# Ocean Common Carrier and Marine Terminal Operator Agreements Subject to the Shipping Act of 1984 > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A03-29738 ## Record - **Collection:** Federal Register - **Document type:** Proposed Rule - **Published:** December 2, 2003 - **Citation:** 68 FR 67510 ## Text FEDERAL MARITIME COMMISSION 46 CFR Parts 501 and 535 [Docket No. 03-15] RIN 3072-AC28 Ocean Common Carrier and Marine Terminal Operator Agreements Subject to the Shipping Act of 1984 AGENCY: Federal Maritime Commission. ACTION: Notice of proposed rulemaking. SUMMARY: The Federal Maritime Commission proposes to amend its regulations governing agreements among ocean common carriers and marine terminal operators in response to changes in the shipping industry since the enactment of the Ocean Shipping Reform Act of 1998 (“OSRA”), which amended the Shipping Act of 1984 (“Shipping Act”). The Commission proposes to delegate additional authority to the Director of the Commission's Bureau of Trade Analysis (46 CFR part 501). The Commission also proposes to update its rules relating to standards and exceptions for information that a filed agreement must contain and to revise its regulations pertaining to transshipment agreements (46 CFR part 535). Further, the Commission proposes to modify its Information Form and Monitoring Reports regulations and appendices (46 CFR part 535) to reflect changes in the amount and kind of data the Commission deems necessary to monitor carriers' use of their antitrust immunity for filed agreements. Finally, the Commission proposes to revise its regulations regarding the filing of agreement minutes (46 CFR part 535). The revision would reduce inadequate inclusion or coverage of substantive issues and insufficient levels of detail to describe carrier discussions, clarify regulations on meetings for which minutes are required to be filed, and identify and provide for timely Commission access to materials used or discussed in such meetings. DATES: Submit an original and 15 copies of comments (paper), or e-mail comments as an attachment in WordPerfect 10, Microsoft Word 2000, or earlier versions of these applications, no later than January 30, 2004. Requests for meetings to make oral presentations to individual Commissioners must be received, and the meetings completed, by this date as well. ADDRESSES: Address all comments concerning this proposed rule to: Bryant L. VanBrakle, Secretary, Federal Maritime Commission, 800 North Capitol Street, NW., Room 1046, Washington, DC 20573-0001, (202) 523-5725, E-mail: secretary@fmc.gov. FOR FURTHER INFORMATION CONTACT: Carol J. Neustadt, Acting General Counsel, Federal Maritime Commission, 800 North Capitol Street, NW., Room 1018, Washington, DC 20573-0001, (202) 523-5740, E-mail: GeneralCounsel@fmc.gov. Florence A. Carr, Director, Bureau of Trade Analysis, Federal Maritime Commission, 800 North Capitol Street, NW., Room 940, Washington, DC 20573-0001, (202) 523-5796, E-mail: tradeanalysis@fmc.gov. SUPPLEMENTARY INFORMATION: Outline I. Delegations to the Director, Bureau of Trade Analysis, 46 CFR 501.26. II. The Content of Ocean Common Carrier and Marine Terminal Operator Agreements Subject to the Shipping Act of 1984, 46 CFR part 535, subparts A, B, C, and D. A. Background—Docket No. 99-13 1. Introduction 2. Summary of the Comments B. The Proposed Rule 1. Proposed Changes to Address Concerns for Certainty 2. Proposed Changes to Address Concerns for Future Commercial Flexibility a. Requirement to File Every Agreement b. Modifications to Effective Agreements c. Exemptions i. Low Market Share Exemption and Definition of Capacity Rationalization ii. Revision of the Present Exemptions for Non-substantive Agreements and Amendments, Miscellaneous Modifications (proposed §§ 535.302 and 535.309), and Public Notice of Filings (proposed § 535.602) iii. Transshipment Agreements 3. Confidentiality of Sensitive Commercial Information in Filed Agreements III. Information Forms and Monitoring Reports, 46 CFR part 535, subparts E and G. A. Introduction B. Background 1. The Current Regulations 2. Changes in Carrier Agreements since OSRA C. The Proposed Rule 1. Information Form Regulations 2. Information Form a. Section I b. Section II c. Section III d. Section IV i. Market Share ii. Total Average Revenue iii. Cargo Volume and Revenue Results for the Top 10 Agreement-Wide Commodities iv. Vessel Capacity and Utilization v. Port Service e. Section V 3. Monitoring Report Regulations 4. Monitoring Report a. Section I b. Section II c. Section III D. Implementation of the Proposed Information Form and Monitoring Report Regulations IV. Minutes, 46 CFR part 535, subpart G. A. Introduction B. Discussion of the components of the current minutes rules and the proposed changes 1. Agreements Required to File Minutes 2. Definition of Meeting 3. Content of Minutes 4. Serial Numbers 5. Filing Deadlines V. Miscellaneous Changes to 46 CFR part 535 VI. Oral Presentations VII. Statutory Reviews and Request for Comments I. Delegations to the Director, Bureau of Trade Analysis, 46 CFR 501.26 The proposed rule amends § 501.26 to account for modifications in the delegations of the Commission's authority to the Director, Bureau of Trade Analysis (“BTA”) in connection with the proposed modifications in 46 CFR part 535. Specifically, sections 501.26(c) and (d) are being revised to match the re-coded section numbers for applications for waivers to the reporting requirements for carrier agreements in part 535 of the proposed rule. Sections 501.26(o) and (p) are being added to provide new delegations of authority to the Director of BTA pertaining to the proposed Monitoring Report regulations for carrier agreements in part 535 of the proposed rule. II. The Content of Ocean Common Carrier and Marine Terminal Operator Agreements Subject to the Shipping Act of 1984, 46 CFR Part 535, Subparts A, B, C, and D A. Background—Docket No. 99-13 1. Introduction The Shipping Act of 1984, 46 U.S.C. app. §§ 1701-1719 (“Shipping Act”), requires, at section 5(a), the filing of certain types of commercial agreements by and among ocean common carriers and marine terminal operators with the Federal Maritime Commission (“Commission” or “FMC”). 46 U.S.C. app. § 1704(a). The Commission's current regulations implementing this provision were first adopted by the Commission in that same year. Docket Nos. 84-26 and 84-32, Rules Governing Agreements by Ocean Common Carriers and Other Persons Subject to the Shipping Act of 1984, 22 S.R.R. 1453, 49 FR 45320 (final rule) (November 15, 1984) (“Docket Nos. 84-26 and 84-32 (final rule)”). The Commission most recently amended its agreement rules in 1999, in response to changes made to the Shipping Act by the Ocean Shipping Reform Act of 1998, Public Law No. 105-258 (“OSRA”). Docket No. 98-26, Ocean Common Carrier and Marine Terminal Operator Agreements Subject to the Shipping Act of 1984, 64 FR 11236, March 8, 1999, (“Docket No. 98-26”). Pursuant to changes mandated by OSRA, Docket No. 98-26 eliminated most of the “form and manner” rules describing the procedural rules for filing these agreements, but left unchanged the substantive “content” requirements, which were not affected by OSRA. 64 FR 11238. Comments submitted in the course of Docket No. 98-26 revealed concerns and uncertainties about the Commission's substantive requirements for agreements, and requested further clarifications, enhancements or new rules on agreements. In response to these concerns, the Commission initiated Docket No. 99-13, The Content of Ocean Common Carrier and Marine Terminal Operator Agreements Subject to the Shipping Act of 1984, by the publication of a Notice of Inquiry (“NOI”) on August 3, 1999, requesting comment on the specific manner in which the Commission's agreement content rules should be updated or refined. 64 FR 42057. 1 The Commission asked commenters to include concrete examples and to quantify their answers in response to the NOI. Id. 1 Docket No. 99-13, The Content of Ocean Common Carrier and Marine Terminal Operators Agreements Subject to the Shipping Act of 1984, has been discontinued by separate order. The instant proceeding, Docket No. 03-15, Ocean Common Carrier and Marine Terminal Operator Agreements Subject to the Shipping Act of 1984, encompasses former Docket No. 99-13 and expands it to cover additional matters. As indicated below, the five comments submitted to the Commission in Docket No. 99-13 are incorporated by reference into the record of the instant proceeding and have been considered by the Commission. The Commission received five comments in response to the NOI, all of which requested that the Commission's rules on content standards for agreement filings be updated or refined in a further rulemaking and identified three main concerns: certainty, flexibility, and confidentiality. These comments are summarized below. 2. Summary of the Comments The Commission received comments from the National Industrial Transportation League (“NITL”), the Council of European & Japanese National Shipowners” Associations (“CENSA”), the International Longshoreman's Association (“ILA”) P&O Nedlloyd, Ltd. (“PONL”), and the Ocean Carrier Working Group Agreement (“OCWGA”). 2 2 Members of OCWGA at the time of this submission were: the Latin America Agreement; Israel Trade Conference; Trans-Atlantic Conference Agreement; Transpacific Stabilization Agreement; United States/Australia-New Zealand Association; United States/South Europe Conference; United States/Southern Africa Conference; Westbound Transpacific Stabilization Agreement; Mediterranean-North Pacific Coast Freight Conference; A.P. Moller-Maersk Line; Contship Containerlines, Ltd.; Crowley American Transport, Inc; Evergreen Marine Corporation (Taiwan) Ltd.; King Ocean Service de Venezuela, S.A.; Sea-Land Service, Inc.; Star Shipping A/S; Tropical Shipping & Construction Company, Ltd.; Wallenius Wilhelmsen Lines AS; Zim-Israel Navigation Company; and Hapag-Lloyd Container Linie GmbH. In addition to responses directed at particular questions posed by the Commission in the NOI, summarized below, there were some general comments in response to the Commission's initial inquiry. OCWGA recommends that the Commission revise the rules by affirmatively defining what must be included in the filed agreement, rather than enumerating what need not be filed. OCWGA at 11. It states that this approach would allow for incremental adjustments to the regulations and clarify any uncertainty in the rule. Id. at 11-12. OCWGA and PONL both assert that the Commission should determine the level of specificity it requires for such filings to be meaningful, and balance that need against the burden on filers. OCWGA at 19; PONL at 8. OCWGA suggests that the Commission seek to alleviate commercial harm arising from the disclosure of sensitive business information and the administrative costs associated with filing agreements so specific that they require constant amendments which also must be filed. OCWGA at 19. A summary of comments addressed to the specific questions contained in the NOI follows. (a) The Commission asked whether the current filing exemption for routine operational or administrative matters should be eliminated, retained in its current form, or modified (NOI Question 1). Although the current regulations provide that filed agreements be “the complete agreement among the parties and * * * specify in detail the substance of the understanding of the parties” (46 CFR 535.407(a)), as summarized below, several comments generally remark that there are exceptions to this requirement. The comments cite the Commission's rules allowing “permissive authority” at 46 CFR 535.407(b) 3 and the exemption from additional filing for interstitial implementation of routine operational or administrative matters at 46 CFR 407(c). OCWGA contends that the Commission has never required the parties to a filed agreement to actually exercise all the authority in an agreement. It also alleges that the Commission's proceedings in Docket No. 97-07, Possible Unfiled Agreement between Hyundai Merchant Marine Co., Ltd. and Mediterranean Shipping Co., S.A., 28 S.R.R. 1428 (2000) and Docket No. 97-08, Possible Unfiled Agreement Among A.P. Moller-Maersk Line, P&O Nedlloyd Limited and Sea-Land Service, Inc., 28 S.R.R. 1431 (2000) (“Docket No. 97-08”), deviate from that position. OCWGA at 12-13. OCWGA asserts that allowing permissive authority benefits both the Commission and the carriers because it allows the Commission to consider both the immediate and potential future effects of the agreement, while providing carriers essential operational and commercial flexibility. Id. at 13. OCWGA suggests that not allowing such permissive authority would be impossibly burdensome for both carriers and the Commission. Id. 3 That provision states: Except as provided in paragraph (c) of this section, agreement clauses which contemplate a further agreement or give the parties authority to discuss and/or negotiate a further agreement, the terms of which are not fully set forth in the enabling agreement, will be permitted only if the enabling agreement indicates that any such further agreement cannot go into effect unless filed and effective under the Shipping Act and that interstitial implementation of routine operational or administrative matters is permitted without requiring further filings. OCWGA gives four instances in which permissive authority could promote flexibility. Id. at 14-17. First, with regard to the requirement that an agreement provide information as to the number of vessels and vessel capacity/slots it intends to utilize, OCWGA asserts it would be useful for the Commission to formalize the current policy that an agreement may set forth a maximum number (or range) of vessels and capacity, or maximum number of slots, that may be used without amendment to the agreement. Id. at 14. Second, OCWGA states that the Commission's practice allowing agreements to describe their geographic scope in terms of port ranges rather than the specific ports served is beneficial because operational and commercial considerations may require diversions on short notice. Id. at 15. OCWGA further asserts that there is no regulatory purpose in requiring that an agreement name the specific ports it intends to serve rather than port ranges, because such information is provided to the Commission in the information forms and monitoring reports, and typically is also provided to the public through published sailing schedules. Id. Third, OCWGA recommends that agreements continue to have the ability to contain permissive authority for their members to discuss and agree on joining other agreements, as the Commission would have notice of any action taken under such authority through a subsequent filing. Id. at 15-16. OCWGA objects to any requirement that an amendment to the original agreement also be filed when the parties exercise permissive authority. It asserts that such a requirement would serve no legitimate regulatory purpose and would be duplicative. It notes that there are 25 effective agreements currently on file with the Commission which contain this authority. Id. at 16. Finally, OCWGA recommends that the Commission allow permissive authority to include operational agreements, such as slot or space charters. 4 4 OCWGA's position on operational agreements generally is discussed below. PONL and CENSA contend that the term, “routine operational or administrative matters” used in section 535.407(c), lacks clarity. PONL at 6; CENSA at 1. CENSA suggests that the Commission identify and define those aspects of agreements which are relevant to its initial review and subsequent monitoring responsibilities, and establish specific rules with respect to them. CENSA at 2. OCWGA, however, recommends that the existing exemption for “routine operational or administrative matters” be retained in its current form. OCWGA at 10. PONL contends that the Commission's interpretations of the term “interstitial implementation” 5 in Docket No. 97-08 and Docket No. 96-14, Compania Sud Americana de Vapores, S.A. v. Inter-American Freight Conference, 28 S.R.R. 137 (1998) (“CSAV”), have made that term very unclear. PONL asserts that its attempts to use the term “interstitial” in agreements have met with objection from the Commission's Bureau of Trade Analysis Office of Agreements. PONL at 5. 5 The terms “interstitial implementation” and “routine operational or administrative matters” are found in 46 CFR 535.407(c), which provides that: [f]urther specific agreements or understandings which are established pursuant to express enabling authority in an agreement are considered interstitial implementation and are permitted without further filing under section 5 of the Act only if the further agreement concerns routine operational or administrative matters, including the establishment of tariff rates, rules and regulations. PONL asserts that if the Commission considers a conference's implementation of its tariff rate agreement authority an “interstitial implementation,” as indicated in the example in 535.407(c), then it should similarly consider implementation of authority to agree on a joint approach to joining a conference to be a routine administrative matter and an interstitial implementation of such authority. Id. PONL further asserts that the implementation of rates, terms, and conditions by an agreement with space charter authority should also be considered interstitial. Id. PONL suggests that an agreement that, for example, includes the authority for its members to enter into space charters, as well as other authorities, can enter into a space charter without any additional filings, as contemplated by 46 CFR 535.407(b). PONL asserts that little purpose would be served by requiring the public filing of agreements that involve interstitial implementation of express enabling authority contained in a filed and effective agreement. Id. at 8. (b) The Commission posed the question, “if parties were required to file every arrangement or understanding that came within the scope of section 4, would they be subject to commercial harm or burden?” (NOI Question 2). Section 5(a) of the Shipping Act requires the filing of a “true copy of every agreement.” 46 U.S.C. app. § 1704(a). The Commission's regulations currently require that the filed agreement be true, complete, detailed and specific. 46 CFR 535.103(g), 535.401(a)(1), 535.407(a). PONL, CENSA and OCWGA all assert that the Commission's requirement that the “complete” agreement be filed cannot be interpreted literally. PONL asserts that a literal reading would create an internal conflict between the Shipping Act's 45-day waiting period imposed on agreements before they become effective, and the fact that tariff rate reductions may become effective immediately. PONL at 7. Similarly, OCWGA believes that the 45-day waiting provision indicates that Congress did not intend to require every detail of coordinated carrier activity to be filed. OCWGA maintains that the Shipping Act's use of the phrase “every agreement” should not be construed literally or else it would be impossible to file every detail of joint or group arrangements. OCWGA at 8, 19. OCWGA asserts that imposing such a requirement on service contracting agreements would subject them to an enormous and repetitive filing burden (because the service contracts themselves are filed) and, in the case of contracts with confidentiality clauses, might violate the terms of the service contract itself and the Shipping Act. Id. at 21. OCWGA believes that at some level of specificity, “agreements” cease to have any relevance to the Commission's statutory duties. Id. CENSA contends that the term “complete” is of little guidance to the industry. CENSA at 1. PONL objects to the current regulation's requirement that a “true and complete” agreement be filed, stating that the statutory requirement is only that a “true copy” of the agreement be filed. PONL at 2 (comparing section 5(a) of the Shipping Act with 46 CFR 535.407(a)). It notes that the Commission's jurisdiction may not cover the “complete” agreement if, for example, it involves trade between foreign ports; and states that based on the Commission's regulations, “complete” does not include “routine operational or administrative matters.” Id. at 2-3 (citing 46 CFR 535.407(c)). PONL asserts that certain agreements, for example, cross space charters, vessel sharing, and alliance agreements, that are on their face subject to additional understandings have been accepted for filing and allowed to go into effect by the Commission. Id. at 3. It further asserts that, therefore, the Commission's jurisdictional limitations, its current regulations, and its past practice of not objecting to the filing of agreements using permissive authority phrases indicate that the term “complete” does not literally mean complete. Id. at 4. NITL urges that only those carrier agreements which are likely to have a significant impact on competition in a given market continue to require “complete” filing with the Commission. NITL at 4. NITL asserts that the Commission and the public need to have the ability to read and understand the scope and terms of agreements that are likely to result in a reduction in competition or otherwise artificially influence the supply of and demand for ocean transportation service. Id. at 3-4. NITL opines that detailed and complete information filed by the carrier parties to such agreements is required. However, NITL cautions that the requirement for the filing of a complete agreement should not be interpreted so as to restrict useful operational flexibility, particularly in non-conference type settings such as space/slot charter and sailing agreements. Id. (c) The Commission asked whether it should adopt different standards for agreement content for different types of agreements. (NOI Question 3). OCWGA points out that the Commission already distinguishes between conference and other types of agreements in 46 CFR 535.404, but warns that developing further general standards for different types of agreements may create more confusion. OCWGA at 22. With respect to alliances and space/vessel sharing agreements, which do not easily fit into fixed categories however, OCWGA suggests that the Commission clarify the filing requirements through guidance stated in functional terms, as opposed to the rules' current use of classification terms. Id. at 22. OCWGA suggests as an example, that the Commission's rules direct that each “agreement that provides for the sharing of vessels or space on vessels shall state the maximum number and capacity of vessels that may be so employed.” Id. NITL believes that the level of detail for filings related to agreements that would not significantly alter competitive conditions in a given market should be relaxed. NITL at 5. CENSA simply urges that the Commission avoid unnecessary and burdensome requirements and provide carriers with a reasonable amount of operational flexibility. CENSA at 2. (d) The Commission asked whether commenters could identify types of agreements currently filed which would be appropriate for exemption from filing under section 16 of the Shipping Act. 6 (NOI Question 4). OCWGA, PONL and CENSA maintain that agreements with little or no competitive effect, agreements concerning operations, and slot charter agreements should all be exempt from the filing requirements of the Shipping Act. OCWGA asserts that agreements which typically have little or no competitive effect (such as those that do not authorize discussion or agreement on rates, vessel operating costs, shared vessel usage, service contracts, or capacity) should be completely exempt from the filing requirements of the Shipping Act. OCWGA at 23. OCWGA contends that this exemption would serve the dual purposes of defining the applicability of the term “cooperative working arrangement” found in section 4(a)(5) of the Shipping Act 7 and providing certainty regarding the filing requirements. Id. It urges the Commission to retain the other existing exemptions. Id. 6 Section 16 provides, inter alia, that the Commission “may exempt for the future any class of agreements * * * if it finds that the exemption will not result in substantial reduction in competition or be detrimental to commerce.” 46 U.S.C. app. § 1715. 7 Section 4(a)(5) of the Shipping Act reads, “This Act applies to agreements by or among ocean common carriers to—(5) engage in exclusive, preferential, or cooperative working arrangements among themselves or with one or more marine terminal operators * * * .” 46 U.S.C. app. § 1703(a)(5). The Commission's regulations define a “cooperative working arrangement” as an agreement which establishes exclusive, preferential, or cooperative working relationships which are subject to the Shipping Act of 1984, but which do not fall precisely within the arrangements of any specifically defined agreement. 46 CFR 535.104(i). NITL suggests that the Commission consider further exemptions for other types of agreements that do not significantly affect competition. NITL at 6. NITL approves of the existing exemption from filing for interstitial implementation of routine operational or administrative matters found in section 535.407(c). Where full exemption for a certain type of agreement is not warranted, NITL believes that the Commission should consider a relaxation of other procedural requirements, such as the waiting period requirement. Id. OCWGA observes that in late 1996 and early 1997, Commission staff began informally requiring space charter, slot charter, sailing and other forms of cooperative agreements among carriers (collectively referred to as “slot charter agreements”) to contain a greater degree of detail than had been required at any time since 1984. OCWGA at 4-5. OCWGA contends that there is now considerable uncertainty stemming from recent Commission proceedings as to what must be set forth in such agreements. Id. PONL suggests that the Commission adopt an exemption for simple space charter agreements where one carrier charters space to another, stating that this enhances, not reduces competition. PONL at 9. OCWGA opines that most slot charter agreements “resemble a joint venture or partnership in which on-going and extensive operational coordination is necessary to provide an efficient, competitive, and coordinated service.” OCWGA at 5-6. OCWGA urges that the Commission resolve this uncertainty in the proposed rules bearing in mind such things as the purpose of agreement filing, what information is practical to include, the procedural requirements of the Shipping Act, and flexibility for the Commission and carriers to process amendments to agreements. Id. at 6. OCWGA contends that the Shipping Act's replacement of the “public interest” standard (which required an affirmative showing of public benefit before an agreement could be approved) with the presumption that agreements are permissible, changed the Commission's need for certain information. Id. at 7. OCWGA states that, therefore, the information necessary to analyze whether an agreement is likely to result in an unreasonable increase in rates or unreasonable reduction in services is identifiable and limited to the nature of the coordinated activities, the identity and number of parties involved, and the trades in which the agreement will operate. Id. Beyond these basic points of information, OCWGA contends, there is a dispute over what should be filed. Id. at 7-8. OCWGA further contends that operational arrangements arising from slot charter agreements that detail how the parties put into effect the authority set forth in the filed agreement should be exempted from filing, arguing the documents are “non-standard” and not “created to fulfill a regulatory purpose.” Id. at 17. OCWGA also opines that filing operational arrangements arising from slot charter agreements would be unworkable, because of their excessive specificity, and impractical, because including such details would require the frequent filing of amendments. Id. (e) The Commission asked whether the rates charged by one carrier to another for use of space and/or vessels should be exempt from filing or withheld from public disclosure. (NOI Question 5). PONL and OCWGA contend that for the last 15 years there has been a de facto exemption to the Shipping Act's filing requirements for slot charter costs. PONL at 9; OCWGA at 24. PONL states that requiring the filing and subsequent public disclosure of that information would harm carriers because other carriers would insist on getting the same rates, and competing carriers and shippers could use the price information in any further pricing and rate negotiation. PONL at 9. PONL believes that there would be no regulatory benefit to requiring that such rates be made public. Id. Similarly, OCWGA believes that these rates should be confidential and that the public has no legitimate interest in them. OCWGA at 24. OCWGA also maintains that such disclosure would be anticompetitive because it would “circumscribe the ability of carriers to negotiate different rates with different carriers.” Id. CENSA also asserts that the “industry needs some degree of confidentiality with respect to the commercial terms of their operational agreements.” CENSA at 2. It claims that requiring carriers to disclose the amounts they pay for vessel space “could prove to be anticompetitive and contrary to the objectives of OSRA.” Id. (f) The Commission requested comments on whether public disclosure of filed agreements is useful to shippers, intermediaries, labor, non-party carriers, marine terminal operators or other interested persons. (NOI Question 6). PONL and OCWGA state that beneficial shippers and ocean transportation intermediaries (“OTIs”) have shown little interest in filed agreements. PONL at 10; OCWGA at 24. OCWGA opines that on the rare occasions that shippers or OTIs do express such interest they usually request the information directly from the carrier or from the agreement rather than from the Commission. OCWGA at 24. PONL suggests that the Commission answer this question by reviewing its records pertaining to requests for copies of agreements and comments on filed agreements. PONL at 10. ILA would like certain matters in agreement filings to be made public and for agreements filed with the Commission (and noticed in the Federal Register ) to document the origins, destinations, and points of entry and departure of cargo accurately and in an easily understandable manner that will not handicap it in administering and enforcing the provisions of its own collective bargaining agreements. ILA at 1. ILA argues that not making such information publicly available would hamper its ability to detect the movements of containers destined for a designated port area but off-loaded at different port. Id. at 1-2. ILA states that it requires access to the carriers' electronic systems, and that it is concerned by some carriers' practice of making certain information public but masking it in digitized codes. Id. at 2. ILA maintains that it is not seeking to have the Commission require disclosure of competitive rates of carriers, their surrogates or allies. Id. Although ILA asserts that its labor contracts apply regardless of whether the filed agreement is classified as a “rate agreement” or an “operational agreement,” ILA wants the “ability to anticipate and locate the shipments which its contracts entitle its [l]ongshorepersons to handle and which are subject to charges as defined under those agreements.” Id. (g) The Commission asked whether it can implement measures to protect commercially sensitive information contained in filed agreements. (NOI Question 7). Some commenters assert that there may be sensitive commercial information in filed agreements that the parties may legitimately need to protect. OCWGA notes that while section 6(a) requires publication in the Federal Register , section 6(j) appears to specify a different treatment for section 5 agreements than for “documentary material” submitted under sections 5 and 6. OCWGA at 24-25. It maintains that this may place some procedural restrictions on how the Commission implements its authority to protect such information from disclosure and urges that, “[s]pecifically, in order for information to be unambiguously protected from disclosure, such information must not be required to be included in the agreement required to be filed under section 5.” Id. PONL opines that the Commission has already implemented measures to protect commercially sensitive information because it does not require conferences to publicly file minutes and notes that the Commission's exemption authority can shield such information. PONL at 10. NITL believes that the Commission should not shield from disclosure information that would enable shippers to gain a thorough and complete understanding of the scope of a filed agreement likely to have a substantial impact on competition, such as conference or discussion agreements. NITL at 7. However, NITL asserts that information of a purely operational nature, and not relating to competition may be appropriately protected from public disclosure and should be determined on a case-by-case basis. Id. ILA believes that the Commission should require that agreements filed with it contain provisions which, while neither exposing rates nor other truly confidential data, would allow labor interests to track the movements of containerized cargoes subject to collective bargaining agreements. ILA at 2. (h) The Commission requested commenters to provide information on how competing concerns of completeness, burden and confidentiality are resolved in the filing requirements of other regulatory agencies. (NOI Question 8). OCWGA notes that no other agency operates under a statutory provision identical to section 6(j) of the Shipping Act but cites some comparable provisions used by other agencies. OCWGA at 26. These include provisions by the Department of Transportation (“DOT”) for air carrier agreements, the Surface Transportation Board (“STB”) for agreements among railroads, the Federal Trade Commission (“FTC”) for general pre-merger notifications and the Securities and Exchange Commission (“SEC”) for registration statements for securities. OCWGA notes that under 49 U.S.C. 41308 and 49 U.S.C. 41309(a) the Secretary of Transportation has the authority to exempt from antitrust laws cooperative air carrier agreements filed with it and that to obtain this exemption, an air carrier must file “a true copy * * * and complete memorandum of an agreement.” Id. OCWGA further notes that DOT has implemented regulations to protect the confidentiality of this information (14 CFR 302.39(b)) which provide a procedure by which a carrier may mark as confidential portions of an agreement and may move to withhold such portion from public disclosure. 8 Id. 8 The rule reads, in pertinent part: Any person who objects to the public disclosure of any information in any paper filed in any proceeding * * * shall segregate, or request the segregation of, such information into a separate paper and shall file it * * * separately in a sealed envelope, bearing the caption of the enclosed paper, and the notation “Classified or Confidential Treatment Requested Under Sec. 302.39.” 14 CFR 302.39(b). OCWGA also cites to 49 U.S.C. 10502 which grants the STB authority to exempt rail carriers from the antitrust laws and directs it to approve and monitor those agreements pursuant to 49 U.S.C. 10704 and 10705. OCWGA urges that 49 CFR 1313.7 and 1313.16 be used as examples for the confidential treatment of agreement information. Id. Finally, OCWGA notes that the FTC receives pre-merger notification filings for companies under its jurisdiction and that 15 U.S.C. 18a(h) exempts from disclosure any information filed pursuant to the pre-merger notification requirement, unless relevant to any administrative or judicial action or proceeding. Id. Similarly, PONL notes that the Antitrust Division of the Department of Justice (“DOJ”) receives pre-merger filings as well as requests for Business Review Letters and that DOJ may ask filers for more information and prevent disclosure of confidential information. PONL at 10. PONL and OCWGA observe that the SEC receives securities registrations as authorized by its controlling statute which enumerates all information required to be submitted in the registration, but that SEC regulations allow filers to request confidential treatment by separating the confidential portion from the regulation statement and filing it separately. 17 CFR 230.406(2). PONL at 10; OCGWA at 26. B. The Proposed Rule In accommodating the concerns expressed in the comments, the Commission must reconcile what may appear to be conflicting missions of the agency—on the one hand, to exercise the meaningful oversight of agreements to check any abuses arising from antitrust immunity required by section 6 of the Shipping Act, and on the other, to minimize regulatory intrusions and burdens, as required by section 1. Therefore, the Commission proposes the following regulations, which are intended to permit it to exercise effective oversight consistent with the Commission's statutory responsibilities without imposing undue regulatory burdens. 1. Proposed Changes To Address Concerns for Certainty Section 5(a) of the Shipping Act requires that a true copy of every agreement entered into with respect to an activity described in section 4(a) or (b) of this Act shall be filed with the Commission, except agreements related to transportation to be performed within or between foreign countries and agreements among common carriers to establish, operate, or maintain a marine terminal in the United States. 46 U.S.C. app. § 1704. Many commenters assert that it is simply not reasonable to require the filing of a true copy of every agreement because there are some details which cannot reasonably be expected to be specifically reflected, and also for the following reasons: • Doing so would subject sensitive commercial information to disclosure, due to the notice requirement of section 6(a) of the Shipping Act; • The parties need more flexibility than the 45-day waiting period would provide; • There are details which have not yet been agreed upon when the agreement is filed; • Some details have no anticompetitive potential; and/or • The details are not reflected in standardized documents, so drafting them would be burdensome for the filer and reviewing them would be burdensome for the Commission. Therefore, they argue that the text of the Shipping Act cannot be interpreted to literally mean a copy of the commercial agreement. The present text of the Commission's policy, stated at section 535.103(g), was originally added in rulemakings in 1984. 9 It represented a codification of the Commission's then-existing policy. Early on in its administration of the Shipping Act, the Commission had received agreements with unacceptably vague, incomplete or indefinite statements of authority. See , Docket Nos. 84-26 and 84-32 (final rule). Therefore, the Commission created this rule to ensure that “a complete agreement is filed in sufficient detail to conduct a meaningful review.” Id. 9 46 CFR 535.103(g) states: An agreement filed under the Act must be clear and definite in its terms, must embody the complete understanding of the parties, and must set forth the specific authorities and conditions under which the parties to the agreement will conduct their present operations and regulate the relationships among the agreement members. Such review, based on the requirements of section 6 of the Shipping Act, includes: (1) A preliminary review of the section 5 requirements; (2) a review for section 6(g) compliance; and (3) a general review of the agreement to ensure that it does not facially contravene other sections of the Shipping Act ( e.g. , acts prohibited by section 10). Section 535.103(g) reflects the Commission's need for specificity in order that it may: (1) Evaluate the probable impact of an agreement; (2) conduct ongoing monitoring of agreement operations (especially for section 10(a)(2) and (3) prohibitions); and (3) avoid ambiguities concerning antitrust immunity granted to agreements. 10 10 In Docket Nos. 84-26 and 84-32 (final rule), the Commission stated, “agreements should be sufficiently precise and definite to determine whether a particular activity is within the scope of the antitrust immunity conferred upon them by section 7 of the [Shipping] Act.” 49 FR at 45332. The policy presently stated at section 535.103(g) is carried out through section 535.407(a) 11 which requires an agreement to “reflect the full and complete present understanding of the parties as to its essential terms.” Docket No. 84-32, Rules Governing Agreements by Ocean Common Carriers and Other Persons , 49 FR 36371 (Interim Rule and Request for Comments) (“1984 Interim Agreement Rule”). The 1984 Interim Agreement Rule also described the reach of section 535.407(a) as follows: 11 Section 535.407(a) provides: (a) Any agreement required to be filed by the Act and this part shall be the complete agreement among the parties and shall specify in detail the substance of the understanding of the parties. The rule does not contemplate that every activity be enumerated in detail. However, general grants of authority which do not specify the activities under the agreement are not favored. For example, an agreement which, as its authority, merely recited the language of section 4(a)(1)-(7) of the Act would require some further clarification. Otherwise, review of such an agreement would be virtually meaningless. Such general statements of authority, even where clarified by subsequent refinement, should be avoided. Id. at 36372. Some commenters claim that the industry does not have a clear understanding of the significance of the term “true and complete,” and argue that the phrase cannot be interpreted literally if it is read concurrently with the exemption allowing routine operational or administrative matters interstitial to a filed agreement without further filing. Some commenters also point out that matters which may be part of the commercial arrangement but which are outside the scope of the Commission's jurisdiction necessarily must not be included in the filed agreement. The Commission's rules (as well as past Commission case law) are not more extensive than its jurisdiction: section 535.103(g) refers to an “agreement filed under the Act” and section 535.407(a) refers to “any agreement required to be filed by the Act.” These jurisdictional limitations, also discussed in Transpacific Westbound Rate Agreement , 951 F.2d 950 (9th Cir. 1991) (“TWRA”), provide boundaries to the information required in a filed agreement. Nevertheless, these concerns appear to be addressed to the limits of the Commission's subject matter jurisdiction over agreements, as opposed to the completeness with which matters within that jurisdiction must be reflected. The Commission has consistently interpreted 46 U.S.C. app. § 1704(a) to require filed agreements to be complete, specific, detailed reflections of the present understanding of the parties. 46 CFR 535.103(g) and 535.407(a). The commenters point to no legislative history to demonstrate that the subject matter jurisdictional limitations of the Shipping Act indicate that its drafters did not intend the phrase “true copy” to be interpreted literally. A general definition of the term indicates “[a] true copy does not mean an absolute exact copy but means that the copy shall be so true that anybody can understand it.” Black's Law Dictionary (1995 ed.). 12 For oral agreements, the Shipping Act requires that “a complete memorandum specifying in detail the substance of the agreement” be filed. 46 U.S.C. app. § 1704(a). The Commission finds no indication that Congress intended the Commission to subject oral agreements to greater requirements than those which are written. Therefore, we disagree with the commenters' assertion that the text of the Shipping Act cannot be interpreted literally. 12 See also , Associated-Banning Co. v. Matson Nav. Co. , 5 F.M.B. 336, 342 (1957), interpreting the “true and complete” standard under the 1916 Act(“when parties file an agreement for approval they must include all understandings and arrangements of the character covered by section 15 which exist between them at the time.”) Nevertheless, we recognize that there may be some legitimate confusion as to what the Commission expects a filed agreement to contain. This confusion may have arisen from the Commission's historical usage of suggested language for form and manner, especially for filed agreements' “authority” clauses. We believe confusion may also arise when the policy reflected in sections 535.103(g) and 535.407(a) is read in tandem with the allowances of sections 535.407(b) and (c) for further agreements on certain routine matters. However, we find no precedent to support the proposition that the term “true and complete” means only those details which the Commission had positively required to be filed in its prior form and manner regulations. For the sake of clarity, the Commission now proposes to remove current sections 535.103(g) and 535.407(a) and replace them with a newly created section 535.402 to serve as one concise and clearly controlling rule. The new section is intended to reassert the Commission's original interpretation requiring the filing of the commercial document as agreed to by the parties, in contrast to the filing of a document drafted solely to meet U.S. regulatory requirements. 2. Proposed Changes to Address Concerns for Future Commercial Flexibility a. Requirement to File Every Agreement (46 CFR 535.402) In promulgating what is now section 535.407(a), the Commission asserted that the statute and the new rule required that an agreement “reflect the * * * present understanding of the parties as to its essential terms.” 13 1984 Interim Agreements Rule at 36372. Thus, the Shipping Act does not require or allow for the filing of proposed, draft or preliminary agreements. In addition, the Commission's rules positively prohibit clauses in agreements which contemplate a further agreement, sometimes called “agreements to agree.” 46 CFR 535.407(b). 14 Allowing vague authority clauses to be filed in agreements appears to conflict somewhat with the Commission's policy requiring that the agreement “set forth the specific authorities and conditions under which the parties to the agreement will conduct their present operations' (46 CFR 535.103(g)). However, forward-looking clauses have been permitted when there is an indication that any further contemplated agreements will not be carried out unless and until filed and effective under the Shipping Act. 46 CFR 407(b). 13 See also , Isbrandtsen Co. v. States Marine , 6 F.M.B. 422, 434 (1961)(“There is no filing requirement until there is an agreement or a meeting of minds * * * regarding activities described in Sec. 15.”). The issue in this case concerned unacceptably vague authority statements in agreements that were being filed at the time. 14 This prohibition might appear to be inconsistent with the Shipping Act's specific provision for agreements “to discuss and agree on any matter related to service contracts.” 46 U.S.C. app. § 1703(a)(7). However, we believe the statute provides consistent treatment by providing that any resulting agreement with respect to service contracts be reflected in confidentially filed “voluntary guidelines.” 46 U.S.C. app. § 1704(c)(3). In order to address parties' needs to maintain future flexibility in agreements describing their collaborative arrangements, the Commission generally has permitted the filing of agreements containing statements of authority which must be amended when the parties have reached the details of their agreement. The Commission has also crafted an exemption for certain day-to-day details, thereby removing the filing requirement for “interstitial implementation of routine operational and administrative matters.” 46 CFR 535.407(c). However, the comments appear to suggest that this approach has proved unsatisfactory. In suggesting that the statute be read broadly enough to accommodate the future needs of parties, the commenters use a term that appears neither in the Shipping Act nor in the Commission's regulations: “permissive authority.” This term apparently refers to: (1) Authority that may never actually be exercised ( e.g. , “the parties may discuss rates” or “the parties are authorized to discuss rates”); (2) broad statements of authority ( e.g. , “the parties are authorized to exchange slots on such terms as they may from time to time agree”); or (3) an agreement to act “within a range,” for example, of capacity or ports served. Such forward-looking statements frequently appear in filed agreements. Indeed, the Commission itself may have encouraged their use by referring in its rules to agreement “authority,” a term that itself implies future implementing agreements. Moreover, we recognize that parties may not wish to file details of their collaboration for at least two reasons. For example, this may be because: (1) agreement on the details has not yet been reached and the parties are still in negotiation, but wish to file and thereby commence the 45-day waiting period; or (2) the parties have reached a final and specific agreement, but anticipate changes to those understandings and wish to build flexibility into the document they file. No commenter has cited nor has the Commission found any legislative history of the Shipping Act which would support the suggestion that Congress intended that parties may file a “preliminary draft” of an agreement, which would commence the running of the 45-day review period. Therefore, the proposed regulations clarify that the Commission will not accept any such “preliminary draft” agreements. This determination is reflected in the revised section 535.402, which retains the Commission's core interpretation of the Shipping Act's requirement that a “true copy of every agreement” be filed. The proposed rule also clarifies this by rephrasing it as a positive requirement in section 535.402 rather than as a policy statement. b. Modifications to Effective Agreements (46 CFR 535.407) While the Commission interprets the Shipping Act to generally require that parties file their final, detailed agreement, rather than a general agreement to collaborate, the Commission has also historically recognized certain exceptions to that general standard. The first of these exceptions is explicit in the Shipping Act: section 4 necessarily contemplates certain agreements which cannot contain implementing details because they are by their very nature agreements to discuss future collaboration. These are the rate agreements authorized by section 4(a)(1), 4(a)(7) and 4(b)(1). 46 U.S.C. app. §§ 1703(a)(1), (a)(7), (b)(1). We believe that the most logical interpretation of section 4 is that certain matters may not be discussed in detail unless and until the parties have a filed and effective agreement. Therefore, the parties cannot be required to file a detailed, complete or specific agreement for those types of agreements. We believe this view is supported by the Commission's historical treatment of conference and other rate-setting agreements in its rulemakings. The use of authority that might (or might not) be exercised pursuant to a filed agreement but would not require further filings, was first recognized by the Commission in “suggested agreement language” published in Docket No. 67-55 (General Order 24), Filing of Agreements Between Common Carriers of Freight by Water in the Foreign Commerce of the United States, 33 FR 11655 (1968). Those rules were intended to “establish guidelines for the filing, format and content of agreements” to “encourage uniformity of agreements” and expedite their review by the Commission. 46 CFR 522.1 (1968). To that end, the regulations suggested language to be used by conference and rate agreements. 15 Although the 1968 “guidelines” for agreements included some suggested language for agreements other than conference and rate agreements, the suggested terms did not include “authority” clauses. 16 15 For conference agreements, the Commission's rules included the following suggested language: 16 Pooling, joint service, sailing, transshipment and cooperative working agreements did not include the “authority” provisions which were suggested for conference and rate agreements. 46 CFR 521.6(c)-(g)(1970). Authority Under This Agreement Subject to applicable provisions of law, the Conference is authorized to: 1. Agree upon and establish rates and charges for the carriage of cargo and rules and regulations governing the application thereof and defining the service to be rendered therefor; 2. Declare rates for specified commodities to be “open” with or without agreed minimum, and thereafter declare the rates for such commodities to be “closed”; 3. Agree upon and establish tariffs, tariff amendments, and supplements; 4. Make rules and regulations for the handling and carriage of cargo; 5. Provide for use of a contract/noncontract rate system for filing with the Commission for approval pursuant to section 14b of the Shipping Act, 1916; 6. Agree on amounts of brokerage and/or compensation to forwarders and the conditions for the payment thereof as permitted by applicable law; 7. Keep such records and statistics as may be required by the parties or deemed helpful to their interests. 46 CFR 522.6(a)(1968)(emphasis added). Similar “authority” provisions were also suggested for non-conference rate agreements. 46 CFR 522.6(b)(196 On their face, therefore, such agreements were, in fact, “agreements to agree.” The two sets of guidelines for agreement language (both intended for agreements with rate-making activity) were the only such Commission-provided examples for agreements containing such open-ended authority. It appears that over the years, the “suggested authority” language has been adopted for use in non-rate-making agreements (also called “operational agreements”) as well. The Commission subsequently recognized and addressed the need for some open-ended authority in agreements through current section 535.407(b). This provision permits “agreement clauses which contemplate a further agreement or give the parties authority to discuss and/or negotiate a further agreement, the terms of which are not fully set forth in the enabling agreement” to be included in filed agreements only if “the enabling agreement indicates that any such further agreement cannot go into effect unless filed and effective under the Act.” The 1984 Interim Agreements Rule's supplementary information described the Commission's reasons for requiring that provisions in agreements that contemplate further agreements not become operative until filed and effective under the Shipping Act: [a] problem of open-ended authority arises where an agreement allows for future substantive modification of an agreement without specifically requiring filing under section 5. Such general authority to make future modifications without filing with the Commission would subvert the Commission's ability to review and monitor an agreement. 49 FR 36372. The Commission's 1984 Agreements Rules offered a further degree of commercial flexibility to agreement parties through another provision: the exception from filing for the “interstitial implementation of routine operational and administrative matters” under section 535.407(c). 17 The Commission explained in the 1984 Interim Agreements Rule that the provision was originally intended to “allow[] flexibility to make changes for tariff matters or routine operational and administrative matters having no anticompetitive effect.” 49 FR 36372. The Commission asserted that this section “provide[s] that activities which may reasonably be viewed as interstitial to a stated agreement authority need not be expressly stated.” Id. The Interim Rule gave only the following two examples: (1) authority to establish “overland common point” rates would be interstitial to general ratemaking authority, but establishing a tariffed contract rate system would not; and (2) changes in the terms and conditions of a charter party (contract) underlying a space charter agreement would generally be interstitial, but changes in the number of vessels (or range of number of vessels) and definition of vessel capacity (or range of capacities) dedicated in a joint service or space charter agreement would not. Id . 18 17 Section 535.407(c) reads: “Further specific agreements or understandings which are established pursuant to express enabling authority in an agreement are considered interstitial implementation and are permitted without further filing under section 5 of the Act only if the further agreement concerns routine operational or administrative matters, including the establishment of tariff rates, rules, and regulations.” 18 The Commission also gave the following guidance: “[A]n agreement which merely stated that the parties are authorized “to operate a joint service,” without indicating the number, or range of vessels, committed to the service would not be deemed to reflect the full understanding of the parties. Such a deficiency would defeat any meaningful Commission review. Similarly, a statement in a joint service agreement which authorized the parties to “acquire substitute or additional tonnage” would result in a situation where the Commission would be unable to evaluate the economic impact of the agreement on the trade under section 6(g). Finally, a filed agreement which referred to or was governed by another agreement not filed with the Commission would be incomplete.” Id. Until recently, conferences (and other rate) agreements were those with which the Commission had the most concern. The Commission's current rules on agreements were adopted at a time when conferences were the principal method by which ocean common carriers exercised their antitrust immunity to achieve price discipline and rate stabilization. Now, however, there has been a precipitous decline in the number and role of traditional conferences, and their influence has been supplanted by discussion agreements on pricing. This development, concurrent with the appearance of global strategic alliances, has resulted in agreements which may be more effective than conferences ever were at stabilizing rates by controlling capacity. As a result of the above-discussed history, the commenters assert that “permissive authority” has come to be invoked for matters much broader than simply the implementation of rate-related authority, i.e. tariffs and service contracts. In addition, the exemption from filing for “interstitial implementation of routine operational and administrative matters” under section 535.407(c) has been a prime source of confusion. Some commenters assert that “interstitial implementation of routine operational or administrative matters” could be indicated by the use of phrases such as, “the parties agree to ___ according to terms, rates and conditions as the parties may from time to time agree.” Thus, with respect to “permissive authority,” responses to the NOI generally proffer two types of future actions taken pursuant to an agreement: (1) those allowed by grants of authority which might (or might not) be exercised, but which do not anticipate subsequent filing if exercised; and (2) those allowed without further filing due to their categorization as “interstitial implementation of routine operational or administrative matters.” There also appears to be another type of “permissive authority'': that which outlines a range (for example of capacity, ports, etc. ) in which the agreement may operate. The following discussion addresses each of these interpretations. In promulgating the exception for “interstitial implementation of routine operational and administrative matters,” the Commission explained that section 535.407(c) would be interpreted on an ad hoc basis. Id . The comments received in the NOI demonstrate that this ad hoc approach may have created some confusion. Recently, the Commission found a violation of section 10(a)(2) of the Shipping Act 19 where a conference failed to file its understanding as to the winding up of its affairs. The respondent conference argued that such a matter was “routine operational or administrative” and therefore exempt from the filing requirements. Compania Sud Americana De Vapores S.A. v. Inter-American Freight Conference (“CSAV”), 28 S.R.R. 141, 141-142 (1998). The Commission found that the winding up was not “routine operational,” but extraordinary and, therefore, not falling within the exemption of section 535.407(c). 19 Section 10(a)(2) reads, “No person may . . . operate under an agreement required to be filed under section 5 of this Act that has not become effective under section 6, or that has been rejected, disapproved or canceled.” In CSAV, the Commission provided further guidance as to matters it would consider “routine operational or administrative,” namely, the establishment of individual tariff rates; 20 the scheduling of individual meetings; the securing of office space or supplies; and the circulation of particular reports or memoranda to members. These are matters which require day-to-day operational flexibility. CSAV, 28 S.R.R. at 142. 20 The establishment of individual tariff rates are specifically enumerated as exempt in the text of the rule. 46 CFR 535.407(c). As discussed above, the Commission's general rule has been that all agreements must be true, complete, detailed and specific and represent the present understanding of the parties. With the exception of agreement clauses which anticipate a further agreement to be filed that are permitted under section 535.407(b), only two types of “further agreements” may be acted upon without further filing: agreements which fall under section 535.407(c), or which are otherwise exempt from filing under an explicit exemption found in subpart C of this part. OCWGA suggests that the Commission recognize four additional types of “further agreements” as “interstitial implementation of routine operational or administrative matters'': (1) Changes to the number of vessels/slots (or changes within a quantified range); (2) changes in port calls; (3) decisions on operation within another filed agreement; and (4) “operational” agreements generally. OCWGA at 14-17. While we rejected the first three suggestions in our previous rulemaking on “routine operational or administrative matters,” we now reconsider these suggestions in light of the comments and recent changes in the industry. It has been the Commission's approach since the passage of the Shipping Act to determine on an ad hoc basis what it considers “routine operational and administrative matters” to be implemented without further filing. However, we believe the comments indicate the public's desire that the better approach is to list specifically operational matters that are exempted and revise the current regulations accordingly. OCWGA's suggestion that the Commission enumerate what must be contained (a positive list), rather than what need not be contained (a negative list or exemptions) appears impractical. The Commission chooses to follow the latter approach. While it is true that the Commission may anticipate some developments in the industry, we do not have the ability to predict them all, nor should we seek to stifle innovation or dictate what must be contemplated in an agreement. We can, however, determine what activities, as they are presently employed by agreements, are most likely not to raise concerns about competition. The Commission, therefore, proposes to remove the current terms “interstitial implementation” and “routine operational and administrative” altogether from its rules, and add a list of specific exemptions for certain types of operations. Under section 16 of the Shipping Act, the Commission has the discretion to grant exemptions it finds will neither cause substantial reduction in competition nor be detrimental to commerce. 46 U.S.C. app. § 1715. The Commission has determined to propose several new specific exemptions to replace the current exemptions for “routine operational and administrative matters” and other operational matters which it finds have met the criteria for exemptions under section 16. The initial proposals for a list begin with the activities already determined by the Commission to be “routine operational and administrative matters,” such as those enumerated in CSAV. Additionally, the Commission proposes to include the following matters previously treated as “interstitial implementation of routine operational and administrative matters” not requiring further filing: • charter parties arising out of filed agreements (such as those pursuant to a space, slot or vessel sharing agreement); • specific monetary amounts for compensation for space; booking and documentation procedures; • insurance; • procedures for resolution of disputes relating to loss and/or damage to cargo; • maintenance of books and records; • force majeure clauses; • common terminal and stevedoring arrangements; • procedures for allocating space and forecasting demand; and • schedule adjustments. 21 21 We recognize that most if not all of these commercially essential matters are likely determined before an agreement can be implemented and are unlikely to require frequent changes in the course of carrying out the agreement. We are skeptical that these need the sort of day-to-day flexibility the current exemption contemplates. Nevertheless, as a practical matter, we also recognize that these details of agreement implementation may be the most commercially sensitive and their absence appears to be unlikely to impair the Commission's ability to assess the relationship among the parties. With regard to the suggestion that changes to the number of vessels or slots to be operated ( i.e. , capacity) be implemented without amendment to an agreement, we find that it may be acceptable to change these terms without further filing if the originally-filed agreement contains an adequately described range ( i.e. , maximum and minimum) of slots or vessels to be used under the agreement and if the changes fall within that range. This approach would allow filers to adjust their agreement from time to time without the need to file, and allow the Commission to make an assessment of the commercial impact of the agreement for both ends of the range. OCWGA also urges the Commission to exempt slot charter costs from a filed slot charter agreement. As the comments point out, it has been the practice of the Commission to allow slot charter costs to be agreed upon from time to time (without requiring further filings or amendments), and not specifically disclosed in the filed agreement, under an interpretation of 535.407(b) and (c). The phrases, “as may be agreed upon from time to time” or “whatever is reasonable based on actual costs” have been used in filed agreements to this effect. We have therefore proposed to treat slot charter rates as matters specifically exempted in proposed section 535.408. The Commission is also proposing to codify its de facto exemption from the filing requirements for vessel charter parties in a new section 535.312. This codification would eliminate uncertainty the commenters now appear to have regarding which agreements must be filed. These contracts, which are generally for the control of single vessels, do not appear to have potential to result in a substantial reduction in competition or be detrimental to commerce, and are therefore within the Commission's section 16 authority for exemption from the requirements of the Shipping Act and its regulations. The commenters are also concerned about operational flexibility for changes to port calls which typically are commercial decisions that must be made quickly. It appears that most agreements are filed reciting only a general “geographic scope” within which they will operate. While it remains a required term in the Commission's rules, 22 geographic scope may be put forth in terms of ports or port ranges. This requirement has in the past provided adequate detail for Commission review purposes, while allowing changes in specific port calls or rotations to be made without filing a modification. 23 Therefore, OCWGA's concern that port calls cannot presently be changed on an emergency or “as-needed” basis without filing a modification of the agreement (entailing a 45-day waiting period) appears to be unfounded. Because the Commission's regulations currently provide that an agreement's scope may be defined in terms of port ranges, such a situation would only arise if the agreement were so specifically drafted as to contain each individual port. We agree that if within a port range, any changes would generally be acceptable with no need for further filing. We note OCWGA's assertion that the public generally is apprised of changes to port calls by the carriers themselves. While the Commission is sensitive to ILA's concern that allowing an agreement's specific port calls to be changed on an ad hoc basis may hamper its ability to anticipate where the cargo which its membership is entitled to handle will arrive or depart, 24 we believe that the current approach, reflected explicitly in the proposed exemption, is an adequate accommodation to the legitimate commercial needs of parties to agreements. 22 Section 535.403(b) requires, in pertinent part, that the parties “[s]tate the ports or port ranges to which the agreement applies and any inland points or areas to which it also applies with respect to the collective activities contemplated and authorized in the agreement.” 23 The Commission is apprised of parties' past service levels and initial changes resulting from an agreement through the concurrently-filed Information Form. 46 CFR part 535 App. A (Information Form, parts V, VI, and VIII). Thereafter, changes to the port calls which expand the overall geographic scope of the agreement must be indicated by the filing of a modification and in some cases an accompanying Information Form. 46 CFR 535.503(b). The Commission does not require such a filing for changes to port calls which effectively reduce the scope of an agreement. 24 It appears that ILA may have confused Shipping Act agreements (a term of art in Shipping Act context) with “agreements” used as a general term, and that their comments may more appropriately address issues which arise in a “service contract” context. It is unclear to which “electronic systems” ILA's comments refer—perhaps it is to the carriers' electronic container tracking systems or to electronic tariff publications. Third, OCWGA suggests that the Commission allow “permissive authority” to ensure flexibility as to how agreement parties would operate vis-a-vis another filed agreement. This appears to run afoul of NITL's concern that the public will not have adequate notice of how an agreement will operate. Further, PONL's assertion that any implementation of such an agreement will be reflected in an agreement filing, does not take into consideration either an agreement that the parties participate only to a limited extent or in a particular concerted manner in another agreement. The Commission's ability to assess an agreement's potential impact on competition would be severely impaired if the relationship between facially “non-restrictive” agreements and other agreements which contain market or capacity restrictions were not revealed. The Commission therefore declines to adopt such an interpretation. Fourth, the OCWGA recommends that the Commission allow agreements to implement “operational” agreements contemplated in, and pursuant to, authority within filed agreements without further filing. We note that NITL expresses no objections to permissive authority in agreements for “purely operational matters which are not likely to have impact on competition.” The proposed language attempts to address these concerns, without creating an exemption so broad as to render other provisions of the regulations meaningless, by an exemption for terms and conditions of space allocation and slot sales, the establishment of space charter rates, and terms and conditions of charter parties, if contemplated by a filed agreement. While we see nothing contradictory between the Commission's current rules requiring true, complete, and detailed agreements to be filed and those providing exemptions from filing certain agreements, the comments indicate that this position should be clarified. The Commission, therefore, proposes to revise sections 535.407(b) and sections 535.407(c). New section 535.408 provides that an agreement reached pursuant to general authority in a filed agreement is not considered part of the filed agreement unless it provides for one or more of the “technical or operational matters” specifically listed or is otherwise exempt from filing under the rules. c. Exemptions Subpart C of part 535 of the Commission's current rules contains exemptions (either partial or full) from the filing requirements of the Shipping Act for several types of agreements and modifications to agreements. 25 The commenters suggest further vague categories of agreements the Commission might exempt from filing, such as: (a) Agreements that have little or no competitive effect (but do not suggest what those may be); (b) agreements for routine operations (be exempt or have a reduced waiting period for effectiveness); and (c) slot charter arrangements (be fully exempt from filing). The Commission has the authority and discretion to grant exemptions from all requirements, or to grant exemptions limited to one or more of the specific filing, notice, and waiting requirements of the Shipping Act and its regulations, consistent with the policies of Congress. 26 46 U.S.C. app. § 1715. The Commission proposes one new exemption and several changes to existing exemptions, as discussed below. i. Low Market Share Exemption and Definition of Capacity Rationalization (proposed §§ 535.311, 535.104(e)) The Shipping Act's general scheme is to enable filers to obtain immunity from prosecution for commercial collaborations that might otherwise be violative of the antitrust laws, in return for oversight of these collaborations by the Commission. 46 U.S.C. app. § 1706. If not filed with the Commission, in addition to being a violation of the Shipping Act itself, collaborations restraining competition are otherwise subject to the antitrust laws and the scrutiny of the agencies which administer those laws. 25 The Commission's current regulations contain various exemptions for the following types of agreements: non-substantive agreements and non-substantive modifications to existing agreements (exempt from notice and waiting requirements); husbanding agreements (fully exempt from filing requirements); agency agreements (limited exemption from filing requirements); equipment interchange agreements (fully exempt from filing requirements); non-exclusive transshipment agreements (limited exemption from filing requirements); marine terminal agreements (exempt from waiting requirements); agreements between or among wholly-owned subsidiaries and/or their parent (fully exempt from filing requirements); miscellaneous modifications to agreements (if filed for informational purposes, exempt from notice and waiting); marine terminal service agreements (limited exemption from filing and waiting requirements, but no antitrust immunity unless the agreement is filed); and marine terminal facilities agreements (exempt from filing and waiting requirements). 46 CFR 535.302-311. 26 S. Rep. No. 61, 105th Cong., 1st Sess. 30 (1997) (“Senate Report”). The Commission believes that exemption from the Shipping Act's waiting period requirement of certain types of agreements that fall under a market share threshold (or “safety zone”) may fall within the criteria of section 16 and be a reasonable way to meet the purposes of the Shipping Act by reducing the regulatory burdens on the industry. This approach also appears consistent with current practices by other regulatory entities charged with oversight of commercial agreements affecting competition. 27 27 The Antitrust Guidelines for Collaborations among Competitors, (“Guidelines”) issued by the FTC and DOJ in April 2000, provides a “safety zone” for “situations in which anticompetitive effects are so unlikely that [FTC and DOJ] presume the arrangements to be lawful without inquiring into particular circumstances.” Guidelines at section 4. To qualify for this exemption the parties to commercial collaborations must meet established market share thresholds as well as meet other enumerated conditions. The European Commission's Competition Directorate has adopted a similar “safety zone” approach for international ocean carrier collaborations which do not involve price-fixing of freight rates and fall below a certain market share threshold. Appropriately exempted agreements would appear to include those which: (1) have neither pricing nor capacity or trade lane allocation authority; and (2) have less than 20% combined market share in the relevant trade lane and all sub-trades, or 15%, if operating within a rate agreement. This exemption might cover, for example, non-exclusive two-party vessel sharing agreements and slot/space charters and other types of collaborative agreements in which the parties' combined market share falls below the 20% level. A definition of “sub-trade” consistent with the definition in the appendix to the Monitoring Report has been added to the Commission's regulations at § 535.104(hh). The types of agreements outlined above would appear to meet the criteria under which the Commission has the authority to grant exemptions from requirements of the Shipping Act. The Commission has discretion to grant such exemptions only if doing so (1) will not result in substantial reduction in competition or (2) be detrimental to commerce. 46 U.S.C. app. § 1715. Agreements within the safety zone exemption would appear to cause neither a substantial reduction in competition nor otherwise be detrimental to commerce. 28 The Commission, therefore, proposes new section 535.311 providing for an exemption from the 45-day waiting period for agreements meeting the above-discussed criteria. 28 We estimate 87 presently effective agreements would have qualified for this exemption. In connection with this proposed new exemption, the Commission also proposes to introduce a new term, “capacity rationalization,” to describe one of the authorities that would prevent an agreement from qualifying for this low market share exemption. The Commission's rules currently utilize the term “capacity management agreement,” which is defined very narrowly: only “artificial” reduction of space on a per vessel basis is contemplated. See, 46 CFR 535.104(e). However, sailing or space charter agreements, especially those with exclusivity clauses, such as vessel sharing arrangements or alliances, may also be properly considered agreements which manage or restrict the amount or use of productive capacity. Therefore, the Commission proposes to revise section 535.104(e) to utilize the term “capacity rationalization” rather than the term “capacity management agreement,” in order to distinguish between those agreements reflecting simple operational arrangements and those which actively impose restrictions on capacity, thereby raising section 6(g) concerns for effects on price and service, and to promote consistency with other Commission regulations. Agreements with capacity rationalization authority would include, for example, agreements in which the parties restrict their ability to provide transportation in the Trade on vessels other than those utilized by the agreement or to enter into services that are alternate to/or in competition with the services provided under the agreement, without the prior consent of the agreement members. ii. Revision of the Present Exemptions for Non-substantive Agreements and Amendments, Miscellaneous Modifications (proposed § 535.302), and Public Notice of Filings (proposed § 535.602) As another effort to address the commenters' concern about the need for flexibility, the Commission proposes to retain and clarify its existing exemptions for certain types of modifications to agreements that may go into effect upon filing, or be filed for informational purposes only: namely, “non-substantive” modifications (46 CFR 535.302) and “miscellaneous” modifications (46 CFR 535.309). We believe that the current “non-substantive” exemption is unnecessarily broader than the pre-1984 exemption for modifications which it was intended to continue, but which contained no category for “non-substantive” initial agreements. The Commission believes that the scope of this exemption is unclear and thus should be revised. In addition, the Commission has determined to eliminate the practice of determining on an ad hoc basis through delegated authority whether an amendment to an agreement is “non-substantive.” 46 CFR 535.302(c). Therefore, the Commission proposes to combine some of the language of section 535.309 with that of a revised section 535.302 to eliminate the exemption for non-substantive initial agreements and enumerate the “non-substantive” and “miscellaneous” modifications that are exempt from filing. The Commission proposes to remove the current exemption for “miscellaneous modifications” for changes to parties to a discussion agreement contained in present section 535.309(a)(2)(i). Such additions in members to a discussion agreement may alter the potential competitive impact of the discussion agreement. On the other hand, the Commission believes that it is appropriate to continue the current exemption from the 45-day waiting period otherwise required by the Shipping Act for conferences, which are required to be open to all carriers serving the conference trade. Therefore, the Commission is proposing a revision to former 535.309(a)(2)(i) to indicate this change. In addition to the specific exemption changes discussed above, the Commission is also proposing to change its current policy regarding publication of notice in the Federal Register of agreement filings that are otherwise exempt from the requirements of this part. At present, the Commission does not publish notice of optionally-filed agreements and modifications, or agreements and modifications exempted from the 45-day waiting period. However, the Commission recognizes that public notice is the most effective way for the public to know what agreements and modifications to agreements are being filed. The Commission believes it is important for the public to know, for example, whether a carrier joins a conference agreement or resigns from one, or whether certain marine terminal operators have leases. To that end, the Commission is proposing to revise § 535.602 to indicate that a notice will be published in the Federal Register of each new agreement and agreement modification, including those agreements that are exempt from the 45-day waiting period and those that are optionally filed under the various exemptions in subpart C. iii. Transshipment Agreements (proposed §§ 535.104(jj) and 535.306(a)) The proposed rule changes for transshipment agreements are intended to clarify the Commission's view of what constitutes a transshipment agreement but not remove the filing exemption for nonexclusive transshipment agreements. The Commission has traditionally viewed transshipment agreements as agreements under which two ocean common carriers that both operate vessels provide a through service between the United States and a foreign port. However, the Commission also recognizes that the ocean transportation industry has substantially evolved since the Commission's current agreement rules were drafted. One notable change is the increased use of vessel sharing or space charter agreements by ocean common carriers to replace or augment their direct services. This change may have led to the development of what the Commission considers to be nontraditional transshipment arrangements, such as those in which a publishing carrier provides a transshipment service solely by taking space on vessels operated by other ocean common carriers. In an effort to provide a regulatory environment that promotes commercial flexibility and the resulting economic efficiencies for the carriers involved and the shipping public, the Commission is amending its definition of transshipment agreement to clarify that such arrangements between two ocean common carriers may be considered to be a transshipment agreement subject to the Shipping Act if the publishing carrier operates its own vessel in the through movement or provides service on its leg of the through service in accordance with a filed and effective space charter agreement. The Commission acknowledged that there is some overlap between transshipment agreements and space charter agreements in promulgating the final rules implementing the Shipping Act, by stating that “a transshipment agreement is a type of space charter.” 49 FR 45324 (November 15, 1984). This observation remains accurate in today's marketplace. Just as a space charter agreement permits an ocean common carrier to offer service in a trade without having to introduce its own vessels, a transshipment agreement permits a carrier to offer a service that it would not otherwise be able to provide unless it operated vessels on both legs of the transshipment. The publishing carrier pays the connecting carrier for space on the connecting carrier's vessel, just as a space charterer pays for the space that it uses on another ocean common carrier's vessel. Inevitably, therefore, a transshipment agreement includes space chartering. In 1984, the Commission exempted nonexclusive transshipment agreements from the filing requirements for policy and practical considerations. Though the publishing carrier provides certain information regarding the transshipment arrangement in its tariff pursuant to Section 535.306(b) and (c), 29 the filing exemption has resulted in reduced transparency for transshipment arrangements. As a result, the shipping public may lack a clear understanding of how the through transportation is being provided. To address the issue of transparency that arises when an ocean common carrier does not use its own vessels in the through transportation as well as to clarify the Commission's view of what constitutes a transshipment agreement, the Commission is proposing the addition of new language to the definition of a transshipment agreement. 29 Under Section 535.306, nonexclusive transshipment agreements are exempt from the filing requirement of the Shipping Act provided that the publishing carrier publishes in its tariff the through rate, the routings, any additional charges, and the participating carriers. The publishing carrier also issues the bill of lading. The added language would clearly set forth the Commission's position that an ocean common carrier offering a transshipment service must either operate a vessel involved in the through movement or have a filed and effective space charter agreement to cover the portion of its service between the United States and the port of transshipment. The Commission believes that it is consistent with the provisions of the Shipping Act relating to agreements (46 U.S.C. app. §§ 1703, 1704) to require an ocean common carrier offering a transshipment service pursuant to a transshipment agreement to operate at least one vessel involved in the through movement. Nevertheless, in recognition that many ocean common carriers in U.S. trades now depend on space charter agreements, in addition to their own vessels, to provide their services, the Commission is including such arrangements in the revised definition of a transshipment agreement. In both instances, the goal of transparency would be achieved. 3. Confidentiality of Sensitive Commercial Information in Filed Agreements The Commission has determined not to re-examine its interpretation of section 6(j) of the Shipping Act at this time. That provision reads, (j) Nondisclosure of Submitted Material. Except for an agreement filed under section 5 of this Act, information and documentary material filed with the Commission under section 5 or 6 is exempt from disclosure under section 552 of title 5, United States Code [FOIA] and may not be made public except as may be relevant to an administrative or judicial action or proceeding. The Commission's current regulation at 46 CFR 535.608(a) states, (a) Except for an agreement filed under section 5 of the Act, all information submitted to the Commission by the filing party will be exempt from disclosure under 5 U.S.C. 552. Included in this disclosure exemption is information provided in the Information Form, voluntary submission of additional information, reasons for non-compliance, and replies to requests for additional information. Section 6 (j) of the Shipping Act should be read harmoniously with the notice provision of section 6(a), which states that “[w]ithin 7 days after an agreement is filed, the Commission shall transmit a notice of its filing to the Federal Register for publication.” 46 U.S.C. app. § 1705(a). In this regard, current Commission regulations further define what the notice of filing must contain, reflecting a long-held understanding that the Commission should make the complete agreement as filed available to the public. 46 CFR 535.602(b)(5). The current regulation is nearly identical to that originally adopted under the Shipping Act, 1916. 46 CFR 572.6(1997); 46 CFR 522.6; General Order 24 (1968). The Commission has long interpreted the Shipping Act to require the public availability of the complete filed agreement, and to protect from Freedom of Information Act (“FOIA”) disclosure only information supplementing the agreement. The Commission has never provided by rule for the protection of information contained in a filed agreement and no objection has ever been filed to the disclosure of such information. Most of the commenters appear to assume that the only means of protecting sensitive information contained in agreements is through filing exemptions. Although no other statute precisely mirrors the Shipping Act procedures, especially as to the public's role in agreement review and their generally automatic effectiveness, we recognize that some agencies responsible for filings similar to agreements under the Shipping Act provide for confidentiality. 30 While it may be arguable, therefore, whether the drafters intended to preclude the Commission from protecting sensitive commercial information contained in the agreement itself, it appears unnecessary for the Commission to make any such determination now. As the Commission is now proposing to exempt the information identified by the commenters as potentially sensitive commercial information, we see no need to address this issue further at this time. Therefore, the proposed rule contains no further proposals in this respect. However, commenters may wish to raise this issue, as well as to identify any item of sensitive commercial information which would be included in an agreement required to be filed that is not within the terms listed in section 535.408 or otherwise exempted. Such comments should also address the issue of the Commission's authority to protect commercially sensitive information contained in filed agreements. 30 See, e.g. , DOT (14 CFR 302.39(b)), STB (49 CFR 1001.4) and SEC (17 CFR 230.406). It is unclear what effect Executive Order 12,600 of June 23, 1987, may have on the Commission's ability to protect sensitive commercial information in filed agreements. Section 2(b) of that order directs Federal agencies “to permit submitters of confidential commercial information to designate, at the time the information is submitted to the Federal government or a reasonable time thereafter, any information the disclosure of which the submitter claims could reasonably be expected to cause substantial competitive harm.” The Commission's rules provide for such protection generally: for nondisclosure of filings generally, 46 CFR 502.119; and for third party comments on agreements, 46 CFR 535.603. III. Information Forms and Monitoring Reports, 46 CFR Part 535, Subparts E and G. A. Introduction Currently, when a carrier agreement is filed with the Commission, the Information Form regulations (subpart E of part 535) require that certain historic revenue and/or operational data be furnished for each party to the agreement. The Information Form must accompany the filed agreement. In addition, certain modifications filed as amendments that expand the geographic scope or authority of an existing agreement must also be accompanied by an Information Form at the time of filing. Once an agreement goes into effect under the Shipping Act, the Monitoring Report regulations (subpart G of part 535) require that ongoing revenue and/or operational data on the parties' activities under the agreement be submitted to the Commission for as long as the agreement remains in effect. The jurisdiction to set rules requiring carrier agreement information is conferred on the Commission by the Shipping Act. Section 5(a) states that “[t]he Commission may by regulation prescribe the form and manner in which an agreement shall be filed and the additional information and documents necessary to evaluate the agreement.” Further, section 17(a) authorizes the Commission to “prescribe rules and regulations as necessary to carry out” the Shipping Act. Additionally, the Shipping Act gives the Commission the direct authority to obtain any relevant information from carriers. Pursuant to section 15, the Commission may issue an order to require any common carrier “to file with it any periodical or special report * * * appertaining to the business of that common carrier.” 31 31 The Commission has consistently held the view that the most reliable source of information on carrier agreements is directly obtained from the parties to the agreement. In Docket No. 94-31, the Commission stressed “that information regarding the operation and probable future impact of an agreement “[a]lmost uniformly is in the hands of those seeking approval * * * and it is incumbent upon those in possession of such information to come forward with it.” Mediterranean Pools Investigation 9 F.M.C. 264, 290 (1966).” See Dkt. No. 94-31, Information Form and Post-Effective Reporting Requirements for Agreements Among Ocean Common Carriers Subject to the Shipping Act of 1984 , 61 FR 11564, 11565 (March 21, 1996). The Commission further emphasized this point by stating that “the 1984 Act removed the burden of proof in agreement investigations from the carriers, but did not alter the accuracy of the Commission's 1996 observation in the Mediterranean Pools Investigation that the primary source for information on the operation of an agreement is the carriers that are the parties to the agreement.” Id. at page 11566. The proposed rule replaces the current regulations with regulations that would require all carrier agreements identified in § 535.201(a) and subject to the forty-five day waiting period to submit an Information Form for the Commission's review upon filing with information and data on the agreement and the authority in the agreement. 32 The proposed rule limits the application of the Monitoring Report regulations to require reporting only from parties to agreements with certain authority. For some authority, the Monitoring Report regulations are further limited based on the parties' market share. 32 “Low market share agreements” defined in section 535.311 of the proposed rule would be exempted from the waiting period requirements, and from the Information Form and Monitoring Report requirements unless otherwise instructed by the Commission. The reporting requirements for the proposed Information Form and Monitoring Report have been modified in relation to changes that have occurred in carrier agreements. Reporting requirements that are no longer necessary have been eliminated. New reporting requirements have been added to obtain essential data, such as vessel capacity, from agreements with authority that poses concerns under the Shipping Act. New terms and definitions have also been provided in the instructions of the proposed Information Form and Monitoring Report. These terms and definitions are intended to provide carriers with clearer instructions that should help to improve the accuracy and consistency of the agreement data reported to the Commission. Commenters are encouraged to review these proposals with this intent in mind, and to suggest further refinements or feasible alternatives to the proposed terms and definitions. In general, the proposed modifications herein seek to ensure that the Commission receives the most meaningful and reliable agreement data to carry out its statutory responsibilities, without placing an undue regulatory burden on carriers. In this regard, the Commission has incorporated its experience in administering the current Information Form and Monitoring Report regulations. Changes in carrier agreements that have occurred since OSRA became effective have resulted in the changes reflected in the proposed rule. The proposed modifications also reduce, where possible, the reporting burden on the carriers. B. Background 1. The Current Regulations The Information Form regulations for carrier agreements were originally established under the Shipping Act in Docket Nos. 84-26 and 84-32 (final rule). Under this rule, depending on the agreement's authority, the Information Form required such data as market share, cargo carriage, and/or planned changes in port calls or services relating to the agreement. The rule did not prescribe standard periodic reporting requirements for carrier agreements after they become effective under the Shipping Act. The current Information Form and Monitoring Report regulations were promulgated in Docket No. 94-31, Information Form And Post-Effective Reporting Requirements For Agreements Among Ocean Common Carriers Subject To The Shipping Act of 1984 , 61 FR 11564 (March 21, 1996). The Information Form is used in the agreement review process to analyze the probable economic impact of filed agreements, or certain agreement modifications. Carrier agreements are initially reviewed upon filing to assess their compliance with the Shipping Act, particularly with respect to section 6(g) and the prohibited acts in section 10. Upon review, the Commission determines whether any action under the Shipping Act is necessary within the 45-day waiting period before an agreement becomes effective. In addition, the data submitted in the Information Form provides historic (or baseline) economic figures for analyzing changes that may occur after the agreement goes into effect. The Monitoring Report enables the Commission to track and analyze the ongoing economic effects of an agreement after it becomes effective, and accordingly, determine whether any action under the Shipping Act may be necessary. Monitoring Reports also are used to assess the probable economic effects of modifications filed. Monitoring Reports further help the Commission to stay informed of agreement activity in the U.S. trades, and to address agreement issues that might arise in connection with investigations, complaints, inquiries, or petitions for Commission action against an agreement. The Commission's current regulations require some level of revenue and/or operational data from almost all carrier agreements subject to the Shipping Act. The degree of required data is determined by the agreement's classification. The current regulations classify agreements into three categories: Class A, Class B, and Class C. Upon a showing of good cause by an agreement, the Commission may waive any of the reporting requirements pursuant to sections 535.505 and 535.709. 33 Carrier agreements that fall outside of the classifications set in the current regulations are not obligated to submit the specified agreement information, unless otherwise instructed by the Commission. 34 33 The Commission's authority to grant or deny waiver applications is delegated to the Director of the BTA in subpart C of part 501. 34 Such agreements currently include housekeeping agreements, equipment management agreements, portal agreements, credit policy agreements, non-compete agreements associated with acquisitions, and general discussion agreements. For the Information Form, Class A and B agreements are grouped together as “Class A/B,” and are identified in section 535.502(a) as: rate agreements, joint service agreements, pooling agreements, agreements authorizing discussion or exchange of data on vessel-operating costs, and agreements authorizing regulation or discussion of service contracts. Class A/B agreements contain forms of pricing or pooling authority that can have a significant impact on competition. The Commission thoroughly addressed its concerns with the agreement authorities included in the Class A/B category and the potential effects of each of these authorities on competition in its Notice of Proposed Rulemaking (“NPRM”)in Docket No. 94-31. See Dkt. No. 94-31, 59 FR 62372, 62375-62376 (December 5, 1994). When a Class A/B agreement is filed for review, an Information Form must also be filed in accordance with the reporting requirements specified in appendix A of part 535 (section 535.503). These reporting requirements address the following topics relating to the parties activities in the agreement trade: other agreement participation, identification of agreement authority, market share for all liner operators, total average revenue, cargo volume and revenue results for major commodities, and port service. Much of this data must be specified for each sub-trade within the geographic scope of the agreement. The regulations define sub-trade to mean all liner movements between each U.S. port range and each foreign country within the scope of the agreement. The U.S. port ranges are specified separately for the Atlantic, Gulf, and Pacific coasts. Information Forms for Class C agreements require much less data. Class C agreements contain various forms of operational authority, and are identified in section 535.502(b) as sailing agreements and space charter agreements. 35 In its NPRM in Docket No. 94-31, the Commission noted that “[a]lthough such agreements have rarely presented serious regulatory concerns, some oversight is necessitated by section 6(g)'s admonition against agreements that cause unreasonable reductions in service.” Id. at 62378. Thus, Class C agreements are only required to submit data on the parties' other agreement participation and port service within the agreement trade, in accordance with the reporting requirements specified in appendix B of part 535 (section 535.504). 35 The Class C category does not include agreements authorizing capacity management or regulation as currently defined in section 535.104(e). Such authority was intentionally not included in section 535.502. At the time of the Commission's rulemaking, agreements with capacity management or regulation programs also contained rate authority, and therefore, automatically fell within the regulations. Subsequently, the authority for capacity management was withdrawn from agreements or held in abeyance. Presently, no agreements engage in capacity management programs as currently identified in section 535.104(e). For Monitoring Reports, however, the current regulations distinguish between Class A and B agreements. 36 Class A agreements are identified as those agreements specified in section 535.502(a) with market shares of 50 percent or more in half or more of the their sub-trades (section 535.702(a)(1)). Class B agreements are identified as those agreements specified in section 535.502(a) that do not have market shares of 50 percent or more in half or more of their sub-trades (section 535.702(a)(2)). To account for changes in market share that may alter an agreement's classification, the regulations direct BTA to classify all Class A and B agreements annually based on their second quarter market share data (section 535.702(b)). Class C agreements are also required to file quarterly Monitoring Reports and are identified as those agreements specified in section 535.502(b) (section 535.702(c)). 36 Under section 535.702(b), the classification of an agreement as Class A or Class B for purposes of its Monitoring Report obligations is initially based on the market share data reported on the agreement's Information Form pursuant to section 535.503, or on similar data otherwise obtained. Thereafter, before the beginning of each calendar year, the agreement is classified as Class A or Class B for that year, based on the market share data reported on the agreement's quarterly monitoring report for the previous second quarter (April-June). Class A agreements file the most Monitoring Report data in line with the same sub-trade specificity required for the Information Form, as instructed in appendix C of part 535 (section 535.703). The amount of Monitoring Report data and sub-trade specificity is reduced for Class B agreements, as instructed in appendix D to part 535 (section 535.704). Class C agreements only report on changes in the parties' other agreement participation and port service in the agreement trade, as instructed in appendix E to part 535 (section 535.705). As of August 2003, there were 29 Class A agreements, 51 Class B agreements, and 133 Class C agreements, for a total of 213 classified agreements on file with the Commission. 37 37 At the same time, there were 24 agreements on file with the Commission that were not subject to the reporting requirements. Since the current regulations became effective in 1996, carriers have continued to raise issues specifically regarding the Monitoring Report requirements. The Ocean Carrier Working Group Agreement commented on the Monitoring Report requirements in Docket No. 98-26, 64 FR at 11240; Docket No. 01-01, The Impact Of The Ocean Shipping Reform Act Of 1998; Notice of Issuance of Notice of Inquiry, 66 FR 7764 (January 25, 2001); and the Commission's Notice of Request for Public Comments Regarding Extensions to Existing OMB Clearances, 67 FR 10407 (March 7, 2002). In sum, carriers have generally voiced concerns about the burden involved in preparing the quarterly sub-trade data for the Monitoring Reports for Class A agreements. To ease this burden, carriers have repeatedly requested that the level of Monitoring Report data for Class A agreements be reduced to the lesser level required for Class B agreements. In support of this request, carriers have argued that market changes since OSRA have rendered the level of Monitoring Report data for Class A agreements unnecessary. In Docket No. 98-26, the Commission dismissed the carriers' request noting that “[a]ny modifications in the current agreement monitoring program based on changed market conditions will be considered only after an opportunity to evaluate the competitive effects of OSRA's regulatory changes.” See Dkt. No. 98-26, 64 FR at 11240. 2. Changes in Carrier Agreements Since OSRA The legislative reforms introduced by OSRA have considerably altered the ocean shipping industry in the U.S. trades. OSRA has encouraged carriers to operate more independently in response to competitive market forces. While these changes have improved competition, carriers are still very committed to cooperating in agreements and actively using their agreement authority to pursue and achieve their collective objectives. Thus, under OSRA, carrier agreements still can exert a powerful collective influence over competition in the U.S. trades. The Commission's need for reliable and specific information to evaluate and monitor carrier agreements remains. Under OSRA, a clear pattern in carrier agreement activity has emerged in most of the U.S. trades. Collective pricing by carriers under conference agreements has declined in favor of voluntary rate authority under discussion agreements. 38 In addition, carriers are cooperating more in operational arrangements which can affect rate and service levels in the trades, particularly in agreements with capacity rationalization authority. 39 38 The preference for voluntary rate discussion agreements between carriers has evolved in most of the major U.S. trades, except for those trades that include member nations of the European Union (“EU”), where the conference system has remained in place. Conference agreements between ocean common carriers are specifically exempted from the competition laws of the EU, and the European Commission (“EC”) opposes other forms of collective pricing outside of formal conference agreements. The effects of conferences, however, have been mitigated under OSRA because most conference carriers heavily engage in individual service contracts to stay competitive in the trades. The EC further restricts conference carriers from adopting voluntary service contract guidelines and disclosing information relating to service contracts negotiated outside the conference system. Nonetheless, conferences still represent the main rate agreements in the U.S./Europe trades, and require close monitoring. 39 The Commission's proposed rule defines capacity rationalization as the concerted reduction, stabilization, withholding, or other limitation in any manner whatsoever by ocean common carriers on the size or number of vessels or available space offered collectively or individually to shippers in any trade or service. Liner cargo in today's trades is predominantly shipped under individual service contracts with independently-negotiated freight rates and terms. While cargo carriage under a common conference tariff has diminished, discussion agreements and the concerted activities of their parties continue to pose significant anticompetitive and statutory concerns under the Shipping Act. Although compliance is voluntary, discussion agreements contain considerable, broad authority over rate, service contract, and service matters spanning large geographic areas in the U.S. trades. Further, many discussion agreements include most of the major carriers operating within their respective geographic scopes. Thus, discussion agreements generally have high market shares which contribute toward their ability to affect freight rates and competitive conditions. For example, each of the agreement market shares for the Transpacific Stabilization Agreement (“TSA”) and the Westbound Transpacific Stabilization Agreement (“WTSA”) in the U.S./Asia trades exceeds 70 percent. OSRA prohibited any mandatory restrictions on individual service contracts, but it allowed agreements to adopt voluntary service contract guidelines applicable to their parties' individual contracts. On a voluntary basis, carriers may collectively set and adhere to rates and terms for their individual service contracts. Thus, while agreement carriers are pricing more independently under OSRA, they still have the power to exert their collective influence over contract rates and terms. The extent to which voluntary authority and adherence are effective under discussion agreements likely depends on the prevailing and anticipated economic conditions in the respective agreement trades. Such conditions, however, are difficult to discern and even harder to anticipate without reliable agreement and trade information. Carriers are also relying more heavily on operational agreements to control the supply of excess vessel capacity. These agreements allow carriers to rationalize services and remove excess vessel capacity through vessel-sharing, space or slot chartering, sailing, and/or service arrangements. Operational agreements with capacity rationalization authority raise particular concerns under section 6(g). This concerted authority not only affects the amount of vessel capacity supplied in a trade, but also imposes restrictions on the parties' ability to freely participate in other service arrangements and/or independently operate competing services within the geographic scope of the agreement. Some carriers use this concerted authority to form complex and highly integrated alliance arrangements where the parties fix and allocate their collective vessel capacity on a global scale. Many of these alliances enter into space chartering agreements as a group with other carriers or groups of carriers. Carriers assert that operational agreements, even those with capacity rationalization authority, produce cost and service benefits for the shipping public. Carriers may use their concerted authority to better align the supply of vessel space with the demand for vessel space in specific trade lanes. In trade lanes burdened with high excess capacity, the coordination of vessel space between carriers can achieve efficiencies by lowering operational costs while still preserving, or even enhancing, the level and frequency of ocean liner services. Alternatively, a concerted reduction in vessel capacity and the restrictions imposed by capacity rationalization authority can result in a shortage of vessel space in a trade causing unreasonable service decreases and/or unreasonable rate increases in violation of section 6(g). Even if a shortage does not occur, a concerted reduction in vessel capacity decreases the amount of market pressure placed on carriers competing to fill excess vessel space. This reduction in competition may be significant enough to enable carriers to increase or maintain rates more easily by discouraging rate discounting. These concerns are compounded where carrier agreements contain both rate and capacity rationalization authority. Even if these authorities are not in the same agreement, many carriers participate in large rate discussion agreements that cover broad trade areas and also participate in separate agreements with capacity rationalization authority in the same trade areas. These authorities are interrelated and complementary. Carriers may discuss and agree on their overall rate and service objectives under the broad authority of their discussion agreements, and implement and fix their service and capacity levels within the same trade using their capacity rationalization authority contained in separate agreements. Likewise, carriers may collectively fix the supply of vessel capacity in a trade, through their capacity rationalization authority contained in separate agreements, to augment the overall rate objectives agreed upon in their discussion agreements. Thus, in addition to market conditions, the structure of complementary authority in agreements within trades further helps carriers achieve their collective objectives, depending on how well they can coordinate and maintain these efforts. While the use of conferences has subsided under OSRA, the benefits carriers enjoy as a result of their ability to participate in antitrust-exempted agreements under the Shipping Act has clearly not diminished. The developments in carrier agreements under OSRA reinforce the need for the Commission to obtain firsthand information directly from the carriers involved in agreements. C. The Proposed Rule To account for the changes that have occurred in carrier agreements since OSRA, and considering the views of carriers, the Commission proposes the following modifications to the Information Form and Monitoring Report regulations and requirements. 1. Information Form Regulations The proposed rule no longer identifies carrier agreements by specific classes for the purpose of assigning reporting requirements. Instead, section 535.502(a) of the proposed rule would require that all carrier agreements identified in section 535.201(a), except for low market share agreements identified in section 535.311, submit an Information Form when the agreement is filed with the Commission. Agreements with certain authorities that have significant potential to affect competition would be required to submit Information Form data pertaining to the specific authority contained in the agreement. The current agreement classification regulations in section 535.502 provide procedures for assigning specific reporting requirements to specific types of agreements. Agreements filed at the Commission, however, have evolved since the current classification regulations were implemented, especially under OSRA. Now, multiple or complex forms of authority may be contained in a single agreement that might not neatly fall under one specific agreement type or class. Further, the reporting requirements assigned to a particular type or class of agreement may not adequately address the full authority of the agreement. For instance, the current reporting requirements for Class C agreements do not distinguish between simple operational agreements, such as vessel space charter arrangements, and the more complex and anticompetitive operational agreements with capacity rationalization authority that include global alliance arrangements. Section 535.503(b) of the proposed rule addresses these concerns by assigning specific reporting requirements to specific authorities contained in agreements. While no rule can cover all circumstances, the Commission believes that this approach would more directly address the elements of concern within the agreement, i.e. , the parties' authority and the concerted activities they may pursue with such authority. Further, the proposed rule would replace the current agreement classification procedures with simpler regulations and clearer instructions. Section 535.502(b) of the proposed rule would require an Information Form when a modification to an existing agreement is filed that adds the authority to discuss or agree on capacity rationalization, or pricing or pooling authority. 40 Further, a modification that expands the geographic scope of such authority within an existing agreement would also require an Information Form under section 535.502(c) of the proposed rule. Aside from adding the Information Form requirement for agreements containing capacity rationalization authority, the proposed rule is not likely to increase the number of agreement modifications which would be subject to Information Form requirements. The proposed rule refers to agreement modifications by listing the actual authorities in place of the current agreement class labels. When authority is added or expanded, the competitive impact of the existing agreement is altered, and must be re-examined with a new Information Form. 40 For ease of reference, the term “pricing or pooling authority” is used herein to identify agreements containing any of the following authorities: (a) The discussion of, or agreement upon, whether on a binding basis under a common tariff or a non-binding basis, any kind of rate or charge; (b) the establishment of a joint service; (c) the pooling or division of cargoes, earnings, or revenues and/or losses; (d) the discussion or exchange of data on vessel-operating costs; and/or (e) the discussion of service contract matters. These authorities are listed in the proposed rule. Section 535.504 of the proposed rule provides waiver procedures whereby carriers m [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A03-29738. Public record. Not legal advice.