Ocean Common Carriers Subject to the Shipping Act of 1984

FEDERAL MARITIME COMMISSION

46 CFR Parts 515, 520, 530 and 535

[Docket No. 99-10]

Ocean Common Carriers Subject to the Shipping Act of 1984

AGENCY: Federal Maritime Commission.

ACTION: Proposed rule.

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

SUMMARY: The Federal Maritime Commission proposes to amend its

regulations implementing the Shipping Act of 1984 to clarify the

definition of ``ocean common carrier'' to reflect the Commission's

current interpretation of the term. As a result, only ocean common

carriers that operate vessels in at least one United States trade will

be subject to these rules.

DATES: Comments due August 24, 1999.

ADDRESSES: Send comments (original and fifteen copies) to: Bryant L.

VanBrakle, Secretary, Federal Maritime Commission, 800 North Capitol

Street, NW., Room 1046, Washington, DC 20573, (202) 523-5725.

FOR FURTHER INFORMATION CONTACT: Thomas Panebianco, General Counsel,

Federal Maritime Commission, 800 North Capitol Street, NW., Room 1018,

Washington, DC 20573, (202) 523-5740.

SUPPLEMENTARY INFORMATION: In one of its several rulemaking proceedings

to implement the Ocean Shipping Reform Act of 1998, Pub. L. 105-258,

112 Stat. 1902 (``OSRA''), the Federal Maritime Commission (``FMC'' or

``Commission'') proposed to amend its regulations governing agreements

among ocean common carriers and marine terminal operators. Docket No.

98-26, Ocean Common Carrier and Marine Terminal Operator Agreements

Subject to the Shipping Act of 1984, 64 FR 11236, March 8, 1999. One of

the proposed changes was a new definition of ``ocean common carrier''

to address perceived deficiencies in the definition of that term

contained in section 3(16) of the Shipping Act of 1984 (``1984 Act''),

46 U.S.C. app. Sec. 1702(16), (``a vessel-operating common carrier''),

and to clarify the dividing line between ocean common carriers and non-

vessel-operating common carriers (``NVOCCs''). The proposed rule sated

that:

Ocean common carrier means a common carrier that operates, for

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

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

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

carrier engaged in ocean transportation by ferry boat, ocean tramp,

or chemical parcel-tanker.

The Commission received comments on this particular aspect of the

proposed rule from Croatia Line and the Council of European & Japanese

National Shipowners Association (``CENSA''). While generally supporting

the Commission's proposed definition, CENSA suggested that it be

further clarified to include a carrier that provides part of a vessel

service in a U.S. trade. In addition, Croatia Line claimed that the

Commission failed to disclose the facts necessitating such a change,

and failed to discuss the effects of the changes on regulated parties.

Croatia Line also argued that the proposed definition would adversely

affect it, since it is party to two space charter agreements and does

not operate vessels making direct calls at U.S. ports. It further

argued that the proposal was contrary to the clear language of the 1984

Act and well-established precedent. Croatia Line suggested that changes

not required by OSRA should not be subject to such a short comment

period.

In light of these comments, and the absence of additional comments

from other potentially affected parties, the Commission decided to

provide an additional opportunity to comment, 64 FR 11236, March 8,

1999. Accordingly, the Commission is initiating this rulemaking

proceeding to further consider the definition of ``ocean common

carrier.'' In addition, because the definition of ocean common carrier

appears not only in the agreement rules but also in the rules governing

ocean transportation intermediaries (part 515), tariffs (part 520), and

service contracts (part 530), the Commission is proposing to adopt a

definition that is consistent for all rules.

As explained in the preamble to the proposed rule in Docket No. 98-

26, the amended definition of ``ocean common carrier'' is proposed to

resolve uncertainty generated by the 1984 Act's definition, which is

simply ``a vessel-operating common carrier.'' At issue is how to

distinguish between ocean common carriers and NVOCCs. The distinction,

which was first codified in 1984, has significant implications,

inasmuch as the 1984 Act affords ocean carriers, but not NVOCCs,

antitrust immunity and other rights and responsibilities, including the

ability to offer service contracts. The need for clarity in this area

is continued by OSRA, which continues to differentiate between vessel-

operating and non-vessel-operating lines with regard to service

contracting and other areas.

At first glance, it is difficult to see the ambiguity in the phrase

``vessel-operating.'' However, the Commission's staff has encountered a

number of complex situations regarding where and when vessels are

operated, and what types of vessels are involved. In this regard,

various bureaus have taken the position that an ``ocean common

carrier'' is a common carrier that, in providing a common carrier

service, operates a vessel calling at a U.S. port. Moreover, if a

carrier is an ocean common carrier in one U.S. trade, it has been

reasoned, it is an ocean common carrier for all U.S. trades. For

example, if a carrier operates vessels from the U.S. East Coast to

northern Europe, it has the legal ``status'' of ocean common carrier to

enter into space charter agreements for any U.S.-foreign trade.

The proposed definition codifies this approach. It would continue

the practice of determining status on a multi-trade basis (i.e., an

ocean common carrier in one U.S. trade has that status in all U.S.

trades). Any interpretation of the statute requiring status

determinations to be made on a trade-by-trade basis would be

administratively impractical and might prompt less than efficient

redeployment of vessels in the U.S. trades solely to meet regulatory

requirements.

The proposed definition would also clarify the issue of whether

companies that operate vessels only outside the U.S.--i.e., they have

no vessel operations to U.S. ports--can be deemed ``ocean common

carriers.'' It appears from the legislative intent of the 1984 Act that

Congress viewed vessel operators as those whose vessels call at U.S.

ports and classified all other common carriers in U.S. commerce as non-

vessel-operating common carriers. For example, in its report on the

1984 Act, the Senate Commerce, Science, and Transportation Committee

observed:

The Committee strongly believes that it is in our national

interest to permit cooperation among carriers serving our foreign

trades to permit efficient and reliable service. * * * Our carriers

need; a stable, predictable, and profitable trade with a rate of

return that warrants reinvestment and a commitment to serve the

trade; greater security in investment * * *.

S. Rep. No. 3, 98th Cong., 1st Sess. 9 (1983). We do not believe that

Congress intended to provide special privileges or protections to

carriers that have not made the financial commitment to providing

vessel service to the United States.

[[Page 34184]]

A definition of ocean common carrier that encompassed companies

that operate vessels only in foreign-to-foreign trades would

substantially broaden the scope of antitrust immunity potentially to

include a number of small operators whose wholly foreign vessel

operations would be difficult for the Commission to monitor or verify.

Such a finding would remove such companies from the scope of the Act's

NVOCC bonding requirements, even though they have no vessels or assets

in the United States that can be attached to satisfy a Commission or

U.S. court judgment. Such an approach would also seem to contravene the

longstanding judicial policy of narrowly construing antitrust

exemptions. See, e.g., Federal Maritime Commission v. Seatrain Lines,

Inc., 411 U.S. 726, 733 (1973). In addition, from the text of the Act,

it appears likely that when Congress used the unadorned term ``vessel''

in the definition of ocean common carrier, it was referring to the

vessels specified in the definition of common carrier, i.e., those that

operate on the high seas or Great Lakes between the United States and a

foreign country.

The proposed definition would continue the policy that the vessels

in question must be used in a common carrier service. If an NVOCC

operates tankers or tramp vessels, wholly apart from its common carrier

service, it does not secure ocean common carrier status from those

vessel operations.

The Chairman certifies, pursuant to section 605 of the Regulatory

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

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

entities. The affected universe of parties is limited to ocean common

carriers or passenger vessel operators. The Commission has determined

that these entities do not come under the programs and policies

mandated by the Small Business Regulatory Enforcement Fairness Act as

they typically exceed the threshold figures for number of employees

and/or annual receipts to qualify as a small entity under Small

Business Administration Guidelines.

List of Subjects

46 CFR Part 515

Exports; Freight forwarders; Non-vessel-operating common carriers;

Ocean transportation intermediaries; Licensing requirements; Financial

responsibility requirements; Reporting and recordkeeping requirements.

46 CFR Part 520

Common carrier; Freight; Intermodal transportation; Maritime

carriers; Reporting and recordkeeping requirements.

46 CFR Part 530

Freight; Maritime carriers; Reporting and recordkeeping

requirements.

46 CFR Part 535

Administrative practice and procedure; Maritime carriers; Reporting

and recordkeeping requirements.

Therefore, for the reasons set forth above, Parts 515, 520, 530,

and 535 of Subchapter C of Title 46 Code of Federal Regulations, are

proposed to be amended as follows:

PART 515--LICENSING, FINANCIAL RESPONSIBILITY REQUIREMENTS, AND

GENERAL DUTIES FOR OCEAN TRANSPORTATION INTERMEDIARIES

1. The authority citation for part 515 continues to read as

follows:

Authority: 5 U.S.C. 553; 31 U.S.C. 9701; 46 U.S.C. app. 1702,

1707, 1710, 1712, 1714, 1716, and 1718, 21 U.S.C. 862; Pub. L. 105-

383, 112 Stat. 3411.

2. In Sec. 515.2 revise paragraph (m) to read as follows:

Sec. 515.2 Definitions

* * * * *

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

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

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

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

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

parcel-tanker.

* * * * *

PART 520--CARRIER AUTOMATED TARIFF SYSTEMS

1. The authority citation for part 520, is revised to read as

follows:

Authority: 5 U.S.C. 553; 46 U.S.C. app. 1701-1702, 1707-1709,

1712, 1716; sec. 424 of Pub. L. 105-383, 112 Stat. 3411.

2. In Sec. 520.2 revise the definitions of ocean common carrier to

read as follows:

Sec. 520.2 Definitions

* * * * *

Ocean common carrier means a common carrier that operates, for all

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

Great Lake between a port in the United States and a port in a foreign

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

in ocean transportation by ferry boat, ocean tramp, or chemical parcel-

tanker.

* * * * *

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, 1716.

2. In Sec. 530.3 revise paragraph (n) to read as follows:

Sec. 530.3 Definitions.

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

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

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

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

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

parcel-tanker.

* * * * *

PART 535--AGREEMENTS BY OCEAN COMMON CARRIERS AND OTHERS SUBJECT TO

THE SHIPPING ACT OF 1984.

1. The authority citation for part 535 is revised to read as

follows:

Authority: 5 U.S.C. 553; 46 U.S.C. app. 1702-1704, 1706-1707;

1709-1710, 1712 and 1714-1717.

2 Revise Sec. 535.101 to read as follows:

Sec. 535.101 Authority.

The rules in this part are issued pursuant to the authority of

section 4 of the Administrative Procedure Act (5 U.S.C. 553), sections

2, 3, 4, 5, 6, 7, 8, 10, 11, 13, 15, 16, and 17 of the Shipping Act of

1984 (``the Act''), and the Ocean Shipping Reform Act of 1998, Pub. L.

105-258, 112 Stat. 1902.

3. In Sec. 535.104 revise paragraph (u) to read as follows:

Sec. 535.104 Definitions.

* * * * *

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

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

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

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

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

parcel-tanker.

* * * * *

By the Commission.

Byrant L. VanBrakle,

Secretary.

[FR Doc. 99-16036 Filed 6-24-99; 8:45 am]

BILLING CODE 6730-01-M