Port ruling may cost Md. millions MPA found to give Maersk, Hale firms improper 'preference'

Involves Maersk, Hale

Rival puts damages at $8 million

judge is named to set award


October 15, 1997|By Suzanne Wooton | Suzanne Wooton,SUN STAFF

In a decision that could cost the state of Maryland millions of dollars, 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.

The commission said price breaks the state 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.

The FMC also ruled that the MPA gave "unreasonable preference" to Hale Container Line Inc., a Baltimore barge company. Ceres also operates a barge service here.

Since the federal shipping act was enacted 13 years ago, ports have been free to strike deals with steamship lines and other businesses rather than apply standard rates.

In the fiercely competitive maritime industry, ports use factors, such as the number of vessel calls and container volume, to cut deals. As a result, the Ceres case had been closely watched by the nation's port officials.

In 1991, with the port of Baltimore hemorrhaging cargo to Norfolk, Va., MPA officials signed a 10-year lease with Maersk that gave it advantageous terms in the hope of shoring up business with the Danish shipping giant.

Ceres said it offered to guarantee an equal or greater amount of cargo business, but the MPA refused to strike a similar deal. The MPA argued that Maersk, as a steamship line, had more ability to control the movement of cargo to one port or another.

The FMC opinion reaffirmed ports' right to negotiate different deals but said differentiations "must be reasonable based on particular facts and circumstances." It ruled that the MPA failed to justify higher rates for Ceres, other than to argue that it was a terminal operator instead of a steamship line.

"Status alone is not a sufficient basis by which to distinguish between leases," the commission wrote in an usually long, 118-page opinion issued Friday. The commission ordered the case turned over to an administrative law judge who will determine the damages the MPA must pay.

In its opinion, the FMC denied Ceres' complaints that the MPA had discriminated in the quality of cranes and the availability of berths.

In its complaint with the FMC, Ceres argued that it 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 the same terms as Maersk. The company said that total damages could run between $8 million and $10 million.

Ceres officials could not be reached for comment yesterday.

The decision caps a four-year battle between the MPA and Ceres, an internationally known Hoboken, N.J., company that has operated in the port of Baltimore for more than 25 years.

At Dundalk Marine Terminal, Ceres operated 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.

Ceres in May stopped processing containers at Dundalk, reiterating its complaint against the MPA and saying that it could not agree on a new five-year lease.

Ceres continues to load and unload car transport ships at Dundalk as well as rail cars at Seagirt Marine Terminal.

Richard A. Lidinksy, a shipping company executive in Washington and former MPA attorney, said yesterday that the decision "sends a very disturbing message to current and potential port customers be overly cautious in your dealings with Baltimore."

Maersk, meanwhile, citing changes in global economy, has canceled half its shipping service to Baltimore in the past two years.

Tay Yoshitani, executive director of the MPA, said yesterday that he does not anticipate that the FMC decision will prompt other companies to challenge their leases with the MPA.

"The most important relevant message is that it's business as usual," he said. "This has no impact on any of our other customers." He said the MPA has not decided whether to appeal the FMC's decision.

Pub Date: 10/15/97

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