Ocean Common Carrier and Marine Terminal Operator Agreements Subject to the Shipping Act of 1984

SUMMARY: The Federal Maritime Commission is amending its regulations

governing agreements among ocean common carriers and marine terminal

operators to reflect changes made to the Shipping Act of 1984 by the

recently enacted Ocean Shipping Reform Act of 1998, Pub. L. 105-258. In

accordance with that Act, the Commission is proposing to establish new

rules for ocean carrier agreements regarding carriers' service

contracts with shippers, amend the scope of marine terminal agreements

subject to the Act, establish rules for agreements on freight forwarder

compensation, reduce the mandatory notice period for carriers'

independent action on tariff rates, and make other conforming changes.

The Commission is also deleting much of its format requirements for

filed agreements and making other technical amendments to the filing

rules for clarity and administrative efficiency.

DATES: Effective May 1, 1999.

FOR FURTHER INFORMATION CONTACT:

Thomas Panebianco, General Counsel, Federal Maritime Commission, 800

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

Florence Carr, Director, Bureau of Economics and Agreement Analysis,

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

DC 20573-0001, (202) 523-5787

SUPPLEMENTARY INFORMATION:

Background

On December 15, 1998, the Commission published in the Federal

Register (63 FR 69034) a proposed rule in this proceeding to bring its

rules for ocean common carrier and marine terminal operator agreements

into conformity with the Ocean Shipping Reform Act, Pub. L. 105-258,

112 Stat. 1902, (``OSRA''), and the Coast Guard Authorization Act of

1998, 1999 and 2000, Pub. L. 105-383, 112 Stat. 3411. These recently

enacted statutes make several changes to the Federal Maritime

Commission's (``FMC'' or ``Commission'') authorities and

responsibilities under the Shipping Act of 1984, 46 U.S.C. app. 1701 et

seq. (``1984 Act''). At the same time, the Commission proposed to amend

its rules to eliminate certain unnecessary formal requirements and make

other clarifications and changes.

Comments in this proceeding were filed by: Fruit Shippers Ltd.;

Port of Philadelphia Marine Terminal Association, Inc.; China Ocean

Shipping (Group) Company (``COSCO''); P&O Nedlloyd Ltd. (``P&ON'');

American Institute for Shippers'' Associations, Inc. (``AISA''); Japan-

United States Eastbound Freight Conference and its Member Lines

(``JUEFC''); Ocean Carrier Working Group Agreement (``Carrier Group'');

National Industrial Transportation League (``NITL''); Croatia Line;

Council of European & Japanese National Shipowners'' Associations

(``CENSA''); Sea-Land Service, Inc.; and American President Lines, Ltd.

and APL Co. Pte. Ltd. (collectively, ``APL'').

The Final Rule

The final rule redesignates the Commission's agreement rules,

formerly 46 CFR part 572, as part 535, and makes changes to its

authority citations to reflect OSRA's passage.

The following discussion first covers the four issues in the

proposed rule that generated the most attention from commenters: (1)

Proposed reporting requirements; (2) changes regarding service

contracts; (3) changes in agreement form; and (4) a revised definition

of ocean common carrier. Following those matters is a discussion of the

remainder of the rule changes and other matters raised by the

commenters.

Proposed Reporting Requirements

The Commission proposed to adopt a new reporting requirement for

ocean common carriers to aid in implementing OSRA's new prohibitions in

sections 10(c)(7-8), barring discrimination against ocean

transportation intermediaries and shippers' associations based on

status. The proposal would have required each member of an agreement to

provide summary statistics on numbers of service contract ``requests,''

``denials,'' and ``approvals,'' tallied by class of shipper.

Several commenters, including APL, Sea-Land, COSCO, JUEFC, and the

Carrier Group object strongly to the Commission's proposed reporting

requirements for service contracting activity. These commenters

characterized the proposal as excessively burdensome or intrusive; P&O

Nedlloyd estimates the annual cost of such data collection at $2

million. Sea-Land asserts that the proposed reporting categories, i.e.,

the terms ``requested,'' ``adopted,'' or ``denied,'' have no meaning in

the context of the actual marketplace of contract negotiations. NITL

echoes many of these sentiments, using examples of negotiating

situations that cannot easily be characterized as ``requests'' or

``denials'' under the rule. NITL is concerned that the reporting

requirements might limit flexibility in carriers' contracting

processes. Sea-Land and other carrier commenters suggest that the

proposed reporting requirements are outside the scope of the

Commission's authority, or they have no valid regulatory purpose,

inasmuch as they reach wholly individual contracting activities not

within the scope of the new sections 10(c)(7-8).

AISA supports the proposed reporting requirement, suggesting that

it will be minimally intrusive, and will aid the Commission in carrying

out its responsibilities under section 10(b) (barring, among other

things, unreasonable refusals to deal) as well as section 10(c)(7-8).

AISA states that under the 1984 Act, it has been able to detect when

shippers' associations have been discriminated against by conferences,

and has sought ``marketplace alternatives to remedy such

discrimination,'' using, among other things, its ``me-too'' rights to

obtain competitive contracts. However, AISA notes that, with the

absence of me-too contract rights for similarly situated shippers and

the confidentiality of service contracts and agreement contract

guidelines, its ability to protect itself from discrimination will be

compromised. It calls the proposed reporting ``prudent,'' ``a good

minimum,'' and a ``first step'' for administering the new statutory

protections for intermediaries and shippers' associations.

The carriers' sweeping legal arguments that the reporting

requirement exceeds the Commission's authority are unconvincing.

Inasmuch as the information sought is reasonably related to the

Commission's oversight responsibilities under the Act, it can

defensibly be compelled by the agency under section 15 of the Shipping

Act.

More persuasive, however, are many of the commenters' explanations

that the proposed categories of reporting do not comport with the

market realities of shipping sales practices and commercial inquiries

and negotiations. After considering the examples set forth in NITL's

and the carriers' comments, we believe that the proposed reporting

would generate a large quantity of data of questionable utility.

Shippers often

[[Page 11237]]

may make inquiries of, and explore negotiations with, a number of

carriers (with regard to both contract and tariff rates) before making

final transportation arrangements. In this environment, the proposed

rule would seem likely to lead to ambiguous tallies reflecting

inquiries, quotes, offers, or counteroffers.

AISA is correct that the Commission must engage in active policing

if the new nondiscrimination provisions of the Act are to be given

effect, as the Commission will be the only body that can compare and

analyze terms of otherwise confidential contracts. However, the

Commission's monitoring and enforcement resources will be better spent

investigating or analyzing specific allegations or complaints about

particular instances of status-based discrimination, rather than

laboring over questionable market-wide statistics. Thus, the reporting

provision of the proposed rule has not been finalized.

Proposed Amendments Regarding Service Contracts

The proposed rule contained provisions implementing new

restrictions and requirements for carrier agreements and service

contracting, as set forth in the new section 5(c) of the Shipping Act.

That section states:

Ocean common carrier agreements. An ocean common carrier

agreement may not--

(1) prohibit or restrict a member or members of the agreement

from engaging in negotiations for service contracts with 1 or more

shippers;

(2) require a member or members of the agreement to disclose a

negotiation on a service contract, or the terms and conditions of a

service contract, other than those terms and conditions required to

be published under section 8(c)(3) of this Act; or

(3) adopt mandatory rules or requirements affecting the right of

an agreement member or agreement members to negotiate and enter into

service contracts.

An agreement may provide authority to adopt voluntary guidelines

relating to the terms and procedures of an agreement member's or

agreement members' service contracts if the guidelines explicitly

state the right of the members of the agreement to not follow these

guidelines. These agreement guidelines shall be confidentially

submitted to the Commission.

The proposed rule included a proposed Sec. 535.802(a-b) indicating

that the new sections 5(c)(1-2) (prohibiting restrictions on members'

negotiations and requirements for members to disclose contract

negotiations and terms) applied to enforceable and unenforceable

agreements. It contained a definition of voluntary guidelines which

limited them to ``contract terms a carrier or carriers may include in

the texts of their individual contracts; or the procedures that a

carrier or carriers may follow in negotiating, modifying, or

terminating contracts with shipper customers.'' The proposed rule also

would have barred guidelines that contained commitments, policies, or

procedures for notification or pre-clearance of proposed service

contract terms with other carriers or agreement officials, or

imposition or acceptance of any liability or sanction whatsoever for

non-compliance with contract terms.

The proposed Sec. 535.802 is supported by AISA and NITL. NITL says

it ``believes that the proposed rules generally comport with the

provisions and policies of the statute, and in general correctly

implement the important new restrictions imposed on collective carrier

action by OSRA.'' NITL at 3. NITL suggests that the proposed section

barring guidelines for auditing and pre-clearing contracts be amended

to include the catch-all phrase: ``and any other commitment, policy, or

procedure that would have a similar effect.''

The proposal is strenuously objected to by the Carrier Group, APL,

Sea-Land, JUEFC, P&ON, and CENSA. APL states that the proposed

Sec. 535.802(a) and (b) are ``overbroad,'' because they ``forbid

carriers from reaching a consensus concerning service contracts or

their negotiations which restrict negotiations or require disclosure.''

APL at 1. APL asserts that carriers have a right to enter into

``lawful, independent, parallel courses of conduct with respect to

service contracts.'' Under OSRA, according to APL, ``carriers may not

adopt rules affecting a carrier's rights to negotiate or enter into a

service contract,'' but carriers can ``discuss[] and adopt[]

consciously parallel action in service contract practices.'' Id. at 1-

2.

APL suggests that carriers must be able to offer multi-carrier

service undertakings; to do that, carriers must have extensive

voluntary discussions and agreements regulating that activity. APL

urges that the Commission adopt the draft rule set forth in the Carrier

Group's comments.

The Carrier Group states that the proposed regulations are

inconsistent with OSRA, and that the proposed Sec. 535.802(d) (which

would limit voluntary guidelines to procedures between shippers and

carriers, not among carriers) is in direct conflict with section 5(c)

of the Act. The Carrier Group suggests that the Commission cannot place

any limitation on the scope of voluntary guidelines. The only

limitation on voluntary guidelines' content, according to the Carrier

Group, is that they must in some way relate to the terms and procedures

of service contracting; referring to Black's definition of ``related

to'' and Supreme Court cases, the carriers assert that guidelines must

``stand in some relation; have bearing or concern; pertain; refer; (or)

bring into association with or connection with'' service contracts.

The Carrier Group states that ``the Commission's position that any

type of voluntary guidelines or procedures is contrary to the

disclosure requirements in section 5(c) is unsupported'' and contrary

to the legislative history. The Carrier Group cites the following

passage from the Report of the Senate Committee on Commerce, Science,

and Transportation on the version of OSRA reported out of that

committee:

The provisions in new section 5(b)(9) do not extend to the

discussion, agreement and adoption of voluntary guidelines by

agreement members concerning their negotiation and use of service

contracts. Thus, nothing in this Act is intended to preclude

agreement members from promulgating voluntary guidelines relating to

the terms and procedures of individual service contracts, as long as

those guidelines make clear that there is no penalty associated with

the failure of a member to follow any such guideline.

S. Rep. 105-61, 105th Cong. 1st Sess. 21.

Sea-Land states that the authority to enter into voluntary

guidelines is ``clear and unambiguous, and does not exclude any subject

matter from its scope.'' Sea-Land at 1-2.

JUEFC makes similar points, stating, ``the plain wording indicates

that if what is adopted is ``mandatory'' it is banned, and that if what

is adopted is ``voluntary,'' it is allowed.'' JUEFC at 2. JUEFC

suggests that carriers could agree to a system of sanctions for failure

to adhere to service contract guidelines, as long as the sanctions were

denoted as voluntary. JUEFC suggests that any issues regarding what may

or may not be permissible guidelines ``should be reserved for

resolution in specific cases.'' Id. at 3.

In light of the comments, the Commission has determined not to

adopt the proposed rule regarding service contracts and voluntary

guidelines. Instead, the Commission is adopting a final rule covering

agreement restrictions on service contracting and voluntary guidelines

that follows the language of OSRA, affording the carriers more

flexibility than under the proposed rule.

No objections were raised to the proposed Sec. 535.803, which is

included in the final rule. It tracks the new statute's mandate that

carriers may not

[[Page 11238]]

agree to limit freight forwarder compensation to less than 1.25 percent

of charges, and must be allowed to take independent action on freight

forwarder compensation on not more than five days' notice.

Proposed Changes Regarding Form of Agreements

The Commission proposed to eliminate many of the form and manner

requirements for agreements set forth in subpart D. While this change

was not mandated by OSRA, the Commission suggested that requirements

for filing highly structured, tariff-type agreements seemed

inconsistent with OSRA's focus on the marketplace and emphasis on

commercial flexibility.

Reaction to the proposal to eliminate the form requirements for

agreements was varied. APL is the sole carrier expressly in favor of

the move, stating:

We commend the Commission for removing its prior requirements

for a uniform format for filed agreements. This will cure the

anomalous situation in which carriers and others subject to the act

entered into agreements which were commercially and legally

appropriate, but then had to be rewritten in the prescribed format

for the regulatory act of filing.

* * * * *

However, we share the concern of TSA, JUEFC, ANERA and others

that any new enforcement activity by the Commission based on novel

and unpublished standards as to what does or does not constitute an

agreement which is properly interstitial to a filed agreement should

await another rulemaking.

APL at 2. APL recognizes that the Commission's regulations, recodified

at 46 CFR 535.407, provide specific guidance as to the content of filed

agreements. APL is ``encouraged by the fact that these standards remain

unchanged by the proposed rule, and we do not think that the

Commission's elimination of the formatting requirement itself changes

any of the standards of completeness by which agreements filing is to

be governed.'' Id.

Other carrier commenters, however, objected strongly to the

proposed move. Sea-Land explains:

Sea-Land would not oppose changes in the agreement form and

manner requirements if they resulted in increased flexibility or

decreased burdens. What this Proposed Rule has done, however, is

generate great concern that, whether intended or not, this

rulemaking could create enormous uncertainty and potential

regulatory infractions for what has been accepted agreement filing

practice and conduct that has existed without a problem for well

over a decade.

Sea-Land at 4.

P&ON, JUEFC, the Carrier Group, and CENSA also suggest that the

deletion of form requirements would change the standards for the

content of agreements. The Carrier Group states that ``we believe the

true purpose * * * is that elimination of the form and manner

requirements is, in fact, intended to require the parties to slot

charter agreements to file their actual operational/administrative

agreements rather than an agreement in `FMC format.' '' Carrier Group

at 13. This, according to the Carrier Group, would ``replace one set of

uncertainties with another.'' Carrier Group at 14. Various carrier

commenters suggest that when carriers are involved in ongoing

cooperative working arrangements, they need to enter into various

detailed agreements to establish the actual working particulars of the

partnerships. According to the commenters, these so-called

``operational'' agreements often contain sensitive or confidential

business information, are revised frequently, and generally are not

filed with the Commission.

The Carrier Group asserts that the issue of operational agreements

is related to the proposed deletion of form requirements:

[O]perational/administrative agreements contain a myriad of

provisions necessary for the parties to carry out the authority

contained in a slot charter agreement filed with the Commission.

Such provisions include, but are not limited to, slot charter hire,

financial accounting, terminals to be used at each port, the name of

the contact person for each party at each port, the type and size of

containers to be accepted, * * * etc. Most, if not all, of these

provisions are of no concern to the Commission. They have little or

no anti-competitive impact. Yet, the Commission's proposed rule

would require that all such provisions be publicly filed, and

amended whenever changed.

Carrier Group at 16.

The Carrier Group does not explain specifically why it believes the

content standards have changed. JUEFC states, however, that ``(b)y

removing the list of required elements from (part) 572, this could

affect future and existing agreements, including those agreements under

challenge today, by prohibiting carriers from defending their

agreements based on the existing regulations.'' JUEFC at 9.

APL's assessment--that elimination of the form requirements does

not affect standards for content--is accurate. The deletion of the form

provisions, such as ordering of provisions, page numbering, and use of

appendices, does not have any impact on the issue of whether particular

operational or administrative matters need to be filed with the

Commission. The fact that particular provisions are required to be set

forth in a fixed order does not provide carriers with a comprehensive

list of particulars that must be filed in agreements, nor otherwise

contribute to the certainty or clarity of agreement content

requirements.\1\

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\1\ The form requirements do not purport to be an exhaustive

list of required content; indeed they do just the opposite. The

current 46 CFR 572.403(b)(5) (which states that every agreement must

have an Article 5 providing a summary of the agreement authority)

states, in part:

To the extent that the summary provided does not represent the

full arrangement between the parties, additional articles or

appendices of the parties' own designation and subsequent to these

enumerated articles will be required to provide the specification of

the authority to be exercised and the mechanics of that exercise.

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Agreement content is controlled by sections of the Act and

regulations that have remained unchanged. Ocean common carriers are

required under section 5 of the 1984 Act to file a true copy of any

agreement with respect to an activity described in section 4, unless

such agreement falls within one of the narrow exceptions or exemptions

set forth in the Act or the Commission's rules. The Commission's rules

require that filed agreements be ``complete,'' ``in detail,''

``clear,'' ``definite,'' and ``specific.'' 46 CFR 572.103(g) and

572.407(a). The issue of routine administrative or operational matters

is addressed in an exception in 46 CFR Sec. 572.407(c) (which is left

unchanged), which states:

Further specific agreements or understandings which are

established pursuant to express enabling authority in an agreement

are considered interstitial implementation and are permitted without

further filing under section 5 of the Act only if the further

agreement concerns routine operational or administrative matters,

including the establishment of tariff rates, rules, and regulations.

The Commission has determined to adopt the approach urged by APL.

First, it is proceeding at this time with the elimination of agreement

form requirements. This step has no substantive effect on the content

requirements for agreements. Indeed, even with form requirements

eliminated, nothing bars carriers from continuing to structure their

agreements as they have done under the old rules.

Second, the Commission has determined, in the face of a request

from the nearly-unanimous carrier community, to institute a subsequent

rulemaking on the issue of content of filed agreements. The carrier

commenters apparently seek far more specific requirements as to what

matters do or do not have to be filed. The

[[Page 11239]]

Commission's rules, according to the commenters, should provide

protections for confidential business information, provide maximum

flexibility for carriers to modify cooperative arrangements without

overly burdensome filing requirements or waiting periods, and possibly

include guidance tailored for different types of agreements. These

prospective issues would appear to warrant a further public airing and

Commission review.

Therefore, Sec. 535.402 is amended as follows. Sections 535.402(a-

b) (paper size, margins, title page) are modified. A revised

Sec. 535.402(d) clarifies that agreements are to be signed by each

individual contracting party or its designated agent, as opposed to a

single official signing on behalf of the group as a whole. Inasmuch as

agreements should represent the true understanding of each party, it

does not appear unreasonable that the assent of each individual party

should be indicated by signature. The Carrier Group and JUEFC object

that this requirement may be burdensome. This does not appear correct,

however, as each agreement party can, if it wishes, select the same

agent for signature purposes. A revised Sec. 535.402(d), permitting

faxed or photocopied signatures, will also minimize any administrative

delay.

The ordering and pagination requirements in Secs. 535.402(e) and

403 are almost entirely removed. Agreements must either include or be

accompanied by a table of contents, and by information such as contact

names, addresses, and specific geographic scope involved. While the

Commission sought to eliminate as many formalities as possible, these

requirements are necessary to the expeditious processing and oversight

of the agreement, and are retained in the final rule.

Section 535.404 is revised to delete the requirement that

conference-specific agreement language be ordered in a particular

fashion. However, the content requirements, which track section 5 of

the 1984 Act's provisions, are largely retained.

The Carrier Group suggests that the use of the ``revised pages''

format for modifications, as proposed in Sec. 535.405, is ``not

consistent with how carriers necessarily structure their commercial

agreements.'' No alternative approach is suggested by the group,

however. Therefore, the revised page format has been retained in the

final rule, as it appears from experience to be the most efficient and

expedient way of processing amendments. If carriers wish to take an

alternative approach, they can seek a waiver of the requirement

pursuant to Sec. 535.406. We would also again note, that the

elimination of the form requirements implicitly provides carriers more

flexibility to amend their understandings by filing additional

agreement pages or sections, rather than revised language. Mandatory

republication is eliminated, replaced with a new Sec. 535.405(e),

providing that the Commission may mandate republication when it is

deemed necessary to maintain the clarity of an agreement. In addition,

the waiting period exemption for miscellaneous amendments, set forth in

Sec. 535.309, is amended to remove specific form requirements.

Proposed Revised Definition of Ocean Common Carrier

The Commission proposed an amended definition of ``ocean common

carrier'' to resolve uncertainty generated by the 1984 Act's definition

(which simply is ``a vessel-operating common carrier'') and clarify the

regulatory dividing line between ocean common carriers and non-vessel-

operating common carriers (``NVOCCs'').

Croatia Line objects to the proposed definition of ``ocean common

carrier.'' Among other things, Croatia Line represents that the

Commission provided inadequate notice by including this issue in a

short-notice OSRA rulemaking. Both Croatia Line and CENSA suggest that

the definition should be broadened to include a vessel operator that

provides service to the U.S. pursuant to a transshipment arrangement,

even if the carrier only operates the foreign-to-foreign leg of the

service.

The Commission believes that, given the brevity of the comment

period in this proceeding and the paucity of comments received on this

issue, it would be useful to provide an additional opportunity for

interested parties to comment. The Commission would also benefit from

more time to consider the merits of this issue. A separate notice

seeking additional comments in a further rulemaking proceeding will be

issued shortly. \2\

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\2\ Croatia Line incorrectly asserts that the Commission is

proposing a change in policy. As explained in the proposed rule, the

proposed definition is a codification of the Commission's

longstanding, but uncodified, policy. That the Commission has taken

no enforcement action against Croatia Line in connection with its

recently filed agreements is not an indication of a proposed policy

shift. Rather, the Commission is seeking to ensure that it had

provided the maximum opportunity for notice and comment on its

longstanding policy in a rulemaking context before considering

specific enforcement action against any one carrier. In deferring

the issue to a separate proceeding, the Commission is in no way

adopting or endorsing Croatia Line's interpretation of the law or

its characterization of its own status, but rather is seeking to be

as procedurally fair and inclusive as possible.

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Other Proposed Changes

Redesignated Sec. 535.102 is amended to reflect that marine

terminal agreements are no longer limited to solely international

commerce.

The definition of ``common carrier'' in Sec. 535.104(f) is amended

to reflect changes made in the 1984 Act by section 424(d) of the Coast

Guard Authorization Act. That act inserted a qualified exception in the

definition for certain vessels carrying perishable agricultural

commodities.

The definition of ``conference agreement,'' in redesignated

Sec. 535.104(g), is changed to clarify that the term (and the rule

sections that apply it, such as the mandatory independent action

requirements) extends only to ocean common carrier conferences, and not

to marine terminal conferences, which are defined elsewhere in this

part. The definition is also changed to eliminate two elements that do

not appear to correspond with the statutory text: (1) The requirement

that, to be a conference, carriers must agree to collective

administrative affairs, and (2) the statement that carriers may have a

common tariff and must participate in some tariff.

The Carrier Group states that there is no statutory need to change

the definition in the regulations of ``conference agreement,'' and

opposes the proposed definition, saying that it could create

``unintended results.'' Carrier Group at 24. The definition does need

to be changed, however, to comport with OSRA. Under the new Act,

agreements other than conferences can enter into service contracts. The

members of these agreements must, as a matter of course, agree to fix

and adhere to those service contract rates that they have in common.

Under the old definition (which said ``conference agreement means an

agreement * * * which provides for: (1) The fixing of and adherence to

uniform rates, charges * * *'') an agreement such as a vessel sharing

agreement that offered joint service contracts would seem to be

classified as a conference, undermining Congress's intentions.

Therefore, the definition was amended to make clear that conferences

provided for the fixing of and adherence to tariff (not service

contract) rates.

The Carrier Group appears to object to removing the references to

``utiliz(ing) a common tariff'' from the current definition. However,

the deleted clause appeared to add nothing to the old definition,

insofar as it said that conference carriers ``may'' (but do not

[[Page 11240]]

have to) use a common tariff, but must participate in some tariff.

While this seems to be an accurate synopsis of the Act's tariff

publication rule, it does not appear to be an integral component of the

definition of ``conference.'' The revised definition will not, as the

Carrier Group suggests without elaboration, subject other carrier

agreements to various statutory requirements set forth in section 5(b)

of the Act. Id.

The definition of ``effective agreement'' in redesignated

Sec. 535.104(j) is changed to remove references to the Shipping Act,

1916, and the definition of ``information form'' in paragraph (m) is

amended to clarify that it extends to some types of agreement

modifications. ``Marine terminal operator'' is redefined in paragraph

(q) to accord with the new definition in OSRA, and the definition of

NVOCC is removed.

OSRA's changes regarding jurisdiction over marine terminal

operators are also reflected in redesignated Sec. 535.201, the list of

agreements subject to the Act. Also in that section, the reference to

cooperative working agreements with non-vessel-operating common

carriers, is deleted in accordance with OSRA. Also, references to NVOCC

and freight forwarder agreements are removed from the non-subject

agreements section, redesignated Sec. 535.202(f) and (g).

The exemption provisions in redesignated Sec. 535.301 are changed

to comport with the new law's more liberal standard. The exemption

procedures are being moved to a general exemption section in the

Commission's Rules of Practice and Procedure, 46 CFR part 502.

In the marine terminal agreements exemption, redesignated

Sec. 535.307, the definition of ``marine terminal conference'' in

paragraph (b) is amended to reflect that such agreements do not have to

involve solely international commerce. Also, the extraneous references

to collective administrative affairs and tariff filing are removed (as

with the definition of ``conference agreement'' in redesignated

Sec. 535.104(g)). In the marine terminal services exemption in

redesignated Sec. 535.310, a definition of marine terminal services is

incorporated in paragraph (a), and paragraph (a)(2), which excepts

previously filed agreements from the exemption, is removed.

Redesignated Sec. 535.501(a) is amended, and a new Sec. 535.503(b)

is added to make clear that agreement modifications that expand the

geographic scope or change the class designation of the underlying

agreement must be accompanied by an appropriate information form. At

NITL's suggestion, the reference in Sec. 535.502(a)(5) to ``regulation

or discussion of service contracts'' is changed to ``discussion or

agreement on service contracts,'' to more closely track the text of

OSRA. Also, redesignated Sec. 535.706(c)(1) is amended to accord with

OSRA's changed tariff requirements.

The mandatory provisions for independent action for conferences in

redesignated Sec. 535.801 are changed to reflect that shortened notice

period, from ten to five days. The rules are amended to reflect the

statutory change that conferences must allow independent action on all

rates and service items, not just those required to be included in

tariffs. That is, if a conference fixes a rate on a commodity exempt

from tariff publication, for example, waste paper, it must allow

members to take independent action on the waste paper rates. If the

conference publishes a waste paper rate in its tariff (it does not have

to, but it can do so voluntarily), then it must publish the member's IA

waste paper rates as well. Section 535.801(i), a transitional provision

that applied to the 90-day period immediately after the IA rules were

adopted, is deleted.

In its comments, the Port of Philadelphia seeks confirmation of its

view of the relationship between the Commission's agreement rules and

its regulations for marine terminal operator schedules. The port's

observations are correct, as discussed in more detail in the final rule

in Docket No. 98-27.

P&ON suggests that the Commission broaden the exception to the 45-

day waiting period when new parties are added to pre-existing

agreements. It also suggests that a new process be implemented to

effect name changes in multiple agreements. Both of these suggestions

could have some merit, and will be noticed for comment in a subsequent

rulemaking proceeding.

The Carrier Group recommends that the Commission take this

opportunity to eliminate its current Class A reporting requirements for

high market share rate agreements. However, that reporting requirement

(adopted less than three years ago) provides information that is

indispensable for the Commission's ongoing oversight of potentially

substantially anticompetitive agreements, pursuant to the 6(g)

standard. Any modifications in the current agreement monitoring program

based on changed market conditions will be considered only after an

opportunity to evaluate the competitive effects of OSRA's regulatory

changes.

In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601 et

seq., the Chairman of the Federal Maritime Commission has certified to

the Chief Counsel for Advocacy, Small Business Administration, that the

rule will not have a significant impact on a substantial number of

small entities. In its Notice of Proposed Rulemaking, the Commission

stated its intention to certify this rulemaking because the proposed

changes affect only ocean common carriers, marine terminal operators,

and passenger vessel operators, entities the Commission has determined

do not come under the programs and policies mandated by the Small

Business Regulatory Enforcement Fairness Act. As no commenter refuted

this determination, the certification remains unchanged.

The Commission has received Office of Management and Budget (OMB)

approval for the collection of this information required in this part.

Section 530.991 displays the control numbers assigned by OMB to

information collection requirements of the Commission in this part by

the pursuant to the Paperwork Reduction Act of 1995, as amended. In

accordance with that Act, agencies are required to display a currently

valid control number. In this regard, the valid control number for this

collection of information is 3072-0045.

This regulatory action is not a ``major rule'' under 5 U.S.C.

804(2).

List of Subjects in 46 CFR Parts 535 and 572

Administrative practice and procedure; Maritime carriers; Reporting

and recordkeeping requirements.

Therefore, for the reasons set forth above, part 572, subchapter C

of Title 46, Code of Federal Regulations, is redesignated and amended

as follows:

PART 572--AGREEMENTS BY OCEAN COMMON CARRIERS AND OTHER PERSONS

SUBJECT TO THE SHIPPING ACT OF 1984 [REDESIGNATED AS PART 535 AND

AMENDED]

1. The authority citation for part 572 [redesignated as part 535]

is amended to read as follows:

Authority: 5 U.S.C. 553, 46 U.S.C. app. 1701-1707, 1709-1710,

1712 and 1714-1717, Pub. L. 104-88, 109 Stat. 803.

2. Redesignate part 572 as part 535 of subchapter B, chapter IV of

46 CFR.

3. Revise redesignated Sec. 535.101 to read as follows:

[[Page 11241]]

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, 17 and 19 of the Shipping Act

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

L. 104-88, 109 Stat. 803.

Sec. 535.102 [Amended]

4. Amend redesignated Sec. 535.102 to remove the parenthetical

phrase ``(to the extent the agreements involve ocean transportation in

the foreign commerce of the United States).''

5. Amend redesignated Sec. 535.103 to add paragraph (h) to read as

follows:

Sec. 535.103 Policies.

* * * * *

(h) In order to promote competitive and efficient transportation

and a greater reliance on the marketplace, the Act places limits on

carriers' agreements regarding service contracts. Carriers may not

enter into an agreement to prohibit or restrict members from engaging

in contract negotiations, may not require members to disclose service

contract negotiations or terms and conditions (other than those

required to be published), and may not adopt mandatory rules or

requirements affecting the right of an agreement member or agreement

members to negotiate and enter into contracts. However, agreement

members may adopt voluntary guidelines covering the terms and

procedures of members' contracts.

6. Amend redesignated Sec. 535.104 as follows: paragraphs (f), (g),

(j), (m) and (q) are revised, paragraph (u) is removed, paragraphs (v),

(w), (x), (y), (z), (aa), (bb) and (cc) are redesignated (u), (v), (w),

(x), (y), (z), (aa) and (bb), paragraph (dd) is redesignated (cc) and

revised, paragraph (ee) is redesignated (dd), redesignated paragraph

(dd) is revised, paragraphs (ff), (gg), (hh), (ii), (jj), and (kk) are

redesignated (ee), (ff), (gg), (hh), (ii) and (jj), as follows:

Sec. 535.104 Definitions.

* * * * *

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

public to provide transportation by water of passengers or cargo

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

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

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

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

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

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

does not include a common carrier engaged in ocean transportation by

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

primarily engaged in the carriage of perishable agricultural

commodities:

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

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

the marketing and distribution of those commodities; and

(ii) Only with respect to those commodities.

(g) Conference agreement means an agreement between or among two or

more ocean common carriers which provides for the fixing of and

adherence to uniform tariff rates, charges, practices and conditions of

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

passengers or cargo for all members. The term does not include joint

service, pooling, sailing, space charter, or transshipment agreements.

* * * * *

(j) Effective agreement means an agreement effective under the Act.

* * * * *

(m) Information form means the form containing economic information

which must accompany the filing of certain kinds of agreements and

agreement modifications.

* * * * *

(q) Marine terminal operator means a person engaged in the United

States in the business of furnishing wharfage, dock, warehouse, or

other terminal facilities in connection with a common carrier, or in

connection with a common carrier and a water carrier subject to

subchapter II of chapter 135 of Title 49 U.S.C. This term does not

include shippers or consignees who exclusively furnish marine terminal

facilities or services in connection with tendering or receiving

proprietary cargo from a common carrier or water carrier.

* * * * *

(cc) Service contract means a written contract, other than a bill

of lading or a receipt, between one or more shippers and an individual

ocean common carrier or an agreement between or among ocean common

carriers in which the shipper or shippers make a commitment to provide

a certain volume or portion of cargo over a fixed time period, and the

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

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

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

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

party.

(dd) Shipper means:

(1) A cargo owner;

(2) The person for whose account the ocean transportation is

provided;

(3) The person to whom delivery is to be made;

(4) A shippers' association; or

(5) A non-vessel-operating common carrier (i.e., a common carrier

that does not operate the vessels by which the ocean transportation is

provided and is a shipper in its relationship with an ocean common

carrier) that accepts responsibility for payment of all charges

applicable under the tariff or service contract.

* * * * *

7. Amend redesignated Sec. 535.201 to revise paragraphs (a)(5),

(a)(6), (a)(7) and (b) to read as follows:

Sec. 535.201 Subject agreements.

(a) * * *

(5) Engage in exclusive, preferential, or cooperative working

arrangements among themselves or with one or more marine terminal

operators;

(6) Control, regulate, or prevent competition in international

ocean transportation; or

(7) Discuss and agree on any matter related to service contracts.

(b) Marine terminal operator agreements. This part applies to

agreements among marine terminal operators and among one or more marine

terminal operators and one or more ocean carriers to:

(1) Discuss, fix, or regulate rates or other conditions of service;

or

(2) Engage in exclusive, preferential, or cooperative working

arrangements, to the extent that such agreements involve ocean

transportation in the foreign commerce of the United States.

8. Amend redesignated Sec. 535.202 to revise paragraphs (d) and (e)

and to remove paragraphs (f) and (g) to read as follows:

Sec. 535.202 Non-subject agreements.

* * * * *

(d) Any agreement among common carriers to establish, operate, or

maintain a marine terminal in the United States; and

(e) Any agreement among marine terminal operators which exclusively

and solely involves transportation in the interstate commerce of the

United States.

9. Amend redesignated Sec. 535.301 to revise paragraphs (a) and

(c), to remove paragraphs (d) and (e), and to redesignate paragraph (f)

as paragraph (d) to read as follows:

[[Page 11242]]

Sec. 535.301 Subject agreements.

(a) Authority. The Commission, upon application or its own motion,

may by order or rule exempt for the future any class of agreements

between persons subject to the Act from any requirement of the Act if

it finds that the exemption will not result in substantial reduction in

competition or be detrimental to commerce.

* * * * *

(c) Application for exemption. Applications for exemptions shall

conform to the general filing requirements for exemptions set forth at

Sec. 502.67 of this title.

* * * * *

10. Amend redesignated Sec. 535.307 to revise paragraph (b) to read

as follows:

Sec. 535.307 Marine terminal agreements---exemption.

* * * * *

(b) Marine terminal conference agreement means an agreement between

or among two or more marine terminal operators and/or ocean common

carriers for the conduct or facilitation of marine terminal operations

which provides for the fixing of and adherence to uniform maritime

terminal rates, charges, practices and conditions of service relating

to the receipt, handling, and/or delivery of passengers or cargo for

all members.

* * * * *

11. Amend redesignated Sec. 535.309 to revise paragraphs (a)(2) to

read as follows:

Sec. 535.309 Miscellaneous modifications to agreements--exemptions.

(a) * * *

(2) Any modification to the following:

(i) Parties to the agreement (limited to conference agreements,

voluntary ratemaking agreements having no other anticompetitive

authority (e.g., pooling authority or capacity reduction authority),

and discussion agreements among passenger vessel operating common

carriers which are open to all ocean common carriers operating

passenger vessels of a class defined in the agreements and which do not

contain ratemaking, pooling, joint service, sailing or space chartering

authority).

(ii) Officials of the agreement and delegations of authority.

(iii) Neutral body policing (limited to the description of neutral

body authority and procedures related thereto).

* * * * *

12. Amend redesignated Sec. 535.310 to revise paragraph (a) to read

as follows:

Sec. 535.310 Marine terminal services agreements--exemptions.

(a) Marine terminal services agreement means an agreement,

contract, understanding, arrangement or association, written or oral

(including any modification, cancellation or appendix) between a marine

terminal operator and an ocean common carrier that applies to marine

terminal services, including checking; dockage; free time; handling;

heavy lift; loading and unloading; terminal storage; usage; wharfage;

and wharf demurrage and including any marine terminal facilities which

may be provided incidentally to such marine terminal services) that are

provided to and paid for by an ocean common carrier. The term ``marine

terminal services agreement'' does not include any agreement which

conveys to the involved carrier any rights to operate any marine

terminal facility by means of a lease, license, permit, assignment,

land rental, or similar other arrangement for the use of marine

terminal facilities or property.

* * * * *

13. Amend redesignated Sec. 535.402 to revise paragraphs (a), (b)

introductory text, (d) and (e) and remove paragraphs (f) and (g) to

read as follows:

Sec. 535.402 Form of agreements.

* * * * *

(a) Agreements shall be clearly and legibly written. Agreements in

a language other than English shall be accompanied by an English

translation.

(b) Every agreement shall include or be accompanied by a title page

indicating:

* * * * *

(d) Each agreement and/or modification filed will be signed in the

original by an official or authorized representative of each of the

parties and shall indicate the typewritten full name of the signing

party and his or her position, including organizational affiliation.

Faxed or photocopied signatures will be accepted if replaced with an

original signature as soon as practicable before the effective date.

(e) Every agreement shall include or be accompanied by a Table of

Contents providing for the location of all agreement provisions.

14. Revise redesignated Sec. 535.403 to read as follows:

Sec. 535.403 Agreement provisions.

If the following information (necessary for the expeditious

processing of the agreement filing) does not appear fully in the text

of the agreement, it shall be indicated in an attachment or appendix to

the agreement, or on the title page:

(a) Details regarding parties. Indicate the full legal name of each

party, including any FMC-assigned agreement number associated with that

name; and the address of its principal office (to the exclusion of the

address of any agent or representative not an employee of the

participating carrier or association).

(b) Geographic scope of the agreement. State the ports or port

ranges to which the agreement applies and any inland points or areas to

which it also applies with respect to the exercise of the collective

activities contemplated and authorized in the agreement.

(c) Officials of the agreement and delegations of authority.

Specify, by organizational title, the administrative and executive

officials determined by the parties to the agreement to be responsible

for designated affairs of the agreement and the respective duties and

authorities delegated to those officials. At a minimum, specify:

(1) The officials with authority to file agreements and agreement

modifications and to submit associated supporting materials or with

authority to delegate such authority; and

(2) A statement as to any designated U.S. representative of the

agreement required by this chapter.

15. Revise redesignated Sec. 535.404 to read as follows:

Sec. 535.404 Organization of conference and interconference

agreements.

(a) Each conference agreement shall include the following:

(1) Neutral body policing. State that, at the request of any

member, the conference shall engage the services of an independent

neutral body to fully police the obligations of the conference and its

members. Include a description of any such neutral body authority and

procedures related thereto.

(2) Prohibited acts. State affirmatively that the conference shall

not engage in conduct prohibited by section 10(c)(1) or 10(c)(3) of the

Act.

(3) Consultation: Shippers' requests and complaints. Specify the

procedures for consultation with shippers and for handling shippers'

requests and complaints.

(4) Independent action. Include provisions for independent action

in accordance with Sec. 535.801 of this part.

(b)(1) Each agreement between carriers not members of the same

conference must provide the right of independent action for each

carrier.

(2) Each interconference agreement must provide the right of

independent action for each conference and specify the procedures

therefor.

16. Amend redesignated Sec. 535.405 to revise paragraphs (a), (b),

(c), (d) and (e),

[[Page 11243]]

and to remove paragraphs (f) and (g) to read as follows:

Sec. 535.405 Modification of agreements.

* * * * *

(a) Agreement modifications shall be: filed in accordance with the

provisions of Sec. 535.401 and in the format specified in Sec. 535.402.

(b) Agreement modifications shall be made by reprinting the entire

page on which the matter being changed is published (``revised

pages''). Revised pages shall indicate the consecutive denomination of

the revision (e.g., ``1st Revised Page 7''). Additional material may be

published on a new original page. New pages inserted between existing

pages shall be numbered with an appropriate suffix (e.g., a page

inserted between page 7 and page 8 shall be numbered 7a, 7.1, or

similarly).

(c) If the modification is made by the use of revised pages, the

modification shall be accompanied by a page, submitted for illustrative

purposes only, indicating the language being modified in the following

manner (unless such marks are apparent on the face of the agreement):

(1) Language being deleted or superseded shall be struck through;

and,

(2) New and initial or replacement language shall immediately

follow the language being superseded and be underlined.

(d) If a modification requires the relocation of the provisions of

the agreement, such modification shall be accompanied by a revised

Table of Contents page which shall report the new location of the

agreement's provisions.

(e) When deemed necessary to ensure the clarity of an agreement,

the Commission may require parties to republish their entire agreement,

incorporating such modifications as have been made. No Information Form

requirements apply to the filing of a republished agreement.

17. Revise redesignated Sec. 535.501 paragraph (a) to read as

follows:

Sec. 535.501 General requirements.

(a) Certain agreement filings must be accompanied with an

Information Form setting forth information and data on the filing

parties' prior cargo carryings, revenue results and port service

patterns.

* * * * *

18. Amend redesignated Sec. 535.502 to revise paragraphs (a)(1),

(a)(3), (a)(4), (a)(5), (b)(1), and (b)(2) to read as follows:

Sec. 535.502 Subject agreements.

* * * * *

(a) * * *

(1) A rate agreement as defined in Sec. 535.104(aa);

(2) * * * * *

(3) A pooling agreement as defined in Sec. 535.104(x);

(4) An agreement authorizing discussion or exchange of data on

vessel-operating costs as defined in Sec. 535.104(jj); or

(5) An agreement authorizing regulation or discussion of service

contracts as defined in Sec. 535.104(cc).

(b) * * *

(1) A sailing agreement as defined in Sec. 535.104(bb); or

(2) A space charter agreement as defined in Sec. 535.104(gg).

19. Amend redesignated Sec. 535.503 to redesignate the introductory

text as paragraph (a) and to add new paragraph (b) to read as follows:

Sec. 535.503 Information form for Class A/B agreements.

(a) * * *

(b) Modifications to Class A/B agreements that expand the

geographic scope of the agreement or modifications to Class C

agreements that change the class of the agreement from C to A/B must be

accompanied by an Information Form for Class A/B agreements.

20. Amend redesignated Sec. 535.706 by revising paragraph (c)(1) to

read as follows:

Sec. 535.706 Filing of minutes---including shippers' requests and

complaints, and consultations.

* * * * *

(c) * * *

(1) Rates that, if adopted, would be required to be published in

the pertinent tariff except that this exemption does not apply to

discussions limited to general rate policy, general rate changes, the

opening or closing of rates, or service or time/volume contracts; or

* * * * *

21. Revise the heading of Subpart H to read as follows:

Subpart H--Mandatory and Prohibited Provisions

22. Amend redesignated Sec. 535.801 by: Revising paragraphs (a),

(b)(1), (d), (e), the final sentence of paragraph(f)(1), and (f)(2);

removing paragraph (i); and redesignating paragraphs (j) as (i) and (k)

as (j), to read as follows:

Sec. 535.801 Independent action.

(a) Each conference agreement shall specify the independent action

(``IA'') procedures of the conference, which shall provide that any

conference member may take independent action on any rate or service

item upon not more than 5 calendar days' notice to the conference and

shall otherwise be in conformance with section 5(b)(8) of the Act.

(b)(1) Each conference agreement that provides for a period of

notice for independent action shall establish a fixed or maximum period

of notice to the conference. A conference agreement shall not require

or permit a conference member to give more than 5 calendar days' notice

to the conference, except that in the case of a new or increased rate

the notice period shall conform to the tariff publication requirements

of this chapter.

* * * * *

(d) A conference agreement shall not require a member who proposes

independent action to attend a conference meeting, to submit any

further information other than that necessary to accomplish the

publication of the independent tariff item, or to comply with any other

procedure for the purpose of explaining, justifying, or compromising

the proposed independent action.

(e) A conference agreement shall specify that any new rate or

service item proposed by a member under independent action (except for

exempt commodities not published in the conference tariff) shall be

included by the conference in its tariff for use by that member

effective no later than 5 calendar days after receipt of the notice and

by any other member that notifies the conference that it elects to

adopt the independent rate or service item on or after its effective

date.

(f)(1) * * * Additionally, if a party to an agreement chooses to

take on an IA of another party, but alters it, such action is

considered a new IA and must be published pursuant to the IA

publication and notice provisions of the applicable agreement.

(2) An IA TVR published by a member of a ratemaking agreement may

be adopted by another member of the agreement, provided that the

adopting member takes on the original IA TVR in its entirety without

change to any aspect of the original rate offering (except beginning

and ending dates in the time period) (i.e., a separate TVR with a

separate volume of cargo but for the same duration). Any subsequent IA

TVR offering which results in a change in any aspect of the original IA

TVR, other than the name of the offering carrier or the beginning date

of the adopting IA TVR, is a new independent action and shall be

processed in accordance with the provisions of the applicable

agreement. The adoption procedures

[[Page 11244]]

discussed above do not authorize the participation by an adopting

carrier in the cargo volume of the originating carrier's IA TVR. Member

lines may publish and participate in joint IA TVRs, if permitted to do

so under the terms of their agreement; however, no carrier may

participate in an IA TVR already published by another carrier.

* * * * *

23. Revise redesignated Sec. 535.802 to read as follows:

Sec. 535.802 Service contracts.

(a) Ocean common carrier agreements may not prohibit or restrict a

member or members of the agreement from engaging in negotiations for

service contracts with one or more shippers.

(b) Ocean common carrier agreements may not require a member or

members of the agreement to disclose a negotiation on a service

contract, or the terms and conditions of a service contract, other than

those terms or conditions required by section 8(c)(3) of the Shipping

Act.

(c) Ocean common carrier agreements may not adopt mandatory rules

or requirements affecting the right of an agreement member or agreement

members to negotiate or enter into service contracts.

(d) An agreement may provide authority to adopt voluntary

guidelines relating to the terms and procedures of an agreement

member's or agreement members' service contracts if the guidelines

explicitly state the right of the members of the agreement not to

follow these guidelines.

(e) Voluntary guidelines shall be submitted to the Director, Bureau

of Economics and Agreement Analysis, Federal Maritime Commission,

Washington, DC 20573. Voluntary guidelines shall be kept confidential

in accordance with Sec. 535.608 of this part. Use of voluntary

guidelines prior to their submission is prohibited.

24. Amend Subpart H--Mandatory and Prohibited Provisions to add new

Sec. 535.803 to read as follows:

Sec. 535.803 Ocean freight forwarder compensation.

No conference or group of two or more ocean common carriers may:

(a) Deny to any member of such conference or group the right, upon

notice of not more than 5 calendar days, to take independent action on

any level of compensation paid to an ocean freight forwarder; or

(b) Agree to limit the payment of compensation to an ocean freight

forwarder to less than 1.25 percent of the aggregate of all rates and

charges applicable under the tariff assessed against the cargo on which

the forwarding services are provided.

By the Commission.3

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\3\ Although Commissioner Won voted to issue the Final Rule, he

indicated a strong preference for the ``voluntary guidelines''

provisions set forth in the proposed rule.

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Bryant L. VanBrakle,

Secretary.

[FR Doc. 99-5364 Filed 3-5-99; 8:45 am]

BILLING CODE 6730-01-P