July 6, 1999   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.

FMC Docket No. 99-06: Direct Container Line, possible violations of the Shipping Act
FMC Docket No. 99-10: new definition of vessel operating common carrier (VOCC)

 Docket No. 99-06: Direct Container Line, possible violations of Shipping Act  

In this recently issued FMC docket Direct Container Line Inc. and its CEO, Owen Glenn, are accused by FMC of Possible Violations of Section 10(a)(1) of the Shipping Act of 1984. A formal investigation and public hearing to determine the facts of the case were ordered by FMC.

Direct Container Line Inc. (DCL) is a well known NVOCC based in Carson, California. According to this FMC docket, it appears that subsequent to October 1994, DCL, by receiving rebates and other freight rate concessions, knowingly and willfully obtained transportation for less than applicable tariff or service

contract rates from one or more ocean common carriers providing service to Chile, Peru and destinations on the East Coast of South America. The receipt of these alleged rebates appears to have been arranged by DCL's principal, Owen Glenn. The FMC’s Bureau of Enforcement was also named as a party to this proceeding. The Bureau recently entered into settlement agreements and collected civil penalties from six other carriers serving the South American trades (see SIGNALS™ issue of June 6, 1999 for details).

The FMC investigation was instituted to determine:

(1) Whether Direct Container Line, Inc., either alone or in conjunction with other persons, violated section 10(a)(1) of the 1984 Act by obtaining or attempting to obtain ocean transportation of property at less than the rates and charges shown in applicable tariffs or service contracts;

(2) Whether Owen Glen, either alone or in conjunction with other persons, violates section 10(a)(1) of the 1984 Act by obtaining or attempting to obtain ocean transportation of property at less than the rates and charges shown in applicable tariffs or service contracts;

(3) Whether, in the event violations of section 10(a)(1) of the 1984 Act are found, civil penalties should be assessed against DCL and Owen Glenn and, if so, the amount of such penalties;

(4) Whether, in the event violations of section 10(a)(1) of the 1984 Act are found, the Commission should cancel or suspend any or all tariffs of DCL or revoke any Commission issued license authorizing DCL to operate as an Ocean Transportation Intermediary; and

(5) Whether, in the event violations of section 10(a)(1) of the 1984 Act are found, an appropriate cease and desist order should be issued.

The FMC also ordered a public hearing on the matter before an FMC Administrative Law Judge of the Commission's Office of Administrative Law Judges. According to its usual practice, the FMC and all parties named in this Docket could agree to settle the matter prior to the hearing by means of an alternative form of dispute resolution, for example, a settlement agreement with civil penalties.

 Docket No. 99-10: new definition of vessel operating common carrier (VOCC)  

In this FMC docket, issued June 25, 1999, the Federal Maritime Commission (FMC) proposes to amend its regulations implementing the Shipping Act of 1984 to clarify the definition of "ocean common carrier" to reflect the Commission's current interpretation of the term. If implemented, only ocean common carriers that operate vessels in at least one United States trade would have the opportunity to enter into service contracts with shippers, and to enter into rate making and vessel sharing agreements with other vessel operating ocean common carriers. Ocean carriers issuing bills of lading to or from the USA who do not operate at least one vessel making regularly scheduled direct calls at US ports would be subject to FMC regulations that apply to Non-Vessel Operating Common Carriers (NVOCCs).

46 CFR Sec. 535.104 Definitions.

(u) Ocean common carrier means a common carrier that operates, for all or part of its common carrier service, a vessel on the high seas or the Great Lakes between a port in the United States and a port in a foreign country, except that the term does not include a common carrier engaged in ocean transportation by ferry boat, ocean tramp, or chemical parcel-tanker.

This new definition of ocean common carrier was proposed previously by the FMC in its regulations implementing the Ocean Shipping Reform Act of 1998, however this proposal was withdrawn.

In response to its previous proposal the FMC received comments from Croatia Line and the Council of European & Japanese National Shipowners Association (CENSA). CENSA suggested that it be further clarified to include a carrier that provides part of a vessel service in a U.S. trade. Croatia Line claimed that the Commission failed to disclose the facts necessitating such a change, and failed to discuss the effects of the changes on regulated parties.

The effects are indeed significant for some carriers; if it were required to register with FMC as an NVOCC, Croatia Line would not longer be able to enter into service contracts with its shippers, and it would be required to resign from space charter agreements it participates in. Under the Shipping Acts of 1984 and 1998 NVOCCs are not permitted to enter into vessel sharing, rate making or discussion agreements with other carriers. These FMC filed agreements are exempt from US antitrust laws.

In view of these comments, and to encourage additional comments from other potentially affected parties, the Commission decided to issue Docket 99-10. The new definition of ocean common carrier appears not only in the agreement rules (46 CFR Part 535) but also in the rules governing ocean transportation intermediaries (Part 515), tariffs (Part 520), and service contracts (Part 530), the Commission is proposing to adopt a definition that is consistent for all rules.

Comments on Docket 99-10 are due August 24, 1999. These should be directed to the FMC Secretary, Mr. Bryant L. VanBrakle, at 800 North Capitol Street NW, Room 1046, Washington, DC 20573-0001. For additional information telephone: 202-523-5725, fax: 202-523-0014, or e-mail: secretary@fmc.gov 15 copies of comments are required.

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SIGNALS™ the newsletter of Distribution-Publications, Inc.
Vol. 3, No. 6, July. 6, 1999