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03/02/82 Council of North Atlantic v. Federal Maritime

March 2, 1982




Before WRIGHT, MacKINNON and WALD, Circuit Judges.



Petition for Review of an Order of the Federal Maritime commission.


Opinion for the court filed by Circuit Judge J. SKELLY WRIGHT.

Opinion concurring in part and dissenting in part filed by Circuit Judge MacKINNON.


This case marks yet another chapter in the lengthy, difficult, and bitterly contested process of technological change in the maritime industry. The development of container technology-often described as the "container revolution"-created the potential for drastic reductions in the utilization of labor on the docks. For more than 20 years containerization has been one of the central issues in collective bargaining between the steamship and stevedoring companies, represented by the Council of North Atlantic Shipping Associations *fn1 and the New York Shipping Association ,2 and the maritime workers, represented by the International Longshoremen's Association .3

After protracted negotiations punctuated by strikes and labor unrest, the employers and the ILA accepted a compromise, the Rules on Containers, which seek to preserve a portion of the longshoremen's traditional work jurisdiction while permitting containerization of a substantial proportion of cargo traffic. The National Labor Relations Board is currently evaluating the legality of these rules under the federal laws governing labor-management relations.4 The Rules on Containers, however, also affect the interests of another group-the customers of the shipping lines-who are protected by the federal shipping laws from unjust, unreasonable, and discriminatory rates and practices.5 In 1978 the Federal Maritime Commission determined that the Rules on Containers violate the shipping laws.6

Petitioners CONASA and NYSA, associations of shipping employers, contend that the Rules are outside the jurisdiction of the FMC because collective bargaining agreements regarding work preservation are exempt from regulation under the shipping laws. We cannot agree. Under controlling principles adopted by the Supreme Court, the FMC has jurisdiction to determine the legality of the Rules on Containers. However, we remand to the FMC for reconsideration of its decision on the merits in light of intervening judicial decisions. I. BACKGROUND

The development of container technology has had a momentous impact on the loading and unloading of ocean-borne cargo. New pressures, perils, and opportunities have faced longshoremen, steamship lines, stevedoring companies,7 shipping customers, freight forwarders, customs brokers, and other groups. Not only have changes in the quantity and types of work on the docks profoundly affected labor-management relations; the new technology has also given rise to new patterns of shipping traffic.

A. The History of Containerization

Before the advent of container shipment, boxes, crates, packages, and other cargo were generally transported to the docks in loose, "breakbulk" form. Longshoremen checked and sorted the cargo, placed it on pallets, and loaded each pallet into the hold of a ship. When the vessel arrived at its destination port, longshoremen unloaded the hold and sorted the individual shipments for pickup or storage.8 Larger boxes, consolidating several packages or crates, were occasionally used in ocean freight but formed an insignificant proportion of cargo traffic.9

Beginning in the late 1950's in the trade between the Atlantic coast and the Gulf coast and between the Atlantic coast and Puerto Rico,10 steamship lines began to use containers-large reusable metal receptacles ranging in length from 20 to 40 feet-which could be moved to and from a ship as a single unit.11 These containers were sometimes loaded ("stuffed") with breakbulk cargo and unloaded ("stripped") at the pier by longshoremen.12 But containers could also be transported by truck or rail to inland terminals for stuffing, thereby reducing dockside congestion, labor costs, and paper work.13 Steamship companies began to supply empty containers to shippers for off-pier loading and to charge a lower rate for a fully-loaded container than for an equivalent amount of breakbulk cargo.14

Large-scale manufacturers and distributors could directly take advantage of the lower rates for containers by filling containers entirely with their own goods, either at their own facilities or at public warehouses. These containers were known in the trade as "full shippers' loads" or, if stuffed at a manufacturer's own facility by its own employees, as "manufacturer's label." In the early 1960's entrepreneurs began to offer some of the benefits of container shipping to small shippers whose cargo volume was not great enough to fill an entire container. Consolidators, also described as "non-vessel operating common carriers" (NVOCC's or NVO's),15 combined the goods of various shippers into a single container obtained from a steamship company and then delivered the container to the pier. The shipment, under a single bill of lading in the consolidator's name, was eligible for the reduced container rate. The consolidator could charge his shipping customers slightly less than the steamship package rate, thus attracting business while making a profit.16 NVO's offered shorter delivery times,17 a single bill of lading, reduced export packaging expenses, better tracing, reduced risks of loss, damage, and pilferage at dockside,18 and specialized services not provided by the steamship lines.19 Many NVO's experienced dramatic growth in traffic volume and revenues during the 1960's.20

The increasing use of containers on conventional ships and on specially fitted container ships greatly reduced the role of longshoremen in handling cargo. A full container, capable of carrying 30,000 pounds of freight, can be transported by truck or rail directly to and from the pier and can be hoisted on and off the vessel by crane, without any tallying, sorting, palletization, loading, or unloading of individual packages by longshoremen.21 Productivity per man-hour has increased markedly22; as a result the need for labor on the piers has drastically declined. In the Port of Greater New York in 1968, immediately before the onset of large-scale containerization,23 23,500 registered longshoremen worked nearly 400 million man-hours. By 1975 fewer than 14,000 registered longshoremen worked less than 25 million man-hours.24

From the outset the International Longshoremen's Association strongly resisted the loss of jobs and members resulting from adoption of containerization. In every set of collective bargaining negotiations from 1957 to the present, including sessions in 1959, 1962, 1964, 1968, 1971, and 1974, containerization was the overriding issue.25 The ILA consistently sought to preserve its traditional work jurisdiction and to share in the economic benefits of labor-saving technology; the steamship companies with equal persistence sought maximum flexibility to use containers and increase productivity.26 Under the pressure of actual and threatened work stoppages,27 the two sides reached a succession of unstable agreements that partially restricted the use of containers. In the 1959, 1962, and 1964 agreements ambiguous wording allowed "unrestricted" movement of containers but also recognized the ILA's jurisdiction over stuffing and stripping within the general port area; the ILA received a royalty payment for each container.28 Although the steamship companies continued to move some consolidated containers across the piers without ILA handling, the ILA asserted the right to stuff or strip such containers at the pier.29

A bitter and lengthy strike in 1968, lasting for 57 days in the Port of New York and more than 100 days on the Gulf coast, resulted in presidential mediation30 and eventually in a more detailed and comprehensive agreement on the utilization of containers. The basic requirements of the present-day Rules were adopted in 1969,31 but the union continued to complain about lax enforcement and unchecked container movement in violation of the collectively-bargained Rules.32 Faced by the ILA's threat to abrogate the compromise, the employers agreed in the early 1970's to more rigid provisions to enforce the Rules,33 culminating in 1973 in the "Dublin Supplement."34

B. The Rules on Containers

The Rules on Containers represent "a reasoned response to the difficult problem of technological innovation," as this court has recognized in the labor-management context.35 Qualified by detailed definitions, exceptions, and enforcement provisions, the Rules36 generally require that containers owned, leased, or used by steamship companies, if they originate within or are destined to a point within 50 miles of the center of any ILA port, must be stuffed and stripped by ILA deepsea labor on the pier, not by other employees at inland terminals. According to rough estimates by CONASA officials, the Rules permit 80 percent of container traffic to pass across the pier without rehandling by ILA labor; the remaining 20 percent remains within the work jurisdiction of the longshoremen's union.37

Within the 50-mile radius38 the Rules require that all shipments, with three major exceptions, be stuffed and stripped at the pier rather than at inland terminals.39 First, containers whose contents are owned by a single beneficial owner, including a manufacturer, and which are loaded or unloaded at the shipper's own facility by its own employees, need not be handled at the pier.40 Second, import containers need not be stripped at the pier if they are actually stored at regular rates at a bona fide public warehouse for 30 days prior to distribution.41 Third, containers of mail, household goods of persons changing residences, and personal effects of military personnel are exempt from stripping and stuffing regardless of their place of origin or destination.42 "The main remaining containerloads which the ILA now insists on stuffing and stripping at the piers," the FMC's Administrative Law Judge has written, "are containers coming to and from NVOCCs, consolidators, forwarders, deconsolidators, and other shippers and consignees who do not use their own employees to load and unload their containers, where the containers come to or go from points within 50 miles of a port."43

Over the course of more than a decade of negotiations, stiff enforcement provisions have been added to the Rules. Shippers must provide detailed documentation to enable the shipping line to determine whether the container is subject to stuffing or stripping at the pier.44 In addition, the shipping companies must not provide containers to consolidators, distributors, or any other persons operating in violation of the Rules.45 If a consolidated container arrives at the pier, it must be stripped and restuffed into a different container before it may be loaded aboard ship.46 If the violation is discovered after the container has been loaded, the steamship company must pay $1,000 in liquidated damages per container into the royalty fund.47 A joint labor-management committee interprets the Rules and determines infractions with the assistance of a team of container investigators.48

The Rules on Containers impose burdens on importers, exporters, consolidators, distributors, and others within the 50-mile zone. If containers could move freely across the pier without ILA handling, regardless of the identity of the shipper, the place of origin, or the destination, then small shippers within the 50-mile zone could take full advantage of the benefits of container shipping. In contrast, the stuffing and stripping requirements allegedly increase shipping delays and labor costs, augment the risk of loss, pilferage, and damage in transit due to improper stowage, and deprive the shippers of the special services provided by consolidators.49 NVO's and distributors previously operating within the 50-mile zone have been severely affected and in some cases have been forced to cease operations.50

On the other hand, the 50-mile rule and the enforcement provisions of the Dublin Supplement have averted further reductions of employment opportunities for ILA longshoremen51 and have reduced labor-management strife on the waterfront. Petitioners warn that if the Rules are set aside, the longshoremen may renew their demand for stripping and stuffing of all containers, not only those ...

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