Petition — Baton Rouge Marine Contractors, Inc. v. Federal Maritime Commission

f Supreme Court, U. &

f FILED

MAY 7% 1976

Leen eee

or act Maay , irnay

ICHAEL RODAK, JR., Cle

In the Been centened ciety tnsrinn Retest

Supreme Court of the United States

OCTOBER TERM, 1975

NO. 95-1622

BATON ROUGE MARINE CONTRACTORS, INC.,

Petitioner

versus

FEDERAw MARITIME COMMISSION and

UNITED STATES OF AMERICA,

Respondents

CARGILL, INC., Intervenor

Respondent

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Terriberry, Carroll, Yancey &

Farrell

Benjamin W. Yancey

Edward S. Bagley

2141 ITM

New Orleans, Louisiana 70130

——————————————

A B Letter Service, Inc., 327 Chartres St., New Orleans, Lo. (504) 581-5555

INDEX

PAGE NO.

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TABLE OF AUTHORITIES

Carnation Co. v. Pacific Westbound Conference

383 US 213, 15 L. Ed. 2d 709, 86 S. Ct. 781

REE SSA een Te eee

FMC v. Seatrain Lines, 411 US 726, 36 L. Ed. 2d

GSD, FS B. Co. BTTD (BVTS) rcocceserscesecenccccsessosessesecces

FMC v. Aktiebolaget Svenska Amerika Linien,

390 US 238, 19 L. Ed. 2d 1071, 88 S.Ct. 1005

CREA INE EMIS POE NI

Greater Baton Rouge Port Commission v. United

States, 287 F. 2d 86 (CA, 5, 1961), reh’g den.

293 F, 2d 959, cert. den., 368 US 985 (1962)........

Greater Baton Rouge Port Commission v. Cargill,

Inc., 252 La. 718, 214 So. 2d 119 (1968)...........00

Port of Boston Marine Terminal Association v.

Boston Shipping Association, 410 F. 2d 419

(1970), reversed on other grounds, 400 US 62,

oe FE ee

Volkswagenwerk A.G. v. FMC, 390 US 261,

19 L. Ed. 2d 1090, 88 S. Ct. 929 (1968)...

Section 17 of the Shipping Act, 1916, 46 USCA 816,

Agreements Nos. 8225 and 8225-1, 5 FMB 648

PAGE NO.

IN THE SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1975

NO.

BATON ROUGE MARINE CONTRACTORS, INC.,

Petitioner

versus

FEDERAL MARITIME COMMISSION and

UNITED STATES OF AMERICA,

Respondents

CARGILL, INC., Intervenor

Respondent

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

Now comes Baton Rouge Marine Contractors, Inc. and res-

pectfully petitions this Honorable Court to issue a writ of

certiorari to review the judgment of the United States Court

of Appeals for the District of Columbia Circuit entered in

this case, Docket No. 75-1108 (consolidated with Docket

No. 75-1018), on February 12, 1976.

OPINION BELOW

The opinion of the United States Court of Appeals for the

2

District of Columbia Circuit is unreported;' the report and

order of the Federal Maritime Commission is not officially

reported; an unofficial report containing the decision is cited

as 14 Shipping Regulation Reports 1373.”

QUESTIONS PRESENTED

The question presented here is whether the Federal Mari-

time Commission, in construing an agreement exempting

conduct of the parties to that agreement from the strictures

of the antitrust laws [under the license granted to such agree-

ments by Section 15 of the Shipping Act, 1916, 46 USCA

814], can interpret that agreement in a broad and expansive

manner thereby giving to the statute, Section 15, a narrow

and restrictive interpretation, under the decisions of this

Court and of the lower federal courts heretofore speaking on

this subject.

The interpretation of the agreement in suit by the Federal

Maritime Commission, approved by the Court of Appeals

below, permitted a change in incidence as to certain charges

assessed, under the cloak of the agreement, against third

parties and, as such, creates a direct conflict with the decision

of the Court of Appeals for the First Circuit in Port ej Ros-

ton Marine Terminal Association v. Boston Shipping Ass: +-

tion, 420 F.2d 419 (1970), reversed on other grounds, 4U%

US 62, 27 L. Ed. 2d 203 91, S. Ct. 203. The decision below.

further, is in conflict, as pointed out by the Court of Ap-

peals for the First Circuit in the Port of Boston Marine Ter-

minal Association case, supra, with the decision of this Court

in ! olkswagenwerk A.G. v. FMC, 390 US 261, 19 L.Ed. 2d

1. Appendix A, infra.

2. Appendix B, infra.

3

1090, 88 S. Ct. 929 (1968) and also cannot be reconciled

with the subsequent decision of this Court in FMC v. Sea-

train Lines, 411 US 726, 36 L. Ed. 2d 620, 93 S. Ct. 1773

(1973).

STATUTES INVOLVED

The statute which governs the issues presented here is

Section 15 of the Shipping Act, 1916, 46 USCA 814, enabl-

ing parties regulated by the Shipping Act to obtain exemp-

tion from the antitrust laws for agreements submitted to and

approved by the Federal Maritime Commission. The statute

is appended as Appendix C, infra.

STATEMENT OF THE CASE

Petitioner, Baton Rouge Marine Contractors, Inc. (herein-

after referred to as “BARMA”) is a contracting stevedore

hired to load vessels at the public grain elevator erected, at

Baton Rouge, Louisiana, by the Greater Baton Rouge Port

Commission (hereinafter referred to as ‘Port Commission’’).

The grain elevator was completed and leased by the Port

Commission to Cargill, Inc. (hereinafter referred to as ‘‘Car-

gill’’) in 1955 but the lease agreement was not submitted at

that time for approval by the predecessor agency of the

Federal Maritime Commission, i.e., the Federal Maritime

Board (the two agencies will be referred to hereinafter, for

convenience, simply as ““FMC”). One year later Cargill and

the Port Commission executed an amendment to the lease

which gave Cargill the right to appoint a subsidiary company

as the exclusive stevedore at the grain elevator and the only

such company entitled to participate in the loading of grain

aboard vessels calling at the elevator. The lease with its ex-

clusive stevedoring amendment became the subject of a

4

complaint filed by BARMA before the FMC. Hearings were

held and the FMC determined that the lease required its

approval under Section 15 of the Shipping Act, 1916, 46

USCA 814; the lease was approved but the exclusive steve-

doring amendment was disapproved under Section 15 as well

as under Section 17 of the Shipping Act, 1916, 46 USCA

816, Agreements Nos. 8225 and 8225-1, 5 FMB 648 (1959).

The Court of Appeals for the Fifth Circuit affirmed, Greater

Baton Rouge Port Commission v. United States, 287 F.2d 86

(CA, 5, 1961), reh’g den. 293 F.2d 959, cert. den., 368 US

985 (1962). Cargill under the lease exercises a monopoly on

the operation of grain elevators at Baton Rouge.*

From the time of the execution of the original lease in

1955 through the execution of the amendment, the proceed-

ings before the regulatory agency and before the Fifth Cir-

cuit, all culminating with the decision of the latter in 1961,

no grain elevator in the United States Gulf, the area with

which we are concerned here, imposed any form of charge

against stevedores operating at the elevator. The first time a

charge was so imposed against stevedores in the United States

Gulf was when one was instituted by Cargill at an elevator

owned and operated by it in the port of Houston, Texas.

This occurred in 1967, twelve years after the execution of

the lease of the Baton Rouge elevator, eleven years after the

attempted amendment of that lease by which Cargill sought

to regulate stevedoring at the elevator and six years follow-

ing the decision, in 1961,of the Court of Appeals for the

Fifth Circuit by which the litigation resulting in the dis-

approval of the lease amendment was terminated. Another

—r . a

3. Greater Baton Rouge Port Commission v. U.S., 287 F.2d 86 (CA,

5, 1961), reh. den. 293 F.2d 959, cert. den. 368 US 985, 7 L.Ed. 2d

523, 82 S. Ct. 600; Greater Bator: Rouge Port Commission v. Cargill,

Inc., 252 La. 718, 214 So.2d 119 (1968).

5

four years elapsed before Cargill, in 1971, first imposed

charges against stevedores operating at the Baton Rouge grain

elevator, which charges are the subject of this litigation.

On the institution of the charges by Cargill and its advices

that it would not load any ships served by BARMA, unless

BARMA agreed to the payment of those charges, a complaint

was filed by BARMA before the FMC giving rise to the pro-

ceedings which have progressed to the point of this petition.

ARGUMENT

The holding be!ow, toward which this petition is directed,

may be briefly stated in the language of the Court of Ap-

peals. As said by the Court, the underlying agency, the

Federal Maritime Commission, held “that the lease to Cargill

gave it a broad authority which embraces such a practice

(i.e., imposing a charge against stevedores seeking to serve the

vessels employ ing them) even though it was not specifically

foreseen’” and even though the charge was “unprecedented

at Baton Rouge”.

The important elements here are all outlined by this

language of the Court of Appeals. These are:

1.The lease did not in any terms give Cargill

authority to impose charges against steve-

dores. As pointed out by the Court (and by

the Commission) this “was not specifically

foreseen’; indeed such charges were “‘unpre-

cedented” when the lease was executed be-

tween the parties and approved by the FMC.

4. Decision of Court of Appeals, Appendix A, p. A-9.

5. Ibid, p. A-7.

6

2. Under the lease, a Section 15 agreement, it is

not necessary that the grant of authority be

specified but, on the contrary, under the broad

and general language, the parties may create

new and totally “unprecedented” charges

against third parties never before subject to any

charges.

We submit that the courts must choose between two pos-

sible interpretations of Section 15, i.e., either (a) a broad

interpretation of the statute under which exemptions from

the antitrust laws granted by approval of agreements there-

under are obtained only when the specific terms of the ex-

emptions are set forth in the agreements and, following

approval, such exemptions are narrowly construed, or, (b) an

interpretation under which the statute itself will be narrowly

construed and the agreements subject to it will be given a

substantial breadth of interpretation according antitrust

exemptions beyond their specific terms which exemptions

were “not specifically foreseen’’ and were “unprecedented”

at the time of approval.

The decisions of this Court and of the lower federal courts

prior to this case have dictated, emphatically and repeatedly,

that Section 15 must be broadly construed and the agree-

ments approved pursuant to its terms given a narrow inter-

pretation, thus limiting the scope of the antitrust exemptions

gained thereby. In its most recent decision on the statute,

this Court held:®

“* * * A broad reading of the third category

would conflict with our frequently expressed

6. FMC v. Seatrain Lines, 411 US 726, 36 L.Ed. 2d 620, 93 S.Ct.

1773 (1973).

view that exemptions from antitrust laws are

strictly construed. see, e.g., United States v.

McKesson & Robbins, Inc., 351 US 305, 316,

100 L.Ed. 1209, 76 S.Ct. 937 (1956), and that

‘[r]epeals of antitrust laws by implication from a

regulatory statute are strongly disfavored. and

have only been found in cases of plain repugnan-

cy between the antitrust and regulaiory pro-

visions’. United States v. Philadelphia National

Bank, 374 US 321,°350-351, 10 L. Ed. 2d 915,

83 S. Ct. 1715 (1963) (footnote omitted). As

we observed only recently, ‘[w]hen...relation-

ships are governed in the first instance by busi-

ness judgment and not regulatory coercion,

courts must be hesitant to c »nclude that Congress

intended to override the fundamental national

policies embodied in the antitrust laws’. Otter

Tail Power Co. v. United States, 410 US 366,

374, 35 L. Ed. 2d 359, 93 S.Ct. 1022 (1973).

See also Silver v. New York Stock Exchange, 373

US 341, 10 L. Ed. 2d 389, 83 S. Ct. 1246 (1963);

Pan American World Airways, Inc. v. United

States, 371 US 296, 9 L. Ed. 2d 325, 83 S. Ct.

476 (1963); California v. Federal Power Commis-

sion, 369 US 482, 8 L. Ed. 2d 54, 82 S. Ct. 901

(1962); United States v. Borden Co., 308 US 188,

84 L. Ed. 181, 60 S. Ct. 182 (1939). This prin-

ciple has led us to construe the Shipping Act as

conferring only a limited antitrust exemption”

in the light of the fact that ‘antitrust laws repre-

sent a fundamental national economic policy’.

Carnation Co. v. Pacific Westbound Conference,

383 US 213, 218, 219,15 L. Ed. 2d 709 (1966).”

(footnote omitted and emphasis added)

Similarly, this Court held that “once an antitrust violation

is established, this alone will normally constitute substantial

evidence that the agreement is ‘contrary to the public inter-

est’, unless other evidence in the record fairly detracts from

the weight of this factor.” Plainly no evidence was or could

have been adduced or considered by the FMC to outweigh

an undisclosed factor which by the decision of the FMC was

created by the use of “broad, expansive language’? which

granted “plenary rate authority” subject to ‘‘no conditions,

restrictions or qualifications.”®

The FMC, by construing this lease in such “broad, expan-

sive language’’, thereby took what was characterized by this

Court in Volkswagenwerk A. G. v. FMC,® as “an extremely

narrow view of a statute that uses expansive language’’ under

which ‘in deciding whether to approve an agreement, the

Commission is required under Section 15 to consider anti-

trust implications’. Certainly no such implications were or

could have been considered by the Commission at the time of

7. FMC v. Aktiebolaget Svenska Amerika Linien, 390 US 238, 19 L.

Ed. 2d 1071, 88 S. Ct. 1005 (1968). See also Carnation Co. v. Pacific

Westbound Conference, 383 US 213, 15 L. Ed. 2d 709, 86 S. Ct. 781

(1966) which noted that the purpose of the Congress would not ‘“‘be

frustrated by the application of the antitrust laws to the implementa-

tion of Conference agreements which had been subjected to public

scrutiny and examination by a governmental agency’. It certainly

would be frustrated here where the public, in its scrutiny, as well as

the governmental agency, would not have been apprised as to the scope

of the exemption until, more than a decade later, the ‘broad, expan-

sive language” was expanded by Cargill to encompass matters in no

manner contemplated (or ‘‘specifically foreseen”) by anyone [and, in-

deed, not even in existence] at the time of the approval.

8. Report of Federal Maritime Commission, Appendix B, infra, pp.

B-32-34.

9. 390 US 261, 19 L. Ed. 1090, 88 S. Ct. 929 (1968).

9

its approval of this agreement since ‘e scope of the agree-

ment and its antitrust implications (and exemptions) were

not set forth in the terms of the agreement.

A case which was for all purposes identical was considered

by the Court of Appeals for the First Circuit in Port of Bos-

ton Marine Terminal Association v. Boston Shipping Associa-

tion,’ where the court held:

“* * * Section 15 requires that ‘modifications

as well as the original agreement, receive the prior

approval of the Commission’. In Boston Shipping

the Commission,without any discussion of the

broad language of the act held that where, under

the already approved agreement, there was power

to fix charges, a change in incidence, as to who

was obligated to pay, was not a modification re-

quiring Section 15 filing and approval.

“In the light of the strictures expressed in VW,

supra, n. 1., this holding seems unsupportable.

While. with some consistency, it represented the

Commission’s past reading of the statute, the

Court in VW pointed to the ‘expansive language’

of Section 15 and the Commission’s ‘extremely

narrow view’, and specifically rejected the binding

effect of the Commission’s administrative con-

struction. 390 US 261, 272-73. Then referring to

the statute’s ‘literal provisions’ the Court spoke

of possible exceptions only in terms of a ‘de

minimis or routine character’, and stated that

even these must be defined by ‘appropriate ad-

ministrative proceedings’. 390 U.S. 261, 276.

10. 420 F. 2d 419 (1970), reversed on other grounds, 400 US

63, 27 L. Ed. 2d 203, 91 S. Ct. 203.

10

“Even this exception could not apply in the case

at bar. No administrative proceedings had been

held to establish guidelines under which modifi-

cations might be found ‘de minimis or routine’.

Administrative standards cannot be established

ex post facto. Cf. NLRB v Wyman-Gordon Co.,

1969, 394 U.S. 759; 5 USC § 553.

“We may add, for good measure, that a change

in incidence, as distinguished from a change in

rate, seems to us anything but routine. Even

less routine is an unjustifiable change. The Com-

mission expressly found this one ‘unjust and un-

reasonable’ to the extent that demurrage was to

be charged to the vessel even if the strike did not

commence until after the expiration of free time,

when the vessel’s obligation to make the goods

available had been fully performed. 10 FMC at

417-18. It would peculiarly violate Section 15’s

‘expansive language’ to hold that an unreasonable

modification could be rewritten nunc pro tunc

and saved in part.”

(footnotes omitted and emphasis added)

Just such a ‘change of incidence” was involved here; any

cost elements involved in the charge were shifted from Car-

gill to the stevedores serving vessels at the elevator.

This decision of the Court of Appeals for the District of

Columbia Circuit is in direct conflict with the prior decisions

of this Court and with the holding of the Court of Appeals

for the First Circuit in the Boston Varine Terminal Associa-

lion case.

11

CONCLUSION

The Court of Appeals and the FMC in this case have de-

parted from the established standards of construction of

Section 15 and of agreements approved by the agency there-

under in a manner which cannot be reconciled with the

decisions of this Court or the lower federal courts. The de-

cision is one which will only serve to create confusion in the

interpretation of agreements falling under that statute-which

cannot be permitted. The importance of the question pre-

sented is further emphasized by the fact that Section 15 ac-

cords immunity from the antitrust laws which “represent a

fundamental national economic policy”.""

We submit, for the foregoing reasons, that a writ of certio-

rari should be granted herein andthat the decision of the

court below should be reversed by this Court, to avoid direct

conflict between the circuits and with the decisions of this

Court in this important area of Federal law.

Respectfully submitted,

Benjamin W. Yancey

Edward S. Bagley

TERRIBERRY, CARROLL,

YANCEY & FARRELL

Of Counsel

11. Carnation Co. v. Pacific Westbound Conference, 383 US 213,

15 L. Ed. 2d 709, 86 S. Ct. 781 (1966).

12

A-1

CERTIFICATE O , Notice: This opinion is subject to formal revision before publication

. istniiaaee in the Federal Reporter or U.S. App. 1).C. Reports. Users are requested

to notify the Clerk of any formal errors in order that corrections may be

I, Benjamin W. Yancey, a member of the bar of this Court. made before the bound volumes go to pr

do hereby certify that I have this day served a copy of the

above and foregoing petition to respondents’ counsel of re- United States Court uf Apprals

cord, Thomas E. Kauper, Assistant Attorney General, and

Howard E. Shapiro and Robert J. Wiggers, Attorneys, Depart- a a a ee

ment of Justice and on Richard E. Hull, General Counsel,

Edward G. Gruis, Deputy General Counsel and Gordon M.

Shaw, Attorney, Federal Maritime Commission, and to coun- No. 75-1018

sel of record for intervenor below, Cargill, Incorporated,

Edward Schmeltzer, E. J. Sheppard and Cecilia E. Wirtz, by

mailing copies thereof, postage prepaid, to them at their

offices, Washington, D. C., on this 5th day of May, 1976.

CARGILL, INC., PETITIONERS

Vv.

FEDERAL MARITIME COMMISSION AND

UNITED STATES OF AMERICA, RESPONDENTS

BATON ROUGE MARINE CONTRACTORS, INC., INTERVENOR

Benjamin W. Yancey

No. 75-1108

BATON ROUGE MARINE CONTRACTORS, INC., PETITIONER

Vv.

FEDERAL MARITIME COMMISSION AND

UNITED STATES OF AMERICA, RESPONDENT

CARGILL, INC., INTERVENOR

Petitions for Review of an Order of the

Federal Maritime Commission

Argued November 4, 1975

Decided February 12, 1976

:

.

LLnL nn nnn nn ee Ce

A 2

Edward J. Sheppard, with whom Edward Schmeltzer

and Cecelia E. Wirtz, were on the brief for petitioner in

No. 75-1018 and intervenor in No. 75-1108.

Edward S. Bagley, for petitioner in No. 75-1108 and

intervenor in 75-1018.

Gordon M. Shaw, Attorney, Federal Maritime Commis-

sion, with whom James L. Pimper, General Counsel and

Edward G. Gruis, Deputy General Counsel, Federal Mari-

time Commission, were on the brief for respondent Fed-

eral Maritime Commission.

Robert J. Wiggers, Attorney, Department of Justice,

with whom Howard E. Shapiro, Attorney, Department of

Justice, was on the brief for respondent, United States

of America. Carl D. Lawsun, Attorney, Department of

Justice, also entered an appearance for respondent,

United States of America.

Before: LEVENTHAL, Circuit Judge, LUMBARD,* Senior

Circuit Judge for the Second Circuit and

WILKEY, Circuit Judge

Opinion for the Court filed by Circuit Judge LEVEN-

THAL.

LEVENTHAL, Circuit Judge: This appeal involves two

petitions for review, under 28 U.S.C. § 2342,’ of the

report and order of the Federal Maritime Commission

in Docket No. 71-29, issued January 7, 1975, which held

that the terminal operator for the Port of Baton Rouge

* Sitting by designation pursuant to 28 U.S.C. § 294(d)

'28 U.S.C. § 2342, as amended in 1966, gives the courts of

appeals exclusive jurisdiction over such final orders of the

Federal Maritime Commission as are made reviewable under

46 U.S.C. § 830.

A3

could institute charges against stevedores for the use of

terminal facilities and services but that its &-cents per

ton service and facility charge was unlawful under § 17

of the Shipping Act (Act', 46 U.S.C. § 816,° to the ex-

tent it was not reasonably related to the benefits accru-

ing to stevedores. The Commission remanded the pro-

ceeding to the Administrative Law Judge (ALJ: for a

determination of what would constitute a “proper alloca-

tion of services and facilities benefits to stevedores .. .

in order to arrive at a charge that can be properly as-

sessed against the stevedores” ‘J.A. 75). Commissioners

Barrett and Morse dissented on the ground that Cargill’s

allocation to the stevedores was sufficiently related to

benefits to pass muster under § 17.

In No. 75-1018, Cargill, Inc., the terminal operator,

maintains that its service and facility charge is reason-

ably related to the benefits provided to stevedores; that

the Commission applied a public utility ratemaking stand-

ard rather than the less exacting reasonableness standard

appropriate under $17; and that the Commission’s order

suspending the 8-cents charge pending further hearing

before the ALJ is, in effect. an interlocutory injunction

beyond its statutory power. In No. 75-1108, Baton

Rouge Marine Contractors, Inc. {Barma), a corporation

comprised of four stevedores, argues that Cargill’s

°46 U.S.C. § 816 provides in relevant part:

Every such carrier [by water in foreign commerce]

and every other person subject to this chapter shall estab-

lish, observe, and enforce just and reasonable regulations

and practices relating to or connected with the receiving,

handling, storing, or delivering of property. Whenever

the Commission finds that any such regulation or practice

is unjust or unreasonable it may determine, prescribe, and

order enforced a just and reasonable regulation or prac-

tice.

eS

AA

, ; ; ! A5

charge violates § 15 of the Act, 46 U.S.C. § 814," be- *. 7

cause it is a modification, without requisite specifie FMC i

lease agreement with the Greater Baton Rouge Port

approval. of Cargill’s underlying Commission-approved

Commission (Port); and violates £16 of the Act, 46

*46 U.S.C. § 814 provides in relevant part:

Every common carrier by water, or other person sub-

ject to this chapter, shall file immediately with the Com-

mission a true copy, or, if oral, a true and complete mem-

orandum, of every agreement with another such carrier

or other person subject to this chapter, or modification

or cancellation thereof, to which it may be a party or con-

form in whole or in part, fixing or regulating trunsporta-

tion rates or fares; giving or receiving special ratcs,

accommodations, or other special privileges or advan-

tazes; controlling, regulating, preventing, or destroying

competition; pooling or apportioning earnings, losses, or

traffic; allotting ports or restricting or otherwise regu-

lating the number and character of sailings between

ports; limiting or regulating in any way the volume or

character of freight or passenger traffic to be carried;

or in any manner providing for an exclusive, preferen-

tial, or cooperative working arrangement. The term

“agreement” in this section includes understandings, con-

ferences, and other arrangements.

The Commission shall by order, after notice and hear-

ing, disapprove, cancel or modify any agreement, or any

modification or cancellation thereof, whether or not pre-

viously approved by it, that it finds to be unjustly discrim-

inatory or unfair as between carriers, shippers, exporters,

importers, or ports, or between exporters from the United

States and their foreign competitors, or to operate to the

detriment of the commerce of the United States, or to be

contrary to the public interest, or to be in violation of

this chapter, and shall approve all other agreements,

modifications, or cancellations. No such agreement shall

be approved, nor shall continued approval be permitted

for any agrecment (1) between carriers not members of

the same conference or conferences of carriers serving

different trades that would otherwise be naturally com-

petitive, unless in the case of agreements between car-

riers, each carrier, or in the case of agreements between

conferences, each conference, retains the right of inde-

pendent action, or (2) in respect to any conference agree-

ment, which fails to provide reasonable and equal terms

and conditions for admission and readmission to con-

ference membership of other qualified carriers in the

trade, or fails to provide that any member may withdraw

from membership upon reasonable notice without penalty

for such withdrawal.

The Commission shall disapprove any such agreement,

after notice and hearing, on a finding of inadequate

policing of the obligations under it, or of failure or re-

fusal to adopt and maintain reasonable procedures for

promptly and fairly hearing and considering shippers’

requests and complaints.

Any agreement and any modification or cancellation

of any agreement not approved, or disapproved, by the

Commission shall be unlawful, and agreements, modific:-

tions, and cancellations shall be lawful enly when and as

long as approved by the Commission; before approval or

after disapproval it shall be unlawful to carry out in

whole or in part, directly or indirectly, any such agree-

ment, modification, or cancellation; except that tariff

rates, fares, and charges, and classifications, rules, and

regulations explanatory thereof (including changes in

special rates and charges covered by section 813a of this

title which do not involve a change in the spread between

such rates and charges and the rates and charges applic-

able to noncontract shippers) agreed upon by approved

conferences, and changes and amendments thereto, if

otherwise in accordance with law, shall be permitted ‘>

take effect without prior approval upon compliance with

the publication and filing requirements of section 817(b)

of this title and with the provisions of any rcgulatio: s

the Commission may adopt.

Every agreement, modification, or cancellation lawful

under this section, or permitted under secticn 813: of this

title, shall be excepted from the provisions of sections

1 to 11 and 15 of Title 15, and amendments and Acts

supplementary thereto.

A6

U.S.C. § 815,‘ because it creates illegal preferences and

privileges for Cargill through the use of Cargill’s wholly-

owned subsidiary, Rogers Terminal and Shipping Cor-

poration (Rogers), in competition with Barma at the

Baton Rouge facility. The Depariment of Justice (Anti-

trust Division), representing the United States as statu-

tory respondent, agrees with the Commission that Barma

has not proven a violation of §§ 15 or 16, but disputes

the Commission’s intimation that it would approve

under § 17 an allocation of the charges to the stevedore

going beyond express contract, custom, or actual use.

*46 U.S.C. § 815 provides in relevant part:

It shall be unlawful for any common carrier by water,

or other person subject to this chapter, either alone or

in conjunction with any other person, directly or in-

directly—

First. To make or give any undue or unreasonable

preference or advantage to any particular person, locality,

or description of traffic in any respect whatsoever, or to

subject any particular person, locality, or description of

traffic to any undue or unreasonable prejudice or disad-

vantage in wny respect whatsoever: Provided, That

within thirty days after enactment of this Act, or within

thirty days after the effective date or the filing with the

Commission, whichever is later, of any conference freight

rate, rule, or regulation in the foreign commerce of the

United States, the Governor of any State, Commonwealth,

or possession of the United States may file a protest with

the Commission upon the ground that the rate, rule, or

regulation unjustly discriminates against that State, Com-

monwealth, or possession of the United States, in which

case the Commission shall issue an order to the confer-

ence to show cause why the rate, rule, or regulation

should not be set aside. Within one hundred and eighty

days from the date of the issuance of such order, the

Commission shall determine whether or not such rate,

rule, or regulation is unjustly discriminatory and issue

a final order either dismissing the protest, or setting

aside the rate, rule, or regulation.

AT

We affirm the Commission on all counts. Cargill’s

charge, while unprecedented at Baton Rouge, comes

within the broad authority conferred by its Commission-

approved lease with the Port and does not require spe-

cific approval under : 15. We reject Barma’s claim of a

per se violation of : 16 premised only on the fact that

Cargi.l also does business with its wholly-owned stevedore

Rogers, in the absence of proof of discriminatory prac-

tices. Finally, we find that the Commission acted within

its mandate under : 17; that its approach here in dis-

approving certain allocations to the stevedore is not

arbitrary or capricious; and that its order does not

prevent an interim levy by Cargili pending further

determination of what may properly be assessed against

the stevedore. We decline to consider the Justice De-

pariment’s contention because it was neither raised before

the Commission nor advanced by Barma in its petition

for review.

I. Background

By a lease agreement. the Port granted Cargill, as

lessee, “the exclusive right to operate hereunder a public

grain elevator within the Port Area.” The Cargill

facility opened in September, 1955, and Barma has

stevedored vessels there from its inception. In March,

1957, the Port and Cargill amended the lease agreement

so as to authorize Cargill to provide stevedoring services

and “to condition the loading or unloading of a vessel

upon the requirement that Cargill’s integrated stevedor-

ing service be used by such vessels.” The Commission’s

predecessor agency, the Federal Maritime Foard, an-

proved the basic lease, b*.. disapproved the exclusive

stevedoring amendment under £15 and as an “unreason-

able practice” under £17, Agreements Nos. 8225 and

8225-1, 5 F.M.B. 648, 655-56 (195°). The Court of

Appeals for the Fifth Circuit affirmed, Greater Baton

Rouge Port Commission v. United Slates, 287 F.2d &6

A8

(5th Cir. 1961), reh’y denied, 293 F.2d 959, cert. denied,

368 U.S. 985 (1962).

As to the dispute in question, on February 4, 1971,

Gargill informed Barma and all other stevedores using

its Baton Rouge facility that charges would be imposed

for use of services and facilities.° Several days later,

Cargill demanded that the stevedores sign an agreement

requiring payment of 5-cents per ton of grain handled

by Cargill and $50.00 per vessel to defray the cost of

cleaning the dock (J.A. 313).° Since Cargill indicated

it would not deliver grain to a vessel employing a non-

signing stevedore, Barma signed “under protest and

with full reservation of its rights” (J.A. 319-20). In-

formed by Barma of the stevedore charges, the General

Counsel of the Port wrote to Cargill asking that they

be postponed until their legality could be determined

(J.A. 303). The Port, however, made no formal com-

plaint and did not participate in the FMC proceeding. On

March 29, 1971, Barma filed a complaint with the Com-

mission resulting in the administrative actions under

review here.

II. Section 15

Barma claims that the action by Cargill represents a

wholly novel and unanticipated practice that constitutes

a modification of its agreement with the Port of Baton

Rouge, and hence under § 15 is not effective until ap-

* Cargill had not previously charged stevedores for the use

of terminal services and facilities at Baton Rouge, although

it had done so at the Port of Houston in 1967. Four other

Louisiana grain elevators had instituted such charges, al-

though Cargill’s main competitor, the public grain terminal

at New Orleans, had not done so.

* During the course of the administrative hearings, Cargill

informed the stevedores that the charge would be increased

to 8-cents per ton, effective 30 days after the date of a Com-

mission decision in Cargill’s favor, and this would include

the dock clean-up charge (J.A. 395).

PPT Te

OL

= ORR Oe POR

pr

A9

proved by FMC. FMC’s ruling rejecting this claim has

two aspects: (1) that the lease to Caigill gave it a

broad authority which embraces such a practice even

though it was not specifically foreseen; and ‘2) that

Cargill’s exercise of what it understood to be its au-

thority under the lease—even if it was wrong—was a

unilateral action, and not an “agreement” requiring

FMC approval.

We rejec: the FMC’s alternative ground, that Cargill's

action was a unilateral undertaking and not an “agree-

ment” subject to § 15, for this might open the door to

evasion of $15, through unilateral actions by one party

to an agreement and failure to protest by the other.’

However, we agree with the FMC that the lease between

the Port and Cargill can fairly be read to authorize

the termina! operator to seek a return on his capital

improvements by levying charges against those parties

reaping the benefit of his equipment. There is room for

deference to the agency on the interpretation of industry

agreements "—though, of course, less than is due for find-

ings of fact. The language of the lease is broad enough

to give Cargill the same charging authority in this re-

spect as any operator of such a terminal—subject, of

course, to FMC reguiatory authority, and subject to the

* Moreover, if Cargill enjoys unilateral authority to impose

novel charges without seeking prior approval under § 15, be-

cause any such unilateral course is not an “agreement” sub-

ject to that provision, the corollary is that there would be no

§ 15 immunity against antitrust actions, if, e.g., Barma or

the Department of Justice should bring an action charging

that Cargill and its stevedore subsidiary have entered into a

combination or contract in restraint of trade.

* United Gas Pipe Line Co. v. Memphis Light, Gas & Water

Division, 358 U.S. 103, 114 (1958); Gulf States Utilities Co.

v. FPC, U.S.App.D.C. . , 518 F.2d 450, 457

(1975) ; North Atlantic Westbound Freight Assn. v. FMC, 130

U.S.App.D.C. 122, 124, 397 F.2d 683, 685 (1968).

Al0

requirement that the charges be competitive (and not

cause a loss of business to any other port).* The FMC

approved the agreement by which the Port gave the lessee

this operating authority—and thenceforth the lessee made

individual decisions like any other operator within the

bounds of the lease. This is not a case of a fundamental

change in ratemaking methodology that gives a whole

new competitive direction to ratemaking authority. Con-

trast Pacific Westbound Conference v. FMC, 440 F.2d

1303 (5th Cir.), cert. denied, 404 U.S. 881 (1971) ($15

approval required for agreement between two ratemaking

conferences conferring mutual veto power over certain

rates).

Barma argues that Cargill and the FMC are barred

from relitigating the issue whether the underlying lease

agreement governs the relationships between Cargill and

stevedores because the Fifth Circuit answered this in

the negative in Greater Baton Rouge Port Commission v.

United States, supra. There is no merit to this res

judicata argument. The issue determined by the Fifth

Circuit was whether Cargill’s lease with the Port and an

attempted amendment to establish an exclusive stevedor-

ing arrangement were subject to §15; Cargill’s rate-

making power under the lease as to stevedores was simply

not at issue. The language quoted by Barma to the

effect that the amendment broadened the lease to reach

stevedores '’ must be viewed in the context of what was

* The lease required that Cargill “establish and enforce rea-

sonable rules and regulations in the operation of the leased

property”: “maintain and operate the same in an efficient

manner”; and “maintain and publish rates and charges for

the handling and storage of grain .. . on a competitive basis

to rates published for similar services at New Orleans and

other competitive Gulf Ports” (J.A. 294).

‘' The Port Commission and Cargill contend that Agree-

ment 8225-1 does fiot come within the purvi-w of Section

15 of the Shipping Act, and that these provisions merely

eae

All

actually decided; an exclusive stevedoring arrangement

would indeed have entailed a modification of the agree-

ment.

represent the exercise of the free right of managerial

judgment by the Commission as owner and Cargill as

operator of the property. But if Agreement 8225 comes

within Section 15, as we have held, then a fortiori Agree-

ment No. 8225-1, which broadens the lease to include

stevedores—clearly a maritime concern—comes within

Section 15.

287 F.2d at 94.

Barma also quotes the following language from the Federal |

Maritime Board’s opinion in the Greater Buton Rouge Port

Commission litigation, which was substantially incorporated

by the Fifth Circuit in its decision, id:

There is a complete separation of the function of the

elevator in delivering gfain and that of the vessel in re-

ceiving and stowing it. There is no physical connection

between vessel and elevator except mooring and guide

lines. The latter hold the spout which discharges the

grain into the hatch under control of the stevedore.

The elevator has completed delivery when the grain flows

out of the spout. All remaining functions are those of

the stevedore, who in effect takes over the ship’s opera-

tion for the time being. The elevator personnel perform

no function on the vessel; the stevedore personnel per-

form no services in the elevator or on the wharf. There

is, of course, necessity for cooperation between the two

groups as the stevedore must signal terminal personnel

in order to control the flow of grain.

Agreements Nos. 8225 and 8225-1, supra, 5 F.M.B. at 651.

This language is quoted out of context, for the issue addressed

is whether primary regulatory authority over Cargill’s ac-

tivities with respect to stevedoring rests with the Department

of Agriculture or the Federal Maritime Board. The deter-

mination that stevedoring is essentially a maritime matter

within the Board’s purview has no bearing on the issue in

this case—whether the terminal operator furnishes services

and facilities to the stevedore for which charges may be

assessed. The fact that stevedores may perform no services

on the leased premises does not mean that they do not derive

benefit from them.

Al2

Ill. Section 16

Barma claims that Cargill’s charges against it are a

per se violation of §16 because Cargill employs its

wholly-owned subsidiary, Rogers, as a competing steve-

dore. This was properly rejected by the Commission,

which reasoned that as long as Cargill’s terminal is open

to all stevedores and its charges are imposed equally

against all stevedores (including its subsidiary) there

is no “unreasonable preference or practice” under § 16.

Barma has made no showing that Cargill’s charges have

in fact harmed its competitive position vis-a-vis Rogers,

although Barma may have suffered some decline in

profits." While, as the Commission noted, the situation

in this case “could give rise to discriminatory prac-

tices” (J.A. 69), the record simply does ni support

Barma’s apprehension that Cargill intends by predator,

practices to drive it out of the Baton Rouge Port.

IV. Section 17

Regarding its authority under § 17 as extending to the

“practices” by a terminal operator of levying charges

against stevedores for services rendered by its grain

elevator, the Commission found Cargill’s 8-cents charge

against Barma an “unreasonable practice” to the extent

it relied on certain improper allocations.

It is true, as Cargill notes, that the FMC’s scope of

scrutiny under §17 is somewhat narrower than with

respect to common carriers by water in domestic and

foreign commerce. But under Volkswagenwerk v. FMC,

'! As the record presently stands, Barma has lost none of

its share of the stevedoring market at Baton Rouge and has

actually increased its share during the first six months of

the charge, primarily because Barma’s rates did not reflect the

new Cargill charge during this period (J.A. 17). On some oc-

casions, Cargill as charterer has chosen Barma rather than

Rogers to act as stevedore (J.A. 205).

“age

Al13

390 U.S. 261 (1968), the agency’s ambit of inquiry is

nonetheless substantial. The Supreme Court specifically

held that “even though the benefits received are clearly

substantial,” the “proper inquiry under § 17 is, in a word,

whether the charge levied is reasonably related to the

service rendered.” 390 U.S. at 282. See California v.

United States, 320 U.S. 577, 584-85 (1944). That was

the inquiry undertaken by the Commission in this case.

One can make the economic argument that there is no

difference in the long run whether the cost of the grain

elevator is charged to the stevedore rather than the ves-

sel, because the charges will be passed on to the party.

usually the vessel, employing the stevedore to load and

trim the vessel. In the long run, the stevedore’s charge

will be borne by the ultimate beneficiary of the services,

the consumer, regardless of whether the stevedore is em-

ployed by and paid in the first instance by the vessel or

shipper. But at least in the short run, different conse-

quences will attach to differences in the immediate inci-

dence of the charges, depending on the documents nego-

tiated and entered into by the parties prior to the impo-

sition of the new charges. Moreover, the separation out

and identification of the various charges may have a kind

of psychological spillover effect on the behavior of the

various parties, which the Commission can properly take

into account.

The Commission has taken the position, first stated in

Pacific Northwest Tidewater Elevators Ass’n, 11 F.M.C.

369, 388 (1968), that the contractual division of respon-

sibility between the buyer and seller of grain does not

control the proper allocation of terminal costs, and that

those costs should be distributed, to the extent possible,

in accordance with “actual use.” This analysis, however

primitive as a matter of economic theory, is in our

view a reasonable interpretation of the Commission’s

mandate under § 17.

Al4

Here the Commission has ruled that while the grain

terminal is rendering services to the stevedore, it is

an “unreasonable practice” under $17 to assess steve-

dores to the extent of 50% of the cost of the shipping

gallery,'* 100‘¢ of the costs of the grain dock and wharf,

$50 per vessel for dock clean-up, and $25,000 per year

for liaison service, because these charges do not reason-

ably relate to services now rendered to the stevedore

based on actual use. The Commission reasons that to the

exteiit benefits of increased efficiency are conferred by

the grain terminal beyond actual use by stevedores, the

attendant costs are properly assessable against the im-

mediate beneficiaries: the vessel, which can make more

trips because of the vastly shortened loading time, and the

shipper, who can have his grain loaded at greatly de-

creased cost per ton (J.A. 72).

Cargill says there is no evidence of such benefits to

the vessel or shipper, and that the only testimony is

that of its expert, Philip E. Linnekin. There are two

answers to this: (1) The cross-examination of Linnekin

brought out that he had not really made a quantitative

determination of benefits to the stevedore, and that he

Was in a sense relying on his general experience and eco-

nomic theory (J.A. 215-16); (2) The matter is one of

judgment in determining benefits under the so-called

Freas Formula, really an approach based on fairness

and benefits.’ The FMC has expertise and familiarity

'* Cargill’s expert first estimated that the stevedores should

bear 75°: of the cost of the gallery, then revised it to 50%

(J.A. 34).

‘The Freas Formula, developed by Howard G. Freas in

connection with Terminal Rate Strueture—California Ports,

3 U.S.M.C. 57 (1948), involves a two-step determination of

(1) total cost as divided by functional area, and (2) the ap-

propriate revenue item from each benefiting user of the

service or facility to produce a compensating revenue for

the marine terminal. As Cargill expert Linnekin testified,

“(i]t is important to note that while the method is called a

Ald

with the concepts, and so long as it gives its reasons

and the basis of its approach, the FMC is not to he

faulted because it did not put on an expert to make a

recital of its approach in the form of testimony.

Here Cargill did not file a petition for reconsidera-

tion,-or offer a witness to testify that the FMC's ap-

proach was unreasonable. While Cargill expert Linnekin

testified as to how he would recommend an allocation, as

a matter of his “judgment” (J.A. 364), he did not say

that this was the only allocation permissible under perti-

nent principles of regulatory economics.

The court does have a supervisory role—to assure that

the agency does not embark on a course that is arbitrary

or capricious. But the function of the reviewing court 1s

limited. We have no warrant for condemning the FMC's

approach here as unreasonable or arbitrary. The ulti-

mate questions involve judgment, and we cannot say that

FMC’s approach is without rationality, although were

the decision ours we might slice the pie differently.

Admittedly Cargill finds little solace in being able to

assess the shipper because Cargill is the shipper here.”

However, the Commission can insist on a proper alloca-

tion among the benefited parties, disregarding the happen-

stance that a given party may occupy several roles. if

the distribution of the benefit is such that the shipper is

properly assessable where there is no relationship be-

tween the terminal operator and the shipper, the same

allocation applies where they are one and the same. In

any case, Cargill’s dilemma is only in the short run, for

‘formula,’ it is not an immutable equation. Rather, it is a

set of principles which when combined with the judgment of

a trained analyst, provides a reasonable assessment of costs,

and a fair and reasonable allocation of those costs.” (J.A.

364).

'* Cargill owns approximately 90 to 95 percent of the grain

it handles at the Baton Rouge facility (J.A. 175-76).

Al6

if the ground rules are now clearly stated, it will be able

to recoup the charges assessable against the shipper by

getting more from the consignee in future transactions.

At the oral argument, it was said that at Baton Rouge

it is customary for the shippers to sell F.O.B. vessel

(J.A. 163), placing the responsibility on the consignee

to procure the vessel, but even if the documents are not

phrased in that form the actual cost of the supplies on

board the vessel is the dominant economic fact of life,

which determines how much the consignees will pay the

shippers for the grain itself.

The question of whether the Port’s reservation of

“dockage” precludes Cargill from charging “wharfage”

to the vessel is not before us.** The FMC would permit

charges associated with the shipping gallery allocable

to the stevedore to be assessed as “wharfage” against

the vessel (J.A. 73 & n.29). We need not consider what

the FMC would have done, and for what reasons, if it

had been confronted with a case where the Port prevented

** The lease provides that “[n]othing herein shall be con-

strued as prohibiting the Port from charging normal and

competitive dockage fees chargeable to ships using the facil-

ities; but wharfage fees chargeable against the grain shall not

be charged” (J.A. 296). The lease thus precludes Cargill from

charging “dockage,” defined by both the Port’s tariff and

the Commission’s regulations as a charge against the vessel

for tieing up at a dock or wharf, see J.A. 301; 46 C.F.R.

§ 533.6(d) (1) (1974). But it is silent on whether Cargill may

assess “wharfage” against the vessel. The Commission de-

fines “wharfage” as a charge “against the cargo or vessel on

all cargo passing or conveyed over, onto, or under wharves

.... for [its] use of [the] wharf,” see 46 C.F.R. § 533.6(d)

(2). While the Port’s tariff recognizes “wharfage” as a

charge separate and distinct from “dockage” and based upon

the movement of cargo over a facility rather than tieing up

there, it defines the term as “a charge against cargo,” see

J.A. 301. Whether this definition precludes such a charge

against the vessel should be addressed by the Commission.

AlT7

the terminal operator from levying any charge on the

vessel.

Cargill further claims that the Commission's order

prevents any assessment against the stevedore until the

ALJ on remand determines what constitutes a proper

allocation to the stevedore. While the Commission’s rul-

ing lacks clarity, we do not read it to say Cargill can-

not in the interim levy a charge against the stevedore

for “actual use” of the grain terminal. The Commis-

sion’s position at oral argument was that Cargill must

follow the usual procedures under the Commission’»

General Order 15, 46 C.F.R. § 533.3, and file a tariff

with charges based on an allocation consistent wit’ its

ruling. Here Cargill failed to file a tariff in the first

instance, which the Commission found to be an in-

dependent violation of section 17 (J.A. 75)—a ruling

endorsed by all five members of FMC, and not appeale'!

by Cargill. The Commission, far from preventing Cargill

from charging Barma, specifically ordered Cargill to

“file forthwith any and all charges and conditions within

the limits authorized by this decision which Cargill in-

tends to impose” id.

Cargill’s failure to file a tariff does not, in some

mysterious fashion, render improper the Commission dis-

position and remand. Picking up on the point raised by

Commissioners Barrett and Morse in their partial! dis-

sent, Cargill urges that the Commission in effect has

issued an interim injunction, a remedy it does not have

under this court’s ruling in Trans-Pacific Freight Con-

ference of Japan v. FMB, 112 US.App.D.C. 290, 302

F.2d 875 (1962). In that case, however, Judge Wash-

ington held that the Commission was not authorized under

$15 to issue a restraining order pendente lite where the

only justification advanced was a finding of irreparable

injury and there was no finding of a violation of the

Act. Trans-Pacific Freight Conference is inapposite here,

A 18

where the Commission is acting under $17 and has

found a violation of that provision, and where charges

cannot be levied forthwith in view of the terminal

operator’s failure to file a tariff. The Commission’s

course here seems clearly within its powers as outlined

by Justice Frankfurter in California v. United States,

320 U.S. 577, 582 (1944). There Justice Frankfurter

stated that on finding a violation of §§ 16 and 17, “the

Commission was charged by law with the duty of devising

appropriate means for their correction,” which included

issuance of “an order generally prohibiting further pref-

erential and unreasonable practices, leaving the parties

to translate such a generality into concreteness and to

devise their own remedies.” Thus, while under § 17 the

Commission “may” prescribe a “reasonable practice” as

a remedy for a $17 violation, under the California de-

cision it may declare the charges to be an “unreasonable

practice” and leave to Cargill the option in the first

instance of filing a tariff carrying charges consistent

with § 17 and the FMC’s ruling thereon.

At the oral argument there was some discussion of

the consequences of Cargill’s filing of a tariff for a 5-

cents charge subsequent to the issuance of the FMC

order under review. That is not a part of the record

and case before us.

The Department of Justice (Antitrust Division) claims

that the FMC went too far in the authorization of

charges to Barma. The Department says that charges

can only be based on (a) express contract with the

persons charged; (b) a custom at the port, possibly on

the theory that this gives rise to an implied contract;

or (c) actual use, in which case there is either another

kind of implied contract or a subjection to reasonable

tariff regulation."° And the Department says that the

1*The Justice Department agrees with the Commission’s

determination as to Cargill’s allocations to the stevedore for

Al9

benefits ascribed to use cannot be the kind of benefits

inherently accruing to a stevedore whose employees never

set foot on the dock, as an “incidental beneficiary.” In

rebuttal, FMC counsel puts it that even a stevedore whose

employees row to the vessel use the dock when they

attach to the spout on the dock.

Barma sought review only on the ground that Cargill’s

charges violated §§15 and 16." Cargill opposed the

FMC’s authority under § 17 to limit its charges against

stevedores. There was no appeal to this court by anyone

on the ground that, assuming §§15 and 16 to be in-

applicable, the FMC contravened § 17 because it did not

place sufficient limits on what might be charged to a

stevedore. The approach of the Antitrust Division was

neither presented to the FMC, nor made the subject of

a petition to review. We have no jurisdiction to rule

on its merits.

Affirmed.

the shipping gallery and dock clean-up and liaison service,

although for different reasons. As to the wharf and utility

allocations, it would expressly condition the charge on actual

use by the stevedore; as to overhead, it would require a re-

calculation to reflect the reduction in other charges to the

stevedore resulting from the Commission’s decision. Brief

for the United States of America at 12.

1* Whatever contention Barma may have previously made

that any charges against the stevedore would constitute an

“unreasonable practice” under § 17 was abandoned in this

appeal. Indeed, Barma filed a brief as intervenor in No.

75-1018, involving Cargill’s petition for review, endorsing

the Commission’s application of § 17.

B-1

FEDERAL MARITIME COMMISSION

SERVED

JANUARY 7, 1975

FEDERAL MARITIME COMMISSION

DOCKET NO. 71-29

BATON ROUGE MARINE CONTRACTORS, INC.

v.

CARGILL, INCORPORATED

Charges assessed and conditions imposed by respondent upon

all stevedores operating at its leased terminal facility do

not constitute a modification to an approved section 15

agreement for which further Commission approval is

required.

No unreasonable preference or privilege as contemplated by

section 16 First of the Shipping Act, 1916, resulted from

the imposition by respondent of charges and conditions

on all stevedores,including respondent’s subsidiary.

The relationship between a terminal operator and a wholly-

owned stevedore does not ipso facto render charges

assessed and conditions imposed equally on all stevedores

as unduly anticompetitive or discriminatory, especially in

the absence of proof of actual damage to the complain-

ant.

Assessement of charges and imposition of conditions upon

stevedores found not to be reasonably related to the

economic and commercial benefits derived by the steve-

dores, and thus to be an unjust and unreasonable practice

within the meaning of section 17 of the Shipping Act,

1916.

B-2

Failure to file new assessed charges and imposed conditions

in terminal tariff found to be an unjust and unreasonable

practice within the meaning of section 17 of the Shipping

Act, 1916.

The matter is remanded to the Administrative Law Judge

for resolution of the sole issue of achieving a proper

allocation formula with regard to actual benefits derived

by stevedores from use of terminal facilities and for

arriving at a proper charge against stevedores based there-

on.

Edward S. Bagley for Baton Rouge Marine Contractors,

Inc.

Edward Schmeltzer and E. J. Sheppard IV for Cargill,

Incorporated.

Donald J. Brunner, Margot Mazeau and Patricia E. Byrne

as Hearing Counsel.

REPORT

BY THE COMMISSION : (Helen Delich Bentley, Chairman,

and James V. Day, Vice Chair-

man. Ashton C. Barrett and

Clarence Morse, Commissioners,

concurring and dissenting. George

H. Hearn, Commissioner, concurr-

ing and dissenting.)

I. PROCEEDING

This proceeding arises from a complaint filed by Baton

Rouge Marine Contractors, Inc. (BARMA or complainant)

on March 29, 1971, alleging that Cargill, Inc. (Cargill or res-

pondent) has violated and continues to violate section 15,

16 and 17, Shipping Act, 1916 (the Act), by unilaterally

modifying a lease agreement between Cargill and the Greater

Baton Rouge Port Commission (Port), which agreement had

B-3

previously been approved by the Commission. The subject

modification allegedly imposed unlawful charges and con-

ditions upon stevedores conducting business at the marine

grain elevator at Port Allen (Baton Rouge), Louisiana, and

was not filed with the Commission. BARMA seeks a cease

and desist order.

Cargill denies any modification of the lease agreement,

unilateral or otherwise, or that it has violated the Act. Res-

pondent admits to having informed BARMA that it would

not deliver grain from the elevator to any vessel employ ing a

stevedore who had not agreed to certain proposed charges

and conditions, but maintains that such action was lawful,

proper and within the terms of its lease agreement. Hearing

Counsel intervened in the proceeding.

Hearings were held in New Orleans, Louisiana on Novem-

ber 30 and December 1, 2, and 3, 1971, and on April 24 and

25, 1972, in Washington, D.C.

In his Initial Decision served December 1, 1972, Adminis-

trative Law Judge Ashbrook P. Bryant concluded that the

charges assessed and the conditions imposed by Cargill upon

the stevedores as a prerequisite to loading grain on vessels

at Port Allen constitute a modification of the lease agreement

between Cargill and the Port previously approved by the

Federal Maritime Commission, and the execution of that

modification without prior filing with and approval by the

Federal Maritime Commission, and the execution of that

modification without prior filing with and approval by the

Commission violates section 15 of the Act. He also found

that the charges and conditions imposed by Cargill, with

minor exceptions, were not reasonably related to the econo-

mic or commercial benefit of the stevedore from the use of

facilities and services provided by the terminal, and thus

constitute unjust and unreasonable practices violative of

section 17 of the Act. Accordingly, the Administrative Law

B4

Judge found that Cargill should cease and desist from assess-

ing, charging and collecting the fees and charges and imposing

the regulations found to be unlawful.

As to the possible section 16 viol’ ‘ons, the Administrative

Law Judge found that the relationship between a terminal

operator and a wholly-owned stevedore does not in and of

itself render charges assessed and coaditions imposed equally

on all stevedores unlawful as unduly anti-competitive and dis-

criminatory, especially in the absence of proof of actual

damage to the complainant. While a substantial competitive

advantage may accrue to the parent-subsidiary combination

from the assessment of charges and imposition of conditions

on all stevedores, including the subsidiary, no unreasonable

preference or privilege of the type contemplated by section

16 First of the Act has been shown.

BARMA filed exceptions to the Initial Decision on Decem-

ber 15, 1972, as did Cargill and Hearing Counsel on Decem-

ber 18, 1972. All parties filed replies to exceptions on Janu-

ary 12, 1973. Oral argument was held on March 7, 1973.

Il. FACTS

Parties

BARMA, a Louisiana corporate entity, is equally held by

four contracting stevedores and/or steamship agents, T.

Smith & Son, Inc., Strachan Shipping Company, Atlantic &

Gulf Stevedores, Inc. and Texas Transport and Terminal

Co., Inc.

Cargill is incorporated in Delaware and with home offices

located in Minneapolis, Minnesota. It is engaged in selling,

loading, unloading, storing and delivering grain and related

commodities, exporting much of the grain through 12 ter-

minals it operates, including the Baton Rouge facility. At

i

’ B-5

Baton Rouge, Cargill is engaged in the business of furnishing

wharfage, dock, warehouse, or other terminal facilities in

connection with common carriers by water.

Rogers Terminal and Shipping Corporation (Rogers) is a

wholly-owned subsidiary of Cargill and operates as a general

cargo and grain stevedore company/steamship agent with

operative offices at Baton Rouge.

The Port owns the grain elevator herein discussed, and is a

regulatory agency of the State of Louisiana. The Port is

engaged in the business of furnishing wharfage, dock, ware-

house, or other terminal facilities in connection with com-

mon carriers by water.

History

In 1955, the Port leased the grain elevator and wharf at

Baton Rouge to Cargill. The four stevedore firms mentioned

earlier, following encouragement by the Port, and with the

assurances of Cargill that the elevator would remain open

competitively, formed BARMA to compete for stevedoring

operations at the grain facility.

in August 1956, Cargill replaced BARMA with Rogers,

its subsidiary, as sole stevedore on the grounds that

BARMA’s performance was deficient. Complainant was ad-

vised that it was no longer welcome at the elevator.

In March 1957, the Port and Cargill agreed that Rogers

should be the exclusive stevedore at the elevator. BARMA

refused to withdraw and protested the exclusive stevedore

arrangement which was provided for in the lease which the

Port and Cargill filed with the Federal Maritime Board

weneere

B-6

(Board) for approval.'

While the Board approved the original lease (Agreement

No. 8225), the amendment (Agreement No. 8225-1) was

found to ‘‘create in Cargill a monopoly over activities which

take place exclusively on the vessels and not on terminal

property” and to be “detrimental to the commerce of the

United States”, and that its operation would constitute an

unjust and unreasonable practice relating to the receiving,

handling and storing of property in violation of section 17 of

the Act.* The amendment was not approved. Accordingly,

BARMA continued to operate as stevedore at the terminal

on an “open’”’ basis.

The lease

The lease, a comprehensive and detailed contract covering

waterfront land and improvements, is for a term of 20 years

from September 7, 1955 to September 6, 1975, with options

to renew under certain conditions for additional periods of

10 years each. Cargill has the right to “‘have, hold, occupy,

possess and enjoy the leased premises” during the term and

any renewal periods “to the exclusion of all others save and

except those using said leased premises with the consent,

1. See Agreements Nos. 8225 and 8225-1, 5 F.M.B. 648 (1959). The

further agreement [8225-1] was as follows:

Cargill further is required to and agrees to provide and furnish

stevedoring services to vessels loading or unloading at the wharf,

it being recognized thet vessels loading or unloading should be in-

tegrated into the overall elevator operations so as to provide effici-

ent service, both to such vessels and to persons depositing commodi-

ties into the elevator. it is to be a reasonable rule and regulation

in the operation of the wharf which is part of the leased property,

for Cargill to condition the loading or unloading of a vessel upon

the requirement that Cargill's integrated stevedoring service be used

by such vessels.

2. Agreements Nos. 8225 and 8225-1, supra note 1.

B-7

express or implied, of lessee.”” The obligations of both lessor

and lessee with respect to repairs, renewals, maintenance,

replacement and restoration of the premises not reimbursed

through insurance proceeds are specified within the agree-

ment, and the rights and obligations of the parties are to be

integrated with the overall operations of the Port insofar as

is possible without violating the other provisions of the lease.

The leased facilities are to be maintained throughout the

period of the lease, or any extended period thereof, as a pub-

lic port facility.

Lessee agrees that it will establish and enforce reasonable

rules and regulations for the operation of the facility and will

maintain and operate it in an efficient manner and will

accept grain without “discrimination between persons desir-

ing to avail themselves of such facilities, as to rates and ser-

vices.” To the extent feasible, lessee agrees to give “‘prefer-

ence to this grain elevator over other grain elevators operated

by lessee in the Gulf area.” Further, lessee agrees to publish

rates and charges for the handling and storage of grain com-

petitive to those for similar services at New Orlear:: and other

competitive Gulf ports so as to insure a schedule of rates,

rules and regulations competitive and comparable to those

maintained in New Orleans and other competitive Gulf

ports.

So far as may be lawful, the Port agrees to give lessee

‘preferential privileges in and to the docks, wharves, roads,

and railroad facilities necessary or convenient to the effici-

ent and economical operation of the leased premises and the

business conducted therein and thereon.” The Port agrees

to give Cargill the most favorable rates for services and

facilities granted to any other person. The Port’s rates shall

be “competitive with, and not greater than rates for similar

services and privileges charged at other Gulf ports, including

but not limited to New Orleans, Louisiana; Galveston and

Houston, Texas.”’ Nothing contained in the lease shall be con-

——— -

B-8

strued as prohibiting the Port from charging normal and

competitive dockage fees chargeable to ships using the facili-

ties, but wharfage charges chargeable against the grain shall

not be charged by the Port. Cargill shall have the exclusive

right to operate a public grain elevator “‘as defined by law”

within the Port area and shall have right of first refusal on

any additional grain storage and handling facilities which the

Port may construct in the event that the present facilities

become inadequate, “‘on such terms and for such payments as

the Port is prepared to make to responsible third perse ~ in

good faith.”

As before stated, the Board refused to approve the Cargill/

Rogers exclusive stevedoring arrangement at Baton Rouge.

This decision was appealed; and the Court of Appeals affirm-

ed the Board’s decision.

In its report, the Board had described in some detail the

relationships among vessel, master, stevedore, and elevator.

The relation between vessel and stevedore involves

trust, reliance, and dependence on the skill, relia-

bility, and efficiency of the stevedore in the per-

formance of an important ship-operating function.

Under the form of grain charter used in the Gulf,

including Baton Rouge, the vessel owner appoints

the stevedore, except where by special provision

the right of appointing is given the charterer. In

all instances, the decision on all matters of loading

rests with the master, the vessel and her owners

are legally and contractually responsible for the

proper loading and seaworthiness of the vessel, and

they pay the cost of loading.

3.. See Greater Baton Rouge Port Commission v. United States, 287 F.

2d 86 (1961), cert. den. 368 U.S. 985.

B-9

There is a complete separation of the function of

the elevator in delivering grain and that of the

vessel in receiving and stowing it. There is no phys-

ical connection between vessel and elevator except

mooring and guide lines. The latter hold the spout

which discharges the grain into the hatch under

control of the stevedore. The elevator has comple-

ted delivery when the grain flows out of the spout.

All remaining functions are those of the stevedore,

who in effect takes over the ship’s operation for

the time being. The elevator personnel perform no

function on the vessel; the stevedore personnel

perform no services in the elevator or on the wharf.

There is, of course, necessity for cooperation be-

tween the two groups as the stevedores must signal

terminal personnel in order to control the flow of

grain. (p. 651)

The decision of responsibility and authority as defined by the

Court and the Board remain largely unaltered and are pre-

sently operative at Port Allen.

In New Orleans Steamship Assn. v. Bunge, Etc., 8 F.M.C.

687 (1965), an exclusive stevedoring arrangement was not

ruled on by the Commission because it was determined that

Bunge was not “an other person subject to the Act”, and

hence we had no jurisdiction. Subsequent to that decision,

the Department of Justice, Antitrust Division, instituted an

investigation into the exclusive stevedoring at Gulf grain

terminals. Consent decrees were entered against several eleva-

tors, including Bunge and another elevator located on the

Mississippi River below the Port of Baton Rouge, whereby

the defendant elevator owners were enjoined and restrained

from imposing “any requirement cr understanding that

stevedoring services of any particular person be utilized”

at the elevators by vessels loading there and from “denying or

otherwise restricting any person access to and the use of the

facilities at the terminal or dock of an elevator in order to

B-10

provide stevedoring services for loading at the elevator.”

The injunctions did not, however, prohibit the elevator

operator from establishing reasonable regulations for access

and use of the facilities if such regulations were applicable to

all.

In 1966 Cargill was served with a civil investigation de-

manded by the Justice Department concerning its elevator at

Port Arthur, Texas, and had not, in the interim period, im-

posed any restrictions on the stevedores at Baton Rouge.

ill feels that marine terminal elevators provide bene-

fits to stevedores for which the elevator should be compen-

sated. In 1967, when the Houston elevator opened, Cargill

instituted the stevedore agreement which has been in exis-

tence since that time. All of BARMA’s members except T.

Smith & Son, Inc., which does not operate at Houston,

signed the agreement without complaint.

In 1970, four other Louisiana grain terminals instituted

charges and agreements similar to the one at issue. Conse-

quently, Cargill, in a letter of February 4, 1971, and revised

February 10, 1971, informed BARMA and other stevedores

using its Baton Rouge facility of certain conditions the

stevedores must meet to use elevators. The basis agreement

now in force provides as follows:

The stevedore will provide sufficient crews of long-

shoremen so that the elevator may operate at

capacity. The stevedore will pay $100.00 per hour

if he fails to provide enough longshoremen. The

stevedore will post a $2,000.00 deposit to secure

this obligation, and Cargill will pay interest on the

deposit.

The stevedore will pay 5¢ per ton of grain handled

for services and facilities provided to it by Cargill,

and will pay $50.00 per vessel to defray the cost

-

B-11

of cleaning the grain dock. The stevedore will

a $1,500.00 deposit to secure these obligations.

The stevedore will adhere to federal equal employ-

ment guidelines and regulations.

The stevedore will use utmost care in his oper-

ations, will hold Cargill harmless from damages

caused by the stevedore’s operations, and will

provide evidence of adequate liability insurance

coverage by companies acceptable to Cargill.

The stevedore will provide adequate supervision for

his operations, which will be performed in a

“workmanlike” manner.

BARMA protested the agreement, but was advised by

Cargill that no vessels would be loaded unless the agreement

was executed. Accordingly, BARMA signed the agreement

under protest. BARMA and Rogers thereafter raised their

rates to compensate for the charges imposed by Cargill.

Cargill’s initial charges were 5¢a ton. During the course of

the hearings in this case, on December 17, 1971, Cargill

advised the stevedores that the 5¢ charge would be increased

to 8¢ per long ton, “effective 30 days after the date of the

Federal Maritime Commission’s decision in Docket 71-29. . .”

By letter of February 13, 1971, the Port protested the

proposed increase and requested Cargill to cancel or postpone

the increase until it could be considered and legally resolved.

While the Port did not intervene in the proceeding, its execu-

tive director testified that the Port considers Cargill’s action

in imposing “charges on vessels utilizing the facility oc the

stevedores hired by them to serve those vessels” as a viola-

tion of the lease agreeme:c, “detrimental to the Port of

B-12

Greater Baton Rouge”’, and tending to reestablish Rogers as

an exclusive stevedore through the manipulation of the

access charges and stevedoring rates. Since there are no

access charges at the Public Grain Elevator in New Orleans,

which is the primary competitor of the Baton Rouge Grain

Elevator, the Port Commission fears that the Cargill charges

against stevedores, which are being passed on to the vessel,

may render the Port noncompetitive; however, there is no

apparent substantiation of this fear.

III. INITIAL DECISION

The Administrative Law Judge initially looked to the law-

fulness of the charges and conditions imposed by Cargill.

Cargill’s position, as earlier stated, is that its actions are,

within the authority and powers granted to it under the

lease, completely legal and no modification of its section 15

agreement has been effected.

BARMA and Hearing Counsel urge that Agreement No.

8225 has been unlawfully modified by Cargill’s unilateral

action. The Administrative Law Judge, in his consideration

of the matter, reviewing the lease arrangement at Baton

Rouge, found “reasonable doubt’’ that the original lease

intended to and did clothe Cargill with authority tc impose

the charges and conditions it did.‘ In its brief, Cargill further

contends that, arguendo, even if its actions resulted in a

4. Cargill explains that the lease gives it only “preferential” and not

exclusive use of “the docks, wharves, roads, etc."’ only because of a

‘peculiarity’ of Louisiana law which prohibits a state body from

“leasing” certain waterfront facilities, such as docks, to any person.

Cargill asserts that in order to comply with this law and still give

terminal operators and others a maximum degree of contro! over

“premises for which they are paying’, the Port Commission has

adopted a concept of “privileged use’’, which, according to Cargill,

in every material respect is the same as a full lease.

B-13

modification of the agreement, since that modification was

unilateral (the Port having no part in the assessment of

charges and conditions upon the stevedores) and not “‘joint

or cooperative” as envisioned by section 15, such modifica-

tion would not be subject to section 15 and thus not need

Commission approval.

Hearing Counsel point out that there is no precise prece-

dent for a unilateral modification within the purview of

section 15, but that since section 15 agreements are not pri-

vate contracts between private parties, the Commission has

the duty to oversee such arrangements where they affect the

maritime industry. Hearing Counsel argue that the fact that

Cargill acted alone in imposing the charges and conditions

does not divest the Commission of its authority to consider

the import of the agreement.

The Administrative Law Judge determined that the Act

does not permit substantial changes in the effect of a section

15 agreement to be taken lightly. Since the Act is remedial

in this nature, any doubt should be resolved in favor of the

applicability of section 15, and any modification of such an

agreement except in unusually clear cases should be scruti-

nized by the Commission.

The Administrative Law Judge further observed that the

modification did introduce an element into the agreement

which was not contemplated at the time the lease was negoti-

ated and, accordingly, ruled that the charges and conditions _

contained in Cargill’s letcers of February 10 and December

17, 1971, constituted a modification of an approved agree- |

ment requiring section 15 approval.

The Administrative Law Judge, in viewing the Cargill/

Rogers relationship found a situation “fraught with potential

B-14

abuse”, but found no specific evidence on the record to sub-

stantiate charges of undue economic disadvantage to BARMA

or other stevedores and shippers. He found little doubt that

a substantial competitive and economic advantage would

accrue to the Cargill /Rogers arrangement from the imposition

of the charges herein considered, but, said the Administrative

Law Judge, it does not follow ipso facto that the charges and

conditions are unlawful since the charges and conditions are

imposed equally on all stevedores.” Accordingly, while the

Administrative Law Judge felt the potential anticompetitive

effect flowing from the parent-subsidiary relationship should

be reason enough to closely scrutinize its charges and con-

ditions for reasonableness, he found no proof of actual dam-

age to BARMA and no unreasonable preference or prejudice

resulting simply from the Cargill/Rogers relationship.

As the “crux” of the case, the Administrative Law Judge

addressed himself to the question as to whether the charges

and conditions imposed on stevedores by Cargill as a pre-

requisite to doing business at Baton Rouge may be fairly

and directly related to benefits derived from the use of the

terminals, facilities and services performed by Cargill.

The Administrative Law Judge felt that no violence would

be done to generally accepted principals of fairness if such

were the case to require BARMA and others to pay for the

benefits they receive.

5. Citing Pittston Stevedoring Corp. v. New Haven Terminal. inc, 13 F.

M.C. 33, 35 (1969).

6. Citing Lake Charles Harbor and Term. Dist. v. Port of Beaumont,

12 F.M.C. 244, 248 (1969); Phila. Ocean Traffic Bureau v. Export

S.S. Corp., 1 U.S.S.B.B. 538 (1936); Port of New York Authority

v. AB Svenska, et a/., 4 F.M.B. 202 (1953).

B-15

Cargill maintains that the charges and conditions are fair.

BARMA and Hearing Counsel contend that the facilities and

services for which charges and conditions are imposed are not

primarily for the benefit of stevedores, and hence, with a

minor exception, are unfair and unreasonable.

The Administrative Law Judge then proceeded to discuss

the Edwards-Differding Formula and the later Freas Formula

used for the determination and allocation of costs in marine

terminals in relation to the testimony of Philip E. Linnekin,

Cargill’s expert witness. Essentially, the Administrative Law

Judge, in sifting down the testimony, came to the conclusion

that the applicability of the Freas Formula can be affected

by the judgment of a trained analyst, by agreement, and/or

by custom and usage. To apply the Freas Formula, which

historically was applied to general cargo terminals allocating

costs between vessel and cargo, to cargo and stevedores, while

novel, does produce certain workable data, which the Admin-

istrative Law Judge referenced at length in his Initial De-

cision. Applying that date to formulate charges and con-

ditions and thereafter imposing these charges and conditions

upun stevedores is not unlawful, he found, provided the

charges and conditions are fair, reasonable and related to

facilities and services provided stevedores for their benefit.

As support for this position, the Administrative Law Judge

noted that several competitive grain elevators now assess

similar charges and conditions, and there is no evidence of

record that Baton Rouge has lost any vessels to the public

grain elevators at New Orleans, although that elevator does

not impose like charges and conditions.

The Administrative Law Judge discussed particular “bene-

fits” to stevedores including a shipping gallery and grain

dock. The shipping gallery is a “highly refined” mechanical

conveyor system for delivering grain from the elevator to the

as

B-16

vessel, without which it would take “scores of longshoremen

moving grain in bags” to convey equal amounts of grain. The

grain dock, a platform at the river end of the gallery, houses

the machinery and the spouts which bring the grain into a

position where it can be dumped into the vessel. Additional-

ly, water, toilets, telephones, utilities and dock clean-up and

liaison service are also benefits to the stevedores for which it

is contended they should pay. Additionally, the Linnekin

study allocates land rental charges to the stevedores.

The Administrative Law Judge then discussed each facility

and service and arrived at the following conclusions:

1. The shipping gallery. According to the rule enunicated

in Greater Baton Rouge Port Commission v. United States,

supra, note 3, the function and responsibility of the steve-

dore does not attach until the grain is discharged from the

loading spout over the hold of the vessel. The loading spout

can be equated with “ships tackle” or “point of rest”

wherein general cargo is considered delivered to the ship.

The speed of transit of the gallery is an advantage to the ele-

vator, not the stevedore. The Linnekin study allocated costs

initially at the rate of 75 percent of the gallery rental to the

stevedore, 25 percent to the cargo; then 50-50. The con-

structed charges under this theory appear duplicative of the

charges to the holders of warehouse receipts, and accordingly

the Administrative Law Judge found that the cost of the

shipping gallery is not shown to be a proper and reasonable

charge against the stevedores.

2. Grain dock-wharf. Linnekin states the wharf benefits

stevedores because it allows ingress and egress to and from

the vessel. However, the Administrative Law Judge found

that the vessel is the primary beneficiary of the wharf. How-

ever, the cost had been allocated 100 percent against the

B-17

stevedores. The wharf included the entire barge unloading

facility, pile clusters, the dust collection system, a multi-

platform structure, upper and lower catwalks and the spouts.

The Administrative Law Judge found that the barge unload-

ing facility is used strictly for Cargill's benefit, the pile

clusters are used exclusively by the vessels, and the dust

collection system is used to avoid grain dust explosions.

3. Water, toilets, telephones and utilities. These items total

$933.00 per year and include certain unsubstantiated

charges. Basically, the stevedores are being charged for a

Cargill-supplied sound powered telephone, fixtures, fuses,

bulks and labor and Cargill-furnished electricity for lighting

the wharf. Under Cargill’s tariff, the vessel is required to

furnish adequate lighting for night reception of cargo.

4. Dock clean-up and liaison service. These items were

allocated at four man-hours per day and costs thereof. The

Administrative Law judge found that the dock is cleaned

only sporadically and “liaison fees’’ of $25,000 a year are

unsubstantited.

5. Overhead expenses. These were allocated at 2.3 per-

cent to the stevedores. Such expenses included Cargill’s

overall terminal elevator administrative expenses (of which

16.88 percent was allocated to Baton Rouge), Minneapolis

branch office administrative expenses, management fees,

and New York office expenses.

The Administrative Law Judge summarized his findings as

follows:

On the basis of the record the costs allocated to stevedores

aie —

B-18

as the basis for the charges and conditions imposed by Car-

gill have not been shown to be reasonably related to use or

benefit to stevedores from services and facilities provided by

Cargill. The principal facilities upon which the charges and

conditions are sought to be justified by Cargill are the shipp-

ing gallery and the wharf. Neither facility is maintained and

operated principally for the benefit of stevedores. The con-

tention that the “‘benefit’’ to the stevedore from the shipping

gallery and the grain dock is the transportation of the grain

one thousand feet from the elevator to the vessel is not valid.

The stevedoring function and, hence this “benefit” to steve-

dores, does not begin, for all practical purposes, until the

grain is delivered at the end of the spout. The fact that the

mechanism of the shipping gallery permits more rapid de-

livery of the grain at the end of the spout benefits the cargo

and, perhaps, the vessel. It does not appreciably benefit the

stevedore. His function is to properly load the vessel with

grain “delivered” by the terminal at the end of the spout

over the hold. Cargill’s function is to make grain available for

loading the vessel by delivering it at that point. Without the

shipping gallery in its entirety, Cargill could not deliver the

grain from elevator to spout end. Also, the charge to steve-

dores for the shipping gallery duplicates the charge on hol-

ders of warehouse receipts for the same facility. No cost

allocable to the shipping gallery may properly be charged to

the stevedore.

Since the Port Commission, under the terms of the lease,

charges vessels for the use of the wharf though dockage

fees, no part of the cost of the wharf may properly be charg-

ed to stevedores. It does not appear that either the clean-up

charge or the liaison charge is justified on the basis of this

record. Nor is the allocation of overhead justified on the

basis of the record.

B-19

The Administrative Law Judge thereafter discussed the

four regulations Cargill has imposed upon the stevedores, to

wit: (1) requiring execution of an agreement that the steve-

dores will exercise “utmost care” in conducting their opera-

tions, coupled with a contractual indemnity agreement;

(2) insurance coverage in specified amounts written with

companies acceptable to Cargill’s reasonable satisfaction;

(3) $100.00 per hour liquidated damages for delays caused

by stevedores; and (4) deposits totaling $3500.00 to secure

payment of the charges. The Administrative Law Judge

found the standard of “utmost care’’ unreasonable and the

indemnity agreements unfair as against public policy. He

found the insurance requirement susceptible to abuse in that

Cargill must be “reasonably” satisfied as to which company

writes the policy. The $100.00 per hour liquidated damage

provision is a one-sided arrangement. The Administrative

Law Judge felt that BARMA was entitled to a reciprocal

clause. Lastly, he found the deposit of $1500.00 to secure

payment of the access and dock cleaning charge to be un-

reasonable and unsupported by facts; however, the $2000.00

deposit to secure payment of liquidated damages was found

to be reasonable, if Cargill posted a similar deposit for delays

it caused.

One argument raised by Hearing Counsel in its Answer and

rebutted by Cargill in its Reply was that Cargill’s failure to

_ file the subject charges and regulations in its terminal tariff

is violative of Section 17 of the Act. The Administrative Law

Judge did not address himself to this issue in the initial

decision, but we will consider it in our final determinations.

IV. EXCEPTIONS

Exceptions and replies were filed by all parties in the pro-

oe

B-20

BARMA excepts to the initial decision on the single

ground that it is in error as a matter of law, in that it fails

to hold that the compulsory imposition of the charges a-

gainst stevedores by Cargill in its dual role as a terminal

operator and stevedore is unlawful per se, is unduly anti-

competitive and discriminatory, constitutes an unreasonable

preference or privilege in violation of 16 First of the Act, and

is an unjust and unreasonable practice in violation of section

17 of the Act.

Complainant urges that because of the status of the Car-

gill/Rogers arrangement, it competes with BARMA and is

thus levying charges against competitors, an illegal, anti

competitive practice. BARMA calls the Cargili/Rogers re-

lationship a “sham”, urging that all that transpires is that

when Rogers pays the charges, money merely passes from

one pocket to the other. Complainant compares this case

to the Commission’s decision in California Stevedore &

Ballast Co., et al. v. Stockton Elevators,Inc.,’ (hereinafter

Stockton) and argues that Stockton demonstrates precisely

why Cargill’s scheme is unlawful: i.e., where a terminal

operator seeks to compete as a stevedore, either directly or

through a stevedore subsidiary, affiliate or subcontractor,

any compulsory charge imposed by it against competing

stevedores will be unlawful per se.

BARMA urges that the substantial competitive and econo-

mic advantage obtained by the Cargill/Rogers arrangement

constitutes actual damage to BARMA, and because Cargill

is capable of absorbing the cost, the practice will eventually

put BARMA out of business.

7. 8 F.M.C. 97 (1964).

B-21

Judge’s decision insofar as it finds that the charges and con-

ditions imposed by Cargill have no harmed BARMA, are

neither preferential nor discriminatory, and do not violate

section 16 of the Act. Cargill takes issue with that portion of

the initial decision which concludes that the charges and con-

ditions constitute an unfiled modification of a section 15

agreement and that they are unjust and unreasonable prac-

tices in violation of section 17 of the Act. Cargill argues that

the Administrative Law Judge erred in concluding that this

case is an extension of its previous litigation, and contends

that the two cases are not related at all.

Cargill essentially reargues its position that it acted uni-

laterally, and hence the charges it has established were not

instituted pursuant to an agreement between Cargill and the

Port. Respondent then cites several Commission cases where-

in it was held that we have no jurisdiction under section 15

over unilateral action.® Cargill urges that it has not modified

the initial lease agreement, and that a fair reading of the lease

indicates that the Port meant to transfer plenary power to

Cargill to deal with stevedores or any other third party at the

elevator.

Cargill maintains that lease disputes should be settled by

the parties and that the Commission should not act as an

umpire of section 15 agreements. As further support for its

arguments, Cargill cites Boston Shipping Assn. v. Port of

Boston Marine Terminal Ass’n.,? where the Commission held

certain joint activities, to wit: a change in allocation of a

8. See, Agreement No, T-2423 Between the Port of Seattle, Washing-

ton & Pacific Molasses Co., FMC Docket No. 70-35, 12 $.R.R. 221,

222 (1971); Agreement No. 9431, Hong Kong Tonnage Ceiling

Agreement, 10 F.M.C. 134, 140 (1966).

9. 10 F.M.C. 409 (1967).

B-22

charge by parties to an approved section 15 agreement, did

not constitute a new agreement or modification of the

existing agreement. Cargill maintains that the present case,

except for the joint activity, is identical, merely involving the

shift of a charge from one party to another.

“Cargill further argues that the Linnekin studies establish

that benefits do accrue to the stevedores, contrary to the

Administrative Law Judge’s findings that the costs are not

reasonably shown to be related to use or benefit to steve-

dores. Cargill calls this decision erroneous, stating that it

demonstrates a complete lack of understanding of the Freas

Formula and its use. Cargill urges that the Commission

decision in Rates and Practices of the Pacific Northwest

Tidewater Elevators Ass'n’? in which the Commission at page

390 of that decision adopted the standard suggested by Mr

Linnekin that the Freas Formula (that the loading operation

begins somewhere along the shipping gallery) should be con-

trolling, and that the Administrative Law Judge rejects this

holding without explanation." " Cargill urges reversal of this

portion of the initial decision.

10. 11 F.M.C. 369 (1968).

11. Cargill surmises the reason for the Administrative Law Judge's

rejection of the “controlling rule” is that the presiding Judge ap-

parently thought that Pacific Northwest Elevators, supra, note 10,

was inconsistent with the earlier court decision in Greater Baton

Rouge Port Commission, supra, note 3. The two decisions are in no

way inconsistent, says Cargill; Greater Baton Rouge Port Com-

mission simply found that the Federal Maritime Board had juris-

diction over marine terminal elevators. in the Pacific Northwest

Elevators case, seven years later, the FMC exercised this jurisdic-

B-23

Cargill cites several “glaring errors’’ in the initial decision

and discusses them as follows:

1. The Administrative Law Judge dismissed the “‘sub-

stantial testimony” that the stevedores benefit from the high

output and rapid speed of the elevator.

2. The cost allocated to the stevedores “appears to be

duplicative of the charges to holders of warehouse receipts”’;

Cargill does not find this on the record.

3. Acost item of $933 per annum for water, toilets, tele-

phones and utilities was not susceptible to verification from

underlying data. Cargill states its witness Pederson was

available for cross-examination.

4. There are no figures to substantiate the sum of $25,000

for liaison services. Cargill states that while it furnished no

figures, it did give testimony of its liaison functions and em-

ployed full time help in this capacity.

5. Lastly, Cargill says the initial decision rejects any allo-

cation for cost for overhead to stevedores, despite testimony

of two expert accountants.

In summation, Cargill requests reversal of the initial de-

cision and dismissal of the proceeding.

Hearing Counsel fully subscribe to the Administrative Law

Judge’s ultimate conclusions, except to strike and correct

certain statements of fact!? tisting them as follows:

1) Correct certain quoted language from the lease to

12. Such facts have been corrected herein, as necessary.

B-24

conform to the specific language of Articles 7, 10 and 17 of

the lease.

2) Modify the quoted conditions imposed by Cargill as

set forth earlier in this report to read as follows? ?

The stevedore will use utmost care in his operations,

... and will provide evidence of liability insurance

coverage with limits as follows:

Employers’ liability including coverage under

Federal Longshoremen’s and Harbor Workers

Compensation Act - $100,000;

Comprehensive general liability including automobile:

(i) bodily injury - $200,000 each person;

(ii) $500,000 each accident;

(iii) property damage - $500,000 each accident.

V. REPLIES TO EXCEPTIONS

BARMA replied to Cargill’s exceptions urging that Cargill

has a monopoly in the elevator pursuant to the section 15

agreement and that any actions taken under the agreement

are subject to the agreement. BARMA then rebuts Cargill’s

reference to the “unchallenged” rule of Boston Shipping,

supra, note 9, urging that the Commission is well aware that

the Court of Appeals for the First Circuit reversed the Com-

13. The original language in the initial decision did not specifically

state the limits and categories of insurance to be provided.

B-25

mission decision,'* and that the controlling theory in this

matter is represented by Volkswagenwerk v. F.M.C."*BAR-

MA urges again that Cargill’s charges and conditions are not

justified, and provide no benefit to the stevedore, and that,

contrary to Cargill’s contention, the decision in Rates and

Practices of Pacific Northwest Tidewater Elevators Ass’n.,

supra, note 10, is erroneous and not controlling.

Cargill replied to the exceptions of BARMA and Hearing

Counsel, urging that contrary to the position of BARMA,

a terminal operator affiliated with a stevedore operating at

that terminal may impose uniform charges against all steve-

dores operating at that terminal may impose uniform charges

against all stevedores operating at the terminal. To support

14. See Port of Boston Marine Terminal Ass‘n. v. Boston Shipping

Assn., 420 F.2d 419 (1st Cir. 1970). BARMA urges, inter alia,

that this case stands for the fact that modifications of section 15

agreement as well as the original agreement need Commission ap-

proval, quoting as follows:

. . Section 15 requires that “‘modifications’’, as well as

the original agreement, receive the prior approval of

the Commission. in Boston Shipping the Commission,

without any discussion of the broad language of the act

held that where, under the already approved agreement,

there was power to fix charges, a change in incidence, as

to who was obligated to pay, was not a modification re-

quiring Section 15 filing and approval. in the light of

the strictures expressed in VW, supra, n.1, this holding

seems unsupportable. While, with some consistency, it

represented the Commission's past reading of the statute,

the Court in VW pointed to the “expansive language”’ of

Section 15 and specifically rejected the binding effect

of the Commission’s administrative construction. 390

U.S. 261, 272-73. (BARMA’s emphasis).

15. 390 U.S. 261, 19 L.Ed. 2d 1090, 88 S. Ct. 929 (1968).

B-26

this premise Cargill again cites the Stockton Elevator case,”

urging that no evil results from its relationship with Rogers,

as Rogers is also assessed the charges and such charges are

reflected in Rogers’ tariff. Cargill then refutes BARMA’s

claims of antitrust monopoly, and urges that BARMA’s

claims of economic injury are speculative and should be dis-

missed, as found by the Administrative Law Judge.

Lastly, Cargill urges that BARMA’s attack upon the Linne-

kin study is improper and in error. Cargill agrees with Hear-

ing Counsel’s factual exceptions, but disagrees with Hearing

Counsel’s statement that the errors of the Administrative

Law Judge do “not vitiate the ultimate conclusions reached

by the Presiding Officer.” Concluding its reply, Cargill urges

rejection of BARMA’s exceptions.

Hearing Counsel replied to Cargill’s and BARMA’s excep-

tions and attempted to clarify the record.

Hearing Counsel first address themselves to complainant’s

exceptions wherein BARMA urged that the Administrative

Law Judge failed to find that where a terminal operator seeks

to compete as a stevedore either by itself or through a sub-

sidiary, any charges it assesses against competing stevedores

would be unlawful per se. Hearing Counsel state that the

Administrative Law Judge addressed himself to that point

and properly decided that charges of this type need not be

prohibited solely because one party against whom such

charges of this type need not be prohibited solely because

one party against whom such charges are assessed is a wholly-

owned subsidiary of the operator of the elevator.

Hearing Counsel then review complainant's argument con-

16. See also, Pittston Stevedoring Corp. v. New Haven Terminal, inc.

13 F.M.C. 33 (1969).

B-27

cerning the Stockton case, wherein BARMA urges the Com-

mission to impose a rule to prohibit any terminal operator

with a stevedore subsidiary from assessing any compulsory

charge, for any reason. Hearing Counsel say Stockton does

not support such a conclusion.’ “In Stockton, it was the am-

biguous tariff, not the terminal operator/stevedore combina-

tion, that was the unreasonable practice.

BARMA, say Hearing Counsel, has been attempting to

show an antitrust monopoly on Cargill’s part. However, say

Hearing Counsel, no facts have been adduced to prove this

point.

17. Stockton was an elevator operator which employed Jones as its

stevedoring subcontractor. It imposed a 15 cent noncompulsory

equipment rental charge on all stevedores operating at its eleva-

tor except Jones. Stockton would bill the vessel on the basis of

a flat charge which included all service rendered, the 15 cent

charge, and its profit. in at least one instance, the 15 cent charge

was not included in Stockton’s bill to the vessel. in holding the

charge violative of section 17, the Commission said:

We agree with respondent that the employment of one

stevedoring subcontractor in preference to another or

even to the exclusion of another does not necessarily

constitute an unreasonable regulation or practice under

section 17 .. .[citation omitted]. But that is not the

question here. The issue here does not concern who is

to be respondent's subcontractor, rather it is the dif-

ference in treatment accorded by respondent to Jones,

and to itself as a stevedore, on the one hand, as compared

with the treatment of complainants on the other. This

difference in treatment results from the imposition of

the rental charge upon complainants, but not upon Jones.

Moreover, it is not imposed by respondent acting as owner

and operator of the terminal upon respondent acting in the

capacity of a stevedore, in the same manner as it is imposed

upon complainants. (Emphasis added.)

B-28

Hearing Counsel then cite Commission precedent in simi-

lar matters as follows:

1. A terminal operator is entitled to a fair return on its

investment and may make a fair and nondiscriminatory

charge for the use of its facilities, citing Stockton;

2. Such a fair and nondiscriminatory charge may be as-

sessed against stevedores, provided such a charge is reasonab-

ly related to services rendered by the terminal operator to

or for the benefit of the stevedore, Crown Steel Sales, Inc.,

et al. v. Port of Chicago, 12 F.M.C. 353, 373 (1967); and

Pittston Stevedoring Corporation v. New Haven Terminal,

Inc., supra, note 5; and,

3. No discrimination results where charges are uniformly

applied, Boston Shipping Association v. Port of Boston

Marine Terminal, supra note 9; and Terminal Charges at

Norfolk, 1 U.S.S.B.B. 357, 358 (1935).

Hearing Counsel submit that the Administrative Law Judge

properly examined the evidence and applied the foregoing

standard.

Turning its attention to Cargill’s exceptions, Hearing

Counsel state that respondent, in citing several cases, misses

the point of the decision in these cases, which, contrary to

Cargill’s interpretation, were decided on the single issue that

no agreement was presented since one of the parties in each

proceeding had withdrawn.

18. Agreement No, T-2423 Between the Port of Seattle, Washington

and Pacific Molasses Co., supra note 8; /nter-American Freight

Conference - Cargo Pooling Agreements, 14 F.M.C, 58 (1970);

and Agreement No. 9431, Hong Kong Tonnage Ceiling Agree-

ment, supra note 8.

B-29

Hearing Counsel then argue that the Administrative Law

Judge correctly determined that the charges and conditions

constituted a modification of the section 15 agreement,

which modification had not been filed with the Commission

for approval.

Hearing Counsel take issue with Cargill’s statement that it

has plenary power to deal with stevedores and others. Steve-

dores, say Hearing Counsel, are hired by the vessel and sub-

ject to the master of the vessel. Further, the Port has prom-

ulgated rules for stevedores, and it is therefore illogical to

assume that the Port was transferring “‘plenary” powers to

Cargill to deal with stevedores.

Hearing Counsel then argue that in spite of Cargill’s urg-

ings, the Administrative Law Judge distinguished the cases in

lyi h "9 rather than Pacific North-

relying upon the proper cases ~ rather than Pacific North

west, supra, note 10, and properly rejected portions of Mr.

Linnekin’s testimony. Hearing Counsel find Mr. Linnekin’s

total testimony in the proceeding to be worthless.

Lastly, Hearing Counsel specifically refute Cargill’s five

specific errors as being without merit. Hearing Counsel, in

summation, find the exceptions of both complainant and

respondent erroneous, and urge their dismissal.

VI. ISSUES

The basic issues to be resolved by the Commission are as

follows:

19. Agreement Nos. 8225 and 8225-1, supra, note 1; Greater Baton

Rouge Port Commission v. U.S., supra note 3.

B-30

Section 15

Do the charges assessed and conditions imposed by Cargill

on the stevedores as a prerequisite to loading vessels at Port

Allen as set forth in Cargill’s letters of February 10 and

December 17, 1971, constitute a modificatior of the approv-

ed lease agreement between the Port and Ca: gill?

Section 16

1. Have Cargill’s actions resulted in actual damage to

BARMA?

2. Does the relationship between Cargill/Rogers ipso facto

render the charges and conditions imposed on all stevedores

equally unlawful as unduly anticompetitive and discrimina-

tory?

3. Has unreasonable preference or privilege as contem-

plated by section 16 First of the Act been established from

the charges and conditions imposed on all stevedores, includ-

ing Cargill’s subsidiary, Rogers, although substantial compe-

titive advantage exists in the Cargill/Rogers relationship?

Section 17

1. Are the following charges and conditions reasonably

related to economic or commercial benefits to stevedores

from the use of the facilities and services provided by Car-

gill:

(a) Eight cents per ton of grain handled for services and

facilities provided by Cargill;

(b) $100.00 per hour liquidated damages for failure to

B-31

provide sufficient crews of stevedores so that the

elevator may operate at capacity ;

.c) that stevedore will use “utmost care” in his opera-

tions;

(d) that stevedore will provide evidence of adequate in-

surance liability by companies acceptable to Cargill;

and

(e) that deposits totaling $3,500.00 will be posted by the

stevedore to secure payment of access, dock cleaning

fees and liquidated damages for delays?

2. Should Cargill be ordered to cease and desist from

those actions cited under the aforementioned issue found not

to be reasonably related to economic or commercial bene-

fits to stevedores?

3. Does the failure to file with the Commission notice of

new charges and conditions imposed upon stevedores in

Cargill’s tariff result in an unjust and unreasonable practice

in violation of section 17 of the Act?

Vil. CONCLUSIONS

Section 15

It is our opinion that the Administrative Law Judge erred

in finding that the charges and conditions imposed by Car-

gill’s letters of February 10 and December 17, 1971, consti-

tuted a modification of the Commission-approved lease

agreement between Cargill and the Port. Nowhere in the

lease is there any restriction on lessee’s granted authority to

B-32

establish and maintain rates for the handling and storage of

grain, saving only (a) lessee could not assess dockage charges,

that being reserved to the lessor, and (b) the rates for storage

and handling grain must be competitive and comparable with

rates at New Orleans and other competitive Gulf ports (Art.

10 of lease - Agreement FMC 8225).?%In all other respects,

relative to rates, rules, and regulations, Cargill was as free of

restrictions as it would have been had it owned the facilities.

The lease did not require identical rates. The lease requir-

ed only “competitive” rates, and, according to the record in

this case, the fact that grain has moved and is moving in

capacity volume via Baton Rouge is persuasive evidence that

the rates are competitive. Some or all of the rates could

even be higher than rates at New Orleans and other Gulf

ports and still be “competitive” if Baton Rouge were a more

efficient elevator, for it is the aggregate costs to the mer-

chant (inclusive of speed in loading, waiting time, distance

from the Gulf, dockage, etc.) which establish whether the

rates are competitive.

What was the extent and scope of the approval given to

this lease by the Federal Maritime Board in 1959? We take

official notice of our own records relating to that approval

action.2 ‘Our examination thereof discloses there are no con-

20. Article 10 of the lease also provides in part that the rates, rules,

and regulations shall be subject “to the approval of public regu-

latory bodies having jurisdiction thereof.”

21. Swift & Company v. Federal Maritime Commission, 306 F.2d

277 at 281 (D.C. Cir. 1962).

“| The Board must be given reasonable leeway in delineating

the scope of the agrzement and therefore the extent of its prior

approve!.”’

Trans-Pacific Freight Conference of Japan v. FMC, 314 F.2d 928

(9th Cir. 1963).

B-33

ditions, restrictions,or qualifications contained in the Board’s

order approving the lease, and no record indication of Board

consideration ever having been given to imposing conditions,

restrictions, or qualifications on lessee’s plenary power over

rates, rles, and regulations. The Federal Maritime Board

having approved plenary rate authority, this Commission may

not lawfully modify, reduce, or restrict that approval without

initiating and following the notice and hearing ++ dures

established by section 15, Shipping Act, 1916, and s.ccion 9,

Administrative Procedure Act.

The lease authorized lessee to establish any competitive

rates for storing and handling grain, and that authorization

was not restricted only to those rates or charges which may

have been in effect when the lease was adopted. This was a

long-term lease and the parties used broad, expansive lang-

uage in the grant of ratemaking authority, for conditions and

needs change with passing time. To have attempted to define

every conceivable item of use or service for which lessee was

free to assess charges or to make rules and regulations in this

long-term lease would have been difficult. 2 Instead, the

drafters wisely limited themselves to identifying only those

22. An incomplete list of services, facilities, and uses made available by

port elevators as indicated by terminal tariffs on file with this

Commission (Koppel Bulk Terminal Tariff No. 1, FMC-T No. 1;

North Pacific Grain Growers, Inc., Tariff No. 3) include the

following:

Receiving (elevation) from truck, rail cars, barge

Shipping to vessels, rail cars, barges, trucks

Weighing in Weighing out Cleaning

Storage Segregation Drying

Smutting Fumigation Treating for weevil

Blending Aeration Cooling

Binning Turning Sampling and inspection

Wharfage Dockage Line handling charges

Fresh water

(Footnote 22 - continued on next page)

B-34

things which the lessee was not permitted to do.

Cargill is operating under authority granted to it by and

within the limits of the approved lease. The charges assessed

by Cargill against stevedores constitute actions taken within

the lease authority and do not constitute either a modifi-

cation of the approved agreement or independent action by

Cargill taken outside its lease authority. Thus, the charges

and conditions imposed on the stevedores by the Cargill

letters do not require further approval by the Commission

under section 15. We, therefore, reverse those fingings of the

Administrative Law Judge with respect to the section 15

issue.

Section 16

With regard to the issue of actual damages to BARMA as

a result of imposition of the new charges and conditions, we

concur with the Administrative Law Judge. No evidence of

record has been presented to show actual damage to BARMA

as a result of the new charges and conditions.

We further concur with the Administrative Law Judge in

his finding that the relationship between Cargill and Rogers

did not in and of itself render unlawful the imposition of the

charges and conditions imposed equally upon all stevedores.

The record, while indicating that a situation exists that could

(Footnote 22 - Continued from previous page)

Rental of marine leg or sucker

Rental of spreaders and other equipment

Rental to stevedores of storage and office space

Electric power to vessel

Electric power to grain spreaders

Service and facilities charge

B-35

give rise to discriminatory practices, does net indicate that

any unlawful situation does in fact exist.22 The Commission

has long recognized the legality of terminal operators also

conducting stevedoring operations. So long as the Cargill/

Rogers relationship remains at arm’s length, Rogers pays to

Cargill the same eight cents per ton charges as BARMA and

other stevedores and no competitive advantage is given

Rogers over BARMA and its members, no unreasonable pre-

ference or privilege exists that would be violative of section

16 First of the Act.24

Reasonableness of Charges and Conditions

The primary issue before the Commission in this proceed-

ing is whether the charges and conditions imposed upon the

stevedores by Cargill are just and reasonable within the mean-

ing of the second paragraph of section 17 of the Act, which

provides:

23. The record establishes that Cargill has billed and collected the

charge in question both from BARMA and from Rogers. If, in

order for Cargill to realize a fair return from capacity use of the

facilities, Cargill requires, say, $100,000 revenue per year from

the assessment on stevedores, then it is obvious that Cargill must

collect the full charge per ton no matter who does the stevedoring.

Thus, this is not a situation where Rogers will receive a competi-

tive advantage for Rogers must pay the charges in order for Cargill

to be made whole. The factual situation here is quite unlike that

which existed in California Stevedore & Ballast Co. v. Stockton

Elevators, Inc., 8 F.M.C. 97 (1964), where the port elevator failed

to assess a charge against its “house’’ stevedore but did assess the

charge against all other stevedores.

24. Ballmill Lumber v. Port of New York Authority, 11 F.M.C. 494

(1968); 12 F.M.C. 29 (1968); 13 F.M.C. 262 (1970); Chr. Sa/vesen

& Co., Ltd. v. West Mich. Dock & Market Corp., 12 F.M.C. 135,

141 (1968).

B-36

Every such carrier and every other person subject

to this Act shall establish, observe, and enforce

just and reasonable regulations and practices re-

lating to or connected with the receiving, handling,

storing or delivery of property. Whenever the

Board finds that any such regulation or prac-

tice is unjust or unreasonable, it may determine,

prescribe, and order enforced a just and reasonable

regulation or practice.

Respondents, in the epesation of their grain terminal ele-

vators, are “other persons” within the meaning of i coction 17

and as that term is defined in section 1 of the Act.”

Furthermore, the term “‘practice’’ as used in section 17 of

the Act is associated with rates and charges. 26 We will thus

discuss each charge and condition separately.

1. The service and facilities charge.

As previously discussed, this charge is to be assessed at

eight cents per ton of grain handled for services and facili-

ties provided by Cargill. Respondent contends that this

charge is based upon the benefits derived by stevedores for

use of its facilities, for which it contends it should be reim-

bursed. We accept this basic contention. The question then

is whether the practices of respondent in its determination |

and allocation of costs are reasonable. We will examine only

the factors which were used to determine the charge as to

the reasonableness of each such factor. It therefore follows

25. California v. U.S., 320 U.S. 577 (1944).

26. /ntercoastal investigation, 1935, 1 U.S.S.B.B. 400, 432 (1935).

B-37

that if any one or all such underlying factors are found to be

unreasonably related to the benefits derived therefrom by

stevedores, then the practice of assessing charges based upon

those factors is itself unreasonable.?’ This finding would not

therefore preclude respondent from assessing a charge against

stevedores based upon those supplied services and facilities

that were found to be of actual benefit to stevedores.

The basis upon which Cargill seeks to assess the eight cents

per ton charge arises under the following services and facili-

ties provided: 1) the shipping gallery; 2) the grain dock-

wharf; 3) water, toilets, telephones and utilities; 4) dock

clean-up and liaison service; 5) overhead expenses? and

6) trimming machines.”

The specific description of each of the above services and

failicites has heretofore been discussed under our review of

the Administrative Law Judge’s initial decision. We will thus

only consider the underlying costs to Cargill of each item,

the allocation of any or all of that cost to stevedores, and

the reasonableness of such an allocation based upon the

actual benefits derived by stevedores from the use or avail-

ability of that service or facility.

First, we will look at the shipping gallery. Respondent

contends that one-half of the benefits derived by use of the

shipping gallery flow to the stevedores, the other half flowing

to the cargo. Past applications of the Freas Formula to grain

27. Transamerican Trailer Transport inc., et al. v. Federal Maritime

Commission, No. 24,019, slip opin. p. 14-15 (D.C. Cir., Jan. 28,

1974).

28. By its letter of December 17, 1971, respondent advised the steve-

dores of its intention to raise the initial five cents charge (now in

effect) to eight cents thirty days after the effective date of a decis-

(Footnote continued on next page)

B-38

costs of the shipping gallery to the cargo and one-half to the

vessel. The Commission has previously approved this alloca-

tion. Rates of Pacific Northwest Tidewater Flevators

Association, supra, note 10. There, as here, Linnekin con-

tended that the cargo benefits equally from the faster loading

and greater efficiency made possible by the gallery by lower-

ing the loading expenses. We concur with this contention.

The controversy arises, however, over the allocation of the

remaining full fifty percent to the stevedores.

The normal practice followed in past Commission proceed-

ings would allocate this latter fifty percent to the vessel.

Stevedores do not benefit from the speed and efficiency of

the shipping gallery to the same extent as does either the

cargo or the vessel under past applications of the Freas For-

mula. As stated above, the cargo benefits by incurring lower

loading expenses. The vessel benefits by having to spend

fewer days in port for loading operations, thus allowing it

to transport more shiploads over a shorter period of time.

But no such benefit can be equated to stevedores. In fact,

it can be argued that the speed and efficiency of the shipping

gallery works to the detriment of stevedores, providing

shorter working hours by fewer men and therefore less rev-

enues to the stevedores. We recognize that the costs associa-

ted with the use of the shipping gallery are allocable to those

who derive an economic and commercial benefit from the use

thereof. We do not, however, recognize that the stevedores

fall into this recipient category, at least not to the degree as

that of the cargo or the vessel.

(Footnote 28 - continued from previous page)

ion by the Commission in favor of Cargill. This charge would ab-

sorb the earlier sought $50 per vessel dock clean-up charge, as well

as one cent per ton charge for the use of trimming machines which

was not contested.

B-39

As Linnekin has stated and past Commission decisions

have approved, the cargo benefits to the extent of fifty per-

cent of the allocable expenses associated with the shipping

gallery. The remaining fifty percent of allocable expense is

thus attributable to the other two beneficiaries, namely the

vessel and the stevedore. But not all of this remaining fifty

percent can be attributable to the stevedore or the vessel

individually. A portion of this remaining fifty percent is

allocable to each, and any charge sought to be imposed upon

either must be based entirely thereon. Therefore, the alloca-

tion of a full fifty percent of the costs of the shipping gallery

to the stevedores is an unreasonable practice within the

meaning of section 17 of the Act.29

A similar conclusion is reached with regard to the alloca-

tion of the total costs of the grain dock and wharf to the

stevedores. The Commission in the Pacific Northwest Ele-

vators case approved allocation of the total costs of the grain

dock to the vessel. However, in this proceeding the terms

of the lease between Cargill and the Port preclude Cargill

from charging dockage to vessels calling at its facilities.

Charges associated with use of the grain dock-wharf anal-

ogous to normal dockage charges against vessels are not

chargeable to the stevedores. There is, however no prohibi-

tion against charging wharfage to the vessel.

Stevedores benefit from the privilege of ingress and egress

from the vessel and to some degree from the use of the

29. The charges associated with the shipping gallery are “wharfage”’

within the definition of that term under Commission rules (46

CFR 533.G(d) (2)). Inasmuch as the lease only precludes Cargill

from assessing “dockage” against the vessel (46 CFR 533.6(d)

(1)), this charge would be assessable against the vessel to the ex-

tent sought to be imposed on the stevedores.

B-40

spouts, but in no way can the total cost for the use of the

dock be attributed to stevedores. The cargo benefits from

the use of the spouts, as does the vessel for the same reasons

they benefit from use of the shipping gallery. We, therefore,

concur with that finding of the Administrative Law Judge

that the charge, inasmuch as it relates to use of the barge un-

Idading facility, the pile clusters, the dust collection system,

and the spouts to the extent assessable against cargo or

vessel, is an unreasonable practice under section 17.

The record provides scant evidence regarding the assess-

ments of charges for the various utilities and overhead ex-

penses associated with Cargill’s operation. However, the

allocation to stevedores of $933.00 per year for water,

toilets, telephones and utilities does not appear to be so un-

reasonable as to justify disapproval. Nor does the amount of

overhead expenses allocated to the stevedores appear to be

unreasonable. The costs associated with the use of the

trimming machines were not contested.

Those costs, however, which are associated with dock

clean-up and liaison service have not been justified on the

record. The evidence presented shows that the docks are

cleaned only sporadically and that the $25,000 per year for

liaison services was unsubstantiated. Those portions of the

overall costs which are based upon these factors have there-

fore not been shown to be reasonably related to the benefits

derived therefrom by the stevedores. As such, we find the

assessment of any charges based upon these services and facil-

ities to be unreasonable practices within the meaning of

section 17 of the Act.

In weighing the overall effect of the various factors used

to derive the eight cents per ton charge, we find sufficient

B-41

unwarranted allocations of costs to stevedores to sustain a

" finding that the imposition of any charge which was com-

piled by use of any of the aforementioned unwarranted cost

factors to be an unreasonable practice under section 17.

Respondent should thus cease and desist from assessing such

charges where based upon costs of services and facilities

found herein to be unassessable against stevedores.

2. The conditions sought to be imposed.

-

We find that the imposition of an indemnity requirement

of $100 per hour for delays caused by failure to provide

sufficient numbers of longshoremen to be an unreasonable

practice within the meaning of section 17. This is a one-

sided requirement with no compensation awarded to steve-

dores for delays caused by Cargill. Likewise, the require-

ments for use of “utmost care’’ in its operations, for evi-

dence of adequate liability insurance coverage insofar as the

insurance companies must be acceptable to Cargill, and for

posting deposits to secure payment of the service and facili-

ties charge and the delay indemnity charges are found to be

equally one-sided and thus unreasonable practices within the

meaning of section 17, With regard to the insurance require-

ment, it would appear to be sufficient to accept insurance

coverage from any company licensed to do business in

Louisiana.

Failure to File Schedule of Charges.

The Commission’s General Order 15 (46 CFR 533) pro-

vides in section 533.3 that all terminal operators (with cer-

tain exceptions not applicable here) file ‘‘. . .a schedule or

tariff showing all its rates, charges, rules, and regulations re-

lating to or connected with the receiving, handling, storing,

B-42

and/or delivering of property at its terminal facilities.” As

noted earlier, the Administrative Law Judge did not address

this issue in his Initial Decision. We, however, consider that

respondent’s failure to comply with the aforementioned pro-

vision to be an unreasonable practice in violation of section

17 of the Act, and as such do hereby order that respondent

file forthwith any and all charges and conditions within the

limits authorized by this decision which Cargill intends to

impose. We further direct Cargill to cease and desist from all

practices found unreasonable herein.

REMAND TO ADMINISTRATIVE LAW JUDGE

We adopt the recommendation of Commissioners Barrett

and Morse in their concurring and dissenting opinion that the

case be remanded to the Administrative Law Judge for a

resolution of the sole issue of the proper allocation of ser-

vices and facilities benefits to stevedores based upon actual

use as outlined in this report, in order to arrive at a charge

that can be properly assessed against the stevedores.

Commissioners Ashton C. Barrett and Clarence Morse, con-

curring and dissenting:

We are not appointed to simply call “balls and strikes”.

Rather, we are appointed to develop a full record in all

cases and to decide matters on their true merits and in the

overall public interest and not on mere procedural short-

comings or on incomplete or inadequate record.*° If there is

30. isbrandtsen Co., inc. v. United States, 96 F Supp. 883 at 892

(1961), aff'd. per curiam 342 U.S. 950, quoting with approval:

“. . , the following views of Commissioner Aitchison of the Inter-

state Commerce Commission concerning the obligations of admin-

istrative agencies: ‘They are not expected merely to call balls and -

strikes, or to weigh the evidence submitted by the parties and let

(Footnote continued on next page)

B-43

any question still remaining in the minds of the majority that

there exists a reasonable relationship between costs/benefits

and the assessment charge in this proceeding, we recommend

the matter be remanded for a resolution of this issue, includ-

ing additional evidence, if necessary.

We are in agreement with Chairman Bentley and Commis-

sioner Day that the charges assessed and the conditions

imposed by respondent upon all stevedores operating at the

leased terminal facility constitute activities and charges

falling within the scope of Agreement No. 8225 and do not

constitute a modification to an approved section 15 agree-

mont for which further Commission approval is requir-

ed.

(Footnote 30 - continued from previous page)

the scales tip as they will. The agency does not do its duty when it

merely decides upon a poor or nonrepresentative record. As the sole

representative of the public, which is a third party in these proceed-

ings, the agency owes the duty to investigate all the pertinent facts,

and to see that they are adduced when the parties have not put them

in . . . The agency must always act upon the record made, and if

that is not sufficient, it should see the record is supplemented before

it acts. It must always preserve the elements of fair play, but it is

not fair play for it to create an injustice, instead of remedying one,

by omitting to inform itself and by acting ignorantly when intelli-

gent action is possible. . .”

31. It has been contended that these actions by Cargill constitute an

unapproved “unilateral modification” of the approved lease. Absent

implied, tacit, or actual consent by Port to the “unilateral modific's-

tion’’, we are unable to find an “agreement’’ between two or more

persons approvable under section 15. American Mail Line Ltd. v.

Federal Maritime Commission, *.2d (CA-DC, June 18, 1974),

Slip Opinion page 19: “A unilateral undertaking by a single party

does not constitute a section 15 agreement.” There may be uni-

lateral action taken by one person beyond the scope of the approved

section 15 agreement, but that purely unilateral action is not itself,

a section 15 “agreement”. As said in Transshipment Agreement,

(Footnote continued on next page).

B44

We are in agreement with Chairman Bentley and Commis-

sioners Day and Hearn that no unreasonable preference or

privilege as contemplated by section 16 First of the Act

resulted from the imposition by respondent of charges and

conditions on all stevedores, including respondent’s sub-

sidiary.

” We are in agreement with Chairman Bentley and Commis-

sioners Day and Hearn that the relationship between a ter-

minal operator and a wholly-owned stevedore does not ipso

facto render charges assessed and conditions imposed equally

on all stevedores unduly anticompetitive or discriminatory.

On this record there was no proof of undue competition or

discrimination.

(Footnote 31 - Continued from previous page)

10 F.M.C. 199, 215 (1966): “It Takes Two to Tango’. One who

acts unilaterally beyond and outside the scope of an approved

agreement subjects himself to the penalties of the Shipping Act,

1916, as well as to antitrust. Carnation, 383 U.S. 213.

Commissioner Hearn interprets the of Agreement No. 8225

as not suthorizing Cargill to make the 5¢ charge against stevedores.

Although in this respect the majority is opposed to Commissioner

Hearn’s views, additional comment is appropriate. Swift & Com-

pany v. F.M.C., 306 F.277, 281 (1962) holds:

“The Board must be given reasonable !eeway in delineating the scope

of the agreement and therefore the extent of its prior approval.”

In our opinion, a “delineation” may only be made with the greatest

of caution and only after a thorough review of the record and with

all appropriate due process safeguards, for, unlike a ‘“‘modification”’

under section 15 which has only prospective application and is made

only by order, efter notice and hearing, a “delineation” has both

prospective application and retroactive application, with possible

serious economic, Shizping Act 1916, and antitrust implications,

particularly in respect to activities taken prior to the “delineation”.

Such a review has not been made by the Commission in this case.

B45

We are in agreement with Chairman Bentley and Commis-

sioners Day and Hearn that respondent's failure to publish

and file the charges and conditions in its terminal tariff is

an unjust and unreasonable practice within the meaning of

section 17 of the Act.

We agree with Chairman Bentley and Commissioners Day

and Hearn that the $100 per hour liquidated damages for

delay provision is an unreasonable practice under section 17

of the Act.

We differ with Chairman Bentley and Commissioners Day

and Hearn in their conclusions that the 5¢ service and facili-

ties charge®7is an unreasonable: practice under section 17 of

the Act.2* We find and conclude that said charge is lawful,

is adequately justified on this record, and its determination,

assessment, and collection is not an unreasonable practice

under section 17 of the Act.

32. The majority's consideration of the projected 8g/charge rather than

the 5¢ charge now assessed by Cargill is a source of confusion. The

charge in effect at the time of hearing and at the present time is

5¢. The Se charge may be raised in the future to 84. At the 5¢

rate, Cargill also assesses an additional $50 per vessel to cover dock

cleaning. This $50 charge will be eliminated when the 8¢ charge

goes into effect. As a result, discussion of the $50 dock cleaning

charge with respect to the 89 rate is irrelevant and results in a

finding of unreasonableness with respect to a nonexisting charge.

33. The majority states that “Charges associated with use of the grain

dock-wharf analogous to normal dockage charges against vessels

are not chargeable to the stevedores.” The 5S¢charge, however, is

neither “analogous to a normal dockage charge” nor is it associa-

ted with docking. Dockage is strictly limited to the vessel's

privilege of berthing - a “parking fee” for vessels. Cargill's

charge, on the other hand, is a charge for the use of the terminal

facilities and equipment furnished by Cargill and used by the

’ stevedores in the handling of cargo. 46 CFR 533.6(d) (1); Pacific

Northwest Elevators Ass‘n, supra, at 403.

B-46

We adopt the findings of fact set forth in Part II of the

above report of Chairman Bentley and Commissioner Day

which are not in conflict with the following supplemental

findings:

BARMA has been operating continuously as a stevedoring

contractor” “at the Cargill elevator since the inception of the

latter’s operations in 1955. In 1956, Rogers, Cargill’s wholly-

owned subsidiary, began operating in competition with

BARMA.

Under the lease, dockage is the only fee the Port may

charge vessels calling at the grain elevator. The Port’s tariff

states that all other fees, rules, and regulations pertaining to

the grain elevator are to be found in Cargill’s tariff.

The charges and regulations compained of herein are

similar to those presently in force at a number of grain ele-

vators in the Gulf area, including Cargill’s elevator at Hous-

ton, and have been assessed by Cargill to all stevedores

operating at Port Allen, including its wholly-owned subsidi-

ary Rogers.

Cargill retained Mr. Phillip E. Linnekin, a partner in the

international certified public accounting firm of Main Le-

frentz & Co., to study the propriety and reasonableness of

34. Sometimes referred to as “the stevedore”. The term ‘‘stevedore”

as used herein may mean either the stevedoring company (for

example, BARMA), or the employee of the stevedoring company.

The employee of the stevedoring company is more accurately

calied a longshoreman, but is not infrequently called a stevedore.

Hence, when the term “stevedore” is used it may mean, depending

upon the context, either the stevedoring company or the long-

shoreman. As used herein, the term “stevedore’’ usually refers to

the stevedoring company.

B47

these charges. Mr. Linnekin, an expert in this field, has ap-

peared before the Commission in numerous proceedings and

assisted in the development of the so-called Freas Formula

which forms the basis for his allocations and methodology

in this proceeding. Previous studies in other proceedings

were initiated for the purpose of allocating terminal costs

between vessel and cargo only. Mr. Linnekin’s study in this

proceeding considers and justifies the imposition of charges

against stevedores on the ground that the stevedores use the

terminal facilities and receive benefit from the use thereof.

Mr. Linnekin classified the leased property into the cate-

gories of “land” and “improvements”’. He valued the land on

the basis of its original cost, and the improvements on the

basis of the original undepreciated construction cost.2° He

determined that the percentages these two categories bear to

the total combiried value of the land and improvements

amounted to 5.4% and 94.6% respectively. Applying these

percentages to Cargill’s annual rental payments of $673,600,

he determined the amount of said payments applicable to

each category as $36,374 to land and $637,226 to improve-

ments. Of the land rental, he allocated 7% to the stevedore

for the grain dock-wharf, and 93% to cargo.

The largest item allocated to the stevedore is rental allo-

cable to the shipping gallery and to the grain dock-wharf.

The shipping gallery is a conveyor system for the delivery

of grain, approximately 1,000 feet long, running from the

elevator headhouse to the loading spouts situated on the

35. Utilization of fair market value or original cost depreciated or

other valuation formula would have hed but de minimis effect on

the end results in this proceeding.

B-48

wharf, It delivers the grain at a loading speed of 1,000 tons

per hour and thus permits a faster loading of the vessel than

would be possible at a less efficient and less modern facility

or by manual loading and stowing of the vessel.

Improvements made by Cargill to the elevator terminal

facilities increased the annual volume of grain available for

shipment and hence the loading capacity. The turnover rate

is 16.5, i.e., the elevator is emptied and refilled sixteen and

one-half times during a one-year period. The loading capa-

city of the elevator has been increased from the original 20

million bushels a year to 113 million bushels in 1971.

Inasmuch as the flow of grain to the vessel is directed by

the stevedore’s employee (the longshoreman) in respect to

the loading and trim of the vessel, the stevedore’s function

commences at a point somewhere between the headhouse

and the water end of the shipping gallery. It is unnecessary

in this proceeding to determine where precisely that ‘“‘point”’

lies.

36. Tha statement in Greater Baton Rouge Port Commission, 5 F.M.B.

648 at 651, quoted in the majority report, that the function and

responsibility of the stevedore does not attach until the grain is dis-

charged from the loading spout is misleading. It is true that physical

contact by the stevedore does not occur prior to that time, but

directive control over the movement of the grain from the head-

house at the elevator end of the shipping gallery, through the shipp-

ing gallery, and thence to the loading spouts is vested in the steve-

dore’s employee (longshoreman) and is effected by signals from the

longshoreman to the elevator employee at the headhouse controls.

Furthermore, the longshoreman manually moves the direction of the

spouts to assure that the grain flows into the proper hatches and

areas within the ship's holds. Thus, it is clear that for the purpose of

allocating costs as between elevator, cargo, ship, and stevedore, the

“point of rest’’ is definitely somewhere in the area between the

headhouse and the wharf. Linnekin utilized thet point of rest for

cost and benefit allocation purposes.

B-49

Questions of ultimate responsibility as to the delivery of

the grain at the end of spout or elsewhere, or questions when

transfer of title to the grain ultimately occurs, or questions

whether the shipper, the vessel, or the consignee ultimately

pays the stevedore are questions arising under sales contracts

and charter parties and have nothing to do with the question

whether the stevedore receives a benefit from the use of the

shipping gallery and of the wharf for which a charge may be

made.

Mr. Linnekin excluded the portion of the shipping gallery

which extends over the wharf from his definition of the

shipping gallery. He allocated 50% of the balance of the

shipping gallery to stevedores and 50% to cargo.

The wharf, referred to herein also as grain dock-wharf,

situated at the water end of the shipping gallery, houses

the loading spouts through which grain is discharged into the

hold of the vessel. The lower part of the wharf is also used

by the stevedore for access to the vessel. Mr. Linnekin de-

fined the wharf so as to exclude the barge unloading facility

and dust collection system and to include that portion of the

shipping gallery which extends over the wharf from the point

that the two form a “T”. He allocated 100% of the rental

allocable to the wharf to the stevedore.

The spillage of grain on the wharf as well as dust generat-

ed by loading operations creates a safety hazard which re-

quires cleaning of the grain dock-wharf after vessel loading.

Cleaning the grain dock-wharf requires approximately 16

man hours and may be done only when the dock is free of

vessels.? ” Cargill’ s personnel spent an average of four man

37. 143 vessels spent 260 loading days at the terminal in 1971.

B-50

hours a day on dock cleaning, at a cost to Cargill in 1971

of $6,045. The $50 per vessel charge wil be incorporated in

the proposed charge of 8¢ per ton loaded.3®

A full-time employee of Cargill is available 24 hours a day,

seven days a week, for liaison service to the stevedore. This

includes the relay of messages to and from the stevedore and

assisting the stevedore in planning and preparing stowage of

the vessel, at a cost to the respondent of $25,000 per annum.

In light ofthe services rendered the stevedore, the liaison

charge is fully justified.

The 2.3% of the total elevator overhead allocated to the

stevedore is based on the percentage that total projected

annual revenue from charges against the stevedore bears to

the elevator’s constructive gross revenue.

The lease authorizes Cargill to assess a facilities and user’s

charge against stevedores.

The rates and charges assessed by Cargill for the handling

and storage of grain are competitive with rates and charges

for similar services at other Gulf ports, including, but not

limited to, New Orleans.

There is no duplication between the charge assessed by

Cargill against the sievedore and the dockage charge assessed

by the Port against the vessel, or Cargill’s charge to holders

of warehouse receipts.

In determining if the 5¢ charge against stevedores is law-

38. The Port Commission tariff also contains a similar charge of $50

per vessel of 3,000 net tons or more, for the cleaning of its general

cargo docks.

B-51

ful and justified on this record, we must apply the following

basic principles of law applicable to terminals:

1. Our ratemaking jurisdiction over rates of terminals

rests solely on the second paragraph of section 17 of the Act.

2. We do not have ratemaking power, comparable to our

ratemaking authority over common carriers in our domestic

offshore commerce, to establish the rates to be charged.39

3. We have jurisdiction only to ha!t rates or practices

which we find are unreasonable or unjust and have limited

power to translate these statutory prohibitions into ‘‘dollars

and gents” terms by establishing a minimum or maximum

rate.

39. The Commission does not possess the ratemaking authority over

terminal operators under section 17 to the extent of that authority

which is held over carriers by authority of the Intercoastal Shipping

Act of 1933. California v. U.S., supra. City of Los Angeles v.

F.M.C., 385 F.2d 678 (1967). In this area, there need be only a

reasonable relationship between the charges assessed and the ser-

vices or benefits provided. Vo/kswagenwerk v. F.M.C., supra, at

282. Evans Cooperage Co. v. Board of Commissioners, 6 F.M.B.

415, 418 (1961).

40. City of Los Angeles v. F.M.C., supra, at 681:

“The tariff filed by a port is significantly different from the tariff

filed by a common carrier. With respect to the former, the Com-

mission is only authorized to halt rates or practices which are un-

reasonable or discriminatory. Subject to its limited power to trans-

late these statutory prohibitions into ‘dollars and cents’ terms by

establishing a maximum or minimum rate, the Commission has no

ratemaking power with respect to ports. The situation is much

different with respect to common carriers, for Section 18 of the

Act, 46 U.S.C. § 817, explicitly gives the power to establish the

rates to be charged and the carrier is obligated to abide by its ef-

fective tariff without exception on pain of criminal fines. We are

not prepared to say that the Commission was required to do what

(Footnote continued on next page)

B-52

4. It is an unjust and unreasonable practice for a terminal

to provide free or charge noncompensatory rates for services

or use of facilities for such practice results in imposing a

disproportionate share of the cost of the terminal on other

users of other terminal services or facilities.*"

5. In establishing the lawfulness of a charge under section

17, a terminal need establish only that the charge is reason-

ably related to the service or benefit.*4

(Footnote 40 - continued from previous page)

Congress has refrained from doing and expand section 18 so as to

include ports.”

Rates and Practices of the Pacific Northwest Tidewater Elevators

Assn., supra - see disclaimer at 371.

This is not intended to suggest that we do not have jurisdiction to

correct undue preferences or advantages, etc., under section 16 and

other sections of the Act.

41. Practices, Etc., of San Franciggg Bay Area Terminals, 2 U.S.M.C.

588, 603 (1941). /nvestigation o “02 Charges at Pacific Coast

Ports, 8 F.M.C. 653, 657 (1965): The Commission, in Docket 555,

« . . found also that the failure of a port terminal to charge compen-

satory rates for a particular service casts an unfair burden on users

of other service in violation of sections 16 and 17 of the 1916 act.”

42. Volkswagenwerk Etc. v. F.M.C., supra, at 282: The testis”...

whether the charge levied is reasonably related to the service ren-

dered.”’

Evans Cooperage Co. v. Board of Commissioners, supra, at 418:

“The first, second, fourth, sixth and tenth exceptions in effect say

thet the charges are unreasonable because no specific service is ren-

dered to the complainant and that the Examiner did not consider

the evidence showing this. The Examiner, however, considered

evidence that wharf tollage does not necessarily cover expenses and

services directly rendered to the cargo and also gave weight to the

opinions of complainant's witness on this point. The Examiner

(Footnote continued on next page)

B-53

Several things are to be borne in mind. First, the Freas

Formula which has been utilized by the Commission is but

one formula or means which may be utilized to equitably

spread the costs of owning and operating a port terminal

amongst the various users of the facility. The Freas Formula

does not purport to be the sole formula or necessarily the

best formula. It is adequate, well recognized, and widely

used on the Pacific Coast. It should not be used to defeat

charges which legitimately should be assessed. The “‘objec-

tive’ of the Freas Formula “is to determine costs’’; hence,

‘no consideration was given to value of service and other

(Footnote 42 - continued from previous page)

found that complainant's barge and the cargo involved enjoyed

substantial benefits from the services and facilities provided by

the respondent. Complainant's barge was tied to the ship and such

mooring would not be possible unless the water berth was dredged

deep enough to accommodate the ship and unless the mooring

facilities were adequate for the ship. Police protection was also pre-

sent and not denied to the complainant regardless of the fact that

direct vision by the policeman might be difficult. The fire tug was

available for protection without extra charge having been levied

thus far except for the cost of chemicals used in fire fighting. Both

forms of protection had to be paid for by users of respondent's

property as well as those who shared in overall benefits, including

incidental benefits, of the commission's facilities. The fact that the

operators of the ship must also pay charges was considered and not

found to be controlling

“Complainant contends that by definition it is an essential element

of wharf tollage that the cargo pass over the wharf and that the

charge should be for the use of the wharf to avoid being unreason-

able. We do not need to be too concerned about other definitions

of wharf tollage. The commission has made a charge to help defray

its costs of operating facilities as measured by cargo handied in the

area and the only question is whether its facilities are being used and

the commission is performing a service reasonably related to its

charges. The Examiner considered the evidence and found that it

was.”

B-54

factors which must be considered in determining the level of

the rates.’’ Its objective is explained in Terminal Rate Struc-

ture - California Ports, 3 U.S.M.C. 57, 59-61 (1948), where

all wharfinger expenditures were apportioned to vessel and

cargo only because in that proceeding vessel and cargo were

the only interests involved. A vessel was held liable to the

terminal for all usages and services from, but not including,

point of rest on outbound traffic; ali other wharfinger costs

were assessed against cargo.

Second, because under the original Freas Formula, all

wharfinger costs were allocated as between vessel and cargo,

it would appear unnecessary to belabor the fact that a charge

may nevertheless be assessed against stevedores or carloaders

or other persons for services provided to them or for facili-

ties made available to them and from which they derive bene-

fits. Hence, if a terminal makes a grain spreader available to

a stevedore, the Freas Formula does not prevent the terminal

from assessing a fair charge for use of that grain spreader. See

Crown Steel Sales, Inc., et al. v. Port of Chicago, supra. The

same reasoning applies to a charge against stevedores for

benefits received by them in respect to utilization of the

termina! facilities.

Chairman Bentley and Commissioners Day and Hearn con-

cur in the view that a charge would lie against stevedores for

benefits from utilization of the facilities, but, so they con-

tend, the record fails to disclose that “the practices of res-

pondent in its determination and allocation of costs are

reasonable.”” We disagree with that latter conclusion. This

is not a conventional rate case. The proofs required to es-

tablish a reasonable relationship between the charges assessed

and the benefitsreceived need not be made with anything

like the degree of precision required in a rate case. See vans

B-55

Cooperage, supra, where the Commission allowed a charge,

stating at 419:

In view of the finding that there can be no pre-

cise equivalence between services rendered and the

charges, we would agree with the Examiner that

the record contains no basis upon which reasonable

allocation of costs could be made. Terminal Rate

Structure - California Ports. 3 U.S.M.C. 57, 60,

69 (1948).

Despite absence of basis upon which reasonable cost alloca-

tions could be made, the charge was allowed because of an

affirmative finding that on the facts of that case there could

be no precise equivalence between services rendered and the

charge assessed. The same principle applies here.

The error of Chairman Bentley and Commissioners Day

and Hearn lies in a too narrow adherence to the principles of

the original Freas Formula, entirely overlooking and disre-

garding the stated objective in that case of allocating whar-

finger costs as between vessel and cargo only. Actually, the

Freas Formula promulgated in 1948 in Terminal Rate Struc-

ture - California Ports, supra, has been expanded in Investiga-

tion of Wharfage Charges at Pacific Coast Ports, supra, to

authorize wharfage charges at grain terminals (which termi-

nals did not exist on the Pacific Coast at the time the Freas

Formula was adopted) as being wharfinger “special facilities”

and in Crown Steel Sales, Inc. et al. v. Port of Chicago, supra,

it was recognized that the Freas Formula “must be varied to

recognize local differences in practices, procedures and ob-

jectives.”” That case held, in part, at 373:

B-56

All costs should be apportioned to the various

services concerned. There is no question that

facility costs are being incurred in connection with

(a) stevedoring, (b) truck loading, and (c) wharf-

age. These costs should be distributed accordingly

and the stevedoring portion recovered by the

stevedoring business through their contract rates

charged the vessel, the truck loading portion by the

terminal operators through their -ruck loading

charges or some tariff charge against the cargo, and

the wharfage portion through wharfage charges

coupled with reduced rents. Although no exhibit

was presented, Mr. Linnekin testified that, using

actual costs revealed in respondents’ operating

statements which were disclosed to complainants,

he calculated and applied facility costs in accord-

ance with the service apportionment provisions of

the Freas Formula. Eventually, of course, the

apportionment of terminal service costs for given

commodities, as between cargo and vessel, be-

comes academic because all such costs as well as

those of the water transportation are ultimately

borne by the cargo importer.

Chairman Bentley, Commissioners Day and Hearn

state:

The normal practice followed in past Commis-

sion proceedings would allocate this latter fifty

percent to the vessel. Stevedores do not benefit

from the speed and efficiency of the shipping

to the same extent as does either the cargo

or the vessel under past applications of the Freas

Formula. As stated above, the cargo benefits by

7

B-57

incurring lower loading expenses. The vessel bene-

fits by having to spend fewer days in port for load-

ing operations, thus allowing it to transport more

shiploads over a shorter period of time. But no

such benefit can be equated to stevedores. In fact,

it can be argued that the speed and efficiency of

the shipping gallery works to the detriment of

stevedores, providing shorter working hours by

fewer men and therefore less revenues to the

stevedores.

Crown Steel squarely refutes the generalized statement that

“The normal practice followed in past Commission proceed-

ings would allocate this latter fifty percent to the vessel.”

That statement is also misleading when it “argues’’ that

“less revenues [accrue] to the ~-stevedores.”’ If it means

fewer longshoremen are employed and less longshore wages

paid, then it is correct. But longshoremen are not parties

. : . . =

to this proceeding, and the impact on them was not an issue

in the case. If it means what it says that less “revenues”

accrue to the stevedoring contractors (Rogers or BARMA)

it is incorrect. The record is clear that at this facility steve-

dores ate paid on tonnage of grain loaded to vessel and that

stevedore ‘revenue is not computed on longshore labor costs

plus a mark-up for overhead and profit or some other form-

ula; hence, the stevedoring rate per ton multiplied by the

number of tons loaded establishes the compensation paid to

the vessel’s stevedore, and this is so whether a given tonnage

takes 24 hours to load or 72 hours to load or whether one

gang of longshoremen or ten gangs of longshoremen are

utilized.44 Obviously, with a given tonnage loaded to vessel,

43. Mr. James F. Carrier, General Manager of Rogers, stated on cross-

examination that although he anticipated making a profit of 75¢

per ton on grain loaded and stowed manually in sacks, ‘‘percentage-

( Footnote continued on next page)

B-58

the shorter the loading period and the fewer longshoremen

employed, the greater the profit to stevedore.

Chairman Bentley and Commissioners Day and Hearn

further state:

**. , .We recognize that the costs associated with the

use of the shipping gallery are allocable to those

who derive an economic and commercial benefit

from the use thereof. We do not, however, recog-

nize that the stevedores fall into this recipient

category, at least not to the degree as that of the

cargo or the vessel . . . Therefore, the allocation of

a full fifty percent of the costs of the shipping

gallery to the stevedores is an unreasonable prac-

tice within the meaning of section 17 of the Act.

”

They assert in Footnote 29 “. . .this [wharfage] charge

would be assessable against the vessel to the extent sought to

be imposed on the stevedores.”” “Wharfage”’ would be direct-

ly assessable against the vessel only if the tariff so provided,

and the Cargill tariff herein does not so provide. Under our

General Order 15 (46 CFR 533.6(4) (2)), wharfage may be

assessed against cargo or vessel or both.** Whether the ulti-

mate cost may end up as being for the expense of the vessel

(Footnote 43 - continued from previous page)

wise” he was happier with the slightly more than 2 cents per ton

profit on grain loaded in bulk at Baton Rouge elevator.

44. In Footnote 29 the majority labels (or likens) the charge assessed

for the use of the shipping gallery to “wharfage”. “Wharfage”,

however, as defined in 46 CFR 533.6(d) (2) is a charge assessed

against cargo or vessel for the movement or passage of cargo “‘over,

onto, or under wharves or between vessels .. . when berthed at

wharf’. it is solely a c

This text is long and has been trimmed here. Open the source document for the complete record.