FEDERAL MARITIME COMMISSION

Served: October 18, 2001

A settlement offer may be made at any point in a proceeding, but a respondent must present its settlement offer directly to the Bureau of Enforcement rather than by way of a legal brief.

For purposes of determining the proper penalty amount, Shipping Act violations should be distinguished based on whether or not they are willfully and knowingly committed, not whether they are technical or non-technical.

An ALJ is not confined to assessing a penalty based solely upon a respondent's operating revenues; due regard should also be given to the gravity and extent of the violations, history of prior offenses, culpability, and the Congressional purpose of deterring violations by imposing greater civil penalties.

Report and Order affirming Initial Decision in part and vacating Initial Decision in part.

BY THE COMMISSION: Harold J. CREEL, Jr., Chairman; Antony M. MERCK, John A. MORAN, and Delmond J.H. WON, Commissioners. *

COUNSEL: Vern W. Hill and Julie Berestov, for the BUREAU OF ENFORCEMENT. Carlos Rodriguez, and Daniel W. Lenehan, III, RODRIGUEZ, O'DONNELL, FUERST, GONZALEZ & WILLIAMS, for Respondent Stallion Cargo, Inc.

ORDER

This proceeding was initiated by the Federal Maritime Commission ("Commission") on October 5, 1999, as an investigation into the activities of a non-vessel-operating common carrier ("NVOCC"), Stallion Cargo, Inc. ("Respondent" or "Stallion").⁽¹⁾ The Commission's Order directed an investigation into whether Respondent violated sections 10(a)(1)⁽²⁾ and 10(b)(1)⁽³⁾ of the Shipping Act of 1984 ("Shipping Act"), 46 U.S.C. app. §§ 1709(a)(1) and (b)(1), by willfully and knowingly obtaining transportation at less than the rates and charges otherwise applicable through the means of misdescription of the commodities actually shipped; and by charging, demanding, collecting or receiving less or different compensation for the transportation of property than the rates and charges shown in its NVOCC tariff. The Order further directed the presiding officer, in the event violations were found, to determine: whether civil penalties should be assessed against Respondent and in what amount, whether Respondent's tariff should be suspended, whether Respondent's Ocean Transportation Intermediary ("OTI") license should be revoked, and whether a cease and desist order should be issued.

Stallion is a tariffed and bonded NVOCC, located in Miami, Florida, and operates under an OTI license issued by the Commission's Bureau of Consumer Complaints and Licensing ("BCCL"). Rafael Croes is the President of Stallion, and owns 100% of its capital stock. Stallion operated in the trade from Port Everglades, Florida, to the port of Oranjestad, Aruba, Netherlands Antilles, during the period covered under this proceeding.

BACKGROUND

This proceeding was assigned to Chief Administrative Law Judge Norman D. Kline ("ALJ"). Pursuant to Commission rules, the Bureau of Enforcement ("BOE") was made a party to the proceeding and filed briefs before the ALJ. BOE argued that Respondent violated sections 10(a)(1) and 10(b)(1), that a significant civil penalty should be assessed, that Respondent's ability to publish its tariff should be suspended and its OTI license revoked, and that a cease and desist order should issue. Respondent filed an Answering Brief⁽⁴⁾ in which it argued that it was in substantial compliance with the Shipping Act's requirements and its violations were accidental or technical in nature. Respondent further argued that the Commission must consider mitigating factors when assessing penalties, and offered to settle this proceeding by payment of a $5,000 fine, payable to the Commission in installments.

On March 15, 2001, the ALJ issued an Initial Decision ("I.D.") in which he found that Respondent knowingly and willfully violated sections 10(a)(1) and 10(b)(1) at various times in 1998, 1999, and 2000, by misdescribing cargoes tendered to vessel-operating common carriers on 15 occasions and by failing to charge its applicable tariff rates on 152 occasions. The ALJ determined that a civil penalty should be assessed and a cease and desist order should issue. In assessing the civil penalty, the ALJ considered various mitigating factors and imposed a penalty of $50,000. This proceeding is now before the Commission on exceptions and replies thereto filed by both BOE and Respondent.

INITIAL DECISION

The ALJ found that the evidence demonstrated a total of 167 violations (15 violations of 10(a)(1) and 152 violations of 10(b)(1)). I.D. at 1, 20, 32, 52.

A. Section 10(a)(1) Violations

The ALJ found that BOE provided sufficient evidence showing that Stallion violated section 10(a)(1) on 15 occasions in 1998 and 1999. Id. at 18. Specifically, he found that during September and October of 1998, and between July and December 1999, Stallion misdescribed various shipments it transported through two ocean common carriers⁽⁵⁾ in order to receive lower rates than it normally would have obtained. I.D. at 8, 18.

The ALJ further found that the evidence showed that these violations resulted in Stallion underpaying the ocean common carriers by $11,349. Id. at 18. He also stated that Stallion's conduct constituted "knowing and willful" behavior within the meaning of section 10(a)(1) due to the fact that Stallion committed these violations over a period of time, despite being warned by a Commission investigator, and that Stallion admitted to deliberately misdescribing the cargoes so as to get lower rates.⁽⁶⁾ Id.

B. Section 10(b)(1) Violations

The ALJ found that Stallion failed to charge its published tariff rates at various times in 1998, 1999, and 2000, thereby violating section 10(b)(1). Id. at 20. Specifically, he found that Stallion failed to charge the applicable rates filed in its tariff 82 times during September and October 1998, undercharging shippers in the aggregate by $32,233.96, and overcharging them in the aggregate by $96.87. Id. He also found that Stallion violated section 10(b)(1) 24 times between July and December 1999, and 46 times between January and June 2000. Id. He found that, on the whole, Stallion failed to adhere to its tariff 152 times and committed at least 119 of the 152 violations "willfully and knowingly" within the meaning of section 13(a) of the Shipping Act, 46 U.S.C. app. § 1712(a)⁽⁷⁾, and therefore warranted imposition of a higher civil penalty. Id. at 20-21. Further, the ALJ opined that section 10(b)(1) of the Shipping Act is an absolute liability statute that does not take into account such factors as "intentions, deliberateness, negligence, or the like," but only looks to see whether the violations occurred. Id.

C. Violations Stallion Contends are Lawful

The ALJ separately considered whether 33 of the 167 shipments were lawfully rated, as asserted by Stallion. In this regard, Stallion argued before the ALJ that 17 of the 33 shipments were correctly rated under its Cargo, N.O.S. $15 per-package rate, because this is the proper rate for all shipments measuring between 1 and 6 cubic feet, and the rate includes a minimum bill of lading charge and a freight consolidation fee. Stallion also contended that it was correct to list 10 shipments of footwear under its rate for "wearing apparel, viz..." because it interprets its tariff item for "wearing apparel" as including footwear. Stallion further argued that its rating of 6 shipments under a freight-all-kinds ("FAK") rate was lawful because the shipments contained more than two commodities per bill of lading as required to qualify for an "FAK" rating. Id. at 21-30.

BOE, however, alleged that Stallion incorrectly rated the 17 shipments assessed a Cargo, N.O.S. rate, asserting instead that they should have been rated under a tariff rule which provides for a minimum bill of lading charge of $20.⁽⁸⁾ BOE also contended that Stallion was wrong to rate 10 of the shipments as "wearing apparel" because Stallion had a separate rate for footwear. BOE also argued that 6 shipments did not qualify for an FAK rating because Stallion's bills of lading for the shipments show that they did not contain more than two items. Id.

The ALJ ruled that Stallion improperly applied its tariff with regard to the 17 shipments assessed the Cargo, N.O.S. rate, and thus violated section 10(b)(1), which he described as an absolute liability rule having no regard for "good intentions." He found that prior to October 21, 1999, the only rate filed in Stallion's tariff was that of Cargo, N.O.S. and thus Stallion had in effect published a "shell" tariff (which he characterized as one with only a single meaningless Cargo, N.O.S. rate in it). The ALJ further found that Stallion had updated its filed tariff rates on October 21, 1999, to include several commodities including, but not limited to, FAK, wearing apparel, appliances, electronic equipment, vehicles, furniture, sporting goods, advertising materials, building materials, store stock merchandise, groceries, and hardware. Id. at 14, 24-25. However, the ALJ ruled that these violations were "highly technical in nature and not committed knowingly and willfully," explaining that although under Stallion's tariff, the $20 minimum bill of lading charge would apply rather than the Cargo, N.O.S. $15 per-package rate or a specific commodity item rate, "reasonable persons could argue" for the lower $15 Cargo, N.O.S. rate. Id. at 24. Citing a number of cases, he held that under principles of tariff construction, an ambiguity in a tariff should be held against the drafter of the tariff language;⁽⁹⁾ that where several different tariff items could arguably apply the more specific item should apply;⁽¹⁰⁾ and that the shipper should be given the benefit of the lowest rate where different rates could apply.⁽¹¹⁾ He found that with regard to the measurements of the packages, the $15 Cargo, N.O.S. rate Stallion applied is more specific than the $20 minimum bill of lading charge of Stallion's tariff, observing that in most cases Stallion had correctly given the shipper the benefit of the lower rate. In addition, the ALJ disagreed with BOE that Stallion should be penalized for publishing a "shell" tariff, arguing that to do so "would be counter to the Commission's efforts to eliminate 'shell' tariffs." He pointed out that Stallion did eventually comply with the Shipping Act by "publishing meaningful rates the shipper could use." Id. at 24-25.

The ALJ also found that the 10 "footwear" shipments were incorrectly rated as "wearing apparel" in violation of section 10(b)(1). He held that any good intentions Stallion may have had are irrelevant because the statute is an absolute liability one. But, he also found the violations to be "of a technical nature" and refused to assess civil penalties "in consideration of that fact and other mitigating factors which are relevant to the question of assessing penalties and issuing sanctions." He found that "it is not entirely unreasonable to believe that 'footwear' is a type of wearing apparel," citing Webster's Ninth New Collegiate Dictionary, which defines "footwear" as "wearing apparel for the feet." Id. at 27-28.

With regard to the 6 shipments rated as "FAK," although the ALJ found Stallion's interpretation of its tariff rule for FAK rates "not unreasonable," he nevertheless found BOE's evidence that the shipments were incorrectly rated to be the more persuasive. He again maintained that section 10(b)(1) is an absolute liability statute, and factors such as "good faith," "good intentions" and "reasonable belief" do not offset the violations. Id. at 30-31.

D. Sanctions

1. Cease and Desist Order

The ALJ considered whether the issuance of a cease and desist order would be appropriate. Id. at 35. BOE contended that it would be appropriate for the Commission to direct Respondent to cease and desist from violating sections 10(a)(1) and 10(b)(1) of the Shipping Act. It argued that Respondent has willfully and knowingly failed to comply with the relevant sections of the Shipping Act and that "Stallion's violations with respect to its tariff have continued even during the course of this proceeding and, in all likelihood, are ongoing." Id. at 35 (quoting BOE's Opening Brief at 27). Respondent failed to address the cease and desist order issue.

The ALJ stated that a cease and desist order is generally issued when there is a reasonable likelihood or expectation that a respondent will continue or resume illegal activities.⁽¹²⁾ Id. The ALJ maintained that in the instant proceeding, there was no evidence that Respondent had continued to violate the Shipping Act since June, 2000. However, after considering the numerous violations committed by Respondent, the ALJ found the issuance of a cease and desist order warranted in this proceeding. Id.

The ALJ next determined what would be an "appropriate" cease and desist order. He stated that assessing an "appropriate" cease and desist order, like other sanctions and penalties, must be tailored to the needs and facts of the particular case.⁽¹³⁾ Id. at 36. BOE had requested an order compelling Respondent to cease and desist from violating sections 10(a)(1) and 10(b)(1) of the Shipping Act. The ALJ noted that such a general order, while appropriate, fails to focus on Respondent's specific conduct. Id. at 36. Therefore, as Respondent was found to have intentionally misdescribed cargoes it tendered to common carriers to obtain lower rates, the ALJ ordered Respondent to cease and desist from repeating such conduct. Similarly, because he found that Respondent ignored its Cargo, N.O.S. rate and its rates for specific commodities and charged lower, unfiled rates, the ALJ ordered Respondent to cease and desist from failing to charge its published rates. Moreover, because Respondent had unlawfully interpreted its tariff so as to charge a Cargo, N.O.S. per-package rate contrary to its tariff rule, incorrectly rated "footwear" shipments as "wearing apparel," and incorrectly applied its FAK rate to commodities consisting of multiple parts, the ALJ ordered that Respondent cease and desist from these practices as well.⁽¹⁴⁾ Id.

2. License and/or Tariff Suspension or Revocation

The ALJ next determined whether Respondent's tariff should be suspended and its OTI license suspended or revoked. BOE argued that Respondent's tariff should be suspended and its license revoked. BOE asserted that allowing Stallion to maintain its current OTI license while continuing to commit violations of the Shipping Act would be misleading to the shipping public and potentially harmful to the Commission's standing as a regulator. BOE pointed out that one of the qualifications for possessing a license is "necessary character to render ocean transportation services." Id. at 37-38 (citing BOE's Opening Brief at 26).

Respondent argued against severe penalties and sanctions based upon mitigating and equitable factors. Respondent averred that: it is a small company serving a small trade (Florida-Aruba); it has cooperated with BOE in this proceeding; any unlawful practices have discontinued; and the sanctions recommended by BOE would be contrary to the Commission's announced goals in its Balanced Enforcement Program and would have a "chilling effect" on other NVOCCs that may be considering whether to cooperate with the Commission. Id. at 38.

The ALJ, while disagreeing with some of Stallion's arguments, found that tariff suspension and license revocation were unwarranted penalties in this instance. He found that Respondent is a small company, making little or no profit, and concluded that while Respondent belatedly updated its tariff, it has demonstrated a willingness to comply with the law. The ALJ stated that license revocation is tantamount to suspension of its tariff. He rejected BOE's assertion that Respondent's tariff need only be suspended "until such time as Stallion reapplies to the Commission and obtains a valid license," noting that if the tariff were suspended, Respondent would have to wait to reapply for a license. Id. (quoting BOE's Opening Brief at 26). The ALJ noted that the Administrative Procedure Act ("APA"), 5 U.S.C. § 558(c), provides licensees with extra protection in law so that a license may not generally be revoked without the agency giving the licensee a "second chance" to reform before instituting formal proceedings. Id. at 40. However, BOE had further opined that Respondent would arguably be unable to demonstrate the necessary character for obtaining a license. As a result, the ALJ held that neither tariff suspension nor license revocation was warranted in the instant proceeding, and that the issuance of a cease and desist order should be an effective deterrent.

3. Civil Penalty

The ALJ next determined whether civil penalties should be assessed against Respondent and, if so, the amount of those penalties. Id. at 45. Respondent argued that because of significant mitigating factors, a lesser civil penalty should be assessed, and further that it should be allowed to pay any civil penalty in installments while being monitored by the Commission. Respondent conceded that violations had occurred in the past, but claimed that all violations of the Shipping Act ceased after June, 2000; that the majority of shipments examined by BOE were correctly rated; and a number of actual violations were technical in nature. Respondent contended that it has cooperated with BOE in this proceeding and that it has taken certain "pro-active measures" to correct perceived discrepancies in its tariff.

Respondent also averred that it is a small company of very limited financial means, and that in 1997, 1998, and 1999, it suffered losses amounting to $87,552, $138,710, and $7,267, respectively.⁽¹⁵⁾ To further support its argument regarding financial instability, Respondent contended that it was necessary to obtain the loans from Mr. Croes simply to stay solvent and to fulfill its financial obligations. While Respondent acknowledged that civil penalties might be assessed, it suggested that a minimal penalty be imposed. Id. at 49. Consequently, Respondent offered to pay a civil penalty of $5,000, and cited Marcella, 23 S.R.R. 857, in support of its contention that it should be allowed to pay the penalty in installments and undergo monitoring by the Commission. Respondent made this offer to settle the proceeding during the briefing period.

BOE asserted that a significant civil penalty should be imposed for several reasons. BOE argued that Respondent willfully misdescribed cargoes that it tendered to ocean common carriers and failed to follow its own tariff, thus circumventing the tariff law's purpose of preventing discrimination among shippers, and continued to do so, despite the initiation of the instant proceeding by the Commission. Id. BOE further argued that Respondent began to update its tariff only after maintaining a shell tariff for some three years. BOE contended that a significant civil penalty was in order, as Respondent's violations were extensive and egregious and the assessment of such a penalty would "serve as an effective message to Stallion and its competitors that the types of violations at issue in this proceeding are not to continue as 'common practice in the trade.'" Id. at 48 (quoting BOE's Opening Brief at 25).

With regard to ability to pay, BOE asserted that Respondent has a $75,000 bond, as required by law, and that the bond is available to pay, among other things, any penalty assessed pursuant to section 13 of the Shipping Act. BOE asserted further that Respondent's president and sole shareholder, Mr. Croes, has lent Respondent over $200,000 in 1998 and 1999. Id.

Concerning the settlement offer, BOE argued that Respondent had an opportunity to conduct confidential settlement discussions with BOE and that a "legal brief is not the appropriate venue for initiating and conducting settlement discussions." Id. (quoting BOE's Reply to Respondent's Answering Brief at 2). Moreover, BOE averred that Respondent's settlement offer in the final stages of the briefing process appeared to indicate a lack of good faith.

In determining the amount of the civil penalty, the ALJ stated that the Commission is required to consider eight different factors found in section 13(c) of the Shipping Act, which states in pertinent part that "the Commission shall take into account the nature, circumstances, extent, and gravity of the violation committed and, with respect to the violator, the degree of culpability, history of prior offenses, ability to pay, and such other matters as justice may require." Id. at 46.

Although the ALJ rejected Respondent's settlement offer, he stated that he was not aware of any specific time limit on making offers to settle. He noted that the Commission has a policy that strongly favors settlements and alternative dispute resolution, and cited the APA, 5 U.S.C. § 554(c), as well as the relevant Commission rule, 46 C.F.R. § 502.91(a), which states in pertinent part:

(a) Parties are encouraged to make use of all the procedures of this part which are designed to simplify or avoid formal litigation, and to assist the parties in reaching settlements whenever it appears that a particular procedure would be helpful.

The ALJ examined evidence provided by both BOE and Respondent and concluded that Respondent does have the ability to pay a civil penalty based on Respondent's balance sheets, its $75,000 surety bond, and the probability that Respondent has access to capital based upon evidence that Respondent received over $200,000 in loans from Mr. Croes in the past. Id. The ALJ found that a penalty was appropriate after considering the various factors as required by section 13 of the Shipping Act and David P. Kelly and West Indies Shipping & Trading, Inc. - Possible Violations of the Shipping Act of 1984, Joint Request to Approve Settlement Agreement Granted, 29 S.R.R. __ (2001) ("Kelly"). In that case, BOE and the respondents entered into settlement negotiations that resulted in a Commission-approved settlement in the amount of $30,000. The ALJ noted that in Kelly there was evidence of at least 50 violations and that the time period of violations was longer than in the instant case. In urging the approval of the settlement agreement, BOE argued there that it took "special note of the factor of ability to pay because of respondents' relative size and financial condition and asserted that the respondents had presented credible documentation as to the extent of their ability to pay a civil penalty." Id. (quoting Kelly at __). The ALJ further noted that unlike in Kelly, BOE has not altered its position in the instant proceeding, and did not propose a specific amount in response to Stallion's proposal. He ultimately found it "probable" that Stallion had access to assets that could satisfy a $50,000 obligation and ordered that Respondent pay a civil penalty in the amount of $50,000. Id. at 54.

EXCEPTIONS

A. Stallion's Exceptions

Respondent first excepts to the imposition of the $50,000 penalty, as being necessary to attain compliance with the Act, because it claims it is already in compliance with the Shipping Act. To support this contention, Respondent cites, inter alia, those portions of the Initial Decision which found that: any violations of the Shipping Act were terminated in early 2000; Stallion discontinued its unlawful practices; and Stallion updated its tariff. Stallion's Exceptions at 5.

Respondent further asserts that the record established in this proceeding indicates its financial discord and that if ordered to pay a $50,000 penalty, its business would be destroyed. Id. at 5,6. Respondent submitted tax returns for 1997, 1998, and 1999, and submitted a cash flow statement covering the period of March 1, 2000 through August 23, 2000. Respondent contends that the tax returns demonstrate that it suffered losses, and, only during the six-month period March 1, 2000 through August 23, 2000, did it report earning a profit of $8,875.48. Therefore, Respondent argues that inasmuch as the record contains nothing to support such a penalty, the ALJ's imposition of a $50,000 penalty is arbitrary and capricious and a patent abuse of discretion. Id. at 6.

Respondent also excepts to the ALJ's finding that its surety bond would be available to satisfy the penalty in the event that it cannot make the payment itself. Respondent avers that because it cannot pay a $50,000 penalty, the assessment of such a penalty is in fact against the surety. Respondent claims that the ALJ imposes a de facto obligation on the surety to pay since the record, according to Respondent, indicates its inability to pay the penalty. Id. at 9. Moreover, Respondent contends that the ALJ directly reverses the Commission's decision in Pacific Champion Express Co., Ltd. - Possible Violations of Section 10(b)(1) of the Shipping Act of 1984, 28 S.R.R. 1397 (2000)("Pacific Champion"), by stating that the surety is available to pay any penalty Respondent cannot. Id. at 11.

Finally, Respondent excepts to the ALJ's finding that it likely has access to assets to pay a $50,000 civil penalty because it has obtained loans from its sole shareholder, Mr. Croes, in the past. This finding, Respondent argues, holding a shareholder of a corporation who is neither a party to the proceeding nor legally accountable responsible for the liabilities of the corporation and payment of the assessed penalty, is contrary to corporate law.

Therefore, Respondent requests that the Commission reverse the imposition of the $50,000 penalty, and instead, impose a $5,000 penalty, which Respondent argues is consistent with its financial condition. Id. at 12.

B. BOE's Exceptions

1. Continuing Violations by Stallion

BOE excepts to the ALJ's conclusion that Stallion's violations ceased entirely or did not continue after June, 2000, contending that this conclusion has no factual or legal basis. BOE's Exceptions at 3. BOE argues that, contrary to the ALJ's assertions, the evidentiary record and his findings of fact establish that Stallion continued to violate the Shipping Act even after the commencement of this proceeding, and thus Stallion's violations "were of a continuing nature." Id. Consequently, BOE insists that the ALJ was wrong to use this incorrect conclusion as a mitigating factor in assessing penalties against Stallion. BOE emphasizes that because the evidentiary record used in this proceeding was closed after June, 2000, and contains no evidence of any shipments beyond that period, there is no evidence that Stallion did not continue to commit the violations after June, 2000. Id. Rather, BOE maintains that the evidence shows that at every stage of the Commission's investigation, both on an informal level and even subsequent to the commencement of this proceeding, Stallion continuously committed violations of the Shipping Act despite being informed by the Commission of the requirements of the Shipping Act. Id. at 3-5. BOE describes Stallion's conduct as a "significant aggravating factor, as well as a clear example of continued disregard for law and a casual attitude over a period of time to exercise greater care." Id. at 5 (citing Marcella, 23 S.R.R at 870). BOE also points out that the ALJ found it necessary to order Stallion to amend its tariff on three separate occasions and to issue a cease and desist order against it, stating that these facts contradict the ALJ's statement that Stallion is in compliance.

Finally, BOE maintains that the ALJ overstepped his bounds when he concluded that there were no continuing violations, because investigation of Stallion's activities after June, 2000, is necessary before such a statement can be made. Id. Thus, BOE argues that the ALJ's ruling regarding civil penalties against Stallion, as well as his decision not to revoke Stallion's OTI license or suspend its tariff, were in error and the Commission must overturn them because they were based on a faulty premise. Id.

2. ALJ's Decision Not to Assess Penalties for the 33 Violations

BOE also excepts to the ALJ's decision not to assess civil penalties for the 33 shipments Stallion made after the commencement of this proceeding. BOE's Exceptions at 8. Although Stallion insisted that those shipments were properly rated, the ALJ ultimately agreed with BOE that Stallion misrated them. However, he described 27 of those violations as merely "technical in nature," and found Stallion's interpretation of its tariff rule to be "not unreasonable." See I.D. at 21-31. BOE urges the Commission to overturn this ruling, arguing that it amounts to an improper departure from the law and reveals an inconsistency in the Initial Decision. BOE states that the inconsistency exists because the ALJ's findings of fact with respect to the 33 violations in question and the section 10(b)(1) violations committed by Stallion from 1998 to 2000 are similar, and nowhere in this finding of fact does the ALJ describe the violations as "technical." BOE's Exceptions at 8.

Moreover, BOE asserts, the ALJ repeatedly emphasized that section 10(b)(1) is a strict liability statute with no regard for good faith, good intentions or reasonable beliefs of the violator. As a result, BOE argues, Stallion's intent when it interprets its tariff is irrelevant and the plain text of the tariff is controlling. BOE further argues that by nevertheless characterizing the violations found as merely "technical," the ALJ undermined the principles upon which his analysis was founded, and departed from the provisions of the Shipping Act and the Commission's regulations, because these provisions do not characterize violations as "technical." BOE further notes that the only distinction between violations contained in section 13(a) of the Act is whether they were willful or knowing, in which case they could receive enhanced penalties. Id. at 10. BOE further opines that the fact that the ALJ did not find the 33 violations to be knowing and willful does not automatically make them "technical." Id. at 11.

In addition, BOE disputes the ALJ's finding that Stallion did not commit the 33 violations knowingly and willfully,⁽¹⁶⁾ contending that Stallion was aware of the requirements of the Shipping Act, particularly after it was advised of those requirements by a Commission representative in 1998. Id. Moreover, BOE argues that, even if Stallion did not understand or was misguided as to the proper application of the rates and charges in its tariff, this would not constitute a meaningful defense. The term "knowingly," BOE explains, requires no knowledge or awareness that the activity in question is a violation, but instead that the Respondent purposely intended to commit the act that constitutes the violation.⁽¹⁷⁾ BOE avers that Stallion's knowledge of the contents of its tariff, and its decision to apply the rates for the 33 shipments, meet the requisite degree of knowledge and willfulness contemplated by the statute and affirmed by legal precedent. Id. at 12.

Finally, BOE rejects the ALJ's contention that the violations committed by Stallion did not cause harm to any shipper. Id. It alleges that Stallion's "persistent and ongoing" failure to adhere to its tariffs is particularly harmful because it invalidates one of the main purposes of the Shipping Act, which is to prevent discrimination in the transportation of goods by water in the U.S. foreign trade. BOE argues that, as a result, Stallion's violations have caused harm to its competitors who have abided by their tariff rules, as well as to its shipper customers who have no way of knowing Stallion's subjective interpretation of its own tariff. Id.

3. Civil Penalty

BOE avers that when determining the civil penalty, the ALJ improperly considered Respondent's ability to pay above all the other factors set forth in section 13 of the Shipping Act. Id. BOE argues that the ability-to-pay factor is only one of several set forth in the statute and care must be taken not to over-emphasize its importance to the detriment of the other factors.⁽¹⁸⁾ Id. BOE contends that the ALJ's analysis sends a message to the maritime community that so long as a respondent can demonstrate financial insecurity, it need not be concerned with the extent and gravity of its violations, culpability of its actions, or its expected compliance with the Shipping Act. Id. at 21.

BOE further contends the ALJ improperly relied upon Kelly when fashioning the civil penalty. BOE argues that the instant case can be distinguished from Kelly for several reasons. In Kelly, BOE and the respondents entered into confidential settlement negotiations which resulted in a settlement agreement. BOE's Exceptions at 17. The respondents agreed to pay a $30,000 civil penalty and also made several other concessions. The respondents agreed to stay out of the ocean transportation business for three years, admitted to committing the alleged violations, and consented to the entry of a cease and desist order by the Commission. Additionally, during the course of the proceeding, the respondents became a defunct corporate entity. These factors, BOE argues, were taken into consideration during the settlement process in Kelly, but were not present in the instant proceeding; therefore, the ALJ had no basis for placing any consideration on his determination that BOE altered its position in Kelly but not this proceeding. Id. at 18. Therefore, BOE requests that the Commission reject the ALJ's elevation of ability to pay above all the other factors contained in the statute. Id.

C. Stallion's Reply to BOE's Exceptions

Stallion disagrees with BOE's contention that the ALJ erred when he held that the evidentiary record shows no continuing violations. To the contrary, Stallion argues that the record has "ample affirmative evidence" substantiating the ALJ's conclusion. Stallion's Reply to Exceptions at 2. Such evidence, Stallion alleges, includes an unrebutted Verified Statement by Stallion's General Manager, Mr. Palacios, indicating that no violations occurred after June, 2000. Id. Stallion also points out that the ALJ did not close the evidentiary record until November, 2000, and states that BOE had adequate opportunity to rebut Mr. Palacios' testimony or introduce evidence of further violations if it had so desired. Id. at 3. As a result, Stallion contends, BOE's failure to introduce additional evidence, in conjunction with the absence of any evidence contradicting Mr. Palacios' Verified Statement, serves as adequate proof that there were no continuing violations.

Next, Stallion contends that accepting BOE's argument that there is no factual or legal basis for the ALJ's holding would violate the APA, arguing that under 5 U.S.C. § 556, the Commission must base its decision on the record and not on the "conjecture of one of its Bureaus," serving as a "prosecutor" in this proceeding. Id.

Stallion also argues that in the absence of compelling evidence to the contrary, the Commission must adopt the decision of its ALJ as to whether a violation is willful or merely technical. Id. at 5. Stallion maintains that BOE's position is entirely its own, propounded by its staff; BOE's position on the proper tariff rates was not supported by expert testimony, even from one of its tariff experts in the Bureau of Trade Analysis; and it is better for the Commission to rely on the findings and conclusions of the impartial Chief ALJ whose decisions are informed by his "in-depth, firsthand knowledge of the record." Id. at 6.

In addition, Stallion challenges BOE's request that the Commission overturn the ALJ's decision and impose higher penalties. Stallion disagrees with BOE's contention that the ALJ erred when he refused to assess additional or higher penalties based on his conclusion that Stallion's failure to follow its tariff rates did not cause harm to any particular shipper. Stallion argues that the ALJ's decision was correct because there is nothing in the record to support BOE's claim that the violations caused harm to Stallion's shipper customers and competitors. Id. at 7.

Stallion disputes BOE's argument that the ALJ placed excessive weight on its ability to pay a civil penalty. Stallion claims that BOE's argument is without merit, as the ALJ assessed a civil penalty ten times greater than what Stallion believed it was financially capable of paying. While Stallion asserts that it does not agree with the amount of the civil penalty, it argues that the ALJ properly considered all the factors set forth in section 13 of the Shipping Act when determining the civil penalty, and did not place excess weight on its ability to pay.

D. BOE's Reply to Stallion's Exceptions

BOE claims that Stallion, in its Exceptions, improperly relied on the ALJ's conclusion that there is no evidence of continuing violations after June, 2000, arguing that the ALJ's opinion is not supported by the evidence on record. BOE's Reply to Exceptions at 2. BOE reemphasizes that the ALJ closed the evidentiary record for this proceeding in June, 2000, and, therefore, there is no information of record to substantiate any assertion that Stallion complied with the Shipping Act prior, or subsequent to, any period reviewed. BOE further maintains that the evidence of record, as well as Stallion's admissions, should lead the Commission to draw the opposite conclusion - that Stallion has not complied with the Shipping Act at any time. Id. at 3. This conclusion, BOE maintains, appears to have been adopted by the ALJ in light of the fact that he chose to order Stallion to amend its tariff, and to cease and desist from misapplying its tariff rates. Id. at 4.

BOE argues that the crux of Respondent's exceptions is its lack of ability to pay and that Respondent is essentially requesting that the Commission elevate ability to pay above all the other factors that must be considered pursuant to section 13 of the Shipping Act. This analysis, BOE asserts, is directly contrary to established Commission precedent regarding assessment of appropriate civil penalties. BOE asserts that Respondent had nearly a year to come into "voluntary compliance" with the Shipping Act before the initiation of the instant proceeding. Only after the commencement of formal action did Respondent exhibit efforts at compliance which, according to BOE, were still ineffective. Id.

BOE disputes Respondent's argument that its sole shareholder is being held personally liable for the penalty should it be unable to make the payment itself. BOE contends that the ALJ correctly considered Respondent's access to "assets that could satisfy" the payment of a penalty. Moreover, neither the Commission nor the ALJ, asserts BOE, is limited to examining exclusively a company's operating profits when assessing a penalty. Id. at 6.

BOE further argues that the ALJ was correct in referring to the availability of Respondent's bond when assessing a civil penalty. To support its argument, BOE cites Pacific Champion, where the Commission recognized that a surety bond is available for the payment of a civil penalty and that the "'surety is required to pay only in the event that the principal fails to honor its obligation.'" Id. at 8. (quoting Pacific Champion, 28 S.R.R. at 1405). Therefore, BOE argues that the ALJ correctly considered Respondent's bond when assessing a civil penalty.

DISCUSSION

The exceptions filed by Stallion and BOE generally pertain to the penalties imposed by the ALJ. The issues raised concern the excessiveness or insufficiency of the penalties imposed, as well as the factors cited by the ALJ as the basis for his decision. A supplemental issue is whether an ALJ may properly consider an offer of settlement presented to the ALJ during the briefing process, rather than directly to BOE. We will address these issues below.

A. Continuing Violations

The ALJ decided not to impose certain penalties on Stallion based on his finding that Stallion did not continue its violations after June, 2000, as well as other factors. BOE argues that the ALJ was wrong to conclude that Stallion did not continue its violations after June, 2000, and to use this finding as a mitigating factor in assessing penalties because there is no evidence on the record of any Stallion shipments beyond June, 2000. Stallion, on the other hand, asserts that the Verified Statement made by its General Manager dated October 4, 2000, states that there were no violations after June, 2000, and should serve as adequate proof because it was unrebutted.

As a general rule, an ALJ may not issue a ruling or impose a sanction without considering the entire record or those parts of it cited by a party and supported by and in accordance with reliable, probative, and substantial evidence. 5 U.S.C. § 556(d) (1994). In addition, the transcript of testimony, exhibits, and all papers and requests filed in the proceeding must constitute the only record used in any such decision. 5 U.S.C. § 556(e) (1994).⁽¹⁹⁾

The ALJ may have inferred that Stallion did not continue its violations after June, 2000, because BOE did not introduce evidence showing violations by Stallion after this period. See I.D. at 32, 35, 39, 42-43.⁽²⁰⁾ We believe any such inference to be in error as it ignores the factual record before the ALJ. As the record shows, all evidence introduced by the parties pertains to shipments before June, 2000; therefore, there was no proof upon which the ALJ could base his finding as to Stallion's conduct after June, 2000. Thus, the ALJ should have restricted his decision to the evidence before him or in the alternative, asked for more information pertaining to Stallion's shipments after June, 2000.⁽²¹⁾ Because there is no evidence supporting the ALJ's conclusion, we find that the ALJ was in error when he stated that Stallion ceased its violations after June, 2000.

Stallion's argument urging the Commission to accept the ALJ's decision because of BOE's failure to pursue evidence of further violations and to refute Mr. Palacios' Verified Statement is somewhat disingenuous. BOE was not required to continue to investigate ad infinitum to disprove every assertion made by Stallion, unsupported by facts on the record; it was the ALJ's responsibility to verify such claims based on the evidence before him.

We also find Stallion's contention that its unrefuted Verified Statement "establishes that no violations occurred after June, 2000" to be without merit. In the first place, Mr. Palacios does not in fact aver that "no violations occurred after June, 2000," as Stallion contends. Stallion's Reply to Exceptions at 2. Instead, his statement merely attempts to rebut numerous shipments identified in a sworn statement by BOE investigator Al Kellogg, all of which occurred prior to June, 2000. Mr. Palacios' statement does not address Stallion's conduct one way or the other, after June, 2000. Thus, there is no evidence of record concerning Stallion's conduct after June, 2000. We therefore vacate the portions of the Initial Decision where the ALJ found that Stallion's violations ceased after June, 2000, and where he used that finding as a mitigating factor in assessing penalties.

B. Technical Violations

The ALJ declined to assess penalties for 33 section 10(b)(1) violations which he treated as "technical in nature." He found, instead, that a cease and desist order against Respondent would be more appropriate for these particular violations. I.D. at 24. BOE urges us to overturn this aspect of his decision, arguing that neither the Shipping Act nor Commission regulations provide for a distinction based on whether or not violations are technical.

The ALJ held that, based on its tariff rules, Stallion should have applied its minimum bill of lading charge of $20 to 17 shipments it made, instead of the lower Cargo, N.O.S. $15 per package rate it charged. He also found that Respondent's tariff rules called for it to rate 10 shipments of footwear under its higher Cargo, N.O.S. rate of $154 weight or measure, rather than under the "wearing apparel" rating it applied. In addition, he found that Respondent's tariff rules prevented it from rating 6 shipments under the "FAK" rating, as it did.

Although the ALJ ultimately held that under Stallion's tariff the $20 minimum bill of lading charge would apply for the 17 shipments it assessed the $15 Cargo, N.O.S. rate, he found that if Stallion's tariff were ambiguous with regard to the shipments, that ambiguity should be construed against the drafter. He further stated that "reasonable persons could argue, as does Stallion, for the lower $15 lumpsum rate." I.D. at 24.

While it is correct that any ambiguity in Stallion's tariff should be resolved in favor of the shipper by giving it the lower rate, we find that no ambiguity exists in this case. Stallion was aware that it should not have applied a Cargo, N.O.S. rate to the 17 shipments because its tariff rule unequivocally stated that it could not do so. The ALJ noted that Stallion's tariff rule 2(8) provides that "[u]nless a commodity is specifically provided for, the . . . Cargo, N.O.S. . . . rate will apply." I.D. at 23. He also noted that Stallion published specific commodity rates and therefore the Cargo, N.O.S. rate was not applicable. He even went as far as saying that "in his table showing all of the 17 shipments, Mr. Kellogg shows that the 17 shipments should have been rated under the minimum bill of lading charge of $20 in Stallion's tariff," as provided under Stallion's rule 6. I.D. at 16 Finding of Fact No. 47, I.D. at 22-24 (emphasis added). There is, therefore, no question that the only applicable charge for the 17 shipments was the $20 minimum bill of lading charge specified under Stallion's tariff rule. The Commission has held that a tariff is not rendered ambiguous simply because the parties interpret it differently, and that an ALJ must look at the plain language of the tariff.⁽²²⁾ We therefore find that Stallion's tariff was not ambiguous with regard to the 17 Cargo, N.O.S. shipments, and vacate the ALJ's finding that Stallion's interpretation of the tariff could be construed as reasonable.

We concur with the ALJ's finding that these 33 shipments involving the issue of tariff interpretation violated the Shipping Act, but disagree that the violations were "merely technical." The ALJ's description of the violations as "merely technical" and subsequent refusal to impose penalties belie his finding that they constituted a violation. Neither the Shipping Act, the Commission's regulations, nor relevant case law provide a basis upon which to make a distinction between technical and non-technical violations.

A violation of section 10(b)(1) occurs when a carrier charges, collects, demands, or receives any rate other than that filed in its tariff, and any attempt to justify that carrier's failure to charge its tariff rates is irrelevant to the issue of whether it violated section 10(b)(1).⁽²³⁾ In Louisville & Nashville R.R. Co. v. Maxwell, 237 U.S. 94, 97 (1915), the Supreme Court made it clear that the only lawful charge a carrier may charge is the rate it filed in its tariff, and that deviation from that charge is not permitted for any reason. The Commission has always followed this mandate,⁽²⁴⁾ and it is not disputed that section 10(b)(1) is an absolute liability statute.⁽²⁵⁾ While the Supreme Court recognized that this rule is strict and could result in hardship in some cases, it nevertheless stated that it is necessary because, according to the Court, "it embodies the policy which has been adopted by Congress in the regulation of interstate commerce in order to prevent unjust discrimination." See Louisville & Nashville, 237 U.S. at 97. It therefore follows that whether or not Stallion's violations are merely technical is irrelevant to the issue of culpability, and Stallion is liable for the violations.

With regard to the 10 footwear shipments, the ALJ also found these violations to be technical, and further stated that Stallion's interpretation of its rates could be argued to be not entirely unreasonable. I.D. at 28. His reference to the Webster's Dictionary definition of "footwear" as "wearing apparel for the feet," is interesting, but not controlling. Id. Of more relevance to our consideration is the testimony of Mr. Kellogg, who has worked for the Commission for 11 years, and whom the ALJ described as "an experienced Commission investigator." Id. at 26 and 31. Mr. Kellogg, who is presumed to be familiar with the industry the Commission regulates,⁽²⁶⁾ testified that carriers generally list "footwear" as separate from "wearing apparel" in tariffs. Id. at 27. Thus, the weight of the evidence points to the conclusion that these commodities are rated differently in general custom and usage within the industry. The Commission has consistently stated that tariff terms must be construed in the manner in which they are generally understood and accepted commercially, and carriers and shippers may not use a "strained and unnatural construction" in interpreting them.⁽²⁷⁾ In line with this principle, the Commission articulated in National Cable, 2 U.S.M.C at 473, that in a proceeding to determine the proper tariff item to apply, the ALJ must conduct an objective inquiry into the true nature of the commodity and whether it can be included under a specific tariff item according to the reasonable construction of the tariff language.

In addition, we believe that Respondent was aware that the two commodities are rated separately. The ALJ found that Respondent's house bills of lading corresponding to each master bill of lading issued for three shipments carried by SeaFreight, differentiated both commodities. The ALJ's Findings of Fact also document the shipment of a variety of commodities by Respondent, including, but not limited to, automobiles, wearing apparel, advertising material, tires, lamps, building material, store stock merchandise, novelties, office equipment, footwear, auto parts, and hardware. I.D. at 9 Finding of Fact No. 14 (emphasis added). We are unwilling to rely on a dictionary definition at variance with normal practice in the ocean transportation business, and, more importantly, contrary to Respondent's previous business practices.

Furthermore, even assuming for purposes of argument that Respondent was unaware it was supposed to rate both commodities differently, it should not be absolved from the imposition of a civil penalty. An NVOCC must educate itself through normal business resources, and repeated failure to do so may indicate that it is acting "willfully and knowingly" within the meaning of the statute.⁽²⁸⁾ As previously stated however, the evidence suggests that Respondent knew that its actions constituted a violation, and yet persisted in performing them. We believe, contrary to the ALJ's opinion, that Respondent should be held liable for these violations regardless of its motive or intent when it committed them.⁽²⁹⁾ We therefore also vacate the portion of the ALJ's decision finding or treating the violations as technical, and not assessing any civil penalties for them because of their "technical" nature.

Having found a violation, the question before the ALJ was not whether to assess a civil penalty but rather, the amount of penalty to assess. The proper guidance to use when determining which civil penalty amount applies is section 13(a), which states, in pertinent part:

Whoever violates a provision of this Act . . . is liable to the United States for a civil penalty. The amount of the civil penalty . . . may not exceed $5,000 unless the violation was willfully and knowingly committed, in which case the amount of the penalty may not exceed $25,000⁽³⁰⁾ for each violation.

46 U.S.C app. § 1712(a). Because we find these 33 instances to be violations of the Shipping Act, we must now consider whether Respondent committed the violations "willfully and knowingly," in order to determine whether it is appropriate to assess a penalty of $5,500 or $27,500 for each violation. As discussed, supra, the ALJ's decision is ambiguous as to whether he found the 10 footwear and 6 FAK violations to be willfully and knowingly committed; we have therefore analyzed whether all the 33 violations were knowing and willful.

A carrier "willfully and knowingly" violates the statute if, of its own free will or choice, it intentionally disregards the statute or is plainly indifferent to its requirements.⁽³¹⁾ Conduct is considered "willful" if it was "marked by careless disregard for whether or not one has the right so to act." Trans Ocean-Pacific, 23 S.R.R. at 412 (citing U.S. v. Murdoch, 290 U.S. 389 (1933)). Thus, when an NVOCC, possessing full information about the article it is shipping, chooses the wrong description consistently and continually ignores a more accurate classification, knowing of the discrepancy between what is being shipped and what has been described, such NVOCC "willfully and knowingly" obtains transportation by water for property at less than the rates or charges otherwise applicable, by means of a false classification. Comm-Sino Ltd., 27 S.R.R. at 1204.

We find that the conditions required to find "willful and knowing" conduct are present here because Respondent obtained a lower rate by improperly designating "footwear" as "wearing apparel," when it knew that carriers generally rate both commodities separately. In fact, Respondent was aware of the differentiation of these cargoes, as evidenced by their separate descriptions on the bills of lading. Also, Respondent continued to perform the proscribed activities even after being informed by Commission staff that its actions constituted a violation. I.D. at 32, 36, 42. Further, the ALJ found that Respondent committed the violations with "careless disregard of statutory requirements" (See I.D. at 32), conduct that is considered "willful" within the meaning of the statute. Accordingly, there is no question that Respondent also knowingly and willfully committed the 10 footwear and 6 FAK violations and we so find.

C. Other Reasons Cited by the ALJ For Not Imposing Penalties

The ALJ also refused to assess penalties for the 10 "footwear" violations because he found that the evidence did not show that any shippers were harmed nor was any discrimination shown among footwear shippers. I.D. at 28. Under Commission precedent, however, whether Stallion's shipper customers or other shippers were harmed is relevant neither to the issue of whether it committed a violation, nor to that of what penalties should be assessed against it.⁽³²⁾ In Commission-instituted proceedings, unlike in private complaint proceedings, it is not necessary that the violation of a statute result in harm to the public for the respondent to be liable.⁽³³⁾

Respondent's failure to maintain a binding tariff also subjected its client shippers to haphazard interpretations of its tariff, as reflected in the record. In addition, the Commission has indicated that it takes tariff law violations seriously and has stated that strict enforcement of tariff law is essential to the effective outlawing of discrimination.⁽³⁴⁾ We thus find that the ALJ was in error when he failed to assess penalties for the 10 "footwear" violations based, in part, on his finding that they did not cause harm to shippers.

We also disagree with the ALJ's statement that assessing civil penalties for the 17 Cargo, N.O.S. shipments would run "counter to the Commission's efforts to eliminate 'shell' tariffs." I.D. at 25. On the contrary, the Commission has expressed a need to penalize those who file shell tariffs. In Ever Freight, 28 S.R.R. at 334, the Commission held that "in order to put a stop to those NVOCCs who file hollow shell tariffs, a strong message must be sent to such persons that their unlawful activity will not be tolerated." The Commission also stated that by giving the power to assess and increase penalties to the Commission, Congress wants "the Commission to enforce the Act vigorously." Id. It stands to reason that the Commission would more clearly fulfill this mandate by treating these tariff law violations with particular disfavor. Most importantly, because, according to the ALJ, Respondent claimed that tariff law violations are common within the industry (See I.D. at 8 Finding of Fact No. 9), it is necessary that we impose strong sanctions for tariff law violations in order to send a strong message to other current or would-be violators. Accordingly, we find that Respondent could be liable up to the statutory amount of $27,500 for each of the 33 violations.⁽³⁵⁾

D. Admissibility of Settlement Discussions or Agreements

In its Answering Brief, Respondent offered to settle this proceeding by paying $5,000 to the Commission on an installment basis. I.D. at 50. BOE objected to the offer during a conference with the ALJ and Respondent's counsel on February 15, 2001, and moved that the settlement offer be struck from the record. BOE's Exceptions at 14. The ALJ denied BOE's motion without prejudice. In its Reply Brief, BOE again raised the issue and restated its objection to Respondent's settlement offer. Specifically, BOE objected to the manner and venue that Respondent chose to initiate settlement discussions. BOE argued that settlement offers or discussions should be directed solely to BOE, not the ALJ who is the adjudicator. BOE also contended that the legal briefing stage of the proceeding is an inappropriate time to begin settlement discussions, and to initiate discussions at this point in the proceeding indicates a lack of good faith. Id. BOE further argued that, pursuant to Rule 91 of the Commission's Rules of Practice and Procedure, 46 C.F.R. § 502.91(c) (1999), which states in pertinent part that no offer shall be admissible in evidence over the objection of any party in any hearing on the matter, the settlement offer should be struck from the record, as BOE objected to its remaining a part of the record. Id. at 16.

The ALJ found that while BOE is not required to accept Respondent's settlement offer, Respondent is not precluded from making such an offer at the briefing stage of the proceeding. I.D. at 54. The ALJ noted that if a settlement offer is made via a brief, BOE may respond to such an offer and its merits or lack thereof. Id. at 56.

The Commission has adopted a strong policy that encourages settlements and set forth settlement procedures in Rule 91. It has held that the primary purpose of Rule 91 is to promote settlements by providing assurance to the parties that the information they disclose in settlement discussions will not subsequently be used against them in the same proceeding to prove liability. See Merck Sharp & Dohme Int'l v. Atlantic Lines, 17 F.M.C. 244, 247 (1973). Conducting settlement discussions in confidence is an essential part of the process, and encourages parties to attempt to settle matters.

In the instant case, Stallion made an offer to settle this proceeding in its Answering Brief to the ALJ. At no point before submitting its Answering Brief did Stallion initiate settlement discussions with BOE. The ALJ stated that he was unaware of any time limit on making settlement offers and noted that BOE was not required to accept Stallion's offer. Id. at 55. While the ALJ was correct in finding that settlement offers may be made at any point in the proceeding, the venue and manner in which Stallion offers to settle suggests a lack of good faith, as any legitimate offer should have been made to BOE directly, not to the ALJ or in a brief that became part of the record.

Furthermore, the ALJ erred in denying BOE's motion to strike Stallion's settlement offer from its Answering Brief. Rule 91 states that "no stipulation, offer or proposal shall be admissible in evidence over the objection of any party in any hearing on the matter." 46 C.F.R. § 502.91(c) (1999).⁽³⁶⁾ In the instant case, BOE's contention that its motion to strike should have been granted is correct, as this proceeding is clearly a "hearing on the matter." Moreover, a legal brief, which becomes part of the record, should not be the forum parties use to initiate settlement discussions. The inherent requirement of confidentiality in the settlement process would be compromised and may adversely affect BOE's and future respondent's willingness to settle. Therefore, we find that the ALJ was correct in his assessment that parties are not prohibited from settling at any point in a proceeding, but erred when finding that the venue and manner in which Stallion made its settlement offer was appropriate.

E. Civil Penalty

1. Ability to Pay

As an initial matter, Stallion argues that because it is already in compliance with the Shipping Act, the evidence of record in this proceeding does not justify the imposition of any penalty. To support its argument, Respondent cites the ALJ's findings that it committed largely technical violations that did not continue after June 2000, it has discontinued its unlawful practices, and it has updated its tariff. Stallion's Exceptions at 5. BOE argues that not only should a penalty be imposed on Stallion, but that it should be significantly higher than that imposed by the ALJ. We discussed, supra, our rationale for rejecting Respondent's contention that no penalties should be assessed, and, therefore, we will deny Stallion's exceptions on this matter.

We now turn to the issue of the proper penalty amount. At the outset, we note that the ALJ considered the factors set forth in section 13(c) of the Shipping Act, including Respondent's ability to pay. I.D. at 46. He concluded that a $50,000 penalty was justified under the circumstances. In fashioning the penalty, the ALJ found that Stallion had or has had access to assets that could satisfy the penalty, namely a $75,000 bond and the fact that Respondent had obtained loans from its sole shareholder in the past. I.D. at 50.

Respondent argues, however, that the imposition of a $50,000 penalty would destroy its business. Stallion's Exceptions at 5,6. To support its contention, Respondent indicated that it had suffered losses from 1997 to 1999 and had only been able to turn a small profit between March and August of 2000. Id. Respondent claims that its losses in 1997, 1998, and 1999, in addition to the small profit it made between March and August of 2000, justify a smaller penalty. It argues that the ALJ assessed a civil penalty that is nearly three times higher than its annualized income during the six month period in 2000, when it earned a small profit. Id. BOE, on the other hand, suggests imposing a much higher penalty than the one imposed by the ALJ.

In fashioning a civil penalty, the ALJ is not confined to assessing one based solely upon Respondent's operating revenue. Civil penalties are punitive in nature, and as the Commission noted in Refrigerated Container Carriers Pty. Ltd., 28 S.R.R. at 791, the main Congressional purpose of imposing civil penalties is to deter future violations of the Shipping Act. Respondent had nearly a year to come into voluntary compliance with the Shipping Act and failed to do so. Despite the commencement of a formal investigation, Respondent's violations nonetheless continued, and it ultimately was found to have committed a large number of violations. Its conduct in this matter thus appears to warrant the imposition of a civil penalty of at least $50,000. Therefore, based upon these findings, Respondent's exception to the specific $50,000 penalty has no merit.

2. Proper Penalty Amount

BOE argues that, in assessing the $50,000 penalty, the ALJ considered Respondent's ability to pay as more important than the other factors set forth in section 13(c). BOE's Exceptions at 21. BOE contends that the ALJ's analysis was erroneous, where he stated in the Initial Decision:

[p]erhaps most importantly, Stallion cites evidence showing that it is a small company that suffered losses in 1997, 1998, and 1999 . . . .The point of this evidence and argument is that Stallion is a small company of very limited financial means and consequently has a very small ability to pay any civil penalty. (emphasis added)

BOE's Exceptions at 20 (citing I.D. at 49). BOE further argues that this finding would set a bad precedent as a future respondent would need only to demonstrate financial difficulty to avoid paying an appropriate civil penalty that would reflect the extent and gravity of its violations, its culpability, and its expected compliance with the Shipping Act. Id. at 21. BOE thus argues for a larger penalty, but, as before the ALJ, declines to offer a specific amount or a suggested range of penalties.⁽³⁷⁾

In determining a civil penalty, the ability to pay is only one of several factors set forth in the statute and care must be taken not to over-emphasize its importance to the detriment of the other factors, particularly to the detriment of the main Congressional purpose of deterring violations.⁽³⁸⁾ As the Commission held in Martyn Merritt, in determining the amount of penalties to be imposed, it is expected that the ALJ will give due regard to the gravity and extent of the violations, history of prior offenses, culpability, and the Congressional purpose to deter violations by imposing greater civil penalties as evidenced by the increased penalties set forth by Congress when it enacted the Shipping Act of 1984.⁽³⁹⁾

The ALJ noted that Respondent's maximum possible liability would be $4,592,500, which reflects the $27,500 statutory maximum penalty allowable for 167 knowing and willful violations. I.D. at 20. He noted further Respondent's willingness to cooperate with BOE in this proceeding as well as certain "pro-active measures" Respondent has taken to correct discrepancies in its tariff. Id. at 49. While the ALJ is required to consider Respondent's ability to pay when fashioning a civil penalty, we do not believe he gave proper weight to other factors, in particular, the extent and gravity of the violations. Despite finding that Respondent committed 167 violations between 1998 and 2000, he imposed a minimal penalty. Id. at 52.

In addition, the ALJ appears to have placed undue importance upon Kelly, when assessing the civil penalty in this case. There are significant differences between that case and the present one. The respondents in Kelly committed 50 violations compared to 167 in this proceeding. They also made several important concessions during the settlement process, specifically agreeing to stay out of the ocean transportation business for three years, and admitting to committing the alleged violations. The respondents in Kelly are no longer in business. Moreover, the timely settlement there avoided the time and expense of litigation. In this case, Respondent made no attempt to enter into settlement negotiations with BOE and litigated this matter to its present posture. While the respondents in Kelly provided BOE with incentives to "alter its position," Respondent did not do so here.

Respondent committed 167 violations knowingly and willfully during a three-year period. As discussed earlier, Respondent repeatedly failed to adhere to the rates and charges in its tariff, charging rates below the applicable rates or unfiled rates. Further, even after specific commodity items were published, Respondent continued to ignore the statutory requirements. Moreover, Respondent had nearly a year to voluntarily comply with the requirements of the Shipping Act, but continued to engage in conduct violative of the Shipping Act even after the initiation of a formal investigation. Assessing a civil penalty to deter future violations is of particular importance here, as Respondent has not readily demonstrated its willingness to comply with the Shipping Act. Respondent's maximum civil liability is $4,592,500. After considering all the section 13(c) factors, a civil penalty in a larger amount is appropriate in this instance. We therefore vacate the ALJ's imposition of a $50,000 penalty and impose a penalty of $10,000 for each of the 134 violations that the ALJ found to be knowingly and willfully committed.⁽⁴⁰⁾ Despite the presence of aggravating factors here, the $10,000 figure is substantially less than the maximum authorized by the statute. Respondent is therefore liable to the United States for a civil penalty in the amount of $1,340,000.⁽⁴¹⁾

3. Respondent's Other Exceptions

While Respondent's exceptions mainly address its alleged inability to pay a $50,000 civil penalty, several of its other contentions need to be addressed individually.

Respondent avers that the ALJ's noting the availability of its bond to satisfy the $50,000 penalty violates the APA and overturns Commission precedent. In assessing a $50,000 penalty, the ALJ stated that should Respondent be unable to pay, its surety bond would be available to satisfy the penalty pursuant to section 19(b)(2)(A) of the Shipping Act.⁽⁴²⁾ I.D. at 53. Respondent argues that because it is unable to pay a $50,000 penalty, the assessment of such a penalty imposes a de facto obligation upon the surety and overturns the Commission's decision in Pacific Champion without discussion or providing any basis to do so.

Respondent's reliance upon Pacific Champion is misplaced. In that case, the administrative law judge incorrectly assessed a civil penalty jointly against respondent Pacific Champion and its surety. The Commission held that a surety cannot be obligated to pay a civil penalty, and that the bond is available only in the event that the principal fails to honor its obligation. This is precisely what the ALJ has done in the instant proceeding. The ALJ assessed the $50,000 civil penalty solely against Respondent, merely noting that should Respondent be unable to pay, it has a $75,000 bond available to satisfy the penalty pursuant to section 19(b)(2)(A) of the Shipping Act. Id. Therefore, Stallion has incorrectly relied on Pacific Champion to support its argument that the ALJ has held the surety liable for the penalty.

Finally, Respondent contends that the ALJ has violated fundamental corporate law by finding that, as a result of loans made by Stallion's sole shareholder in the past, it has or has had access to assets that could satisfy the $50,000 penalty. The ALJ found that because Respondent had obtained loans totaling over $200,000 in the past from its sole shareholder, it is probable that Respondent has or has had access to assets to satisfy a $50,000 penalty. I.D. at 53. Respondent argues that this finding is directly contrary to fundamental corporate law principles, namely that a corporation is a distinct entity from its shareholders. Stallion's Exceptions at 10 (citing Flink v. Paladini, 279 U.S. 59 (1929)). Respondent further argues that the ALJ violates fundamental corporate law by holding the sole shareholder liable for penalties imposed upon Stallion. Id. at 11. In contrast, BOE contends that the fact that Respondent has the ability to borrow funds and has a source for the loan is proper evidence to consider in assessing its ability to pay, irrespective of whether the ultimate source of the loan is a shareholder or a bank. BOE's Exceptions at 7.

In evaluating Respondent's ability to pay, the ALJ considered its sources of assets or funds. The fact that Respondent's sole shareholder lent it over $200,000 in loans was provided by Respondent. Respondent claims that these loans were made because of its financial difficulties and to "assure that Stallion continued to fulfill its obligations to its customers." Stallion's Answering Brief at 14. Whether Respondent intended to demonstrate its financial difficulty by providing information regarding the loans or its ability to borrow is irrelevant. Moreover, the ALJ never pierced the corporate veil to find that Mr. Croes was in effect Stallion's alter ego. Nor did the ALJ find that Mr. Croes was jointly liable for any penalty assessed against Respondent. The ALJ merely noted that, in the past, Mr. Croes had been a source of funds for Respondent, and presumably, could be a source for Respondent in the future. However, the ALJ imposed the civil penalty only on Respondent. Therefore, Respondent's argument concerning its relationship with its sole shareholder also lacks merit.

F. License Suspension or Revocation

The ALJ found that license revocation and suspension of Respondent's tariff are sanctions that are unwarranted in this proceeding. I.D. at 38. BOE argues that due to the nature and gravity of Stallion's violations, license revocation would be an appropriate sanction. BOE's Exceptions at 18-19. BOE further argues that Respondent does not have the requisite character to possess an OTI license, as it has failed to comply with the provisions of the Shipping Act, and its violations with respect to its tariff have continued throughout the course of this proceeding and are likely ongoing.⁽⁴³⁾ Id. Respondent asserts that license revocation would be a "draconian" remedy and urges the Commission to follow the approach it took in Saeid B. Maralan (AKA Sam Bustani) - Possible Violations of Sections 8(a)(1), 10(b)(1), 19(a) and 23(a) of the Shipping Act of 1984, 28 S.R.R. 1244 (1999), by using the issuance of a cease and desist order as an effective vehicle to enforce compliance with the Shipping Act. Stallion's Reply to Exceptions at 11.

With the enactment of OSRA, Congress mandated that all OTIs operating in the United States be licensed. 46 U.S.C. app. § 1718 (1999). Prior to that time, only ocean freight forwarders, and not NVOCCs, were required to be licensed.⁽⁴⁴⁾ The licensing requirements lend credibility to those entities who meet and comply with them. Moreover, ensuring that only reputable and qualified OTIs are licensed protects the public as well as the shipping community by reducing their risks. The Commission has a significant interest in making certain that those entities it deems fit to license are in compliance at all times.

As the ALJ noted, the Commission has considerable discretion in determining appropriate sanctions and remedies but should take care to ensure that the penalties are tailored to the particular facts of each case. I.D. at 39. In this regard, we note that section 19(c) of the Shipping Act states that:

The Commission shall, after notice and hearing, suspend or revoke a license if it finds that the ocean transportation intermediary is not qualified to render intermediary services or that it willfully failed to comply with a provision of the Act or with a lawful order, rule, or regulation of the Commission. The Commission may also revoke an intermediary's license for failure to maintain a bond, proof of insurance, or other surety in accordance with subsection (b)(1).

46 U.S.C. app. § 1718(c). The issue before us is whether Respondent is "qualified to render intermediary services." Based on Respondent's numerous violations, we find that Respondent does not possess the necessary character to render OTI services. We believe that license revocation is an appropriate sanction in this instance.

This case is one of first impression, as the Commission has never had the opportunity or obligation to revoke an NVOCC license for cause. Because of the severity of license revocation, it is a sanction that should be used only in the most egregious instances. This proceeding presents such an instance. Respondent was found to have committed 167 knowing and willful violations. Respondent continued to violate the Shipping Act despite the initiation of a formal investigation, which did not begin until nearly one year after Respondent's apparent violations were brought to its attention through an informal investigation.

The Commission also has a strong policy interest in revoking Respondent's license. The shipping community should be protected from those who choose not to comply with the Shipping Act's licensing requirements. The ability to demonstrate the necessary character to obtain and possess a license is one that should not be taken lightly. Moreover, revoking Respondent's license sends a message to the shipping industry that such conduct will not be tolerated or casually dismissed, especially since Respondent claimed that such violations are common practice in the trade in which it operated. We recognize that license revocation is a harsh sanction, resulting in an NVOCC being put out of business; however, we believe, for the reasons above, that it is warranted in this instance.

G. Cease and Desist Order

The ALJ determined that a cease and desist order should issue, and accordingly, ordered Respondent to cease and desist from the following:

• Violating section 10(a)(1) of the Shipping Act by intentionally misdescribing cargoes it tenders to vessels for the purpose of obtaining lower rates than those lawfully applicable or for any other purpose.
  
• Failing to charge its published rates.

• Unlawfully interpreting its tariff so as to charge an N.O.S. per-package rate, incorrectly rating "footwear" shipments as "wearing apparel," and incorrectly applying its FAK rate to commodities consisting of multiple parts.

The ALJ stated that a cease and desist order is generally issued when there is a reasonable likelihood or expectation that a respondent will continue or resume illegal activities. See I.D. at 35 (citing Alex Parsinia, 27 S.R.R. at 1342-1343). Based on Respondent's conduct throughout the investigation, we believe that the cease and desist order was properly issued. However, in light of our revocation of Respondent's OTI license, the cease and desist order is modified to direct Respondent to cease and desist from operating in the United States as an ocean transportation intermediary.⁽⁴⁵⁾

THEREFORE, IT IS ORDERED, That the Initial Decision is affirmed, to the extent discussed above;

IT IS FURTHER ORDERED, That the ALJ's finding that Stallion's interpretation of its tariff could be construed as reasonable is vacated;

IT IS FURTHER ORDERED, That those portions of the Initial Decision finding that: (1) Respondent's violations ceased after June, 2000, and that this constitutes a mitigating factor in assessing penalties; (2) the 33 violations were technical in nature and did not warrant a civil penalty; (3) the 10 footwear violations did not cause harm to shippers and no civil penalties should be assessed for them; and (4) assessing civil penalties for shell tariffs would run "counter to the Commission's efforts to eliminate 'shell' tariffs," are vacated;

IT IS FURTHER ORDERED, That the ALJ's assessment of the $50,000 civil penalty is vacated and Stallion is ordered to pay a civil penalty in the amount of $1,340,000;

IT IS FURTHER ORDERED, That Respondent is ordered to cease and desist from operating in the United States as an ocean transportation intermediary;

IT IS FURTHER ORDERED, That Stallion's license to operate as an ocean transportation intermediary is revoked; and

FINALLY, IT IS ORDERED, That this proceeding is discontinued.

By the Commission.

Bryant L. VanBrakle
Secretary

Commissioner BRENNAN's concurrence in part and dissent in part.

I dissent because, in my view, the Commission majority has failed to articulate a reasoned methodology for arriving at a civil monetary penalty of $1,340,000. I would affirm the decision of the ALJ, except that I would also revoke the Respondent's OTI license.

The ALJ assessed a civil penalty of $50,000, after considering the eight factors under section 13(c) for determining the amount of a civil penalty. He noted that Stallion "is a small company that has suffered losses in 1997, 1998, and 1999, amounting to $87,552, $138,710, and $7,267, respectively." The company "did not earn any net income until the period March 1, 2000 through August 23, 2000, when its net operating income was only $8,875.48." (Initial Decision at 49). Tax returns in the record show that Stallion's reported gross receipts/sales income was $287,314 for 1997, $305,914 for 1998, and $348,578 for 1999.

While it is true that "ability to pay" is not given an importance greater than any of the other factors listed in section 13(c), I do not believe that the majority has given any consideration to the ability of the Respondent to satisfy a monetary penalty of $10,000 per violation. It is clear from financial information in the record that the total penalty of $1.34 million is inconsistent with any notion of ability to pay.

The Commission should have accorded more deference to the experienced ALJ's weighing of the penalty amount factors of section 13(c), including ability to pay. The decision of the administrative law judge should be affirmed in all respects, except that the Commission should, in addition to the $50,000 civil penalty and cease and desist order imposed by the ALJ, revoke the Respondent's license to operate as an ocean transportation intermediary as an additional sanction for over 100 knowing and willful violations.

ENDNOTES

* Commissioner Joseph BRENNAN’S concurrence in part and dissent in part is attached. Commissioner WON dissented on the issue of the penalty amount.

1. Notice of the Order of Investigation and Hearing ("Order") was published in the Federal Register on October 14, 1999, 64 Fed. Reg. 55726.

2. Section 10(a)(1) states that: no person may -

(1) knowingly and willfully, directly or indirectly, by means of false weighing, false report of weight, false measurement, or by any other unjust or unfair device or means obtain or attempt to obtain ocean transportation for property at less than the rates or charges that would otherwise be applicable.

3. Section 10(b)(1) provided that:

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.

That section was removed by the Ocean Shipping Reform Act ("OSRA"), Pub. L. 105-228, 112 Stat. 1902, and replaced with section 10(b)(2)(A), which states:

No common carrier, either alone or in conjunction with any other person, directly or indirectly, may -
(2) provide service in the liner trade that
(A) is not in accordance with the rates, charges, classifications, rules, and practices contained in a tariff published or a service contract entered into under section 8 of this Act unless excepted or exempted under section 8(a)(1) or 16 of this Act.

Although the Commission's Order was issued after the implementation of OSRA, it concerns conduct that occurred pre- and post- OSRA. Because these two sections are substantively similar, references to the section 10(b)(2)(A) violations will be shown as section 10(b)(1) for consistency.

4. Respondent refers to its opening brief as an "answering brief." Hereafter, it will be referred to as its Answering Brief.

5. These ocean common carriers were SeaFreight Line Ltd. ("SeaFreight") and King Ocean Service de Venezuela, S.A. ("King Ocean").

6. The ALJ relied upon a number of cases cited by BOE to support the holding relating to "knowing and willful," including: In re: Rubin, Rubin & Rubin Corp., 6 F.M.B. 235, 239 (1961); and Kin Bridge Express Inc. - Possible Violations of the Shipping Act of 1984, 28 S.R.R. 984, 990 (I.D.), administratively final, August 2, 1999.

7. Section 13(a) states that:

Whoever violates a provision of this Act, a regulation issued thereunder, or a Commission order is liable to the United States for a civil penalty. The amount of the civil penalty, unless otherwise provided in this Act, may not exceed $5,000 for each violation unless the violation was willfully and knowingly committed, in which case the amount of the civil penalty may not exceed $25,000 for each violation.

8. Rule 6 of Stallion's tariff states that the minimum bill of lading charge is $20 "for one bill of lading in ordinary stowage plus additional charges as provided herein." See I.D. at 23-24.

9. E.g., United Nations Children's Fund v. Blue Sea Line, 12 S.R.R. 1067, 1069 (1972); United States v. Hellenic Line, 14 F.M.C. 255, 260 (1971); Aluminium Products of Puerto Rico, Inc. v. Trans-Carribean Motor Transport, Inc., 5 F.M.B. 1 (1956).

10. United States v. Gulf Refining Co., 268 U.S. 542, 546 (1925); Coca-Cola Co. v. Atchison, T. & S.F. Ry. Co., 608 F.2d 213, 221 (5^th Cir. 1979); Corn Products Co. v. Hamburg-Amerika Line, 9 S.R.R. 79, 84 (I.D.), administratively final May 12, 1967; The Carborundum Co. v. Royal Netherlands Steamship Co., 16 S.R.R. 1634, 1638 n.3 (1977).

11. Gulf Refining Co., 268 U.S. at 546; United Nations Children's Fund, 12 S.R.R. at 1069; Peter Bratti Assocs., Inc. v. Prudential Lines, Inc., et al., 5 S.R.R. 611 (I.D.), administratively final January 14, 1965; J. I. Case - Int'l Div. v. South African Marine Corp., 20 S.R.R. 1182, 1183 (1981).

12. Citing Alex Parsinia d/b/a Pacific Int'l Shipping and Cargo Express, 27 S.R.R. 1335, 1342-1343 (I.D.), administratively final December 4, 1997 ("Alex Parsinia").

13. Citing Marcella Shipping Co., Ltd., 23 S.R.R. 857, 871-872 (I.D.), administratively final March 26, 1986.

14. The ALJ stated that if Respondent has published a separate tariff rate for "footwear," as it argues in its Answering Brief, this issue would become moot.

15. Respondent submitted evidence demonstrating its financial status in its Answering Brief at 13.

16. The ALJ appears to have found that the 17 Cargo, N.O.S. violations were not knowing and willful. See I.D. at 24. We are unclear, however, as to his finding on this issue with regard to the remaining 16 footwear and FAK violations. We address the issue, infra.

17. BOE cites to Union Petroleum Corp. v. United States, 376 F.2d 569, 573 (10^th Cir. 1967), and Shipman Int'l (Taiwan) Ltd. - Possible Violations of Sections 8, 10(a)(1), and 10(b)(1) of the Shipping Act of 1984, 28 S.R.R. 100, 109 (I.D.), administratively final May 30, 1998.

18. Citing Refrigerated Container Carriers Pty. Ltd. - Possible Violations of Section 10(a)(1) of the Shipping Act of 1984, 28 S.R.R. 799, 805 (I.D.), administratively final May 21, 1999.

19. See also Steadman v. Securities and Exchange Comm'n, 450 U.S. 91, 102 (1981) ("Where there is evidence pro and con, the agency must weigh it and decide in accordance with the preponderance. In short, these provisions require a conscientious and rational judgment on the whole record in accordance with the proofs adduced") (quoting H.R. Rep. No. 1980, 79^th Cong., 2d Sess. 37 (1946)).

20. At 49 n.3, the ALJ states that the evidence shows the section 10(b)(1) violations continued into but not after June, 2000.

21. See generally Rodriguez v. Doral Mortg. Corp., 57 F.3d 1168, 1171 (1^st Cir. 1995) (cases must be decided "on the merits after an adequate development of the facts") (quoting Mayer v. Mylod, 988 F.2d 635, 638 (6^th Cir. 1993)).

22. See Atlantis Lines, Ltd. v. American President Lines, Ltd., 24 S.R.R. 1391, 1394 (1988).

23. See Trans Ocean-Pacific Forwarding, Inc. - Possible Violations of Section 10(b)(1) of the Shipping Act of 1984, 27 S.R.R. 409, 412 (I.D.), administratively final February 9, 1996.

24. See, e.g., Marcella, 233 S.R.R. at 862 (citing to a number of Commission decisions showing that the Commission has consistently followed the principles enunciated by Louisville & Nashville when applying the shipping acts); Comm-Sino Ltd. - Possible Violations, Sections 10(a)(1) and 10(b)(1), 27 S.R.R. 1201, 1205, (I.D.), administratively final May 21, 1997 (stating that the strict tariff adherence from which section 10(b)(1) emanates is based on the filed rate doctrine enunciated in Louisville & Nashville).

25. In fact, in the Initial Decision the ALJ acknowledges this rule several times. See I.D. at 21, 27, 31.

26. See Ever Freight Int'l, Ltd., Sigma Express Inc. and Mario F. Chavarria d/b/a Transcargo Int'l - Possible Violations of Sections 10(a)(1) and 10(b)(1) of the Shipping Act of 1984, 28 S.R.R. 329, 336 (I.D.), administratively final December 4, 1997 (which states that a regulatory agency such as the Commission is presumed to be familiar with the industry it regulates).

27. See Sanrio, 19 S.R.R. at 1642; Corn Products Co. v. Hamburg-Amerika Lines; 10 F.M.C. 388, 393 (1967); National Cable and Metal Co. v. American-Haiwaiian S.S. Co., 2 U.S.M.C 470, 473 (1941). See also Markt & Hammacher Company-Misclassification of Glassware, 5 F.M.B. 509, 511 (1958), where the Commission stated that "using a dictionary definition which does such violence to the clear meaning of the tariff, at best, manifests such an indifference and lack of care in construing the tariff as to constitute a deliberate violation of the Act."

28. See In re Rubin, 6 F.M.B. at 239-240 (stating that persistent failure to inform oneself by means of normal business resources might mean that a shipper or forwarder was acting "knowingly and willfully").

29. See Sanrio, 20 S.R.R. at 377-378 (stating that once a carrier breaches its duty to rate cargo accurately, the Shipping Act "and analogous provisions of the Interstate Commerce Act, require the imposition of liability without fault" and that "no other approach is consistent with the overriding statutory purpose of eliminating unjust discrimination between shippers"). See also I.D. at 21, where the ALJ states that "intentions, deliberateness, negligence or the like are irrelevant to a finding of [section 10(b)(1)] violations."

30. In conformity with the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. § 2461, as amended by the Debt Collection Improvement Act of 1996, Pub. L. 104-134, April 26, 1996, the $5,000 penalty has been increased to $5,500, and the $25,000 penalty has been increased to $27,500. See 46 U.S.C. app. § 1712.

31. Trans Ocean-Pacific, 23 S.R.R. at 412. See also Shipman Int'l, 28 S.R.R. at 108 ("[I]t is noted that 'willfully and knowingly' has been defined as meaning purposely or obstinately and is designed to describe the attitude of a carrier, who having a free will or choice, either intentionally disregards the statute or is plainly indifferent to its requirements.") (citing United States v. Illinois Central R. Co., 303 U.S. 239 (1938)).

32. See, e.g., F&D Loadline Corp - Possible Violations of Section 10(b)(1) of the Shipping Act of 1984, 27 S.R.R. 764, 767 (I.D.), administratively final June 28, 1996.

33. Id. (stating that the measure of the public wrong on account of violation of a statute is not the same as that for private damages) (citing Penna R.R. Co. v. International Coal Co., 230 U.S. 184, 206 (1913)).

34. See F&D Loadline, supra, at 767 (citing Cari-Cargo Int'l, Inc., Jorge Villena and Sea Trade Shipping, 23 S.R.R. 1007 (I.D.), administratively final May 5, 1986).

35. We also note that the ALJ included the 33 violations when calculating the maximum penalty, arriving at a total maximum penalty of $4,592,500 for the 167 violations. (167 x $27,500, the maximum penalty for "knowing and willful" violations). I.D. at 20 n.9.

36. The Commission, however, has created a narrow exception where settlement agreements may be admitted despite an objection by one of the parties. In Banfi Products Corp. - Possible Violations of Section 16, Initial Paragraph, Shipping Act 1916, and Section 10(a)(1) of the Shipping Act of 1984, 26 S.R.R. 954 (1993), the Commission determined that a settlement agreement admitted in subsequent litigation did not violate Rule 91 as it was not being admitted in a "hearing on the matter" i.e., on the merits of the alleged violations. In Banfi, the settlement-related evidence was admitted to show willfulness or knowledge, not to demonstrate liability for or invalidity of the claim.

37. In future proceedings, both an ALJ and the Commission would benefit from more specific input from BOE.

38. Martyn Merritt, AMG Servs., Inc. - Possible Violations of Sections 10(a)(1) and 10(b)(1) of the Shipping Act of 1984, 26 S.R.R. 663, 664 (1992) ("Martyn Merritt").

39. The legislative history of the Shipping Act demonstrates that Congress intended to increase the deterrent effect of penalties for violations, since penalties imposed under the Shipping Act, 1916 could be absorbed by shippers as the cost of doing business. See Martyn Merritt, 26 S.R.R. at 664-665.

40. In view of the size of the penalty, we find it unnecessary to impose penalties for the remaining 33 shipments.

41. Commissioner Brennan's partial dissent states that the majority did not articulate a reasoned methodology for arriving at this figure. The Commission's exercise of its discretion in fashioning appropriate remedies is not an exact science, but the calculation of $1,340,000 was not arbitrary. The $10,000 per violation represents a penalty substantially less than the $27,500 per violation allowable for the 134 knowing and willful violations found by the ALJ. In addition, in light of the size of that penalty, the majority made a determination not to impose any penalty for the remaining 33 shipments.

Commissioner Brennan states that the Commission failed to provide any consideration of Respondent's ability to pay. This is not correct. Assuming arguendo the legitimacy of Respondent's evidence of its losses from 1997 to 1999, Respondent's ability to pay is not, as suggested by the ALJ, the "most important [ ]" of the several relevant factors in calculating a penalty amount. If it were, it would trump those other factors and render them meaningless whenever the respondent were unlikely to afford the penalty, regardless of the severity of the violations or the presence of other aggravating factors. Respondent may very well be unable to pay the penalty imposed by the Commission, but the other factors present - the severity of the violations, Respondent's continued disregard of the statutory requirements even after the initiation of a formal investigation, and the need to further the Congressional purpose to deter violations by imposing greater civil penalties - militate, on balance, that a substantial, though not the maximum, penalty be imposed.

42. Section 19(b)(2)(A) states that:

A bond, insurance, or other surety obtained pursuant to this section-

(A) shall be available to pay any order for reparation issued pursuant to section 11 or 14 of this Act, or any penalty assessed pursuant to section 13 of this Act. 46 U.S.C. app. § 1718 (b)(2)(A) (1999).

43. Part 515 of 46 CFR sets forth the licensing and financial responsibility requirements governing OTIs. Section 515.11 contains the basic requirements for licensing and eligibility. The requirements include, inter alia, that the applicant seeking an OTI license possess the necessary experience (a minimum of three years in OTI activities in the United States) and the necessary character to render OTI services.

44. During the rulemaking proceeding implementing OSRA, the Commission received comments from the shipping industry favoring the expansion of the licensing requirements imposed by Congress.

45. Section 19(a) of the Shipping Act provides that "[n]o person in the United States may act an as ocean transportation intermediary unless that person holds a license issued by the Commission." 46 U.S.C. app. § 1718 (1999).