In order to enable the Commission to make the requisite findings under the aforementioned provisions of section 14b of the Shipping Act in a fair, meaningful, and expeditious manner, applicants should furnish to the Commission a factual statement in support of their dualrate contract system and a statement in support of the reasonableness of the spread between contract and non-contract rates. The statement submitted in support of a dual-rate contract system should include, but need not be limited to, information concerning the amount and type of present or potential competition in the trade, competitive practices of other carriers, and the general effect that such competition has had on the service and rate structure maintained by the applicant. The statement submitted in support of the spread between contract and non-contract rates should include, but need not be limited to, information as to why the proposed spread was selected, and why a lesser spread would be inadequate to accomplish the purposes of the system.

§ 538.2 Filing of modifications to approved contracts.

Any carrier or conference of carriers desiring approval of the Federal Maritime Commission for any modification of its contract should file immediately with the Commission the details of such modification. If such modification involves a change in the form of the contract, the filing should include the modified form. If the modification involves a change in spread between contract rates and noncontract rates with respect to a single commodity or a number of commodities, Commission processing of the modifications submitted for approval will be facilitated if supported by the type of information referred to in § 538.1(b). If the modification involves an addition to the number of commodities for which both contract and noncontract rates will be published, or the republication of both contract and noncontract rates for a commodity or commodities for which the publication of such dual rates had previously been terminated, or the extension of the contract to additional port areas not previously covered by the system, the processing of such modifications for approval will be expedited if supported by the types of information referred to in § 538.1(b). Processing of other modifications for approval, of a type not specifically re

ferred to in this part, will be facilitated if accompanied by a statement in support of the proposed modification. Filing under this section may be accomplished by submitting to the Secretary, Federal Maritime Commission, Washington, D.C. 20573, an original and fifteen (15) copies of the application requesting approval of the modifications requested.

§ 538.3 Notice of filing.

All applications to institute dual-rate contract systems and all proposed modifications to existing contracts, together with any information furnished in support of such applications, filed with the Commission pursuant to the provisions of this part shall be available for inspection at the Federal Maritime Commission. Notice of filing shall be published in the FEDERAL REGISTER, and interested parties may, within twenty (20) days after the date of publication or within such other period of time as the Commission may prescribe, file written views, comments or arguments relating to such filing. Comments shall include a statement of position with respect to approval, disapproval, or modification of the proposed contract or modification, together with reasons therefor, and a request for hearing, should the same be desired.

The Commission has determined that the form of the "Uniform Merchant's Contract" which follows complies with the provisions of the Shipping Act, 1916. Applications for approval of dual-rate contracts submitted to the Commission after the effective date of this order in a form which comports with the "Uniform Merchant's Contract" which follows will receive expedited handling by the Commission. Any conference or independent carrier1 desiring Commission approval for the use of a dual-rate contract in a form which comports with the "Uniform Merchant's Contract" which follows should request approval thereof by filing with the Commission copies of

1 Contracts for use by independent lines should follow the form of "Uniform Merchant's Contract" herein provided to the extent possible, omitting only those portions of the contract which clearly apply only to conferences.

such contracts pursuant to the provisions of § 538.1. Use of the "Uniform Merchant's Contract" which follows is prospective only and shall apply only to applications to institute dual-rate contract systems submitted after the effective date of the provisions of this part. The provisions of this part do not affect dual-rate contracts currently approved by the Commission, except as to modifications thereof submitted after the effective date of this part. In considering whether to approve the use of dualrate contract forms which comport with the "Uniform Merchant's Contract" which follows, the Commission will ordinarily not inquire into the form of the contract, but will generally inquire into the spread and the system of contract and non-contract rates, as required by section 14b of the Shipping Act, 1916. UNIFORM MERCHANT'S CONTRACT

(Name of Conference or Independent Carrier) Conference Agreement No. This contract made this

day of 19-, by and between_. (hereinafter called the "Merchant") and the Shipping Lines undernamed, members of the

Freight Conference (hereinafter called the "Carriers") Witnesseth:

For their mutual benefit in the stabilization of rates, services and practices and for development of international maritime commerce in the trade defined in Article 1 of this contract, the parties hereby agree as follows:

1. (a) The Merchant undertakes to ship or cause to be shipped all of its ocean shipments, for which contract and non-contract rates are offered, moving in the trade from (or between) ((Name ports or range or countries in which ports are located)) to ((Name ports or range or countries in which ports are located)); on vessels of the Carriers unless otherwise provided in this contract.

(b) The term "Merchant” shall include the party signing this contract as shipper and any of his parent, subsidiary, or other related companies or entities who may engage in the shipment of commodities in the trade covered by this contract and over whom he regularly exercises direction and working control (as distinguished from the possession of the power to exercise such direction and control) in relation to shipping matters, whether the shipments are made by or in the name of the "Merchant", any such related company or entity, or an agent or shipping representative acting on their behalf. The names of such related companies and entities, all of whom shall have the unrestricted benefits of this contract and be fully bound thereby, are listed at the end of this contract. The party signing this contract as "Mer

chant" warrants and represents that the list is true and complete, that he will promptly notify the Carriers in writing of any future changes in the list, and that he has authority to enter into this contract on behalf of the said related companies and entities so listed.

(c) In agreeing to confine the carriage of its (their) shipments to the vessels of the Carriers, the Merchant promises and declares that it is his (their) intent to do so without evasion or subterfuge either directly or indirectly by any means, including the use of intermediaries or persons, firms or entities affiliated with or related to the Merchant.

(d) The Carriers agree that they will not provide contract rates to anyone not bound by a Merchant's Contract with the Carriers. The Merchant agrees that he will not obtain contract rates for any persons not entitled to them, including related companies not bound by this contract, by making shipments under this contract on behalf of any such person.

2. The Carriers undertake, throughout the period of this contract, to maintain a steamship service which shall, so far as concerns the frequency of sailings and the carrying capacity of their vessels, be adequate to meet all of the reasonable requirements of the Merchant in the trade specified in Article 1 hereof, and the Carriers further agree that, subject to the availability of unbooked suitable space in the vessels of the Carriers at the time when the Merchant applies therefor, the vessels of the Carriers shall, subject to the provisions of this contract, transport the cargoes of the Merchant in the aforesaid trade upon the terms and conditions herein set forth.

3. The Carriers undertake to apply to the Merchant contract rates as quoted in the tariff. The rates applicable to shipments made under this contract shall be the contract rates in effect at the time of shipment as set forth in the tariff published by the Carriers and on file with the Federal Maritime Commission.1 Contract rates on every commodity or class of commodities shall be lower than the ordinary rates set forth in the Carriers' tariff by a fixed percentage of (---

-()) percentum of the ordinary rates. In order that both the contract and ordinary rates may be stated in multiples of twentyfive (25) cents per revenue ton (or other customary shipping unit such as M.B.F. or per individual unit) or five (5) cents per hundred pounds or per cubic foot, the rates may be rounded out to the nearest twentyfive (25) cents per revenue ton or unit or five (5) cents per hundred pounds or cubic foot, as the case may be (not including addi

1 Specific reference in the contract provisions to Federal Maritime Commission jurisdiction, to various sections of the Shipping Act, 1916, and to Rules and Regulations of the Commission is optional and may be deleted without further permission from the Commission.

tional handling or accessorial charges), which will not result in the difference between the rates exceeding (-----------( )) percent of the ordinary rates.

4. (a) The Carriers shall make no change in rates, charges, classifications, rules or regulations, which results in an increase or decrease in cost to the Merchant, except as provided by section 18(b)(2) of the Shipping Act, 1916, as amended, and the Rules of the Federal Maritime Commission, provided, however, the rates of freight under this contract are subject to increase from time to time and the Carriers, insofar as such increases are under the control of the Carriers, will give notice thereof not less than ninety (90) calendar days in advance of the increases by publishing them ninety (90) calendar days in advance in the Conference Tariff. Should circumstances necessitate increasing the rates by notice as aforesaid and should such increased rates be not acceptable to the Merchant, the Merchant may tender notice of termination of this contract to become effective as of the effective date of the proposed increase by giving written notice of such intention to the Conference within thirty (30) calendar days after the date of notice, as aforesaid, of the proposed increase: Further provided, however, That the Carriers may, within thirty (30) calendar days subsequent to the expiration of the aforesaid thirty (30) calendar day period, notify the Merchant in writing that they elect to continue this contract under the existing effective rates and, in the event the Carriers give such notice, this contract shall remain in full force and effect as if the proposed increase had never been made and the Merchant's notice of termination had never been given.

(b) The Conference shall offer to the Merchant a subscription to its tariff at a reasonably compensatory price, however, the Merchant shall be bound by all notices accomplished as aforesaid without regard to whether it subscribes to the Conference tariff. Tariffs shall be open to the Merchant's inspection at the Conference offices and at each of the offices of the Carriers during regular business hours.

(c) The rates initially applicable under this contract shall be deemed to have become effective with their original effective date through filing in the respective tariff with the Federal Maritime Commission rather than to have become effective with the signing of this contract and notices of proposed rate increases which are outstanding at the time this contract becomes effective shall run from the date of publication in the tariff rather than from the date of this contract.

5. The Merchant has the option of selecting any of the vessels operated by the Carriers, subject to agreement with the particular

2 That portion of paragraph (a) to and including "provided, however," is optional and may be deleted.

Carrier as to quantity, and agrees to make application for space as early as possible before the selected vessel's advertised sailing date. In the event that the Merchant is unable to secure space on the selected vessel he may request the assistance of the Conference in securing space on the selected vessel or on a vessel sailing from the chosen port at or about the same time as the selected vessel. If within three business days of such request the Conference fails to secure space on a vessel scheduled to sail within 15 days of the date of the request from the Merchant as aforesaid the Merchant shall be at liberty to secure such space on any vessel whatsoever.

6. (a) If the Merchant has the legal right at the time of shipment to select a carrier for the shipment of any goods subject to this contract, whether by the expressed or implied terms of an agreement for the purchase, sale or transfer of such goods, shipment for his own account, operation of law, or otherwise, the Merchant shall select one or more of the carriers.

(b) If Merchant's vendor or vendee has the legal right to select the carrier and fails to exercise that right or otherwise permits Merchant to select the carrier, Merchant shall be deemed to have the legal right to select the carrier.

(c) It shall be deemed a breach of this contract, if before the time of shipment, the Merchant, with the intent of avoiding his obligation hereunder, divests himself, or with the same intent permits himself to be divested, of the legal right to select the carrier and the shipment is carried by a carrier not a party hereto.

(d) For the purposes of this Article, the Merchant shall be deemed prima facie to have the legal right at the time of shipment to select the carrier for any shipment:

(1) With respect to which the Merchant arranged or participated in the arrangements for ocean shipment or selected or participated in the selection of the ocean carrier,

or

(2) With respect to which the Merchant's name appears on the bill of lading or export declaration as shipper or consignee.

Some variation in these time periods may be permitted based on the reasonable commercial needs of a particular trade.

* Clause (d) of Article 6 is optional and may be used by those conferences and carriers which desire a provision raising a rebuttable presumption.

An additional subparagraph (3) is permitted in clause (d) of the contracts in the Hong Kong trades-Trans-Pacific Freight Conference (14-1) and New York Freight Bureau (Hong Kong) (5700) because of special circumstances known to exist in those trades. This provides as follows:

"(3) With respect to which Merchant participated in the arrangement for ocean shipment beyond the delivery to the ocean carrier's terminal or alongside the carrier's

(e) Nothing contained in this contract shall require the Merchant to refuse to purchase, sell or transfer any goods on terms which vest the legal right to select the carrier in any other person.

7. (a) This contract does not apply to the Merchant's cargo which is loaded and carried in bulk without mark or count, except liquid bulk cargoes (other than chemicals and petroleum products) in less than full shipload lots, or any cargo owned by Merchant and carried in Merchant-owned vessels or in Merchant-chartered vessels where the term of the charter is for six (6) months or longer.

(b) The Merchant and the Carriers recognize that mutual benefits are derived from freedom on the part of the Carriers to open rates, where conditions in the trade require such action, without thereby terminating the dual rate system as applicable to the commodity involved; therefore, it is agreed that the Conference, to meet the demands of the Merchants and of the trade may suspend the application of the contract as to any commodity through the opening of the rate on such commodity (including opening subject to maximum or minimum rates) provided that none of the carriers during a period of ninety (90) days after the date when the opening of such rate becomes effective shall quote a rate in excess of the Conference contract rate applicable to such commodity on the effective date of the opening of the rate and provided further that the rate shall not thereafter be closed and the commodity returned to the application of the contract system on less than ninety (90) days' notice by the Carriers through the filing of contractnon-contract rates in their tariff.

8. This contract does not require the Merchant to divert shipments of goods from natural transportation routes not served by conference vessels where direct carriage is available: Provided, however, That where the Carriers provide service between any two ports within the scope of this contract which constitute a natural transportation route between the origin and destination of such shipment, the Merchant shall be obligated to select the Carriers' service. A natural transportation route is a traffic path reasonably warranted by economic criteria such as costs, time available facilities, the nature of the shipment and any other economic criteria appropriate in the circumstances. Whenever the Merchant intends to assert his vessel and without in any way exhausting what may constitute subterfuge or evasion within the meaning of Article 1(c) hereof, the merchant shall be deemed prima facie to have the legal right to select the carrier for any shipment made in fact by such merchant in respect of which the name of any firm or person, being associated with the local agents of a non-conference line appears as the shipper on the relevant bill of lading and any merchant using this subterfuge shall be deemed prima facie to have violated his contract with the carriers."

rights under this Article to use a carrier who is not a party hereto and the port through which Merchant intends to ship or receive his goods is within the scope of this contract, the Merchant shall first so notify the Conference in accordance with the provisions of Article 5 hereof.

9. Shipments under this contract are subject to all terms, conditions, and exceptions, not inconsistent herewith, contained in the respective Carrier's engagement note, permit, dock receipt and/or regular form of bill of lading, in use by the Carrier when shipments are tendered. The rates, conditions, rules and regulations, as shown in the Conference Tariff on file with the Federal Maritime Commission constitute an integral part of this contract, binding on both contracting parties hereto, and consequently the Merchant explicitly confirms his agreement to be bound by such rates, conditions, rules and regulations as well as by amendments thereto and reissues thereof. The Merchant's particular attention is called to the provisions of the Tariff relating to misdeclaration and misdescription. With respect to contracts of carriage made between the Merchant and one of the carriers, none of the other companies referred to as Carriers shall be liable, jointly or severally, or in any way or to any extent.

10. Any additional carriers trading in the Conference range, which may become members of the

Conference during the effective period of this contract, shall thereby become parties hereto, and the Merchant and such additional carriers shall have the same mutual rights, privileges, obligations and liabilities as if such additional carriers had been signatories hereto; and if and when any carrier, which now is or hereafter becomes a member of the Conference, should cease to be a member thereof, such carrier shall simultaneously cease to be a party hereto and, from and after the date when such carrier ceases to be a member of the Conference or the date which shall be fifteen (15) days after the carriers shall have mailed to the Merchant written notice of such cessation (whichever date shall be later), any shipment made by the Merchant on vessels of said Carrier shall be in violation hereof to the same extent as if said Carrier had never been a party hereto or a member of the Conference. The Merchant may, without any liability therefor, cancel any booking agreement with any member of the Conference if such agreement provides for transportation within the scope of this contract for merchandise to be delivered to such Carrier for transportation on or after the date when such Carrier shall have ceased to be a member of the Conference.

11. (a) If at any time the Merchant shall make any shipment or shipments in violation of any provisions of this contract, the Merchant shall pay liquidated damages to the Carriers in lieu of actual damages, which would be difficult or impracticable to deter

mine. Such liquidated damages shall be paid in the amount of freight charges on the shipment or shipments made in violation hereof, computed at the contract rates therefor in effect on the date or dates thereof, less the cost of loading and unloading.

(b) Upon the failure of the Merchant to pay or dispute his liability to pay liquidated damages as herein specified for breach of the contract within thirty (30) days after receipt of notice by registered mail from the Conference that they are due and payable, the Conference shall suspend the Merchant's rights and obligations under the contract until he pays such damages.

(c) If, within thirty (30) days after receipt of such notice, the Merchant notifies the Conference by registered mail that he disputes the claim, the Conference shall within ninety (90) days thereafter, proceed in accordance with Article 16 to adjudicate its claim for damages, and if it does not do so, said claim shall be forever barred. If the adjudication is in the Conference's favor, and the damages are not paid within thirty (30) days after the adjudication becomes final, the Conference shall suspend the Merchant's rights and obligations under the contract until he pays the damages.

(d) No suspension shall abrogate any cause of action which shall have arisen prior to the suspension.

(e) Payment of damages shall automatically terminate suspension.

(f) The Conference shall notify the Federal Maritime Commission of each suspension and of each termination of suspension within ten (10) days after the event.

12. Damages for breach of this contract by the Carriers or any of them shall be actual damages to be determined after breach in accordance with the principles of contract law.

13. (a) In order that the Conference may investigate the facts as to any shipment of the Merchant that has moved, or that the Merchant or the Carriers believes has moved, via a non-conference carrier, and upon a written request clearly so specifying, the Merchant shall, at his option, (1) furnish to the Conference Chairman, Secretary, or other duly authorized Conference representative or attorney, such information or copies of such documents which relate thereto and are in his possession or reasonably available to him, or (2) allow the foregoing persons to examine such documents on the premises of the Merchant where they are regularly kept. Pricing data and similar information may be

In lieu of this liquidated damages provision, the contract may limit damages recoverable for breach by either party to actual damages determined after breach in accordance with the principles of contract law.

A minimum period of 30 days and a maximum period of 90 days may be used without further permission from the Commission.

deleted from the documents at the option of the Merchant and there shall be no disclosure of any information in violation of Section 20 of the Shipping Act, 1916, as amended.

(b) Within ten (10) days after the event in any transaction in which the Merchant is a party and the legal right to select the carrier is vested in a person other than the Merchant, and if he has knowledge that the shipment has been made via a non-conference carrier, the Merchant shall notify the Conference in writing of this fact, giving the names of the Merchant and his customer (or vendor), the commodity involved and the quantity thereof, and the name of the nonconference carrier: Provided, however, That where the activities of Merchant are so extensive in area or the nature or volume of his sales or purchases makes it impracticable to give notice within ten (10) days, the Merchant shall give notice as promptly as possible after the event.

14. (a) In the event of war, hostilities, warlike operations, embargoes, blockades, regulations of any governmental authority pertaining thereto, or any other official interferences with commercial intercourse arising from the above conditions, which affect the operations of any of the Carriers in the trade covered by this contract, the Carrier or Carriers may suspend the effectiveness of this contract with respect to the operations affected and shall notify the Merchant of such suspension. Upon cessation of any cause or causes of suspension set forth in this Article and invoked by any Carrier or Carriers, said Carrier or Carriers shall forthwith reassume its or their rights and obligations hereunder and notify the Merchant on fifteen (15) days' written notice that its suspension is terminated.

(b) In the event of any of the conditions enumerated in Article 14(a), the Carrier or Carriers may increase any rate or rates affected thereby, in order to meet such conditions, in lieu of suspension. Such increase or increases shall be on not less than fifteen (15) days' written notice to the Merchant, who may notify the Carrier or Carriers in writing not less than ten (10) days before increases are to become effective of its intention to suspend this contract insofar as such increase or increases is or are concerned, and in such event the contract shall be suspended as of the effective date of such increase or increases, unless the Carrier or Carriers shall give written notice that such increase or increases have been rescinded and canceled.

(c) In the event of any extraordinary conditions not enumerated in Article 14(a), which conditions may unduly impede, obstruct, or delay the obligations of the Carrier or Carriers, the Carrier or Carriers may increase any rate or rates affected thereby in