Do ocean carriers have the right to limit the number and kinds of shipments they accept? Can they restrict a shipper's right to choose a carrier? Can discussion agreements, which allow groups of ocean carriers to set voluntary business guidelines, impose penalties on carriers that don't toe the line?

These are just some of the questions shippers are raising about the proposed "refrigerated trade management program" announced last month by the Westbound Transpacific Stabilization Agreement (WTSA). WTSA is a discussion agreement that includes 13 ocean carriers representing more than 90 percent of capacity on the westbound trans-Pacific trade lane.

The one-year program reduces refrigerated container capacity by assigning a percentage of market share to each carrier, based on its historical volumes plus a 0.5-percent "cushion." Carriers that exceed their annual allocation will pay a penalty of $500 per 20-foot container and $1,000 per 40-foot container. Carriers that handle less than their allotment will receive a bonus of $250 per 20-foot container and $500 per 40-foot container.

WTSA carriers say the program is needed to counteract a decline in the number of refrigerated containers heading from North America to Asia. Freight rates have fallen to "unsustainable levels," while the costs of equipment and repositioning, maintenance and repair, shipment monitoring, insurance and claims for refrigerated cargoes continue to rise, according to the WTSA's executive director, Albert Pierce. Mounting losses, he says, threaten the carriers' ability to maintain refrigerated equipment and service levels.

No one disputes that most ocean carriers are facing tough financial times. But many are questioning the legality of the carriers' response to their problems. Both the National Industrial Transportation League (NITL) and the National Customs Brokers and Forwarders Association of America (NCBFAA) have expressed concerns in comments filed with the Federal Maritime Commission (FMC), which oversees ocean carrier agreements and tariffs. The FMC has said that it intends to question WTSA about the program.

Peter J. Gatti, NITL's vice president of international relations, says the refrigerated cargo program is anti-competitive. "What they're proposing essentially is an agreement not to compete with each other and not to go above a specified market share," he says. By locking carriers into a percentage of the market and penalizing them for increasing their business, the plan in effect will determine which services a carrier can offer customers, he argues. By the same token, it will also limit shippers' rights to choose a provider, since carriers will not want to take on new customers that might push them above their annual allotments.

The provision penalizing carriers for exceeding their allotments also raises questions about the definition of a voluntary discussion agreement, Gatti continues. "Is it really voluntary or is it mandatory? If penalties are going to be imposed, what you really have is a mandatory situation."

NITL has asked the FMC to examine whether the refrigerated container plan complies with the Ocean Shipping Reform Act (OSRA). Although NITL believes that OSRA is working extremely well, Gatti notes, carriers' activities still need to be monitored to be sure they follow the letter of the law. But it's also important to follow the spirit of the law, he adds. "What OSRA really intended to achieve was true economic partnerships between carrier and customer. If you're going to start putting into play what WTSA is proposing, then you're moving away from that spirit of allowing one-on-one relationships to prevail."