*EPF507 03/14/2003
Excerpt: Federal Maritime Commission Head Reports on Japan, China
(Testimony before House of Representatives subcommittee March 13) (1220)

The Chairman of the Federal Maritime Commission (FMC) testified before a Congressional subcommittee March 13 that Japanese laws continue to have an adverse impact on U.S. shipping interests, and that an investigation into Chinese practices was still underway.

Steven R. Blust told members of the House of Representative's subcommittee on maritime transportation that the Japanese government recently made changes in Japanese port operations and revised its Harbor Transportation Business Law.

"Unfortunately, I cannot report to you that those changes have resolved fully the challenging conditions affecting the operations of non-Japanese carriers in Japanese ports," he continued.

"U.S. executive agencies with maritime responsibilities and others continue to express dissatisfaction with the results of Japan's deregulation efforts," Blust said.

"We are hopeful that attempts to address the problem through bilateral talks will be renewed," he added.

Blust also said there had been indications that "Chinese laws and regulations discriminate against and disadvantage U.S. carriers and other non-Chinese shipping lines."

He noted that the Chinese government, however, adopted a new law and implementing regulations on international maritime transport in December 2001.

FMC officials "are currently in the process of determining whether these revisions adequately address the concerns raised in this proceeding or whether further action is merited," Blust said.

The Federal Maritime Commission (FMC) was established in 1961 as an independent government agency responsible for the regulation of shipping in the foreign trades of the United States. Among its missions is the protection of shippers, carriers and others engaged in the foreign commerce of the U.S. from restrictive rules and regulations of foreign governments, and from the practices of foreign-flag carriers that have an adverse effect on shipping in U.S. trades.

Following is the excerpt from Blust's March 13 testimony:

(begin excerpt)

STATEMENT OF
THE HONORABLE STEVEN R. BLUST
CHAIRMAN, FEDERAL MARITIME COMMISSION
800 NORTH CAPITOL ST., N.W.
WASHINGTON, D.C. 20573
(202) 523-5911

BEFORE THE
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
SUBCOMMITTEE ON COAST GUARD AND
MARITIME TRANSPORTATION
UNITED STATES HOUSE OF REPRESENTATIVES

MARCH 13, 2003
...

The Commission continues to exercise its authority to address restrictive or unfair foreign shipping practices under section 19 of the Merchant Marine Act, 1920; the Foreign Shipping Practices Act of 1988 ("FSPA"); and the Controlled Carrier Act of 1978. Section 19 empowers the Commission to make rules and regulations to address conditions unfavorable to shipping in our foreign trades; FSPA allows the Commission to address adverse conditions affecting U.S. carriers in our foreign trades that do not exist for foreign carriers in the U.S. And, under the Controlled Carrier Act, the Commission can review the rates and rules of government-controlled carriers to ensure that they are not unjust or unreasonable.

As we have advised this Committee previously, in August 1998, the Commission initiated a proceeding to investigate whether the laws, rules or policies of the Government of the People's Republic of China might have an adverse impact on U.S. shipping and warrant action under section 19 or the FSPA. The Commission sought information from interested parties, including shippers, ocean transportation intermediaries, vessel operators, and others in the ocean transportation industry, on Chinese policies and practices regarding port access, the licensing of multi-modal transport operations, and the establishment of representative and branch offices.

The initial responses indicated that Chinese laws and regulations discriminate against and disadvantage U.S. carriers and other non-Chinese shipping lines. In late 1999 and early 2000, the Commission obtained further information from two more parties: China Shipping Container Lines, a new Chinese government-controlled carrier in the trade, and A.P. Moller Maersk, which had just taken over the substantial U.S.-flag China service of Sea-Land Service, Inc.

The Commission issued a Notice of Inquiry ("NOI") on March 12, 2002, and a Further Notice of Inquiry ("FNOI") on June 28, 2002. The Commission's issuance of the NOI was prompted by the adoption, on December 21, 2001, of a new Chinese law, the Regulations on International Maritime Transport ("RIMT") (effective January 1, 2002) and the news that the Chinese Ministry of Communications ("MOC") intended to issue regulations implementing and interpreting the requirements of the RIMT ("Implementing Rules"). The NOI also was prompted by concerns raised by the National Customs Brokers and Forwarders Association of America, Inc. ("NCBFAA"), a trade association of ocean freight forwarders and NVOCCs. The FNOI was issued in response to the MOC's June 21, 2002, release of a "Notice Inviting Comments on Implementing Rules for the Regulations of the PRC on International Maritime Transportation." The Commission's FNOI specifically requested information about the impact of the Implementing Rules. Generally, the Commission was concerned that the RIMT and the draft Implementing Rules may have changed the restrictions and requirements it was continuing to scrutinize in this proceeding.

Pending the Commission's consideration of the matter, MOC announced finalized Implementing Rules which became effective on March 1, 2003. The Commission obtained a translation of these Final Rules on February 20, 2003, and we are currently in the process of determining whether these revisions adequately address the concerns raised in this proceeding or whether further action is merited.

As you may be aware, the Commission also had occasion to address restrictive port practices in Japan in 1997. The Commission took action under section 19 against various restrictive conditions in the harbor services industry in Japan, including a system that required carriers to receive permission from the Japan Harbor Transportation Association (a cartel of Japanese terminal and stevedore companies) before making any operational changes, and prevented non-Japanese carriers from offering or performing for themselves or others terminal and stevedoring operations routinely undertaken by carriers at U.S. ports. As a result of these conditions, both U.S. carriers and U.S. trade were burdened with unreasonably high costs and inefficiencies.

The Commission found these conditions to be unfavorable to shipping in the U.S. trade and imposed a fee of $100,000 per voyage on Japanese ocean common carriers entering U.S. ports. The Commission subsequently compromised the outstanding fines after government negotiators reached an accord under which some changes to the system of prior approval would be put in place and other changes in port practices would be sought legislatively. We also imposed semiannual reporting requirements on U.S. and Japanese lines to keep us apprised of the anticipated changes in the system, and received one-time reports in August, 2001, from additional carriers serving the trade.

Since we last updated this Committee, Japan has revised its Harbor Transportation Business Law and has made other changes in port operations. Unfortunately, I cannot report to you that those changes have resolved fully the challenging conditions affecting the operations of non-Japanese carriers in Japanese ports. Although Japan maintains that its "deregulation" of shipping has resulted in major improvements, including increased competition in Japanese ports, the U.S. executive agencies with maritime responsibilities and others continue to express dissatisfaction with the results of Japan's deregulation efforts. We are hopeful that attempts to address the problem through bilateral talks will be renewed. In the meantime, we continue to monitor closely developments in Japan that affect our shipping interests.

...

(end excerpt)

(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

Return to Public File Main Page

Return to Public Table of Contents