[Federal Register Volume 66, Number 158 (Wednesday, August 15, 2001)]
[Notices]
[Pages 42859-42862]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-20554]


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FEDERAL MARITIME COMMISSION

[Docket No. 96-20]


Port Restrictions and Requirements in the United States/Japan 
Trade

AGENCY: Federal Maritime Commission.

ACTION: Requirement for reporting revised.

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SUMMARY: The Federal Maritime Commission is revising its requirement 
that certain ocean common carriers in the U.S.-Japan trade report on 
the status of efforts to reform conditions unfavorable to shipping in 
the U.S.-Japan trade. Areas for reporting include effects of recent 
changes in Japanese laws and ordinances; continued application of the 
``prior consultation'' system for pre-approving carriers' service 
changes in Japan; and entry of new entities into Japan's harbor 
services market.

DATES: Reports due by November 7, 2001, 90 days from the date of 
service of this Order and every 180 days thereafter.

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, DC 
20573; (202) 523-5725.

FOR FURTHER INFORMATION CONTACT: David R. Miles, Acting General 
Counsel, Federal Maritime Commission, 800 North Capitol Street, NW., 
Washington, DC 20573; (202) 523-5740.

SUPPLEMENTARY INFORMATION:   

Background

1997 Final Rule

    Following an extensive investigation, the Commission on February 
26, 1997 issued a final rule in this docket finding unfavorable 
conditions facing U.S. ocean shipping interests in Japanese ports and 
imposed sanctions in the form of $100,000 per voyage fees on three 
Japanese ocean common carriers entering United States ports. The rule 
took effect on September 4, 1997, but was 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 February 1997 final rule identified a number of conditions 
unfavorable to shipping warranting action under section 19 of the 
Merchant Marine Act, 1920, 46 U.S.C. app. sec. 876:
     Ocean common carriers in the Japan-U.S. trades could not 
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, the 
Japanese Ministry of Transportation (``MOT'').\1\
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    \1\ As part of a reorganization, the functions formerly 
performed by the Ministry of Transport were transferred to the new 
Ministry of Land, Infrastructure and Transport (``MLIT'') at the 
beginning of 2001.
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     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 
under prior consultation, nor were there written explanations given for 
the decisions.
     JHTA threatened to use, and did use, its prior 
consultation authority to punish its detractors and to disrupt their 
business operations.
     JHTA used its prior consultation authority to extract fees 
and impose operational restrictions, such as limits on Sunday work.
     JHTA used its prior consultation authority to allocate 
work among its members, by barring carriers and consortia from freely 
choosing stevedores and terminal operators and by compelling carriers 
to hire additional, unneeded stevedores or contractors.
     MOT administered a licensing standard which blocked new 
entrants from the stevedoring industry in Japan, protected JHTA's 
dominant position, and ensured that the stevedoring market remained 
entirely Japanese.
     Because of the restrictive licensing requirements, U.S. 
carriers could not perform stevedoring or terminal operating services 
for themselves or for 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 reaffirmation 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 its transparency, and provide for dispute settlement 
procedures which would include a role for MOT or an MOT-chaired 
committee;
     A commitment by the GOJ and carrier groups to establish 
and implement an alternative to the prior consultation system under 
which carriers intending to implement operational changes would confer 
with their terminal operators (who, in turn, would consult with labor 
unions, directly or through a collective bargaining agent as may be 
required by applicable collective bargaining agreements);
     Commitments that prior consultation would 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; and
     A commitment by the GOJ that it would use its authority to 
prevent the unjustifiable denial of essential services, ensure the 
smooth operation of the port

[[Page 42860]]

transportation business and the improvement of port efficiency, and 
ensure that operation of the alternative prior consultation process 
would be free from outside interference, harassment, or retaliation.
    The comprehensive settlement reached in this proceeding was 
reflected in an exchange of letters between the Japanese Ambassador and 
the U.S. Secretary of State. In those letters, the GOJ confirmed its 
``commitment * * * to guide all the signatories to the attachments [the 
Three-Party and Four-Party Agreements] in securing their faithful, 
effective and timely implementation of these reforms.'' In addition to 
the undertakings concerning the approval and issuance of licenses for 
port transportation businesses, the GOJ committed to ``exert its 
maximum effort to prevent the unjustifiable denial of services 
essential to the conduct of any licensed activities.'' The letter also 
pledged that ``[p]rior consultation shall not be used as a means to 
approve carriers'' business plans or strategies, allocate business 
among port transportation business operators, restrict competition or 
infringe on the carriers' freedom to select port transport business 
operators.'' The GOJ also ``reiterate[d] its commitment to enforce the 
Labor Relations Adjustment Law, and further emphasize[d] that the 
parties concerned with labor disputes can use mediation, reconciliation 
and arbitration as provided for in that law to maintain order in the 
provision of port transportation services.''

1999 Withdrawal of Final Rule and Imposition of Reporting Requirements

    The Commission noted in May, 1999 that the pace of progress and 
reform in Japan's port transportation sector had been slow, despite the 
commitments of the GOJ to market opening and increased accountability. 
Port Restrictions and Requirements in the United States/Japan Trade, 28 
S.R.R. 822 (FMC, 1999), 64 FR 30245 (June 7, 1999). It was reported 
that no foreign carriers had applied for or received licenses to 
operate their own terminals; no carrier had invoked or tested the prior 
consultation dispute settlement procedures or other procedural 
safeguards that were agreed to; and no alternative to the prior 
consultation system had been developed. Among the reasons noted by the 
Commission for the lack of substantial change at that time was the 
strong opposition to change by Japanese labor unions. This opposition 
included threats of work stoppages communicated to foreign lines which 
hoped to establish their own terminal operations. The Commission also 
noted that GOJ regulatory requirements, including ``close ties'' 
(through equity exchange or long-term contracts) with subcontractors, 
made launching a terminal venture even more difficult. Furthermore, the 
Commission found that economic factors in Japan were negatively 
affecting the attractiveness of carrier investment in Japan's high-cost 
ports.
    The Commission expressed dissatisfaction with the status of port 
conditions facing the Japan/U.S. trade, including the high costs 
inefficient Japanese waterfront practices imposed on U.S. trade and 
carriers, and suggested further steps that the GOJ appropriately could 
take to ensure that its market-opening commitments were fulfilled. With 
regard to licensing, these included the elimination or liberalization 
of regulatory requirements that make entry more difficult, such as the 
close-ties test and regulatory minimum manning requirements. In order 
to make the success of any new entrants possible, the Commission 
suggested that MLIT and other GOJ authorities must also ensure that 
there would be no illegal boycotts of new entrants to the market, and 
must act to prevent unlawful threats or harassment.
    Finally, the Commission stated that it would monitor regulatory 
changes then under consideration by the GOJ. Those proposals, 
propounded in the December 1998 Interim Report of Japan's Transport 
Policy Council Harbor Transport Subcommittee, included the elimination 
of the supply/demand test for licensing port business operators (i.e., 
the requirement that new entrants for a license demonstrate that the 
supply of port transportation services would not exceed current demand) 
and the regulatory approval of harbor companies' fees and charges. The 
Commission noted that these might be positive steps, but suggested that 
a plan limited to these measures was not likely to remedy current 
inefficiencies and obstacles in Japan's ports, or ensure an open and 
competitive market for terminal and stevedoring services. Drawbacks to 
the deregulatory plan included retaining the economically burdensome 
requirements that terminal operators: (1) Perform at least 70% of their 
services themselves; (2) maintain ``close-tie'' relationships with 
subcontractors; and (3) meet regulatory minimum manning standards.
    Although it pointed out these negative developments, the Commission 
also suggested that the reasons for the lack of progress were unclear 
and determined that further information to update the record was 
necessary. In order to effectively evaluate whether the unfavorable 
conditions identified in the final rule continue to exist, and if they 
do exist, the extent to which their continued existence arises out of 
or results from laws, rules, or regulations of the GOJ, the Commission 
withdrew the final rule and required the U.S. and Japanese carriers to 
file periodic reports.

Port Transportation Business Law Amendments

    The Commission has continued to follow with interest developments 
relating to these issues. The port deregulation measures resulting from 
the Transport Policy Council Harbor Transport Subcommittee's Final 
Report were embodied in amendments to the Port Transportation Business 
Law enacted on May 10, 2000. The amended law and related ordinances 
became effective in November, 2000.
    The amendments replaced the licensing for a general port 
transportation business with ``permission'' (Article 22-2) and 
abolished the supply and demand requirement. The law as amended: (1) 
Requires that applicants for permission provide a ``business plan'' 
appropriate for executing business activities (including demonstrating 
adequate funding) (Article 5); (2) continues the requirements for 
``close ties'' to subcontractors; and (3) increases the minimum manning 
standards to 150 percent of the old standard. The requirement that 
tariffs and fees for port transportation services be approved by MLIT 
was replaced with a filing requirement. However, MLIT may order changes 
in the tariffs and fees as filed within a specified period of time. The 
revised law also permits shipping lines to own their terminal operating 
equipment. Additional changes affecting carrier operations in Japanese 
ports have reportedly occurred in the availability of Sunday and 
extended working hours at Japanese ports as a result of labor 
agreements concluded earlier this year.

Discussion

    The reports received from carriers following the withdrawal of the 
final rule in May, 1999 suggest that the situation with respect to the 
issues raised in this proceeding had not changed materially. The 
amendments appear to have done little to address the substantial 
obstacles to proprietary carrier terminal operations affecting carriers 
in Japan. For example, the revised law does not address ``close tie'' 
requirements, the role of JHTA, or the prior consultation system, and, 
in a move backwards, it actually increases

[[Page 42861]]

the minimum manning requirements for new business entrants.
    These issues were raised by the Acting Maritime Administrator in a 
letter to MOT in September, 2000. In response, the Director-General of 
the Maritime Transport Bureau wrote that ``[w]e are actively making 
efforts to improve the prior consultation system.'' He also reported 
that detailed procedures for implementation of the amended Port 
Transportation Business Law had been published for public comments in a 
cabinet order issued in May, 2000 and a ministerial ordinance issued in 
July, 2000. These interpretive guidelines appear to have been the 
subject of some controversy, and were reportedly significantly revised 
before their issuance in response to Japanese labor unions' opposition 
to the possibility they raised of increased competition in port 
services.\2\
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    \2\ ``Labor Reads Riot Act to Transport Ministry Over New 
Ordinances,'' Shipping and Trade News, September 27, 2000 at 1; 
``Port Labor Prepared to Strike Over Anti-Dumping Ordinances,'' 
Shipping and Trade News, October 12, 2000 at 1; ``Labor Ready to 
Strike 12 Major Ports,'' Shipping and Trade News, October 18, 2000 
at 1; ``MOT Amends Ordinances for Revised Port Law (October 24, 
2000),'' Cyber Shipping Guide; and ``Agreement on Port Law Revision 
Averts Strikes,'' Shipping and Trade News, October 24, 2000 at 1. 
The provisions as originally proposed were reportedly objected to by 
JHTA as well as the Council of Japanese Dockworkers Unions (Zenkoku 
Kowan).
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    Press reports of recent events, as well as the reports in this 
proceeding, indicate that progress has been minimal and, with respect 
to some issues, negative. Reports published since the revised law 
became effective do not suggest that it has resulted in the entry of 
new competitors in the port transportation business. To the contrary, 
such reports suggest that the obstacles to firms contemplating new 
types of service or service to additional ports, including those 
created by labor opposition, remain formidable.\3\
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    \3\ For example, three companies which applied for licenses to 
serve the port of Shimizu reportedly withdrew their applications 
following the filing of a notice of opposition by Zenkoku Kowan. 
``Japan's Ports Are Feeling the Deregulation Pressure,'' 
International Transport Journal, March 23, 2001. Plans by the port 
of Kitakyushu for private construction and operation of a major new 
container terminal (Hibiki Box Terminal) with the support of MLIT, 
and its stated goal to operate at low cost, 24 hours a day, 365 days 
a year, have faced similar opposition from established firms and 
labor organizations. ``Japanese Port Bids to Break Unions,'' 
Fairplay International Shipping Weekly, September 7, 2000; 
``Terminal Operators Scramble to Build Private Container Port in 
Japan,'' Journal of Commerce Online, August 21, 2000; ``Seven Bid 
For Test-case Port,'' Fairplay Daily News, August 25, 2000; 
``Kamigumi, Nittsu Withdraw From Hibiki Box Terminal Project,'' 
Shipping and Trade News, April 9, 2001 at 1; ``Future of Kitakyushu 
Terminal Remains Unclear,'' Containerisation International, May 2001 
at 33.
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    The Commission is concerned that, despite the length of time which 
has passed, carriers' opportunities to perform port services for 
themselves or other carriers or to benefit from increased competition 
in port services have not materialized. As previously noted, in some 
respects, the laws and regulations affecting these issues appear to 
have become more, rather than less, onerous. Therefore, the Commission 
remains concerned that the amelioration of the unfavorable conditions 
found in this proceeding, which was anticipated as a result of the 
agreements reached in November 1997, has not occurred.
    In light of the recent legislative and ministerial enactments, the 
Commission has concluded that once again it is necessary to gather 
further information and to update the record in this proceeding. The 
carriers named in the Commission's Order of May 28, 1999, have 
continued to file the reports required by that Order. The most recently 
filed responses were filed only three months after the revisions to the 
Port Transportation Business Law became effective. The next report is 
presently due to be filed on August 20, 2001. However, we find that the 
questions posed in the May 28, 1999 Order may no longer be as precise 
as we would wish in light of the current conditions, laws and 
ordinances affecting port practices in Japan.\4\ Therefore, we hereby 
amend the reporting requirements established in the Commission's May 
28, 1999 Order. In addition, while it appears that the GOJ has issued 
ministerial guidelines or ordinances implementing or interpreting the 
revised Port Transportation Business Act, the Commission has not had an 
opportunity to review these documents. We are therefore requiring the 
three Japanese carriers to provide such documents.
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    \4\ In addition, the Commission is concerned that limitation of 
the reporting requirements to the five originally-named carriers in 
this proceeding may not sufficiently reflect the impact of those 
conditions on shipping in the U.S./Japan trade generally. Therefore, 
by a separate order, the Commission is directing all of the carriers 
who have substantial operations in the U.S./Japan trade to respond 
to a limited number of questions concerning the conditions affecting 
their operations at major ports in Japan.
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    Therefore, It Is Ordered, That Kawasaki Kisen Kaisha, Ltd., Mitsui 
O.S.K. Lines, Ltd., and Nippon Yusen Kaisha, Ltd. file, collectively or 
individually, copies of any cabinet order or ministerial ordinances, 
notifications, notices, or regulations issued by the Japanese Ministry 
of Transportation (``MOT'') or the Ministry of Land, Infrastructure and 
Transport (``MLIT'') implementing or interpreting the revised Port 
Transportation Business Act with the Commission by November 7, 2001, 90 
days from the date of service of this Order; \5\ and
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    \5\ Any document in a language other than English shall be 
accompanied by an English translation. For the purposes of this 
Order, the term ``document(s)'' refers to written, printed, typed, 
or visually or aurally reproduced material of any kind, including 
(but not limited to) all copies of any and all letters, 
correspondence, recommendations, contracts, agreements, orders, 
records, minutes, reports, press releases, plans, manuals, lists, 
memos, instructions, notes, notices, confirmations, inter-office or 
electronic mail, faxes, cables, notations, summaries, opinions, 
studies, surveys, or memoranda of any conversations, telephone 
calls, meetings, or other communications.
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    It Is Further Ordered, That the requirement for the submission of 
reports contained in the Commission's Order of May 28, 1999, Port 
Restrictions and Requirements in the United States/Japan Trade, 28 
S.R.R. 822 (FMC, 1999), 64 FR 30245 (June 7, 1999), is rescinded;
    It Is Further Ordered, That the following parties are ordered to 
file reports with the Commission by November 7, 2001, 90 days from the 
date of service of this Order, and every 180 days thereafter: American 
President Lines, Ltd.; A.P. Moller Maersk Sea-Land; Kawasaki Kisen 
Kaisha, Ltd.; Mitsui O.S.K. Lines, Ltd.; and Nippon Yusen Kaisha. These 
reports should address the following:
    1. (For initial reports due in 90 days only). Describe any new or 
further restrictions or requirements placed on your company regarding 
the use or operation of terminals or harbor services as a result of 
changes in laws, regulations or ordinances of the Government of Japan 
issued during 2000 or 2001.\6\
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    \6\ References to ``your company'' include parent companies, 
subsidiaries, and corporate affiliates with whom common ownership is 
shared.
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    2. (For initial reports due in 90 days only). Describe in detail 
any effects not described in response to question number 1 of recent 
changes in the laws, ordinances or standards for the provision of 
marine terminal or stevedoring services in Japanese ports on your 
company's business operations, particularly with respect to minimum 
manning requirements, ``close-tie'' relationships, and the 
``permission'' system affecting such services.
    3. Describe any plans or legislative or regulatory proposals to 
improve the prior consultation system proposed by MOT, MLIT, JHTA, JSPC 
or JFSA during 2000 or 2001 (for initial reports due in 90 days) or 
within the last 180 days (for reports due thereafter) and provide 
copies of any such plans or proposals.
    4. (For A.P. Moller Maersk Sea-Land and American President Lines, 
Ltd.

[[Page 42862]]

only). Has your company entered into or sought to enter into any joint 
venture with a Japanese company to perform stevedoring or marine 
terminal services in Japan during 2000 or 2001 (for initial reports due 
in 90 days) or during the last 180 days (for reports due thereafter)? 
If so, for each instance, describe in detail: the relationship sought; 
whether the venture sought or was required to seek a license or permit 
to perform such services; the procedures followed for obtaining such a 
license or permit; and whether the license or permit ultimately was 
issued as well as the length of time that elapsed from initial 
application to final issuance or denial.
    5. Has your company altered or abandoned any planned or 
contemplated change in operations on matters subject to prior 
consultation due to opposition or threats of strikes or other 
withdrawal of labor by labor organizations or others during 2000 or 
2001 (for initial reports due in 90 days) or within the past 180 days 
(for reports due thereafter)? If so, did your company make any attempt 
to bring these threats to the attention of Japanese authorities? If so, 
describe in detail any such consultations, provide copies of documents 
(including any correspondence, complaint, petition, report, or other 
application filed) and identify the agency of the Government of Japan 
contacted concerning the matter.
    6. Has any dispute between your company and JHTA under the prior 
consultation system arisen within the past 180 days? If so, was MLIT 
notified or requested to serve as arbitrator? Describe in detail what 
actions, if any, have been taken by MLIT. (Responses may be limited to 
prior consultation regarding services in U.S.-Japan trades).
    7. With respect to major matters (as defined in the ``Revised Prior 
Consultation System of 1997''), has your company had reason to submit a 
major matter to JHTA for prior consultation in the past 180 days, or is 
it likely to have reason to submit such a matter within the next 180 
days? Please describe each request or likely request. If past, indicate 
specifically how the matter was handled and disposed of by JHTA and 
whether the procedures outlined in paragraph II of the ``Revised Prior 
Consultation System of 1997'' were adhered to by JHTA and your 
company.\7\
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    \7\ Paragraph II.(1-3) of the ``Revised Prior Consultation 
System of 1997'' requires that:
    1. The JHTA shall promptly process a request from a carriers 
[sic] for Prior [Consultation] without refusing to accept it nor 
suspending the processing of it.
    2. The JHTA shall promptly inform the carrier in writing of the 
result of the labor-management consultation (with adequate 
explanation when the labor-management consultation is unsuccessful) 
or the request for further clarification of the carrier's request.
    3. When a prior consultation is unsuccessful, both the carrier 
and the JHTA shall report it in writing to the MOT.
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    It Is Further Ordered, That each of the questions listed above 
calling for the submission of information (as opposed to documents) 
must be answered separately and fully, in writing and under oath, and 
signed by the corporate official providing the answer;
    It Is Further Ordered, That every document provided pursuant to 
this Order must clearly identify the question in response to which it 
is supplied;
    It Is Further Ordered, That documents provided pursuant to this 
Order must be accompanied by a certification, under oath, by a 
corporate official indicating that a thorough search has been made, and 
that the documents provided are the only documents responsive to this 
Order within his or her possession, custody, or control; and
    It Is Further Ordered, That responses to this Order shall be 
protected from disclosure to the public to the fullest extent permitted 
by law; provided, however, that such treatment shall not foreclose use 
by the Commission of such information in any subsequent formal 
proceeding.

    By the Commission.
Bryant L. VanBrakle,
Secretary.
[FR Doc. 01-20554 Filed 8-14-01; 8:45 am]
BILLING CODE 6730-01-P