Criteria for Granting Waivers of Requirement for Exclusive U.S.- Flag Vessel Carriage of Certain Export Cargoes

DEPARTMENT OF TRANSPORTATION

Maritime Administration

46 CFR Part 384

[Docket No. R-166]

RIN 2133-AB26

Criteria for Granting Waivers of Requirement for Exclusive U.S.-

Flag Vessel Carriage of Certain Export Cargoes

AGENCY: Maritime Administration, Department of Transportation.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The Maritime Administration (MARAD) is soliciting public

comment concerning whether MARAD should amend its existing criteria and

methodologies for granting waivers of the requirement for U.S.-flag

vessel carriage of cargo covered by Public Resolution 17, 33rd

Congress, 46 App. U.S.C. 1241-1 (PR 17), and if so, what the new

procedures should be.

DATES: Comments must be received on or before December 27, 1996.

ADDRESSES: Comments should be sent to the Secretary, Maritime

Administration, Room 7210, 400 7th St., S.W., Washington, DC 20590.

Comments will become part of this docket and will be available for

inspection or copying at the above address during normal business

hours.

FOR FURTHER INFORMATION CONTACT: James J. Zok, Associate Administrator

for Ship Financial Assistance and Cargo Preference, Maritime

Administration, Washington, DC 20590. Telephone (202) 366-0364.

SUPPLEMENTARY INFORMATION: PR 17 reads:

Resolved by the Senate and the House of Representatives of the

United States of America in Congress assembled, That it is the sense

of Congress that in any loans made by any instrumentality of the

Government to foster the exporting of agricultural or other

products, provision shall be made that such products shall be

carried exclusively in vessels of the United States, unless, as to

any or all of such products, the Secretary of Transportation, after

investigation, shall certify to the instrumentality of the

Government that vessels of the United States are not available in

sufficient numbers, or in sufficient tonnage capacity, or on

necessary sailing schedule or at reasonable rates.

The reservation of such cargoes for the U.S.-flag merchant marine

helps support a vital national asset which is necessary in times of war

or national emergency, and in peacetime provides essential service to

ensure the continued flow of foreign water-borne commerce.

In 1934 (37 Op. A.G. 546), and again in 1965 (42 Op. A.G. 301), the

Attorney General concluded that PR 17 does not impose a mandatory

requirement and is therefore not violated by the granting of waivers.

MARAD's current policy on granting waivers was first published in Pike

& Fischer's Shipping Regulation Report (at para. 501) in 1959. The

Export-Import Bank (Exim Bank) is the principal agency generating

export cargo subject to PR 17.

Under MARAD's existing policy, two types of waivers are granted.

The first, called a ``general'' waiver, is granted to allow the

national flag vessels of the recipient country to carry 50 percent of

the cargo. The condition for receiving a general waiver is that the

recipient country not maintain discriminatory policies detrimental to

U.S.-flag vessels.

MARAD has long held that the Cargo Preference Act of 1954, 46 App.

U.S.C. 1241(b) ('54 Act), is applicable to Exim Bank financed cargoes

and must be read together with PR 17. The '54 Act applies ``whenever

the United States * * * shall advance funds or credits.'' (See 152 Gen.

Counsel Op. 107 (May 15, 1970)). The '54 Act requires that 50 percent

of the gross tonnage of all cargoes subject to the Act shall be

transported on privately-owned U.S.-flag commercial vessels, to the

extent such vessels are available at fair and reasonable rates for

U.S.-flag commercial vessels. Thus, general waivers under PR 17 may not

be granted in excess of 50 percent.

The second type of waiver is called a ``statutory'' or ``non-

availability'' waiver. MARAD's policy provides that Exim Bank loan

recipients may apply for a non-availability waiver ``(w)hen it appears

that U.S. vessels will not be available from the port or area of

shipment to the foreign destinations within a reasonable time or at

reasonable rates.'' The policy further states that ``(s)uch waivers

shall apply to the specific movements occurring during the period of

U.S.-flag non-

[[Page 55615]]

availability as approved (by MARAD) * * * ''

U.S.-flag vessels are usually available to carry containerized

cargo to most destinations. In the past, MARAD has granted non-

availability waivers sparingly, and only for specific voyages. Much of

the Exim Bank financed cargo is project cargo, comprising oversized

pieces of equipment. Breakbulk ships are more suitable for this cargo

than are containerships.

In the past year or so, MARAD has received an increased number of

complaints from shippers of Exim Bank cargo about MARAD's

implementation of PR 17. The shippers are particularly concerned that

when they bid on an Exim Bank-financed project, a reasonable projection

of transportation costs is required. Project cargoes consist of many

shipments over an extended period of time. Frequently, the shipments

are planned so that delivery must be made in proper sequence and in

critical time frames. Consequently, the shippers take issue with

MARAD's present policy of granting waivers for only one voyage at a

time, because this policy does not facilitate their long-range

transportation planning. On the other hand, the assurance of a stream

of PR 17 cargo could enhance the availability of U.S.-flag vessels and

reduce the necessity for waivers.

MARAD is seeking comments on whether it should adopt a new policy

on the granting of PR 17 waivers by promulgating a new regulation.

Among the goals sought to be achieved by any new proposal are: (1) The

preservation of a cargo base for carriage by U.S.-flag vessels

generated by Exim Bank financing; and (2) maximizing the export of U.S.

manufactured goods.

MARAD asks the public to comment on the following options and

proposals.

Should MARAD grant a non-availability waiver for periods in excess

of one voyage? If so, should the waiver be granted for a period not to

exceed six months? for a period coextensive with the life of the

project?

Should MARAD allow the U.S.-flag carrier to quote on the entire

transportation costs related to a specific project (including

containerized and bulk cargo) with the option of chartering foreign-

flag vessels to carry oversized cargo if no suitable U.S.-flag vessels

are available?

What conditions, if any, should apply to non-availability waivers?

Should any or all of the following criteria be met prior to

granting a non-availability waiver?

--There is no present U.S.-flag service available?

--U.S.-flag vessels are not presently serving the proposed destination

ports for the project?

--There are draft restrictions on destination ports that may not be

able to accommodate U.S.-flag vessels?

--Others?

Should a project-long waiver be granted only when the shipper is

required to include an estimate of transportation costs as part of its

overall bid to furnish the export project?

Should the shipper be required to provide the carriers with a

complete packing list and a proposed transportation schedule of the

project for the carriers to evaluate prior to bidding to ship the

cargo?

Once MARAD grants a non-availability waiver, what rights do owners

and operators of U.S.-flag vessels have to offer U.S.-flag service

during the pendency of a specific project should U.S.-flag service

later become available?

Under what criteria would U.S.-flag vessels be able to provide

service during a specific project once it has commenced?

What incentives, if any, should be provided U.S. companies to

encourage the carriage of oversized Exim Bank cargo?

Interested persons, corporations, or any other entities, are

invited to submit written comments on the above mentioned options, or

to offer alternatives. After consideration of the comments received,

MARAD will decide whether to proceed with a specific proposed change to

MARAD's existing policy.

Rulemaking Analysis and Notices

Executive Order 12866 (Regulatory Planning and Review)

If a rule is actually promulgated, it would not be considered an

economically significant regulatory action under section 3(f) of E.O.

12866. In the event that MARAD decides to proceed with a rulemaking, a

preliminary regulatory evaluation would be prepared that reflects the

comments to this advance notice of proposed rulemaking.

Federalism

MARAD has analyzed this advance notice of proposed rulemaking in

accordance with the principles and criteria contained in Executive

Order 12612 and has determined that any rule that might be subsequently

promulgated would not have sufficient federalism implications to

warrant the preparation of a Federalism Assessment.

Regulatory Flexibility Act

The Maritime Administration has evaluated this rule under the

Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, and certifies

that any rule that might be promulgated subsequent to this advance

notice of proposed rulemaking would not have a significant economic

impact on a substantial number of small entities. Companies providing

the carriage of preference cargoes are not small entities.

Any rule that might be subsequently promulgated would not be

expected to significantly affect the environment. Accordingly, an

Environmental Impact Statement would not be required under the National

Environmental Policy Act of 1969.

Paperwork Reduction Act

Any rule that might be promulgated would not be expected to

significantly change the current requirement for the collection of

information.

Dated: October 23, 1996.

By order of the Maritime Administrator.

Joel C. Richard,

Secretary.

[FR Doc. 96-27597 Filed 10-25-96; 8:45 am]

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