike the 50 Mile Rulesthe Pacific Coast practices did not facially restrict the carriersfrom releasing their containers to freight consolidators nordid they place any restraints on the freedom of small shippersto employ such consolidators The Commission thus deniedthe petition without prejudice to the right of ATA or otherpersons to file a complaint

2 Litigation

The General Counsel represents the Commission inlitigation before courts and other administrative agenciesAlthough the litigation work largely consists of representingthe Commission upon petition for review of its orders filedwith the US Courts of Appeals the General Counsel alsoparticipates in actions for injunctions enforcement ofCommission orders actions to collect civil penalties and othercases where the Commissions interest may be affected bylitigation

The following are representative of matters litigated bythe Office

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New York Shipping Association Inc v FMC 854 F2d1338 DC Cir 1988 cert denied US 109 S

Ct 866 1989

The Commission had ruled that the publication andenforcement by ocean common carriers of the 50 MileContainer Rules whereby cargo originating from or destinedto points within 50 miles of Atlantic and Gulf Coast ports wererequired to be loaded or unloaded at the ocean piers bylongshoremen were unreasonable and unjustly discriminatoryand therefore violated the 1916 Act the 1984 Act and the 1933Act

The Commission further had ruled that under themaritime statutes the Rules could not be defended on theground that they were the result of collective bargainingagreements between the carriers and the InternationalLongshoremensAssociation ILA intended to preserve workfor longshoremen The Commission concluded that the properaccommodation for national labor policy under the shippinglaws was in the construction of the remedy for shippingviolations The Commission accordingly limited the remedy toan order directing the carriers to cease and desist furtherpublication and enforcement of the Rules However this orderwas stayed during the subsequent court review of theCommissionsdecision

The US Court of Appeals for the District of ColumbiaCircuit upheld the Commissionsaction The carriers and theILA then filed a petition for certiorari with the United StatesSupreme Court The Commission and the US SolicitorGeneral filed a joint brief in opposition to certiorari InJanuary 1989 the Supreme Court denied certiorari The stayof the Commissionscease and desist order subsequently waslifted and the Commission issued an order directing the carriersto comply with the terms of the cease and desist order withinseven calendar days Docket No 8111

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AS Ivarans Rederi v Companhia de Navegacao LloydBrasileiro Docket No 869 24 SRR 1468December 22 1988

The Commission denied a complaint of a member of acargo revenue pooling agreement in the NorthboundBrazilUS Atlantic Coast trade that an interpretation of theagreement by its other members violated the 1984 Act bycarrying out actions unauthorized by the agreement TheCommission found contrary to complainantscontentions thatthe proper interpretation of the agreement was that the failureof a major carrier party to the agreement to make the requirednumber of sailings under the agreement did not result in theagreements suspension but only in the reduction of thatcarriers pool share The matter is now under review by theCourt of Appeals for the District of Columbia Circuit in Nos881597 and 891105 AS Ivarans Rederi v USA FMC

AgreementProvisions on Loyally Contracts Docket Nos8726 and 881 24 SRR 1395 October 31 1988

The Commission determined that conference agreementprovisions which prohibit a conference member from enteringinto a loyalty contract or from taking independent action forthe purpose of entering into a loyalty contract had not beenshown to be unlawful under the 1984 Act The case is nowpending decision by the United States Court of Appeals for theDistrict of Columbia Circuit in Nos 881850 and 881894Chemical Manufacturers Association v USA FMC

National Customs Broken Forwarders v United States883 F2d 93 DC Cir 1989

The US Court of Appeals for the District of ColumbiaCircuit upheld the Commissionsdetermination not to institutea rulemaking proceeding to amend its present rules andpromulgate new rules relating to the regulation of freight

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forwarding activities The court found that the regulationsattacked were reasonable exercises of the Commissions

rulemaking authority and that the decision with respect to therequested rules was not improper The Court held that adetermination not to institute rulemaking could only beoverturned in the rarest and most compelling of circumstancesinvolving legal error or change in factual predicate for theagencys action neither of which was present here

American Association of Cruise Passengers Inc vCarnival Cruise Lines Inc DC Cir No 887229

The Commission filed an amicus curiae brief in a privatetreble damage antitrust action brought by a discount travel clubagainst a number of ocean passenger lines The Commissionappeared in support of defendants contention that theplaintiffs allegations of a group boycott constitute charges ofShipping Act violations within the Commissions exclusivejurisdiction and against the plaintiffs argument that carriersproviding roundtrip ocean cruises are not passenger commoncarriers within the scope of the Shipping Act The case is nowbefore the United States Court of Appeals for the District ofColumbia Circuit

3 Legislative Activities

The General Counsel represents the Commissionsinterests in all matters before Congress This includes

commenting on proposed legislation proposing legislationpreparing testimony for Commission officials and respondingto Congressional requests for assistance

In February 1989 comments were provided to theCommittee on Merchant Marine and Fisheries on HR 439 abill to amend the 1984 Act to provide for equitable treatmentof US ocean freight forwarders by ocean carrier conferencesThe bill would provide conference members a right ofindependent action on the level of ocean freight forwarder

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compensation and would prohibit conferences from limitingocean freight forwarder compensation to less than 125 percentof all rates and charges assessed against the cargo

In April 1989 comments were submitted to the SenateCommittee on Governmental Affairs on S 444 a bill to amendthe Federal Advisory Committee Act The Commission

enclosed a copy of a letter submitted to the Office ofManagement and Budget concerning federal advisorycommittee operations In this letter the Commission advisedthe Office of Management and Budget that the only existingindustry advisory committee sponsored by the FMC is theSection 18 Study Advisory Committee

Vice Chairman Carey testified before the HouseSubcommittee on Merchant Marine at hearings on the domesticoffshore trades in February 1989 The domestic offshore tradesinclude water transportation routes between the mainlandUnited States and Hawaii Alaska Puerto Rico the US VirginIslands Guam and American Samoa Unlike the internationalliner trades rate levels established by the carriers are subjectwithin Limits to review by either the FMC or the ICCdepending on the service offered by a carrier The hearing wasdesigned to examine problems associated with regulation of thePuerto Rico trade by both the FMC and ICC According toSubcommittee Chairman Walter B Jones DNC dualregulation has become a source of confusion for companiesoperating in the Puerto Rico trade Currently the FMCregulates porttoport shipments to and from Puerto Rico andthe ICC has jurisdiction over joint through intermodalmovements

On June 15 1989 Acting Chairman Carey testified beforethe House Subcommittee on Merchant Marine at hearings onHR 2498 the Intermodal Shipping Act of 1989 HR 2498was introduced by Chairman Jones on May 25 1989 Thislegislation is the result of an oversight hearing in San JuanPuerto Rico on February 16 1989 on the regulation of thedomestic offshore trades

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Testimony was also prepared and coordinated for fourother Congressional hearings during fiscal year 1989

4 International Affairs

The General Counsel has the responsibility for monitoringand reporting on international maritime developmentsincluding practices of foreign governments which affect oceanshipping The General Counsels Office represents theCommission on US Government interagency groups dealingwith international maritime issues and participates as atechnical advisor on regulatory matters in bilateral andmultilateral maritime discussions

Several reports and recommendations were prepared andsubmitted to the Commission on matters arising under section191bof the 1920 Act Section 19 The subject of theseSection 19 matters included Peruvian See Docket No 876and Ecuadorian cargo reservation laws See Docket No 897and restrictions on intermodal activities of carriers operatingin the USTaiwan trade See Docket No 8725 In additionthe Commission instituted an investigation under the ForeignShipping Practices Act of 1988 46 USC app 1710a

FSPA into alleged doing business restrictions and practicesof Taiwan authorities which appeared to adversely affect UScarriers See Docket 8916

Further the Commission continues to assess the impactof the laws regulations and policies of the Governments ofKorea Taiwan and the PeoplesRepublic of China which mayunfairly burden or restrict the operations of certain oceancommon carriers including US flag carriers operating in theUS trades with these countries and the US importers andexporters which depend on their services The Commission isassessing the impact of these nations laws regulations andpolicies to determine whether action under Section 19 or theFSPA is warranted Of particular concern to the Commissionare indications that US flag and possibly other carriers are

prevented from conducting shipping and ancillary activities inthese trades The Commission has issued orders and notices

regarding these possible impediments to trade in theUSTaiwan and USKorea trades

The Office of the General Counsel participated ininteragency groups and international maritime discussionsparticularly as technical advisors to the Interagency MaritimePolicy Group whose other members include representatives ofthe US Departments of Transportation State Commerce andJustice and the Office of the US Trade Representative Inaddition the Office served as liaison on international shippingmatters between the Commission and other US Government

agencies as well as private parties The Office also coordinatedand participated in briefings of foreign visitors to theCommission

Finally under the Commissions controlled carrierprogram relating to the status of controlled carriers severalcommon carriers were classified as such during the fiscal year

5 Significant Ongoing Activities

a Korea Shipping Conditions

The Commission initiated an inquiry into the existenceand effects of laws regulations and policies of the Republic ofKorea ROK on the ability of USflag and othernonROKflag ocean carriers to undertake ancillary maritimeactivities in the ROK by service of a Section 15 Order on allnonROKflag carriers serving the trade on April 14 1987The Section 15 Order requested information on laws rulespolicies or administrative interpretations which prevent carriersfrom owning or operating their own facilities or conductingspecific shoreside shipping operations The Commission wasparticularly concerned that nonROKflag carriers are requestedto operate through a Koreanowned general agent and areapparently unable to perform their own sales marketing

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contracting warehousing trucking and equipment maintenanceand repair functions in the ROK

The responses to the Section 15 Order show a complexpattern of legislation regulations and administrative agencyoversight consisting of some 10 laws and 6 sets of implementingdecrees which affect the transaction of maritimerelatedbusiness activities in the ROK The restrictions established inthese laws and decrees appear to unfairly burden nonROKcarriers and may result in conditions unfavorable to shipping inthe trade by preserving certain business opportunities in theROK for Korean nationals effectively handicapping nonROKinternational shipping lines in their competition with ROKflagcarriers The Departments of State and TransportationMarAd have engaged in consultations with representatives ofthe ROK Government regarding those issues on severaloccasions

Legislation was recently enacted and regulationsimplemented to permit the US flag carrier operation ofbranch offices in the ROK The Commission is currentlyreviewing the effect of these developments on the US carriersefforts to conduct such activities

b Inquiry Into Laws Regulations and Policies of theGovernment of Ecuador Affecting Shipping in theUnited StatesEcuador Trade Docket No 8907Notice of Inquiry 54 Fed Reg 10721 March 151989 Notice of Further Comments 54 Fed Reg21473 May 1 1989 Notice of ProposedRulemaking 54 Fed Reg 34194 August 181989

The Commission received information from Overseas

Enterprises Inc OEI a USowned company and theDepartment of State regarding allegations that OEI has beenunable to reestablish a liquid bulk service in the USEcuadortrade because of the Government of Ecuadors GOErequirement that OEI employ USflag vessels in such a

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service In response to these submissions the Commissionissued a Notice of Inquiry requesting interested parties tocomment on the allegations and on any other laws regulationsor policies of the GOE which may adversely affect shipping inthe USEcuador trade in order to determine whether actionpursuant to section 19 is warranted The principle Ecuadorianlaw in question is a Resolution which reserves solid and liquidbulk import cargo from the United States to Ecuador forEcuadorianflag vessels or foreign vessels chartered byEcuadorian shipping companies orUSflag vessels

Based on the comments received in response to its Noticeof Inquiry the Commission determined that the EcuadorianResolution on its face appears to create conditions unfavorableto shipping in the trade and to the extent that the Resolutionapplies only to the USEcuador trade it is discriminatoryHowever due to questions raised in the comments regardingthe status of OEI the Commission requested further commentsto provide interested parties an opportunity to submitadditional information on the status and operations of OEI aswell as on conditions in the USEcuador trade

Upon review of all comments submitted the Commissionissued a Notice of Proposed Rulemaking to adjust or meetconditions unfavorable to shipping in the trade created by GOEcargo reservation laws The Commission also noted that theDepartment of State reports that the GOE was notcontemplating any initiatives to allow OEI to operate in thetrade The proposed rule would impose a fee of 100000 peroutbound voyage of Maritima Transligra SA anEcuadorianflag carrier from the US to Ecuador

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D OFFICE OF

EQUAL EMPLOYMENT OPPORTUNITY

The Office of Equal Employment Opportunity appliesknowledge of Federal EEO and personnel managementconcepts procedures and regulations to develop and manage acomprehensive program of equal employment opportunityThe Office works independently under the direction of theChairman to provide advice to the Commissionsmanagementin improving and carrying out its policies and program of nondiscrimination and affirmative program planning

The Office is responsible for affirmative programplanning special emphasis programming and complaintsprocessing and adjudication with the assistance of collaterallyassigned EEO counselors and Special Emphasis ProgramCoordinators

The Office works closely with the Office of Personnelmanagers and supervisors to

o Improve recruitment and representation ofminorities and women in the workforce

o Provide adequate career counseling

o Facilitate early resolution of employment relatedproblems

o Develop program plans and progress reports

The Director of Equal Employment Opportunity arrangesfor counseling of employees who raise allegations ofdiscrimination provides for the investigation hearing factfinding adjustment or early resolution of such complaints ofdiscrimination accepts or rejects formal complaints ofdiscrimination and prepares proposed dispositions of such

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formal complaints and monitors and evaluates the programsimpact and effectiveness

Significant accomplishments in fiscal year 1989 include thefollowing 1 developed and implemented an EEO briefingfor all new employees 2 planned developed and coordinatedextensive internal and external special emphasis programs foremployee participation 3 broadened the nationwide EEOinformation training and counseling support network for FMCto include the New Orleans District Office 4 provided indepth technical support and training for the Bureau ofInvestigations 5 initiated and implemented FMCs firstIntergovernmental Personnel Assignment with an historicallyBlack college 6 utilized external sources for EEO counselortraining at no cost to FMC 7 in concert with the Office ofPersonnel developed and implemented targeted recruitmentstrategies in selected areas 8 worked with the SelectivePlacement Coordinator to ensure that the Commission

maintained its high standing among agencies in employment ofstaff with targeted disabilities 9 increased minority andfemale representation in the professional and administrativeseries 10 improved minority and female participation inAgency decisionmaking

During fiscal years 1990 and 1991 the Office will continueits existing programs and initiate activities designed to increasemanagement and employee understanding of EEO principlesand to foster greater participation in EEO related activities

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E OFFICE OF INSPECTOR GENERAL

The Office of Inspector General at the Federal MaritimeCommission was created by the passage of Public Law 100504 which amended the Inspector General Act of 1978 toprovide for the establishment of additional statutory inspectorgenerals at designated Federal entities including the FederalMaritime Commission This new legislation was signed intolaw on October 18 1988

On the statutory effective date of April 17 1989 theOffice of Inspector General was in operation as a separateindependent entity reporting only to the head of the agencyThe Inspector General does not report to nor is subject tosupervision by any other officer or employee of theCommission The Inspector General has complete control overall audits and investigations including determining whether toinitiate or close a particular audit or investigation

It is the duty and responsibility of the Office of InspectorGeneral to

o Provide policy direction for and to conductsupervise and coordinate audits and investigationsrelating to the Commissions programs andoperations

o Review existing and proposed legislation andregulations relating to the Commissionsprogramsand operations and to make recommendationsconcerning the impact of such legislation orregulations on the economy and efficiency in andthe prevention and detection of fraud and abuse inthe administration of the Commissionsprogramsand operations

o Recommend policies for and to conduct superviseor coordinate other activities carried out or financed

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by the Commission for the purpose of promotingeconomy and efficiency in the administration of orpreventing and detecting fraud and abuse in theCommissionsprograms and operations

o Recommend policies for and to conduct superviseor coordinate relationships between the Commissionand other Federal agencies State and localgovernmental agencies and nongovernmentalagencies with respect to all matters relating to thepromotion of economy and efficiency in theadministration of or the prevention and detectionof fraud and abuse in programs and operationsadministered or financed by the Commission or theidentification and prosecution ofparticipants in anysuch fraud or abuse

o Keep the Chairman and the Congress fully andcurrently informed by means of semiannual andother reports concerning fraud and other seriousproblems abuses and deficiencies relating to theadministration of programs and operationsadministered or financed by the Commissionrecommend corrective action concerning suchproblems abuses and deficiencies and report onthe progress made in implementing such correctiveaction

Significant accomplishments in fiscal year 1989 includethe following

1 Established the Office of Inspector General This

entailed recruiting personnel determining the location andphysical layout of the Office acquiring furniture andequipment and formulating policies and procedures

2 Reviewed the organizational structure of the Commissiondetermined those activities subject to audit and identified anagencywide audit universe

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3 Revised the Conunissionsinternal order relating to theInspector General activity and issued a circular to all agencypersonnel outlining the audit function to be carried out by theOffice

4 The Inspector General is an active member of theCoordinating Conference of the PresidentsCouncil on Integrityand Efficiency PCIE and participated at meetings and oncommittees established by that body

5 Initiated a comprehensive program of audits and asneeded investigations to prevent and detect fraud and abusein Commission programs and operations Three investigationsand one limited inquiry were completed during the fiscal year

The Office will continue to implement the new legislationand expand the role of the Office in the next fiscal year Weanticipate the issuance of a number of significant audits duringthe year as well as surveys and followup reviewsInvestigations will be conducted as necessary The CommissionsInspector General will continue his participation in the PCIECoordinating Conference which provides a forum for theexchange of views for the inspector general community

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F OFFICE OF THE

MANAGING DIRECTOR

The Office of the Managing Director is responsible for thedirect administration and coordination of Commission staff

activities and programs to ensure the timely and properachievement of Commission goals and objectives

The Office provides direct administrative and technicalsupervision to the

o Bureau of Trade Monitoringo Bureau of Domestic Regulationo Bureau of Economic Analysiso Bureau of Hearing Counselo Bureau of Investigationso Bureau of Administration

Additionally the Office of the Managing Director furnishesadministrative direction to the

o Office of the Secretaryo Office of the General Counsel

o Office of Administrative Law Judgeso Office of Equal Employment Opportunityo Office of the Inspector General

A significant achievement of the Office during FY 89 wasthe continued coordination of an enhanced enforcement programinvolving all operating Bureaus Several aspects of the majorinitiative in the Trans Pacific Trade were addressed and

concluded with further action contemplated for FY 90 Thenecessary planning and initial groundwork also was completedfor future enforcement programs

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The Office is currently

1 Guiding the development ofthe agencysAutomated TariffFiling and Information ATFI System

2 Directing under Commissioner Ivancies oversight thedevelopment and implementation of the agencysnew StrategicPlan

3 Monitoring the installation of a Commissionwide LocalArea Network which will ultimately be utilized for the ATFIsystem and

4 Directing a scaleddown collection of data relative to thereport required by section 18 of the 1984 Act The Office willalso oversee any staff assistance provided to the AdvisoryCommission on Conferences in Ocean Shipping

The Office of the Managing Directorskey objectives forfiscal years 1990 and 1991 are the continued coordination ofstaff efforts regarding the development of ATFI the expansionof the enhanced enforcement program and the correction of thematerial weaknesses identified in the 1989 Federal ManagerFinancial Integrity Act report

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1 General

G BUREAU OFTRADE MONITORING

The primary function of the Bureau is to plan develop andadminister programs related to the oversight of concerted activityof common carriers by water under the standards of the ShippingAct of 1984 and the Shipping Act 1916 The Bureausmajorprogram activities include

o Administering comprehensive trade monitoringprograms to identify and track relevant competitivecommercial and economic activity in each majorUStrade in order to keep the Commission and its staffapprised of current trade conditions emerging trendsand regulatory needs impacting on waterborne linertransportation

o Systematic surveillance programs overseeing carrieractivity in areas relevant to the Commissionsadministration of statutory standards

o Processing and analysis of agreements involvingcommon carriers and

o Support of formal Commission proceedings in theBureaus areas of expertise

2 Surveillance See Chapter III

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3 Types of Agreements

a Conference and Ratemaking Agreements

Conference and ratemaking agreements provide for thecollective discussion agreement and establishment of oceanfreight rates and practices by groups of ocean carriers Suchagreements are limited to a geographic area or trade route TheCommissions rules currently do not distinguish betweenconference and rate agreements for purposes of determiningapplicability of the socalled mandatory provisions

During fiscal year 1989 the Commission concluded theprocessing of 170 conference and rate agreements includingamendments to existing agreements pursuant to the ShippingAct of 1984 There were 74 conferencerate agreements ineffect at the end of the fiscal year

b Pooling and Equal Access Agreements

Pooling agreements are commercial arrangements amongcarriers in given trades which provide for the pooling andapportionment of cargo andor revenues in the interest of theincreased efficiencies which such arrangements can provide asa result of their stabilization of competitive conditions Theseagreements also often set forth sailing requirements and otherfeatures relating to overall service efficiency Equal accessagreements serve to formalize national flag carrier access tocargo which is controlled by the governments of reciprocaltrading partners as a result of cargo preference laws importquotas or other restrictions

At the conclusion of fiscal year 1989 there were 23agreements in effect with pooling andor equal access authorityEleven agreements of this type have a significant impact on USocean liner commerce with Argentina Brazil Chile Peru andColombia

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c Space Charter and Sailing Agreements

Space charter agreements authorize the chartering orcrosschartering of vessel space or container slots between oramong vessel operators The essential objective of arrangementsof this type is to facilitate the rationalization of overall fleetoperations and to reduce overtonnaging in given trades Theseagreements also generally contain authority to rationalize sailingsand to exchange equipment

During fiscal year 1989 30 space charter and sailingagreements and amendments were filed under the 1984 Act and114 were in effect at the conclusion of the fiscal year

d Joint ServiceConsortia Agreements

Joint service and consortia agreements generally establisha new and separate line or service to be operated by otherwiseindependent operators as a joint venture in a given trade Theresulting service operates as a single carrier fixing its own ratespublishing its own tariffs and issuing its own bills of lading butits authority is strictly confined to that which is specifically setforth in the agreement authorizing its operation

Eleven joint serviceconsortia agreements and amendmentswere filed during fiscal year 1989 and 34 such agreements werein effect at the conclusion of the fiscal year

e Cooperative Working Arrangements

Cooperative working arrangements run the gamut fromdiscussion agreements which authorize the participants todiscuss competitivelysensitive trade matters to specializedinter carrier operational undertakings which do not precisely fitthe other categories reported above Thirtynine cooperativeworking agreements and amendments to effective agreementswere filed during fiscal year 1989 and 99 such agreements werein effect at the conclusion of the fiscal year

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4 Future Plans and Proposed Activities

With the completion of the 5year study mandated bySection 18 of the Shipping Act of 1984 the Bureau intends tofurther develop its monitoring programs Additional reportsgenerated through this effort will include an indepth audit ofagreement activities that will contain a review of agreementminutes development ofdetailed trade profiles and topic papersand specific monitoring of selected agreements

The Bureausoverall monitoring program will continue tofocus on the systematic oversight of carrier and trade activityin areas relevant to the administration of the standards of theShipping Act of 1984 To this end the Bureau plans to continueits series of periodic monitoring reports to provide a frameworkand methodology for the indepth monitoring of key subtradesand analyzing rate and service activity under the standards ofsections 5 6g and 10 of the Act The Bureaus monitoringreports provide periodic trend analyses of agreement activitiesand other topics its trade studies provide an overview of tradeconditions between the United States and selected countriesThe Bureaus controlled carrier reports support theCommissionsactivities under section 9 of the Act Also specificmonitoring of selected carrier agreements will continue Inaggregate the Bureaus monitoring reports and studies providean uptodate and detailed interpretation of evolving carrier andagreement activity and changing trade conditions under theActs standards Although they are informative in their ownright they are not an end in themselves Rather the

reportstudy program develops a factual basis that can isolateand identify activity that may contravene the Acts standards forappropriate followup by the Bureau or the Commission itselfas warranted by the circumstances of each case

The Bureau anticipates continuing pre effectiveness analysisof newlyfiled agreements to determine if an agreement is likelyto raise any section 5 6g or 10 issues or policy questions thepreparation of recommendations to the Commission on more

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complex agreements or issues and the disposition of routineagreements under authority delegated by the Commission

In support of the Bureausmonitoring efforts continuedmaintenance of databases for the WorkinProcess System WIPSand the Required Reports Profile System RRPS programmingchanges in current programs for the systems and developingprograms for additional functions are also planned

It is anticipated that the Bureau will continue to beinvolved in projects related to various investigative initiativesThe Bureau also expects to continue to be actively involved inrulemakings refining andor clarifying the application of theCommissionsregulations

Development of a plan for the production of an agreementlistingreference book containing agreement related informationis also proposed

Finally the Bureaus support of formal Commissionproceedings is expected to continue The Bureaus degree ofinvolvement will of course turn on the number and subjectmatter of the proceedings initiated during the next fiscal year

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1 General

H BUREAU OF

DOMESTIC REGULATION

The Bureau of Domestic Regulation plans developsadministers and analyzes programs and activities in connectionwith pricing by common carriers by water conferences of suchcarriers and terminal operators in the foreign and domesticoffshore commerce of the United States reviews and maintainsboth new and amended tariff filings rejecting those which failto conform to the Commissions regulations approves ordisapproves special permission applications involving requeststo deviate from certain tariff filing rules processes servicecontracts and essential terms publications filed by oceancommon carriers and conferences of such carriers initiatesrecommendations in collaboration with other offices of theCommission as warranted for formal action and proceedings bythe Commission and plans develops and administers programsfor processing evaluating and monitoring agreement activity ofmarine terminal operators

The Bureau is also responsible for the licensing of oceanfreight forwarders under the provisions of the Shipping Act of1984 and under Public Law 89777 the certification of ownersand operators of passenger vessels in the United States tradewith respect to the financial responsibility of such owners andoperators to satisfy liability incurred by non performance ofvoyages or for death or injury to passengers or other personsThus the Bureau of Domestic Regulation is responsible for alltariffs filed by ocean common carriers and terminal operatorsmarine terminal agreements service contracts the licensing ofocean freight forwarders and the certification of passengervessels for financial responsibility

The Bureau develops longrange plans new or revisedpolicies and standards and rules and regulations with respect

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to its program activities The Bureau also cooperates with otherCommission components with regard to enforcement of theCommissionsregulatory requirements

2 Foreign Commerce Tariff andService Contract Activity

a Service Contracts

The Shipping Act of 1984 permits ocean common carriersand conferences of such carriers to enter into service contractswith shippers andor shippers associations A service contractis defined in the Act as

a contract between a shipper and an ocean commoncarrier or conference in which the shipper makes acommitment to provide a certain minimum quantity ofcargo over a fixed time period and the ocean commoncarrier or conference commits to a certain rate or rateschedule as well as a defined service level such as

assured space transit time port rotation or similar servicefeatures the contract may also specify provisions in theevent of nonperformance on the part of either party

Each contract entered into under section 8c of theShipping Act of 1984 must be filed confidentially with theCommission and at the same time a concise statement of itsessential terms must be filed with the Commission and madeavailable to the general public in tariff format The essentialterms must be offered to all similarly situated shippers

The essential terms of a service contract include

o The origin and destination port ranges orgeographic area

o The commodity involved

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o The minimum volume

o The linehaul rate

o The duration

o Service commitments and

o Liquidated damages for nonperformance if any

The variables which can be prescribed in service contractsare almost infinite thereby giving carriers and shipperssignificant freedom to tailor transportation arrangements suitableto their commercial needs

During the fiscal year the Commission revised itsregulations governing the modification of service contractessential terms The purpose of the revised rule is to permit themodification of service contracts to correct administrative or

clerical error Under the rule requests to modify servicecontract essential terms are made to the Commission and ifapproved the modified essential terms are made available toall other shippers and shippers associations for a specifiedperiod of time During fiscal year 1989 the Commissionreceived 20 requests for modification of service contracts dueto clerical or administrative error Of these the Commissiongranted 13 requests and denied two five requests were pendingat the close of fiscal year 1989

Another service contract issue was addressed in Docket

No 887 MostFavoredShipper Provisions The new rulelimited contingency clause provisions for adjustments to contractrates to permit the contract rate to be changed to meet a rateoffer of another carrier or conference only if such a rate ispublished in a tariff or set forth in a service contract on file withthe Commission The new rule effectively eliminated socalledCrary Eddy clauses in service contracts

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On April 12 1989 the Commission issued Circular Letter189 to ocean common carriers and conferences The Letter

addressed the Shipping Act of 1984 requirements with regardto service contracts and the need for mutual commitments and

the contractsliquidated damages provisions if any Specificallythe Commission advised carriers and conferences that 1service contracts must contain mutually binding commitmentsby the contracting parties sufficient to meet the definition ofservice contract contained in the 1984 Act 2 this commitmentmay not be vitiated by any other provision in the contract suchas a provision providing for a reduction in the shipperscargominimum as the shippers exclusive remedy in the event of acarrier breach and 3 that liquidated damage provisions shouldnot be de minimis so as to give a shipper an unfair benefit eventhough it did not meet its commitment under the contract

During fiscal year 1989 the Bureau received5215 servicecontracts These contracts were filed by 75 individual oceancommon carriers and 25 conferences The contracts involved

approximately 7600 shippers and the entire scope of the USforeign commerce both inbound and outbound

b Controlled Carriers

A controlled carrier is an ocean common carrier whose

operating assets are directly or indirectly owned or controlledby the government under whose registry the vessels of thecommon carrier are operated Section 9 of the Shipping Act of1984 46 USC app 1708 provides that no controlled carriermay maintain rates or charges in its tariffs filed with theCommission that are below a level that is just and reasonablenor may any such carrier establish or maintain unjust orunreasonable classifications rules or regulations in those tariffsIn addition such rates charges classifications rules orregulations of a controlled carrier may not without specialpermission of the Commission become effective sooner than the30th day after the date of filing with the CommissionExceptions to these proscriptions include rates of controlled

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carriers of a state whose vessels are entitled by a treaty of theUnited States to receive most favored nation treatment

The Bureau of Domestic Regulation monitors the tarifffilings of controlled carriers to assure that the required noticefor rate increases and decreases is given During fiscal year1989 controlled carriers filed approximately 11000 tariff pagesThe Bureau also acted on 12 special permission applicationsfiled by controlled carriers

c Common Carrier AntiRebate Certification ARCProgram

Every common carrier by water in the foreign commerceof the United States and ocean freight forwarder is required bysection 15b of the Shipping Act of 1984 46USC app 1714and 46 CFR Part 582 to file a sworn Certification of CompanyPolicies and Efforts to Combat Rebating in the ForeignCommerce of the United States This certification is to be filedwith the Secretary of the Commission annually and is to besigned by the Chief Executive Officer of the common carrier orocean freight forwarder Section 15b and 46 CFR 5821bprovide that failure to file the required certification may resultin a civil penalty of5000 for each day the violation continuesThe information obtained under the anti rebating program isused to maintain continuous surveillance over common carrier

activities and to provide a deterrent against rebating practices

An automated program was implemented to insure thereceipt of certifications from all those required to file Duringthe year approximately3000 certifications were filed in a timelymanner In conjunction with the Bureau of Hearing Counselthe Bureau undertook an enforcement program with respect tononfilers of certifications Enforcement actions are plannedduring fiscal year 1990

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d Inactive Tariffs

During fiscal year 1989 the Bureau of DomesticRegulation continued a comprehensive review of foreigncommerce tariffs currently on file with the Commission Thepurpose of this review was to identify tariffs of firms whichappeared to be inactive or no longer operating as carriers in thewaterborne foreign commerce of the United States Inactivetariffs reflect inaccurate information and serve no useful purposewhile adding to administrative cost A carrier was deemed tobe inactive if it had not amended its tariff during the precedingtwelve month period had not filed the required antirebatingcertification and could not be contacted by mail or telephoneAs a result of this review an order to show cause why identifiedcarrier tariffs should not be cancelled was prepared The orderwas served during fiscal year 1989 and resulted in thecancellation of 246 inactive tariffs

e Tariff Processing

During fiscal year 1989 the Bureau of DomesticRegulation received and reviewed 739 new foreign tariffs ofwhich 141 were rejected In addition 725093 tariff pagesamending existing tariffs and 182 foreign special permissionapplications were processed The program of microfichingcancelled tariffs and cancelled pages to active tariffs iscontinuing During fiscal year 1989 approximately 707000cancelled tariff pages were recorded on microfiche

3 Domestic Tariff Activity

a Authority

Common carriers operating in the US domestic offshorecommerce are required pursuant to section 18aof the ShippingAct 1916 46 USC app 817 and section 2 of the IntercoastalShipping Act 1933 46 USC app 844 to file tariffs of ratescharges and rules with the Commission The Bureau of

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Domestic Regulation must ensure that these tariffs comply withapplicable statutory requirements The Commissionsregulationsalso require the filing of annual reports of financial andoperating data by vessel operating common carriers in thedomestic trades

b Inactive Tariffs

During fiscal year 1989 the Bureau of DomesticRegulation continued a program similar to that with respect toforeign tariffs to identify tariffs of firms which appeared to beinactive or no longer operating as carriers in the domesticoffshore waterborne commerce of the United States As a result

of this program an order to show cause why identified carriertariffs should not be cancelled was served early in fiscal year1989 and resulted in the cancellation of 49 inactive domestictariffs during the fiscal year

c Tariff Processing

During fiscal year 1989 46 new domestic offshore tariffswere received and reviewed of which 15 were rejected Inaddition 23 domestic special permission applications wereprocessed The Bureau also processed approximately4000 tariffpages amending existing tariffs

4 Marine Terminal Activities

Marine terminals operated by both public and privateentities provide facilities and labor for the interchange of cargoand passengers between land and ocean carriers and for thereceipt and delivery of cargo to shippers and consignees TheCommission is responsible for the review and processing ofcertain agreements and tariffs related to the marine terminalindustry

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a Agreements

During fiscal year 1989 the Bureau received 283agreements and agreement modifications relating to port andterminal services and facilities Of these 272 agreementsbecame effective upon filing under Commission rules whichexempt entitled marine terminal agreements from the waitingperiod requirements of the Shipping Act of 1984 andor theapproval requirements of the Shipping Act 1916 agreementsnot entitled to the Commissionsexemption provisions wereprocessed under the applicable statutory filing requirementsSeven agreements were considered not subject to theCommissionsjurisdiction Seven hundred and fifty terminalagreements were in effect at the end of the fiscal year

The Commission is also charged with processing certainlabormanagement agreements pursuant to the Maritime LaborAgreements Act of 1980 PL 96325 94 Stat 1021 This Actprovides that such agreements to the extent they provide for thefunding of collectively bargained fringe benefit obligations onother than a uniform manhour basis regardless of the cargohandled or type ofvessel or equipment utilized shall be deemedeffective upon filing with the Commission During fiscal year1989 three labormanagement agreements of this type werefiled

During fiscal year 1989 the Commission continued itsmoratorium on the assessment of penalties against certainunified terminal service agreements Resumption of potentialenforcement activities is pending the Commissionsdispositionof the staffsrecommendations in Fact Finding Investigation No17 That fact finding addressed whether certain terminal serviceagreements are subject to the Commissionsjurisdiction

The Bureau continued its monitoring and surveillanceprogram regarding all existing terminal agreements on file withthe Commission

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b Terminal Tariffs

The Bureau carried out its responsibilities with respect toterminal tariffs by reviewing 5071 terminal tariff pages filedduring fiscal year 1989 At the end of the fiscal year there were460 terminal tariffs on file with the Commission The Bureaucompleted its review of all terminal tariffs in the Commissionsfiles during fiscal year 1989

5 Freight Forwarders

The ocean freight forwarding industry is comprised ofpersons who in effect hold themselves out to shippers as exportdepartments for hire Ocean freight forwarders serve exportshippers by arranging for the ocean transportation of cargo bycommon carriers and by handling the paperwork legalrequirements safety requirements and other incidentals relatedto exports Ocean freight forwarders receive a fee from theexporter for handling an export shipment as well ascompensation from the ocean carrier whose vessel is selectedto carry the cargo

Congressional findings in 1961 focusing on malpracticeswithin the ocean freight forwarding industry led to theenactment of section 44 of the Shipping Act 1916 46 USC841b which vested the Commission with authority for thelicensing and regulation of independent ocean freight forwardersAt that time malpractices in the export trades were rampantGiven the importance of maintaining a favorable climate forUS businesses especially small businesses which lacked theexpertise to do their own exporting Congress found thatlicensing and limited oversight of ocean freight forwarders wasnecessary to eliminate secret illegally preferential rebates andto ensure that unscrupulous incompetent and financiallyirresponsible persons were prevented from operating as oceanfreight forwarders Although the number of licensed oceanfreight forwarders has increased since 1961 forwarder initiatedmalpractices are now more the exception than the rule

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The continued maintenance of fiduciary responsibilitytechnical qualifications and the financial responsibility of anocean freight forwarder are currently assured by means of alicense issued by the Commission and a surety bond which isrequired to be maintained on file with the Commission Onceissued a license need not be renewed However Commissionapproval for a change in the business form of a licensee or alicense transfer to another person is required The amount ofthe bond depends upon the number of offices through which anocean freight forwarder provides services The basic bondamount is 30000 It is increased by 10000 for eachunincorporated branch office of a forwarder Each separatelyincorporated office of a forwarder is required to obtain its ownlicense

With the enactment of the Shipping Act of 1984 theCommissionsregulatory responsibilities over the forwardingindustry are now found in section 19 of that Act Under thisstatute the basic licensing requirements remain essentially inplace However the prohibition against export shippersreceiving a license has been eliminated ie freight forwardersno longer have to be independent Licensed forwarders arebarred from collecting compensation from carriers on shipmentsin which they have a beneficial interest Also under the statuteagreements by and among forwarders engaged in foreigncommerce of the United States are no longer required to befiled with the Commission for approval Hence suchagreements are afforded no antitrust immunity

The Shipping Act 1916 as amended does not requirepersons operating as forwarders in the domestic offshore tradesof the United States to obtain a license to do so nor are suchentities required to file a surety bond

The Commission received 249 applications for oceanfreight forwarder licenses and for approval of the transfer oflicenses or other organizational changes during fiscal year 1989while 57 applications were pending at the end of fiscal year1988 Of these 86 new license applications were approved six

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were withdrawn one was denied and 62 were returned toapplicants because of deficiencies which prevented processingFiftyeight applications for transfers or other organizationalchanges were approved and eight were withdrawn or returnedbecause of deficiencies Eightyfive applications were pendingat the close of fiscal year 1989

During fiscal year 1989 88 ocean freight forwarder licenseswere revoked resulting primarily from the licensees failure tomaintain the required surety bond on file 83 new licenses wereissued and 16 licenses were reissued At the end of the fiscal

year 1600 licensed forwarders were operating under theCommissionsjurisdiction approximately 1more than the totalnumber of licensees at the close of fiscal year 1988

Onsite compliance investigations are conducted as partof the Commissionseffort to ensure that licensed ocean freightforwarders comply with the provisions of the shipping statutesand the Commissions regulations During the year 66investigative reports were received by the Bureau Two reportswere pending review at the beginning of the fiscal year Fortyof these reports resulted in the issuance of warning letters orreferral to the Bureau of Hearing Counsel for the assessmentof appropriate civil penalties Seventeen cases were determinedto require no formal corrective action Eleven reports werepending review at the close of fiscal year 1989

Other activities during the year included

o The processing of 738 surety bond actions includingnew bonds riders to bonds and cancellations ofbonds

o The review and processing of nine informalcomplaints concerning in the majority of cases thenon payment of freight charges by forwarders tocarriers

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o The issuance of 83 new licenses and the reissuance

of 16 revoked licenses after new surety bonds wereobtained

o The receipt of information about 19 claims totalingin excess of 171000 that were filed againstforwarder bonds

During fiscal year 1989 The National Customs Brokers andForwarders Association of America Inc NCBFAA soughtjudicial review of the Commissionsdenial of its 1987 petitionfor rulemaking to amend six areas of the Conunissionsoceanfreight forwarder rules 46 CFR Part 510 The Court affirmedthe Commissionsdecision denying the NCBFAAspetition

6 Passenger Vessel Certification

The Commission is responsible for administering sections2 and 3 of Public Law 89777 46 USC 817d and 817e whichhave been implemented by the Commissionsregulations foundin 46 CFR 540 Security for the Protection of the PublicOwners charterers and operators of American and foreignvessels having berth or stateroom accommodations for fifty ormore passengers and embarking passengers at United Statesports must establish financial responsibility 1 to meet anyliability incurred for death or injury to passengers or otherpersons on voyages to or from United States ports and 2 toindemnify passengers for nonperformance of transportation towhich they would be entitled under ticket contracts Upon thesubmission of evidence of financial responsibility in accordancewith Subpart B of 46 CFR 540 the Commission will issue aCertificate of Financial Responsibility to Meet Liability Incurredfor Death or Injury to Passengers or Other Persons on VoyagesCertificate Casualty Upon submission of similar evidencein accordance with Subpart A of 46 CFR 540 the Commissionwill issue a Certificate of Financial Responsibility forIndemnification of Passengers for Nonperformance ofTransportation Certificate Performance

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With respect to the Certificate Casualty financialresponsibility must be established in accordance with a scheduleprovided in section 2 of Public Law 89777 An applicantoperating more than one vessel must evidence financialresponsibility for its fleet under the casualty provisions at a levelbased on the passenger capacity of its largest vessel The extentof financial responsibility required under section 3 of PublicLaw 89777 for the issuance of a Certificate Performance isdetermined by the Commission taking into account factors suchas the number of vessel accommodations fare structurecollection policy sailing schedule itinerary and past experienceThe maximum amount with respect to performance is 10million except as a selfinsurer which could require a greateramount The Commissionsstaff is presently reviewing thisCommission imposed limit to determine if it should beincreased

The certificates must be presented to United StatesCustoms officials at the port or place of departure of the vesselfrom the United States Under the law the US CustomsService will refuse clearance of a vessel if it does not have

proper certificates on board or until such time as theCommission confirms compliance with the law

During fiscal year 1989 the Commission processed 59applications for passenger vessel certificates involving 84separate vessel certifications Twentyone were newperformance certificates 17 were new casualty certificates 42were amendments to existing certificates and 4 vesselcertification requests were withdrawn Holders of passengervessel certificates have on file with the Commission evidence of

financial responsibility in excess of 250 million for performancecertification and over 1 billion for casualty certification

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7 Automated Database Systems

The Bureau of Domestic Regulation maintains severalautomated database systems These are 1 The Service ContractSystem 2 The Regulated Persons Index 3 The Tariff ProfileSystem 4 The Microfiche System and 5 The Ocean FreightForwarder System The Service Contract System provides certainkey service contract data such as geographies shipper namescommodities and rates The Regulated Persons Index assigns adiscrete number to each person the Commission regulates andprovides their address and business name The Tariff ProfileSystem lists key data contained in tariffs on file with theCommission The Microfiche System provides a means oflocating cancelled tariffs which have been microfiched TheOcean Freight Forwarder System provides pertinent data necessaryfor the tracking of licensees including surety bond information

During fiscal year 1989 the Bureau began to design andprogram another automated system for its terminal agreementfiling activity The system prototype is planned for fiscal year1990

A local area network LAN prototype was implementedin the Bureau late in fiscal year 1989 The fully implementedLAN will act as a gateway to the Commissions plannedAutomated Tariff Filing and Information System and provideBureau staff with access to local databases within the Bureauand the Commission

8 Shippers Associations

The Shipping Act of 1984 recognized shippers associationsfor the first time as entities in international ocean transportationThey are defined in the Act as groups of shippers which on anon profit basis consolidate their cargoes to secure volume ratesor enter into service contracts The Act expressly requires thatthe carriers and conferences negotiate with shippersassociations It also provides that associations can enter intoservice contracts on behalf of their members Shippers

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associations have not been granted antitrust immunity under the1984 Act In fiscal year 1989 18 service contracts were filedinvolving 20 shippers associations Since the Shipping Act of1984 became effective a total of 38 shippers associations haveentered into a total of 174 service contracts with certain carriersand conferences

9 Financial Analysis

The Bureau of Domestic Regulation provides accountingand financial expertise to help ensure the reasonableness ofrates for the transportation of cargo and other services providedby common carriers in the domestic offshore waterbornecommerce of the United States The Bureau also providestechnical assistance to other activities within the Commission

The Bureau continued to monitor the activities of carriersin the domestic offshore commerce of the United States The

effort involved the receipt and review of financial and operatingdata submitted in compliance with 46 CFR Part 552

During the year the Bureau reviewed a general rateincrease filed in the Hawaii Trade The Bureau was alsoinvolved in an inquiry concerning an increase in certain ratesin the Guam Trade

Financial expertise is also provided with respect to thepassenger vessel certification program During fiscal year 1989a full onsite audit was conducted for unearned passenger vesselrevenue collected by one passenger vessel operator Thefinancial statement of a company wishing to participate in theprogram as an insurer was also reviewed

Accounting assistance was provided to the Bureau ofHearing Counsel in connection with its enforcement programand litigation activities

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10 Support Activities

The Bureau of Domestic Regulation acts as one of theprimary information and data sources for other Commissionactivities and programs

Investigative activities require substantial tariff researchand supporting documentation which is provided by Bureaustaff Automated data bases such as the regulated personsindex and service contract system are utilized for initial dataidentification purposes and actual hard copy of relevant materialis retrieved and provided to the Bureau of Investigations andorthe appropriate field office

The Commissions field offices are also provided withgeneral data lists of regulated persons situated in specific fieldoffice jurisdictions This data assists not only with investigativeefforts but serves localized public needs for informationconcerning Commission regulated industries

During the past fiscal year the Bureau completed andsubmitted several chapters and sections of chapters on Bureaurelated subjects which were incorporated into the CommissionsSection 18 Report on the ShippingAct of1984 September 1989The Bureau also supported other bureaus and offices in theirSection 18 Report activities by providing the raw tariff rate datawhich was tracked to study pricing behavior in the liner shippingindustry and service contract database information to supportthe analysis of service contract trends over the five year studyperiod

11 Rulemaking and Docketed Proceedings

The Bureau initiates or supports formal rulemakings andCommission docketed proceedings During fiscal year 1989 theBureau was involved with Docket No 887 Service Contracts

MostFavoredShipper Provisions to amend service contractregulations to prohibit clauses referencing unpublished or unfiled

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rates of other carriers and conferences Docket No 8904 TariffPublication of Free Time and Detention Charges Applicable toCarrier Equipment Interchanged with Shippers and Their Agentsto require the publication of terms and conditions governing theuse of carrier provided equipment Docket No 8816 ServiceContracts to permit the correction of administrative or clericalerrors in service contracts under specific circumstances DocketNo 8903 Tariff Filing Notice Period Exemption to permitcarriers providing porttoport service in the Hawaiian domesticoffshore trade to publish on one days notice reductions inexisting individual commodity rates and rates on new tariffitems Docket No 8817 Interpretations and Statements ofPolicystating that common carriers or conferences may not require ashippers association to obtain or apply for a Department ofJustice Review Letter prior to or as part of a service contractnegotiation process Docket No 8819 Effective Date of TariffChanges that requires common carriers to specify in their tariffsthat the effective date for rates rules and charges applicable toa given shipment is the date the cargo is received by the carrieror its agent and Docket No 8920 Definition of a Shipper andAvailability of Mixed Commodity Rates to define the termshipper more clearly and provide that mixed commodity rateswill be available only to shippers as redefined The Bureau alsoparticipated in Fact Finding Investigation No 17 Rates Chargesand Services Provided at Marine Terminal Facilities to determinethe Commissions jurisdiction over certain marine terminalindustry practices

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1 General

I BUREAU OFECONOMIC ANALYSIS

The Bureau of Economic Analysis provides economicstatistical and financial analysis for the Commission TheBureau augments the Commissionspolicy planning capabilitiesand enhances the agencysresponsiveness to new developmentsand trends in US ocean commerce and the liner shippingindustry

Major activities of the Bureau include

o Preparing the fiveyear study required by section 18of the Shipping Act of 1984 as to the impact of theAct on the international ocean shipping industry

o Coordinating the input of various industry studygroups which were organized to assist the staff ingathering information and trade data for the Section18 Study

o Organizing and coordinating the activities of theSection 18 Study Advisory Committee which wasformed to receive in a public forum industry adviceon the conduct of the fiveyear study

o Preparing financial and economic data and reportsfor use in overseeing the activities of carriers in thedomestic offshore trades

o Preparing special reports on economic and financialdevelopments in liner shipping and

o Providing information in response to Commissionneeds for economic political and policy information

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2 Section 18 Study

The Bureaus major project during FY 1989 was tocomplete the collection and analysis of data required by section18a and finalize the reports required by section 18 c of theShipping Act of 1984 The CommissionsSection 18 Report onthe Shipping Act of 1984 Section 18 Report or Report wassubmitted on September 20 1989 as required by section 18 ofthat Act to the Congress and three other government agencies

the Department of Transportation the Department of Justiceand the Federal Trade Commission The Advisory Commissionon Conferences in Ocean Shipping Advisory Commission isalso to receive a copy of the Report however the AdvisoryCommission had not been formed by the end of the fiscal yearAn Executive Summary of the FMCsSection 18 Report presentsan overview of the Reports findings and conclusions It hasbeen included in Chapter VII the Section 18 Study

3 Future Plans and Proposed Activities

The Bureau will concentrate its efforts in fiscal year 1990on developing a strategic plan for the FMC The plan willbecome a framework for the Commission to use in the

development of its programs and general process of allocatingresources to the various program areas

The Bureau will analyze the responses to the CommissionsSection 18 Report on the Shipping Act of 1984 from theDepartment of Transportation the Department ofJustice and theFederal Trade Commission The Commissionsdata collectioneffort may be continued on a scaleddown level to ensure thatthe Advisory Commission has current information on sections18a of the 1984 Act level of rates service and competition

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J BUREAU OFHEARING COUNSEL

The Bureau of Hearing Counsel participates as trialcounsel in formal adjudicatory docketed proceedingsnon adjudicatory investigations rulemaking proceedings whendesignated by Commission order and other proceedings initiatedby the Commission Bureau attorneys serve as trial attorneyswhere intervention is permitted and appropriate in formalcomplaint proceedings instituted under section 22 of the 1916Act and section 11 of the 1984 Act Bureau attorneys also aredesignated Investigative Officers in non adjudicatory formalproceedings In addition to the formal proceedings in which theBureau participates as a party the Bureau monitors all otherformal proceedings in order to ascertain that major issuesaffecting the shipping industry andor the general public asdistinguished from issues deriving from private disputesbetweenthe litigating parties are adequately developed The Bureaualso participates in an advisory capacity in the development ofCommission rules and regulations On occasion the Bureaumay participate in court litigation by or against the Commission

On request the Bureau furnishes legal advice to the staffBureau attorneys provide legal advice to the Bureau ofInvestigations during field investigations and review enforcementreports completed by that Bureau When appropriate theBureau of Hearing Counsel prepares and serves notices ofviolations of the shipping statutes andor regulations and maycompromise and settle civil penalty allegations arising out ofthose violations If settlement is not reached the Bureau actsas prosecutor in formal Commission proceedings that may resultin the assessment of civil penalties The Bureau also participatesin conjunction with other Bureaus in special enforcementinitiatives such as the TransAtlantic Enforcement Initiative andthe Trans Pacific Malpractice Program

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At the beginning of fiscal year 1989 27 enforcementreports were pending final resolution by the Bureau Duringthe fiscal year 46 new enforcement reports were received fromthe Bureau of Investigations Fortysix such cases werecompromised and settled administratively closed or referredfor formal proceedings Twentyseven enforcement reports werepending resolution on September 30 1989

At the start of fiscal year 1989 the Bureau was party tonine formal proceedings During the fiscal year the Bureauparticipated in seven new formal proceedings Four proceedingsin which the Bureau participated were completed Accordinglythe Bureau was involved in twelve formal proceedings at the endof the fiscal year

At the beginning of fiscal year 1989 there were 48 requestsfor legal advice pending in the Bureau Seventyone requestsfor legal advice were received during the fiscal year and 70 legaladvice projects were completed Accordingly 49 legal advicematters were pending in the Bureau on September 30 1989

The Commissionsincreased emphasis on enforcement isresulting in expansion in all areas of Bureau activity As aresult of this effort the Bureau collected almost5000000 incivil penalties in fiscal year 1989 Appendix E shows that over5500000 was compromised or assessed in fiscal year 1989This included some of the largest settlements with singlerespondents entered into by the Commission under the 1984Act and represented the largest amount of civil penalties evercollected by the Commission in a single year Settlements werereached with all segments of the industry eg carriers shippersforwarders marine terminal operators in the full range of theUS foreign trades

In April 1989 the Commission instituted Fact FindingInvestigation No 18 a non adjudicatory proceeding to investigaterebating and other rate malpractices in the Trans Pacific tradesAs a direct consequence of the fact finding settlements in excessof1000000 have resulted with Pacific cargo interests and an

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NVOCC Generally as a consequence of the increasedemphasis on enforcement and in particular due to continuedFact Finding No 18 activity it is anticipated that this trend incivil penalty collection will continue

In fiscal years 1990 and 1991 the Bureau will continue topursue violations of the shipping statutes aggressively and willcontinue to offer legal advice and support to the Commissionstaff

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K BUREAU OF

INVESTIGATIONS

The Bureau ofInvestigations monitors the activities of andconducts investigations of alleged violations by ocean commoncarriers non vesseloperating common carriers freightforwarders shippers ports and terminals and other persons toensure compliance with the statutes and regulations administeredby the Commission

The Bureau maintains a staff of 47 personnel located inthe Headquarters Office in Washington DC and DistrictOffices in the major port cities of Houston Los Angeles MiamiNew Orleans New York San Francisco and Hato Rey PuertoRico In addition to investigative and surveillance functionseach District Office represents the Commission within itsjurisdiction provides liaison between the Commission and themaritime industry and the shipping public collects and analyzesintelligence of regulatory significance and assesses industrywide conditions for the Commission

The Bureau investigates significant competitive practicespursuant to major Commission approved malpractice programsIn addition the Bureau investigates a full range of violations ona local level These activities may also be carried out inconjunction with fact finding formal or court proceedings

The following practices are subject to ongoinginvestigations conducted by the Bureau

o Illegal rebating by carriers and receipt of illegalrebates by shippers non vessel operating commoncarriers and shippers associations

o Misdescriptions and misdeclarations of cargo orother malpractices of carriers shippers consigneesand other persons

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o Activities of ocean common carriers who are partiesto agreements whenever it appears that suchagreements and modifications have been implementedprior to filing with the Commission or are beingcarried out in violation of the Shipping Acts

o Failure by common carriers to file appropriate tariffscovering their rates and charges or to charge ratesthat are in effect and on file with the Commissionand

o Operating as an ocean freight forwarder without alicense issued by the Commission or contrary tostatute or regulation

The Bureaus surveillance activities include

o Review of service contracts to determine compliancewith statute and regulation

o Review of non vesseloperating common carrieroperations

o Post licensing and routine compliance checks oflicensed freight forwarders to determine whether theiroperations conform with regulatory requirements

o Audits of passenger vessel operators to ensure thefinancial protection of cruise passengers

Bureau liaison activities involve cooperation andcoordination with other Government agencies providingregulatory information and relaying Commission policy to theshipping industry and the public and handling informalcomplaints within a District

The Bureau assists the Bureau of Hearing Counsel informal proceedings before the Commission conducts studiesand surveys for use in program development and program

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revision reports trade information and recommends remedialaction

During fiscal year 1989 the Bureau continued toinvestigate malpractices in the major trade routes with specialemphasis on the Trans Pacific and Trans Atlantic trades TheBureausintensified efforts in the Trans Pacific trades resulted

in the development of a significant number of investigations intothe practices of vesseloperating common carriers nonvesseloperating common carriers freight forwarders and cargointerests The investigative strategies employed in the TransPacific Malpractice Program will be applied to programs focusingon other trades routes in fiscal years 1990 and 1991 TheBureau continues to monitor and investigate conditions in theNorth Atlantic trades as part of the TransAtlantic EnforcementInitiative which began in fiscal year 1987

The Bureau conducted 132 investigations and specialinquiries in fiscal year 1989 of which the majority weretransferred to the Bureau of Hearing Counsel for enforcementaction See Chapter III A total of 191 surveillance matterswere conducted in fiscal year 1989 including audits of selectedservice contracts freight forwarder compliance checks andaudits of non vesseloperating common carriers

Coordination between the CommissionsDistrict Officesand US Customs Services Field Offices continued in fiscal

year 1989 as a part of the Memorandum of Understandingbetween the agencies for the exchange of enforcementinformation Part of the focus of fiscal year 1989 activities wasthe development an agreement whereby Commissioninvestigators may access information filed by the shippingcommunity in CustomsAutomated Commercial System electronicdatabase The exchange of investigative information willincrease in fiscal years 1990 and 1991 as both agencies movetoward automation and the electronic filing of informationregarding their regulatory activities

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During fiscal year 1989 the Bureau continued to provideits investigators with formal training in fraud detection throughparticipation in the White Collar Crime Training Program at theFederal Law Enforcement Training Center FLETC in

Glynco Georgia In addition all District Office personnel wereprovided with training in the use of automated systems insupport of Bureau operations Training activities in fiscal 1990will focus on the enhancement of data processing skills for allBureau personnel continued participation in FLETCsadvancedtraining programs and midlevel supervisory and managementtraining for senior investigative personnel

In fiscal year 1989 the Bureau initiated hiring actions inthe Houston Los Angeles New Orleans and Puerto RicoDistrict Offices A Special Assistant to the Bureau Director wasalso hired in August 1989 to provide additional expertise andguidance in the planning coordination and evaluation of theBureaus target malpractice program This augmentation ofBureau personnel resulted in a marked increase in the numberof field investigations conducted by the Bureau

At the beginning of fiscal year 1989 there were 187 fieldinvestigations in progress During the year 323 new fieldinvestigations were initiated providing 510 cases on hand andscheduled for inquiry Completed investigations totaled 257leaving 253 cases pending at the end of the fiscal yearAppendix F summarizes the Bureau of Investigations activities

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L ADMINISTRATIONPROGRAM

Office of the Director

Bureau of Administration

The Bureau of Administration is responsible for the directadministration and coordination of the

1 Office of Administrative Services2 Office of Budget and Financial Management3 Office of Personnel4 Office of Special Studies

Many of the functions and achievements of the Bureau ofAdministration are reflected in the narratives for these Offices

infra

The Office of the Director is responsible for coordinatingthe procurement of the CommissionsATFI system In fiscalyear 1989 the following major accomplishments related to theATFI procurement process were achieved

o The Commission issued a decision in an ATFI Noticeof Inquiry proceeding in which it decided to retainthe original functionality of the system includingremote retrieval of tariffs by the public

o Issued a second draft and then a final Request forProposals RFP to over 200 bidders

o Received and evaluated offers from private sectorfirms or teams of firms in response to the RFP

o Awarded a contract for the initial two phases of thesystem and

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o Had its new contractor commence work on the first

phase of the systemie Finalizing the ATFI systemconcept including validation of requirements

In fiscal year 1990 the ATFI contract permits theCommissionsexercise of contract options for Phases III and IVie development and operation as a Prototype system if certainfindings are made Full operation of the system is expected tobegin in fiscal year 1991

The Office of the Director coordinated and edited the

Commissions27th Annual Report to Congress

The Director is Agency Contact for FEMA andCommission representative as Principal Management Officialto the Small Agency Council Additionally the Director is theExecutive Secretary and Committee Management Officer of theCommissionsSection 18 Study Industry Advisory Committeewhich met in April 1989

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1 Office of Administrative Services

a General Office Responsibilities

The Office of Administrative Services directs and

administers a variety of management services functions thatprincipally provide administrative support to the regulatoryprogram operations of the Commission The Director of theOffice ofAdministrative Services reports directly to the DirectorBureau of Administration

The offices support programs include communicationsprocurement of administrative goods and services propertymanagement space management printing management mailand records services reproduction and graphic services facilitiesand equipment maintenance and transportation The officesmajor functions are to secure and furnish all necessary suppliesequipment and services required in support of the Commissionsmission and to formulate regulations policies procedures andmethods governing the use and provision of these supportservices in compliance with the Federal Acquisition RegulationFAR the Federal Property Management Regulations FPMRthe Federal Information Resources Management RegulationFIRMR and other appropriate Federal guidelines

b Office Program Objectives

The program objectives of the Office of AdministrativeServices are to

o Execute Commission contracts and administer these

and any other procurement matters which obligatethe Government to expenditure of funds

o Control and administer the Commissionsacquisitionutilization inventory maintenance and dispositionof property

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o Develop and coordinate a comprehensivetelecommunications program for Washingtonheadquarters and at all Commission field officeswhich includes installation and maintenance of all

telecommunications equipment and features

o Administer programs for improvement of theworkplace environment and other space utilizationoperations for headquarters and field locationswhich include planning negotiating drafting andinterpreting architectural drawings and

specifications and assigning space to and providingfurnishings for offices

o Manage the receipt storage issuance and inventoryof all supplies forms and accessories required insupport of Commission operations

o Coordinate and control all printing duplicatingcopying and graphic services whether provided inhouse or by outside sources

o Regulate receipt distribution and dispatching ofmail

o Coordinate the use of the buildingsphysical facilitiesat headquarters with respect to maintenance securityand parking

o Arrange for transportation services for allCommission locations

o Conduct safety inspections and coordinate theCommissionsemergency evacuation program

o Manage the retention transfer and disposal ofCommission records and

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o Direct the Commissionsparticipation developmentand goal setting under the Small Business Act

c Accomplishments

During fiscal year 1989 the Office of AdministrativeServices

o Initiated the lease renewal process for Headquartersspace and provided justification package to GSA

o Provided temporary space for the Houston fieldoperation and initiated a dialogue with GSA forestablishing a permanent location

o Initiated the relocation process to expand and movethe Los Angeles field operation to a larger facilityand better location

o Established an automated property inventory ofagency furniture and equipment and revised theprogram for regular excessing and disposal ofunserviceable items

o Restructured the mail and supply operationsincluding staffing changes and duty andresponsibility adjustments

o Printed and distributed two 2 draft RFPs and thefinal RFP for award of the FMCsAutomated Tariff

Filing and Information system ATFI contract

o Procured and distributed required furnishings andequipment needed for implementation of the ATFIprogram throughout the FMC Headquarters andfield locations

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o Arranged for expert consultants for programinitiatives in both the Bureau of Economic Analysisand Bureau of Investigations

o Established the new Office of the Inspector Generalat the Headquarters location rearranged spaceallocation and made alterations as necessary for thenew operation also arranged for an expertconsultant to assist the Inspector General in thedevelopment of program initiatives

o Revised and upgraded position descriptions forprofessional and technical OAS staff for upwardmobility and career development

o Conducted an FTS telecommunications study onHeadquarters and field usage and providedrecommendations for future needs

o Established a program for procuring temporaryclerical assistance

o Printed and distributed the Section 18 Report andCompendium on the Shipping Act of 1984

o Conducted a copy management study forHeadquarters and field locations made upgrades tothe Headquarters current copying program andrecommended purchasing vs leasing of field officecopiers

o Disposed of and replaced an obsolete word processingsystem throughout the FMC Headquarters facility

o Conducted an internal activity review of theprocurement program and made noted adjustmentsto improve its effectiveness recommending staffingchanges as appropriate

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o Drafted the Congressional response on the FMCsproperty disposition practices and

o Revised the Commission Order on Long DistanceTelephone Usage

d Office Prognosis

In fiscal year 1990 the Office plans to conclude theinitiatives begun in fiscal year 1989 along with finalizingobjectives surrounding the following

o Establishing a credit card program for smallpurchases

o Planning procurement initiatives to upgradetelecommunication instruments and systemsthroughout Headquarters and field locations

o Reestablishing and automating vendorbidder listreference files as procurement informationalresources

o Resolving ongoing facility concerns over handicapaccessibility

o Continuing office initiative of revising OAS relatedCommission Orders Managing Directives andStandard Operating Procedures specifically in theareas of procurement property and

telecommunications and

o Resolving and finalizing space initiatives inHeadquarters Los Angeles and Houston

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2 Office of Budget and Financial Management

a General

The Office of Budget and Financial Managementadministers the Commissionsfinancial management programand is responsible for optimal utilization of the Commissionsphysical fiscal and staffing resources The Office is chargedwith interpreting government budgetary and financial policiesand programs and developing annual budget justifications forsubmission to the Congress and the Office of Management andBudget The Office also administers internal controls systemsfor agency funds travel and cash management programs andthe Commissionsimprest fund The Director of the Office isthe CommissionsChief Financial Officer

b Objectives

The objectives of the Office are to

o Submit annual budget justifications and estimatesto OMB and the Congress

o Execute the budget to ensure appropriated funds areproperly expended

o Prepare regular financial reports to aid managementdecisions

o Administer the control system over workyears ofemployment

o Collect all fees and forfeitures due the Commission

o Process payments to vendors as efficiently and inaccordance with the Prompt Payment Act

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o Ensure resources are used properly to avoid fraudwaste error and abuse

o Process travel orders and vouchers within established

time limits and in accordance with governingregulations

o Review internal controls and accounting proceduresto ensure that they conform to existing regulationsand develop procedures to correct deficiencies and

o Administer the CommissionsImprestFund programand manage the CommissionsCash ManagementProgram

c Achievements

During fiscal year 1989 the Office of Budget and FinancialManagement

o Collected and deposited4888328 from user feesfines collections freight forwarder licensing andvessel certification fees

o Provided the Cash Management Division of theDeportment of Treasury with data on the agencysparticipation in the electronic funds transfer ofemployee paychecks and allotments as well as theagencysparticipation in theDinersClub Credit CordSystem

o Prepared Merit Pay and award calculations

o Coordinated and prepared budget justifications andestimates for the fiscal year 1990 Congressionalbudget and the fiscal year 1991 budget to OMB

o Participated in OMB and Congressional budgethearings

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o Managed the Commissions Travel and CashManagement programs

o Provided management with monthly status reportson workyears funding travel and receivables

o Reviewed and updated financial management andaccounting control procedures to ensure compliancewith OMB GAO and Treasury guidelines

o Assisted the Office ofThrift Supervision formerly theFederal Home Loan Bank Board in producing thePrompt Payment Report to OMB for 1989

o Prepared an Impact Statement in response to OMBsproposed reductions in FY 1989 appropriations andan analysis of increased pay costs associated withthe FY 1989 and 1990 pay increases

o Participated in the planning strategy for tariffautomation

o Completed office procedures and an internal controlmanual and

o Studied the use ofa commercial credit card for smallpurchases

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3 lice of Personnel

The Office of Personnel plans and administers personnelmanagement programs including recruitment and placementtraining position classification and pay administrationoccupational safety and health employee counseling servicesemployee relations performance appraisal incentive awards andretirement Significant achievements during fiscal year 1989 areoutlined below

a Program Development

A new Commission Order 115 Performance ManagementSystem Including Senior Executive Service SES PerformanceAppraisal System was finalized and published The new orderwhich incorporates all of the changes mandated by FPM 43022 was circulated to all managers and supervisors for commentprior to issuance and their comments were incorporated to theextent possible The order was approved by OPM as meetingall the requirements of law and regulation A major goal of thenew order is to simplify as much as possible a complexprocedure and to make it as consistent as possible with thePMRS system

A new Commission Order 114 Annual Leave TransferProgram was prepared and issued Under the provisions of thisprogram a percentage of accrued annual leave of a Commissionemployee can be donated to another employee who needs suchleave because of a medical emergency Since the beginning ofthe program the Commissionsfour qualified leave recipientsand recipients at other agencies have received over 1200 hoursof annual leave In every instance applications to become leaverecipients have been acted upon within 24 hours The

experimental Leave Bank Program was studied for possible useat the Commission but ultimately rejected because the presentprogram is working so well

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The CommissionsDrug Free Workplace Plan was amendedto incorporate the comments and suggestions of the InteragencyCoordinating Group and resubmitted to the Group for reviewand approval The Office also made arrangements for theCommission to be included in the InteriorDepartmentsRequestfor Proposal for collection and testing services

Commission Order 65 Administrative Grievance System wasamended to exclude from its coverage requests forreconsideration of nonSES performance appraisals executedunder the new PMS plan

Commission Order 95 Executive Resources Board wasamended to eliminate the prohibition on members succeedingthemselves and include the EEO Director as an advisor to theBoard

b Recruitment and Placement

Having concluded the largest concentrated recruitmenteffort since 1978 the Office worked closely with managementofficials to maintain staffing at authorized levels Close

coordination with the Managing DirectorsOffice Budget Officeand selecting officials as well as careful monitoring of turnoverand quick advertising and filling of vacancies was essential tothis effort to maximize workyears available to the CommissionDuring the year the Commission maintained its high standingamong all agencies in percentage of employees with targeteddisabilities and offered special salary rates to clerical employeesin Washington DC New York Florida and California

An expanded investigative program meant that recruitmentefforts were concentrated in the major port cities around thecountry where the Commission maintains district offices Amajor effort was made during the staffing of the new Houstonoffice to attract well qualified minorities and women ascandidates A total of 37 new employees were hired during theyear All schedule C and other personnel matters associatedwith a change in administration were handled expeditiously

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c Employee Relations

The Office prepared a proposal to provide all employeeswith personalized benefits statements detailing their specificbenefits under the health and life insurance social securityretirement Thrift Savings Plan workers compensation andleave programs This proposal was approved and is currentlybeing implemented

Employee counseling services contracts in WashingtonNew York Miami San Francisco and Los Angeles were closelymonitored during the year and supervisors and employees wereadvised of the services provided by the contractors Thisconfidential voluntary program makes professional counselingand assistance available to covered employees at no chargeEfforts were made to provide counseling services to employeesin New Orleans and Houston on an asneeded basis Theseveral wellness programs presented included seminars on TimeManagement AIDS Balancing Work and Family StressManagement etc A bimonthly counseling services newsletterwas distributed to all employees

Arrangements were made for interested employees nearingretirement to participate in a weeklong retirement planningprogram held by the Federal Aviation Administration at no costto the Commission The Office also conducted a Health BenefitsOpen Season sponsored the Annual Employee Health Fair andmade the Check Book Health Benefits Guide available toemployees at no charge

The Office worked closely with the Red Cross to improveagency participation in the blood donor program by establishinga system of coordinators within each bureau and office Thesecoordinators were trained in the latest techniques to encourageblood donations Two onsite blood drives were held

The Office continued to advise supervisors concerning theirresponsibilities in the areas of employee conduct andperformance including the granting of withingrade increases

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and awards correcting discipline and other problems In seekingto resolve performance or conductrelated problems the Officeworked closely with Commission legal advisors to ensure thatemployees affected by adverse actions were accorded their duerights All employee relations cases were successfully resolvedduring the year

d Training

The Office worked closely with the Executive ResourcesBoard to address the issues of how to train and develop theCommissionscadre of senior executives SES candidates andPMRS managers and supervisors This work produced two ERBsanctioned and Chairmanapproved training programs one forexecutives and one for the PMRS group Both programs consistof ERBapproved core management training which all coveredemployees must complete and ERBapproved electivemanagerial training designed to meet specific individual needsThe PMRS onsite training is open to GS 13 thru 15 employeeson a firstcome first served space available basis Also a policywas developed and issued to all employees limiting the amountthe Commission would pay for credit courses at local colleges

Onsite training programs offered to agency employeesincluded a Salute to Secretaries Reception and Time ManagementWorkshop Supervising Employee Performance Conduct andLeave and a course in Proofreading Approximately 150instances of offsite training were offered to employees Newprocedures were put in to place to speed approval of trainingrequests and followup once the training is completed to obtainand review course evaluations and assure prompt payment

e Performance Appraisal

With the publication of a new appraisal system for PMSemployees PMRS managers and supervisors were offered onsite training in performance evaluation and the workings of thenew system In addition during the rating year SES PMRSand nonPMRS performance appraisal milestones were charted

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and issued by the Office to all employees and supervisorsreminder memos and instructions covering midyear progressreviews performance appraisal and new performance plans wereprepared and issued on schedule A plan for the payment ofPMRS performance awards for the FY 88 appraisal cycle wassubmitted to the Chairman for approval All performanceawards were timely Onsite audits of all midyear progressreviews were conducted and an audit conducted to determine

that all employees had a position description and performancestandards

f Incentive Awards

A campaign to revitalize and promote the suggestionprogram resulted in a significant increase in the number ofsuggestions received and approved for implementation duringthe year

The Commissions Incentive Awards Program wasadministered in a timely fashion This included prompt actionon internal awards successful efforts to revitalize the EmployeeoftheMonth Award and the Suggestion Program and thenomination of several employees for external awards eg anSES rank award the Arthur S Flemming Award the FEIAAExecutive of the Year Award and the Disabled Employee of theYear Award

g Position Classification and Pay Administration

The major recommendations contained in a comprehensivestudy of the Commissionsgrade structure were implementedduring the year and efforts made to expedite the processing ofpromotion requests were successful In addition the staff closelymonitored special pay rates in various locations around thecountry and issued decisions in three pending highest previousrate cases

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During fiscal years 1990 and 1991 The Office willcontinue to advise the Commission on all personnel matters andensure the maintenance of a progressive personnel programwithin the Commission

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4 Office of Special Studies

a General Office Responsibilities

The Office of Special Studies provides leadership andguidance for the agencys information resources managementefforts These efforts support the Commission in every phaseof its statutory mission to include policy and rule making tariffautomation complaint investigation litigation and

administration The office is also responsible for the conductof management analysis and control activities and energy andenvironmental impact studies

b Major Accomplishments

During fiscal year 1989 the Office

o Developed and began implementation of a plan forthe conversion of traditional wordprocessing tomicrocomputer compatible equipment A

Replacement Plan and schedule was also approvedand is presently being implemented The Officedeveloped and provided micro computer trainingclasses onsite for headquarters personnelSpecialized micro computer training classes weredeveloped and provided to each of the Commissionsfield offices

o Initiated a Forms Study Group to evaluatethe potential for automation access completion andstorage of current paperbased forms

o Administered the implementation of a SBA 8acontract which will provide microcomputers andsoftware for a Local Area Network LAN that willserve as the gateway for the planned AutomatedTariff Filing and Information System ATFI Themicro computers acquired through this contract have

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been installed training was designed and conductedand testing of the LAN prototype was initiated Thetarget date for activation of the CommissionwideLAN is set for April 1990

o Provided technical support and guidance to the ATFIGroup in various precontract award phases andduring the contractor evaluation phase In August1989 the ATFI contract was awarded to the PlanningResearch Corporation PRC teaming with DataExchange International DXI

o Control and authority were centralized over all ADPservice contracts This enables the Commission toestablish accountability for systematic review ofADPservice contract budgets performance and payments

c Ongoing Activities

o The Forms Automation Study will continue throughfiscal year 1990 and should be fully implemented byfiscal year 1991

o Implementation of the Commissionwide LAN whichwill serve as the gateway to ATFI will continue intofiscal year 1990

o Technical support and guidance for the developmentand implementation of ATFI will continue and theoffice will continue to monitor tasks and schedulesto ensure the smooth and timely interface of ATFIto the LAN Gateway

o The office will recommended a contract to provideCommission personnel with handson PC trainingin word processing

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o The office is developing a proposal to restructurecurrent Productivity Measurements being reportedto the Department of Labor

o Analysis to identify opportunities for automatinglaborintensive operations is ongoing

d Description of Future Plans or Proposed Activities

During fiscal year 1991 the Office will continue to developinformation resource management strategies which will furtherthe effective efficient and economical use of informationmanagement principles systems and guidelines

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APPENDICES

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Formal Proceedings

APPENDIX B

COMIVIISSION PROCEEDINGS

Fiscal Year 1989

Decisions 12

Discontinuances Dismissals 11

Initial Decisions Not Reviewed 6

Report on Remand fromUS Court of Appeals 1

Remanded 1

Rulemakings Final Rules 7

Total 38

Applications to Correct Service Contracts 13

Special Dockets 86

Informal Dockets 15

Oral Arguments 1

182

APPENDIX C

CARRIER AGREEMENT FILINGS AND STATUSFiscal Year 1989

Carrier Agreements Filed in FY 1989including modifications

Foreign and Domestic Commerce 277

277

Agreements Processing Categories in FY 1989

FortyFive Day Review 154Shortened Review 62

ExemptEffective Upon Filing 79

Rejection of Filing 0

Formal Extension of Review Period 2

Approved Under Shipping Act 1916 3

300

Canier Reports Submittedfor Commission Review

Shippers Requests and Complaints 120

Minutes of Meetings 1149

Pooling Statements 6

Operating Reports 3Index of Documents 254Consultations 120

1652

Carrier Agreements on File as of September 34 1989

Conference 74

Interconference 20

Pooling Equal Access 23Joint Service 34

Sailing Charter 114

Cooperative Working Agency Equipment Interchange 99

183

364

APPENDIX D

TARIFF AND TERMINAL AGREEMENTFILING AND STATUS FISCAL YEAR 1989

Tariff Filings Pages

Foreign Filings 798993Domestic Filings 8684Terminal Filings 5071L

TOTAL 812748

TariffPublications

Foreign On Hand 10188 4399On Hand 10189 4947

Domestic On Hand 10188 317

On Hand 10189 262

Terminals On Hand 10188 399

On Hand 10189 460

Special Pennission Applications

Total Received Foreign 182

Granted 140Denied 29Withdrawn 13

Total Received Domestic 23

Granted 16Denied 2Withdrawn 5

Domestic Investigation and Suspension Memoranda

Completed 2

Pending 0

Service Contracts Filed 5215

Terminal Agreements Receivedincluding amendments 283

On Hand 10188 623

On Hand 10189 750

184

APPENDIX E

CIVIL PENALTIES COMPROMISED OR ASSESSEDFiscal Year 1989

Allstate Trading Co 120000Aloha Pacific Cruises Limited Partnership

SS Monterey Limited Partnership 7500

American Transport Lines Inc 10000Amertrans International Co 5000Benel International Co 2000Big Roc Tools Inc 11000Coaster Company of America Inc 57500Crossocean Shipping Co Jugolinija 185000DB Berelson Co 52500EK Fasteners Inc 88000

Elegant Products Inc 10000Ffairtime 15000Food Products International Inc 17500Greenbali Corp 100000Hanstai International Inc 70000Intex Corporation 40000Korea Shipping Corp 38000Lloyd Bermuda Line Inc 75000

Matson Terminals Inc 71223Mediterranean Shipping Company 50000Mitsui Air International Inc 22500National Shipping Co of Saudi Arabia 45000Orient Overseas Container Line Inc 2550000

Pac Bridge Shipping Ltd 200EPacific Motif Inc 50000Philip Karahalis 97500Raymond Whitcomb NY Inc 7500Showa Line Ltd 1225000

Society Expeditions Cruise Inc 29ETatung Company of America 250000US South Atlantic

GulfCentral American Freight Association 10000Warner Forwarders Inc 12500

Total Civil Penalties Compromisedor Assessed 5525073

185

APPENDIX F

FIELD INVESTIGATIONSFiscal Year 1989

SurveillanceActions Other TOTAL

Pending 10188 41 146 187

Opened FY 1989 191 132 323

Closed FY 1989 139 118 257

Pending93089 93 160 253

186

APPENDIX G

STATEMENT OF APPROPRIATIONS OBLIGATIONS ANDRECEIPTS FOR THE FISCAL YEAR ENDED SEPTEMBER301989

APPROPRIATIONS

Public Law 100459 approved October 1 1988 For necessary expenses ofthe Federal Maritime Commission as authorized by section 201d of theMerchant Marine Act of 1936 as amended 46 App USC III includingservices as authorized by 5 US03109 hire of passenger motor vehiclesauthorized by 31 USC 1343 b and uniforms or allowances therefor asauthorized by 5 USC 59015902 Provided that not to exceed1500 shallbe available for official reception and representation expenses

187

13585000

OBLIGATIONS AND UNOBLIGATED BALANCE

Net obligations for salaries and expenses for the fiscal year ended September30 1989

13585000

STATEMENT OF RECEIPTS Deposited with the General Fund ofthe Treasury for the Fiscal Year Ended September 30 1989

Publications and reproductionsFees and Vessel Certificationand Freight Forwarder Applications 155045

Fines and penalties 4733283

Total general fund receipts 4888328