Economic Regulation WY 
The economic regulation of ocean shipping in U.S. 
foreign and domestic commerce is basically a 20th- 
century phenomenon.Before 1916, the only regula- 
tory authority over such carriage was exercised by 
the Interstate Commerce Commission as an adjunct 
to its authority to regulate railroads. Under the terms 
of the Interstate Commerce Act of 1887, railroad 
regulation was defined to include the regulation of 
continuous intermodal cargo movements by a com- 
bination of rail and water carriers when carried out 
under common control or management. The clear 
objective of this provision was railroad regulation, 
however, and not water carrier regulation. 
In general, during this early period water trans- 
portation was looked on with considerable favor as 
a means of at least partially curbing the extensive 
power of the railroads in areas where water carriage 
provided an alternative to rail transport. 
With the opening of the Panama Canal, a new 
opportunity for rail/water competition emerged in 
the provision of important transportation services be- 
tween the West Coast and the East and Gulf Coast 
areas of the United States. By this time, however, 
many water carriers had come under railroad con- 
trol and, as a result, the socially desirable conse- 
quences of rail/water competition had begun to 
erode. To alleviate this condition, the Congress in- 
cluded in the 1912 Panama Canal Act an amend- 
ment to the Interstate Commerce Act which made it 
illegal for a railroad to have any interest in a water 
carrier with which it competed or might compete. 
Again, the purpose was to control the power of the 
railroads and assure the viability of the rail-compe- 
titive water transportation industry. 
At about this same time, however, concern did 
begin to emerge regarding certain anti-competitive 
practices in shipping. Basically this concern focused 
on the liner segment of the industry, where it was felt 
that the nature of the service provided tended to 
encourage agreements designed to limit competition 
in order to prevent unlimited competition from be- 
coming predatory. It is necessary to understand the 
distinction between the liner industry and other seg- 
ments of the shipping industry in order to understand 
why Federal economic regulation of liner shipping 
services emerged. The general (although not total) 
confinement of Federal reguation to common carrier 
liner-type operations arises from a perspective which’ 
sees these services as economically distinct from 
services provided by other types of vessel operations. 
Regulatory Imperatives 
Basically there are three types of water transpor- 
tation services, although at times some operations 
may exhibit characteristics of more than one type. 
First, there is the service provided by the private car- 
tier which is owned by its primary user and devoted 
principally to the carriage of propri cargoes. 
These services are provided internally as an integral 
part of some larger business activity and because 
they are not offered to the public, they are generally 
outside the scope-of Government e economic _regula- 
tion._ Examples of this type of operation include 
©) tankers owned and operated by oil companies and 
ore carriers owned by steel and aluminum producers. 
@ The second basic type of operation is the tramp 
service which is offered to shippers ona contract 
carriage basis. No fixed schedule or service is offered 
and vessels so employed move freely from trade to 
trade in pursuit of bookings. Cargo space may be 
secured for a single voyage or, in some cases, the 
entire vessel may be chartered for_a period of years 
as is common in the oi] industry where many long- 
term charters are used to provide services essentially 
indistinguishable_ from proprietary carriage. Char- 
acteristically, the tramp shipping industry is_highly 
competitive, because of the ease with which shipping 
assets may be shifted from one trade to another in 
pursuit of new employment opportunities. This com- 
petitive characteristic provides a strong element of 
natural regulation which largely obviates the need 
for extensive Government involvement. nt for4 
eign trade such operations are totally outside the 
scope of Federal economic regulatory authority. In 
domestic commerce, the Interstate Commerce Com- 
mission exercises some authority over contract car- 
riage, but only to the extent required to protect com- 
mon carriers from unfair competition from contract 
carriers. Basically, contract carriers are forbidden 
from charging unreasonably low rates and must file 
a minimum rate schedule with the ICC. Any mini- 
mum rate determined by the ICC to be unreasonably 
low can be ordered raised, but the contract carrier 
owner remains free to charge any rate above the 
floor rate and there are no restrictions regarding 
rate discrimination among shippers.”° Hence, while a 
limited Federal regulatory role does exist with re- 
spect to domestic contract carriage, this type of 
service in both foreign and domestic commerce re- 
mains primarily subject to the control of the market 
aan than the Government. 
The third basic type of shipping operation is the 
7 fie gaits which is characterized by the offering 
of water transportation services to the eneral peel 
in accordance with a fixe ublished schedule. 
29 William 1. Grossman. Ocean Freight Rates. 
Md., Cornell Maritime Press, 1956, p. 108. 
Cambridge, 
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