[Federal Register Volume 63, Number 161 (Thursday, August 20, 1998)]
[Notices]
[Pages 44621-44623]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-22355]
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FEDERAL MARITIME COMMISSION
[Docket No. 98-15]
Hual As--Service Contracts And Time-Volume Rate Arrangements With
Ocean Freight Forwarders; Order Of Investigation and Hearing
HUAL AS (``HUAL''), formerly known as Hoegh-Ugland Auto Liners A/S,
is an ocean common carrier which operates vessels in the trade between
the United States and Europe and is engaged in the ocean transportation
of automobiles and boats from the United States. HUAL is a Norwegian
company located at Dronningensgt. 40, Oslo 1, Norway. It currently
maintains several tariffs at the Commission, and its Automated Tariff
Filing and Information System (``ATFI'') organization number is
015120.1 According to HUAL's Internet site, HUAL's main
branch office in the United States is HUAL North America Inc., The
Jericho Atrium, 500 North Broadway, Suite 259, Jericho, NY
11753.2
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\1\ This organization record was filed in ATFI on October 22,
1997. HUAL's predecessor, Hoegh-Ugland Auto Liners A/S, had ATFI
organization number 001444, and it maintained tariffs between June
1994 and October 1997.
\2\ HUAL has additional branch offices in Baltimore, MD;
Chicago, IL; and Jacksonville, FL. In addition to its branch
offices, HUAL has a booking agent in the United States: Palmetto
Ship Agencies, Inc. in Charleston, SC. See HUAL's Internet site--
http:/www.hual.no/hual.
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In 1997 HUAL entered into at least four service contracts with
ocean freight forwarders where none of the actual shippers were
identified. These service contracts provided for shipments of vehicles
and boats from United States ports to European ports. It appears that
there are common elements of these four service contracts and of the
shipments made thereunder, including:
1. The service contract identified the freight forwarder as
``shipper/freight forwarder'' or ``shipper.''
2. There was no shipper certification in the service contract.
3. The service contract contained a provision which stated,
``Carrier will pay freight forwarders commission of 5% on base ocean
freight only to licensed freight forwarder if services, as stipulated
by F.M.C. regulations, are provided whether or not freight forwarder is
contract signatory.''
4. The service contract was filed at the Commission.
5. The essential terms for the service contract did not contain the
service contract's provision about freight forwarder commission.
6. For the shipments that moved under the contract, the freight
forwarder identified itself for the ocean common carrier's bills of
lading as the freight forwarder.
7. For the shipments that moved under the contract, the freight
forwarder did not identify itself for the ocean common carrier's bills
of lading as the shipper.
8. The freight forwarder collected freight forwarder compensation
on the shipments that moved under the service contract.
9. There is no evidence that the freight forwarder certified to
HUAL that it performed the freight forwarding services.
A review of service contracts indicates that HUAL may have been signing
service contracts with freight forwarders since May 1993.3
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\3\ For service contracts signed before October 1997, HUAL was
known as Hoegh-Ugland Auto Liners A/S.
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The 1984 Act defines a shipper as the ``owner or person for whose
account the ocean transportation of cargo is provided or the person to
whom delivery is to be made.'' Only shippers or shippers' associations
may enter into a service contract in accordance with section 8(c) of
the 1984 Act. Therefore, unless a company can be defined as a shipper,
it cannot enter into a service contract.
As defined by the 1984 Act, a freight forwarder dispatches cargo
from the United States on behalf of the owner or person for whose
account the ocean transportation of cargo is provided or the person to
whom delivery is to be made. Because a freight forwarder is an agent of
the shipper and not the shipper, the statute would not appear to permit
[[Page 44622]]
a freight forwarder to enter into service contracts on its
own.4 Rather, it appears that a forwarder can only sign
service contracts on behalf of a disclosed shipper where the shipper is
the principal entering into the contract.
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\4\ The Commission is aware of the contrary views on this matter
of some in the industry. This proceeding should provide an
appropriate forum for the adjudication of this issue.
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None of the shippers who were listed in the shipper identification
box on HUAL's bills of lading, were signatories to the HUAL service
contracts nor were they affiliates of the service contract signatories.
However, HUAL seems to have allowed these shippers to obtain the
service contract rates for their shipments.
By entering into service contracts with freight forwarders, HUAL
apparently allowed freight forwarders and shippers to obtain
transportation for property at less than the rates or charges
established in HUAL's tariff or service contracts by an unlawful means
in violation of section 10(b)(4) of the 1984 Act. Furthermore, HUAL
seems to have charged, demanded, collected or received less
compensation than the rates or charges that would otherwise be
applicable for the service contract shipments in violation of section
10(b)(1) of the 1984 Act.
In addition to entering into service contracts with freight
forwarders, HUAL also appears to have allowed freight forwarders to
enroll in HUAL's time-volume rates (``TVR'').5 Currently,
HUAL maintains in its tariff a TVR (ATFI Tariff No. 015120-004, Tariff
Rule 26, Sub-rule 09, TVR No. 3698) which states:
\5\ A freight forwarder can give notice to a common carrier of a
disclosed shipper's decision to enroll in a TVR.
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The name of the enrollee shall appear on the Bill of Lading as
the Shipper, Consignee, or Forwarder in order that cargo represented
by the Bill of Lading be credited under this offering. There shall
be only one shipper, one consignee, one port of loading and one port
of discharge per Bill of Lading. * * * Enrollees desiring to ship
cargo under this offering should notify the Carrier in writing using
the form specified at the end of this offer. No cargo shipped by
enrollee will qualify for this offer until the Carrier has received
enrolee's [sic] enrollment form The [sic] The enrollment must be in
the name of the Shipper or Consignee making the application.
The 1984 Act defines a TVR as a tariff rate which will ``vary with
the volume of cargo offered over a specified period of time.'' 46 USC
app. 1707(b). A freight forwarder does not have cargo of its own which
it can commit to a common carrier, and for the reasons discussed above,
the statute would not appear to permit a freight forwarder to enroll in
TVRs on its own account. Furthermore, it appears that some shippers who
received HUAL's TVRs were not enrolled or gave no notice to HUAL of
their intention to enroll in the TVRs, as required by the Commission's
regulations at 46 CFR 514.13(b)(19)(I)(D). Thus, by permitting freight
forwarders to enroll in TVRs, HUAL may have allowed freight forwarders
and shippers to obtain transportation for property at less than the
rates or charges established in HUAL's tariff or service contracts by
an unlawful means in violation of section 10(b)(4) of the 1984 Act. In
addition, HUAL also seems to have charged, demanded, collected or
received less compensation than the rates or charges that would
otherwise be applicable for the TVR shipments in violation of section
10(b)(1) of the 1984 Act.
It appears that HUAL has paid freight forwarder compensation to
forwarders for service contract shipments since at least March 1995.
HUAL also may have paid freight forwarder compensation to the freight
forwarders for the shipments that moved under its TVRs. Section
19(d)(1) of the 1984 Act sets forth certain conditions under which a
common carrier can pay freight forwarder compensation on a shipment.
One condition is that the shipment must be dispatched by the freight
forwarder ``on behalf of others.'' Another condition is that the
freight forwarder must certify to the carrier as to the forwarding
services that it performed. While it appears that the freight
forwarders dispatched the HUAL service contract and TVR shipments on
behalf of others, there is no evidence that certifications of freight
forwarding services were provided to HUAL regarding the shipments.
Therefore, HUAL may have violated section 19(d)(1) in paying
compensation to these forwarders without obtaining any freight
forwarder certifications.
Section 19(d)(4) prohibits a common carrier from knowingly paying
forwarder compensation to a freight forwarder which has a beneficial
interest in a shipment. Beneficial interest is defined in the
Commission's regulations at 46 CFR 510.2(b) as:
a lien or interest in or right to use, enjoy, profit, benefit, or
receive any advantage, either proprietary or financial, from the
whole or any part of a shipment of cargo where such interest arises
from the financing of the shipment or by operation of law, or by
agreement, express or implied.
HUAL's service contracts and TVRs gave the signatory freight forwarders
various benefits and advantages with respect to the shipments that took
place under these agreements. Since the freight forwarders obtained the
benefits and advantages by means of the HUAL agreements, they may have
had beneficial interests in the shipments.6 Furthermore,
HUAL appears to have facilitated the beneficial interests of the
freight forwarders through the provision of service contracts and TVRs
to the freight forwarders. Therefore, HUAL should have known whether
the freight forwarders had beneficial interests in the shipments. Thus,
HUAL may have knowingly paid freight forwarder compensation on TVR and
service contract shipments to freight forwarders which had beneficial
interests in the shipments in apparent violation of section 19(d)(4) of
the 1984 Act.
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\6\ The beneficial interest appears to be the benefits resulting
to the forwarders from HUAL providing the forwarders discounted
service contract and TVR rates which only are available to shippers
if they use those forwarders for their cargo. The beneficial
interest does not arise out of any arrangements between the
forwarders and shippers.
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The Commission's regulations at 46 CFR 514.4(d)(5)(i)(A) and 46 CFR
514.17(a)(1), require a common carrier to file at the Commission the
essential terms of service contracts so that the terms of the service
contracts are available to the general public, which includes shippers
who may want ``me-too'' service contracts. The Commission's regulation
at 46 CFR 514.17(d)(7)(vi), imposes a mandatory obligation to file in
Essential Term No. 6 ``any and all conditions and terms of service or
operation or concessions which in any way affect such rates or
charges.'' In its essential terms, HUAL did not file the service
contract provision that the ``Carrier will pay freight forwarders
commission of 5% on base ocean freight only to licensed freight
forwarder if services, as stipulated by F.M.C. regulations, are
provided whether or not freight forwarder is contract signatory.'' A 5%
commission paid to a service contract signatory is a concession which
affects the rates or charges in the service contracts. Therefore, by
failing to file the complete essential terms as mandated by the
Commission's regulations, HUAL may have violated the Commission's
regulations at 46 CFR 514.4(d)(5)(i)(A), 46 CFR 514.17(a)(1), and 46
CFR 514.17(d)(7)(vi).
The Commission's regulation at 46 CFR 514.7(e)(1), requires the
shipper signatory to a service contract to certify its shipper status
on the signature page of the contract. The Commission's regulation at
46 CFR 514.4(d)(5)(i)(A), requires the carrier signatory to file the
service contract with the Commission. HUAL apparently did not include
the
[[Page 44623]]
information for shipper certification on the signature pages of its
service contracts; as a result, none of the freight forwarders who
entered into service contracts with HUAL certified their shipper status
in the contracts. Thereafter, HUAL filed these service contracts at the
Commission. Thus, HUAL appears to have failed to file complete service
contracts at the Commission in violation of the Commission's
regulations at 46 CFR 514.4(d)(5)(i)(A).
Now therefore it is ordered, That pursuant to sections 3, 8, 10,
11, 13 and 19 of the 1984 Act, 46 U.S.C. app. 1702, 1707, 1709, 1710,
1712 and 1718, and 46 CFR Part 514, an investigation is hereby
instituted to determine:
(1) Whether HUAL violated section 10(b)(1) of the 1984 Act by
charging, demanding, collecting or receiving less compensation for the
transportation of property than the rates or charges that are set forth
in its tariffs;
(2) Whether HUAL violated section 10(b)(4) of the 1984 Act by
allowing freight forwarders and shippers to obtain transportation for
property at less than the rates or charges established in HUAL's
tariffs by an unjust or unfair device or means;
(3) Whether HUAL violated section 19(d)(1) of the 1984 Act by
paying freight forwarder compensation on shipments without obtaining
certifications from the freight forwarders;
(4) Whether HUAL violated section 19(d)(4) of the 1984 Act by
paying freight forwarder compensation on shipments to freight
forwarders who had beneficial interests in the shipments;
(5) Whether HUAL violated 46 CFR 514.17(d)(7)(vi), 46 CFR
514.4(d)(5)(i)(A) and 46 CFR 514.17(a)(1), by failing to file complete
essential terms for its service contracts;
(6) Whether HUAL violated 46 CFR 514.4(d)(5)(i)(A) by failing to
file complete service contracts at the Commission;
(7) Whether, in the event HUAL violated sections 10(b)(1),
10(b)(4), 19(d)(1) or 19(d)(4) of the 1984 Act or the Commission's
regulations at 46 CFR 514.4(d)(5)(i)(A), 46 CFR 514.17(a)(1), or 46 CFR
514.17(d)(7)(vi), civil penalties should be assessed and, if so, the
amount of such penalties;
(8) Whether, in the event HUAL violated sections 10(b)(1) or
10(b)(4) of the 1984 Act, the tariff of HUAL should be suspended for a
period not to exceed 12 months; and
(9) Whether, in the event HUAL violated sections 10(b)(1),
10(b)(4), 19(d)(1) or 19(d)(4) of the 1984 Act or the Commission's
regulations at 46 CFR 514.4(d)(5)(i)(A), 46 CFR 514.17(a)(1), or 46 CFR
514.17(d)(7)(vi), an appropriate cease and desist order should be
issued against HUAL.
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 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 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 HUAL 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 August 13, 1999, and
the final decision of the Commission shall be issued by December 13,
1999.
By the Commission.
Joseph C. Polking,
Secretary.
[FR Doc. 98-22355 Filed 8-19-98; 8:45 am]
BILLING CODE 6730-01-P
