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FMC Announces Addendum to 2003 Settlement Agreement with Transpacific Stabilization Agreement Members Lines

May 25, 2007

NR 07-02

The Federal Maritime Commission announced today that it has voted to accept a proposed Addendum to the Settlement Agreement reached between the Commission and major ocean carrier agreements and their member lines, including the Transpacific Stabilization Agreement (TSA), on September 11, 2003. That Settlement Agreement addressed carrier practices investigated in the Commission's Fact Finding Investigation No. 25 – Practices of the Transpacific Stabilization Agreement Members Covering the 2002-2003 Service Contract Season. By mutual agreement of the Parties, the Addendum modifies the original Settlement Agreement to permit TSA member lines to file an amendment to their agreement to include the Indian Subcontinent within TSA's geographic scope. The vote was three to one, with Commissioners Anderson, Creel and Dye voting for the Addendum, and Commissioner Brennan voting against.

The 2003 Settlement, which included a payment of $1.35 million in lieu of civil penalties, was designed to improve the competitive environment in the Transpacific trades through structural changes to the TSA agreement intended to end certain problematic carrier practices in the trade. Under the terms of the Settlement, the carriers agreed to refrain from certain practices involving discussion and agreement on rates and negotiation of service contract terms particularly affecting non-vessel operating common carriers (NVOCCs). The Settlement also required the removal of the Indian Subcontinent from TSA's geographic scope, and the elimination of the Indamex/TSA bridging agreement (FMC Agreement No. 011784) and the Evergreen/Lloyd Triestino/Hatsu Marine Alliance/TSA bridging Agreement (FMC Agreement No. 011799).

In late April of this year, TSA member lines proposed an Addendum to the Settlement Agreement that would permit TSA to file an amendment to their discussion agreement expanding TSA's geographic scope to once again include the Indian Subcontinent. In support of its proposal, TSA asserted that member lines had complied fully with all terms of the Settlement, including termination of the two bridging agreements and removal of the Indian Subcontinent from TSA's scope. TSA further indicated that the conditions in the Indian Subcontinent trade that had originally raised Commission concerns about TSA's market power have changed considerably since September 2003. The changes cited by TSA include its decline in market share, an increase in overall trade, overtonnaging and new services competing for cargo in the trade.

The Addendum only permits TSA to file an amendment to expand its geographic scope and does not alter any other provisions of the Settlement Agreement, which remain in full force and effect. Specifically, restrictions addressing the practices alleged by NVOCC petitioners (i.e., practices relating to unequal timing of negotiations and unequal application of general rate increases and surcharges) are not affected by the Addendum.

The Commission notes that the anticipated TSA agreement amendment would still be subject to the regular Commission agreement review process and public comment before it would become effective. Therefore, in addition to notifying the public of the Parties' mutual agreement on the Addendum, this news release provides the shipping public notice of the anticipated amendment. Interested parties have the opportunity to submit comments on the amendment when notice of its filing appears in the Federal Register.

Commissioner Brennan voted against the Addendum, arguing that TSA failed to show how expanding the carrier agreement would promote fairness and efficiency in maritime commerce as called for in the Commission's Vision Statement. Citing the market share of TSA and the concentration of the market, he concluded that the Addendum would not benefit the shipping public.

The Federal Maritime Commission is responsible for the regulation of ocean-borne transportation in the foreign commerce of the The FMC is working to streamline the regulatory process as it goes about fulfilling its core mission, which is to administer regulations and policies that foster a fair, efficient and secure maritime transportation system.

Press Contact: Bryant L. VanBrakle (202) 523-5725; e-mail: secretary@fmc.gov