[Federal Register Volume 69, Number 66 (Tuesday, April 6, 2004)]
[Notices]
[Pages 18079-18081]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-7783]


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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 the current status of shipping in the U.S. trade 
with the People's Republic of China (``PRC'') and the effects of the 
U.S.-China bilateral Maritime Agreement signed on December 8, 2003. 
Specifically, the Commission seeks information on whether anticipated 
improvements in the ability of non-Chinese ocean carriers and non-
vessel-operating common carriers to conduct operations in the U.S. 
trade with China have occurred. Interested parties, including shippers, 
ocean transportation intermediaries, vessel operators and others in the 
shipping industry, are invited to comment.

DATES: Submit an original and 15 copies of comments (paper), or e-mail 
comments as an attachment in WordPerfect 10, Microsoft Word 2000, or 
earlier versions of these applications, no later than June 1, 2004. 
Requests for meetings to make oral presentations to individual 
Commissioners must be received, and the meetings completed, by this 
date as well.

ADDRESSES: Send comments to: Bryant L. VanBrakle, Secretary, Federal 
Maritime Commission, 800 North Capitol Street, NW., Washington, DC 
20573-0001, (202) 523-5725, [email protected].

FOR FURTHER INFORMATION CONTACT: Amy W. Larson, General Counsel, 
Federal Maritime Commission, 800 North Capitol Street, NW., Washington, 
DC 20573-0001, (202) 523-5740, [email protected].

SUPPLEMENTARY INFORMATION: This proceeding to investigate potentially 
restrictive practices in the U.S./China trade was initiated by the 
Federal Maritime Commission (``Commission'' or ``FMC'') on August 12, 
1998, with the issuance of Information Demand Orders on U.S. and 
Chinese carriers and a Notice of Inquiry to the shipping public 
generally.\1\ Shipping Restrictions, Requirements and Practices of the 
People's Republic of China, 63 FR 44259 (August 18, 1998). The 
information collected was supplemented through Further Information 
Demand Orders issued on December 2, 1999, and February 8, 2000, to 
Maersk/Sea-Land and China Shipping Container Lines (``CSCL''), and 
Notices of Inquiry issued on March 12 and June 28, 2002. 67 FR 11695 
(March 15, 2002); 67 FR 4483 (July 4, 2002).
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    \1\ Those orders were directed to Sea-Land, American President 
Lines, China Ocean Shipping (Group) Company (``COSCO'') and China 
National Foreign Trade and Transportation Co. (``Sinotrans'').
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    Among the potentially restrictive practices addressed in the 
Commission's orders were:

[[Page 18080]]

     The prohibition of branch offices on non-Chinese 
vessel operators in locations other than port cities at which they or 
their carrier partners have regular vessel calls, and the resulting 
inability to issue through bills of lading for carriage originating in 
or destined for inland points in China to directly serve inland 
customers;
     Limitation of vessel agency operations to 
Chinese state-owned entities, thus requiring non-Chinese liner 
operators to employ vessel agent subsidiaries of their Chinese 
competitors; and
     Possible adverse effects of the Chinese 
Regulation on International Maritime Transport (``RIMT'') and final 
rules implementing the RIMT issued December 25, 2002, particularly on 
the ability of non-vessel-operating common carriers (``NVOCCs'') to do 
business in China.
    The diplomatic negotiations that continued while the Commission 
considered the issues in this proceeding have resulted in the signing 
of a bilateral Maritime Agreement (``Agreement'') and Memorandum of 
Consultations signed by U.S. Secretary of Transportation Norman Y. 
Mineta and PRC Minister of Communications Zhang Chunxian on December 8, 
2003. That Agreement, characterized by Secretary Mineta as one of the 
most far-reaching agreements in the history of U.S.-China maritime 
relations, appears to provide potentially significant relief from the 
restrictive practices raised before the Commission in this proceeding.
    With respect to the geographic restrictions on vessel operating 
carriers' branch Offices, Parts I and II of the Annex to the Agreement 
provide:

    Shipping companies of each Party, as well as their subsidiaries, 
affiliates and joint ventures, have the right to establish and 
maintain any number of branch offices in the territory of the other 
party * * * without geographic limitation * * * (emphasis added).

    With respect to ``doing business'' restrictions on non-Chinese 
carriers, the list of the types of services that may be provided by 
non-Chinese common carriers' branch (or head) offices in China 
contained in Parts I and II of the Annex to the Agreement appears to be 
comprehensive of the functions necessary to conduct intermodal as well 
as port to port international ocean shipping services. These include 
the ability to:
     Solicit and book cargo;
     Prepare, authenticate, process and issue bills 
of lading, including through bills of lading that are generally 
accepted in international maritime transport (emphasis added);
     Assess, collect and remit freight and other 
charges arising out of their service contracts or tariffs;
     Negotiate and enter into service contracts;
     Contract for truck and rail transport, cargo 
handling and other ancillary services;
     Quote and publish tariffs;
     Conduct sales and marketing activities;
     Establish office facilities;
     Import and own vehicles and other equipment 
necessary to their operation;
     Employ local and foreign employees; and
     Conduct multimodal or combined transport 
activities using commercially customary bills of lading or combined 
transport documents.
    Part II of the Annex to the Agreement also provides that vessel 
operators may: ``Perform vessel agency services, including customs 
clearance and inspection, for vessels owned, chartered, or operated by 
shipping companies'' (emphasis added). Finally, with respect to the 
NVOCC ``bonding'' requirements of the RIMT, the Memorandum of 
Consultations states that:

    The Chinese delegation * * * noted its Government's intentions 
not to require U.S. NVOCCs to make a cash deposit in a Chinese bank, 
as a prerequisite to apply to the Chinese Ministry of Communications 
(MOC) to engage in [NVOCC] services between U.S. and Chinese ports, 
provided that the NVOCC:
    1. Is a legal person registered by U.S. authorities;
    2. Obtains an FMC license evidencing NVOCC eligibility; and
    3. Provides evidence of financial responsibility in the total 
amount of 800,000 RMB or $96,000 U.S. (certificate of bond as proof 
of credit.)

    Subsequent to the Agreement's signing, the Commission received 
separate letters from Maritime Administrator Captain William G. 
Schubert and Under Secretary of State for Economic, Business, and 
Agricultural Affairs Alan Larson, describing the Agreement and the 
process by which the Agreement would enter into force. The Agreement 
will not enter into force until both parties, i.e., the Government of 
China and the U.S. Government, take the additional actions outlined in 
the Memorandum of Consultations. Letter of Captain William G. Schubert 
to Chairman Steven R. Blust, December 31, 2003 (``Schubert letter''). 
Completion of these actions will enable the two governments to exchange 
diplomatic notes confirming that all agreed upon steps have been 
completed and that they are satisfied that the Agreement should enter 
into force.
    Actions on the part of the U.S. Government include the Maritime 
Administrator's commitments to advise the FMC of the significant 
improvements in the bilateral relationship formalized in the Agreement, 
share that communication with U.S. shippers and carriers, and encourage 
a similar positive reaction on their part to the FMC, and action by the 
U.S. Government to grant relief from certain provisions of the 
Controlled Carrier Act to Chinese carriers that have pending requests 
for relief before the FMC.\2\ The actions on the part of the Chinese 
Government necessary to ``harmonize its relevant measure with the 
Agreement's terms'' include making changes to licenses of U.S. shipping 
companies and container transport service companies to permit them to 
exercise the rights enumerated in Parts I and II of the Annex to the 
Agreement.
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    \2\ Only the FMC can act administratively to exampt carriers 
from the requirements of that law.
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    The letters from the Maritime Administrator and the Under Secretary 
of State expressed their support for the Chinese carriers' Petitions 
then pending before the Commission, and encouraged the filing of 
similar expressions of support by U.S. shippers and carriers. The 
Commission enabled such parties to convey their views by publication of 
the Notices providing for an additional comment period in the 
proceedings on the Petitions. P3-99, Petition of China Ocean Shipping 
(Group) Company for a Partial Exemption from the Controlled Carrier 
Act, 69 FR 4158-4159 (January 28, 2004); P4-03, Petition of China 
Shipping Container Lines Co., Ltd. for Permanent Full Exemption from 
The First Sentence of Section 9(c) of The Shipping Act of 1984, 69 FR 
4159-4160 (January 28, 2004); and P6-03, Petition of Sinotrans 
Container Lines Co., Ltd. (Sinolines) for a Full Exemption from the 
First Sentence of Section 9(c) the Shipping Act of 1984, as Amended, 69 
FR 4160-4161 (January 28, 2004). The comment period closed on February 
23, 2004. The Commission received numerous comments in support of those 
Petitions, and none in opposition. The Commission has acted today to 
grant those Petitions in separate proceedings. Commission action on the 
Petitions would appear to complete the U.S. Government actions 
described in the Memorandum of Consultations as necessary to precede 
the exchange of diplomatic notes that will bring the Agreement into 
force.

[[Page 18081]]

    The Agreement and the Memorandum of Consultations contain 
commitments for actions by the Chinese Government that, if implemented, 
appear likely to resolve all of the major concerns raised in this 
proceeding. As the Maritime Administrator notes, ``China has agreed to 
significant market opening measures under this Agreement.'' He further 
suggests that ``dramatic improvement in business operations * * * will 
come about for U.S. carriers as a result.'' Schubert letter at 2.
    In addition, in order to make it possible to give effect to the 
provision of the Memorandum of Consultations relating to the furnishing 
by U.S. NVOCCs of proof of an FMC license and proof of financial 
responsibility in addition to that required by the FMC, as an 
alternative to the deposit of cash in a Chinese bank required under the 
RIMT, the Commission today has amended its rules on proof of financial 
responsibility. The rules now make it possible for an NVOCC that wishes 
to participate in the U.S. trade with China to file with the Commission 
an optional proof of financial responsibility, in the form of a bond 
rider, to supplement the evidence of financial responsibility required 
to secure its FMC license. This optional rider would appear to meet the 
Chinese requirements as provided for in the Memorandum of 
Consultations.
    We are encouraged by these developments and anticipate that the 
conditions affecting non-Chinese ocean common carriers that led us to 
initiate this proceeding will either be substantially ameliorated or no 
longer exist. Moreover, it appears likely at this time that the 
Commission's rule permitting the filing of the additional bond rider by 
NVOCCs will provide a satisfactory resolution to that issue.
    Nevertheless, we believe that additional information is required in 
order to determine whether the commitments made by the Chinese are 
being acted upon and therefore whether discontinuance of this 
proceeding is appropriate. For example, we believe it will be difficult 
to ascertain whether NVOCC concerns previously expressed in this 
proceeding will be adequately addressed until the optional rider 
authorized today can be made available by the issuers of bonds for U.S. 
NVOCCs and filed with the Commission and some NVOCCs have successfully 
obtained licenses to operate in China on the basis of such riders.
    Therefore, the Commission is providing an opportunity for the 
filing of further information, with an extended period for receipt of 
comments, in this proceeding so that it will be able to verify that 
U.S. NVOCCs have been able to secure licenses to operate as NVOCCs in 
China without making the substantial deposit in a Chinese bank required 
under the RIMT, and that carrier licenses have been modified as 
necessary to fully carry out their operations. The Commission 
encourages companies participating in the U.S. trade with China who are 
affected by the Agreement to submit comments and, if relevant, 
supporting documentation. Comments may be submitted at any time during 
the comment period. Commenters also may wish to file supplemental 
comments to update information initially submitted. Such comments will 
assist the Commission in measuring the effects of the Agreement.
    Pursuant to Rule 53(a) of the Commission's Rules of Practice and 
Procedure, 46 CFR 502.53(a), in notice-and-comment rulemakings the 
Commission may permit interested persons to make oral presentations in 
addition to filing written comments. The Commission has determined to 
permit interested persons to make such presentations to individual 
Commissioners in this proceeding, at the discretion of each 
Commissioner. Any meeting or meetings shall be completed before the 
close of the comment period. The summary or transcript of oral 
presentations will be included in the record and must be submitted to 
the Secretary of the Commission within five days of the meeting. 
Interested persons wishing to make an oral presentation should contact 
the Office of the Secretary to secure contact names and numbers for 
individual Commissioners.
    Upon request, the Commission may hold information submitted in 
response to this Notice of Inquiry confidential, pursuant to 46 U.S.C. 
app. 876(h) and 46 U.S.C. app. 1710a(d)(3). The Commission cannot, 
however, ensure the confidentiality of documents submitted via e-mail 
due to the nature of such transmissions.
    Now therefore, it is ordered, that this Notice of Inquiry be 
published in the Federal Register.

    By the Commission.
Bryant L. VanBrakle,
Secretary.
[FR Doc. 04-7783 Filed 4-5-04; 8:45 am]
BILLING CODE 6730-01-P