[Federal Register Volume 67, Number 51 (Friday, March 15, 2002)]
[Notices]
[Pages 11695-11697]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-6305]


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FEDERAL MARITIME COMMISSION

[Docket No. 98-14]


Shipping Restrictions, Requirements and Practices of the People's 
Republic of China

AGENCY: Federal Maritime Commission.

ACTION: Notice of inquiry.

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SUMMARY: The Federal Maritime Commission is seeking comments from the 
shipping public on current laws, rules, and policies of the Government 
of the People's Republic of China that appear to have an adverse impact 
on U.S. shipping, and which may merit Commission attention under 
section 19 of the Merchant Marine Act, 1920 or the Foreign Shipping 
Practices Act of 1988. The Commission is seeking information on the 
impact of new Chinese legislation on U.S. oceanborne trade, as well as 
the effects of that legislation on a number of existing Chinese 
practices and restrictions. Interested parties, including shippers, 
transportation intermediaries, vessel operators and others in the 
shipping industry, are invited to comment.

DATES: Comments due on or before June 13, 2002.

ADDRESSES: Send comments (original and 20 copies) to: Bryant L. 
VanBrakle, Secretary, Federal Maritime Commission, 800 North Capitol 
Street, NW., Washington, DC 20573-0001. (202) 523-5725.

FOR FURTHER INFORMATION, CONTACT: David R. Miles, Acting General 
Counsel, Federal Maritime Commission, 800 North Capitol Street, NW., 
Washington, DC 20573-0001. (202) 523-5740.

SUPPLEMENTARY INFORMATION:

Background

    This proceeding was initiated on August 12, 1998, to gather 
information regarding certain apparently restrictive laws, rules and 
regulations of the People's Republic of China (``PRC'' or ``China'') in 
order to determine if further Commission action under section 19 of the 
Merchant Marine Act, 1920 or the Foreign Shipping Practices Act of 1988 
was warranted.\1\ In its effort to continue to monitor the issues 
identified in this proceeding, the Commission, by this Notice of 
Inquiry is inviting affected parties to comment on the effects of 
recent changes in Chinese law.
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    \1\ Section 19 of the Merchant Marine Act, 1920, 46 U.S.C. app. 
Sec. 876, authorizes and directs the Commission, inter alia, to 
``make rules and regulations affecting shipping in the foreign trade 
not in conflict with law in order to adjust or meet general or 
special conditions unfavorable to shipping in the foreign trade * * 
* which arise out of or result from foreign laws, rules, or 
regulations or from competitive methods or practices employed by 
owners, operators, agents, or masters of vessels of a foreign 
country. * * *.''
    The Foreign Shipping Practices Act of 1988, 46 U.S.C. app. 
Sec. 1710a, authorizes the Commission to investigate whether any 
laws, rules, regulations, policies, or practices of foreign 
governments, or any practices of foreign carriers or other persons 
providing maritime or maritime related services in a foreign country 
result in the existence of conditions that (1) adversely affect the 
operations of United States carriers in the United States oceanborne 
trade; and (2) do not exist for foreign carriers of that country in 
the United States under the laws of the United States or as a result 
of acts of United States carriers or other persons providing 
maritime or maritime-related services in the United States. If the 
Commission determines that such adverse conditions exist, it may 
take actions including limitations on sailings, suspension of 
tariffs, suspension of agreements, or fees not to exceed $1,000,000 
per voyage.
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    The Commission has learned that the PRC recently issued a new law, 
``Regulations of the PRC on the International Maritime 
Transportation,'' which became effective January 1, 2002,\2\ and is 
expected very soon to promulgate implementing regulations addressing 
requirements for operators in international shipping generally. It 
appears that this new law and regulations may significantly affect the 
Commission's review of the potentially restrictive practices that 
existed prior to January 1, 2002. Therefore, through this Notice of 
Inquiry, and Information Demand Orders to be formulated as appropriate, 
the Commission seeks to ensure that it has the most accurate 
information with regard to these issues, so that it may in turn 
determine whether any current Chinese laws, rules, regulations or 
practices merit the initiation of a proceeding under section 19 of the 
Merchant Marine Act, 1920 (``Section 19''), or the Foreign Shipping 
Practices Act of 1988 (``FSPA'').
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    \2\ The law is in the form of a Decree promulgated by the State 
Council of the PRC on December 5, 2001, signed by Prime Minister Zhu 
Rong Ji, which was published on December 21, 2001 and became 
effective on January 1, 2002.
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    The Commission has received expressions of concern regarding the 
new Chinese legislation from several sources. These include the U.S. 
Government Executive Branch agencies with responsibilities affecting 
transportation policy and the conduct of negotiations with foreign 
governments as well as organizations representing shippers and ocean 
transportation intermediaries (``OTIs'') operating or seeking to 
provide shipping and shipping-related services in the U.S. trade with 
China.

A. Comments From Intermediaries

    Concerns about the new Chinese shipping legislation were raised in 
a March 4, 2002 letter to Bruce J. Carlton, Acting Deputy Maritime 
Administrator, (with copies to the Commission) from the National 
Customs Brokers and Forwarders Association of America (``NCBFAA''), a 
trade association of ocean freight forwarders and non-vessel-operating 
common carriers (``NVOCCs''). NCBFAA states that ``U.S. intermediary 
and shipper interests will be directly and discriminatorily affected in 
an adverse manner.''
    NCBFAA expresses specific concerns regarding the effects of Chinese 
law on the ability of its members to do business in China, including 
possibly conflicting and confusing requirements for direct ownership 
and control of NVOCC businesses and separate Chinese incorporation of 
foreign NVOCCs; the required maintenance of substantial funds in 
Chinese banks (rather than bonding or insurance); provisions governing 
the filing of rates, waiting periods for rate changes and the 
confidentiality of service contract rates (which may subject NVOCCs to 
requirements inconsistent with recently

[[Page 11696]]

amended U.S. laws); and the required use of vouchers prepared by 
Chinese tax authorities to invoice customers in China. NCBFAA 
identifies other matters as to which the new Chinese law is ambiguous, 
including whether the PRC intends to regulate rate levels and which 
entities will be subject to such rate regulation, and the mandatory or 
other status of rate-fixing conferences, discussion agreements, and 
capacity fixing agreements.

B. The Executive Agencies

    On March 1, 2002, Maritime Administrator William G. Schubert wrote 
Chairman Harold J. Creel, Jr., expressing concern that the new law may 
restrict the operations not only of shipping companies, but also of 
shippers and OTIs. The Administrator further indicates that he has made 
these concerns known to the Chinese government, and that he has sought 
clarification on the law and the suspension of the effectiveness of any 
implementing regulations pending an opportunity to discuss the impact 
they may have with the Government of the PRC. The Maritime 
Administration has now announced that a U.S. government delegation will 
meet with PRC authorities in Beijing March 19-22, 2002 to obtain 
clarification about the meaning and impact of the Decree and any 
related implementing regulations.

Discussion and Request for Comments

    It appears that U.S. OTIs, carriers and other providers of 
transportation services may face serious restrictions in obtaining the 
necessary licenses and permissions to do business in China. Indeed, it 
appears that wholly foreign-owned NVOCCs continue to be completely 
barred from engaging in a number of commercial activities, such as 
offering through transportation as an NVOCC. Other types of services 
may be permitted, but only if a foreign firm enters a joint venture 
with a Chinese entity.
    The Commission is seeking to establish a clear record of what types 
of services U.S. NVOCCs or ocean freight forwarders, as those terms are 
defined by the Shipping Act of 1984, are now permitted to perform in 
China, what activities are prohibited, what requirements or 
prerequisites are imposed and what, if any, detrimental effects these 
requirements and prohibitions have on U.S. companies seeking to do 
business in China. It would be most useful for the Commission to 
receive comments describing, in detail, what types of ocean 
transportation intermediary activities are permitted under Chinese law 
in effect since January 1, 2002; what are prohibited; and in what 
situations joint ventures or similar arrangements are required.
    The Commission, in order to determine how the new Chinese laws, 
rules, regulations, policies and/or practices will affect its 
consideration of whether further Commission action under section 19 or 
the Foreign Shipping Practices Act may be merited, is now collecting 
information on the following specific areas.

1. General

    Individual companies' accounts of their efforts, successful or 
otherwise, to establish operations in China, and their dealings with 
Chinese authorities, would be especially useful. Any supporting 
documentation would be welcomed. The Commission also seeks to determine 
the effects on shippers of any such restrictions; that is, will the 
Chinese law in effect since January 1, 2002 as it is applicable to non-
Chinese ocean transportation intermediaries and vessel operators, have 
any effects on shippers' ability to secure efficient and economical 
intermodal transportation services in U.S. oceanborne commerce? The 
Commission would welcome comments from any carrier, shipper, or other 
party on the details or effects of these issues.

2. Licensing Requirements

    The Commission has concerns about apparent new Chinese requirements 
for the licensing of vessel operators, non-vessel operators, 
international ocean freight forwarders, shipping agency operators and 
ship management operators. It is not clear whether there continue to be 
nationality-or investment-based limitations on a company's ability to 
obtain certain types of transportation business licenses in China or 
what the criteria are by which licenses can be withheld or denied, and 
what, if any, appeal rights applicants enjoy. The Commission would 
welcome comments from any carrier, shipper, or other party that could 
shed light on these practices and their effects on U.S.-China 
oceanborne trade.

3. Branch Offices and Multimodal Transport Operations

    It appears that after January 1, 2002, non-Chinese vessel operators 
continue to face a number of restrictions on operating and increasing 
the number of the branch offices they may operate in China. For the 
branch offices that do exist, it appears that there may continue to be 
serious restrictions on their operations, both in terms of the 
geographic area they may serve and the scope of services they may 
offer. A number of these may be the same as, or similar to, the 
restrictions faced by NVOCCs and freight forwarders in China. 
Apparently, there are certain narrowly prescribed business areas in 
which non-Chinese vessel operators are now allowed to operate; however, 
it remains unclear just what those are as a result of the new Chinese 
law that went into effect on January 1, 2002.
    We are particularly concerned that there may continue to be 
restrictions that seriously limit vessel operators' and ocean 
transportation intermediaries' ability to offer multimodal 
transportation services in China. The Commission requires more 
information on such restrictions on vessel operators' and ocean 
transportation intermediaries' branch office or multimodal operations.

4. Rate Filing Requirements

    It appears that the new Chinese legislation may require vessel 
operators and NVOCCs to file the rates they charge customers for 
carriage to and from China. Please describe the Chinese ministry or 
regulatory body with whom you must file these matters, how they are 
filed, and what types of review or analysis of the rates are made by 
the relevant authority. Describe whether there are any mechanisms to 
protect the confidentiality of service contract rates. Please also 
describe what action may be taken by the relevant authority upon a 
finding that the rate in question does not meet regulatory criteria.

5. Ocean Transportation Intermediaries

    What conditions, requirements or restrictions are placed on OTI 
activities? \3\ What types of licenses are required, and what 
restrictions are placed on their issuance? Who issues the necessary 
licenses and permissions, and what are the legal standards and 
procedures for granting them? What are the capital investment or 
deposit requirements to obtain such a license? Also, what commercial 
partners are available in China for joint ventures, and under what 
commercial conditions? If your company had already been doing OTI 
operations in China prior to January 1, 2002, please describe how your 
ability to do business in China has been affected, if at all, by the 
new Chinese law effective that day. Are there nationality or 
investment-based differences? If your company has sought a license to 
do these types of activities since January 1, 2002, please describe 
that process, including the criteria,

[[Page 11697]]

requirements and procedure for obtaining a license, whether there are 
any limitations on the type of license your company may obtain, and the 
Chinese government authority(ies) to whom applications must be 
submitted or from which approvals must be sought.
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    \3\ E.g., arranging inland or ocean transportation, preparing 
documentation and issuing bills of lading, consolidation, 
warehousing, cargo agency, and logistics services.
     *Commissioner John A. Moran is not participating.
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    Now Therefore, It is ordered, that this Notice of Inquiry be 
published in the Federal Register.

    By the Commission.*
Bryant L. VanBrakle,
 Secretary.
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    \*\ Commissioner John A. Moran is not participating.
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[FR Doc. 02-6305 Filed 3-14-02; 8:45 am]
BILLING CODE 6730-01-P