Exemption From Property Tariff-Filing Requirements

DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Parts 221 and 292

[Docket No. 49827; Notice No. 94-18]

RIN 2137-AC48

Exemption From Property Tariff-Filing Requirements

AGENCY: Office of the Secretary, DOT.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Department proposes to adopt a new Part 292 that would

exempt U.S. and foreign air carriers from the statutory and regulatory

duty to file international property (``cargo'') tariffs with DOT,

subject to the reimposition of the duty in specific cases when

consistent with the public interest. Commencing with the effective date

of the final rule, currently effective cargo tariffs would be canceled

as a matter of law, pending tariff applications would be dismissed, and

new tariffs would not be accepted for filing. This action is taken on

the Departments initiative.

DATES: Comments should be received no later than December 23, 1994.

Proposed Effective Date: Since the proposal would eliminate a

requirement and create no additional burden, the exemption provisions

would be effective immediately upon issuance of a final rule.

ADDRESSES: Comments should be sent to the Docket Clerk, Docket No.

49827, U.S. Department of Transportation, 400 7th Street, SW., Room

4107, Washington DC 20590-0002, and should plainly refer to this

docket. To facilitate consideration of the comments, we ask commenters

to file twelve copies of each comment. We encourage commenters who wish

to do so also to submit comments to the Department through the

Internet; our Internet address is [email protected]. Note,

however, that at this time the Department considers only the paper

copies filed with the Docket Clerk to be the official comments.

Comments will be available for inspection at this address from 9:00

a.m. to 5:00 p.m., Monday through Friday. To receive an acknowledgment

of receipt of comments, include a stamped, self-addressed postcard

which the Docket Clerk will time and date-stamp, and return.

FOR FURTHER INFORMATION CONTACT:

Mr. Keith A. Shangraw or Mr. John H. Kiser, Office of the Secretary,

Office of International Aviation, X-43, Department of Transportation,

at the address above. Telephone: (202) 366-2435.

SUPPLEMENTARY INFORMATION:

Background

Section 41504 of Title 49 of the United States Code, formerly

section 403(a) of the Federal Aviation Act of 1958, as amended,

requires every U.S. and foreign air carrier to file with the

Department, and to keep open for public inspection, tariffs showing all

prices for foreign air transportation between points served by that

carrier, as well as all rules relating to that transportation to the

extent required by the Department. This includes prices for carriage of

cargo, known as cargo ``rates.'' Over the years, international cargo

tariffs have provided U.S. regulatory authorities with a means to

exercise close regulatory supervision over cargo pricing, either for

public policy or consumer protection reasons, or in the context of

bilateral aviation relations. Increasingly, however, we have come to

see that the cargo tariff is a device that is no longer necessary for

us to meet our public interest objectives, and that this tariff regime

is costly and burdensome to everyone connected with it.

Cargo rates fall into two broad categories: (1) General commodity

rates (GCRs), and (2) special rates. Special rates include specific

commodity rates (SCRs), contract rates, container rates and exception

rates, all of which are based on the characteristics of particular

types of traffic, as well as expedited, door-to-door rates for

documents and small packages, which are based on a premium service.

In the cargo area, only international scheduled service tariffs

continue to be filed with the Department. Domestic scheduled service

cargo tariffs were eliminated in 1978 by Regulation ER-1080, 43 FR

53635, November 16, 1978. Similarly, both domestic and international

cargo charter tariffs were eliminated in 1979 by ER-1125, 44 FR 33056,

June 8, 1979. Domestic and international tariffs of air freight

forwarders (part of a class of carriers called ``indirect cargo air

carriers'' or ``foreign indirect air carriers'') were eliminated by ER-

1094, 44 FR 6634, February 1, 1979, and by ER-1159, 44 FR 69635,

December 4, 1979, respectively.

The Department's regulatory policy regarding international cargo

rate tariffs appears at 14 CFR 399.41.\1\ Under this policy,

independently-set carrier prices in most international cargo rate

categories are effectively deregulated.\2\ Barring extreme

circumstances, the only tariff rates over which the Department

continues to exercise regulatory supervision are GCRs up to and

including the 500 kilogram weight break, and certain exception

rates.\3\ Even this oversight is not applicable to markets governed by

a liberal entry and pricing regime.

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\1\This policy was originally established by the Department's

predecessor agency in this area, the Civil Aeronautics Board (CAB),

in 1983. The Department assumed jurisdiction over international

cargo tariffs and cargo rate regulation upon CAB sunset, January 1,

1985.

\2\Agreements containing international cargo rates, which

carriers coordinate through the tariff conferences and procedures of

the International Air Transport Association (IATA), must be filed

with and approved by the Department before tariffs can be filed or

other steps taken for their implementation. These agreements are

subject to economic justification requirements and Department

analysis which are independent of its tariff policy and procedures.

The proposed rule will not affect the review of IATA agreements in

any way.

\3\Section 399.41 sets zones of pricing flexibility for GCRs up

to 500 kilograms, and establishes a Standard Foreign Rate Level

(SFRL) for each market as the basis for these zones of flexibility.

The SFRL is calculated periodically to reflect changes in the cost

experiences of the carriers. The SFRL zones also govern exception

rates, priced at levels higher than comparable GCRs, for shipments

of live animals, perishable goods and other kinds of specialized

cargo. However, the other special rate categories are not subject to

any zone constraints.

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Since its adoption in 1983, section 399.41 has proved adequate.

Virtually no complaints have been received against filed cargo tariffs,

whether against rates or against rules stating conditions of

service.\4\ In many markets, carriers have not used the upward

flexibility available to them to raise rates to the SFRL ceilings. The

international cargo market has continued to evolve to the point where

today the Department tentatively believes that it no longer needs to

rely on the routine government supervision of cargo tariffs to protect

the public.

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\4\The basic conditions of service for the international air

transportation of cargo are also stated in the carriers' air

waybills, and most areas of potential shipper concern are governed

directly by provisions of the Warsaw Convention.

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Many shippers who now tender shipments directly to carriers are

large volume forwarders or ``consolidators.'' These shippers have a

sufficient position in the market to shop around and negotiate the best

service/price options. Many small volume or irregular shippers are now

generally served either by consolidators or, increasingly, by small

package specialists offering premium services. The filing of

consolidator tariffs was discontinued in 1979 with no apparent adverse

effect on the public. Nor has the Department received any complaints

about small package rates, which have not been regulated in keeping

with its liberal pricing policy on all optional premium services.

The U.S. Government has also actively pursued the liberalization of

international cargo prices with other countries. It has concluded

aviation agreements which effectively deregulate cargo prices in a

number of major markets, including the United Kingdom, Belgium,

Germany, and the Netherlands. We have had no bilateral pricing disputes

involving cargo rates in recent years, and the Department expects that

deregulation of international cargo prices will continue to be a

routine objective in future bilateral or multilateral discussions.

Indeed, a few foreign countries are considering, or have already

decided, not to require carriers to file international cargo rate

tariffs with their aviation authorities.

Carriers are thus filing, and the Department is processing,

thousands of pages of cargo tariff material each year with little, if

any, meaningful regulatory consequence.\5\ Requiring the continued

routine carrier filing of cargo tariffs would burden the industry

unnecessarily, and continuing the physical processing and storage of

such tariffs would needlessly burden the Department in an era of scarce

and diminishing governmental resources without consequent benefits. In

these circumstances, the Department tentatively has determined to end

the routine filing and review of detailed price and other tariff

information relating to the carriage of cargo by air.\6\

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\5\In 1993 alone, The Department received and processed 8,591

pages of cargo tariffs.

\6\International air transport agreements routinely permit, but

do not obligate, each party to require tariffs to be filed with its

aeronautical authorities.

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The proposed rule would exempt U.S. and foreign air carriers from

their statutory and regulatory duty to file tariffs with DOT containing

rates and any other rules or conditions of service for the carriage of

cargo to/from U.S. points, and it would not permit them to do so.

Existing tariffs would be cancelled, and pending tariff applications

would be dismissed. The exemption would encompass all material

currently filed in international cargo tariffs with DOT.

However, existing regulations of the Department, set forth in 14

CFR Part 249 and in section 221.177 of 14 CFR Part 221, would continue

to require each carrier, individually and through its agents, to

maintain pertinent information on its cargo prices and rules, and to

make that information available to the public upon request.

This rule will not materially lessen the Department's ability to

intervene in cargo pricing and related matters should that be

necessary. First, Departmental review of IATA cargo agreements will

continue. Second, the Department has always had statutory authority to

take action directly against unfiled cargo prices and rules under a

variety of circumstances.\7\ And third, the Department will reserve the

option under the proposed rule of revoking the exemption in whole or in

part, thus reinstating the tariff-filing obligation, with regard to a

particular carrier or carriers where consistent with the public

interest. This would make available to the Department, in a timely

manner, the full panoply of tariff-filing requirements and review

procedures that are currently applicable, although the Department would

not necessarily implement them all in any particular case.\8\

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\7\See, e.g., 49 U.S.C. sections 41712, 41507 and 41310.

\8\For example, the Department could require filings, but grant

a waiver from all or some of the format procedures set forth in Part

221 of the Regulations; or it might require the filing of only a

particular rate or group of rates of a particular carrier.

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To facilitate any cargo rate evaluation that may be required, the

Department proposes to leave in place its current regulatory policies,

embodied in the section 399.41 policy statement, and to continue to

recalculate the SFRL cost index. This would continue to establish

benchmark levels for GCRs and exception rates that would be, prima

facie, reasonable, and that could be used to resolve any complaints

against rates in categories regulated by the SFRL.

In addition to rates, existing cargo tariffs also contain general

material governing such subjects as notice of terms of contract of

carriage, liability for loss, claims procedures, carriage of dangerous

goods, acceptability of cargo, and other general matters of concern to

shippers and other consumers of international cargo air transportation.

The absence of cargo tariffs should have no impact in this regard. Most

such material merely restates provisions contained in the standard air

waybill or other contract of carriage, and it is not necessary for the

protection of shippers to repeat the information in filed tariffs. To

the extent that shippers have questions about the application or

interpretation of certain contract provisions, it is likely that they

consult the carrier directly rather than its tariffs. To the extent

that tariffs might set forth certain provisions in greater detail, the

Department already has an alternative framework in place to permit its

incorporation into the contract of carriage. Under section 221.177,

carriers may incorporate by reference material not actually printed on

the air waybill, provided that they make the full text of all such

incorporated terms readily available for public inspection, in either

electronic or printed medium, at each airport or other sales office of

the carrier. This procedure preempts any state laws on the same

subjects, as did 14 CFR Part 253 in the case of domestic passenger air

transportation.

Regulatory Analyses and Notices

Executive Order 12866 and DOT Regulatory Policies and Procedures

The Department has determined that this proposed rule is not

subject to review under Executive Order 12866. Moreover, the rule is

not significant under the Department's Regulatory Policies and

Procedures (44 CFR 11034; Feb. 26, 1979). A regulatory evaluation in

this Docket shows that the benefits of the proposed rule exceed the

costs to the industry and the Federal Government significantly, since

it eliminates a current regulatory burden, without imposing other

requirements.

Executive Order 12612

This proposal has been analyzed in accordance with the principles

and criteria contained in Executive Order 12612 (``Federalism''), and

the Department has determined the rule does not have sufficient

federalism implications to warrant the preparation of a Federalism

Assessment.

Regulatory Flexibility Act

I certify that this rule, if adopted, will not have a significant

economic impact on a substantial number of small entities. The tariff

filing requirements apply to scheduled service air carriers. The vast

majority of the air carriers filing international (``foreign'') air

cargo tariffs are large operators with revenues in excess of several

million dollars each year. Small air carriers operating aircraft with

60 seats or less and 18,000 pounds payload or less that offer on-demand

air-taxi service are not required to file such tariffs.

Paperwork Reduction Act

With respect to the Paperwork Reduction Act, this proposed rule

change eliminates information collection requirements that require the

approval of the Office of Management and Budget pursuant to the Act.

This proposal will reduce paperwork burden, as described in detail in

the Regulatory Evaluation in this docket.

If these proposed regulations are implemented, about 7,000 to

10,000 tariff pages encompassing cargo rates, charges and rules, and

about 500 Cargo Special Tariff Permission Applications (STPA's), would

be eliminated each year, saving the air carriers a filing fee of $2 per

cargo page and $12 per cargo STPA (which generally consists of about

three double-sided pages for each STPA form).

Such filing fees, now paid to DOT, total about $20,000 or less

annually. Air carriers and their cargo filing agents also would avoid

the burden of preparing and transmitting tariff filings, estimated to

be about 5.34 hours for each of the 7,500 cargo tariff pages and STPA

forms, or about 40,050 burden hours, which at an estimated industry

salary rate of about $10.40 an hour would indicate a savings of

approximately $416,520.

In addition, other associated costs, such as those incurred by

carriers to formulate and disseminate the cargo rate and rules pages to

their customers, may be reduced. For example, the $48 charge per

international cargo tariff page to cover 1994 publication/distribution

costs, announced by the Airline Tariff Publishing Company (ATPCO) in

Cargo Tariff Bulletin No. 19, dated November 18, 1993, might be

favorably affected. The subscription rate for each cargo tariff ranges

from $15 to $95, based upon speed of delivery (bulk/priority/or air).

Currently the charge for the delivery of the complete international

cargo tariff in the U.S., Canada or Mexico is $200, or $500 for

delivery elsewhere. Whether these subscription rates would be reduced

would be decided by the tariff agent and the air carriers.

For further information contact: The Information Requirements

Division, M-34, Office of the Secretary of Transportation, 400 Seventh

Street, S.W., Washington, D.C. 20590, (202) 366-4735 or Transportation

Desk Officer, Office of Management and Budget, New Executive Office

Building, Room 3228, Washington, DC 20503.

Any comments regarding the burden estimate or any aspect of these

information requirements, including suggestions for reducing the

burden, may be sent to: Director, Office of Airline Statistics, DAI-1,

U.S. Department of Transportation, Research and Special Programs

Administration, 400 Seventh Street, S.W., Room 4125, Washington, DC

20590-0001 as well as the above contact at OMB.

Regulation Identifier Number

A regulation identifier number (RIN) is assigned to each regulatory

action listed in the Unified Agenda of Federal Regulations. The

Regulatory Information Service Center publishes the Unified Agenda in

April and October of each year. The RIN number contained in the heading

of this document can be used to cross reference this action with the

Unified Agenda.

List of Subjects

14 CFR Part 221

Air carrier, Cargo rates, Tariffs, Reporting and recordkeeping

requirements.

14 CFR Part 292

International cargo transportation.

This rule is being issued under authority delegated in 49 CFR

1.56(j)(2)(ii). For the reasons set forth in the preamble, it is

proposed that 14 CFR Part 221 be amended and a new Part 292 be added,

to read as follows:

PART 221--TARIFFS

1. The authority citation for Part 221 continues to read as

follows:

Authority: 49 U.S.C. 40101, 40109, 40113, 46101, 46102, Chapter

411, Chapter 413, Chapter 415, and Subchapter I of Chapter 417,

unless otherwise noted.

Subpart A--[Amended]

2. Section 221.3 is amended by adding paragraph (d)(9) to read as

follows:

Sec. 221.3 Carrier's duty.

* * * * *

(d) * * *

(9) Part 292, International Cargo Transportation, except as

provided in Part 292.

* * * * *

3. A new Part 292 is added to read as follows:

PART 292--INTERNATIONAL CARGO TRANSPORTATION

Subpart A--General

Sec.

292.1 Applicability.

292.2 Definitions.

Subpart B--Exemption From Filing of Tariffs

292.10 Exemption.

292.11 Revocation of exemption.

Subpart C--Effect of Exemption

292.20 Rule of construction.

292.21 Termination of effectiveness.

Authority: 49 U.S.C. 40101, 40105, 40109, 40113, 40114, 41504,

41701, 41707, 41708, 41709, 41712, 46101; 14 CFR 1.56(j)(2)(ii).

Subpart A--General

Sec. 292.1 Applicability.

This Part applies to direct air carriers providing scheduled

transportation of cargo in foreign air transportation.

Sec. 292.2 Definitions.

For purposes of this part:

Direct air carrier means an air carrier or foreign air carrier that

directly engages in foreign air transportation under a certificate,

regulation, order or permit issued by the Department of Transportation

or its predecessor.

Cargo means property other than baggage accompanied or checked by

passengers, or mail.

Cargo tariff means a tariff containing rates, charges, or

provisions governing the application of such rates or charges, or the

conditions of service, applicable to the scheduled transportation of

cargo in foreign air transportation.

Subpart B--Exemption From Filing of Tariffs

Sec. 292.10 Exemption.

Direct air carriers are exempted from the duty to file cargo

tariffs with the Department of Transportation, as required or provided

by 49 U.S.C. 41504 and 14 CFR Part 221.

Sec. 292.11 Revocation of exemption.

(a) The Department, upon complaint or upon its own initiative, may

take action to revoke in whole or in part the exemption granted by this

Part with respect to a carrier or carriers, when such action is in the

public interest.

(b) The decisionmaker will be the Assistant Secretary for Aviation

and International Affairs.

(c) Revocations under this section will have the effect of

reinstating all applicable tariff requirements, and procedures

specified in the Department's regulations for the tariff material to be

filed, unless otherwise specified by Department order.

Subpart C--Effect of Exemption

Sec. 292.20 Rule of construction.

Carriers holding an effective exemption from the duty to file cargo

tariffs under this Part shall not, unless otherwise directed by order

of the Department, be subject to tariff posting, notification or

subscription requirements set forth in 49 U.S.C. 41504 of the Act or 14

CFR Part 221, except the requirements set forth in section 221.177 and

the requirements set forth in 14 CFR Part 249. References to

``tariffs'' in section 221.177 shall be construed to mean terms,

conditions or other provisions which are part of the contract of

carriage as permitted by that section.

Sec. 292.21 Effect of exemption.

As of [insert publication date], cargo tariffs on file with the

Department will cease to be effective as tariffs under 49 U.S.C. 41504

and 41510 and will be canceled by operation of law. Pending

applications for filing and/or effectiveness will be dismissed by

operation of law. No new filings or applications will be permitted

except as provided under section 292.11, above.

Issued in Washington, D.C. on October 18, 1994.

Patrick V. Murphy,

Acting Assistant Secretary for Aviation and International Affairs.

[FR Doc. 94-26211 Filed 10-21-94; 8:45 am]

BILLING CODE 4910-62-P