Apr 5, 2000
Volume 4, Number 4
Oakland, California

SIGNALS™ provides detailed information on the regulations and activities of the US Federal Maritime Commission (FMC), and related developments in the ocean freight industry. For past issues, please consult our index.

In this issue, we discuss these industry developments:

 FMC Announces 18 Compromise Agreements:    $ 1,060,000 in penalties collected  

During March 2000 the FMC Bureau of Enforcement collected a total of $1,060,000 in penalties from four vessel operating common carriers and fourteen ocean transportation intermediaries (OTIs). These payments settled allegations of violations of the US Shipping Acts. Individual settlements ranged from $15,000 to $290,000 (in US Dollars). These entities did not admit any violations of the Shipping Acts, but each paid a significant penalty. Two of the OTI-Freight Forwarders involved surrendered their licenses.

The malpractices cited by the FMC in these settlement agreements include illegal rebating, misdescription of commodities in order to obtain lower rates, failure to enforce tariffs, unlawful freight forwarder compensation, and service contract misuse. Illegal rebating was the most frequent allegation. Three of the four vessel operating common carriers named by the FMC were alleged to have paid illegal rebates. Seven of the OTIs named were alleged to have received illegal rebates in violation of section 10(a)(1) of the Shipping Act.

Misdescription of commodities to obtain more favorable rates was involved in three of the compromises. In one case, the misdescriptions were made by an origin agent in China, but because the shipment moved on the bill of lading of the US based NVOCC, and under its service contract, the NVOCC had to settle with FMC for $25,000. In several cases, the ocean carrier or NVOCC was alleged to have failed to enforce the rates of its tariff or service contract, and thereby violated section 10(b) of the Shipping Act by allowing shippers to obtain transportation at less than the applicable tariff or contract rates.

Agreements between the FMC and vessel operating common carriers (VOCCs) settled allegations of rebating, service contract misuse, and failure to enforce tariffs. The four carriers named were:

Empresa de Navegacao Alianca S.A. This Brazilian VOCC was alleged to have knowingly and willfully allowing shippers to obtain transportation for less than applicable rates shown in its tariffs and service contracts by the payment of illegal rebates. It was also alleged to have allowed shipments which did not qualify for carriage under service contract to be transported at service contract rates. Alianca paid FMC $290,000 in compromise.

Caribbean General Maritime, Ltd. (CAGEMA): This St. Lucia based VOCC was alleged paid illegal rebates in the South America trades. Also, it was alleged that CAGEMA violated section 10(b)(14) of the Shipping Act by knowingly and willfully providing service to an untariffed and unbonded NVOCC in the Caribbean trades. In compromise of these allegations, CAGEMA paid FMC $80,000.

Compania Chilena de Navegacion Interoceanica S.A. The FMC alleged that CCNI, a Chilean VOCC, paid illegal rebates. Under the compromise, CCNI paid the sum of $150,000 to the FMC.

DSR - Senator Lines GmbH. - The compromise resolves allegations that DSR-Senator Lines violated the Shipping Act by charging less compensation for transportation than the rates filed in its tariffs and service contracts. DSR-Senator is also alleged to have allowed third parties to obtain transportation at less than the applicable rates by allowing access to a service contract without the consent of the shipper signatory. DSR-Senator Lines GmbH is a VOCC based in Bremen, Germany. It paid FMC the sum of $120,000.

Four of the compromise agreements involve OTIs licensed by the FMC to operate as both NVOCCs and Ocean Freight Forwarders. These firms were alleged by FMC to have violated the section 19 of the Shipping Act by obtaining forwarder compensation from ocean carriers on shipments were they had a beneficial interest in the shipment, or had not rendered any forwarding service. Handling a shipment as an NVOCC is a beneficial interest.

Ace Shipping Corp. (NVOCC) of Des Plaines, IL and Young S. Kim dba Ace Young Company of Jamaica, NY: Young S. Kim is a principal in Ace Shipping Corp. and also acted as a licensed freight forwarder. It was alleged that Ace Shipping Corp. designated a related entity, Ace Young, as freight forwarder on master bills of lading in order to obtain forwarder compensation on shipments for which no forwarder services had been rendered. Young S. Kim surrendered his forwarders license. Ace Shipping Corp. and Ace Young Company paid FMC $23,000.

Brian Min dba B & A Express. This NVOCC located in Gardena, CA was also a licensed ocean freight forwarder, but recently surrendered its forwarders license. The FMC alleged that B & A Express designated others as freight forwarder on certain master bills of lading, as a means of permitting others to obtain forwarder compensation on shipments in which no forwarder services had been rendered. B & A Express also was designated as forwarder on shipments by other NVOCCs in order to qualify B & A Express for payments of forwarder compensation when it had rendered no forwarder services. B & A Express paid FMC $20,00.

F.R.T. International Inc. dba Frontier Logistics Services, a licensed NVOCC and freight forwarder located in Compton, CA, paid FMC $15,000 to compromise allegations of receiving forwarder compensation on shipments for which it rendered no forwarding services.

Multiple violations of the Shipping Act involving forwarding compensation and tariff enforcement were cited in unrelated settlement agreements with two other OTIs licensed to operate as both NVOCCs and freight forwarders: Cargonauts, Inc., of Miami, FL paid FMC $60,000 to compromise allegations of receiving illegal rebates, tariff violations, and collecting ocean freight forwarder compensation on shipments in which it had a beneficial interest. Suntrans International, Inc., of Mt. Prospect, IL, paid FMC $25,000 to compromise allegations of charging rates other than those on file in its FMC tariff, and collecting forwarding compensation unlawfully.

Commodity misdescription was alleged by FMC in the case of Speed Cargo Service, Inc. of Miami, FL. This OTI-NVOCC was alleged to have obtained transportation at less than the applicable tariff rates by means of commodity misdescription. It paid FMC $30,000 to settle. Oceanic Bridge International Inc., an NVOCC based in City of Industry, CA, was alleged to have obtained transportation at less than the applicable service contract rates due to the misdescription of commodities by its origin agent in China on shipments transported under an Oceanic Bridge service contract with COSCO. It paid FMC $25,000.

Illegal rebates were cited by the FMC in settlement agreements with five unrelated NVOCCs based in Miami, FL. Alexim Trading Corporation, Asecomer International Corporation dba Interworld Freight Inc., Express Container Line, Inc., and Total Marine System paid FMC $20,000 each to settle allegations of receiving illegal rebates. Maritime Trading Group, Inc. paid FMC $42,000 to compromise allegations it received illegal rebates and other rate concessions. J.F. Hillebrand USA (West Coast), Inc., a Sonoma, CA based ocean freight forwarder, was alleged by the FMC to have received rebates on shipments during 1995 thru 1997. It paid FMC $50,000 to settle.

     Volume 4   Number 4      Apr 5, 2000

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