U.S. Moves to Lock Out Japanese Shipping

In an action that threatens billions of dollars in transpacific trade, the Federal Maritime Commission voted Thursday to bar Japanese container ships from entering U.S. ports and to seize ships already in port, beginning as early as today.

The commission took the surprising and unprecedented step after three Japanese shipping companies refused to pay a $4-million fine levied by the commission last month in a bitter bilateral dispute. It represents the first time that foreign vessels have been banned under a 1920 U.S. maritime law.

The U.S. move turns a back-burner problem into a high-stakes confrontation, and comes as U.S. and Japanese officials are struggling to resolve contentious disputes involving aviation, automobiles and photo film trade.

California could be particularly hard hit because it is home for subsidiaries of many large Japanese corporations and the Japanese shipping companies are leading customers for the ports. Japan accounts for nearly half of the cargo entering the West Coast.

But observers doubted that the two nations would let the predicament spin out of control, given the enormous problems it would cause in both countries and the fact that it could be defused by the payment of a relatively small fine. The dispute was sparked by complaints by U.S. officials that American vessels face unfair and costly restrictions in Japanese ports.

The two sides were still talking late Thursday night in Washington, and confusion reigned throughout the shipping world as Japanese shipping executives and U.S. government and port officials scrambled to figure out exactly how the commission’s action would play out.

“It’s a great pity that the decision was made at the last minute,” Takao Fujii, Japan’s transport minister, said in Tokyo. “We will keep monitoring the negotiations.”

Fuji said the sanctions would violate U.S.-Japan trade treaties. He said Japan would do its best to resolve the dispute and that it was too early to discuss Japan’s response to any sanctions.

Japan’s Kyodo news service, quoting an unidentified shipping industry source, reported that the Japanese shipping companies had been prepared to make the payments by the Wednesday deadline, but that “the Japanese Transport Ministry instructed the three shippers to withhold the payments because the talks are underway.”

Meanwhile, companies dependent on Japanese shipping lines were scrambling to line up alternative carriers and hoping that their most time-sensitive cargo would not get caught in the cross fire.

“I have some critical freight that needs to go out on a NYK vessel next Friday, so we are watching this very carefully,” said Patty Mura, national import-export manager for Mitsubishi Electric America in Cypress. She said the shipment was elevator equipment headed for a customer in China.

Japanese executives were caught off guard by the commission’s action, but they remained hopeful Thursday that the dispute would be resolved before any vessels are barred or impounded.

“We’re surprised and disappointed,” said Dodd Fiori, a senior vice president in the New Jersey offices of Japan’s NYK Line North America. “We had no expectation this was going to escalate into this kind of thing.”

The other two Japanese shipping lines affected by the U.S. action are Mitsui O.S.K. Lines Ltd. and Kawasaki Kisen Kaisha Ltd.

The three Japanese shipping lines, which are in partnerships with eight other foreign carriers including American President Lines, are likely to shift as much cargo as possible to ships owned by their foreign partners.

“We are keeping our services going and expect to be able to continue servicing our customers,” said Ray Keene, executive vice president of Mitsui O.S.K. in Concord, Calif.

President Clinton has the authority to overturn the commission’s vote on national security grounds. But a White House spokesman traveling with the president in Argentina would not speculate Thursday on what action, if any, he would take.

The pressure to reach an agreement and avert a full-scale trade war is tremendous because the increasingly interdependent economies of the United States and Japan would be badly disrupted if a large chunk of their multibillion-dollar trade was suddenly shut down.

One observer described the threatened action as a “catastrophe for all parties” with the potential to disrupt as much as one-third of the Pacific Coast waterborne trade, including the delay of time-sensitive shipments of holiday goods and critical parts needed to keep assembly lines going.

The commission’s order to ban or impound Japanese ships is expected to be sent to U.S. Coast Guard and customs officials this morning.

The Japanese shippers argue that they have gotten unfairly caught up in a dispute that was triggered by U.S. dissatisfaction with the way Japan operates its own ports.

In September, after the two governments were unable to resolve their differences, the commission imposed penalties of $100,000 on every Japanese container ship that enters U.S. ports. The total fines so far have reached $6 million, of which $4 million was due Wednesday.

Some Japanese critics argue the maritime commission’s provocative action was designed to give it political visibility at a time when U.S. budget cutters have questioned its usefulness. The panel, established in the 1960s, regulates the nation’s waterborne trade and offshore commerce.

But U.S. and European shippers have long complained that the Japanese have cumbersome and costly rules that restrict foreign access to their ports. Those include a requirement that foreign carriers give prior notice to Japanese officials of any changes in shipping routes, prices and other operating arrangements.

The Japan Foreign Steamship Assn., a trade group representing carriers that deal in Japan, claims that it costs a container ship $36,750 to call at Yokohama, compared with $12,350 at the Port of Long Beach and only $5,463 in Hong Kong. Japanese officials dispute those figures.

Foreign shipping firms are not the only beneficiaries of proposed reforms. Japanese lines also face high costs at their ports. The biggest opponents of reforms are powerful Japanese labor unions.

Port officials in Los Angeles and Long Beach, which handle the lion’s share of the Japan trade, said it was difficult to anticipate the impact of the commission’s action. The Kawasaki service, known as K-Line, is the sixth-largest customer of the Port of Long Beach and a ship was being unloaded Thursday. NYK, which also had a ship in port Thursday, and Mitsui are major customers of the Port of Los Angeles.

“No one’s quite sure what the ramifications will be,” said a Port of Los Angeles spokesperson.

* STOCKS TUMBLE: Dow falls 119 as trade-war fears add to profit worries. D1

Times staff writer David Holley in Tokyo contributed to this story.