FMC: PACIFIC LINES NEAR SELF-POLICING PACT

FMC: PACIFIC LINES NEAR SELF-POLICING PACT

Ocean carriers in the Pacific are working to complete a self-policing mechanism designed to curb illegal rebates and other malpractices, the chairman of the Federal Maritime Commission said.

The Pacific compliance agreement will be modeled after a self-policing arrangement that has been in existence in the North Atlantic since 1987, William Hathaway said in recent interview here.During an investigation of shipping lines, shippers, non-vessel-operating common carriers and cargo consolidators over the past several years, the FMC reached settlements with a number of participants in the Far Eastern trades. Although the companies did not admit guilt, they did pay fines totaling more than $50 million.

As part of the settlement agreements, most carriers pledged to form a self- policing mechanism to curb further malpractices. Practices such as paying rebates to shippers for using a particular shipping line are a violation of U.S. shipping law.

In the 1980s, after the FMC and participants in the Atlantic trades reached similar settlements totaling about $2.5 million to $3 million, carriers hired a neutral, private-sector company known as The Adherence Group (TAG) to monitor the trade and prevent further rebating. The contract with TAG was renewed in July.

The 18 signatories to the Trans-Atlantic Policing Agreement pay annual fees to support the monitoring activities of TAG. Although occasional malpractices have occurred in the Atlantic since the compliance agreement was signed, it is generally agreed the level of rebating has dropped significantly.

Mr. Hathaway said he expects carriers in the Pacific will complete an agreement "soon," although he could not be more specific.

He also said the FMC is looking at other trade lanes and is prepared to initiate fact-finding investigations elsewhere if warranted.

"We feel this is our primary task - going after violators with a no-holds- barred approach," Mr. Hathaway said. The purpose of these investigations is to ensure that carriers adhere to the terms published in their tariffs so no shipper is afforded a competitive advantage over its competitors.

Besides that, Mr. Hathaway said the FMC is waiting to see what competition authorities in Europe decide in their investigation of the rate-setting conference known as the Trans-Atlantic Agreement. However, he does not expect the decision of the European Community Commission will cause the FMC to change its approach to the conference.

Although shippers have roundly criticized the 15-member TAA for significant rate increases over the past year, the FMC, in its investigation of the group, found no violations of U.S. shipping law.

The EC will determine if the TAA violates European shipping law. Mr. Hathaway said the FMC continues to monitor the TAA, but it will only take action if the EC renders a decision that is in conflict with U.S. law.

"The Europeans are aware of that, and they have agreed to get in touch with us first," he said. Although a decision is expected soon from the EC, the Europeans have said nothing to that would indicate a conflict with U.S. law will occur, Mr. Hathaway said.