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FMC Authorizes Actions Based on Transpacific Fact Finding Investigation

March 12, 1999

FEDERAL MARITIME COMMISSION

FMC AUTHORIZES ACTIONS BASED ON
TRANSPACIFIC FACT FINDING INVESTIGATION

Washington, D.C. 20573

NR 99-07


For Release: March 12, 1999

FOR FURTHER INFORMATION CONTACT: Bryant L. VanBrakle, Secretary at
(202) 523-5725

The Federal Maritime Commission today released a Report Summary synopsizing Commissioner Delmond J. H. Won's findings in the Transpacific Fact Finding Investigation No. 23. The Commission's actions followed consideration of Commissioner Won's Report and Recommendations, received by the Commission on January 13, 1999, which includes commercially sensitive material submitted to the Commission in confidence. Accordingly, the Commission authorized the public release of a Report Summary of Commissioner Won's Report and Recommendations. The Commission further authorized its staff to prepare enforcement proceedings and other actions based on the carrier malpractices indicated in that investigation.

The Transpacific trade was affected during the peak shipping season of early July to early November 1998 by strong eastbound demand and depressed westbound demand due to economic crises in Asian economies and the strong U.S. dollar. Ocean carriers experienced vessel space and equipment shortages as eastbound demand outstripped capacity. The Fact Finding Investigation was initiated by the Commission in response to charges by numerous shippers, consignees, shippers' associations, and non-vessel-operating common carriers ("NVOCCs") that ocean carriers in the Transpacific trades were refusing to provide space under current year service contracts and imposing significant and sudden increases in rates and charges applicable under service contracts during the 1998 peak shipping season. It was alleged that these practices had particularly prejudicial application to small shippers and NVOCCs.

Commissioner Won, appointed Investigative Officer for the proceeding, reported that evidence collected from shippers and carriers who were interviewed, testified, or provided documents in the course of the Investigation, suggested that the carriers, individually or collectively, sought to reduce or eliminate the carriage of less profitable cargo and to replace it with cargo which produced a better financial return, demanded rate increases or premiums under existing service contracts in return for space, and discriminated against NVOCCs and members of some shippers' associations in providing space or demanding higher rates than those applicable under service contracts. He further reported that some shippers were subjected to higher rates than those apparent or specified in service contract essential terms by some carriers who"opted out" of the contract rate to substitute tariff rates. Commissioner Won also found that on several occasions the carriers appeared to have held discussions or engaged in meetings which were not reported to the Commission, as required by the Commission's rules.

At its meeting on March 9, 1999, the Commission directed its Bureau of Enforcement to prepare and undertake specific enforcement proceedings and actions to address these practices. The Commission authorized a variety of formal and informal enforcement actions involving practices prohibited by Section 10 of the Shipping Act of 1984. The Commission intends through these actions to assure that carrier practices which undermine shipper rights secured in service contracts will be viewed seriously and will be pursued by the agency. Details of particular formal proceedings will be made available as such actions are initiated in the ensuing weeks.