Interpool Ltd. v. Federal Maritime Commission, 79-1194

• Decision Date: 18 November 1980
• Docket Number: No. 79-1194,79-1194
• Citation: 663 F.2d 142
• Parties: INTERPOOL LTD., et al., Petitioners, v. FEDERAL MARITIME COMMISSION and United States of America, Respondents, North Atlantic Conferences, Pacific Westbound Conference, etc., North Europe-US Pacific Coast Freight Conference, et al., The Coleman Company, Inc., et al., 3M Company and Anchor Hocking, Inc., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 142

663 F.2d 142

213 U.S.App.D.C. 378

INTERPOOL LTD., et al., Petitioners, v. FEDERAL MARITIME COMMISSION and United States of America, Respondents North Atlantic Conferences, Pacific Westbound Conference etc., North Europe-US Pacific Coast Freight Conference, et al., The Coleman Company, Inc., et al., 3M Company and Anchor Hocking, Inc., Intervenors.

No. 79-1194.

United States Court of Appeals District of Columbia Circuit.

Argued Jan. 23, 1980.

Decided Nov. 18, 1980.

Robert J. Wiggers, Atty., Dept. of Justice, Washington, D. C., with whom Barry Grossman and John J. Powers, III, Attys., Dept. of Justice, Washington, D. C., were on the brief, for respondents, United States of America.

John C. Cunningham, Atty., Federal Maritime Commission, Washington, D. C., with whom Edward G. Gruis, Deputy General Counsel, Federal Maritime Commission, Washington, D. C., was on the brief, for respondent, Federal Maritime Commission.

Robert B. Yoshitomi, San Francisco, Cal., with whom Edward D. Ransom, Thomas E. Kimball, and Richard C. Jones, San Francisco, Cal., were on the brief, for intervenor Pacific Westbound Conference and Far East Conference.

Neal M. Mayer, Paul D. Coleman, Washington, D. C., Howard A. Levy, Encino, Cal., and Patricia E. Byrne, San Francisco, Cal., were on the brief, for intervenor, North Atlantic Conferences.

David C. Nolan, San Francisco, Cal., was on the brief, for intervenor, North Europe-United States and Pacific Coast Freight Conference, et al.

Robert J. Ables, Washington, D. C., with whom Ronald J. Greene, Washington, D. C., was on the brief, for petitioners and intervenor, Coleman Co., Inc., et al.

Before ROBB, WILKEY and WALD, Circuit Judges.

Opinion for the Court filed by Circuit Judge ROBB.

ROBB, Circuit Judge:

Pursuant to 28 U.S.C. § 2342(3) (1976) and 46 U.S.C. § 830 (1976) petitioners seek review of an order of the Federal Maritime Commission (FMC) holding that certain amendments to the tariffs of various conferences of ocean carriers did not require its approval under section 15 of the Shipping Act of 1916, 46 U.S.C. § 814 (1976). The amendments in question prescribe the manner in which the conferences will apply their rates to cargo shipped in containers that are owned by neither the shipper nor the carriers. Because we find that the Commission misapplied the appropriate legal standard in making its decision, we vacate its order and remand the case for further proceedings.

Background

Shippers who transport goods in containers can receive their containers from various sources. They may use containers furnished by a carrier, containers which they own or lease themselves, or containers furnished to them by an independent container leasing company. Containers from these independent companies are often referred to as "neutral containers". The carriers' treatment of containerized cargo varies significantly depending upon the source of the container.

A shipper using a container furnished by a carrier must use that carrier to transport the goods when it is loaded. The shipper is also obliged to pay the cost of transporting the empty container to its location for loading. After the container is unloaded at the end of its journey, the shipper or the consignee is also responsible for returning the empty container to the carrier.

Shippers who use containers which they own or lease are not obligated to use a particular carrier. As a result a greater number of sailing dates are available to them. In addition, some conference tariffs allow a shipper furnishing its own container a discount from the rate normally applicable to the cargo shipped.

The third category-neutral containers-is the subject of this case. Neutral containers are owned by container leasing companies. These companies maintain large pools of containers and provide them to shippers without charge for their use. The leasing companies have entered into master agreements with individual inland and ocean carriers in which the carriers have agreed to transport loaded neutral containers tendered to them. The carriers charge the shippers the normal tariff rates applicable to their shipments, and pay the leasing company a per diem charge for the use of the container. The carriers are also responsible for returning the containers to the leasing companies after they are unloaded.

The neutral container system provides many advantages to shippers who make use of it. They may tender their cargo to any of the carriers which accept neutral containers, thereby allowing them a greater number of sailing dates from which to choose. In addition, under the neutral container system shippers are not responsible for any charges for transporting the empty containers. Until the adoption of the tariff rules at issue in this case, however, neutral containers were not eligible for the discount allowed by some carriers to shippers who furnish their own containers.

From the carriers' viewpoint the neutral container system has several disadvantages. A carrier transporting cargo in a neutral container will realize less revenue than it would if it transported the same cargo in one of its own containers. This is due to the per diem charge it must pay to the container leasing company and the added transportation costs it must absorb. ¹ Nevertheless carriers have been willing to enter into contracts with container leasing companies in order to obtain business from the shippers who use neutral containers. Apparently these are large companies which ship a great deal of merchandise, and carriers have been willing to accept lower profit margins on each container shipped in order to obtain the high volume of shipments from these large shippers.

As noted above, container leasing companies negotiate master agreements with individual carriers. Many of these carriers are members of ratemaking conferences, established by agreements among the carriers which have been approved by the Federal Maritime Commission pursuant to section 15 of the Shipping Act, 46 U.S.C. § 814 (1976). ² In May 1976 several conferences ³ and Seatrain International, S.A., a participant in the Europe-Pacific Coast Rate Agreement, amended their tariffs on file with the Commission in a manner designed to shift from the carriers to the shippers the costs of leasing neutral containers. All the rules adopted are substantially the same; the Continental North Atlantic Westbound Freight Conference's rule is typical.

Any trailer/container, not owned or leased by a member line or affiliate thereof, prior to its delivery to a shipper for loading, shall be deemed to be a shipper-owned or leased trailer/container for the purpose of this rule and once so deemed, such trailer/container shall remain shipper-owned or leased for the entire duration of its transit both by water or by land and will not be interchanged with the carriers. ⁴

The rules, known here as "neutral container rules," thus required all member carriers to treat neutral containers as though they were shipper-owned and thereby prohibited the carriers from making the per diem payments to the container leasing companies. They also relieved the carriers of responsibility for returning neutral containers to the container leasing companies after they are emptied. Under the new rules, neutral containers were eligible for the discount offered by some carriers to shippers who furnish their own containers. Petitioners allege, however, that this discount, when offered, is insufficient to offset the cost to the shipper of renting a neutral container. ⁵ While the conferences filed the rules with the Commission in accordance with 46 U.S.C. § 817(b) (1976), none of the conferences asked the Commission to approve the new rules pursuant to section 15, 46 U.S.C. § 814 (1976) before they went into effect.

The Commission's Proceedings

On June 16, 1976 American Export Lines, a member of one of the conferences that adopted the neutral container rules, petitioned the Commission for a declaratory order holding that the Commission's approval was required under section 15 before the rules could be implemented. At about the same time, a number of container leasing companies and shippers informally complained to the Commission that the rules were not authorized by the conference agreements and therefore required separate approval by the Commission under section 15. In response, the Commission issued an order to show cause on June 24, 1976. The order required the conferences which had adopted these rules ⁶ to show why their adoption was not a concerted activity which "controls, regulates, prevents or destroys competition and which has been taken without prior Commission approval of such activity in violation of Section 15, Shipping Act, 1916." (J.A. at 14)

The Commission ordered that the proceeding "be limited to submission of affidavits of fact and memoranda of law, and replies thereto," and that any party who believed that an evidentiary hearing was required must specifically request it, setting forth in detail "the facts to be proven, their relevance to the issues in this proceeding, a description of the evidence which would be adduced to prove those facts, and why such proof cannot be submitted through affidavit." (J.A. at 15) ⁷

The proceedings pursuant to the order to show cause were consolidated with American Export's petition for a declaratory order. The Institute of International Container Lessors, a trade association of container leasing companies, intervened in support of the position that the neutral container rules required the approval of the Commission before they could be implemented. Several large shippers and trade associations of freight forwarders and brokers also intervened in support of this position. A number of conferences which had not adopted rules dealing with neutral containers intervened in support of the conferences named as respondents.

Shortly after the order to show cause was issued all the conferences but one...