[Federal Register Volume 64, Number 14 (Friday, January 22, 1999)]
[Notices]
[Pages 3516-3518]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-1389]
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FEDERAL MARITIME COMMISSION
[Docket No. 99-01]
Direct Container Line Inc. Possible Violations of Sections
10(a)(1) and 10(b)(1) of the Shipping Act of 1984
Order of Investigation and Hearing
Respondent Direct Container Line Inc. (``DCL'') is a tariffed and
bonded non-vessel-operating common carrier (``NVOCC'') based in Carson,
California. DCL holds out to furnish transportation services worldwide,
including NVOCC services, inter alia, from ports and points in the
United States to the Far East. According to DCL's webpage, DCL operates
13 offices and 25 receiving terminals in the United States and Canada,
with branches or subsidiaries in 86 countries worldwide. DCL claims to
have over 500 employees, with over 350 based in the United States.
Through interviews and on-site examination of shipping records
maintained in DCL's offices in Carson, CA and Carteret, NJ, an
investigation was commenced into the possible involvement of DCL in
equipment substitution malpractices involving OOCL and Maersk Line on
consolidated shipments to the Far East. In all, records were reviewed
of nearly one hundred shipments in which provisions of the Transpacific
Westbound Rate Agreement (``TWRA'') equipment substitution rules were
invoked for the purpose of providing DCL with 45' containers while
charging DCL those service contract rates applicable to 40' equipment.
In practice, it appears that DCL met the requirements of TWRA's
equipment substitution rules by misdeclaring the cargo measurements at
65 CBM or less, equivalent to the ordinary capacity utilization of a 40
foot high cube container under TWRA rules. It further appears that
cargo weights also were misdeclared on the master bill of lading so as
to understate the actual weights to a figure less than 21 metric tons
(21,000KG), the maximum weight
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permitted under TWRA Rule 2(G)(5).\1\ The container manifest furnished
by DCL to the ocean common carrier on consolidated shipments reflected
measurements and weights consistent with those shown on the ocean
common carrier's master bill of lading. DCL's charges to its own NVOCC
customers, meanwhile, were calculated on the basis of the higher
measurements and weights shown only on DCL's internal manifests. The
house bills of lading issued by DCL to its shippers likewise reflect
DCL's reliance upon the higher measurements and weights.
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\1\ Rule 2(G)(5) provides, inter alia:
Carrier may, at its option, substitute a type of equipment other
than that which was booked or ordered by the shipper or its agent,
subject to the following conditions:
* * * * *
2. A 45' container may be substituted for a 40' container,
subject to a maximum of 65 CBM and 21KT, at a rate and charges
applicable to a 40' container.
When cargo is loaded in excess of the above quantities, the
applicable revenue ton or per container rate for a 45' container
will apply.
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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 (3d Cir., 1932). In the case
of equipment substitution violations, it appears that DCL affirmatively
sought the application of the equipment substitution rule to its own
freight rate advantage, and did so without regard for the ocean common
carrier's equipment substitution rule or the implication of DCL's
misdeclaration of shipment weights and measurements.
In the course of its investigation, BOE sought also to examine
DCL's rating of cargoes under the provisions of its NVOCC tariff. In
examining copies of rated house bills of lading for these same
shipments, it appears that DCL has in many instances applied LCL rates
which are higher than those on file in DCL's tariff. Pertinent examples
are rates for dry cell batteries, machines NOS and textiles, in which
the rates charged by DCL exceed the tariff by varying amounts.\2\ DCL's
actions do not appear to meet the ``reasonable diligence'' standard
required of carriers in satisfying their obligations under the
statute.\3\ Rates From Japan to United States, 2 USMC 426, 434 (1940);
Rates from United States to Philippine Islands, 2 USMC 535, 542 (1941).
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\2\ The range of variance in rates appears substantial. On one
shipment to Hong Kong, DCL's rate for dry cell batteries was $55 per
CBM, while its tariff rate was $50/CBM; for textiles (synthetic
fabrics), the rate charged by DCL was $100 per CBM (DCL's tariff
rate was $70/CBM); for laundry machines DCL collected $95 per CBM
(versus $51/CBM under DCL's tariff).
\3\ In 1994, DCL entered into a compromise agreement with the
Commission, resolving allegations of violations on section 10(b)(1)
for failure to assess the rates set forth in its tariff with respect
to shipments in the South American Trades. As part of its agreement,
DCL represented that it had implemented measures to eliminate such
practices by DCL.
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Section 10(a)(1) of the 1984 Act, 46 U.S.C. app. Sec. 1709(a)(1),
prohibits 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 or attempt to obtain
ocean transportation for property at less than the rates or charges
that would otherwise be applicable. 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. 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.\4\ Section 13 and
section 23, 46 U.S.C. app. Sec. 1721, further provide that a common
carrier's tariffs may be suspended for violations of sections 10(a)(1)
or 10(b)(1) for a period not to exceed one year.
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\4\ These penalties are increased 10 percent for any violations
occurring after November 7, 1996. See Inflation Adjustment of Civil
Penalties, 61 FR 52704 (October 8, 1996).
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Now therefore, it is ordered, That pursuant to sections 10, 11, 13
and 23 of the 1984 Act, 46 U.S.C. app Secs. 1709, 1710, 1712 and 1721,
an investigation is instituted to determine:
(1) whether Direct Container Line Inc. Violated Section 10(b)(1) of
the 1984 Act by obtaining or attempting obtain transportation at less
than the rates and charges otherwise applicable by an unjust or unfair
device or means;
(2) whether Direct Container Line Inc. violated section 10(b)(1) of
the 1984 Act by charging, demanding, collecting or receiving greater,
less or different compensation for the transportation of property than
the rates and charges shown in its tariff.
(3) whether, in the event violations of sections 10 (a)(1) and
10(b)(1) of the 1984 Act are found, civil penalties should be assessed
against Direct Container line and, if so, the amount of penalties to be
assessed;
(4) whether, in the event violations of sections 10(a)(1) and
10(b)(1) of the 1984 Act are found, the tariff of Direct Container Line
should be suspended;
(5) 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 Commissions
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 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 Direct Container Line Inc. is
designated a 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 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 notices of the time and place of hear 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, DC 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 January 18, 2000 and
the final
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decision of the Commission shall be issued by May 17, 2000.
Bryant L. VanBrakle,
Secretary.
[FR Doc. 99-1389 Filed 1-21-99; 8:45 am]
BILLING CODE 6730-01-M
