Cargo PreferenceU.S.-Flag Vessels; Available U.S.-Flag Commercial Vessels

DEPARTMENT OF TRANSPORTATION

Maritime Administration

46 CFR Part 381

[Docket No. R-153]

RIN 2133-AB17

Cargo Preference--U.S.-Flag Vessels; Available U.S.-Flag

Commercial Vessels

AGENCY: Maritime Administration, Department of Transportation.

ACTION: Final rule.

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SUMMARY: This amendment to the cargo preference regulations of the

Maritime Administration (MARAD) would provide that during the 1995

shipping season when the St. Lawrence Seaway is in use, MARAD will

consider the legal requirement for the carriage of bulk agricultural

commodity preference cargoes on privately-owned ``available'' U.S.-flag

commercial vessels to have been satisfied where the cargo is initially

loaded at a Great Lakes port on one or more U.S.-flag or foreign-flag

vessels, transferred to a U.S.-flag commercial vessel at a Canadian

transshipment point outside the St. Lawrence Seaway, and carried on

that U.S.-flag vessel to a foreign destination. This amendment allows

Great Lakes ports to compete for agricultural commodity preference

cargoes during an entire season trial period.

EFFECTIVE DATE: This final rule is effective on May 9, 1995.

FOR FURTHER INFORMATION CONTACT: John E. Graykowski, Deputy Maritime

Administrator for Inland Waterways and Great Lakes, Maritime

Administration, Washington, DC, 20590, Telephone (202) 366-1718.

SUPPLEMENTARY INFORMATION: United States law at sections 901(b) (the

``Cargo Preference Act'') and 901b, Merchant Marine Act, 1936, as

amended (the ``Act''), 46 App. U.S.C. 1241(b) and 1241f, requires that

at least 75 percent of certain agricultural product cargoes

``impelled'' by Federal programs (preference cargoes), and transported

by sea, be carried on privately-owned United States-flag commercial

vessels, to the extent that such vessels ``are available at fair and

reasonable rates.'' The Secretary of Transportation intends to

administer that program so that all ports and port ranges may

participate.

1994 Rulemaking

On August 8, 1994, MARAD published a final rule on this subject in

the Federal Register (59 FR 40261). That rule stated that it was

intended to allow U.S. Great Lakes ports to participate with ports in

other U.S. port ranges in the carriage of bulk agricultural commodity

preference cargoes. It cited as justification for the rule dramatic

changes in shipping conditions that have occurred since 1960, including

the disappearance of any all-U.S.-flag commercial ocean-going service

to foreign countries from U.S. Great Lakes ports. It further stated

that the static configuration of the St. Lawrence Seaway system and the

evolving greater size of commercial vessels contributed to the

disappearance of any all-U.S.-flag service.

No preference cargo has moved on U.S.-flag vessels out of the Great

Lakes since 1989, with the exception of one trial shipment in 1993.

Under the Food Security Act of 1985, Public Law 99-198, codified at 46

App. U.S.C. 1241f(c)(2), a certain minimum amount of Government-

impelled cargo was required to be allocated to Great Lakes ports during

calendar years 1986, 1987, 1988, and 1989. That Great Lakes ``set-

aside'' expired in 1989, and was not renewed by Congress. The

disappearance of Government-impelled cargo flowing from the Great Lakes

coincided with the expiration of the Great Lakes ``set aside.''

At the time of the opening of the 1994 Great Lakes shipping season

on April 5, 1994, the Great Lakes did not have any all-U.S.-flag ocean

freight service for carriage of bulk preference cargo. In contrast, the

total export nationwide by non-liner vessels of USDA and USAID

agricultural assistance program cargoes subject to cargo preference in

the 1992-1993 cargo preference year (the latest program year for which

figures are available) amounted to 6,297,015 metric tons, of which

4,923,244, or 78.2 percent, was transported on U.S.-flag vessels.

(Source: Maritime Administration database.)

MARAD issued the 1994 rule to provide Great Lakes ports with the

opportunity to compete for agricultural commodity preference cargoes

for only the 1994 Great Lakes shipping season cargoes, and to assess

the results.

Inadequate 1994 Trial Period

As predicted by numerous commenters on the first notice of proposed

rulemaking (NPRM), published on May 11, 1994 (59 FR 24390), the timing

of the final rule did not allow for a true trial period since it was

actually in effect for less than one-half of the 1994 Great Lakes

shipping season. Because of the long lead time required for arranging

shipments of bulk agricultural commodity preference cargoes, there was

no real opportunity [[Page 24561]] for U.S.-flag vessel operators to

make the necessary arrangements to bid on preference cargoes.

Second NPRM

Because the publication of the 1994 final rule occurred too late to

allow participants in the shipment of agricultural commodity preference

cargoes to arrange shipments from Great Lakes ports, no shipments

occurred in 1994. Accordingly, MARAD was not able to evaluate the

impact of the 1994 amendment, and issued a second NPRM on February 1,

1995 (60 FR 6068), that proposed to extend the trial period for

applying its policy for shipment of preference cargoes on available

U.S.-flag vessels through the 1995 Great Lakes shipping season.

MARAD received twelve (12) comments on this second NPRM from

individual Great Lakes ports, a Federal shipper agency, Great Lakes

grain carriers, grain producers and exporters, and a commodity

exchange. All commenters enthusiastically supported the amendment as a

minimal initial action that would allow Great Lakes ports to

participate in the bulk agricultural cargo preference trade by being

able to offer service at competitive rates. Most commenters supported a

longer trial period, or requested that the rule be made permanent. They

cited equity as being the paramount justification.

In reiterating last year's statement that the trial period should

extend for several navigation seasons or until U.S.-flag vessels resume

operations on the Great Lakes, a commenter asserted that not only is it

difficult to assess any benefits based on only one shipping season, but

that shippers are reluctant to change their shipping patterns for a

short period of time, knowing that they must revert back to the ``old

way,'' irrespective of their recognition of a cost advantage during

that short period. MARAD will issue another proposed rule to extend the

trial period for at least three years if it determines that this

amendment actually was responsible for the carriage of agricultural

commodity cargoes from Great Lakes ports to foreign destinations on

available U.S.-flag vessels during the 1995 Great Lakes shipping

season.

Another commenter urged MARAD to promulgate a rule that allows

shipment of agricultural commodities from a Great Lakes port for the

entire voyage, from origin to destination, on foreign-flag vessels

where U.S.-flag vessels are not available for such voyages from Great

Lakes ports. The commenter argued that this policy will allow the Great

Lakes ports greater participation in USDA and USAID agricultural

assistance program cargoes. That proposal is contrary to the provisions

and intent of the Cargo Preference Act of 1954, and of this rulemaking.

Based on the unequivocal support of all the commenters for

modification of the interpretation of ``available'' U.S.-flag

commercial vessels for the carriage of bulk agricultural commodity

preference cargoes from Great Lakes ports, MARAD is adopting as a final

rule, without change, the text of the NPRM.

Rulemaking Analyses and Notices

Executive Order 12866 (Regulatory Planning and Review)

This rulemaking has been reviewed under Executive Order 12866 and

Department of Transportation Regulatory Policies and Procedures (44 FR

11034, February 26, 1979). It is not considered to be an economically

significant regulatory action under section 3(f) of E.O. 12866, since

it has been determined that it is not likely to result in a rule that

may have an annual effect on the economy of $100 million or more or

adversely affect in a material way the economy, a sector of the

economy, productivity, competition, jobs, the environment, public

health or safety, or State, local, or tribal governments or

communities. However, since this rule would affect other Federal

agencies, is of great interest to the maritime industry, and has been

determined to be a significant rule under the Department's Regulatory

Policies and Procedures, it is considered to be a significant

regulatory action under E.O. 12866.

MARAD expects that this rule could allow, in the 1995 Great Lakes

season, the movement of up to 300,000 metric tons of agricultural

commodities from Great Lakes ports, with a reduction in the shipping

cost to sponsoring Federal agencies of up to $3 per metric ton

($900,000). Because the Great Lakes shipping season opened on March 24,

MARAD has determined, pursuant to 5 U.S.C. 553(d), that good cause

exists to make this rule effective on publication.

MARAD will evaluate the results of the one-season trial period

before determining whether to issue a rule to make this arrangement

permanent.

This rule has been reviewed by the Office of Management and Budget

under Executive Order 12866.

Federalism

The Maritime Administration has analyzed this rulemaking in

accordance with the principles and criteria contained in Executive

Order 12612, and it has been determined that it does not have

sufficient federalism implications to warrant the preparation of a

Federalism Assessment.

Regulatory Flexibility Act

The Maritime Administration certifies that this rulemaking will not

have a significant economic impact on a substantial number of small

entities.

Environmental Assessment

The Maritime Administration has considered the environmental impact

of this rulemaking and has concluded that an environmental impact

statement is not required under the National Environmental Policy Act

of 1969.

Paperwork Reduction Act

This rulemaking contains no reporting requirement that is subject

to OMB approval under 5 CFR Part 1320, pursuant to the Paperwork

Reduction Act of 1980 (44 U.S.C. 3501, et seq.)

List of Subjects in 46 CFR Part 381

Freight, Maritime carriers.

Accordingly, MARAD hereby amends 46 CFR part 381 as follows:

PART 381--[AMENDED]

1. The authority citation for Part 381 continues to read as

follows:

Authority: 46 App. U.S.C. 1101, 1114(b), 1122(d) and 1241; 49

CFR 1.66.

2. Section 381.9 is revised to read as follows:

Sec. 381.9 Available U.S.-flag service for 1995.

For purposes of shipping bulk agricultural commodities under

programs administered by sponsoring Federal agencies from U.S. Great

Lakes ports during the 1995 shipping season, if direct U.S.-flag

service, at fair and reasonable rates, is not available at U.S. Great

Lakes ports, a joint service involving a foreign-flag vessel(s)

carrying cargo no farther than a Canadian port(s) or other point(s) on

the Gulf of St. Lawrence, with transshipment via a U.S.-flag privately

owned commercial vessel to the ultimate foreign destination, will be

deemed to comply with the requirement of ``available'' commercial U.S.-

flag service under the Cargo Preference Act of 1954. Shipper agencies

considering bids resulting in the lowest landed cost of transportation

based on U.S.-flag rates and service shall include within the

comparison of U.S.-flag rates and service, for shipments originating in

U.S. Great Lakes ports, through rates (if offered) to a Canadian port

or other point on the Gulf of St. Lawrence and [[Page 24562]] a U.S.-

flag leg for the remainder of the voyage. The ``fair and reasonable''

rate for this mixed service will be determined by considering the U.S.-

flag component under the existing regulations at 46 CFR Part 382 or

383, as appropriate, and incorporating the cost for the foreign-flag

component into the U.S.-flag ``fair and reasonable'' rate in the same

way as the cost of foreign-flag vessels used to lighten U.S.-flag

vessels in the recipient country's territorial waters. Alternatively,

the supplier of the commodity may offer the Cargo FOB Canadian

transshipment point, and MARAD will determine fair and reasonable rates

accordingly.

Dated: May 3, 1995.

By Order of the Maritime Administrator.

Joel Richard,

Secretary, Maritime Administration.

[FR Doc. 95-11272 Filed 5-8-95; 8:45 am]

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