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Show Me Some Badges - the Transportation Worker Identification Credential

Excuse the reference to a classic movie, but it seemed appropriate.

In the wake of 9/11, Congress passed the Maritime Transportation Security Act.  One part of this legislation required the Transportation Security Administration and the U.S. Coast Guard to develop a Transportation Worker Identification Credential, aka TWIC.  According to the TSA, the TWICs are "tamper-resistant biometric credentials for workers who require unescorted access to secure areas of ports, vessels, outer continental shelf facilities and all credentialed merchant mariners."  The scale of this federal identification card is quite large with the government anticipating "that more than 750,000 workers including longshoremen, truckers, port employees and others will be required to obtain a TWIC."

The final rule can be downloaded here.  The Navigation and Vessel Inspection circular (basically the Coast Guard's policy advice) about the TWIC program is here .  The implementation is being "rolled out" port by port.  Honolulu is scheduled for November 2007.  The schedule is available here.  A great trade law blog, International Trade Law News, provides other details of the TWIC program.

In the Final Rule, credentialed merchant mariners and workers with unescorted acess to secure areas of vessels and facilities to undergo a security threat assessment and a biometric credential, the TWIC.  After the compliance date published by each local Captain of the Port has passed, "persons without TWICs will not be granted unescorted access to secure areas at affected maritime facilities." 

The interplay between the Transportation Security Administration and the U.S. Coast Guard is noted.  The U.S. Coast Guard regulates the vessel and facility security and will use the TWIC as "an access control measure." 

The program is on the leading edge of technology, in fact the Final Rule does not address the biometric requirements of the TWIC, saving it for a future regulation. 

The Final Rule is comprehensive in denoting treatment of the various types of non-U.S. citizens who could hold TWICs.  There is a disqualification process by which certain classes of persons, including those convicted of serious crimes, those with immigration issues, and those without mental capacity can be disqualified from holding a TWIC with administrative appeal rights to an Administrative Law Judge.

Some crimes permanently disqualify an applicant for a TWIC:  espionage, sedition, treason, terrorism, transportation security incident, unlawful hazardous material shipment, possession of explosives, murder, bomb threats, RICO, and attempts and conspiracies of some of the above.

Some crimes are disqualifying in the interim when the applicant has been convicted of (or found not guilty by reason of insanity after being charged with) the following offenses within seven years of the date of application or if incarcerated and released within five years of the TWIC application:  weapons violations, extortion, dishonesty/fraud, bribery, smuggling, immigration violations, controlled substances, arson, kidnapping, rape or aggravated sexual abuse, assault with intent to kill, robbery and conspiracy to commit the above offenses.

Obviously, the disqualification based on criminal histories may be disruptive to current port workers with criminal convictions.  An example is reported here.

Somali Pirates Make Strange Bedfellows

The U.S. Navy came to the aid of a North Korean vessel besieged by pirates off the coast of Somalia, as reported here.

As the Navy spokesperson stated, the U.S. Navy will help mariners in distress regardless of their country of origin.

Supreme Court to Hear Exxon Valdez Punitive Damages Case

The U.S. Supreme Court has granted a petition to hear Exxon's claim regarding the Exxon Valdez oil spill.  Exxon claims that the $2.5 billion punitive damage award was unlawful. 

New York Times reports the details here.  SCOTUSBlog reports the details here.

Haven't read the Petition for Certiorari yet, but will do so and digest shortly.

Price of Paradise Unwrapped - Insight into the Costs of Shipping from the Mainland to Hawaii

The U.S. Court of Appeals for the Ninth Circuit recently issued an opinion in DHX, Inc. v. Surface Transportation Bd., No. 05-74592 (Aug. 30, 2007) which does much to illuminate the workings of the federal Surface Transportation Board.  The opinion follows traditional analysis of judicial review of federal agency decisions, but the court's recitation of the facts provides great detail in how the prices for shipping to Hawaii are developed by the shippers and reviewed by the federal government.

"While some shipments via water carrier are arranged between the carrier and the shipper, others are handled through a third-party intermediary such as a freight forwarder.  DHX is a freight forwarder, an entity that holds itself out to the general public to provide transportation of property for compensation, usually by assembling and consolidating shipments to take advantage of volume rates offered by the carrier actually hauling the goods." 

After the volume of cargo shipped to Hawaii decreased in the mid-1990's, Matson and Horizon "tailored their rates to attract profitable traffic away from freight forwarders as well as to draw traffic away from each other." 

The carriers did this by offering high volume shippers with volume rates with "overflow provisions."

"Overflow occurs when a particular shipper's traffic for a given shipment does not completely fill all the containers for that shipment."  When a customer has a shipment that will fill more than one container, the carrier offers a discounted rate for the partially filled container.  This directly competes with the market for freight forwarders. 

The opinion says that DHX began to "target the water carrier's larger customers that already tendered volume traffic to the carriers [directly]."

"Specifically, DHX would take the same containerload traffic of large shippers such as Home Depot, unpack the full containers, redistribute their contents, and repack them in order to create more overflow containers than the shippers themselves would have tendered had they dealt directly with the water carriers, thereby resulting in a larger number of containers subject to the lesser overflow rates."

In response to DHX's competition, Matson and Horizon adopted specific actions to get their high volume customers back, including adopting tariffs setting up more favorable rates and entering into agreements with large shippers.

Thereafter, DHX brought suit with the Surface Transportation Board ("STB"), then ended up in federal court.  The STB is a successor to the Interstate Commerce Commission and the Federal Maritime Commission and is the regulatory authority for trade between ports in Alaska, Hawaii, the U.S. territories/possessions and the U.S. mainland.

DHX challenged the carriers' pricing schemes as anti-competitive and unreasonable as they relate to partially filled shipping containers. 

The Ninth Circuit first held that there was no private cause of action or right to sue water carriers for discrimination.

The Ninth Circuit held that "providing different customers with different rates and services is not inconsistent with a water carrier's common carrier duty to provide service to each customer upon reasonable request, if the rates charged are reasonable." 

The court acknowledged the antitrust and oligopoly concerns of DHX, but held that the proper forum for airing these concerns was the STB, not an original action in federal court.  In other words, STB is entrusted with these issues for initial vetting and resolution, the court stating, "the STB possess ample statutory authority to address and remedy any oligopolist pricing concerns arising out of the water carriers' conduct under traditional antitrust principles." 

With the significant majority of cargo to Hawaii arriving in maritime shipping containers, those rates have a inexorable impact on the cost of living in Hawaii, or as some have called it, the Price of Paradise.

Living in a Bygone Era - Pirates, Sunken Treasure, and Spanish Warships

Yesterday's news was filled with events which could have been reported in the late 1600's.

The International Maritime Bureau issued its annual piracy report, as reported here.  The reports notes a decrease in piracy in the infamous Straits of Malacca but also warns of a dramatic increase in attacks off the coasts of Somalia and Nigeria.  Piracy off the coast of Somalia has been rising in the past several years, prompting increased presence by the U.S. Navy.  A recent encounter between a U.S. warship and these pirates is recounted here.

And, an American vessel was boarded and detained at gunpoint by the Spanish Navy for unlawfully taking treasure from a sunken galleon, as reported here.

Securing the Superferry - Security Zone Upheld

U.S. District Judge Helen Gillmor has denied an application for a temporary restraining order sought by Hawaii Superferry opponents.  The opponents had filed a federal lawsuit seeking to enjoin the Coast Guard from enforcing a security zone at Kauai's Nawiliwili Harbor.

The temporary security zone (effective from Sep. 1, 2007 through Oct. 31, 2007) is located in the Federal Register (33 CFR Part 165) and is posted here.  The rule's Summary:

The Coast Guard has created a security zone in the waters of Nawiliwili Harbor, Kauai, and on the land of the jetty south of Nawiliwili Park, including Waapa Road. This zone is intended to enable the Coast Guard and its law enforcement partners to better protect people, vessels, and facilities in and around Nawiliwili Harbor in the face of non-compliant protesters who have impeded passage of the Hawaii Super Ferry to its dock in the harbor. This rule complements, but does not replace or supersede, existing regulations that establish a moving 100-yard security zone around large passenger vessels like the Hawaii Super Ferry.

The Coast Guard had been recently, and undoubtedly reluctantly, brought into the ongoing Superferry controversy (part of which is explained by my colleague Robert Thomas, here) after the Superferry made its initial voyages to Kauai in August.   As explained in the "Background" section of the temporary rule:

On August 26 and 27, 2007, protesters impeded the passage of the Super Ferry Hawaii Super Ferry into and through Nawiliwili Harbor by entering the water from the land and waterfront facilities adjacent to the harbor, often with kayaks, surfboards, and other small vessels, and then swimming into and blocking the harbor’s navigable channel.  In addition, several hundred onlookers watched the unfolding events from land adjacent to the harbor. Most of these observers were on the jetty that is south of Nawiliwili Park, which is adjacent to the Madsen shipping facility in Nawiliwili Harbor (hereinafter referred to as ‘‘Nawiliwili Jetty’’). Some of these onlookers threw rocks and bottles at Coast Guard personnel who were conveying detained protesters to shore on August 26. Most of the protesters doing so from Nawiliwili Jetty. 

The transit of the entrance into Nawiliwili harbor is difficult for large vessels in all but calm weather. The turn around the outer breakwater, then immediately turning in the opposite direction around the inner jetty is made more difficult by the combined effects of the winds and seas. Due to the difficulty of maneuvering in the small area of Nawiliwili, and in the interest of ensuring the safety of the protesters, the Hawaii Super Ferry’s master chose not to enter the channel until the Coast Guard had cleared the channel of protesters. However, because the vessel remained outside the harbor, and because the protesters did not approach to within 100 yards of the vessel, the existing security zone (see 33 CFR 165.1410) did not provide the Coast Guard with the authority to control protestor entry into Nawiliwili Harbor or clear the channel of protesters before the Hawaii Super Ferry commenced its transit into the harbor. The resulting situation substantially complicated an already difficult transit and created a substantial risk of damage and injury.

The plaintiffs' First Amended Complaint is posted here, the Memorandum in Support of the Application for TRO is posted here.

Judge Gillmor's decision denying the Temporary Restraining Order can be downloaded here.  Exhibit A to the Order is the graphic of the security zone. 

The Coast Guard has also proposed another rule to continue the security zone until December 31, 2007, which is provided here .