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

DEPARTMENT OF TRANSPORTATION

Maritime Administration

46 CFR Part 381

[Docket No. R-165]

RIN 2133-AB25

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

Commercial Vessels

AGENCY: Maritime Administration, Transportation.

ACTION: Proposed rule.

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SUMMARY: This amendment to the cargo preference regulations of the

Maritime Administration (MARAD) would provide that during the five year

period beginning with the 1996 Great Lakes 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 provision would allow U.S. Great Lakes ports to

compete for certain bulk agricultural commodity preference cargoes

under agricultural assistance programs administered by the U.S.

Department of Agriculture (USDA) and the U.S. Agency for International

Development (USAID). MARAD issued substantially identical rules in 1994

and 1995 related to the Great Lakes Shipping season for each of those

years, respectively. This rule would extend the provision for an

additional five years, after which the Agency would assess the merits

of making the rule permanent.

DATES: Comments must be received on or before April 10, 1996.

ADDRESSES: Send original and two copies of comments to the Secretary,

Maritime Administration, Room 7210, Department of Transportation, 400

7th Street S.W., Washington, D.C. 20590. To expedite review of

comments, MARAD requests, but does not require submission of an

additional ten (10) copies. All comments will be made available for

inspection during normal business hours at the above address.

Commenters wishing MARAD to acknowledge receipt of comments should

enclose a self-addressed envelope or postcard.

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) 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 wishes to administer that program so that all ports

and port ranges, including U.S. Great Lakes ports, may participate in

the carriage of preference cargoes under five programs administered by

the United States Department of Agriculture (USDA) and United States

Agency for International Development (USAID), pursuant to Titles I, II

and III of the Agricultural Trade Development and Assistance Act of

1954, as amended, P.L. 480 (7 U.S.C. 1701-1727), the Agricultural Act

of 1949, as amended (7 U.S.C. 2791(c)) and the Food for Progress Act of

1985, as amended (7 U.S.C. 1736).

Prior 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. Dramatic changes in shipping conditions have

occurred since 1960, including the disappearance of any all-U.S.-flag

commercial ocean-going bulk cargo service to foreign countries from

U.S. Great Lakes ports. 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 bulk grain 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 the Great Lakes shipping seasons of 1986, 1987, 1988 and

1989. That ``set-aside'' expired in 1989, and was not renewed by the

Congress. The disappearance of Government-impelled agricultural 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 capability 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 1994-1995 cargo preference year (the latest program year for which

figures are available) amounted to 6.2 million metric tons, of which

4.9 million (78 percent) was transported on U.S.-flag vessels.

Extension of Trial Period

MARAD initially issued that rule for the purpose of allowing Great

Lakes ports the opportunity to compete for agricultural commodity

preference cargoes for only the 1994 Great Lakes shipping season

cargoes, and to assess the results. As predicted by numerous

commenters, the timing of the final rule, which was not published until

August 18, 1994, did not allow for a true trial period since it

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

Shipping season. Because of the long

[[Page 9671]]

lead time required for arranging shipments of bulk agriculture

commodity preference cargoes, there apparently was no real opportunity

for U.S.-flag vessel operators to make the necessary arrangements and

bid on preference cargoes. Accordingly, MARAD proposed to extend this

policy to the 1995 Great Lakes shipping season and issued a final rule

that was published in the Federal Register on May 9, 1995 (60 FR

24560).

Great Lakes participation in cargo preference shipments under these

five programs administered by the USDA and USAID could be improved if

foreign-flag feeder vessels were authorized to transport bulk grain

commodities from Great Lakes ports to Canadian transshipment points for

export on oceangoing U.S.-flag bulk carriers to the final destination

port. MARAD issued its 1994 and 1995 final rules to authorize the use

of foreign-flag feeder vessels for the transportation of bulk

agricultural commodities cargoes from the Great Lakes ports to Canadian

transshipment ports outside the St. Lawrence Seaway during the 1994-95

Great Lakes shipping season. Outside the St. Lawrence Seaway, the cargo

would be transferred to a U.S.-flag vessel for delivery to its foreign

destination.

Subsequently, USDA indicated that provisions in Pub. L. 480

regulating the payment of freight by USDA for the Title II and Title

III shipments, as well as in the Food For Progress Act of 1985,

negatively impacted on suppliers that bid on Great Lakes cargoes to be

transshipped to Canadian shipping points. USDA indicated that these

provisions prevent them from paying for the foreign-flag Great Lakes

transit leg, even if the freight is billed separately. The Pub. L. 480

Title I program is not affected by this provision. Due to these

statutory provisions, the Great Lakes region has been, in effect,

prohibited from utilizing the rule and participating in 54 percent, or

7.9 millon metric tons, of the bulk cargo shipped during the past two

years under Titles II and III of Pub. L. 480, the Agricultural Act of

1949 and the Food for Progress Act of 1985 programs.

USDA has proposed an amendment to the 1995 Farm Bill which would

allow USDA to pay the cost of the foreign-flag Great Lakes transit leg

for transshipment in Canadian ports. Consistent with the legislation

proposed by the USDA provision in the 1995 Farm Bill, MARAD recommends

that the rule be extended for an additional five years, after which it

would reassess the merits of making the rule permanent.

Rulemaking Analyses and Notices

Executive Order 12866 (Regulatory Planning and Review)

This rulemaking is not considered to be an economically significant

regulatory action under section 3(f) of Executive Order 12866, or a

significant rule under the Department's Regulatory Policies and

Procedures. Accordingly, it has not been reviewed by the Office of

Management and Budget.

MARAD projects that this rule would allow the annual 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).

If this rule is finalized, MARAD will evaluate the results over

that trial period before determining whether to issue a rule to make

this provision permanent.

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 these regulations do 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 proposes to amend 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 would be revised to read as follows:

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

For purposes of shipping bulk agricultural commodities under

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

Lakes ports during the 1996-2000 Great Lakes shipping seasons, 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 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: March 6, 1996.

By Order of the Maritime Administrator.

Joel Richard,

Secretary, Maritime Administration.

[FR Doc. 96-5727 Filed 3-8-96; 8:45 am]

BILLING CODE 4910-81-P