[Federal Register Volume 64, Number 108 (Monday, June 7, 1999)]
[Rules and Regulations]
[Pages 30245-30248]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-14257]
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FEDERAL MARITIME COMMISSION
46 CFR Part 551
[Docket No. 96-20]
Port Restrictions and Requirements in the United States/Japan
Trade
AGENCY: Federal Maritime Commission.
ACTION: Final rule.
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SUMMARY: The Federal Maritime Commission is requiring U.S. and Japanese
ocean common carriers in the U.S.-Japan trade to provide reports
addressing the status of efforts to reform conditions unfavorable to
shipping in the U.S.-Japan trade. Areas for reporting include reform of
the ``prior consultation'' system for pre-approving carriers' service
changes in Japan; entry of non-Japanese carriers into Japan's harbor
services market; and Government of Japan proposals for broader harbor
services deregulation. As marketplace developments have overtaken the
findings in the currently suspended final rule in this proceeding in
certain respects, the Commission has determined to remove that final
rule.
DATES: The removal of Sec. 551.2 is effective June 7, 1999. Reports are
due August 26, 1999, and every 180 days thereafter.
[[Page 30246]]
ADDRESSES: Reports and requests for publicly available information
should be addressed to: Bryant L. VanBrakle, Secretary, Federal
Maritime Commission, 800 North Capitol Street, NW., Washington, D.C.
20573, (202) 523-5725.
FOR FURTHER INFORMATION CONTACT: Thomas Panebianco, General Counsel,
Federal Maritime Commission, 800 North Capitol Street, NW., Washington,
D.C. 20573, (202) 523-5740.
SUPPLEMENTARY INFORMATION:
Background
After an extensive investigation regarding potentially unfavorable
conditions facing U.S. ocean shipping interests in Japanese ports, the
Commission on February 26, 1997, issued a final rule finding such
conditions to exist and imposing $100,000 per voyage sanctions against
Japanese carriers entering United States ports. The rule was originally
scheduled to take effect on April 14, 1997; however, the Commission
postponed the effective date of the final rule until September 4, 1997,
in recognition of assurances by the Japan Ministry of Transport
(``MOT'') that it and other involved parties would undertake reforms to
correct the conditions at issue. On September 4, 1997, the Commission,
having not been presented with any evidence of corrective measures,
allowed the rule to go into effect, and sanctions began to accrue
against the Japanese carriers. The rule was again suspended by the
Commission on November 13, 1997, after the signing of comprehensive
government-to-government and industry-government accords to
substantially reform Japanese port practices; at that time, accrued
fees of $1.5 million were paid by the Japanese carriers.
The Commission took the above-described actions in this proceeding
after a comprehensive inquiry into restrictions and requirements
affecting U.S. carriers and U.S. commerce in Japanese ports. The fees
assessed in the final rule were deemed necessary in light of the
Commission's identification of a number of conditions unfavorable to
shipping warranting action under section 19 of the Merchant Marine Act,
1920, 46 U.S.C. app. 876:
Shipping lines in the Japan-U.S. trades were not allowed
to make operational changes, major or minor, without the permission of
the Japan Harbor Transportation Association (``JHTA''), an association
of Japanese waterfront employers operating with the permission of, and
under the regulatory authority and ministerial guidance of MOT.
JHTA had absolute and unappealable discretion to withhold
permission for proposed operational changes by refusing to accept such
proposals for ``prior consultation,'' a mandatory process of
negotiations and pre-approvals involving carriers, JHTA, and waterfront
unions.
There were no written criteria for JHTA's decisions
whether to permit or disallow carrier requests for operational changes,
nor were there written explanations given for the decisions.
JHTA used and threatened to use its prior consultation
authority to punish and disrupt the business operations of its
detractors.
JHTA used its authority over carrier operations through
prior consultation as leverage to extract fees and impose operational
restrictions, such as Sunday work limits.
JHTA used its prior consultation authority to allocate
work among its member companies, by barring carriers and consortia from
freely choosing operators and by compelling shipping lines to hire
additional, unneeded stevedore companies or contractors.
MOT administered a licensing standard which blocks new
entrants from the stevedoring industry in Japan, protecting JHTA's
dominant position, and ensuring that the stevedoring market remains
entirely Japanese.
Because of the restrictive licensing requirement, U.S.
carriers could not perform stevedoring or terminal operating services
for themselves or third parties in Japan, as Japanese carriers do in
the United States.
On November 10, 1997, U.S. and Japanese officials and relevant
industry groups (i.e., JHTA, the Japan Shipowners' Port Council
(``JSPC'') and the Japan Foreign Steamship Association (``JFSA'')) came
to terms on a number of points for remedying conditions in Japanese
ports, including:
A reaffirmance by the Government of Japan (``GOJ'') that
it would approve foreign shipping companies' applications for licenses
for port transportation business operations;
An agreement to simplify the prior consultation system,
increase transparency through the use of written decisions, and provide
for dispute settlement procedures in which MOT or an MOT-chaired
committee would resolve questions and disputes, and MOT would arbitrate
and issue judgments;
An agreement among the GOJ and carrier groups to establish
an alternative to the prior consultation system and to implement the
alternative system, whereby carriers intending to implement operational
changes would confer with their terminal operators (who would, to the
extent required by applicable collective bargaining agreements, consult
with labor unions either directly or through a collective bargaining
agent);
Commitments that prior consultation not be used as a means
to approve carriers' business plans and strategies, allocate business
among port transportation business operators, restrict competition or
infringe on carriers' freedom to select port transport business
operators;
Commitments that the GOJ will use its authority to prevent
the unjustifiable denial of services essential to the conduct of
licensed activities, to ensure the smooth operation of the port
transportation business and the improvement of port efficiency, and to
ensure that operation of the alternative prior consultation process
will be free from outside interference, harassment, or retaliation.
Discussion
In the period since the Government of Japan made its commitments to
market opening and increased accountability, the pace of progress and
reform in Japan's port transportation sector has been slow. It has been
reported that no foreign shipping lines have applied for or received
licenses to operate their own terminals. No carrier appears to have
invoked or tested the prior consultation dispute settlement procedures
or other procedural safeguards that were agreed to, and no alternative
to JHTA's prior consultation system for reconciling carrier service
issues with the concerns of Japanese labor has been developed.
Moreover, proposals for broader reform under consideration by Japan's
Government fall well short of full deregulation.
There appear to be several reasons for these shortcomings. While
the Government of Japan has committed to provide licenses to foreign
carriers to operate port transportation businesses in their own berths,
it has been reported that Japanese labor unions have communicated
strong opposition to foreign lines establishing terminal operations,
including threats of work stoppages or other labor actions. Other
factors have made foreign entry into this sector more difficult as
well. The Government of Japan maintains regulatory requirements,
including ``close ties'' (through equity exchange or long term
contracts) with subcontractors, that make launching a terminal venture
more difficult. Furthermore, it appears that recent
[[Page 30247]]
economic factors in Japan, including currency and trade shifts, have
made carrier investment in Japan's high-cost ports even less attractive
than before. As a result, some lines have curtailed services in Japan,
restructured existing arrangements, and shifted other operations to
more rapidly growing, lower-cost modern maritime centers in the region.
The reasons for the lack of progress regarding alternatives to
prior consultation may be similarly complex, potentially involving
labor concerns or resistance, lack of governmental leadership, and the
scaling back of some carriers' operations in Japan. Also, while the
1997 agreements provide for dispute resolution processes, these
procedures are as yet untested. The reasons for and effects of this
remain unclear, requiring further information and clarification.
Given these evolving circumstances, it is necessary for the
Commission to continue its review of this matter, and to update its
record in this proceeding. The existing record and the resulting
findings in the final rule are no longer current, having been overtaken
in a number of respects by changes in both market conditions and
governmental policies. The Commission needs to collect further
information, both now and on an ongoing basis, to effectively evaluate
whether the unfavorable conditions identified in the rule continue to
exist, and if so, the extent to which their continued existence arises
out of or results from foreign laws, rules, or regulations. Such
oversight is necessary to ensure that U.S. carriers do not face
restrictions in their operations in Japan that Japanese carriers do not
face in this country.
As some of the findings in the Commission's suspended final rule--
for example, findings regarding official refusals to grant licenses--
appear to have been overtaken in part by evolving circumstances and are
not supported by the current record, the Commission has determined to
withdraw the suspended rule while it reevaluates the current conditions
facing U.S. shipping in Japan.
Removal of the final rule in no way reflects the satisfaction of
the Commission with the current status of this matter, however, or a
conclusion of the Commission's interest in the reform of port
conditions facing Japan-U.S. trade. U.S. carriers and U.S. trade
continue to bear the high costs of inefficient Japanese waterfront
practices. There are a number of further steps that the Government of
Japan appropriately could take to ensure that its market opening
commitments can become effective. With regard to licensing, the
Government of Japan could move swiftly to eliminate or liberalize
regulatory requirements that make entry more difficult, such as the
close-ties test and regulatory minimum manning requirements. For any
new entrants to succeed, Japanese authorities must also ensure that
there will be no illegal boycotts of new entrants to the market, and
must take action to prevent unlawful threats or harassment. Japanese
authorities could certainly take further steps as well, including
providing guidance and leadership in dialogue with interested parties
to address Japanese labor's concerns with, and resistance to, the entry
of foreign carriers into Japan's port transportation business.
Japanese authorities also could appropriately take an active role
to oversee the prior consultation process and ensure that all parties
are conforming with the procedures and obligations set forth in
agreements among MOT, shipowners, and JHTA. Of particular importance is
the need to enforce the principle that prior consultation should not be
used to allocate carrier business among operators. Active oversight by
MOT could ensure that disputes regarding these provisions could be
addressed and resolved before any conflicts become so severe that a
formal request for dispute settlement becomes necessary.
Japanese authorities could also do more to facilitate the creation
of alternative processes to prior consultation. For such an alternative
to be possible, the Government of Japan will have to work actively with
interested parties to provide assistance and advice, including aiding
in resolving concerns of port labor.
The Commission will also continue to look closely at regulatory
changes under consideration by the Government of Japan. In December
1998, Japan's Transport Policy Council Harbor Transport Subcommittee
issued an interim report, laying out proposals for potential regulatory
changes in this sector. These proposals included elimination of the
supply/demand test for licensing port business operators, which has
been an issue of serious concern in this proceeding, and ending the
system of regulatory approval of harbor companies' fees and charges.
While these could be positive steps, the draft plan as a whole appears
to fall short of what is needed to remedy current inefficiencies and
obstacles in Japan's ports, and to ensure an open and competitive
market for harbor services. As the United States Government pointed out
to MOT earlier this year, the deregulatory plan retains economically
burdensome and seemingly unnecessary requirements, including required
commercial relationships (i.e., terminal operators are required to
perform at least 70% of their services themselves) and close-tie
requirements for subcontractors. Most troublesome are regulatory
minimum manning requirements, which are increased, rather than
eliminated, in the proposal.
The Commission will continue to watch these matters closely, to
ensure that the laws and regulations of the Government of Japan do not
give rise to unfavorable conditions for U.S. maritime companies or
trade.
Therefore, it is ordered, That 46 CFR 551.2, is removed;
It is further ordered, That the following parties are ordered to
file reports with the Commission 90 days from the date of service of
this order, and every 180 days thereafter: American President Lines,
Ltd.; Sea-Land Service, Inc.; Kawasaki Kisen Kaisha, Ltd.; Mitsui
O.S.K. Lines, Ltd.; and Nippon Yusen Kaisha. These reports should
address the following:
1. Has your company 1 submitted any major matters (as
defined in ``the Revised Prior Consultation System of 1997'') for
prior consultation in the past 180 days? (Responses may be limited
to prior consultation regarding services in U.S.-Japan trades). If
so, for each major matter presented, describe the request, the
process followed by the carrier, and how the matter was handled and
disposed of by JHTA. Indicate specifically whether the procedures
outlined in paragraph II of ``The Revised Prior Consultation System
of 1997'' were adhered to by JHTA and your company. If any dispute
between your company and JHTA under the prior consultation system
has arisen, has MOT been notified or requested to serve as
arbitrator? If so, describe in detail what actions, if any, have
been taken by MOT.
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\1\ References to ``your company'' include parent companies,
subsidiaries, and corporate affiliates with whom common ownership is
shared.
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2. Describe what attempts or inquiries your company has made
with other shipping lines, port transportation business operators,
MOT, or any waterfront organizations to create an alternative to the
prior consultation system as described in the ``Agreement on the
Improvement of the Prior Consultation System of 1997'' paragraph
3(2), and describe the responses received.
3. Describe in detail the status of any legislative or
regulatory proposals to deregulate or change the laws or standards
for the provision of marine terminal or stevedoring services in
Japanese ports, and the likely effects of such changes on your
business operations.
4. (For response by APL and Sea-Land only.) Does your company
have plans to begin performing or offering port harbor
transportation services in Japan in the forseeable future? If so,
describe: the planned
[[Page 30248]]
operations in detail; any attempts to obtain a license to operate a
harbor services business, including any communications your company
has had with any MOT officials regarding the issuance of licenses;
and any communications your company has had in Japan with JHTA,
other steamship or harbor services companies, and any other
waterfront organization, regarding your company's plans to offer
harbor transportation services in Japan or efforts to obtain
licenses to do so.
5. Describe any new or further restrictions or requirements
placed on your company regarding the use or operation of terminals
or harbor services.
List of Subjects in 46 CFR Part 551
Maritime Carriers.
For the reasons set out in the preamble, the Commission amends 46
CFR part 551 as follows:
PART 551--ACTIONS TO ADJUST OR MEET CONDITIONS UNFAVORABLE TO
SHIPPING IN THE U.S. FOREIGN TRADE
1. The authority citation for part 551 continues to read as
follows:
Authority: 46 U.S.C. app. 876(1)(b); 46 U.S.C. app. 876(5)
through (12); 46 CFR part 550; Reorganization Plan No. 7 of 1961, 26
FR 7315 (August 12, 1961).
Sec. 551.2 [Removed]
2. Remove Sec. 551.2.
By the Commission.
Bryant L. VanBrakle,
Secretary.
[FR Doc. 99-14257 Filed 6-4-99; 8:45 am]
BILLING CODE 6730-01-U