FMC enters settlement agreement with transpacific carriers
The U.S. Federal Maritime Commission entered into a settlement agreement in its fact-finding investigation into the practices of the Transpacific Stabilization Agreement liner carriers during the 2002-2003 service contract season.
The investigation was initiated by the agency after receiving a joint petition from the National Customs Brokers and Forwarders Association of America and International Association of NVOCCs, which alleged service contract abuses against non-vessel-operating common carriers by the TSA members. The FMC initiated its investigation in August 2002.
FMC Chairman Stephen Blust said in a statement: “the settlement agreement resolves the concerns unearthed in the fact finding investigation in an efficient manner with the greatest possible benefit to the trade.”
The commission believes the settlement agreement would improve competitive conditions in the transpacific trades. “These changes otherwise could have been achieved only through lengthy commission-initiated FMC proceedings or litigation before the U.S. District Court for the District of Columbia,” the commission said.
The settlement agreement requires the liner carriers to refrain from certain practices involving discussion and agreement on rates and negotiations of service contract terms, especially those involving NVOs, such as unequal timing of negotiations and unequal application of general rate increases and surcharges.
The FMC said the settlement “secures important structural changes” in TSA. These changes include:
* Removing authority to discuss or agree on capacity rationalization, and providing that TSA members will refrain from filing any other agreement to discuss or agree upon capacity rationalization for three years.
* Prohibiting the exchange of shipper-specific information relating to individual service contracts.
* Limiting discussions of rates or capacity to meetings for which minutes are filed with the commission.
Also, the TSA must drop bridging agreements authorizing discussions with the Indamex Agreement, a conference operating in the Indian Subcontinent trade, and eliminate the geographic scope of the trade from its coverage.
The settlement includes a payment of $1.35 million in lieu of civil penalties that could have been pursued through litigation. The penalty settlement addresses practices involving alleged Shipping Act section 10 and regulatory violations.
The settlement’s provision also calls for semi-annual meetings of TSA and commission representatives with the purpose of conducting additional oversight of the agreement actions.
“Moreover, as a matter of deterrence, I believe the structural changes in TSA achieved through the settlement are a more immediate and effective means than penalties or enforcement proceedings to assure that such practices will not occur,” Blust said.
TSA officials said they “fully cooperated” with the FMC investigation, led by Commissioner Joseph Brennan, by producing “tens of thousands of pages of documents” for review. TSA management and liner members also provide oral testimony.
TSA officials still maintain they did nothing unlawful. “The carriers and distractions of this investigation made a settlement desirable,’ said Albert A. Pierce Jr., executive director for the San Francisco-based TSA. “The carriers are glad to put this matter behind them and again devote full attention and resources to meeting customers’ transportation and logistics needs in the transpacific market.”