FMC to Investigate if Hong Kong NVOCC Violated Shipping Act by Providing Lower Rates, Receiving Incentives
The Federal Maritime Commission has issued a notice announcing that it has ordered an investigation and will hold a hearing to determine if a Hong Kong non-vessel operating common carrier and its shareholder/chief executive officer violated Section 10 of the Shipping Act of 1984.
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The FMC is investigating World Chance Logistics (Hong Kong), Ltd., a foreign based tariffed and bonded NVOCC, and Yu, Chi Shing, aka Johnny Yu (Mr. Yu), the company's sole shareholder and chief executive officer.
May Have Provided Non-Tariff and Direct Access Rates
FMC states that based on evidence available, it appears that World Chance and Mr. Yu may have permitted unrelated shippers of pyrotechnics to have direct access to the rates in World Chance's service contracts. Moreover, it also appears that World Chance and Mr. Yu may have provided rates and charges to pyrotechnics shippers that were not in accordance with the rates and charges contained in World Chance's tariff.
May Have Also Used Unfair Means to Obtain Lower Rates and Volume Incentive Payments
Additionally, in 2005, Mr. Yu incorporated Fireworks Logistics Association Ltd. (FLA) as a "private limited company" in Hong Kong. FLA, however, does not appear to have a separate legal identity, and lists World Chance's Hong Kong address as its own and uses World Chance's telephone and fax numbers and its email account.
From the evidence developed, it appears that by entering into service contracts in FLA's name, World Chance and Mr. Yu may have utilized FLA as an unfair device or means to obtain lower rates and to receive volume incentive payments not otherwise applicable.
FMC Investigation to Determine if Shipping Act Violated
The FMC has instituted an investigation to determine whether:
World Chance and/or Mr. Yu violated the Shipping Act by utilizing FLA as an unfair device or means to obtain lower rates and receive volume incentive payments not otherwise applicable;
World Chance and/or Mr. Yu violated the Shipping Act by allowing persons to obtain transportation of property at less than the rates and charges in the carrier's tariff or filed contracts "by means of false billing, false classification... or by any other unjust or unfair device or means;"
World Chance and/or Mr. Yu violated the Shipping Act by providing service in the liner trades "not in accordance with" the rates and charges published in a tariff or filed in an NVOCC service arrangement;
in the event violations of the Shipping Act are found, civil penalties should be assessed against World Chance and/or Mr. Yu and, if so, the amount of the penalties to be assessed; and
in the event violations are found, appropriate cease and desist orders should be issued against World Chance and/or Mr. Yu.
(The 1984 Shipping Act, as amended, prohibits any person from knowingly and willfully obtaining or attempting to obtain ocean transportation of property at less than the otherwise applicable rates or charges "by means of false billing, false classification, false weighing, false report of weight, false measurement, or any other unjust or unfair device or means..." In addition, the Shipping Act prohibits a carrier from allowing any person to obtain transportation of property at less than the rates and charges in the carrier's tariff or filed contracts "by means of false billing, false classification or by any other unjust or unfair device or means" or providing service in the liner trades "not in accordance with" the rates and charges published in a tariff or filed in an NVOCC service arrangement. Parties found in violation may be subject to a civil penalty not exceeding $5,000 for each violation unless the violation was willfully and knowingly committed, in which case the amount of the civil penalty may not exceed $25,000 for each violation.)
Hearing Ordered, ALJ Initial Decision Due in October 2010
The FMC ordered that public hearing be held in this proceeding and that this matter be assigned for hearing before an Administrative Law Judge. The initial decision of the Administrative Law Judge must be issued by October 22, 2010 and the final decision of the FMC is due by February 22, 2011.
FMC notice (D/N 09-07, FR Pub 10/28/09) available at http://edocket.access.gpo.gov/2009/pdf/E9-25877.pdf