[Federal Register Volume 63, Number 82 (Wednesday, April 29, 1998)]
[Notices]
[Pages 23466-23468]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-11359]
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FEDERAL MARITIME COMMISSION
[Docket No. 98-06]
Sea-Land Service Inc. Possible Violations of Sections 10(b)(1),
10(b)(4) and 19(d) of the Shipping Act of 1984; Order of Investigation
and Hearing
Sea-Land Service Inc. (``Sea-Land'') is a vessel-operating common
carrier with offices at 6000 Carnegie Boulevard, Charlotte, North
Carolina. Sea-Land provides regular liner services, inter alia, between
the United States West Coast ports and points and ports and points in
the Far East and currently operates as many as 21 containerships in its
Transpacific services. Further shipping services are furnished by Sea-
Land worldwide both directly and through participation in reciprocal
[[Page 23467]]
space charter agreements with Maersk, P&O Nedlloyd and others. As
relevant herein, Sea-Land operates as a member of the Transpacific
Westbound Rate Agreement (``TWRA''), and participates in the tarrifs
and service contracts established by that conference.
Through interviews and on-site examinations of shipping records
maintained by World Pacific Container (USA) Inc. (``World Pacific'')
and other non-vessel-operating common carriers (``NVOCCs'') providing
services in the outbound trades from the U.S. West Coast to the Far
East, it appears that World Pacific and competing NVOCCs in the Los
Angeles area were actively engaged in equipment substitution
malpractices on shipments transported by Sea-Land. Due in substantial
part to the actions of its Los Angles sales representatives, Sea-Land
has been substantially implicated in the subject malpractices with
respect to cargoes destined for the Far East during 1997 and
thereafter.
Shipment records of World Pacific and other NVOCCs reflects the
near-routine abuse of the TWRA equipment substitution rules as a means
by which Sea-Land apparently furnishes an NVOCC with a larger container
while still assessing the per-container rates normally applied only to
a container of smaller capacity. The NVOCC then loads the container
beyond the cubic capacity of the container initially requested, and
obtains the financial benefits of paying the freight rate applicable to
the smaller box. The above equipment substitution malpractices occur
both in conjunction with, and independent of, shipments on which the
commodity has been misdescribed.
It is alleged that representatives of Sea-Land solicited cargo on
the basis that the carrier would substitute 40-foot container equipment
for 20-foot container equipment in order to secure the patronage of
World Pacific and other NVOCCs as shipper clients of Sea-Land. Key to
this rate malpractice is the understanding that the NVOCC would be
required to misdeclare the cubit measurement of the shipment. In
practice, World Pacific and other NVOCCs would meet this requirement by
routinely declaring the cargo measurements at 25 cubic meters
(``CBM''), equivalent to the maximum capacity utilization of a 20-foot
container under TWRA rules. Cargo weights, however, were generally
correctly declared and shown on the master bill of lading, thus
indicating a significant variance between the loading characteristics
of the cargo as declared, and the actual commodity and cubic
measurements of the goods physically loaded within the substituted
container.
In addition, it appears that Sea-Land subsequently made payment of
freight forwarder compensation on many of these same NVOCC shipments,
with such compensation being paid to ITL Shipping Co. (``ITL
Shipping'') as the forwarder on behalf of World Pacific. ITL Shipping
did not then possess a valid ocean freight forwarder's license, its
license having been revoked effective March 27, 1997.\1\ If further
appears that ITL Shipping had not provided any certification to Sea-
Land claiming entitlement to forwarder compensation upon World
Pacific's shipments, nor had ITL Shipping in fact performed services of
any kind with respect to securing the cargo or preparing the
documentation thereon. Sea-Land allegedly issued forwarder compensation
checks automatically to any party shown in the forwarder box of the
master bill of lading, without regard to specific requirements for the
submission to or receipt by Sea-Land of the forwarder's certification.
It is further alleged that Sea-Land had reason to know that no
forwarder compensation was payable in any event inasmuch as all details
of booking the shipment or preparing or processing the ocean bill of
lading were conducted by Sea-Land directly with the NVOCC shipper. In
additional instances, it appears that forwarder compensation payments
were made by Sea-Land to other forwarders in circumstances in which
such forwarders did not perform the requisite forwarding services or
were otherwise known to be related to the shipper NVOCC.
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\1\ Order of Revocation, Ocean Freight Forwarder License No.
3102, Kyung H. (Harry) Oh d/b/a ITL Shipping Company, served April
1, 1997.
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It is well-established law that a carrier is charged with a
responsibility of reasonably diligent inquiry and exercise of care to
ensure its compliance with the shipping statutes. Prince Line v.
American Paper Exports Inc., 55 F.2d 1053 (2d Cir., 1932). In the case
of the subject instances of equipment substitution, it is clear that
Sea-Land agreed to furnish a larger container and to apply the
equipment substitution rule to the freight rate advantage of the
involved NVOCC, with no apparent regard for the NVOCC's subsequent
misdeclaration and abuse of the equipment substitution rule. A
carrier's persistent failure, moreover, to inform or attempt to inform
itself of any false billings through those normal business resources
available to the carrier such as weighing or measuring, inquiries of
shippers or importers, reference to those ``marks and numbers'' shown
on the bills of lading or other means, may reflect that carrier's
attempt to keep itself in ignorance of the false billings concerned.
Rates From Japan to United States, 2 USMC 426, 434 (1940); Rates From
United States to Philippine Islands, 2 USMC 535, 542 (1941).
Section 10(b)(1) of the 1984 Act, 46 U.S.C. app. Sec. 1709(b)(1),
prohibits a common carrier from charging, collecting or receiving
greater, less or different compensation for the transportation of
property than the rates and charges set forth in its tariff. Section
10(b)(4) of the 1984 Act, 46 U.S.C. app. Sec. 1709(b)(4), prohibits any
common carrier from allowing any person by means of false billings,
false classification, false weighing, false report of weight, false
measurement, or by any other unjust or unfair device or means, to
obtain ocean transportation for property at less than the rates or
charges that would otherwise be applicable. Section 19(d) of the 1984
Act, 46 U.S.C. app. Sec. 1718(d), provides that a carrier may
compensate an ocean freight forwarder only when it has received
certification that such forwarder possesses a valid license and that
specified services relating to securing the shipment and preparing the
documentation thereon have been performed by the forwarder. Under
section 13 of the 1984 Act, 46 U.S.C. app. Sec. 1712, a person is
subject to a civil penalty of not more than $25,000 for each violation
knowingly and willfully committed, and not more than $5,000 for other
violations.\2\ Section 13 further provides that a common carrier's
tariffs may be suspended for violations of sections 10(b)(1) or
10(b)(4) for a period not to exceed one year.
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\2\ These penalties are increased 10 percent for any violations
occurring after November 7, 1996. See, Inflation Adjustment of Civil
Penalties, 61 Fed. Reg. 52704 (October 8, 1996).
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Now therefore, it is ordered, That pursuant to sections 10, 11, 13
and 19 of the 1984 Act, 46 U.S.C. app. Secs. 1709, 1710, 1712 and 1718,
an investigation is instituted to determine:
(1) Whether Sea-Land violated section 10(b)(1) of the 1984 Act by
charging, demanding, collecting or receiving less or different
compensation for the transportation of property than the rates and
charges shown in its tariffs or service contracts;
(2) Whether Sea-Land violated section 10(b)(4) of the 1984 Act by
allowing certain NVOCCs to obtain transportation at less than the rates
and charges otherwise applicable by an unjust or unfair device or
means;
(3) Whether Sea-Land violated section 19(d) of the 1984 Act by
compensating
[[Page 23468]]
an ocean freight forwarder whose license was revoked, and without
requiring the forwarder to provide the necessary certification or
furnish those services entitling the forwarder to such compensation;
(4) Whether, in the event violations of sections 10(b)(1), 10(b)(4)
and 19(d) of the 1984 Act are found, civil penalties should be assessed
against Sea-Land and, if so, the amount of penalties to be assessed;
(5) Whether, in the event violations of sections 10(b)(1) and
10(b)(4) of the 1984 Act are found, the tariff(s) of Sea-Land should be
suspended;
(6) Whether, in the event violations are found, an appropriate
cease and desist order should be issued.
It is further ordered, That a public hearing be held in this
proceeding and that this matter be assigned for hearing before an
Administrative Law Judge of the Commission's Office of Administrative
Law Judges at a date and place to be hereafter determined by the
Administrative Law Judge in compliance with Rule 61 of the Commission's
Rules of Practice and Procedure, 46 CFR 502.61. The hearing shall
include oral testimony and cross-examination in the discretion of the
Presiding Administrative Law Judge only after consideration has been
given by the parties and the Presiding Administrative Law Judge to the
use of alternative forms of dispute resolution, and upon a proper
showing that there are genuine issues of material fact that cannot be
resolved on the basis of sworn statements, affidavits, depositions, or
other documents or that the nature of the matters in issue is such that
an oral hearing and cross-examination are necessary for the development
of an adequate record;
It is further ordered, That Sea-Land Service Inc. is designated
Respondent in this proceeding;
It is further ordered, That the Commission's Bureau of Enforcement
is designated a party to this proceeding;
It is further ordered, That notice of this Order be published in
the Federal Register, and a copy be served on parties of record;
It is further ordered, That other persons having an interest in
participating in this proceeding may file petitions for leave to
intervene in accordance with Rule 72 of the Commission's Rules of
Practice and Procedure, 46 CFR 502.72;
It is further ordered, That all further notices, orders, and/or
decisions issued by or on behalf of the Commission in this proceeding,
including notice of the time and place of hearing or prehearing
conference, shall be served on parties of record;
It is further ordered, That all documents submitted by any party of
record in this proceeding shall be directed to the Secretary, Federal
Maritime Commission, Washington, D.C. 20573, in accordance with Rule
118 of the Commission's Rules of Practice and Procedure, 46 CFR
502.118, and shall be served on parties of record; and
It is further ordered, That in accordance with Rule 61 of the
Commission's Rules of Practice and Procedure, the initial decision of
the Administrative Law Judge shall be issued by April 26, 1999 and the
final decision of the Commission shall be issued by August 24, 1999.
Ronald D. Murphy,
Assistant Secretary.
[FR Doc. 98-11359 Filed 4-28-98; 8:45 am]
BILLING CODE 6730-01-M