[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