Amendments to Regulations Governing Restrictive Foreign Shipping Practices, and New Regulations Governing Controlled Carriers

FEDERAL MARITIME COMMISSION

46 CFR Parts 550, 551, 555, 560, 565, 585, 586, 587, and 588

[Docket No. 98-25]

Amendments to Regulations Governing Restrictive Foreign Shipping

Practices, and New Regulations Governing Controlled Carriers

AGENCY: Federal Maritime Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Maritime Commission proposes to revise and

redesignate its regulations relating to section 19 of the Merchant

Marine Act, 1920, section 13(b)(5) of the Shipping Act of 1984, and the

Foreign Shipping Practices Act of 1988, and add new regulations

relating to section 9 of the Shipping Act of 1984, in order to

incorporate certain amendments made by the Ocean Shipping Reform Act of

1998 as well as to clarify and reorganize existing regulations.

DATES: Submit comments on or before January 4, 1999.

ADDRESSES: Address all comments concerning this proposed rule to:

Joseph C. Polking, Secretary, Federal Maritime Commission, 800 North

Capitol Street N.W., Room 1046, Washington, D.C. 20573-0001.

FOR FURTHER INFORMATION CONTACT: Thomas Panebianco, General Counsel,

Federal Maritime Commission, 800 North Capitol Street N.W., Washington,

D.C. 20573-0001, (202) 523-5740.

SUPPLEMENTARY INFORMATION: The Ocean Shipping Reform Act of 1998,

Public Law 105-258, 112 Stat. 1902 (``OSRA''), amends the Shipping Act

of 1984 (``1984 Act''), the Merchant Marine Act, 1920 (``1920 Act''),

and the Foreign Shipping Practices Act of 1988 (``FSPA'') in several

areas. The Commission's rules at former 46 CFR parts 585, 586, 587, and

588 effectuate the statutory obligations mandated by the 1984 Act, the

1920 Act, and the FSPA. The Commission now proposes to update,

redesignate, and clarify these rules to reflect the changes made by

OSRA. In addition, the Commission proposes a new regulation, 46 CFR

part 565, which would implement changes made by OSRA to section 9 of

the 1984 Act and would gather previously scattered regulations

affecting

[[Page 67031]]

controlled carriers into a more readily accessible codification.

Clarification and Amendment of Former 46 CFR Part 585

The proposed rule would amend the Commission's regulations covering

the provisions of section 19 of the 1920 Act, to incorporate the

changes made by OSRA. The entire part is redesignated as part 550.

Changes to redesignated Sec. 550.102 and Sec. 550.301 reflect

OSRA's clarification that ``pricing practices'' are among the practices

that could give rise to a condition unfavorable to shipping. The

changes to the authority citation and to redesignated Sec. 550.103(a)

reflect the addition of OSRA as an amendment to the 1920 Act. The

changes to redesignated Secs. 550.103(b), 550.201, 550.202(b), and

550.301(d) reflect OSRA's use of the new term ``ocean transportation

intermediary'' in place of the old terms ``ocean freight forwarder''

and ``non-vessel-operating common carrier''.

The amendments instituted by OSRA include the addition of the

suspension of service contracts to the list of available remedies in

redesignated Secs. 550.505(a), 550.601(c), and 550.602. The

Commission's proposed rule reflects this change.

Redesignation of Former 46 CFR Part 586 and Removal of Sec. 586.3

The proposed rule would redesignate former 46 CFR part 586 as part

551, Actions To Adjust or Meet Conditions Unfavorable to Shipping in

the U.S. Foreign Trade. Former 46 CFR 586.3, Conditions unfavorable to

shipping in the United States/Ecuador trade, is no longer an ongoing

proceeding and is therefore removed.

Clarification and Amendment of Former 46 CFR Part 587

The proposed rule would amend the Commission's regulations covering

the 1984 Act's provisions providing relief for U.S.-flag vessels unduly

impaired from accessing the ocean trade between foreign ports. See

section 13(b)(5) of the 1984 Act, 46 U.S.C. app. Sec. 1712(b)(5)

(renumbered by OSRA as section 13(b)(6)). The entire part is

redesignated as part 560.

Changes to redesignated Secs. 560.1(a) (1) and (2) and 560.5(a) are

changes to reflect renumbering of the Act. Section 560.2(c) refers to

``fighting ships,'' a term which has been deleted from the definitions

section of the Act and elsewhere. The removal of this term effects that

deletion. The changes to redesignated Sec. 560.7(b)(3)(i) reflect

OSRA's addition of the suspension of service contracts as a section

11a(e)(1)(B) remedy.

Clarification and Amendment of Former 46 CFR Part 588

The proposed rule would amend the Commission's regulations covering

the FSPA's provisions authorizing Commission action to address adverse

conditions affecting U.S.-flag carriers that do not exist for foreign

carriers in the United States. The entire part is redesignated as part

555.

The change to redesignated Sec. 555.1 makes reference to OSRA as an

amendment to the FSPA. Changes to redesignated Sec. 555.2 (a) and (d),

and Sec. 555.4 reflect OSRA's use of the new term ``ocean

transportation intermediary'' in place of the old terms ``ocean freight

forwarder'' and ``non-vessel-operating common carrier''. The change to

redesignated Sec. 555.2(c) corrects an error of word choice and

corresponds to the language employed in the FSPA.

The change to redesignated Sec. 555.4(c) improves the clarity of

the provision. The changes to redesignated Sec. 555.8 reflect OSRA's

addition of the suspension of service contracts as a remedy.

New 46 CFR Part 565

The proposed new rule would implement OSRA's revision of section 9

of the 1984 Act, and would provide procedures for reviewing controlled

carrier rates, charges, classifications, rules and regulations. The

proposed rule improves the clarity of regulations governing controlled

carriers, and gathers into a single part regulations which were

previously scattered among the tariff and service contract regulations

in former 46 CFR Part 514.

In addition to the 1984 Act's prohibitions against ``maintaining''

rates or charges below a level that is just and reasonable, OSRA adds

the prohibition against ``charging or assessing'' such rates.

Similarly, OSRA adds the prohibition on ``enforcing'' unjust or

unreasonable rates, charges, classifications, rules or regulations in

addition to ``establishing and maintaining'' them.

The change of tariff filing to tariff publication under OSRA is

also reflected in section 9(a) of the 1984 Act as it applies to

controlled carriers. Hence, in place of ``filing,'' the Commission is

authorized to prohibit the ``publication or use'' of any rates,

charges, classifications, rules or regulations that a controlled

carrier has failed to show are just and reasonable.

In a further reflection of the new tariff system, OSRA changes the

authority of the Commission from ``disapproving'' the ``filing'' to

``prohibiting and suspending'' the ``publication and use'' of unjust

and unreasonable rates, charges, classifications, rules or regulations.

Likewise, the Commission is directed by OSRA to take into account

whether the rates or charges which have been ``published or assessed''

are below a compensatory level.

OSRA imposes a new time limit on the Commission's decision on

whether or not a rate, charge, classification, rule or regulation is

unjust or unreasonable. The Commission must decide such matters within

120 days of the receipt of information. This is reflected in proposed

46 CFR 565.8.

Finally, a significant change was made by OSRA to the regulation of

controlled carriers in the exceptions found in section 9(f) of the 1984

Act. Three of the five exceptions were removed by OSRA; the provisions

of section 9 now apply to all controlled carriers except those that

are: (1) of a state whose vessels are entitled by a treaty of the

United States to receive national treatment or Most Favored Nation

treatment; or (2) in a trade served exclusively by controlled carriers.

Proposed regulation Sec. 565.5 reflects those changes. In addition to

requiring ocean common carriers to inform the Commission of any changes

to their control which might affect their controlled carrier

classification, Sec. 565.4 also requires newly commencing controlled

common carrier operations to notify the Commission of the details of

their ownership or control.

This document also outlines the proposed restructuring of

subchapter C of chapter IV, 46 CFR, by revising the subchapter heading

and adding redesignated parts 550, 555, and 560 and new part 565 to

subchapter C. Current provisions of part 514 which are proposed here to

be incorporated into new part 565 will be removed from part 514 in a

subsequent document.

In accordance with 44 U.S.C. 3518(c)(1)(B), and except for

investigations undertaken with reference to a category of individuals

or entities (e.g., an entire industry), any information requests or

requirements in 46 CFR parts 585, 586, 587 and 588 are not subject to

the requirements of section 3507 of the Paperwork Reduction Act because

such collections of information are pursuant to a civil, administrative

action or investigation by an agency of the United States against

specific individuals or entities.

The reporting requirements contained in 46 CFR Part 565 have been

submitted to the Office of Management and Budget (OMB). The Commission

estimates that

[[Page 67032]]

the public burden for this collection of information is estimated to be

70 annual personhours for all of the estimated 10 annual respondents.

This estimate includes, as applicable, the time needed to review

instructions, develop, acquire, install, and utilize technology and

systems for the purposes of collecting, validating, and verifying

information, processing and maintaining information, and disclosing and

providing information; adjust the existing ways to comply with any

previously applicable instructions and requirements; train personnel to

respond to a collection of information, search existing data sources,

gathering and maintain the data needed, and complete and review the

collection of information; and transmit or otherwise disclose the

information.

Send comments regarding the burden estimate to the Office of

Information and Regulatory Affairs, Office of Management and Budget,

Attention Desk Officer for the Federal Maritime Commission, New

Executive Office Building, 725 17th Street, N.W., Washington, D.C.

20503 within 30 days of publication in the Federal Register.

The FMC would also like to solicit comments to: (a) evaluate the

accuracy of the Commission's burden estimates for the proposed

collection of information; (b) enhance the quality, utility, and

clarity of the information to be collected; and (c) minimize the burden

of the collection of information on respondents, including through the

use of automated collection techniques or other forms of information

technology. Comments submitted in response to this proposed rulemaking

will be summarized and/or included in the final rule and will become a

matter of public record. The OMB control number will be displayed in

the final rule.

The Chairman certifies, pursuant to section 605 of the Regulatory

Flexibility Act, 5 U.S.C. 605, that the proposed amendments will not,

if promulgated, have a significant impact on a substantial number of

small entities. The proposed changes affect vessel-operating common

carriers, entities that are not considered to be small.

List of Subjects

46 CFR Parts 585 and 550

Administrative practice and procedure, Maritime carriers.

46 CFR Parts 586 and 551

Japan, Maritime carriers.

46 CFR Parts 587 and 560

Administrative practice and procedure, Maritime carriers.

46 CFR Parts 588 and 555

Administrative practice and procedure, Investigations, Maritime

carriers.

46 CFR Part 565

Administrative practice and procedure, Maritime carriers, Reporting

and recordkeeping requirements.

For the reasons set out in the preamble, the Commission proposes to

amend 46 CFR parts 585, 586, 587, and 588, and to add new part 565, as

set forth below:

1. Revise the title of subchapter C to read:

SUBCHAPTER C--REGULATIONS AND ACTIONS TO ADDRESS RESTRICTIVE

FOREIGN MARITIME PRACTICES

PART 585--REGULATIONS TO ADJUST OR MEET CONDITIONS UNFAVORABLE TO

SHIPPING IN THE FOREIGN TRADE OF THE UNITED STATES

PART 585--[REDESIGNATED AS PART 550]

1. Redesignate part 585 as part 550, and transfer newly designated

part 550 to subchapter C.

2. The authority citation for redesignated part 550 is revised to

read as set forth below:

Authority: 5 U.S.C. 553; sec. 19 (a)(2), (e), (f), (g), (h),

(i), (j), (k) and (l) of the Merchant Marine Act, 1920, 46 U.S.C.

app. 876 (a)(2), (e), (f), (g), (h), (i), (j), (k) and (l), as

amended by Pub. L. No. 105-258; Reorganization Plan No. 7 of 1961,

75 Stat. 840; and sec. 10002 of the Foreign Shipping Practices Act

of 1988, 46 U.S.C. app. 1710a.

2a. Add a note to newly designated part 550 to read as follows:

Note to part 550: In accordance with 44 U.S.C. 3518(c)(1)(B),

and except for investigations undertaken with reference to a

category of individuals or entities (e.g., an entire industry), any

information requests or requirements in 46 CFR part 550 are not

subject to the requirements of section 3507 of the Paperwork

Reduction Act because such collections of information are pursuant

to a civil, administrative action or investigation by an agency of

the United States against specific individuals or entities.

3. Revise redesignated Sec. 550.102 to read as set forth below:

Sec. 550.102 Scope.

Regulatory actions may be taken when the Commission finds, on its

own motion or upon petition, that a foreign government has promulgated

and enforced or intends to enforce laws, decrees, regulations or the

like, or has engaged in or intends to engage in practices which

presently have or prospectively could create conditions unfavorable to

shipping in the foreign trade of the United States, or when owners,

operators, agents or masters of foreign vessels engage in or intend to

engage in competitive methods, pricing practices or other practices

which have created or could create such conditions.

4. Revise redesignated Sec. 550.103 (a) and (b) to read as set

forth below:

Sec. 550.103 Definitions.

* * * * *

(a) Act means the Merchant Marine Act, 1920, as amended by Pub. L.

No. 101-595 and as amended by Pub. L. No. 105-258.

(b) Person means individuals, corporations, partnerships and

associations existing under or authorized by the laws of the United

States or of a foreign country, and includes any common carrier, tramp

operator, bulk operator, shipper, shippers' association, importer,

exporter, consignee, ocean transportation intermediary, marine terminal

operator, or any component of the Government of the United States.

* * * * *

5. Revise redesignated Sec. 550.201(a) to read as set forth below:

Sec. 550.201 Information orders.

* * * * *

(a) The Commission may, by order, require any person (including any

common carrier, tramp operator, bulk operator, shipper, shippers'

association, ocean transportation intermediary, or marine terminal

operator, or any officer, receiver, trustee, lessee, agent, or employee

thereof), to file with the Commission a report, answers to questions,

documentary material, or other information which the Commission

considers necessary or appropriate;

* * * * *

6. Revise redesignated Sec. 550.202(b) introductory text and (b)(3)

to read as set forth below:

Sec. 550.202 Type of information.

* * * * *

(b) Shipper, shippers' association, or ocean transportation

intermediary in the affected trade to furnish any or all of the

following information:

* * * * *

(3) Amount of brokerage, ocean transportation intermediary

compensation or other charges collected or paid in connection with

shipments in the affected trade; and

* * * * *

7. Revise the introductory text and paragraph (d) of redesignated

Sec. 550.301 to read as set forth below:

[[Page 67033]]

Sec. 550.301 Findings.

For the purposes of this part, conditions created by foreign

governmental action or competitive methods, pricing practices or other

practices of owners, operators, agents or masters of foreign vessels

are found unfavorable to shipping in the foreign trade of the United

States, if such conditions:

* * * * *

(d) Restrict or burden a carrier's intermodal movements or shore-

based maritime activities, including terminal operations and cargo

solicitation; agency services; ocean transportation intermediary

services and operations; or other activities and services integral to

transportation systems; or

* * * * *

8. Revise redesignated Sec. 550.601(c) to read as set forth below:

Sec. 550.601 Actions to correct unfavorable conditions.

* * * * *

(c) Suspend, in whole or in part, tariffs and service contracts for

carriage to or from United States ports, including a common carrier's

right to use tariffs of conferences and service contracts of agreements

in United States trades of which it is a member for any period the

Commission specifies;

* * * * *

9. Revise redesignated Sec. 550.602 to read as set forth below:

Sec. 550.602 Penalty.

A common carrier that accepts or handles cargo for carriage under a

tariff or service contract that has been suspended under Sec. 550.505

or Sec. 550.601 of this part, or after its right to use another tariff

or service contract has been suspended under those sections, is subject

to a civil penalty of not more than $50,000 for each day that it is

found to be operating under a suspended tariff or service contract.

PART 586--ACTIONS TO ADJUST OR MEET CONDITIONS UNFAVORABLE TO

SHIPPING IN THE U.S. FOREIGN TRADE

1. Redesignate part 586 as part 551, and transfer newly designated

part 551 to subchapter C.

PART 586--[REDESIGNATED AS PART 551]

2. The authority citation for redesignated part 551 is revised to

read as set forth below:

Authority: 46 U.S.C. app. 876(1)(b); 46 U.S.C. app. 876 (5)

through (12); 46 CFR part 550; Reorganization Plan No. 7 of 1961, 26

FR 7315 (August 12, 1961).

2a. Add a note to newly designated part 551 to read as follows:

Note to part 551: In accordance with 44 U.S.C. 3518(c)(1)(B),

and except for investigations undertaken with reference to a

category of individuals or entities (e.g., an entire industry), any

information requests or requirements in 46 CFR part 551 are not

subject to the requirements of section 3507 of the Paperwork

Reduction Act because such collections of information are pursuant

to a civil, administrative action or investigation by an agency of

the United States against specific individuals or entities.

3. Redesignated Sec. 551.3 is removed.

PART 587--ACTIONS TO ADDRESS CONDITIONS UNDULY IMPAIRING ACCESS OF

U.S.-FLAG VESSELS TO OCEAN TRADE BETWEEN FOREIGN PORTS

PART 587--[REDESIGNATED AS PART 560]

1. Redesignate part 587 as part 560, and transfer newly designated

part 560 to subchapter C.

2. The authority citation for redesignated part 560 is revised to

read as set forth below:

Authority: 5 U.S.C. 553; secs. 13(b)(6), 15 and 17 of the

Shipping Act of 1984, 46 U.S.C. app. 1712(b)(6), 1714, and 1716, as

amended by Pub. L. No. 105-258; sec. 10002 of the Foreign Shipping

Practices Act of 1988 (46 U.S.C. app. 1710a), as amended by Pub. L.

No. 105-258.

3. Revise redesignated Sec. 560.1(a) to read as set forth below:

Sec. 560.1 Purpose; general provisions.

(a)(1) It is the purpose of this part to enumerate certain

conditions resulting from the action of a common carrier, acting alone

or in concert with any person, or a foreign government, which unduly

impair the access of a vessel documented under the laws of the United

States whether liner, bulk, tramp or other vessel, (hereinafter ``U.S.

flag vessel'') to ocean trade between foreign ports, which includes

intermodal movements, and to establish procedures by which the owner or

operator of a U.S. flag vessel (hereinafter ``U.S. flag carrier'') may

petition the Federal Maritime Commission for relief under the authority

of section 13(b)(6)of the Shipping Act of 1984 (``the Act'') (46 U.S.C.

app. 1712(b)(6)).

(2) It is the further purpose of this part to indicate the general

circumstances under which the authority granted to the Commission under

section 13(b)(6)may be invoked, and the nature of the subsequent

actions contemplated by the Commission.

(3) This part also furthers the goals of the Act with respect to

encouraging the development of an economically sound and efficient U.S.

flag liner fleet as stated in section 2 of the Act (46 U.S.C. app.

1701).

* * * * *

4. Revise redesignated Sec. 560.2(c) to read as set forth below:

Sec. 560.2 Factors indicating conditions unduly impairing access.

* * * * *

(c) Use of predatory practices, possibly including but not limited

to below market pricing designed to exclude competition, and use of

closed conferences employing deferred rebates, which unduly impair

access of a U.S. flag vessel to the trade.

* * * * *

5. Revise the first sentence of the introductory text of

redesignated Sec. 560.5(a) to read as set forth below:

Sec. 560.5 Receipt of relevant information.

(a) In making its decision on matters arising under section

13(b)(6)of the Act, the Commission may receive and consider relevant

information from any owner, operator, or conference in an affected

trade, or from any foreign government, either directly or through the

Department of State or from any other reliable source. * * *

* * * * *

6. Revise redesignated Sec. 560.7(b)(3)(i) to read as set forth

below:

Sec. 560.7 Decision; sanctions; effective date.

* * * * *

(b) * * *

(3)(i) Suspension, in whole or in part, of any or all tariffs or

service contracts for carriage to or from United States ports for any

period the Commission specifies, or until such time as unimpaired

access is secured for U.S. flag carriers in the affected trade.

* * * * *

PART 588--ACTIONS TO ADDRESS ADVERSE CONDITIONS AFFECTING U.S. FLAG

CARRIERS THAT DO NOT EXIST FOR FOREIGN CARRIERS IN THE UNITED

STATES

PART 588--[REDESIGNATED AS PART 555]

1. Redesignate part 588 as part 555, and transfer newly designated

part 555 to subchapter C.

2. The authority citation for redesignated part 555 is revised to

read as set forth below:

Authority: 5 U.S.C. 553; sec. 10002 of the Foreign Shipping

Practices Act of 1988 (46 U.S.C. app. 1710a), as amended by Pub. L.

No. 105-258.

[[Page 67034]]

2a. Add a note to newly designated part 555 to read as follows:

Note to part 555: In accordance with 44 U.S.C. 3518(c)(1)(B),

and except for investigations undertaken with reference to a

category of individuals or entities (e.g., an entire industry), any

information requests or requirements in 46 CFR part 555 are not

subject to the requirements of section 3507 of the Paperwork

Reduction Act because such collections of information are pursuant

to a civil, administrative action or investigation by an agency of

the United States against specific individuals or entities.

3. Revise redesignated Sec. 555.1 to read as set forth below:

555.1 Purpose.

It is the purpose of the regulations of this part to establish

procedures to implement the Foreign Shipping Practices Act of 1988, as

amended by the Ocean Shipping Reform Act of 1998, which authorizes the

Commission to take action against foreign carriers, whose practices or

whose government's practices result in adverse conditions affecting the

operations of United States carriers, which adverse conditions do not

exist for those foreign carriers in the United States. The regulations

of this part provide procedures for investigating such practices and

for obtaining information relevant to the investigations, and also

afford notice of the types of actions included among those that the

Commission is authorized to take.

4. Revise redesignated Sec. 555.2(a), (c), and (d) to read as set

forth below:

Sec. 555.2 Definitions.

* * * * *

(a) Common carrier, marine terminal operator, ocean transportation

intermediary, ocean common carrier, person, shipper, shippers

association, and United States have the meanings given each such term,

respectively, in section 3 of the Shipping Act of 1984 (46 U.S.C. app.

1702);

* * * * *

(c) Maritime services means port-to-port carriage of cargo by the

vessels operated by ocean common carriers;

(d) Maritime-related services means intermodal operations, terminal

operations, cargo solicitation, agency services, ocean transportation

intermediary services and operations, and all other activities and

services integral to total transportation systems of ocean common

carriers and their foreign domiciled affiliates on their own and

others' behalf;

* * * * *

5. Revise redesignated Sec. 555.4 (a) and (c) to read as set forth

below:

Sec. 555.4 Petitions.

(a) A petition for investigation to determine the existence of

adverse conditions as described in Sec. 555.3 may be submitted by any

person, including any common carrier, shipper, shippers' association,

ocean transportation intermediary, or marine terminal operator, or any

branch, department, agency, or other component of the Government of the

United States. Petitions for relief under this part shall be in

writing, and filed in the form of an original and fifteen copies with

the Secretary, Federal Maritime Commission, Washington, DC 20573.

* * * * *

(c) A petition which the Commission determines fails to comply

substantially with the requirements of paragraph (b) of this section

shall be rejected promptly and the person filing the petition shall be

notified of the reasons for such rejection. Rejection is without

prejudice to the filing of an amended petition.

6. Revise redesignated Sec. 555.8(a)(2) to read as set forth below:

Sec. 555.8 Action against foreign carriers.

(a) * * *

(2) Suspension, in whole or in part, of any or all tariffs or

service contracts, including the right of an ocean common carrier to

use any or all tariffs or service contracts of conferences in United

States trades of which it is a member for such period as the Commission

specifies;

* * * * *

PART 565--[ADDED]

1. Add part 565 to subchapter C to read as set forth below:

PART 565--CONTROLLED CARRIERS

Sec.

565.1 Purpose and scope.

565.2 Definitions.

565.3 Classification as controlled carrier.

565.4 Notification to Commission of change in control.

565.5 Exceptions.

565.6 Level of rates and charges generally.

565.7 Effective dates.

565.8 Special permission.

565.9 Commission review, suspension and prohibition of rates,

charges, classifications, rules or regulations.

565.10 Suspension procedures, period and replacement rates.

565.11 Presidential review.

565.12 Stay, postponement, discontinuance or suspension of action.

Authority: 46 U.S.C. App. 1708, as amended by Pub. L. No. 105-

258.

Sec. 565.1 Purpose and scope.

(a) Purpose. The regulations of this part are intended to carry out

the Commission's mandate under section 9 of the Shipping Act of 1984,

as amended by the Ocean Shipping Reform Act of 1998, to monitor the

practices of controlled carriers and ensure that they do not:

(1) Maintain rates or charges in their tariffs and service

contracts that are below a level that is just and reasonable; nor

(2) Establish, maintain or enforce unjust or unreasonable

classifications, rules or regulations in those tariffs or service

contracts which result or are likely to result in the carriage or

handling of cargo at rates or charges that are below a just and

reasonable level.

(b) Scope. The regulations contained in this part set forth the

special procedures whereby controlled carriers' tariffs and service

contracts become effective and are reviewed by the Commission. These

regulations in no way exempt controlled carriers from other Commission

regulations or statutory authority to which they may otherwise be

subject as ocean common carriers. These regulations apply to all

controlled carriers operating in the foreign commerce of the United

States unless excepted under section 9(f) of the Shipping Act of 1984,

as reflected by Sec. 565.5.

Sec. 565.2 Definitions.

(a) Controlled carrier means an ocean common carrier that is, or

whose operating assets are, directly or indirectly owned or controlled

by a government. Ownership or control by a government shall be deemed

to exist with respect to any ocean common carrier if:

(1) A majority portion of the interest in the carrier is owned or

controlled in any manner by that government, by any agency thereof, or

by any public or private person controlled by that government; or

(2) That government has the right to appoint or disapprove the

appointment of a majority of the directors, the chief operating officer

or the chief executive officer of the carrier.

(b) Effective date has the same meaning it has in 46 CFR part 520.

Sec. 565.3 Classification as controlled carrier.

(a) Notification. The Commission will periodically review the ocean

common carriers operating in the foreign commerce of the United States

and will notify any ocean common carrier of any change in its

classification as a controlled carrier.

(b) Rebuttal of classification. (1) Any ocean common carrier

contesting such a classification may, within 30 days after

[[Page 67035]]

the date of the Commission's notice, submit a rebuttal statement.

(2) The Commission shall review the rebuttal and notify the ocean

common carrier of its final decision.

Sec. 565.4 Notification to Commission of change in control.

Whenever the operation, control or ownership of an ocean common

carrier is transferred resulting in a majority portion of the interest

of that ocean common carrier being owned or controlled in any manner by

a government, the ocean common carrier shall immediately send written

notification of the details of the change to the Secretary of the

Commission. If a carrier is newly commencing ocean common carrier

operations in a United States trade, and if a majority portion of the

carrier is owned or controlled by a government, or if a government may

approve or disapprove the majority of directors or the chief executive

or operating officer of the carrier, the carrier shall immediately send

written notification to the Secretary of the details of such ownership

or control.

Sec. 565.5 Exceptions.

All controlled carriers shall be subject to provisions of this part

and section 9 of the Shipping Act of 1984 except those which meet the

following exceptions:

(a) When the vessels of the controlling state are entitled by a

treaty of the United States to receive national or most-favored-nation

treatment; or

(b) When the controlled carrier operates in a trade served

exclusively by controlled carriers.

Sec. 565.6 Level of rates and charges generally.

No controlled carrier may maintain or enforce rates or charges in

its tariffs or service contracts that are below a level that is just

and reasonable. No controlled carrier may establish or maintain unjust

or unreasonable classifications, rules, or regulations in its tariffs

or service contracts. An unjust or unreasonable classification, rule or

regulation means one that results or is likely to result in the

carriage or handling of cargo at rates or charges that are below a just

and reasonable level. See Sec. 565.9(a)(2) (Rate standards).

Sec. 565.7 Effective dates.

(a) Generally. Except for service contracts, the rates, charges,

classifications, rules or regulations of controlled carriers may not,

unless the Commission has granted special permission, become effective

sooner than the 30th day after the date of publication.

(b) Open rates. (1) Generally. Controlled carriers that are members

of conference agreements publishing rates for commodities designated as

open by the conference are subject to the 30-day controlled carrier

notice requirement, except when special permission is granted by the

Commission under Sec. 565.8.

(2) Conference publication of reduced open rates. Notwithstanding

paragraph (b)(1) of this section, a conference may, on less than 30

days' notice, publish reduced rates on behalf of controlled carrier

members for open-rated commodities:

(i) At or above the minimum level set by the conference; or

(ii) At or above the level set by a member of the conference that

has not been determined by the Commission to be a controlled carrier

subject to section 9 of the Shipping Act of 1984.

(c) Independent action rates of controlled carriers. Conferences

may publish on behalf of their controlled carrier members lower

independent action rates on less than 30 days' notice, subject to the

requirements of their basic agreements and subject to such rates being

published at or above the level set by a member of the conference that

has not been determined by the Commission to be a controlled carrier

subject to section 9 of the Shipping Act of 1984.

Sec. 565.8 Special permission.

Section 8(d) of the Shipping Act of 1984 authorizes the Commission,

in its discretion and for good cause shown, to permit increases or

decreases in rates, or the issuance of new or initial rates, on less

than statutory notice under Sec. 565.7. Section 9(c) of the Shipping

Act of 1984 authorizes the Commission to permit a controlled carrier's

rates, charges, classifications, rules or regulations to become

effective on less than 30 days' notice. The Commission may also in its

discretion and for good cause shown, permit departures from the

requirements of this part. The Commission will consider such requests

for special permission by controlled carriers pursuant to its

procedures set forth at 46 CFR part 520.

Sec. 565.9 Commission review, suspension and prohibition of rates,

charges, classifications, rules or regulations.

(a)(1) Request for justification. Within 20 days of a request (with

respect to its existing or proposed rates, charges, classifications,

rules or regulations) from the Commission, each controlled carrier

shall file a statement of justification that sufficiently details the

controlled carrier's need and purpose for such rates, charges,

classifications, rules or regulations upon which the Commission may

reasonably base its determination of the lawfulness thereof.

(2) Rate standards. (i) In determining whether rates, charges,

classifications, rules or regulations by a controlled carrier are just

and reasonable, the Commission shall take into account whether the

rates or charges which have been published or assessed or which would

result from the pertinent rates, charges, classifications, rules or

regulations are below a level which is fully compensatory to the

controlled carrier based upon that carrier's actual or constructive

costs.

(ii) For the purposes of Sec. 565.9(a)(2)(i), ``constructive

costs'' means the costs of another carrier, other than a controlled

carrier, operating similar vessels and equipment in the same or a

similar trade.

(iii) The Commission may also take into account other appropriate

factors, including, but not limited to, whether:

(A) The rates, charges, classifications, rules or regulations are

the same as or similar to those published or assessed by other carriers

in the same trade;

(B) The rates, charges, classifications, rules or regulations are

required to assure movement of particular cargo in the trade; or

(C) The rates, charges, classifications, rules or regulations are

required to maintain acceptable continuity, level or quality of common

carrier service to or from affected ports.

(3) Time for determination. The Commission shall determine within

120 days of the receipt of information requested by the Commission

under this section, whether the rates, charges, classifications, rules

or regulations of a controlled carrier may be unjust and unreasonable.

Whenever the Commission is of the opinion that the rates, charges,

classifications, rules or regulations published or assessed by a

controlled carrier may be unjust and unreasonable, the Commission shall

issue an order to the controlled carrier to show cause why those rates,

charges, classifications, rules or regulations should not be

prohibited.

(b) Suspension. Pending a decision on whether to prohibit the

rates, charges, classifications, rules or regulations of a controlled

carrier, the Commission may suspend the rates, charges,

classifications, rules or regulations. See Sec. 565.10.

(c) Prohibition. The Commission shall prohibit the use of any

rates, charges, classifications, rules or regulations that the

controlled carrier has failed to demonstrate to be just and reasonable.

In a proceeding under this paragraph, the burden of proof is on the

controlled

[[Page 67036]]

carrier to demonstrate that its rates, charges, classifications, rules

or regulations are just and reasonable. The use of rates, charges,

classifications, rules or regulations published or assessed by a

controlled carrier that have been suspended or prohibited by the

Commission is unlawful.

(d) Publication. All final orders of prohibition shall be published

in the Federal Register.

Sec. 565.10 Suspension procedures, period and replacement rates.

(a) (1) Suspension prior to effective date. Pending a determination

as to their lawfulness in a prohibition proceeding as described in

Sec. 565.9, the Commission may suspend the rates, charges,

classifications, rules or regulations at any time before their

effective date.

(2) Suspension after effective date. In the case of rates, charges,

classifications, rules or regulations that have already become

effective, the Commission may, upon the issuance of an order to show

cause, suspend those rates, charges, classifications, rules or

regulations on not less than 30 days' notice to the controlled carrier.

(b) Period of suspension. In any case, no period of suspension may

be greater than 180 days.

(c) Implementation. (1) Upon issuance of an order suspending a

rate, charge, classification, rule or regulation in whole or in part,

the Commission shall direct the controlled carrier to remove the

suspended material from its tariff publication; or

(2) If the matter subject to the suspension order is not covered by

paragraph (c)(1) of this section, the Commission shall set forth

procedures in the order for implementing the suspension.

(3) Publication. All orders of suspension shall be published in the

Federal Register.

(d) Replacement rates. Controlled carriers may publish in tariffs

or file in service contracts rates, charges, classifications, rules or

regulations in lieu of the suspended matter (``replacement rates'').

(1) Effective date. In the case of replacement rates which are

published in tariffs and which are scheduled to become effective during

a suspension period, may become effective immediately upon either their

publication in tariffs or upon the effective date of the suspension,

whichever is later.

(2) Rejection of replacement rates. The Commission may reject the

replacement rates, charges, classifications, rules or regulations

published in tariffs or filed in service contracts to take effect

during the suspension period if they are unjust and unreasonable. In

determining whether to reject replacement rates, charges,

classifications, rules or regulations, the Commission will consider

whether they would result in total charges (i.e, rate plus applicable

surcharges) that are lower than the lowest comparable charges effective

for a common carrier, other than a controlled carrier, serving the same

trade.

(3) At the same time it announces replacement rates, the controlled

carrier shall submit to the Secretary of the Commission, a letter

identifying the specific competing common carrier's rates, charges,

classification or rules resulting in total charges which are equal to

or lower than its own.

Sec. 565.11 Presidential review.

The Commission shall transmit all orders of suspension or final

orders of prohibition to the President of the United States

concurrently with the submission of such orders to the Federal Register

pursuant to Sec. 565.9(d) or Sec. 565.10(c)(3). The President may,

within 10 days of either the receipt or effective date of the order,

request in writing that the Commission stay the effect of the order for

reasons of national defense or foreign policy.

Sec. 565.12 Stay, postponement, discontinuance or suspension of

action.

The Commission may, on its own motion or upon petition, postpone,

discontinue, or suspend any and all actions taken by it under the

provisions of this part. The Commission shall immediately stay the

effect of any order issued under this part as requested by the

President pursuant to Sec. 565.11.

By the Commission.

Joseph C. Polking,

Secretary.

[FR Doc. 98-32224 Filed 12-3-98; 8:45 am]

BILLING CODE 6730-01-P