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; delay of effective date, requirement for reporting,

and request for comments.

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SUMMARY: The Federal Maritime Commission is delaying the effective date

of its final rule assessing fees on liner vessels operated by Japanese

carriers, in light of recent commitments made by the Government of

Japan addressing restrictive and unfavorable conditions for the use of

Japanese ports.

DATES: Effective April 13, 1997, delay until September 4, 1997, the

effective date of the rules published March 4, 1997 (62 FR 9696), as

amended by the Commission April 11, 1997 in a rule to be published

April 16, l997. Status reports and comments are due July 1, 1997, and

August 5, 1997.

ADDRESSES: Filings and requests for publicly available information

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: On March 4, 1997, the Commission

published a final rule pursuant to section 19(1)(b) of the Merchant

Marine Act, 1920, 46 U.S.C. app. 876(1)(b), to assess per-voyage

fees on Japanese liner carriers, effective April 14, 1997, in

response to restrictive and unfavorable requirements for the use of

Japanese ports. An amendment to the final rule was issued by the

Commission on April 11, 1997, providing that fees would not be

assessed twice in a seven day period (or, for port calls in Hawaii,

in a 40 day period). In light of commitments made by the Government

of Japan in recent bilateral talks with the United States

Government addressing the unfavorable conditions identified in the

final rule, the Commission has decided to suspend the effective

date of the rule.

The Commission issued its final rule after a comprehensive inquiry

into restrictions and requirements facing U.S. carriers and U.S.

commerce in Japanese ports. The fees were deemed necessary in light of

the Commission's identification of a number of conditions unfavorable

to shipping warranting action under section 19:

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'').

JHTA has absolute and unappealable discretion to withhold

permission for proposed operational changes by refusing to accept such

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

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

unions.

There 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.

JHTA uses and has threatened to use its prior consultation

authority to punish and disrupt the business operations of its

detractors.

JHTA uses its authority over carrier operations through

prior consultation as leverage to extract fees and impose operational

restrictions, such as Sunday work limits.

JHTA uses its prior consultation authority to allocate

work among its member companies, by barring carriers and consortia from

freely choosing operators and by compelling shipping

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lines to hire additional, unneeded stevedore companies or contractors.

MOT administers a licensing standard which blocks new

entrants from the stevedoring industry in Japan, protecting JHTA's

dominant position, and ensuring that the stevedoring market remains

entirely Japanese.

Because of the restrictive licensing requirement, U.S.

carriers cannot perform stevedoring or terminal operating services for

themselves or third parties in Japan, as Japanese carriers do in the

United States.

In the rule, the Commission observed that these conditions were

matters of longstanding concern to the United States Government, and

that repeated diplomatic efforts to resolve them had been unsuccessful.

Since the rule was issued, the United States Government has undertaken

a number of discussions, diplomatic approaches, and consultations to

persuade the Government of Japan to remedy the conditions identified in

the rule. The most recent and most intensive of these efforts was a

series of consultations, commencing April 2, 1997, and concluding

Friday, April 11, 1997. At that time, the two sides signed a Memorandum

of Consultation containing a series of statements and agreements

concerning Japanese port practices, licensing, and prior consultation.

With regard to licensing, the Japanese side confirmed that license

applications meeting the standards stipulated in the Port

Transportation Business Law will be approved by MOT within

approximately four months of receipt when such applications meet the

following criteria:

1. They are submitted by foreign carriers and their subsidiaries;

2. They are for General Port Transportation Business Licenses as

set forth in Article 3, Section 1 of the Port Transportation Business

Law and/or Port Stevedoring Business Licenses as set forth in Section 2

of the same article; and

3. They are for operations to be conducted for the applicant's (or

the applicant's parent's) own account and/or for its consortia partners

and third parties at berths leased in a containership port by the

applicant (or the applicant's parent).

The Japanese side stated that MOT is knowledgeable regarding the

operations of U.S. carriers and their consortia partners in Japan's

ports and that, based on this knowledge, completed applications by

these companies for operations at berths leased by the applicant (or

the applicant's parent) would be in compliance with the law and,

accordingly, will be approved.

With regard to prior consultation, the Japanese Government

explained that, under the leadership of MOT, concerned parties have

endorsed an agreement that provides a framework for reforming the prior

consultation system by July 31, 1997. MOT stated that it will continue

to use its ``maximum effort,'' and clarified a number of other points,

including: prior consultation will not be used to allocate work among

operators; all carriers have freedom to contract with any operator; all

requests for prior consultation will be considered; the so-called

``pre-pre-prior consultation'' will not be required. The U.S. side

stressed four important goals to be achieved by July 31, 1997, relating

to the elimination of minor matter consultations, the process of major

matter consultations, the definition of ``major'' and ``minor''

matters, and the implementation of a transparent appeals process under

MOT direction.

As was agreed in the talks, at the conclusion of the consultations

a letter was sent by the head of the U.S. delegation, Maritime

Administrator A.J. Herberger, to FMC Chairman Harold J. Creel, Jr.,

stating that the discussions were conducted in good faith and represent

a reasonable basis for the Commission not to impose the proposed

sanctions on April 14, 1997.

In the wake of the signing of the Memorandum of Consultation,

comments were submitted by the U.S. carriers, American President Lines,

Ltd. and Sea-Land Service, Inc., and a response was filed by Japanese

carriers Kawasaki Kisen Kaisha, Ltd., Mitsui O.S.K. Lines, Ltd., and

Nippon Yusen Kaisha.

The U.S. carriers call MOT's commitments on licensing

``meaningful'' and ``excellent progress.'' With regard to the approach

on prior consultation, the U.S. carriers state that, since the process

has been dominated by JHTA, they see ``obvious risks.'' However, they

state that MOT has shown new leadership in convening this process and

has undertaken to use its best efforts to reach a conclusion

satisfactory to all parties. Expressing the belief that MOT guidance is

significant and holds promise for reform in the near term, the U.S.

carriers state that it would be appropriate to give this process time

to work without the distraction of imposed sanctions.

The Commission agrees. The Government of Japan's commitments on

licensing are highly laudable, and, once implemented, will go far

toward providing the type of reciprocal treatment in Japan that

Japanese carriers enjoy in this country. The approach agreed on will

benefit not just the carriers involved, but also all oceanborne trade

and commerce between the U.S. and Japan.

The Commission remains concerned about the prior consultation

system, and the attendant market power enjoyed by JHTA. However, in

light of the fact that the approach described in the Memorandum of

Consultation has been agreed to by the parties, we find that it would

be appropriate to allow that process an opportunity to achieve results

without the imposition of sanctions. MOT's recently demonstrated

commitment to action and oversight in this area has renewed our

optimism that the necessary reforms will be implemented in a timely

manner.

The U.S. carriers recommend deferring the effectiveness of the

final rule until August 30, 1997. The Japanese carriers, however,

suggest that the effectiveness of the final rule be suspended

indefinitely. The Commission has elected to adopt the U.S. carriers'

suggestion and defer the rule's effectiveness until a date certain. The

Commission appreciates the commendable efforts made thus far by the

Government of Japan, both in making the above-described commitments and

clarifications in the consultations, and also in convening and leading

the ongoing discussions in Japan. The Commission has accordingly

determined that the imposition of fees is not warranted at this time.

Moreover, the Commission has the highest respect for, and confidence

in, MOT officials. However, the basis of the Commission's rule is the

unfavorable conditions which exist in Japanese ports. Until such

conditions are substantially remedied, in a concrete and identifiable

way, the Commission cannot permanently suspend or withdraw the rule.

Therefore, the effectiveness of the rule is suspended until September

4, 1997.1 The Commission has elected to require the carriers to

file status reports describing developments relevant to this

proceeding.2 If warranted, the

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Commission will reassess the suspension of the rule based on the

information submitted.

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\1\ The date suggested by the U.S. carriers would meet our

objectives of affording the parties an opportunity to conclude the

consultative process and submit reports, and giving the Commission

the opportunity to further evaluate the results. However, the

proposed date falls during a holiday weekend.

\2\ Section 19(6) of the Merchant Marine Act, 1920, 46 U.S.C.

app. Sec. 876(6), states:

(a) the Commission may, by order, require any person * * * to

file with the Commission a report, answers to questions, documentary

material, or other information which the Commission considers

necessary or appropriate; (b) the Commission may require a report or

answers to questions to be made under oath;

* * * * *

(d) a person who fails to file * * * information required to be

filed under this paragraph shall be liable to the United States

Government for a civil penalty of not more than $5000 for each day

that the information is not provided.

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Therefore, it is ordered That the effective date of the rules

published March 4, 1997 (62 FR 9696), as amended by the Commission

April 11, 1997 (in a rule to be published April 16, 1997), amending

Part 586 of Title 46 of the Code of Federal Regulations, is hereby

suspended until September 4, 1997.

It is further ordered, That the following parties are ordered to

file reports with the Commission on July 1, 1997, and August 5, 1997:

American President Lines, Ltd.; Sea-Land Service, Inc.; Kawasaki Kisen

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

reports should describe, in detail:

the status of the consultative process to reform the prior

consultation system;

any planned or implemented changes to the prior

consultation system, and the observed or expected effects of these

changes;

the role of the Government of Japan in any future prior

consultation system or related review or appeals process;

the extent to which carriers in Japan have freedom to

contract with any port transportation business operator;

the status of any efforts by U.S. carriers to secure

licenses to operate port transportation businesses or to establish such

businesses;

any other information relevant to this proceeding that

parties wish to bring to the attention of the Commission.

It is further ordered, That any other persons with information

relevant to this proceeding may submit comments for the Commission's

consideration, due on July 1, 1997, and August 5, 1997.

By the Commission.

Joseph C. Polking,

Secretary.

[FR Doc. 97-9903 Filed 4-14-97; 1:15 pm]

BILLING CODE 6730-01-W