The Order named Sea-Land as the respondent herein. The Commission's Bureau of Enforcement ("BOE") was named a party to this proceeding.

The accuracy of the complete history and background of this investigation as compiled by BOE, which has not been challenged or controverted by Sea-Land, has been verified and with minor revisions may be found in Appendix A, for convenience.

Official notice is taken of the principal tariff rule involved in this investigation. Counsel have provided a copy of the TWRA equipment substitution rule 2 G5, TWRA Rules Tariff TWRA-017 (Tariff code), reflecting the governing text of the rule during the period at issue, 1996-1998 (see Appendix B).

The record in this investigation includes the evidence submitted by the parties consisting of verified statements, exhibits, attached documents, a deposition, and the 14 volumes of the transcripts of oral hearing conducted in Washington, D.C. and Long Beach, CA.

The parties furnished opening and reply briefs. In this ruling, the designations employed by the parties for the exhibits will be followed. For example, each exhibit of BOE was numbered and is referred to as "BOE Ex.___," Sea-Land's exhibits appear as "SL Ex.___" and the exhibits introduced at the hearing are shown as "CO Ex.___."

References to the transcript testimony are shown by the name of the witness, followed by "Tr.___," the blank being filled in with the transcript page number(s) and in certain instances the volume number. For example, the transcript testimony of Mr. Oliver Clark is designated as "Clark Tr.___." Mr. Glenn Spargo and Mr. Richard Favor testified on more than one occasion, so the testimony of Mr. Spargo appears as "SpargoI___" or "SpargoII___," and that of Mr. Favor as "FavorI___," "FavorII___" or "FavorIII___."

Appendix C contains a list of the names of the various witnesses, the manner in which their testimony is identified, the page number of their transcript testimony and the dates of their appearances, which is useful in locating in which of the 14 volumes their particular testimony may be found.

Appendix D is a summary of data as to the 149 shipments at issue based on Gravitt's Attachment A.

BOE points to rule 221(d)(2) of the Commission's Rules of Practice and Procedure, which requires that proposed findings of fact in opening briefs be set forth "with reference to exhibit numbers and pages of the transcript." 46 C.F.R. § 502.222(d)(2). BOE contends that Sea-Land's proposed Findings of Fact Nos. 3, 9, 17, 18 and others specified below contain no references to the record for Sea-Land's assertion. BOE also urges that Nos. 5, 22, 24 and others, specified below, include a record reference which supports but one element or factual aspect of a proposed finding, while leaving the remainder unsupported by any citation to the record. BOE seeks that such materials as are unsupported by citations to the record be clearly distinguished in the decision from that body of proposed findings which explicitly meets the terms of Rule 221(d)(2).

Rule 221(d) requires that opening briefs "shall contain the following matters in separately captioned sections: "(2) proposed findings of fact in serially numbered paragraphs with reference to exhibit numbers and pages of the transcript," 46 C.F.R. § 502.221(d)(2). BOE is correct that many of Sea-Land's proposed findings of fact do not comply with this rule and in the circumstances they cannot be accepted. In Morales v. A.C. Orssleff's EFTF, 246 F.3d 32 (1^st Cir. 2001), cited by BOE, Senior Circuit Judge Coffin, writing for a panel of the First Circuit, dealt with a case he termed "a lesson in summary judgment practice." Id. at 33. The material filed by the parties in Morales produced an appendix of two thick volumes. Id. Such a case "signals the formidable search for a general issue of material fact. If this is not to impose the daunting burden of seeking a needle in a haystack, the court needs help from counsel." The 1^st Circuit affirmed strict application of the trial court's local rules mandating that genuine issues of fact be "properly supported by specific reference to the record." Id.

Since the rule in Morales requiring record references for proposed findings of fact was applied where the record consisted of two volumes, much more so is it applicable here where the record in the present investigation includes 2700 pages of transcripts of the oral hearings spread over 14 volumes. Thus, those proposed findings of fact which do not comply with Rule 221(d)(2) have been given no weight in this ruling. Any other requested findings of fact not specifically discussed nor reflected in this ruling or conclusions have been considered but found either not justified or unnecessary for the proper disposition of the pertinent issues presented in this investigation.

This investigation has been bifurcated and this ruling treats only the issue of liability with the question of penalty to be disposed of separately, if necessary-both documents to comprise an Initial Decision. This procedure of two rulings comprising an Initial Decision has been followed previously. See, e.g., Military Sealift Command v. Sea-Land Service, Inc., 27 S.R.R. 89 (ALJ 1995), and 27 S.R.R. 227 (ALJ 1995). "The two rulings thus comprise an Initial Decision." Id. at 227. This finding and procedure was not disturbed on appeal. This course enables subsequent review by the Commission to embrace the entire proceeding and not cause a subsequent remand in court for lack of a non-final order. See Meredith v. Federal Mine Safety and Health Review, 177 F.3d 1042 (D.C. Cir. 1999):

. . . Subject to a few limited exceptions, appellate review of administrative action is restricted to final agency orders. See Bell v. New Jersey, 461 U.S. 773, 778, 103 S.Ct. 2187, 76 L.Ed.2d 312 (1983) ("The strong presumption is that judicial review will be available only when agency action becomes final."). We have held repeatedly and across agency contexts that an order will be considered final to the extent that it "imposes an obligation, denies a right, or fixes some legal relationship, usually at the consummation of an administrative process." Transwestern Pipeline Co. v. FERC, 59 F.3d 222, 226 (D.C.Cir.1995) (quoting State of Alaska v. FERC, 980 F.2d 761, 763 (D.C. Cir.1992)). See also Burlington N. R.R. Co. v. Surface Transp. Bd., 75 F.3d 685, 690 (D.C.Cir.1996); Mountain States Tel. & Tel. Co. v. FCC, 939 F.2d 1021, 1027 (D.C.Cir.1991).

Id. at 1042. This same rule has been applied to prior proceedings before this Commission. See James J. Flanagan Shipping Corporation v. FMC and US, 1998 WL 65567 (D.C. Cir.) ("The Federal Maritime Commission's decision is not final as it did not dispose [] of all issues as to all parties in the . . . proceeding." See also American President Lines, Ltd. v. FMC and U.S. and Government of the Territory of Guam v. F.M.C. and U.S., 1998 WL 849406 (D.C. Cir.) ("In light of the ongoing agency proceedings, the Federal Maritime Commission's order filed June 1, 1998 is not final and is therefore not reviewable by this court at this time.").

This ruling adopts the following findings of fact proposed by BOE and Sea-Land which have appropriate references to the record and which have been edited in light of the record and the comments and arguments of the parties. For convenience of the parties and the readers, the numerical sequences used in each of the parties' respective proposed findings of fact are followed in this ruling. Supplementary findings are designated with a letter following the number as, for example, 110A, 110B and 110C. The findings of fact proposed by BOE and adopted will also be prefaced by "FF" to distinguish them from those of Sea-Land, which will be prefaced by "SL."

Respondent Sea-Land

FF1. During all periods relevant hereto, Sea-Land" was an ocean common carrier operating in the U.S. foreign trade. Order of Investigation, at 1; SL Ex. 4, ¶ 1.

FF2. In 1999, Sea-Land operated approximately 70 container vessels and 200,000 containers in worldwide trades. BOE Ex. 2, ¶ 52.

FF3. Sea-Land provided regular liner services, inter alia, between the United States West Coast ports and points and ports and points in the Far East, operating as many as 21 containerships in its Transpacific services. Order of Investigation, at 1.

FF4. During all periods relevant hereto, Sea-Land was a wholly-owned subsidiary of CSX Corporation, a publicly-traded company based in Richmond, VA. BOE Ex. 2, ¶ 50.

FF5. During all periods relevant hereto, Sea-Land was a member of the Transpacific Westbound Rate Agreement ("TWRA"), Order of Investigation, at 1, SL Ex. 1, ¶¶ 2, 5; SL Ex. 4, ¶ 2; SL Ex. 5, ¶ 2.

FF6. TWRA published common tariffs under which its carrier members, including Sea-Land, were to operate, including tariff rules applicable to carriers' equipment substitution practices (Rule 2 G5). Order of Investigation, at 1; SL Ex. 5, ¶ 2; BOE Ex. 14, ¶¶ 4, 5; Appendix B and Clark Attachment "O." Rule 2 G5 provided in pertinent part, as follows:

EQUIPMENT SUBSTITUTION

A. The following applies to Dry, Closed Containers only. Carrier may, at its option, substitute a type of equipment other than that which was booked or ordered by the shipper or his agent, subject to the following conditions:

1. A 40' container may be substituted for a 20' container, subject to maximums of 25 CBM and 18 KT, at the rate and charges applicable to a 20' container. . . . a 45' container may be substituted for a 40' container, subject to a maximum of 65 CBM and 21 KT, at the rate and charges applicable to a 40' container. When cargo is loaded in excess of the above quantities, the applicable revenue ton rate or per container rate and charges for a 40' container will apply.

Clark Attachment "O"; Appendix B.

FF7. In November 1992, Sea-Land and other carriers entered into a compromise agreement with the Commission, resolving allegations that the carriers violated sections 10(a) and 10(b) of the 1984 Act in their operations in the Transpacific Trades. BOE Ex. 2, ¶ 49.

FF8. As part of such settlement, Sea-Land and other carriers participated in an agreement to provide effective "neutral body" policing in the Transpacific Trades. BOE Ex. 2, ¶ 49.

FF9. Under the auspices of the Transpacific Self-Policing Agreement (Agreement No. 203-011452), Robinson Stark Associates Ltd. furnished "neutral body" services enforcing, on behalf of TWRA members and other Transpacific carriers, the rate provisions and applicable rules published in TWRA's tariffs, including the authority to assess penalties for carrier violations. BOE Ex. 2, ¶ 49.

FF10. The Order of Investigation alleged the "near-routine abuse" of the TWRA equipment substitution rules whereby Sea-Land solicited the patronage of World Pacific Container (U.S.A.) Inc. and other NVOs by furnishing a larger container or box while assessing the per-container rates normally applied only to a container of smaller capacity. It was further alleged that Sea-Land allowed NVOs to load the containers beyond the capacity specified under TWRA's applicable tariff rules, while paying Sea-Land the freight rate applicable to the smaller box. Order of Investigation, at 2.

FF11. The Order also alleged that, on many of these same NVO shipments, Sea-Land made payment of freight forwarder compensation to ITL Shipping Co. and other forwarders in circumstances in which such forwarders did not perform the requisite forwarding services or were otherwise known to be related to the shipper NVO. Order of Investigation, at 3.

FF12. Subsequent to the commencement of this proceeding, CSX entered into an agreement whereby it sold those assets comprising the international liner business of Sea-Land to Maersk (see footnote 4). The transaction, publicly valued at $800 million, closed on December 10, 1999. BOE Ex. 2, ¶ 51.

Competitive Conditions in the Trans-Pacific Westbound Trades

FF13. For carriers such as Sea-Land, the Transpacific trades historically have been unbalanced, with import volume from the Far East significantly exceeding exports. Ohle Tr. 389 ln4 - ln7; SL Ex. 4, ¶ 3. A typical export vessel profile westbound for Sea-Land would consist of one-half loaded containers and one-half empty containers being repositioned or returned to the Far East. Ohle Tr. 388 ln17 - 389 ln3.

FF14. Sea-Land's cost of repositioning such empty boxes to Far East ports such as Hong Kong ranged from $400-$450 per 40' box. Ohle Tr. 388 ln17 - ln25; Spargo I Tr. 83 ln22 - 84ln3.

FF15. Sea-Land predominately looked at controlling its costs. Spargo I Tr. 82 ln15 - 83 ln2. By locating additional export cargoes, even at marginal revenues, Sea-Land helped control its costs. Spargo I Tr. 85 ln17 - 86 ln6. Export shipments were viewed by Sea-Land as contributing favorably to Sea-Land's financial picture so long as the rates were about $100 to $150 over the variable cost Sea-Land would incur. Spargo I Tr. 87 ln4 - ln8.

FF16. Sea-Land enjoyed strong export volumes through late 1995 and part of 1996, but in late 1996 to early 1997, Sea-Land experienced a significant decline in carryings on its Transpacific vessel strings,⁽⁵⁾ Hagan Tr. 22 ln10 - 17; 101 ln9 - 102 ln17; Wing Tr. 165 ln14 - 15. By 1996, Sea-Land was "searching for volume" in the westbound direction. Hagan Tr. 22 ln3 - ln21. Sea-Land was "always trying to pursue more business." Wing Tr. 171 ln6 - 16.

FF17. Sea-Land's export volume of loaded containers then fell about 50 percent. Hagan Tr. 101 ln9 - 102 ln17. Market volumes thereafter remained flat for Sea-Land throughout the period, Hagan Tr. 22 ln22 - 23 ln3.

FF18. Although consolidated or "FAK" rates were declining and the TWRA was losing market share because of the new concept of shippers contracting with the carriers and as NVOs signed service contracts with carriers such as Hyundai Merchant Marine, FAK cargo remained attractive in 1996, even though FAK rates had dropped to about $1800-1900 per 20' container. Wing Tr. 274 ln1 - ln23. FAK was part of the cargo mix that Sea-Land wanted to carry. Hagan Tr. 19 ln7 - ln10.

FF19. Sea-Land's sales representatives reported in 1996 that Sea-Land's westbound volumes were declining due to Maersk competition, as well as other issues such as service levels. Wing Tr. 223 ln3 - ln18; Hagan 63 ln6 - ln13. Competition from Maersk was said to be affecting Sea-Land's market in two distinct ways: through equipment substitution practices and by preventing Sea-Land from loading FAK on Maersk's vessels on the "Panama string." Wing Tr. 224 ln9 - 20; Tr. 281 ln16 - 282 ln7.

FF20. The Panama string ("TP3") was preferred by customers in Asia due to fast service times to Hong Kong and Japan. Wing Tr. 279 ln5 - ln21; Chang Tr. 48 ln16 - 49 ln8. The Panama vessel string generally offered a better delivery schedule with good timing and attractive arrival dates in the Far East, which were matters of particular importance and essential to shippers of refrigerated ("reefer") cargo to have it available before the week-end market. Wing Tr. 280 ln5 - ln13.

FF21. Sea-Land was very concerned that Maersk was manipulating the terminal's "late gate" process⁽⁶⁾ for Sea-Land to be loaded on Maersk's vessels on the Panama string. Sea-Land believed Maersk was doing this to obtain a competitive advantage over Sea-Land. Wing Tr. 280 ln 14 - ln19. Maersk had an arrangement with Sea-Land which permitted a certain number of Sea-Land containers to be moved on the Panama string. Timely access to the vessel was crucial to Sea-Land. Wing Tr. 280 ln14 - 282 ln14. Sea-Land paid for space on the vessel (slots) but many times the slots went empty because the cargo could not get through the gate. Wing Tr. 281 ln2 - 282 ln14.

FF22. The major problem that Sea-Land encountered was Maersk's practice of limiting the number of Sea-Land containers that could arrive late and pass through the gate for loading on Maersk "Panama string" vessels. This caused NVOs to divert some of their containers from Sea-Land to Maersk. Wing Tr. 224 ln7 - 230 ln8. Sea-Land was limited to only four or five containers of "late gate cargo" weekly. Wing Tr. 224 ln5 - ln20. Late gate privileges were a service issue critical to time sensitive cargoes such as reefer cargo and consolidated or FAK cargoes. Wing Tr. 225 ln21 - 226 ln9, 229 ln9 - 230 ln8.

FF23. One of the largest export shippers of FAK cargoes in the Los Angeles, CA ("LA") area was Direct Container Line ("DCL"), Spargo I Tr. 20 ln12 - ln15. DCL's business required late gate privileges. Wing Tr. 173 ln24 - 174 ln5. For FAK cargoes, late gate privileges give the shipper customer more time to deconsolidate and re-consolidate freight, to handle equipment problems, or receive additional cargo. Wing Tr. 228 ln17 - 229 ln8. As a result of Sea-Land's problems with late gate privileges, Sea-Land's service could not meet DCL's needs. Wing Tr. 173 ln13 - ln24.

FF24. At the beginning of 1996, Sea-Land lost DCL's business, amounting to 20-25 containers per week, to Maersk. Wing Tr. 172 ln16 - 173 ln3, 282 ln21 - 283 ln6; Hagan Tr. 16 ln9 - ln18, 64 ln - ln11; Wing Tr. 173 ln4 - ln8. Other disagreements also had arisen between Sea-Land and DCL's owner, resulting in the failure of Sea-Land to acquire DCL. Hagan Tr. 84 ln22 - 85 ln20; Wing Tr. 282 ln21 - 283 ln6.

FF25. Since Maersk controlled the late gate privileges and operated the vessels shared with Sea-Land and utilized for many of DCL's shipments, it was easy for DCL and other customers, including reefer shippers, to switch to Maersk, and NVOs other than DCL also shifted away from Sea-Land, at least with respect to the Panama string. Wing Tr. 173 ln24 - 174 ln5.

Sea-Land's Efforts in Competing for FAK Shippers

FF26. As the Director of the Westbound Trade Lane for the Pacific Trade, Michael "Scott" Hagan had responsibility for determining Sea-Land's westbound marketing strategy Hagan Tr. 4 ln12 - 14, Tr. 8 ln5 - 15; Tr. 10 ln15 - 13 ln10. From Mr. Hagan's perspective, Sea-Land's performance in the export market in 1996-1997 was unacceptable. Hagan Tr. 23 ln4 - ln7.

FF27. Sea-Land set quotas or sales targets on a territorial basis for Sea-Land's "outside" sales representatives ("reps"). Spargo I Tr. 12 ln22 - 14 ln4; Tr. 46 ln4 - 12; Wing Tr. 171 ln24 - 172 ln6. To reach the sales target or goal the outside sales rep would have to obtain a given amount of business, i.e., produce "X" number of boxes. Spargo I Tr. 46 ln13 - 16. For the entire Western Region there was an aggregate target that Mr. Spargo was expected to meet. Spargo I Tr. 47 ln11 - 16. As General Manager for the Western Region, Glenn Spargo had the job responsibility to implement Sea-Land's westbound marketing strategy. Hagan Tr. 24 ln16 - ln20; Spargo I Tr 9 ln4 - 17. Mr. Spargo had overall responsibility for the production of the outside sales representatives as, for example, "how many containers were being 'sold' in the marketplace by the Western Region during the month of July 1977." Spargo I Tr. 22 ln10- 16.

FF28. David Wing was one of Mr. Spargo's four export sales managers and Mr. Wing's sales staff were assigned sales volumes of about 930 container loads weekly for all trades serviced by Sea-Land's Pacific Division. Wing Tr. 159 ln17 - 160 ln6; Hagan Tr. 34 ln1 - ln22. Of this number, Mr. Wing had to generate sales volumes of about 500 container loads per week for vessels on Sea-Land's Trans-Pacific strings. Hagan Tr. 35 ln1 - ln7, 128 ln20 - 129 ln2.

FF29. At the beginning of 1996, Sea-Land was not making an effort to obtain FAK cargo. Wing Tr. 171 ln21 - 172 ln6. Part of Sea-Land's overall Trans-Pacific export volume, FAK cargo, accounted for 40 - 50 container loads per week. Wing Tr. 160 ln7 - ln18.

FF30. Sea-Land's container volume declined in the westbound trade on a number of big accounts; however, the carrier did not perceive this as a crisis situation. Wing Tr. 172 ln7 - ln15. Sea-Land's practice was to try to fill the gap of any lost business, whether FAK or other cargo. Hagan Tr. 17 ln1 - ln14.

FF31. Sea-Land generally wanted higher rated, time sensitive cargoes, which included reefer cargo and FAK. Wing Tr. 278 ln11 - 279 ln4. FAK cargo came primarily from NVOs. Wing Tr. 161 ln4 - ln7.

FF32. FAK accounts were considered difficult for Sea-Land to secure. Hagan Tr. 81 ln22 - 82 ln3. Mr. Hagan perceived that there wasn't sufficient FAK cargo available to Sea-Land to justify a significant marketing strategy for soliciting FAK accounts. Hagan Tr. 17 ln15 - 18 ln1.

FF33. Westbound Trade Lane Director Scott Hagan knew that Sea-Land could not regain DCL's business. Hagan Tr. 82 ln 11 - 83 ln2.

FF34. Glenn Spargo was given substantial autonomy to make decisions within his sales area. Hagan Tr. 31 ln 18 - 32 ln1. Mr. Spargo was known to have the "horsepower" to make things happen. Wing Tr. 306 ln14, Tr. 307 ln6; Hagan Tr. 32 ln5 - ln7.

FF35. Rich Favor was a successful inside sales associate for Sea-Land, who attracted favorable attention from the manager in its Atlantic Division and in 1995, when an opening came up in the Pacific Division for an outside sales rep, he was selected. Wing Tr. 266 ln7 - 266 ln1. Mr. Favor had experience in servicing NVO accounts, knew the people, and had demonstrated an understanding of how an NVO business flowed. Wing Tr. 267 ln2 - 22.

FF36. Among qualities sought by the sales group as desirable for working with Sea-Land's FAK customer base, Mr. Favor was "competitive, creative, likeable and unconventional" to a certain extent. Wing Tr. 265 ln22 - 266 ln6. The decision to employ Favor in outside sales had the support of Frank Baragona, the Regional General Manager for the Pacific Division, and of Drew Mickle, the Regional General Manager for the Atlantic Division. Wing Tr. 266 ln7 - ln18; Spargo I Tr. 20 ln76 - 21 ln2.

FF37. Mr. Favor took over sales accounts which included military household goods; metals; building materials; FAK accounts; and freight forwarders. Wing Tr. 161 ln13 - 161 ln24; Spargo I Tr. 18 ln9 - 19 ln5. FAK cargo accounted for about 40 percent of the weekly sales target of 100-110 container loads which Sea-Land assigned to Mr. Favor in 1996. Wing Tr. 162 ln5 - ln18, 178 ln7 - ln21; Hagan Tr. 129 ln3 - ln8. Sea-Land set up a plan for Mr. Favor early in 1996, by account, a bi-weekly volume which Sea-Land expected him "to use as a road map to meet his numbers." Wing Tr. 178 ln7 - 179 ln7. Mr. Favor was one of three sales reps that came in right about his target number. Wing Tr. 179 ln8 - 179 ln22.

FF38. Among FAK sales accounts, Rich Favor was given responsibility for servicing accounts with DCL, Brennan International Transport Inc. ("Brennan International" or "Brennan") and Conterm. Spargo I Tr. 20 ln6 - ln11. DCL, Brennan and Conterm were known to Sea-Land as the largest export NVOs operating in the Los Angeles area. Spargo I Tr. 20 ln12 - ln15. Other NVO accounts included Pan Pacific Express Corp. ("Pan Pacific"), World Pacific Container (USA) Inc. ("World Pacific"), Global Links Express Inc. ("Global Links Express"), General Ocean Freight Container Line Inc. ("General Ocean Freight" or "General Ocean"), Morrison Maritime Inc. ("Morrison Maritime") and Supertrans International Inc. ("Supertrans"). Wing Tr. 183 ln10 - 184 ln2.

FF39. Sea-Land's local sales managers were responsible for actively monitoring the sales accounts of their sales reps. Spargo I Tr. 21 ln20 - 22 ln1. As part of his duties to "coach" and to look for new business opportunities, David Wing, regional sales manager, often accompanied Mr. Favor on his sales calls. Wing Tr. 303 ln23 - 305 ln13; Wing Tr. 158 ln18 - 159 ln2.

FF40. From 1995 through late 1996, Mr. Wing continued to accompany Favor on sales calls as often as twice a month. Wing Tr. 304 ln1 - ln10. During a sales call upon Pan Pacific, Cooper Chao, general manager of Pan Pacific, initiated discussions with Mr. Wing and Mr. Favor about equipment substitution involving other TWRA carriers. Wing Tr. 174 ln25 - 175 ln11, 176 ln10 - ln15, 220 ln14 - 221 ln5, 319 ln25 - 320 ln7. Cooper Chao discussed increasing Pan Pacific's shipments with Sea-Land through use of equipment substitution. Wing Tr. 321 ln19 - ln25.

FF41. Similar discussions of equipment substitution came up several times during sales calls made by Mr. Wing and Mr. Favor upon NVO shipper Supertrans. Wing Tr. 177 ln12 - ln19, 236 ln20, 237 ln10. Mr. Wing testified that NVO customers initiated other discussions with him about equipment substitution that involved TWRA carriers. Wing Tr. 174 ln25 - 175 ln11.

FF42. David Wing informed Mr. Spargo about his discussions of equipment substitution with Pan Pacific. Wing Tr. 252 ln4 - ln23, 223 ln19 - 224 ln10.

FF43. Mr. Spargo was familiar with the NVO accounts serviced by Rich Favor, Spargo I Tr. 18 ln17 - ln19, and periodically went on joint sales calls with Mr. Favor and other sales representatives. Wing Tr. 303 ln20 - ln22, 296 ln25 - 297 ln11. Mr. Spargo visited with World Pacific two or three times, Spargo I Tr. 51 ln 16 - 52 ln2; with General Ocean, Spargo I Tr. 52 ln3 - ln7; and with Pan Pacific, Spargo I Tr. 52 ln14 - ln18; Wing Tr. 305 ln14 - ln20. In addition, Mr. Spargo already was familiar with Brennan International on a personal basis, Wing Tr. 305 ln21 - 306 ln2, and had close relationships with other major NVOs. Wing Tr. 303 ln12 - ln19.

FF44. Despite the downturn in the export market and Sea-Land's loss of DCL as a customer, Mr. Favor performed favorably in his new role, with his sales volume increasing in 1996 over his sales targets for 1995. Wing Tr. 179 ln15 - ln22, 268 ln18 - 269 ln21. Mr. Wing recommended Mr. Favor for a $5,500 bonus in 1996. Wing Tr. 268 ln18 - 271 - ln1. Within Mr. Wing's sales group, Rich Favor was one of only three sales representatives who made their sales objectives during 1996-"he came right about the target number." Wing Tr. 179 ln8 - ln14.

FF45. Rich Favor garnered container loads for Sea-Land from FAK shippers during this period, including shipments of Brennan International, Sehwani Tr. 20 ln19 - 24 ln18, Hagan Tr. 37 ln21 - 38 ln2; from Supertrans, D_Lee Tr106 ln11 - 107 ln13; from Global Links, Tse Tr. 29 ln18 - 30 ln9; and from World Pacific, Tam Tr. 47 ln9 - ln14.

FF47. At hearing, Sea-Land witness David Wing agreed that Mr. Favor had encouraged equipment substitution abuse while employed at Sea-Land. Wing Tr. 311 ln3 - ln7. Mr. Wing agreed that Mr. Favor intended to use equipment substitution malpractices in order to increase Sea-Land's sales to NVO customers. Wing Tr. 311 ln8 - ln11.

Section 10(b)(4) of the 1984 Act, 46 U.S.C. app. § 1709(l)(4)

The BOE Investigation

FF48. BOE witness Oliver E. Clark is the Los Angeles Area Representative for the Federal Maritime Commission Bureau of Enforcement. BOE Ex. 1 (Verified Statement of Oliver E. Clark), ¶ 1; Clark Tr. 22 ln3-6.

FF49. Mr. Clark has served in an investigative capacity with the Commission since 1975. BOE Ex. 1, ¶ 1. Clark Tr. 17 ln3 - 18 ln3; 22 ln13 - 15. Mr. Clark served previously as special agent for Army counterintelligence. Clark Tr. 22 ln16 - 21.

FF50. In the fall of 1997, Mr. Clark initiated an examination of export documentation filed with U.S. Customs for possible misdescription of commodities in the export trade to Hong Kong and other ports in the Far East. BOE Ex. 1, ¶ 2; Clark Tr. 40 ln22 - 43 ln8. Mr. Clark heard different rumors that possible misdescriptions outbound might be going on; that people call up and leave anonymous messages on his answering machine stating, "you ought to look into this or that." Clark Tr. 42 ln3 - Tr. 44 ln2.

FF51. Mr. Clark determined that significant amounts of certain cargo misdescribed as electrical or electronic equipment were being transported by Sea-Land vessels on behalf of certain non-vessel-operating common carriers. BOE Ex. 1, ¶ 2; Clark Tr. 46 ln22 - 48 ln1.

FF52. Through Mr. Clark's examination of carrier bills of lading filed with U.S. Customs, it was also determined that many of these same shipments had been annotated "Equipment Substitution for 20' Container" or had employed similar terminology. BOE Ex. 1, ¶ 3; Clark Tr. 48 ln11 - 49 ln6. "What I say that caught my eye was . . . all these 40-foot containers that were being given and 20-foot rates were being applied." Clark Tr. 48 ln11 - 16.

FF53. Equipment substitution involves the practice by which a carrier such as Sea-Land furnishes a shipper or NVO with a larger container than booked or ordered while still charging the per container rates normally applied to containers of smaller capacity. Appendix B; BOE Ex. 14, ¶ 6. An ocean common carrier's practices with respect to equipment substitution must be set forth in the applicable tariff of the carrier or conference in which it participates. BOE Ex. 1, ¶ 4; BOE Ex. 14, ¶ 6.

FF54. Due to the lower rates accorded to commodities transported under equipment substitution terms, these shipments are particularly susceptible to being abused by persons seeking to permit others to obtain transportation at less than the tariff or service contract rates otherwise applicable. BOE Ex. 1, ¶ 4; Clark Tr. 51 ln19 - 53 ln23. The FMC investigators' examination was directed toward identifying "significant patterns of abuse." Clark Tr. 48 ln9 - 10, Tr. 71 ln7 - ln13, 137 ln20 - 138 ln20, 146 ln9 - ln15, 149 ln5 - ln16; Carey Tr. 674 ln8 - ln22, 777 ln7 - ln15. Mr. Clark's review of U.S. Customs documentation of a number of other ocean carriers did not show the same patterns as in the present investigation involving Sea-Land. Clark Tr. 137 ln1 - 138 ln20, Tr. 145 ln10 - 14, Tr. 148 ln22 - 149 ln16, Tr. 150 ln20 - 22.

FF55. Among shippers identified for further investigation was World Pacific Container (U.S.A.) Inc. BOE Ex. 1, ¶ 3; Clark Tr. 43 ln9 - 44 ln 11; Carey Tr. 458 ln21 - 459 ln16.

FF56. The FMC investigation which began with on-site inspections of shipment records of various NVO shippers on November 18, 1997, included the review and copying of documentation relating to representative shipments transported during 1997 and interviews of the principals of the NVO shippers who have presented verified statements in this investigation and were cross-examined, infra. BOE Ex. 1, ¶¶ 5, 17, 26, 33, 37, 47, 68; Clark Tr. 54 ln12 - 55 ln6, 89 ln14 - 90 ln7; 120 ln13 - 121 ln19, 122 ln19 - 22, 270 ln11 - ln20, 174 ln21 - 175 ln3, 177 ln12 - 178 ln16, 190 ln11 - 20, 215 ln6 - 216 ln5, 220 ln6 - ln18, 236 ln4 - 11, 239 ln9 - 15, 240 ln16 - 241 ln12, 257 ln19 - 258 ln3, 270 ln11 - ln20, 429 ln20 - 431 ln20; Carey Tr. 590 ln15 - 593 ln2, 594 ln19 - 595 ln2, 606 ln12 - 607 ln10, 614 ln2 - 615 ln3; Tam Tr. 19 ln24 - 20 ln24; Wu Tr. 122 ln24 - 125 ln10; Tse Tr. 33 ln 14 - 37 ln 10; Wei Tr. 113 ln25 - 114 ln25, 120 ln4 - 123 ln25; D_Lee Tr. 113 ln3 - 117 ln5.

FF57. Following their interviews, the FMC investigators Mr. Clark and Mr. Carey generally sought to obtain written statements from principals of the NVO shippers. BOE Ex. 1, ¶¶ 12, 20, 29, 35, 40, 49; CO Ex. 2; CO Ex. 3; Clark Tr. 54 ln12 - 55 ln6, 98 ln23 - 102 ln17, 393 ln21 - 394 ln7. Messrs. Clark and Carey advised the NVOs of their potential liability under the Shipping Act, and in turn the NVO witnesses furnished statements without promise of immunity. BOE Ex. 3, Attachment at 3; BOE Ex. 4, Attachment at 3; CO Ex. 3, Attachment at 2; BOE Ex. 6, Attachment at 1; BOE Ex. 7, Attachment at 1; CO Ex. 2, at 2; BOE Ex. 9, Attachment at 2; Clark Tr. 91 ln1 - 92 ln 22, 103 ln6 - ln18, 105 ln7 - ln20, 177 ln14 - 178 ln16, 221 ln3 - 222 ln9; Tam Tr. 5 ln9 - ln22, 26 ln8 - 27 ln23; Tiao Tr. 165 ln12 - 166 ln10; Wu Tr. 125 ln11 - 127 ln3, 128 ln 17 - 129 ln1; Tse Tr. 6 ln15 - ln22, 31 ln11 - 31 ln24, 93 ln3 - ln7, 93 ln24 - 94 ln15; Wei Tr. 124 ln23 - 126 ln2; D_Lee Tr. 126 ln10 - 127 ln23; Chang Tr. 46 ln5 - ln17, 63 ln13 - 64 ln6; Chao Tr. 93 ln18 - 94 ln7, 97 ln10 - 99 ln6, 103 ln24 - 104 ln23.

FF58. On or about December 1, 1997, Mr. Clark interviewed Mr. Rich Favor, who identified NVOs he knew to be involved in equipment substitution abuses during the term of his employment at Sea-Land, and he stated that he had expressed his concerns about such illegal activities to Glenn Spargo at a meeting in April or May 1997. BOE Ex. 1, ¶¶ 72, 73, 74; Favor I Tr. 192 ln18 - 21, 193 ln3 - 4.

FF59. Mr. Rich Favor was deposed on July 9, 1998. SL Ex. 3. He subsequently appeared at the hearing on December 12-13, 2000, and on March 20, 2001, at which times he repudiated his earlier deposition testimony at which time he had denied that anyone at Sea-Land was involved in equipment substitution abuses. Favor I Tr. 199 ln17 - 200 ln10; CO Ex. 37.

NVO World Pacific Container

FF60. From January 1996 through May 1997, Sea-Land's sales representative, Mr. Rich Favor, serviced sales accounts with NVOs World Pacific Container ("WPC"), General Ocean Freight, Global Lines Express, Supertrans International, Brennan International, Pan Pacific and Morrison Maritime. Hagan Tr. 26 ln19 - 27 ln1; Spargo I Tr. 18 ln9 - ln19; Wing Tr. 183 ln 10 - ln24.

FF61. In 1996, Sea-Land's representative Mr. Favor approached Messrs. Danny Tam and Tony Tiao, President and Vice President, respectively, of WPC, to induce WPC to ship freight with Sea-Land and offered to permit WPC to obtain lower tariff rates available under equipment substitution rules. BOE Ex. 1, ¶¶ 6, 7; BOE Ex. 3, Attachment at 1; BOE Ex. 4, Attachment at 1; Tiao Tr. 171 ln1 - ln25, 190 ln1 - 191 ln8; Tam Tr. 25 ln13 - ln16, 47 ln9 - ln14, 96 ln10 - ln24; Tiao Tr. 190 ln1 - ln24; Tam Tr. 23 ln18 - 24 ln3.

FF62. Mr. Favor advised that, to obtain the lower equipment substitution rates, WPC would be required to misdeclare the cubic measurement of any shipment to ensure that Sea-Land's bill of lading reflected cargo measurements of 25 cubic meters (25 CBM) or less. BOE Ex. 1, ¶ 8; BOE Ex. 3, Attachment at 1; BOE Ex. 4, Attachment at 1; Clark Tr. 95 ln13 - 97 ln17, 104 ln20 - 105 ln6, 341 ln8 - 342 ln16; Tiao Tr. 212 ln25 - 213 ln 11; Tam Tr. 97 ln14 - l8 ln6.

FF63. WPC generally secured bookings from Sea-Land two or more weeks in advance of the movement of the shipment itself, and at the time of booking specifically requested that a forty-foot container be provided as equipment substitution by Sea-Land. BOE Ex. 1, ¶ 8.

FF64. In booking shipments using the code "40-foot container - equipment substitution," WPC knew that Sea-Land would charge the lower per-container rates set for 20-foot containers. BOE Ex. 1, ¶ 6; BOE Ex. 3, Attachment at 2; BOE Ex. 4, Attachment at 2; Carey Tr. 510 ln 15 - ln19.

FF65. During 1996 - 1997, WPC increased its shipment volume with Sea-Land from four or fewer containers to 15 or more containers per week. BOE Ex. 1, ¶ 9; BOE Ex. 3, Attachment at 2-3; BOE Ex. 4, Attachment at 2-3; Tam Tr. 13 ln20 - 14 ln3, 15 ln9 - ln15, 44 ln2 - ln8.

FF66. By March 1998, WPC calculated that it had transported over 2000 FEU on Sea-Land obtaining the lower 20-foot container rates by this equipment substitution ruse. BOE Ex. 1, ¶ 148 and Clark Att. T-5.

FF67. The lower rates allowed by Sea-Land under equipment substitution continued to be applied to WPC shipments after May 1997, when Mr. Favor terminated his employment at Sea-Land, and Sea-Land charged and collected for shipments under equipment substitution rates on a continuing basis through at least February 19, 1998. BOE Ex. 1, ¶ 9; BOE Ex. 3, at 1; BOE Ex. 4, at 1; BOE Ex. 4, ¶ 3; BOE Ex. 14, ¶¶ 2, 3 and Attachment B (Gravitt Shipments # 82-84, 87-90, 104-105, 122, 126-127, 129-130, 132-136, 140, 149).

FF68. Subsequent to May 1997, Sea-Land continued to service the WPC account through sales representatives Jerome Ginn and Bob Steele. BOE Ex. 3, Attachment at 1, Tam Tr. 24 ln4 - ln7, 47 ln15 - 48 ln1, 105 ln15 - 106 ln4; Spargo I TR. 119 ln14 - ln20; Wing Tr. 271 ln17 - 272 ln8.

FF69. Glenn Spargo directly handled the WPC account on matters important to the NVO shipper. CO Ex. 40; Spargo I Tr. 51 ln16 - 52, ln2, 59 ln15 - ln21.

NVO General Ocean Freight

FF70. During a sales call, Sea-Land's sales representative, Mr. Favor, offered to provide General Ocean Freight ("GOF") with 40-foot high-cube containers at 20-foot container rates. Mr. Favor advised that, for the arrangement to work, GOF would not be permitted to declare on Sea-Land's bill of lading cargo measurement of more than 25 CBM or the corresponding weight limit set under equipment substitution rules for 20-foot containers. BOE Ex. 1, ¶ 18; BOE Ex. 5, ¶ 3; CO Ex. 3, at 2; Wu Tr. 136 ln10 - 137 ln3, 142 ln19 - 143 ln22, 144 ln4 - ln25, 149 ln20 - 150 ln 5, 151 ln19 - 152 ln14.

FF71. Mr. Favor advised that Sea-Land would not question the weights and measurements that GOF would put on the Sea-Land bills of lading. BOE Ex. 5, ¶ 3.

FF72. Sea-Land continued to allow lower rates under equipment substitution to be applied upon GOF shipments carried after May 1997 when Mr. Favor left Sea-Land, and on the same basis through at least November 6, 1997. BOE Ex. 14, ¶¶ 2, 3 and Attachment B (Gravitt shipments # 103, 108).

FF73. Each week GOF shipped 1-5 containers to the Far East. Wu Tr. 108 ln3 - ln25, 141 ln20 - ln25. GOF's volume grew in 1997 - 1998 once the "guy from Sea-Land told us how to do it." Wu Tr. 109 ln1 - ln13, 110 ln7 - ln15. In this manner GOF shipped as many as 100 containers to the Far East using Sea-Land. BOE Ex. 1, ¶ 19; CO Ex. 3; Wu Tr. 141 ln20 - ln25.

NVO Global Links Express

FF74. During a sales call on behalf of Sea-Land prior to August 1996, Mr. Favor approached Global Links Express ("GLE") with Sea-Land's offer to provide 40-foot high-cube containers at 20-foot container rates. Mr. Favor advised that, for the arrangement to work, GLE would not be permitted to declare on Sea-Land's bill of lading cargo measurements of more than 25 CBM. BOE Ex. 1, ¶¶ 27-28; BOE Ex. 6, Attachment at 1; Clark Tr. 184 - ln6 - 185 ln13, 414 ln18 - 417 ln7; Carey Tr. 618 ln4 - ln23; Tse Tr. 49 ln21 - 50 - ln22, 97 ln1 - ln7, 100 ln18 - 101 ln13, 102 ln17 - 103 ln22, 110 ln17 - ln19.

FF74A. Mr. Tse of Global Links stated in regard to the solicitation by Mr. Favor: "Well, technically he had told me that this is not supposed to be mentioned, but yet he is helping us to obtain equipment substitution. Q. It sounds like he didn't go into a lot of detail about the equipment substitution. A. Yes, he has given us the details. . . . He gave us some details about the procedure for equipment substitution . . . what could be inside a 40-foot container." Tse Tr. 50 ln7 - 20.

FF74B. Other people in the industry, other NVOCCs, also told Mr. Tse about their "equipment substitution arrangement." Tse Tr. 47 ln14 - 48 ln9.

FF74C. The other NVOCCs also made sure to show on the master bill of lading that the cargo measured 25 CBM or less. This was one of the details that Mr. Favor had furnished. Tse Tr. 102 ln23; 110 ln17 - 18.

FF74D. Sea-Land did not care whether Global Links loaded more than 25 CBM in a 40' container. Tse Tr. 102 ln24 - 103 ln2.

FF74E. Confirming the use of code words, Mr. Tse was asked by Sea-Land whether Mr. Favor had stated that he didn't care how much cargo was loaded in a 40' container. Mr. Tse answered, "He didn't mention it. He just mention how to do the equipment sub." Tse Tr. 118 ln6 - 7. "Q. So he never specifically said he didn't care how much cargo was in there? A. No. He mentioned how to do it on a 40-foot container. Q. Right. A. 40, sub 20." Tse Tr. 118 ln13 - 18.

FF75. The lower 20-foot container rates allowed by Sea-Land on 40-foot containers under equipment substitution continued to be applied upon GLE's shipments after May 1997, when Mr. Favor left Sea-Land. Sea-Land charged and collected for shipments under equipment substitution rates on a continuing basis through at least January 5, 1998. BOE Ex. 1, ¶ 28; BOE Ex. 6, ¶ 3; BOE Ex. 14, ¶¶ 2, 3 and Attachment B (Gravitt Shipments # 4-14, 16-20, 24-32, 35, 39, 64-67, 71-74, 76, 85-86, 91-93, 96-99, 101-102, 107, 110-111, 114-115, 117-121, 123); Tse Tr. 100 ln1 - ln12.

FF76. GLE continued its rate arrangement with Sea-Land with the knowledge of Sea-Land salesman Jerome Ginn, Mr. Favor's replacement. BOE Ex. 1, ¶¶ 28, 30. GLE subsequently discontinued its use of equipment substitution with Sea-Land in April 1998. Tse Tr. 90 ln13 - 91 ln10, 92 ln21 - 93 ln2.

FF77. GLE shipped in excess of 500 containers to the Far East utilizing Sea-Land's vessels on the basis of the lower 20-foot container rates provided on 40-foot containers under equipment substitution during the period at issue. BOE Ex. 1, ¶ 31; Clark Tr. 183 ln7 - 184 ln5.

FF78. The ability to obtain a larger container at lower equipment substitution rates caused GLE to make greater use of Sea-Land. Tse Tr. 101 ln18 - 101 ln23. GLE used Sea-Land in this manner for 70 - 75% of its westbound shipments. Tse Tr. 30 ln1 - ln9, 97 ln1 - ln10.

NVO Supertrans International

FF79. During a sales call in late 1995 - 1996, Mr. Favor of Sea-Land approached Supertrans International ("SI") with the offer to provide SI with 40-foot containers at 20-foot container rates. BOE Ex. 1, ¶ 48; BOE Ex. 9, Attachment at 1; D_Lee Tr. 117 ln1 - 118 ln13, 120 ln16 - 121 ln3. Mr. Favor advised Mr. David Lee, President of SI, that the arrangement would work only if SI declared cargo measurements and corresponding weight limits set for 20-foot containers under equipment substitution rules. BOE Ex. 1, ¶ 48; BOE Ex. 9, Attachment at 1; D_Lee Tr. 118 ln14 - 120 ln7, 179 ln24 - 181 ln11.

FF80. During sales calls at SI, Sea-Land's representatives had multiple discussions with Mr. Lee about equipment substitution. Sea-Land sales manager David Wing inferred from these conversations that SI may have been abusing equipment substitution. Wing Tr. 236 ln10 - ln25. Mr. Wing nonetheless advised SI that it would be able to use equipment substitution on Sea-Land's ships. Wing Tr. 177 ln22 - 178 ln6.

FF81. David Wing advised NVOs inquiring about equipment substitution that "your documentation will determine what your rate is." Wing Tr. 238 ln4 - ln14.

FF82. ST began using Sea-Land for its consolidation cargo in 1966. D_Lee Tr. 106 ln 15 - ln20, 107 ln7 - ln13, 119 ln23 - 121 ln3. By 1997, SI's export volume had increased to more than 150 containers from about 60 containers in the previous year. D_Lee Tr. 106 ln2 - ln10.

FF83. SI stopped using Sea-Land for shipments in July 1997, after the TWRA discontinued 20' container substitution. BOE Ex. 1.

NVO Brennan International

FF84. In January 1996, Mr. Favor approached Brennan International ("Brennan" or "BI") with an offer regarding Sea-Land's application of the equipment substitution rule and he advised that Sea-Land would provide BI with larger size containers at the rates charged for smaller size containers. BOE Ex. 1, ¶¶ 53, 54, 57; BOE Ex. 10, ¶ 3; Sehwani Tr. 51 ln5 - 53 ln15, 80 ln24 - 82 ln7. Mr. Favor said Sea-Land had a system in place by which customers could obtain equipment substitution rates regardless of the weight or volume of cargo in the container. BOE Ex. 1, ¶ 55; BOE Ex. 10, ¶ 3; Sehwani Tr. 65 ln4 - ln14, 88 ln17 - 90 ln11.

FF85. Mr. Favor told Mr. Sehwani that Sea-Land had a "very liberal attitude" towards the use of equipment substitution; that Sea-Land would not question BI's shipments rated under the equipment substitution provisions; and that Sea-Land would advise BI to alter its documents to show compliance with these restrictions, even if BI's documentation staff submitted a container manifest incorrectly. BOE Ex. 1, ¶¶ 55, 56; BOE Ex. 10, ¶ 3; Sehwani Tr. 88 ln3 - 89 ln21. On subsequent occasions Mr. Favor repeated Sea-Land's offer to allow use of the equipment substitution rule to obtain lower rates from Sea-Land. BOE Ex. 1, ¶ 57; BOE Ex. 10, ¶ 3.

FF86. At the time of booking BI specifically requested that a forty-foot container be provided by Sea-Land. Sehwani Tr. 56 ln16 - ln22, 80 ln24 - 82 ln7. BI would then misdeclare the shipment and ask Sea-Land to apply the 20' container rate. Sehwani Tr. 80 ln24 - 82 ln7, 86 ln25 - 88 ln2.

FF87. TWRA did not revise the Notes to the FAK tariff commodity description to eliminate 20' equipment substitution until July 1997. CO Ex. 29. Sea-Land continued thereafter to allow lower rates under equipment substitution for larger size containers of FAK cargoes. Sehwani Tr. 83 ln13 - 85 ln10. BI was never advised that Sea-Land was discontinuing equipment substitution as to BI's shipments. Sehwani Tr. 82 ln21 - 83 ln12, 86 ln17 - ln24.

FF88. BI utilized Sea-Land during 1996 and 1997 due to Mr. Favor's offer that Sea-Land would let BI misuse the equipment substitution rule to obtain lower rates from Sea-Land. BOE Ex. 1, ¶ 57; Sehwani Tr. 53 ln16 - 57 ln15, 64 ln18 - 65 ln14.

FF89. Mr. Sehwani testified that Sea-Land advised BI to alter its documents to show compliance with equipment substitution restrictions on shipments initially declared by BI in excess of the weight or cubic measurement limits for equipment substitution. "[I]f what we had did not basically fall into the equipment substitution rule, [Sea-Land] would come back and say, 'Are you applying or are you not applying for an equipment substitution?' Q. And did they give you an opportunity to then amend the documentation to bring it under the equipment substitution rule? A.  Yes, they did." Sehwani Tr. 89 ln 3 - ln14. Sea-Land never sought to inspect BI's shipments under equipment substitution. Sehwani Tr. 89 ln15 - ln21.

FF90. After 1996, BI began using Sea-Land to transport about 25% of BI's NVO shipments in the westbound trade to the Far East. Sehwani Tr. 20 ln19 - 24 ln18, 61 ln24 - 62 ln12. BI shipped about 1500 containers yearly during 1996 - 1997. Sehwani Tr. 17 ln24 - 20 ln18. BI averaged 6-7 containerloads weekly with Sea-Land. Wing Tr. 184 ln15 - ln20. BI explained a typical situation where misuse of the equipment substitution rule occurred and it would maximize a 40-foot container to its advantage and "just use the equipment substitution." Sehwani Tr. 54 ln 19 - 21. The witness further explained: ". . . [d]uring the course of a day [BI] would get customers calling and saying, 'Can you please handle a little more freight for us? We need to make that shipment.'

"To go over slightly what the equipment substitution would allow you would basically then put you into a higher cost rate. [sic] So instead of paying for a 20, you would then be stuck with paying for a 40. And like any businessman, you would always look at your bottom line and say when we have a substitution available to us, we can make a few bucks here. Let's basically use the equipment substitution.

"Q Even if it meant doing something unlawful?

"A Yes, it did."

Sehwani Tr. 54 ln24 - 55 ln12; Tr. 57 ln14 - 15.

NVO Pan Pacific Express

FF91. In January 1997, Sea-Land salesman Mr. Rich Favor approached Pan Pacific Express ("PPE") with an offer to allow PPE to obtain equipment substitution rates regardless of the weight or measure of cargo in the container. BOE Ex. 1, ¶¶ 60, 62; BOE Ex. 11, ¶ 4; Chao Tr. 90 ln13 - ln19, 93 ln1 - ln17, 111 ln5 - ln23.

FF92. Mr. Favor said that Sea-Land had a system in place whereby Sea-Land would not question the weight or measure of PPE's shipments rated under the equipment substitution provisions. BOE Ex. 1, ¶¶ 63, 65; BOE Ex. 11, ¶ 4. PPE could obtain cheaper rates for its cargo by, for example, filling a 40-foot container and shipping it with Sea-Land at the lower rates applicable to a 20-foot container. BOE Ex. 1, ¶ 62; BOE Ex. 11, ¶¶ 4, 7 and Chao Attachments.

FF93. Mr. Favor and others at Sea-Land instructed PPE "how to complete the documentation" to obtain lower rates under equipment substitution. BOE Ex. 1, ¶ 65; BOE Ex. 11, ¶ 5.

FF94. Mr. Cooper Chao, General Manager of PPE, also discussed PPE's access to equipment substitution with Mr. Favor's superior, David Wing, on more than one occasion. BOE Ex. 1, ¶ 66; BOE Ex. 11, ¶ 5; Wing Tr. 174 ln25 - 175 ln11, 176 ln10 - ln15, 220 ln14 - 221 ln5, 319 ln25 - 320 ln7.

FF95. According to Mr. Chao, Mr. Wing assured him that Sea-Land "would continue to protect Pan Pacific" in its use of the equipment substitution procedures to obtain lower rates. BOE Ex. 1, ¶ 66; BOE Ex. 11, ¶ 5; Chao Tr. 113 ln10 - 114 ln14, 119 ln5 - ln16.

FF96. Sea-Land sales manager Mr. David Wing inferred from these conversations with Mr. Chao that equipment substitution abuses were occurring on PPE's shipments with other carriers, specifically Sea-Land's Vessel Sharing Agreement ("VSA") partner, Maersk. Wing Tr. 221 ln6 - ln20, 169 ln15 - ln25, 254 ln17 - 255 ln5. Mr. Wing was aware that Maersk was soliciting the same NVO accounts as Sea-Land at that time. Wing Tr. 223 ln3 - ln6.

FF97. Mr. Wing was familiar with equipment substitution. Wing Tr. 162 ln22 - 163 ln25. Mr. Wing knew that equipment substitution could be abused and, for an FAK shipper, Mr. Wing also believed that, except for equipment availability, the NVO received no advantage from equipment substitution under the tariff if the cargo were properly tendered and declared correctly. Wing Tr. 330 ln16 - 331 ln19. Mr. Wing concluded that PPE was misdeclaring weight or measurement on shipping documents to get a lower rate from Maersk. Wing Tr. 221 ln6 - 21, 252 ln24 - 253 ln15.

FF98. Mr. Wing mentioned the equipment substitution issue to his superior, Mr. Glenn Spargo, and may have discussed the issue further during their weekly sales meetings. Wing Tr. 223 ln19 - 224 ln10. Mr. Spargo attended meetings with Mr. Wing's sales staff occasionally. Wing Tr. 296 ln25 - 297 ln11.

FF99. PPE's inquiries to Mr. Wing revolved around whether Sea-Land would offer equipment substitution. Wing Tr. 319 ln9 - ln24, 330 ln3 - ln8. Mr. Wing inferred from Mr. Cooper Chao that the amount of PPE's shipments with Sea-Land could be increased through the use of equipment substitution. Wing Tr. 321 ln19 - ln25.

FF100. Mr. Wing advised Mr. Cooper Chao that equipment substitution could be made available to PPE. Wing Tr. 176 ln10 - ln22. Mr. Wing advised that the "tenor of the documents" would be the determining factor in applying equipment substitution rates to PPE's shipments. Wing Tr. 255 ln6 - ln20.

FF101. Beginning in 1997, PPE diverted its cargo from Maersk to Sea-Land because PPE was allowed to misuse equipment substitution to obtain lower 20-foot rates on 40-foot containers of consolidated cargo and the amount of PPE's westbound containers increased sharply from 1996. BOE Ex. 11, ¶¶ 3-5. PPE accounted for about 1200 40-foot containers annually in the westbound Trans-Pacific trade (as of September 12, 2000) and a lot less in 1996-1997. Chao Tr. 72 ln21 - 73 ln7.

FF102. Based on shipment dates, Sea-Land allowed lower rates under equipment substitution to be applied upon PPE's shipments carried after May 1997, and on a continuing basis through December 13, 1997. BOE Ex. 1, ¶¶ 64, 65, 67; BOE Ex. 11, ¶¶ 3-5, 8; BOE Ex. 14, ¶¶ 2, 3 and Attachment B (Gravitt Shipments # 57-63, 69, 78-80, 124-125); Chao Tr. 89, ln8 - 13; Tr. 109 ln3 - 7.

FF103. PPE stated that Sea-Land continued to allow PPE to obtain lower rates on the misuse of equipment substitution rules until early February 1998, when its attorney advised that such illegal practices were not permitted by the TWRA tariff or the 1984 Act. BOE Ex. 11, ¶ 8, Chao Tr. 88 ln2 - 91 ln19.

NVO Morrison Maritime

No. 104. During a sales call in the summer of 1996, Mr. Rich Favor of Sea-Land approached Morrison Maritime with the offer to provide Morrison Maritime with 45-foot containers at 40-foot container rates. He stated that Morrison Maritime would have to furnish its own or "house" bill of lading and a container manifest that would match the declared measurement on Sea-Land's bill of lading and which were consistent with the cubic measurements and corresponding weight limits set for 40-foot standard containers under equipment substitution rules. BOE Ex. 1, ¶ 69; BOE Ex. 12, at 1; Clark Tr. 245 ln9 - 21; C_Lee Tr. 41 ln16 - ln25; 47ln19 - 48 ln23, 74 ln12 - 76 ln13, 80 ln17 - 82 ln9.

FF105. Mr. Favor later returned to Morrison Maritime and expanded Sea-Land's offer to permit Morrison Maritime to obtain 40-foot high-cube containers for the rates applicable to cargo in a 20-foot container. BOE Ex. 1, ¶ 70; BOE Ex. 12, at 1; C_Lee Tr. 85 ln8 - 86ln3.

FF106. Mr. Favor advised Mr. Chao Lee, Ocean Manager of Morrison Maritime, how the documentation was to be created so that its house bill of lading and container manifest would match the lower, inaccurate cubic measurement declared on the Sea-Land bill of lading. BOE Ex. 1, ¶ 70; BOE Ex. 12, at 1; C_Lee Tr. 73 ln24 - 74 ln11, 85 ln18-23. Mr. Favor indicated that Morrison Maritime could be permitted to use the extra space in the 40' boxes to load additional cargo for its NVO business. BOE Ex. 1, ¶ 69; BOE Ex. 12, at 1.

FF107. The lower rates allowed by Sea-Land under equipment substitution continued to be applied after May 1997, when Mr. Favor departed his position at Sea-Land. Sea-Land allowed lower rates under equipment substitution to be applied upon Morrison Maritime shipments on a continuing basis through June 30, 1997. BOE Ex. 1, ¶¶ 64, 65, 67; BOE Ex. 12, at 1; BOE Ex. 14, ¶¶ 2, 3 and Attachment B (Gravitt Shipment # 56).

NVO Jasper Freight

FF109. In late 1996, Mr. Nathan Wei, Manager of Jasper Freight, learned from an NVO competitor that Sea-Land was permitting NVOCCs to ship 40-foot containers with Freight All Kinds ("FAK") cargo to Taiwan "using the substitution rule" but they were only paying the rates for a 20-foot container. BOE Ex. 1, ¶ 34; BOE Ex. 7, Attachment at 1; Wei Tr. 126 ln13 - 128 ln3.

FF110. Mr. Jerome Ginn of Sea-Land (Mr. Favor's successor) subsequently advised Mr. Wei of Jasper Freight how to use a 40-foot container but only be charged for a 20-foot container. BOE Ex. 1, ¶ 36; BOE Ex. 7, Attachment at 1; Wei Tr. 128 ln17 - 131 ln11. Sea-Land told Jasper Freight that it was "okay to use it. Otherwise, we would never have thought of - to use it in this way." [sic] Wei Tr. 134 ln1 - 8. "I just remembered that I was told okay [sic] to use it. Otherwise, why would I do it if they're not going to agree with it. If I submitted documentation they can come back with a higher rate." Wei Tr. 134 ln1 - 8, 137 ln25 - 138 ln7. Jasper Freight began using Sea-Land more frequently once Sea-Land allowed Jasper Freight to obtain transportation using equipment substitution rates in this manner. BOE Ex. 1, ¶ 34; BOE Ex. 7, Attachment at 1; Clark Tr. 184 ln6 - ln15, 207 ln5 - 208 ln20; Carey Tr. 763 ln14 - ln18; Wei Tr. 119 ln7 - 120 ln3. Jasper Freight used Sea-Land for about half of its westbound shipments. Wei Tr. 119 ln10 - ln19.

FF110A. Jasper Freight did not misdeclare the weight and cube to any ocean carrier except Sea-Land. Wei Tr. 141 ln14 - 16.

FF110B. Jasper Freight misdeclared the weight or cube of the cargo it was presenting to Sea-Land on the bill of lading instructions to Sea-Land. Wei Tr. 145 ln10 - 23, 147 ln19 - 21.

FF110C. The Shipper Export Documents ("SEDs") and the container manifests which Jasper Freight sent to Sea-Land contained the correct weight and other information. Wei Tr. 146 ln17 - 147 ln18, Tr. 152 ln16 - 153 ln5.

NVO Pagoda Container Line

FF111. In 1996, Pagoda Container Line ("Pagoda") learned from an NVO competitor that Sea-Land would allow NVOs to book 40-foot high-cube containers for FAK shipments to Taiwan and be billed by Sea-Land for the contents of the 40-foot container at 20-foot container rates. BOE Ex. 1, ¶ 38; BOE Ex. 8, ¶ 2; Chang Tr. 23 ln21 - 24 ln25, 43 ln22 - 44 ln7.

FF112. For this arrangement to work, Pagoda had to under-declare the cubic measurement of the cargo on Sea-Land's bill of lading so that the measurements would be consistent with the amount of cargo which would fit into a 20-foot container. Pagoda had to under-declare the cubic measure "so that it looked on the bill of lading as if the cube of goods in a 40 ft. container was no more than the amount of cubic measure that would fit into a 20 ft. container." BOE Ex. 1, ¶ 39; BOE Ex. 8, ¶¶ 2, 3; CO Ex. 2 at 1; Chang Tr. 25 ln7 - 25 - ln22.

FF113. Mr. Dean Chang, President of Pagoda, was told that Sea-Land would not pay any attention when NVOs used the equipment substitution rule to lower their rates. BOE Ex. 8, ¶ 3; BOE Ex. 1, ¶ 43; Chang Tr. 30 ln10 - 31 ln1. Mr. Chang then instructed Pagoda staff to begin mis-using the equipment substitution rule on shipments with Sea-Land. BOE Ex. 8, ¶ 3.

FF114. Sea-Land never questioned any of Pagoda's shipments rated under equipment substitution. BOE Ex. 8, ¶ 3; BOE Ex. 1, ¶ 44.

FF115. Pagoda obtained lower rates from Sea-Land on the basis of equipment substitution for two years until early 1998. BOE Ex. 1, ¶¶ 37, 39, 46. Mr. Chang estimated that Pagoda had misused equipment substitution with Sea-Land on more than 100 shipments during 1997 alone.  BOE Ex. 1, ¶ 46; BOE Ex. 8, ¶ 4; Clark Tr. 258 ln12 - 259 ln8, 260 ln1 - ln4; Chang Tr. 18 ln17 - ln19, 30 ln3 - ln5.

FF116. Pagoda shipped about four containers per week to the Far East, and was allowed by Sea-Land to utilize equipment substitution until early in 1998. Pagoda stopped the practice upon learning that the Federal Maritime Commission was investigating misuse of equipment substitution. BOE Ex. 1, ¶¶ 37, 39, 46; BOE Ex. 8, ¶ 4; Chang Tr. 17 ln14 - 18 ln8, 50 ln17 - 51 ln3.

FF117. By obtaining equipment substitution on a regular basis from Sea-Land and under-declaring the cubic measurement of its shipments, Pagoda was "able to obtain lower rates and [regain the] customer's business that we had been losing to the competition." BOE Ex. 1, ¶ 45; BOE Ex. 8, ¶ 3; CO Ex. 2, at 2; Chang Tr. 26 ln10 - 27 ln9, 40 ln13 - 41 ln16, 56 ln13 - 57 ln8.

FF118. Sea-Land employees Mr. Rich Favor and Mr. Jerome Ginn, and Sea-Land supervisor Mr. David Wing, among others at Sea-Land, thus knew about the equipment substitution practices by which NVO shippers were allowed to obtain transportation at less than the applicable tariff rates.

FF119. Sea-Land knew or persistently failed to inform itself that various NVO shippers were allowed to obtain transportation at less than the tariff rates by means of Sea-Land's equipment substitution practices. Such NVO shippers include World Pacific Container (USA) Inc., General Ocean Freight Container Lines, Global Links Express Inc., Jasper Freight, Pagoda Container Line, Pan Pacific Express Corp., Supertrans International Inc., Brennan International Transport and Morrison Maritime Inc. BOE Ex. 1, ¶ 153.

Evidence of Sea-Land's Knowledge Through the Booking Process

FF120. Mr. John Herbert Ohle, Manager of Port Operations at the Port of Long Beach, CA, from about March 1995 to December 1998, testified that customers would make bookings for their shipments on Sea-Land through its Customer Service department. Ohle Tr. 350 ln6 - ln22, 360 ln20 - 22.

FF121. Booking typically occurs from two to three weeks before shipment, up to the same day of shipment. Ohle Tr. 383 ln11 - ln16. At the time of booking, the shipper would identify what equipment he wanted. Ohle Tr. 378 ln16 - ln24.

FF122. At the time of booking, Customer Service had access to a database showing all the containers available within the Sea-Land system. Ohle Tr. 379 ln9 - ln15. Customer Service would not need to call the Equipment Control Department to determine what kind of containers were available. Ohle Tr. 351 ln14 - ln22, 360 ln21 - 361 ln7, 379 ln16 - ln23. Even if a shipper booked twenty 20' containers, the Customer Service Department could examine the equipment control screen and determine for itself whether such empty equipment was available. Ohle Tr. 360 ln21 - 361 ln7.

FF123. Through the booking process, particular sized containers could be reserved if they were shown as available in inventory. Ohle Tr. 379 ln24 - 380 ln12. Booking also had the effect of authorizing a motor carrier to pick up an empty container on behalf of an NVO shipper. Ohle Tr. 383 ln17 - ln24.

FF124. Because the Customer Service Department had information on available container equipment, Customer Service called Sea-Land Operations only when equipment was already assigned, but the customer wanted equipment immediately. Ohle Tr. 397 ln25 - 398 ln25; Wing Tr. 234 ln7 - ln13.

FF125. Mr. Ohle further testified that any shortages of 20' equipment experience in Long Beach were not great enough to explain Sea-Land's widespread application of equipment substitution on shipments by Sea-Land's NVO customers. "I had no idea, until a conversation with one of the folks in your department, that it was at the magnitude that it was. . . . I do not remember enough occurrences of no 20 foot equipment available to cause hundreds or thousands of substitutions for NVO customers." Ohle Tr. 355 ln15 - ln25, 372 ln11 - ln18. At that time, Sea-Land Operations was loading empty 20' boxes to Asia for repositioning. Mr. Ohle stated, "Well, it just has to do with the whole balance of trade. The ships would come in and they'd be completely full . . . and then loading back, the typical vessel profile would be half . . . loads and half empties. And we would have to move the empties back at our cost. . . . Q. In other words, there was a lot more import cargo than export cargo? A. Yeah. It was literally a two-to-one ratio most of the time." Ohle Tr. 388 ln9 - 389 ln19, 397 ln20 - ln24.

FF126. The Sea-Land Operations Department would furnish a 40' or 40' high cube container as a substitute only if Sea-Land didn't have enough 20' containers available. Ohle Tr. 349 ln18 - 350 ln1. Sea-Land Operations tried to keep sufficient 20' containers on hand, but sometimes came up short by a small number. "[T]hat's what would cause a normal equipment substitution, a 40-foot for a 20-foot piece of equipment." Ohle Tr. 389 ln8 - ln19. When a motor carrier sought to pick up assigned equipment, he might find the requested size container no longer available. The Operations Department would then consult with the Customer Service Department and give instructions as to the size or type of equipment to dispatch to the trucker. Ohle Tr. 350 ln6 - ln22.

FF127. On certain movements, Sea-Land had applied equipment substitution rates for as many as twenty containers to handle the volume of cargo in a single shipment. CO Ex. 43. Mr. Ohle testified he was not aware of any instance where the Sea-Land Operations Department would have authorized equipment substitution on 10 or more containers for any one shipment. Ohle Tr. 364 ln13 - ln21.

FF128. In order to determine whether 20-foot boxes were available for equipment substitution, Sea-Land did not use a control number or process other than to annotate its booking activity information screens to record for rating purposes when equipment substitution was authorized. Wing Tr. 249 ln19 - 250 ln15. Equipment substitution was authorized by Sea-Land personnel on an oral basis. Wing Tr. 202 ln18 - 203 ln7.

FF129. Sea-Land had no written policy or procedure requiring that equipment availability be confirmed with the Sea-Land Operations Department. Wing Tr. 203 ln22 - 204 ln7.

FF130. Sea-Land failed to tell its sales representatives that they were not allowed to participate in the process of approving equipment substitution requests when a customer called. Wing Tr. 208 ln11 - 209 ln6.

FF131. To improve Sea-Land's booking process the Customer Service Department maintained an electronic database profiling Sea-Land's customers and details of past shipments. Wing Tr. 239 ln 25 - 240 ln22. The profile was intended to allow Customer Service to retrieve on a computer screen the shipper's typical commodity and trade lanes. Wing Tr. 240 ln23 - 241 ln4.

FF132. The customer profile database was intended to speed the booking process. Sea-Land measured the performance of Customer Service by the volume of calls handled and length of time to complete a booking. Wing Tr. 241 ln5 - 241 ln20.

FF133. The customer profile database contained a template which allowed the Customer Service Department to create a booking based on the record of a prior booking. Wing Tr. 244 ln1 - ln10. The prior booking would be used as a "map" for the new booking. Wing Tr. 244 ln11 - 245 ln24.

FF134. If a mapped booking indicated that equipment substitution was approved for that shipper, the Customer Service Department could carry over that same rate information for use on subsequent shipments. Wing Tr. 248 ln6 - ln22.

FF135. As a marketing decision, the Sea-Land Sales Department reserved the available inventory of 20' containers weekly for shippers of heavy base metals such as aluminum and borates. Wing Tr. 230 ln9 - 231 ln8, 234 ln14 - 235 ln4, 236 ln4 - ln25, 323 ln1 - ln18. Equipment substitution was not an issue on these heavy commodities since 40-foot containers were not suitable because the loads then would exceed that permitted on the highways. Wing Tr. 235 ln9 - 11.

FF136. Mr. Wing did not reserve any 20' containers for FAK shippers. Wing Tr. 235 ln23 - 236 ln3, 166 ln7 - 167 ln3. An FAK shipper would not use a 20' container in the Hong Kong trade because it would not permit loading enough of that FAK Cargo to be profitable. Wing Tr. 331 ln9 - 332 - ln8.

FF137. NVOs would not delay pick-up of empty containers. They would be needed at the NVO facility from two to 10 days as NVOS were loading and consolidating small shippers' cargo. Loading cargo at the last minute might delay return of the box back to Sea-Land. As long as it was satisfactory the motor carrier could make the cut-off date at the terminal with the loaded container. Ohle Tr. 395 ln23 - 396 ln71.

FF138. Brennan International held a "pool booking" with Sea-Land permitting its motor carrier to pick up empty containers of any size needed by Brennan. Sehwani Tr. 90 ln16 - 91 ln20. Brennan could obtain a 20' container whenever it needed one. Sehwani Tr. 56 ln11 - ln22, 86 ln25 - 87 ln6.

FF139. At the time of booking, other NVO shippers also requested that Sea-Land provide a forty-foot container as "equipment substitution." BOE Ex. 1, ¶ 1, Sehwani Tr. 87 ln7 - ln14.

FF140. On or about January 15, 1997, Sea-Land's booking employees were aware that Sea-Land sales representatives were directing that bookings be revised after the fact to allow rating on an equipment substitution basis for NVOs. The booking staff recorded the following entry on behalf of Sea-Land salesman Rich Favor: "P/ Rich F., This [shipment] should have been booked as a equip sub. Booking have been updated and docs have been notified. . . ." [sic] BOE Ex. 1, ¶ 77 and Clark Attachment A; Smith Tr. 75 ln2 - 76 ln21. A document from World Pacific Shows that this shipment contained printing paper with a weight of 9,259 pounds and a cube of 15.010 CBM, within the tariff maximums for equipment substitution. Clark Attachment A, Bates No. 000764.

FF141. On or about January 1997, Sea-Land's rate audit employees also were aware that Sea-Land sales representatives revised bookings to allow shipments to be rated on an equipment substitution basis. Sea-Land employees, including Donna Smith, processed rate reductions on the basis of the revised booking instruction received from Sea-Land sales representatives. BOE Ex. 1, ¶ 78 and Clark Attachment A; Smith Tr. 75 ln2 - 76 ln7. Sea-Land's booking activity and rate audit information contain no records that Sea-Land's Operations Department had approved or been contacted about equipment substitution. Smith Tr. 76 ln9 - ln21; Wing Tr. 248 ln23 - 249 ln12.

FF142. Sea-Land's Document Retention Policy requires that Sea-Land maintain shipment records or forms including Form No. SL-1024, "Booking Card," and Form SL-1027, "Booking File Changes," and miscellaneous outbound documentation and shipper correspondence. CO Ex. 32 at 23, CO Ex. 33 at 2. Sea-Land furnished booking activity information or other detail from its booking and customer service database responsive to BOE's discovery with respect to a very limited number of shipments. BOE Ex. 1, ¶ 79.

Evidence of Sea-Land's Knowledge Through the Rating Process

FF143. Sea-Land was directly aware of the factual circumstances of shipments upon which Sea-Land charged and collected lower rates, when such shipments did not then meet the tariff requirements for equipment substitution. BOE Ex. 1, ¶ 129.

FF144. As early as May 1997, personnel in Sea-Land's documentation and rate audit offices knew of the issue of equipment substitution abuses at Sea-Land. Smith Tr. 55 ln16 - 56 ln18; 87 ln12 - ln16.

FF145. On August 4, 1997, Sea-Land transmitted by fax to Jasper Freight for its review bill of lading SEAU796227652. BOE Ex. 1, ¶¶ 130, 131 and Clark Att. Q-1. Initially declared with the cargo weight above the maximum prescribed in TWRA rules, Sea-Land allowed the shipper to revise and reduce the weight of the shipment below the tariff maximum and to add the annotation "Apply 20' substitution rule." BOE Ex. 1, ¶¶ 131, 132, and Clark Att. Q-3, Q-3. Sea-Land should not have allowed the NVO shipper to thus obtain a lower rate because Sea-Land knew that the actual contents of the shipment precluded lawful equipment substitution and the charging of inapplicable low rates. BOE Ex. 1, ¶ 133 and Clark Att. Q-4.

FF146. On August 13, 1997, Global Links' agent in Taiwan, Amphibian Project Int'l Co., transmitted to Global Links Express by fax a copy of Sea-Land bill of lading SEAU796225684. BOE Ex. 1, ¶ 134 and Clark Att. R-1. Initially declared with the cargo measurement above the maximum prescribed in TWRA rules, Sea-Land allowed the shipper to revise and reduce the cubic measure of the shipment, and to add the annotation "Equipment substitution for 20' ctnr rate." BOE Ex. 1, ¶¶ 135, 136 and Clark Att. R-2, R-3. Sea-Land should not have allowed the NVO shipper to obtain lower rates because Sea-Land knew that the cargo in the shipment precluded rating it as equipment substitution. BOE Ex. 1, ¶ 137 and Clark Att. R-4.

FF147. On March 3, 1998, World Pacific Container transmitted by fax the bill of lading instruction sheet with respect to Sea-Land Booking No. LBC431005. BOE Ex. 1, ¶¶ 138 - 139 and Clark Att. S-1, S-2. Initially declared as a "mixed commodity" shipment with the cargo weight and measure above the maxima prescribed in TWRA rules, Sea-Land allowed the shipper to revise and reduce its weight and cubic measure and charge the shipment low inapplicable rates by applying the 20' substitution rule. BOE Ex. 1, ¶¶ 140, 141 and Clark Att. S-3, S-4. Sea-Land should not have permitted the NVO shipper to obtain 20' container rates because Sea-Land knew that the cargo in the shipment did not qualify for equipment substitution. BOE Ex. 1, ¶ 142 and Clark Att. S-5; CO Ex. 28 (TWRA Rule on mixed commodity shipments).

FF148. On March 25, 1998, World Pacific Container transmitted by fax the bill of lading instruction sheet with respect to Sea-Land Booking No. LBC245518. BOE Ex. 1, ¶ 143 and Clark Att. T-1, T-2. Initially declared as a "mixed commodity" shipment of steel products with the cargo weight and measure below the maxima prescribed in TWRA rules, Sea-Land allowed the shipper to revise the commodity description to "mixed commodity" of plastic household articles, and to rate the shipment by applying the 40' substitution rule. Sea-Land's offices in Kaohsiung, Taiwan knew that the shipment did not meet TWRA requirements of the mixed commodity rule nor for the provision of a packing list. BOE Ex. 1, ¶¶ 145, 147, and Clark Att. T-3, T-4; CO Ex. 28 (TWRA Rule on mixed commodity shipments).

FF149. Sea-Land's Document Retention Policy requires that Sea-Land maintain shipment records including Form SLA-1392 "Destination Freight bill," "Delivery Order," and miscellaneous outbound documentation. CO Ex. 32 at 23, 25, 28. Sea-Land did not furnish Delivery Orders or other documents from its overseas office with respect to shipment records responsive to BOE's discovery, except with respect to this single instance. BOE Ex. 1, ¶ 146.

FF150. Between March 10, 1997 and December 8, 1997, Sea-Land allowed the NVO shipper to obtain lower rates based on equipment substitution on at least nine additional shipments despite knowledge on the part of Sea-Land as to the actual weight or cubic measurement of the shipment. BOE Ex. 1, ¶ 149 and Clark Att. U-CC.

FF151. Sea-Land took no actions to address equipment substitution abuses prior to late 1997 or early 1998. SL Ex. 2, ¶¶ 4-5; SL Ex. 1, ¶¶ 6-7; SL Ex. 4, ¶¶ 7-8; SL Ex. 5, ¶ 9.

FF152. Sea-Land began collecting SEDs in January 1998 in response to earlier Neutral Body investigations. Smith Tr. 89 ln14 - 92 ln17. In stating that SEDs were "highly reliable" as supporting documentation for rating shipments, Sea-Land witness Donna Smith was unaware that U.S. Customs and the Census Bureau had warned carriers in March 1996 that SEDs were deficient, because increasing numbers of them were not complete or accurate. Smith Tr. 21 ln16 - 22 ln8, 23 ln14 - ln17; CO Ex. 45.

FF153. In order for shipments to qualify for equipment substitution, Sea-Land had to determine that the cargo did not exceed either the weight nor the cubic measurement maxima specified under the TWRA Rule. Smith Tr. 92 ln18 - 94 ln15. SEDs did not require that measurement information be included. Smith Tr. 95 ln10 - ln17, 97 ln22 - 98 ln5, 99 ln3 - ln9. While Sea-Land's rate audit office would sometimes request a packing list, Smith Tr. 95 ln18 - ln22, auditing by Sea-Land of equipment substitution shipments was "very minimal." Smith Tr. 96 ln1 - ln9.

FF154. Sea-Land's Document Retention Policy requires that Sea-Land maintain shipment records including "Customer Packing List" and miscellaneous outbound documentation. CO Ex. 32 at 25, 28; CO Ex. 33, at 2. Sea-Land did not generally furnish packing lists and other shipment documents responsive to BOE's discovery, except with respect to a limited number of shipments. BOE Ex. 1, ¶ 82.

No. 155. Subsequent to Sea-Land's Eddie Chan's e-mail of January 6, 1998, Sea-Land allowed the NVO shipper to obtain lower rates based on equipment substitution despite knowledge on the part of Sea-Land as to the actual weight or cubic measurement of the shipment, based on findings by the Neutral Body. BOE Ex. 1, ¶ 150, Clark Att. L, M, O, and SL Ex. 1, Attachment at 1. The Neutral Body cited indications of carrier knowledge of the actual weight or cubic measurement with respect to 25 additional shipments on behalf of General Ocean Freight, World Pacific Container and Pagoda Container Line. The Neutral Body concluded "the cubic measurements on the bills of lading and SEDs are understated so as to qualify the cargo for the 20' container rate." BOE Ex. 1, ¶ 151 and Clark Att. O.

FF156. Sea-Land had obtained complete information on the cubic measurement on only five of 149 shipments examined by BOE witness Gravitt. SL Ex. 2, Attachment A; Smith Tr. 102 ln10 - 103 ln4. If the SED did not contain cubic measurement data, Sea-Land had insufficient information to allow equipment substitution rates to be applied. Smith Tr. 96 ln10 - ln20, 99 ln10 - ln13, 100 ln4 - ln9.

FF157. Sea-Land maintains weight scales at the gates of its Los Angeles terminal. Ohle Tr. 373 ln15 - 20. The scales at this gate generate a printed record or "RCV" ticket when the loaded container passes over the scales. Ohle Tr. 374 ln7 - 9; Smith Tr. 32 ln6 - 14. The RCV ticket prepared by Sea-Land records complete weight information including the net weight of the cargo. BOE Ex. 1, ¶ 161 and Clark Att. FF-1. Donna Smith agreed that the RCV ticket would be a more accurate indicator of actual cargo weight than the SED. Smith Tr. 38 ln1 - ln21. Where the RCV ticket showed greater cargo weight than Sea-Land's bill of lading, Sea-Land witness Ms. Donna Smith believes the weight information shown on the RCV ticket would be more accurate. Smith Tr. 39 ln13 - 41 ln9; SL Ex. 46, Gravitt's shipment # 135.

FF158. Sea-Land issued rated bills of lading only after the shipment had been received and weighed at the terminal. Smith Tr. 43 ln12 - ln20.

FF159. In January 1998, Sea-Land knew that collecting SEDs would not permit Sea-Land documentation to determine the correct application of equipment substitution on its shipments. Smith Tr. 92 ln7 - 93 ln4, 94 ln12 - ln15, 96 ln10 - ln20.

Evidence of Sea-Land's Knowledge Through the Process of Receiving Cargo

FF160. Sea-Land employees engaged in preparing and issuing Sea-Land's weight tickets and receiving gate documentation were directly aware of the factual circumstances under which Sea-Land would charge lower rates by applying equipment substitution on shipments of various NVO shippers, including World Pacific Container, General Ocean Freight, Global Links Express, Jasper Freight, Pagoda Container Line, Pan Pacific, Supertrans, Brennan International and Morrison Maritime. BOE Ex. 1, ¶ 154.

FF161. The RCV ticket was used by Sea-Land Operations to determine the weight of the loaded container and cargo container in order to position the containers safely on the vessel. Ohle Tr. 374 ln10 - ln13.

FF162. Sea-Land used security guards at the terminal gates to direct loaded containers over the weight scales. Ohle Tr. 386 ln20 - 387 ln7. Every incoming container with a cargo load was weighed before being released to the vessel for loading. Ohle Tr. 387 ln8 - ln11; Smith Tr. 43 ln6 - ln20.

FF163. On August 25, 1997, Sea-Land processed the gate receipt and issued an RCV ticket with respect to Sea-Land Booking No. LBC225155. The RCV ticket prepared by Sea-Land recorded weight information concerning the incoming container, including the net weight of cargo, equal to 42271 lbs. BOE Ex. 1, ¶ 161 and Clark Attachment FF-1. Sea-Land should not have provided lower rates to the NVO shipper World Pacific Container with respect to the corresponding Sea-Land bill of lading SEAU796264901 showing 13,520 pounds because Sea-Land knew that the actual weight of the shipment exceeded the limit of 18K (approximately 38,682 lbs.) for equipment substitution at 20' container rates specified in TWRA Rule 2 G5. BOE Ex. 1, ¶ 163; Smith Tr. 39 ln3 - 41 ln11; CO Ex. 46.

FF164. On or about October 2, 1997, Sea-Land issued an RCV ticket with respect to Sea-Land Booking No. LBC430209. The RCV ticket prepared by Sea-Land shows the net weight of the cargo as 42470 lbs. BOE Ex. 1, ¶ 158 and Clark Attachment EE-1. Sea-Land should not have provided lower rates to the NVO shipper World Pacific Container with respect to the corresponding Sea-Land bill of lading SEAU796310065 showing 23,540 pounds because Sea-Land knew that the actual weight of the shipment exceeded the limit of 18 kilotons (approximately 39,682 lbs.) for equipment substitution at 20' container rates specified in TWRA Rule 2 G5. BOE Ex. 1, ¶ 160.

FF165. On or about October 9, 1997, Sea-Land issued an RCV ticket with respect to Sea-Land Booking No. LBC430212. The RCV ticket prepared by Sea-Land shows the net weight of the cargo, equal to 46980 lbs. BOE Ex. 1, ¶ 155 and Clark Attachment DD-1. Sea-Land should not have provided lower rates to the NVO shipper with respect to Sea-Land bill of lading SEAU796310066 because Sea-Land knew that the actual weight of the shipment exceeds the limit of 18K (approximately 38,682 lbs.) for equipment substitution at 20' container rates specified in TWRA rule 2 G5. BOE Ex. 1, ¶¶ 155-157.

FF166. In at least six additional instances between August 25, 1997 and October 21, 1997, Sea-Land employees engaged in preparing and issuing Sea-Land's weight tickets and receiving gate documentation were directly aware of the factual circumstances under which Sea-Land would charge rates lower than those otherwise applicable based on equipment substitution. Sea-Land should not have provided lower rates to the NVO shipper World Pacific Container with respect to the pertinent Sea-Land bills of lading because Sea-Land gate personnel knew that the actual weight of the shipment exceeded the limits for equipment substitution at 20' container rates specified in TWRA Rule 2 G5. BOE Ex. 1, ¶ 164 and Clark Attachments GG-LL.

FF167. As manager of operations at Long Beach, Mr. Ohle's experience was that the actual weight of containers received by Sea-Land for export often varied from the weight declared to Sea-Land at booking. Ohle Tr. 384 ln9 - ln13. The variance in actual weight from those declared at booking ultimately drove the need for Sea-Land to install the scales. Ohle Tr. 384 ln14 - ln17.

FF168. Technologically, there is no reason why the scale weight derived by Sea-Land at its terminal could not have been referred to Sea-Land's documentation and rating staff for use in rating the cargo. Ohle Tr. 375 ln12 - ln18.

FF169. Sea-Land witness Donna Smith would have relied upon the RCV tickets if such weight records had been made available to her by Sea-Land at the time Sea-Land rated its shipments. Smith Tr. 41 ln5 - ln11. Sea-Land rated shipments after the cargo was received at port of loading. Smith Tr. 41 ln12 - 43 ln20.

FF170. Sea-Land's Documentation Retention Policy requires that Sea-Land maintain shipment records including "Container Tally Sheet," "Scale Sheet," "Dock Receipt," "Marine Stowage Recap," "Vessel Stow Plans" and miscellaneous outbound documentation. CO Ex. 32 at 22, 26, 28; CO Ex. 33 at 2. Sea-Land furnished RCV or gate receipts as to container weights received by Sea-Land responsive to BOE's discovery but only with respect to a very limited number of shipments. BOE Ex. 1, ¶ 165.

Evidence of Sea-Land's Knowledge Prior to May 1997

FF171. On March 11, 1997, Chris Dianora, Director of Pricing, Agreements and Regulatory Affairs for Sea-Land, attended a meeting of the Trans-Pacific Policing Agreement ("Neutral Body") as Sea-Land's representative. CO Ex. 48; Hagan Tr. 75 ln11 - ln16. At that meeting, the equipment substitution rules were summarized and members were informed concerning increased enforcement activities in this area. CO Ex. 48, at 2.

FF172. The results of agreement meetings generally were reported to Sea-Land management. Hagan Tr. 76 ln6 - 77 ln3.

Evidence of Sea-Land's Knowledge Through the First Neutral Body Investigation

FF173. On or about May 1, 1997, Robinson Stark Associates Limited, the Neutral Body enforcement authority, notified Sea-Land by letter that it would commence an investigation of alleged malpractices by reviewing documents maintained in Sea-Land's Long beach office. Wing Tr. 174 ln20 - 24, 218 ln15 - 219 ln4, 251 ln3 - ln11, 292 ln2 - 293 ln25; Ohle Tr. 357 ln13 - 358 ln5. The Neutral Body said its action was responsive to "written complaints which prompted this investigation." BOE Ex. 1, Clark Attachment L.

FF174. Mr. John Ohle, Manager, Port Operations, at Sea-Land's Long Beach, CA office, was advised by his supervisor, Mr. Chris Lytle, in advance of the arrival of the Neutral Body. Ohle Tr. 356 ln17 - ln22. Mr. David Wing was advised about the Neutral body by his supervisor, Mr. Glenn Spargo. Wing Tr. 174 ln19 - ln24, 218 ln15 - 220 ln2, 219 ln5 - ln11. The Neutral Body letter furnished "initial notification" of issues regarding equipment substitution. Wing Tr. 251 ln12 - ln20.

FF175. On May 15 and July 1, 1997, Mr. John Ohle discussed with Mr. Giles Ryan, Regional Manager for the Neutral Body, the particulars of the equipment substitution malpractices being investigated in Sea-Land's Long Beach offices. BOE Ex. 1, ¶ 100 Att. L; Ohle Tr. 356 ln1 - ln11, 357 ln13 - ln18, 358 ln6 - ln19.

FF176. The evidence relied upon by the Neutral Body addressed shipments dated in April 1997 by General Ocean Freight; a shipment in May 1997 by Fleet Shipping Lines to World Pacific Container in Hong Kong, and two shipments dated in May 1997 by Pan Pacific Express. BOE Ex. 1, ¶ 102.

FF177. Mr. Ohle subsequently advised Mr. David Wing about the Neutral Body visit. Ohle Tr. 359 ln14 - ln25. Mr. Wing stated that he would "look into" the issue. Ohle Tr. 370 ln2 - ln10.

FF178. Mr. Ohle's supervisor, Mr. Chris Lytle, spoke several times with Mr. Glenn Spargo regarding the Neutral Body investigation. Ohle Tr. 359 ln14 - 360 ln3. Following these discussions, Mr. Chris Lytle advised that the investigation was a "potentially serious" matter for Sea-Land. Ohle Tr. 370 ln2 - 371 ln5.

FF179. Mr. Chris Lytle instructed Mr. Ohle that any requests for equipment substitution initiated by anyone outside of Sea-Land's Operations Department should thereafter be referred "back to sales." Ohle Tr. 371 ln22 - 372 ln10.

FF180. Following the Neutral Body visit and discussions with Mr. Glenn Spargo, Mr. Rich Favor withdrew from employment at Sea-Land. SL Ex. 3, Favor Dep. Tr. at 94 and Attachment 1.

FF181. On August 2, 1997, the Neutral Body transmitted to Sea-Land a letter entitled "Neutral Body Investigation Report." The Neutral Body concluded (Bates page 000458) that "If the information above is correct [referring to documents relied upon by the Neutral Body], the application of a smaller size container rate to larger containers into which cargo has been loaded in excess of the limits stated in . . . TWRA Rule 2 G5 constitutes improper equipment substitution and confirms the written complaints which prompted this investigation." Eight separate complaints filed with the Neutral Body stated that Sea-Land was involved in rate malpractices with its NVO customers. BOE Ex. 1, ¶¶ 103-104, Clark Att. L.

FF182. Sea-Land did not, prior or subsequent to the first Neutral Body investigation, establish written procedures regarding equipment substitution applicable to its Sales/Marketing staffs or to Sea-Land Operations. CO Ex. 34; Spargo I Tr. 90 ln4 - 91 ln18; Wing Tr. 288 ln2 - 290 ln15; Ohle Tr. 359 ln2 - ln13.

FF183. On and after May 1, 1997, Sea-Land employees Mr. John Ohle and Mr. Chris Lytle in Sea-Land Operations, and Mr. David Wing and Mr. Glenn Spargo in Sea-Land Sales, among others, knew about the equipment substitution abuses by which various NVO shippers were allowed to obtain transportation at less than the applicable tariff rates. BOE Ex. 1, ¶¶ 98, 105, 109, 115; OHLE Tr. 359 ln14 - ln25.

Evidence of Sea-Land's Knowledge Prior to September 1997

FF184. Sea-Land's practice of permitting NVOs to obtain lower rates by misuse of equipment substitution was widely known within the NVO industry doing business in the trades to Far East ports. BOE Ex. 1, ¶ 10; BOE Ex. 3, Attachment at 3; BOE Ex. 5, ¶ 8; BOE Ex. 8, ¶ 2; BOE Ex. 11, ¶ 5.

FF185. Other carriers also were aware that misuse of equipment substitution had become a widespread practice by which the NVOs were allowed to obtain from Sea-Land rates lower than those established in the applicable tariff. BOE Ex. 1, ¶ 11.

FF186. On or about July 18, 1997, the TWRA published Notes or Exceptions within the FAK commodity description in the tariff line items which prohibited equipment substitution of 40' containers for 20' containers for FAK cargo. BOE Ex. 14, ¶ 9; CO Ex. 29 (Bates page 00149).

FF187. Between August 3, 1997 and September 2, 1997 Direct Container Line ("DCL") communicated, through internal memos and correspondence, with carrier members of the Transpacific Westbound Rate Agreement, concerning equipment substitution malpractices involving Sea-Land. DCL alleged violations involving "misdeclaration by World Pacific of loading 40' for the 20' rate and/or utilizing their Sealand service contract for full loads to move their FAK." BOE Ex. 1, ¶¶ 84-87 and Clark Attachments B-E.

Evidence of Sea-Land's Knowledge through the Second Neutral Body Investigation

FF188. By e-mail message dated September 18, 1997, Orient Overseas Container Line ("OOCL") submitted a complaint to Robinson Stark Associates, the neutral body enforcement authority for the TWRA trades, indicating "persistent" rumors that Sea-Land was still offering equipment substitution on FAK shipments on behalf of World Pacific Container Line and General Ocean Freight. BOE Ex. 1, ¶ 88 and Clark Attachment F.

FF189. On October 15 and 29, 1997, Mr. Glenn Spargo discussed with Mr. Giles Ryan, Regional Manager for the Neutral Body, equipment substitution malpractices being investigated in Sea-Land's Long Beach offices. On November 20, 1997, the Neutral Body also discussed equipment substitution malpractices with Mr. Rich Hopkins in Sea-Land's Dallas office. BOE Ex. 1, ¶ 111 and Clark Attachment M.

FF190. The evidence relied upon by the Neutral Body addressed a shipment with a sailing date of August 31, 1997 by shipper-NVOCC General Ocean Freight for which Sea-Land had applied 20' container rates for 40' containers even though effective August 13, 1997, equipment substitution of 40' containers for 20' containers was no longer allowed for FAK cargo by action of the TWRA. BOE Ex. 1, ¶ 112 and Clark Att. M.

FF191. On December 13, 1997, the Neutral Body transmitted to Sea-Land a letter entitled "Neutral Body Investigation Report" which concluded that if the information in FF190 is correct, improper application of equipment substitution constitutes violations of Article 5(b) of the TWRA Agreement, and confirm written complaints received by the Neutral Body. BOE Ex. 1, ¶ 113 and Clark Att. M.

FF192. On or about January 9, 1998, Sea-Land subsequently accepted the conclusions of the Neutral Body Investigation Report, and the amount of the fines was reduced 50% to $15,000. BOE Ex. 1, ¶ 114 and Clark Attachment N.

FF193. On or about January 1998, Mr. Glenn Spargo terminated Mr. Jerome Ginn from his sales position handling Sea-Land's FAK shipper accounts, including General Ocean Freight and World Pacific Container (USA). Wing Tr. 300 ln14 - 301 ln2; Spargo I Tr. 119 ln11 - 120 ln16; CO Ex. 12. Mr. Spargo asserted that Mr. Ginn's discharge had "nothing to do" with the Neutral Body investigations. Spargo I Tr. 120 ln20 - ln23.

FF194. On and after the October 15, 1997 discussion between Sea-Land and the Neutral Body, Mr. Glenn Spargo, among others, knew of the equipment substitution abuses by which various NVO shippers were allowed to obtain transportation at less than the applicable tariff rates. BOE Ex. 1, ¶ 115.

Knowledge That Sea-Land's Activities Continued After October 1997

FF195. Between October 17, 1997 and January 15, 1998, DCL exchanged further correspondence with OOCL as to OOCL's efforts to address the misapplication of rates by NVOs. In particular, OOCL reported that "in addition to the misdeclaration of the cargo, the violators are compounding the problem by abusing the equipment substitution rule." Among NVOs named therein were World Pacific, Pagoda, General Ocean, and Global Links Express. Mr. Hay of OOCL reported that "OOCL, together with Maersk, has been driving the TWRA to adopt an inspection program." BOE Ex. 1, ¶¶ 89-93 and Clark Attachments G-K.

FF196. On January 6, 1998, the TWRA carriers extensively discussed at a TWRA meeting whether to adopt an inspection program. BOE Ex. 1, ¶ 92 and Clark Attachment J.

FF197. On the evening of January 6, Eddie Chan of Sea-Land notified other employees by e-mail that "recent fines were focused on FAK shippers from the U.S. to Asia" and that "Effective immediately, all FAK shippers' bills of lading will be held by this office until a proper SED is submitted by the customer to S/L." SL Ex. 1, Attachment at 1; Spargo I Tr. 152 ln4 - ln10.

FF198. On March 5, 1998, the Neutral Body discussed equipment substitution malpractices with Rich Hopkins, Donna Smith and Eddie Chan in Sea-Land's Dallas office. BOE Ex. 1, ¶ 121 and Clark Attachment O.

Evidence of Sea-Land's Knowledge Through the Third Neutral Body Investigation

FF199. The evidence relied upon by the Neutral Body addressed 15 shipments in January and February 1998 by General Ocean Freight, two shipments in February 1998 by World Pacific Container, and eight shipments in February 1998 by Pagoda Container Line. One shipment is singled out by the Neutral Body as the only shipment not having equipment substitution applied thereon by Sea-Land. BOE Ex. 1, ¶ 122.

FF200. On March 27, 1998, the Neutral Body transmitted to Sea-Land a letter entitled "Neutral Body Investigation Report." which concluded that if the information in FF191 is correct, this improper equipment substitution constitutes a violation of TWRA Tariff No. FMC 017 Rule 2 G5. "We view these violations as especially serious because they represent a repetition of the same violations described in previous Investigation Reports." BOE Ex. 1, ¶ 123 and Clark Att. O at Bates 000107.

FF201. On or about April 28, 1998, Sea-Land accepted the conclusions of the Neutral Body Investigation Report, for which action the amount of damages was reduced 50 percent to $27,500. BOE Ex. 1, ¶ 125 and Clark Attachment P.

FF202. Sea-Land had not acted to preclude equipment substitution for commodities other than FAK. Hagan Tr. 124 ln10 - ln22, 133 ln2 - 134 ln1. The shipments identified by the Neutral Body in March 1998 did not involve FAK but did involve the same NVO shippers as in the two prior Neutral Body Investigation Reports. Hagan Tr. 122 ln16 - 124 ln9.

FF203. Subsequent to the three Neutral Body investigations, Sea-Land continued "internal conversations" seeking to educate and train staff as to equipment substitution. Hagan Tr. 129 ln17 - 130 ln15. Sea-Land instituted no new controls as to equipment substitution by NVOs. Hagan Tr. 133 ln8 - 134 - ln12; SL Ex. 4, ¶ 8.

FF204. Subsequent to the three Neutral Body investigations, Sea-Land proceeded to negotiate service contracts with these same NVOs, including World Pacific, General Ocean Freight, and Global Links. Hagan Tr. 40 ln12 - 41 ln15, 80 ln19 - ln22, 86 ln13 - 89 ln12. Mr. Hagan initially did not want to "sponsor" any activities with accounts said to be involved in equipment substitution abuses. Hagan 85 ln21 - 86 ln12. The determination to negotiate service contracts with FAK shippers ultimately reflected the consensus of the Westbound Trade Lane Director for the Pacific trades' organization and Sea-Land sales. Hagan Tr. 86 ln13 - 18.

Shipments of World Pacific Container

FF205 and FF206. Sea-Land charged and collected 20-foot container rates by transporting cargo of World Pacific Container ("World Pacific" or "WPC") in 40- or 45-foot containers on an equipment substitution basis from about December31, 1996 to about March 9, 1998. BOE Ex. 1, ¶ 9; BOE Ex. 3 at 1; BOE Ex. 4 at 1; BOE Ex. 4, ¶ 3; Tam Tr. 32 ln17 - 19; BOE Ex. 14, ¶¶ 2, 3 and Attachment B (Gravitt Shipments 126 and 131; BOE Ex. 1, ¶ 77 and Clark Attachment A; BOE Ex. 1, ¶¶ 138-148 and Clark Attachments S1 - S4, T1 - T5.

FF207. To ensure that Sea-Land would charge and collect 20-foot container rates on its cargo handled in 40-foot containers under the misuse of the equipment substitution rule, World Pacific misdeclared the cubic measurement of its cargo. BOE Ex. 1, ¶ 8; BOE Ex. 3, Attachment at 1-2; BOE Ex. 4, Attachment at 1-2; Clark Tr. 95 ln13 - 97 ln17, 104 ln20 - 105 ln6, 341 ln8 - ln20, 342 ln4 - ln16; Tiao Tr. 166 ln20 - ln24, 167 ln2 - ln9, 168 ln1 - ln10, 169 ln7 - ln23, 212 ln19 - 213 ln11; Tam Tr. 30 ln6 - 31 ln9.

FF208. World Pacific knew the shipment information furnished to Sea-Land was incorrect. Carey Tr. 496 ln12 - ln21, 522 ln15 - ln18; Tiao Tr. 169 ln17 - ln23, 171 ln1 - ln4, 181 ln11 - ln15, 207 ln15 - ln25; Tam Tr. 36 ln12 - ln14, 96 ln10 - ln24, 97 ln14 - 98 ln6, 117 ln21 - ln25.

FF209. The NVO house bills of lading issued by World Pacific Container show the actual measurements (correct weight and cube) of the shipments handled by Sea-Land. Clark Tr. 342 ln17 - 343 ln3, 407 ln20 - 408 ln18; Tiao Tr. 222 ln1 - ln19.

Shipments of General Ocean Freight

FF210. Sea-Land charged and collected less than applicable rates by transporting cargo of General Ocean Freight in 40' containers on an equipment substitution basis during a period beginning on or about March 10, 1997, and continuing through February 1998. BOE Ex. 1, ¶¶ 18-19; BOE Ex. 5, ¶ 3; CO Ex. 3, Wu Statement at 1; BOE Ex. 14, ¶¶ 2, 3 and Attachment B (Gravitt Shipments # 106 and 103); BOE Ex. 1, ¶ 149 and Clark Attachment U; BOE Ex. 1, ¶ 122 and Clark Attachments CC.

FF213. The weights and measures shown on Sea-Land's bills of lading were declared incorrectly by General Ocean Freight in order to obtain the less than applicable 20-foot container rates which Sea-Land made available through the misuse of the equipment substitution rule. BOE Ex. 5, ¶ 4; Wu Tr. 142 ln19 - 143 ln22, 144 ln4 - 145 ln17, 146 ln15 - ln24.

Shipments of Global Links Express

FF214. Sea-Land charged and collected less than applicable rates by transporting cargo of Global Links Express on an equipment substitution basis during a period beginning no later than February 3, 1997 and continuing through at least January 5, 1998. BOE Ex. 1, ¶ 28; BOE Ex. 6, ¶ 3; BOE Ex. 14, ¶¶ 2, 3 and Attachment B (Gravitt Shipments #239 and 66).

FF215. In obtaining equipment substitution rates from Sea-Land, Global Links Express knew that it had to misdeclare the cubic measurement of the cargo so that it did not exceed that applicable to cargo in 20-foot containers. Tse Tr. 102 ln3 - 103 ln22.

Shipments of Supertrans International

FF216. Sea-Land charged and collected less than applicable 20-foot container rates by transporting containerized cargo of Supertrans in 40' boxes on an equipment substitution basis from January 5, 1997 through April 21, 1997. BOE Ex. 1, ¶ 48; BOE Ex. 9, Attachment at 1-2; BOE Ex. 14, ¶¶ 2, 3 and Attachment B (Gravitt Shipments #46 and 41).

FF217. The weights and measures declared by Supertrans and shown on Sea-Land's bills of lading do not reflect the correct measurement of Supertrans' shipments rated under the equipment substitution rule. D_Lee Tr. 119 ln11 - ln22, 122 ln10 - ln18, 181 ln1 - ln11.

FF218. Supertrans' internal container manifest, dock receipts and related NVO bills of lading show the actual measurements of the cargo moved by Sea-Land. D_Lee Tr. 145 ln25 - 147 ln1, 156 ln22 - ln25, 176 ln17 - 177 ln10, 178 ln11 - ln20.

Shipments of Brennan International

FF219. Sea-Land charged and collected less than applicable rates by transporting cargo of Brennan on an equipment substitution basis from May 16, 1996 to March 28, 1997. BOE Ex. 1, ¶ 57; BOE Ex. 10, ¶¶ 3, 4, 5; BOE Ex. 14, ¶¶ 2, 3 and Attachment B (Gravitt Shipments #1 and 109).

FF220. The actual measurements were reduced by Brennan on Sea-Land's bills of lading to permit Brennan to obtain less than applicable rates through misuse of the equipment substitution rule. BOE Ex. 10, ¶ 5 at pp. 4-5; Sehwani Tr. 24 ln19 - 27 ln24, 53 ln16 - 57 ln15.

FF221. Brennan's container load plan and related NVO bills of lading show the actual measurements of the cargo for shipments on Sea-Land. BOE Ex. 10, ¶ 5 at pp. 3-4; Sehwani Tr. 24 ln19 - 27 ln24, 57 ln16 - 60 ln16.

Shipments of Pan Pacific Express

FF222. Sea-Land charged and collected less than applicable lower container rates on cargo of Pan Pacific Express ("Pan Pacific") transported by Sea-Land in larger containers from May 5, 1997 to December 13, 1997. BOE Ex. 1, ¶¶ 64, 65, 67; BOE Ex. 11, ¶¶ 3-5, 8; BOE Ex. 14, ¶¶ 2, 3 and Attachment B (Gravitt Shipments #77 and 124).

FF223. The cargo measurements were reduced on Sea-Land's bills of lading to allow Pan Pacific to obtain lower rates through misuse of the TWRA equipment substitution rule. BOE Ex. 11, ¶ 7; Chao Tr. 89 ln14 - 89 ln123, 90 ln4 - ln8, 91 ln7 - ln12, 93 ln1 - ln9.

FF224. Pan Pacific's container load plan, manifests and related NVO bills of lading show the actual measurements of Pan Pacific's cargo moved by Sea-Land in containers. BOE Ex. 11, ¶ 7; Chao Tr. 83 ln1 - ln7, 83 ln19 - ln22, 84 ln1 - ln4.

Shipments of Morrison Maritime

FF225. Sea-Land charged and collected lower container rates on cargo of Morrison Maritime ("Morrison") moved by Sea-Land in larger containers on an equipment substitution basis from September 22, 1996 to June 30, 1997. BOE Ex. 1, ¶¶ 64, 65, 67; BOE Ex. 12, at 1; BOE Ex. 14, ¶¶ 2, 3 and Attachment B (Gravitt Shipments #53 and 56).

FF226. The cargo measurements were reduced on Sea-Land's bill of lading and related cargo manifest to allow Morrison to obtain lower rates through the misuse of the TWRA equipment substitution rule. BOE Ex. 1, ¶ 70; BOE Ex. 12, at 1; C_Lee Tr. 40 ln1 - ln21, 46 ln1 - ln16.

FF227. Morrison's container load plan, manifests and related NVO bills of lading show that the actual measurements of the cargo for Morrison's shipments on Sea-Land exceeded the limits permitted on larger containers under the equipment substitution rule. BOE Ex. 14, ¶¶ 7, 14 and Gravitt Attachment B.

Shipments of Jasper Freight

FF228. Sea-Land charged and collected lower rates by transporting cargo of Jasper Freight ("Jasper") in larger containers on an equipment substitution basis from late 1996 through August 1997. BOE Ex. 1, ¶ 34; BOE Ex. 7, Attachment at 1; Clark Tr. 184 ln6 - ln15; Carey Tr. 763 ln14 - ln18; Wei Tr. 119 ln7 - 120 ln3; BOE Ex. 1, ¶¶ 130-133 and Clark Attachments Q1 thru Q4.

FF230. The weights and measures shown on Sea-Land's bills of lading were declared incorrectly in order to obtain for Jasper the benefits of lower rates which Sea-Land made available under the equipment substitution rule on cargo moved in larger boxes. Wei Tr. 140 ln9 - 141 ln17, 145 ln10 - 146 ln6.

Shipments of Pagoda Container Line

FF231. Sea-Land charged and collected lower rates by transporting cargo of Pagoda Container Line ("Pagoda") in larger containers on an equipment substitution basis from1996 through February 1998. BOE Ex. 1, ¶ 38; BOE Ex. 8, ¶¶ 2-3; CO Ex. 2, at 1; BOE Ex. 1, ¶¶ 38-39; BOE Ex. 8, ¶ 3-4; CO Ex. 2, at 1-2; Clark Tr. 258 ln12 - 259 ln8, 260 ln1 - ln4; Chang Tr. 18 ln17 - ln19, 30 ln3 - ln5; BOE Ex. 1, ¶ 122 and Clark Attachment O.

FF233. In obtaining equipment substitution rates from Sea-Land on its cargo handled in larger boxes, Pagoda underdeclared the cubic measurement of the cargo on Sea-Land's bill of lading so that the measurements would be consistent with those on cargo fitting into a 20-foot container. BOE Ex. 1, ¶ 39; BOE Ex. 8; ¶¶ 2, 3; Chang Tr. 25 ln7 - ln22, 53 ln17 - 54 ln20. Pagoda also reduced the weight or cubic measurements on the Shippers Export Declaration ("SED") or cargo manifest, where necessary, to reflect the same inaccurate figures on the bill of lading. Chang Tr. 55 ln4 - ln23.

Rate Analysis of Sea-Land's Shipments by BOE Witness Mr. Gravitt (see Appendix D)

FF234. In order to determine the extent to which Sea-Land's rates to the NVO shippers were lower than would otherwise be applicable under TWRA tariffs, shipment records provided by the NVO shippers and by Sea-Land were furnished to BOE witness Thomas W. Gravitt for his review and rerating in accordance with the applicable tariff. BOE Ex. 1, ¶ 168; BOE Ex. 14, ¶ 2.

FF235. Mr. Gravitt held the position of Senior Investigator for the Federal Maritime Commission in Washington, D.C., and has served in an investigative capacity with the Federal Maritime Commission since 1978. BOE Ex. 14, ¶ 1; Gravitt Tr. 786 ln23 - 787 ln6.

FF236. In the course of his employment, Mr. Gravitt examined 149 shipment records provided to the Federal Maritime Commission by Sea-Land and by 9 NVO shippers-World Pacific Container (USA) Inc., General Ocean Freight Container Lines, Inc., Global Links Express Inc., Jasper Freight Inc., Pagoda Container Line Corp., Pan Pacific Express Corp., Supertrans International Inc., Brennan International Transport Inc. and Morrison Maritime Inc. BOE Ex. 14, ¶ 2; Gravitt Tr. 791 ln18 - 792 ln17, 793 ln3 - 794 ln1.

FF237. Mr. Gravitt reviewed records of 31 World Pacific container shipments whereby Sea-Land charged and collected lower rates provided under equipment substitution. BOE Ex. 1, ¶ 5; BOE Ex. 3, ¶ 3; BOE Ex. 4, ¶ 3; BOE Ex. 14, ¶¶ 2, 3 and Attachment B (Gravitt Shipments #82-84, 87-90, 104-105, 122, 126-136, 140-149).

FF238. General Ocean Freight furnished records of three shipments where Sea-Land charged and collected lower rates provided under equipment substitution. BOE Ex. 1, ¶ 17; BOE Ex. 5, ¶ 3; BOE Ex. 14, ¶¶ 2, 3 and Attachment B (Gravitt Shipments #103, 105, 108).

FF239. Global Links Express furnished records of 79 shipments as to which Sea-Land charged and collected lower rates provided under equipment substitution. BOE Ex. 1, ¶¶ 26, 31; BOE Ex. 6, ¶ 3; BOE Ex. 14, ¶¶ 2, 3 and Attachment B (Gravitt shipments #4-39, 64-68, 70-76, 85-86, 91-102, 107, 110-121, 123, 137-139).

FF240. Jasper and Pagoda furnished similar records of shipments as to which Sea-Land charged and collected lower rates provided under equipment substitution. BOE Ex. 1, ¶¶ 26, 31; BOE Ex. 7, ¶ 3; BOE Ex. 8, ¶ 3. But these were not used by Mr. Gravitt in his rerating analysis. BOE Ex. 14, ¶¶ 2, 3 and Attachment A.

FF242. Supertrans, Brennan, Pan Pacific and Morrison furnished records of 11, 4, 15, and 6 shipments, respectively, whereby Sea-Land charged and collected from those NVOs lower rates provided under equipment substitution. BOE Ex. 1, ¶ 47; BOE Ex. 9, ¶ 3; BOE Ex. 14, ¶¶ 2, 3 and Attachment B (Gravitt Shipments #40 - 50); BOE Ex. 10, ¶¶ 4, 5; BOE Ex. 14, ¶¶ 2, 3 and Attachment B (Gravitt Shipments #1-3,109); BOE Ex. 11, ¶¶ 6-7; BOE Ex. 14, ¶¶ 2, 3 and Attachment B (Gravitt Shipments #1-3, 109); BOE Ex. 1, ¶ 68; BOE Ex. 12, at 1; BOE Ex. 14, ¶¶ 2, 3 and Attachment B (Gravitt Shipments #51-56).

FF246. For the 149 identified shipments, Sea-Land issued bills of lading for shipments transported between April 1, 1996 and April 30, 1998, which identified the size of container utilized (whether 40' or 45' in length), the commodity description(s), the measurement and/or weight of the cargo and the ocean freight charged by Sea-Land. BOE Ex. 14, ¶ 3.

FF247. Mr. Gravitt concluded that the rates and charges set forth in TWRA's North Asia Tariff No. 005794-019 ("TWRA North Asia Tariff"), TWRA South Asia Tariff No. 005794-018 ("TWRA South Asia Tariff") and TWRA Essential Terms Publication No. 005794-020 ("TWRA Essential Terms Publication") were applicable to these shipments by Sea-Land occurring between April 1, 1996 and April 30, 1998. BOE Ex. 14, ¶ 4.

FF248. Between April 1, 1996 and April 30, 1998, rule 2, Sub-rule G5 ("Equipment Substitution") of TWRA Rules Tariff No. 005794-017 ("TWRA Rules Tariff") provided that a carrier could, at its option, substitute a type of equipment other than that specific type of equipment booked or ordered by the shipper. BOE Ex. 14, ¶ 6, and App. C.

FF249. The TWRA Rules Tariff, Rule 2, Sub-rule G5 also set forth the requirement that all bills of lading for any shipments wherein equipment is substituted under the provisions of the rule, must be specifically annotated: "Equipment Substitution per Rule 2-G5." BOE Ex. 14, ¶ 6.

FF250. Many, but not all, Sea-Land bills of lading included the annotation "Equipment Substitution" or similar annotations indicating that the tariff provisions as to equipment substitution had been applied in rating the cargo. BOE Ex. 14, ¶ 3.

FF251. The TWRA Rules Tariff, Rule 2, Sub-rule G5, sets forth the requirement that equipment substitution was subject to specified maximum measurements and weights for each size of container. BOE Ex. 14, ¶ 6.

FF252. In the event a 40' container was substituted for a 20' container, the carrier could charge the rate and charges applicable to a 20' container provided that the cargo not exceed 25 Cubic Meters ("CBM") and 18 Kilotons ("KT") (18,000 Kilograms); BOE Ex. 14, ¶ 6; BOE Ex. 1, ¶¶ 4, 54, 62.

FF253. In the event a 45' container was substituted for a 40' container, the carrier could collect the rate and charges applicable to a 40' container provided that the cargo not exceed 65 CBM and 21 KT. BOE Ex. 14, ¶ 6; and BOE Ex. 1, ¶¶ 4, 69.

FF254. The TWRA Rules Tariff stated that when cargo was loaded in excess of the maximums specified for container substitution, "the applicable revenue ton rate or per container rate and charges" for the larger container will be applied. BOE Ex. 14, ¶ 6.

FF255. For each of the 149 identified shipments, Mr. Gravitt compared the Sea-Land bills of lading with the underlying NVO manifest for the container, the corresponding NVO house bills of lading, the commercial packing list, the warehouse receipt, the booking confirmation, the container load plan or other shipment records provided by Sea-Land for the shipments. BOE Ex. 14, ¶ 7; Gravitt Tr. 802 ln1 - 803 ln21, 866 ln1 - ln4.

FF256. Mr. Gravitt then determined that the cargo loaded into the containers exceeded the maximums set forth in the TWRA equipment substitution rule as determined by the actual cubic measurement, the actual weight of the shipment or both factors. BOE Ex. 14, ¶ 7; Gravitt Tr. 813 ln14 - 814 ln2, 821 ln3 - 821 ln6.

FF257. Mr. Gravitt concluded that Sea-Land should not have charged or collected lower rates based on equipment substitution inasmuch as the cargo loaded in those containers exceeded the maximums stated in TWRA Rule 2, Subrule G5. BOE Ex. 14, ¶ 7.

FF258. In the process of rerating these shipments, Mr. Gravitt found numerous shipments where the commodity description on the Sea-Land bills of lading did not match the commodity descriptions on the NVO manifest or the corresponding NVO house bills of lading. In those instances, Mr. Gravitt used the commodity descriptions in the NVO manifest for the container, the NVO house bills of lading, the commercial packing list, the warehouse receipt, booking confirmation or container load plan in rerating the shipment. BOE Ex. 14, ¶ 8.

FF259. Mr. Gravitt also found that many shipments contained four or more different commodities consolidated in a single container. Mr. Gravitt determined that in most instances the commodity description applicable under the TWRA tariffs would be "Freight All Kinds" ("FAK"), shown in TWRA North Asia Tariff's Commodity Description No. 0000-00-7000 and TWRA South Asia Tariff's Commodity Description No. 0000-00-7000. BOE Ex. 14, ¶ 9; Gravitt Tr. 1057 ln5 - 1058 ln18, 1120 ln13 - 1124 ln10; CO Ex. 29.

FF260. Notes published within the FAK tariff line items prohibited equipment substitution of 40' containers for 20' containers effective July 18, 1997. BOE Ex. 14, ¶ 9; CO Ex. 29.

FF261. Mr. Gravitt compiled a table of calculations which reflects, by shipment, both the total ocean freight charges and cubic measurement basis as determined and charged by Sea-Land on the 149 issue shipments, and the actual cubic meter measurement of the shipment and the ocean freight which should have been charged by Sea-Land for the shipments under the applicable TWRA tariff. BOE Ex. 14, ¶ 10, Gravitt Attachment A, and Appendix D to this ruling.

FF262. For each of the 149 shipments identified in Gravitt Attachment A, Sea-Land charged less than the applicable rates and charges as shown in the tariffs and the service contracts' essential terms publication. BOE Ex. 14, ¶ 13, Gravitt Attachment A, and Appendix D to this ruling.

FF263. BOE veteran investigative witnesses Clark and Gravitt concluded that 9 NVO shippers, namely, World Pacific Container (USA) Inc., General Ocean Freight Container Lines Inc., Global Links Express Inc., Jasper Freight Inc., Pagoda Container Line Corp., Pan Pacific Express Corp., Supertrans International Inc., Brennan International Transport Inc. and Morrison Maritime Inc., obtained from Sea-Land or were allowed to obtain transportation at less than the applicable tariff rates by means of Sea-Land's equipment substitution practices. BOE Ex. 1, ¶ 80; BOE Ex. 14, ¶ 13; Clark Tr. 407 ln20- 408 ln21, 425 ln22 - 426 ln3.

FF264. BOE witnesses Clark and Gravitt concluded that Sea-Land knew or persistently failed to inform itself that various NVO shippers obtained from Sea-Land transportation at less than the applicable tariff rates by means of Sea-Land's equipment substitution practices. The nine NVO shippers include World Pacific Container (USA) Inc., General Ocean Freight Container Lines, Global Links Express Inc., Jasper Freight, Pagoda Container Line, Pan Pacific Express Corp., Supertrans International Inc., Brennan International and Morrison Maritime Inc. BOE Ex. 1, ¶ 153; BOE Ex. 14, ¶ 14; Clark Tr. 151 ln12 - 152 - ln23, 153 ln1 - ln19, 425 ln22 - 426 ln8.

Section 19(d)(4)of the 1984 Act

Payment of Forwarder Compensation to ITL Shipping

FF265. During 1996 and 1997, Sea-Land paid freight forwarder compensation to ITL Shipping Co. ("ITL") on 265 shipments shown by "remittance advices," BOE Ex. 2, ¶¶ 7 and 23, and BOE presented documentary evidence as to 46 such shipments. BOE Ex. 2, ¶ 23 and Attachment D-H 10; BOE Ex. 1, ¶¶ 174 and 175; BOE Ex. 13 - Attachment.

FF266. ITL performed no freight forwarding services for any of the shipments for which Sea-Land paid freight forwarder compensation to ITL. Oh Tr. 36 ln8 - 40 ln24; BOE Ex. 13-Attachment; BOE Ex. 1, ¶¶ 172, 174, 175; BOE Ex. 2, ¶ 23; and Carey Tr. 740 ln23 - 741 ln4.

FF267. World Pacific Container performed all forwarding services on the shipments for which Sea-Land paid freight forwarder compensation to ITL, and World Pacific Container did not use any other company or entity to book cargo or reserve space or confirm availability of space as to these shipments. Tiao Tr. 199 ln12-16; Tam Tr. 85 ln24 - 86 ln8; Carey Tr. 554 ln18 - 555 ln1; and Clark Tr. 317 ln22 - 318 ln11.

FF268. A forwarder must contact the carrier to engage, book, secure or contract directly with the carrier or its agent for space aboard a vessel or confirm the availability of that space and the forwarder usually communicates with the carrier in the preparation and processing of the ocean bill of lading or other documents with respect to the shipments. Oh Tr. 87 ln20 - 90 ln2.

FF269. Sea-Land's records identified the person or firm who contacted Sea-Land to book shipments and permitted notations in Sea-Land's booking records to identify any other person who contacted Sea-Land to update the booking by confirming vessel space. In addition, Sea-Land's records identified who communicated with Sea-Land regarding the preparation and processing of the bills of lading and other shipping documents. BOE Ex. 2, ¶¶ 14 and 34; Attachment E-2; Carey Tr. 731 ln9 - 731 ln22.

FF271. As to the shipments in issue, Sea-Land's records demonstrate that the forwarder ITL did not communicate with Sea-Land to engage, book, secure or contract directly with Sea-Land or its agent for space aboard a vessel or confirm the availability of that space; Sea-Land's records demonstrate that the shipper-NVOCC World Pacific Container- contacted Sea Land directly to book cargo. BOE Ex. 2, ¶ 14; BOE Ex. 2, Attachment E -2 Bates Stamp Nos. 5317, 5292; Carey Tr. 718 ln2 - 729 ln7, 740 ln14 - 741 ln4, 764 ln5 - 769 ln15, 717 ln1 - 718 ln18.

FF272. Sea-Land's records demonstrate that ITL did not communicate with Sea-Land in the preparation and processing of the ocean bill of lading or other documents with respect to the issue shipments; Sea-Land's records demonstrate that the shipper NVOCC contacted Sea-Land in the preparation and processing of the ocean bills of lading and other shipping documents as to the issue shipments. BOE Ex. 2, ¶ 14; and Carey Tr. 740 ln23 - 741 - ln4.

FF273. Before Sea-Land paid compensation to ITL, Sea-Land knew that ITL did not engage, book, secure or contract directly with Sea-Land or its agent for space aboard a vessel or confirm the availability of that space on the shipments by World Pacific. Carey Tr. 718 ln2 - ln8, 731 ln14 - ln22.

FF274. Before Sea-Land paid compensation to ITL, Sea-Land knew that ITL had never contacted Sea-Land regarding the preparation or processing of the ocean bill of lading or other documents with respect to the shipments by World Pacific. Carey Tr. 731 ln14 - 732 ln6.

FF275. Using information furnished by the shipper World Pacific, Sea-Land added the name of ITL Shipping in the forwarder box upon all bills of lading prepared for issuance to the shipper, World Pacific Container (USA), Inc. BOE Ex. 2, ¶ 2; BOE Ex. 1, ¶ 171; Tiao Tr. 195 ln3 - ln8, 196 ln3 - ln9, 199 ln8 - ln16, 200 ln13 - ln21; Carey Tr. 717 ln17 - 718 ln1.

FF275A (BOE PFF No. 270). Inasmuch as ITL never performed freight forwarding services for any shipment of World Pacific Container carried by Sea-Land, Sea-Land personnel had to know that ITL never contacted Sea-Land to perform freight forwarding services on the issue shipments. BOE Ex. 13 - Attachment at 3; Oh Tr. 11 ln22 - 14 ln10; and Oh Tr. 39 ln8 - 40 ln5.

FF276. Sea-Land's business practice in the payment of forwarder compensation was to check Sea-Land's own records to ascertain whether the name of the person identified as the forwarder in the bill of lading instructions matched the forwarder's FMC license number in Sea-Land's customer database. SL Ex. 2, ¶ 14B.

FF277. If the forwarder information matched the Sea-Land's customer database information, Sea-Land issued compensation checks to the freight forwarder named on the bill of lading. SL Ex. 2, ¶ 14D.

FF278. ITL's ocean freight forwarder license, FMC No. 3102, was revoked on April 1, 1997. BOE Ex. 2, ¶ 3 and Attachment A.

FF279. The Commission published public notice of ITL's license revocation in the Federal Register on April 23, 1997. 62 Fed. Reg. 19761; BOE Ex. 2, ¶ 4 and Attachment B.

FF280. Sea-Land did not utilize Federal Register revocation notices or any other means to update its records. As a result, Sea-Land failed to update its records to reflect the April 1997 revocation of ITL's license. SL Ex. 2, ¶¶ 15, 16.

FF281. Sea-Land paid freight forwarder compensation to ITL for several months after ITL's license was revoked. Oh Tr. 39 ln8 - 40 ln5; BOE Ex. 2, ¶ 8.

FF283. Between 1996 and 1998 Sea-Land printed a freight forwarder certification form on the reverse of its compensation checks, which stated:

The undersigned hereby certifies that neither it nor any holding company, subsidiary, affiliate, officer, director, agent or executive of the undersigned has a beneficial interest in this shipment; that it is the holder of valid
FMC license No. ____________________________________________________
issued by the Federal Maritime Commission and has performed the following services:
(1) Engaged, booked, secured, reserved, or contracted directly with the carrier or its agent for space aboard a vessel or confirmed the availability of that space.
(2) Prepared and processed the ocean bill of lading, dock receipt, or other similar document with respect to the shipment.
CO Ex. 9.

Sea-Land did not otherwise require forwarders to provide their own form of certification and thus Sea-Land did not obtain ITL's own freight forwarder certification from the ocean freight forwarder ITL for any of the issue shipments of World Pacific. BOE Ex. 1, ¶ 173; BOE Ex. 2, ¶¶ 6, 9, 17; BOE Ex. 13, Attachment 2, SL Ex. 2, ¶¶ 14D and 14E.

FF285. Sea-Land knew that forwarders' FMC license numbers rarely were inserted in the appropriate space by forwarders on Sea-Land's certification form and that forwarders rarely endorsed the check with a handwritten signature. Sea-Land relied on the license number information on the shipping instructions and in its database. SL Ex. 2, ¶ 14E. The freight forwarders, such as ITL, would endorse and cash the compensation checks making the endorsement by a stamp indicating their banks and account numbers after stating "for deposit only." SL Ex. 2, ¶ 14E.

FF286. After the compensation checks were negotiated, Sea-Land failed to implement any business procedures to verify whether any number was entered in the blank for the licensee number in Sea-Land's preprinted form or whether the preprinted form bore any signature of a licensed ocean freight forwarder. SE Ex. 2, ¶ 14E.

FF287. The Freight forwarder, ITL, never entered its license number on Sea-Land's certification form. BOE Ex. 1, ¶ 176; BOE Ex. 2, ¶ 17; BOE Ex. 13, Attachment at 2.

FF288. The freight forwarder, ITL, never signed Sea-Land's certification form. BOE Ex. 1, ¶ 17; BOE Ex. 13, attachment at 2; Carey Tr. 620 ln2 - 622 ln14; and Clark Tr. 398 ln4 - 400 ln23.

FF289. According to Mr. Harry Oh, President of ITL, it never certified that it performed freight forwarding services for Sea-Land because in fact ITL has never performed freight forwarding services for shipments involving Sea-Land. Mr. Oh explained that ITL used its check deposit stamp on the Sea-Land compensation checks when presenting them for deposit in its financial institution; however, there was nothing on the reverse of the check from Sea-Land that Mr. Oh could remember that indicated that ITL performed freight forwarding services for the Sea-Land shipments. BOE Ex. 13, Attachment at 2-3.

FF290. Even though Sea-Land knew that FMC forwarder license numbers rarely were added by forwarders to Sea-Land's certification form and that forwarders rarely signed the form, Sea-Land never deviated from its practice of placing this form on the back of its checks for the payment of forwarder compensation. Sea-Land thereby failed to obtain properly completed certification forms from ITL for shipments between January 1, 1996 and December 31, 1997. SL Ex. 2, ¶ 14E; and BOE Ex. 2, ¶ 17.

FF291. ITL's check deposit stamp stated, "PAY TO THE ORDER OF CALIFORNIA CENTER BANK GARDENA, CA 90247 122041235 FOR DEPOSIT ONLY INTER TRADE LINER SHIPPING." BOE Ex. 2, ¶¶ 9 and 14 and Attachment C.

FF292. During 1996 and 1997, Sea-Land paid freight forwarder compensation to ITL which failed to perform the requisite services necessary for the payment of forwarder compensation. BOE Ex. 2, ¶ 23; Oh Tr. 36 ln8 - 40 ln24; BOE Ex. 13 - Attachment; Tiao Tr. 199 ln12 - 16; and Tam Tr. 85 ln24 - 86 ln8.

FF293. After the Commission's Order of Investigation was issued, Sea-Land sent a letter dated May 6, 1998, to ITL in which Sea-Land demanded that ITL return the issue freight forwarder compensation to Sea-Land. Sea-Land never secured the return of freight forwarder compensation paid to ITL. CO Ex. 30; Oh Tr. 46 ln13 - 49 ln3; Carey Tr. 578 ln13 - 579 ln1.

FF294. Sea-Land's letter dated May 6, 1998 to ITL stated: "If Sea-Land does not receive payment in full within 10 days of the date of this letter, Sea-Land will commence legal action against ITL Shipping." CO Ex. 30. The record does not show that Sea-Land ever pursued any legal action for the return of forwarder compensation paid to ITL. BOE Ex. 13 - Attachment at 4; Oh Tr. 49 ln4 - 52 ln1; Oh Tr. 93 ln16 - 94 ln1; and CO Ex. 36.

FF295. According to ITL, no one from Sea-Land had otherwise contacted ITL to seek return of the forwarder compensation. Oh Tr. 46 ln3 - 49 lnb3; Carey Tr. 716 ln6 - ln23.

Payment of Forwarder Compensation to General Air Freight Consolidators, Inc.

FF296. General Air Freight Consolidators, Inc. ("General Air" or "GAF"), whose owner was Simon Wu, began in 1985 and received its ocean freight forwarder's license No. 3375 on July 26, 1990. FMC records indicate its address as 1031 W. Manchester Blvd., Suite A, Inglewood, CA. BOE Ex. 2, ¶¶ 17 and 25; Wu Tr. 106 ln10 - 25.

FF297. However, Sea-Land's data base showed the address of General Air as 125½ Marengo Avenue, Alhambra, CA. SL Ex. 2, ¶ 17.

FF298. General Ocean Freight Container Lines Inc. ("General Ocean"), whose owner was also Simon Wu, began in 1986 as an NVOCC whose address was the same as that of the forwarder GAF, namely, 1031 W. Manchester Blvd., Suite A (and later Building No. 8), Inglewood, CA. SL Ex. 2, ¶ 17; BOE Ex. 2, ¶ 25; WU Tr. 95 ln18 - 20; Tr. 101 ln7 - l03 ln18. General Ocean Freight was an NVOCC that shipped with Sea-Land from time to time. SL Ex. 2, ¶ 17. The actual address of both General Air and General Ocean in Inglewood was the same. Wu Tr. 102 ln23 - ln103 - ln2.

FF299. The address, 125½ Marengo Avenue, Alhambra, CA (which Sea-Land's data base showed as the address of General Air-FF297), actually was the address of the old residence of Simon Wu. He never operated General Air out of that residential location. Wu Tr. 105 ln12 - 106 ln9. However, the Sea-Land compensation checks to General Air list the address on the checks as, and the checks were sent to, 125½ Marengo Ave., Alhambra, rather than1031 W. Manchester Blvd., Suite A, Inglewood. BOE Ex. 2 - Attachments 1 - 10.

FF300. Since 1990, when it received its ocean freight forwarder license No. 3375, General Air has also been authorized to operate under the trade name of General Ocean Freight Container Lines ("GOC") (as distinguished from the NVOCC General Ocean whose name ends with "Inc.") BOE Ex. 2, ¶ 27.

FF301. Simon Wu was the president of General Air and General Ocean. Wu Tr. 102 ln20 - 22.

FF302. General Air was the ocean freight forwarder and General Ocean was the NVOCC shipper. Wu Tr. 106 ln10 - 107 ln9.

FF303. Simon Wu owned all the stock in General Air and General Ocean. Wu Tr. 107 ln10 - 13.

FF304. During the period at issue, 1996 and 1997, Mr. Wu was the President and owned all the stock in both companies (General Air, the ocean freight forwarder, and General Ocean, the NVOCC). Wu Tr. 99 ln18 - ln19, 101 ln3 - ln5, 102 ln20 - ln22, 107 ln10 - ln13, 108 ln - ln10.

FF304A. During 1997 Sea-Land paid freight forwarder compensation to the ocean freight forwarder, General Air, on 170 shipments (shown by "Remittance Advices," BOE Ex. 2, ¶ 44) of the other company owned by Mr. Wu, the affiliated shipper (NVOCC) General Ocean. The record contains documentary evidence as to 25 such shipments. BOE Ex. 2, ¶¶ 42, 44; BOE Ex. 5, ¶ 5; CO Ex. 3; Wu Tr. 107 ln10 - 108 ln2; SL Ex. 2, ¶ 17.

FF305. For the shipments by General Ocean, the NVOCC, where Sea-Land paid freight forwarder compensation to General Air, FMC License No. 3375 was shown on the Sea-Land bills of lading, but the name of the forwarder never appeared on the bills of lading as either General Air or doing business under the trade name of General Ocean Freight Container Lines ("GOC"). Some of the Sea-Land bills of lading showed the same address for the forwarder (identified on the bills of lading as GOC), viz.-1031 W. Manchester Blvd., Suite A or (Building 8), Inglewood, CA. BOE Ex. 2, ¶¶ 28, 36; Wu Tr. 95 ln18 - 20; Wu Tr. 106 ln3 - 6; Wu Tr. 102 ln23 - 25; Wu Tr. 101 ln7 - 103 ln18.

FF305A. In order for Sea-Land to pay forwarder compensation to GOC (the designation on some of the bills of lading as the trade name of the forwarder) Sea-Land's data base would have identified FMC license No. 3375 as belonging to GOC, located at the shipper-NVOCC's address since Sea-Land's data base showed the name of the forwarder, the FMC license member and the forwarder's address. SL Ex. 2, ¶¶ 14 and 14D.

FF305B. According to Simon Wu, the forwarder General Air's address was the same as the shipper NVOCC General Ocean's address, but Simon Wu never operated as a forwarder out of his home. Wu Tr. 101 ln7 - 103 ln18; and Wu Tr. 105 ln9 - 107 ln9. Mr. Wu explained that during a period of business downturn he tried to operate out of his home but he never actually closed the office at 1831 W. Manchester Blvd. in Alhambra, but just moved from Suite A to Building 8. Wu Tr. 105 ln12 - 107 ln13; Wu Tr. 159 ln7 - 20.

FF306.   In paying freight forwarder compensation to the forwarder General Air, Sea-Land's data base would have identified FMC License No. 3375 as belonging to the forwarder General Air, located at Mr. Wu's residential address, 125½ Marengo Avenue Alhambra, CA. SL Ex. 2, ¶ 17.

FF307. Sea-Land's database identified two addresses for FMC License No. 3375: the address of the NVOCC shipper General Ocean and the residential address of the NVOCC shipper's president. BOE Ex. 2, ¶¶ 31-38. For certain of the issue shipments Sea-Land's bills of lading listed the residential address of the forwarder General Air, BOE Ex. 2, ¶ 28; CO Ex. 3; and Wu Tr. 106 ln9 - 107 ln9, as did certain of the compensation checks. BOE 2 Attachment H1 - H10.

FF308. According to Simon Wu, Sea-Land's sales representative understood that General Air, the forwarder, and General Ocean, the NVO-shipper, were affiliated companies. Wu Tr. 171 ln4 - ln23.

FF309. For 170 shipments during 1997, Sea-Land paid freight forwarder compensation to General Air which failed to perform the requisite services necessary for the payment of forwarder compensation. BOE Ex. 2, ¶¶ 31, 32, 33, 34, 44.

FF310. According to Mr. Wu, his forwarding company, General Air, did not prepare and process the ocean bill of lading, dock receipt, or other similar document with respect to the shipments. It just did the bookings. BOE Ex. 2, ¶¶ 31-34 and Wu Tr. 159 ln17 - 160 ln25; Tr. 161 ln10 - 169 ln3.

FF311. Sea-Land's records show that this forwarder, General Air, did not contact Sea-Land for the preparation and processing of the ocean bill of lading, dock receipt, or other similar document for shipments during 1977. BOE Ex. 2, ¶¶ 31-34.

FF311A. In Mr. Wu's location at Alhambra he had two companies, one the ocean freight forwarder, General Air, and the other company the shipper-NVOCC, General Ocean. His employees worked for both companies, sharing space and duties. An employee at either company made the bookings with the ocean carrier. Wu Tr. 162 ln9 - 165 ln21.

FF312. While General Air, the forwarder, was uncertain whether it engaged, booked secured or contracted directly with Sea-Land or its agent for space aboard a vessel or confirmed the availability of that space for shipments of General Ocean during 1997, Sea-Land's records for that period show that the shipper, General Ocean, rather than General Air, the forwarder, contacted Sea-Land to engage, book, secure or contract directly with Sea-Land or its agent for space aboard a vessel or confirm the availability of that space for those shipments of General Ocean. Wu Tr. 161 ln1 - 165 ln23; and BOE Ex. 2, ¶¶ 31-34.

FF313. Sea-Land personnel had reason to believe that General Air did not perform the requisite services necessary for the payment of forwarder compensation before Sea-Land paid it the forwarder compensation. Carey Tr. 731 ln14 - 732 ln6; BOE Ex. 2, ¶¶ 31-34.

FF314. For 170 of these General Ocean forwarder shipments during 1997, where Sea-Land paid freight forwarder compensation to General Air, Sea-Land did not obtain certifications devised and prepared by General Air. BOE Ex. 2, ¶¶ 37-38; Wu Tr. 173 ln22 - 174 ln8.

FF315. Mr. Wu's ocean freight forwarder, General Air, deposited the Sea-Land compensation checks; however, it never performed freight forwarding services in regard to any of the shipments handled by Sea-Land, and never sent Sea-Land Ocean Air's own certification form. Wu Tr. 168 ln12 - 169 ln12, 173 ln17 - 174 ln8.

FF 317. The freight forwarder, General Air, did not write a signature or insert its license No. 3375 on Sea-Land's certification form or on the back of the compensation checks. BOE Ex. 2, ¶ 37, Attachments H1 - H10.

FF319. The Sea-Land compensation checks for the General Ocean shipments were negotiated after being stamped with General Air-payee's bank deposit stamps. BOE Ex. 2, ¶ 37 and CO Ex. 9.

FF320. For the General Ocean shipments where Sea-Land paid freight forwarder compensation, the check deposit stamps stated the name of either the forwarder or the NVO-shipper, i.e., either, "FOR DEPOSIT ONLY GENERAL AIR FREIGHT CONSOLIDATORS, INC." or "FOR DEPOSIT ONLY GENERAL OCEAN FREIGHT CONTAINER LINES." Wu Tr. 156 ln23 - 159 ln16; BOE Ex. 2, at Attachments H-1 to H-10, and CO Ex. 9.

FF321. Sea-Land identified a Sea-Land certification form printed on the reverse of a freight forwarder compensation check which showed the check deposit stamp of the NVOCC shipper, General Ocean. Carey Tr. 624 ln5 - 628 ln6 and CO Ex. 9.

FF322. Since Sea-Land believed that license numbers would rarely be added by forwarders to Sea-Land's certification form and that forwarders would rarely sign the form, Sea-Land printed language (shown in FF283) on the reverse of its checks for the payment of forwarder compensation. Sea-Land thereby obtained certification forms which lacked the license number and the signature but were endorsed on the certification form upon the reverse side of the compensation checks for 170 shipments during 1997. SE Ex. 2, ¶ 14E and BOE Ex. 2, ¶ 37.

SL1. At all times relevant to this investigation, respondent Sea-Land was a member of the Transpacific Westbound Rate Agreement ("TWRA") and was therefore legally authorized to apply equipment substitution under rule 2 G5 of the TWRA rules tariff. SL Ex. 1, ¶ 2.

SL2. Rule 2 G5 of the governing tariff, of which official notice has been taken (see Appendix C), provided in pertinent part:

A 40' container may be substituted for a 20' container, subject to maximums of 25 CBM and 18 KT, at the rate and charges applicable to a 20' container . . . a 45' container may be substituted for a 40' container, subject to a maximum of 65 CBM and 21 KT, at the rate and charges applicable to a 40' container.

SL3. During the period involved in this investigation, equipment substitution was used by Sea-Land for numerous considerations, including the following.

SL4. Sea-Land reduced its fleet of 20' containers significantly starting in 1996 for economic reasons. Shippers of heavy cargoes such as borax, pet food, and aluminum required 20' containers. Wing Tr. 164 ln11 - 165 ln11, 191 ln13 - ln20, 192 ln1 - ln13. As a marketing decision, Sea-Land Sales reserved the available inventory of 20' containers weekly for Sea-Land customers who actually needed such equipment, e.g., dense, heavy cargoes requiring a smaller 20' container. Wing Tr. 230 ln9 - 231 ln8, 234 ln14 - 235 ln4, 236 ln4 - ln25, 323 ln1 - ln18. At that time, Sea-Land Operations was repositioning empty 20' boxes on ships departing for Asia. The typical vessel profile would be half westbound loads and half empties. Ohle Tr. 388 ln9 - 397 ln20 - ln24. "Lots of times we said we moved more air than we did freight to get them back to Asia to generate the next load." Sea-Land did not reserve any 20' containers for FAK shippers but rather gave them to customers who shipped hefty cargo and had to use two containers. Wing Tr. 235 ln23 - 236 ln9, 166 ln7 - 167 ln3. Any shortages of 20' equipment experienced in Long Beach were not of sufficient volume to explain Sea-Land's widespread application of equipment substitution on shipments by Sea-Land's NVO customers. The manager of port operations for Sea-Land at Long beach testified: "I do not remember enough occurrences of no 20-foot equipment [being] available to cause hundreds or thousands of substitutions for NVO customers." Ohle Tr. 355 ln15 - ln25, 372 ln11 - ln18.

SL5. During the tail end of 1995 and in 1996, cargo volumes in the westbound Transpacific trade, which used 20' containers, were very strong, resulting in shortages of 20-foot equipment at U.S. west coast ports, particularly in the Pacific Northwest. Wing Tr. 164 ln11 - 166 ln6.

SL6. Even in a strong westbound market, import cargo in the eastbound Transpacific, primarily a 40' trade, far exceeded export westbound cargo. This meant that Sea-Land needed to reposition as many 40' and 45' containers to Asia as possible, which was a strong incentive for Sea-Land to substitute 40' containers for 20' containers in the westbound export trade. In addition, 40' and 45' containers are not routinely used to move with cargo in the export trade because the export trade involves heavier commodities such as foodstuffs and raw materials which move in 20-foot containers. The transpacific shipping trades have been chronically imbalanced, with imports exceeding exports. The imbalance meant that containers often had to be repositioned to Asia empty to handle the high volume of import cargo. SL Ex. 1, ¶¶ 2 and 3; SL Ex. 4, ¶ 3. As supervisor of the Long Beach terminal responsible for dispatch of containers and chassis, Ohle Tr. 348 ln24 - 349 ln14, Mr. Ohle stated that operational reasons, i.e., the need of Sea-Land's Operations Department to substitute larger equipment to address occasional shortages of smaller size containers, was the only known basis upon which a customer should be provided equipment substitution. Normal equipment substitution was for the convenience of the carrier. Equipment substitution is not for shipper convenience, it is for carrier convenience. Ohle Tr. 392 ln23 - 393 ln4. See also Wing Tr. 162 ln22 - 163 ln25, 164 ln11-20; Smith Tr. 77 ln1 - 21. Mr. Ohle testified that Long Beach Operations Department "in no way, shape or form" had an operational role in those abuses of equipment substitution at issue here. Ohle Tr. 372 ln11 - 18. See also Ohle Tr. 355 ln15 - 25, 364 ln13 - 21, 397 ln25 - 298 ln25.

Due to concerns about pending Neutral Body investigations of Sea-Land and internal rumors about misuse of equipment substitution for improper marketing purposes, Ohle Tr. 363 ln6 - 20, 370 ln11 - 371 ln5, Mr. Ohle's supervisor issued instructions in early 1997 that the Operations Department implement equipment substitution only for valid operational reasons. "Make sure that no one . . . was initiating any type of container substitution." Ohle Tr. 371 ln25 - 372 ln10. All other inquiries were to be referred back to the Sea-Land office originating the request, which Mr. Ohle identified as being Sea-Land Sales. Ohle Tr. 371 ln25 - 372 ln5. See also BOE FF ¶¶ 125, 126, 129, 136.

SL7. Equipment substitution often had to be used for NVOCCs because they had a tendency to tender their loads of consolidated cargo at the last minute, after Sea-Land had dispatched all its 20' containers. Wing Tr. 193 ln21 - 195 ln1; Ohle Tr. 395 ln11 - 395 ln7.

SL8. While 20' and 40' container rates were declining during the period in question, Sea-Land sought revenue produced by 40' boxes for FAK shipments, Wing Tr. 175 ln14 - 15.

SL19. Bills of lading and other shipping documents were prepared at Sea-Land's documentation center located in Dallas, TX for inbound and outbound shipments in all the trades in which Sea-Land operated to and from North America. SL Ex. 2, ¶¶ 2-3.

SL20. The Dallas documentation center prepared documentation for approximately 8,000 to 10,000 shipments a week. SL Ex. 2, ¶ 3.

SL21. Sea-Land also had a rate audit department located in the Dallas documentation center. The rate audit department was responsible to resolve rating questions or complaints from customers and to oversee the work of the documentation department. Ms. Donna Smith, who was a supervisor in the rate audit department during the period at issue in this case, presented a written statement and was subjected to cross-examination. SL Ex. 2, ¶ 1.

SL22. Sea-Land prepared its bills of lading for the disputed shipments based on instructions received from its customers. Carey Tr. 698.

SL26. Sea-Land did not load the cargo into the containers for the shipments at issue. They were loaded by the NVOCC shippers at their places of business, sealed, and presented to Sea-Land. SL Ex. 1, ¶ 4. Sea-Land could not break the seal or open the container except under extraordinary circumstances not present here. SL Ex. 1, ¶ 4.

SL28. From May 16, 1996 until March 2, 1998, Global Links Express accounted for 79 shipments, while World Pacific Container (USA) accounted for 31 of the shipments at issue. BOE Ex. 14, attachments.

SL29. Two other NVOCCs, Pan Pacific Express and Supertrans International, accounted for 15 and 11 of the allegedly misrated shipments, respectively, while three other NVOCCs accounted for less than 10 each-Brennan International (4), General Ocean (3), and Morrison Maritime (6). BOE Ex. 14, attachments.

SL30. BOE presented the testimony of two other NVOCCs, Jasper Freight, Inc. and Pagoda Express Inc., who claimed they had misdeclared equipment substitution shipments to Sea-Land However, BOE did not present any evidence of specific misrated shipments by either of these NVOCCs. BOE Ex. Nos. 7 and 8.

SL33. The record shows that the testimonial evidence submitted by BOE falls into three main categories-NVOCC and forwarder witnesses, BOE investigators and rate analyst, and impeachment witness Richard Favor.

SL35. The record also shows that the NVOCCs' statements were written by BOE's investigators, Mr. Carey and Mr. Clark, after conversations with the witnesses, or by the witnesses' counsel, and the witnesses were subsequently cross-examined.

SL36. BOE's NVOCC witnesses testified under oath that Mr. Rich Favor told them how to falsify the documents and thereby obtain larger containers at rates for smaller containers and that they had knowingly submitted false information to Sea-Land and other carriers in order to obtain more favorable rates or to meet perceived competition from other NVOCCs who were doing the same thing. BOE Exs. 3-12; Sehwani Tr. 81-2; Wu Tr. 146-7; Wei Tr. 140; BOE Ex. 1, ¶¶ 6, 7, 8, 18, 27, 28, 48, 57, 60, 63, 69, 70, 72, 77. Mr. Tiao admitted that he knowingly gave carriers false information in order to make more profit, following the advice of Sea-Land how to do it. Tiao Tr. 171 ln20 - 25.

SL40. BOE's investigator observed that the NVOCC witnesses he interviewed typically tried to blame someone other than themselves for their misuse of equipment substitution. Carey Tr. 475.

SL42. Mr. Lee of Morrison Maritime, in response to a question, "Q. So is it fair to say that when you executed this statement, your belief from your conversations with Mr. Clark was that neither you nor Morrison were going to be penalized for these activities?," answered, "Yes, uh-huh. He told me that." C_Lee Tr. 42 ln15 - 19. The witnesses for the other NVOs stated to the contrary, viz.-that they had not been promised immunity by the FMC investigators. Wu Tr. 96 ln9 - 15; Sehwani Tr. 5, ln14 - 23; Wei Tr. 106 ln1 - 107 ln22; Tse Tr. 6 ln6 - 22; Chang Tr. 8 ln2 - 7, 35 ln1 - 3, 46 ln5 - 17; Chao Tr. 67 ln13 - 18, 93 ln18 - 94 ln7; D_Lee Tr. 97 ln8 - 98 ln22; Tam Tr. 5 ln5 - 22; Tiao Tr. 136 ln18 - 137 ln2.

SL43. Although they have admitted under oath that they knowingly misdeclared information to Sea-Land and other carriers for the purpose of obtaining a lower rate than would be applicable under the tariff, none of the NVOCCs has yet been penalized by the FMC or yet been given notice of a penalty or other proceeding for a violation of the Shipping Act while the present proceeding is pending. However, they have been advised of their potential liability. See BOE FF 57. Tiao Tr. 165-6; Tse Tr. 93-4; D_Lee Tr. 127; Sehwani Tr. 66; Wu Tr. 129; Wei Tr. 126.

SL44. The BOE investigators-Messrs. Clark, Carey and Gravitt-were not direct participants in the events involved in this investigation. Their testimony related to what they were told by the direct witnesses or, in the case of Mr. Gravitt, relating to what he learned from reviewing documents. Mr. Gravitt, who rerated shipments on behalf of BOE, had no contact with any NVOCC personnel in the course of his analysis. Gravitt Tr. 909 ln13 - 19.

SL45. Witness Tse of Global Links acknowledged that he was familiar with and at times personally prepared Global's shipment documentation. Tse Tr. 26 ln6 - 27 ln4, 70 ln16 - 71 ln7. BOE's other NVO witnesses also acknowledged that they were familiar with and at times personally prepared shipment documentation, and thus were competent to testify as to the NVO's malpractices involving Sea-Land. See Chang Tr. 21 ln18 - 23; D_Lee Tr. 110 ln17 - 21, 178 ln11 - 20; Tiao Tr. 143 ln22 - 144 ln13, 162 ln20 - 163 ln16, 223 ln7 - 14; Tam Tr. 85 ln21 - 23, 109 ln21 - 112 ln3; Chao Tr. 80 ln20 - 81 ln12; Sehwani Tr. 33 ln2 - 7, 53 ln16 - 54 ln21; Wei Tr. 114 ln17 - 116 ln9; C_Lee Tr. 72 ln12 - 73 ln20.

SL49. Mr. Carey destroyed a statement that he had prepared for Mr. Knowles of Direct Container Line when Mr. Knowles refused to sign it. Carey Tr. 542.

SL50. Mr. Favor was called by BOE in the December 2000 hearing in Long Beach purportedly to impeach the testimony of Mr. Spargo. He also testified in March 2001. Mr. Favor was a salesman in Sea-Land's Long Beach organization from early 1996 until May 1997, when he left the company.

SL51. In his impeachment testimony, Mr. Favor testified that he was approached by certain NVOCCs, beginning with Pan Pacific, who demanded that they be given the same equipment substitution program offered by other carriers. Favor I Tr. 204. Mr. Favor testified that he passed their requests on to his supervisors, Mr. Spargo and Mr. Wing, who allegedly authorized abuse of equipment substitution. Favor I Tr. 204 ln24 - 205 ln2.

SL52. Mr. Clark asserted that Mr. Favor knew that particular NVOs were involved in equipment substitution abuses during his employment at Sea-Land. BOE Ex. 1, ¶ 72. See also CO Ex. 37, ¶ 3; Favor I Tr. 192 ln18 - 193 ln14; Favor III Tr. 52 ln23 - 53 ln18. Mr. Favor later repeated his assertions in a telephone interview with Mr. Clark and Mr. Carey. BOE Ex. 1, ¶ 74. On cross-examination by Sea-Land, Mr. Favor asserted that he had informed Mr. Clark that Mr. David Wing knew of, and had participated in authorizing, equipment substitution practices on behalf of Pan Pacific. Favor I Tr. 301 ln10 - 12.

SL53. In a sworn deposition in July 1998, Mr. Favor stated that he suspected World Pacific may have been misdeclaring FAK shipments in some respects. However, he denied having any knowledge or suspicion of equipment substitution irregularities by any other NVOCC. SL Ex. 3, pp. 69-71. Mr. Favor testified that he did not believe Mr. Spargo was aware of any misdeclaration of equipment substitution shipments. SL Ex. 3, p. 84. Mr. Favor, who was subsequently subpoenaed by BOE, appeared at the hearing on December 12, 2000, at which time he recanted much of his deposition testimony. See BOE FF 59. Favor I Tr. 199 ln17 - 200 ln10. Mr. Favor was then cross-examined by Sea-Land over two days, December 12-13, 2000, and was recalled by Sea-Land for further testimony on March 20, 2001. Favor I Tr. 191 ln13 - 306 ln15; Favor II Tr. 4 ln5 - 222 ln20; Favor III Tr. 5 ln1 - 145 ln6. Mr. Favor testified affirmatively of his own involvement and the involvement of others at Sea-Land in equipment substitution abuses. Favor I Tr. 199 ln17 - 200 ln10; CO Ex. 37.

SL54. Mr. Favor was clear and explicit in impeaching his deposition testimony, Favor I Tr. 200 ln8 - 10, Favor II Tr. 40 ln8 - 42 ln20, 49 ln12 - 22, 55 ln22 - 18, 58 ln13 - 19, 60 ln13-14, 60 ln21 - 63 ln12, 88 ln4 - 6, 216 ln5 - 15; in accepting responsibility for his prior lack of candor, Favor I Tr. 234 ln13 - 235 ln4, Favor II Tr. 88 ln22 - 89 ln3, 156 ln14 - 22; and in explaining the basis for giving such prior inaccurate testimony. Favor I Tr. 197 ln3 - 198 ln1, 198 ln9 - 200 ln7, 243 ln10 - 12, 254 ln14 - 255 ln5, 281 ln2 - 285 ln4; Favor II Tr. 39 ln11 - 23, 215 ln8 - 22. Sea-Land's witness Scott Hagan admitted speaking with Mr. Favor prior to his deposition, Hagan Tr. 31 ln2 - 13; but has denied tampering with any witness. SL Ex. 38, ¶ 2.

SL55. Sea-Land contends that Mr. Favor had two motives to seek to provide testimony unfavorable to his supervisors at Sea-Land in his most recent testimony; that, first, Mr. Spargo had refused his request for a raise shortly before he left Sea-Land, and in fact advised him that he was to be placed on a performance improvement program" for poor performance. SL Ex. 5, ¶ 7. Second, Mr. Favor believed that Mr. David Wing, and possibly other Sea-Land personnel, had recently spread unflattering rumors about his personal life. Favor III Tr. 65-6. However, the record shows to the contrary that Mr. Favor's immediate superior, David Wing, testified that he gave a favorable performance review to Rich Favor for calendar year 1996, as well as recommending that a bonus be awarded to Mr. Favor. Wing Tr. 213 ln11 - 214 ln3, 216 ln18 - 269 ln21, 270 ln12 - 15. Mr. Wing's supervisor Mr. Spargo did not overrule that appraisal. Wing Tr. 216 ln21 - 217 ln3, 270 ln16 - 271 ln1. Mr. Wing did not recommend a "performance improvement plan" be imposed for poor job performance by Rich Favor. Wing Tr. 216 ln16 - 19. Mr. Wing denied participating in any meeting wherein Mr. Spargo informed Rich Favor about imposing a performance improvement plan for Mr. Favor. Wing Tr. 218 ln5 - 11. Mr. Wing denied that Glenn Spargo had even spoken to him about the work performance of Mr. Favor. Wing Tr. 300 ln12 - 10.

SL56. In support of its allegations that Sea-Land incorrectly rated 149 shipments, BOE has submitted NVOCC bills of lading. NVOCC container manifests, packing lists, and dock receipts, which were obtained by BOE's investigators from the files of the NVOCCs. BOE Ex. 1, ¶ 168; BOE Ex. 14, ¶¶ 1 and 2; Gravitt Tr. 786 ln23 - 787 ln6.

SL57. BOE obtained from the NVOCC shippers other backup documentation that was not included in Mr. Gravitt's attachments. BOE provided to Sea-Land all shipping documentation used in Mr. Clark's review. See, e.g., CO Ex. 4-8, 14-23, 25 and 37; Clark Tr. 9 ln18 - 12 ln18.

SL58. The internal NVOCC documents submitted in support of BOE's case often overstated the weight of a shipment. For example, Brennan International's tariff specified that cargo would be rated on a weight/measurement basis whichever produced the greater revenue. Sehwani Tr. 44 ln19 - 45 ln7, 45 ln23 - 46 ln15. Brennan's cargo moved on volume, the size of the freight rather than the weight governing the rate. Brennan did not actually weigh the cargo that came into the warehouse. Weights were taken from the freight forwarder's or shipper's instructions of how much the cargo weighed. Sehwani Tr. 29 ln11 - 20. Brennan was very selective on the cargo it accepted. Since its rates depended on volume the fluffier the freight the better. Brennan tried to avoid the dense cargo. Brennan preferred shipments of feathers to bricks. Sehwani Tr. 45 ln14 - 21.

SL59. During 1996 - 1997, Supertrans used Imperial CFS as a third-party subcontractor to consolidate cargo in containers. D_Lee Tr. 112 ln4 - 15, 159 ln6 - 9, 141 ln19 - 23. Although the ocean rates were the same, Supertrans was using American President Lines ("APL") to Taiwan because its service consisting of unloading the ocean freight and trucking it to northern Taiwan within 48 hours was superior to Sea-Land's transit time. Id. Tr. 120 ln8 - 19. Then Mr. Favor offered equipment substitution rates where Supertrans could use 40-foot containers and pay rates for 20-foot containers as long as the documentation showed that the cargo was within the limits for a 20-foot container. Id. Tr. 120 ln25 - 121 ln3. Mr. Lee, President of Supertrans, thought that if Sea-Land was willing to accept such freight that was the shipping lines' business, and if Sea-Land had no objection to whatever measurement or weight Supertrans reported, then it must be "okay." Id. Tr. 121 ln13 - 123 ln1. After Sea-Land terminated the equipment substitution arrangement, Supertrans resumed service with APL. Id. Tr. 123 ln20 - 124 ln23. Supertrans' practice was to require use of correct weight or measure whenever a shipper furnished a packing list which sought to underdeclare. D_Lee Tr. 172 ln9 - 173 - ln8. This was the practice followed "99 percent" of the time. D_Lee Tr. 173 ln9 - 14. Supertrans employed a third-party warehouse in order to avoid disputes with shippers about the correct weight or cubic measurements. D_Lee Tr. 158 ln13 - 159 ln9.

SL60. Documentation as to weight and cube for shipments when the NVOCCs charged their customers a per container basis was irrelevant because neither the weight nor the cube entered into the rate computation when it was on a per contract basis regardless of the weight or the cube of the cargo. Tse Tr. 103 ln7 - 104 ln8; Tr. 107 ln21 - 108 ln8.

SL61. The NVOCCs sometimes split up cargo into different containers if it would not fit into a single container. Thus, documentation showing what was received from a shipper would not necessarily indicate the weight or measurement of the cargo in a particular container loaded and tendered to Sea-Land, but it could provide other information such as the number of cartons and pallets in the container. The cubic meters of the cargo in the container could be determined from the dock receipt which was in the shipment jacket. Tse Tr. 113 ln4 - 10, 121 ln 4 - 25; Tse Tr. 121; Tam Tr. 120.

SL62. The NVOCCs in this investigation made clerical and other errors in their documentation, but they did not affect the accuracy of the actual charges to be applied. D_Lee Tr. 162 ln2 - 11. D_Lee Tr. 162 ln2 - 11. For example, they sometimes included incorrect voyage numbers, Tse Tr. 70, or incorrect booking numbers, Tse Tr. 78-9. On one Supertrans house bill of lading, for Gravitt shipment no. 48, the measure was shown as 160.63 cbm instead of 16.63 cbm, as shown on the house bill of lading copy and on a dock receipt. It is not unusual for Supertrans documentation to contain typing mistakes or transposed numbers, because of the extensive amount of documentation contained in those documents. D_Lee Tr. 163, 169-70.

SL63. Sea-Land presented five witnesses: Mr. Christopher J. Dianora, Director of Pricing, Agreements, and Regulatory Affairs; Ms. Donna Smith, Rate Audit Supervisor; Mr. Scott Hagan, Westbound Trade Lane Manager; Mr. Glenn Spargo, General Manager for the Western Region, and Mr. David Wing, General Sales Manager. Sea-Land also submitted the deposition transcript of Richard Favor.

SL64. In addition, Sea-Land presented, from its electronic imaging system, additional shipping documentation with respect to 149 shipments involved in the investigation. SL Ex. 2, attachments. In particular, Sea-Land provided numerous Shipper's Export Declarations ("SEDs") that had been submitted with respect to the disputed shipments.

SL66. As to Sea-Land's witnesses' stake in this matter, Mr. Spargo retired from Sea-Land in 1998 and receives a pension from Sea-Land. SL Ex. 5, ¶ 1; Spargo I Tr. 27 ln12 - 28 ln13. Mr. Hagan left Sea-Land in December 1999 and now works in the electronics industry in Atlanta, GA. Hagan Tr. 4, ln15 - 18. Mr. Wing left Sea-Land in October of 1998 and currently works for an NVOCC in Seattle. Wing Tr. 157. Ms. Smith left the company in December 2000. Smith Tr. 7, ln7 - 22.

SL68. Sea-Land's documentation department obtained SEDs on many of the equipment substitution shipments examined by Mr. Gravitt. SL Ex. 2, ¶ 6 and Att. A; CO Ex. 39, ¶ 6; Tam Tr. 116.

SL69. SEDs are provided to the United States government, and providing false information exposes the filer to possible civil and criminal penalties. The SED form includes the following declaration:

I certify that all statements made and all information contained herein are true and correct and that I have read and understand the instructions for preparation of this document, set forth in the "Correct Way to Fill Out the Shipper's Export Declaration." I understand that civil and criminal penalties, including forfeiture and sale, may be imposed for making false or fraudulent statements herein, failing to provide the requested information or for violation of U.S. laws on exportation (13 U.S.C. Sec. 305; 22 U.S.C. Sec. 401; 18 U.S.C. Sec. 1001; 50 U.S.C. App. 2410).

SL70. Mr. Tse of Global Links testified that while he may have directed his documentation people to falsify bill of lading instruction information, he never directed his documentation people to falsify information on SEDs submitted to Sea-Land. Tse Tr. 28. Mr. Tse was aware that there were potential penalties for falsifying SEDs. Tse Tr. 28 ln10 - 20. The record shows some of Global Links' practices in regard to SEDs. For example, Mr. Tse testified, on a mixed commodity shipment on cross-examination, that he wrote "NO SED REQ. VALUE under $2500 for incorporation" on the shipping documentation. CO Ex. 16, p. 4 (Gravitt No. 25); Tse Tr. 70 ln16 - 71 ln7. Mr. Tse was further interrogated as to a commercial invoice pertaining to the cargo in the shipment. Tse Tr. 72 ln6 - 16. The invoice (of An Sheng Intl. 7/17/97) established the value of the goods, for shippers' export purposes, as $140,000. CO Ex. 16, page 6. (Sea-Land furnished bill of lading instructions but neither an SED nor a packing list for this shipment.) (Tangentially, Mr. Tse explained that this shipment was part of "triangle trade" or "triangle business" and the names and entities described on the documentation were to make it so that the consignee in Hong Kong did not know who the seller was in the U.S. because if he or she did the companies would buy directly from the supplier.) Tse Tr. 72 ln23 - 74 ln11.

Similarly on another shipment, the SED prepared by the forwarding agent (shown on the SED as Baltrans) identifies "computers" with a value of $314,944. CO Ex. 22, page 9. The Sea-Land bill of lading reflects the annotation "No SED required," and identifies the commodity for subsequent rating by Sea-Land as "mixed commodities, toys NOS," for which Sea-Land applied equipment substitution rates. CO Ex. 22, page 1 (Gravitt No. 22).

In CO Ex. 17 (Gravitt No. 111), the shipping file reflects that World Pacific was in possession of a commercial invoice as to the goods contained in the NVO shipment, which established the value of the computer goods, for shipper's export purposes at $90,771. CO Ex. 17, page 15 (invoice of An Sheng Intl. Dated 9/29/97). The SED obtained by Sea-Land claims a value of $5,987 for unspecified "electrical equipment." CO Ex. 17, page 4 (Gravitt No. 111); Gravitt Tr. 1061 ln23 - 1062 ln13. The shipper and the consignee named on the SED (both Gannison Limited) likewise were at variance from those named in the commercial invoice (An Cheng International) or any other document in Global Links' file. Gravitt Tr. 1059 ln4 - 1063 ln13. BOE's experienced analyst expressly concluded that the SED could not be relied upon. Gravitt Tr. 1063 ln14 - 17; Gravitt Tr. 925 ln10 - 926 ln6.

In CO Ex 18, at page 19, the invoice (Oct. 2, 1997) contained within Global Links' shipment file established the value of the computer goods, for shipper's export purposes at $160,720. The SED obtained by Sea-Land claims a value of $5,298 for unspecified "electrical equipment." CO Ex. 18, page 4; Gravitt Ex. 64 (SED). Mr. Tse claimed he could not identify the person signing on behalf of Global Links, Tse Tr. 77 ln6 - 16, but acknowledged that Global Links likely prepared the SED, Tse Tr. 76 ln11 - 23. See also Gravitt Tr. 925 ln10 - 926 ln6. BOE's experienced analyst, Mr. Gravitt, determined that measurements shown on the warehouse dock receipts supported the determination that the shipment exceeded the cubic measurement limits for equipment substitution. Gravitt Tr. 921 ln7 - 922 ln4, 923 ln10 - 13, 1064 ln21 - 1066 ln23; CO 18, pages 8 and 10.

SL71. In regard to the correct weight and measure of the cargo represented by Sea-Land Bill of Lading No. SEAU 796502796, Mr. Tiao, the owner and president of World Pacific Container USA, Inc., testified on cross-examination that the correct weight and measure were shown on World Pacific's house bill of lading, not the SED. Tiao Tr. 138 ln14 - 16; Tr. 213 ln13 - 16; Tr. 222 ln9 - 16. Mr. Tiao testified that the house bill of lading was the only document which "followed" the commercial invoice and packing list for that cargo. Tiao Tr. 222 ln17 - 19. Mr. Tiao on further cross-examination testified that the weight and measure on the SED which differed from the house bill of lading but matched that on the Sea-Land bill of lading was incorrect. Tiao Tr. 222 ln20 - 223 ln6.

SL72. Mr. David Lee, president of Supertrans International, was cross-examined in regard to the weight and measure of the cargo described on Sea-Land bill of lading No. 767930435 (Gravitt's shipment No. 48). He testified that Supertrans paid a lot of attention to the SEDs. "Where normally we tell the customer, 'Hey, you have to give us the correct information, especially the schedule number and the description.'" D_Lee Tr. 153 ln21 - 24. He further testified that the Supertrans cargo manifest would be the document that he relied on to determine that the cubic measure of the foregoing shipment was 60.98 cbm. D_Lee Tr. 177 ln3 - 10.

SL73. Brennan witness Sehwani and Jasper Freight witness Wei both confirmed that the critical element for application of equipment substitution, the cubic measurement of the shipment, would not be found on their SEDs. Sehwani Tr. 26 ln22 - 27 ln2; Wei Tr. 147 ln3 - 9. Mr. Sehwani explained that the SEDs basically showed the weight, the description of the commodity and the schedule numbers. Sehwani Tr. 26 ln22 - 25. Instead, Brennan submitted an unfreighted manifest which contained falsified numbers as to cubic measurement, Sehwani Tr. 26 ln3 - 14; Brennan's load plan established the actual cubic measure of the shipment, Sehwani Tr. 25 ln13 - 21. Likewise, Jasper Freight had little occasion to misdeclare on the SED because the SED included "just the value for the package . . . [and] the number of packages." Wei Tr. 147 ln3 - 6. Mr. Wei testified that Jasper Freight's bill of lading instructions contained incorrect measurements, while the accurate measurements were reflected on Jasper's internal container manifest. Wei Tr. 145 ln10 - 146 ln3, 147 ln19 - 21.

SL74. Mr. Gravitt, the FMC rate analyst, on cross-examination stated when asked about the reliability of SEDs answered: "Sometimes they are wrong, but yes generally they can be reliable." When asked where he would rank the SEDs compared with the house bill of lading or container manifests, he answered "below." Gravitt Tr. 809 ln12 - 810 ln1. If the information on the Sea-Land bill of lading differed from that on the container manifest and the house bill of lading, Mr. Gravitt considered the house bill more reliable because the house bill is issued to the ultimate shipper of the cargo who knows what he tendered and the weight and measure of the commodity. The house bill would also be more reliable because the information on it is easily verifiable by the shipper. Gravitt Tr. 808 ln15 - 809 ln11; Tr. 810 ln3 - 11.

SL75. SEDs generally contain information on the nature of the cargo, the number of packages, and weight, but do not usually provide information as to the measure of the cargo. Smith Tr. 126 ln4 - 172 ln14. While Sea-Land urges that its documentation department used the description of the cargo, the weight and/or quantity information on the SED to verify the information on the bill of lading provided by the customer (NVO), citing Smith Tr. 127, the record shows that no Sea-Land employee of the documentation department testified; that Ms. Smith was an employee of the rate audit department which did not supervise the documentation department. Smith Tr. 8 ln1 - 3. Ms. Smith "didn't audit the documentation department." Smith Tr. 8 ln7 - 16. The record further shows that Sea-Land's documentation staff did not receive the SEDs from the NVO until more than two weeks after Sea-Land issued the bill of lading. CO Ex. 4; Gravitt Tr. 847 ln2 - 849 - ln2.

An NVO witness testified that Sea-Land could not have used the SED for verification purposes because that cargo had already sailed and the bill of lading had been issued by the time Sea-Land began asking for the SED. Tam Tr. 104 ln2 - 7. The witness acknowledged that Sea-Land's documentation practice was "unusual" for this Sea-Land bill of lading. Tam Tr. 105 ln2 - 14.

SL76. To qualify cargo for equipment substitution, Sea-Land had to determine that the cargo did not exceed the weight maximums nor the cubic measurement maximums specified under TWRA tariff rules. Smith Tr. 92 ln18 - 94 ln15. The NVO shippers acknowledged that they falsified packing lists and other shipping documentation, consistent with instructions received from Sea-Land sales representative Rich Favor and others. BOE Ex. 1, ¶¶ 65, 70; BOE Ex. 12, at 1; BOE Ex. 11, ¶ 5; C_Lee Tr. 73 ln24 - 74 ln11; Sehwani Tr. 89 ln6 - ln14; Chang Tr. 30 ln10 - 31 ln1.

SL77. For FAK shipments, Sea-Land submitted SEDs in fewer than two-thirds of the shipments, including shipments where SEDs accounted for less than the complete container. SL Ex. 2, Att. A. Sea-Land furnished cubic measurements of the entire cargo with respect to only five of the 149 issue shipments. Smith r. 102 ln10 - 103 ln4; SL Ex. 2, Att. A.

BOE's rate witness testified that it was his experience that an NVO engaged in misdeclaration would submit an SED to the carrier consistent with any misdeclaration of weight or cubic measure set forth on the master bill of lading. Gravitt Tr. 1014 ln1 - 7. Likewise, a carrier participating in a joint practice of misdeclaration with an NVO likely would insist that SED and all other shipping documentation be made consistent with the inaccurate bill of lading. Gravitt Tr. 1014 ln8 - 23, 1019 ln11 - 1020 ln2, 1025 ln2 - 21. See also Tam Tr. 99 ln1 - 17. If documents such as the packing list likewise appear consistent with the weights and measures on the ocean carrier's bill of lading, that carrier can then claim deniability with respect to any abuses later revealed. Gravitt Tr. 1025 ln23 - 1026 ln7.

SL78. As to NVOs hearing about Sea-Land's equipment substitution practices from other NVOs, World Pacific first learned of Sea-Land's practice from World Pacific Container Line in Hong Kong, its destination agent for U.S. export shipments. Tam Tr. 41 ln10 - 43 ln12. The abuse was such a widespread practice among NVOCCs that "Everyone knows the policy with respect to 'equipment substitution' and it is such a large industry practice that no one needs to say anything about it." BOE Ex. 3, page 4.

World Pacific also learned of the availability of equipment substitution through its Sea-Land sales representative, Mr. Rich Favor, telling World Pacific how to make it work. Tam Tr. 23 ln18 - 24 ln3, 25 ln13 - 16, 47 ln9 - 14, 96 ln10 - 24; Tiao Tr. 190 ln1 - 191 ln8. Tony Tiao initially identified Bob Steele to Commission investigators as the salesman then servicing World Pacific's account. Tam Tr. 25 ln2 - 16, 105 ln15 - 106 ln4; Tiao Tr. 180 ln1 - 11. Other carriers did not inform Mr. Tiao about equipment substitution. Tiao Tr. 184 ln21 - 185 ln5.

SL79. Having heard of Sea-Land's equipment substitution practice through sources such as General Ocean and Pagoda, Tse Tr. 47 ln6 - 18, Global Links confirmed the availability of equipment substitution through Sea-Land's sales representative, Mr. Rich Favor, who gave Global Links details about the procedures for equipment substitution, and helped Global Links implement those procedures. Tse. Tr. 49 ln21 - 50 ln4; Tr. 50 ln5 - 22, 101 ln3 - 23, 102 ln12 - 103 ln22, 110 ln7 - 19.

SL80. Jasper Freight heard about Sea-Land's equipment substitution practices from another NVO, General Ocean. Wei Tr. 126 ln13 - 128 ln3. Jasper Freight pointed out the financial risks of not seeking carrier approval before undertaking an equipment substitution arrangement: "Otherwise, why would I do it if they're not going to agree with it? If [Jasper Freight] submitted documents, they can come back with a higher rate." Wei Tr. 137 ln22 - l38 ln3.

SL81. Pagoda Container learned of Sea-Land's practice from General Ocean. Chang Tr. 23 ln21 - 25 ln6. Other NVOs told General Ocean that it could obtain equipment substitution from other carriers than Sea-Land, Chang Tr. 30 ln6 - 9; however Pagoda found that two other carriers would not offer equipment substitution. Chang Tr. 46 ln18 - 47 ln14. Since Sea-Land gave Pagoda good rates based on its equipment substitution arrangement, Pagoda stayed with Sea-Land. Chang Tr. 30 ln3 - 5.

SL82 and SL83. As to Sea-Land's claim of the "close relationship" among NVOs, the record shows that World Pacific did not do business with Global Links, Tse Tr. 47 ln11 - 13, 53 ln23 - 54 ln11; Tam Tr. 13 ln5 - 9, 57 ln15 - 19; Tiao Tr. 192 ln22 - 24, 193 ln8 - 15; that Brennan International did not do business with World Pacific, Sehwani r. 65 ln15 - 66 ln14; Tam Tr. 58 ln 11 - 13; Tiao Tr. 193 ln23 - 194 ln1; that General Ocean did not do business with Pan Pacific, Wu Tr. 133 ln14 - 23; Chao Tr. 116 ln18 - 23; that Pan Pacific did not do business with Global Links, Tse Tr. 55 ln9 - 10; Chao Tr. 116 ln18 - 23; that Supertrans did not do business in the Pacific trades with Global Links, D_Lee Tr. 129 ln9 - 130 ln4; Tse Tr. 55 ln2 - 6; that Global Links did not do business in the Pacific trades with Brennan International, Tse Tr. 55 ln15 - 16, 56 ln1 - 20; Sehwani Tr. 68 ln5 - 6; that Pan Pacific did not do business with Pagoda, Chao Tr. 116 ln18 - 23; Chang Tr. 53 ln6 - 8; that Jasper did not do business with Supertrans, D_Lee Tr. 129 ln4 - 8; that Brennan International did not do business with Jasper, Wei Tr. 144 ln23 - 25; Sehwani Tr. 67 ln25 - 68 ln1; that Pagoda did not do business with Supertrans, Chang Tr. 52 ln20 - 22; D_Lee Tr. 133 ln10 - 134 ln1; and that Supertrans did not do business with Brennan International, D_Lee Tr. 134 ln2 - 15; Sehwani Tr. 68 ln2 - 4.

SL84. Mr. Tiao and Mr. Lee of Morrison knew most of the other NVOs, but there is often little substance to a casual business relationship. Morrison had not discussed equipment substitution with World Pacific. C_Lee Tr. 52 ln1 - 6.

SL85. In addition to soliciting most of the NVO accounts on the basis of equipment substitution, nearly one-third of the 149 shipments occurred during Mr. Favor's tenure at Sea-Land. See, e.g., BOE Ex. 14, Table. At that time, Mr. Favor had already served as an inside sales coordinator for Sea-Land's Atlantic Division. Mr. Favor had experience in servicing NVO accounts and already had demonstrated an understanding of how an NVO business was run. Wing Tr. 266 ln7 - 267 ln22. In 1995, Sea-Land's Pacific Division had recruited Rich Favor for employment as an outside sales representative. Wing Tr. 266 ln7 - 267 ln22. The decision to employ Mr. Favor in outside sales had support from the Regional General Manager Pacific Division, and the Regional Manager, Atlantic Division. Wing Tr. 266 ln7 - 18.

Mr. Favor's immediate superior, Mr. David Wing, testified that he gave a favorable performance review to Mr. Rich Favor for calendar year 1996; that he recommended that he receive a bonus, Wing Tr. 213 ln11 - 214 ln3, 216 ln18 - 269 ln21, 270 ln12 - 15; and that he did not recommend a "performance improvement plan" ("PIP") be imposed on Mr. Favor for poor job performance. Wing Tr. 216 ln16 - 19. Mr. Wing denied participating in any meeting where Mr. Spargo informed Mr. Favor about imposing a PIP on him. Wing Tr. 218 ln5 - 11. Mr. Wing denied that Glenn Spargo had even spoken to him about the performance of Mr. Favor. Wing Tr. 300 ln12 - 20. Following the Neutral Body investigation and discussions with Mr. Spargo in May 1997, Mr. Favor left the employment of Sea-Land. SL Ex. 3, Favor Dep. Tr. at 94 and Attachment 1. Mr. Favor denied that Mr. Spargo ever spoke with him about a performance improvement plan, or that Mr. Spargo ever presented him with a PIP. Favor II tr. 172 ln1 - 173 ln17; Favor III Tr. 116 ln7 - 17.

SL86. BOE submitted numerous statements, which were reasonably contemporaneous with the events at question in 1997 - 1999 and two in early 2000. BOE Ex. 12 and CO Ex. 37. See BOE Ex. 3-11 and CO Ex 2 and 3. The witnesses were cross-examined at length. BOE investigators likewise have been cross-examined as to the contemporaneous utterances of the NVO witnesses. Clark Tr. 16 ln8 - 446 ln3; Carey Tr. 452 ln3 - 782 ln6. Mr. Favor testified on three occasions.

SL87. From conversations with Mr. Cooper Chao of Pan Pacific, Sea-Land sales manager Mr. David Wing inferred that equipment substitution abuses were occurring on Pan Pacific's shipments with other carriers, specifically Sea-Land's VSA partner, Maersk. Wing Tr. 221 ln6 - ln20, 169 ln15 - ln25, 254 ln17 - 255 ln5. Mr. Wing was aware that Maersk was soliciting the same NVO accounts as Sea-Land at that time. Wing Tr. 223 ln3 - ln6. Mr. Wing was, moreover, familiar with equipment substitution, Wing Tr. 162 ln22 - 163 ln25, and knew that equipment substitution could be abused. For FAK shippers, Mr. Wing was aware that no advantage accrued to the NVO from equipment substitution if the cargo was properly tendered and declared correctly. Wing Tr. 330 ln16 - 331 ln19.

Mr. Wing likewise acknowledged similar discussion with other NVOs. During sales calls upon Supertrans, Sea-Land's representatives had multiple discussions with Mr. Lee of Supertrans about equipment substitution. Sea-Land sales manager Mr. David Wing inferred from these conversations that Supertrans may have been abusing equipment substitution. Wing Tr. 236 ln10 - ln25. Mr. Wing nonetheless advised that Supertrans would be able to use equipment substitution if it tendered cargo in containers for movement on Sea-Land. Wing Tr. 177 ln22 - 178 ln6. Mr. Wing advised NVOs inquiring about equipment substitution that "your documentation will determine what your rate is." Wing Tr. 238 ln4 - ln14.

SL88. On cross-examination, Mr. Wing testified that Pan Pacific's inquiries revolved around whether Sea-Land also would offer equipment substitution. Wing Tr. 319 ln9 - ln24, 330 ln3 - ln8. It was intimated by Mr. Chao of Pan Pacific that Pan Pacific's shipment volumes with Sea-Land could be increased if Sea-Land offered the use of equipment substitution. Wing Tr. 321 ln19 - ln25. Mr. Wing advised Cooper Chao that equipment substitution could be made available to Pan Pacific. Wing Tr. 176 ln16 - ln22.

Mr. Wing stated that he advised that the "tenor of the documents" would be the determining factor in applying equipment substitution rates to Pan Pacific's shipments. Wing Tr. 255 ln6 - ln20. Mr. Favor had informed Pan Pacific that Sea-Land had a system in place whereby Sea-Land would not question Pan Pacific's shipments rated under the equipment substitution provisions. BOE Ex. 1, ¶¶ 63, 65; BOE Ex. 11, ¶ 4. Mr. Wing confirmed that Mr. Favor had encouraged equipment substitution abuse while employed at Sea-Land. Wing Tr. 311 ln3 - ln7. Mr. Wing also corroborated testimony that Mr. Favor intended to use equipment substitution malpractices in order to increase Sea-Land's sales to NVO customers. Wing Tr. 311 ln8 - ln11.

Mr. Wing acknowledged that he and Mr. Chao discussed Pan Pacific's access to equipment substitution on more than one occasion. BOE Ex. 1, ¶ 66; BOE Ex. 11, ¶ 5; Wing Tr. 174 ln25 - 175 ln11, 176 ln10 - ln15, 220 ln14 - 221 ln5, 319 ln25 - 320 ln7. Beginning in 1997, Pan Pacific diverted its cargo from Maersk to Sea-Land because Pan Pacific was allowed to misuse equipment substitution to obtain lower rates from Sea-Land for shipments of consolidated cargo. BOE Ex. 11, pp. 1 and 2. Pan Pacific's westbound volumes on Sea-Land thereafter increased sharply from 1996. Chao Tr. 73 ln19 - 74 ln3.

SL89. Mr. Tam, Vice President of World Pacific Container (U.S.A.), corrected his statement in BOE Ex. 11. He stated it was Mr. Rich Favor not Mr. Bob Steele who told Mr. Tam that Sea-Land would substitute 40 foot containers for 20 foot containers to secure World Pacific's business and in order for the equipment substitution to work World Pacific would have to misdeclare the cubic measurement of the cargo. BOE Ex. 4 and Tam Tr. 23 ln18 - ln10. Mr. Tse testified that Global Links continued its rate arrangement with Sea-Land with the knowledge of Sea-Land salesman Jerome Ginn, Mr. Favor's replacement. BOE Ex. 1, ¶¶ 28, 30. Mr. Wei of Jasper Freight testified that Jerome Ginn of Sea-Land advised Jasper Freight of the procedures by which Sea-Land would provide equipment substitution rates. BOE Ex. 1, ¶ 36; BOE Ex. 7, Attachment at 1; Wei Tr. 128 ln17 - 131 ln11. BOE investigator Carey concluded that Mr. Ginn "knew that Sea-Land was substituting equipment," Carey Tr. 490 ln1 - 7, albeit denying his own involvement in such activities.

SL90. Mr. Jerome Ginn was a sales representative for Sea-Land for about nine months up to late January 1998. CO Ex. 12. He stated that he was unaware of any equipment substitution arrangement where Sea-Land permitted NVOs such as World Pacific and Jasper to misuse the tariff provisions to their own advantage in violation of law. Mr. Ginn stated that as a sales representative he would not be made aware of "special arrangements" with shipper/NVOCC accounts. CO Ex. 12.

From his interview of Mr. Ginn, BOE investigator Carey concluded that Mr. Ginn's statement had no real utility. Carey Tr. 489 ln12 - 21. Mr. Ginn "knew that Sea-Land was substituting equipment," Carey Tr. 490 ln2 - 7, but Ginn asserted he had no role in any discussions with World Pacific about equipment substitution following the departure of Rich Favor in May 1997. Carey Tr. 490 ln8 - 21. Upon cross-examination by Sea-Land counsel, Mr. Tam of World Pacific in effect corroborated Mr. Ginn's statement as it relates to Jerome Ginn's direct participation, asserting that Mr. Tam did not need to speak with Jerome Ginn since World Pacific was already fully engaged in equipment substitution abuses. Tam Tr. 47 ln15 - 48 ln1.

SL91. Sea-Land had a strict company policy of adherence to the terms of its tariff and service contracts. This policy was reiterated consistently by Sea-Land management in the westbound Transpacific trade during the period at issue in this proceeding. SD Ex. 1 and 12; SL Ex. 2, ¶ 5. Sea-Land witness Mr. Hagan provided testimony that he would "immediately terminate" any employee once his malpractice activities were revealed. SL ex. 4, ¶ 6.

Following the Neutral Body investigation and discussions with Mr. Spargo in May 1997, Mr. Favor left the employment of Sea-Land. SL Ex. 3, Favor Dep. Tr. at 94 and Attachment 1. Following the Neutral Body's second Investigation Report issued December 1997, Mr. Spargo discharged Jerome Ginn from employment. Wing Tr. 300 ln24 - 301 ln2; Spargo I Tr. 119 ln21 - 120 ln5. Sea-Land responded to the second Neutral Body report in January 1998, whereby it "accepted the conclusions" of the Neutral Body Investigation Report, for which action the Neutral Body reduced its penalty to $15,000. BOE Ex. 1, ¶ 114 and Clark Attachment N. Mr. Spargo and Mr. Wing both left the employment of Sea-Land that same year. Spargo Tr. 26 ln19 - 28 ln7; Wing Tr. 158 ln3 - 159 ln4.

SL92. Official notice is taken of FMC Agreement No. 203-011452, Article II, which states: "The purpose of this Agreement is to permit the carriers which are parties hereto to provide for an effective system of neutral body policing of their activities in order to ensure compliance with tariffs and service contracts within the geographic scope of this agreement. . . ."

In the "Neutral Body Investigation Report" dated August 2, 1997, the Neutral Body recites its authority to conduct investigations and assess damages involving "malpractices" by the carriers party thereto. BOE Ex. 1, Att. L. The Neutral Body concluded that Sea-Land had committed breaches of the applicable tariffs involving "improper equipment substitution." BOE Ex. 1, ¶¶ 97-98, and Att. L. Eight separate complaints were filed with the Neutral Body indicating Sea-Land's involvement in rate malpractices involving NVO misdeclarations. BOE Ex. 1, ¶¶ 103-104 and Att. L; Spargo I Tr. 116 ln12 - 17. The Neutral Body took no equivalent action with respect to World Pacific. Tam Tr. 115 ln3 - 16.

SL93 and SL94. In light of the Neutral Body warnings, Sea-Land's rate audit department held 4-5 meetings with the documentation department in Dallas regarding equipment substitution, along with numerous informal conversations with the documentation staff. The documentation department was instructed to obtain complete documentation from the NVOCCs involved. The rate audit department emphasized the need to obtain SEDs or other supporting documentation from the suspect NVOCCs to ensure the information was consistent with the bill of lading instructions. SL Ex. 2, ¶ 5. After the August 1997 report, Mr. Christopher Dianora, Sea-Land's Director of Pricing, Agreements, and Regulatory Affairs, met several times with those in charge of the westbound trade at Sea-Land's Charlotte headquarters, including Mr. Scott Hagan, trade lane director, and Mr. John Crowley, vice president of marketing. In those meetings, these officials discussed the need to pay special attention to the accounts named in the Neutral Body report and to obtain proper documentation as to shipment details. Following these meetings, telephone and email instructions along these lines were given from headquarters to Sea-Land's rate audit and documentation departments in Dallas. SL Ex. 1, ¶¶ 7-8; SL Ex. 4, ¶ 8; Hagan Tr. 48-9. Sea-Land did not, prior or subsequent to the first Neutral Body investigation, establish written procedures regarding equipment substitution applicable to its Sales/Marketing staffs or to Sea-Land Operations. CO Ex. 34; Spargo I Tr. 90 ln18 - 91 ln3; Wing Tr. 288 ln2 - ln7; Ohle Tr. 359 ln2 - ln13. Complaints by competing NVO shippers and by competing carriers continued in the wake of the first Neutral Body investigation, BOE Ex. 1, ¶¶ 88, 89-93, and Clark Attachments F, and G-K. Sea-Land's own witnesses acknowledge that Sea-Land took no actions to address equipment substitution abuses prior to "late 1997 or early 1998." See SL Ex. 2, ¶¶ 4-5; SL Ex. 1, ¶¶ 6-7; SL Ex. 4, ¶¶ 7-8; SL Ex. 5, ¶ 9. Such actions as were taken by Sea-Land would have effect only as to FAK shipments, Hagan Tr. 124 ln10 - ln22, 133 ln2 - 134 ln1. Violations identified in the third Neutral Body Investigation Report as to Sea-Land involved the same NVO shippers, but not FAK cargo. Hagan Tr. 122 ln16 - 124 ln9. The Neutral Body indicated that its level of damages included penalties for "recidivism" on the part of Sea-Land. BOE Ex. 1, ¶ 124 and Clark Att. O. Sea-Land instituted no new controls as to equipment substitution by NVOs. Hagan Tr. 133 ln8 - 134 ln12; SL Ex. 4, ¶ 8.

SL95. In regard to the efforts of Sea-Land to obtain backup documentation, Sea-Land obtained SEDs for virtually all equipment substitution shipments in the latter half of 1997 and 1998. SL Ex. 2, ¶ 6 and Att. A; CO Ex. 39, ¶ 6; Tam Tr. 116; D_Lee Tr. 165. Copies of SEDs for certain of the 149 shipments involved in this case are attached to Sea-Land Exhibit 2. Violations identified in the third Neutral Body Investigation Report as to Sea-Land involved the same NVO shippers as earlier, but not FAK cargo. The Neutral Body indicated that "all the shipments on Exhibit A have dubious or incomplete export declarations. . . ." BOE Ex. 1, Clark Att. O, at 3. Sea-Land instituted no new controls as to equipment substitution by NVOs. Hagan Tr. 133 ln8 - 134 ln12; SL Ex. 4, ¶ 8.

SL96. On some equipment substitution shipments, Sea-Land also obtained backup documentation such as packing lists from World Pacific. Tam Tr. 116-7, 127. Mr. Tam testified that Sea-Land "doesn't usually request" a packing list. Tam Tr. 127 ln10 - 20. World Pacific was asked "sometimes" to submit a packing list, Tam Tr. 117 ln10 - 20, but not on every equipment substitution shipment. Tam Tr. 126 ln15 - 127 ln9; Smith Tr. 19 ln14 - 17.

While Sea-Land's rate audit office would request a packing list, Smith Tr. 95 ln18 - ln22, auditing by Sea-Land of equipment substitution shipments was "very minimal." Smith Tr. 96 ln1 - ln9. Sea-Land was obligated by corporate policy to retain and make available copies of all packing list and associated documentation collected by the carrier. CO Ex. 32 at pp. 25, 28; CO Ex. 33, at 2; Smith Tr. 72 ln1 - 12. If a packing list was obtained by Sea-Land, Ms. Smith indicated that it would be kept with the original shipment file. Smith Tr. 72 ln13 - 22.

SL97. Counsel's Exhibit 4 includes a copy of a bill of lading instruction that was sent back to World Pacific By Sea-Land Dallas with the notation "Need SED." That exhibit also includes the SED that was provided to Sea-Land, in which the cargo weight, commodity description, and quantity all match the bill of lading instructions and ocean bill of lading. Sea-Land requested the SED more than two weeks after the bill of lading issue date. Gravitt Tr. 847 ln2 - 848 ln6; Tam Tr. 100 ln2 - 104 ln1. The SED does not include any information on the cubic measurement of the shipment. CO Ex. 4; Smith Tr. 95 ln10-12, 97 ln16 - 98 ln5, 126 ln4 - 17.

Mr. Tam testified that the SED contained in CO Ex. 4 was incorrect. Tam Tr. 121 ln18 - 122 ln5. Mr. Tam acknowledged that, on equipment substitution shipments, World Pacific had to ensure the SED was consistent with the weight and measure being declared on Sea-Land's bill of lading. Tam Tr. 99 ln2 - 13. From internal reference numbers identified on the SED, Mr. Tam also concluded that it was World Pacific that prepared the SED. Tam Tr. 122 ln9 - 19. After examining the shipment file and confirming purchase order numbers and other export references, Mr. Tam separately concluded that the shipment weight exceeded the maximum limits for equipment substitution. Tam Tr. 96 ln25 - 97 ln13. Mr. Tiao likewise repudiated the SED. Tiao Tr. 222 ln1 - 223 ln6.

SL98. Sea-Land witness Hagan conceded that he had knowledge of equipment substitution malpractices on or before July 1997. See, e.g., Hagan Tr. 113 ln1 - 114 ln11. Mr. Hagan was aware of equipment substitution malpractices when first raised by the Neutral Body. Hagan Tr. 68 ln1 - 12, 73 ln19 - 74 ln4. Mr. Hagan agreed that any TWRA action would first be preceded by discussions internal to Sea-Land management. Hagan Tr. 110 ln15 - 11 ln12. Mr. Hagan's review would have included discussion of the problems compelling Sea-Land to take action against equipment substitution practices. Hagan Tr. 111 ln13 - 17. Mr. Hagan testified that he knew of internal "notes" which identified Rich Favor as the Sea-Land salesman handling these NVO accounts. Hagan Tr. 69 ln20 - 70 ln1.

Sea-Land sponsored an effort within TWRA which resulted in July 1997 in prohibiting 20' equipment substitution on FAK shipments. CO Ex. 29; BOE Ex. 14, ¶ 9. As implemented in the TWRA tariff, Sea-Land allowed continued equipment substitution for NVO shippers and others of 45' containers at 40' container rates. Hagan Tr. 131 ln1 - 133 ln1. After reading the second Neutral Body Investigation Report, dated December 1997, Mr. Hagan agreed that the Neutral Body asserted violations by Sea-Land in providing 20' equipment substitution after the date the FAK rate restrictions became effective. Hagan Tr. 116 ln1 - 117 ln12, 117 ln21 - 118 - ln18. Consistent with this practice, Brennan understood that it would be allowed lower equipment substitution rates only for its larger-sized containers of FAK cargo. Sehwani Tr. 83 ln13 - 85 ln10.

As implemented in the TWRA tariff, Sea-Land allowed continued equipment substitution for NVO shippers and others of 40' containers at 20' container rates for commodities other than FAK. Hagan Tr. 133 ln2 - 134 ln4. After reading the third Neutral Body Investigation Report, dated March 1998, Mr. Hagan agreed that the Neutral Body had asserted violations by Sea-Land in providing 20' equipment substitution for commodities other than FAK. Hagan Tr. 122 ln16 - 124 ln9, 125 ln15 - 127 ln16. Mr. Hagan has exonerated himself of any responsibility therefor, asserting that: "I can't be responsible for actions outside of myself and what we have told our organization." Hagan Tr. 125 ln5 - 14.

SL99. On January 6, 1998, Sea-Land's chief of documentation for the westbound Transpacific, Mr. Eddie Chan, circulated an e-mail to Sea-Land's regional managers for all regions in North America, documentation and rate audit personnel, as well as numerous executives at Sea-Land's headquarters in Charlotte, reiterating that complete documentation, including supporting SEDs, needed to be collected from NVOCC shippers, including specifically World Pacific General Ocean Freight, and Global Links Express. SL Ex. 1, Attachment. Upon reviewing the January 6, 1998 e-mail, Mr. Spargo asserted he was unaware whether the "FMC" was then fining Sea-Land for anything. Spargo I Tr. 140 ln14 - 21. Mr. Spargo agreed that the Neutral Body's letter of December 1997 made no mention of the "lack of proper presentation of SED" as the basis for finding violations against the carrier. Spargo I Tr. 142 ln20 - 145 ln14. Mr. Spargo testified that he forwarded Mr. Chan's e-mail, without comment, to Trade Lane Director Hagan, VP-Sales Bill Kenwell and other Sea-Land management, because Mr. Spargo "didn't have anything to say." Spargo I Tr. 140 ln3 - 12.

While the January 6 e-mail committed Sea-Land not to release shipments without first obtaining the appropriate documentation, the Neutral Body Investigation Report dated March 1998 indicated that "all the shipments on Exhibit A have dubious or incomplete export declarations. . . ." BOE Ex. 1, Clark Att. O, at 3. The evidence relied upon by the Neutral Body included inter alia three (3) shipments dated in January 1998 by General Ocean Freight, twelve (12) shipments dated in February 1998 by General Ocean Freight, and two (2) shipments dated February 1998 by World Pacific Container. BOE Ex. 1, ¶ 122 and Clark Att. O. Both were NVOs named in the January 6 e-mail. SL Ex. 1, Attachment. Sea-Land witness Spargo asserted that he had no knowledge of communications from Sea-Land representative Shane Hanna in May 1998, assuring World Pacific that Sea-Land was not holding its shipments. CO Ex. 35; Spargo I Tr. 167 ln13 - 168 ln9.

Prior to receipt of shipping instructions, Customer Service Department of Sea-Land first issues a booking for the shipment. Ohle Tr. 350 ln6 - 22, 383 ln11 - 16; Carey Tr. 764 ln5 - 766 ln 22; Favor III Tr. 88 ln12 - 19. Sea-Land Customer Service maintains an electronic database for this purpose, intended to speed the booking process. Wing Tr. 239 ln25 - 240 ln22, 241 ln5 - 20k 244 ln1 - 10. An example of Sea-Land's booking information is found in the record at Clark Attachment A. See BOE Ex. 1, Att. A; Wing Tr. 244 ln11 - 245 ln5; Ohle Tr. 361 ln8 - 362 ln17; Favor III Tr. 82 ln24 - 84 ln23, 123 ln2 - 16. Sea-Land's records thus would identify, for each shipment, the person and firm contacting Sea-Land to book the shipment or confirm vessel space. BOE Ex. 2, ¶¶ 14, 34; Carey Tr. 731 ln9 - 22.

SL100. Sea-Land's process of paying forwarder compensation to freight forwarders during the 1996-1998 period was as follows:

SL101. The shipper would designate the forwarder it was using on a particular shipment on the shipping instructions it sent to Sea-Land. This was usually done by fax. The forwarder would be identified in the field which would become the forwarder box on the bill of lading. SL Ex. 2, ¶ 14A.

To earn forwarder compensation for providing services to the carrier, the forwarder must contact the carrier to engage, book, secure or contract directly with the carrier or its agent for space aboard a vessel or must confirm with the carrier the availability of that space; the forwarder usually communicates with the carrier also in the preparation and processing of the ocean bill of lading or other documents with respect to the shipments. Oh Tr. 87 ln20 - 90 ln2. ITL Shipping, a forwarder, never performed forwarding services for the shipper or the carrier with respect to World Pacific's shipments on Sea-Land. Oh Tr. 11 ln22 - 14 ln10, 39 ln8 - 40 ln5. ITL did not at any time communicate with Sea-Land to make the booking, or confirm the availability of space aboard a vessel. Instead, the shipper contacted Sea-Land directly to book cargo. BOE Ex. 2, ¶ 14 and Attachment E; BOE Ex. 1, Att. A; Carey Tr. 718 ln2 - 729 ln7, 740 ln23 - 741 ln4, 764 ln5 - 769 ln15, 717 ln1 - 718 ln18. Sea Land thus knew it was relying exclusively upon its contacts with the shipper in adding the name of ITL Shipping in the forwarder box upon all bills of lading prepared for World Pacific Container. BOE Ex. 2, ¶ 2; BOE Ex. 1, ¶ 171; Tiao Tr. 195 ln3 - ln8, 196 ln3 - ln9, 199 ln8 - ln16, 200 ln13 - ln21; Carey Tr. 717 ln17 - 718 ln18, 768 ln15 - 769 ln15.

SL102. To make sure it was in order, Sea-Land's documentation department in Dallas would receive the shipping instructions from World Pacific, the shipper, check to see that the forwarder's name was in the appropriate field, and check to see that the shipper supplied the forwarder's FMC license number. The department would also check Sea-Land's customer database to determine whether the forwarder's name matched the license number contained in the database for that forwarder. SL Ex. 2, ¶ 14B.

SL103. If the shipping instructions were inconsistent with Sea-Land's database, or if neither contained the forwarder's FMC license number, the documentation department could check with Sea-Land's Customer Management Department in Dallas to see if they could provide or verify the information. If they could not, they would contact the FMC in Washington D.C. to verify that the named forwarder had a current FMC license and, if so, the number of the license. SL Ex. 2, ¶ 14C.

SL104. If the information checked out after the above process, Sea-Land's accounts payable department would issue a check to the forwarder for the compensation at the rate specified in the applicable tariff. Each compensation check included a stamp on the back with the following language for the forwarder to certify that it had a license and that it had performed forwarding services with respect to the shipment for which it was being compensated (SL Ex. 2, ¶ 14D):

The undersigned hereby certifies that neither it nor any holding company, subsidiary, affiliate, officer, director, agent or executive of the undersigned has a beneficial interest in this shipment; that it is the holder of valid FMC license No. ________________ issued by the Federal Maritime Commission and has performed the following services:

• Engaged, booked, secured, reserved, or contracted directly with the carrier or its agent for space aboard a vessel or confirmed the availability of that space.
  
• Prepared and processed the ocean bill of lading, dock receipt, or other similar document with respect to the shipment.

SL105. The freight forwarders involved in this investigation endorsed and cashed the compensation checks imprinted with the above language. The endorsement was made by a stamp that indicated their name and bank account number, generally stating "for deposit only." Rarely would a forwarder endorse a check with a handwritten signature, and forwarders would rarely if ever provide their own certification. Although there was a space on the certification for the forwarder to insert its license number, forwarders rarely filled in the space. Sea-Land relied on the license number information on the shipping instructions and in its database. SL Ex. 2, ¶ 14E.

SL106. Sea-Land had no method to check with the FMC or any other sources such as the Federal Register on the forwarder license information for each of the 8,000-10,000 bills of lading processed at Sea-Land's documentation center every week. The only time Sea-Land changed its database was if it was informed that a forwarder's license had been revoked or changed. It was Sea-Land's policy that a forwarder should not be paid forwarder compensation if it did not have a current FMC license or if its license number did not match the forwarder's name as reflected in Sea-Land's database. SL Ex. 2, ¶ 15. However, on and after April 1, 1997, Sea-Land issued compensation checks to ITL Shipping when such entity no longer had licensed status as a freight forwarder. BOE Ex. 2, ¶ 3 and Att. A; Oh Tr. 39 ln8 - 40 ln5.

SL107. In 1996-1998, Sea-Land's database showed that ITL Shipping Co.'s FMC freight forwarder license number was 3102. After the FMC began its investigation of payments to ITL and informed Sea-Land that ITL's license had been revoked, Sea-Land at that time included a note of that fact in its database. SL Ex. 2, ¶ 16. Public notice of ITL's license revocation was published in the Federal Register on April 23, 1997, 62 Fed. Reg. 19761; BOE Ex. 2, ¶ 4 and Attachment B. See also 44 U.S.C. 1507. Sea-Land nonetheless paid freight forwarder compensation to ITL for months after ITL's license was revoked. Oh Tr. 39 ln8 - 40 ln5; BOE Ex. 2, ¶ 8.

SL108. In 1996-1998, Sea-Land's database showed that an ocean freight forwarder, General Air Freight Consolidators Inc.'s FMC freight forwarder license number was 3375. General Air Freight's address was shown on Sea-Land's database as 125 l/2 Marengo Avenue, Alhambra, CA. However, licensing records showed the address of record of General Air Freight Consolidators, license No. 3375, as 1031 W. Manchester Blvd., Suite A, Inglewood, CA.

The address of General Ocean Freight, which was an NVOCC that shipped with Sea-Land from time to time, was shown in Sea-Land's database as 1031 Manchester Blvd., Suite A, Inglewood, CA, customer # 3584522. SL Ex. 2, ¶ 17. For General Ocean shipments where Sea-Land paid freight forwarder compensation, certain Sea-Land bills of lading show the identical office address for both the forwarder (identified on the bills of lading as GOC) and the shipper NVOCC: 1031 W. Manchester Blvd. Suite A, Inglewood, CA. BOE Ex. 2, ¶¶ 28, 36; Wu Tr. 101 ln7 - 103 ln18. In order for Sea-Land to pay forwarder compensation to the forwarder GOC, Sea-Land's database thus would have identified FMC License No. 3375 as belonging to GOC, the forwarder, located at the shipper's address. SL Ex. 2, ¶¶ 14B and 14D. Sea-Land nonetheless paid freight forwarder compensation when Sea-Land knew the forwarder and the shipper's address were identical on the Sea-Land bill of lading. BOE Ex. 2, ¶ 36; and Wu Tr. 101 ln7 - 103 ln18.

For the balance of General Ocean shipments where Sea-Land paid freight forwarder compensation, Sea-Land bills of lading listed the residential address of Simon Wu as the address of the forwarder General Air. BOE Ex. 2, ¶ 26; CO Ex. 3; Wu Tr. 105 ln9 - 107 ln9. In order for Sea-Land to pay forwarder compensation on these shipments, Sea-Land's database would have identified FMC License No. 3375 as belonging to General Air, located at Mr. Wu's residential address. SL Ex. 2, ¶ 17. Sea-Land's database thus identified two addresses for FMC License No. 3375: the address of the shipper and the residential address of the shipper's president. SL Ex. 2, ¶¶ 14B, 14D, 17. Sea-Land nonetheless paid freight forwarder compensation when Sea-Land knew the forwarder address on the Sea-Land bill of lading did not correspond to General Air's known address of record, and General Air did not contact Sea-Land for the preparation and processing of the ocean bill of lading, dock receipt, or other similar document for shipments between January 1, 1997 and December 31, 1997. BOE Ex. 2, ¶¶ 31-34 and Attachment H; Carey Tr. 729 ln10 - 730 ln19. As the booking is made by Sea-Land prior to Sea-Land first issuing its forwarder compensation check, Sea-Land would already know that the named forwarder was not booking or securing the cargo for the shipment, nor preparing the shipping documentation. BOE Ex. 2, ¶ 35; Carey Tr. 731 ln14 - 732 ln6.

SL109. Sea-Land often received shipping instructions or other shipper documentation directly from a shipper, even when a freight forwarder was involved. The services performed by forwarders varied, and Sea-Land was not always informed of what services the forwarder performed with respect to a shipment. Sea-Land communicated only with the shipper NVOCC, General Ocean Freight, for all functions of booking the shipment and preparing the shipping documentation thereon. The forwarder, General Air, did not prepare or process the ocean bill of lading, dock receipt, or other similar document with respect to the issue shipments. Wu Tr. 159 ln17 - 160 ln25. Sea-Land's available records demonstrate that General Air did not contact Sea-Land for the preparation and processing of the ocean bill of lading, dock receipt, or similar documents for shipments between January 1, 1997 and December 31, 1997. BOE Ex. 2, ¶¶ 31-34; Carey Tr. 729 ln10 - 730 ln19. Sea-Land's available records identified that the shipper, rather than General Air, contacted Sea-Land to engage, book, secure or contract directly with Sea-Land for space aboard a vessel or confirm the availability of that space for shipments during this period. Wu Tr. 161 ln1 - 165 ln23.

SL110. Mr. Oh of ITL Shipping never had any contact with anyone from Sea-Land regarding the forwarder compensation checks sent to ITL. Oh Tr. 93. Sea-Land Customer Service knew, and documented in its database, the identity of the person and firm booking the shipment. BOE Ex. 2, ¶¶ 14 and 34; Carey Tr. 731 ln9 - 731 ln22. See also BOE Ex. 2, at Attachment E-2. Sea-Land's available records demonstrate that Sea-Land knew it was dealing with the shipper directly to book cargo. BOE Ex. 2, ¶ 14 and Attachment E; Carey Tr. 718 ln2 - 729 ln7, 740 ln23 - 741 ln4, 764 ln5 - 769 ln15, 717 ln1 - 718 ln18. Sea-Land's documentation and rate audit offices likewise knew of the identity of the persons submitting shipping instructions or other documentation with respect to the shipment. See, e.g., SL Ex. 2, Attachment A; CO Ex. 4 (handwritten notes and fax tags identifying shipper as source of all documentation). Sea-Land had no contact at any time whereby the forwarder ITL Shipping provided services to the carrier with respect to bookings or preparation of shipping documentation. Oh Tr. 11 ln22 - 14 ln10, 39 ln8 - 40 ln5; Tiao Tr. 199 ln12 - 16; Tam Tr. 85 ln24 - 86 ln8; Carey r. 554 ln18 - 555 ln1, 718 ln2 - 8, 731 ln14 - 22. Sea-Land never sought to contact ITL Shipping with respect to any of World Pacific's shipments, nor did Sea-Land inquire of ITL Shipping why compensation should be paid when ITL did not book or secure the cargo for Sea-Land's benefit. Carey Tr. 716 ln6 - 717 ln11.

SL111. When Sea-Land became aware that ITL had not performed services with respect to the World Pacific shipments, it then, after the order of investigation was issued, requested reimbursement of the amounts previously paid. Co. Ex. 30. Sea-Land was continuously aware that ITL Shipping performed no forwarding services for the carrier. Sea-Land never secured the return of forwarder compensation paid to ITL. Oh Tr. 46 ln13 - 49 ln3; Carey Tr. 578 ln13 - 579 ln1. Sea-Land's letter to ITL stated: "If Sea-Land does not receive payment in full within 10 days of the date of this letter, Sea-Land will commence legal action against ITL Shipping." CO Ex. 30. Sea-Land never pursued legal action for the return of forwarder compensation paid to ITL. CO Ex. 36; BOE Ex. 13 - Attachment at 4; Oh Tr. 49 ln4 - 52 ln1, 93 ln16 - 94 ln1. No one contacted ITL to seek return of the forwarder compensation. CO Ex. 36; Oh Tr. 46 ln13 - 49 ln3; Carey Tr. 716 ln6 - ln23.

SL112. Mr. Simon Wu of General Ocean Freight never discussed the forwarder compensation checks with anyone from Sea-Land. Wu Tr. 169. As noted, Sea-Land was aware that General Air Freight performed no forwarding services for the benefit of the carrier. Sea-Land paid freight forwarder compensation on certain Sea-Land bills of lading which show the identical office address for both the forwarder and the shipper: 1031 W. Manchester Blvd. Suite A, Inglewood. BOE Ex. 2, ¶¶ 28, 36; Wu Tr. 101 ln7 - 103 ln18. Sea-Land's sales representative understood that General Air and General Ocean were affiliated companies. Wu Tr. 171 ln14 - 23. In one instance documented through Sea-Land's banking records, Sea-Land permitted payment of compensation where Sea-Land's funds were deposited directly to the account of the shipper, General Ocean. CO Ex. 9; Carey Tr. 624 ln5 - 628 ln6.

BOE contends that Sea-Land violated section 10(b)(4) of the 1984 Act, which provides as follows:

(b) Common carriers.-No common carrier, either alone or in conjunction with any other person, directly or indirectly may-

(4) allow any person to obtain ocean transportation for property at less than the rates or charges established by the carrier in its tariff or service contract by means of false billing, false classification, false weighing, false measurement, or by any other unjust or unfair device or means; [46 U.S.C. app. § 1709(b)(4)]

The foregoing statutory language serves as the counterpart provision to section 10(a)(1) of the 1984 Act, and finds its historical origins in section 16 Second of the Shipping Act, 1916. BOE states that while case law under section 10(b)(4) involving carriers is less numerous than shipper-related decisions under section 10(a)(1), longstanding precedent holds that the "essential element of proof" is the employment of any unjust or unfair device or means to convey a concession to a shipper (citing cases).

BOE argues that the record reveals an approach undertaken by Sea-Land to capture much-needed new cargo in the NVO shipper market to the Far East, concealed by means of manipulating the applicable TWRA equipment substitution provisions; that Sea-Land began by approaching established but important FAK accounts such as Brennan and Morrison Maritime; that FAK accounts offered the prospect of sizeable shipping volumes, and promised container revenues deemed attractive by Sea-Land management, even at the level of 20' container rates; and that Sea-Land subsequently approached sales accounts on this same basis.

BOE states that Sea-Land's practice has been memorialized through the testimony of FMC investigators and by verified statements from the involved NVO shippers, who have been cross-examined, and by witnesses having knowledge of instructions given by Sea-Land as to how equipment substitution could be misused by the NVOs involved.

BOE states that the central role played by Sea-Land sales representative Mr. Rich Favor in this marketing scheme is beyond doubt; that Mr. Favor was recruited into Sea-Land's Pacific Division due to his knowledge and affinity for working successfully with NVO accounts; that Mr. Favor had the backing and direct assistance of his Export Sales Manager, Mr. David Wing; and that, likewise, Mr. Wing's supervisor, Mr. Glenn Spargo, accompanied Mr. Favor on sales calls upon prospective sales accounts.

BOE states that the record shows that Sea-Land's booking, documentation and rate audit offices knew of abuses of equipment substitution then ongoing with respect to the NVO customers served by Rich Favor and by successors to his sales position, and that the record shows that equipment substitution for these NVO shipper accounts was not coordinated by nor with Sea-Land Operations. BOE states that equipment substitution had become a device or means to boost Sea-Land's sales volume, and not at all an operational tool to assist carriers in repositioning equipment.

BOE states that from the paucity of booking records furnished by Sea-Land in discovery, it may be inferred that such evidence would have further corroborated that NVO shippers were requesting to be furnished larger size containers with Sea-Land, and that Sea-Land knew and routinely accepted such bookings as "40-foot container - equipment substitution," for which the carrier subsequently charged the rates applicable to 20' containers, citing Banfi Products Corp. et al., 26 S.R.R. 30 (FMC 1991) and 26 S.R.R. 123 (ALJ 1991); Ever Freight Int'l Ltd. et al., 28 S.R.R. 329, 334 (ALJ, FMC notice of finality, June 26, 1998); World Line Shipping Inc. et al., Docket No. 00-05, slip op. at 21, 29 S.R.R._____ (ALJ, June 19, 2001), in turn citing McMahon & Co. v. Po Folks Inc., 206 F.3d 627, 632 (6^th Cir. 2000). BOE states that the record demonstrates that Sea-Land maintained no effective controls over the application of equipment substitution by employees outside Sea-Land's Operations Department so as to limit such transactions solely to issues of "carrier convenience."

BOE states that despite Sea-Land's history and awareness of equipment substitution malpractices arising no later than May 1997, Sea-Land made no effort to effectuate any substantive changes directed to the application of equipment substitution rates by Sea-Land's own employees; and that Sea-Land did not preclude equipment substitution privileges for NVO shippers identified with previous abuses.

BOE states that in preparing and issuing gate documentation at Sea-Land's Long Beach terminal, Sea-Land also had access to information showing that certain shipments of NVO shippers did not qualify for lower equipment substitution rates because the shipment weight exceeded the maximum weight restrictions specified for equipment substitution.

BOE states that the Neutral Body instituted its first investigation of Sea-Land in May 1997, which investigation uncovered violations of TWRA equipment substitution rules; that a second investigation was instituted, which uncovered more violations of TWRA equipment substitution rules; and that Sea-Land's misratings under equipment substitution continued.

BOE states that a third Neutral Body investigation uncovered violations of the TWRA equipment substitution rules upon Sea-Land shipments in January and February; that Sea-Land instituted no new controls on equipment substitution; that Sea-Land sought to negotiate service contracts with the same shippers said to have defrauded Sea-Land; and that BOE states that Sea-Land's practice together with an understanding that NVO shipments rated under equipment substitution would not be scrutinized by the carrier thereafter constitutes an "unfair device or means" for concealment of the true weight and measurements of these shipments within the meaning of section 10(b)(4) of the Shipping Act of 1984, citing cases. BOE states that on 149 occasions as documented in Gravitt Attachments A and B, Sea-Land allowed other persons to obtain transportation at less than the rates or charges established by the carrier in its tariff or service contract by an unjust or unfair device or means despite Sea-Land's knowledge of the actual weight or cubic measurement of the shipments, in violation of section 10(b)(4) of the 1984 Act; and that judgment should be entered against Sea-Land for violations of section 10(b)(4) of the 1984 Act in 149 separate instances.

BOE points out that during all relevant time periods, section 10(b)(1) of the 1984 Act, 46 U.S.C. app. § 1709, provided that the rates filed by common carriers in their tariffs have constituted the only lawful rates a common carrier can charge its customer. BOE states that Sea-Land consistently and deliberately failed to apply its tariffs properly in matters of that carrier's commercial pricing and practices as to equipment substitution with respect to its NVO customers through a persistent course of conduct from May 16, 1996 to February 19, 1998.

BOE states that, in Mr. Gravitt's rate review, documents relating to149 outbound shipments to the Far East were examined to determine whether Sea-Land was collecting those rates and charges set forth in the applicable TWRA tariffs for shipments transported under the terms of the TWRA equipment substitution rules,

BOE states that on examination of the specific commodities, weights and cargo measurements involved, the underlying shipment records reflect that the cargo loaded into the containers exceeded the weight and/or measurement maximums for equipment substitution; that based on the actual measurements and weights reflected in the shipment files prepared by the NVOCC shippers Sea-Land could not use the equipment substitution provisions to reduce the ocean freight for its NVO customers and thereby charge the lower per-container rate on these 149 shipments; and that Sea-Land thus charged and collected a rate lower or different than the rates and charges set forth in the applicable TWRA tariffs or service contracts.

BOE states that section 10(b)(1) of the 1984 Act establishes a strict adherence standard; that a violation occurs when any rate other than the rate filed in a carrier's tariff is charged, collected, demanded or received, citing cases; and that the knowledge or active participation of the NVO-shippers in such joint scheme of misrating the NVO's shipments likewise is immaterial to whether Sea-Land itself charged the correct and lawful rate, citing American President Lines Ltd. v. Cyprus Mines Corporation et al., 26 S.R.R. 969 at 971-74 (ALJ 1993), proceeding dismissed March 15, 1995.

BOE states that inasmuch as the pattern or practice by which Sea-Land permitted NVOs to obtain lower rates under provisions of the equipment substitution rules constitutes an "unfair device or means" within the meaning of section 10(b)(4) of the Shipping Act of 1984, so also does the respondent's practice of charging or collecting such lower rates in fulfillment of Sea-Land's knowing scheme constitute violations of section 10(b)(1) of the Shipping act of 1984, citing cases; and that, on at least 149 occasions between May 16, 1996 and February 19, 1998,⁽⁷⁾ as documented in Gravitt Attachments A and B, Sea-Land failed to charge and collect those rates and charges applicable under the TWRA tariffs and service contract, in violation of section 10(b)(1) of the 1984 Act.

BOE states that between January 1, 1996 and December 31, 1997, Sea-Land violated section 19(d)(1) of the 1984 Act by paying unearned freight forwarder compensation on some 435 shipments to a person that was not a licensed ocean freight forwarder and without obtaining written forwarder certifications, also in violation of section 19(d)(1); that, in addition, Sea-Land violated section 19(d)(4) of the 1984 Act by knowingly paying compensation to an ocean freight forwarder having a direct or indirect beneficial interest in no fewer than 170 shipments carried on behalf of its affiliated shipper between January 1, 1997 and December 31, 1997.

BOE states that, of necessity, a forwarder must communicate with the carrier in order to perform the requisite two forwarding services; that a carrier never contacted by the forwarder for a particular shipment has no reason to know that the forwarder is performing those forwarding services necessary for the payment of compensation; that, in the instant case, Sea-Land knew that the forwarders had not performed their requisite services; that all documents needed by Sea-Land for these shipments were transmitted directly between shipper and carrier; and that the preponderance of the evidence demonstrates that Sea-Land's personnel knew that the forwarder-ITL-never communicated with Sea-Land to provide freight forwarding services for any of these 265 shipments.

BOE states that with respect to Sea-Land's payments to the forwarder General Air, Sea-Land's records confirm that all processing of documents with Sea-Land was handled directly by the affiliated NVO shipper, General Ocean; that Sea-Land's personnel knew that General Air did not communicate with Sea-Land to perform the necessary booking or documentation services with respect to any of these 170 shipments; and that, even though Sea-Land had information in its possession sufficient to demonstrate that the forwarders had not earned compensation, Sea-Land automatically issued compensation checks to any party identified as a licensed forwarder in the bill of lading instructions, without regard to the statutory requirements.

BOE states that section 19(d)(1) provides that forwarder compensation can be paid only to licensed ocean forwarders. BOE states that Sea-Land's business practice was to have employees check Sea-Land's records to verify whether a forwarder was a licensed forwarder prior to authorizing the issuance of compensation checks; that, however, Sea-Land apparently chose not to update its records by reviewing Federal Register license revocation notices on a monthly or more current basis; that Sea-Land's decision to rely on its own records for the payment of forwarder compensation but then failing to maintain proper records demonstrates reckless disregard for the statutory requirements; that this practice directly gave rise to Sea-Land paying forwarder compensation to a person that was not a licensed forwarder in violation of section 19(d)(1); that ITL's license was revoked on April 1, 1997; that, as a result, Sea-Land continued to pay compensation to ITL on numerous shipments for several months after ITL's license was revoked; and that, thus, Sea-Land violated section 19(d)(1) by paying compensation to a person that was not then a licensed ocean freight forwarder.

BOE states that in paying freight forwarder compensation, a common carrier must obtain written certification from the forwarder wherein the forwarder certifies both that it is licensed and that it has performed the two requisite services. BOE states that Sea-Land employed for this purpose a preprinted forwarder certification form, located on the reverse of its compensation checks.⁽⁸⁾ BOE states that Sea-Land apparently assumed that this act satisfied all of Sea-Land's legal obligations for the payment of compensation.

BOE states that Sea-Land alone was responsible for choosing to use a preprinted check format as the carrier's exclusive means to collect forwarder certifications between January 1, 1996 and December 31, 1997; that Sea-Land's form unambiguously required the forwarder to insert its license number in a blank space provided. BOE adds that, in addition, Sea-Land's form plainly makes reference to the forwarder as the "undersigned," thus signaling Sea-Land's own contemporaneous understanding that a written signature literally still was required of each forwarder certifying.

BOE states that, at the hearing, witnesses from ITL and General Air, respectively, testified that they did not provide any forwarder certifications to Sea-Land; that, thus, the same persons responsible for completing the forwarder certifications in the first instance testified that they acted with no understanding of the operation or legal significance which Sea-Land now seeks to assign to the act of depositing Sea-Land's compensation checks; that the witnesses stated unequivocally that they intended to negotiate payment of the checks, without more; and that they make no claim whatsoever that they knew or intended to convey signed certifications as part of the process of depositing Sea-Land's payment.

BOE states that Sea-Land knew that the forwarders would not fill out the certification form; Sea-Land also knew that the forwarders would not sign its certification; that Sea-Land accordingly made no efforts internally to verify whether the blank for the licensee number in Sea-Land's preprinted form was ever completed; that neither did Sea-Land check to see whether its preprinted forms in fact bore any signature of licensed ocean freight forwarders; and that Sea-Land's failure to obtain any valid forwarder certifications resulted thereby in automatic payments of compensation on hundreds of shipments to persons that performed no forwarding services.

BOE states that this is the exact result that Congress sought to prevent in first enacting the freight forwarder certification requirement, and that Sea-Land's actions exemplify the pattern of carrier misconduct that prompted Congress to impose statutory responsibilities upon the carrier as a condition upon the payment of forwarder compensation.

BOE states that Sea-Land had knowledge that any forwarder certifications would be incorrect. BOE states that the Commission's regulations state that when a common carrier has obtained a completed and signed certification from a licensed ocean freight forwarder, it is entitled to rely on such certification unless the common carrier knows that the certification it has obtained is incorrect. 46 C.F.R. § 510.23(b). BOE states that assuming arguendo that any person's check deposit stamp placed underneath or over the printed Sea-Land form could be construed as a signed certification by a licensed ocean freight forwarder, Sea-Land would not be entitled to rely on such purported certifications for the 170 shipments. BOE states that Sea-Land knew that any such certifications would be incorrect; that the forwarders had to certify that they had in fact performed two statutorily-mandated services; that Sea-Land knew that its records showed that the shippers, not the forwarders, were booking the shipments.

BOE states that, on at least 170 shipments, Sea-Land knowingly paid compensation on shipments in which the forwarder had a direct or indirect beneficial interest in violation of section 19(d)(4);⁽⁹⁾ that, as a named party in the contract of affreightment (bill of lading), a shipper has an agreement which establishes its interest in a shipment.⁽¹⁰⁾ BOE states that whether proprietary cargo owner or NVOCC, the shipper retains a beneficial interest in the res of its shipments. BOE concludes that, thus, a freight forwarder that is affiliated with an NVO shipper has a beneficial interest in that NVO shipper's shipments.

BOE states that Sea-Land knowingly paid compensation to a forwarder, in violation of section 19(d)(4), because Sea-Land had actual and constructive knowledge that the forwarder had a direct or indirect beneficial interest in the shipments involved. BOE states that Sea-Land knew that General Ocean was the shipper since Sea-Land's bills of lading identified General Ocean as shipper; that Sea-Land knew it was paying forwarder compensation to a forwarder whose name ("dba") was essentially identical to the shipper's own name and was located at the shipper's address. BOE states that Sea-Land knew whether the shipper and forwarder were affiliated or inferred that they were affiliated; and that Sea-Land's persistent failure to inquire about the affiliation of the two companies demonstrates conduct which is considered "knowing and willful," citing cases.

BOE states that the evidence shows that Sea-Land violated section 10(b)(1) on 149 occasions between May 16, 1996 and February 19, 1998, by charging shippers less than the applicable rates or charges for their shipments; that Sea-Land violated section 10(b)(4) on 149 shipments between May 16, 1996 and March 25, 1998, by allowing 9 different shippers to obtain ocean transportation for their shipments at less than the applicable rates or charges, and employing an unjust and unfair device or means by which to conceal the actual cargo weight and/or measure so that Sea-Land and the shippers, acting in concert, could misuse the applicable conference's tariffs' equipment substitution provisions; that Sea-Land compensated forwarders that did not perform the requisite forwarding services, paid forwarder compensation without obtaining certifications and paid forwarder compensation to a person with a revoked forwarder license in violation of section 19(d)(1) for at least 435 shipments between January 1, 1996 and December 31, 1997; that, finally, the evidence shows that Sea-Land violated section 19(d)(4) for at least 170 shipments between January 1, 1997 and December 31, 1997, by knowingly paying forwarder compensation to a forwarder that had a beneficial interest in the shipments; and that judgment should be entered against Sea-Land for these violations and that an expedited schedule be set to determine the penalty phase of this proceeding.

It is Sea-Land's position that BOE has not met its burden of proving that the 149 shipments at issue were misdeclared and incorrectly rated in violation of section 10(b)(1), because BOE has relied on NVO bills of lading and container manifests to establish what it views to be the "correct" weight and measure information; that, however, there is scant evidence in the record attesting to the accuracy of that documentation; that BOE has not presented evidence as to when that documentation was prepared or on what basis; that there is considerable evidence indicating that that documentation is often not accurate; and that Sea-Land has also demonstrated several inconsistencies in that documentation.

Sea-Land contends that it has presented extensive evidence, primarily in the form of Shipper's Export Declarations, which support the fact that the shipments in question were rated correctly; that BOE's NVO witnesses have uniformly testified that their SED information was generally accurate; and that, accordingly, BOE has not met its burden of proof that the 149 shipments were incorrectly rated in violation of section 10(b)(1).

Sea-Land states that, in support of its 10(b)(4) claim, BOE has alleged that Richard Favor and other Sea-Land employees promoted equipment substitution abuse among NVOs or were aware of, and did not adequately address, the alleged abuses; that, however, the NVO testimony relied upon by BOE does not support its interpretation of Mr. Favor's role, and that the evidence with respect to other Sea-Land personnel is even less supportive of BOE's contentions.

Sea-Land contends that it, in fact, took substantial and reasonable precautions when it learned of possible abuses of equipment substitution; that it spearheaded an amendment to the TWRA tariff in the summer of 1997 to limit equipment substitution on FAK shipments; and that it circulated e-mail messages and convened a series of meetings and teleconferences involving its sales, marketing, documentation, and rate audit departments to ensure that its personnel took precautions to prevent abuses.

Sea-Land states that BOE has misconstrued the requirements of the Shipping Act and the Commission's regulations, which permit ocean carriers such as Sea-Land to rely on certifications by forwarders that they are entitled to compensation; that BOE would have required Sea-Land to make extensive investigations into whether the forwarder provided services, had a current license, or had a beneficial interest in the shipment; and that this would be particularly onerous given that the average commission on the shipments in question was between $10 and $25.

Sea-Land states that, in fact, on each shipment at issue, Sea-Land obtained certifications as required under the regulations; that Sea-Land had no knowledge of alleged abuses by the forwarders, and therefore was entitled to rely on the certifications it received; and that, moreover, Sea-Land had no reason to believe that the forwarder on several General Ocean Freight shipments was affiliated with the shipper.

Sea-Land states that, in order to establish violations of either section 10(b)(1) or 10(b)(4), BOE must show as a prerequisite that shipments were rated other than in accordance with a carrier's applicable tariffs or service contracts; that even assuming arguendo that Sea-Land sought to promote or tolerate equipment substitution abuse, which was not the case, there was no violation of either section if the shipments were rated in accordance with the tariff rule; and that BOE's burden of proof is heavy in this case because it is trying to establish the contents of sealed containers four and five years after the fact, without eyewitness testimony of the people who packed the containers, citing Pan American Health Organization v. Moore-McCormack Lines, Inc., FMC Report on Remand, 19 S.R.R. 762 (FMC 1979).

Sea-Land states that the fact that the NVOs may have misdeclared on some shipments does not mean that they misdeclared on the 149 shipments at issue in this case; that since the NVOs rated some correctly, and some incorrectly, BOE must show with more precision that the 149 shipments fall into the misdeclared group; that this it has not done; that Sea-Land cannot be penalized based on general evidence that some indeterminate amount of misrating occurred; that since Sea-Land is subject to Shipping Act penalties based on the specific number of shipments in violation, it is only reasonable and fair to require BOE to show the extent of the misdeclaration, i.e., to prove what individual shipments were misdeclared; that any lower standard of proof could result in Sea-Land being unfairly penalized for shipments on which violations did not occur; that the evidence presented by Sea-Land showing that the 149 disputed shipments were rated correctly is at least as strong as the evidence presented by BOE that they were rated incorrectly; and that, accordingly, BOE has not shown by a preponderance of the evidence that these shipments were misrated.

Sea-Land states that it is not disputed that the suspect NVOCCs did not misdeclare all their equipment substitution shipments with Sea-Land. Sea-Land states that the NVOCC witnesses confirmed that not all their shipments were misdeclared; that Brennan was only able to identify four shipments that were allegedly misdeclared; that Mr. Tam of World Pacific, who supervised the documentation process but did not prepare shipping documents except in rare instances, testified that while he understood some incorrect weight and cube information was sent to Sea-Land, he could not determine on which shipments that occurred; and that Mr. Tam's colleague Mr. Tiao similarly was not familiar enough with World Pacific's documentation to know on which shipments misdeclaration occurred; that because only a fraction of these NVOs' shipments were misdeclared, BOE cannot rely on general testimony to prove violations; that it is incumbent on BOE to prove by a preponderance of the evidence that misdeclarations occurred on the 149 shipments; and that BOE has not met this burden.

Sea-Land states that the evidence showing that the 149 shipments were correctly rated is at least as persuasive as the evidence showing alleged misdeclarations; that there is precious little evidence or testimony regarding the documentation BOE advances in support of the "correct" weight and measure of the shipments; that what little there is casts as much doubt on the veracity of that evidence as it supports it; and that, moreover, that evidence is contradicted by evidence, primarily Shipper's Export Declarations, that the NVOCCs have testified were accurate.

Sea-Land contends that there is very little evidence regarding the internal NVOCC documentation relied upon by BOE; that Mr. Gravitt supports his findings in virtually all cases based on either an NVOCC house bill of lading or container manifest, neither of which was given to Sea-Land at the time of shipment; that there is virtually no evidence in the record as to how or by whom these documents were generated, and where the weight and measure information came from; and that, thus, there is no basis to evaluate their reliability or accuracy.

Sea-Land states that there is little evidence supporting the reliability of the internal documentation of World Pacific, which had 31 of the 149 shipments; that BOE concludes that World Pacific's bills of lading show the actual measurements of the shipments primarily based on the unsubstantiated opinion of Oliver Clark and a lone statement by Mr. Tiao; and that there is no corroboration in the direct testimony of Mr. Tam or Mr. Tiao for Mr. Clark's opinion.

Sea-Land states that, with two exceptions, the direct testimony of the other NVO witnesses is also devoid of any reference to the reliability of their internal documentation,⁽¹¹⁾ and that there are a few references to the internal documentation in the NVOs' cross-examination or redirect, but few comments as to its accuracy.

Sea-Land states that much of the available testimony regarding the internal NVO documentation indicates it is unreliable; that much of what little testimony there was regarding the internal NVO documentation pointed to its unreliability, particularly with respect to NVO bills of lading; that the NVOs generally rated their cargo on one of two bases; that the first was on a per container basis, in which case there was no incentive to accurately state the weight and measure because they did not affect the rate; and that the second was on a weight/measure basis, in which case it was to the NVO's advantage to overstate the weight or measure of the cargo to increase its revenues.

Sea-Land states that Mr. Tse of Global Links testified about the unreliability of his internal documentation; that Global Links would not bother to reflect accurately the weight and measure on its documentation for many shipments because that information had no effect on its revenue on per container rates.

Sea-Land contends that the documentation for shipments rated on a weight/measure basis was also suspect; that Mr. David Lee described a process for weight/measure cargo under which, if Supertrans' customer sent in a packing list that showed a weight or measure higher than that measured by Supertrans, which happened in a small number of cases, his company would "keep silence" and use the customer's number, even though it was probably incorrect, because it resulted in higher revenue; that the NVOs had an obvious incentive to inflate the weight and measure on these documents, because it would increase their revenues; that Mr. Tse acknowledged that on such shipments, the more cubic meters were shown on the in-house bills of lading, the more his customer would pay.

Sea-Land states that BOE could hardly dismiss the possibility that its NVOCC witnesses would inflate the weight and measure figures on their internal documentation in order to increase the revenues from their customers; that, after all, the linchpin of their 10(b)(1) argument is that these same NVOCCs lied about the same facts to Sea-Land in order to increase their profits; and that, of course, it was not necessarily altruism that motivated them to correctly declare on SEDs, but rather the fear of criminal and civil penalties for falsifying that information.⁽¹²⁾

Sea-Land states that BOE's own witnesses confirm the accuracy of the information on their shipper's export declarations; that BOE's NVO witnesses admit that they misdeclared weight and measure information on some of the shipping instructions provided to Sea-Land; that it would stand to reason, therefore, that they would not hesitate to admit that they falsified Sed information provided to Sea-Land if that were the case; that, however, the NVOs unanimously testified that their SED information was accurate; that some of the SEDs were not even prepared by the NVOs, but rather their underlying shippers, who would not have an incentive to falsify them for Sea-Land's benefit; that Sea-Land cited 90 shipments on which the SED supports the information upon which Sea-Land rated the disputed shipments under equipment substitution; that, in addition to the SED documentation, Sea-Land showed major inconsistencies in 14 shipments which supported the conclusion that these shipments were correctly rated; that Sea-Land also presented testimony from reliable witnesses that its documentation department collected SEDs on the rest of the 149 shipments, or at least the vast majority of them, that were not retained in Sea-Land's files or imaging system; and that this testimony demonstrated that the SED documentation was compared with Sea-Land's bills of lading and shipping instructions to verify that the information was correct.

Sea-Land states that BOE has not satisfied its burden to show that Sea-Land violated section 10(b)(4); that one of BOE's common errors is to equate the fact that someone from Sea-Land may have known that equipment substitution was being used with being aware that it was being abused; that it is critical not to confuse knowledge about the use of equipment substitution with knowledge about the abuse of equipment substitution, which is quite different; that the evidence shows that to the extent abuse may have occurred, Sea-Land was not the perpetrator or promoter; that, rather, it was the victim of misdeclarations and falsified documentation by NVOCCs seeking financial gain; and that BOE incorrectly dismisses the evidence of Sea-Land's prompt and appropriate actions when it learned of possible abuse.

Sea-Land contends that BOE has not proven that Richard Favor promoted the NVOCCs' abuse of equipment substitution; that, in fact, Mr. Favor's role is subject to serious question, particularly with the two major NVOCCs in this case, Global Links and World Pacific; and that BOE has not proved that he promoted equipment substitution abuse with these accounts.⁽¹³⁾

Sea-Land notes that six of the NVO witnesses, representing five of the nine NVOs, did not clearly testify that Mr. Favor told them to misdeclare; that another was specifically told by Mr. Wing, Mr. Favor's supervisor, that Sea-Land would only permit equipment substitution in accordance with tariff limits; that for two of those same NVOs, no shipments were found by Mr. Gravitt; and that the testimony of the remaining three NVOs regarding Mr. Favor is too riddled with inconsistencies to be credible.

Sea-Land contends that Mr. Favor did not encourage Global Links to misdeclare. Sea-Land states that the evidence is clear that Mr. Favor did not instruct or encourage Global Links (79 alleged violations) to misdeclare equipment substitution shipments; that in his written statement, BOE Ex. 6, Raymond Tse testified that Mr. Favor merely told him "that I could possibly get 40' HC equipment, but only where the measurement was 25 CBM or less" (emphasis added by Sea-Land); that BOE investigator Carey, who wrote out the statement, confirmed that it was an accurate reflection of what Mr. Tse told the investigators in their interview; that both in his March 8, 2000 declaration, BOE Ex. 6, and in cross examination, Tse Tr. 39, Mr. Tse confirmed that his written statement was accurate; that there was nothing he would add to it; and that he specifically confirmed that the description of what Mr. Favor told him was accurate.

Sea-Land states that, on redirect, BOE counsel tried to contort Mr. Tse's testimony to mean that even if Mr. Favor did not encourage him to misdeclare, he somehow implied that he would not care how much cargo was in equipment substitution containers; and that, however, on recross, Mr. Tse clarified that Mr. Favor merely summarized accurately the requirements of the TWRA rule:

Q: Mr. Tse, on the redirect examination, you talked about what Mr. Favor told you. Do you recall that?

A: Yes.

Q: And you said, I believe, that your understanding or how you interpreted it was that he wouldn't care how much Global loaded in the 40-foot container; is that right?

A: He didn't mention it. He just mention how to do the equipment sub.

Q: When you say how to do the equipment sub, he said that you could do equipment sub-and Im quoting from your statement-"where the measurement was 25 cubic meters or less." Is that roughly what he said?

A: Yes.

Q: So he never specifically said he didn't care how much cargo was in there?

A: No. He mentioned how to do it on a 40-foot container.

Tse Tr. 117-8.

Sea-Land states that, in fact, Mr. Tse was very clear that Global Links' information about using, and particularly abusing, equipment substitution came from "people in the industry," i.e., other NVOCCs such as Dyna Transport, M7, General Ocean Freight, and Pagoda, not Mr. Favor; and that any abuse was unrelated to Mr. Favor or Sea-Land.

Sea-Land states that Mr. Favor did not encourage World Pacific to misdeclare. Sea-Land states that the different accounts of Mr. Favor's contacts, if any, with World Pacific (3 alleged violations) are so contradictory and confusing that it is impossible to conclude that he encouraged World Pacific to misdeclare equipment substitution shipments; that World Pacific's witnesses did not even identify Mr. Favor until three years after their initial interview with BOE's investigators; that in their contemporaneous written statement to the investigators in 1997, Messrs. Tiao and Tam made no mention of Mr. Favor; that they identified Bob Steele and Jerome Ginn as their contacts at Sea-Land regarding equipment substitution;⁽¹⁴⁾ that on March 8, 2000, for Mr. Tam, and March 17, 2000, for Mr. Tiao, each of them swore under penalty of perjury that the statements contained in their 1997 handwritten statements-which did not mention Mr. Favor-were true and accurate.

Sea-Land contends that it was only during cross examination in September 2000 that Mr. Tam's memory was strangely clarified and he changed his story to identify Mr. Favor as the Sea-Land salesperson who told World Pacific about equipment substitution; that Mr. Tam testified that Mr. Steele was merely Mr. Favor's replacement as Sea-Land's sales representative, but he did not speak with World Pacific about equipment substitution; and that he also changed his testimony about Mr. Ginn, denying that Mr. Ginn had explained equipment substitution to World Pacific.

Sea-Land states that, in fact, during his cross examination, Mr. Tam stated that he had no discussions with Mr. Favor or anyone else from Sea-Land about equipment substitution:

Q: Did you personally have any discussions with anyone from Sea-Land about the use of equipment substitution?

A: No.

Tam Tr. 49.

Sea-Land states that Mr. Tam alleged only that Mr. Tiao had discussions with Sea-Land on this subject. Sea-Land states that Mr. Tiao, in turn, also stated that his conversations about equipment substitution were with Mr. Favor, not Mr. Steele or Mr. Ginn; that, however, he never testified that Mr. Favor encouraged him to misdeclare equipment substitution shipments; that he merely testified vaguely that he discussed with Mr. Favor how the documentation on such shipments would look; that, in fact, the main reason World Pacific misdeclared equipment substitution shipments was to increase profits, not because Mr. Favor suggested it; and that World Pacific was originally told about equipment substitution by a competitor NVO, not Sea-Land.

Sea-Land contends that the statements of Morrison, Pagoda, and Jasper do not support BOE's allegations. Sea-Land states that Mr. Chao Lee of Morrison Maritime testified that Mr. Favor spoke with him about equipment substitution and told him that the documentation had to reflect weight and measure within the TWRA rule; that he did not state that Mr. Favor told him to misdeclare; that Mr. Favor had some communications with Morrison's documentation people, but Mr. Lee was not present for those discussions and could not testify as to what was discussed; that, unfortunately, Morrison's documentation people were not interviewed (or asked to be interviewed) by BOE's investigators or called as witnesses; and that Mr. Lee testified:

Q: . . . In response to some questions from Mr. King, you testified that after you had spoken with Mr. Favor from Sea-Land, you then introduced him to your operations people, and you understood he may have had some conversations with the operations people, correct?

A: Yes.

Q: And you weren't present for those conversations though, correct?

A: No.

Q: So you don't know what he told those operations people, do you?

A: No idea.

Q: And you don't know if he told them how to prepare documentation on equipment substitution shipments, do you?

A: I don't know.

* * *

Q: So as far as you know, what he told the operations people to get the 20-foot rate may have been in accordance with the TWRA tariff rule, correct?

A: That's what I thought.

(C_Lee Tr. 100-101.) Sea-Land states that this type of evidence does not satisfy BOE's burden of proof to show that Mr. Favor encouraged equipment substitution abuse.

Sea-Land states that Mr. Dean Chang of Pagoda testified that he was told about equipment substitution by an NVOCC competitor, later identified as Simon Wu, not by Sea-Land; that in a previous statement drafted by the BOE investigators, Mr. Chang made a vague reference to a "Richard" from Sea-Land, but in cross-examination he declared that he merely met Mr. Favor briefly through Simon Wu, but did not discuss use or abuse of substitution. "I didn't discuss with Rich Favor about the substitution face to face." (Chang. Tr. 44.)

Sea-Land states that Mr. Nathan Wei of Jasper Freight testified that he found out about equipment substitution from "a competitor-a personal friend" (BOE Ex. 7), whom he later identified as Tammy at General Ocean; and that Mr. Wei never identified Mr. Favor.

Sea-Land states that Pan Pacific was clearly told by Sea-Land's sales manager that it had to comply with the tariff. Sea-Land states that its position that equipment substitution could only be done within the limits of the TWRA rule was clearly and unequivocally stated to Pan Pacific in the presence of both Cooper Chao and Richard Favor; that the most credible witness on Sea-Land's communications with Pan Pacific was David Wing, Mr. Favor's manager; that Mr. Wing testified that he explained to Mr. Chao, in the presence of Mr. Favor, that equipment substitution could only be used strictly in accordance with the TWRA tariff limits; and that, as Mr. Favor's manager, Mr. Wing represented Sea-Land's official position on equipment substitution by Pan Pacific, which was strict adherence to the TWRA rule

Sea-Land states that the other accounts of Mr. Favor's conversations with Cooper Chao of Pan Pacific with respect to equipment substitution are irreconcilably inconsistent; that Mr. Chao claimed that, as part of a sales effort, Mr. Favor explained equipment substitution abuse to him in January of 1997, after Mr. Favor had been visiting Pan Pacific for over a year and that Mr. Favor explained the documentation process to Pan Pacific; that Mr. Favor, in contrast, initially testified under oath that he did not even know if Pan Pacific used equipment substitution; that in his later testimony, Mr. Favor testified that Mr. Chao demanded that Pan Pacific be permitted to abuse equipment substitution or it would give all its cargo to another carrier who was offering such an arrangement; that Mr. Favor denied explaining the documentation process to Pan Pacific; and that Mr. Favor testified that this exchange occurred in early 1966, while Mr. Chao had testified their discussions occurred in 1997.

Sea-Land states that the testimony with respect to the three other NVOCCs is irreconcilably inconsistent or incredible. Sea-Land states that the testimony of David Lee of Supertrans does not prove that Mr. Favor encouraged him to misdeclare; that Mr. Lee's 1998 statement to BOE investigators, as affirmed in his declaration of March 8, 2000 (BOE Ex. 9), was that the equipment substitution would only work "if the CUBIC MEASUREMENT and WEIGHT of the documentation were consistent with a 20 foot container," an accurate summary of the requirements of the TWRA rule; that, on cross-examination, Mr. Lee suggested that Mr. Favor may have indicated that he did not care how much cargo was in the containers (a fact not reflected in either of his written statements); that, however, when asked whether Mr. Favor told him to misdeclare, he stated, "I couldn't remember, because I'm not the one doing this documentation bill of lading," D_Lee Tr. 118; and that, as with the other NVOs, there is no evidence from the person who prepared Supertrans' documentation.

Sea-Land contends that, with respect to Brennan, the self-serving statement of Mr. Sehwani regarding Mr. Favor's alleged encouragement of substitution abuse is not credible; that, similarly, Mr. Wu's allegations regarding General Ocean Freight are not credible; that, in fact, Mr. Wu himself appears to have been the primary promoter of equipment substitution use and, to the extent it occurred, abuse; that several other NVOCCs identified General Ocean as a source of information about equipment substitution abuse; and that, in any event, Brennan and General Ocean Freight represent only 7 out of the alleged 149 violations.

Sea-Land states that the most recent testimony of Mr. Favor cannot be relied upon; that Mr. Favor's first two statements in this investigation, first to Mr. Clark in 1997 and then his July 1998 deposition, are his most credible and are inconsistent with a conclusion that he encouraged NVOCCs to misdeclare; and that, in sum, BOE's attempts to blame Mr. Favor for promoting equipment substitution abuse based on the NVO testimony fails for the following reasons:

• Five of the nine NVOs-Global Links, World Pacific, Morrison, Jasper Freight, and Pagoda-did not testify that Mr. Favor told them to misdeclare.
• One NVO, Pan Pacific, was told by Mr. Wing, in the presence of Mr. Favor, that Sea-Land required strict adherence to the TWRA tariff rule. Otherwise, the testimony of Pan Pacific's witness and Mr. Favor are hopelessly contradictory.
• The testimony of the three other NVOs-Brennan, General Ocean Freight, and Supertrans, who accounted for only a small portion of the allegedly abusive shipments-is either contradictory or not credible to the extent it blames Mr. Favor for promoting equipment substitution.

Sea-Land argues that it is possible that, in his youth and inexperience in outside sales in general and equipment substitution in particular, Mr. Favor may have made some statements to a few of the NVOCCs that were misinterpreted as showing indifference to misdeclaration; that, however, the most likely scenario is that, to the extent abuse occurred, it was because the NVOs were determined to do it and encouraged each other in the practice; and that Mr. Favor cannot be blamed as the catalyst for this practice, and the record does not show a "systematic and methodical approach" by Sea-Land to manipulate the equipment substitution rule, as claimed by BOE. BOE Brief at 57.⁽¹⁵⁾

Sea-Land states that the record does not support BOE's characterization of the participation of other Sea-Land employees. Sea-Land states that David Wing did not promote equipment substitution use or abuse by Pan Pacific. Sea-Land states that BOE makes three allegations regarding Mr. Wing's interaction with Mr. Chao of Pan Pacific; that BOE alleges first that, "[a]t hearing, Mr. Wing acknowledged conversations with Cooper Chao from which he inferred that Pan Pacific was abusing equipment substitution with others [i.e., other shipping lines]"; and that it is not clear what that is supposed to prove, as it has nothing to do with participation by Sea-Land in an abuse scheme.

Sea-Land states that BOE's inference is that Mr. Wing may have felt he had to offer equipment substitution abuse to compete with other lines that were offering the same thing; that, in this regard, BOE alleges that "Cooper Chao inferred to Wing that Pan Pacific's shipment volumes with Sea-Land could be increased through the use of equipment substitution"; that, in fact, however, Mr. Wing testified that Mr. Chao "did not leverage us for the -for doing it or not doing it," and did not threaten to pull cargo from Sea-Land if it did not permit Pan Pacific to use equipment substitution; and that to the extent Mr. Chao indicated that being able to use equipment substitution might increase Pan Pacific's lift with Sea-Land to a small degree, Mr. Wing understood that to be for operational reasons, i.e., that it would mean Pan Pacific would have 40-foot equipment available if 20-foot equipment was not.

Sea-Land states that BOE also contends that Mr. Wing "conceded that he had advised Pan Pacific that equipment substitution would be made available by Sea-Land"; that it is true that Mr. Wing indicated to Pan Pacific that equipment substitution, which was authorized under the TWRA tariff, would be available; that, however, that fact does not support BOE's theory; that Mr. Wing testified that he told Pan Pacific clearly and unambiguously that "if they were able to use substitution, it would have to be per the tariff guidelines, and that he did not authorize or know about any abuse by Pan Pacific; that he also testified that he understood the reason Pan Pacific was asking about the availability of equipment substitution, and that he acknowledged its availability, was to ensure Pan Pacific would have equipment available for their shipments, a legitimate reason to use the TWRA rule; and that, on cross-examination, Mr. Chao confirmed that Mr. Wing did not discuss the concept of misdeclaration or abuse.

Sea-Land concludes that, thus, BOE has not demonstrated participation by Mr. Wing in a scheme to promote equipment substitution in violation of section 10(b)(4); that all it has shown is that he had discussions with one NVO (which accounted for a small minority of the 149 shipments) about the use of equipment substitution as provided in the TWRA tariff.

Sea-Land states that Glenn Spargo was not involved in equipment substitution abuse. Sea-Land states that BOE's allegation that Mr. Glenn Spargo was involved in promoting abuse is not only contrary to the evidence, it is illogical; that BOE's acknowledgment that the evidence of Mr. Spargo's knowledge or awareness was even "less direct" than that for Mr. Wing, is an understatement.

Sea-Land states that the only substantive point BOE can muster to link Mr. Spargo to the alleged scheme was that David Wing "testified that he reported upon issues regarding equipment substitution through discussions with Glenn Spargo, including matters arising in talks with Pan Pacific"; that it is true that Mr. Wing reported to Mr. Spargo "briefly" in a sales meeting the rumors that Pan Pacific may have been seeking to abuse equipment substitution with other carriers; that, however, it was not a major issue, and the use of equipment substitution with other carriers was not putting pressure on Sea-Land to respond in kind, so was largely irrelevant;⁽¹⁶⁾ and that Mr. Wing testified:

Q: When you-I believe you testified that you had mentioned to Mr. Spargo about the issue of equipment substitution abuses occurring, the ones mentioned by Pan Pacific. Did Mr. Spargo indicate that he was going to report that elsewhere?

A: No. I don't believe he did, but I don't think we at that time fully understood what was going on. It just-it basically came in again through the sales representative calling on these guys saying that there's some alleged issue with carriers in that particular rule, but we were-you know, it wasn't a leverage situation where, you know, someone saying you either do it or you don't get freight or we take freight away.

Wing Tr. 252.

Sea-Land states that, in the final analysis, the fact that Mr. Wing reported to Mr. Spargo that Pan Pacific may have been seeking to abuse equipment substitution with other lines does not support a conclusion that Mr. Spargo "knew, or had reason to know, of the equipment substitution scheme by which Sea-Land was allowing NVO shippers to obtain lower rates"; that Mr. Wing did not tell Mr. Spargo that Pan Pacific was abusing equipment substitution with Sea-Land, which of course Mr. Wing himself did not know; that it is also abundantly clear that Mr. Spargo did not at any time authorize or condone abuse of equipment substitution by Pan Pacific or any other NVO; and that Mr. Wing corroborated Mr. Spargo's clear and unequivocal denial on this point.

Q: Did Mr. Spargo in fact ever indicate to you that he had made a decision to promote equipment substitution for NVOCC accounts?

A: No.

Q: Did he ever tell you that he had authorized any salesperson to promote misdeclaration by NVO accounts?

A: No.

Q: Is it your belief that he or you ever authorized promoting misdeclaration by NVOCC accounts?

A: We never authorized misdeclarations.

Wing Tr. 329.

Sea-Land states that BOE also seeks to infer some knowledge of abuse to Mr. Spargo from the fact that he was accountable for the performance of Sea-Land's western region on matters of sales volumes, was familiar with some of the NVO accounts including Pan Pacific, and was known to intervene in order to handle matters directly with a customer; and that while this may be an accurate summary of Mr. Spargo's job description as regional manager, it does not support a claim that he knew about any equipment substitution abuse on Sea-Land shipments.

Sea-Land states that, finally, BOE cites "rumors circulating within Sea-Land" about the possible "involvement of persons higher in Sea-Land's sales organization engaged in NVO abuses"; and that, in fact, Mr. Ohle testified, "I do not have direct knowledge that the company [i.e., Sea-Land] was or had any type of plan to capture a market segment through gimmicking of equipment substitution." (Ohle Tr. 354-5.)

Sea-Land states that Jerome Ginn was not involved in equipment substitution abuse. Sea-Land states that BOE alleges that Jerome Ginn knew about and carried on the equipment substitution abuse after Mr. Favor left the company; that Mr. Ginn was mentioned in the testimony of only two of the NVO witnesses-World Pacific and Jasper Freight; that the World Pacific witnesses changed their testimony in cross-examination and stated that they did not in fact speak with Mr. Ginn (or Mr. Bob Steele) about equipment substitution;⁽¹⁷⁾ that Mr. Tam noted that Mr. Ginn was not involved with World Pacific until after Mr. Favor left Sea-Land, which is consistent with the testimony of other witnesses; and that, thus, from a timing standpoint, it would not have been logical that Mr. Ginn explained equipment substitution to World Pacific (even if he had been capable of doing so).

Sea-Land states that Mr. Wei of Jasper changed his story in the opposite direction; that in his written statement given to BOE investigators Clark and Carey in 1997, Mr. Wei initially testified that his Sea-Land salesperson was Mr. Ginn, who "never said anything about my company being permitted to use 40' for 20' equipment"; that three years later, when asked by BOE to provide testimony in this investigation, Mr. Wei sought to change his statement to state that Mr. Ginn told him about "how we would be permitted to use a 40' for a 20' equipment without being charged for a higher rate"; that, of note, even in this revised version, Mr. Wei does not state that Mr. Ginn told him to misdeclare; that, nevertheless, Mr. Wei's attempt to change his testimony nearly three years later is implausible, in addition to being inconsistent with the testimony of Mr. Carey and the signed statement of Mr. Ginn; and that the only plausible explanation is that Mr. Wei believed it would help his position if he tried to blame someone other than himself for his alleged abuse of equipment substitution.⁽¹⁸⁾

Sea-Land contends that the testimony of the World Pacific and Jasper witnesses with respect to Mr. Ginn is too contradictory to be credited and, more importantly, other testimony precludes a finding of Mr. Ginn's involvement. Sea-Land states that BOE investigator Carey testified that Mr. Ginn "knew that there was equipment substitution but was really uncertain and didn't have a good grasp of even what it was"; that, in Mr. Carey's words, Mr. Ginn "didn't have a clue" about equipment substitution; that it is not plausible that he instructed NVOs how to abuse equipment substitution; and that, in addition, Mr. Ginn signed a statement in which he stated that he was "unaware of any arrangements whereby Sea-Land permitted NVOCC accounts such as WPC and Jasper to misuse the 'equipment substitution' provisions to their own advantage in violation of the law."⁽¹⁹⁾

Sea-Land contends that its Customer Service Department was not involved in equipment substitution abuse. Sea-Land states that BOE alleges that the Customer Service Department, which took bookings from Sea-Land's customers, knew of equipment substitution abuse; that the basis for BOE's claim with respect to Customer Service is based on the allegations that Sea-Land used "mapped bookings," that the operational reasons for doing equipment substitution did not support the number of substitutions that occurred, and that Customer Service took substitution bookings initiated by the shipper and not the carrier; and that BOE is confusing knowledge of equipment substitution with knowledge of abuse.

Sea-Land states that Customer Service could not have been a party to the primary abuse of equipment substitution alleged in this case; that, at the time of booking, a container would not yet have been loaded, so Customer Service would have no way of knowing whether it would be loaded with more or less than 25 cbm or 18,000 kg.

Sea-Land states that BOE also points to the fact that Sea-Land's Customer Service Department used "mapped bookings" which carried over information on booking templates for the same customer, including information that the customer used equipment substitution; that given that Sea-Land processed 8,000-10,000 shipments per week, it is not surprising that Customer Service used templates and carried over information; and that the fact that an account may be authorized to use equipment substitution, as provided for in the TWRA tariff, does not establish any knowledge of or participation in a scheme to abuse substitution.

Sea-Land states that BOE alleges that equipment substitution "had become a device or means to boost Sea-Land's sales volume, and not at all an operational tool to assist carriers in repositioning equipment"; that BOE relies primarily on a statement by Mr. John Ohle, Sea-Land's operations manager in Long Beach, that he did not remember enough shortages of 20-foot equipment "to cause hundreds or thousands of substitutions for NVO customers."

Sea-Land states that, first of all, "Mr. Ohle's statement is largely irrelevant because it addresses the use of equipment substitution in hundreds or thousands of cases, which has not been established here"; that "we are dealing with 149 uses of equipment substitution over a year and a half period, which is not in the same realm as what Mr. Ohle was asked about"; that, moreover, Mr. Ohle testified that his department did not need to get directly involved in the booking process for most equipment substitution shipments because Customer Service could determine equipment availability directly through Sea-Land's computer system:

Q: Did you understand, Mr. Ohle, that customer service, at the point of booking, called terminal operations or equipment management to determine whether equipment substitution would occur immediately at the point of booking?

A: No. I'm not aware of that. When they took the booking, they would be able to look on the equipment screen to see what was available that day or that week in terms of available equipment for Sea-Land.

Sea-Land states that Mr. Ohle acknowledged the operational uses of equipment substitution during the period covered by this investigation; that he testified that beginning in the mid-1990s, Sea-Land made a corporate decision to reduce its supply of 20-foot containers, which could trigger a need to substitute 40-foot containers; that he also acknowledged the serious imbalance of eastbound and westbound cargo which led to the need to reposition empty containers to Asia to carry import cargo; that, for example, if a load of empty 20-footers has just left for Asia, there might be a shortage of 20-foot equipment on the next voyage; and that David Wing and Chris Dianora corroborated that fact that Sea-Land was reducing its 20-foot fleet at the time relevant to this case and that repositioning in connection with cargo imbalance caused a need to use equipment substitution in many cases.

Sea-Land states that in a hypertechnical reading of the TWRA rule, which refers to the carrier substituting a type of equipment "other than that which was booked or ordered by the shipper or his agent," BOE claims that a shipment should not be entitled to substitution under the rule if the shipper rather than the carrier physically initiated a booking under equipment substitution; and that this point has no merit.

Sea-Land states that, first, the evidence indicates that shippers did not unilaterally book equipment substitution and that substitution was at all times for the carrier's convenience, not the shipper's; that the World Pacific witnesses described the process of equipment substitution at Sea-Land as one where "a 40 foot container would be used in place of a 20 foot container that would be ordered by the shipper-World Pacific Container (USA) Inc. . ." (BOE Ex. 3; emphasis added by Sea-Land); and that Mr. Tse of Global Links testified of being able to obtain a 40 foot container "when I ordered a 20 foot container. . ." (BOE Ex. 6.)

Sea-Land argues that even if the shipper initially asked that a booking show equipment substitution, that does not mean there was abuse; that several Sea-Land departments were involved in the equipment substitution process-Sales, Operations, and Customer Service, among others; that any of them could have worked out with the shipper that 20-foot equipment was not available and should therefore be booked under equipment substitution; and that the fact that the shipper physically told Customer Service that a shipment would be an equipment substitution shipment does not make a difference.⁽²⁰⁾

Sea-Land states that BOE claims that it is entitled to adverse inferences on various points because Sea-Land allegedly did not produce certain documents in discovery; that, for example, because of a supposed "paucity" of certain booking records, BOE urges an inference that NVO shippers were requesting larger size containers and Sea-Land acceded to those requests; that an alleged shortage of delivery orders leads, in BOE's view, to an inference that Sea-Land charged equipment substitution rates even though it knew they were not applicable (Sea-Land states that BOE does not explain the link between the two); and that an alleged shortage of RCV tickets and gate receipts supposedly leads to an inference that the weights on equipment substitution shipments were excessive.

Sea-Land states that there is no basis for adverse inferences in this case; that, first, Sea-Land fully responded to discovery requests in this case, producing thousands of pages of documents from numerous locations, and whatever documents BOE believes were lacking are presumably no longer available; that if BOE believed otherwise, it could have filed a motion to compel or otherwise sought discovery sanctions; that, moreover, the cases BOE cites in support of its request for adverse inferences are very different from the current case; that, for example, in Banfi Products Corp., et al., 26 S.R.R. 30 (FMC 1991) and 26 S.R.R. 123 (ALJ 1991), the documents in question existed but were not produced because of an Italian blocking statute; that, here, in contrast, the documents do not exist; that, moreover, booking documents are peripheral to this case; that whether a shipment was booked under equipment substitution will not show whether Sea-Land knew the substitution would be abused or the shipment would be rated incorrectly; and that, thus, no adverse inferences are warranted in this case.

Sea-Land states that its rate audit and documentation departments were not involved in equipment substitution abuse. Sea-Land states that BOE claims that Sea-Land's rate audit department was aware of equipment substitution abuse because they were rerating shipments based on equipment substitution as early as January 15, 1997; that BOE relies on Clark Exhibit A, in which the rate audit department rerated a shipment that should have originally been rated under equipment substitution but was not; that BOE again appears to confuse awareness of the use of equipment substitution with awareness of its abuse; that it is puzzling why BOE would raise the shipment in Clark Attachment A, because it supports Sea-Land's case; that, here, the shipping instruction shows a shipment of printing paper with a weight of 4,200 kg and a cube of 15.010 cbm, both within the tariff limits for equipment substitution; that this shipment is not included in Mr. Gravitt's list, nor does BOE present any NVO documentation or other evidence that the declared weight and cube were incorrect; that before it rerated, rate audit would have obtained a packing list from the shipper to verify the weight and cube of the shipment; that rate audit did not rerate the shipment, as BOE suggests, because of the request from Sea-Land's sales department; that rate audit apparently concluded, correctly as far as the evidence shows, that the shipment should have been rated under equipment substitution; and that, indeed, based on that weight and cube in the record, Sea-Land would have been violating the Shipping Act by not rerating the shipment.

Sea-Land states that BOE emphasizes the fact that there is a note in which Richard Favor apparently pointed out to someone in Customer Service that the shipment should have been booked as equipment substitution; that, again, this observation is consistent with the evidence in the record; that it appears the shipment should have been booked and rated under equipment substitution; and that there is no evidence to the contrary.

Sea-Land states that BOE points to other shipments on which "[r]ate audit staff thereafter continued to charge lower rates to such shipper accounts under equipment substitution, even though staff knew the lower rates allowed under equipment substitution should not be charged"; that the fact that these shipments were rerated shows nothing; that the entire function of the rate audit department was to rerate shipments that were shown to be incorrectly rated; and that BOE has presented no evidence to show that the weight or measure was different than stated in the shipping instructions provided by the shipper, on which Sea-Land reasonably relied.

Sea-Land states that BOE also argues that Sea-Land's documentation and rate audit departments did not exercise adequate diligence because they did not obtain weight tickets, also called "RCV tickets," generated by Sea-Land's terminal in Long Beach to verify the weight of the shipments; that the weight tickets were generated as part of the cargo loading process at the ocean terminal, and were not part of Sea-Land's usual documentation process for rating cargo; that the use of weight tickets would have had little impact on the rating or rerating of the 149 shipments at issue in this case, since BOE only argues that a handful of those shipments failed to qualify for equipment substitution because of weight; and that, according to Mr. Gravitt, the cubic measure was the problem for the vast majority of the shipments, and of course the weight tickets provide no information on cubic measure.

Sea-Land states that the weight tickets could perhaps have been used to double check the information declared by the shipper, since presumably if the weight had been misdeclared, the measure may have been too; that, however, Sea-Land already had a source to verify the weight in that manner, the SEDs (in addition to the shipping instructions on which it usually relied); that, per the direction of the Neutral Body, and from its experience that SEDs were generally accurate, Sea-Land had renewed efforts to obtain SEDs and verify the weight and other information declared by the shipper; and that, given what it knew at the time, Sea-Land's efforts were reasonable and careful.

Sea-Land states that it took appropriate actions to prevent equipment substitution abuse. Sea-Land states that BOE cites the reports issued by Robinson Stark, the neutral body engaged by TWRA, as evidence that Sea-Land knew of an equipment substitution abuse problem and did nothing about it; that the first report cited four equipment substitution shipments, while the second cited one shipment; that Sea-Land processed 8 - 10,000 shipments per week in its Dallas documentation center; that the neutral body's reports alerted Sea-Land to a "potential" problem that needed to be addressed, although it did not signal an "epidemic";⁽²¹⁾ and that Sea-Land took appropriate and reasonable steps to address the problem under the circumstances.

Sea-Land states that the first neutral body report, issued on August 2, 1997, cited one shipment involving Asian Plaza, where General Ocean Freight was shown as the forwarder, one shipment by Fleet Shipping Lines to World Pacific in Hong Kong, and two shipments involving Pan Pacific.⁽²²⁾ Sea-Land states that in July of 1997, before the formal investigation report was even issued, Sea-Land sponsored an amendment to the TWRA tariff prohibiting 40' for 20' equipment substitution on FAK cargo, which the neutral body had indicated was a major source of the problem, and that this move stopped Brennan International and probably Supertrans from using equipment substitution.

Sea-Land states that it immediately convened a series of meetings and conference calls to address the neutral body's concerns; that these meetings included personnel from rate audit, documentation, sales, marketing, and pricing; that during those meetings, Sea-Land's policy of strictly adhering to its tariffs and service contracts was emphasized and the need to obtain SEDs or other supporting documentation from the shipper, and to verify that it was consistent with the bill of lading, was emphasized; and that Donna Smith recalls that the meetings commenced even prior to the issuance of the neutral body's formal report, based on the pre-report conversations with the investigator.⁽²³⁾

Sea-Land states that the second neutral body report, issued on December 13, 1997, revealed a single FAK shipment for General Ocean Freight; that, in response to this report, Sea-Land again met with documentation and other staff to reiterate the need to follow the tariff and obtain complete and accurate documentation; and that Sea-Land's westbound documentation director, Mr. Eddie Chan, issued an e-mail reminder to all North American regions, to documentation and rate audit, and to sales, advising of the need to obtain proper documentation.

Sea-Land states that the final neutral body report was issued on March 27, 1998; that it cited a number of shipments allegedly in violation of the equipment substitution rule; that the most common complaint was that in the neutral body's view, the weight shown for the cargo did not seem to correspond with the cubic measure; and that the neutral body believed that the weights indicated heavier contents than shown by the weights on the bill of lading.

Sea-Land states that it did not contest the neutral body findings because of the option provided for in the neutral body system to reduce the fine by half; that Sea-Land chose to take the warnings and move on; that, at the same time, Sea-Land did not admit liability; and that, thus, the Administrative Law Judge should not simply assume that the neutral body's findings in this report are necessarily correct.

Sea-Land states that BOE claims that Sea-Land instituted no new controls after the March 27, 1998 report; that, however, this is a moot point because neither the neutral body nor Mr. Gravitt found any shipments after March 27, 1998; that Sea-Land states that BOE notes that Sea-Land sought to negotiate service contracts with these shippers; that, however, Mr. Hagan testified that one of the major issues in those contract negotiations was avoidance of equipment substitution abuse; and that, moreover, there is no evidence that Sea-Land actually concluded contracts with those shippers.

Sea-Land states that BOE has not satisfied its burden of proof to support section 10(b)(4) violations on 170 shipments. Sea-Land states that at the end of its argument on section 10(b)(4), BOE requests the Administrative Law Judge to find section 10(b)(4) violations with respect to 170 shipments, rather than the 149 shipments that have been the focus of the case throughout the hearing process;⁽²⁴⁾ that the additional 21 shipments come from exhibits to Mr. Clark's verified statement; and that there is no basis to find section 10(b)(4) violations with respect to these 21 shipments. BOE now agrees that 149, not 170, shipments are involved here, infra.

Sea-Land contends that it did not violate section 19(d). Sea-Land states that BOE alleges that Sea-Land violated section 19(d) by paying forwarder compensation to ITL Shipping, who allegedly performed no forwarding services on the shipments in question and had had its license revoked, and to General Air Freight Consolidators, when it allegedly did not perform forwarding services and was affiliated with the shipper on the disputed shipments.

Sea-Land argues that its payment of forwarder compensation was consistent with the Shipping Act and the Commission's regulations, as well as with prevailing industry practice; that BOE's approach would require Sea-Land to take steps well beyond what is reasonable and what is required by the Shipping Act in order to pay forwarder compensation; that, essentially, to support a $20 forwarder compensation payment, BOE would have required Sea-Land's documentation department to examine-for each of the 8,000 - 10,000 shipments it processed each week-where the booking originated, from what location the bill of lading instructions were faxed, whether an individual was mentioned on the bill of lading instructions and if so what company that person worked for, whether the names of the shipper and forwarder were similar (and if they were, that would prompt further investigation), and whether a Federal Register notice had been issued revoking the forwarder's license, among other things; and that surely this is not a requirement.

Sea-Land states that the Shipping Act and the Commission's regulations, on the other hand, required Sea-Land to obtain a signed certification from the forwarder stating that it had an FMC license, that it had performed the required services, and that neither it nor an affiliate had a beneficial interest in the shipment; that Sea-Land did so on every shipment at issue in this case, and also checked out the certification against its own records, which were consistent; and that Sea-Land did not violate section 19(d).

Sea-Land states that BOE's proposed findings of fact are not supported by the record in several critical respects. Sea-Land contends that the issue with respect to section 19(d) is far less significant than BOE claims; that, first of all, the number of shipments for which documentation is provided is far less than the number of violations claimed by BOE; and that, second, when the dollar amounts of the payments-typically ranging between $10-25 per shipment-is taken into account, the issue borders on the trivial.

Sea-Land states that BOE has alleged that Sea-Land paid unlawful compensation to ITL Shipping on at least 265 occasions and to General Air Freight Consolidators on at least 170 occasions, citing primarily the Verified Statement of James Carey (BOE Ex. 2; see, e.g., BOE PFF 265-6, 296, 314): that, however, Attachments D and E to Mr. Carey's affidavit identified and provided check stubs for only 46 specific shipments for ITL Shipping; that, similarly, Attachments G and H identified and provided check stubs for only 25 specific shipments for General Air Freight Consolidators;⁽²⁵⁾ and that Mr. Carey does not explain or substantiate where the 265 and 170 numbers came from.

Sea-Land states that, as the Carey exhibit show, the forwarder compensation payments involved were typically between $10 and $25 per shipment; that the total amount Sea-Land paid to ITL on the 46 shipments identified by Mr. Carey was $857.19; and that the total amount Sea-Land paid to General Air Freight Consolidators on the 25 shipments identified by Mr. Carey was $256.58.

Sea-Land states that BOE has the burden to show specific evidence for these violations, not the mere assertion by Mr. Carey that he believes compensation was unlawfully paid on over 400 shipments; that such assertions do not permit Sea-Land and the Administrative Law Judge the opportunity to critically examine BOE's allegations and proposed factual findings; and that, thus, the universe we are dealing with on the 19(d) issue is the 46 ITL compensation payments and the 25 General Air Freight Consolidators payments, with a total compensation amount of approximately $1,100.

Sea-Land contends that BOE has misinterpreted the legal standard for payment of forwarder compensation. Sea-Land states that the subheadings of BOE's argument illustrate its application of an incorrect legal standard; that subheading (a) on page 80 states "Compensation can be paid only when specified services are provided," while subheading (b) on page 83 states, "Compensation can be paid only to licensed ocean freight forwarders"; that BOE has confused the standard for when a forwarder may receive compensation with the standard for when a carrier may pay compensation; and that Congress and the Commission have placed the higher standard on the forwarder, which is the party that has the singular knowledge of all the facts.

Sea-Land contends that BOE ignores the clear language of section 19(d)(1), which states that a carrier may compensate a forwarder "when the ocean freight forwarder has certified in writing that it holds a valid license and has performed the following services. . ." (emphasis Sea-Land's); that section 510.23(b) of the regulations provided that "[t]he common carrier shall be entitled to rely on such certification unless it knows that the certification is incorrect"; and that, thus, the standard for carrier payment of compensation is not whether the forwarder is licensed or has performed services, but whether the forwarder has provided a certification in writing that it has done so.⁽²⁶⁾

Sea-Land states that, similarly, BOE ignores the clear statutory policy, e.g., that the restriction in section 19(d)(4) against compensation to parties having a beneficial interest in a shipment applies primarily to the forwarder receiving compensation; that a common carrier may not "knowingly" pay compensation to such a forwarder; that, in this regard, the carrier is again entitled to rely on the forwarder's certification, which is included in the standard language provided by the Commission in then-section 510.23(c) of the regulations; and that the Commission's language, coincidentally, is exactly the language used by Sea-Land in the certifications it received.

Sea-Land states that it obtained the required certifications from forwarders for each shipment at issue in this case. Sea-Land states that it is not disputed that each compensation check issued by Sea-Land to ITL shipping and General Air Freight Consolidators included stamped language on the back that corresponded with the certification language in then-section 510.23(c) of the Commission's regulations; that this method of obtaining certifications is common practice in the industry; that it is further undisputed that each of those checks, with the certifications, was endorsed and cashed by ITL or General Air Freight Consolidators; and that, however, BOE argues that the certifications and endorsements were inadequate.

Sea-Land states that BOE argues that section 510.23(c) "provides no regulatory recognition that any act of endorsement or negotiation of the check serves as the factual and legal equivalent of a signed forwarder's certification"; that, in fact, section 510.23 specifically authorizes the certification "as an endorsement on the carrier's compensation check"; that BOE seeks to portray this regulation as merely designating the location, and not the form, of the certification; and that, however, the use of the term "endorsement" clearly envisions that endorsement of the check with the appropriate certification language would be a sufficient certification.

Sea-Land states that, in this regard, BOE argues that the language "undersigned" (which, Sea-Land states, came from the FMC's regulations) implied a handwritten signature, not a stamped endorsement; that there is no requirement in the regulatory language that the endorsement be handwritten; that, if a stamp were not a proper endorsement, or it was not generated by the forwarder, its bank presumably would not permit negotiation of the check; and that the record is clear that forwarders, like other companies, rarely endorsed checks with a handwritten signature, and that a stamped endorsement was the standard practice in the industry. Sea-Land states that the record further shows, and BOE has not disputed, that ITL and General Air Freight Consolidators stamped the compensation checks themselves; that, moreover, requiring handwritten endorsements would frustrate the express purpose of the Commission's regulation, which was to "streamline procedures for the payment of ocean freight forwarder compensation" and to render forwarder compensation "better automated and less enmeshed in clerical procedures," citing Licensing of Ocean Freight Forwarders, 22 S.R.R. 1148, 1149 (FMC 1984).

Sea-Land states that BOE next contends that the certifications were somehow invalid because the forwarders did not fill in their license numbers when they endorsed the compensation checks; that, however, as Mr. Carey's exhibits show, Sea-Land already had these forwarders' license numbers from the bill of lading instructions and bills of lading; that, in addition, Sea-Land double checked the license number on the bill of lading with the license number shown in its database; that, as a result, Sea-Land already had two sources of the license number information; that BOE does not dispute that the license numbers matched the forwarders involved (recognizing that ITL's license was revoked at a certain point); and that, in other words, Sea-Land would have had no more information if the forwarders had filled in the blank on the check endorsement.

Sea-Land states that BOE cites the testimony of Mr. Oh and Mr. Wu that they did not subjectively understand that their endorsement of the compensation checks constituted certification; that the language on the checks they endorsed was quite clearly certification language; that Sea-Land cannot be required to divine the subjective understanding of each forwarder that endorses a compensation check; that the Commission's regulations authorize certification by endorsement; that Sea-Land used the language from the regulations verbatim; that ITL and General Air Freight Consolidators endorsed the checks; that Sea-Land satisfied its obligations for payment of compensation and is entitled to rely on the certifications by endorsement; and that this, in essence, is what the statutory policy requires, nothing more.

Sea-Land states that, finally, BOE asserts that Sea-Land was not entitled to rely on the certifications because it knew they were incorrect, triggering the exception in section 510.23(b); that BOE claims that Sea-Land knew that the forwarders had not engaged, booked, secured, reserved, or contracted for the cargo, or prepared and processed the documentation; and that BOE apparently believes that Sea-Land should have recognized the contact name on some of the bills of lading instructions (the contact person, it turns out, works for the shipper) or perhaps the fax marking on the bill of lading instructions.

Sea-Land states that it did not know that the forwarders had not performed the requisite services based on the bill of lading instructions; that the fact that those might have been faxed from the shipper's offices, or that they showed a contact person different from the shipper, does not show on their face that the forwarder had no role; that the forwarder might have called on the telephone to book the cargo at an earlier date; that the forwarder might have prepared the documentation in conjunction with the shipper and then faxed it from the shipper's fax machine; and that Ms. Donna Smith testified that Sea-Land often received shipping instructions or other documentation directly from a shipper's office, even when a freight forwarder was involved.

Sea-Land states that BOE's argument shows how it is seeking to turn the simple, streamlined procedure provided for in the Commission's regulations into a tortuous quagmire that would engulf carriers in a sea of unnecessary paperwork; that, in addition to the efforts already undertaken, BOE would require Sea-Land's documentation department to check-on each of the 8,000 - 10,000 shipments it processes per week-where the booking originated, from what location the bill of lading instructions were faxed, whether an individual was mentioned on the bill of lading instructions and if so what company that person worked for, whether the names of the shipper and forwarder were similar (and if they were, that would prompt further investigation), and whether a Federal Register notice had been issued revoking the forwarder's license, among other things; and that this level of investigation is not required by the Act or the regulations.

Sea-Land states that it did not knowingly pay forwarder compensation to an affiliate of General Ocean Freight. Sea-Land states that BOE argues that Sea-Land improperly compensated General Air Freight Consolidators because it was an affiliate of the shipper, General Ocean Freight; that again, however, BOE applies an incorrect legal standard; that under section 19(d)(4), a carrier is only liable where it "knowingly" pays compensation to a party with a beneficial interest in the shipment; that part of the shipper's signed certification, which General Air Freight Consolidators provided for each shipment in question, was that "neither it nor any holding company, subsidiary, affiliate, officer, director, agent or executive of the undersigned has a beneficial interest in this shipment; and that Sea-Land was entitled to rely on General Air Freight's certifications, which were provided in all cases.

Sea-Land states that it did not know, and had no reason to know, that General Air freight Consolidators was affiliated with General Ocean Freight Container Lines; that the names were not, as BOE asserts, "essentially identical"; that "General" and "Freight" are such common terms for transportation companies that the presence of those terms in the respective names would not necessarily lead one to believe they were affiliated; that the two companies had different addresses (General Ocean Freight's address was 1031 Manchester Blvd., Suite A, Inglewood, CA, while General Air Freight Consolidators' address was 125½ Marengo Avenue, Alhambra, CA); that each had a different identification number in Sea-Land's database; and that General Air Freight Consolidators showed an FMC license number of 3375, while General Ocean Freight did not.

Sea-Land states that BOE alleges that Sea-Land paid forwarder compensation directly to General Ocean Freight on some of the disputed shipments; that it is not clear where this allegation comes from, and there is no evidence to support it in the record; that all of the compensation checks in Mr. Carey's exhibits are made out to General Air Freight at the Alhambra address, and that they are endorsed in the name of General Air Freight Consolidators; that the same is true for the compensation checks included in Counsel's Exhibit 9, with one exception; that that exception is a check used to provide a readable example of the certification language on Sea-Land's compensation checks, which in many cases is blurred in the available copies; that it is not clear that that check has any direct relation to the shipments in this case; that, for the check in question, it is not clear who the shipper was on the shipment for which compensation was paid; that as Counsel's Exhibit 25 shows, that check was paid in May 1998, outside the time period alleged by BOE for the improper compensation payments; and that, thus, there is no evidence in the record that Sea-Land ever paid compensation directly to General Ocean Freight on a General Ocean Freight shipment.

Sea-Land states that in several other instances, BOE's proposed findings of fact used to support this argument are not consistent with the record references attached to them; that, for example, PFF 300 indicates that some bills of lading showed General Ocean Freight at the Inglewood address as the freight forwarder, citing paragraphs 28 and 36 of Mr. Carey's statement; that, in paragraph 28, Mr. Carey seems to imply that General Ocean Freight was sometimes shown as the forwarder on Sea-Land shipments, but none of his attachments so indicate; that BOE's PFF 307 claims that "Sea-Land's database identified two addresses for FMC License No. 3375: the address of the shipper and the residential address of the shipper's president," citing paragraphs 14B, 14D, and 17 of Donna Smith's statement; that, in fact, paragraphs 14B and 14D have nothing to do with the address for FMC license 3375, and paragraph 17 shows exactly the opposite of what BOE claims; that it shows that the address of the licensee was the Alhambra address, while the address of General Ocean Freight (which was not the licensee) was the Inglewood address.

Sea-Land states that, in sum, BOE has not satisfied its burden of proof to demonstrate that Sea-Land knew that General Air Freight Consolidators was affiliated with General Ocean Freight or otherwise had a beneficial interest in the shipment at issue; that, in fact, the evidence available to Sea-Land did not reasonably indicate an affiliation; and that, accordingly, Sea-Land did not violate section 19(d)(4) by paying forwarder compensation to General Air Freight Consolidators.

BOE replies that any "heavy burden of proof" urged by Sea-Land to establish violations by Sea-Land four to five years after the shipments occurred relates only to the difficulty in obtaining the evidence rather than the weight to be given to such evidence.

BOE states that Sea-Land purports to attack the "origin or reliability of the documents relied upon" and asserts that there is no evidence "when" internal NVOCC documents were prepared or "where the weight and measurement information came from." BOE's reply is that Sea-Land's attack is predicated solely upon the weight to be given its evidence; "that a regulatory body . . . ought not to be hampered in its proceedings by the hard and fast rules as to pleading and practice which govern courts of law" and "that even when acting in a quasi-judicial capacity the strict rules which prevail in suits between private parties do not apply, and that inquiries should not be too narrowly constrained by technicalities. . .," citing Sanrio Co. Ltd. v. Maersk Line, 19 S.R.R. at 1635, in turn citing Oakland Motor Car Co. v. Great Lakes Transit Corp., 1 U.S.S.B.B. 308, 311 (1934); Agreement No. 10294, 19 S.R.R. 318, 321 (ALJ 1979); Banfi Products Corp., 26 S.R.R. 951, 957 (FMC 1993); Pacific Champion Express Co. Ltd.-Possible Violations of Section 10(b)(1) of the Shipping Act of 1984, 28 S.R.R. 1105, 1106 (ALJ 1999).

BOE states that the oral and written testimony of the NVO witnesses, together with the testimony of BOE's investigators Clark, Carey and Gravitt, and the rebuttal testimony of witnesses Rich Favor and John Ohle, corroborate and explain the documentary evidence and meets the preponderance of the evidence test.

BOE states that Sea-Land has not met its burden of going forward with rebuttal evidence. BOE states that Sea-Land assails the "accuracy" of the documents produced as insufficient to establish misdeclarations, while discounting (or ignoring) entirely the testimony of NVO witnesses admitting that such practices were undertaken by the NVOs; that Sea-Land seeks to isolate and critique Mr. Gravitt's written and oral testimony without regard to the context of the NVO testimony already adduced, and without regard for the contemporaneous nature of the investigations and related document collection conducted by BOE witnesses Clark and Carey; and that this "restricted or fragmented approach to the evidence" suggested by Sea-Land exemplifies the very procedure which the Commission has rejected previously.

BOE states that no element better reveals the growing chasm between traditional concepts of substantial evidence and Sea-Land's own reliance upon "lawyer's evidence" than respondent's single-minded insistence that the Sea-Land bill of lading should be deemed the most reliable documentation here because it matches the shipper export declaration ("SED"); and that no witness testifying in this proceeding, including Sea-Land's sponsored witnesses, have yet supported this SED matching theory created by Sea-Land.

BOE states that, contrary to Sea-Land's assertions that the SED information is conceded to be reliable, BOE introduced evidence wherein third parties, such as the Federal government (Bureau of Census and the U.S. Customs Service) as well as the Neutral Body,⁽²⁷⁾ each have stated that many SEDs are unreliable. On March 12, 1996, the Bureau of Census and the U.S. Customs Service issued a letter to the shipping industry (FTSR Letter No. 165), in which the government stated that "an increasing number of SEDs are deficient-as many as one out of every two paper SEDs contains errors of omission or commission," thus placing the industry on notice of the Federal government's own concern that SEDs could not be deemed reliable. (CO Ex. 45.) FTSR Letter No. 165 also identifies the agencies' general enforcement policy with respect to SED deficiencies: "[i]n the past, Customs has generally limited its enforcement actions to fining the carriers up to $1,000 for filing SEDs late." (CO Ex. 45.) BOE states that expert witness Mr. Gravitt came to the same conclusion. BOE states that, furthermore, indeed Sea-Land's own witness, Donna Smith, acknowledged that she would rely more upon Sea-Land's gate terminal ("RCV" ticket) when there is a conflict between the weight shown on the SED and the weight shown on Sea-Land's RCV ticket. BOE states that this same Sea-Land witness testified that for cargo received by Sea-Land that was not containerized by the shipper, she would not assume that the SED is more reliable than the Sea-Land bill of lading: if there was a conflict between the Sea-Land bill of lading and the SED, she would "go to the warehouse and get the CFS [Container Freight Station] warehouse receipt" to determine from the weight and measure recorded on the receipt whether the Sea-Land bill of lading, or the SED, was correct. BOE states that, thus, the evidentiary record demonstrates that the witnesses herein, and such other persons familiar with SEDs, had little reason to assume that SEDs are always reliable; nor is there evidence demonstrating that SED information is, in fact, always reliable with respect to Sea-Land's own shipments.

BOE states that through probative and reliable evidence it has shown the actual weight and cubic measure of these 149 shipments based on NVO testimony, NVO documentation, RCV tickets and the analysis of BOE witness Gravitt; that Sea-Land's sole evidence to contravert this proof is the bill of lading and the SEDs-at least in those instances where the SEDs are complete as to the shipment, and where the SEDs do not reflect that Sea-Land had possession and thus knowledge of the actual cargo measurements.

BOE states that Sea-Land has not met its burden of going forward with rebuttal evidence as to the Gravitt rate analysis. BOE states that Sea-Land's personal opinions, arguments and assessment of the evidence, however informed or misinformed, cannot substitute for the evidence of record, citing Agreement No. 10387, 21 S.R.R. 131, 132 (FMC, 1981) ("[U]nder any reasonable standard, argument of counsel does not suffice as substantial evidence."), accord, Petition of South Carolina State Ports Authority for Declaratory Order, 27 S.R.R. 1137, 1162 (FMC 1997). BOE states that Sea-Land chose not to present a witness to challenge Mr. Gravitt's analysis; that Sea-Land opines, without any witness or sworn testimony to support same, that the documents used by Mr. Gravitt in his analysis were simply not reliable; and that this is classic "lawyer's evidence," Malpractices-Brazil/United States Trade, 12 S.R.R. 242, 251 (I.D. 1971), adopted, 12 S.R.R. 817, 820 (FMC, 1971), citing International Ass'n of Machinists v. NLRB, 110 F.2d 29, 35 (D.C. Cir. 1939), aff'd 311 U.S. 72 (1940). BOE states that Sea-Land may not now furnish personally the testimony lacking in Sea-Land's case in chief, citing Eastern Guide Trading Co. v. Cyprian Fabre et al., 1 U.S.S.B. 188, 191 (1930); West Coast Line Inc. v. Grace Line, 3 F.M.B. 586, 595 (1951); Alcoa Steamship Co. Inc. v. Cia. Anonima Venezolana, 7 F.M.C. 345, 361 (1962); and Rate Agreement Exclusive Patronage System, 11 F.M.C. 513, 523 (1968).

BOE states that, while BOE has presented substantial extrinsic evidence which demonstrates that the SEDs were not reliable, that Sea-Land has failed to introduce evidence which demonstrates that Mr. Gravitt's factual analysis is unreliable.

Gravitt Shipment No. 1

BOE states that Mr. Gravitt concluded that this shipment exceeded the maximum measurement allowed for equipment substitution and therefore it did not qualify for equipment substitution rates; that this shipment was selected by the shipper, Brennan, and appended as evidence of its own equipment substitution malpractice involving Sea-Land; that, thus, there is direct written testimony by the shipper which supports Mr. Gravitt's conclusion that an equipment substitution malpractice in fact occurred; that the "measurements on Brennan's container load plan were reduced so that Brennan could take advantage of [Sea-Land employee] Mr. Favor's invitation to obtain lower rates through misuse of the equipment substitution rule"; and that Brennan's witness and Mr. Gravitt independently concluded that there was a misuse of the equipment substitution rule for this shipment.

Gravitt Shipment No. 3

BOE states that Mr. Gravitt concluded that this shipment exceeded the maximum measurement allowed for equipment substitution and, therefore, it did not qualify for equipment substitution rates; that Brennan's witness testified that the equipment substitution rule was misused for this specific shipment; that, inasmuch as Brennan's "unfreighted manifest" was created to support the numbers shown on the Sea-Land bill of lading, Brennan informed Sea-Land that this shipment would contain 6.06 CBM of non-hazardous cleaning compounds; that the container load plan, dock receipt and other documents also report this cargo; and that Sea-Land chooses to disbelieve the "Freight Transfer Receipt" identifying 6.06 CBM of non-hazardous cleaning compound; that adding the cleaning compound measurement as stated in the Brennan container load plan shows that the shipment exceeded maximum measurement for equipment substitution; and that, thus, Brennan and Mr. Gravitt independently concluded that there was a misuse of the equipment substitution rule for this shipment.

Gravitt Shipment No. 4

BOE states that Mr. Gravitt determined that this shipment's measurement was 43.94 CBM and, therefore, equipment substitution rates should not have been charged; and that this is the number listed on Global Links' container manifest.

BOE states that the Sea-Land bill of lading shows the measurement as 19.22 CBM; that the SED fails to show any cubic measurement; and that, according to Sea-Land, because the weights on the SED "match" the weight on the Sea-Land bill of lading, all other information on the Sea-Land bill of lading also must be correct.

BOE states that, inasmuch as the SED fails to provide any evidence regarding measurement, Mr. Gravitt decided that the container manifest's measurement was reliable; that, based upon his review of this shipment file, equipment substitution abuse took place; and that no witness testified that Mr. Gravitt's expert opinion was wrong.

Gravitt Shipment No. 11

BOE states that Mr. Gravitt determined that this shipment's actual measurement was 36.17 CBM and, therefore, equipment substitution rates should not have been charged; that this is the number listed on Global Links' container manifest; that the Sea-Land bill of lading shows the measurement as 21.55 CBM; that the SED fails to show any cubic measurement; that Sea-Land employed an SED matching theory to claim that the container manifest is unreliable; that Sea-Land offered no witness to support this theory, which the evidentiary record refutes; that Mr. Gravitt gave an expert opinion that there was a misuse of the equipment substitution rule for this shipment; and that Sea-Land offered no sworn witness to testify that Mr. Gravitt's expert opinion was wrong.

Gravitt Shipment No. 22

BOE states that Mr. Gravitt determined that this shipment's actual measurement was 63.13 CBM and, therefore, equipment substitution rates should not have been charged; that this is the number listed on Global Links' NVO bill of lading wherein Baltrans Ocean is listed as shipper, the commodity is identified as "computers," and the weight shown is 10.526K; that the Sea-Land bill of lading shows the measurement as 21.78 CBM, the weight as 10.52K and the commodity as "Toys, N.O.S."; and that no SED was provided by Sea-Land for this shipment.

BOE states that according to Sea-Land there were two Global Links bills of lading for this shipment: one supported Mr. Gravitt's analysis and the other supported the information on the Sea-Land bill of lading; that, according to the testimony of Mr. Gravitt, the document which supports the Sea-Land bill of lading is a Global Links "Intermodal Master Set" where the bottom of the document does not contain any standard bill of lading language but instead shows: "To: Sea-Land, Incorporated, Attention: Ocean Outbound Documents From David and /GLE"; and that this Intermodal Master Set document was the bill of lading instruction sheet sent to Sea-Land by Global Links.

BOE states that Sea-Land claims that the shipment file contains two dock receipts which demonstrate that Global Links received a total of 74.71 CBM of "Compaq Presario"; that of the 332 cartons shown (96 + 68 + 168 cartons), only 304 were included in the container reflected on Sea-Land's bill of lading; and that if the NVO received more cargo than could be loaded into a single container, Global Links' practice was to break up shipments for loading purposes.

BOE states that Mr. Gravitt gave an expert opinion that there was a misuse of the equipment substitution rule for this shipment; that Sea-Land offered no sworn witness who examined this shipment file or testified that Mr. Gravitt's expert opinion was wrong; that Mr. Gravitt concluded that the Global Links bill of lading that identified Baltrans Ocean Inc. as the shipper was reliable; that Mr. Gravitt also identified in the shipment file a Baltrans Ocean Inc. document that contained measurement information corroborating the Global Links bill of lading upon which he relied; and that, thus, Mr. Gravitt considered all available documentation as to the measurement information shown in the documents of the underlying shipper, Global Links, and Sea-Land in concluding that the shipment did not qualify for equipment substitution rates.

Gravitt Shipment Nos. 24, 25, 64 and 111

BOE notes that Sea-Land states that Global Links assigned the same figure of 50 CBM to each of "these four full-container shipments of Compaq computers" where the weights ranged from 8,377.48K to 14,010.23K; that, according to Sea-Land, the weight and measurement information for these shipments is so "unreliable" that no conclusion can be made as to whether these shipments exceeded the maximum measurement for equipment substitution. BOE states that from this determination Sea-Land states that the weights and measures shown on the Sea-Land bills of lading are "well within the limits for equipment substitution."

BOE states that, in reviewing these shipments, Mr. Tse stated that the 50 CBM used on the Global Links bills of lading were approximate measurements for the cargo; that the cargo definitely exceeded 40 CBM for one shipment where he prepared the documentation; and that by using the Global Links warehouse receipts contained within the remaining three shipment files, one could calculate the approximate cubic measurements for these shipments.

BOE states that, according to Mr. Tse, Global Links gave reduced cargo measurements to Sea-Land to obtain equipment substitution rates based on the details furnished by Sea-Land's employee Richard Favor; that Mr. Gravitt determined that Global Links' approximate cargo measurement of 50.0 CBM was a more reliable cargo measurement for these four shipments than the measurements given by Global Links to Sea-Land and, therefore, equipment substitution rates should not have been charged by Sea-Land; that, thus, Global Links' witness confirmed Mr. Gravitt's conclusion that these four shipments did not qualify for the equipment substitution rates; and that Sea-Land has offered no witness who examined these shipment files or who testified that Mr. Gravitt's expert opinion was wrong.

Gravitt Shipment No. 51

BOE states that Mr. Gravitt determined that this shipment's actual measurement was 64.24 CBM and, therefore, equipment substitution rates should not have been charged; that this number is based on a Morrison container manifest; and that the Sea-Land bill of lading shows the measurement as 24.24 CBM.

BOE states that Sea-Land offered no sworn fact witness for the purpose of examining this shipment file and to testify that Mr. Gravitt's expert opinion was wrong or to testify that Mr. Gravitt should have excluded the container manifest which showed 64.24 CBM of cargo from his analysis.

BOE states that Mr. Gravitt gave an expert opinion that there was a misuse of the equipment substitution rule for this shipment; that, according to Mr. Gravitt, the manifest that supports the Sea-Land bill of lading is an altered version of the manifest upon which he relied; that Mr. Gravitt testified that he believed someone purposefully changed the manifest measurement numbers to reduce the cubic measurement; and that Mr. Gravitt also testified that, based upon his experience as an investigator, the commodity descriptions of pallets, rolls and pieces indicated cubic measurements which would be consistent only with that manifest upon which he had relied.

BOE states that Sea-Land sought to test Mr. Gravitt's expertise using this shipment; that Sea-Land asked Mr. Gravitt to calculate the approximate measurement for 5 pallets of golf clubs and parts, all without looking at the documents; that Mr. Gravitt estimated the cargo at approximately 15 CBM; that the Morrison manifest upon which Mr. Gravitt relied identified the actual measurement as 13.65 CBM; that the Morrison manifest that Sea-Land claimed as support for Sea-Land's bill of lading identified the measurement as 3.65 CBM; and that Sea-Land thus successfully demonstrated Mr. Gravitt to be expert in analyzing the reliability of information in shipping documents.

Gravitt Shipment No. 53

BOE states that Mr. Gravitt determined that this shipment's actual measurement was 60.36 CBM and, therefore, equipment substitution rates should not have been charged; that this number is based on a Morrison container manifest; and that the Sea-Land bill of lading shows this shipment's measurement as 24.36 CBM of cargo.

BOE states that Sea-Land contends that because there are two Morrison documents in the shipment file which support the Sea-Land bill of lading information, Mr. Gravitt's decision to rely on the Morrison manifest which showed a higher cubic measurement is based on speculation; that, according to Sea-Land, Mr. Gravitt's conclusion that someone altered the Morrison manifest to support the Sea-Land bill of lading measurement is simply wrong; and that Sea-Land again testifies to the effect that there are no "obvious alteration marks" on the manifest.

BOE states that the two Morrison documents to which Sea-Land presumably is referring include a document where Sea-Land bill of lading information was printed on Morrison bill of lading stationery for transmittal to Sea-Land, and a second document comprising the Morrison container manifest; that Mr. Gravitt testified generally that Morrison would not have issued to itself a Morrison bill of lading where Morrison is listed as the shipper; and that such document might be used by Morrison to provide instructions to Sea-Land for the preparation of the Sea-Land bill of lading.

BOE states that, with regard to the two Morrison container manifests, Sea-Land asked Mr. Gravitt if the second might be simply be a corrected manifest; that Mr. Gravitt explained that the second manifest was not a corrected version because of the suspicious cubic measurement reductions from the Morrison manifest upon which he relied; that Mr. Gravitt gave specific examples derived from his experience in reviewing NVO documentation: a change of exactly 10 CBM from 18.78 CBM to 8.78 CBM, and a change of exactly 13 CBM reducing 16.76 CBM to 3.76 CBM; that he also explained the basis for his observation: "It's uncommon for one manifest to have such two whole number changes. And if you go down to the others, the rarity increases with each example" (Gravitt Tr. 964 ln 12-15); that based upon his years of reviewing shipping documents, Mr. Gravitt gave an expert opinion that there was a misuse of the equipment substitution rule for this shipment; and that Sea-Land has offered no sworn witness who examined this shipment file.

Gravitt Shipment No. 54

BOE states that Mr. Gravitt determined that this shipment's actual measurement was 61.18 CBM and, therefore, equipment substitution rates should not have been charged; that this number is based on a Morrison container manifest; that the Sea-Land bill of lading shows the measurement as 24.18 CBM; that, according to Sea-Land, there was a second Morrison manifest and a Morrison house bill of lading which confirmed the Sea-Land bill of lading information; and that, therefore, according to Sea-Land, Mr. Gravitt's analysis and conclusion was wrong because he chose not to rely on these Morrison documents.

BOE states that with regard to the document which Sea-Land describes as a Morrison bill of lading, Mr. Gravitt testified that this document may have been sent to Sea-Land as Morrison's bill of lading instruction sheet; that the document identifies Morrison as both shipper and consignee; that Morrison would not issue such a bill of lading to itself; that Mr. Gravitt also testified that he believed that the Morrison container manifest that he relied upon was correct and that the second Morrison manifest which supported the Sea-Land bill of lading appeared to be an altered version of the container manifest upon which he relied; and that, when asked if the manifest that matched Sea-Land's bill of lading could instead be a corrected manifest, Mr. Gravitt testified, "Usually when things are corrected, they're corrected in such a manner as not to conceal. There's an attempt here to conceal, not to correct, in my opinion."

BOE states that Mr. Gravitt gave an expert opinion that there was a misuse of the equipment substitution rule for this shipment; that Sea-Land has offered no witness who examined this shipment file and testified that Mr. Gravitt's expert opinion was wrong; and that there is no evidentiary basis to find that Mr. Gravitt should have excluded the Morrison container manifest which showed 61.18 CBM of cargo from his analysis.

Gravitt Shipment No. 108

BOE states that Mr. Gravitt determined that this shipment's actual measurement was 45.0 CBM and, therefore, equipment substitution rates should not have been charged; that this is the number listed on General Ocean Freight's NVO bill of lading; and that the Sea-Land bill of lading shows the measurement as 22.0 CBM, which figure appears also on the SED.

BOE states that its witness previously testified that an NVO bill of lading can be considered reliable because it is "being issued to the ultimate shipper of the cargo, he knows what he's tendered. He knows what the commodity is, he knows the weight, he knows the measure. If you're giving him a house [NVO] bill of lading, it's more likely that it would be correct because it's easily verifiable to the shipper." (Gravitt Tr. 809 ln3 - 11.)

BOE states that, in contrast, this October 1997 shipment of General Ocean took place shortly after Sea-Land received the first Neutral Body letter stating that, based upon the cubic measurement shown on a General Ocean SED, Sea-Land had engaged in an abuse of the equipment substitution rule; that, according to Sea-Land witness Donna Smith, Sea-Land would check the documents of just the NVOCC accounts identified in the Neutral Body investigation to make "sure weights, cubes, commodities, matched" (Smith Tr. 120 ln19 - 121 ln4); that this was done because Sea-Land understood that the Neutral Body's general practice was to "come back after a certain period of time" to "spot-check those accounts" (Smith Tr. 121 ln10 - 15); that Sea-Land thus would have checked to make sure that the General Ocean SEDs had been made consistent with the bills of lading; that, notwithstanding such awareness by Sea-Land, the Neutral Body identified further General Ocean shipments in March 1998, stating that the "cubic measurement on the Bills of Lading and SEDs are understated so as to qualify the cargo for the 20' container rate; that, thus, Mr. Gravitt's decision not to give any greater weight to the General Ocean SED for this shipment when presented for the first time during the cross-examination of Mr. Gravitt was well-founded; and that Sea-Land offered no sworn witness who examined this shipment file to testify that Mr. Gravitt's expert opinion was wrong or to testify that Mr. Gravitt should have excluded the house bill from his analysis.

Gravitt Shipment No. 129

BOE states that Mr. Gravitt determined that this shipment's actual weight was 19.55K and, therefore, equipment substitution rates should not have been charged; that this information is based on the weight recorded on World Pacific's NVO bill of lading; that the Sea-Land bill of lading shows the weight as 10.9K; and that the SED shows the same weight as the Sea-Land bill of lading.

BOE states that, despite BOE's discovery request and Sea-Land's own document retention policy, Sea-Land failed to provide its RCV ticket (weight scale receipt) which would show how much this cargo weighed when Sea-Land weighed it at the terminal in Long Beach, CA; and that Sea-Land's practice was to weigh all loaded containers.

BOE states that the entire shipment file for this shipment was introduced into evidence as CO Ex. 6; that the file contains a "Bill of Lading Master" where the information on it matches the World Pacific bill of lading; that this bill of lading master has a facsimile tag on the edge which states, "From: PSD-LAX"; that, according to the bill of lading master and World Pacific's bill of lading, the underlying shipper is "P.S.D. International Inc."; that the bill of lading master was sent initially by the shipper to World Pacific; that, thus, Mr. Gravitt considered the weight information shown in the documents of the underlying shipper, as well as World Pacific and Sea-Land, when he concluded that the shipment did not qualify for equipment substitution rates; that Mr. Gravitt gave an expert opinion that thee was a misuse of the equipment substitution rule for this shipment; and that Sea-Land offers only "speculative possibilities" which do not arise to the level of substantial evidence, citing West Coast Line Inc. v. Grace Line, supra, 3 F.M.B. at 595.

Gravitt Shipment No. 130

BOE states that Mr. Gravitt determined that this shipment's actual weight was 19.04K and, therefore equipment substitution rates should not have been charged; that this information is based on World Pacific's bill of lading; that the Sea-Land bill of lading shows the weight as 11.12K; and that the SED shows the same weight as the Sea-Land bill of lading.

BOE states that the entire file for this shipment was introduced into evidence as CO Ex. 5; that the file contains a "Bill of Lading Master" which information matches the World Pacific bill of lading; that this bill of lading instruction contains a handwritten note, "Attn:Joey - World Pacific"; that Mr. Gravitt concluded that this document did not originate with World Pacific, but was sent to World Pacific by a third party having dealings with the cargo; that, thus, Mr. Gravitt considered the weight information shown in the documents of a third party, as well as World Pacific and Sea-Land, in concluding that the shipment did not qualify for equipment substitution rates; and that no witness has examined this shipment file and provided sworn testimony that Mr. Gravitt's expert opinion was wrong.

BOE states that, despite BOE's discovery request and Sea-Land's own document retention policy, Sea-Land failed to provide its RCV ticket which would show how much this cargo weighed when Sea-Land weighed it at the terminal gate in Long Beach, CA; and that Sea-Land's practice was to weigh all loaded containers.

Gravitt Shipment No. 131

BOE states that Mr. Gravitt determined that this shipment's actual measurement was 39.84 CBM and, therefore, equipment substitution rates should not have been charged; and that this is the number listed on World Pacific's bill of lading.

BOE states that Mr. Tiao of World Pacific testified that, for this shipment, World Pacific's bill of lading contained the correct information; that the SED shows a weight of 11,026 kilos but fails to show any cubic measurement; and that, as to the SED weight, Mr. Tam of World Pacific testified that he had reason to believe that this SED sent to Sea-Land was incorrect.

BOE states that, despite this testimony, Sea-Land tries to use its SED matching theory as the vehicle to claim that the NVO bill of lading is unreliable; that Sea-Land's theory is based upon the flawed premise that if certain SED information matches certain Sea-Land bill of lading information, then all other Sea-Land bill of lading information must be correct; and that Sea-Land offers no witness to support this theory, while the evidentiary record and sworn witnesses have refuted this theory.

BOE states that the entire file for this shipment was introduced into evidence as CO Ex. 4; that, as explained by World Pacific's witness, the measurement, weight and purchase order number on the underlying shipper's packing list, which is included in the shipment file matches the World Pacific bill of lading; that, thus, Mr. Gravitt considered the measurement information shown in the documents of the underlying shipper, as well as that of World Pacific and Sea-Land, when he concluded that the shipment did not qualify for equipment substitution rates; that Mr. Gravitt gave an expert opinion that there was a misuse of the equipment substitution rule for this shipment; and that Sea-Land offered no witness who, having first examined this shipment file, could testify that Mr. Gravitt's expert opinion was wrong.

Gravitt Shipment No. 134

BOE states that this shipment was appended as Attachment 3 to Sea-Land's Opening Brief; that from his examination of the shipping file, Mr. Gravitt had determined that this shipment's weight was 22.13K and, therefore, equipment substitution rates should not have been charged; and that this information is based on World Pacific's bill of lading.

BOE states that the Sea-Land bill of lading shows the weight as 23,580 pounds and 10.69K; that the SED shows the same weight as the Sea-Land bill of lading; and that Sea-Land claims that because the weights on the SED and Sea-Land bill of lading match, the weight information on the NVO bill of lading must be unreliable.

BOE states that, despite BOE's discovery request and Sea-Land's own document retention policy, Sea-Land failed to provide its RCV ticket which would show how much this cargo weighed when Sea-Land weighed it at its terminal gate in Long Beach, CA; and that Sea-Land's practice was to weigh all loaded containers.

BOE states that Mr. Gravitt gave an expert opinion that there was a misuse of the equipment substitution rule for this shipment based upon all of the documents in the shipment file; that Sea-Land offered no witness who examined this shipment file to testify that Mr. Gravitt's expert opinion was wrong or to establish a convincing basis upon which Mr. Gravitt should have excluded World Pacific's bill of lading from his analysis; and that while this entire shipment file was not introduced into the record, Mr. Gravitt's decision to rely on World Pacific's bill of lading for this shipment was reasonable based upon Mr. Gravitt's assessment as to the demonstrated reliability of other World Pacific shipments, previously described.

BOE states that Sea-Land has submitted no testimony which rebuts the balance of Mr. Gravitt's review and testimony, and that since Sea-Land had ample opportunity to cross-examine Mr. Gravitt as to the full extent of his findings, and could have tendered testimony of its own expert witnesses, the violations as to these additional 132 shipments must be deemed admitted, citing, e.g., Adair v. Penn-Nordic Lines Inc., supra, 26 S.R.R. at 15 ("It is a familiar rule of evidence that a party having control of information bearing upon a dispute issue may be given the burden of bringing it forward and suffering an adverse inference from failure to do so. . . . In regulatory proceedings, placing such a burden on the regulated firm, where the relevant information concerns its operations and management, has become part of the 'common law' of regulations."), citing Alabama Power Co. v. F.P.C., 511 F.2d 383, 391 n.14 (D.C. Cir. 1974).

BOE states that Sea-Land has not met its burden of gong forward with evidence rebutting the participation of Sea-Land and its employees. BOE states that Sea-Land claims that it "made substantial and determined efforts to find out the weight and measure of equipment substitution shipments" and asserts that NVOs "found out about equipment substitution from other NVOs" rather than from Sea-Land, and that these assertions are not supported by the record, citing, e.g., BOE response to SL PFF 93-94, 95-96.

BOE states that Sea-Land's sales representative stated that he told NVOs that they could load cargo in excess of the maximum measurement and weight requirements for equipment substitution and obtain equipment substitution rates in 1996 and early 1997; that he made it clear to his NVO customers that Sea-Land would not question requests for equipment substitution rates; and that subsequent events have, in fact, shown that Sea-Land did not challenge the excessive use of equipment substitution by certain NVOs.

BOE states that Sea-Land's sales representative testified that his supervisors were aware of his equipment substitution sales approach and fully authorized his actions; that the supervisors deny they authorized such malpractices; that their negligence in supervising this employee allowed such rate malpractices to arise and to flourish during the tenure of Mr. Favor's employment; that neither can they deny that their inattention or willful disregard permitted such equipment substitution abuses to continue after May 1997, at a time when Mr. Favor's replacements were servicing these same NVO accounts, citing BOE response to SL PFF 85, 89; and that thus, by their negligence, these Sea-Land supervisors allowed shippers to obtain ocean transportation at less than the applicable rates and charges in 1996 through May 1997, and thereafter until at least March 1998, in violation of section 10(b)(4). BOE states that, during this same time period, other Sea-Land employees also helped the NVO shippers by permitting the NVO to "correct" the shipper documentation so that everything would, on paper, support Sea-Land's charging of equipment substitution rates; and that Sea-Land has presented no evidence that Sea-Land ever used its own weight records to verify weight, opened containers to verify measurements, refused to provide equipment substitution to the NVOs previously identified by the Neutral Body, or even spoke with NVOs about their equipment substitution abuses.

BOE states that Sea-Land has not met its burden of going forward with evidence rebutting violations of section 19. BOE states that, in its opening brief, Sea-Land creates a new and wholly automatic standard by which carriers would pay compensation to freight forwarders or those claiming to be such; that, according to Sea-Land, a common carrier is exonerated of all legal responsibility for determining whether a forwarder performed any services requisite to payment of compensation so long as the common carrier obtains a written "certification"; that instead the Commission should take cognizance of the fact that the purported "certification," as received by Sea-Land, remained facially incomplete; that Sea-Land also would have the Commission give no significance to the fact that the party purportedly tendering such "certification" denied any knowledge and any intent to render such certification; and that, in effect, Sea-Land contends that any action whereby an endorsement by any person is placed on the back of the compensation check is sufficient to immunize Sea-Land from the consequences of its own actions.

BOE states that Sea-Land's assumption that a common carrier only need obtain a certification to satisfy its legal responsibilities is incorrect; that a common carrier that has reason to know that the forwarder did not perform the requisite services cannot pay unearned freight forwarder compensation regardless of whether a certification is provided, citing L. Braverman & Company v. Lykes Bros. Steamship Company, 21 F.M.C. 372 (ALJ 1978), administratively final, in which the freight forwarder, L. Braverman & Company ("Braverman"), provided its own certification to the carrier in its demand for compensation; that, however, the presiding officer determined that the carrier's documentation demonstrated that the carrier dealt with the ocean broker Bresnan & Company and did not deal with the forwarder Braverman; that the presiding officer noted that:

§510.24(e) expressly states that the "carrier shall be entitled to rely on such certification unless it knows that the certification is incorrect." From its course of dealing with Bresnan & Company, the carrier knew the Braverman certification was incorrect. [Emphasis in original.]

BOE states that the presiding officer concluded that the carrier could not pay compensation to the forwarder based upon the forwarder's certification where the carrier had knowledge that another person, Bresnan & Company, an ocean broker not a forwarder, actually booked the cargo, Braverman, 21 F.M.C. 372, 377; that, thus, the existence of a certification will not override carrier knowledge of contrary facts as derived through the carrier's own course of dealing with the shipments and parties at issue; and that neither can such certifications serve to absolve a common carrier of all legal obligations under section 19 of the 1984 Act.

BOE states that Sea-Land's standard gives no effect to evidence of the carrier's knowledge and course of dealings prior to its gratuitous acts in issuing forwarder compensation payments; that Sea-Land's remittance advices were attached to its compensation checks demonstrating that Sea-Land issued compensation checks to ITL Shipping Co. ("ITL") and General Air Freight Consolidators Inc. ("General Air") for at least 435 shipments; that the forwarders testified that they did not perform the requisite services for the Sea-Land shipments; that from its course of dealing with the shippers, Sea-Land knew that the forwarders did not provide the requisite services; that forwarders must contact carriers to book or confirm cargo space; that, furthermore, when a forwarder is involved in preparing and processing documents for hundreds of shipments, a forwarder will undertake direct dealings with the carrier; and that, regardless of any certification that Sea-Land might have received, Sea-Land knew that the forwarders were not performing the requisite services when Sea-Land paid the unearned compensation.

BOE states that Sea-Land's standard likewise is so automatic in its operation that Sea-Land's interpretation of the endorser's intent would be given dispositive weight over the evidence of the endorser's own knowledge and intent in tendering such check for payment; and that, according to Sea-Land's documents, the carrier paid freight forwarder compensation upon 435 shipments. BOE contends that the two forwarders involved, ITL Shipping and General Air Freight, have given written testimony and stated under cross-examination that they did not provide the requisite services; that they did not provide written certification to the carrier; that Sea-Land's position that it obtained certifications from the two forwarders is thus unsupported in the record, and is equally untenable in the law; and that tender of a valid, written certification clearly requires some affirmative act by which it may be determined that the forwarder intended to certify.

BOE states that the record will not support a finding of such intent on the part of the forwarders; that Sea-Land cannot claim that it obtained the signature of either forwarder to any certification, at any time; that Sea-Land thus resorts to a bootstrap argument by which Sea-Land asserts that any party tendering Sea-Land's check for payment is deemed, in effect, to have furnished certification by reason of having "endorsed" such check, whether same occurred by actual signature or otherwise; and that Sea-Land made no adequate showing, moreover, that "industry practice" was to accept incomplete or unsigned compensation checks as the functional or legal equivalent of obtaining written certification, and BOE investigator Carey disputed the existence of such practice other than at Sea-Land. BOE states that Sea-Land also made no showing that the Commission intended to give different and divergent meanings to obtaining the forwarder's "endorsement" in the case of carrier checks, while retaining the signature requirement for all other specified media by which the forwarder conveys written certifications, citing Licensing of Ocean Freight Forwarders, 22 S.R.R. 1148 (FMC 1984).

BOE states that while Sea-Land claims to have found "safe harbor" in the provisions of 46 C.F.R. 510.23(b), that respondent is not entitled to that "good faith" exception; that it is axiomatic that a party claiming entitlement to an exception has the burden to demonstrate its material compliance with the terms thereof, citing, e.g., E.A. Juffali & Brothers v. Waterman S.S. Co., 21 S.R.R. 1648 (I.D. 1983), aff'd 23 S.R.R. 470 (FMC 1983) (failure of proof of compliance with carrier's tariff rule); United States v. Ocean Bulk Ships Inc., 248 F.3d 331 (5^th Cir. 2001); Daewoo International (America) Corp. v. Sea-Land Orient Ltd., 196 F.3d 481 (3d Cir. 1999); Rainly Equipos de Riego v. Pentagon Freight Services Inc., 979 F. Supp. 1079 (S.D. Tex. 1997) (under COGSA, carrier has burden to prove exercise of "due diligence" or other statutory cause excepting carrier from liability for damage to cargo). BOE states that, here, Sea-Land would feign ignorance of its Customer Service Department's course of dealings in taking bookings from the shipper (rather than the forwarder) on hundreds of shipments, and would gloss over past actions of its documentation department which processed, without resort to any forwarder, the shipping documentation furnished directly by the shipper; that, furthermore, Sea-Land asserts that, because Sea-Land was not individually "informed" of license revocations, Sea-Land is without any responsibility for continuing compensation payments to ITL Shipping following revocation of its forwarding license in April 1997. BOE states that, finally, having issued compensation checks without any intervening performance of the two forwarding services required of a licensee, Sea-Land contends it had no responsibility to verify that these licensed forwarders in fact completed the certification form Sea-Land alone chose to imprint on the reverse of its compensation checks. BOE contends that where the forwarders have testified that there were no such certifications provided and the carrier's only response is to present checks stamped "for deposit" on or below an incomplete form pre-printed by the carrier, it is impossible to further condone the carrier's wanton disregard of its statutory responsibilities, which actions directly resulted in the payment of unearned forwarder compensation on hundreds of shipments. BOE states that the facts show that there was no material compliance by Sea-Land with the certification requirements of section 19(d) of the 1984 Act; that, thus, the record fully supports the entry of findings that, by paying unearned forwarder compensation and by making such payments to parties who were related to the shipper or otherwise without a valid forwarder license, Sea-Land knowingly and willfully violated section 19(d) of the 1984 Act in at least 435 instances.

BOE states that, moving now into its final phase, this case should not be viewed as limited solely to the 149 shipments which were admitted into the record, inasmuch as Sea-Land's equipment substitution abuses were of significant competitive importance to Sea-Land and to the rest of the ocean common carrier and NVO community at the time; that Sea-Land's continuing mindset of denial, both personal and corporate, has compelled extended legal proceedings and demanded the personal appearance and testimony of numerous shippers, BOE investigators and former carrier employees; and that, however the official policy of Sea-Land may be stated on paper, it has not in practice precluded equipment substitution abuses by the carrier and its employees.

On the basis of the facts and the evidence now admitted, BOE seeks a finding that Sea-Land violated section 10(b)(1), section 10(b)(4) and section 19(d) of the 1984 Act; that the preponderance of the evidence set forth in BOE's proposed findings of fact demonstrate that Sea-Land violated the strict liability statutory provision of section 10(b)(1) of the 1984 Act on at least 149 occasions between May 16, 1996 and February 19, 1998 by charging shippers less than the applicable rates or charges for their shipments; that Sea-Land also violated section 10(b)(4) of the 1984 Act on 149 shipments between May 16, 1996 and March 25, 1998 by allowing nine different shippers to obtain ocean transportation for their shipments at less than the applicable rates or charges, and employing an unjust and unfair device or means by which to conceal the actual cargo weight and/or measure so that Sea-Land and the shippers, acting in concert, could misuse the applicable conference tariffs' equipment substitution provisions.

BOE states that Sea-Land paid compensation to forwarders who did not perform the requisite forwarding services, that Sea-Land paid such forwarder compensation without obtaining required certifications and that Sea-Land paid forwarder compensation to a person with a revoked license for at least 435 shipments between January 1, 1996 and December 31, 1997, all such acts being in violation of section 19(d)(1); that the evidence shows that Sea-Land violated section 19(d)(4) for at least 170 shipments between January 1, 1997 and December 31, 1997 by knowingly paying forwarder compensation to a forwarder who had a beneficial interest in the shipments; that judgment be entered against Sea-Land for these violations of the 1984 Act; and that an expedited schedule to determine the penalty phase of this proceeding be established.

The ultimate question presented in this investigation is whether BOE has established by a preponderance of the evidence that respondent Sea-Land violated sections 10(b)(1), 10(b)(4) and 19(d)(4) of the 1984 Act, as alleged in the Order of Investigation. The facts pertaining to equipment substitution are of extreme importance. It is also important to distinguish between the rates which the NVOCCs charged their customers to transport their cargo and, in turn, the rates which the ocean carrier, here Sea-Land, charged the NVOCCs for transporting their customers' cargo. The Order of Investigation in this proceeding only names Sea-Land as a respondent, not any NVOCC. Thus, the rates which are the subject of this investigation are only Sea-Land's rates.

The standard in administrative law is that the evidence must show by a preponderance of the evidence that something in fact occurred, i.e., more probably than not. Rose Int'l, Inc. v. Overseas Moving Network Int'l Ltd., 29 S.R.R. 119 (2000) ("Rose"). "It is appropriate to draw inferences from certain facts when direct evidence is not available, and circumstantial evidence alone may even be sufficient; however, such findings may not be drawn from mere speculation." Rose at 158. (Internal citations omitted.)

Judge Kline explained the reasonable inferences rule further in Adair v. Penn-Nordic, Inc., 26 S.R.R. 11 (1991) (administratively final, October 24, 1991):

In many instances, direct evidence is not available and courts or agencies have to rely on inferences. In other words, a "smoking gun" cannot be found in all or most cases. In such instances, reasonable inferences are permitted from circumstantial evidence, and if the finder of fact is an expert agency which is presumed to have special familiarity with the industry in question, the courts will respect the findings of the agency. (See F.M.C. v. Svenska, 390 U.S. 238, 249 (1968) (Commission entitled to draw inferences from incomplete evidence based on human experience generally or on Commission's special familiarity with the industry); United States v. F.M.C., 655 F.2d 247, 253-254 (D.C. Cir. 1980) (hearsay and indirect evidence can be used to support finding of rebating absent direct evidence); DeWitt v. Dept. of the Navy, 747 F.2d 1442, 1444 (Fed. Cir. 1984); Hale v. Dept. of Transportation, cited above, 772 F.2d at 885; Agreement No. 57-96, 19 F.M.C. 291, 303 (FMC 1976)).

26 S.R.R. at 15.

During all time periods relevant hereto, section 10(b)(1) of the 1984 Act provided that:

(b) COMMON CARRIERS.--No common carrier, either alone or in conjunction with any other person, directly or indirectly, may-

(1) charge, demand, collect, or receive greater, less, or different compensation for the transportation of property or for any service in connection therewith than the rates and charges that are shown in its tariffs or service contracts. . . .

46 U.S.C. app. § 1709.

It is well established that section 10(b)(1) of the 1984 Act sets a strict adherence standard, so much that a violation occurs when any rate other than the rate filed in a carrier's tariff is charged, collected, demanded or received. Louisville & Nashville R.R. Co. v. Maxwell, 237 U.S. 94, 97 (1915); and Maislin Industries U.S. Inc. v. Primary Steel Inc., 497 U.S. 116 (1990). The Commission adheres to this principle. American President Lines Ltd. v. Cyprus Mines Corporation et al., 26 S.R.R. 969 (ALJ 1993), aff'd 26 S.R.R. 1227 (FMC 1994); Marcella Shipping Co., Ltd., supra, 23 S.R.R. at 862-863; Sanrio Co. Ltd. v. Maersk Line, 19 S.R.R. 1627 (ALJ 1980), aff'd 20 S.R.R. 375, 377-378 (FMC 1980). Moreover, the knowledge or active participation of the shipper in such a joint scheme of misrating the NVO's shipments likewise is immaterial to whether the carrier itself charged the correct and lawfully applicable rate. American President Lines Ltd. v. Cyprus Mines Corporation et al, supra, 26 S.R.R. at 971-74. In granting summary judgment in favor of APL for collection of unpaid freight under the "filed rate" doctrine, the presiding officer in Cyprus Mines summarized the carrier's position as follows:

However, according to APL, how the cargo came to be described as copper scrap is wholly immaterial to deciding this case. APL states that it is entitled, and indeed has an obligation, to recover the correct tariff rate (and charges) from Cyprus regardless of whether APL knew of the misclassification. (Emphasis omitted.)

26 S.R.R. at 971, citing Sea-Land Service Inc. v. Murrey & Son's Co., 824 F.2d 740 (9^th Cir. 1987).

Section 10(b)(4) of the 1984 Act provided that:

(b) COMMON CARRIERS.-No common carrier, either alone or in conjunction with any other person, directly or indirectly, may-

(4) allow any person to obtain transportation for property at less than the rates and charges established by the carrier in its tariff or service contract by means of false billing, false classification, false weighing, false measurement, or by any other unjust or unfair device or means.

46 U.S.C. app. § 1709(b)(4).

Both parties cite Prince Line Ltd. v. American Exports Inc., 55 F.2d 1053 (2d Cir. 1932), on this issue. Some seventy years ago, Judge Learned Hand in his incisive decision distinguishing those concessions to be condemned from those Congress intended to be permitted, explained it this way:

The law did not forbid all concessions to a shipper; apparently it assumed if these were above board and known or ascertainable by competitors, the resulting jealousies and pressure upon the carrier would be corrective enough. But it did forbid the carrier to grant such favors when accompanied by any concealment, and its command in that event was as absolute as though it had been unconditional. Id. at 1055.

The "essential element of proof" for a section 10(b)(4) violation is the employment of any unjust or unfair device or means to convey a concession to a shipper. Pacific Far East Lines-Alleged Rebates, 10 S.R.R. 1, 8-9 (FMC, 1968); States Marine Lines - Hohenberg Bros., 1 S.R.R. 383, 384h-384j (FMC, 1961), aff'd sub nom. Hohenberg bros. Co. v. Federal Maritime Comm., 316 F.2d 381, 4 S.R.R. 20, 371 (D.C. Cir. 1953); Rates from United States to Philippine Islands, 2 U.S.M.C. 535 (1941); and Rates from Japan to United States, 2 U.S.M.C. 426 (1940).

The present investigation began with Mr. Oliver Clark, BOE's investigator, located in the Los Angeles, CA area. His maritime investigative experience⁽²⁸⁾ dates back to 1975. (FF 48 and 49)

Mr. Clark began his investigation in the fall of 1997 after hearing rumors of possible misdescriptions of commodities in the export or outbound trade to Hong Kong and other ports in the Far East. (FF 50) Mr. Clark went to the offices of the U.S. Customs and began examining documentation, mostly copies of rated bills of lading. (FF 52) During that examination, Mr. Clark determined that significant amounts of electrical or electronic equipment were being transported on vessels of Sea-Land on behalf of certain NVOCCs. (FF 51)

What caught Mr. Clark's eye were "all these 40-foot containers that were being given and 20-foot rates were being applied." (Clark Tr. 48 ln14 - 16) This involves equipment substitution which is a practice by which a carrier such as Sea-Land, for its convenience and pursuant to established rule, furnishes a shipper or NVOCC with a larger container than booked or ordered, while still charging the container rates normally applied to containers of smaller capacity. (FF 53) An ocean common carrier's practices with respect to equipment substitution must be set forth in the governing or applicable tariff or service contract by the carrier or conference in which it participates. (FF 53 and Appendix C)

Sea-Land was a member of the Transpacific-Westbound Rate Agreement ("TWRA") during the period at issue-1996-1998. (FF 5) The TWRA Rules Tariff, Rule 2 G5, provided that a carrier could, at its option, substitute a type of equipment other than the specific type of equipment booked or ordered by the shipper subject to specified maximum measurements and weights for each size of container. (FF 251 and App. C) If a 40' container was substituted for a 20' container, the carrier could charge the rates applicable to a 20' container provided that the cargo not exceed 25 cubic meters ("CBM") and 18 Kilo Tons ("KT"). (FF 252) The carrier also could charge 40' container rates if a 45' container was substituted for a 40' container provided that the cargo not exceed 65 CBM and 21 KT. (FF 253 and App. C)

In November 1992, Sea-Land and other carriers entered into a compromise agreement with the FMC resolving allegations that the carrier violated sections 10(a) and 10(b) of the 1984 Act in their operations in the Transpacific trades. (FF 7) As part of such settlement, Sea-Land and other carriers participated in an agreement to provide effective "neutral body" policing in the Transpacific trades. (FF 8) Under the auspices of the resulting Transpacific Self-Policing Agreement (No. 203-011452), Robinson Stark Associates furnished "neutral body" services policing and enforcing, on behalf of TWRA members and other Transpacific carriers, the rate provisions and applicable rules established in TWRA's tariffs. (FF 9) Robinson Stark examined shipping documentation to determine whether the carriers were adhering to the terms of their tariffs.

The Transpacific trades historically have been unbalanced, with more cargo imported into the United States from the Far East than exported. A typical vessel profile westbound for Sea-Land, for example, would consist of one-half the containers being loaded with cargo and one-half empty containers being repositioned in the Far East. (FF 13) Securing added export cargoes, even at rates only $100 over variable cost, would aid Sea-Land financially. (FF 15) In 1997, Sea-Land's export loaded containers declined 50 percent. (FF 17) Sea-Land sought additional Freight All Kinds ("FAK") cargoes whose rates were about $1800-$1900 per 20' container. (FF 18) Many NVOs had diverted such cargoes from Sea-Land to A.P. Moller-Maersk Line ("Maersk").

Sea-Land set sales targets each year. For example, Mr. David Wing, an Export Sales Manager, had to generate cargoes for 500 containers a week for vessels on Sea-Land's Trans-Pacific strings. (FF 28) The individual sales representative in turn would also have to produce a given number of boxes or containers. (Spargo I Tr. 46 ln13 - 15) Sea-Land wanted higher rated cargoes such as FAK cargo which came primarily from NVOs. (FF 31)

In 1995, Sea-Land recruited Mr. Rich Favor as an outside sales representative for its Pacific Division since he had experience in servicing NVO accounts and knew how the NVO business operated. (Ff 35) Mr. Favor's weekly target was about 40 containerloads of FAK cargo. (FF 37) Mr. Favor was given sales responsibility for the following NVOs: Brennan International Transport Inc. ("Brennan"), Pan Pacific Express Corp. ("Pan Pacific"), World Pacific Container (USA) Inc. ("World Pacific"), Global Links Express Inc. ("Global Links"), General Ocean Freight Container Lines Inc. ("General Ocean Freight"), and Morrison Maritime Inc. ("Morrison Maritime"). (FF 38) Mr. Favor was successful and his sales volume increased in 1996 despite the general downturn in the volume of the export market. (FF 44) Mr. Glenn Spargo was Sea-Land's Regional General Manager for the Western Region and had four export sales managers, including Mr. David Wing, who supervised Mr. Rich Favor. (FF 27, 28 and 39)

Mr. Favor advised several NVOs that they could obtain the use of larger containers and only be charged lower rates through equipment substitution if they misdeclared the cubic measurement of their cargo, i.e., they had to make sure that Sea-Land's bill of lading reflected cargo dimensions of no more than the tariff maximums. (FF 61, 62, 70, 74, 79, 84, 91, 104, 118) The NVOs were told that Sea-Land would not question their documentation--the weights and measurements put on Sea-Land's bills of lading. (FF 71, 85, 92, 113)

The record shows that there was no economic benefit to an NVOCC-shipper to use a 40' container and pay 20' container rates if he had to adhere to the tariff maximum for the cargo to be loaded in the container. (FF 97) Equipment substitution when the tariff provisions were adhered to was for the convenience of the carrier not the shipper and, as noted, equipment substitution according to the tariff was at the carrier's option. (FF 97) As practiced by Sea-Land, however, the record amply demonstrates that "40' equipment sub" or similar shorthand phrases became a code that NVOs were taught by Sea-Land personnel to employ. Then the carrier would furnish a 40' container and the NVO could stuff it beyond the limits for cargo in a 20' container. The excess cargo was also charged the 20' container rate. It was common knowledge that Sea-Land would not challenge the measurements of the cargo which the NVOs put on Sea-Land's bill of lading. (FF 71, 85, 92, 113) BOE overwhelmingly established that this was done by Sea-Land in its zeal to attract cargo to fill containers being repositioned to the East Coast and otherwise traveling empty.

Sea-Land began by soliciting NVOs who shipped large quantities of FAK cargo which would be remunerative even at 20' container rates. (FF 18, 30-31, 84, 104) Askance at the 50 percent drop in its cargo volume, Sea-Land sales representatives were reminded of their target goals each week." (FF 16-17, 19, 24-25, 26, 30, 33, 60, 70, 74, 79-80, 84-85, 91-94, 104-105, 110) Verified statements from representatives of several of the NVO shippers confirms Sea-Land's scheme. (BOE Ex. 3-12)

While Sea-Land argues that some of the NVOs testified that they learned about equipment substitution from other NVOs, the record shows that the NVO industry was initially solicited by Sea-Land representatives who explained "how to do"-how to make sure that the shipping documentation purported to show that the measurements of the cargo was less than the maximum. The NVO made sure that the documents showed, for example, that the cargo measured 23 CBM instead of the actual size of 30 CBM. (Sehwani Tr. 60 ln4 - 16) The NVOs knew that Sea-Land would not question the paperwork-"we knew we could use it at Sea-Land and we did." (Sehwani Tr. 64 ln13, 81ln2 - 82ln7, and FF 71, 85, 92 and 113) Other carriers said, "We want to be able to do it. We can't do it." This meant that other carriers did not permit their salesmen to offer the same deal as Sea-Land. (Sehwani Tr. 8-15; 92ln13 - 20) As noted, Sea-Land's scheme by which it could increase its share of the business and reposition otherwise empty 40' containers to the Far East at a compensatory level was uncovered and documented by FMC investigators. (FF 48-57, 234-236) The oral testimony of Mr. Favor, Sea-Land's sales representative, after he recanted his earlier deposition, gave proof of the veracity of the admissions of the NVOs that they followed the lure of Sea-Land. For example, Mr. Wu of General Ocean Freight Container Lines explained how he succumbed. "You have the shipping line people come to tell you that you can do this way. This is okay. Then if they say okay, shipping line say okay, everything is okay because we follow the rule." (Wu Tr. 146 ln16 - 19) "The guy from Sea-Land told us how to do it." (Wu Tr. 109 ln12 - 13) "Sea-Land sales told us how to do it. Otherwise we will be rejected." (Wu Tr. 144 ln24 - 25. "When we don't use Sea-Land, we have to do exactly. When we use APL, we have to pay full amount. We using YK, we can't get substitution. (Wu Tr. 143 ln20 - 22)

Since Mr. Favor knew how to work with NVO accounts, Sea-Land recruited him into its Pacific Division to obtain a greater share of the lucrative FAK cargo, increase Sea-Land's revenue and reduce the cost of repositioning containers to the Far East. (FF 35-38, 99) The record confirms that Mr. Favor was one of the top sales representatives. (Favor III Tr. 68 ln17 - 22; Wing Tr. 213 ln11 - 214 ln4) Mr. Favor did not get directly involved in the Sea-Land documentation process because he did not have means to access the computer codes to make changes to bills of lading, to "key the bills," although he did receive calls from Sea-Land's customer service department as to whether equipment substitution should be approved for instance on large scale bookings of containers. (Favor III Tr. 56 ln18 - 57 ln13, Tr. 80 ln13 - 82 ln23) He was under the close supervision of the Export Sales Manager, Mr. David Wing, and Mr. Wing's supervisor, Mr. Glenn Spargo. (FF 43)

The equipment substitution rule was subject to abuse as noted by the Neutral Body, and effective July 18, 1997, Rule 2 G5 was amended to prohibit its use on FAK shipments. (CO Ex. 29, Bates Stamp 149; Hagan Tr. 64 ln17 - 68 ln11; Gravitt Tr. 1022 ln1 - 1024 ln2) The record shows that Sea-Land abuse of the equipment substitution rules continued after that date.

Mr. Wing accompanied Mr. Favor on calls to certain NVOs and offered to allow Pan Pacific, for example, to obtain lower rates through equipment substitution and to protect Pan Pacific's 20' container rates in such circumstances. (FF 94, 95) Sea-Land urges that Mr. Wing meant that Sea-Land would see that Pan Pacific could have the low 20' container rates, for example, but only if the cargo fell within the tariff maximums. But the record does not support this qualification or interpretation because Mr. Wing was well aware that there was no advantage to an NVO shipping FAK cargo to be saddled with extra costs connected with a 40' container loaded with cargo that would fit comfortably in a 20' container. (FF 97; Wing Tr. 330 ln16 - 331 ln19) The record is clear that it soon became common knowledge that an NVO requesting "40' container-equipment substitution" or similar phrases was a code for misdeclaring cargo and abusing the equipment substitution rule which led to its termination on July 18, 1997, except that TWRA and Sea-Land continued to allow 45' substitution at 40' container rates after that date.

Mr. Glenn Spargo was Regional General Manager for the western Region. (FF 27) Under him in the chain of command for Sea-Land was Mr. David Wing, a local sales manager in southern California who in turn was Mr. Rich Favor's supervisor. (FF 28, 39) Mr. Spargo went with Mr. Favor and saw the customers himself. (FF 43) Mr. Spargo had overall responsibility for the number of containers of cargo actually moved in the Western Region. (Spargo I Tr. 22 ln15 - 15, Tr. 23 ln16 - 20) There was a quota or sales target for the territory which filtered down to a target number of boxes for each sales representative to produce. (Spargo I Tr. 46 ln3 - 15)

Mr. Wing testified that he reported to Mr. Spargo about equipment substitution. (FF 42, 98) It was evident that there would be no economic advantage to NVO shippers to use 40' containers as equipment substitutes for 20' containers unless through misdeclaration more cargo could be placed in the 40' container than the governing tariff permitted. (FF 97) Thus, in answer to the question of what did he know and when did he know it, the record shows that Mr. Spargo was aware that to meet the sales quotas the sales representatives had taught the NVOs how to misdeclare the cargo and get 40' containers at 20' container rates. This is also confirmed by the results of the Neutral Body investigation of which Mr. Spargo was aware, and in which Sea-Land was found guilty of abuse of the equipment substitution rule and paid a penalty. (FF 183, 194)

Other segments of Sea-Land were also aware of the scheme. By January 15, 1997, Sea-Land's rate audit department knew that their sales representatives were advising NVOs to revise documentation and allow NVO shipments to receive 20' container rates on cargo in 40' containers which exceeded the tariff maximum. (FF 140) As a tariff matter, Sea-Land could provide the 40' container in place of the 20' container only if the shipper requested the larger box and Sea-Land determined that the 20' boxes were unavailable. (FF 53, 248, 124-126) Mr. John Ohle, Operations Manager for Sea-Land's Long Beach terminal, acknowledged that Sea-Land's Customer Service department (i.e., booking staff) ordinarily would have no need to contact his operations office to determine equipment availability. (FF 122-124) He also testified that any shortages of 20' boxes were not large enough to explain Sea-Land's widespread application of equipment substitution on shipments by Sea-Land's NVO customers. (FF 125-127) It is thus clear that the equipment substitution scheme was developed to garner cargo to fill otherwise empty 40' boxes being repositioned in the Far East. (FF 135-136)

At the time a motor carrier sought to pick up an empty container, Sea-Land's Operations Department determined what was needed and authorized equipment substitution if it was required. (FF 124, 126) The record shows that there was not a large enough shortage of 20' containers to explain Sea-Land's widespread application of lower rates on a supposed equipment substitution basis for the benefit of Sea-Land's shippers. (FF 125, 127)

The record clearly shows that Sea-Land maintained no effective controls over the application of equipment substitution by employees outside of Sea-Land's Operations Department (FF 127, 128, 129, 130). Nor did Sea-Land prohibit its sales or marketing personnel from participating in the process by which lower equipment substitution rates could be applied unlawfully for the mutual benefit of Sea-Land and its shipper accounts. (FF 130) Sea-Land did not regulate the booking process or insure the proper application of equipment substitution rules. It is clear that Sea-Land's "system" by which its customers ordered or booked empty containers invited carrier manipulation and abuse.

The customer profile database used by the booking department featured a customer profile or "mapped booking" feature originally intended to speed the booking process. (FF 131-133) If a mapped booking indicated that equipment substitution was approved for the shipper, another department, Customer Service, would provide that same information for use on all subsequent bookings. (FF 134) Sea-Land's records amply demonstrate a continuing pattern of authorizing the use of larger containers but only charging rates on smaller containers for most of the cargoes by the involved NVOs without regard to the tariff maximums. (FF 77, 78) Sea-Land did not subject all equipment substitution arrangements to the control of Sea-Land Operations so as to restrict such transactions to issues of carrier convenience, rather than "shipper convenience." (FF 128, 130)

Sea-Land's documentation and rate audit staff similarly facilitated this misrating scheme. The rate audit staff allowed NVO shipments to be rated at the lower equipment substitution rates in accordance with the booking comments received from Sea-Land's sales staff, and assisted in rerating such shipments to apply lower rates without substantive challenge. It became common knowledge that Sea-Land, unlike many other carriers, would not subsequently challenge the measurement or weight on Sea-Land's bills of lading on shipments "declared" under equipment substitution. (FF 71, 85, 92, 95) This unlawful scheme persisted well into August 1997, long after Mr. Favor had departed from Sea-Land. (FF 145, 146) Rate audit staff thereafter continued to charge lower rates to such shipper accounts under equipment substitution, even though the staff knew that the lower equipment substitution rates should not be permitted and charged. (FF 145, 146) In corroboration of NVO testimony to this effect, the record shows nine additional similar Sea-Land shipments between March 10, 1997 and December 8, 1997, where Sea-Land charged a lower rate despite knowing that the weight or cubic measurement of the shipment exceeded the tariff maximums. (FF 150)

NVO shipper Brennan International, for example, revealed that Sea-Land rating staff would contact Brennan to solicit corrections of Brennan's documentation in order to reduce cargo measurements below the maximums specified for equipment substitution. (FF 89) Sea-Land's practice carried out Mr. Favor's earlier sales lure that Sea-Land would advise Brennan International to alter its documents if needed to show facial compliance with the TWRA restrictions on equipment substitution. (FF 85) Brennan International began to use Sea-Land for its FAK shipments on account of Mr. Favor's offer. (FF 88) Sea-Land continued this "very liberal attitude" towards the use of equipment substitution well into March 1998. (FF 147, 148; BOE Ex. 10, ¶ 3) Sea-Land continued to rate NVO shipments at lower equipment substitution rates. In January 1998, Sea-Land e-mailed employees to begin collecting SEDs. But the carrier knew that SEDs alone would not show the weight and cubic measurements needed to apply equipment substitution rates lawfully. (FF 152-156, 251-254)

Despite Sea-Land's long awareness of equipment substitution malpractices arising in May 1997, Sea-Land made no adequate change to insure the proper application of equipment substitution rates by Sea-Land's own employees. (FF 151) In fact, the Neutral Body penalized Sea-Land for continued violations with respect to shipments on which equipment substitution rates were applied after January 1998. (FF 155) Sea-Land did not even preclude equipment substitution privileges for NVO shippers identified with previous abuses. (FF 202, 203) The equipment substitution abuses continued.

In preparing and issuing gate documentation at Sea-Land's Long Beach terminal, Sea-Land knew that certain shipments of various NVO shippers did not qualify for lower equipment substitution rates because the shipment weight exceeded the maximum weight restrictions specified for equipment substitution. (FF 160) Weight scales maintained by Sea-Land at the terminal gates generate a receipt, a scale or "RCV" ticket by which Sea-Land Operations verifies the weight of each container to ensure safe loading of Sea-Land's vessels. (FF 161, 162) On nine occasions between August 25, 1997 and October 21, 1997, Sea-Land charged and collected freight on shipments for World Pacific at the lower per-container rates under equipment substitution, when Sea-Land operations knew that the shipment exceeded the weight limits for applying equipment substitution. (FF 163-165, 166) In this regard, Sea-Land acknowledged that its rate audit staff would have relied upon RCV tickets had such weight records been made available to rate audit staff for use at the time Sea-Land rated its shipments. (FF 157, 169)

Inasmuch as the shipments were not rated until after the loaded container had been received at the terminal and weighed (FF 158, 169), Sea-Land kept itself in the dark as to weight information already on hand, and thus failed to exercise that reasonable diligence which the law expects on the part of the carrier. "One charged with a duty who purposely keeps himself in ignorance in order to deny actual knowledge is estopped to deny knowledge of what he could learn by his exercise of reasonable diligence." Rates from Japan to the United States, 2 U.S.M.C. 426, 434-435 (1940). Sea-Land could have sent the scale weights from its terminal for use in rating the cargo properly. (FF 168)

Responsive to numerous complaints from competing carriers of alleged equipment substitution malpractices in the outbound Transpacific trades, the Neutral Body's investigation uncovered violations of TWRA equipment substitution rules by Sea-Land involving shipments by General Ocean Pan Pacific, Fleet Shipping and World Pacific. (FF 171, 176) Sea-Land instituted no new adequate procedures to control equipment substitution, and its misratings continued. (FF 67, 72, 75-76, 87, 102-103, 115-116, 176, 182, 205-206, 210, 212, 214, 222, 231-232)

The Neutral Body Investigative Report of August 2, 1997, did not close the issue with respect to Sea-Land's NVO shippers, however. That same month, FAK shipper DCL was corresponding actively with other members of the TWRA to complain of Sea-Land's rate arrangements with NVO World Pacific. (FF 187) A carrier complained to the Neutral Body, triggering a second investigation as to Sea-Land. (FF 188, 191) Discussions with the Neutral Body involved carrier personnel, including Mr. Glenn Spargo, and revealed further violations of TWRA equipment substitution rules. (FF 189, 190) Despite the issuance of the Neutral Body Investigative Report on December 13, 1997, Sea-Land's misratings under equipment substitution did not abate. (FF 67, 75-76, 102-103, 115-116, 205-206, 209, 212, 231-232) A third Neutral Body Investigation showed violations of the TWRA equipment substitution rules upon Sea-Land shipments in January and February 1998, although the shipments cited by the Neutral Body did not involve FAK cargo. (FF 202) Following the third Neutral Body Investigative Report issued March 27, 1998, Sea-Land instituted no new written controls on equipment substitution. (FF 203)

The record shows that beginning in May 1996 and continuing through March 1998, Sea-Land has maintained a persistent practice by which it allowed NVOs to obtain lower rates through the intentional misuse of the TWRA equipment substitution provisions. For those NVO shippers solicited by Sea-Land's sales representatives, that practice has relied upon an explicit understanding with Sea-Land as to misdeclaration of shipment weights and measurements in order to cause NVO shipments to be charged lower rates by Sea-Land, together with an understanding that NVO shipments rated under equipment substitution would not be scrutinized by the carrier thereafter.

Such egregious behavior and concealment of the true weight and measurements of these shipments, initiated and sponsored by Sea-Land as its chosen method of capturing cargo and allowing lower rates for Sea-Land's NVO shipper accounts, clearly constitutes an "unfair device or means" within the meaning of section 10(d)(4) of the 1984 Act, as explained by Judge Learned Hand in Prince Line Ltd. v. American Paper Exports Inc., 55 F.2d 1053 (2d Cir. 1932). Sea-Land's practice survived the departure of Sea-Land salesman Rich Favor, and was continued and expanded by Sea-Land thereafter. That same practice has survived repeated investigations by Sea-Land's contracted Neutral Body and emerged, once again, substantially unchanged by Sea-Land.

Sea-Land contends that BOE has to show that it allowed the NVOCCs to obtain the non-tariff rates through participation in an unjust or unfair device or means; that essentially that it must be found that Sea-Land knowingly and willfully participated in a scheme to abuse equipment substitution.

Sea-Land asserts that there is no evidence or allegation that Sea-Land falsified any documentation; that Sea-Land accurately reflected in its documentation the information given to it by the NVOCC shippers; and that Sea-Land did not have access to the internal NVOCC documentation relied upon by BOE's expert rate analyst to support the alleged misrating; and that even if the shipments were misrated, Sea-Land should not be found liable under section 10(b)(4).

Sea-Land states that knowing and willful means more than "casual indifference or inadvertence; that instead it requires a finding of wanton disregard and of purposefulness which the Commission equates with 'gross negligence' in tort cases"; that while it is not necessary to have a motive to violate the Act, a finding that activity is knowing and willful requires that the respondent "purposely or obstinately intended to perform the unlawful act," citing Shipman Int'l (Taiwan) Ltd.-Possible Violations of 1984 Act and 45 CFR Part 514, 28 S.R.R. 100, 109 (I.D.1998).

Sea-Land states that, as the Supreme Court reminded us in United States v. Illinois Central RR Co., 303 U.S. 239 (1938), the two prongs-knowing and willful-have different meanings and must both be established independently, 303 U.S. at 243, quoting St. Louis & Santa Fe Railroad Co. v. United States, 169 F. 69, 71 (8^th Cir. 1909). "Knowingly" means that the respondent knows the fact that makes the act a violation. "Willfully" means that the respondent "purposely or obstinately intended to perform the unlawful act," or "having a free will or choice either intentionally disregards the statute or is plainly indifferent to its requirements." Shipman, 28 S.R.R. at 109.

Sea-Land states that it was not indifferent to the requirements of law; that it actively sought to ensure compliance with the law when it became aware that abuses might be occurring; and that any violations, to the extent they occurred, were the result of false documents submitted to Sea-Land by shippers who stood to gain by the falsification.

Sea-Land states that it made substantial and determined efforts to find out the weight and measure of equipment substitution shipments; that it maintained a strong company policy to abide by its tariffs as to equipment substitution; that employees were regularly reminded of this policy; and that this was affirmed in the sworn testimony of its trade lane director, director of regulatory affairs, regional manager, sales manager, and rate audit supervisor.

BOE presented 11 NVO and ocean freight forwarder affiants who were cross-examined extensively by Sea-Land. Contrary to Sea-Land's contentions, the record amply supports the findings as to the origins of the rate schemes explained by Sea-Land's employees and identified Sea-Land's sales representative Mr. Rich Favor and others in the establishment and carrying out of the illegal scheme of equipment substitution abuse. All the NVOCCs were aware that Sea-Land would permit the usage of 40' or 45' containers and only charge 20' container rates even if the size of the cargo exceeded the tariff's maximum weight and measure limits as long as the shipping documentation showed that the cargo was within those tariff limits. The NVOCCs knew that use of the code words "equipment substitution" or similar words would trigger the application of the lower rates which they sought on such cargo and that Sea-Land would not question the false documentation. A typical comment was from Mr. Simon Wu, President of General Ocean Freight Container Lines, "the guy from Sea-Land told us how to do it." (Wu Tr. 109 ln12 - 13; Wu Tr. 143 ln6 - 7; Wu Tr. 144 ln24 - 25) "We have somebody from Sea-Land teach us how to do it." (Wu Tr. 137 ln2 - 3) Other ocean carriers would not permit the illegal substitution. (Wu Tr. 139 ln6 - 140 ln4; Wu Tr. 143 ln20 - 22)

It can be deduced from the record that the zeal in obtaining cargo to fill otherwise empty 40' and 45' containers being repositioned to the Far East overcame the legal requirement that Sea-Land adhere to all the terms in the TWRA tariff; that the ultimate goal of Sea-Land was to obtain cargo for that purpose without regard to any monetary penalties which might ensue since these could be written off as a cost of doing business.

Sea-Land denies responsibility for the actions of its agent, Mr. Rich Favor, and argues that the NVOCCs misdeclared their cargo based on information from other NVOCCs. However, the record is clear that the ultimate source of the unlawful scheme was Sea-Land. During 1996, 1997 and up to March 1998, Sea-Land employees and supervisors assured the NVOCCs that Sea-Land would furnish larger containers and would not question requests for lower equipment substitution rates if the cargo exceeded the tariff maximums. (CO Ex. 37, ¶ 23; BOE Ex. 10, ¶ 3; and BOE Ex. 11, ¶ 4)

Since Sea-Land's sales representative and other Sea-Land employees enabled the NVOCCs to access the equipment substitution rule in an unlawful manner, the record establishes that Sea-Land through its agents and employees has permitted shippers to obtain ocean transportation at less than the applicable rats and charges by means of an unfair device or means in violation of section 10(b)(4).

The Commission has previously addressed the question of a carrier's responsibility for the acts of its agents. In a series of decisions beginning in 1964, the Commission imposed a standard of strict liability on principals for the acts of their agents. Hellenic Lines Ltd.-Violation of Sections 16 (First) and 17, 7 F.M.C. 673, 676 (1964); Unapproved Sec. 15 Agreements--Spanish/Portuguese Trade, 8 F.M.C. 596, 609 (1965); Malpractices-Brazil/United States Trade, 15 F.M.C. 55, 59 (1971) ("Shipping Act cannot be circumvented through the medium of an agent"); and Pickup and Delivery-Puerto Rico, 16 F.M.C. 344, 350 (FMC 1973). ("Respondents cannot insulate themselves from the responsibility for the proper performance of the service by attempting to relieve themselves of accountability for their agents' acts.") As the Commission stated in Spanish/Portuguese Trades, supra:

Sound enforcement of the Shipping Act of necessity demands that those subject to its terms be held to a strict standard of accountability for the acts of agents representing them. As we made clear in Hellenic Lines Ltd.-Violation of Section 16 (First) and 17, 7 F.M.C. 673, 676 (1964), we cannot allow a carrier to "immunize itself from the common carrier responsibilities placed upon it by the Act by dissociating itself from any of its agent's activities which are brought into question."

8 F.M.C. at 609.

The reasons for the Commission's imposition of strict principal liability are embedded in the policies underlying the Shipping Acts. For example, in Hellenic the Commission explained:

To adopt respondent's position would do much to frustrate the objectives of the Shipping Act. Respondent necessarily performs its far-flung transportation business by utilizing agents to solicit and book cargo and attend to various other requirements of the business. Under respondent's theory, however, it could immunize itself from the common carrier responsibilities placed upon it by the Act simply by disassociating itself from any of its agents' activities which are brought into question. . . . The Act does not permit of any such evasion. United States v. American Union Transport, Inc., 327 U.S. 437, 457 (1946). It is regulatory legislation which evinces a strong policy of protecting the public, and there is ample authority for the view that a principal is liable for his agent's violation of such a statute . . . .

In Corpco International Inc. v. Straightway, Inc., 28 S.R.R. 296, 299 (1998), the Commission approved the foregoing discussion of Commission case law in the initial decision holding principals liable for the acts of their agents.

Thus, on 149 occasions as documented in Gravitt Attachments A and B, Sea-Land allowed the transportation at less than the rates or charges established by the carrier in its tariff or service contract by an unjust or unfair device or means, in violation of section 10(b)(4) of the 1984 Act. BOE has overwhelmingly established that Sea-Land allowed the NVO shippers to obtain a lower rate despite Sea-Land's knowledge of the actual weight or cubic measurement of the shipments. In aggregate, judgment will be entered against Sea-Land for violations of section 10(b)(4) of the 1984 Act in 149 separate instances.

As noted, since the Supreme Court handed down its decision in Louisville & Nashville R.R. Co. v. Maxwell, 237 U.S. 94, 97 (1915), the rates filed by common carriers in their tariffs have constituted the only lawful rates a common carrier can charge its customer. Congress followed the Maxwell principle when enacting both the Shipping Act, 1916 (formerly 46 U.S.C. §§ 801-842), and the 1984 Act. (With the passage of the Ocean Shipping Reform Act of 1998 ("OSRA"), Pub. L. 105-258, 112 Stat. 1902, the substantive provisions of section 10(b)(1) were revised and republished as section 10(b)(2). That provision largely continues intact under OSRA the statutory prohibition that no carrier may provide service in the liner trades which is "not in accordance with the rates, charges, rules and practices contained in a tariff published . . . under section 8 of this Act.")

The Commission has remained constant in enforcing this principle. See Best Freight International Ltd. et al.-Possible Violations of Sections 10(a)(1) and 10(b)(1) of the Shipping Act of 1984, 28 S.R.R. 447 (ALJ, 1998); Ever Freight International Ltd. et al.-Possible Violations of Sections 10(a)(1) and 10(b)(1) of the Shipping Act of 1984, 28 S.R.R. 329 (ALJ, 1998); Comm-Sino Ltd., 27 S.R.R. 1201 (ALJ, 1997); F&D Loadline Corporation, 27 S.R.R. 764 (ALJ, 1996); Trans Ocean-Pacific Forwarding Inc., 27 S.R.R. 409, 412 (ALJ, 1996); Marcella Shipping Co. Ltd., 23 S.R.R. 857, 862 (ALJ, 1986); Cari-Cargo Int'l, Inc., 23 S.R.R. 1007 (ALJ, 1986).

Ocean common carriers including Sea-Land have been long aware that they are required to maintain and observe the requirements of their ocean common carrier tariffs as a concomitant condition of doing business as a common carrier in the foreign commerce of the United States. (FF 7, 8) Sea-Land's zeal to obtain cargo overshadowed the need to adhere to the tariff-any subsequent expenditure would be a cost of doing business. Sea-Land received a warning shot across its bow with respect to its equipment substitution practices as a result of its earlier commitment to the Commission to participate in an agreement to provide effective "neutral body" policing in the Transpacific trades. (FF 9, 171, 173-174) Despite this, Sea-Land consistently and deliberately failed to apply its tariffs properly in matters of that carrier's commercial pricing and practices with respect to its NVO shipper customers (FF 205-206, 210-212, 214, 216, 219, 222, 255, 228, 231, 232) through a persistent course of conduct between May 16, 1996 and February 19, 1998. (FF 206, 219) Both in practice and in effect, Sea-Land's equipment substitution abuses became the means by which such shippers were allowed to obtain rates lower than the NVOs could obtain had their cargoes been correctly declared.

In Mr. Gravitt's rate review, documents relating to 149 outbound shipments to the Far East were examined to determine whether Sea-Land was collecting those rates and charges set forth in the applicable TWRA tariffs for shipments transported under the terms of the TWRA equipment substitution rules. (FF 234, 236, 237-245) While the applicable TWRA tariffs permit the carrier, "at its option," to substitute a larger container, such provision was subject to explicit maximums as to cargo weight and measurement. (FF 248, 251-253) Only if the cargo loaded into a larger container did not exceed the cargo weight and measurement capacity of the smaller container could Sea-Land then charge and collect the lower per-container rates applicable to the smaller container. (FF 254)

On examination of the specific commodities, weights and cargo measurements involved, the underlying shipment records reflect that the cargo loaded into the containers exceeded the weight and/or measurement maximums for equipment substitution. (FF 256-257) Based on the actual measurements and weights reflected in the shipment files prepared by the NVOCC shippers, Sea-Land could not use the equipment substitution provisions to reduce the ocean freight for its NVO customers and thereby charge the lower per-container rate on these 149 shipments. (FF 257)

Sea-Land's further contentions as to some specific shipments, BOE's responses, and the disposition of those contentions follow:

Gravitt Shipment No. 4. On shipment No. 4, there are several shipment documents in the record-the Sea-Land bill of lading and the bill of lading (B/L) instructions on which it was based; an internal Global Links document entitled "container manifest"; and the SED submitted to Sea-Land by Global Links.

The Sea-Land bill of lading shows the weight of the shipment as 8733.56 kilograms ("kg")/19,254 pounds and the measure as 19.220 cbm. The container manifest shows the weight as 16,181 pounds and the measure as 43.94 CBM (clearly more than the 25 CBM limit for equipment substitution). Sea-Land points out that the weight shown for the shipment on the container manifest of 16,181 pounds is less than that on the Sea-Land bill of lading (19,254 pounds) even though the measure shown on the container manifest (43.94 CBM) is purportedly over twice that shown on the Sea-Land bill (19.220 CBM).

Sea-Land contends that the manifest appears less reliable than the SED which Mr. Tse of Global Links testified was correct; that the manifest does not show the Sea-Land bill of lading number and it only has an estimated sailing date, which indicates the manifest was drawn up before the shipment was finalized; that the SED, on the other hand, is dated subsequent to the manifest; that BOE's analyst Mr. Gravitt took the view that documents created later in time were generally more reliable (Gravitt Tr. 940, 942); that the SED information matches the Sea-Land bill of lading in all material respects, including commodity description, number of packages, and weight; that the preponderance of the evidence does not support a finding that the shipment exceeded the limits for equipment substitution; and that BOE has failed to meet its burden of proof on this shipment.

Discussion and Conclusion-Gravitt Shipment No. 4. Mr. Gravitt, the Commission's veteran rate analyst who submitted a verified statement and was cross-examined, determined that this shipment's measurement was 43.94 CBM and, therefore, Sea-Land should not have charged the lower equipment substitution rates.

According to Sea-Land, because the weights on the SED "match" the weight on the Sea-Land bill of lading, all other information on the Sea-Land bill of lading, including the measurement of 19.22 CBM, also must be correct. However, since the SED is dated subsequent to the container manifest, Sea-Land's documentation and rating staff could not have relied upon a subsequent SED to verify the weight on a bill of lading issued earlier by Sea-Land.

The SED matching theory proposed by Sea-Land has not been shown to have any probative value. BOE demonstrated this by a World Pacific Container shipment that Sea-Land excluded from its analysis: Gravitt Shipment No. 136. Sea-Land's witness Donna Smith acknowledged that the weight on the SED and the Sea-Land bill of lading for this shipment match. (Smith Tr. 37 ln17 - 18) According to Sea-Land, this match "proves that all other information on Sea-Land's bill of lading is correct. However, Sea-Land's own terminal weight (RCV) ticket for Gravitt 136 shows that when Sea-Land itself weighed the cargo, it was approximately 93,000 pounds or three times the purported weight shown on the Sea-Land bill of lading and on the SED. (Smith Tr. 34 ln20 - 21. Moreover, Sea-Land's witness agreed that when in doubt the RCV ticket is a more accurate indicator of weight than the Sea-Land bill of lading and SED. (Smith Tr. 38 ln1 - 20)

Sea-Land's conclusion that no improper equipment substitution occurred is incorrect. Mr. Gravitt's analysis was not limited to a comparison of two documents (the container manifest and the Sea-Land bill of lading) in isolation from the other documents in the shipment file. (Gravitt Tr. 802 ln6, 866 ln3 - 4)

Upon his review of the entire shipment file, Mr. Gravitt gave his expert opinion that equipment substitution abuse took place because the shipment measured 43.94 CBM which exceeded the permitted limit under the tariff of 25 CBM. No witness testified that Mr. Gravitt's expert opinion was wrong. Sea-Land has failed to demonstrate any error in the conclusion of BOE's rate expert that the cargo in this shipment exceeded the tariff maximum limit and did not qualify for equipment substitution and 20' container rates.

Gravitt Shipment No. 11. Gravitt shipment No.11 contained packages of mixed commodities (Toys N.O.S.). The Sea-Land bill of lading shows a weight of 9742.36 kg/21,478 pounds and 21.55 cbm, well within the equipment substitution limits, and the accompanying SED supports the Sea-Land bill of lading on commodity, quantity, and weight. Sea-Land urges that BOE has clearly not satisfied its burden to prove that this shipment was incorrectly rated.

The container manifest shows a weight of 25,564 pounds, but an over the limit measure of 36.17 cbm. The commodities shown on the manifest do not match either the Sea-Land bill or the SED. Several commodities aside from Toys are shown. Mr. Gravitt determined that this shipment's actual measurement was 36.17 CBM and therefore it did not qualify for equipment substitution, and lower container rates should not have been charged. The Sea-Land bill of lading shows the measurement as 21.55 CBM.

Discussion and Conclusion-Gravitt Shipment No. 11. Sea-Land uses its SED matching theory that since the SED also shows 21.55 CBM then all other Sea-Land bill of lading information must be correct. Sea-Land offered no witness to support this theory, whereas BOE's rate analyst gave his expert opinion that the shipment measured 36.17 CBM and that there was a misuse of the equipment substitution rule for this shipment. Sea-Land offered no witness to testify that Mr. Gravitt's expert opinion was wrong, and BOE's position as to this shipment is sustained as the best evidence of record.

Gravitt Shipment No. 134. Shipment No. 34 reflects a World Pacific shipment of electrical equipment in two 40' high cube containers. Sea-Land rated the bills under equipment substitution on the basis of the declared weight of 21,328.71 kg and 28.45 cbm for the two containers together. BOE relies on World Pacific's house bill of lading that shows a shipment weight of 22.13 K. The house bill of World Pacific shows no cubic measure. The World Pacific bill of lading is marked "COPY" and is not rated, so Sea-Land urges that it is unclear that it is even a final version of the house bill. The SED for this shipment corroborates the Sea-Land bill of lading, and conflicts with the World Pacific bill of lading. The weight, of course, is the key piece of information for this shipment, since BOE rerated the shipment based on weight, not measure. Sea-Land claims that because the weights on the SED and the Sea-Land bill of lading match, the weight information on the NVO bill of lading must be unreliable. Sea-Land urges that the evidence does not support BOE's conclusion.

Sea-Land contends that these shipments, which are representative of the 90 shipments for which there is specific SED information, illustrate how the determination of the size of what was in the container-the key issue for purposes of determining whether there was a 10(b)(1) violation-often comes down to a comparison of an SED coupled with a Sea-Land bill versus an NVOCC's manifest or bill of lading; that in such cases, the evidence supports the reliability of the SEDs; and that, as a result, BOE has not satisfied its burden of proof on section 10(b)(1) with respect to these shipments.

Discussion and Conclusions-Shipment No. 134. From his examination of the shipping file, BOE's rate analyst determined that this shipment's weight was 22.13 K based on World Pacific's bill of lading, over the limit of 18 K, and, therefore, the equipment substitution rate should not have been charged.

Even though it was Sea-Land's practice to weigh all outbound containers upon entering the terminal and despite Sea-Land's own document retention policy, Sea-Land failed to provide its RCV weight ticket which would have shown the weight of this cargo when Sea-Land weighed it at the terminal gate in Long Beach, CA. (Ohle Tr. 386 ln20 - 387 ln11)

Mr. Gravitt gave his expert opinion that there was a misuse of the equipment substitution rule for this shipment based upon all of the documents in the shipment file. Sea-Land offered no witness who examined this shipment file to testify that Mr. Gravitt's expert opinion was wrong or to testify that Mr. Gravitt should have excluded World Pacific's bill of lading from his analysis. Sea-Land's "matching" theory as to SEDs is rejected as having no probative value. Mr. Gravitt's decision to rely on World Pacific's bill of lading for this shipment is reasonable based upon his expert opinion as to the demonstrated reliability of the documentation of other World Pacific shipments. (Gravitt Tr. 809 ln3 - 11)

BOE has carried the burden of proof that this shipment was charged inapplicable 20' container rates since the shipment exceeded the maximum weight limits permitted under the governing tariff. BOE furnished the best evidence of record.

Gravitt Shipment No. 129. In this shipment, the Sea-Land bill of lading shows 14.285 cbm and 10,931.51 kg of electrical equipment, which would qualify for equipment substitution under TWRA's tariff rule. The weight and number of packages are consistent with World Pacific's shipping instructions and are further confirmed by a signed SED that was available to, but apparently never considered seriously by, Mr. Gravitt.

Mr. Gravitt relied instead on a World Pacific house bill of lading that corroborated the measure on the Sea-Land bill, but shows a weight of 19,549.729 kg. Sea-Land contends that since the house bill is marked "COPY" and is not rated, it is not clear that it is the final version; that World Pacific may have rated the shipment on a per container basis, for which the weight would have been irrelevant; and that, for all these reasons, Sea-Land urges that the weight on the house bill of lading should not be found more reliable than the weight shown uniformly on the Sea-Land bill, bill of lading instructions, and SED.

Discussion and Conclusions-Gravitt Shipment No. 129. Sea-Land again failed to provide its RCV weight ticket which would have proven the weight of this cargo when Sea-Land weighed it at the terminal gate in Long Beach, CA. As noted, Sea-Land's practice was to weigh all outbound containers upon entering the terminal. (Ohle Tr. 386 ln20 - 387 ln11.

The file for this shipment also contains a "Bill of Lading Master" where the information on it matches the World Pacific bill of lading. This bill of lading master has a facsimile tag on the edge which states, "From: PSD-LAX." According to the bill of lading master and World Pacific's bill of lading, the underlying shipper is "P.S.D. International Inc" (CO Ex. 6) and the bill of lading master was sent initially by the shipper to World Pacific. (Gravitt Tr. 1032 ln11 - 19) Thus, Mr. Gravitt considered the weight information shown in the documents of the underlying shipper, as well as World Pacific and Sea-Land, when he concluded that the shipment did not qualify for equipment substitution rates.

Mr. Gravitt gave an expert opinion that there was a misuse of the equipment substitution rule for this shipment, which was not controverted by an expert witness for Sea-Land. BOE has presented the best evidence of record. Sea-Land's "speculative possibilities" are thus of little weight. West Coast Line Inc. v. Grace Line, Inc., 3 F.M.B. 586 at 595 (1951) (agencies are not authorized to base decisions on speculative possibilities). BOE has sustained its burden of proof as to this shipment.

Gravitt Shipment No. 130. There is no dispute about the measure of this shipment but there is about the weight, which appears on the Sea-Land bill of lading, the bill of lading instructions, and the signed SED as 11,129.284 kg. The only contrary indication is on a World Pacific internal bill of lading, which shows 19,035.357 kg, and a "Bill of Lading Master" which indicates 41,966 pounds. Sea-Land states that this latter document appears to have come from G.I.T. Logistics, but the source of the weight information is unspecified; that the World Pacific bill is marked "COPY" and is not rated, so it is not clear that it is even the final version; and that World Pacific may have rated the shipment on a per container basis, in which case the weight would have been irrelevant. For all these reasons, Sea-Land urges that the weight on the house bill is less reliable than the weight shown on the Sea-Land bill, bill of lading instructions, and SED.

Discussion and Conclusion-Shipment No. 130. Initially it must be pointed out that Sea-Land's proffer of personal opinions, argument, and assessment of the evidence are not an acceptable substitute for probative evidence and have been uniformly rejected as they are here. See Agreement No. 10387, 21 S.R.R. 131, 132 (FMC, 1981) ("[U]nder any reasonable standard, argument of counsel does not suffice as substantial evidence."). Accord Petition of South Carolina State Ports Authority for Declaratory Order, 27 S.R.R. 1137, 1162 (FMC 1997); Malpractices-Brazil/United States Trade, 12 S.R.R. 242, 251 (I.D. 1971), adopted, 12 S.R.R. 817, 820 (FMC 1971), citing International Ass'n of Machinists v. NLRB, 110 F.2d 29, 35 (D.C. Cir. 1939), aff'd 311 U.S. 72 (1940); Eastern Guide Trading Co. v. Cyprian Fabre et al., 1 U.S.S.B. 188, 191 (1930); West Coast Line Inc. v. Grace Line, 3 F.M.B. 586, 595 (1951); Alcoa Steamship Co. Inc. v. Cia. Anonima Venezolana, 7 F.M.C. 345, 361 (1962); and Rate Agreement Exclusive Patronage System, 11 F.M.C. 513, 523 (1958).

The "Bill of Lading master," which shows 41,966 pounds (over the weight limit) contains a handwritten note "Attn: Joey - World Pacific," was sent to World Pacific by a third party having dealings with the cargo. (Gravitt Tr. 1029 ln9 - 1030 ln10) Mr. Gravitt testified that when reviewing a shipment file he would look for documents originating from third parties or shippers as being persons that would most likely know the actual weight or measurement of the cargo. (Gravitt Tr. 1033 ln18 - 1034 ln2.) Thus, Mr. Gravitt considered the weight information shown in the documents of a third party, as well as World Pacific and Sea-Land, in concluding that the shipment did not qualify for equipment substitution rates. Sea-Land again failed to provide its RCV ticket which would have shown how much this cargo weighted. Mr. Gravitt testified that the SED is in error. (Gravitt Tr. 856 ln22 - 23.) No witness on behalf of Sea-Land examined this shipment file and provided sworn testimony that Mr. Gravitt's expert opinion was wrong. In the circumstances, BOE's presentation is the best evidence of record and it has sustained its burden of proof with its preponderance of the evidence..

Gravitt Shipments Nos. 24, 25, 64, and 111. On its house bills of lading, Global Links showed the same figure of 50 cubic meters for each of these four full-container shipments of Compaq computers. Sea-Land states that Mr. Tse of Global Links admitted the documentation for these shipments was not accurate; that Global Links did not care how much cargo was in these containers, and therefore used only rough estimates of the cubic measure, because the measure would not affect the per container rate charged to its customer. (Tse Tr. 104) Sea-Land argues that the weight and measure information for these shipments is obviously unreliable and does not satisfy BOE's burden of proof, and that the weight and measure shown on the Sea-Land bills of lading are well within the limits for equipment substitution.

Discussion and Conclusion-Gravitt Shipment Nos. 24, 25, 64 and 111. In reviewing the documents for these shipments, Mr. Tse of Global Links stated that even though the measure of the shipments would not affect the full container rate he charged, that the 50 CBM used on the Global Links bills of lading were approximate measurements for the cartons of computers (Tse Tr. 117 ln12); that by using the Global Links warehouse receipts, one could calculate the approximate cubic measurements for the total 228 cartons of computers in these shipments (Tse Tr. 113 ln4 - 10 and CO Ex. 15, 17 and 18); that, for one shipment, the warehouse receipt showed that 140 cartons measured 29.07 CBM and the rest measured 20 CBM. Thus, the warehouse receipts and oral testimony showed that the cartons of computers in the shipment measured about 29.07 CBM and 20 CBM or about the 50 CBM shown on the Global Links bill of lading. (Tse Tr. 112 ln21 - 23) According to Mr. Tse, Global Links gave reduced cargo measurements to Sea-Land to obtain lower container rates based on the scheme devised by Sea-Land. (Tse Tr. 110 ln3 - 19) Mr. Tse answered Sea-Land's questions in part as follows: "He just mention how to do the equipment sub.** He mentioned how to do it on a 40-foot container. **40, sub 20." (Tse Tr. 118 ln2 - 18)

Mr. Gravitt judged that Global Links' cargo measurement of about 50.0 CBM and over the limit was the best evidence of record and, therefore, that lower container rates should not have been charged by Sea-Land. Mr. Gravitt, like Mr. Tse, testified that the Global Links' warehouse receipts could be used to calculate the cubic measurement. In reviewing the warehouse receipts for CO Ex. 18, Mr. Gravitt testified that the calculated measurement for the cartons of computers would be more than the tariff permitted CBM, and that the shipment thus did not qualify for equipment substitution rates. (Gravitt Tr. 1066 ln13 - 23) Global Links' witness confirmed Mr. Gravitt's conclusion that these shipments did not qualify for the equipment substitution rates.

Sea-Land has offered no witness who examined these shipment files or who testified that Mr. Gravitt's expert opinion was wrong, and in the circumstances, Sea-Land's arguments cannot be accepted and BOE has sustained its burden of proof by a preponderance of the evidence.

Gravitt Shipment No. 54. Sea-Land's bill of lading shows 24.18 cbm of cargo. Morrison's house bill of lading confirms the 24.18 cbm number, as well as the weight of 12,575 kg shown on Sea-Land's bill. The file includes two Morrison internal documents styled "Container Manifests," one of which reflects 61.18 cbm of cargo and another of which shows 23.07 cbm..

Mr. Gravitt concluded that the version of the Container Manifest, which showed 61.18 cbm, was the correct one; that the manifest showing 23.07 CBM was created later in time because it had more information and was altered. (Gravitt Tr. 940-2) Sea-Land states that, however, upon being presented with these documents, Morrison's ocean manager Mr. C. Lee, who was presumably more familiar with Morrison's documentation system than Mr. Gravitt, refused to make that assumption:

Q: Do you have any reason on this particular shipment to know whether or not that was the amount of cargo that was actually in the container?

A: I don't know.

Q: Okay. And after that document there are two versions of container manifests. Do you see those?

A: Yes. . . .

Q: Now, given your limited involvement in the documentation process with Morrison, do you have any reason to be able to tell us which of these container manifests at this point was accurate?

A: I don't know.

(C_Lee Tr. 98-9) Sea-Land contends that if Mr. C. Lee could not conclude which document was accurate, BOE cannot now claim to have fulfilled its burden of proof with respect to this shipment based on mere speculation.

Discussion and Conclusion-Gravitt Shipment No. 54. BOE's expert Mr. Gravitt testified that the Morrison container manifest that he relied upon was correct and that the Morrison manifest which supported the Sea-Land bill of lading was an altered version of the other container manifest and was not correct. (Gravitt Tr. 1149 ln7 - 11) Mr. Gravitt added that, "Usually when things are corrected, they're corrected in such a manner as not to conceal. There's an attempt here to conceal, not to correct, in my opinion." (Gravitt Tr. 1149 ln15 - 18)

Sea-Land asserts that Mr. Gravitt must be wrong because Morrison's witness, Mr. Chao Lee, failed to confirm Mr. Gravitt's analysis. However, given Mr. Lee's admitted own "limited involvement in the documentation process with Morrison," it cannot be concluded that Mr. Lee's testimony in this regard is of any probative value. Sea-Land offered no expert witness who examined this shipment file and testified that Mr. Gravitt's opinion was wrong. Mr. Gravitt's presentation is the best evidence of record and clearly established that this shipment did not qualify for equipment substitution and that the lower container rates were inapplicable. BOE has sustained its burden of proof by a preponderance of the evidence.

Gravitt Shipment No. 51. Here again, Morrison's file contained two documents styled Container Manifest that relate to the same shipment. One supported Sea-Land's bill of lading that 24.24 cbm were contained in the shipment. The other amounted to 64.24 cbm. Mr. Gravitt adopted the latter figure, on the grounds that it "appeared to be the unaltered one." (Gravitt Tr. 953) Sea-Land contends that, however, there are no obvious alteration markings on the document, other than the fact that some of the numbers are different, and that Mr. Gravitt, without any knowledge of who prepared the document, adopted the conclusion unfavorable to Sea-Land.

While Mr. Chao Lee, Ocean Manager of Morrison Maritime, did not testify specifically on this shipment, he confirmed that he would have no better insight into what documentation was correct on Morrison shipments than on Gravitt Shipment No. 54:

Q: Would your answer be any different with respect to any other Morrison shipments in terms of your knowledge of how much cargo was in the container with respect to any of those particular shipments?

A: I don't have any idea because I am not doing like a container loading or anything. I just do my sales activity, and the rest of operation I hand down to the real operation and warehouse people.

(C_Lee Tr. 102) Sea-Land urges that BOE has not satisfied its burden of proof with respect to this shipment.

Discussion and Conclusion-Gravitt Shipment No. 51. While Sea-Land contends that Mr. Gravitt must be wrong in his analysis, Sea-Land presented no expert witness who offered a contrary opinion to that of Mr. Gravitt, who concluded that there was a misuse of the equipment substitution rule for this shipment. As indicated earlier, Sea-Land's arguments and opinions lack probative value. The record shows that the manifest that supports the Sea-Land bill of lading is an altered version of the manifest upon which BOE's senior investigator relied. (Gravitt Tr. 950 ln1- 2) Mr. Gravitt testified that he believed someone purposely reduced the manifest measurement numbers with a resulting lower cubic measurement. (Gravitt Tr. 1070 ln11 - 19) Sea-Land asserts that because Morrison's witness was unwilling to identify which manifest was correct, Mr. Gravitt cannot make any analysis as to which manifest is correct. However, Sea-Land's argument fails because the Morrison witness had "limited involvement" in the preparation of documents and primarily was involved in the sales aspect of the company. (C_Lee Tr. 98-9 and 102) "[N]ever do paperwork when I was the ocean manager," explained Mr. Lee. (C_Lee Tr. 17 ln13 - 18 ln3)

Mr. Gravitt also testified that, based upon his experience as an investigator, the commodity descriptions of pallets, rolls and pieces indicated cubic measurements which would be consistent only with that manifest upon which he had relied. (Gravitt Tr. 1071 ln6 - 1072 ln23) Mr. Gravitt explained that 9 pallets, 5 rolls, 362 pails, 20 pieces and 72 cartons of personal effects would probably measure 12.15 CBM shown on one manifest rather than the 2.15 CBM shown on the other manifest. (Gravitt Tr. 1071 ln2 - 20) Mr. Gravitt also testified that he believed 8 pallets of pumps described as containing 195 cartons would more likely amount to 22.74 CBM shown on one manifest rather than 2.74 CBM shown on the other manifest. (Gravitt Tr. 1072 ln1 - 23)

Sea-Land sought to test Mr. Gravitt's expertise further. Sea-Land inquired in the following manner: "I'm asking you not about this document but your experience as an investigator." (Gravitt Tr. 1094 ln14 - 16) Sea-Land asked Mr. Gravitt to calculate the approximate measurement for 5 pallets of golf clubs and parts without looking at any documents. Mr. Gravitt estimated that such cargo would measure about 15 CBM. When the measure on the document was revealed it showed that the actual measurement was 13.65 CBM. The Morrison manifest that Sea-Land claimed as support for Sea Land's bill of lading erroneously put the measurement at a low 3.65 CBM. (Gravitt Tr. 1094 ln3 - 1096 ln2) Sea-Land's strategy backfired since Mr. Gravitt clearly demonstrated his expertise in analyzing the reliability of information in shipping documents, and BOE clearly sustained its burden of proof as to this shipment.

Gravitt Shipment No. 53. The documentation for this shipment is similar to the previous two Morrison shipments discussed above. Three documents, one a Sea-Land bill of lading and two Morrison internal documents, agree that the shipment contained 24.36 cbm of cargo. One Morrison document, a container manifest, differs from the other three and shows 60.36 cbm. Mr. Gravitt adopted the latter document, stating that the other container manifest had been altered obviously triggering the false numbers on the bill of lading and the other document. (Gravitt Tr. 961)

Sea-Land contends that neither of the manifests was dated, nor are there any obvious alteration marks; that yet Mr. Gravitt reaches the conclusion that is adverse to Sea-Land; and that this type of speculation, with no evidentiary basis, does not satisfy BOE's burden of proof.

Discussion and Conclusion-Gravitt Shipment No. 53. Once again, Sea-Land has failed to present expert testimony and its arguments and opinions lack substantive value.

BOE's expert witness explained that the second manifest contained suspicious cubic measurement reductions. He pointed to a change of exactly 10 CBM from 18.78 CBM to 8.78 CBM, and a change of exactly 13 CBM reducing 16.76 CBM to 3.76 CBM. (Gravitt Tr. 964 ln1 - 12) He explained further: "It's uncommon for one manifest to have such two whole number changes. And if you go down to the others, the rarity increases with each example." (Gravitt Tr. 964 ln12 - 15) Based upon his years of reviewing similar shipping documents, BOE's veteran investigator rendered his expert opinion that there was a misuse of the equipment substitution rule for this shipment. Sea-Land offered no sworn witness to contravene his opinion so there was no battle of experts. BOE has sustained its burden of proof.

Gravitt Shipment No. 22. Global Links' file for this shipment contained two different Global Links bills of lading that relate to the same shipment. One supported Sea-Land's bill of lading that the shipment contained 21.78 cbm of toys. The other reflected 63.13 cbm of computers. Sea-Land contends that the documentation in the file is confusing and contradictory, and that this file does not provide sufficient certainty to fulfill BOE's burden of proof with respect to this shipment.

Discussion and Conclusion-Gravitt Shipment No. 22. The question is whether the shipment consisted of computers measuring 63.13 CBM, as claimed by BOE, or toys measuring 21.78, as urged by Sea-Land. BOE's expert rate analyst, Mr. Gravitt, determined that this shipment's measurement was 63.13 CBM as shown on the Global Links NVO bill of lading wherein Baltrans Ocean is listed as shipper, and the commodities are identified as "computers," and, therefore, equipment substitution was barred and 20' container rates should not have been charged.

BOE's rate expert gave his opinion that there was a misuse of the equipment substitution rule for this shipment. The Bill of Lading Master shows one container with 304 packages of computers measuring 63.13 CBM confirming Mr. Gravitt's opinion that the shipment exceeded the tariff maximum and that the lower container rates were not applicable. No expert witness testified to the contrary. Sea-Land offered no sworn witness who examined this shipment file or testified that Mr. Gravitt's expert opinion was wrong.

Mr. Gravitt also concluded that the Global Links bill of lading that identified Baltrans as the shipper was the most accurate (Gravitt Tr. 975 ln18 - 20) and that a Baltrans document that contained measurement information corroborated the Global Links bill of lading upon which he relied. (Gravitt Tr. 1077 ln21 - 1079 ln18) Thus, Mr. Gravitt considered all available documentation in concluding that the shipment did not qualify for equipment substitution rates. BOE has clearly sustained its burden of proof.

Gravitt Shipment No. 131. On this shipment, the Sea-Land bill of lading shows a weight of 11025.41 kg and a measure of 14.485 cbm for a shipment of "plastic pipe & fitting." World Pacific's internal bill of lading shows a weight for the shipment of 19,644 kg and 39.84 cbm. The SED for this shipment agrees with Sea-Land's bill of lading as to weight and commodity description. World Pacific's bill differs from the SED as to both weight and measure.

Sea-Land states that in cross-examination on this shipment, Mr. Tam and Mr. Tiao of World Pacific had difficulty determining which of the documents contained the correct information (Tam Tr. 76-7; Tiao Tr. 213-223); that there was also conflicting information in a packing list; that Mr. Tam stated that he had not instructed anyone to falsify the SED for this shipment and that World Pacific's general practice was to declare information correctly on the SEDs. (Tam Tr. 125)

Sea-Land failed to introduce its RCV ticket which would show the actual cargo weight based on the carrier's own figures when Sea-Land weighed the container and cargo at its terminal gate in Long Beach.

Mr. Tiao of World Pacific testified that World Pacific's bill of lading contained the correct information because it should be followed by the invoice and the packing list. (Tiao Tr. 222 ln9 - 19)

Sea-Land again urges adoption of its now discredited SED matching theory which is that if certain SED information matches certain Sea-Land bill of lading information, then all other Sea-Land bill of lading information must be correct. However, BOE's rate expert testified regarding that SED, "[I]t's clearly wrong because it did not agree with the packing list." (Gravitt Tr. 846 ln18) "Sea-Land is asking for an export doc after the shipment has sailed." (Gravitt Tr. 848 ln4 - 6)

Discussion and Conclusion-Gravitt Shipment No. 131. The entire shipment file for this shipment was introduced into evidence as CO Ex. 4. As explained by World Pacific's witness, the measurement, weight and purchase order number on the underlying shipper's packing list matches the World Pacific bill of lading. BOE's veteran investigator considered the measurement information shown in the documents of the underlying shipper, as well as that of World Pacific and Sea-Land, when he gave his expert opinion that the shipment did not qualify for equipment substitution rates, and that there was a misuse of the equipment substitution rule for this shipment. Sea-Land offered no countervailing expert witness to prove that Mr. Gravitt's expert opinion was wrong. In the circumstances, BOE has sustained its burden of proof by a preponderance of the evidence.

Gravitt Shipment No. 108. The Sea-Land bill of lading shows 22 cbm and 28,000 pounds, while the General Ocean Freight bill of lading shows more cbm-45.00-but a much lower weight-13,885 pounds. Sea-Land states that this discrepancy is answered by the SED for the shipment, which confirms the numbers on the Sea-Land bill, and that it is impossible to say that the preponderance of the evidence supports BOE's conclusion.

Discussion and Conclusion-Gravitt Shipment No. 108. This shipment took place shortly after Sea-Land received the first Neutral Body letter stating that, based upon the cubic measurement shown on a General Ocean SED, Sea-Land had engaged in an abuse of the equipment substitution rule. Thus, Mr. Gravitt's decision not to give any greater weight to the General Ocean SED for this shipment was correct. Sea-Land agreed that it should have checked to make sure that General Ocean SEDs were consistent with the bills of lading. (Smith Tr. 121 ln21 - 122 ln7)

Sea-Land offered no sworn witness who examined this shipment file to testify that BOE's veteran investigator's expert opinion was wrong. BOE has clearly sustained its burden of proof by presenting the best evidence of record as to this shipment. The preponderance of the evidence supports BOE's contention that Sea-Land misused the tariff rules.

Gravitt Shipment No. 1. Sea-Land contends that the documentation here is inconsistent and inconclusive, and certainly does not show by a preponderance of the evidence that a misrating occurred. Sea-Land alleges that Brennan's container load plan is unreliable because the measurements on the "eight" available Brennan bills of lading do not match Brennan's container load plan's measurement. The Sea-Land bill shows 24.810 cbm and 17,930 kg, both within the equipment substitution limit.

Discussion and Conclusion-Gravitt Shipment No. 1. This shipment was selected by the shipper, Brennan, as an admission of its misdeclaration and as evidence of its equipment substitution malpractice involving Sea-Land. Brennan's container load plan shows 10 shipments in Brennan's consolidated container, not 8 as claimed by Sea-Land (Nos. 3605193-01 thru 3605193-8, 9605009-01 and 5605001-95). BOE Ex. 16.

The record shows that the "measurements on the container load plan were reduced so that Brennan could take advantage of Mr. Favor's invitation to obtain lower rates through misuse of the equipment substitution rule." (BOE Ex. 10, ¶ 5, at p. 4) The record clearly demonstrates that the container load plan contains accurate information and that there was a misuse of the equipment substitution rule for this shipment. BOE has amply sustained its burden of proof.

Gravitt Shipment No. 3. The Sea-Land bill of lading shows 24.466 cbm of cargo while BOE concludes that it actually contained 39.76 cbm. BOE's supporting documentation consists of several documents, but the one in contention is the one of which is stamped "FREIGHT TRANSFER RECEIPT" for 6.06 CBM of cleaning compounds.

Sea-Land contends that it is far from clear that this latter lot of cargo (represented by the Freight Transfer Receipt) belongs in this shipment; that the Freight Transfer Receipt is not only styled differently from the others, but it has a different identifying number; that all the other documents are part of a series commencing with "Bill of Lading No. 3608350-01," while the Freight Transfer Receipt is numbered "Freight Transfer Receipt No. 3608330-03A."

Sea-Land urges that without the cargo on the Freight Transfer receipt Brennan's underlying documentation would support a shipment of 21.24 cbm, well within the tariff limits for equipment substitution, and that there is at least as much evidence, if not more, that the information on the Sea-Land bills of lading were correct.

Discussion and Conclusion-Gravitt Shipment No. 3. The question boils down to whether this shipment included the cargo represented by the Freight Transfer Receipt. The record shows that Brennan admitted that the equipment substitution rule was misused for this specific shipment; that Brennan's "unfreighted manifest" was created to support the numbers on the Sea-Land bill of lading; that Brennan informed Sea-Land that this shipment would contain 6.06 CBM of cleaning compounds; that the container load plan, dock receipt and other documents also warrant inclusion of this cargo in this shipment; and that adding this cleaning compound proves that the shipment's measurement exceeded the maximum limit for equipment substitution. The record shows that Brennan and BOE's senior rate analyst independently established that there was a misuse of the equipment substitution rule for this shipment. BOE has amply sustained its burden of proof by presenting a preponderance of the evidence.

Other Shipments. Sea-Land next contends that BOE has not sustained its burden of proof under section 10(a)(1) as to the remaining 53 shipments because beginning in the latter half of 1997 Sea-Land obtained SEDs, packing lists or other backup documentation to verify the information provided by the shippers in their bill of lading instructions; that the reliability of the SEDs has been amply demonstrated whereas the documentation of BOE allegedly has been shown to be unreliable; that the shippers declared the weight and cube of the cargo in sealed containers tendered to Sea-Land; that there is no allegation that any Sea-Land employee ever falsified documents; and that BOE has not established that the shipments were incorrectly rated and therefore violated section 10(b)(1).

Contrary to Sea-Land's assertions, the record shows that third parties, such as the Neutral body, established that many of Sea-Land's SEDs were unreliable; that BOE's expert rate witness came to the same conclusion, stating "I believe in the context of these 149 shipments, those export docs that match . . . the master bill of lading were done to conceal." (Gravitt Tr. 1119 ln22 - 1120 ln2) In addition, NVO witnesses agreed that SEDs were not always accurate. (Tam Tr. 121 ln22 - 24) Moreover, Sea-Land's own witness, Ms. Donna Smith, explained that when a container is delivered to Sea-Land's port terminal, Sea-Land weighs the container and the weight of the cargo is noted on the RCV ticket; that thereafter the applicable charges are determined and that when there is a conflict between the weight on the SED and the RCV ticket and weight is the determining factor, she would rely more on the RCV ticket. (Smith Tr. 32 ln6 - 8; Tr. 33 ln11 - 16; Tr. 43 ln16 - 20; and Tr. 38 ln1 - 20) Furthermore, the record establishes that an NVO bill of lading is considered reliable because it is "being issued to the ultimate shipper of the cargo, he knows what he's tendered. He knows what the commodity is, he knows the weight, he knows the measure. If you're giving him a house [NVO] bill of lading, it's more likely that it would be correct because it's easily verifiable to the shipper." (Gravitt Tr. 809 ln3 - 11)

In summary, the evidence introduced by BOE as to the weight and cube of these 149 shipments, consisting of NVO testimony, NVO and other documentation, RCV tickets and the analysis of the sole expert rate witness, BOE's Mr. Gravitt, is the best evidence of record and clearly rebutted the validity of the "matching theory" of Sea-Land as to its SEDs. Finally, BOE has shown that even if Sea-Land's SEDs had probative value, 20 are defective since they contain fewer than all the SEDs in the shipments,⁽²⁹⁾ several contain total weights over the tariff limit,⁽³⁰⁾ and some SEDs show cubic measures over the tariff limits.⁽³¹⁾ BOE's proof has established that it has sustained its burden to show by a preponderance of the evidence that the 149 shipments were incorrectly rated in violation of section 10(d)(1), 46 U.S.C. app. § 1709(d)(1).

As to whether the number of freight forwarder shipments is 435 as alleged by BOE the record shows that it is based on the affidavit of Mr. Carey that he examined that number of "remittance advices" which Sea-Land attached to the compensation checks.

Sea-Land had Mr. Carey's affidavit from April 2000 until August 24-25, 2000, when he was cross-examined. No question was raised as to the number of shipments at that time. The "remittance advices" were in Sea-Land's possession. If Sea-Land believed that its documents would disprove Mr. Carey's numbers it should have produced them. Failure to do so warrants the inference that they would have been adverse to Sea-Land's position and thus the conclusion is warranted that Mr. Carey's numbers of 170 and 165 are accepted by a preponderance of the evidence as the best evidence of record.

"It is a familiar rule of evidence that a party having control of information bearing upon a disputed issue may be given the burden of bringing it forward and suffering an adverse inference from failure to do so. See McCormick, Evidence § 337 at 787 (2^nd ed. 1972). In regulatory proceedings, placing such a burden on the regulated firm, where the relevant information concerns its operations and management, has become part of the 'common lore of' regulations." See Commonwealth of Puerto Rico v. FMC, 468 F.2d 872, 880 (1972). As the Supreme Court stated in Interstate Circuit v. U.S., 306 U.S. 208, 225 (1939), "The production of weak evidence when strong is available can lead only to the conclusion that the strong would have been adverse."

BOE has established by a preponderance of the evidence that the number of compensation checks at issue was 265 to ITL and 170 to General Air.

Between January 1, 1996 and April 30, 1999, sections 19(d)(1) and (4) of the 1984 Act, 46 U.S.C. app. § 1718(d)(1) and (4), provided that:

(1) A common carrier may compensate an ocean freight forwarder in connection with a shipment dispatched on behalf of others only when the ocean freight forwarder has certified in writing that it holds a valid license and has performed the following services:

(A) Engaged, booked, secured, reserved, or contracted directly with the carrier or its agent for space aboard a vessel or confirmed the availability of that space.

(B) Prepared and processed the ocean bill of lading, dock receipt, or other similar document with respect to the shipment.

(4) No ocean freight forwarder may receive compensation from a common carrier with respect to a shipment in which the forwarder has a direct or indirect beneficial interest nor shall a common carrier knowingly pay compensation on that shipment.

Section 19 was predicated upon section 44 of the Shipping Act, 1916, formerly 46 U.S.C. app. § 841(b). In pertinent part, section 44(e) stated:

A common carrier by water may compensate a person carrying on the business of forwarding to the extent of the value rendered such carrier in connection with any shipment dispatched on behalf of others when, and only when, such person is licensed hereunder and has performed with respect to such shipment the solicitation and securing of the cargo for the ship or the booking of, or otherwise arranging for space for, such cargo, and at least two of the following services:

(1) The coordination of the movement of the cargo to shipside;

(2) The preparation and processing of the ocean bill of lading;

(3) The preparation and processing of dock receipts or delivery orders;

(4) The preparation and processing of consular documents or export declarations;

(5) the payment of the ocean freight charges on such shipments.

Before any such compensation is paid to or received by any person carrying on the business of forwarding, such person shall, if he is qualified under the provisions of this paragraph to receive such compensation, certify in writing to the common carrier by water by which the shipment was dispatched that he is licensed by the Federal Maritime Commission as an independent ocean freight forwarder and that he performed the above specified services with respect to such shipment. Such carrier shall be entitled to rely on such certification unless it knows that the certification is incorrect.

Section 44(e) was, in turn, enacted by Congress in response to a proposal by the Federal Maritime Board (the predecessor agency to the Federal Maritime Commission) to eliminate all common carrier payments to freight forwarders. The Federal Maritime Board had proposed this action based upon an industry-wide investigation of illegal rebating, wherein it concluded:

The record discloses with certainty that brokerage payments lead indirectly, through the forwarder recipients, to undesirable and unlawful practices.

Investigation of Practices, Operations, and Agreements of Ocean Freight Forwarders and Related Matters, and Proposed Revision of General Order 72 (46 CFR 244) and Investigation of Practices and Agreements of Common Carriers by Water in Connection with Payment of Brokerage or Other Fees to Ocean Freight Forwarders and Freight Brokers, 6 F.M.B. 327, 363 (1961).

Faced with a substantial loss of revenue to result from the proposed ban on brokerage, the forwarding industry appealed to Congress for the enactment of legislation which would permit such payments under appropriate safeguards. The ultimate result was Public Law 87-254. Instead of a total ban on brokerage (as the Board had proposed), Congress opted to permit compensation from carriers, but only where the forwarder rendered specified services of value and where the forwarder remained independent, i.e., free of any affiliation with a shipper, consignee, seller, purchaser or any person having a beneficial interest in the goods shipped, in order to eliminate indirect rebates to shippers. See Hugo Zanelli d/b/a Hugo Zanelli & Co., 18 F.M.C. 68, 73-4 (I.D. 1974), adopted 18 F.M.C. 60 (1974), aff'd sub nom, Zanelli v. Federal Maritime Comm., 524 F.2d 1000 (5^th Cir. 1975); See also Practices and Agreements of Common Carriers by Water in Connection with Payment of Brokerage or Other Fees to Ocean Freight Forwarders and Freight Brokers, 7 F.M.C. 51 (1962). According to the report of the Committee on Merchant Marine and Fisheries:

Section (e) of the bill, as amended, sets out certain prescribed duties which the freight forwarder must perform for the carrier in order to be entitled to receive compensation from the carrier in the form of brokerage. In this connection "the solicitation and securing of the cargo for the ship or the booking of, or otherwise arranging for space for, such cargo" are mandatory prerequisites to the receipt of brokerage from the carrier.

It is the feeling of the committee that this service certainly inures to the benefit of the carrier and that it goes back to the age-old concept of the services for which brokerage was paid, that is, the bringing together of the cargo and ship.

H.P. Rep. No. 1096, 87^th Cong., 1^st sess. 3 (1961). Of like result, the Senate explained in S. Rep. No. 691, 87^th Cong., 1^st Sess. 4 (1961), that "[s]everal steamship officials expressed the conviction that the burden of preparing the required consular documents, bills of lading, dock receipts, etc., would likely fall on the lines in most cases, which would require additional staffing so that the end result likely would be a greater cost than the 1¼ percent fee they now pay the forwarders." Thus, section 44 permitted payment of compensation where the forwarder secured cargo for a vessel and performed additional services for the benefit of the carrier, such as preparing bills of lading, dock receipts, or similar documents.

Congress, however, was concerned that compensation payments remained susceptible to abuses. In H.R. Rep. No. 2939, 84^th Cong., 2^nd Sess. 55 (1956), the Committee on Merchant Marine and Fisheries explained:

The committee is disturbed by the apparent widespread practice of automatic payment of brokerage commissions to registered forwarders irrespective of the services they may or may not have performed. Consequently, in view of the testimony on this point, we believe that appropriate legislation is required. . . . Accordingly, we are convinced that an orderly system of licensing is needed under which reasonable rules and regulations shall be prescribed aimed at (1) the preclusion of undesirable applicants from engaging in the business of forwarding, and (2) the elimination of "automatic unearned brokerage fees."

Investigation Into the Activities of Foreign Freight Forwarders and Brokers.⁽³²⁾ The certification process created by Congress in section 44(e) thus was intended to deter a system of "automatic" carrier payments where forwarder compensation, in fact, was unearned. The certification requirement was designed to furnish written confirmation that the licensed ocean freight forwarder earned the compensation by identifying the services performed. To underline these Congressional concerns, Congress placed the burden upon common carriers to collect this signed certification from the licensed ocean freight forwarder in the payment of forwarder compensation. The Commission's regulations emphasize this purpose inasmuch as common carriers, rather than forwarders, are required to keep the certifications for five years. See 46 C.F.R. § 510.23(b), replaced by 46 C.F.R. § 515.42(b) in 1999. Finally, Congress made clear that a carrier may not make payment if the carrier knows the certification to be incorrect. While this statutory provision was eliminated in the Shipping Act of 1984, the Commission continues to provide "safe harbor" to a carrier that has obtained a signed certification from a licensed ocean freight forwarder and relied upon such certification in good faith. See 46 C.F.R. § 510.23(b) (1998).

The 1984 Act directly impacted on the Commission's regulations pertaining to the ocean freight forwarder industry. In Licensing of Freight Forwarders, 22 S.R.R. 1148 (1984), revisions were made to final rules pertaining, as relevant here, to certification requirements for compensation for ocean freight forwarders.

The Commission stated as follows:

In view of the comments regarding the certification requirements contained in the forwarder regulations, the Final Rules will allow forwarders to provide the required certification on one copy of the bill of lading, or on a forwarder's summary statement, or on a forwarder's invoice for compensation, or as an endorsement on the back of a carrier's compensation check. Carriers will still be required to retain a copy of the forwarder's certification. Forwarders will only be required to retain in their shipment files evidence that the required services were performed on the particular shipments. It is our belief that this change is consistent with the language of the 1984 Act, and it will afford the industry an opportunity to streamline procedures for the payment of ocean freight forwarder compensation for the benefit of all concerned. Id. at 1149

The Commission earlier indicated that the general view of the commenting parties was that the then current certification requirements:

. . . create substantial administrative expenses both on the part of the forwarder and the carrier which could be eliminated through use of efficient automated systems for the payment of compensation. It is pointed out that the 1984 Act specifically eliminates the language of the Shipping Act, 1916 (1916 Act) requiring certifications prior to payment of compensation by the carrier. It is suggested that this change expresses Congress' intent to eliminate the current onerous and counterproductive paperwork procedures.

It has been estimated by one commenter that with a revised rule, as recommended, the industry could realize a saving of three million dollars. The significant saving, it is suggested, would result from elimination of the need both for forwarders to submit the huge volume of certifications to carriers and for carriers to process and retain their paperwork in order to generate appropriate compensation checks. Payment of Compensation, it is believed, could be better automated and less enmeshed in clerical procedures." Id. at 1149.

It is clear that, under section 19(d), an ocean freight forwarder must certify that it has performed two specified services for the common carrier to pay compensation. The forwarder must have "(A) Engaged, booked, secured, reserved, or contracted directly with the carrier or its agent for space aboard a vessel or confirmed the availability of that space. (B) Prepared and processed the ocean bill of lading, dock receipt, or other similar document with respect to the shipment." Thus, a common carrier cannot pay compensation unless services within both categories are performed by the forwarder. For example, if a forwarder books cargo but does not prepare and process documents with respect to a shipment, the carrier cannot pay compensation. Likewise, if the forwarder prepares and processes the shipment documentation but does not engage, book, secure, reserve, or contract directly with the carrier or its agent for space aboard a vessel or confirm the availability of that space, the carrier cannot pay the compensation. 46 U.S.C. app. § 1718(d)(1)(A) and (B).

Of necessity, a forwarder must communicate with an ocean common carrier to "engage, book, secure, reserve, contract or confirm vessel space availability" for that specific shipment. (FF 268 and SL FF 101) The Commission's regulations allow the use of written documents, fax transmissions or telephone (oral) communications for those purposes. In the present proceeding, the record shows that Sea-Land's record system provided one means by which Sea-Land could capture and memorialize each forwarder transaction of booking and confirming vessel space. (FF 269)

Similarly, a forwarder seeking to process shipment document(s) usually undertakes direct communication with the carrier regarding shipper's instructions, approval of the carrier's "pro forma" bill of lading, document corrections or requests for additional shipping documents, such as a shipper export declaration. (FF 268 and SL FF 101) Thus, a carrier never contacted by the forwarder for a particular shipment has reason to know that the forwarder is not performing those forwarding services necessary for the payment of compensation.

Here in this investigation the record shows that Sea-Land knew that the forwarders had not performed their requisite services. Not only did ITL testify that it has never performed forwarding services for any Sea-Land shipment (FF 266, 270, 289) for which it received compensation, but Sea-Land's records confirm this fact, i.e., that ITL never contacted Sea-Land to engage, book, secure, reserve, or contract directly with the carrier or its agent for space aboard a vessel or confirm the availability of that space. (FF 266, 267, 269, 271) Moreover, Sea-Land's records corroborate the testimony of other witnesses that the shipper not the forwarder contacted Sea-Land to book its own cargo. (FF 266, 267, 269, 270, 271 and SL FF 101) Sea-Land's records also show that ITL, the forwarder, never processed documents for Sea-Land shipments, the second requisite service. All documents needed by Sea-Land for these shipments were transmitted directly between the shipper and the carrier, not the forwarder and the carrier. (FF 266, 269, 270, 272, 275 and SL FF 101) The preponderance of the evidence thus amply demonstrates that Sea-Land's personnel knew that ITL never communicated with Sea-Land to provide any of the requisite freight forwarding services for any of these 265 shipments. (FF 270, 293, 294, 295 and SL FF 101)

With respect to Sea-Land's payments to the other forwarder, General Air, the record shows that all processing of documents with Sea-Land was handled directly by the affiliated shipper, General Ocean, not the forwarder, General Air. (FF 310, 311 and SL FF 108) According to General Air, the only service that it might have performed for these shipments was booking the cargo. Sea-Land's records, however, demonstrate that the shipper General Ocean regularly booked the cargo, rather than General Air. (FF 312 and SL FF 108) The preponderance of the evidence demonstrates that Sea-Land's personnel knew that the forwarder General Air did not communicate with Sea-Land to perform the requisite services to entitle General Air to forwarder compensation with respect to any of these 170 shipments. (FF 313 and SL FF 108, 109 and 110) Thus, even though Sea-Land had information in its possession sufficient to demonstrate that the forwarders ITL and General Air had not earned compensation, Sea-Land automatically issued compensation checks to either party identified as a licensed forwarder (IL and General Air) in the bill of lading instructions, without regard to the statutory requirements. (FF 273, 274, 275, 292, 309, 310, 311, 312, 313 and SL FF 108)

Section 19(d)(1) provides that forwarder compensation can be paid only to FMC licensed ocean forwarders. To comply with this mandate Sea-Land's purported business practice was to have employees check Sea-Land's own records to verify whether a forwarder had a license from the FMC prior to authorizing the issuance of compensation checks. (FF 276, 277) However, to verify this, Sea-Land failed to update its records, for example, by reviewing Federal Register license revocation notices on a monthly or more current basis or to take any other appropriate measure to insure compliance with section 19(d)(1). (FF 280)

It is a matter of public record that ITL's license was revoked on April 1, 1997. (FF 278) Notice of that revocation was duly published in the Federal Register. Publication in the Federal Register "is sufficient to give notice of the contents of the document to a person subject to or affected by it." 44 U.S.C. § 1507. However, Sea-Land continued to pay compensation to ITL on numerous shipments for several months after ITL's license was revoked. (FF 281) Sea-Land failed to note in its records that ITL's license had been revoked. (FF 280) Sea-Land's failure to establish and maintain proper records for the correct payment of forwarder compensation demonstrates reckless disregard for the statutory requirements, and this practice directly gave rise to Sea-Land knowingly paying forwarder compensation to a person who was not a licensed forwarder in violation of section 19(d)(1). (FF 281) See Shipman International (Taiwan) Ltd.-Possible Violations of Sections 8, 10(a)(1) and 10(b)(1) of the Shipping Act of 1984 and 46 C.F.R. Part 514, 28 S.R.R. 100, 110 (ALJ 1998), administratively final March 30, 1998 (A common carrier acted "knowingly and wilfully" when it knew or showed reckless disregard as to whether its conduct was prohibited by the 1984 Act.). Thus, Sea-Land knowingly violated section 19(d)(1) by paying compensation to a person who was not then a licensed ocean freight forwarder.

A common carrier may compensate an ocean freight forwarder only when the ocean freight forwarder has certified in writing that it holds a valid license by specifying its FMC license number and certifying that it has performed the two requisite services by signing the certification. 46 C.F.R. 510.23(c). Sea-Land employed for this purpose a preprinted forwarder certification form, located on the reverse of its compensation checks. (FF 283) The Commission's regulations at 46 C.F.R. § 510.23(c) are permissive in identifying where the forwarder can place its certification: upon the bill of lading, a forwarder's summary statement, forwarder's compensation invoice or as an endorsement on the carrier's compensation check. Sea-Land's certification form stated:

The undersigned hereby certifies that neither it nor any holding company, subsidiary, affiliate, officer, director, agent or executive of the undersigned has a beneficial interest in this shipment; that it is the holder of valid

FMC license No. ____________________________________________________ issued by the Federal Maritime Commission and has performed the following services:

(1) Engaged, booked, secured, reserved, or contracted directly with the carrier or its agent for space aboard a vessel or confirmed the availability of that space.

(2) Prepared and processed the ocean bill of lading, dock receipt, or other similar document with respect to the shipment.

(FF 284) Sea-Land used a preprinted check format as the carrier's exclusive means to collect forwarder certifications between January 1, 1996 and December 31, 1997. (FF 283) Sea-Land's form provided a blank space for the forwarder to insert its FMC license number, and the form refers to the forwarder as the "undersigned," thus signaling Sea-Land's own contemporaneous understanding that a written signature still was required of each forwarder certifying, but its form provided no lines or spaces where the signature could be placed. (FF 284) Sea-Land failed to show that its form resulted in either ITC or Ocean Air properly completing the form nor is it shown that any act of endorsement or negotiation of the check serves as the factual and legal equivalent of a signed forwarder's certification.

Sea-Land urges that depositing the compensation checks was an acknowledgment by the forwarders that they complied with the duty to perform the requisite services. However, this is obviously incorrect since both ITL and General Air, respectively, testified that they did not provide any forwarder certifications to Sea-Land. (FF 289, 318) Thus, the same persons responsible for completing the forwarder certifications in the first instance testified that they acted with no understanding of the operation or legal significance of the preprinted certification form on the reverse of the compensation check, which Sea-Land now seeks to assign to the act of depositing Sea-Land's compensation checks. ITL and General Air stated that they intended to negotiate payment of the checks, without more; they make no claim whatsoever that they knew or intended to convey signed certifications as part of the process of depositing Sea-Land's payment. (FF 289, 291, 315, 319, 320)

Sea-Land knew that forwarders would not fill out the certification form properly; Sea-Land also knew that the forwarders would not sign its certification. There was no place on the form for any signature. (FF 285, 287, 288, 316, 317) Sea-Land made no effort to verify whether the blank for the licensee number in Sea-Land's preprinted form