Judge says MPA bias hurt Ceres Discrimination against customer violated federal law

Unfair edge to competitors

Case is part of 3-year fight over rates

August 24, 1996|By Suzanne Wooton | Suzanne Wooton,SUN STAFF

An administrative law judge for the Federal Maritime Commission has ruled that the Maryland Port Administration violated the Shipping Act of 1984 by discriminating against one of the port's major customers.

Judge Charles E. Morgan said that price breaks the state of Maryland gave Maersk Line for cranes, wharfage and terminal space hurt Ceres Marine Terminal, a stevedoring company that competes with Maersk and its subsidiary, Universal Maritime Service Corp.

In a dispute that ultimately could cost the MPA substantial financial damages, the judge ruled that the MPA also discriminated against Ceres by giving "unreasonable preference" to Hale Container Line Inc., a Baltimore-based barge operation. Ceres also operates a barge service here.

The case -- which now goes to the full maritime commission -- is part of a three-year battle between Ceres and the MPA over rates.

Some industry observers said yesterday that the dispute, involving several of the port's largest customers, was an invitation to other businesses to challenge the MPA over their leases.

"It's a landmark port case that will be analyzed throughout the industry," said Richard A. Lidinksy, a Washington, D.C., lobbyist for Sea Containers America Inc. and former counsel for the MPA. "The interests of all three parties -- Ceres, Maersk and Hale -- have been ill-served by the MPA."

Since the federal shipping act was enacted 12 years ago, ports have been free to strike deals with steamship lines and other port businesses rather than apply set rates. While the law effectively deregulated rates, it warned that ports must treat customers fairly.

In the fiercely competitive maritime industry, East Coast ports, including Baltimore's, are rushing to retain business and lure new cargo by offering sometimes highly lucrative deals to steamship and barge lines.

In 1991, with the port of Baltimore hemorrhaging cargo to Norfolk, Va., MPA officials signed a 10-year favorable lease with Maersk, hoping to shore up business from the Danish shipping giant.

Maersk, in return, guaranteed that it would provide a specified level of ships and cargo.

Maersk recently canceled half its shipping service to Baltimore, citing vast changes in the global shipping industry.

According to Judge Morgan, Ceres offered to guarantee an equal or greater amount of cargo business, but the MPA refused to strike a similar deal.

"The MPA had no good legal reason to give better terms to Maersk than it gave to Ceres," Judge Morgan wrote in his opinion.

The judge said that Ceres is entitled to financial damages from the MPA, but he did not specify an amount because the case still must go before the Federal Maritime Commission.

But the opinion noted that Ceres paid $3.5 million to $4 million more during the first two years of its lease at the state's Dundalk Marine Terminal than it would have if it had been given the same rates as Maersk.

The case was brought before the Federal Maritime Commission by Ceres, a Hoboken, N.J., company that has operated in the port of Baltimore for more than 25 years.

At Dundalk Marine Terminal, Ceres operates one of the two private mini-terminals, processing cargo from ships and barges onto trucks, and vice versa.

The other terminal is operated by Universal, a Maersk subsidiary. Opened in 1992, the mini-terminals are seen as critical to Maryland's dual goals of processing cargo more efficiently while creating a competitive environment that results in lower rates for the steamship lines.

None of those parties were available for comment. But Lisa Shenkel, a spokeswoman for the MPA, predicted the FMC would ultimately rule in Maryland's favor.

"Our goal is to make the port of Baltimore as competitive as possible in the North Atlantic," she said. "It's premature to say we're going to use it [the opinion] as a yardstick to negotiate other contracts."

Pub Date: 8/24/96

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