Service Contracts Subject to the Shipping Act of 1984

FEDERAL MARITIME COMMISSION

46 CFR Parts 514 and 530

[Docket No. 98-30]

Service Contracts Subject to the Shipping Act of 1984

AGENCY: Federal Maritime Commission.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The Federal Maritime Commission (``Commission'' or ``FMC'')

proposes to revise its regulations governing service contracts between

shippers and ocean common carriers to reflect changes made to the

Shipping Act of 1984 (``1984 Act''), the Ocean Shipping Reform Act of

1998 and the Coast Guard Authorization Act of 1998). Specifically, the

Commission proposes to revise its regulations implementing section 8(c)

of the 1984 Act and create a new regulation which would govern only

service contract filings. The Commission is proposing to establish new

rules for service contract filing and essential terms publication,

revise its regulations to include the newly permitted agreement and

multiple shipper-party service contracts, and make other conforming

changes. The Commission is also proposing an electronic filing system

for service contracts which is intended to reduce the filing burden on

parties and accommodate the efficient processing and review of what is

predicted to be a large number of filed contracts.

DATES: Submit comments on or before January 22, 1999.

ADDRESSES: Address all comments concerning this proposed rule to:

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

Capitol Street, NW., Room 1046, Washington, DC 20573-0001.

FOR FURTHER INFORMATION CONTACT:

Thomas Panebianco, General Counsel, Federal Maritime Commission, 800

North Capitol Street, NW., Washington, DC 20573-0001, (202) 523-5740

Bryant L. VanBrakle, Director, Bureau of Tariffs, Certification and

Licensing, Federal Maritime Commission, 800 North Capitol Street, NW.,

Washington, DC 20573-0001, (202) 523-5796

SUPPLEMENTARY INFORMATION: The Ocean Shipping Reform Act of 1998, Pub.

L. 105-258, 112 Stat. 1902 (``OSRA'') was signed into law on October

14, 1998. OSRA makes several changes to the existing system by which

the Federal Maritime Commission (``FMC'' or ``Commission'') regulates

ocean shipping in the foreign commerce of the

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United States. OSRA makes significant changes to the provisions

governing service contracts under the 1984 Act. On November 13, 1998,

the Coast Guard Authorization Act of 1998, Pub. L. 105-383, 112 Stat.

3411, was signed by the President. That Act also amends the 1984 Act by

redefining the term ``common carrier.'' Accordingly, the Commission now

proposes to update, redesignate and clarify its rules to implement the

changes mandated by these laws. This supplemental information presents

these changes in detail.

The proposal seeks to carry over existing regulations (particularly

46 CFR 514.7 and 514.17) where they comport with the revisions to the

1984 Act made by OSRA and where they represent a sound approach. The

purpose, scope, applicability and definition sections, found in

proposed regulations Secs. 530.1, 530.2, 530.3 and 530.4 are adapted

from current Secs. 514.1(b) (purpose), 514.1(a) (scope) and 514.2

(definitions). These proposed rules envision an electronic filing

system for service contracts, and coordinate the publication of

essential terms under section 8(c) of the 1984 Act with the publication

of tariffs under proposed regulation 46 CFR part 520.

OSRA fundamentally revises the statutory scheme for tariffs and

service contracts. Tariffs are no longer required to be filed with the

Commission. Service contracts, on the other hand, are required to be

filed confidentially with the Commission, and must contain specified

essential terms. Similarly, while OSRA preserves the requirement that

certain essential terms be published, that requirement has been

significantly scaled back and includes only the following terms: (1)

Origin and destination port ranges; (2) the commodity or commodities

involved; (3) the minimum volume or portion; and (4) the duration of

the service contract. Just as significant to service contracting is the

repeal of the ``me-too'' right for similarly situated shippers.

Carriers will no longer be required to offer the same contract terms to

similarly situated shippers.

Another significant change made by OSRA is the authorization of

non-conference ocean common carrier agreements to enter into service

contracts. Furthermore, under OSRA, unrelated, multiple shippers may

enter into service contracts without necessarily being members of

shippers' associations. These changes significantly free parties to

make service contracts centered around the realities of the

marketplace.

The Commission is mindful of several competing interests regarding

the filing of service contracts. First, the filing requirements must be

crafted with an appreciation for regulated entities' interests in

simple, speedy and straightforward filing procedures. Second, they must

enable the Commission to fulfill its statutory duty to guard against

section 10 violations and section 6(g) matters. This responsibility on

the part of the Commission is especially important now that service

contracts will be confidential; potentially aggrieved parties will rely

on Commission oversight. This will be complicated by the predicted

increase in the sheer number of service contracts filed. It is with

these goals in mind that the Commission proposes the following

regulations, designed to enable the Commission to fulfill its

regulatory mandate while imposing a minimal burden on regulated

parties.

The Proposed Rule

The proposed rule redesignates the Commission's rules on service

contracts currently in 46 CFR part 514 into a new part, 46 CFR part

530. The following discussion covers the proposed rule's treatment of

service contract filings; essential terms publications; carrier duty to

disclose to collective bargaining agreements; confidentiality; excepted

commodity (``mixed'') and global contracts; re-rating; and

miscellaneous matters.

General filing requirements

Filing requirements in the existing regulations (46 CFR part 514)

as well as in the proposed regulations, govern initial filings,

amendments, and notices of correction and cancellation. In an attempt

to update and streamline the filing system, as well as enable the

Commission to fulfill its statutory monitoring duty over service

contracts, the Commission is proposing to initiate a filing system

which would be completely electronic. Due to the volume of service

contract filings the Commission expects after May 1, 1999, adoption of

an electronic, as opposed to a paper-based, system appears to be the

most practical approach.

Given the exceptionally short legislative deadlines and limitations

on resources available to the Commission, the only viable approach to

implementing an electronic filing system at this juncture would be to

create a system adapted from the Commission's currently used filing

system for the Essential Terms (``ETs'') of service contracts. The

proposed rule reflects this approach. It envisions accepting only

electronic filings (including amendments to service contracts filed

prior to May 1, 1999); amendments to paper-filed service contracts

would also necessitate the re-filing in electronic form of the

underlying, i.e. initial, contract itself.

While the creation of an entirely new, tailor-made service contract

filing system could have benefits over the proposed approach in terms

of simplicity or flexibility, the creation of such a new system simply

is not possible before May 1, 1999. The Commission invites comments on

approaches to establishing such a new system, however, and if warranted

and financially feasible could pursue such a strategy as a longer-term

goal, treating the proposed system as a transitional solution.

The Commission has determined not to propose continuing the paper

filing of service contracts, based on an assessment that an increased

volume of contracts would create unworkable administrative burdens on

both the industry and the agency and could substantially impair the

Commission's ability to fulfill its oversight, enforcement, and

monitoring responsibilities. However, commenters are welcome to address

this matter as well.

The proposed regulation includes the details of this system. See,

Sec. 530.9 and Appendix A. The Commission solicits from the industry

its views on the benefits and limitations of this approach and any

suggested alternatives.

Registration of filers

The proposed rule carries over the existing filing fees for service

contract and amendment filings, and for corrections to service

contracts. Also, provision has been made to ``grandfather''

organizations currently registered to file essential terms

publications, with no requirement that they submit a further

registration fee. All individuals who presently possess an organization

maintenance log-on be issued a new log-on and password for the new

system. All other potential service contract filers must pay the

requisite fee and be registered for service contract filing prior to

filing service contracts. The proposed rule would also ``grandfather''

software which was certified by the old system, but would allow

software providers to test their filing software if they so desired for

the same certification fee.

Publication of essential terms

OSRA continues to require the publication of certain essential

terms of service contracts. Section 8(c)(3) instructs carrier parties

to service contracts to make these essential terms

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available to the public ``in tariff format.'' The proposed regulation

suggests that carriers and conferences should be able to satisfy this

obligation in the same way they publish their tariff information under

proposed 46 CFR part 520. Comments are solicited on any other options

which might also be feasible and which would affect compliance with the

publication requirement of the Act.

In an effort to assist the shipping public find statements of

essential terms published according to this part, the Commission

anticipates making a list of the locations of all such publications

available on the FMC website. 46 CFR 530.13(f). The Commission requests

comments this proposal.

OSRA removes the requirement that carriers and conferences provide

``me-too'' rights to similarly situated shippers on their service

contracts. Similarly, OSRA no longer requires carriers and conferences

to publish most of the essential terms of service contracts filed with

the Commission. It appears that allowing carriers and conferences to

publish their (non-confidential) essential terms by the same method

they publish their tariffs is the most efficient approach to the

publication requirement. Therefore, the proposed rule cross-references

the technical requirements of the newly proposed tariff publication

regulations to effectuate the essential terms publication required

under this part.

Agreements and service contracting

Commission regulation governing the filing of individual carrier

and conference service contracts remains, for the most part, the same

as it had been under previous Commission regulation. However, there has

been one significant change by OSRA: The additional authority for an

``agreement'' (as opposed to only a ``conference'') to enter into

service contracts. This raises several issues which the Commission will

address in this rulemaking.

Often, non-conference agreements do not create a central

secretariat or authority to act on the agreement's behalf, nor do they

maintain a common tariff. Unlike conferences, therefore, such

agreements may have no uniform or standard method for filing or

publishing the agreement service contract matters.1

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\1\ Indeed, while the statute speaks of a ``carrier or an

agreement'' entering into a contract, in instances where the

agreement is not a distinct legal entity, the Commission anticipates

that it is the multiple carrier members, rather than the agreement

itself, who would be signatories to such a contract.

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With regard to non-conference agreements, the proposed rule

indicates that any of the agreement parties to the service contract may

file; if none of the parties properly files, the liability for such

failure to file would rest equally on all agreement members party to

the contract.

The question arises of how to require publication of statements of

essential terms by agreements which do not have a common tariff. The

proposed rule requires that each member of a non-conference agreement

publish the statement of essential terms in its individual tariff, and

reflect in its statement of essential terms the identity of the other

carrier parties. 46 CFR 530.13(b). The Commission welcomes any comments

as to alternative approaches by which non-conference agreement carriers

may satisfy the publication requirement of section 8(c)(3) of the Act

as revised by OSRA.

A similar issue arises with the Commission's policy regarding the

filing by conferences of service contracts to which fewer than all

members are parties. In the past, the Commission's policy has been to

impose on the conferences the duty to file and publish the service

contract material for service contracts entered into under the

conference agreement, in which fewer than all the members would

participate. 46 CFR 514.4(d)(5)(B). For service contracts outside the

scope of the conference, the conference retained the authority to file

on behalf of its member(s), but the carrier(s) involved also had a

separate duty to file. 46 CFR 514.4(d)(5)(B)(2)(ii).

It appears necessary to revisit these policies at this time. A

requirement that conferences file service contracts entered into by a

subset of its membership would seem inconsistent with OSRA's new

prohibition on agreement members being required to disclose the terms

of their contracts, as well as other provisions regarding independent

and confidential service contracting. Therefore, we are proposing that,

for filing and publication purposes, contracts entered into by some,

but not all, of a conference's members be treated in the same manner as

non-conference agreement contracts. 46 CFR 530.5, 530.13.

Finally, the Commission must resolve how to handle re-rating issues

which might arise under non-conference agreement service contracts. By

definition, agreements do not have common tariffs at which carriage

under a terminated or canceled contract could be re-rated. Therefore,

if a service contract is rejected for not meeting the filing

requirements, deadlines, etc., the issue of which rate should be

applied to cargo which moved under that contract presents itself. One

approach to this problem would be to re-rate the cargo at the tariff

rate for that commodity of the carrier which actually moved the cargo.

46 CFR 530.16. While this is the approach presented in the proposed

regulations, the Commission is interested to hear any others which

might be suggested in the comments.

Duty to Disclose to Labor Organizations

In light of the confidentiality of service contracts and some of

their essential terms, OSRA amends section 8(c)(4) to require that a

carrier which is a party to or is subject to a collective bargaining

agreement with a labor organization must respond within a reasonable

period of time to that labor organization's request regarding the

carrier's responsibility for certain activities related to cargoes

transported under a service contract. The Commission is proposing, at

46 CFR 530.8, certain definitions of ``reasonable period of time'' for

responding to a labor organization's request for information under

section 8(c)(4) of the Act. This definition reflects the concern that

labor organizations are apprised of the handling responsibility for

cargo before that cargo arrives at the discharge port. The Commission

expects that aggrieved labor organizations will use existing Commission

processes in the event of noncompliance by a carrier. The Commission

would entertain proposals for more specific and stringent rules if the

existing standards and procedures prove inadequate in practice.

Commission Confidentiality

Proposed regulation 46 CFR 530.4 seeks to amend the confidentiality

provision as follows: ``Nothing contained in this part shall preclude

the Commission from providing certain information from service

contracts to another agency of the Federal government of the United

States as deemed necessary.'' Other federal agencies, in the

administration of their statutorily mandated responsibilities, may have

a need for service contract information which will otherwise be filed

confidentially with the Commission and which under the existing 1984

Act is disclosed in the published essential terms statement. In an

April 1, 1998 floor statement, the Senate bill's sponsor, Senator

Hutchison, noted that

Federal agencies have expressed concerns over how they are to

ensure ocean carrier compliance with United States cargo preference

law requirements concerning shipping rates in an era of service

contract rate confidentiality. The FMC is encouraged

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to work with affected Federal agencies to address this concern.

Cong. Rec. S3320,(daily ed. April 21, 1998)(statement of Sen.

Hutchison). Similarly, in an October 1, 1998 floor exchange, the

Chairman of the Senate Committee on Commerce, Science and

Transportation, Senator McCain, asked Senator Hutchison

to clarify the ability of the FMC to share confidential service

contract rate and service information with other Federal agencies to

ensure that the U.S.-fleet shipping rates for preference cargo

shipments meet statutory requirements.

Cong. Rec. S11302 (daily ed. Oct. 1, 1998)(Statement of Sen. McCain).

Senator Hutchison replied,

. . . I want to make it clear that the FMC is authorized to

share with another Federal agency service contract information that

parties of the service contract have legally decided to protect from

public disclosure in order to enable that Federal agency to ensure

the compliance of U.S.-flag ocean common carriers with cargo

preference law shipping rate requirements. Of course, that

confidential service contract information would remain protected

from disclosure to the public consistent with the Shipping Act of

1984, as amended by the Ocean Shipping Reform Act of 1998, and other

applicable Federal Laws.

Cong. Rec. S11302 (daily ed. Oct. 1, 1998)(Statement of Sen.

Hutchison). Thus, it is clear that the confidentiality afforded to

service contract information is limited to nondisclosure to the public,

and was not intended by Congress to fetter other Federal agencies in

their oversight responsibilities.2 It is therefore the

intention of the Commission to allow access to filed contracts to

Federal government agencies where appropriate; any such disclosures

will not jeopardize the statutory aim of nondisclosure of confidential

service contract information to nongovernmental entities.

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\2\ With respect to Department of Defense cargo preference law

oversight, moreover, it also appears that the Federal Acquisition

Regulations, 48 CFR 9.104-1(g), 9.105-1(c)(3), 15.404-1(a)(1), and

15.403-3(a), would provide the Department access to the service

contract information in any event, although in a less efficient and

more cumbersome manner.

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Service Contracts With NVOCCs as Shipper Parties

Service contracts with non-vessel-operating common carriers

(``NVOCCs'') remain subject to special requirements for certification

of NVOCCs'' financial responsibility. See 46 CFR 514.7(e) and 46 CFR

530.7. The financial responsibility procedures in this proposed rule

comport with the proposed regulation at 46 CFR Sec. 515.27 (dealing

with financial responsibilities of ocean transportation

intermediaries).

Exceptions and Rejection

Congress has directed the Commission to refuse to accept any

service contract dealing with commodities excepted from application by

section 8(c)(2) or receiving an exemption under section 16 of the 1984

Act. S.Rep. No. 105-61, 105th Cong. 1st Sess., at 23

(1997)(``Report''). The Commission proposes to continue to permit the

filing of service contracts which include both excepted and non-

excepted commodities (``mixed'' contracts), in lieu of requiring the

parties to rewrite their contracts to separate excepted and non-

excepted commodities for filing purposes. Therefore, the Commission

seeks comments on proposed regulation 46 CFR 530.14, particularly

regarding the burden that would result to filers if service contracts

were required to be drafted specifically so that excepted commodities

were not covered. The proposal indicates that the Commission would

refuse to accept for filing service contracts which exclusively cover

excepted commodities, in keeping with the Report language.3

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\3\ The Commission solicited comment on this subject in Docket

No. 85-6, Notice of Inquiry Concerning the Interpretation of Section

8(a) and (8)(c) of the Shipping Act of 1984, as well as Docket No.

86-6, Service Contracts. In Docket No. 86-6, the Commission issued

its Final Rule, 52 FR 23989 (June 26, 1989), and noted that

``service contracts often include a mixture of exempt and non-exempt

commodities, so that a shipper can obtain a better contract rate.

Presumably, the ability to offer service contracts on mixed

commodities also benefits carriers.'' Id. at 23996. The Commission

assumes that the same holds true for the shipping industry today,

but solicits comment on industry practice and the burden which would

be imposed if the Commission were to require that filed service

contracts cover only non-excepted commodities.

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Global Service Contracts

Members of the carrier industry have suggested that the Commission

should accept filings of service contracts which include terms covering

both U.S.-to-foreign and foreign-to-foreign movements of cargo

(hereinafter ``global contracts''). Clearly, the foreign-to-foreign

activity lies outside the Commission's jurisdiction to regulate. This

issue was before the Commission previously in Docket No. 92-20, Service

Contracts in Foreign-to-Foreign Trades, Advance Notice of Proposed

Rulemaking, 57 Fed. Reg. 18855 (May 1, 1992). That proceeding was

discontinued, as carriers, conferences and shippers' associations

strongly opposed the proposal to allow the filing of global service

contracts. In their comments in that proceeding, several carriers and

conferences noted that there was no business efficiency reason to allow

the filing of global service contracts as ``there was no commercial

need'' for the ability to so. In contrast, several large shippers

expressed their desire to have the ability to enter into global service

contracts and to thereby simplify and aggregate their traffic and

logistics operations.

Many commenters in that proceeding suggested that global

contracting would severely interfere with or complicate ``me-too''

rights. Furthermore, the National Customs Brokers and Forwarders

Association of America stated that allowing such global contracts would

give rise to discrimination in favor of large global shippers that

could commit to larger worldwide volumes. However, Congress has

eliminated the Commission's mandate to guard against unreasonable

discrimination (except with regard to clearly defined protected

classes), retooling the Act to place more emphasis on individual

contracting and the marketplace.

There remains a concern, however, that allowing global service

contracts, in which rates in U.S. trades will depend on minimum volume

commitments calculated on a global basis, will complicate the

Commission's ability to monitor and enforce carriers' compliance with

their filed contract rates. While there is merit to this point, the

legal obstacles do not appear to be insurmountable. There is no bright-

line geographic limit to the Commission's ability to compel information

from carriers. Rather, information sought must be ``not unreasonable''

and ``reasonably relevant'' to a lawful Commission inquiry. United

States v. Morton Salt Company, 338 U.S. 632 (1950); Far East Conference

v. Federal Maritime Commission, 337 F.2d 146 (D.C. Cir. 1964).

Therefore, if information about the volumes moving in foreign-to-

foreign commerce is relevant to the question of what rate applies in a

U.S.-to-foreign trade (clearly a matter within the Commission's

jurisdiction), then it would appear that such information may be

compelled by the Commission. Moreover, we note that proper

administration of certain sections of the 1984 Act, i.e., section

13(b)(5), redesignated as 13(b)(6) by OSRA, would seem to require that

the Commission have the ability to compel information about cross-

trades. However, as a practical matter, auditing arrangements with

global quantities will undoubtedly generate substantial challenges.

Some of the objections in Docket No. 92-20 focused on whether

global

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volumes were consistent with the requirement for the filing of minimum

volume commitments in public essential terms. While that issue was more

important when parties had the right to ``me-too'' the terms, it still

has some significance. The Commission proposes an approach that, when

parties have a unitary minimum volume commitment covering U.S.-and

foreign-to-foreign trades, it publish the amount in its public

essential terms publication, but clearly indicate for the public that

the volume includes quantities moving in foreign-to-foreign trades.

Furthermore, the concerns that conferences and niche carriers had

in 1992 may have disappeared completely with the ability of non-

conference agreements to enter into service contracts. Under OSRA,

alliances, along with individual carriers, will have the ability to

offer global service contracts. This ability, of course, will also be

affected by the Commission's approach on the treatment of less-than-

total agreement service contracts, as discussed more fully above.

Another question raised in Docket 92-20 was whether filing of

global contracts would somehow extend other provisions of the Act, such

as the prohibited acts in section 10, to the foreign-to-foreign legs.

It is clear, however, that there would be no authority for the

Commission to spontaneously extend its jurisdiction in this manner.

Therefore, it appears that there is little policy or legal necessity to

require parties to artificially structure their commercial dealings to

be coextensive with the Commission's regulatory jurisdiction. Rather, a

more sound approach would seem to be for carriers to enter into

contracts based on the requirements of the global market, for carriers

to submit them in their true and complete totality, and for the

Commission to regulate those carriers, their agreements and service

contracts to the extent of its authority, and not beyond.

It appears that the significant revisions to the 1984 Act

necessitating sweeping changes to the service contract filing

regulations, make this proposed rulemaking proceeding an opportune

moment for the Commission to revisit the issues presented by the

acceptance of filing for both mixed and global contracts. In light of

the regulatory changes mandated by OSRA, the current proposal seeks to

reduce the burden on the entities subject to the section 8(c) filing

and publication requirements, together with recognition of the

Commission's need to have the ability to easily access and search the

filed documents. Thus, the proposed regulation allows the filing of

service contracts which include (but are not limited to) excepted and

exempted commodities and service outside the U.S. foreign trades. The

Commission is concerned that it not overburden its filers, or encourage

them to create artificial documents which do not reflect the actual

underlying business agreement which the service contract represents.

Inland Portions of Through Movements to Europe

Unlike the United States, it appears that the European Commission

(``E.C.'')--while permitting conference service contracts for the ocean

movement of cargo--prohibits conference contracts which cover the

movement of cargo to inland points in Europe. Therefore, it seems that

carriers in the U.S.-European trade may participate in a conference

service contract covering U.S.-Europe ocean movements, and sign an

individual service contract covering European inland transport for the

same shipper customer. A question has arisen as to whether these

contracts for European inland transport must be filed with the

Commission. It would seem that filing would be consistent with

statutory requirements to the extent the contracts establish the

European inland portion of a through rate charged by a carrier in a

U.S.-Europe intermodal movement. However, the Commission welcomes

comments on how it could minimize the regulatory burdens occasioned by

these differences in regulatory regimes, to the extent it may do so

given its own statutory responsibility.

Cross-Referencing Tariffs

Presently, most filed service contracts contain re-occurring terms

common to all of a carrier's or conference's service contracts

(including matters such as free time and demurrage, bunkering rates,

currency matters, etc.) the complete text of which would be very

cumbersome for the carrier party to file with the service contract.

Therefore, service contracts almost always make cross-reference to

terms contained in that carrier's or conference's tariff or an

essential terms publication.

The Commission recognizes that it was Congress' intent, by lifting

the requirement that tariffs be filed with the Commission, to allow

parties to service contracts more freedom and flexibility in their

commercial arrangements. The proposed rule, Sec. 530.9(c)(2), thus

permits filed service contracts to refer to terms outside the four

corners of the filed service contract, but only if they are contained

in the carrier's or conference's tariff publication.

Another option for the system is to allow service contract filers

to file with the Commission a ``general rules'' filing as a part of

their service contract register. This might be useful for filers which

file multiple service contracts with duplicative and/or commonly

applicable items (e.g. rules for hazardous cargo, equipment

interchanges, mileage guide publications, location groups, inland

rates, and bills of lading); rather than repeatedly submitting the text

of these amendments in each contract filing, filers could simply

reference their ``general rules'' filing. This would also maintain the

confidentiality of such terms. Filing and amendments to these ``general

rules'' would be subject to the filing requirements of service

contracts and amendments. The Commission wishes to hear how the

industry views this issue and what options may be available for its

resolution.

Rejection of Service Contract Filings

Commission regulations currently outline the procedures for

rejection of service contracts and essential terms filed with the

Commission. 46 CFR 514.7(j). The Commission rejects service contracts

or their amendments which do not conform to the requirements of the

1984 Act or Commission regulation, including timeliness of filing and

adequacy and accuracy of the publication of the statement of essential

terms. The proposed regulation adapts the current rejection rules as

necessary to meet the changes to the 1984 Act made by OSRA. The

proposed regulations also provide for ``non-acceptance,'' a new term

reflecting the congressional mandate that the Commission not accept for

filing service contracts which cover only excepted commodities,

consistent with congressional directives.

The proposed regulations also anticipate re-rating for service

contracts with non-conference agreements. Such re-rating will be made,

under proposed regulation 46 CFR part 530 subpart E, at the tariff rate

of the carrier which actually carried the cargo in question.

The definitions of ocean common carrier and conference are changed

to reflect the concerns the Commission discussed in its proposed

Agreements rulemaking. See, 46 CFR part 535.

The reporting requirements contained in 46 CFR part 530 have been

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

total annual burden for the estimated 155 annual respondents is 303,953

manhours. This estimate includes, as applicable, the

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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, NW, Washington, DC 20503

within 30 days of publication in the Federal Register.

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

whether the proposed collection of information is necessary for the

proper performance of the functions of the agency, including whether

the information will have practical utility; (b) evaluate the accuracy

of the Commission's burden estimates for the proposed collection of

information; (c) enhance the quality, utility, and clarity of the

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

collection of information on respondents, including 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 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 affected universe of the parties is limited to

vessel-operating common carriers. The Commission has determined that

these entities do not come under the programs and policies mandated by

the Small Business Regulatory Enforcement Fairness Act as they

typically exceed the threshold figures for number of employees and/or

annual receipts to qualify as a small entity under Small Business

Administration guidelines.

List of Subjects for 46 CFR Parts 514 and 530

Freight, Maritime carriers, Reporting and recordkeeping

requirements.

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

remove 46 CFR part 514 and to add new 46 CFR part 530 to subchapter B

to read as follows:

PART 514--[REMOVED]

PART 530--SERVICE CONTRACTS

Subpart A--General Provisions

Sec.

530.1 Purpose.

530.2 Scope and applicability.

530.3 Definitions.

530.4 Confidentiality.

530.5 Duty to file.

530.6 Service contracts with NVOCCs.

530.7 Certification of shipper status.

530.8 Duty to labor organizations.

Subpart B--Filing Requirements

530.9 Service contracts.

530.10 Notices.

530.11 Amendment, correction, and cancellation.

530.12 Filing fees and other costs.

Subpart C--Publication of Essential Terms

530.13 Publication.

Subpart D--Exceptions

530.14 Exceptions.

Subpart E--Rejection

530.15 Contract non-acceptance, rejection and notice.

530.16 Implementation, prohibition and rerating.

Subpart F--Recordkeeping and Audit

530.17 Recordkeeping and audit.

Appendix A to Part 530--Instructions for the Filing of Service

Contracts

Exhibit 1 to Part 530--Filer Registration Form and Instructions

Authority: 46 U.S.C. App. 1704, 1705, as amended by Pub. L. 105-

258. 112 Stat. 1902.

Subpart A--General Provisions

Sec. 530.1 Purpose.

The purpose of this part is to facilitate filing of service

contracts and publication of certain essential terms of those service

contracts as required by section 8(c) of the Shipping Act of 1984

(``Act''). This part enables the Commission to review service contracts

to ensure that these contracts and the parties to them comport to the

requirements of the Act. It is also the purpose of this part to

implement electronic filing provisions for service contracts to

facilitate compliance and minimize the burden on the oceanborne

commerce of the United States.

Sec. 530.2 Scope and applicability.

An individual ocean common carrier or an agreement between or among

ocean common carriers may enter into a service contract with one or

more shippers subject to the requirements of the Act.

Sec. 530.3 Definitions.

When used in this part:

(a) Act means the Shipping Act of 1984 as amended by the Ocean

Shipping Reform Act of 1998.

(b) Agreement means an understanding, arrangement, or association

(written or oral) and any modification or cancellation thereof which

has been filed and effective under 46 CFR part 535 with the Federal

Maritime Commission. The term does not include a maritime labor

agreement.

(c) Authorized person means a carrier itself or a duly appointed

agent thereof who is authorized to file service contracts on behalf of

the carrier party to a service contract and to publish the

corresponding statement of essential terms and registered by the

Commission to file under Sec. 530.5(d) and appendix A of this part.

(d) BTCL means the Commission's Bureau of Tariffs, Certification

and Licensing or its successor bureau.

(e) Common carrier means a person holding itself out to the general

public to provide transportation by water of passengers or cargo

between the United States and a foreign country for compensation that:

(1) Assumes responsibility for the transportation from the port or

point of receipt to the port or point of destination; and

(2) Utilizes, for all or part of that transportation, a vessel

operating on the high seas or the Great Lakes between a port in the

United States and a port in a foreign country, except that the term

does not include a common carrier engaged in ocean transportation by

ferry boat, ocean tramp, or chemical parcel tanker, or by a vessel when

primarily engaged in the carriage of perishable agricultural

commodities:

(i) If the common carrier and the owner of those commodities are

wholly owned, directly or indirectly, by a person primarily engaged in

the marketing and distribution of those commodities and

(ii) Only with respect to those commodities.

(f) Conference means an agreement between or among two or more

ocean common carriers which provides for the fixing and adherence to

uniform tariff rates, charges, practices and conditions of service

relating to the receipt, carriage, handling and/or delivery of

passengers or cargo for all members; but the term does not include

joint service, consortium, pooling, sailing, or transshipment

agreements.

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(g) 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.

(h) File or filing (of service contracts or amendments thereto)

means use of the Commission's electronic filing system for receipt of a

service contract or amendment and the recording of its receipt.

(i) Labor agreement means a collective-bargaining agreement between

an employer subject to the Act, or group of such employers, and a labor

organization or an agreement preparatory to such a collective-

bargaining agreement among members of a multi-employer bargaining

group, or an agreement specifically implementing provisions of such a

collective-bargaining agreement or providing for the formation,

financing, or administration of a multi-employer bargaining group, but

the term does not include an assessment agreement.

(j) Ocean common carrier means a common carrier that operates, for

all or part of its common carrier service, a vessel on the high seas or

the Great Lakes between a port in the United States and a port in a

foreign country, except that the term does not include a common carrier

engaged in ocean transportation by ferry boat, ocean tramp, or a

chemical parcel tanker.

(k) Non-vessel-operating common carrier (``NVOCC'') means an ocean

transportation intermediary as defined by section 3(17)(B) of the Act.

(l) Service contract means a written contract between one or more

shippers and an individual ocean common carrier or an agreement between

or among ocean common carriers, in which the shipper makes a commitment

to provide a certain minimum quantity or portion of its cargo or

freight revenue over a fixed time period, and the individual ocean

common carrier or the agreement commits to a certain rate or rate

schedule and a defined service level, such as, assured space, transit

time, port rotation, or similar service features. The contract may also

specify provisions in the event of nonperformance on the part of any

party.

(m) Shipper means a cargo owner; the person for whose account the

ocean transportation is provided; the person to whom delivery is to be

made; a shippers' association; or an NVOCC that accepts responsibility

for payment of all applicable charges under the service contract.

(n) Statement of essential terms means a concise statement of the

essential terms of a service contract required to be published under

Sec. 530.13 of this part.

Sec. 530.4 Confidentiality.

All service contracts and amendments to service contracts filed

with the Commission shall, to the full extent permitted by law, be held

in confidence. Nothing contained in this part shall preclude the

Commission from providing certain information from or access to service

contracts to another agency of the Federal government of the United

States.

Sec. 530.5 Duty to file.

(a) Generally. The duty under this part to file service contracts

and notices, and to publish statements of essential terms shall be upon

the carrier party or conference which is the signatory to the service

contract.

(b) Agreements. A service contract entered into by all members of a

non-conference agreement may be filed by any member of that agreement,

as the carrier parties may so designate. Signatories to a service

contract required to file a service contract under this part shall be

jointly and severally liable for a failure to file the service

contract.

(c) Conferences.--(1) The duty to file shall be upon the conference

for service contracts entered into by a conference on behalf of its

full membership.

(2) A service contract entered into by fewer than all the members

of a conference may be filed by any participating carrier, as the

participating carriers may so designate. Signatories to a service

contract required to file a service contract under this part shall be

jointly and severally liable for a failure to file the service

contract.

(d) Registration.--(1) Application. Authority to file or delegate

the authority to file must be requested by a responsible official of

the service contract carrier party in writing, by submitting to BTCL

the Registration Form in Exhibit 1 to this part and the appropriate fee

as defined under Sec. 530.12.

(2) Approved registrations. BTCL shall grant Registrants with

software certified by BTCL a log-on ID and password for filing and

amending service contracts.

(3) Software certification. Certification of software may be

requested by appointment through the Commission's Office of Information

Resources Management (``OIRM'') and payment of the appropriate fee as

set forth in Sec. 530.12. OIRM will test the software as set out in

appendix A to this part. Organizations certified prior to May 1, 1999

for the batch filing of ``Essential Terms Publications'' (``ETs'') in

the Commission's former ``Automated Tariff Filing Information System''

(``ATFI'') are not required to re-certify their software but may if

they so choose using the same procedure as for initial certification.

(4) Emergencies. In an emergency, a person, already authorized to

maintain and edit its firm's organization record under appendix A to

this part, may change a ``publisher'' under Appendix A to this part,

verbally notify BTCL, and promptly submit the proper documents.

(5) Prior registration and certification. Each organization

registered to file essential terms publications before May 1, 1999 will

be issued a log-on ID and password for access to file service contracts

under the Commission's electronic filing system.

Sec. 530.6 Service contracts with NVOCCs.

No ocean common carrier or agreement among ocean common carriers

may execute or file any service contract in which a contract party, an

affiliate of such contract party, or a member of a shippers'

association, entitled to receive service under the contract, is an

NVOCC, unless such NVOCC has a published tariff and proof of financial

responsibility as required by sections 8 and 19 of the Shipping Act of

1984 and Commission regulations under this part, and 46 CFR parts 515

and 520.

Sec. 530.7 Certification of shipper status.

(a) Certification. The shipper contract party shall sign and

certify on the signature page of the service contract its shipper

status (e.g., owner of the cargo, shippers' association, NVOCC, or

specified other designation), and the status of every affiliate of such

contract party or member of a shippers' association entitled to receive

service under the contract.

(b) Proof of tariff and financial responsibility. If the

certification completed by the contract party under paragraph (a) of

this section identifies the contract party or an affiliate or member of

a shippers' association as an

[[Page 71069]]

NVOCC, the ocean common carrier, conference or agreement shall obtain

proof that such NVOCC has a published tariff and proof of financial

responsibility as required under sections 8 and 19 of the 1984 Act

before signing the service contract. An ocean common carrier,

conference or agreement can obtain such proof by the same methods

prescribed in Sec. 515.27 of this chapter.

(c) Joining shippers' association during term of contract. If an

NVOCC joins a shippers' association during the term of a service

contract and is thereby entitled to receive service under the contract,

the NVOCC shall provide to the ocean common carrier, agreement or

conference the proof of compliance required by paragraph (b) of this

section prior to making any shipments under the contract.

(d) Reliance on NVOCC proof; independent knowledge. An ocean common

carrier, agreement or conference executing a service contract shall be

deemed to have complied with section 10(b)(12) of the Act upon meeting

the requirements of paragraphs (a) and (b) of this section, unless the

carrier party had reason to know such certification or documentation of

NVOCC tariff and bonding was false.

Sec. 530.8 Duty to labor organizations.

(a) In response to a written request transmitted from a labor

organization with which it is a party or is subject to the provisions

of a collective bargaining agreement with a labor organization, an

ocean common carrier shall state, within a reasonable period of time,

whether it is responsible for the following work at dock areas and

within port areas in the United States with respect to cargo

transported under a service contract:

(1) The movement of the shipper's cargo on a dock area or within

the port area or to or from railroad cars on a dock area or within a

port area;

(2) The assignment of intraport carriage of the shipper's cargo

between areas on a dock or within the port area;

(3) The assignment of the carriage of the shipper's cargo between a

container yard on a dock area or within the port area and a rail yard

adjacent to such container yard; or

(4) The assignment of container freight station work and

maintenance and repair work performed at a dock area or within the port

area.

(b) Terms. (1) For the purposes of this section, the terms dock

area and within the port area shall have the same meaning and scope as

defined in the applicable collective bargaining agreement.

(2) For the purposes of this section, a reasonable period of time

means:

(i) If the cargo in question is due to arrive in less than five (5)

days from the date of receipt of the request as defined in paragraph

(a) of this section, two (2) days from the date of receipt of the

request; but

(ii) If cargo in question is due to arrive in more than five (5)

days from the date of receipt of the request as defined in paragraph

(a) of this section, four (4) days from the date of receipt of the

request.

(3) For the purposes of this section, movement includes, but is not

necessarily limited to, the normal and usual aspects of the loading and

discharging cargo in containers; placement, positioning and re-

positioning of cargo or of containers; the insertion and removal of

cargo into and from containers; and the storage and warehousing of

cargo.

(4) For the purposes of this section, assignment includes, but is

not limited to, the carrier's direct or indirect control over the

parties which, the manner by which, or the means by which the shipper's

cargo is moved, regardless of whether such movement is completed within

or outside of containers.

(5) For the purposes of this section, transmit includes first-class

mail, by facsimile, by telegram, hand-delivery, or electronic mail

(``e-mail'').

(c) Applicability. This section requires the disclosure of

information by an ocean common carrier only if there exists an

applicable and otherwise lawful collective bargaining agreement which

pertains to that carrier.

(d) Disclosure not deemed admission or agreement. No disclosure

made by an ocean common carrier shall be deemed to be an admission or

agreement that any work is covered by a collective bargaining

agreement.

(e) Dispute resolution. Any dispute regarding whether any work is

covered by a collective bargaining agreement and the responsibility of

the ocean common carrier under such agreement shall be resolved solely

in accordance with the dispute resolution procedures contained in the

collective bargaining agreement and the National Labor Relations Act,

and without reference to this section.

(f) Jurisdiction and lawfulness. Nothing in this section has any

effect on the lawfulness or unlawfulness under the Shipping Act of

1984, the National Labor Relations Act, the Taft-Hartley Act, the

Federal Trade Commission Act, the antitrust laws, or any other federal

or state law, or any revisions or amendments thereto, of any collective

bargaining agreement or element thereof, including any element that

constitutes an essential term of a service contract under section 8(c)

of the Act.

Subpart B--Filing Requirements

Sec. 530.9 Service contracts.

(a) Authorized persons pursuant to Sec. 530.5 of this part shall

file electronically, in the manner set forth in appendix A to this

part, with BTCL a true and complete copy of every service contract

before any cargo moves pursuant to that service contract, and as

specified by this part.

(b) Every service contract filed with the Commission shall include

the complete terms of the contract, including, but not limited to, the

following:

(1) The origin port ranges in the case of port-to-port movements

and geographic areas in the case of through intermodal movements;

(2) The destination port ranges in the case of port-to-port

movements and geographic areas in the case of through intermodal

movements;

(3) The commodity or commodities involved;

(4) The minimum volume or portion;

(5) The service commitments;

(6) The line-haul rate;

(7) Liquidated damages for non-performance (if any);

(8) Duration;

(9) The legal names and business addresses of the contract parties;

the legal names of affiliates entitled to access the contract; the

names, titles and addresses of the representatives signing the contract

for the parties; and the date upon which the service contract was

signed. An agreement service contract must identify the FMC Agreement

Number(s) under which the service contract is filed. Carriers,

conferences and/or agreements which enter into contracts that include

affiliates must in each instance either:

(i) List the affiliates' business addresses; or

(ii) Certify that this information will be provided to the

Commission upon request within ten (10) business days of such request.

However, the requirements of this section do not apply to amendments to

contracts that have been filed in accordance with the requirements of

this section unless the amendment adds new parties or affiliates.

Subsequent references in the contract to the contract parties shall be

consistent with the first reference (e.g., (exact name), ``carrier,''

``shipper,'' or ``association,'' etc.);

(10) A certification of shipper status in accordance with

Sec. 530.7;

(11) A description of the shipment records which will be maintained

to

[[Page 71070]]

support the contract and the address, telephone number, and title of

the person who will respond to a request by making shipment records

available to the Commission for inspection under Sec. 530.17; and

(12) All other provisions of the contract.

(c) Certainty of terms. The terms described in paragraph (b)(1)-(8)

of this section may not:

(1) Be uncertain, vague or ambiguous; or

(2) Make reference to terms not explicitly detailed in the service

contract filing itself, unless those terms are contained in a tariff

publication in accordance with the requirements of 46 CFR part 520.

(d) Other requirements. Every service contract filed with BTCL

shall also include, in the manner set forth in appendix A to this part:

(1) A unique service contract number, and consecutively numbered

amendment number, if any, of more than one (1) but less than ten (10)

alphanumeric characters in length (``SC Number''); and

(2) A number of more than one (1) but less than ten (10)

alphanumeric characters in length which is the same number assigned to

the filer's publication of statement of essential terms (``ET

Number'').

Sec. 530.10 Notices.

(a) Notice to the Commission. Within 10 days of the occurrence of

any event listed below, there shall be filed with the Commission,

pursuant to the same procedures as those followed for the filing of an

amendment pursuant to Sec. 530.11 and appendix A to this part, a

detailed notice of:

(1) Correction (clerical or administrative errors);

(2) Cancellation;

(3) Termination by mutual agreement, breach or default not covered

by the service contract;

(4) Adjustment of accounts, by rerating, liquidated damages, or

otherwise under Sec. 530.16;

(5) Final settlement of any account adjusted as described in

Sec. 530.16; and

(6) Any change to:

(i) The name of a basic contract party; or

(ii) The list of affiliates, including changes to legal names and

business addresses, of any contract party entitled to receive or

authorized to offer services under the contract.

(b) Notice to contract party. A proposed final accounting or

rerating shall be issued to the appropriate contract party within 60

days of termination, discontinuance, breach or default of the service

contract, for:

(1) Liability for liquidated damages provided for by the service

contract; or

(2) Termination, breach or default not covered by the contract.

Sec. 530.11 Amendment, correction, and cancellation.

(a) Amendment. Service contracts may be amended by mutual agreement

of the parties to the contract and shall be filed electronically with

the Commission in the manner set forth in Sec. 530.9 and appendix A to

this part.

(b) Corrections. Either party to a filed service contract may

request permission to correct clerical or administrative errors in the

terms of a filed contract. Requests shall be filed, in duplicate, with

the Commission's Office of the Secretary within 45 days of the

contract's filing with the Commission, accompanied by remittance of a

$233 service fee, and shall include:

(1) A letter of transmittal explaining the purpose of the

submission, and providing specific information to identify the initial

or amended service contract to be corrected;

(2) A paper copy of the proposed correct terms. Corrections shall

be indicated as follows:

(i) Matter being deleted shall be struck through; and

(ii) Matter to be added shall immediately follow the language being

deleted and be underscored;

(3) An affidavit from the filing party attesting with specificity

to the factual circumstances surrounding the clerical or administrative

error, with reference to any supporting documentation;

(4) Documents supporting the clerical or administrative error; and

(5) A brief statement from the other party to the contract

concurring in the request for correction.

(6) If the request for correction is granted, the carrier,

agreement or conference shall file the corrected contract provisions

using a special case number as described in appendix A to this part.

(c) Cancellation.--(1) Events anticipated by the contract;

rerating. An account may be adjusted for events and damages covered by

the service contract. This shall include adjustment necessitated by

either liability for liquidated damages under Sec. 530.9(b)(8), or the

occurrence of an event described in paragraph (c)(2) of this section.

(2) Events not anticipated by the service contract. In the event of

a contract termination which is not provided for in the contract itself

and which results from mutual agreement of the parties or because the

shipper party has failed to tender the minimum quantity or portion

required by the service contract:

(i) Further or continued implementation of the service contract is

prohibited; and

(ii) The cargo previously carried under the contract shall be

rerated according to the otherwise applicable tariff provisions as set

forth in Sec. 530.16.

Sec. 530.12 Filing fees and other costs.

(a) Under the authority of the Independent Offices Appropriation

Act, 31 U.S.C 9701, the Commission assesses a filing fee for the filing

of service contracts, modifications and corrections thereto. Unless

otherwise provided in this part, checks, drafts or money orders shall

be remitted and made payable to ``Federal Maritime Commission'' 800 N.

Capitol Street, NW., Washington, DC 20573.

(b) Unless otherwise specified, overdue payments will be charged

interest in accordance with the rate established by the Department of

the Treasury for each 30-day period or portion thereof that the payment

is overdue. In addition to any other remedy and penalty provided by law

and regulation, if payment is overdue for 90 days the Commission may

suspend or terminate electronic filing access.

(c) Fees. (1) Service contracts and amendments. The filing fee

shall be $1.63 per filing for all initial and amended service contract

filings. Within 10 calendar days after the end of each month, the

Office of Budget and Financial Management shall send a billing

statement for each filer.

(2) Filer registration. $91 for initial registration for one firm

and one individual; and $91 for additions and changes. No fee will be

assessed to continue filer registration for organizations registered

for batch filing with the Commission prior to May 1, 1999.

(3) Filing Guide. $25 for diskette; $49 for paper format. Requests

for filing guides should be made in writing and addressed to: ``BTCL

Manuals,'' Federal Maritime Commission, Washington, DC 20753. A check

for the appropriate amount should be made to the ``Federal Maritime

Commission.''

(4) Corrections. $233 for corrections to service contracts under

Sec. 530.11(c).

(5) Software certification. $496 per test submission.

Subpart C--Publication of Essential Terms

Sec. 530.13 Publication.

(a) Contents. All authorized persons who have a duty to file

service contracts under Sec. 530.5 are also required to make available

to the public,

[[Page 71071]]

contemporaneously with the filing of each service contract with the

Commission, and in tariff format, a concise statement of the following

essential terms:

(1) The port ranges:

(i) Origin;

(ii) Destination;

(2) The commodity or commodities involved;

(3) The minimum volume or portion; and

(4) the duration.

(b) Method. The statement of essential terms shall be published as

a separate part in the filer's tariff publication, conforming to the

format requirements set forth in 46 CFR part 520. Where there is more

than one carrier party to the service contract each of the carrier

parties to the service contract shall publish the essential terms in

their individual tariff publication pursuant to 46 CFR part 520; except

however, when the carrier parties comprise the full membership of a

conference, publication shall be made in the conference tariff.

(c) References. The statement of essential terms shall contain the

same number as that for the confidentially filed service contract (``ET

Number'').

(d) Terms. (1) If any of the essential terms include figures for

commodities exempt under the Act or moving outside of the United States

trades, the statement of essential terms shall so note.

(2) If there are common carrier parties to the contract other than

the carrier within whose tariff publication the essential terms appear,

they shall be identified in the statement of essential terms.

(e) Agents. Common carriers, conferences, or agreements may use

agents to meet their publication requirement under this part.

(f) Location. The Commission will publish on its website,

www.fmc.gov, a listing of the locations of all service contract

essential terms publications as defined in paragraph (a) of this

section. The Commission will update this list on a periodic basis.

(g) Updating statements of essential terms. To ensure that the

information contained in a published statement of essential terms is

current and accurate, the statement of essential terms publication

shall include a prominent notice indicating the date of most recent

publication or revision. When the published statement of essential

terms are affected by filed amendments pursuant to Sec. 530.9 or

corrections pursuant to Sec. 530.11(c), the current terms shall be

immediately changed and published in the relevant statement of

essential terms.

(h) Commission monitoring. The Commission shall periodically

monitor the publications of statements of essential terms to ensure

that they conform to the corresponding filed terms.

Subpart D--Exceptions

Sec. 530.14 Exceptions.

(a) Except as provided in paragraphs (b)(1) and (b)(2) of this

section, the Commission will not accept for filing service contracts

which exclusively concern bulk cargo, forest products, recycled metal

scrap, new assembled motor vehicles, waste paper or paper waste, as

those terms are defined in section 3 of the Act or service contracts

exempted under section 16 of the Act. Such service contracts

transmitted to the Commission for filing under appendix A to this part

shall be rejected and the filer shall be notified of the rejection.

(b) Inclusion in service contracts. An excepted commodity or

exempted service listed in paragraph (a) of this section may be

included in a service contract filed with the Commission, but only if:

(1) There is a tariff of general applicability for the

transportation, which contains a specific commodity rate for the

excepted commodity; or

(2) The contract itself sets forth a rate or charge which will be

applied if the contract is rejected or otherwise terminated.

(c) Waiver of exemption. Upon filing under this section, the

service contract shall be subject to the same requirements as those for

contracts involving non-excepted commodities.

Subpart E--Rejection

Sec. 530.15 Contract non-acceptance, rejection and notice.

(a) Non-acceptance. The Commission shall not accept for filing any

service contracts which relate exclusively to excepted commodities as

described under Sec. 530.14(a). The Commission shall immediately notify

the filer of the non-acceptance.

(b) Notice of intent to reject. (1) Within 20 days after the

initial filing of an initial or amended service contract, the

Commission may reject, or notify the filing party of the Commission's

intent to reject, a service contract that does not conform to the

requirements of the 1984 Act or this part. The Commission will provide

an explanation of the reasons for such rejection or intent to reject.

(2) Except for rejection on the ground that the service contract or

amendment thereto was not filed before cargo moved under it, or other

major deficiencies (such as not containing terms required by

Sec. 530.9(b)(1)-(8)) the parties will have 20 days after the date

appearing on the notice of intent to reject to resubmit an

appropriately modified contract.

Sec. 530.16 Implementation; prohibition and rerating.

(a) Performance under a service contract or amendment thereto may

begin without prior Commission authorization on the day it is effective

consistent with Sec. 530.5, except for rejection under Sec. 530.15;

(b) When the filing parties receive notice that an initial or

amended service contract or statement of essential terms has been

rejected under Sec. 530.15:

(1) Further or continued implementation of the service contract is

prohibited;

(2) All services performed under the contract shall be rerated in

accordance with the otherwise applicable tariff provisions for such

services with notice to the shipper within 5 days of the date of

rejection; and

(3) Detailed notice shall be given to the Commission under

Sec. 530.10 within 10 days of:

(i) The rerating or other account adjustment resulting from

rejection under this paragraph; or

(ii) Final settlement of the account adjusted under Sec. 530.11.

(c) If the rejected service contract was that of an agreement with

no common tariffs, the re-rating shall be in accordance with the

published tariff rates of the carrier which actually transported the

cargo which were in effect at the time the cargo was transported.

(d) Nothing in this section applies to service contracts

unacceptable for filing with the Commission pursuant to Sec. 530.15(a).

Subpart F--Recordkeeping and Audit

Sec. 530.17 Recordkeeping and audit.

(a) Records retention for five years. Every common carrier or

agreement shall maintain original signed service contracts, amendments,

and their associated records in an organized, readily accessible or

retrievable manner for a period of five (5) years from the termination

of each contract.

(b) [paragraph (b) is stayed until further notice.] Where

maintained. (1) Service contract records shall be maintained in the

United States, except that service contract records may be maintained

outside the United States if the Chairman or Secretary of an agreement

or President or Chief

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Executive Officer of the carrier certifies annually by January 1, on a

form to be supplied by the Commission, that service contract records

will be made available as provided in paragraph (c) of this section.

(2) Penalty. If service contract records are not made available to

the Commission as provided in paragraph (c) of this section, the

Commission may cancel any carrier's or agreement's right to maintain

records outside the United States pursuant to the certification

procedure of paragraph (b) of this section.

(c) Production for audit within 30 days of request. Every carrier

or agreement shall, upon written request of the FMC's Director, Bureau

of Enforcement, any Area Representative or the Director, Bureau of

Economics and Agreements Analysis, submit copies of requested original

service contracts or their associated records within 30 days of the

date of the request.

(d) Agreement service contracts. In the case of service contracts

made by agreements, the penalties for a failure to maintain records

pursuant to this section shall be jointly and severally on all of the

agreement members party to the service contract in question.

Appendix A--Instructions for the Filing of Service Contracts

Part I--Filing Guide

Service contract filing will be done in accordance with the

instructions to service contract filers found in the Service

Contract Filing Guide (``Filing Guide''). Filers may inspect a copy

of the Filing Guide at the Commission's Bureau of Tariffs,

Certification, and Licensing (``BTCL'') (or its successor), 800 N.

Capitol St., NW, Suite 940, Washington, DC. The Filing Guide may be

purchased from BTCL for a fee specified in 46 CFR 530.12.

The Filing Guide includes the following items:

(a) Transaction set. The transaction set format includes all

transaction set segments and segment definitions.

(b) Data Element Dictionary (``DED''). The data element

dictionary contains the definition of data elements (e.g., amendment

number, date formats, etc.).

Part II--Filing

In all cases, the filing is processed as soon as possible after

submission/receipt of the filing. The FMC's service contract filing

system (``system'') assigns the filing date, which is the date an

electronically transmitted (``on-line batch'') filing session file

transfer is initiated, assuming there has been a successful file

transfer. After the filing is processed, a filing-results message is

placed in the filer's electronic mailbox on the central site system.

A. Procedure. Filing is performed by transmission of prepared

service contract material to the FMC system over dial-up lines from

the filer's own computer, using Filing Guide service contract

transaction set formats and the KERMIT or ZMODEM file transfer

protocols. The conclusion of the file transfer sequence is a

positive keyboard entry to initiate the transfer and a response that

indicates completion of that submission. The modem must be v.34

compatible.

B. General format requirements.

1. Database format. The FMC service contract database is

structured from service contract data elements and the service

contract terms formed by logical grouping of those elements.

2. Transmission. On-line batch transmission of service contracts

to the FMC computer is governed by the transaction sets contained in

the Filing Guide. Service contract filings not complying with the

regulations in this part or the formats and valid codes contained in

the Filing Guide are subject to rejection.

3. Adding new transaction data. Requests for major changes or

additions to the transaction set format and/or data shall be

submitted in writing to BTCL, with sufficient detail and reasons for

each proposed change. A contact person and telephone number also

should be provided in case of questions.

(a) A proposed major change (other than a correction), such as

to a transaction set, will require formal configuration management

procedures and a minimum of thirty days' advance notice of the

change in the Federal Register and the ``Service Contract System

News'', available at system log-on, and by other established

Commission communications procedures.

(b) Minor changes will be entered into the system and published

as soon as possible. Such minor changes include additions to any of

the standard terminology published in appendix A to part 520.

C. Hardware and software requirements.

The basic equipment necessary to file service contracts is a

personal computer (``PC''), a VT-100 emulation software package, and

a modem. The transmitted filing session must be formatted to comply

with the transaction sets. The transmission may be via the use of

KERMIT or ZMODEM file transfer protocols after establishing a link

for on-line batch filing with the FMC central site computer.

The Commission will not make available to the public software

packages for firms to use in formulating service contract filings.

The Commission has released the Filing Guide (with transaction set)

into the public domain so that qualified commercial firms can

develop filing software for the general market. Firms which develop

filing software, must, by appointment through the Commission's

Office of Information Resources Management and payment of the fee

set forth in Sec. 530.12, test their formatting of service contracts

transaction set format by submission of that data to the FMC central

site computer before they will be permitted to transmit any filings.

The data must be submitted via on-line batch transmission over dial-

up telecommunications links using the required file transfer

protocols. Testing will require submission of sample service

contract filings to the FMC system, with an evaluation of the actual

results of the attempted filings to ensure that the transaction set

formats are properly employed and that the filing results are

consistent with the filer's expectations. Organizations certified

prior to May 1, 1999 for the batch filing of ``Essential Terms

Publications'' (``ETs'') in the Commission's former ``Automated

Tariff Filing Information System'' (``ATFI'') are not required to

re-test their software but may if they so choose using the same

procedure as for initial registrants.

D. Registration, Log-on ID and Password.

1. System identifications (``IDs'') for filing log-on and

initial password are obtained by submitting the Service Contract

Registration Form (Exhibit 1 to this part), along with the proper

fee under Sec. 530.12 and other necessary documents, including

delegation of authority, as prescribed by this part, to BTCL. A

separate Service Contract Registration Form is required for each

individual that will file service contracts with the FMC. However,

each organization certified prior to May 1, 1999 to perform batch

filing of ET publications in the Commission's former ``ATFI''

system, will be issued a new log-on ID and password for access to

file service contracts.

2. Log-on IDs and passwords may not be shared with or loaned to

or used by any individual other than the individual registrant. The

Commission reserves the right to disable any log-on ID that is

shared with, loaned to or used by parties other than the registrant.

3. Authority for organizational filing can be transferred by

submitting an amended registration form requesting the assignment of

a new log-on ID and password. The original log-on ID will be

canceled when a replacement log-on ID is issued.

E. Connecting to the Service Contract Filing System.

If service contract filer equipment (hardware and software) is

compatible with the configurations specified in this section and

have been tested in accordance with Part II C. of this appendix, and

the proper log-on ID and password have been obtained under this

section, filing services are available to filers registered under

this section, over commercial telecommunications using standard

(v.34 compatible) asynchronous modems with data rates up to 28800

baud. The dial-up procedures are set forth in the Filing Guide.

F. Major menu selections.

Proper connection will lead the filer to the ``Logo Menu,''

which allows selections by any filer for ``Organization Maint.,''

``Mailbox,'' ``Service Contract System News,'' ``Change Password,''

``Screen Setup,'' and ``Logout.'' Additionally, a registered filer

can access ``Begin File Transfer'' to initiate the on-line batch

filing of a service contract. Upon the selection of ``Begin File

Transfer'' the filer will be presented the option to select KERMIT

or ZMODEM and to commence the file transfer.

G. Conformity checks.

Certain service contract data submitted to the FMC for filing

are screened for compliance with conformity checks, and certain data

not automatically rejected by the conformity checks are flagged for

[[Page 71073]]

Commission examiner review. The conformity checks are syntax checks,

validity checks and associative checks. The system will generally

not accept service contracts which fail conformity checks.

Commercially developed batch filing software can be designed to

accomplish the same functionality. However, all proposed filings of

service contracts must undergo the routine system conformity checks

before they can be received into the database. Filers will be

notified of automatic rejections at this stage by electronic mail,

with a follow-up letter if the electronic mail has not been read

within 10 days of dispatch. The conformity checks are:

1. Syntax Checks. Service contracts will be checked for file

integrity, proper data types, field lengths, and logical sequence

according to the Filing Guide's transaction sets. Data not

conforming to the data element format or type in the Filing Guide's

DED and the sequence requirements of the transaction sets and

segment definitions will result in rejections of submitted service

contracts to include the possible rejection of an entire filing if

form and format errors are extensive enough to preclude processing.

2. Validity Checks. Certain data elements of filed service

contracts will also be checked for data validity by type against the

DED's published reference tables, such as amendment codes, amendment

numbers and valid dates.

3. Associative Checks. The system uses associative checks to

identify logical conformity with established service contract filing

rules. The following are some representative types of associative

checks performed by the system.

(a) Any initial service contract or amendment must have:

(i) A valid organization number.

(ii) No suspended carrier or object status.

(iii) Appropriate filing authority.

(iv) Filing date (system-assigned) equal to or less than the

effective date.

(v) Valid and appropriate filing/amendment codes.

(vi) Valid and appropriate filing, effective, termination and

expiration dates.

(vii) When used, valid special case number and filing/amendment

code ``S,'' with no other filing/amendment codes entered.

(viii) Each service contract must have a new (unique to carrier/

conference/agreement) service contract number. The service contract

number must be paired with a unique essential terms number and the

pair must remain constant for all amendments and must be consistent

between the filed service contracts and the published statement of

essential terms.

H. Filing/amendment codes.

1. Codes. Filing/amendment codes must be valid Filing Guide

codes and the effective, termination (if any) and expiration dates

must match the corresponding dates published in the statement of

essential terms.

2. Multiple symbols. Filed service contracts frequently can be

coded with more than one symbol. Accordingly, the field, ``Amendment

Type,'' will allow up to three different, compatible symbols

(Amendment codes and definitions are presented in the Filing Guide

and the Standard Terminology Appendix to 46 CFR part 520).

I. Control dates and history.

1. Filing date. The filing date is the date any service contract

or amendment is processed by the system. Filers will have a filing

date automatically assigned to all service contracts and amendments

filed according to the start time of the file transfer, for file

transfers that are successfully completed, U.S. Eastern Time Zone.

Filers should plan the transmission of filing session files to allow

for retransmission(s) starting during the same U.S. Eastern Time

Zone date, in case the results of the initial transmission(s) are

not successful.

2. Effective date. The effective date is the date upon which a

service contract or amendment is scheduled to go into effect by the

filer. Specifically, a service contract or amendment becomes

effective at 12:01 a.m. on the beginning of the effective date. The

effective date of the corresponding statement of essential terms

cannot be prior to the filing date of the service contract or

amendment with the Commission.

3. Expiration date. The expiration date is the last day, after

which the entire service contract is no longer in effect.

Part III--Organization Record and Register

A. Organization Record. The organization record is the master

record for all service contract information in the system for a

specific firm. Upon Commission acceptance of registration, a

``shell'' organization record, specific to the requestor, is

established and contains the organization number, organization name

and organization type. The firm's authorized representative can then

access the newly established organization record, using the special

access log-on ID and password to file the address for the firm's

home office, and complete the affiliations, d/b/a, and publisher

lists as appropriate. To maximize security of the data, maintenance

(editing) of the organization record will be permitted only to the

individual in the firm holding the special access log-on ID and

password for organization record maintenance.

B. Service Contract Register. Each organization must create a

service contract register (``register'') prior to the filing of any

service contracts or amendments thereto (and including ``general

rules'' filings). The register is a directory subordinate to which

service contracts and their amendments are filed. Each organization

may create more than one register (e.g., according to location

groups). Each register must include a record reflecting the filer's

name, organization number and status (e.g. ocean common carrier/

conference) which identifies the filer. At the option of the filer,

the register may also include the filer's service contract rules,

i.e. the stated terms and conditions set by the carrier, agreement,

or conference party to a service contract which govern the

application of service contract rates, charges and other matters.

Part IV--Service Contracts

As required by Sec. 530.9, each service contract filed with the

Commission shall include the following:

A. Service Contract Title. The filer's title of the service

contract (generally descriptive of the commodity and/or service).

B. SC Number (Service contract number). The ``SC Number'' is

defined by the filer and shall be entered in the appropriate field.

C. ET Number (statement of essential terms number). The ``ET

Number'' is defined by the filer and shall be entered in the

appropriate field. (Note: Service contracts must have a new (unique

to carrier/conference/agreement) service contract number for the

initial filing. The service contract number must be paired with a

unique essential terms number and the pair must remain constant for

all amendments and must be consistent between the filed service

contracts and the published essential terms documents.)

D. Amendment Number. Where feasible, service contracts should be

amended by amending only the affected specific term(s) or subterms.

Each time any part of a service contract is amended, the filer shall

assign a consecutive amendment number (up to three digits),

beginning with the number ``1.'' (The amendment number field must be

``0'' or void for the initial filing). Each time any part of the

service contract is amended, the ``Filing Date'' will be the date of

filing of the amendment.

E. FMC File Number. The FMC File Numbers will be system-assigned

as initial service contract filings are received and processed. The

FMC File Numbers will be assigned sequentially and will start at a

number designated by the FMC. The FMC File Number will be provided

to filers in the acknowledgment message (via electronic mail) for

filings.

F. Effective Date. The service contract must indicate the

effective date and the expiration date governing the duration of the

contract. The duration must also be set forth in Term No. 8 where

the duration of the contract shall be stated as a specific fixed

time period, with a beginning date (effective date) and an ending

date (expiration date).

G. Amendment Codes. All amendment codes listed in the Filing

Guide, except ``G'' and ``S'', may be used in any combination, with

up to three amendment codes for amendments.

H. Special case symbol and number. The ``S'' amendment code must

be used singly, and in conjunction with a validated special case

number for corrections to service contracts.

I. Filing Date. The filing date is automatically set by the

system whenever a service contract or amendment thereto is filed.

J. Contract terms (``terms''). Terms Nos. 1 to 11 shall address

the subjects and bear the terms'' titles for the respective numbers

exactly as provided in this section. (Note: If a subject is not

included, such as No. 12, the number must be listed with the

appropriate title and the designation ``NA.'' All terms may be

subdivided into subterms to facilitate amendment).

1. Origin (No. 1). ``Origin'' includes the origin port range(s) in

the case of port-to-port movements, and the origin geographic area(s)

in the case of through intermodal movements, except that the origin and

destination of cargo moving under the contract need not be stated in

the form of ``port ranges'' or ``geographic

[[Page 71074]]

areas,'' but shall reflect the actual locations agreed to by the

contract parties. Service contracts shall only employ locations

(points) that are valid, published locations in the National Imagery

and Mapping Agency (``NIMA'') gazetteer and ports published or approved

for publication in the World Port Index (Pub. No. 150).

2. Destination (No. 2). ``Destination'' includes the destination

port range(s) in the case of port-to-port movements, and the

destination geographic area(s) in the case of through intermodal

movements, except that the origin and destination of cargo moving under

the contract need not be stated in the form of ``port ranges'' or

``geographic areas,'' but shall reflect the actual locations agreed to

by the contract parties. Service contracts shall employ only locations

(points) that are valid, published locations in the National Imagery

and Mapping Agency (``NIMA'') gazetteer and ports published or approved

for publication in the World Port Index (Pub. No. 150).

3. Commodities (No. 3). Term No. 3 shall include commodities

covered by the service contract. For each commodity filed in this term,

a separate formatted commodity index entry is required. To the maximum

extent possible, service contracts should use the U.S. Harmonized

Tariff Schedule (``US HTS'') for commodity coding and associated

terminology.

4. Minimum quantity or portion (No. 4). Term No. 4 shall address

the minimum quantity or portion of cargo and/or amount of freight

revenue necessary to obtain the rate or rate schedule(s). The minimum

quantity or cargo committed by the shipper may be expressed as a fixed

percentage of the shipper's cargo.

5. Service commitments (No. 5). Term No. 5 shall address the

service commitments of the carrier, conference or specific members of a

conference, agreement or specific members of an agreement, such as

assured space, transit time, port rotation or similar service features.

6. Rates or rate schedule(s) (No. 6). Term No. 6 shall contain the

contract rates or rate schedules, including any additional or other

charges (e.g., general rate increases, surcharges, terminal handling

charges, etc.) that apply, and any and all conditions and terms of

service or operation or concessions which in any way affect such rates

or charges.

7. Liquidated damages for non-performance, if any (No. 7). Term No.

7 shall include liquidated damages for non-performance, if there is

such provided for in the service contract.

8. Duration of the contract (No. 8). The duration of the contract

shall be stated as a specific, fixed time period, with a beginning date

(effective date) and ending date (expiration date).

9. Signature date, contract parties, signatories and affiliates,

if any (No. 9). The identification of contract parties must be

included as follows:

(a) the legal names and business addresses of the contract

parties. (Note: if the service contract is entered into by an

agreement or conference, this shall include the corresponding

agreement number on file with the Commission);

(b) the legal names, titles, and addresses of representatives

signing the contract for the parties and the date the contract was

signed; and

(c) the legal name(s) and business address(es) of affiliates

entitled to access the contract, if any. Subsequent references in

the contract to the contract parties shall be consistent with the

first reference (e.g., (exact name), ``carrier,'' ``shipper,'' or

``association, etc.). (Note: This term must name every affiliate of

each contract party named under Sec. 530.9(d)(4) entitled to receive

or authorized to offer services under the contract, except that in

the case of a contract entered into by all of the parties of a

conference, agreement or shippers' association, individual members

need not be named unless the contract includes or excludes specific

members.)

10. Shipper's Status Certification and Affiliates, if any. (No.

10). The shipper signatory(ies) must certify its status and that of

any affiliates in accordance with Sec. 530.7 of this part.

11. Records (No. 11). Term No. 11 must contain:

(a) A description of the shipment records which will be

maintained to support the contract; and

(b) The address, title, and telephone number of the person who

will respond to a request by making the original signed service

contract and shipment records available to the Commission for

inspection under Sec. 530.17 of this part.

12. Other Provisions of the Contract (No. 100-999). Any term of

a service contract not otherwise specifically provided for in this

section shall be entered after the above terms and in numerical

order, beginning with No. 100.

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[[Page 71076]]

Exhibit 1--Instructions for Service Contract Registration [Form FMC-83]

Instructions

Line 1. Registration. Indicate whether this is the initial

(first time) registration or an amendment to an existing Service

Contract Registration.

Line 2. Registrant. This must be the full legal name of the firm

or individual registering for the FMC's Service Contract Filing

System and any trade names. The registrant name should match the

corporate charter or business license, conference membership, etc.

It should be noted that the registrant name cannot be changed by the

registrant after the registration without submission of an amended

registration fee.

Line 3. Address of Home Office. The complete street address

should be shown in addition to the post office box. Also, provide

the registrant's Federal Taxpayer Identification Number (``TIN''

Number).

Line 4. Billing Address if Different. This should be completed

if the billing address differs from the home office address. Show

the firm name (if different from the registrant), street address and

post office box (if applicable).

Line 5. Organization Number. Complete if known. (Regulated

Persons Index or ``RPI'' number.)

Line 6. Registrant Type. Indicate the type of organization. A

registrant cannot be more than one type. This data cannot be changed

by the registrant after registration without submission of an

amended registration form.

Line 7. Permissions Requested and Person Granted These

Permissions.

Maintenance of Organization Record--The person listed in line 8

is authorized to access the organization maintenance functions

(i.e., modify organization information, assign publishers,

affiliations, and d/b/as).

Service Contract Filing--The person listed in line 8 is

authorized only to submit filings.

Line 8. Certified for Batch Filing. Indicate whether the

registrant was registered with software certified to perform batch

filings prior to May 1, 1999. Otherwise, the registrant must first

be certified for batch filing as outlined in 46 CFR part 530. After

certification, the registrant can submit an amended registration

form to request permission for a person in their organization to

perform the batch filing. If the person already has an existing log-

on, the log-on (not the password) should be listed on the requesting

form. Also, the certification date received from the FMC should be

listed on the requesting form.

By the Commission.

Joseph C. Polking,

Secretary.

[FR Doc. 98-33894 Filed 12-22-98; 8:45 am]

BILLING CODE 6730-01-P