Academic journal article
By Wetzel, Elizabeth A.
Review of Business , Vol. 25, No. 3
The year 2004 marks the 25th anniversary of the resumption of ocean shipping between China and the United States. It is highlighted by the recent signing of the Agreement on Maritime Transport between the U.S. and China on maritime trade and regulatory issues. Three of the major liner ocean carriers are operated out of China and are controlled by the Chinese Government. These carriers are China Ocean Shipping Company (COSCO), China Shipping and Sinolines.
International ocean shipping between the United States and its trading partners is regulated by the Federal Maritime Commission (FMC). The FMC was established in 1961 as an independent government agency, responsible for the regulation of shipping in the foreign trades of the United States. The Commission's five members are appointed by the President of the United States, with the advice and consent of the U.S. Senate.
Among other responsibilities, the FMC:
* Protects U.S. 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;
* Investigates, upon its own motion or upon filing of a complaint, discriminatory, unfair, or unreasonable rates, charges, classifications and practices of ocean common carriers, terminal operators and freight forwarders operating in the foreign commerce of the U.S.;
* Receives agreements among ocean common carriers or marine terminal operators and monitors them to assure that they are not substantially anticompetitive or otherwise violative of the Shipping Act of 1984, as amended;
* Reviews tariff publications under the access and accuracy standards of the Shipping Act of 1984, as amended;
* Monitors rates, charges, classifications, rules and regulations contained in tariffs of carriers controlled by foreign governments and operating in U.S. trades to ensure that such matters are just and reasonable;
* Licenses U.S. based international ocean transportation intermediaries (OTIs); and
* Requires bonds of U.S. and foreign based OTIs.
The FMC's jurisdiction encompasses many facets of the maritime industry. The principal shipping statutes administered by the FMC are the Shipping Act of 1984 (46 USC app. 1710 et seq), the Foreign Shipping Practices Act of 1988 (46 USC app. 1701 et seq), and section 19 of the Merchant Marine Act, 1920 (46 USC app. 876).
Since the resumption of ocean trade between the U.S. and China, the Chinese ocean carriers calling in the U.S. have been subject to the Controlled Carrier Act. These companies are nearly the only controlled carriers remaining in the world, as many other shipping companies who have been government sponsored or government controlled have either been privatized or have gone out of business.
The Chinese shipping companies believed that they were at a competitive disadvantage, and sought relief, with COSCO filing a petition with the FMC as long ago as March 1998, to exempt COSCO from the statutory 30 day waiting period for implementing freight rate reductions. The FMC granted COSCO partial relief from the rate filing time requirements in 1998 and further relief in 1999. China Shipping and Sinolines followed COSCO, filing their own petitions in July 2003, and August 2003, respectively, to be granted similar exemptions as COSCO had requested in 1998.
Meanwhile, in the United States during this same time period, international ocean transportation companies, non-vessel operating common carriers (NVOCCs) and other Ocean Transport Intermediaries (OTIs) were looking to expand their operations into China. However, the Chinese government required joint ventures between Chinese and non-Chinese companies in order for the non-Chinese companies to be licensed. And the financial requirements for licensing NVOCCs to do business in China were stringent. …