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: Confirmation of interim final rule with changes.

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SUMMARY: This rule confirms as final the Federal Maritime Commission's

interim rule governing service contracts between shippers and ocean

common carriers to implement changes made to the Shipping Act of 1984

(``Act'') by the Ocean Shipping Reform Act of 1998 (``OSRA''). The

interim final rule implemented section 8(c) of the Act. The interim

final rule is adopted as a final rule with certain changes. The final

rule: revises the Commission's definition of ``motor vehicle'' in

accordance with its regulation governing Carrier Automated Tariff

Systems (Docket No.98-29); adds a limited exception to the filing

requirements in cases of the Commission's electronic filing systems'

malfunction; revises the requirements for registration for filing and

cross-referencing for clarity; revises the regulation on ET publication

to clarify where those for multiple carrier parties must appear; and

carries forward certain exemptions from the requirements of the

regulation which the Commission had granted in former part 514 of this

chapter, but which had been inadvertently omitted from the interim

final rule. The final rule also corrects a paragraph numbering error

made in the section dealing with publication.

DATES: Effective May 1, 1999.

FOR FURTHER INFORMATION CONTACT:

Austin L. Schmitt, Director, Bureau of Tariffs, Certification and

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

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

Thomas Panebianco, General Counsel, Federal Maritime Commission, 800

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

SUPPLEMENTARY INFORMATION: On December 17, 1998, the Federal Maritime

Commission (``Commission'' or ``FMC'') issued a notice of proposed

rulemaking (``NPR'') to implement changes to the Shipping Act of 1984

(``Act'') mandated by the Ocean Shipping Reform Act of 1998 (``OSRA''),

Pub. L. 105-258, 112 Stat. 1902, enacted on October 14, 1998. 63 FR

71062-71076 (December 23, 1998). On March 1, 1999, the Commission

issued an interim final rule (``IFR''), removing 46 CFR part 514 and

adding 46 CFR part 530, which made significant changes to the proposed

rule. 64 FR 11186-11215 (March 8, 1999). The Commission held the

interim final rule open for comment until April 1, 1999.

The Commission received comments on the IFR from: Wallenius Lines

(``Wallenius''); Effective Tariff Management (``ETM''); Department of

the Army, Military Traffic Management Command (``MTMC''); the United

States Postal Service (``USPS''); the Council of European and Japanese

National Shipowners' Associations (``CENSA''); the American Association

of Exporters and Importers (``AAEI''); P&O Nedlloyd (``P&O''); the

International Longshore and Warehouse Union, AFL-CIO (``ILWU''); the

Ocean Carrier Working Group Agreement (``OCWG''); the National

Industrial Transportation League (``NITL''); Sea-Land Service, Inc.

(individually, concurring in the U.S. Industry Interests comments)

(``Sea-Land''); E.I. du Pont de Nemours and Company (``DuPont''); and

joint comments from American President Lines, Ltd., Sea-Land Service,

Inc., Crowley Maritime Corporation, Farrell Lines Inc., Lykes Lines,

Ltd., LLC, the Transportation Institute, the American Maritime

Congress, and the Maritime Institute for Research and Industrial

Development (``U.S. Industry Interests'').

A. General Comments

The comments generally agree with the Commission's re-assessment of

the filing systems and the more innovative approach of the IFR.

B. Section 530.3(m)--Definitions--Motor Vehicle

The Commission received comments from Wallenius on the IFR's

definition of ``motor vehicle.'' We adopt the same analysis as set

forth in Docket No. 98-29, Carrier Automated Tariff Systems (46 CFR

part 520) and, accordingly, revise the definition of ``motor vehicle.''

C. Section 530.4--Confidentiality

Section 530.4 of the IFR maintains that all service contracts filed

with the Commission will be confidential; however, such confidentiality

from the public does not preclude the Commission from providing service

contract information to another agency of the Federal government. In

order to address certain commenters' concerns about public disclosure

of service contract information that could result from sharing such

information with other Federal agencies, the Commission will require an

agency requesting the information to enter a Memorandum of

Understanding (``MOU'') with the Commission, stating that such

information is necessary to its statutory functions and agreeing to

protect the confidentiality of the information it receives.

MTMC and the U.S. Industry Interests are the only parties that

filed comments on this section. MTMC states that it is the Army

component of the United States Transportation Command. It is

responsible for providing ocean and intermodal transportation services

and

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related support services to Department of Defense (``DOD'') components

during peace, war and national emergencies. MTMC explains that it

solicits ocean and intermodal transportation in the U.S. and abroad. It

procures transportation services by soliciting rates for fixed periods

from operators of U.S.-flag vessels for DOD cargo movements between the

continental U.S. and worldwide points, as well as between foreign

points. Such DOD cargo is transported, MTMC states, in commercial

carriers' regularly scheduled commercial routes, in the same vessels

and on the same schedule as any other commercial cargo. MTMC further

points out that its worldwide solicitations may result in the

acceptance of more than one carrier's offer in order to fulfill DOD

transportation requirements.

MTMC agrees with the Commission's assessment that the legislative

history of OSRA indicates that confidentiality accorded to service

contract filings may not be used to prevent other Federal agencies

(particularly DOD) from performing their statutory duties. The Cargo

Preference Act of 1904, 10 U.S.C. 2631, and the Competition in

Contracting Act, 10 U.S.C. 2302, et seq., MTMC argues, are two statutes

whose requirements MTMC can fulfill only by having access to service

contract information. The Cargo Preference Act, asserts MTMC, requires

DOD to use U.S.-flag vessels for the transportation of Armed Forces'

supplies unless ``the freight charged by those vessels is excessive or

otherwise unreasonable,'' and prohibits the operators of those vessels

from charging rates that are ``higher than the charges made for

transporting like goods for private persons.'' MTMC at 5 (quoting 10

U.S.C. 2631(a)). Further, MTMC explains that the law requires that the

government purchase supplies and services at ``fair and reasonable''

prices. Id. (citing 10 U.S.C. 2304, 2305).

MTMC asserts that it ``relies upon access to tariff and service

contract information to fulfil its statutory responsibilities with

regard to the Cargo Preference Act of 1904 and other related government

acquisition laws,'' and, thus, it is ``vital that government agencies

procuring ocean transportation services * * * have access to service

contract information concerning commodities, volumes, routing, service

commitments and rates.'' Id. MTMC argues that examination of publicly

available tariff rates is less relevant than the examination of service

contract rates in determining fair and reasonable rate levels in a

trade lane, because the vast majority of international cargo moves

under service contracts. MTMC also notes that the legislative history

of OSRA includes several assurances that government agencies would have

access to service contract information. MTMC at 6 (citing 144 Cong.

Rec. S3320, and 144 Cong Rec. at S11302).

Finally, MTMC asserts its intention to formally request an MOU

under which the Commission would release confidential service contract

information which MTMC will hold in confidence and will use only for

the purposes of enforcing the Cargo Preference Act and for fulfilling

the requirements of the Competition in Contracting Act.

The U.S. Industry Interests initially incorporate into their

comments by reference the arguments set forth in their comments filed

on January 22, 1999, in response to the NPR. The U.S. Industry

Interests then argue that making service contracts available to MTMC

and other Federal agencies will ensure that such information is made

available to government procurement officials responsible for the

contracts with carriers. Such disclosure, the U.S. Industry Interests

assert, would be inconsistent with the policies underlying OSRA,

namely, that carriers ``need the flexibility to keep service contract

terms confidential from a shipper who might use such information to

seek better terms for itself.'' U.S. Industry Interests at 3.

Assuming, however, that the legislative history does justify

disclosure of confidential service contract information to other

government officials in order to monitor compliance with the Cargo

Preference Act, the U.S. Industry Interests claim that the monitoring

function should be performed only by those officials who are

independent of the procurement activity.

If the Commission decides to defer the resolution of the

aforementioned issues, the U.S. Industry Interests urge the Commission

to add the following sentence to Sec. 530.4: ``Before doing so, the

Commission will enter into a Memorandum of Understanding (MOU) with

such agency setting forth the terms and conditions for use of such

information or contracts, and before executing any such MOU will

publish it in proposed form for public comment.'' U.S. Industry

Interests at 3-4. The U.S. Industry Interests argue that ``[s]uch

notice and comment is both appropriate and required given the potential

substantive impacts of interagency disclosure of confidential service

contract information, and also given the prohibitions of the Trade

Secrets Act, 18 U.S.C. 1905.'' U.S. Industry Interests at 4 & n.4

(citing Reynolds Metals Co. v. Rumsfeld, 564 F.2d 663, 669 (4th Cir.

1977), and Chem Serv., Inc. v. Environmental Monitoring Systems of EPA,

12 F.3d 1256, 1267 (3d Cir. 1993)).

The U.S. Industry Interests argue in a footnote that, under the

Trade Secrets Act, confidential information such as service contracts

can only be disclosed if they are ``authorized by law.'' U.S. Industry

Interests at 4 n.5. At a minimum, the U.S. Industry Interests assert,

OSRA only allows the Commission to disclose service contract

information to other Federal agencies for the purposes of the Cargo

Preference Act.1 However, the U.S. Industry Interests aver

that assuming, arguendo, that other disclosures would be ``authorized

by law,'' any MOU must be adopted in accordance with Administrative

Procedure Act (``APA''), 5 U.S.C. 501, et seq., notice and comment

procedures. Id. (citing Chrysler Corp. v. Brown, 441 U.S. 281, 302

(1979) (finding that when a Federal agency is relying on a federal

regulation as authorization to disclose confidential information to

another Federal agency under the exception to the Trade Secrets Act

that such disclosure be ``authorized by law,'' such authorization must

be based on a substantive agency regulation that has the force and

effect of law).2

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\1\ However, the U.S. Industry Interests refer to their January

22, 1999 comments to reiterate that they believe the Commission does

not have the authority to do this.

\2\ The U.S. Industry Interests cite this case in support of

their position that the MOU be adopted in accordance with notice and

comment procedures; however, this case is inapposite because it

speaks to what type of law is sufficient to satisfy the ``authorized

by law'' exception to the Trade Secrets Act. The Court found that

the law must be substantive, and therefore a procedural rulemaking

promulgated by an agency that was not noticed for public comment

would be insufficient. In the instant proceeding, as discussed

infra, the Commission is relying on OSRA, the Cargo Preference Act,

and the Competition in Contracting Act as its authorization for

disclosing service contract information to other Federal agencies.

Moreover, the case does not state that the MOU itself is innately

substantive and must be noticed for public comment, as the U.S.

Industry Interests suggest.

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The Federal Reports Act, 44 U.S.C. 3501, et seq. (which is part of

the Paperwork Reduction Act), governs the disclosure to other Federal

agencies of information obtained from the public by agency collection,

while the Trade Secrets Act, 18 U.S.C. 1905, governs the disclosure by

Federal employees of confidential information generally.

One of the main purposes of the Federal Reports Act is to minimize

the paperwork burden on the public by maximizing ``the utility of

information created, collected, maintained, used,

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shared and disseminated by or for the Federal Government.'' 44 U.S.C.

3501(1), (2). In order to accomplish this purpose, the Federal Reports

Act encourages the sharing of information between Federal agencies by

providing that ``an agency may make available to another agency,

information obtained by a collection of information if the disclosure

is not inconsistent with applicable law.'' 44 U.S.C. 3510(a). The House

Report reiterates this intention: ``The Act promotes sharing and

disclosure of information for purposes of maximizing the utility of

information to users, both governmental and non-governmental. Sharing

of information among Government agencies also serves the goal of

minimizing the burden imposed on the public by Government collection of

information.'' H.R. Rep. No. 104-37, 104th Cong., 1st Sess. 31 (1995),

reprinted in 1995 U.S.C.C.A.N. 164, 194.3

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\3\ ``To the extent the legislation is a restatement of the 1980

[Paperwork Reduction] Act, as amended in 1986, the scope, underlying

purposes, basic requirements, and legislative history of the law are

unchanged. To the extent legislation modifies provisions in current

law, the amendments are made strictly for the purposes described in

this report, and in order to further the purposes of the original

law.'' H.R. Rep. No. 104-37 at 2, 1995 U.S.C.C.A.N. at 165.

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The only limitation Congress placed on inter-agency disclosure of

information is when such disclosure is ``inconsistent with applicable

law.'' 44 U.S.C. 3510(a). Section 3510 was unchanged by the 1980 and

1986 amendments, ``except for word changes for purposes of consistency

and clarity,'' (H.R. Rep. No. 104-37 at 53, 1995 U.S.C.C.A.N. at 216);

thus, the Commission can rely on the legislative history from the

previous amendments in order to determine what Congress intended by

``inconsistent with applicable law.'' The Senate Report states that

for the sharing of data to be inconsistent with applicable law, the

applicable law must prohibit the sharing of data between agencies or

must totally prohibit the disclosure to any one outside the agency.

A mere prohibition on disclosure to the public would not be

inconsistent with sharing the data with another agency unless the

sharing would inexorably lead to a violation of that prohibition.

S. Rep. No. 96-930, 96th Cong., 2d Sess. 50 (1980), reprinted in 1980

U.S.C.C.A.N. 6241, 6290.

Section 8(c)(1) of OSRA states that ``service contracts shall be

filed confidentially with the Commission.'' As was delineated in the

NPR (63 FR at 71064-71065) and the IFR (64 FR at 11188), the Commission

has found that Congress intended that such service contract information

would be held confidential by the Commission from the public, not other

Federal agencies.4 The legislative history indicates that

the drafters intended that the confidentiality provision not hamper

other Federal agencies which have legitimate needs to access service

contract information in order to carry out their statutory duties. The

Commission is required to protect information filed confidentially from

disclosure to the public, but it is not precluded from disclosing such

information to other Federal agencies where clearly warranted and

justified. Moreover, Congress did not attempt, through OSRA, to remove

other Federal agencies' access to pricing information necessary for the

administration of the Cargo Preference Act and the Competition in

Contracting Act. All three statutes must be read together to give each

validity. Therefore, the Commission declines to read OSRA as

repudiating the responsibilities assigned other agencies by those

statutes.

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\4\ In the IFR, the Commission addressed and rejected the U.S.

Industry Interests' argument that the colloquy between Senators

McCain and Hutchison is of limited value for the purpose of

legislative history because it followed, rather than preceded, the

adoption of the bill which became OSRA. 64 FR at 11188. The U.S.

Industry Interests seek to incorporate that argument by reference in

their comments made in response to the IFR. Because no new arguments

were made in regard to that issue, it is unnecessary for the

Commission to address that argument again.

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As OSRA intended service contract information to be kept

confidential from the public and not from other Federal agencies, the

disclosure of such information to other Federal agencies is not

``inconsistent with applicable law.'' Furthermore, sharing such

information with another Federal agency would not ``inexorably lead to

a violation'' of the prohibition against disclosure to the public,

because, as the Commission stated in the IFR, such information would

only be disclosed to an agency which enters an MOU with the Commission

assuring that such information is necessary to the fulfillment of its

statutory functions and that it will protect the confidentiality of

such information. 64 FR at 11188. Therefore, disclosure of service

contract information to other Federal agencies will not jeopardize the

statutory aim of non-disclosure of confidential service contract

information to non-governmental entities.

The U.S. Industry Interests argue that disclosing confidential

service contract information to other Federal agencies would violate

the Trade Secrets Act. It is unclear, however, whether the Trade

Secrets Act is applicable to the disclosure of confidential service

contract information between Federal agencies. Two cases have addressed

whether inter-agency disclosures of confidential information are

governed by the Federal Reports Act or the Trade Secrets Act: Shell Oil

Co. v. Department of Energy, 477 F. Supp. 413 (D. Del. 1979), aff'd,

631 F.2d 231 (3d Cir. 1980), cert. denied, 450 U.S. 1024 (1981), and

Emerson Electric Co. v. Schlesinger, 609 F.2d 898 (8th Cir. 1979). In

Shell Oil, the District Court of Delaware, affirmed by the Third

Circuit, held that the Trade Secrets Act applies to inter-agency

disclosures, 477 F.2d at 432, while the Eighth Circuit found in Emerson

Electric that because the Federal Reports Act controls the exchange of

information between Federal agencies, the Trade Secrets Act applies

only to the public disclosure of trade secret material, 609 F.2d at

907. The Supreme Court has yet to specifically address this conflict

among the circuits. Thus, while it is debatable whether the Trade

Secrets Act applies, we will assume it does for the purposes of this

discussion.

The Trade Secrets Act prohibits Federal employees from disclosing

trade secret information unless ``authorized by law.'' 19 U.S.C. 1905.

The U.S. Industry Interests argue that such disclosure of confidential

service contract information to other Federal agencies is not

authorized by law because there is no language in OSRA specifically

granting that authority and the legislative history relied on by the

Commission followed, rather than preceded, the adoption of S. 414, the

Senate bill which became OSRA. As was discussed, supra, this argument

is unconvincing because section 8(c)(2) remained unchanged in the final

version of OSRA, and the statements were made on the same day the

Senate passed S. 414.

Furthermore, the Cargo Preference Act requires DOD to use U.S.-flag

vessels to transport supplies unless ``the freight charged by those

vessels is excessive or unreasonable,'' and prohibits those vessel

operators from charging rates that are ``higher than the charges made

for transporting like goods for private persons.'' 10 U.S.C. 2631(a)

(emphasis added). Moreover, the Supreme Court has recognized that the

Competition in Contracting Act requires that the government be charged

``fair and reasonable'' prices for the purchase of supplies and

services. Paul v. United States, 371 U.S. 245 (1963); see also 10

U.S.C. 2304, 2305. These statutes appear premised on the assumption

that certain pricing information will be made available to the relevant

agencies.

[[Page 23785]]

The Cargo Preference Act entitles DOD to the same rates that other

commercial shippers are charged for the transportation of like goods.

5 As the majority of international cargo will be moving

under service contracts, we agree with MTMC's argument that the

examination of publicly available tariff rates will be less indicative

of what are fair and reasonable rate levels than the examination of

service contract rates. As tariff and service contract rates could vary

significantly, DOD would need to have access to such service contract

rate information to ensure that it is being offered equivalent rates

for like services and thus fulfill its statutory mandate. Moreover,

Federal agencies may require access to such service contract rate

information in order to comply with the requirement of the Competition

in Contracting Act that they purchase fair and reasonable rates.

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\5\ The U.S. Industry Interests point out that the Cargo

Preference Act does not require that the government be given rates

lower than commercial shippers. Neither MTMC nor the Commission has

proffered this argument, and in fact we agree that the statute only

requires that the government receive equivalent rates for like

goods.

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Therefore, OSRA and the accompanying legislative history, the Cargo

Preference Act, and the Competition in Contracting Act all authorize

the disclosure of confidential service contract information filed with

the Commission to other Federal agencies. The U.S. Industry Interests,

however, further argue that, assuming that the legislative history

authorizes the disclosure of confidential service contract information

to other Federal agencies, such disclosure would be limited to

fulfilling the requirements only of the Cargo Preference Act. As

discussed, supra, the legislative history only prohibits disclosure to

the public and reflects that any Federal agency that requires access to

confidential service contract information as necessary to its statutory

functions may be entitled to it. Because the legislative history of

OSRA indicates that Congress did not wish to limit the agencies with

which the Commission should cooperate, but instead used the term

``other federal agencies,'' the Commission interprets this to include

agencies other than DOD, as well as laws other than the Cargo

Preference Act of 1904. Therefore, these regulations do not attempt to

define every situation in which the requested information is relevant

to the purposes of the requesting agency.

The U.S. Industry Interests also assert that disclosing service

contract information to other Federal agencies would necessarily

guarantee that an agency's procurement official would use that

information to seek better terms for the agency. Assuming that another

Federal agency is entitled to such information in order to monitor

compliance with the Cargo Preference Act, the U.S. Industry Interests

argue that only an employee at the requesting agency who is independent

of the procurement process should have access to the information for

such monitoring. Thus, the U.S. Industry Interests' suggestion would

compel the Commission to dictate by MOU how DOD conducts its

procurement procedures in order to obtain service contract information.

The Commission will not attempt to dictate internal DOD procedures or

policy. Furthermore, this issue is beyond the scope of this proceeding.

Finally, the U.S. Industry Interests request that the Commission

add language to Sec. 530.4 to require it to enter an MOU with any

agency to which it discloses confidential service contract information

and, prior to execution of such MOU, to publish it for public comment.

The U.S. Industry Interests argue that because of the ``potential

substantive impact'' of such an MOU, it must be adopted in accordance

with notice and comment procedures under the APA. We disagree. An MOU

can be formulated in the course of a rulemaking proceeding, but it need

only be subjected to notice and comment procedures if it makes a

substantive impact on individual rights and obligations. 5 U.S.C.

551(4), 553; see also Paralyzed Veterans of America v. West, 138 F.3d

1434, 1436 (Fed. Cir. 1998); Chem Serv., Inc. v. Environmental

Monitoring Systems of EPA, 12 F.3d 1256, 1267 (3d Cir. 1993); and

Reynolds Metal Com. v. Rumsfeld, 564 F.2d 663, 669 (4th Cir. 1977).

Thus, the MOU would have to either diminish or increase the rights or

obligations of the parties to a service contract in order to be

considered substantive. See Reynolds Metal Com., 564 F.2d at 669.

The parties to a service contract must file the service contract

confidentially with the Commission. Because DOD or other Federal

agencies are authorized to collect the same information in order to

comply with the Cargo Preference Act and the Competition in Contracting

Act (as authorized by the Federal Acquisition Regulations, 48 CFR parts

9, 15), the service contract parties' right to confidentiality would

not be diminished by disclosing this information pursuant to an MOU. A

Federal agency that needs service contract information to fulfill its

statutory functions would appear to be entitled to such information

already. As such, even if an MOU were promulgated by a rulemaking, it

would be procedural under section 553 of the APA, not subject to notice

and comment. The Commission declines to add language to Sec. 530.4 to

require rulemaking or notice and comment procedures before it can

execute an MOU with another Federal agency.

Moreover, the Commission is not inclined to add language to the

rule itself requiring that it enter an MOU. Such language was not

noticed in the rule for public comment, and therefore, is beyond the

scope of this proceeding. As we have already stated in the

supplementary information section of the IFR,

the Commission shall require a requesting federal agency to enter

into a Memorandum of Understanding that it will protect the

confidentiality of any information it receives from the Commission

and that such information is necessary to its statutory functions,

and adopts as final the language in Sec. 530.4 of the proposed

regulations.

64 FR at 11188. The Commission therefore adopts as final the language

of Sec. 530.4 as it appeared in the IFR.

D. Section 530.5(a), (b)--Duty to File and Filing by Agents

NITL supports the Commission's regulations placing the duty to file

upon the carrier party (Sec. 530.5(a)), but allowing the service

contract to be filed by a ``duly agreed upon agent as the parties to

the service contract may designate, and subject to conditions as the

parties may agree.'' Sec. 530.5(b). NITL points out that this

clarification is important due to the changes made by OSRA which

authorize individual contracting by members of carrier agreements and

which allow for confidentiality of contract terms. NITL asserts that

the language of the rule properly provides for flexibility, and leaves

the matter appropriately as one to be decided by the parties to the

contract. Because the use of an agent for filing may increase risks to

confidentiality, NITL points out, some shippers may legitimately prefer

that an agent not be used, and insist on a provision against such use

of agents in their service contracts.

NITL's commentary does not request any further clarification or

change to the Commission's IFR. This section of the IFR is confirmed as

final.

E. Section 530.6--Shipper Status Certifications

1. Extending Provisions to Groups of two or More Unrelated Shippers

Sections 530.6(a) and Sec. 530.8(b)(9) of the Commission's IFR

carry over an exception for shippers' associations to the requirement

that all shippers list their names and addresses and that all shippers

certify their status in their

[[Page 23786]]

service contracts. DuPont recommends that the Commission extend these

provisions for shippers' associations to include unrelated groups of

shippers which choose to enter into a single service contract, and make

conforming changes to Sec. 530.9(e)(2) for this expansion. DuPont

asserts that the exception for shippers' associations was created in

response to ``marketplace realities'' and that it ``helps protect the

integrity of the shippers'' association without unduly interfering with

the ability of the FMC to enforce the law.'' DuPont at 2. Extending

this provision to unrelated groups of shippers which enter into service

contracts, DuPont argues, would result in ``more equitable treatment''

of shippers which join together to enter into service contracts,

whether as members of associations or as unrelated groups.

This request was not raised in comments responding to the NPR, and

the Commission declines now to expand its treatment of shippers'

associations to unrelated groups of shippers. As of yet, the Commission

has had little indication, besides DuPont's brief and rather general

comments, of how unrelated groups of shippers will come together to

enter into service contracts. Furthermore, there is difficulty in

expanding the treatment of shippers' associations to unrelated shippers

groups: while shippers' associations generally can provide a list of

members who are legally obligated to fulfill the terms of a service

contract, shippers who are unrelated may not be able to provide such a

list, because one shipper cannot impose such obligations on other,

unrelated shippers who have not signed the service contract. When the

shipper status certification was first introduced, the Commission found

that the requirement of section 10(b)(15) of the Act (certification)

(renumbered as section 10(b)(12) by OSRA) required that ``such

certification should encompass not only the signatory shipper, but any

affiliates or members of the shippers' associations entitled to ship

under the service contract.'' 56 FR 1496. Therefore, DuPont's request

is denied.

2. Shipper Status Certifications Generally

NITL reiterates the comments it made to the Commission in response

to the NPR: namely that the shipper status certification is unnecessary

and that its purpose is unclear. NITL argues that because parties are

free to complain to the Commission if they believe they were treated in

an illegal fashion, and because OSRA has narrowed the discrimination

prohibitions, the Commission should conduct investigations on a case-

by-case basis rather than take the IFR's monitoring approach, to

justify the status certification requirement. NITL at 9.

The Commission has examined this comment previously and rejected

it. When the Commission examined the predecessor of Sec. 530.5

(originally Sec. 581.11) in 1991, it found that this approach would

give the Commission ``the opportunity to closely monitor all service

contracts to ensure that they are not improperly used by NVOCCs not in

compliance with the Act.'' Docket 91-1, Bonding of Non-Vessel-Operating

Common Carriers, 56 FR 51987, 51992. We reiterate that the shipper

status certification requirement serves both to remind shippers in what

capacity they may enter into service contracts, and to assist carriers

to ensure they enter into a service contract only with compliant

NVOCCs.

Sea-Land, OCWG, and NITL take exception to the following statement

in the supplementary information section of the IFR which was part of

the Commission's reasoning behind a requirement that a shipper status

certification be filed with each service contract:

OSRA prohibits discrimination and refusals to deal based on

anything other than valid transportation factors (such as volumes)

and the regulation as proposed intends to guard against such

discrimination, prohibited by section 10(b)(10) of the Act.

64 FR at 11190. The comments maintain that this language misinterprets

the scope of the prohibited acts under the OSRA. The three commenters

complain first, that the Commission improperly confused refusals to

deal and negotiate with discrimination, and second, that the statement

incorrectly expands the Act's prohibitions on discrimination.

NITL asserts that the Commission's statement is an over-broad

characterization of the discrimination prohibitions of the Act which

have been substantially narrowed by OSRA with respect to service

contracts. NITL urges the Commission to clarify the application of the

discrimination prohibitions with regard to service contracts. Sea-Land

also requests that the Commission clarify that service contracting

discrimination prohibitions are limited to sections 10(b)(5), 10(b)(9),

10(c)(7) and 10(c)(8). Concurring with Sea-Land's comments, OCWG argues

that differentiating service contract rates and terms between shippers

for any reasons other than those prescribed in sections 10(c)(7) and

(8) is entirely lawful in joint service contracts offered by ocean

common carriers. OCWG at 3-4.

We concede that in our effort to be succinct, the statement

objected to by the commenters was over-broad and unclear. OSRA does

retain prohibitions against refusals to deal and negotiate as well as

against discrimination in certain circumstances in section

10.6 Sections 10(b)(5), 10(b)(9), 10(c)(7) and 10(c)(8) of

the Act refer to discrimination; section 10(b)(10) of the Act prohibits

unreasonable refusals to deal; and section 10(c)(1) prohibits concerted

action resulting in unreasonable refusals to deal. Further

clarification is unnecessary.

---------------------------------------------------------------------------

\6\ Section 10 of the Act reads, in pertinent part,

(b) Common carriers. No common carrier, either alone or in

conjunction with any other person, directly or indirectly, may--

* * * * *

(5) for service pursuant to a service contract, engage in any

unjustly discriminatory practice in the matter of rates or charges

with respect to any port;

* * * * *

(9) for service pursuant to a service contract, give any undue

or unreasonable preference or advantage or impose any undue or

unreasonable prejudice or disadvantage with respect to any port.

* * * * *

(10) unreasonably refuse to deal or negotiate;

* * * * *

(c) Concerted action. No conference or group of two or more

common carriers may--

* * * * *

(1) Boycott, or take any other concerted action resulting in an

unreasonable refusal to deal.

* * * * *

(7) for service pursuant to a service contract, engage in any

unjustly discriminatory practice in the matter of rates or charges

with respect to any locality, port, or persons due to those persons'

status as shippers' associations or ocean transportation

intermediaries; or

(8) for service pursuant to a service contract, give any undue

or unreasonable preference or advantage or impose any undue or

unreasonable prejudice or disadvantage with respect to any locality,

port, or persons due to those persons' status as shippers'

associations or ocean transportation intermediaries.

---------------------------------------------------------------------------

F. Section 530.7--Duty to Labor Organizations

ILWU comments that the incorporation of the word ``ordinarily''

into the regulation's definition of ``reasonable period of time'' to

respond to a labor request, ``invites a delayed response from the

carriers, and inevitably raises a host of tangential issues that will

have to be investigated and perhaps even litigated.'' ILWU urges the

Commission to avoid this potential waste of resources by deleting

``ordinarily'' from the definition of ``reasonable period of time.''

We find no reason to revise the approach taken by the Commission in

the IFR; only experience under this new statutory provision will reveal

whether more stringent regulations are warranted. The Commission

reiterates its expectation that carriers will comply

[[Page 23787]]

with the spirit of the legislation and respond promptly to requests

from labor organizations for information.

G. Section 530.8--Filing of Service Contracts

1. Transition Issues and Contingency Plans

OCWG, CENSA and NITL express concern about the Commission's filing

systems' abilities to accommodate the rush of filings they predict to

occur early in May. NITL supports the Commission's decision to accept

before May 1, 1999, service contracts in the new system effective on or

after May 1, 1999. This, NITL asserts, should avoid an anticipated rush

of filings on May 1 and likewise avoid overburdening the internet-based

system on May 1. CENSA comments that, because neither of the proposed

electronic systems are currently operational, in the event the

internet-based system is not available at least ten days prior to May

1, 1999 (which is April 21, 1999), filers should be permitted to file

in the current paper format until the system is operational, and should

be granted a grace period after the system is operational (implicitly

also 10 days) before filers will be required to use the new system.

Similarly, OCWG urges the Commission to adopt a contingency plan

for the filing of service contracts in the event that the internet-

based system is not available for filing by April 20, 1999. OCWG

asserts that thousands of service contracts will be filed for effect on

May 1, and as such, the volume of filings both before and after May 1

will be enormous. OCWG suggests that the Commission allow for paper or

diskette filing beginning April 20 and continuing until 30 days after

the internet-based filing system becomes available. This, OCWG argues,

would allow both the industry and the Commission to make a more gradual

transition, and is similar to the approach the Commission took when it

made the transition from paper tariffs to the Commission's Automated

Tariff Filing Information (``ATFI'') system. Finally, OCWG comments

that it would not object if those service contracts filed in paper

format during the transition period were required to be re-filed via

the internet system at a later date, provided there was a reasonable

period allowed for making such refilings. Such a contingency plan, OCWG

suggests, would provide for a smooth transition to electronic filing

while ensuring there is no commercial disruption due to the

unavailability of the internet-based system.

The Commission's IFR introduced two service contract filing

systems: option 1 (``internet-based'') and option 2 (``dial-up'').

Presently, the Commission is confident that both systems will be

available on May 1. Indeed, the internet-based system will accept

filings on April 26. In addition, as announced in press releases and on

the Commission's website, the Commission's Office of Information

Resources Management (``OIRM'') conducted certification sessions for

the dial-up system in which filers test their filing software on April

22 and 23.

The Commission has taken other steps to help filers be prepared to

file as soon as the Commission's systems are operational. On April 8,

1999, OIRM sent letters to entities currently registered to do batch

filing in the ATFI system, requesting an indication of their intent to

register in the new systems. Another reminder of the registration

requirement was also placed on the Commission's website by OIRM. Based

on all of the above preparations, therefore, a transitional alternative

filing plan is not deemed necessary.

As for the ongoing contingency plans suggested by the comments, the

Commission is confident that the systems will be able to receive a

large volume of filings in the early days of May. Both systems will be

available to receive filings 24 hours each day and 7 days per week.

Therefore, the times that filing will be unavailable to filers would

appear to be rare. Of course, there may be minutes or hours in which

either of the systems will be ``down'' and will be unavailable to

receive filings, whether for scheduled maintenance or for unscheduled

interruptions due to telephonic or other systemic problems. Contrary to

the commenters' concerns, however, the Commission does not anticipate

that these brief periods of unavailability will create interruptions of

commercial transactions on the scale implied by the comments.

However, the Commission wishes to further allay concerns as to the

capability of the systems to accept the amount of filings that may

occur around May 1, or at some time in the future, by providing for a

suspension of the timeliness requirement of the rules in the event that

the filing systems malfunction. The Commission therefore has adopted a

limited exception from the requirements of Secs. 530.8(a) and 530.14(a)

(that the service contract must be filed before any cargo may be

carried under it) in situations in which the Commission's filing

systems are unavailable for twenty-four (24) consecutive hours or more.

This limited exception requires filing to be done at the latest by

twenty-four (24) hours after the system returns to service. Also, this

limited exception will only arise in situations where the Commission

has verified that the filing system is unavailable to all filers, and

not, for instance, when the filer's own computers or communications

systems are non-functional. The Commission therefore adds paragraph (e)

to Sec. 530.8.

2. Appendix A--Registration

While the Commission received no formal comments on the matter,

several informal requests for information indicate that there is some

confusion over registration for filing under both internet-based and

dial-up systems. First, all of a carrier's, conference's or agreement's

service contracts must be filed in one and only one of the systems.

Second, while a carrier, conference or agreement may only be registered

to file in one of the systems, a publisher which files on behalf of

many carrier parties, may be registered in both systems. However, the

regulation requires that a publisher must file an entity's service

contracts in only one of the systems. Therefore, to make this clear, we

revise Appendix A paragraph I., Registration, Log-on ID and Password.

H. Section 530.8(c)(2)--Cross-Referencing

As it appears in the IFR, Sec. 530.8(c) reads,

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

this section may not:

(1) Be uncertain, vague or ambiguous; or

(2) Make reference to terms not explicitly contained in the

service contract filing itself, unless those terms are contained in

a publication widely available to the public and well known within

the industry.

CENSA is concerned that the revision of Sec. 530.8(c)(2) may confuse

filers and lead them to mistakenly conclude that a service contract may

not refer to a tariff or a service contract register filing. CENSA

points out that, as originally proposed by the Commission in the NPR,

Sec. 530.8(c)(2) specifically permitted cross-referencing to tariff

publications. OCWG also comments that in revising Sec. 530.8(c)(2), the

Commission inadvertently omitted language which would have allowed

cross-referencing to tariffs and service contract registers. Both CENSA

and OCWG suggest that the Commission revise the provision to read as

follows:

. . . make reference to terms not explicitly contained in the

service contracts filing itself, unless those terms are contained

in: (i) a tariff publication in accordance with the requirements of

46 CFR part 520; or (ii) a service contract register filed with the

Commission; or (iii) a publication widely available to the public

and well known within the industry.

[[Page 23788]]

P&O supports the OCWG comments on this section. P&O requests that

the Commission also clarify that service contracts may cross-reference

their own or their conference tariff; their service contract register;

or publications that are widely available to the public and well known

within the industry (including, for example, whether published as a

tariff relating to hazardous materials or privately published as a

register for intermodal equipment). Further, P&O argues that cross-

referencing will be an essential element in multi-trade service

contracts, and the Commission must ensure that its regulations on

cross-referencing do not preclude carriers from making such multi-trade

contracts in a ``commercially acceptable manner.'' P&O does not

elaborate with particularity on how such multi-trade contracts might be

affected.

In its NPR, which proposed only one filing system modeled on ATFI,

the Commission specifically solicited comments from the industry on

whether the provision of a ``service contract register,'' in which

service contract boilerplate may be filed, would be desirable. The

comments were generally positive, and the Commission determined that

the first proposed system (``dial-up'') would have the capability of

such register filings. There were few other details given in the IFR

regarding register filings. 64 FR at 11197.

There is a dichotomy between the two filing systems due to their

technological configurations and their distinct approaches to filing:

the dial-up system requires an ``organizational record'' filing which

has the ability to also accept ``register'' filings; the internet-based

system has neither ``organizational record'' requirements nor

provisions for ``register'' filings. With the major revisions made in

the IFR, the technological question of whether such a ``register''

would be part of the internet-based system was not specifically

discussed.

The guiding concept of the internet-based filing system was

principally that the carrier party to the service contract would be

able to file the complete, commercial agreement it had entered into

with the shipper party. The matter of a register was not specifically

considered for the internet-based system, because that system, in

contrast to the dial-up system, would allow ``free text'' and not

require the more rigidly formatted line items of the dial-up system.

For the internet-based system, the principle was that the filer would

simply transmit the contract as agreed to by the parties and executed

by them, via the internet and into the Commission's database. In other

words, whatever document the parties had signed would be identical to

the document transmitted to the Commission. All the ``boilerplate'' of

such contracts would be included in them, thereby eliminating any

necessity for a ``register'' filing. Indeed, such ``register'' filings

would appear to impose additional burdens of multiple filings for what

could now easily be accomplished in a single filing.

Furthermore, the Commission is concerned that adopting the language

suggested by the three aforementioned commenters may lead to situations

in which shippers are party to service contracts referring to

boilerplate which is filed in a service contract register which the

shipper may have never read, and to which it would necessarily have no

access from the Commission after filing. Therefore, the Commission has

added a caveat to the allowance for cross-referencing material

contained in a service contract register: the material filed in the

service contract register and referred to in the service contract must

be available to the other parties to the contract. Further, we wish to

make it absolutely clear that changes to boilerplate which affect

service contracts must be treated as amendments, and as such, subject

to the mutual agreement of the parties. Such ``registers'' will only be

available in the dial-up system.

Finally, because tariffs are published and widely available, cross-

referencing to those publications in service contracts does not appear

to pose any new issues. The Commission notes, therefore, that a tariff

published pursuant to part 520 of the Commission's regulations will be

considered ``a publication widely available and well known within the

industry'' for the purposes of cross-referencing in service contracts.

The Commission therefore revises Sec. 530.8(c) to clarify its

approach to cross-referencing, particularly references to ``service

contract register'' filings.

I. Section 530.10--Cancellation

AAEI comments that Sec. 530.10 directly contradicts section 13(f)

of the Act as revised by OSRA.7 AAEI asserts that

Sec. 530.10 imposes the following choice on parties to service

contracts: that they contemplate a shortfall (i.e. a failure to meet

minimum cargo commitments) with a liquidated damages provision or they

will be subject to Sec. 530.10(d), which states that further or

continued implementation of the service contract is prohibited; and

that the cargo previously carried under it is to be re-rated at

otherwise applicable tariff rates. AAEI doubts the legality of this

provision, and asserts that it contradicts the ``black and white letter

of the law in section 112(c)(3)'' of OSRA. AAEI further states that the

failure of a contract to include a liquidated damages clause does not

render the contract illusory. AAEI asks the Commission to consider

whether it ``makes sense'' for example, to require the re-rating of

9,900 FEUs of cargo which has already been shipped when there has been

a shortfall of only 100 FEUs in a service contract commitment for

10,000 FEUs. Finally, AAEI asserts that the proper penalty for

fraudulent misrepresentation by a shipper is the imposition of monetary

penalties, not the re-rating of previously carried cargo.

---------------------------------------------------------------------------

\7\ Section 13(f) reads, in pertinent part,

Neither the Commission nor any court shall order any person to

pay the difference between the amount billed and agreed upon in

writing with a common carrier or its agent and the amount set forth

in any tariff or service contract by that common carrier for the

transportation service provided.

---------------------------------------------------------------------------

DuPont comments that the Commission's proposed ``solution * * * is

worse than the original problem it sought to cure.'' DuPont at 5.

DuPont, relying on its ``vast experience in the field of transportation

contracting'' asserts that ``no matter how expert, complete and

thorough negotiations are, the parties will inevitably experience

barriers to fulfilling all of their obligations.'' DuPont at 5.

Mandating re-rating, in situations in which the parties in good faith

cannot meet their contractual obligations and elect to mutually

terminate, is inappropriate in DuPont's estimation.

DuPont therefore urges the Commission to revise Sec. 530.10(d)(2)

to make re-rating permissible, but not mandatory, subject to Commission

order, and proposes the provision read as follows:

In the event of cancellation as defined in Sec. 530.10(a)(3) * *

* (ii) the cargo previously carried under the contract * * * may,

pursuant to order by the FMC based upon its finding of a purposeful

violation of applicable regulation, be re-rated according to the

otherwise applicable tariff provisions.

This provision, DuPont asserts, would permit more lenient treatment of

the ``unsophisticated, small, or first time shipper (or carrier) for

its lack of foresight or experience'' and re-rating would only be

imposed if the Commission found an intent to defraud or avoid

compliance. DuPont at 6.

AAEI appears to have misread both the Commission's supplementary

information and the text of the IFR itself. The supplementary

information makes it clear that other provisions (i.e.

[[Page 23789]]

not only liquidated damages provisions) can ensure that the service

contract has a fall-back rate for shortfalls. 64 FR at 11204. The text

of the regulation itself defines cancellation as

an event which is unanticipated by the service contract, in

liquidated damages or otherwise, and is due to the failure of the

shipper party to tender minimum cargo as set forth in the contract,

unless such tender was made impossible by an action of the carrier

party. Sec. 530.10(a)(3)(emphasis added).

The regulation, rather than being a penalty provision, is a method by

which the ``applicable rate'' can be determined, and is invoked only

when the parties have chosen not to make other provisions.

DuPont's recommendation that the re-rating provision be subject to

Commission order, not automatic, and optional for the Commission to

impose, may create uncertainty in the industry. DuPont's comment

indicates its belief that this requirement is a penalty provision.

Again, the requirement in Sec. 530.10 for re-rating is only a last

resort means of determining the applicable rate when the contract

parties make no other provision and fail to amend the contract.

``Penalizing'' Shippers for Operating Under Unfiled Service

Contracts

NITL states that it is unfair to ``penalize'' shippers for

violations of Secs. 530.8(a) or 530.14(a) (which require that a service

contract or amendment be properly filed with the Commission before

cargo moves under it) when they have no control over the timeliness or

method of such filing or ensuring that the filing is not defective.

NITL asserts that shippers which tender cargo for carriage under a

service contract which they believe to have been filed, should not be

subject to such violations. NITL describes a scenario in which an

innocent shipper may have been told by its carrier that the service

contract has been filed, and then would be subject to penalties for

violation of Commission regulations. NITL complains that it is not

clear what the consequences for a shipper would be in such a case, and

requests that the Commission clarify that it will not hold a shipper

liable for penalties and will protect the shipper from re-rating in

such a situation.

DuPont expresses concern about shipper parties not receiving

independent, written confirmation of service contract and amendment

filings, but facing re-rating or penalties, as well as legal defense

costs for failure to file or improper filing. To eliminate this

potential problem, therefore, DuPont urges the Commission to provide

shipper parties with written (or electronic) notice when service

contracts or amendments are filed or rejected within 5 working days of

the filing or rejection. This approach, DuPont suggests, would

eliminate the potential for a recreation of the motor carrier filed

rate problem. In the alternative, DuPont proposes that shippers be held

harmless and permitted to carriage pursuant to an otherwise valid

contract which the carrier either failed to file or failed to notify

the shipper if rejected by the Commission.

There are several reasons why the Commission declines to adopt

DuPont's suggestion either to hold shippers harmless from such failures

to file or to require that the Commission send confirmation of filing

to the shipper as well as to the carrier. First, the filing requirement

has been part of the Act and Commission regulation since 1984, and we

are unaware of any shipper having been held to have violated section

10(a)(1) of the Act when it had a reasonable belief that the carrier

had duly filed the service contract. Second, we note that shippers may

require confirmation of filing from their carrier as part of the

negotiation process, if they wish to do so. Third, the shipper may have

some indication of whether or not a service contract has been duly

filed by verifying that the ET for that service contract has been

published by the carrier. Finally, with respect to NITL's scenario, the

Commission's position can only be determined in the course of

proceedings with parties in interest arguing the facts before an

administrative law judge. We note only that while it is not the shipper

party who has the obligation to file under Commission regulations, if

it operates under an unfiled service contract, it may violate section

10(a)(1) of the Act. That section only applies to knowing and willful

actions, however, rather than a question of absolute liability, and

would therefore not apply to a shipper unknowingly victimized by a

carrier's failure to file. Furthermore, there is nothing in the

legislation which suggests that the Commission can immunize shippers

from the assessment of civil penalties. However, under section 13(f), a

shipper's culpability is part of any consideration in an assessment of

civil penalties.

In response to DuPont's comments, and as the Commission has already

discussed in the IFR, section 13(f) would appear to protect a shipper

against a claim by a carrier for undercharges. 64 FR at 11204. The

Commission has already stated its position in the IFR, namely that

section 13(f) does not operate to nullify section 10 requirements; that

the Act must be read so that every section is given meaning and

harmonizes with the others; 8 that section 13(f) should not

be interpreted so as to make service contracts illusory, or allow

parties to take advantage of service contract rates without being bound

to a contract; 9 and that the Commission's provisions for

maximum flexibility (e.g., amendments, contingencies, and liquidated

damages) are adequate methods by which the parties may avoid the

application of Sec. 530.10 and protect their commercial interests.

Therefore, the Commission makes no revision to this section and adopts

it as final as it appeared in the IFR.

---------------------------------------------------------------------------

\8\ As stated in Sutherland on Statutory Construction at

Sec. 46.05 at 103:

A statute is passed as a whole and not in parts or sections and

is animated by one general purpose and intent. Consequently, each

part or section should be construed in connection with every other

part or section so as to produce a harmonious whole. Thus, it is not

proper to confine interpretation to the one section to be construed.

The Commission must ``strive to implement the policy of the

legislature and harmonize all provisions of the statute.'' Id. at

104.

\9\ Section 10(b)(1) reads, in pertinent part: No common carrier

* * * may allow any person to obtain transportation for property at

less than the rates or charges established by the carrier in its * *

* service contract by means of * * * any other unjust or unfair

device or means;

(2) Provide service in the liner trade that--(A) is not in

accordance with the rates, charges, classifications, rules, and

practices contained in a * * * service contract entered into under

section 8 of this Act * * *

---------------------------------------------------------------------------

J. Section 530.12--Publication

P&O, ETM, OCWG and CENSA comment that the IFR is unclear as to

whether the statements of essential terms of service contracts

(hereinafter ``ETs''), currently required to be filed in the ATFI

system, will remain adequate for compliance with Sec. 530.12 after May

1, 1999. ETM urges that the publication of ETs in ATFI be sufficient

for publication under the new regulations, and further that such ETs

not be required to be ``re-published'' in a new private system.

ETM argues that ETs of service contracts effective prior to May 1,

1999 were filed in ATFI for two reasons: to meet the filing

requirements of the Act and to allow for public notice of the

eligibility period for ``me-too'' shippers. As for the ``me-too''

aspect of the publication, P&O and ETM assert that because no further

``me-too'' eligibility is required after the end of the eligibility

period, and because the ETs are available to interested parties

(presumably in the then-historical ATFI system), to require the re-

publishing of such ETs would provide no benefit to anyone and would

impose a substantial

[[Page 23790]]

burden on carriers. ETM appears to assert that service contracts filed

effective prior to May 1, 1999 may have an eligibility period which

runs beyond May 1, 1999, and that this may be a problem for similarly

situated shippers accessing the privately maintained Carrier Automated

Tariff Systems (``CATS'') pursuant to Commission regulations at part

520 after May 1, rather than ATFI.

Further, ETM argues, requiring such re-publication would be

duplicative and burdensome; the FMC staff would be inundated with

reviewing re-published ETs as well as new ETs and determining which

publication required a simultaneous filing and which did not. ETM also

argues that the filing requirements of OSRA are met if service

contracts effective prior to May 1, 1999 are electronically filed by

use of ATFI, and, therefore, further filing or re-publication of either

ETs or the service contracts themselves should not be required. ETM

proposes that the Commission issue the following guidelines for the

transition period:

1. Except for amended service contracts, all service contracts

with an effective date prior to May 1, 1999 and with an eligibility

period that expires no later than April 30, 1999, shall not require

re-publication of essential terms or re-filing of the contract on or

after May 1, 1999;

2. Amended service contracts with an effective date prior to May

1, 1999 and with an eligibility period that expires no later than

April 30, 1999 shall not require re-publication of essential terms

or re-filing of the contract on or after May 1, 1999;

3. Amended service contracts with an effective date prior to May

1, 1999 but with an eligibility period that expires no later than

April 30, 1999 shall not be re-filed but the essential terms are to

be re-published in the Carrier's Automated Tariff System and

reference to the eligibility period should be stated in the duration

clause;

4. All service contract amendments with an effective date of May

1 or later shall be filed in accordance with the provisions of 46

CFR part 530 and the essential terms shall be re-published in the

Carrier's Automated Tariff System.

CENSA also asserts that requiring the re-publication of ETs of

``carry over'' service contracts will not benefit the carriers, their

customers or the Commission. CENSA points out that many service

contracts will continue. P&O, CENSA and OCWG urge the Commission to

grant a blanket exemption from such republication; or in the

alternative, give carriers and conferences a period of time over which

to re-publish these ETs in their CATS.

P&O agrees with CENSA and ETM that ETs previously published in ATFI

should not be required to be republished in CATS by May 1, 1999,

because there is little regulatory purpose in such a requirement and

because republication is time-consuming and expensive.10

Furthermore, P&O argues, republication will create confusion because

new service contract numbers will have to be assigned to such re-

published ETs. P&O suggests the Commission grant a blanket exemption,

or alternatively that it extend the time for republication to the date

of amendment of the ETs or October 1, 1999, whichever comes first.

---------------------------------------------------------------------------

\10\ P&O comments that it will have 350 such service contracts.

---------------------------------------------------------------------------

OCWG also comments that existing service contract ETs, which are

published in the Commission's ATFI system, should not be required to be

published again in a private tariff publication after May 1, 1999. OCWG

asserts that it represents carriers which collectively will have

thousands of service contracts which would be affected by such a

requirement. Such republication, OCWG asserts, would be burdensome and

will have no little or no benefit because there will be no right to

``me-too'' after May 1. Instead of requiring republication as of May 1,

OCWG contends, the Commission should require ETs for contracts in

effect prior to May 1 be republished the first time the contract is

amended after May 1, or by October 1, whichever is later.

1. Eligibility for ``Me-Tooing'

First, with regard to eligibility periods for ``me-too'' rights, it

is clear that OSRA completely eliminates ``me-tooing'' of service

contracts. OSRA is effective May 1, 1999, and therefore, no shipper can

assert ``me-too'' rights after May 1, 1999, regardless of what the

eligibility period of the service contract may have been under the Act

prior to OSRA's effective date.

2. Accessability to and Maintenance of ATFI

Second, regarding accessability and content in the ATFI database,

the Commission reiterates that it will maintain ATFI for historical

information only, and access to ATFI will continue as it has been done

in the past, by registration, log on and password. ATFI will become

exclusively historical on April 30, 1999, as filers will cease to have

the ability to file and amend ETs, but will continue to be able to

retrieve them.

3. Republication

OSRA requires that ``when a service contract is filed

confidentially with the Commission, a concise statement of essential

terms * * * shall be published and made available to the general public

in tariff format.'' Section 8(c)(3). The Commission has determined that

the simplest and least burdensome way for filers to comply with this

requirement of the Act is to require publication of ETs as part of the

privately published tariff systems. This publication requirement

ensures that the shipping public has access to certain very general

information on service contracts filed with the Commission. However,

for service contracts currently in effect, ETs of such service

contracts may not be as readily accessible to the extent that they are

still in the ATFI system. Allowing currently effective service

contracts' ETs to appear in two places (i.e. the ATFI historical

database and the active CATS publication) may add a degree of

complexity for those seeking access to the ETs, but any confusion would

be minimal, especially as compared to the cost and burden on the filers

if republication were required.

Therefore, the Commission will not require that ETs for service

contracts previously filed in the ATFI system, but which continue in

effect after May 1, be published in the CATS system. However, the

Commission wishes to make it clear that pre-May 1 service contracts

which are amended after May 1 will require republication of ETs as soon

as possible after the filing of the amendment (comporting with the

requirement of Sec. 530.12(g)) regardless of whether or not the four

essential terms are affected by the amendment.

K. Amendment Filing

Although the Commission received no formal comment on this matter,

several informal inquiries have indicated that filers need further

guidance as to how pre-May 1 service contracts are to be amended after

May 1. The internet filing system will not require the re-filing of the

original service contract. The dial-up system, however, will require

that the filer re-file a restatement of the service contract. This is

due to the fact that the dial-up system requires a data file with which

amendments must be associated; amendments may not stand on their own.

In the dial-up system, all reissued service contracts will be required

to:

(1) Have a current effective date which is no earlier than the

system assigned filing date (Appendix to Part 530, section II. H. 2);

(2) Employ an amendment code of ``I'' and an amendment number of

``null'' or ``0'' (Sec. 530.10(b)(2) and Appendix to Part 530, section

II D.);

(3) Contain all twelve mandatory terms and the exact term titles

[[Page 23791]]

(Appendix to Part 530, section IV. (Format Requirements));

(4) Reflect the latest version of each mandatory term, optional

term and any Register Rules for each pre-OSRA term and rule; and

(5) State at term 12 that the service contract was ``reissued'' and

cross-reference the FMC File Number of the pre-OSRA filing of the ET

filing(s) in ATFI.

L. Section 530.12 (c)--Multiple Carrier Party Contracts-Publication

of ETs

CENSA characterizes Sec. 530.12(c) as giving multiple carrier

parties the option of publishing either in their individual tariffs or

in a conference tariff, which CENSA asserts is ``logical and

reasonable.'' CENSA believes, however, that the rule's language is

contradicted by the language of the supplementary information, which

requires that ``essential terms of an individual service contract

entered into by multiple carrier parties to a conference must be filed

in the conference tariff.'' CENSA urges the Commission to revise the

supplementary information to confirm that carriers would have an option

of where to publish the ETs of a multi-carrier contract. CENSA asserts

that this flexibility would not hinder the Commission's ability to

carry out its regulatory responsibilities.

OCWG urges the Commission to revise Sec. 530.12(c) as follows:

(c) Location. The statement of essential terms shall be

published in an automated tariff publication in accordance with

520.12(c)(1) through (4) and in conformance with the format

requirements set forth in part 520 of this chapter. The statement of

essential terms may be published in the following locations:

(1) Conference service contracts. In the conference tariff(s).

(2) Individual service contracts. In the carrier's individual

tariff publication or in the tariff publication of a conference of

which the carrier is a member, at the carrier's option.

(3) Multi-party contracts. For a multi-party individual service

contract entered into pursuant to the authority of a conference

agreement, in each of the participating carriers' individual tariff

publications or in the tariff publication of the conference, at the

carriers' option.

(4) All other service contracts. In the individual tariffs of

the participating carrier(s).

The foregoing language, OCWG asserts, would increase carrier

flexibility by giving the members of a conference the choice of where

to publish. It would also, OCWG asserts, make clear that individual

carrier members of conferences may have their own tariff in which they

may publish ETs even if they participate in a conference rate tariff.

OCWG argues that this may be necessary to comply with the legal

requirements of other jurisdictions, particularly those of the European

Union. Giving carriers these options, OCWG argues, would not inhibit or

discourage individual contracting, nor would it complicate the

Commission's compliance monitoring. ETs belonging to carriers/

conferences and individual/agreement service contracts but published in

the same tariff, OCWG asserts, will be easily distinguished because the

ET must contain the FMC agreement number for conference and non-

conference agreement service contracts. OCWG also complains that

allowing agents to file, but restricting who the carrier party may

appoint to publish ``makes little sense.'' OCWG at 8. They argue that

because carriers are ``very unlikely to permit anyone other than their

employees or their tariff publisher to access their tariff

publication,'' the approach of the IFR ``effectively prohibits carriers

from using an agreement secretariat to publish the ETs of their

individual service contracts.'' OCWG at 8.

We agree with CENSA that there appear to be conflicting approaches

to publishing between the text of the rule itself and the language of

the supplementary information. The supplementary information included a

discussion of the competing interests behind the publication

requirement for multiple carrier service contracts: on the one hand

avoiding confusion to the public and ensuring that ETs can be located

by the public, and on the other, minimizing the burden on the

publishing carriers. 64 FR at 11200-11201.

Despite OCWG's and CENSA's arguments regarding flexibility for

publication of multi-party ETs, however, the Commission has revised the

language of the regulation to make it clear that conference ETs must

appear with the conference tariff; individual ETs must appear with the

individual tariff; and non-conference agreement ETs must appear with

each of the individual carriers' tariffs. Where non-conference

agreement or conference ETs may appear is not optional. While allowing

such options would give carriers ``increased flexibility,'' we are not

persuaded that doing so has the same implications as those for filing

of confidential terms, and therefore it appears not to be particularly

relevant whether or not it is ``entirely consistent with the approach

the Commission has taken with respect to the filing of service

contracts.'' OCWG at 8.

OSRA clearly distinguishes filing from publication. The publication

of ETs is required in order that the information is reasonably

available to the public. If the Commission were to allow the option

suggested by these comments, the public may only with significant

difficulty ever be able to find non-conference agreement ETs or

conference ETs. This would not appear consistent with the statutory

requirement that the ETs be ``made available to the public.''

The Commission has already determined that having ETs published

alongside the carrier party's CATS is the simplest and least

duplicative approach to such publication. As the Commission stated in

the IFR, the statement of essential terms of

[i]ndividual carrier service contracts are to be published alongside

that carrier's tariff matter * * * * Multi-party service contracts

entered into under the authority of a conference must be published

alongside the conference tariff, and not in the individual member's

tariff * * * * For service contracts jointly entered into by

multiple parties of a non-conference agreement, the publication of

the statement of essential terms will be published as for individual

service contracts [i.e. in each of the individual carrier's tariffs]

but note must be made of the relevant FMC-designated Agreement

number.

64 FR at 11200-11201.

For independent individual service contracts entered into by a

conference member, therefore, ETs must be published with the individual

carrier's tariff publication, and not with the conference's tariff. As

the Commission previously found, ``[a]llowing such would lead to public

confusion.'' 64 FR at 11201. For multi-party service contracts, the IFR

appears to allow non-conference agreements a choice as to where their

ETs could be published (i.e. in a conference's tariff or in an

individual tariff). The language of Sec. 530.12(c)(2) is revised to

clarify that for non-conference agreement service contracts, the ETs

must be published in each of the individual participating carriers'

tariffs, noting the FMC-assigned agreement number pursuant to which the

service contract is entered.

CENSA alternatively asserts that the Commission should permit non-

conference agreements to ``create a tariff in which the ETs of the

service contracts of its members may be published either by themselves

in their own tariffs, or through an agreement secretariat created for

that purpose.'' CENSA at 2. Such an approach, CENSA argues, would

neither hinder individual contracting nor compromise the

confidentiality of contract terms. Furthermore, CENSA comments, such an

approach could enhance the Commission's ability to

[[Page 23792]]

determine the level of contracting taking place pursuant to a non-

conference agreement, because the ETs would all be published in a

single tariff.

Allowing non-conference agreements to publish tariffs may be

convenient; however, sections 3(7) and 8(a) of the Act reserve the

ability to publish a tariff solely for ``carriers and conferences.''

Non-conference agreements are precluded from publishing tariffs by the

statute. If the IFR's approach to the publication of ETs for non-

conference agreements or for individual carrier members of conferences

becomes overly burdensome or confusing to the public, and another

approach is therefore warranted, the Commission may then revise the

regulations to address such concerns. Before having had experience with

the practices of the industry and the concerns of the public, however,

it appears to be more prudent to leave this approach in place.

Therefore, the Commission has revised the language of Sec. 530.12(c)(2)

to clarify with which tariff system multiple carrier service contracts

must be filed and to correct a numbering error which appeared in the

IFR.

Although the Commission received no formal comments on the

provision, there has been informal inquiry about the meaning of the

provision of Sec. 530.12 which requires that ETs ``be published as a

separate part in the filer's automated tariff publication, conforming

to the format requirements of part 520 of this chapter.'' As this

language was merely intended to indicate that ETs be located in the

carrier's automated tariff system, the Commission has deleted the

phrase ``conforming to the format requirements of part 520 of this

chapter,'' and to change the term ``publication'' to ``system.'' The

balance of the paragraph adequately indicates that ETs must be

published in the carrier's automated tariff system. Therefore,

Sec. 530.12(c) is revised to address both the issues concerning

multiple carrier party service contract filing and format requirements.

M. Section 530.13--Exceptions and Exemptions

USPS urges the Commission to continue a specific exemption to the

requirements of this part for the transportation of mail between the

United States and foreign countries. USPS recommends that

Sec. 530.13(a) be revised to include an exemption to the requirements

of the regulation for mail. USPS points out that mail had been granted

an exemption in 1976 (Docket No. 75-41, June 22, 1976) to the tariff

filing requirements and further argues that this exemption should be

carried forward for service contract filing as well.11 Nor,

USPS asserts, did the order find that such an exemption would deprive

the shipping public of a means for determining the rates for the

carriage of mail, because, with respect to mail, there is no ``shipping

public'' other than foreign governments which set the rates applicable

to the transportation of their mail. Finally, USPS notes that the 1976

exemption order recognized that under 39 U.S.C. 5005(b)(3), USPS'

contracts for the carriage of mail are available for inspection by the

general public.

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\11\ In that order the Commission found that, while it may move

in foreign commerce, mail is not a U.S. export or an item of trade

between countries, and thus it is apparent that the exemption would

not be detrimental to the commerce of the United States.

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USPS cites 46 CFR 514.3(b)(2) of the Commission's former

regulations to support its proposition that service contracts for the

carriage of mail in the U.S.-foreign trade are exempt from both tariff

and service contract filing requirements. Under current practice,

furthermore, carriers under contract with the USPS do not file their

service contracts with the Commission. USPS argues that there is

nothing contained in OSRA which would require a change from current

practice. For the foregoing reasons, therefore, USPS urges the

Commission to carry forward the exemption for mail to the Commission's

regulation on service contracts.12

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\12\ USPS also argues that the current regulations, 46 CFR

Sec. 514.3(b)(2) indicate that the Commission recognizes that mail

transportation is exempt from the Act itself, as well as from its

implementing regulations. Further, USPS argues, the Postal

Reorganization Act not only preempts the application of the Shipping

Act to mail transportation, but further exempts mail transportation

by the USPS from all other federal contract laws except those listed

in 39 U.S.C. Sec. 410(b). 39 U.S.C. Sec. 5001 et seq. Finally, USPS

contends, mail is not cargo, and for that reason the Commission's

requirements do not apply to contracts for its movement.

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USPS' comment was the only comment regarding section 16 exemptions

the Commission received, with the exception of the Household Goods

Forwarders Association of America's comments to the proposed rule. USPS

did not comment on the NPR, and the Commission did not consider in the

IFR whether exemptions which had appeared in the combined tariff and

service contract part of the Commission's former regulations (part 514)

would continue to have application.

The Commission's regulations on tariffs and service contracts were

originally contained in separate parts of the CFR. Subsequently,

however, when the ATFI filing system was adopted to accept ETs, the

Commission combined its service contract and tariff regulations into

one part. As USPS' comment has brought to the Commission's attention

that it had inadvertently failed to consider in the IFR the extension

of certain exemptions which had been contained in the combined tariffs/

service contract rule, the Commission will carry forward the section 16

exemptions the Commission had previously granted and which have

relevance for the service contract filing requirements of this part.

The Commission has therefore revised Sec. 530.13 to include the

relevant Commission exemptions, and further to indicate that terms not

particularly defined in this section will have the same meaning they

have as defined by the Act itself or by 46 CFR part 520 (Carrier

Automated Tariff Systems).

As the Commission previously noted in the IFR, which it now

confirms as final, it has received approval from the Office of

Management and Budget for this collection of information pursuant to

the Paperwork Reduction Act of 1995, as amended. Also as noted in the

IFR, in accordance with that Act, agencies are required to display a

currently valid control number. The valid control number for this

collection of information is 3072-0065. 64 FR 11206.

List of Subjects in 46 CFR Part 530

Freight, Maritime carriers, Reporting and recordkeeping

requirements.

Accordingly, the interim final rule removing 46 CFR part 514 and

adding 46 CFR part 530 which was published at 64 FR 11186-11215 on

March 8, 1999, is adopted as a final rule with the following changes:

PART 530--SERVICE CONTRACTS

1. The authority citation for part 530 continues to read as

follows:

Authority: 5 U.S.C. 553; 46 U.S.C App. 1704, 1705, 1707, 1716.

2. Amend Sec. 530.3 by revising paragraph (m) to read as follows:

Sec. 530.3 Definitions.

* * * * *

(m) Motor vehicle means a wheeled vehicle whose primary purpose is

ordinarily the non-commercial transportation of passengers, including

an automobile, pickup truck, minivan or sport utility vehicle.

* * * * *

3. Amend Sec. 530.8 by revising paragraph (c) and adding paragraph

(e) to read as follows:

Sec. 530.8 Service Contracts.

* * * * *

[[Page 23793]]

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

this section may not:

(1) Be uncertain, vague or ambiguous;

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

contract itself unless:

(i) Those terms are contained in a publication widely available to

the public and well known within the industry; or

(ii) Those terms are contained in a service contract register

filing duly filed in the Commission's dial-up filing system and are

available to all parties to the service contract. Service contract

register filings are subject to the same requirements of this part as

service contracts and amendments.

* * * * *

(e) Exception in case of malfunction of Commission filing system.

(1) In the event that the Commission's filing systems are not

functioning and cannot receive service contract filings for twenty-four

(24) continuous hours or more, affected parties will not be subject to

the requirements of paragraph (a) of this section and Sec. 530.14(a)

that a service contract be filed before cargo is shipped under it.

(2) However, service contracts which go into effect before they are

filed, pursuant to paragraph (e)(1) of this section, must be filed

within twenty-four (24) hours of the Commission's filing systems'

return to service.

(3) Failure to file a service contract that goes into effect before

it is filed, pursuant to paragraph (e)(1) of this section, within

twenty-four (24) hours of the Commission's filing systems' return to

service will be considered a violation of Commission regulations.

4. Amend Sec. 530.10 by revising paragraph (d)(1) to read as

follows:

Sec. 530.10 Amendment, correction, and cancellation.

* * * * *

(d) Cancellation. (1) 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 appearing in

the service contract as filed with the Commission under

Sec. 530.8(b)(7), or the occurrence of an event described below in

paragraph (d)(2) of this section.

* * * * *

5. Amend Sec. 530.12 by redesignating the second paragraph (c) and

paragraphs (d) through (g) as paragraph (d) and paragraphs (e) through

(h), respectively, and by revising paragraph (c) and newly redesignated

paragraphs (d) through (h) to read as follows:

Sec. 530.12 Publication.

* * * * *

(c) Location. (1) Generally. The statement of essential terms shall

be published as a separate part of the individual carrier's automated

tariff system.

(2) Multi-party service contracts. For service contracts in which

more than one carrier participates or is eligible to participate, the

statement of essential terms shall be published:

(i) If the service contract is entered into under the authority of

a conference agreement, then in that conference's automated tariff

system;

(ii) If the service contract is entered into under the authority of

a non-conference agreement, then in each of the participating or

eligible-to-participate carriers' individual automated tariff systems,

clearly indicating the relevant FMC-assigned agreement number.

(d) References. The statement of essential terms shall contain a

reference to the ``SC Number'' as described in Sec. 530.8(d)(1).

(e) Terms. (1) The publication of the statement of essential terms

shall accurately reflect the terms as filed confidentially with the

Commission.

(2) If any of the published essential terms include information not

required to be filed with the Commission but filed voluntarily, the

statement of essential terms shall so note.

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

agents to meet their publication requirements under this part.

(g) Commission listing. The Commission will publish on its website,

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

essential terms publications.

(h) 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 its most recent

publication or revision. When the published statement of essential

terms is affected by filed amendments, corrections, or cancellations,

the current terms shall be changed and published as soon as possible in

the relevant statement of essential terms.

6. Revise Sec. 530.13 to read as follows:

Sec. 530.13 Exceptions and exemptions.

(a) Statutory exceptions. Service contracts for the movement of the

following, as defined in section 3 of the Act, Sec. 530.3 or Sec. 520.1

of this chapter, are excepted by section 8(c) of the Act from the

requirements of that section, and are therefore not subject to the

requirements of this part:

(1) Bulk cargo;

(2) Forest products;

(3) Recycled metal scrap;

(4) New assembled motor vehicles; and

(5) Waste paper or paper waste.

(b) Commission exemptions. Exemptions from the requirements of this

part are governed by section 16 of the Act and Rule 67 of the

Commission's Rules of Practice and Procedure, Sec. 502.67 of this

chapter. The following commodities and/or services are exempt from the

requirements of this part:

(1) Mail in foreign commerce. Transportation of mail between the

United States and foreign countries.

(2) Department of Defense cargo. Transportation of U.S. Department

of Defense cargo moving in foreign commerce under terms and conditions

negotiated and approved by the Military Transportation Management

Command and published in a universal service contract. An exact copy of

the universal service contract, including any amendments thereto, shall

be filed with the Commission as soon as it becomes available.

(c) Inclusion of excepted or exempted matter. (1) The Commission

will not accept for filing service contracts which exclusively concern

the commodities or services listed in paragraph (a) or (b) of this

section.

(2) Service contracts filed with the Commission may include the

commodities or services listed in paragraph (a) or (b) of this section

only if:

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

transportation, which contains a specific commodity rate for the

commodity or service in question; or

(ii) The service contract itself sets forth a rate or charge which

will be applied if the contract is canceled, as defined in

Sec. 530.10(a)(3).

(d) Waiver. Upon filing a service contract pursuant to paragraph

(c) of this section, the service contract shall be subject to the same

requirements as those for service contracts generally.

7. Amend Appendix A to part 530 by revising the introductory text,

paragraph A under the heading Registration, Log-On ID and Password, and

by adding paragraph D under the same heading to read as follows:

Appendix A---Instructions for the Filing of Service Contracts

Service contracts shall be filed in accordance with one of the

methods described in this Appendix, at the filer's

[[Page 23794]]

option. Carriers, conferences, and agreements may only be registered

to file in one system at a particular time. Publishers may be

registered in both systems, but must file each carrier, conference

or agreement service contracts into only one system.

I. Registration, Log-On ID and Password

A. To register for filing, a carrier, conference, agreement or

publisher must submit the Service Contract Registration Form (Form

FMC-83) to BTCL. A separate Service Contract Registration Form is

required for each individual that will file service contracts.

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

batch filing of Essential Terms Publications in the Commission's

former Automated Tariff Filing Information (``ATFI'') system, will

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

contracts. Filers who wish a third party (publisher) to file their

service contracts must so indicate on Form FMC-83. 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.

* * * * *

D. A carrier, conference, or agreement may be registered to file

its service contracts in only one of the Commission's filing systems

at any given time. A publisher which files on behalf of many

carriers, conferences or agreements may be registered to file into

both systems simultaneously, however, each of its clients' service

contracts must be filed in only one system. For example, a publisher

who files for carrier X and conference Y may file all of carrier X's

service contracts into the option 1 (internet-based) filing system,

and all of conference Y's service contracts into the option 2 (dial-

up) filing system, but cannot file some of carrier X's service

contracts in the option 1 filing system and some of carrier X's

service contracts in the option 2 filing system.

* * * * *

By the Commission.

Bryant L. VanBrakle,

Secretary.

[FR Doc. 99-11058 Filed 4-29-99; 4:01 pm]

BILLING CODE 6730-01-P