Exemption From Property Tariff-Filing Requirements

DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Parts 221 and 292

[Docket No. 49827]

RIN 2105-AC09

Exemption From Property Tariff-Filing Requirements

AGENCY: Office of the Secretary, DOT.

ACTION: Final rule.

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SUMMARY: The Department is exempting U.S. and foreign air carriers from

their 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 date of effectiveness of the final rule, currently effective

rate tariffs are canceled as a matter of law, pending tariff

applications are dismissed, and new tariffs will not be accepted for

filing. In response to comments, currently effective cargo rules

related to carrier

[[Page 61473]]

rights and/or obligations, set forth in general governing rules

tariffs, may continue in legal effect for 90 days from the date of

effectiveness of the final rule, although carriers may elect to cancel

them earlier and also may deviate from such rules through express

contract. This action is taken on the Department's initiative in order

to streamline government operations and eliminate unjustified

regulatory burdens.

DATES: This regulation is effective on November 30, 1995.

However the cancellation of certain tariffs pursuant to the first

sentence of Sec. 292.22(b) will take place on March 1, 1996.

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, 400 Seventh Street SW., Washington, DC

20590. Telephone: (202) 366-2435.

SUPPLEMENTARY INFORMATION:

Background

Section 41504 of Title 49 of the United States Code 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 and rules for the carriage of cargo.

Over the years, cargo rate tariffs have provided U.S. regulatory

authorities with a means to exercise close regulatory supervision over

cargo pricing, either for consumer protection and other public policy

reasons, or in the context of bilateral aviation relations. While much

less frequent, regulatory supervision of cargo rules was also

occasionally exercised. During the last two decades, however, cargo

tariff requirements have been reduced substantially by both legislative

and regulatory action in favor of placing primary reliance on

competitive market forces to achieve essential public policy

objectives.1 For this and other reasons discussed in our Notice of

Proposed Rulemaking (NPRM), published October 24, 1994 (59 FR 53377),

we have tentatively found that the remaining cargo rate tariffs are no

longer necessary to protect the public interest, and that this tariff

regime is costly and burdensome to everyone associated with it.

\1\ In the cargo area, only international scheduled cargo rate

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 charter rate tariffs were eliminated in 1979 by ER-

1125, 44 FR 33056, June 8, 1979, while 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.

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As discussed in the NPRM, the Department's regulatory policy

regarding international cargo rates appears at 14 CFR Sec. 399.41.

Under this regulation, carrier prices in most international cargo rate

categories are effectively deregulated.2 Barring extreme

circumstances, the only tariff rates over which we continue to exercise

regulatory supervision are general cargo rates (GCRs) up to and

including the 500 kilogram weightbreak, and certain non-standard

``exception'' rates.3 Even this oversight is not applicable to

markets governed by bilateral air transport agreements that establish

liberal entry and pricing regimes.

\2\ Agreements containing international cargo rates that

carriers coordinate through the tariff conferences of the

International Air Transport Association (IATA) must be filed with

and approved by the Department before they can be implemented. These

agreements are subject to economic justification requirements and

Department analysis that are independent of its tariff policy and

procedures. The new rule is not intended to affect the review of

IATA agreements in any way.

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

to 500 kilograms, and established a Standard Foreign Rate Level

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

The SFRL is recalculated 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.

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Since the regulation's adoption in 1983, virtually no complaints

have been received against filed cargo tariffs, and 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 we believe we no longer

need to rely on the routine government supervision of cargo tariffs to

protect the public.

Yet, carriers are still filing, and we are still processing,

thousands of pages of tariff material each year that has little, if

any, meaningful regulatory consequence.4 Requiring carriers to

continue filing cargo tariffs thus burdens the industry unnecessarily,

and continuing the physical processing and storage of such tariffs at

the Department needlessly wastes scarce and diminishing governmental

resources.

\4\ In 1994 alone, we received and processed 9,721 pages of

cargo tariffs.

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We have therefore proposed to amend our tariff regulations to end

the routine filing and review of price and other tariff information

relating to the scheduled foreign air transportation of cargo, i.e. to/

from U.S. points. As in the case of the previous elimination of

domestic and other cargo tariffs, this proposal would take the form of

an exemption of U.S. and foreign carriers from their statutory and

regulatory duty to file with the Department, and adhere to, tariffs

containing rates or any other rules or conditions of service relating

to such transportation. The exemption would encompass all material

currently filed in international cargo tariffs with the

Department.5 Similarly, the exemption would be mandatory; it would

not permit such filings. However, the duty to file tariffs in any

respect could be reimposed in particular cases where consistent with

the public interest.

\5\ Part 221 provides for the filing of up to four seperate

kinds of international cargo tariffs: rates tariffs, governing rules

tariffs, rate classification tariffs, and restricted articles

tariffs.

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Comments

We received comments on our proposal from Aeromexpress, S.A. de

C.V.; the Air Freight Association (AFA); the Air Transport Association

of America (ATA); American Airlines, Inc. (American); Athearn

Transportation Consultants, Inc. (Athearn); British Airways PLC (BA);

Evergreen International Airlines, Inc. (Evergreen); Haupauge Industrial

Association (HIA); the International Air Transport Association (IATA);

International Support Systems (ISS); Korean Air Lines, Co. (KAL);

Nippon Cargo Airlines Co., Ltd. (Nippon); Ocean Freight Consultants,

Inc. (OFC); Pakistan International Airlines (PIA); and United Air

Lines, Inc. (UAL).

In general, the carriers, ATA and AFA support the proposal; IATA

takes no position on the elimination of the requirement to file rate

tariffs, but supports the continued filing of cargo rules tariffs; HIA

wants the Department to require carriers to make information on their

cargo rates available to shippers within a reasonable amount of time;

and Athearn, ISS and OFC oppose the proposal in its entirety.

ATA, AFA, and several carriers, however, condition their support

upon several modifications or clarifications to the proposal regarding

(1) its effect on their ability to incorporate contract terms by

reference and/or provide requisite public notice, and (2) its effect

[[Page 61474]]

on federal preemption of State law governing contracts or the

regulation of common carriers. Their position on both issues coincides

in certain fundamental respects with IATA's reasons for urging the

continued filing of cargo rules tariffs, and therefore we will discuss

these comments together. Then we will address the arguments of the

parties who support the continuation of cargo rates tariffs as well.

Decision

We have decided to adopt the NPRM substantially as proposed.

However, we are making certain minor changes in response to the

comments. First, as a transition measure, we will permit the carriers

to maintain in effect as official tariffs their current rules relating

to the general conditions of carriage,6 for a period of up to

ninety days, in order to maintain the legal framework for current

contracts while the carriers are drafting new language for air waybill

and/or other documents to provide acceptable forms of actual notice to

shippers of such terms. We do not find a similar transitional need for

cargo rate tariffs, including related applicability rules,7

because pricing is a key term negotiated and stated in every contract.

At the same time, we are providing expressly that carriers may cancel

any or all rules tariffs prior to 90 days, and that they may deviate

from any filed rules by express contract provision. Second, we are

providing explicitly that carrier compliance with the notice

requirements set forth in 14 CFR 221.177 permits incorporation of

contract terms as a matter of federal law, and that such requirements

supercede any contrary State contract law requirements relating to

incorporation by reference. On the other hand, we are also making clear

that terms cannot be enforced against shippers without proper notice.

We also make explicit, in our discussion below, that this cargo tariff

exemption is not intended to undermine in any respect the scope of the

statutory preemption of State economic regulation provided under 49

U.S.C. 41713.

\6\ This would include all rules in separate governing rules

tariffs and separate restricted articles tariffs.

\7\ This would include rate ``classification'' tariffs, which,

as IATA notes, may be filed in the rate tariffs or separately.

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We find that this final rule should be made effective immediately

upon publication in the Federal Register because it grants an exemption

from costly regulatory burdens and relieves certain restrictions.

Discussion of Comments and Issues

1. Notice. Most of the concerns raised by our proposal involve the

issue of legal notice of contract terms. While taking no position on

the elimination of the requirement to file cargo rate tariffs, IATA

contends that the proposed rule should be amended to permit the

continued filing of cargo rules tariffs governing such matters as

consignments, liability for loss, claims procedures, handling of

dangerous or other restricted goods, acceptability of cargo, and other

general matters of concern to shippers of cargo to/from U.S. points. It

argues primarily that such rules should continue to be deemed a part of

each contract of carriage as a matter of tariff law, regardless of any

actual notice to shippers of their existence or content.8 ATA,

AFA, American and United support the elimination of all official

tariffs, but want the proposed rule amended or clarified so that a

carrier's continued publication of its cargo tariffs or the ``filing of

its rates and rules with a named tariff publishing agent'' will

``provide constructive notice to the public of their contents.'' 9

In the alternative, ATA and American request that cargo tariffs be

permitted to remain in effect for 180 days in order to allow carriers

to revise existing air waybill language to provide adequate notice of

all contract terms. British Airways requests at least a 90-day

transition period, paralleling the action of the Civil Aeronautics

Board (CAB) in eliminating charter tariffs, forwarder tariffs and

carrier tariffs for domestic cargo transportation.

\8\ See, e.g. Slick Airways, Inc. v. U.S., 292 F. 2d 515 (1961).

\9\ ATA comments, page 3.

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IATA joins ATA, American and British Airways in arguing that an

immediate elimination of official rules tariffs will cause a disruption

in the administration of existing contracts because most waybills state

only generally that carriage is subject to the carrier's ``applicable

tariffs.'' 10 We are persuaded, as was the CAB in taking similar

actions, that a brief transition period of 90 days is justified to

permit clarification of any existing contracts that may be rendered

ambiguous by reference to rules tariffs no longer officially on file

with the Department and to facilitate the redrafting of waybills and

other contract documents to provide acceptable actual notice of any

missing terms, whether through incorporation by reference or otherwise.

A longer period may cause confusion and appears unnecessary. Carriers

are neither required nor expected to completely replace their current

waybill stock in this 90-day period. The period should be sufficient,

however, for them to print notices or other supplemental contractual

materials to conform such stock to the new environment until it can be

replaced. Carriers needing less time should be able to cancel their

rules tariffs when ready, while no carrier should be bound to tariffs

on file during the transition where negotiations with shippers suggest

a different result.

\10\ The argument presumes that such a general reference would

not constitute a valid ``incorporation by reference'' of tariff

provisions into the contract of carriage under State contract law,

nor would it fully comply with the Department's notice regulations

in 14 CFR Part 221. Without the specificity of certain tariff

provisions, these parties contend, the waybill contract might be

rendered ambiguous or uncertain.

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IATA argues that in the longer term eliminating rules tariffs will

not only force carriers to incur the cost of redrafting waybills or

other contract documents to provide adequate forms of notice of

contract terms, but also that efforts to incorporate terms by reference

could engender litigation under State contract law. It also contends

that many matters not now subject to direct carrier-shipper negotiation

would become so, with the effect of reducing uniformity among carriers,

complicating transactions, and hindering the introduction of a

paperless ``electronic data interface.'' In IATA's view, such burdens

greatly outweigh the perceived cost savings related to the elimination

of rules which assertedly change infrequently and impose relatively few

administrative costs on DOT and filing parties. IATA contends that the

Department's ``narrow cost-benefit analysis'' fails to recognize that

the tariff system provides the most efficient means of establishing

uniform, binding and predictable contract conditions of carriage, and

that therefore the Department has failed to demonstrate that the

exemption is ``compelled'' by the public interest.

At the outset, we note that IATA's position contains two

fundamental errors. First, the filing of rules tariffs is not a

statutory requirement. Rather, rules are to be filed to the extent that

the Secretary requires by regulation. It is sufficient to find that the

continued filing and review of such tariffs can no longer be justified

by the public interest factors underlying the promulgation of the

original filing requirement in Part 221, which is certainly the case.

Secondly, we do not presume that carriers will cease publishing their

rates and rules in tariff-like formats. To the contrary, we assume that

the carriers will continue to promulgate, publish and disseminate,

directly or through

[[Page 61475]]

agents, a number of documents containing both rules and rates, as

indicated by ATA, American and United. In addition to foreign tariff-

filing requirements, the carriers indicate that such publications are

necessary to reach potential customers and to incorporate terms into

the waybill by reference, where necessary.

IATA's characterization of constructive notice of official tariff

material as more ``efficient'' than the forms of actual notice that

have been used successfully where cargo tariffs have been eliminated

is, in our view, questionable. More fundamentally, its emphasis on

official tariffs as a means to produce ``uniformity'' among carrier

rules ignores many of the considerations of procompetitive and market-

oriented public policy that underlay previous reductions in filing

requirements. Those considerations are equally present here and form an

additional basis for our conclusion that the continued filing of

international cargo rates and rules tariffs is no longer in the public

interest.

Most of IATA's arguments relating to the long-run desirability of

maintaining constructive notice of cargo rules through filed tariffs

are similar to those found unpersuasive by the Civil Aeronautics Board

when it eliminated domestic cargo tariffs and international air freight

forwarder tariffs.11 More importantly, IATA has not effectively

challenged the reasons given in the NPRM for concluding that the

elimination of filed tariffs should have no significant impact on the

ability of carriers and shippers to deal with the general terms and

conditions of carriage.

\11\ Moreover, when it adopted uniform rules for incorporation

by reference of domestic passenger conditions in 14 CFR Part 253,

the CAB found that insufficient grounds had been presented to

warrant extending those rules to domestic cargo transportation.

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Thus, the NPRM noted that domestic cargo tariffs were eliminated

without significant difficulty; that international forwarder tariffs

were eliminated in 1979 with no apparent adverse effect on the

forwarders' ability to do business with their customers, many of whom

are smaller shippers; that most international small shipper traffic is

handled by large forwarder intermediaries and small package specialists

who are familiar with direct carrier services and are able to negotiate

the best price/service options; that most areas of potential carrier

and shipper concern are governed directly by provisions of the Warsaw

Convention and that, largely as a result of its requirements, the basic

conditions of service for international cargo transportation are

already stated in the carriers' waybills; and that 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. IATA has not demonstrated that the

elimination of cargo rules tariffs in the past has created any of the

longer-term difficulties it describes, nor has it even alleged that to

be the case. Moreover, IATA does not address the fact that domestic

cargo carriers have functioned effectively without the presumed

advantage of federal incorporation rules, since 14 CFR Part 253 was

limited to passenger transportation. All general conditions of domestic

carriage are either fully stated on contract documents or are

incorporated by reference to other sources accessable to shippers

without apparent significant risk of challenge under State contract law

requirements.12

\12\ A typical domestic waybill incorporates by reference the

``rates, rules and classifications set forth in the most recent

Official Airline Cargo Rate Tariff,'' an unofficial carrier

document. All other terms and conditions are stated on the waybill.

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While IATA and AFA both assert that international rates,

classifications, and rules are more complex than domestic ones, they

have not cited significant differences, nor have they indicated how

current international waybills or other transportation documents would

need to be revised to provide sufficient actual notice of all necessary

conditions of carriage.13 AFA has not discussed examples of

revisions required by the elimination of international forwarder

tariffs in 1979. Moreover, no party has challenged the Department's

observation that international waybills are already drafted with

considerable specificity to accommodate the detailed requirements of

the Warsaw Convention, which governs major elements of the contract of

carriage regardless of the existence of filed tariffs, as well as other

important matters. Indeed, of the important general rules cited by

IATA, all are governed by the Warsaw Convention and are dealt with

specifically in the IATA waybill, which is a model for many

carriers.14

\13\ IATA claims that the development of ``paperless

transactions'' will suffer, but does not explain how the electronic

medium is any less adapted to providing information, including

requisite notice, than the paper medium. The incorporation by

reference rules in 14 CFR 221.177 already contemplate notice through

electronic media.

\14\ The IATA waybill states that carriage is subject to the

Warsaw Convention, and, where not in conflict with it, to the

carrier's ``general conditions of carriage,'' applicable domestic

laws and regulations, and ``applicable tariffs'' of such carrier.

Tariffs, which are not necessarily filed officially in many

countries, are at most one of several means of supplementing the

basic conditions of contract.

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There is therefore no record basis for concluding that the

elimination of international cargo rules tariffs will impose

significant economic or administrative burdens on carriers or shippers.

However, the NPRM noted that, to the extent that tariffs might set

forth certain conditions of carriage in greater detail than does the

current waybill, such details could be incorporated into the contract

if notice is given in conformity with the Department's alternative

posting requirements in 14 CFR Sec. 221.177, which are incorporation-

by-reference standards essentially identical to those provided for

domestic passenger transportation by 14 CFR Part 253.15 In giving

the carriers an alternative to the paper tariff notice requirement,

which most had found difficult to comply with, it was the Department's

intention to shift from a constructive to an actual notice system

consonent with contract principles. To the extent that carriers wish to

rely upon such an incorporation mechanism for cargo, Part 221.177 is

already in place and it is likely that some, if not many, carriers are

already complying with its graduated notice provisions in preference to

the earlier requirement in Part 221.170 that complete paper tariffs be

made available for inspection at each sales office.

\15\ Under section 221.177, carriers must give written notice,

on or with the waybill or other contract instrument, that the

contract of carriage may include terms incorporated by law from

public tariffs or by reference from other sources; that the customer

may inspect the full text of such terms at any carrier sales office

and request a mailed copy thereof; and that the customer may receive

an immediate explanation of any terms covering carrier liability

limits, claims restrictions, service modification rights, or

contract modification rights. In addition, direct written notice of

the salient features of incorporated terms that restrict refunds,

impose monetary penalties, or permit price changes must be provided

on or with the waybill or other contract instrument.

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While ATA, AFA, American and United support the elimination of all

official tariffs in favor of an incorporation by reference mechanism,

they request that the final rule make the provisions of section 221.177

more explicit in certain respects, including a specific request by ATA,

AFA and United that carriers be authorized to incorporate terms and

conditions of service included in a ``tariff'' published either

individually or through a recognized and identified agent. All four

commenters, plus IATA, emphasize a need for assurance that carrier

reliance upon federal incorporation by reference requirements will be

protected from challenge under possibly divergent State law

requirements.

AFA questions whether the provisions of 14 CFR Sec. 221.177 permit

[[Page 61476]]

the incorporation by reference of material filed in unofficial carrier

tariffs or other documents, since the current language of subsection

221.177(b)(1) refers to notice of the possible incorporation of ``terms

and conditions filed in public tariffs with U.S. authorities.''

Supporting ATA's request, AFA suggests that this reference be changed

to cover unofficial tariffs filed with a recognized tariff publishing

agent, or that a similar provision be made in proposed Part 292.

While the NPRM proposed a ``rule of construction'' in section

292.20 which would implicitly permit such incorporation by reference,

subject to the various specific notice requirements set forth in

section 221.177, we agree with the commenters that the final rule

should be clarified in this and several other respects. We have decided

to add provisions to Part 292 which will expressly authorize carriers

exempt from filing tariffs under that Part to incorporate any terms by

reference into their contracts for the carriage of cargo in scheduled

foreign air transportation upon compliance with all of the notice,

inspection, explanation and other requirements set forth in section

221.177.16 Completing the basic parallel to 14 CFR Part 253, we

will also expressly provide that shippers are not bound by incorporated

terms unless the carrier complies with such requirements, and that the

requirements are intended to preempt any State requirements governing

incorporation of contract terms by reference. The NPRM contained a

similar preemption statement in the explanatory section, but, given the

concerns of the carriers and AFA on this subject, we will clarify our

intention in Part 292 itself.

\16\ Amending section 221.177 itself is neither necessary nor

desirable, since tariff-filing requirements could be reimposed in

specific cases. To correct ambiguities in existing language, it is

sufficient to provide in Part 292 that the sign required by

subsection 221.177(a)(3) is not required of exempt carriers, and

that notices required of such carriers under subsection 221.177(b)

shall refer to the title or general nature of the publication or

document containing the referenced terms rather than to ``terms and

conditions filed in public tariffs with U.S. authorities.'' See

section 292.21(a)(1).

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At the same time, we are not prepared to consider weakening the

notice requirements contained in Section 221.177 to further simplify

incorporation by reference of terms for cargo carriage. The graduated

system of written notice and right of immediate inspection for most

general terms coupled with direct notice and/or a right to immediate

explanation of certain more important terms constitutes a deliberate

balance between ease of contract formation and the importance of

informed assent. Once on actual notice that terms may be incorporated

by reference, the customer is under an obligation to inquire and

understand them. A general desire to minimize necessary modifications

to existing waybills is not, in our view, a justification for modifying

this balance.17

\17\ Moreover, a DOT rule defining tariffs published by carriers

or their agents as ``official,'' ``filed,'' ``applicable'' or any

other term suggesting legal effect in order to accommodate existing

waybill language would be potentially misleading.

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American, and to some extent United, are also concerned that

carriers will continue to face a public notice requirement that is

currently satisfied by the filing of tariffs. American points to the

statement in the NPRM that 14 CFR Part 249 and section 221.177 will

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. The

carriers have apparently misunderstood the scope of that statement,

which was a narrow reference to the record retention requirements of

Part 249 and the notice provisions of section 221.177 applicable solely

in cases of incorporation by reference.18 We construe the term

``tariff information'' in section 221.170 to mean tariffs filed with

the Department. Thus, in their absence, there is no general ``duty'' to

make such information public. Our experience with the elimination of

domestic cargo tariffs and other tariffs has demonstrated clearly that

carriers have ample marketplace incentives to disseminate their rates

and rules as broadly as possible, and that the threat of administrative

enforcement action to compel a general duty in this regard has little

influence. Similarly, our experience has been that carriers have strong

economic incentives to maintain evidence of past rates and rules, as

well as specific waybills beyond the time requirement of Part 249, as a

defense against litigation. Such evidence is discoverable by other

parties in the event of litigation. Therefore, we have not proposed a

general public notice requirement for exempted carriers, nor have the

comments persuaded us that one is necessary.

\18\ Where no incorporation of rules by reference to unofficial

sources is made, shippers will have direct notice of all contract of

carriage terms on the waybill or other accompanying document.

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2. Preemption. In addition to the requests of ATA, AFA, American,

United, and IATA that the final rule make as clear as possible that

State contract law requirements governing incorporation by reference

differing from those in 14 CFR Sec. 221.177 are preempted, several of

these commenters have also expressed concern that the tariff exemption

itself might be construed by some courts as evidence that State

regulatory requirements might have increased applicability to airline

activities. We do not believe such a concern to be well founded. While

the legal effect of filed tariffs was at one time an important element

in the consideration of the scope of federal preemption by the courts,

Congress in 1978 adopted a broad preemption provision protecting the

``rates, routes and services'' of carriers with federal authority

19 in anticipation of the statutory sunset of domestic tariffs and

other public utility regulation. The statute has been given a broad

reading by the courts, most recently in American Airlines, Inc. v.

Wolens, 115 S. Ct. 817, 130 L. Ed. 2d 63 (1995). IATA's argument that

the absence of a federal rules tariff facility ``actively supervised by

the Department'' may generate unnecessary and costly litigation over

both State contract and public utility law requirements ignores the

fact that domestic cargo carriage has flourished without the benefit of

either filed tariffs or federal incorporation rules for well over a

decade. As noted above, domestic waybills do make some use of

incorporation by reference. Some litigation may be inevitable in this

area, in part because the statute also preserves many remedies at

common law. However, we see no reason to assume that the elimination of

the tariff requirement for cargo rules will result in an increased risk

of litigation for the carriers.

\19\ Now codified as 49 U.S.C. 41713.

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3. Rates and other issues. Athearn, ISS and OFC, shipping

consultants which, as part of their services, audit international

shipping invoices to determine if their customers have been properly

charged, all oppose the proposal.20 In general, they contend that

the proposal will deny shippers and/or their auditors the only assured,

complete source of factual information on international carrier rates

and rules; that carriers are reluctant to provide customers with

precise rate information while cargo agents, whose commissions are

based on gross sales, will not always quote the best rates; that

existing alternative sources of tariff information,

[[Page 61477]]

such as The Air Cargo Tariff (TACT), are inadequate since they are

infrequently issued and incomplete; that these sources often do not

include all rates available, especially the lowest ones; and that

shipper costs will increase due to de facto cargo rate increases.

\20\ OFC also seeks an extension of the comment period, arguing

that the proposal has not been well publicized among the shipping

community. We do not believe such an extension to be necessary. The

NPRM was published in the Federal Register, which is legal notice,

and the breadth of the comments received indicates industry

awareness of the proposal.

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In addition, the shipping consultants assert that, because these

tariffs are a matter of public record, they also serve to protect

unsophisticated shippers by discouraging carriers from engaging in

unreasonable practices and charging unfair rates; that the proposal

will undermine this public benefit, which facilitates the recovery of

thousands of dollars annually from overcharges; that the elimination of

easily monitored, published tariffs, defining carriers' maximum rates,

would increase forwarders' opportunities for misrating; and that

without filed tariffs, shippers will lose their ability to apply

reasonable controls on shipping expenses.21

\21\ OFC asks that any final rule give shippers access to the

Department's resources so as to ensure that carriers will furnish

complete information on their cargo rates and rules to shippers on

request and within a reasonable amount of time. We do not believe

this to be necessary. Normal contract law has the tools needed to

accomplish these goals.

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ISS contends that the lack of complaints indicates that the current

system is working, and provides important protection to consumers; and

that while many shipments tendered by large volume forwarders or

``consolidators'' are governed by negotiated ``contract rates,'' most

of the air waybills issued by forwarders acting as carrier agents are

governed by filed tariffs and are often misrated. Athearn contends that

the Department has overstated the proposal's cost savings since, even

with the exemption, carriers will still bear the costs of disseminating

their prices. If the Department needs to reduce costs, it should

recognize that paper tariffs are obsolete, and explore converting them

to less expensive electronic media so that they will continue to be

available to the public at one central location.

These commenters have not substantiated their basic contention that

filed tariffs are an essential source of pricing information that is

not, or will not be, available to shippers through normal marketplace

incentives and mechanisms. Notwithstanding the contrary experience

following domestic cargo and international forwarder tariff

deregulation, Athern states that it is ``questionable'' whether

carriers will continue to publish and routinely make available to the

public the comprehensive rate information contained in tariffs.

However, Athern also states that the general source of international

rate information for forwarders today is the unofficial memorandum

tariff identified as TACT, and further that ``because most rates have

been available through tariff publication firms, there has not been the

need by shippers or their auditors to deal with each carrier.'' This

corresponds with the Department's experience that very few requests are

received each year from the public for certified copies of present or

past cargo tariffs, as well as with our findings in support of the

alternative notice requirement in 14 CFR 221.177 that most carrier

tariffs maintained at sales offices were incomplete, inaccessible and

infrequently used by the public.22 In general, both the CAB and

the Department have found that filed tariffs are not an effective means

of informing the public of a carrier's prices and services. The airline

commenters in this proceeding agree, affirming that they will continue

to publish international rates and rules in formats similar to those

used now for both legal and promotional reasons.23

\22\ 53 FR 52677, December 29, 1988.

\23\ IATA also concurs that shippers and interested agent/

intermediaries can access applicable rates directly from carriers

``as efficiently as through tariff filings.''

---------------------------------------------------------------------------

Finally, the rate consultants have not substantiated their

contentions that tariff-filing discourages unreasonable carrier

practices and prices, and acts as a necessary check on ``misrating.''

As the Department has found, it is competition in the marketplace, not

the filing of tariffs or the Department's substantive review policies,

that keeps prices and practices within reasonable bounds. The concepts

of ``overcharging'' and ``misrating'' used by these commenters have

meaning only in the context of approved tariffs, not the free

marketplace where shippers are free to negotiate the best deal for each

contract and may be expected to place their business with carriers and/

or agents that provide the best information and the best rate options.

It is this competition and this freedom to negotiate which provides the

greatest economic benefits to the shipping public. The rate consultants

have provided no sound basis for their argument that cargo tariffs

should continue to be required.

Regulatory Analyses and Notices

Executive Order 12866 and DOT Regulatory Policies and Procedures

The Department has determined that this rule is not significant

under Executive Order 12866 and 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 regulatory burden, without imposing other requirements.

This rule could result in net savings to the airlines of approximately

$600,000 per year.

Executive Order 12612

This final rule 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 will not have a significant economic

impact on a substantial number of small entities, because 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 rule eliminates

information collection requirements that require the approval of the

Office of Management and Budget pursuant to the Act. This proposal

reduces paperwork burdens, as described in detail in the Regulatory

Evaluation in this docket.

The implementation of these regulations will reduce tariff filings

of cargo rates, rules and charges by almost 10,000 cargo tariff pages

and about 200 Cargo Special Tariff Permission Applications (STPA's)

filed each year, saving the air carriers a filing fee of $2 a cargo

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

double-sided pages for each STPA form).

Such filing fees, now paid to DOT, total about $22,400 or less

annually. In addition, ATPCO charges carriers $18 for preparing each

STPA for submission to the Department, which amounts to an additional

$3,600 per year for an average of 200 STPA's.

Air carriers and their cargo filing agents also will avoid the

burden of filing the tariffs with DOT, estimated to be about 5.34 hours

for each of the 10,200 cargo tariff pages and STPA

[[Page 61478]]

forms, or about 54,468 burden hours, which at an estimated industry

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

approximately $566,467.

In addition, other costs incurred by carriers to formulate and

disseminate the cargo rate and rule pages to their customers (by the

air carriers or their agent, such as the Airline Tariff Publishing

Company (ATPCO) or Cargo Rate Services (CRS)) may be affected.

Elimination of government filing may favorably affect some portion of

their overall cost other than the DOT filing fee; for instance, $48 for

an international cargo tariff page publication/distribution cost in

1994 by the Airline Tariff Publishing Company (ATPCO) in Cargo Tariff

Bulletin No. 19, dated November 18, 1993.

The reporting and recordkeeping requirements associated with this

rule are being submitted to OMB for approval in accordance with 44

U.S.C. chapter 35 under OMB NO. 2137-AC48; Administration: Department

of Transportation; TITLE: Exemption From Property Tariff-Filing

Requirements; NEED FOR INFORMATION: Exempts a data page filing

requirement; PROPOSED USE OF INFORMATION: Exemption is based on ``de

minimis'' regulatory use; FREQUENCY: Currently, an initial tariff

filing is required of each respondent; changes are voluntary, whenever

an air carrier elects; BURDEN ESTIMATE: 5.34 hours for an STPA or a

cargo rate page; RESPONDENTS: 45; FORM(S): 10,200 pages or forms per

annum; AVERAGE BURDEN HOURS PER RESPONDENT: 1,210 hours.

For further information on paperwork reduction contact: The

Information Requirements Division, M-34, Office of the Secretary of

Transportation, 400 Seventh Street SW., Washington, D.C. 20590, (202)

366-4735 or Edward Clarke, Office of Management and Budget, New

Executive Office Building, Room 3228, Washington, D.C. 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 International Aviation, X-

40, U.S. Department of Transportation, Office of the Secretary, 400

Seventh Street SW., Room 6402, Washington, D.C. 20590-0001 as well as

the above contact.

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 rates and fares, Freight, Reporting and recordkeeping

requirements.

14 CFR Part 292

Air rates and fares, Freight, Reporting and recordkeeping

requirements, Preemption.

For the reasons set forth herein, and under the authority delegated

in 49 CFR 1.56(j)(2)(ii), the Department of Transportation amends 14

CFR Part 221 and adds a new Part 292 as follows:

PART 221--TARIFFS

1. The authority citation for Part 221 is revised 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.

2. Section 221.3 is amended by removing the period at the end of

paragraph (d)(8) and adding a semicolon in its place, and by adding a

new paragraph (d)(9) to read as follows:

Sec. 221.3 Carrier's duty.

* * * * *

(d) * * *

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

provided in 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 Tariffs

292.10 Exemption.

292.11 Revocation of exemption.

Subpart C--Effect of Exemption

292.20 Rule of construction.

292.21 Incorporation of contract terms by reference.

292.22 Effectiveness of tariffs on file.

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. 291.1 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:

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.

Direct air carrier means an air carrier or foreign air carrier

directly engaged in the operation of aircraft under a certificate,

regulation, order, exemption or permit issued by the Department or its

predecessor, the Civil Aeronautics Board.

Subpart B--Exemption From Filing Tariffs

Sec. 292.10 Exemption.

Direct air carriers are exempted from the requirement to file cargo

tariffs with the Department of Transportation provided in 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,

immediately and without hearing, 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) Any such action will be taken in an order issued by the

Assistant Secretary for Aviation and International Affairs, and will

identify:

(1) The tariff matter to be filed; and

(2) The deadline for carrier compliance.

(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

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 or 14 CFR part

221, except as provided in Sec. 292.21 of this part.

Sec. 292.21 Incorporation of contract terms by reference.

(a) Carriers holding an effective exemption from the duty to file

tariffs under this part may incorporate contract

[[Page 61479]]

terms by reference (i.e. without stating their full text) into the

waybill or other document embodying the contract of carriage for the

scheduled transportation of cargo in foreign air transportation,

provided that:

(1) The notice, inspection, explanation and other requirements set

forth in 14 CFR 221.177(a)(1), (a)(2), (a)(4), (b), (c) and (d) are

complied with, to the extent applicable, except that the notice

required under 14 CFR 221.177(b)(1) shall refer to the title or general

nature of the publication(s) or document(s) containing the full text of

the referenced terms rather than to ``terms and conditions filed in

public tariffs with U.S. authorities'';

(b) In addition to other remedies at law, a carrier may not claim

the benefit as against a shipper or consignee of, and a shipper or

consignee shall not be bound by, any contract term which is

incorporated by reference under this part unless the requirements of

paragraph (a)(1) of this section are complied with, to the extent

applicable; and

(c) The purpose of this section is to set uniform disclosure

requirements, which preempt any State requirements on the same subject,

for terms incorporated by reference into contracts of carriage for the

scheduled transportation of cargo in foreign air transportation.

Sec. 292.22 Effectiveness of tariffs on file.

(a) Cargo rate tariffs on file with the Department, including

related classification and/or applicability rules, cease to be

effective as tariffs under 49 U.S.C. 41504 and 41510, as well as under

the provisions of 14 CFR Part 221, and they are canceled by operation

of law.

(b) As of March 1, 1996, all remaining cargo tariffs on file with

the Department cease to be effective as tariffs under 49 USC 41504 and

the provisions of 14 CFR part 221, and are cancelled by operation of

law. Any such tariffs may be cancelled voluntarily prior to that date.

With respect to terms expressly agreed in the contract of carriage,

carriers, agents and other persons are relieved from the requirement of

adherence to filed tariffs in 49 USC 41510 and the related provisions

of 14 CFR part 221 as of November 30, 1995.

(c) Applications for filing and/or effectiveness of any cargo

tariffs pending on November 30, 1995 are dismissed by operation of law.

No new filings or applications will be permitted except as provided

under Sec. 292.11.

Issued in Washington, D.C. on November 13, 1995.

Patrick V. Murphy,

Deputy Assistant Secretary for Aviation and International Affairs.

[FR Doc. 95-28474 Filed 11-29-95; 8:45 am]

BILLING CODE 4910-62-P