Program for Qualifying Department of Defense (DOD), Air Freight Forwarders

DEPARTMENT OF DEFENSE

Department of the Army

32 CFR Part 619

Program for Qualifying Department of Defense (DOD), Air Freight

Forwarders

AGENCY: Military Traffic Management Command, DOD.

ACTION: Final rule.

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SUMMARY: This final rule adds qualification standards for Air Freight

Forwarders and establishes a change in the basic agreement between the

Military Traffic Management Command and Air Freight Forwarders

requirements.

EFFECTIVE DATE: September 18, 1996.

ADDRESSES: Headquarters, Military Traffic Management Command, ATTN:

MTOP-QQ, 5611 Columbia Pike, Falls Church, VA 22041-5050.

FOR FURTHER INFORMATION CONTACT:

Rick Wirtz, telephone: 703-681-6393.

SUPPLEMENTARY INFORMATION:

a. Background

Basic information on the Carrier Qualification Program was

previously published in the Federal Register, 53 FR 17970, 54 FR 27667,

55 FR 7361, 55 FR 52976 and 56 FR 45895 and 57 FR 11376.

b. Comments and Responses

Comment: Carrier objected to providing a list of carriers with who

they contract, as per paragraph 609.6 of the proposed rule.

Response: MTMC requires this information in the event the carrier

abandons or frustrates the shipment in order to maintain the control to

overrule negative decisions made by the forwarders, if the need should

arise.

Comment: MTMC should not be able to direct forwarders as to which

carriers they can and cannot use.

Response: MTMC is ultimately responsible for the safe and timely

delivery of all DOD cargo. In that capacity this organization retains

the authority to approve or disapprove all carriers hauling federal

freight.

Comment: In general, Air Freight Forwarders do not operate vehicles

and therefore do not normally carry Public Liability Insurance.

Response: Code of Federal Regulations 49 387.9 states carriers for

hire in interstate or foreign commerce (property) must maintain a

minimum limit of $750,000. Due to the volume of carriers that

forwarders do business with, MTMC requires $1,000,000 in liability

insurance. All carriers participating in the movement of DOD freight

will provide this minimum.

Comment: Rules must reflect the fact that Air Freight Forwarders

operate on a released-value basis and do not provide full-value

protection, unless additional transportation charges are paid.

Response: MTMC requires $250,000 per shipment cargo insurance.

Again, due to the high volume of carriers providing transportation

services for the forwarders.

Comment: Performance bonds are redundant since cargo losses and

damages are covered under cargo insurance, and on-time delivery is

covered by reduction in rates to service provided.

Response: The bond secures performance and fulfillment of the

[[Page 49061]]

carrier obligation to deliver DOD freight to destination. It will cover

DOD reprocurement costs as a result of carrier default, abandoned

shipments or bankruptcy. The bond will not be utilized for operational

problems such as late pickup or delivery, excessive transit time,

refusals, no shows, improper/inadequate equipment or claims for lost or

damaged cargo.

Comment: If the forwarder changes his name, the SCAC code is

nullified and the forwarder can no longer participate. All of the other

requirements for notice are really not pertinent and place a paperwork

burden on both the forwarder and the Government.

Response: The NMFTA will, in fact, allow a carrier to change their

company name and still retain the original SCAC. However, HQMTMC does

not allow this within the carrier qualification program.

Comment: Pursuit of claims under Interstate Commerce Act needs

clarification as the Air Freight Forwarders Association is not familiar

with these claims procedures.

Response: An Air Freight Forwarder, whether domestic or

international, is by statute and regulation, an indirect air carrier

and hence is liable as a common carrier.

Executive Order 12219

This rule was reviewed under Executive Order 12291 and the

Secretary of the Army has classified this action as non major. The

effect of the rule on the economy will be less than $100 million.

Regulatory Flexibility Act

This rule has been reviewed with regard to the requirements of the

Regulatory Flexibility Act of 1980 and the Secretary of the Army has

certified that this action does not have a significant impact on a

substantial number of small entities. The objective of the program is

to ensure that DOD obtains safe, dependable, and reliable

transportation services. The requirements are not designed to preclude

participation by small businesses. Rather, they are part of a mechanism

designed to ensure that traffic offered to small businesses does not

exceed their capabilities. The program's reporting and recordkeeping

requirements are essentially administrative in nature and do not demand

significant expenditures of resources such as personnel, computer

equipment, or software. No professional or technical training is

necessary to comply with these requirements. Alternatives to facilitate

entry of small businesses have been identified and implemented.

Paperwork Reduction Act

This rule is approved by the Office of Management and Budget as

required under the requirements of the Paperwork Reduction Act of 1980

(44 U.S.C. 3507).

List of Subjects in CFR Part 619

Common carriers, Freight, Motor vehicle, Safety, Shipping, Trucks.

Accordingly, part 619 of title 32 of the Code of Federal

Regulations is amended by the following changes:

1. The authority citation for part 619 continues to read as

follows:

Authority: 49 U.S.C. 1801-1813, 2503, 2505, 2509.

2. Section 619.1 is amended by revising the first sentence to read

as follows:

Sec. 619.1 Introduction.

Carriers, surface freight forwarders, shipper agents, and air

freight forwarders interested in or remaining qualified will submit

data described in Secs. 619.2 through 619.6 to the appropriate area

command (Bayonne, NJ or Oakland, CA) based on the location of the

carrier's headquarters. * * *

* * * * *

3. Section 619.4 is amended by revising paragraphs (a), (b),

introductory text, and (b)(5) to read as follows:

Sec. 619.4 Insurance-public liability and cargo.

(a) Public liability. Motor carriers, surface freight forwarders,

shipper agents and air freight forwarders will submit proof of public

liability to MTMC on a certificate of insurance form issued by the

insurance company. Expiration dates will not be reflected on the

certificate, the policy must be continuous until canceled. However, the

deductible portion will be shown on the certificate. The insurance

underwriters must be rated in Best's Insurance Guide, or listed in the

Fiscal Service Treasury Department Circular 570, Listing of Surety

Companies. The certificate holder block of the form will indicate that

HQMTMC, 5611 Columbia Pike, Falls Church, Virginia 22041-5050, ATTN:

MTOP-QQ, will be notified, in writing, 30 days in advance of any change

or cancellation. The public liability requirements are specified in 49

CFR 387.9. Surface freight forwarders and shipper agents will submit

proof of $1 million public liability (death and bodily injury, property

damage, and environment restoration).

(b) Cargo. Motor common carriers, surface freight forwarders,

shipper agents and air freight forwarders must have their insurance

company provide a certificate of insurance form. The deductible portion

will be shown on the certificate. The insurance underwriter must have a

policyholder's rating in the Best's Insurance Guide, listed in the

Fiscal Service Treasury Department Circular 570, Listing of Surety

Companies or specifically approved by HQMTMC. DOD's minimum cargo

insurance requirements are listed below.

* * * * *

(5) Surface freight forwarders, shipper agents and air freight

forwarders--$250,000 per shipment.

4. Section 619.6 is amended by revising the introductory text and

paragraph (k) as follows:

Sec. 619.6 Information.

Motor carriers, surface freight forwarders and shipper agents will

provide HQMTMC the following information.

* * * * *

(k) In addition to information contained in (a) through (h) and (j)

above, exempt surface freight forwarders, shipper agents and air

freight forwarders must furnish a listing of the carriers which they

have contract with and intend to use in the movement of government

shipments. Information must include the complete company name, company

officials to include their position and title, home office address,

telephone number, 24-hour emergency point of contact for shipment

status, and FHWA operating authority number of each carrier.

5. Section 619.7 is amended by revising paragraph (d) as follows:

Sec. 619.7 Performance bond.

* * * * *

(d) Surface Freight Forwarders, Shipper Agents and Air Freight

Forwarders. Due to the volume of traffic handled by these modes and the

area normally serviced, the bond amount is set at $100,000.

* * * * *

6. Section 619.8 is revised to read as follows:

Sec. 619.8 Basic Agreement.

Motor carriers, surface freight forwarders, shipper agents and air

freight forwarders meeting the qualification requirements of

Secs. 619.1 through 619.7 will be required to sign the appropriate

Basic Agreement in the appendices to this part.

7. A new Appendix G is added to part 619 of the appendices as

follows:

[[Page 49062]]

Appendix G to Part 619--Agreement Between the Military Traffic

Management Command and Air Freight Forwarders Governing the

Transportation of General Commodities for and on Behalf of the U.S.

Department of Defense

1. The undersigned, who is duly authorized and empowered to act

on behalf of:

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(Name of forwarder, typed or legibly printed)

hereinafter referred to as the Forwarder, as a prerequisite for

consideration for participation in the transport of general

commodities as an exempt Air Freight Forwarder, for the U.S.

Department of Defense (DOD), agree to comply with all requirements,

terms and conditions as set forth in this Agreement. Noncompliance

with any provision of this Agreement will be sufficient grounds for

immediate revocation of the forwarder's privilege to participate in

the movement of DOD freight. For the purpose of this Agreement, an

Air Freight Forwarder is defined as a person or company who acts as

a common carrier. That is, a carrier who holds itself out to the

general public to provide transportation of property for

compensation, assembles and consolidates less-than-truckload

freight, as defined in the Instruction for Preparation of Department

of Defense Standard Tender of Freight Services, MT form 364-4 (and

revisions thereto), Part II, uses for the whole or any part of the

line-haul transportation the services of regulated motor or air

carriers, break bulk and delivers the less-than-truckload freight

holding out in its own name and under its own responsibility a

through transportation service from point of receipt to destination.

2. Approval and Revocation.

a. Forwarder understands that its initial approval and retention

of approval are contingent upon establishing and maintaining to

MTMC's satisfaction, sufficient resources to support its proposed

scope of operations and services. Sufficient resources include

equipment, personnel, facilities, and finances to handle traffic

anticipated by DOD/MTMC under the Forwarder's proposed scope of

operations in accordance with the service requirements of the

shipper.

b. The Forwarder understands that MTMC may revoke approval at

any time upon discovery of grounds for ineligibility or

disqualification.

c. In addition to the initial evaluation, the forwarder agrees

that it will cooperate with MTMC follow-up evaluations at any time

subsequent to signing this Agreement to confirm continued

eligibility.

d. Forwarder agrees and certifies that neither the owners,

company, corporate officials, nor any affiliation or subsidiary

thereof are currently debarred or suspended, disqualified by a MTMC

Carrier Review Board (CRB), or placed in non-use by MTMC from doing

business with DOD.

3. Lawful Performance.

a. Forwarder agrees to comply with all applicable Federal,

State, municipal, and other local laws and regulations. No fines,

charges, or assessments for overloaded vehicles or other violations

of applicable laws and regulations will be passed to or be paid by

any agency of the Federal Government.

b. The Forwarder agrees to keep current and on file a list of

all carriers to be used in the transport of DOD freight shipments.

This list will contain, as a minimum, the company's name, president/

vice president's name(s), operating authority number, corporate

office address, telephone number and a designated 24-hour on call

point of contact in the event of an accident or emergency situation.

MTMC can direct the Forwarder not to use specific carriers in the

movement of DOD freight shipments.

c. Forwarder further agrees and certifies that it will only use

carriers that are approved through the Carrier Qualification Program

(CQP) to transport DOD freight, and will not use any carrier that

had been debarred, suspended by the Government or which has been

placed in nonuse or disqualified any MTMC from doing business with

the DOD for the movement of any DOD freight shipments.

4. Operations. Forwarder agrees and certifies that it is

operating as a forwarder as defined herein. If incorporated,

evidence of incorporation, bearing the official seal of the state in

which filed, Articles of Incorporation, listing all the officers of

the corporation is attached and certified to be true, correct and

current.

5. Insurance.

a. The Forwarder agrees to maintain a minimum of $1 million

public liability insurance and $250,000 cargo insurance for loss and

damage of Government freight. A copy of the certificate of insurance

must be on file with MTMC, ATTN: MTOP-QQ prior to any performance of

service by the forwarder.

b. The insurance, carried in the name of Forwarder, will be in

force at all times while this Agreement is in effect or until such

time as the Forwarder cancels all tenders. Forwarder agrees to

ensure that the policies include a provision requiring the insurer

to notify MTMC prior to any performance of service by the carrier.

The certificate holder block of the form will indicate that MTMC,

5611 Columbia Pike, ATTN: MTOP-QQ, Falls Church, VA 22041-5050, will

be notified in writing, 30 days in advance of any change or

cancellation. The deductible portion will be shown on the

certificate.

c. The insurance underwriter must have a policy holder's rating

in the Best's Insurance Guide, listed in the Fiscal Service Treasury

Department Circular 570, Listing of Surety companies. Self-Insurance

will not be accepted.

6. Performance Bond.

a. Forwarder agrees to provide MTMC with a Performance Bond. The

bond secures performance and fulfillment of the Forwarder's

obligation to deliver DOD freight to destination. It will cover

default, abandoned shipments, bankruptcy and reprocurement costs.

The bond will not be utilized for operational problems such as late

pickup or delivery, excessive transit time, refusals, no shows,

improper or inadequate equipment or claims for lost or damaged

cargo. The bond must be issued by a surety company listed in the

Fiscal Service Treasury Department Circular No. 570. The sum of the

bond shall be no less than $100,000. The bond must be completed on

the form provided by MTMC and will be continuous until cancelled.

MTMC will be notified, in writing, 30 days in advance of any change

or cancellation. A letter of intent (LOI), by the surety company, is

required with the initial application. Upon MTMC approval, the

Forwarder will submit the performance bond before the Tender of

Service will be accepted.

7. Safety.

a. Forwarder agrees not to use any carrier that has an

``unsatisfactory'' safety rating with the Federal Highway

Administration (FHWA), Department of Transportation (DOT), and if it

is an intrastate motor carrier, with the appropriate state agency.

b. Shipments will be delivered in direct service without delay

to the destination shown on the Government Bill of Lading (GBL)

unless consignor or consignee directs diversion of the shipment to a

new or different destination. Deliveries will be made during the

shipper's normal business hours.

c. Forwarder agrees to not divulge any information to

unauthorized persons concerning the nature and movement of any

movement of shipment tendered to it.

d. The Forwarder agrees to notify, within 24-hours, the

consignor and consignee named by GBL or Commercial Bill of Lading

(CBL) of cargo loss, damage, or unusual delay. Information reported

will include origin/destination, GBL/CBL number, shipping paper

information, time and place of occurrence, and other pertinent

details. Upon request, the Forwarder agrees to furnish MTMC a copy

of accident reports submitted to the DOT on Form MCS 50-T

(property).

e. Forwarder agrees to have in place a company-wide safety

management program. Forwarder safety program will comply with

applicable Federal, State and local statutes or requirements. Safety

programs at the company-wide or terminal level may be subject to

evaluation by DOD representatives. The Forwarder further agrees to

permit unannounced safety inspections of its facilities, terminals,

equipment, employees, and procedures by DOD civilian, military

personnel, or DOD contract employees.

8. [Reserved.]

9. Equipment.

a. Forwarder agrees to ensure equipment is spotted for loading

at the time and place requested. Civil Reserve Air Fleet (CRAF)

carriers will be utilized to the maximum extent possible for the

movement of DOD freight. The Government reserves the right to reject

the utilization of any equipment placed for loading by the Forwarder

if it does not, upon inspection meet the specifications and

requirements for the particular shipment involved (sizes, cube,

cleanliness, mechanical condition, etc.).

10. Shipment.

a. Further, the Forwarder agrees to not indulge any information

to unauthorized persons concerning the nature and movement of any

DOD shipment.

11. Documentation.

a. Forwarder agrees to accept GBLs and CBLs on which freight

charges will be paid

[[Page 49063]]

by the Government, and be bound by all terms stated thereon.

b. Forwarder agrees to comply with documentation prelodging

procedures in effect at military terminals in which cargo is

consigned for further movement overseas. (Prelodging is the

submission of advance shipment documents that identify the shipments

to the military terminals prior to arrival of the cargo at the

terminal to permit preparation of the terminal documentation.)

Instructions will be provided by the consignors to furnish certain

data at least 24-hours in advance of cargo arrival at the terminal.

12. Loss and Damage.

a. The Forwarder agrees to be fully liable for delivery of all

cargo in the same condition as received at origin, except loss or

damage caused by an Act of God, public enemy act, omission of

shipper, inherent vice or detrimental changes due to nature of

commodity, or natural shrinkage. Forwarder agrees to settle

promptly, claims for loss or damage. Forwarder also agrees to

provide the status of any shipment tendered to them within 24-hours

after an inquiry is made.

13. Standard Tender of Service.

a. The Forwarder agrees to comply with the preparation and

filing instructions in applicable freight traffic rules publications

issued by MTMC. Forwarder understands that MTMC will reject tenders

not in compliance with these instructions.

b. The Forwarder agrees to publish a street address where the

company office is located in lieu of post office box number. MTMC

must be advised of any change in address. Failure to do so is

grounds to discontinue use of the Forwarders.

c. Forwarder understands that tenders inadvertently accepted and

distributed for use and not in compliance with this Agreement, the

provisions continued in the Standard Tender of Freight Services MT

Form 364-R, or the application MTMC Freight Rules Publication, and

supplements thereof, will be advised when tenders are removed under

these circumstances.

14. Rates.

a. Forwarder agrees to transport Government shipments at the

lowest effective charge named in the tender applicable on the

commodity transported, whether or not the rate tender is referenced

on the GBL.

b. The Forwarder agrees to publish through rates guaranteed for

at least 30 days. These rates must be filed with USTRANSCOM. The

rates for movement of DOD cargo by air will be filed with the Air

Mobility Command (AMC). The Forwarder must publish all rates,

changes, and accessorial services on a DOD Standard Tender of

Freight Services, MT Form 364-R and must comply with the tender

preparation instructions. (Only services annotated with a charge in

the tender will be paid by the shipper.)

c. The Forwarder agrees to promptly refund all uncontested

overcharges to the Government and authorizes the Government to

deduct the amount of overcharges from any amount subsequently found

to be due the Forwarder.

d. The Government reserves the right to pursue administrative

claims directly with Forwarders under the Interstate Commerce Act

(ICC) or other authorities.

15. Carrier Performance.

a. The Forwarder agrees that it's equipment, performance, and

standards of service will conform with its obligations under

Federal, State and local law and regulation as well as with the

guidelines found in the Defense Traffic Regulation (DTR) and this

Agreement. The Forwarder fully understands its obligation to remain

current in its knowledge of service standards. The Forwarder accepts

the Government's right to revoke approval, declare ineligible, non-

use, or disqualify the Forwarder for unsatisfactory service for any

operating deficiency, noncompliance with terms of this Agreement or

terms of any negotiated agreements, tariffs, tenders, bills of

lading or similar arrangements determining the relationship of the

parties, or for the publication or assessment of unreasonable rates,

charges, rules, descriptions, classifications, practices, or other

unreasonable provisions of tariffs and tenders. Rules governing the

Carrier Performance Program (CPP) are found in MTMC Regulation 15-1,

and Army Regulations 55-355 DTMR. If a Forwarder is removed or

disqualified for 6 months or more, it will have to be requalify.

b. Failure or nonperformance by the Forwarder with any of the

terms or conditions of service will constitute a breach of this

Agreement. The Government reserves the right to disqualify the

Forwarder for unsatisfactory service until such time as the

Forwarder establishes, to the satisfaction of DOD that the operating

or other deficienc(ies) have been corrected.

16. General Provisions. That the Forwarder must have a valid

Standard Carrier Alpha Code (SCAC) and use it on all DOD billing

documents to identify the Forwarder. When a company holding the

appropriate authority has operating divisions each with its own

unique SCAC, each such division is required to execute a separate

agreement with MTMC governing the transportation of protected

commodities.

17. Terms of the Agreement.

a. The terms of this Agreement will be applicable to each

shipment.

b. This Agreement shall be effective from the date of

acknowledgment by the MTMC, until terminated upon receipt of written

notice by either party.

c. Nothing in this Agreement will be construed as a guarantee,

by the Government, of any volume traffic.

d. The Forwarder agrees to immediately notify MTMC of any

changes in ownership, in affiliations, executive officers, and/or

board members, and forwarder name. Forwarder understands that

failure to notify MTMC shall be grounds for immediate revocation of

the Forwarder's approval and their participation in the movement of

DOD freight.

18. Additional Specialized Requirements. The terms of this

Agreement will not prevent different or additional requirements with

respect to negotiated agreements or added requirements for other

types of service and/or commodities.

19. Inquiries. Inquiries may be referred to Commander, MTMC,

5611 Columbia Pike, Falls Church, Virginia 22041-5050, ATTN: MTOP-

QQ.

20. Forwarder Acknowledgment and Acceptance.

a. The undersigned forwarder official, by affixing signature

hereto, states that he has read and understands the general and

specific terms and conditions of service outlined and agrees to

provide service in accordance with such terms or conditions. Any

information found to be falsely represented in the Qualification

Form, the attachments or during the qualification procedures, to

include additional requirements of this Agreement, shall be grounds

for automatic revocation of this Agreement and immediate non-use of

the carrier, the affiliated companies, division and entities.

Forwarder's Acknowledge/Acceptance

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(Typed name and title of carrier official)

verify under penalty of perjury, under the laws of the United States

of America, that the information contained in the forwarder

qualification application packet and this Agreement is true, correct

and complete. If representing a company or organization, I certify

that I am qualified and authorized to offer this information. I know

that willful misstatements or omissions of material facts constitute

Federal criminal violations punishable under 18 U.S.C. 1001 by up to

5 years imprisonment and fines up to $10,000 for each offense, or

punishable as perjury under 18 U.S.C. 1621 by fines up to $2,000 or

imprisonment up to 5 years for each offense. Further, I understand

the requirements of this Agreement and on behalf of:

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(Name of forwarder, typed or legibly printed)

comply with the terms and conditions contained herein.

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(Signature of carrier official and title)

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(Signature of agent official and title)

Date:------------------------------------------------------------------

Address:---------------------------------------------------------------

Telephone Number:------------------------------------------------------

24-Hr. Emergency Number:-----------------------------------------------

Military Traffic Management Command Acknowledgment/Acceptance

Signature and Title:

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Date Approved:---------------------------------------------------------

Frederick G. Wirtz,

Traffic Management Specialist, Qualification Division.

[FR Doc. 96-23874 Filed 9-17-96; 8:45 am]

BILLING CODE 3710-08-M