[Federal Register Volume 63, Number 13 (Wednesday, January 21, 1998)]
[Notices]
[Pages 3115-3120]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1291]
=======================================================================
-----------------------------------------------------------------------
FEDERAL MARITIME COMMISSION
[Docket No. 97-18]
APL/MOL/OOCL/HMM Reciprocal Slot Exchange Agreement (Agreement
No. 203/011588) and APL/MOL/HMM Reciprocal Slot Exchange Agreement,
Agreement No. 203-011596; Order to Show Cause and Motion To Dismiss
Denied
Introduction
The APL/MOL/OOCL/HMM Reciprocal Slot Exchange Agreement, Agreement
No. 203-011588 (``the Four Party Agreement'') is an agreement for the
reciprocal chartering of space aboard vessels operated in the U.S.
foreign trades by agreement members.\1\ The Four Party Agreement became
effective on October 17, 1997. Agreement No. 203-011596, the APL/MOL/
HMM Reciprocal Slot Exchange Agreement (``the New Agreement''), is a
space charter agreement which is intended to replace the Four Party
Agreement.\2\
---------------------------------------------------------------------------
\1\ The Agreement members are Hyundai Merchant Marine, Ltd.
(``Hyundai'' or ``HMM''), American President Lines, Ltd. (``APL''),
Mitsui O.S.K. Line, Ltd. (``MOL''), and Orient Overseas Container
Line, Inc. (``OOCL'').
\2\ The members of the agreement are Hyundai, APL and MOL.
Although the New Agreement is intended to replace the Four Party
Agreement, the latter will remain in effect until canceled by the
parties according to its terms, to permit an orderly transition in
the parties' operations.
---------------------------------------------------------------------------
Under section 10(c)(6) of the Shipping Act of 1984 (``1984 Act''),
46 U.S.C. app. 1709(c)(6), it is unlawful for any conference or group
of two or more common carriers to:
[[Page 3116]]
Allocate shippers among specific carriers that are parties to
the agreement or prohibit a carrier that is a party to the agreement
from soliciting cargo from a particular shipper, except as otherwise
required by the law of the United States or the importing or
exporting country * * *.
The New Agreement contains terms, also present in the Four Party
Agreement, by which carriage of cargo subject to U.S. cargo preference
laws is restricted to the U.S.-flag carrier participant, APL. In its
Order to Show Cause served on October 17, 1997, Docket No. 97-18, 62 FR
55260 (October 23, 1997), 27 S.R.R. 1304 (1997) (``Show Cause Order''),
the Commission stated that the Four Party Agreement appeared on its
face to present a violation of section 10(c)(6). For reasons similar to
those stated in the Show Cause Order, it appears that the New Agreement
on its face also presents a violation of section 10(c)(6). Therefore,
pursuant to section 11 of the 1984 Act, the parties to the New
Agreement are ordered to show cause why the New Agreement should not be
found to be in violation of the 1984 Act and should not be disapproved,
canceled or modified accordingly.
APL filed a Motion to Dismiss Docket No. 97-18, on the grounds,
inter alia, that ``changed circumstances'' have mooted this proceeding,
and requested, in the event that the Commission determined not to
dismiss the proceeding, that the time for filing Respondents' opening
submissions, then due on December 2, 1997, be extended to 30 days after
the Court of Appeals takes final action in Sea-Land Service, Inc. v.
FMC, D.C. Circuit No. 97-1083.\3\ Motion of APL to Dismiss the
Proceeding (``Motion'') at 1.\4\ The Commission's Bureau of Enforcement
(``BOE'') filed a reply to the Motion. OOCL filed a Response to the
Order to Show Cause. We address both the New Agreement and the Motion
and Response in this Order.
---------------------------------------------------------------------------
\3\ That case is consolidated with Military Sealift Command and
United States v. FMC, No. 97-1084 and American President Lines v.
FMC, No. 97-1085 which are, like No. 97-1083, petitions for review
of the Commission's order in Military Sealift Command v. Sea-Land
Service, Inc., F.M.C. , 27 S.R.R. 874 (1996) (``MSC'').
\4\ The procedural schedule in Docket No. 97-18 was postponed by
the Secretary on December 1, 1997 until further Commission notice or
action on the Motion.
---------------------------------------------------------------------------
Background
This proceeding was instituted pursuant to sections 10(c)(6) and
11, 46 U.S.C. app. 1710, to determine whether the Four Party Agreement
should be found to be in violation of the 1984 Act, and be disapproved,
canceled or modified accordingly. Citing the Commission's holding in
MSC, the Commission ordered the parties to the Four Party Agreement to
show cause why the Agreement should not be found to violate section
10(c)(6) inasmuch as Article 5.1 of the Four Party Agreement appears to
effectively allocate U.S. government shippers of cargo via agreement
members, subject to U.S. cargo preference laws, to APL, the sole U.S.
carrier member of the Agreement.\5\
---------------------------------------------------------------------------
\5\ In MSC, the Commission determined that a provision whose
effect appears to be identical to that of Article 5.1 of the Four
Party Agreement and Article 5.1 of the New Agreement constituted an
allocation of shippers prohibited under section 10(c)(6). Upon
complaint filed by the Military Sealift Command, Department of the
Navy (``MSC''), a shipper of U.S. preference cargo, the Commission
determined that the provision constituted an allocation of shippers
prohibited by the first clause of section 10(c)(6). However, the
Commission further determined that the provision was not unlawful
because it was required by an order of the Maritime Administration,
Department of Transportation (``MarAd'') which constituted ``law of
the United States'' within the meaning of the ``except'' clause of
section 10(c)(6).
---------------------------------------------------------------------------
A. The New Agreement
The New Agreement was filed with the Commission on November 18,
1997, pursuant to section 5 of the 1984 Act, 46 U.S.C. app. section
1704,\6\ and became effective on January 2, 1998.\7\ The New Agreement
authorizes the parties to charter space on each other's vessels on a
reciprocal basis in the trades between ports and points in the U.S.
served via U.S. Pacific Coast ports and ports and points in the Far
East. The Agreement provides for the reciprocal sale, exchange or use
of up to an annualized average of 6,000 TEUs of space per week by
Hyundai on vessels operated by APL and MOL, and for use by APL and MOL
of 7,000 TEUs of space per week on Hyundai vessels operating in the
trade. The parties may also agree on feeder operations, sailing
schedules, service frequency, port calls, addition or withdrawal of
capacity, and the number, type and size of vessels they will use in the
trade. No party may charter or sub-charter space aboard another party's
vessel to a third-party carrier without the consent of the party
operating the vessel.
---------------------------------------------------------------------------
\6\ Section 5 provides, in relevant part, that ``(a) true copy
of every agreement (with respect to activities subject to the Act as
described in section 4) * * * shall be filed with the Commission * *
*.'' Notice of the filing of the Agreement was published in the
Federal Register on December 2, 1997, 62 FR 63716 (December 2,
1997).
\7\ Section 6(c), 46 U.S.C. app. section 1705, provides, inter
alia, that ``(u)nless rejected by the Commission * * *, agreements .
. . shall become effective * * * on the 45th day after filing, or on
the 30th day after notice of the filing is published in the Federal
Register, whichever day is later * * *.''
---------------------------------------------------------------------------
Article 5.1 of the New Agreement, ``Limited Grant,'' provides:
Nor shall anything in this Agreement be construed as granting a
right on the part of any party to carry aboard the vessel of any
other party any cargoes subject to cargo preference laws of the
country of registry of such other party's vessel or the country of
citizenship of its owner.\8\
\8\ The language quoted above is also used in Article 5.1 of the
Four Party Agreement, ``Limited Grant,'' but it is preceded there by
the provision that: (n)othing in this Agreement shall be construed
as granting a right on the part of any other party to carry aboard
the vessels of American President Lines, Ltd. cargoes shipped from
or to the U.S. Department of Defense or Agriculture, or any
subsidiary agencies thereof, or any other agency of the U.S.
Government whose shipments are subject to cargo preference laws of
the United States to the extent requiring and reserved for
transportation aboard U.S.-flag vessels.
---------------------------------------------------------------------------
Article 5.1 further provides:
If the (preceding) sentence * * * shall be determined to violate
U.S. law with respect to U.S. preference cargoes by a court or
agency of competent jurisdiction and any stay upon the order of such
court or agency giving effect to such determination arising by
reason of an appeal of such order shall have ceased to be effective,
then the [preceding] sentence * * * shall be deemed severed with
respect to U.S. preference cargoes,* * *.\9\
---------------------------------------------------------------------------
\9\ The similar provision for severance of the cargo preference
provision upon a final finding of unlawfulness in the Four Party
Agreement is more limited.
---------------------------------------------------------------------------
B. APL's Motion to Dismiss Docket No. 97-18
1. The Motion
APL repeatedly points out that the Show Cause Order ``focused'' on
the second sentence of Article 5.1 of the Four Party Agreement, i.e.,
the language quoted above at note 6. Motion at 2, 4. APL describes
various ``intervening events'' which purportedly render the Order to
Show Cause moot. APL states that, with respect to APL's participation,
the Four Party Agreement has never been implemented and will never be
implemented because APL intends to withdraw from that Agreement upon
effectiveness of the New Agreement. APL also indicates that, in
connection with the acquisition of APL by Neptune Orient Lines and the
transfer of APL's ODS Agreements and Maritime Security Program
(``MSP'') contracts with MarAd to an independent vessel-operating
company bareboat chartering the vessels, MarAd withdrew the letter of
March 11, 1997 from the MarAd Secretary to APL Vice President Michael
Murphy, granting APL a waiver under section 804(b) of the Merchant
Marine Act, 1936 (``1936 Act''), 46 U.S.C. app. 1222(b), for APL's use
of foreign-flag capacity.\10\ Motion at 4-5. In addition,
[[Page 3117]]
APL suggests that, as a consequence of the joint Department of Defense
(``DOD'')-MarAd Voluntary Intermodal Sealift Agreement (``VISA'')
program, ``DOD itself now reserves its peacetime cargoes to U.S.-flag
vessel operators that are participants in VISA, thus by regulation
mandating the same result as the reservation provisions in the
commercial agreements * * *.'' Motion at 5. Finally, APL submits that
it would be appropriate to await the possibly ``definitive guidance''
of the D.C. Circuit on the issues raised in MSC, which ``are relevant
to the Show Cause order.'' Id. at 6.
---------------------------------------------------------------------------
\10\ MarAd's waiver, for the remaining term of APL's ODS
contract through December 1997 and for the full term of each of
APL's nine operating agreements under the Maritime Security Program
(``MSP''), included as ``condition D'' that:
No space on APL's U.S.-flag vessels that are subject to space
sharing agreements with any foreign operator shall be utilized for
the carriage of cargo reserved for U.S.-flag vessels under any
statute, resolution or regulation unless such cargo is carried
pursuant to bills of lading or contracts of carriage issued to, or
entered into with, the shipper of such cargo by or for a citizen of
the United States.
Thus, MarAd was alleged to have required the provision of the
Agreement allocating U.S. preference cargo to APL.
---------------------------------------------------------------------------
APL's request that the proceeding be dismissed focuss on the
parties' intention, stated by APL, that the agreement which was the
subject of the Show Cause Order will be supplanted by the New Agreement
and the narrow scope of the Commission's focus in that order, i.e., the
second sentence of Article 5.1, ``which will then have no possible
future significance.'' Id. at 7. APL recognizes, however, that the New
Agreement retains the more general cargo reservation language, but
contends that this provision was not identified as a basis of potential
violation of section 10(c)(6) in the Show Cause Order. Thus, says APL,
if the Commission should consider this provision to raise section
10(c)(6) issues that require Commission consideration, the
appropriate context in which to evaluate those issues--which are
necessarily broader than and different from those identified in the
Commission's October 22, 1997 Order--would be with respect to an
agreement in which that provision has continued effect.
Id. In the event the Commission elects not to dismiss the proceeding,
or to institute a new proceeding relating to the New Agreements, APL
requests that the time for filing of Respondents' opening submissions
be extended to a date 30 days after final court action in MSC.
2. BOE's Reply to the Motion
BOE opposes the Motion on the ground that the issues in Docket No.
97-18 are not moot, and the proceeding should not be dismissed, until
APL actually withdraws from the Four Party Agreement. BOE does not,
however, oppose APL's request that the time for Respondents' initial
filing be extended until 30 days after final action by the D.C. Circuit
in MSC. Although BOE noted that the New Agreement was being considered
by the staff, it did not further comment on the validity of the
substantive representations of fact or law in the Motion.
C. OOCL's Response to Order to Show Cause
OOCL filed a Response to the Order to Show Cause, stating that it
has given notice on December 1, 1997 of its intention to withdraw from
the APAC Agreement and ``hence will no longer be a party to (the Four
Party) Agreement * * *.'' Response To Order To Show Cause
(``Response'') at 1. In its Response, OOCL moves that it be dismissed
as a party to this proceeding. In the alternative, OOCL adopts the
position of APL that the proceeding should be dismissed, or, in the
alternative, if the proceeding is directed to a new agreement, that the
time for Respondents' opening submissions be extended to 30 days after
issuance of the D.C. Circuit's mandate in MSC.
OOCL suggests that the Commission take administrative notice of the
filing of a successor agreement to the Four Party Agreement, of which
OOCL is not a member. OOCL also joins in APL's representations that
subsequent events have rendered the current proceeding moot.
D. The Maritime Administrator's Letter
It is not the FMC's role to decide on the validity of a MarAd
order. MSC, 27 S.R.R. at 888. In initiating this proceeding, we noted
that the Commission did not undertake to review the actions of the
Maritime Administrator under his statutory authority, but to determine
whether an agreement filed pursuant to the 1984 Act required action by
MarAd under a statute which authorizes that agency to command carrier
obedience to orders cognizable as ``law of the United States,'' and
whether it had so required the action specifically taken by the parties
in this instance. We also directed the Commission's Secretary to invite
the Acting Administrator to participate amicus curiae in this
proceeding, which the Secretary did by letter of October 24, 1997.
The Acting Administrator advised the Commission on December 16,
1997, that APL ceased to be a party to an ODS contract as of November
12, 1997, and therefore is no longer subject to section 804 or the
waiver and conditions imposed in MarAd's March 11, 1997 letter. The
Acting Administrator further advised the Commission that,
notwithstanding APL's request that MarAd impose a similar condition on
APL's new charter arrangements, MarAd
Did not * * * consider whether such a condition should be
imposed under the various statutes MarAd administers as a result of
an October 19, 1993 opinion by the Office of Legal Counsel (OLC) of
the Department of Justice. That opinion * * * concluded that even
though conditions contained in charter orders approved by MarAd
impose legal obligations on the chartering parties, those
obligations are not ``otherwise required by law'' for purposes of
the second prong of section 10(c)(6), and that MarAd lacks authority
to impose such conditions since, in OLC's view, they would violate
the first prong of section 10(c)(6). The OLC opinion remains the
unified position of the United States. Given this, MarAd does not
believe that it should participate at this time as an amicus in the
pending FMC proceeding.
Finally, the Acting Administrator, noting the filing of the New
Agreement and APL's announced intention to withdraw from the Four Party
Agreement, suggested that questions relating to the lawfulness of the
Four Party Agreement are now moot and that, in the event the FMC
decides nevertheless to continue the proceeding, the matter should be
held in abeyance pending the decision of the D.C. Circuit on review of
MSC.
Discussion
A. The New Agreement
The language of Article 5.1 of the New Agreement does not contain
the language in the Four Party Agreement which was specifically cited
by the Commission in its Show Cause Order. However, it does contain the
following more general language which is also in the Four Party
Agreement:
Nor shall anything in this Agreement be construed as granting a
right on the part of any party to carry aboard the vessel of any
other party any cargoes subject to cargo preference laws of the
country of registry of such other party's vessel or the country of
citizenship of its owner.
While this language does not refer specifically to U.S.-government
agency shippers, its general reference to ``cargo preference laws''
would certainly include those U.S. cargo preference laws which by their
terms effectively allocate the Department of Defense, the Department of
Agriculture, and other U.S. government departments and agencies to
U.S.-flag vessels for all or a major portion of their shipments. Thus
it would have the same effect as the more specific language of the Four
Party
[[Page 3118]]
Agreement: U.S. government entities which ship cargo via agreement
members are allocated to APL.
As we noted in our Show Cause Order concerning the Four Party
Agreement, the New Agreement presents issues similar to those decided
by the Commission in MSC.\11\ The VSAs involved in MSC required the
approval of the Secretary of Transportation for the charter or transfer
of a U.S.-flag vessel to a non-citizen under section 9 of the Shipping
Act, 1916 (``1916 Act''), 46 U.S.C. app. 808, subject to the broad
power to prescribe conditions--violations of which are crimes
punishable by fines, imprisonment and vessel forfeiture--given the
Secretary in section 41.\12\ MarAd's approval of the charters of the
U.S.-flag vessels and vessel space to foreign-flag carrier members of
the VSAs were conditioned on the exclusion of the foreign-flag
participants from use of the vessels to carry U.S. preference
cargo.\13\ The Commission specifically found that the conditional
charter orders issued by MarAd pursuant to sections 9 and 41 of the
1916 Act had the force and effect of law because they were compulsory
and the statute provided criminal penalties for noncompliance. MSC, 27
S.R.R. at 889.
---------------------------------------------------------------------------
\11\ The vessel sharing agreements (``VSAs'') involved in MSC
provided for the use of twelve U.S.-flag vessels owned by a U.S.
carrier to be operated on behalf of all of the parties to the
agreements, and to replace all U.S.-flag and foreign-flag vessels
previously operated by the parties in the covered trade. By
chartering space on a U.S.-flag vessel, the foreign carriers gained
eligibility to submit bids for military and other government
preference cargoes reserved to U.S.-flag vessels. However, the
foreign carriers agreed that they would not use any vessels or space
chartered from the U.S. carrier for carriage of government
preference cargo.
\12\ Section 9(c) provides that, with certain exceptions not
relevant here, ``a person may not, without the approval of the
Secretary of Transportation--
(1) sell, mortgage, lease, charter, deliver, or in any manner
transfer, or agree to sell, mortgage, lease, charter, deliver, or in
any manner transfer, to a person not a citizen of the United States,
any interest in or control of a documented vessel * * * owned by a
citizen of the United States * * *.''
46 U.S.C. app. 808(c). The Secretary has delegated to the
Maritime Administrator authority to carry out sections 9 and 41 of
the 1916 Act. 49 CFR 166(a).
\13\ MarAd acted under section 9 on each individual charter of a
U.S.-flag vessel and incorporated conditions requiring restriction
of U.S. preference cargo to the U.S.-flag carrier member of the
agreements in each of the ``charter orders'' approving the
arrangement, as required by section 41. MarAd has apparently
dispensed with individualized approvals of charters of U.S.-flag
vessels like those at issue in MSC. See 46 CFR 221.13(a)(1) (except
as limited by provisions not relevant here, MarAd ``hereby grants
the approval required by [section 9(c) of the 1916 Act] for the * *
* Charter * * * to a Noncitizen of an interest in or control of a
Documented Vessel owned by a Citizen of the United States * * *.'').
---------------------------------------------------------------------------
The Commission's inquiry in MSC included the threshold conclusion
that MarAd action under the 1916 Act was a prerequisite for the
existence of the agreement at issue: the U.S.-flag vessels could not be
chartered to the foreign carrier agreement parties without approval.
Id. at 876. Here, as we noted in the Show Cause Order with respect to
the Four Party Agreement, no similar nexus between the New Agreement
and the statutory authority of the Maritime Administrator is evident.
This case apparently does not involve the 1916 Act authority exercised
by MarAd with respect to the space charter agreements at issue in MSC.
Until the November 12, 1997 consummation of its acquisition by
Neptune Orient Line (``NOL''), APL operated U.S.-flag vessels under
operating-differential subsidy contracts with MarAd pursuant to Title
VI and sections 801 and 804 of the 1936 Act, 46 U.S.C. app. 1171 et
seq. and 1211 and 1222.\14\ MarAd's March 11, 1997 letter granted APL's
request for a waiver under section 804(b) of 1936 Act for APL to own,
operate or charter up to 18 foreign-flag vessels in line haul service
between U.S. and foreign ports for the remaining term of APL's
Operating Differential Subsidy Agreement (``ODSA''), Contract MA/MSB-
417, through December 31, 1997 and for the full term of each of APL's
nine operating agreements under the MSP, Contract Nos. MA/MSP-1 through
MA/MSP-9, subject to the conditions imposed.\15\ During FMC review of
the Four Party Agreement, APL suggested that the March 11, 1997 MarAd
letter should be considered ``law of the United States'' within the
meaning of the ``except clause'' of section 10(c)(6). This argument was
dealt with a length in the Show Cause Order. 62 FR 55262-55263, 27
S.R.R. 1306-1308.\16\
---------------------------------------------------------------------------
\14\ Section 603, 46 U.S.C. app. 1173(a), provides that, upon
approval of an application for ODS under section 601, the Secretary
of Transportation may enter into a contract with the applicant
``subject to such reasonable terms and conditions * * * as the
Secretary * * * shall require to effectuate the purposes and policy
* * *'' of the Act. Section 804(a) provides that it is ``unlawful
for any contractor receiving an operating-differential subsidy under
title VI * * * to own, charter, * * * or operate any foreign-flag
vessel which competes with any American-flag service'' on a route
deemed essential by the Secretary, except as provided in section
804(b). Section 804(b), 46 U.S.C. app. 1222(b), authorizes the
Secretary to waive the prohibition for a specific period of time
``(u)nder special circumstances and for good cause shown * * *.''
The March 11, 1997 MarAd letter states that the Administrator has
found ``special circumstances'' and ``good cause'' for granting the
waiver and that the waiver granted ``is subject to the * * *
conditions and will terminate in the event any of the conditions are
not fulfilled * * *.''
\15\ The Agreement parties do not represent that APL sought
MarAd approval pursuant to section 9 for use of its U.S.-flag
vessels in operations under the Agreement. The March 11, 1997 MarAd
letter grants authority to APL only under section 804(b) of the 1936
Act, and does not refer to sections 9 and 41 of the 1916 Act of
MarAd authority under those provisions.
\16\ In any event, as we noted in the Show Cause Order, the
Military Security Act of 1996, Pub. L. 104-239, 110 Stat. 3118,
substantially amended the 1936 Act, creating the Military Security
Fleet Program, 46 U.S.C. app. 1187, et seq. It is a condition for
including any vessel in the Fleet that the owner or operator of the
vessel enter into an operating agreement governed by the section's
provisions with the Secretary of Transportation, which will be one-
year, renewable contracts. Subsection (c) provides that ``[a]
contractor of a vessel included in an operating agreement under this
part may operate the vessel in the foreign commerce of the United
States without restriction, and shall not be subject to any
requirement under'' certain sections of the 1936 Act dealing with
record keeping, equitable distribution of contracts among U.S.
ports, and discrimination. 46 U.S.C. app. 1187a(c). Section 804 was
substantially amended as well: a new subsection 804(f) provides that
nothing in section 804(a) will preclude a contractor receiving ODS
or MSP assistance from ``entering into time or space charter or
other cooperative agreements with respect to foreign-flag vessels *
* *.'' 46 U.S.C. app. 1221(f)(5). The new section 804(f) was made
effective as to carriers with existing ODS contracts on the date on
which such a contractor entered into an MSP contract with MarAd. 46
U.S.C.A. app. 1222, Historical and Statutory Notes. APL entered into
operating agreements with MarAd for nine vessels for January 21,
1997.
---------------------------------------------------------------------------
Moreover, as MarAd noted in promulgating its final regulations for
the MSP, ``[u]nlike the operating differential subsidy * * * program,
the MSP has few restrictions on vessels operating in the U.S.-foreign
commerce * * *.'' 62 FR 37733 (July 15, 1997). Under the provisions of
the 1936 Act, as amended by the Maritime Security Act of 1996, no
recourse to the Maritime Administration appears to be required for
APL's participation in the Four Party Agreement or the New
Agreement.\17\
---------------------------------------------------------------------------
\17\ It thus does not appear to be necessary for a U.S.-flag
carrier with an MSP operating agreement to seek a waiver under
section 804(b) in order to participate in a space charter or vessel
sharing agreement. Nevertheless, on January 17, 1997, APL filed a
request with MarAd for a waiver under section 804(b) of the 1936 Act
for operation of up to 18 foreign-flag vessels. Notice of its filing
was published January 29, 1997. 62 FR 4377 (January 29, 1997). The
March 11, 1997 MarAd letter granted APL's request. The waiver
provides that APL may ``own, operate or charter'' up to 18 foreign-
flag vessels.
---------------------------------------------------------------------------
MarAd's withdrawal of the March 11, 1997 section 804 waiver, which
occurred after issuance of our Show Cause Order, would suggest that
this argument no longer may be said to apply to APL's operations under
the Four Party Agreement or the New Agreement. No colorable argument
that the effective allocation of U.S. government shippers of cargo
subject to the U.S. cargo preference laws by
[[Page 3119]]
Article 5.1 of the New Agreement is ``required by the law of the United
States'' as a result of the March 11, 1997 MarAd letter or other MarAd
action under the 1936 Act appears to exist.
In discussion with the staff concerning Article 5.1 of the New
Agreement, and in its Motion, however, APL advanced the view that the
allocation issue was essentially moot as a result of various actions of
MarAd and DOD, including significant policy changes by DOD relating
particularly to the VISA program. Thus, in the Motion and in
discussions concerning the New Agreement, APL has argued that the
effect of the VISA program is to authorize or require the allocation
provision of the New Agreement. As it noted in MSC, the Commission
must, ``[u]nder ordinary circumstances, * * * consider the text and any
relevant analyses of the proffered law [said to create an exception to
the prohibition of section 10(c)(6)], and render a conclusion as to
whether the law commanded the actions that otherwise might fall within
section 10(c)(6)'s prohibition clause.'' MSC, 27 S.R.R. at 888.
MarAd administers the VISA program under authority of section 708
of the Defense Production Act of 1950, as amended, 50 U.S.C. app. 2158.
The VISA program provides for agreements entered into between MarAd and
the operators of U.S.-flag vessels and establishes a ``prioritized
order for utilization of commercial sealift capacity to meet DOD
peacetime and contingency requirements * * *.'' 62 FR 6840 (February
13, 1997). The program emphasizes use of U.S.-flag vessel capacity
operated by VISA participants or available to VISA participants under
VSAs for the carriage of DOD peacetime cargo and assures the
availability of U.S.-flag capacity for DOD contingency use. Although
the program establishes priorities under which DOD will call upon the
operators of U.S-flag vessels to provide capacity, by awarding
contracts and booking cargo, neither the MarAd rules for the VISA
program itself nor any DOD policy or contract provision thus far called
to our attention appears to reserve aggregate DOD peacetime cargo to
VISA participants. No prohibition against the use of the vessel
capacity of a VISA participant made available to a non-U.S. carrier
member of a VSA for carriage of DOD cargo is contained in the
regulations promulgated by MarAd. Moreover, those regulations and the
VISA program itself relate only to cargo shipped by DOD. Other U.S.
government departments and agencies, which are also subject to the U.S.
cargo preference laws, are unaffected by the VISA program. These
shippers would be allocated to APL by the terms of Article 5.1 of the
New Agreement. No requirement for the exclusion of agreement parties
other than APL from bidding on DOD or other government-shipped cargo
arises from the VISA regulations or other U.S. law, or the DOD
contracts under VISA.
The parties apparently recognize that the allocation issues raised
by the New Agreement would most appropriately be addressed in a formal
proceeding: both APL's Motion and OOCL's Response suggest such a course
of action. In view of the possibility that Agreement No. 203-011596 may
be merely an interim measure to see the parties through the
restructuring of their various alliances, and may be replaced by yet
another version of the parties' space sharing arrangement, we find it
most appropriate to address these issues in the context of the existing
proceeding, Docket No. 97-18, rather than to initiate a new proceeding.
Therefore, the parties to the New Agreement are ordered to show
cause why it does not violate section 10(c)(6) for the same reasons
which prompted us to institute a proceeding against the Four Party
Agreement: A prima facie case appears to exist that the provision is
unlawful and is not otherwise required by the law of the United States.
The parties to the New Agreement are ordered to show cause why Article
5.1 of the New Agreement should not be disapproved, canceled or
modified, as part of this proceeding.
B. The Motion and Response
We agree with BOE that dismissal of the Show Cause proceeding with
respect to the Four Party Agreement is premature. Termination of this
proceeding with respect to the Four Party Agreement may be proper when
and if the Four Party Agreement itself is terminated. However, it does
not appear at this time that either APL's or OOCL's cessation of
operations under the Four Party Agreement will occur simultaneously
with the effectiveness of the New Agreement. We may act to modify the
proceeding at any time it appears appropriate, with or without further
request of the parties.
APL's further suggestion that the Commission delay action on this
issue until 30 days after the D.C. Circuit has acted in MSC is without
merit. This would effectively stay the Commission's determination that
the allocation of preference cargo in an agreement permitting the
charter of space on U.S.-flag vessels by foreign lines constitutes a
violation of section 10(c)(6). The Commission's determination of this
legal issue remains in effect, no stay having been entered by the
Commission or any court of competent jurisdiction.\18\ As we noted in
MSC, an order by an administrative agency is presumed to be valid until
such time as it is overturned by a court of competent jurisdiction.
See, e.g., Citizens to Preserve Overton Park, Inc. versus Volpe, 401
U.S. 402, 415-16 (1971); Motor Vehicle Manufacturers Association of the
United States, Inc. versus Ruckelshaus, 719 F.2d 1159, 1164 (D.C. Cir.
1983).
---------------------------------------------------------------------------
\18\ No stay was requested or suggested as necessary by any
party in the context of the MSC proceeding.
---------------------------------------------------------------------------
Accordingly, the appeal of the MSC decision provides no basis to
permit the effectiveness, without investigation, of allocation language
based on U.S. cargo preference laws having the same or similar effects
to that found in MSC to constitute a violation of section 10(c)(6).
Therefore, the Motion is denied with respect to delay of the filing of
initial submissions until 30 days after issuance of the decision in MSC
by the D.C. Circuit. A new procedural schedule for the conduct of this
proceeding is established below.
As a result of MarAd's withdrawal of the March 11, 1997 section 804
waiver, no question remains as to whether that letter constitutes ``law
of the United States,'' within the meaning of section 10(c)(6),
requiring the cargo preference reservation in either of the Agreements.
It would therefore appear that no basis exists as a matter of law or of
fact at this time for dismissal of the existing proceeding with respect
to the Four Party Agreement.
Now therefore, it is ordered, that pursuant to section 11 of the
Shipping Act of 1984, American President Lines, Ltd., Mitsui O.S.K.
Line, Ltd., and Hyundai Merchant Marine, Ltd. show cause why they
should not be found to have violated section 10(c)(6) of the Shipping
Act of 1984 by prohibiting specific carriers that are parties to the
APL/MOL/HMM Reciprocal Slot Exchange Agreement, Agreement No. 203-
011596, from soliciting cargo from a particular shipper or shippers;
It is further ordered, that American President Lines, Ltd., Mitsui
O.S.K. Line, Ltd., and Hyundai Merchant Marine, Ltd. show cause why an
order should not be issued disapproving, canceling or modifying the
APL/MOL/HMM Reciprocal Slot Exchange Agreement, Agreement No. 203-
011596;
It is further ordered, that the Motion to Dismiss Docket No. 97-18
of American President Lines, Ltd. is denied;
[[Page 3120]]
It is further ordered, that the Motion of Orient Overseas Container
Lines, Inc. to be dismissed as a party to Docket No. 97-18 is denied;
It is further ordered, that any person having an interest and
desiring to intervene in this proceeding in connection with the APL/
MOL/HMM Reciprocal Slot Exchange Agreement, Agreement No. 203-011596,
shall file a petition for leave to intervene in accordance with Rule 72
of the Commission's rules of practice and procedure, 46 CFR 502.72.
Such petition shall be accompanied by the petitioner's memorandum of
law and affidavits of fact, if any, and shall be filed no later than
the day fixed below;
It is further ordered, that affidavits of fact and memoranda of law
addressing issues with respect to both the Four Party Agreement and the
New Agreement shall be filed by Respondents and any intervenors in
support of Respondents no later than February 20, 1998;
It is further ordered, that reply affidavits and memoranda of law
addressing issues with respect to both the Four Party Agreement and the
New Agreement shall be filed by the Bureau of Enforcement and any
intervenors in opposition to Respondent no later than March 20, 1998;
It is further ordered, that rebuttal affidavits and memoranda of
law addressing issues with respect to both the Four Party Agreement and
the New Agreement shall be filed by Respondents and intervenors in
support no later than April 3, 1998;
It is further ordered, that, should any party believe that an oral
argument is required, that party must submit a request specifying the
reasons therefore and why argument by memorandum is inadequate to
present the party's case. Any request for oral argument shall be filed
no later than April 3, 1998;
It is further ordered, that notice of this Order to Show Cause be
published in the Federal Register, and that a copy thereof be served
upon Respondents;
It is further ordered, that all documents submitted by any party of
record in this proceeding shall be filed in accordance with Rule 118 of
the Commission's rules of practice and procedure, 46 CFR 502.118, as
well as being mailed directly to all parties of record;
Finally, it is ordered, that pursuant to the terms of Rule 61 of
the Commission's rules of practice and procedure, 46 CFR 502.61, the
Order to Show Cause served October 17, 1997 in this proceeding is
amended to require that the final decision of the Commission in this
proceeding shall be issued by July 3, 1998.
By the Commission.
Joseph C. Polking,
Secretary.
[FR Doc. 98-1291 Filed 1-20-98; 8:45 am]
BILLING CODE 6730-01-M