Port Restrictions and Requirements in the United States/Japan Trade

FEDERAL MARITIME COMMISSION

46 CFR Part 586

[Docket No. 96-20]

Port Restrictions and Requirements in the United States/Japan

Trade

AGENCY: Federal Maritime Commission.

ACTION: Final rule.

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SUMMARY: The Federal Maritime Commission, in response to unfavorable

conditions in the foreign oceanborne trade between the United States

and Japan, is imposing $100,000 per-voyage fees on liner vessels

operated by Japanese carriers calling at United States ports. The

unfavorable conditions identified by the Commission involve

restrictions on and requirements for use of Japanese ports. These

conditions arise out of or result from laws, rules, and regulations of

the Government of Japan.

DATES: Effective Date: April 14, 1997.

ADDRESSES: Requests for publicly available information or additional

filings should be addressed to: Joseph C. Polking, Secretary, Federal

Maritime Commission, 800 North Capitol Street, N.W., Washington, D.C.

20573, (202) 523-5725.

FOR FURTHER INFORMATION CONTACT: Thomas Panebianco, General

Counsel, Federal Maritime Commission, 800 North Capitol Street, N.W.,

Washington, D.C. 20573, (202) 523-5740.

SUPPLEMENTARY INFORMATION:

Background

On November 6, 1996, the Commission proposed a rule, pursuant to

section 19(1)(b) of the Merchant Marine Act, 1920, 46 U.S.C. app.

876(1)(b) (``Section 19'') to assess fees on Japanese liner operators

in response to requirements and restrictions on the use of Japanese

ports.1 In the Notice of Proposed Rulemaking, 61 FR 58160, Nov.

13, 1996, (``Notice'') the Commission stated that the Government of

Japan appeared to discriminate against U.S. carriers by not licensing

non-Japanese companies to perform stevedoring or terminal operating

services. The Commission further found that the Government of Japan,

through its licensing practices and other support, appeared to protect

the dominant position of the Japan Harbor Transportation Association

(``JHTA''), the trade organization that wields broad control over the

Japanese harbor services industry. The Commission explained that JHTA's

authority over Japanese harbor services stemmed from its administration

of the prior consultation system, a process of mandatory discussions

and pre-approvals for ocean carrier operational plans. In response to

these conditions, the Commission proposed to levy a per-voyage fee of

$100,000 each time a liner vessel owned or operated by one of the three

Japanese liner operators serving U.S. trades (Kawasaki Kisen Kaisha,

Nippon Yusen Kaisha, and Mitsui O.S.K. Lines) enters a U.S. port from

abroad.

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\1\ Section 19 authorizes and directs the Commission to ``make

rules and regulations affecting shipping in the foreign trade not in

conflict with law in order to adjust or meet general or special

conditions unfavorable to shipping in the foreign trade, whether in

any particular trade or upon any particular route or in commerce

generally, including . . . terminal operations . . . which arise out

of or result from foreign laws, rules, or regulations or from

competitive methods or practices employed by owners, operators,

agents, or masters of vessels of a foreign country . . . .''

The rules and regulations the Commission is authorized to make

include limitation of sailings, suspension of carriers' tariffs or

rights to use conference tariffs, suspension of carriers' rights to

operate under FMC-filed terminal and other agreements, fees of up to

$1,000,000 per voyage, or any other action deemed necessary and

appropriate to adjust or meet the unfavorable condition. 46 U.S.C.

app. 876(9).

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The closing date for comments, originally set for January 13, 1997,

was extended to January 20, 1997, to allow parties to address the

outcome of maritime consultations held between the United States

Government and the Government of Japan on January 6-7, 1997.

Comments

American President Lines and Sea-Land Service

Joint comments strongly supporting the proposed rule were filed by

American President Lines, Ltd. (``APL''), and Sea-Land Service, Inc.

(``Sea-Land''), the two U.S. carriers operating in the Japan trade.

Those lines stated:

The premise on which [the proposed rule] rests is indisputable,

namely, that the government of Japan has, through its discriminatory

licensing system in the harbor services industry, created conditions

unfavorable to shipping in the U.S.-Japan trade. As accurately

recounted in the Supplementary Information to the Notice, the

stevedoring and terminal services providers in Japan are licensed by

the Ministry of Transport (``MOT'') in a largely discretionary

process and are exclusively Japanese entities. Also, [JHTA]

functions as a trade association of such providers with the approval

of MOT. The activities of the JHTA, in which MOT have long

acquiesced, are characterized by blatant anti-competitive practices

including those at issue in this and prior proceedings of the

Commission.

APL/Sea-Land Comments at 1-2.

The U.S. carriers explained that the need for changes in Japanese

port practices is becoming more urgent:

In years past, when carriers performed their individual vessel

and terminal operations, JHTA-imposed inefficiencies were merely an

unwelcome set of phenomena. However, difficult market conditions in

the trans-Pacific trade in general and in the U.S.-Japan trade in

particular have forced carriers to enter into reciprocal slot

charter and terminal rationalization arrangements in order to

increase service competitiveness while lowering costs. Thus, when an

economically-driven redeployment of the assets of several carriers

operating under a strategic alliance is frustrated or delayed by the

absolute control and abuse of power of the JHTA in Japan over

[[Page 9697]]

every operational aspect of the alliance, the need for reform

becomes acute.

APL/Sea-Land Comments at 4.

APL and Sea-Land also pointed out that other foreign carriers

serving Japan are being adversely affected as well. They noted that the

European Commission, at the behest of European carriers, has urged the

Government of Japan for years to secure the elimination of port

restrictions. It was also pointed out that in October of last year, the

European Commission filed a formal complaint with the World Trade

Organization regarding the prior consultation process and JHTA's ``de

facto monopoly on stevedoring in Japan.''

The U.S. carriers opined that the amount of the sanction proposed

by the Commission, $100,000 per voyage, is reasonable under the present

circumstances. According to those lines, the sanction ``is an

assessment which is far less than the economic impact on the U.S.

Carriers of the cumulative adverse effects of the prior consultation

system, that is, the abuse of unbridled market power by the harbor

services industry in Japan.'' APL/Sea-Land Comments at 3. However, the

U.S. carriers suggested that, if JHTA were to retaliate against U.S.

carriers in response to the actions taken by the Commission, either

directly or through labor disturbances, the severity of sanctions

should be increased substantially. Similarly, they urged that if the

Government of Japan or its instrumentalities take any retaliatory

action against the U.S. carriers in response to actions taken by the

Commission, the severity of sanctions should also be increased.

The sanctions should be continued until U.S. carriers are licensed

to perform stevedoring and terminal operating services co-extensive

with those performed by licensed entities in Japan and by Japanese

carriers and their affiliates in U.S. ports, the U.S. carriers

recommended. Moreover, they argued that they must be free to operate

as, or contract for the operation of, stevedores and terminal operators

independent of JHTA's system of prior consultation. They also

maintained that any remaining conspiracy by the Japan harbor services

monopoly to injure or eliminate competition from the new licensees, or

to deprive new licensees of a supply of skilled labor, would merit

continuing sanctions.

APL and Sea-Land also reported on consultations between the

Government of Japan and the United States in Washington on January 6-7,

1997, concerning prior consultation, licensing, and other Japanese port

practices. According to the U.S. lines, the Japanese delegation to

these talks recited the view that the practices in question were purely

commercial matters, and the talks adjourned without an agreement of any

kind having been reached.

International Chamber of Commerce

Comments in support of the proposed rule were submitted by the

Commission on Maritime Transport of the International Chamber of

Commerce (``ICC-CMT''). The comments indicated that the ICC-CMT is made

up of representatives of all segments of the maritime sector, including

carriers, shippers, forwarders and port interests from around the

world.

The ICC-CMT raised the following concerns: (1) Limited competition

in Japan's harbor services creates port costs which are arguably among

the highest in the world; (2) carriers are subjected to a system of

prior consultation with the JHTA which makes it difficult to

effectively improve service or reduce costs; and (3) shippers are

forced to absorb some of the very high costs which result from these

restrictions. The comments expressed hope that the Government of Japan

will see to it that port services are opened to competition, and

indicated support for all governmental efforts to remove restrictions

and assure free and fair trade in maritime transport services.

Japan Foreign Steamship Association

The Japan Foreign Steamship Association (``JFSA''), the

organization of non-Japanese shipping lines in Japan, submitted a copy

of a position paper urging specific and detailed changes in Japanese

port policies and practices.

JFSA represents the interests of the foreign carriers (including

the U.S. lines) in prior consultation and other dealings with JHTA.

According to a cover letter included in its submission, JFSA's position

paper was provided to the Director General of the Maritime Transport

Bureau, Ministry of Transport (``MOT''), for consideration at a MOT-

chaired meeting between JFSA, the Japanese Shipowners' Association, and

JHTA, held January 29, 1997.

JFSA in its position paper proposed a number of changes to the

prior consultation system. Under the JFSA plan, shipping lines would be

permitted to consult or negotiate directly with their stevedoring

companies, rather than be required to submit their operational plans to

JHTA for approval. Stevedore companies would then consult (either on

their own or, if they choose, through JHTA), with labor. JFSA also

urged that the requirement for prior consultation be limited to ``major

issues,'' defined as arrangements for rationalization requiring changes

in ports, terminals, or berths, that may seriously affect the

employment of port laborers, rather than all operational changes, as is

currently the case.

In addition, JFSA requested a commitment from MOT, JHTA and its

member companies that prior consultations will not be used as a tool

for allocating business among member companies, and that prior

consultation will never be required for individual business

transactions between carriers and stevedoring companies. JFSA proposed

procedural rules for prior consultation, including time limits and

requirements that decisions be explained in writing. According to JFSA,

MOT should be responsible for implementation and enforcement of the

revised process, and disputes over operation of the process should be

referred to a standing arbitration body nominated by all parties and

supervised by MOT.

JFSA urged that, within a reasonable time period, carriers be

allowed to freely select stevedore and terminal service companies, and

be allowed to obtain unrestricted general stevedore licenses at any or

all Japanese ports. The present system of regulated rates, according to

JFSA, should be abolished to allow for competitive bidding for port

services. In addition, JFSA proposed the implementation of permanent

Sunday work, including terminal and gate services, and 24-hour port

operations.

According to JFSA, the proposed changes would ``insure fair and

equitable commercial operating conditions comparable to those now

enjoyed in U.S. and European international trades by Japanese shipping

companies.'' The changes were said to be necessary to secure fair and

reasonable business practices, protect the significant investment of

shipping lines, ascertain a satisfactory service environment for

Japanese export and import industry, and maintain and assure sufficient

work volume to satisfy labor requirements.

American Association of Exporters and Importers

The American Association of Exporters and Importers (``AAEI'')

stated that ``the port practices in question supported by Japanese

government regulations are trade restrictive practices working against

the interests of U.S. (and all other) shippers.'' AAEI also

acknowledged that the practices in question fall within the

Commission's jurisdiction.

However, AAEI stated that it believes the practices at issue place

Japan in

[[Page 9698]]

violation of World Trade Organization (``WTO'') rules, and followed

that ``the United States has both the obligation and the long term need

to settle its trade disputes, in areas covered by WTO rules, through

WTO dispute settlement channels.'' Accordingly, AAEI proposed a

procedure whereby the Commission, before taking any action, would join

with the Office of the United States Trade Representative to ``satisfy

themselves that these . . . port practices . . . are in violation of

WTO rules.'' If so satisfied, AAEI would have the Commission take no

action while the U.S. sought to resolve these matters through the WTO;

otherwise, the agencies would jointly issue an explanation of why WTO

rules did not apply, ``in order to justify'' FMC action.

AAEI also asked that the Commission perform an impact study of the

costs to the U.S. business community of cargo diversion to Canadian

ports which, according to AAEI, might occur as a result of the

Commission's action.

Port of Portland

The Port of Portland, located in Portland, Oregon, raised three

points concerning the proposed rule. First, it suggested that the

Commission should clarify whether the $100,000 fee would be assessed on

a ``per port call'' basis, or on a ``per voyage'' basis. Second, it

suggested that the Commission consider and publish additional steps the

Government of Japan might take to avert the imposition of sanctions.

Finally, the Port of Portland expressed concern that the proposed

sanctions could lead to the diversion of vessel calls to non-U.S. ports

in Mexico and Canada. The Port of Portland urged the Commission to

consider and publish alternative sanctions that would not create such a

risk.

Japanese Shipowners' Association

The Japanese Shipowners' Association (``JSA'') stated that it is an

association domiciled in Japan of 147 shipping companies doing business

both in the ocean worldwide trades and in Japan's domestic trades. The

JSA indicated that it is ``curious to know why our leading members are

to be penalized where they are not accused of any misconduct and where

the allegations in the Notice are as vague as they are groundless.''

JSA went on to state:

Our understanding is that the Japanese Ministry of Transport has

never received an application from a U.S. carrier, that the

licensing law has not been administered to discriminate against the

nationality of an applicant, that no MOT official was authorized to

advise any U.S. carriers not to apply for a license and that,

according to the Association's inquiry, no such advice was ever

given by a responsible MOT official.

Unilateral sanctions proposed against entities having no

responsibility could lead to only confusion, as well as to a

precedent detrimental to the future of U.S./Japan trade

relationships.

Mitsui O.S.K. Lines, Kawasaki Kisen Kaisha, and Nippon Yusen Kaisha

Opposition to Sanctions

Comments and a memorandum opposing the proposed rule were jointly

filed by Mitsui O.S.K. Lines, Ltd. (``MOL''), Kawasaki Kisen Kaisha,

Ltd. (``K-Line''), and Nippon Yusen Kaisha (``NYK''), the three

Japanese liner carriers operating in the U.S. trades. Those lines, as

an initial matter, stated that they are private companies, that they

are not in a position to direct or control the policies and actions of

the Ministry of Transport, and that they ``deplore a statutory

application which would punish us irrespective of the lawful character

of our carrier operations in the Japan/U.S. oceanborne trades.'' MOL/K-

Line/NYK Comments at 4.

The Japanese carriers indicated that they will be severely injured

by the threatened sanctions. Based on 1996 vessel operations, during

which sailings were said to have averaged 34 per month, imposition of

the proposed $100,000 fee reportedly would cost the Japanese lines 3.5

to 4 million dollars per month in 1997, approximately 42 to 45 million

dollars per year.

Licensing

The Japanese carriers challenged the Commission's proposed finding

that the Ministry of Transport uses its licensing authority to restrict

entry and to shield JHTA and its members from foreign competition. They

asserted that the Government of Japan has never discriminated against

U.S. carriers with regard to the issuance of licenses, and that MOT has

never advised U.S. carriers on the matter of licensing or received an

application from a U.S. carrier.

The Japanese carriers stated that there is no ownership restriction

in the Port Transportation Business Law which would bar a U.S. carrier

applicant based on nationality. According to MOL, NYK and K-Line, the

supply-demand requirement in the law was enacted as an internal measure

to promote tranquility at the waterfront; ``while this restriction

inherently serves to place a limit at some point on the number of

licenses the ministry can grant, it is a limit when reached that would

apply to any applicant regardless of its nationality.'' MOL/K-Line/NYK

Memorandum at 2-3. They asserted that MOT has offered written assurance

that a U.S. carrier's application ``would be fairly and evenly adjudged

under the same standards as Japanese applications. . . .'' Id. at 2.

The Japanese carriers argued that the ``basis'' and ``linchpin'' of

the Commission's proposed action is the ``single undocumented

assertion'' that U.S. carriers have been shut out of the Japanese

stevedoring market and advised not to bother to apply, and contended

that no legal or factual support is presented to substantiate these

findings. Id. at 2; MOL/K-Line/NYK Comments at 5. They urged the

Commission to discontinue the proceeding on the basis that ``sanctions

under section 19 simply cannot be applied absent a demonstration by

substantial evidence of discrimination against U.S. carriers.'' MOL/K-

Line/NYK Memorandum at 4. They further asserted that the Commission

violated section 553(b)(3)(c) of the Administrative Procedure Act, 5

U.S.C. 553(b)(3)(c), and contravened the carriers' protections of the

Due Process Clause of the Fifth Amendment, by failing to disclose

factual information such as the timing and circumstances under which

inquiries regarding licenses were made, the names of relevant carrier

and MOT officials, and accounts of the exchanges. The Japanese carriers

urged the Commission to release any such details and to allow an

opportunity for comment on them.

The Japanese carriers suggested that the Government of Japan is

taking steps to address the licensing-related concerns raised by the

Commission. They indicated that in December, 1996, MOT announced a

proposal to abolish the licensing system over a three-to-five year

period. Attached to the comments was a newspaper article outlining

MOT's plan, indicating that prior to any action the proposal would be

deliberated at the administrative reform committee and studied at the

Council for Transport Policy. Furthermore, the article stated that, as

a precondition for such a move, ``measures for ensuring the stable

management of ports are necessary.'' MOL/K-Line/NYK Comments,

Attachment 3. However, the Japanese lines pointed out that MOT's

announcement was met with opposition by waterfront labor unions,

suggesting need for a period of time before the intended changes can be

made.

Prior Consultation

The Japanese carriers read the Notice to propose that only the

Government of Japan's licensing practices, and not

[[Page 9699]]

prior consultation, contravene the standards set forth in section 19:

[T]he Commission's Notice observes that it is the Ministry of

Transport's discriminatory and restrictive licensing which would

``appear'' to constitute conditions unfavorable to shipping. Though

critical of the procedural aspects of the Prior Consultation system

and MOT's alleged exercise of authority as to permit JHTA to wield

``unchecked authority'' through the Prior Consultation process, we

read the Notice as not concluding that the system itself is a

condition which is unfavorable to shipping.

MOL/K-Line/NYK Comments at 10. Nevertheless, they maintained that

the Commission has inaccurately characterized the prior consultation

system.

MOL, NYK and K-Line suggested that the Commission failed to

distinguish between the system of prior consultation itself, which they

asserted enjoys the support of both Japanese and non-Japanese carriers,

and the way it is administered, which they conceded is in need of

reform. They reviewed the procedures for prior consultation:

[M]atters related to innovated services which affect port

laborers are negotiated first between the shipping company (or JSPC

or JFSA) and JHTA and then JHTA and the harbor workers' Unions.

Under the procedures followed since 1986, matters are proposed for

prior consultation through the submission of a written application

by the shipping company. * * * The initiation of this process is

known as ``pre-prior consultation'' under which the matter proposed

is considered at a meeting attended by JHTA's Chairman and some of

its prior consultation committee members and the shipping company

applicant.

Once a matter passes pre-prior consultation and has been

accepted by JHTA for Prior Consultation, it is deliberated between

JHTA and the Unions, first, at the ``Central'' or national level and

then at the local level. Under these procedures, therefore, there

are no direct negotiations between shipping companies and the harbor

worker unions, thus reducing the prospect of labor conflicts and

confrontations.

MOL/K-Line/NYK Comments at 11-12.2

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\2\ ``JSPC'' refers to the Japanese Shipowners Ports Council,

the component of the Japanese Shipowners' Association that deals

directly with harbor service-related matters. JSPC often serves as

the voice of the Japanese lines in prior consultation and other

dealings with JHTA.

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The Japanese lines suggested that the prior consultation system was

developed to resolve the conflicting objectives of shipping companies

and shoreside laborers and to avoid the debilitating confrontations of

the past. They asserted that they are aware of no other system that

offers a better prospect for labor peace. Pointing to the 1986 boycott

of YS Line vessels described in the Notice, they claimed that

waterfront unions support prior consultation and are willing to take

whatever steps are necessary to defend it.

MOL, NYK and K-Line stated that over the past year parties began to

address the flaws in the current system. They described negotiations

between shipping lines and JHTA regarding transparency and

simplification of procedures, and pointed to an agreement signed in

August, 1996, confirming the necessity of prior consultation and

establishing new procedures and time limits to accelerate the process.

The Japanese carriers also stated that the Commission did not

properly characterize the role of MOT with regard to the prior

consultation system. They contended that prior consultation is a

private sector business practice, and that MOT has no interest in its

continuation, other than labor peace and the smooth running of Japan's

ports. According to the Japanese carriers, MOT's only involvement with

the system has come when carriers have asked it to bring about the

restoration, continuance, and improvement of the system. They

maintained that MOT treats prior consultation negotiations as matters

for the private sector, except when they break down, at which point MOT

may become involved as a catalyst. This is because, according to MOL,

NYK and K-Line, under Japanese labor laws, there is a policy of non-

interference in employer-union bargaining.

The Japanese lines stated that the 1992 Ministerial View referred

to in the Notice was not an endorsement of JHTA's activities; rather,

it ``merely called for respect for the existing system regarding the

operations of existing container terminals which procedures had been

privately negotiated by the parties.'' MOL/K-Line/NYK Comments at 19.

The Japanese carriers also pointed out that MOT has endeavored to

arrange meetings of interested carrier parties and JHTA with the aim of

improving the prior consultation process.

Port and Terminal Interests

After the comment period closed, the Commission received a number

of closely similar or identical comments from various port and terminal

interests, including H&M International Transportation, Inc.; the Port

of Seattle; the Port Authority of New York and New Jersey; the

Jacksonville Port Authority; Cronos Containers Inc.; Ceres Terminals

Inc.; Georgia Ports Authority; and the Port of Oakland.3 These

comments urged that the Commission stay final action, or reduce or

revise the proposed sanctions. The commenters raised the concerns that

the Japanese carriers would divert sailings to non-U.S. ports or ``load

center'' operations at a single U.S. port. Several of these commenters

suggested that it is unfair to penalize Japanese carriers for Japanese

port conditions, when the carriers have invested millions of dollars in

U.S. terminals, inland facilities, equipment, and ships. Jacksonville

Port Authority expressed concerns that the rule would negatively affect

the Japanese-flag auto carriers that call there.

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\3\ The Commission has determined to accept these comments into

the record.

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Discussion

Licensing

The Japanese carriers appear to have taken the position, first,

that the sole basis for the Commission's proposed finding of conditions

unfavorable to shipping is the Government of Japan's reportedly

restrictive and discriminatory licensing practices, and second, that

MOT has never actually acted discriminatorily in issuing licenses.

Therefore, they concluded, the proposed rule should be withdrawn.

However, both aspects of the Japanese lines' argument are without

foundation or merit.

It is clear from the Notice that the administration of the

restrictive licensing requirement is not the sole unfavorable condition

at issue in this proceeding. Rather, the Commission listed in section

586.2(a)(1-4) of the proposed rule, and explained in detail in the

Supplementary Information, an extensive series of apparent unfavorable

conditions. These conditions included MOT's refusal to grant U.S.

carriers licenses, with the result that U.S. carriers have no choice

but to submit their shoreside planning and operations to JHTA control;

however, several other conditions were set forth as well, including

JHTA's use of the prior consultation system to control competition in

the harbor services market, impose restrictions on carrier operations,

and force carriers to take on unnecessary stevedoring companies.

There is also little apparent basis for the Japanese carriers'

challenges to the Commission's proposed finding that the Government of

Japan's licensing processes are discriminatory and restrictive. The

Japanese lines asserted that MOT, to their knowledge, never advised

U.S. carriers on the matter of licensing or received an application

from a U.S. carrier, that there are no

[[Page 9700]]

nationality-based restrictions in the Port Transportation Business Law,

and that MOT would review any new application without regard to

nationality. However, these arguments focus entirely on purported

procedures for obtaining a license, ignoring the practical bars to

obtaining such a license that stem from well-known official Japanese

policies. By emphasizing the form and substance of the licensing

system, the Japanese lines disregard its discriminatory and restrictive

effects and results, which are of primary concern to the Commission.

These official barriers to licensing U.S. carriers and other

potential entrants to the stevedoring market, and their practical

effects, were confirmed most recently in the U.S.-Japan maritime

consultations on January 6-7, 1997. During these meetings, officials

from the Departments of State and Transportation reportedly inquired as

to how MOT would apply its supply and demand test to a stevedoring

application filed by a large organization such as APL or Sea-Land.

4 After reviewing supply and demand factors to be considered, the

delegation of the Government of Japan reportedly stated that, in

general, Japanese ports are either balanced or supply is slightly

larger than demand, that there is already too much competition, and

that there are too many service providers already. The Japanese

delegation was said then to have suggested that U.S. carriers buy an

interest in an existing stevedore company or form a joint venture with

such a company, so that the supply-demand balance could be maintained.

Given the mandatory nature of the supply-demand test, the position

articulated by the Government of Japan leads inescapably to the

conclusion that licenses will not be issued to U.S. carriers. Under

such circumstances, it would seem futile for U.S. carriers to go to the

considerable time and expense of preparing and submitting formal

applications, absent a clear shift in policy by the Government of

Japan.

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\4\ Section 19(12) of the Merchant Marine Act, 1920, states:

``the Commission may consult with, seek the cooperation of, or make

recommendations to other appropriate agencies prior to taking any

action under this section.''

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Given these conditions, even if the Government of Japan's licensing

standard is administered in a nationality-neutral manner, it is still

discriminatory and protectionist in effect. By barring new entrants,

the licensing system protects existing operators, all of whom are

Japanese firms, from competition from U.S. or other foreign companies.

It also shields JHTA from competition from new non-JHTA entrants,

thereby protecting that group's dominant position.

The Japanese carriers invite the Commission to be sidetracked on an

evidentiary dispute regarding whether MOT officials told U.S. carriers

that licenses would not be granted, or told them not to apply, or

whether involved officials were properly authorized. Such a diversion

is unwarranted, however. First, statements by MOT officials that

licenses would not be granted are entirely consistent with the position

recently articulated by the Government of Japan that supply currently

balances or exceeds demand in Japanese ports. More importantly,

however, the Commission's concerns regarding licensing are based on the

system's restrictive and protectionist effects, rather than the timing

or details of any particular bureaucratic exchange. 5

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\5\ Moreover, we are skeptical that the Japanese carriers,

which in response to the Commission's 1995 Information Demand Orders

pled unawareness of virtually all matters concerning MOT's licensing

practices, can now credibly attest to the details of MOT officials'

past conversations regarding licensing.

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MOT's recently announced proposal to abolish its current licensing

system does not warrant deferral of further Commission action. MOT

proposed that the change be made in three to five years, that it be

subject to review and consultation by a number of governmental bodies,

and that other unspecified measures would be enacted to ensure the

``stable management'' of ports. While elimination of the licensing

requirement would address a number of the Commission's concerns, the

conditions attaching to the MOT proposal and its over-the-horizon

timetable call into question whether, and under what conditions, such

reforms might actually be made. If MOT is indeed of the opinion that

more entrants and increased competition would be appropriate in the

port services sector, its broad administrative discretion could be used

to issue new stevedoring licenses to U.S. carriers and other qualified

applicants; any action or plan substantially short of that would appear

to be an inadequate resolution of these issues.

Prior Consultation

There is no support for the Japanese carriers' broad assertion that

the Commission ``fails accurately to describe or comprehend the prior

consultation system.'' MOL/K-Line/NYK Comments at 10. The Japanese

lines failed to identify any specific factual errors in the

Commission's account and, in fact, their description of prior

consultation is consistent with that of the Notice, differing only in

focus and emphasis on historical context. The U.S. carriers, in

contrast, ardently supported the proposed findings in the Notice

regarding prior consultation.

As the Japanese carriers explained, the prior consultation system

involves ``two party/two party'' negotiations for all planned changes

in shipping line operations involving Japanese ports. The first ``two

party'' negotiation is between a shipping line and JHTA, while the

second is between JHTA and the waterfront unions. As was described in

the Notice, virtually all carrier operational changes must be submitted

for prior consultation. 6 If a carrier wishes to make such a

change and it is deemed important by JHTA, a representative of the

line, often accompanied by an official of the stevedoring company it

uses, must explain its request to the JHTA Chairman. At this stage

(sometimes referred to as ``pre-pre-prior consultation''), the JHTA

Chairman may refuse to accept the request, or require changes or impose

conditions for acceptance.

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\6\ As noted in the proposed rule, these include: changes in

berth, route, or port calls; inauguration of new services or new

vessels; calls by non-container ships at container berths; changes

in vessel size or technology which affect stevedoring or terminal

operations; temporary assignment of vessels as substitutes or the

renaming of vessels; rationalization agreements between carriers

involving vessel sharing or berthing changes; the assignment of a

stevedoring contractor or terminal operator to a carrier and any

subsequent change in assignment; requests for Sunday work; changes

in mandatory weighing and measuring arrangements; or any other

changes which affect stevedoring or terminal operations.

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If the carrier's request is acceptable to the JHTA Chairman, it is

taken up at a formal ``pre-prior consultation'' meeting between the

carrier and its stevedore, on the one hand, and JHTA on the other. If

the request is accepted at this stage, the matter is deliberated at

formal prior consultation meetings between JHTA and union officials,

both in Tokyo and at the local level. It appears that the formal pre-

prior consultation and prior consultation meetings are merely

formalities; if a carrier's request is unacceptable to JHTA, it simply

is not accepted for consideration at the formal prior consultation

meetings. In contrast, if a request is accepted at the initial stage by

the JHTA Chairman, it is almost assured to be approved at the formal

meetings.

JHTA's processes are characterized by a total lack of transparency.

There are almost no written rules, either substantive or procedural,

nor are there written reasons for decisions or an appeal process. JHTA

appears to have

[[Page 9701]]

absolute discretion over the terms and conditions imposed in the prior

consultation process.

This arrangement, whereby JHTA can arbitrarily permit or deny

carriers access to the prior consultation process, gives JHTA

extraordinary leverage. If JHTA refuses to accept a proposed matter for

prior consultation, any attempt by the carrier or its stevedore to

implement the plan is likely to be met with work stoppages or other

labor disruptions. Carriers are left with no choice but to acquiesce to

any conditions imposed by JHTA. In a recent conversation with a U.S.

Government official, the JHTA Chairman gave a clue as to the extent of

his influence and discretion, reportedly stating that he enjoys

``absolute power'' to influence harbor-related matters in Japan.

It is uncontroverted that JHTA uses this leverage (that is, its

unchecked authority to accept or reject carrier plans for pre-prior

consultation) to prevent competition and maintain an agreed upon

allocation of work among JHTA member companies. This conclusion is

well-established in the responses of several lines to the Information

Demand Orders, and was further supported in the U.S. lines' comments.

For example, JHTA has prevented carriers and consortia from freely

switching terminals or stevedores, and from consolidating and

rationalizing operations. Also, it has refused to grant prior

consultation requests unless carriers agreed to employ additional

unnecessary stevedoring companies or contractors. Such practices

prevent any real competition and undermine attempts to increase the

efficiency of port operations, with the result that Japan has port

costs that far exceed those of its Asian neighbors and other major

trading nations.

The Japanese carriers raised several arguments in defense of the

prior consultation system. First, they asserted that the system itself

enjoys universal support among carriers. This, however, is clearly

incorrect, as JFSA and the U.S. carriers advocate substantial revisions

in the current system. Their proposed changes would go to the heart of

the Commission's concerns, removing JHTA's free hand to approve or deny

carrier requests, restrict competition, and allocate stevedoring work.

The improvements advanced by the non-Japanese lines would, among other

things, allow carriers to arrange their operations normally with their

chosen stevedoring and terminal companies, as is the case in other

major maritime nations. Under the JFSA proposal, JHTA could still

maintain a legitimate collective bargaining role in negotiations

between employers and labor unions, but would no longer be a ``black

box'' issuing unappealable directions as to how carriers' shoreside

operations should be conducted.

The Japanese carriers stated that the system was created to

maintain labor stability and avoid the need for face to face

confrontations between carriers and unions over the inauguration of

``innovated vessels.'' They pointed out that the inauguration of

container service, which occurred in the 1960's and 70's, raised

serious issues and led to disruption in waterfront labor relations in

many maritime nations, including the U.S. They suggested that prior

consultation is still necessary to avoid the disruptions of the past,

and stated that they know of no other system that would better

guarantee labor stability.

These reasons, however, do not justify the anticompetitive

practices currently engaged in by JHTA. At no point has the Commission

ever questioned the appropriateness of JHTA's role as an intermediary

between employers and unions, or the practice of collective bargaining

for waterfront labor, nor has it challenged any employer's right to

designate JHTA as its representative in such negotiations. The

Commission's concern lies with JHTA's autocratic control of carrier

operations, suppression of competition, allocation of work among

members, extraction of fees and other concessions, and retaliation

against its detractors. None of these factors is a necessary or logical

precondition to JHTA's collective bargaining or labor relations role,

and none merits a policy of labor-related ``non-interference'' by the

Government of Japan. Rather, these measures only serve to consolidate

JHTA's power and shield its member companies from market forces.

While JHTA itself is an organization of harbor service providers,

its abuses are not purely private sector matters. As explained in

detail in the Notice and Information Demand Orders, in accordance with

Japanese laws and regulations, JHTA operates with the permission of,

and under the supervision of, MOT, which can annul JHTA's incorporation

if it acts contrary to the public interest. MOT is authorized to give

oversight or guidance relating to the prior consultation system, and

has in fact intervened repeatedly, as confirmed by the Japanese

carriers, to bring about the ``restoration, improvement, and

continuance'' of the system. Moreover, MOT is vested with broad

regulatory authority over JHTA member companies, including licensing

authority and the right to review and disapprove rates and business

plans. The Japanese lines' protestations that MOT generally takes no

role in the day-to-day operations of prior consultation, and that it

has no vested interest in its continuation, are immaterial. Given the

Government of Japan's regulatory and oversight authority, JHTA and its

member firms could not continue to operate in the current manner

without the Government of Japan's ongoing support and approval.

The Japanese lines suggested that recent changes in prior

consultation have eliminated the U.S. carriers' concerns. While any

improvements are praiseworthy, these recent changes have been aimed

only at adding transparency and speed to the process. They have done

nothing to address the core problems of the system, such as JHTA's

absolute authority to block carrier plans at the pre-pre-prior

consultation stage, and its use of this authority to eliminate

competition and extract other concessions.

Procedural Issues

The Japanese carriers argued that this proceeding is procedurally

defective, and that their due process rights have been violated,

because they have not had an opportunity to review the responses

submitted by other carriers to the Commission's 1995 Information Demand

Orders. They asserted that it was improper for the Commission to rely

on these materials to reach the proposed findings set forth in the

Notice without making them available to the Japanese carriers.

These procedural challenges are without basis. Confidentiality of

submissions is explicitly provided for in the statute; section 19(8)

states: ``Notwithstanding any other law, the Commission may refuse to

disclose to the public a response or other information provided under

the terms of this section.'' The confidentiality provided by this

section is necessary to ensure that the Commission receives the most

complete and accurate information possible. Disclosure in some cases

could lead to retribution against respondents, seriously discouraging

candid submissions. These points apparently were not lost on the

Japanese carriers, as they requested confidential treatment for their

entire Information Demand Order submissions.7

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\7\ The ``[n]otwithstanding any other law . . .'' language in

the statute undermines the Japanese carriers'' argument that full

disclosure is required by the Administrative Procedure Act. It would

defy logic and common tenets of statutory construction to suggest

that Congress added the non-disclosure provision in 1990 with the

intention that it be vitiated by the general provisions of the pre-

existing APA. In addition, we would point out that the section cited

by the Japanese lines includes an exception ``to the extent there is

involved . . . [a] foreign affairs function of the United States.''

46 U.S.C. Sec. 553(a)(1); see American Association of Exporters and

Importers v. U.S., 751 F.2d 1239 (Fed. Cir. 1985).

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[[Page 9702]]

The Japanese carriers' assertion that their due process rights have

been violated also lacks merit. In American Association of Exporters

and Importers v. U.S., the Court of Appeals for the Federal Circuit

rejected statutory and constitutional challenges raised by an

importers'' and exporters'' group to actions of the Committee for the

Implementation of Trade Agreements, a federal agency, regulating and

imposing quotas on trade in textiles. The court found no merit in

appellant's claim that the agency violated importers' due process

rights by denying them the opportunity to be heard prior to the

imposition of quotas. In reasoning applicable to this proceeding, the

court held that ``a prerequisite for due process protection is some

interest worthy of protecting; `We must look to see if the interest is

within the [Constitution's] protection of liberty and property.' '' 751

F.2d at 1250, quoting Board of Regents v. Roth, 408 U.S. 564, 571

(1972). The court reasoned that a protectable interest must be more

than a unilateral expectation; rather, those seeking constitutional

protection under the due process clause must point to a ``legitimate

claim of entitlement'' prior to any consideration of the government's

constitutional obligations. The court held that the mere subjective

expectation of a future business transaction does not rise to the level

of an interest worthy of protection, and that ``[n]o one has a

protectable interest in international trade.'' Id., citing Arnett v.

Kennedy, 416 U.S. 134, 167 (1974); Perry v. Sinderman, 408 U.S. 593,

603 (1972); Norwegian Nitrogen Co. v. United States, 288 U.S. 294

(1933).

The Japanese carriers' expectation to be permitted, in the future,

to operate in the U.S. foreign trades free of fees or charges therefore

does not rise to the level of an interest in property worthy of

constitutional protection. Accordingly, there can be no finding that

the Japanese carriers' due process rights were violated.

There also is no merit to the Japanese carriers' argument that the

instant proceeding is an ``adjudication'' and that as such they are

entitled to additional procedural protections. The Commission's notice

did not propose findings of unlawful conduct on the part of these three

individual companies. Rather, it proposed findings that there exist

conditions unfavorable to shipping in the U.S.-Japan trade, arising out

of Japanese laws, rules, and regulations. In response, it proposed an

across-the-board fee of $100,000, prospectively establishing the terms

and conditions by which all Japanese carriers may operate liner vessels

in the U.S. trades. The character of the proceeding is not transformed

by the fact that the Commission, drawing on its trade monitoring

resources, preliminarily identified in the Notice those carriers that

appeared to fall into the subject class. Indeed, should it come to the

Commission's attention that other Japanese carriers are operating liner

services in the U.S. trades, the final rule will be amended to include

them. See Docket No. 91-24, Actions to Adjust or Meet Conditions

Unfavorable to Shipping in the United States/Korea Trade--Amendment to

Final Rule, 58 FR 7988 (1993) (adding a Korean carrier that had newly

entered the trade to a list of lines subject to sanctions).

Port and Terminal Concerns

The Port of Portland asked that the Commission clarify whether the

$100,000 fee would be levied ``per-voyage'' or ``per-port call.'' As

set forth in the proposed rule, the fee would be assessed on a per-

voyage basis; that is, after a line first calls in the U.S. from abroad

and is assessed the $100,000 fee, it would not be subject to additional

fees for each successive U.S. port call on that voyage. This treatment

would seem to eliminate the concern that the fee could lead to Japanese

lines dropping or consolidating port calls in the U.S. Also, in

response to Jacksonville Port Authority's concerns, we would point out

that the rule applies only to container-carrying liner vessels, not

dedicated car-carriers.

A number of commenters requested that the Commission address the

possibility that Japanese carriers will cancel sailings or shift

services to Canadian or Mexican ports in response to the fee. Such

actions would appear improbable, and have not, in any event, been

suggested by the Japanese carriers thus far in this proceeding. The

$100,000 fee represents only a small percentage of the Japanese

carriers' gross per-voyage revenues in the U.S. trades. 8 Given

carriers' high fixed costs, it is unlikely that they would cancel

services, foregoing multi-million dollar revenues, in order to avoid

paying the fee. Similarly, it does not appear that the level of the fee

would justify the high costs of shifting vessel calls to foreign ports.

Such moves would require lines to make costly changes in contracts and

arrangements for, among other things, terminal facilities, stevedoring,

warehousing and storage, inland transportation, sailing schedules, and

foreign and U.S. customs clearance. Nevertheless, the Commission will

closely monitor and evaluate cost, revenue, and service level data to

guard against adverse effects on U.S. ports, terminals, and shippers.

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\8\ For example, for an average-sized vessel in the Asia-U.S.

trades (i.e., a vessel with 3000 20-foot container capacity

operating three-quarters full) the FMC fee would cost a carrier

about $45 per container. In contrast, a carrier collects freight

charges averaging $1,836 per container in the Japan-U.S. trades, and

$2,250 from the China, Hong Kong, and Taiwan regions, according to

FMC rate indices. A carrier will collect freight of over $4 million

for one sailing of one average-sized vessel from Japan to the U.S.,

and over $5 million from the China range to the U.S., not including

revenues from the return or onward voyage.

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The Commission is not swayed by the argument, raised by a number of

port commenters, that it would be unfair to impose fees on Japanese

carriers when they are not responsible for Japanese port conditions and

have invested millions of dollars in U.S. port facilities. Indeed, this

argument highlights the inequity in treatment afforded U.S. lines in

Japan versus that afforded Japanese carriers in this country, as U.S.

carriers have had no opportunity to make similar investments in owning

and operating Japanese terminal facilities. Japanese carriers have

enjoyed continued success in the American market, enjoying high

revenues and substantial growth in liner services and terminal

operations, in large part due to the favorable and open business

climate created by the laws, rules, and regulations of the United

States. However, Japanese firms cannot expect to continue to reap the

benefits of favorable U.S. transportation policies if such treatment is

not reciprocated by the Government of Japan.

Recent Developments

As noted in the comments, a meeting reportedly was held on January

29, 1997, involving JHTA, non-Japanese carriers (represented by JFSA),

and Japanese carriers (represented by JSPC). The meeting was arranged

and chaired by MOT for the purpose of discussing possible reforms to

the prior consultation system. Apparently, at the meeting JFSA

presented a proposal based on the position paper submitted to the

Commission. No proposals were submitted by JSPC or JHTA. MOT did not

take a position on the JFSA proposal. We understand that another such

meeting was held February 18,

[[Page 9703]]

1997; however, by all accounts, no progress was made.

It appears that the Government of Japan has modified its stance

somewhat with regard to JHTA and prior consultation. Rather than

insisting that these are purely private matters outside of its control,

it now appears to be acknowledging that the system has serious problems

and indicating that it will endeavor to bring about a solution.

However, thus far MOT's only action has been to arrange meetings, in

the hopes that JHTA and the carriers will find a solution among

themselves. The Government of Japan has suggested to U.S. officials

that more time to reach a solution is needed.

MOT, however, has had ample time to address the restrictive

conditions that exist in its ports. The instant controversy did not

begin with the issuance of the Commission's Information Demand Orders

or proposed rule. The U.S. Government and other major trading nations

have been informing the Government of Japan repeatedly and strenuously

for several years that its port policies and practices are

unacceptable. In October of 1995, the Commission clearly indicated that

these problems may be serious enough to warrant sanctions under Section

19. However, the Government of Japan simply maintained that the

disputed practices were a matter for the private sector. While it is

encouraging that the Government of Japan has finally begun

acknowledging the seriousness of these matters, and meeting with

involved parties, these steps do not go far enough now to warrant a

stay of Commission action.

It appears unlikely, moreover, that a resolution to the current

problems involving prior consultation will be reached through

commercial negotiations limited to carriers and JHTA. At issue in this

proceeding are, among other things, JHTA's dominance of the stevedoring

industry, its control of the prior consultation system, and its use of

that system to force changes and extract concessions from carriers. It

appears, in sum, that JHTA has boundless negotiating leverage, and the

carriers, especially foreign carriers, have none. Under such

conditions, it is improbable that JHTA will simply volunteer to

relinquish its overarching control over port services. Rather, it

appears that only decisive measures by the Government of Japan can

bring about meaningful reforms.

Demonstrating this point, JHTA recently threatened U.S. Government

officials with massive retaliation against U.S. carriers if the

Commission does not withdraw its proposed rule. Earlier this month, the

JHTA Chairman reportedly told U.S. officials that, unless the threat of

FMC sanctions against Japanese carriers is removed, he ``will not let

any U.S. ships come into Japanese ports.'' Stating that it would be

impossible to resolve issues with sanctions looming, he announced that

he intends to suspend prior consultations for U.S. shipping firms, and

possibly European firms as well, if the proposed rule is not withdrawn.

Such threats were reportedly repeated at the February 18, 1997, meeting

between JHTA and the carrier groups.

The JHTA Chairman's threats confirm and validate the need for

immediate action in this area. That JHTA could recklessly threaten to

disrupt the U.S.-Japan oceanborne trade, causing severe commercial harm

to U.S. carriers, shippers, and international commerce, and that it has

the apparent will and means to carry out such threats, strongly

supports and justifies a finding of conditions unfavorable to shipping.

These are clearly not private sector matters; the responsibility lies

with the Government of Japan to eliminate the conditions which have

left international trade so vulnerable to JHTA's self-serving caprice.

Final Rule

Based on the foregoing, the Commission concludes that a finding of

conditions unfavorable to shipping in the U.S.-Japan trade is

warranted. Accordingly, the Commission is issuing a final rule levying

a fee of $100,000 each time a container-carrying liner vessel owned or

operated by a Japanese carrier enters a U.S. port from abroad, assessed

in the manner set forth in the proposed rule. This final rule will

become effective April 14, 1997.9

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\9\ Accordingly, the Motion to Withdraw Proposed Rule and

Discontinue the Proceeding, filed February 12, 1997, by MOL, NYK,

and K-Line, is denied.

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The Commission is authorized to assess a per-voyage fee of up to

one million dollars to adjust or meet conditions unfavorable to

shipping in the foreign trade. At this time, a $100,000 fee is an

appropriate and measured response to the conditions identified herein.

However, if these issues are not addressed in a timely fashion, the

level of this fee will be increased.

In addition, the Commission is gravely concerned about the

possibility of retaliation against U.S. carriers for the actions and

positions taken by the Commission and the United States Government. The

validity of these concerns, voiced as well by the U.S. carriers in

their comments, was confirmed by the repeated threats of JHTA

officials. Therefore, as indicated in the final rule, the Commission

has determined that the level of the fee will be increased upon a

finding that the Government of Japan, JHTA, or related bodies have

retaliated against U.S. carriers. Such a finding may be made

expeditiously upon review by the Commission of information collected

from carriers, U.S. Government agencies, or other sources, without the

need for additional notice and comment. The level of the fee increase

will be commensurate with the economic harm to U.S. carriers as a

result of the retaliation. Similarly, should a finding of retaliation

be made prior to the effective date of the final rule, the rule will be

amended to become effective immediately.

List of Subjects in 46 CFR Part 586

Cargo vessels, Exports, Foreign relations, Imports, Maritime

carriers, Penalties, Rates and fares, Tariffs.

Therefore, pursuant to section 19(1)(b) of the Merchant Marine Act,

1920, 46 U.S.C. app. 876(1)(b), as amended, Reorganization Plan No. 7

of 1961, 75 Stat. 840, and 46 CFR Part 585, Part 586 of Title 46 of the

Code of Federal Regulations is amended as follows:

1. The authority section for Part 586 continues to read as follows:

Authority: 46 U.S.C. app. 876(1)(b); 46 U.S.C. app. 876(5)

through (12); 46 CFR Part 585; Reorganization Plan No. 7 of 1961, 26

FR 7315 (August 12, 1961).

2. Section 586.2 is added to read as follows:

Sec. 586.2 Conditions unfavorable to shipping in the United States/

Japan trade.

(a) Conditions unfavorable to shipping in the trade. The Federal

Maritime Commission (``Commission'') has identified the following

conditions unfavorable to shipping in the U.S.-Japan trade, arising out

of or resulting from laws, rules, or regulations of the Government of

Japan:

(1) Shipping lines in the Japan-U.S. trades are not allowed to make

operational changes, major or minor, without the permission of the

Japan Harbor Transportation Association (``JHTA''), an association of

Japanese waterfront employers operating with the permission of, and

under the regulatory authority and ministerial guidance of, the Japan

Ministry of Transport (``MOT'').

(2) JHTA has absolute and unappealable discretion to withhold

permission for proposed operational changes by refusing to accept such

[[Page 9704]]

proposals for ``prior consultation,'' a mandatory process of

negotiations and pre-approvals involving carriers, JHTA, and waterfront

unions.

(3) There are no written criteria for JHTA's decisions whether to

permit or disallow carrier requests for operational changes, nor are

there written explanations given for the decisions.

(4) JHTA uses and has threatened to use its prior consultation

authority to punish and disrupt the business operations of its

detractors.

(5) JHTA uses its authority over carrier operations through prior

consultation as leverage to extract fees and impose operational

restrictions, such as Sunday work limits.

(6) JHTA uses its prior consultation authority to allocate work

among its member companies (whose rates and business plans are subject

to MOT approval), by barring carriers and consortia from freely

choosing or switching operators and by compelling shipping lines to

hire additional, unneeded stevedore companies or contractors.

(7) The Government of Japan administers a restrictive licensing

standard which blocks new entrants from entering into the stevedoring

industry in Japan. Given that all currently licensed stevedores are

Japanese companies, and all are JHTA members, this blocking of new

entrants by the Government of Japan shields existing operators from

competition, protects JHTA's dominant position, and ensures that the

stevedoring market remains entirely Japanese.

(8) Because of the restrictive licensing requirement, U.S. carriers

cannot perform stevedoring or terminal operating services for

themselves or third parties in Japan. In contrast, Japanese carriers

(or their related companies or subsidiaries) currently perform

stevedoring and terminal operating services in Japan and the United

States.

(b) Definitions--(1) Japanese carrier means Kawasaki Kisen Kaisha,

Ltd., Mitsui O.S.K. Lines, Ltd, and Nippon Yusen Kaisha.

(2) Designated vessel means any container-carrying liner vessel

owned or operated by a Japanese carrier (or any subsidiary, related

company, or parent company thereof).

(c) Assessment of fees. A fee of one hundred thousand dollars is

assessed each time a designated vessel is entered in any port of the

United States from any foreign port or place.

(d) Report and payment. Each Japanese carrier, on the fifteenth day

of each month, shall file with the Secretary of the Federal Maritime

Commission a report listing each vessel for which fees were assessed

under paragraph (c) during the preceding calendar month, and the date

of each vessel's entry. Each report shall be accompanied by a cashier's

check or certified check, payable to the Federal Maritime Commission,

for the full amount of the fees owed for the month covered by the

report. Each report shall be sworn to be true and complete, under oath,

by the carrier official responsible for its execution.

(e) Refusal of clearance by the collector of customs. If any

Japanese carrier subject to this section shall fail to pay any fee or

to file any report required by paragraph (d) of this section within the

prescribed period, the Commission may request the Chief, Carrier

Rulings Branch of the U.S. Customs Service to direct the collectors of

customs at U.S. ports to refuse the clearance required by 46 U.S.C.

app. 91 to any designated vessel owned or operated by that carrier.

(f) Denial of entry to or detention at United States ports by the

Secretary of Transportation. If any Japanese carrier subject to this

section shall fail to pay any fee or to file any report required by

paragraph (d) of this section within the prescribed period, the

Commission may request the Secretary of Transportation to direct the

Coast Guard to:

(1) Deny entry for purpose of oceanborne trade, of any designated

vessel owned or operated by that carrier to any port or place in the

United States or the navigable waters of the United States; or

(2) Detain that vessel at the port or place in the United States

from which it is about to depart for another port or place in the

United States.

(g) Adjustment in fees to meet retaliatory measures. Upon a finding

by the Commission that U.S. carriers have been subject to

discriminatory fees, restrictions, service disruptions, or other

retaliatory measures by JHTA, the Government of Japan, or any agency,

organization, or person under the authority or control thereof, the

level of the fee set forth in paragraph (c) shall be increased. The

level of the increase shall be equal to the economic harm to U.S.

carriers on a per-voyage basis as a result of such retaliatory actions,

provided that the total fee assessed under this section shall not

exceed one million dollars per voyage.

By the Commission.

Joseph C. Polking,

Secretary.

[FR Doc. 97-5233 Filed 3-3-97; 8:45 am]

BILLING CODE 6730-01-P