# Service Contracts Subject to the Shipping Act of 1984

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A99-5365

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** March 8, 1999
- **Citation:** 64 FR 11186

## Text

SUMMARY: The Federal Maritime Commission has revised its regulations
governing service contracts between shippers and ocean common carriers
to implement changes made to the Shipping Act of 1984 (``Act'') by Pub.
L. 105-258 (the Ocean Shipping Reform Act of 1998) and section 424 of
Pub. L. 105-383 (the Coast Guard Authorization Act of 1998).
Specifically, the Commission has revised its regulations implementing
section 8(c) of the Act and has created a new 46 CFR part 530 to govern
service contract filing. The interim nature of this rule is due to a
major revision of the proposed regulation, which did not include the
internet-based filing system of the interim final rule. The proposed
regulations have been revised to accommodate the alternative system.
Portions of the proposed rule have been redrafted for clarity,
repetitive sections have been deleted and the remaining sections are
accordingly renumbered.

DATES: Effective date May 1, 1999. Submit comments on this interim
final rule on or before April 1, 1999.

ADDRESSES: Address all comments to: Bryant L. VanBrakle, Secretary,
Federal Maritime Commission, 800 North Capitol Street, NW., Room 1046,
Washington, DC 20573-0001.

FOR FURTHER INFORMATION CONTACT:

Thomas Panebianco, General Counsel, Federal Maritime Commission, 800
North Capitol Street, NW., Washington, DC 20573-0001, (202) 523-5740
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

SUPPLEMENTARY INFORMATION: On December 23, 1998, the Federal Maritime
Commission (``Commission'') issued proposed regulations to implement
changes to the Shipping Act of 1984 (``Act'') mandated by the Ocean
Shipping Reform Act of 1998, Pub. L. 105-258, 112 Stat. 1902
(``OSRA''), enacted on October 14, 1998. 63 FR 71062-71076. OSRA made
several changes to the existing system by which the Federal Maritime
Commission regulates ocean shipping in the foreign commerce of the
United States, particularly to the provisions governing service
contracts under the Act.
As noted in the Notice of Proposed Rulemaking (``NPR''), the
Commission sought to balance the general deregulatory intent of OSRA
with the important oversight role that Congress has assigned to it,
through the proposed rules. The difficulty in achieving that balance is
apparent in the reactions the proposal received from members of the
industry. Further, while the Commission recognized that the filing
requirements must be crafted with an appreciation for regulated
entities' interests in simple, speedy and straightforward filing
procedures, the Commission also noted in the NPR that the procedures
must enable the Commission to fulfill its statutory duty to guard
against section 10 violations and perform its section 6 functions. As
several of the comments urge, this responsibility on the part of the
Commission is especially important as service contracts will be
confidential and potentially aggrieved parties will have to rely on the
Commission for oversight. This will be complicated by the predicted
increase in the sheer number of service contracts filed. It was with
these goals in mind that the Commission originally proposed the draft
regulations, designed to enable the Commission to fulfill its
regulatory mandate while imposing a minimal burden on regulated
parties.

Comments

The Commission received twenty-eight (28) responses to the NPR,
from the following: Seaboard Marine (``Seaboard''); International
Longshoremen's Association (``ILA''); Cargo Brokers International, Inc.
(``CBI''); China Ocean Shipping (Group) Company (``COSCO''); Effective
Tariff Management Corporation (``ETM''); Trans-Atlantic Conference
Agreement (``TACA'') (endorses OCWG comments); Household Goods
Forwarders Association of America, Inc. (``HGFAA''); Council of
European & Japanese National Shipowners' Association (``CENSA'');
Bicycle Shippers' Association, Inc. (``BSA''); United States Council
for International Business, Sea Transportation Committee (``USCIB'');
International Longshore & Warehouse Union (``ILWU'') (endorses ILA
comments); IBP, Inc. (``IBP''); National Industrial Transportation
League (``NITL''); Japan-United States Eastbound Freight Conference
(``JUSEFC''); American Institute for Shippers' Associations, Inc.
(``AISA''); Ocean Carrier Working Group Agreement (``OCWG''); National
Customs Brokers & Forwarders Association of America, Inc. (``NCBFAA'');
American Import Shippers' Association (``AImpSA''); E.I. DuPont de
Nemours and Company (``DuPont''); Conagra, Inc. (``Conagra''); P&O
Nedlloyd, Ltd. (``P&O''); Pacific Coast Tariff Bureau (``PTCB'');
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 Development (joint comments)
(``Carriers''); Chemical Manufacturers Association (``CMA''); American
President Lines, Ltd. and APL Co. Pte. Ltd. (``APL'') (endorses OCWG
comments); Sea-Land Service, Inc. (``Sea-Land'') (endorses OCWG and
TACA comments); American International Freight Association and
Transportation Intermediaries Association (``AIFA'') (joint comments)
(endorses NITL comments); and Wal-Mart Stores, Inc. (``Wal-Mart'').
These comments reflected the views of large, beneficial interest
shippers (DuPont, Wal-Mart, Conagra, and IBP), shippers' associations
and representatives (BSA, NITL, AISA, AImpSA, and CMA), labor
organizations (ILA and ILWU), carriers, conferences, agreements and
carrier associations (APL, COSCO, P&O, CENSA, OCWG, TACA, JUSEFC, 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
Development), ocean transportation intermediaries (CBI, HGFAA, NCBFAA,
AIFA and the Transportation Intermediaries Association), third-party
filing services (ETM and PTCB), and, finally, the American affiliate of
the International Chamber of Commerce, representing the general
business interests of shippers and carriers (USCIB).
A significant number of comments generally oppose the proposed
regulations as inflexible, overly technical, rigid, burdensome and
costly, and, as such, inconsistent with the deregulatory aims of OSRA.
OCWG; NITL; USCIB; P&O; Sea-Land; Seaboard; CENSA and Conagra. Most of
the opposition to the proposed regulation is aimed at the Commission's
proposal to adapt an electronic system already in its possession, and
the technical constraints that would accompany the use of that system.
There are also comments that applaud the Commission's proposal as a

[[Page 11187]]

conscientious effort to implement a key feature of OSRA in a timely
manner, but which also express concern that some of the provisions may
be at odds with OSRA. Conagra.
Several other comments are just as strongly in favor of the
regulations as proposed, and support them as a fair reflection and
implementation of the changes intended to be made by Congress through
OSRA. AISA; AImpSA; NCBFAA; and BSA. Shipper groups urge the Commission
to be mindful that, under OSRA, smaller shippers will be disadvantaged
and thus will rely more on FMC oversight. Therefore, they argue, OSRA
has placed a heightened obligation on the Commission to oversee and
prevent potential service contract discrimination, and unreasonable
refusals to deal or negotiate. They also comment that while the
proposed regulations represent positive initial steps the Commission
must take to fulfill its oversight role, they fail to propose
adequately strong regulations to enforce section 10's anti-
discrimination prohibitions. The shippers further argue that OSRA
directed the Commission to concentrate on discrimination based on
shipper status, and the regulations fall short in this respect as well.

Section 530.3 Definitions

One commenter takes issue with the proposed definition of
``conference,'' being different from the statute, and not referring to
the requirement of a common tariff. APL, 1. The comment suggests that
the definition track the statute. The change to the definition of
``conference'' in this rule conforms with the changes made in the
Commission's rulemaking on agreements, Docket No. 98-26, and tariffs,
Docket No. 98-29.
Similarly, the Commission in this proceeding had proposed a new
definition of ``ocean common carrier'' to match that proposed in the
agreements rulemaking. However, upon receipt of opposition to that
proposal from one commenter and little input from other industry
interests, the Commission has determined to carry over its former
definition of ``ocean common carrier'' and take the matter up in a
later, separate rulemaking. See, Docket No. 98-26.
APL also questioned the proposed definition of ``service
contract.'' APL, 1-2. The comment urges the Commission to adopt a
definition of ``service contract'' which would correct a ``persisting
drafting error in OSRA'' as a contract between one or more shippers and
an ocean common carrier or an agreement between or among carriers. APL,
1-2. APL complains that this definition literally contemplates an
agreement that is a party to an agreement, a circular and legally
impossible definition. APL, 2. The comment suggests either redefining
or interpreting OSRA so that wherever the statute refers to ``an
agreement,'' that the meaning will be two or more ocean common carriers
acting pursuant to an agreement on file with the Commission or exempt
from such filing. APL, 2.
Prior to revisions made by OSRA, the Act provided that only a
certain type of agreement between ocean common carriers, namely a
conference agreement, could enter into service contracts. OSRA changed
the definition of service contract from ``a contract between a shipper
and an ocean common carrier or conference'' to ``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.'' This had two effects. First, it allows a group
of two or more unrelated (i.e. not a shippers' association) shippers to
jointly enter into a service contract. Second, it allows any ocean
common carrier agreement (not just a conference agreement) to enter
into service contracts. Therefore, the definition of service contract
in the regulation is revised to appear as it does in the Act. APL's
observation appears correct. The authority to enter into service
contracts extends to carriers acting collectively pursuant to a filed
agreement, even if the agreement does not provide for any central
administrative entity.
For the sake of clarity, the definitions of ``effective date'' and
``expiration date'' are moved from the Appendix to the definitions
section, Sec. 530.3. Finally, a definition of ``motor vehicle'' is
added, comporting with the definition of that term in the Commission's
tariff regulation, Docket No. 98-29. See also infra, discussion of
exempt commodities.

Section 530.4 Confidentiality

Carriers, shippers and one filing service commented on Sec. 530.4
of the proposed rule. While most agree that the Commission has the
authority to share service contract information with other federal
agencies, they also request clarification on how the Commission intends
to ensure that other agencies maintain confidentiality. CMA, 3; DuPont,
5. One suggests the following addition to the section:

any information from or access to service contracts to another
agency of the Federal government shall, to the full extent permitted
by law, also will be (sic) held in confidence by such other agency
or notice of the confidentiality of such information will be
provided by the Commission to such other agency.

ETM, 1.

Another suggests,

The Commission shall seek to ensure, prior to providing access
to confidential service contract information to another Government
agency, that such other agency will protect the confidentiality of
the service contract information.

NITL, 23.

Two comments suggest that the regulations should ensure that
information shared not be inadvertently publicized through the Freedom
of Information Act (``FOIA'') or other means, and that the same level
of protection afforded within the Commission should follow the
information when it is shared with another federal agency. DuPont, 5;
NITL, 23.
Exemption 4 of FOIA would presumably protect service contract
information confidentially filed with the Commission from requests for
public disclosure. 5 U.S.C. 552(b)(4)(1994). Exemption 4 of FOIA
protects ``commercial or financial information obtained from a person
(that is) privileged or confidential.'' The exemption affords
protection to those submitters who are required to furnish commercial
or financial information to the government by safeguarding them from
the competitive disadvantages that could result from disclosure. See
U.S. Department of Justice, Office of Information and Privacy, Freedom
of Information Act Guide and Privacy Act Overview, at 123.
Another comment suggests this provision should be amended to
provide that all confidential information will be provided to other
government agencies which have a Memorandum of Understanding (``MOU'')
agreeing that they will maintain confidentiality of the information in
accordance with the letter and spirit of OSRA. Conagra, 4. The
Commission has concluded that it will provide confidential service
contract information only to federal government agencies with which it
has an MOU ensuring that the recipient agency will accordingly protect
the information from public disclosure. This should adequately address
the reasonable concerns expressed in the comments.
One commenter asserts that the confidentiality requirement of the
Act applies to the Commission only, and does not give the Commission
any authority to review the parties' complaints for breach of a

[[Page 11188]]

confidentiality clause in the contract itself. Such a breach, they
argue is purely a contract matter and as such, for a court to decide.
APL, 2. The comment suggests that in order to clarify this point, the
phrase ``by the Commission'' should be added at the end of the first
sentence. APL, 2. The statute appears to be adequately clear on this
matter, and there is no need for further clarification at this time.
Wal-Mart is concerned that disclosure of the actual international
freight rate required by U.S. Customs Service (``USCS'') (form CF 7501)
will provide an opportunity for unscrupulous customs brokers to obtain
confidential rate information and disclose it. Wal-Mart, 1. Wal-Mart is
concerned that, even with a confidentiality agreement with the broker,
the monitoring and enforcement of such confidentiality agreements may
prove difficult, or impossible. Wal-Mart, 2. Wal-Mart therefore
requests the Commission coordinate with other federal government
agencies, especially USCS, in its final implementation of the
regulations to ensure that the confidentiality of service contracts be
preserved by those other agencies, and suggests that one approach may
be to declare average or estimated freight rates on the CF 7501 form
supplemented by actual data directly to USCS without using the broker.
Wal-Mart, 2.
The commenter's request is outside the Commission's jurisdiction.
While it understands Wal-Mart's concerns, the Commission has no
authority to dictate to other agencies what information they may or may
not require from the entities they regulate. Therefore, the comment is
more appropriately directed towards USCS.
In contrast, one commenter argues that the proposed regulations do
not acknowledge limitations on the Commission's authority to release
service contract information, recognize the complexity of the
associated issues, or provide procedures for making a determination to
release information. Carriers, 2. First, the Carriers argue, the
Commission's authority to disclose confidential service contract
information to other federal government agencies at all is
questionable. Carriers, 2. These comments argue 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. Carriers, 2 n.1.
This argument is unconvincing, however, as we note that Senator
Hutchison, with specific reference to section 8(c)(2) of S. 414 (which
remained unchanged in the final passage of OSRA), remarked on April 21,
1998, that the Commission ``is encouraged to work with affected Federal
agencies to address'' their concerns about how they are to ensure rate
compliance with U.S. cargo preference law in an era of service contract
rate confidentiality. Cong. Rec S3320 (daily ed., April 21, 1998)
(statement of Sen. Hutchison). While the statute itself reads only,
``each contract entered into under this subsection * * * shall be filed
confidentially with the Commission'' (section 8(c)(2) of OSRA), and
``[w]hen a service contract is filed confidentially with the
Commission, a concise statement of the essential terms * * * shall be
published and made available to the general public in tariff format''
(section 8(c)(3)), taken with the remarks made on the same day the
Senate passed S. 414, the legislative history indicates that it was the
intent of the drafters that the confidentiality provision not hamper
other federal government agencies which have legitimate need to access
the confidentially filed information in order to carry out their
respective duties.
There is further indication that the drafters intended that the
confidentiality provision would apply to preclude Commission disclosure
to the public. As Senator Hutchison remarked in the aforementioned
floor colloquy, ``(o)f course * * * confidential service contract
information would remain protected from disclosure to the public
consistent with the Shipping Act of 1984, as amended by the Ocean
Shipping Reform Act and other applicable Federal laws.'' Cong. Rec.
S11302 (daily ed. Oct. 1, 1998) (Statement of Sen. Hutchison) (emphasis
added). This emphasized the importance of the Commission protecting
information filed confidentially with it from disclosure to the public,
but does not limit the Commission's right to disclose such information
to other federal agencies where clearly warranted and justified.
Finally, the Commission noted in the NPR that it would only ``allow
access to filed contracts to Federal government agencies where
appropriate; any such disclosure will not jeopardize the statutory aim
of non-disclosure of confidential service contract information to non-
governmental entities.'' 63 FR 71065. This continues to correctly
express Commission policy on the subject.
The Carriers argue further that even if the authority of the
colloquy is accepted, the only exception to the statutory requirement
that the Commission keep service contract information confidential is
``to ensure compliance of U.S.-flag ocean common carriers with cargo
preference law shipping rate requirements.'' Carriers, 3. Therefore,
they contend that this does not authorize the Commission to disclose
such information when a government agency is acting in a proprietary
capacity as shipper. Carriers, 2. This implies that the following
language of the second sentence of proposed Sec. 530.4 is at least over
broad: ``Nothing contained in this part shall preclude the Commission
from providing certain information from or access to service contracts
to another agency of the Federal government of the United States.'' The
Carriers are concerned that there is too large a potential for
procurement officials to use such information to drive down rates.
Carriers, 4.
The Carriers question whether any statutory requirements, including
the cargo preference laws, actually exist which would require
information from confidentially filed service contracts and further
question the relevancy of the information, as procurement is typically
based on ``competitively bid, lowest landed cost awards.'' Carriers, 4.
We are not persuaded that service contract information should be
withheld from agencies that ship cargo with ocean carriers. The
Commission, however, is not attempting in these regulations to predict
every situation in which the requested information may or may not be
relevant to the purposes of the requesting agency. This would be
another matter most appropriately addressed by an MOU.
The Carriers' reference to the pending litigation against the
Department of Defense (``DoD'') serves to further illustrate this
point. Carriers, 5. The Commission simply does not have the ability to
predict in what situations confidential service contract information
may or may not be relevant to the execution of the requesting agency's
statutory duties, but can require that the agency support its request
with a good faith argument for relevancy, in an accordingly drafted
MOU.
Furthermore, because Congress did not indicate that it wished to
limit the agencies with which the Commission should cooperate, but
instead used the term ``other federal agencies,'' the Commission
interprets this admonition to include agencies other than DoD and laws
other than the Cargo Preference Act of 1904. Again, as the Commission
cannot presently predict which statutory requirements other agencies
may have for confidential service contract information, the Commission
declines to add to its regulations at this

[[Page 11189]]

time any such limitation on its future action. Rather, the Commission
asserts that disclosure of confidentially filed service contract
information will only be made to other federal government agencies with
which it has negotiated an MOU which will protect the information from
disclosure to the public.
The Carriers complain that the proposed regulations do not provide
for procedures for informed comment on and consideration of the
conflicting interests, but rather appear to envision an approach to
such interagency requests on a unilateral and ad hoc basis. Carriers,
2. The Carriers assert that they are entitled to a ``careful and open
appraisal'' based on an informed record before the Commission, rather
than the approach contemplated by the proposed rule. Carriers at 6. The
Carriers' comments appear to request that the Commission create a
formal review proceeding for each request before any service contract
information is released to a requesting Federal government agency.
Again, the MOU should adequately address the Carriers' concerns without
requiring that the Commission initiate an adversary proceeding which
would require the Commission to implement new procedures, and undertake
the time and expense which would accompany each evaluation.
Finally, the Carriers comment that if the Commission does not
delete the provision in question, that a separate proceeding should be
initiated to ``permit full ventilation of the issues by concerned
parties.'' Carriers at 6. On the contrary, it appears that the notice
and comment period in this rulemaking proceeding has given the Carriers
an opportunity, of which they have availed themselves, to address such
issues.
For the foregoing reasons, therefore, 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.

Section 530.5 Duty to File

As stated in the NPR, the Commission's past regulations generally
imposed on a conference the duty to file and publish service contract
material on behalf of its members. 46 CFR 514.4(d) (duty and authority
to file). Specifically, the Commission's former regulation placed the
duty to file service contracts and publish their essential terms on
either: A service contract signatory carrier which is not a member of a
conference for the service covered by the contract; or the conference
which is signatory or has one or more members for service otherwise
covered by the conference agreement. Conferences could file for and on
behalf of one or more of its member lines for service outside the scope
of the conference agreement. Sec. 514.4(d)(5)(B)(ii). In such case, the
statement of essential terms was to be filed simultaneously in both the
essential terms publication of the conference and the carriers
involved.1
---------------------------------------------------------------------------

\1\ While it related to the responsibility to file tariffs,
Sec. 514.4(d)(4)(ii)(A) reminded carrier participants in a
conference tariff that they are not relieved from the necessity of
complying with Commission regulations and the requirements of
section 8(a)(1) of the Act.
---------------------------------------------------------------------------

The Commission's past approach distinguished duty to file based on
the subject matter of the contract itself. In this respect, for
contracts entered into by a member of a conference but which fell
outside the scope of that conference, the duty to file and publish fell
on the signatory carrier. For contracts which concerned subject matter
within the scope of a conference agreement, the duty to file and
publish fell upon the conference which was the signatory to the
contract or whose member or members were signatories. Conferences,
under the Commission's prior regulations, were authorized to file and
publish for their member lines for services outside the scope of the
conference. Sec. 514.4(d)(5)(ii). For such filing, essential terms were
required to be published by both individual carrier and conference. Id.
OCWG suggests that the Commission continue this approach, and merely
revise the previous regulations by changing the term ``conference'' to
``agreement.''
In the proposed rule, the Commission recognized that agreement
service contracts would pose somewhat different problems for filing and
publishing than did conferences, which unlike some other agreements,
maintain a central authority or secretariat. The proposed regulation
sought to anticipate situations in which members of an agreement
without a central authority enter a service contract. The proposal
would have allowed members of such an agreement to delegate the filing
duty to one member, but also indicated that such delegation would not
relieve the other carrier parties from any liability should there be a
failure to comply with the filing requirements of the regulations.
OCWG objects to the proposed rules' provisions placing filing
requirements generally on individual carriers. OCWG asserts that a
carrier breach of contract confidentiality 2 is not a
violation of the Act, citing Senator Hutchison's April 21, 1998 floor
remarks. OCWG further asserts that a carrier could publish confidential
service contract information in the New York Times and not violate the
Act. OCWG at 16. We note, however, that some disclosures could raise
issues under section 10(b)(13) of the Act which prohibits any common
carrier, either alone or in conjunction with any other person,
indirectly or directly, from knowingly disclosing, offering,
soliciting, or receiving any information concerning the nature, kind,
quantity, destination, consignee or routing of any property tendered or
delivered to a common carrier without the consent of the shipper or
consignee if that information may be used to the detriment or prejudice
of the shipper or consignee, may improperly disclose its business
transaction to a competitor, or may be used to the detriment or
prejudice of any common carrier.
---------------------------------------------------------------------------

\2\ We agree with the comments that for publication, no
confidentiality issue exists. The underlying duty to publish,
however, is identical as that for filing. For publication, the
Commission's concern lies primarily in ensuring that the public not
be misled by the location of the statement of essential terms. When
an essential terms publication appears in an individual carrier's
tariff, there must be some indication of whether the underlying
service contract was made by that carrier independently or jointly
as part of an agreement. For further discussion of publication
requirements, see infra, Sec. 530.12.
---------------------------------------------------------------------------

Carriers and conferences urge they should have the ability to take
advantage of the efficiencies membership in an agreement provides for
the accomplishment of such ministerial acts as filing. OCWG, 13; CENSA,
2; COSCO, 2; JUSEFC, 2-5. The comments of BSA reveal serious concerns
shippers rightfully may have about filing done by agents closely
controlled by agreement authorities. The comments of COSCO and JUSEFC
also recognize this legitimate shipper concern.
The Commission has determined to revise Sec. 530.5 and simplify the
filing duties in accordance with the comments. Section 530.5, as
revised, places the duty to file on the individual carrier party to a
service contract, as Commission regulations always have. For multi-
party service contracts, the duty to file falls equally upon all the
carrier parties participating or eligible to participate in the
contract. Multi-party service contracts must indicate the agreement
(conference or otherwise) under whose authority the contract is
entered. Carrier parties may designate any agent they choose for
filing, including an agreement secretariat. The

[[Page 11190]]

Commission shall closely monitor filing or other ministerial tasks
undertaken by central authorities for violations of section 10(b)(13)
and other activities which may have implications for the Commission's
section 6(g) oversight.
Contrary to the assertion of OCWG, simply adopting the former
regulation language and substituting the term ``agreement'' for
``conference'' will not account for the individual member of an
agreement which wishes to take independent action within the scope of
the agreement, but which does not wish to disclose the service contract
information to the agreement. The regulation, therefore, makes clear
provision for the contract parties' election on who shall be authorized
as filer. Furthermore, the regulation would allow shippers to negotiate
a requirement, for filing done by a conference or agreement
secretariat, for example, that provisions for confidentiality be
undertaken, e.g., through the use of ``firewalls.'' Finally, the use of
an agent for filing does not relieve the carrier parties in any way for
a failure to duly file or publish. They are unquestionably responsible
for ensuring their agents comply with these regulatory requirements.

Section 530.6 Certification of Shipper Status

Proposed Sec. 530.6(a) requires each shipper party to a service
contract to sign and certify on the signature page of the service
contract its shipper status and the status of all its affiliates which
have access to the service contract. NITL, AIFA, and DuPont oppose the
proposed regulation, and particularly complain that the rationale for
the requirement is unclear and the certification itself is burdensome.
NITL, 21; AIFA, 3; DuPont, 3. They recommend that this requirement
should only apply when the shipper is an NVOCC. DuPont, 3; AIFA, 3,
NITL, 21.
NITL, APL and DuPont assert that contracting parties should be able
to resolve on their own the capacity in which a particular shipper is
acting with respect to the service contract as a matter of negotiation
between the parties, not one mandated by the Commission. NITL, 21; APL,
3; DuPont, 3.
The regulation as proposed, however, does not appear to impose any
limitations on the commercial negotiations of service contracts. The
parties are free to contract with any individual or entity entitled to
enter into service contracts under the Act, and in certain capacities
(e.g., no NVOCCs as carrier parties).3 This was one of the
compromises made by OSRA: In return for confidentiality, the parties
would report their operations to the Commission, in order that it would
continue to be able to monitor the industry for prohibited acts.
---------------------------------------------------------------------------

\3\ CBI comments that NVOCCs should be able to offer
confidential service contract to their shippers. This was explicitly
rejected by Congress when it rejected the Gorton Amendment (No.
2287) to S. 414, which would have so allowed. Cong. Rec. S3306-11
(daily ed.) (April 21, 1998).
---------------------------------------------------------------------------

DuPont is concerned that the requirement would unnecessarily
increase the Commission's workload. DuPont, 3. NITL comments that there
are less burdensome ways for the Commission to obtain information about
the status of a shipper party. For instance, they suggest that the
Commission could request the information informally after the service
contract has been executed. Further, AIFA comments that the proposed
regulation would require the parties to make fine legal judgments.
AIFA, 3.
Contrary to several comments, it appears that the certification
does not create an unreasonable burden for shippers. Proposed
Sec. 530.7 (here renumbered Sec. 530.6) was adopted nearly verbatim
from the Commission's current regulation, 46 CFR 514.7(e)(1), which
requires the shipper party to certify its status. Original
Sec. 514.7(e)(1) had the same intent, namely to enable the Commission
to monitor service contract arrangements for discrimination. Rather
than increasing any burden on the parties to service contracts, or
creating additional workload for the Commission, Sec. 530.6(a)
continues to enable the Commission to monitor service contracts for
trends in practices and to guard against OSRA's prohibition on refusals
to deal and on concerted unjust discrimination based on shipper status.
The burden on the shipper signatory is also minimal. Contrary to the
comments of AIFA, determining the shipper's status should be relatively
simple and shippers have been doing this since the rules were first
implemented.
While NITL is correct that there are other ways for the Commission
to obtain this information, the method promulgated herein is not
unreasonable because the burden it places on service contract parties
is light, and it is of high utility to the Commission, not only because
of its intrinsic nature, but also because of the early point at which
it is provided. Finally, contrary to the concerns of DuPont, the
maintenance of this provision will not create an additional burden on
the Commission.
Some commenters suggest that the certification provision should be
deleted altogether or redrafted. APL, 3; AIFA, 3; NITL, 22. NITL
suggests the proposed regulation be revised to read as follows:

If the shipper contract party or any affiliate or member of a
shippers' association entitled to access a service contract is an
NVOCC, it shall sign and certify on the signature page of the
service contract that its status under the service contract is that
of an NVOCC.

NITL, 22.

With respect to the first purpose of the proposed regulation, NITL
and DuPont incorrectly assert that OSRA prohibits discriminatory
treatment and refusal to deal towards NVOCCs only. As the shippers'
comments correctly point out, smaller shippers which negotiate for
service contracts through their shippers' associations are also
entitled to such protection, as are all shippers, regardless of whether
they are beneficial cargo interests, their representatives, or
unaffiliated groups of shippers. 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.
The comments of several shippers' organizations point to the
competing congressional mandates with which the Commission must craft
these regulations: to allow parties to negotiate their commercial
arrangements with as little interference as possible while maintaining
its ability to monitor for discrimination and refusals to deal in
violation of section 10. AISA, 5. AISA's comments remind the Commission
that with confidential contracts, smaller shippers will be
disadvantaged and will, therefore, rely more on the Commission's
oversight. AISA, 3. AISA asserts that the Act places an affirmative
obligation upon carriers to negotiate and deal in good faith with
shippers' associations and to offer them competitively equivalent
contracts to those offered to beneficial shippers for the same volumes
and goods between the same ports. AISA, 5.
AISA asserts that OSRA requires the Commission to establish
mechanisms by which it and the public can discover such discrimination,
and point out that filing and publishing essential terms of
confidential contracts, as well as establishing a listing on the
Commission's website is only a first step in the right direction. AISA,
3-6. AISA is disappointed with the proposed regulations because they
fail to be strong enough to enforce section 10 anti-

[[Page 11191]]

discrimination prohibitions. Further, they allege that the Commission
is wrong in saying the law does not continue to prohibit carrier
actions which unreasonably discriminate against small- and medium-sized
shippers and shippers' associations. AISA, 3-6.
One commenter urges the Commission to acknowledge Congress' intent
that anti-discrimination protections be strengthened and expanded as
they apply to shippers' associations and OTIs. BSA, 13-15. NCBFAA
believes OSRA directs the Commission to concentrate on discrimination
based on a shipper's status as an OTI. NCBFAA, 1. For AImpSA, OSRA's
direction to the Commission is to concentrate on status-based
discrimination against shippers' associations or OTIs. AImpSA, 2-3.
While NCBFAA is concerned about the possibility of collusive,
discriminatory and anti-competitive behavior by carrier agreements, it
recognizes that Congress intended to allow parties to service contracts
to behave like private contract parties in a deregulated environment.
NCBFAA, 1. NCBFAA, also, however, recognizes a need for the service
contract regulations to be sufficient for Commission oversight in order
to combat discriminatory practices such as those which have been
carried out by the carriers in the past. NCBFAA, 1.
The opposition of some shipper parties, especially NVOCCs, to this
provision is puzzling. Shippers should be willing to assist the
Commission in its enforcement of the Act's prohibition on
discrimination against them due to their status and refusals to deal
because of shipper status. Indeed, the comments of shippers'
associations (BSA, AISA, AImpSA) and OTIs (NCBFAA) urge the Commission
to adopt strong regulations to protect against shipper status-based
discrimination by carriers. This provision serves the simultaneous
functions of giving shipper parties to contracts an additional reminder
of the capacity in which they may act (e.g., not as an ``agent,''
``broker'' or ``freight forwarder'') while also decreasing the need for
investigations which may unnecessarily burden shippers.
One commenter urges the Commission to establish a separate docket
to address regulations to specifically guard against section 10
violations. AImpSA, 2-3. We decline, and point out that the regulations
in all the areas that the Commission regulates were drafted with an eye
toward our responsibilities in this regard. There is no need for
another, separate rulemaking to address this issue at this point. The
certification requirement has served the Commission well in the past
and appears to continue to be a useful tool for monitoring without
being an intrusion into commercial contract negotiations or an overly
burdensome reporting requirement. Whether other regulations will be
necessary will be a question better answered after the Commission has
had some experience with and insight into the way the industry will
develop in the new era of confidential service contracting.
BSA requests that the Commission give notice to the shipping public
of the extent to which shippers' associations can rely on DOJ safe
harbor guidelines for unaffiliated shippers entering joint contracts.
BSA, 2-5. The Commission, in Docket 92-31, revised its definition of
``shippers' association'' and found that ``such associations between or
among shippers will remain subject to anti-trust laws.'' 57 FR 49665,
49666 (Nov. 3, 1992). Presumably, therefore, shippers operating in
informal groups would be similarly subject to the antitrust laws, and
could rely on DOJ guidelines for their behavior.
APL complains that the proposed regulation's requirement that
carriers identify NVOCC parties and determine that they are compliant
is ``overkill.'' APL, 3. The provision, they complain, unreasonably
delegates the policing of NVOCCs to ocean common carriers. APL, 3. APL
offers that there are other effective and less burdensome ways of
ensuring that NVOCC members of shippers' associations are compliant:
For instance, requiring an association in the contract to warrant that
any of its NVOCC members are compliant and providing evidence of such
compliance. APL recommends that Sec. 530.6(b) be deleted or redrafted
by changing the word ``signing'' to ``implementing'' and deleting ``or
an affiliate or member of a shippers' association''. APL, 3.
Section 530.6(b) as proposed was intended to ensure that carriers
do not violate section 10(b)(11) of the Act, which forbids the knowing
or willful acceptance of cargo for the account of unbonded or
unlicensed NVOCCs. Similar to the benefit to shippers provided by
Sec. 530.6(a), Sec. 530.6(b) also inures to the benefit of the carrier
party, as certification of its belief that the NVOCC with whom it
contracts is in compliance with Commission regulation may assist in
establishing it did not act knowingly and/or willfully if later the
Commission finds the NVOCC was not properly licensed or bonded.
Furthermore, the burden on the carrier signatory has been
significantly reduced, as carriers will now have the ability to confirm
an NVOCC's bond status by checking the Commission's website (see, 46
CFR 515.27(d)) and its license by reference to an NVOCC's letterhead,
as required by 46 CFR 515.31(b). Finally, this provision does not
appear to intrude into the negotiations between contract parties, as
parties generally would already have a desire to either assert their
status, or have good commercial reasons for avoiding entering into
business arrangements with a non-compliant entity. Proposed Sec. 530.6,
entitled ``service contracts with NVOCCs'' was seen to be repetitive of
the certification language of final Sec. 530.6(b). That section is
therefore deleted, and the remaining sections are renumbered. For the
foregoing reasons, the provision is adopted as it appeared in the
notice of proposed rulemaking, except that it is renumbered as
Sec. 530.6.

Section 530.7 Duty to Labor Organizations

The proposed regulation included a definition of ``reasonable
period of time'' by which a carrier must respond to a labor
organization's request. Section 530.7(a)(2). This definition was
crafted with sensitivity toward labor organizations' interests in
knowing about cargo that is due to arrive in port before it arrives, so
that the movement of that cargo may be ``claimed'' as labor work.
However, labor interests contend that the definition is inadequate
as it will not ensure a timely response, which they claim should be
within 24 hours of receipt of request. ILA, 4. If the carrier is unable
to respond, labor argues, the regulation should specify that it shall
so state and explain. ILA, 4.
Carrier interests, on the other hand, object to any definition of
the term, and assert that it should be determined on a case-by-case
basis. OCWG, 21-22. Several argue that the Commission contravenes OSRA
by defining the term at all. One maintains that implicit in the concept
of ``reasonable'' is the phrase ``under the circumstances.'' APL, 3. If
Congress had intended the term to be defined on anything other than a
case-by-case basis, it would have defined the term itself in OSRA. APL,
3. It is arbitrary, they argue, for the Commission to fix a reasonable
time for reporting. Furthermore, consideration should be given to the
carrier's situation and reasonable ability to respond to the request.
APL, 3; Sea-Land, 6. Sea-Land asserts that because the Commission
determines what is reasonable for other matters (e.g., Sections 6(g);
10(b)(8),(9),(10); 10(c)(8); and 10(d)(1)) on a case-by-case basis, it
should do the same in this context. Sea-Land, 7.

[[Page 11192]]

The carriers argue that fixing a reasonable period of time is
unfair because it gives the labor organization the exclusive control of
the timetable in that it is labor who starts the clock with the
request. APL, 3; Sea-Land, 6. Also, the comments urge, the requests
might be repetitious or unclear, or the labor organization could
inundate the carrier with hundreds of requests at a time in which it
could not possibly respond in the time allotted by this definition.
Sea-Land, 6.
One carrier comments that because service contracts run for terms
of many months, no significant union work will be irrevocably lost if
the information is not acted on within a matter of hours or days. APL,
3. This assertion is in direct contradiction to the emphatic comments
by the ILWU and the ILA that time is most certainly of the essence in
these matters. Another carrier is concerned that imposing a specific
time limit may be inconsistent with obligations under collective
bargaining agreements or labor laws. Sea-Land, 7.
It appears that the approach taken by the Commission in the
proposed rule will achieve a workable compromise and protect both
carrier and labor interests. But we note the objections of the carriers
that the definition of ``reasonable period of time'' as two or four
days would not appear to recognize that the reasonableness of any
response may depend on the circumstances. Requests may, for example, be
made in large batches, or at a time when a two or four day response is
not reasonably achievable. It is also unknown at this time how often
labor organizations will invoke these provisions, and how simple or
burdensome it will be for the carriers to supply the appropriate
response. To this end, the Commission amends the definition to include
the word ``ordinarily.'' The definition provides the sense, at this
pre-implementation stage, of what should normally constitute a
reasonable, good faith response to a legitimate request. Any complaints
of deviations from these standards resulting in harm to labor
organizations would be adjudged in the context of the particular
circumstances and the Commission's overall experience with this new
provision of the statute.
The Commission is not persuaded by the arguments of the carriers
that no definition of reasonable time is appropriate. OSRA is replete
with general guidelines and standards for which the Commission is
expected to supply more detailed qualifications of elements such as
time and dollar amounts. Here, the amended rule provides only general
guidelines of what the Commission expects will meet the general
standard, in hopes that such guidance will help obviate the need for
more formal complaints and procedures. As to the carrier concern that
the time limit contravenes collective bargaining agreements or labor
laws, it is impossible for the Commission to respond in a meaningful
way, as it has no direct involvement in administering either.
Labor organizations criticize other provisions of this section as
falling short of the mark. ILA, 1; ILWU, 1-2. They recommend that the
Commission add a requirement that a response be adequate as well as
timely. The required response, they argue, should include supporting
documentation, such as bills of lading, delivery orders, and other non-
privileged documents. This is a determination that the Commission must
make on a case-by-case basis, as the text of the statute requires only
that the response state ``whether'' the carrier is responsible. While
one floor remark by Senator Hutchison alludes to the requirement that
further documentation be produced,4 it is unclear what the
Commission's role in the disclosure of this information may be and
therefore, the Commission declines to assume the authority to impose a
requirement that particular documents be produced.
---------------------------------------------------------------------------

\ 4\ ``Section 8(c)(4) envisions the release of information not
necessarily contained in the service contract (and that provision)
may require the use of documents other than the service contract.''
Cong. Rec. S3320 (daily ed., April 21, 1998)(Statement of Sen.
Hutchison).
---------------------------------------------------------------------------

ILWU and ILA comments recommend that a particular Commission
investigator be assigned in advance to all of the investigations which
might arise out of complaints of non-compliance with this section. The
ILWU suggests that the regulations include a requirement that requests
for information be concurrently filed with the Commission to help avoid
disputes over whether a given response was made within a reasonable
period of time. ILWU, 5-6. Then, the ILWU suggests, the regulation
should require that the Commission shall promptly solicit the carrier's
written position on the complaint and conduct an administrative
investigation on the merits of the complaint. The recommended procedure
further includes the requirement that the Commission's investigator
issue a report within thirty days, including findings to recommend a
formal proceeding or dismissal and penalties. ILA, 5; ILWU, 1,2.
There is no requirement that such a procedure be contained in the
regulations, and no indication from the legislative history of OSRA
that it was the intent of Congress for the Commission to use any
procedures other than its current complaint procedures to address
violations of this section of the Act. An early version of the bill,
which was to become OSRA, did include specific procedures which the
Commission would undertake to enforce the responsiveness of ocean
common carriers to labor requests for information. The April 3, 1998
version of S. 414 included a different version of section 8(c)(4) and
included a section 8(c)(5), which read:
(4) Disclosure of Certain Unpublished Terms.--A party to a
collective-bargaining agreement may petition the Commission for the
disclosure of any service contract terms not required to be
published by paragraph (3) which that party considers to be in
violation of that agreement. The petition shall include evidence
demonstrating that
(A) A specific ocean common carrier is a party to a collective-
bargaining agreement with the petitioner;
(B) The ocean common carrier may be violating the terms and
conditions of that agreement; and
(C) The alleged violation involves the moment [sic] of cargo
subject to this Act.
(5) Action By Commission.--The Commission, after reviewing a
petition under paragraph (4), the evidence provided with the
petition, and the filed service contracts of the carrier named in
the petition, may disclose to the petitioner only such unpublished
terms of that carrier's service contracts that the Commission
reasonably believes may constitute a violation of the collective-
bargaining agreement. The Commission may not disclose any
unpublished service contract terms with respect to a collective-
bargaining agreement term or condition determined by the Commission
to be in violation of this Act.

Cong. Rec. S3194 (daily ed., April 3, 1998).

Between the version of April 3, 1998 and the bill as finally
adopted by the Senate on April 21, 1998, this section underwent
significant change. It is clear, therefore, that Congress specifically
considered requiring the Commission's involvement in disclosing
confidential carrier information to labor organizations. In the final
analysis, Congress rejected such Commission involvement, and chose
instead to minimize the role of the Commission in implementing the
objectives of this section of the statute. The Commission indicated in
the NPR that it ``expects that aggrieved labor organizations will use
existing Commission processes in the event of noncompliance by a
carrier. The Commission would entertain proposals for more specific and
stringent rules if the existing standards and procedures prove
inadequate in practice.'' 63 F.R. 71064. We are hopeful that labor
organizations and carriers will

[[Page 11193]]

operate diligently and in good faith in exercising their rights and
responsibilities in implementing this section of the Act. The
Commission expects not to have to initiate programs or promulgate
particularized procedures to ensure what should be the routine and
noncontentious transmittal of information. We reiterate, however, that
the Commission will revisit these issues if experience under the
provision suggests such a need. Therefore, the proposed rule in
Sec. 530.7 will be finalized, except that the term ``ordinarily'' is
added to the definition of ``reasonable period of time'' in Sec. 530.7
(a)(2), and the placement of the provisions defining relevant terms
have been re-organized for clarity.

Section 530.8 Filing Provisions

The proposed regulation requires service contracts to be filed in
their entirety (except for signatures) in a system which would be
modified from the current ATFI essential terms publication system. The
proposed regulations make no provision for waiver, transition, or other
filing options. As stated in the supplemental information to the
proposed rule, the Commission proposed that, ``due to the volume of
service contract filings * * * expect[ed] after May 1, 1999, adoption
of an electronic, as opposed to paper-based, system appears to be the
most practical approach.'' 63 F.R. at 71063. Further, the Commission
noted that while the ``only viable approach to implementing an
electronic system at this juncture would be to create a system adapted
from the Commission's currently used filing system for Essential Terms
of service contracts,'' it also sought comment on other ``approaches to
establishing a new system * * * treating the proposed system as a
transitional solution.'' Id. Furthermore, comment on continuing the
paper filing of service contracts was specifically requested. Id.
The comments generally oppose the use of any modified ATFI system
for filing, even as an optional system. Seaboard; CENSA; USCIB; NITL;
AIFA; OCWG; P&O; Conagra; and Sea-Land. Several commenters assert that
using ATFI (as modified) is inconsistent with the deregulatory thrust
of OSRA, and the regulations should allow for filing by any electronic
means which ``meet the OSRA objective.'' CENSA, 1-2; Sea-Land, 3; NITL,
5-8. Two comments assert that because Congress expressly rejected
continuing ATFI for tariffs, it could not have intended to continue its
use for service contract filing. NITL, 5-6; Sea-Land, 3.
NITL urges that the Commission, rather than ``clinging to an
outmoded electronic system'' for filing common carrier tariffs, and
imposing that system on a very different contracting environment, give
up its reliance on ATFI in the face of systems for communication that
are changing for the better on a daily basis. NITL 5-8. Sea-Land
contends that the Commission's assertion that ATFI is the ``only viable
approach'' is incorrect and that there are other viable approaches, as
evidenced by other agencies which have adopted electronic filing
systems using ``off the shelf'' software. Sea-Land, 3.
Generally, CMA and other commenters are concerned that the Appendix
requirements are too detailed and would restrict the freedom of parties
to negotiate terms. CMA, 2; NITL, 14-15; DuPont, 4. NITL urges the
Commission to delete the Appendix entirely because it is completely
unworkable, unnecessarily burdensome, very costly and because there is
no statutory basis for its requirements. NITL, 14. Further, NITL is
concerned that the risks of contract rejection, and its associated
costs and penalties, are heightened by the inclusion of so many
technical details. NITL, 14.
Two comments object to the regulation as proposed because it
appears that it was designed for the administrative ease of the agency
without regard to the convenience to the parties. NITL, 5-8; OCWG. 3-4.
While electronic filing is the preferred long-term approach, OCWG
comments that the proposal to use ATFI would impose substantial burdens
on carriers. OCWG, 3-4. OCWG objects to using ATFI because, like CENSA,
it believes that the proposal would require filers to create two
documents: One for the commercial transaction, and another for FMC
filing. CENSA, 1.
These concerns appear somewhat justified. While in the past filers
have been required to file an ``essential terms publication'' in ATFI
format, the Commission concludes that applying ATFI-like restrictions
on the entirety of a filed service contract may not fully benefit both
filers and the Commission. In the ATFI-based system, filers may be
required to either re-format their commercial agreement or draft it in
ATFI format in the first place, or the system may make it difficult for
filers to provide the Commission with the true and complete terms of
the contract.
On the other hand, several commenters support the draft
regulation's proposal to modify and utilize ATFI. ETM; PTCB; AISA; and
NCBFAA. Others accept the modification of ATFI provided that there is
at least one alternative means of filing. JUSEFC; COSCO. JUSEFC finds
the Commission's proposal to use ATFI ``logical.'' JUSEFC, 6. NCBFAA
comments that the detailed filing requirements of the proposed
regulation (and appendix A) are required if the Commission is to be
able to police prohibited conduct. NCBFAA, 1. NCBFAA asserts that the
industry will not be able to monitor for prohibited conduct because
public essential terms will be limited. NCBFAA, 2. Furthermore, NCBFAA
presents, as indication that this was the intent of Congress, that
while OSRA specifically eliminates tariff filing, it also retains the
requirement that service contracts be filed with the Commission.
NCBFAA, 2.
Other commenters oppose any justification of the filing
requirements based on section 10(b)(2) monitoring. NITL, 5-8. They
suggest rather than imposing strict filing requirements, that the
Commission determine whether carriers are providing service in
accordance with the rates in their service contracts in the same way
that shippers and carriers themselves will monitor each other's
contract compliance, namely by consulting the terms of the contracts,
and comparing those terms to the actual billed amounts. NITL, 5-8.
Similarly, Sea-Land comments that the Commission's interest in
oversight for unjust discrimination is limited to protecting ports,
shippers' associations and OTIs due to their status and that carriers
are relieved by the Act of any affirmative obligations towards
shippers. Sea-Land, 5-6. It asserts that the Commission's enforcement
of section 10 does not require continuation of ATFI in any form. Sea-
Land, 5.
P&O complains that continuing the use of ATFI is not a secure
option because it will require third party compilers and filers who
will have access to confidential information. P&O, 3-4. BSA also
worries that the proposal to ``grandfather'' previously approved
software might not ensure confidentiality. BSA, 6. It requests
clarification from the Commission on the ability of the proposed system
to ensure rate confidentiality, and urges the use of new software and
systems which would provide total assurance of confidentiality. BSA, 6-
7. BSA recommends that the Commission draft specific regulations to
address technical qualifications which software must meet to ensure and
guarantee to shippers that service contract information will be
confidential during filing, and that the Commission also draft
regulations which include penalties for violating the security of the
websites and

[[Page 11194]]

computer systems which contain service contract information
(``hacking''). BSA, 8.
Similar to the preceding comments expressing concern for modernity
and the ability to upgrade any system based on ATFI, BSA suggests that
the Commission require that all common carrier websites are ``Y2K''
compliant. BSA, 6-7. As the internet is a communication line, and
digital, this is not a concern for filing.
With regard to the registration requirements in the proposed
regulation, PTCB urges the Commission to allow current ATFI registrants
to maintain their current registrations and organization records
without having to re-register. PTCB, 3. PTCB agrees that requiring
batch filers to re-register for new log-ons and passwords is
acceptable, but requests clarification that the organization number
will remain the same, thus avoiding a requirement that filing services'
clients amend their organizational records in order to re-authorize.
PTCB, 4.
The Commission has directed its Office of Information Management
(``OIRM'') to allow filers who intend to use either the internet-based
system (discussed infra) or the dial-ups system to apply for
registration and obtain log-on IDs and passwords prior to May 1, 1999
in order that they may be ready on May 1 for filing on that date.
Organization numbers will remain the same in the service contract
database. OIRM will notify via U.S. mail all presently-registered
organization record holders to ensure that the individual will remain
the same. If the ``org. holder'' will not be the same individual, a
registration form will be included in the letter for the recipient to
respond regarding who would ``own'' the organizational I.D. Any other
log-ons will have to re-register.
Also, PTCB requests that the Commission continue, as is currently
the case in ATFI, the method by which delegation of authority to file
is done, namely by revising the organizational record. PTCB, 4. PTCB
points out a deficiency in proposed Form FMC-83: It does not have a
place to indicate delegation. PTCB, 4. Finally, PTCB requests that the
Commission delete the requirement that individuals only (as opposed to
organizations) are registered for filing because this unnecessary
limitation is time-consuming and expensive. PTCB, 4.
The Commission must deny PTCB's request to allow log-on IDs and
passwords to be granted to organizations, not individuals, due to
security concerns and the requirements of the Computer Security Act.
Therefore, the requirement that individuals, rather than organizations
will be the registered filers will continue. Filing authority and
delegation will be indicated on the Registration Form, FMC-83.
Four of the comments opposing the proposed regulation's adaptation
of the ATFI system for service contract filings offer alternatives.
Seaboard; OCWG; NITL; and P&O. Seaboard, OCWG, and P&O propose that the
Commission allow filing in a generic word processing format as an
attachment via electronic mail (``e-mail''). Seaboard, 1. OCWG suggests
the Commission adopt a system based on commercially available software
already in common use in the industry, but does not suggest precisely
what that may be. OCWG, 4. NITL and OCWG offer generally that there are
electronic alternatives to the proposed regulation which include filing
via e-mail, internet, and diskettes. NITL, 7; OCWG, 8. OCWG proposes
that the only technical requirements which would arise from using
``off-the-shelf'' software would be the assignment of user
identification codes and security. OCWG, 4. Sea-Land recommends that
filers be allowed to file their service contracts via the internet on a
confidential site established by the Commission or via diskette, which
apparently would be mailed to the Commission. Sea-Land, 4. They assert
that this would be simple, flexible, inexpensive, complete, accessible
and accurate and would fulfill all statutory requirements. Sea-Land, 4.
Finally, while DuPont praises the Commission's desire to use modern
electronic means, it recommends that the Commission approach the U.S.
Customs Service to ascertain whether a joint system, or at least a
compatible system, could be created to serve both agencies and their
``customers.'' DuPont, 5.
NITL recommends that the Commission revise proposed Sec. 530.8(a)
to read:

Authorized persons pursuant to Sec. 530.5 of this part shall
file with the Commission electronically or in paper format a true
and complete copy of every service contract before any cargo moves
pursuant to that service contract. Service contracts filed
electronically may be submitted via electronic mail, the internet,
or on diskettes using software that is compatible with the
Commission's computer systems.

NITL, 14-15.

P&O offers the most detailed suggestion. P&O suggests the
Commission adopt an electronic filing system which allows the carrier/
filer to send the entire text of the service contract via e-mail as an
attachment to a Commission-designated e-mail address, which would be
based on the filer's current organizational record. P&O, 2-3. Upon
receipt of the service contract, P&O suggests, the Commission then open
a directory for each carrier into which it downloads the service
contract and therefore would be able to organize the information
according to its own needs. P&O, 3. This information could be easily
organized because all word-processing programs are searchable. P&O, 3.
P&O analogizes the management of this system to the Commission's
current maintenance of a list of filed agreements, which is done on a
WordPerfect file. P&O, 3. Finally, P&O recommends that the Commission
use passwords for confidentiality. P&O, 3.

Other Federal Agencies' Approaches

Several comments urge the Commission to follow the examples of
other Federal government agencies in crafting its approach to
electronic service contracts filing, namely the Federal Communication
Commission (``FCC'') and the Surface Transportation Board (``STB'').
NITL, 7; OCWG, 8. It appears that, after review of the approaches of
these agencies, as well as that of the Federal Energy Regulatory
Commission (``FERC''), the Commission is still faced with limitations
of time and resources which might make the adoption of one of these
systems inappropriate for the FMC.
1. Federal Communications Commission
Under the Telecommunications Act of 1996, the FCC receives tariff
filings for its common carrier tariffs via its website. This process
was developed over two years. The FCC requires that tariff publications
be filed in both paper copy and on diskette, subject to various format
requirements.5 Filers must submit a cover letter on paper
with the diskette and changes (amendments) to the tariff must be made
by re-filing the entire tariff on a new diskette, with the changed
material, and indicating the changes. The FCC also receives filing via
its internet homepage. This filing system was designed and is managed
by a private contractor.
---------------------------------------------------------------------------

\5\ The diskette must be 3\1/4\ inch, IBM-compatible form and
use MS-DOS 5.0 and WordPerfect 5.1 software, in ``read-only'' mode,
and labeled with the carrier's name, tariff number, and date of
submission.
---------------------------------------------------------------------------

2. Surface Transportation Board
One commenter suggested that because the STB ``requires the filing
of pleadings and reports in electronic form, which permits those
agencies to analyze filings electronically,'' that modifying ATFI is
not the only feasible

[[Page 11195]]

approach available to the Commission. NITL, 7. A review of the STB
regulations on filing methods, however, indicates that the STB has not
reached an electronic panacea for filing. For the filing of summaries
of railroad contracts for the transportation of agricultural products,
the STB requires that ``two copies of each contract summary'' be filed.
49 CFR 1313.4(a)(1). There does not appear to be an electronic option
for this type of filing. For the filing of tariffs for the
transportation of cargo by or with a water carrier in a noncontiguous
domestic trade, the STB requires that ``tariffs shall be printed on
paper not larger than 8\1/2\ x 11 inches.'' 49 CFR 1312.4(b). Filers
for these tariffs do have the option of electronic filing; however,
that option is accomplished through the FMC's ATFI system. 49 CFR
1312.17. Obviously, this option will be eliminated with the removal of
the ATFI system, and there appears to be no contemplation by the STB
for the implementation of a new method for receiving these filings
electronically after ATFI is discarded.
The notice requirements, on the other hand, under STB regulations
may be achieved electronically, but only where there is agreement
between the parties. See, e.g., 49 CFR Sec. 1300.2(b); 1300.4(b);
1305.2(b),(c); 1305.3; and 1305.4(a),(b). These notice requirements are
between carrier and shipper and are not official filings.
3. Federal Energy Regulatory Commission
While none of the comments referred to the approach of FERC, the
Commission has investigated FERC's approach to the crafting of a viable
electronic filing system. FERC issued a Notice of Inquiry on May 19,
1998 (Docket No. PL98-1-000, 63 FR 27529-27533) requesting comments on
various issues which arise with the implementation of electronic
filing, including formats, citations, signatures, methods of
transmission, confidentiality, security, attestation and service. FERC
held a conference on electronic filing on October 22, 1998. FERC has
since taken a broader, agency-wide approach for completely re-
engineering its methods for accepting filings and managing documents.
For the present, the official copies of filed documents are still in
paper form. FERC staff manually scans those documents which are not
filed electronically (about 120,000 pages per month) but hopes to
achieve a system which would provide for hyper-linking all public
filings in a particular docket to the docket sheet so the user has the
ability to select a document on the docket sheet list and go to the
full text of the document immediately.
Due to the general response in opposition to adapting the ATFI
filing system for service contract filings, the Commission will make
available an option which will address most of the commenters' concerns
that the proposed regulations would be too rigid, cumbersome and
costly. Interactive internet filing of service contracts with the
Commission will be provided, and while the dial-up system will be
available, the Commission expects to phase it out as soon as possible,
but certainly no later than the end of Fiscal Year 1999.
Specific details on internet-based filing will be made available on
the Commission's website (http://www.fmc.gov) when final development
and testing is complete. This option will provide for interactive
internet filing of service contracts via the Commission's homepage.
Individuals filing service contracts will presumably already have filed
Form FMC-1, registering them as tariff publishers, and will have been
assigned an organization number. Upon review, the Commission will
provide prospective service contract filers with a user ID and
password. A service contract filer will sign on to the Commission's
website and provide its user ID and password. A screen will then
indicate several options (e.g., filing a single contract, amendment or
batches of contracts or amendments) in addition to detailed filing
instructions. A single initial service contract will be filed by
providing certain basic information such as a carrier contract number
(which will enable linking of amendments to the initial contract),
effective date, organization number, and the location of the service
contract file which will be uploaded to the Commission upon activating
the screen's ``submit'' button. Amendment filings will be done in the
same manner, with the addition of a filer-provided service contract
amendment number. Batch filings will require similar information for
each contract, but will enable the filer to submit more than one
contract per session. Finally, the Commission foresees assessing user
fees at a later date, as the Commission gains experience and the
details of the system are completed.
Therefore, Sec. 530.8 and appendix A to this part, in which the
options for filing are detailed, are accordingly revised to reflect the
addition of internet-based filing.

Section 530.8 and Appendix A Transition Issues

Several commenters request that the Commission accept paper filings
of service contracts as well as electronic filings for a transitional
period. COSCO, 1-2; CMA, 3; JUSEFC, 5-7; OCWG, 6; P&O, 4; NITL, 7;
DuPont, 5. OCWG recommends that such a transition period be at least
one year. OCWG, 6 n.1. OCWG also asserts that there is no need to have
a system in place on May 1, 1999. OCWG, 5. P&O also suggests that if
the Commission needs more time to put an electronic system into place,
it can receive paper filings. P&O, 4. Only BSA and the filing services
(PTCB and ETM) support the immediate adoption of electronic-only
filing. BSA, 5.
A satisfactory response to the commenters' general opposition to
the modification of the Automated Tariff Filing Information (``ATFI'')
system and their general support for electronic filing is achieved by
the Commission's determination to offer an alternative filing method to
the modified ATFI filing which is internet filing (herein referred to
as ``internet-based'' or ``option 1''). This option offers filers great
ease and flexibility, while allowing the Commission to receive the
entirety of the contract information and to organize those filings for
the Commission's monitoring and enforcement duties. Furthermore, most
of the commenters' concerns about the rigidity and the cumbersome
nature of the dial-up filing system are removed with the implementation
of this filing method.
While most comments oppose any transitional system which does not
include a paper option, the flexibility of the new system will make it
extremely easy to file. Filers need only have created their contract on
one of several word-processing systems and have access to the internet.
It is not unreasonable to expect that carriers have access to this
equipment, or that if they do not, they may choose to out source the
filing. Removal of the requirement that they use a dial-up system
appears to enable all carriers to do their own filing, if they wish to
do so, thus removing any confidentiality concerns they expressed in the
comments regarding the use of third party filing services.
The Commission intends to allow the filing of service contracts
which have an effective date of May 1, 1999 or later in advance of May
1, 1999, as soon as filing systems are ready. The Commission
contemplates that the systems could be ready in the week

[[Page 11196]]

prior to May 1, 1999. The Commission will issue further advisory
notices of the status of the availability of the revised filing systems
as information becomes available.
Again, due to the expense of maintaining the dial-up service, the
Commission expects to phase it out as soon as possible, but certainly
by the end of FY 1999. Finally, the Commission will request further
industry input, if necessary, as it refines the internet-based system.

Section 530.8(c) and 530.12 Cross Referencing

Two comments generally voice support for the regulation allowing
for the cross-referencing to tariffs and general rules filing as part
of service contract register. BSA, 16; JUSEFC, 7. BSA recommends that
the Commission make available on its FMC website the general rules
tariff of any carrier or conference and periodically inspect that
tariff to determine that changes made by amendments have been made, and
thereby ensure that the shipping public will be able to obtain
necessary information regarding applicable items (e.g. rules for
hazardous cargo). BSA, 16.
P&O comments that the proposed regulation's prohibition against
cross-referencing has no support in OSRA and no reasonable regulatory
purpose, and that as such it should be withdrawn and the regulations
should allow cross-referencing to a carrier's own tariff as well as its
conference tariffs. P&O, 8. NITL and OCWG, as a means to allow greater
commercial flexibility, both support revision of Sec. 530.8(c)(2) to
allow cross-referencing not only to tariffs but also to ``widely
available public information.'' OCWG, 19; NITL, 13. OCWG recommends
that the Commission add to Sec. 530.8(c)(2) the phrase, ``or unless
those terms are available in a regularly published and readily
available public source commonly known in the industry.'' OCWG, 18-19.
NITL also believes that this change will ensure that the Commission
could obtain all of the contract's terms. NITL, 13.
The Commission, in an effort to make filing less burdensome for
carriers, but while ensuring that it had the entire contents of, or
access to, the service contract terms, proposed that carriers may
``cross-reference'' their own tariff publications or their conference
tariff publications in their filed service contracts. This provision
was intended to allow carriers to refer to rules of general
applicability (free time and demurrage, bunkering rates, currency
matters, etc.) for the ``boilerplate'' or terms which appear in all
their contracts. Further, the Commission recognized that it was
Congress' intent, by lifting the requirement that tariffs be filed with
the Commission, to allow parties to service contracts more freedom and
flexibility in their commercial arrangements. For those reasons, the
proposed rule, originally numbered Sec. 530.9(c)(2), was drafted to
permit filed service contracts to refer to terms outside the four
corners of the filed service contract, but only if they are contained
in the carrier's or conference's tariff publication. P&O appears to
have misread the proposed rules as not allowing any cross-referencing
whatsoever. This was not the intent of the proposed rules. Rather, the
regulation would have allowed cross-referencing, but only to matter
contained in a published tariff of the carrier or conference of which
it was a member.
However, in response to comments that allowing cross-referencing
only to published tariff matter would unduly stifle the parties'
contract terms, the Commission has decided to allow cross-reference to
a ``publication widely available to the public and well known within
the industry.'' Sec. 530.8(c)(2). The Commission wishes to stress,
however, that exact terms of the contract must be determinable and
certain, in keeping with the requirements of the Act. In response to a
comment by COSCO that this approach would undermine the confidentiality
of the contract terms, we point out that any term, except of course
published essential terms, can be kept confidential by inclusion in a
general rules filing or by filing in the text of the contract itself.
The Commission is confident that this approach will satisfy both the
concerns of filers for confidentiality, and the requirement that the
complete contract be filed.

Section 530.8(b)(9) Naming Affiliates

AISA believes that proposed Sec. 530.8(b)(9) should be amended to
remove the requirement that shippers' associations name all of their
members. They assert that this requirement is not mandated by any
change made by OSRA and is contrary to current Commission regulation
and policy which requires only such naming if the contract specifically
excludes or includes specific members. AISA, 7. AISA is concerned that
such disclosure would give carriers blackmail potential, as was found
in Fact Finding 15, and Docket 91-1. AISA, 8.
AISA suggests the provision be revised to read as follows:

(9) The legal names and business addresses of the contract
parties; the legal names of affiliates entitled to access the
contract, except that in the case of a contract entered into by a
shippers' association, individual members need not be named unless
the contract includes or excludes specific members; the names,
titles and addresses of the representatives signing the contract for
the parties; and the date upon which the service contract was
signed. An agreement service contract must identify the FMC
Agreement Number(s) under which the service contract is filed.
Carriers, conferences, and/or agreements which enter into contracts
that include affiliates must in each instance either: (further
unchanged).

AISA, 10.

CMA and NITL agree that reporting all names and addresses of
shippers would be unnecessarily burdensome. CMA, 2; NITL, 12-13. NITL
questions the purpose of this requirement. NITL, 12. If the Commission
has a question about identity or location of a particular affiliate,
NITL suggests that it obtain the information informally, on a case-by-
case basis. Therefore, NITL argues, this requirement should be either
deleted or the production period of 10 days should be increased. NITL,
12.
The deletion of the exception for shippers' associations being
required to list all members in a service contract was a drafting
oversight. We therefore re-insert the exception. However, the
production period of 10 days was fully explored when the currently
effective rule was put into place and this will be unchanged. OSRA
makes no changes which would have an impact on this requirement.
APL complains that proposed Sec. 530.8(b)(9)(ii) (identifying
affiliates) is unintelligible, as it is unclear to whom the
certification information must be provided. APL, 4. Further, it asserts
that the last two sentences of the paragraph seem to be unrelated to
clause 9(ii), and requests clarification of the regulation. APL, 4.
Section 530.8(b)(9) as proposed reads, (the filed contract or
amendment shall include)

(9) the legal names and business addresses of the contract
parties; the legal names of affiliates entitled to access the
contract; the names, titles and addresses of the representatives
signing the contract for the parties; and the date upon which the
service contract was signed. An agreement service contract must
identify the FMC Agreement Number(s) under which the service
contract is filed. Carriers, conferences and/or agreements which
enter into contracts that include affiliates must in each instance
either:
(i) list the affiliates' business addresses; or
(ii) certify that this information will be provided to the
Commission upon request within ten (10) business days of such
request. However, the requirements of this section do not apply to
amendments to contracts that have been filed in accordance with the

[[Page 11197]]

requirements of this section unless the amendment adds new parties
or affiliates. Subsequent references in the contract to the contract
parties shall be consistent with the first reference (e.g., (exact
name), ``carrier,'' ``shipper,'' or ``association,'' etc.);

The Commission has re-drafted this provision for clarity, and these
alterations should sufficiently address the reasonable concerns of the
commenters.

Appendix A General Rules Filings

COSCO and JUSEFC comment that allowing filers to make general rules
filings or register filings is beneficial and will allow carriers to
avoid repetitious filing. COSCO, 1; JUSEFC, 7. COSCO urges that
publishing general rules in a tariff would be unacceptable because of
the confidentiality issues and, further are concerned that such
publication would require a thirty-day delay for the implementation of
such rules. COSCO, 1.
ETM is concerned that the proposed regulations are unclear as to
whether the Commission would allow for multiple service contract
registers, and whether the registers are to be based on strict location
group application or if overlapping scopes are allowed. ETM 2-3. Both
ETM and PTCB foresee future problems if the Commission intends for the
registers to be unique, such as by location group, without conflicting
scopes or overlapping of scopes and does not allow different and
overlapping scopes between registers. These problems may include
amendment numbering, effective dates and contract terms. ETM 2-3; PTCB,
9.
Other comments disfavor allowing service contract registers as
being unnecessary, burdensome and without meaningful regulatory
purpose. P&O, 7. P&O further comments that using a service contract
register for general rules filing seems contrary to the continued
requirement to publish essential terms where carriers have
traditionally published, and they assume would continue to publish,
their ``boilerplate.'' P&O, 7.
The provision for a ``general rules'' filing is somewhat
complicated by the fact that there may be two electronic filing systems
in place. However, the Commission allowance of more liberal cross-
referencing as well as a filing system which would accept the full text
of the document in a word processing format (i.e., the same as the
document signed by the parties), this should relieve any burden on
filers to file with the Commission anything other than the commercially
agreed upon service contract, and should be adequate for the Commission
to determine the terms of the contract with precision.

Other Term Requirements

Many of the system requirements and restrictions opposed in the
comments diminish, if not completely disappear, with the addition of
the option for a web-based filing system. First, PTCB's concern that
ATFI will not accept port ranges disappears when filers file the full
and original text of their contract on-line. PTCB, 5. The Commission
has revised the regulations relating to the ATFI-based system to allow
the filed matter+ to reflect the true agreement of the parties, to the
maximum extent possible, given some inherent technical limitations of
that system.
The same is true for location and commodity descriptions: There
would be no need to require NIMA or WPI locations, or to use the
Harmonized Schedule for commodity descriptions in a ``free text''
system. OCWG, 21; P&O, 8; NITL, 11; Conagra, 4. The Commission agrees
that this unduly limited the parties in contracting and might cause
confusion, and so has removed references to the US HTS, NIMA and WPI in
the interim final rule.
For duration requirements, however, the Commission will continue to
require service contracts to have specific effective and expiration
dates. P&O, 7; NITL, 12. This is required by the statutory definition,
that a service contract be ``a commitment * * * over a fixed time
period.'' Section 2(19) of the Act. See below, discussion on amendments
for renewal of service contracts.
System requirements may also dictate the Commission's ability to
allow filers to have access to their filed contracts for reviewing and
auditing. PTCB, 3. At first blush, this may create confidentiality/
security issues which are, at present, unforeseen. While the new system
may give the filer the ability to review (on a read-only basis) its
filings, the contents of a filed service contract may only be changed
through a subsequent filed amendment or correction.
Finally, the Commission will make the addition of a provision which
requires agreement-authorized service contracts to include the filed
agreement number, Sec. 530.8(d)(3), and a provision for filers to
inform the Commission where the statement of essential terms will be
filed, Sec. 530.8(d)(4). For the reasons described above, the proposed
regulation is revised to add the alternative system, remove unnecessary
requirements and further simplify the filing procedures.

Section 530.9 Notices

Proposed Sec. 530.9 (as renumbered) requires the carrier party to a
service contract to notify the Commission within 10 days of the
occurrence of certain events which affect the service contract. Those
events include: Correction ((a)(1)); cancellation ((a)(2)); termination
not covered by the contract ((a)(3)); adjustment of accounts (by re-
rating, liquidated damages, or otherwise under Sec. 530.16)((a)(4));
final settlement of any account adjusted as described in Sec. 530.16
((a)(5)); and any changes to the name of a basic contract party or the
list of affiliates, including changes to legal names and business
addresses, of any contract party entitled to receive or authorized to
offer services under the contract ((a)(6)).
Commenters suggest that there is no need for the Commission to
receive notice of matters which are affected by amendment of the
service contract because such amendments are filed with the Commission.
NITL, 15. They suggest that the events which are enumerated in the
proposed regulation are events that would require such amendment.
CMA and NITL believe that requiring changes to be reported within
ten days is overly burdensome. CMA, 2. NITL suggests that if the
proposal is not completely deleted, the time period should be
lengthened to ninety days. NITL, 15-17. In the original regulation,
found at Sec. 514.7(g)(2), notices were required to inform the
Commission within thirty days of such events, and that period of time
was based on the commercial practice for settlements of accounts.
The proposed rules reduced the time in which notification must be
made from thirty to ten days based on an understanding that this would
be in line with the speed at which these transactions now occur and
that, therefore, no additional burden would be created for regulated
entities. However, due to the commentary to the contrary, the
Commission has decided to simply revert to the former requirement of
thirty days.
NITL and DuPont comment that the requirements cover too many
events, and are overly broad. DuPont asserts that such notices should
only be required to be reported when events occur which affect the
essential terms of the service contract. DuPont, 2. The proposed
regulation would give the Commission power to limit, restrict and
dictate the content of changes to service contracts. DuPont, 2.
Contrary to these assertions, the Commission will continue to
require that all changes to a filed service

[[Page 11198]]

contract must be filed with the Commission, not only those which effect
the essential terms. The Commission must monitor the operation of
service contracts for acts prohibited by the statute and simply cannot
fulfill this duty if it is not guaranteed of having all the terms of
service contracts within its jurisdiction.
The comments suggest the proposed regulation be altered to permit
periodic reporting, perhaps on a semi-annual basis in a prescribed
format (but not one which would restrict the parties right to mutually
alter, modify or terminate) of routine changes which effect essential
terms. DuPont, 2,3. CMA suggests this approach for changes to shipper
affiliates only. CMA, 2.
Proposed Sec. 530.9 (as renumbered) was adapted from original
Sec. 581.5(b) (52 FR at 23939, 23999), which the Commission asserted
was

necessary to enable the Commission to perform its contract
surveillance role and ensure the terms of contracts are met. The
notice requirements should not be burdensome since such information
is exchanged in the normal course of business by the contract
parties. Compliance with the notice requirement can be met merely by
providing the Commission with a copy of whatever documents are
exchanged between the parties under such circumstances.

The Commission continues to have such a surveillance role, which is
made more important by the fact that service contracts will not be
publicly available. Furthermore, the Commission particularly reminds
filers that any changes to the public essential terms must be updated
in the essential terms publication, regardless of such notification to
the Commission. See Sec. 530.12 (publication).
NITL is correct not only that the Commission ``would like'' to
receive notice, but that it must receive notice of changes in service
contracts in order that it have the complete terms of the contract
which are in effect, and to be aware that a certain filed contract is
no longer in effect. NITL, 15. Also, NITL argues that corrections
should be handled through amendments. NITL, 15-17. If the filer uses
the modified ATFI, the filer will receive a special case number with
which it will make its own corrections. As the Commission itself does
not enter the corrections into the system, the Commission must know
when that is done. The introduction of an alternate system filing may
or may not have the capability of alerting the Commission when a
correction is made, so while there may be no need for notice, the
Commission will continue to require it at this point. See, discussion
regarding correction, Sec. 530.10.
As cancellations (Sec. 530.10(a)(2)) are necessarily only those not
anticipated by the terms of the contract, there is a clear need for the
Commission to have notice of that event. If the termination has
occurred as anticipated by the service contract, we agree, in
accordance with the rationale above, that there is no need for
additional notice to the Commission. If, however, an event has occurred
which was not contemplated by the parties in the service contract but
which affects its operation, the Commission must be so notified in
order to assess whether the parties are employing an unjust device to
obtain rates otherwise not applicable. Similarly, for terminations not
covered by the contract (Sec. 530.10(a)(3)), the parties will no longer
have the right to use the rates in the service contract and there are
section 10(a)(1) concerns.
Several commenters assert that the notification requirements of
Secs. 530.10 (a)(4), (a)(5) and (b) for account adjustments are
unnecessary and arbitrary, intrude into the commercial relationship,
create needless burdens and are outside the Commission's oversight
functions. OCWG, 20; Conagra, 4-5; NITL, 15-17. Notice of account
adjustments and final settlement which are made pursuant to the terms
of the service contract filed with the Commission appear to have no
legitimate basis. NITL, 16. They appear to stem from prior ``me-too''
requirements. NITL, 16.
Again, and contrary to the comments, however, the Commission must
know what the adjustments or final settlements of an account may be,
not to impose the rate differential on the carrier or shipper, but to
ensure that no section 10 violations are being carried out. There is
little burden on the filers in providing this information, as they may
simply copy the information to the Commission as they send it to the
shipper.
Similarly, for final settlement of any account adjusted, the
Commission requires notice. Both of these notice requirements were
``intended to apply to only those service contracts where there has
been a change to the basic compensation required by the terms of the
service contract.'' 52 FR at 23999. The applicable rate must be
determinable at any given time, to ensure compliance with the Act and
section 10(a)(1). Therefore, while parties are free to provide for
liquidated damages, contingencies, etc., in their service contracts,
using a rate from a service contract which is not lawful under the Act
would create section 10(a)(1) and possibly other violations.
NITL comments that changes to names of parties (requirement of
which is discussed supra) should be handled through amendments, and
that additional notice of these should therefore not be required. NITL
15-17. NCBFAA and CMA suggest that there is no need to notify the
Commission of changes to lists of shipper affiliates as required in
Sec. 530.9(a)(6)(ii). NCBFAA, 2; CMA, 2. Furthermore, this is too
burdensome to shippers. NCBFAA, 2; CMA, 2. DuPont recommends that
Sec. 530.9(a)(6)(ii) be altered to eliminate the requirement to report
all names and addresses of shippers (except NVOCC) because identity of
shippers is not an essential term, is not reported to the public and
could be required to be maintained in the records of the carrier,
records which can be obtained by the FMC through subpoena power.
DuPont, 2-3.
Notice to the Commission of changes to shipper parties arises from
the same concerns the Commission has when any other term of the filed
service contract changes. The Commission must have the ability at any
time to examine the filed service contract and assess whether or not
parties (or non-parties) are operating in conformity to the service
contract, or whether they may be employing an unjust means or device to
elude the requirements of the Act. The Commission must be able to
ascertain at any given moment who has the right to access a service
contract.
Furthermore, there appears to be no reason at this juncture for the
Commission to consider whether periodic reporting of changes to who may
have access to a service contract (affiliates) would be adequate to
meet its responsibilities. No change to OSRA mandates such a change,
and the regulation was carried over from prior Commission regulation
found at 46 CFR 514.7(g)(2).
OCWG complains that proposed Sec. 530.9(b) (notice to contract
party) fails to acknowledge commercial realities, including the
sometimes protracted negotiations and communications delays relating to
the covered subject matter and, further, that carriers and shippers
have both regulatory and commercial incentives to promptly pursue their
contract rights. Thus, they argue, there is no reason to graft further
deadlines onto the commercial relationship. OCWG, 20-21.
Originally, this provision was crafted with respect to the general
commercial practice of settling accounts in thirty days; additional
time was provided, and the regulation as adopted required notice to the
shipper party of the final settlement of account within 60 days of

[[Page 11199]]

the termination of the contract. 52 FR 23999.
OSRA shifts parties' remedies to their common law contract rights,
and as such, this provision appears to be no longer necessary, as it
was originally intended to protect the shipper party. With the
deregulatory goals of OSRA, parties are expected to protect their own
contract rights and as such the Commission's role as mediator between
the parties for contract disputes is removed. Accordingly,
Sec. 530.10(b)(as originally numbered) is deleted completely.

Section 530.10 Amendment, Correction and Cancellation

The proposed regulation provides that either party to a filed
service contract may request permission to correct clerical or
administrative errors in a filed service contract by filing a request
with the Commission's Office of the Secretary within 45 days of the
contract's filing with the Commission, for a fee of $233 pursuant to
Sec. 530.11(c)(4). Any notices in connection with the filing of such
corrections would be filed with the Commission under Sec. 530.9 within
10 days. Amendments are intended by the rule as proposed to be filed in
the same manner as initial service contracts. Finally, cancellation of
the service contract is provided for by this section.
COSCO requests clarification about what rules, and specifically
whether confidentiality, will apply to service contract amendments
filed after May 1, 1999, where the original service contract was filed
before May 1, 1999. COSCO, 2.
Amendments filed on or after May 1, 1999 to service contracts filed
before May 1, 1999 must comply with the regulations in effect as of May
1, 1999. The Commission expects that many parties to service contracts
entered into before May 1, 1999 may wish to obtain confidentiality for
more of their service contract terms under OSRA, and therefore will
terminate the contracts, write new ones and file them in their entirety
rather than simply making amendments. As we previously indicated, the
Commission will strive to have the filing systems ready to accept
service contracts in the week prior to May 1, 1999 and thereby allow
the filing of service contracts which have an effective date of May 1,
1999 or later as soon as possible.
Two commenters believe that requiring a formal correction
proceeding and justification for correcting clerical errors of proposed
Sec. 530.10(b) incorrectly carries over provisions from the previous
regulations on ``me-too,'' which has been eliminated by OSRA. CMA, 2;
DuPont, 3. It appears that confusion has arisen among the commenters
regarding the differences between the terms ``correction'' and
``amendment'' to a service contract filed with the Commission under the
Act. Parties to a filed service contract are free to amend its terms
prospectively at any time, by filing their amendments pursuant to
Sec. 530.8. Meanwhile, the ability to correct clerical or
administrative errors retroactively helps contract parties avoid undue
hardships in instances where the parties discover, subsequent to filing
a contract with the Commission, that a clerical or an administrative
error had been made.
There is utility to having in place a procedure by which the
parties may correct inadvertent errors through the correction
procedure. However, this procedure must be structured so as to enable
the Commission to distinguish between legitimate requests and requests
crafted to avoid the statutory requirements of the Act, regardless of
the fact that me-too rights have been eliminated by OSRA. The ability
to change provisions retroactively without Commission scrutiny would
undermine the clear intent of section 10(b)(2)(A) which provides that
no common carrier, either alone or in conjunction with any other
person, directly or indirectly may provide service in the liner trade
that is not in accordance with the rates, charges, classifications,
rules, and practices contained in a tariff published or a service
contract entered into under section 8 of OSRA.
Furthermore, allowing parties to ``correct'' retroactively terms of
the filed service contract would make any such agreement illusory and
thereby bring it outside the requirements contained in section 2(19) of
the Act that a service contract be certain and contain commitments on
the parts of both parties. It appears that allowing for corrections
(retroactive) and amendments (prospective) to filed service contracts
provides more than adequate flexibility for parties to take advantage
of their commercially negotiated arrangements while ensuring adherence
to the Act's requirements.
CMA asserts that the Commission has no authority to accept or
reject a contract change, as it is a matter for the parties. CMA, 2;
DuPont, 3. NITL believes it is nonsensical to require permission to
correct a clerical error. NITL, 17. We disagree. The authority for the
Commission to scrutinize a retroactive change to a service contract is
based on the requirement of section 8(c) of the Act that service
contracts be filed with the Commission and that they reflect certain,
meaningful commitments. Thus, allowing parties to make retroactive
corrections devoid of any review or oversight would render that
statutory requirement meaningless.
CMA argues that there should be no distinction between changes that
are made prospectively (amendments) and changes that are made
retrospectively (corrections). CMA, 2. Again, we disagree, and point
out that the Commission has made such a distinction: the terms of
corrections, but not those of amendments, are subject to Commission
review before they may be made.
Two commenters complain that the correction procedure is
excessively burdensome. NITL, 15; NCBFAA, 2. Further, NITL argues, the
fee for corrections is too high. NITL, 17. The service fee associated
with such requests became effective November 2, 1998, and reflects the
costs incurred by the Commission in providing this service to the
parties which elect to use it. Correction requires a significant amount
of work by Commission staff, because the request must be scrutinized to
ensure it is not an attempt to circumvent the requirements of the Act.
Again, the need for notice of correction (see Sec. 530.9(a)) will
depend on the capabilities of the filing system.
PTCB comments that filers should have access to their filings to
check them for errors and to audit them. PTCB, 1. The read-only access
to filings may be possible, but certainly filers will have no ability
to change their filings (except by amendment) once submitted to the
Commission's database for the reasons set forth above.
NITL comments that the 45-day period by which filers must report
clerical and administrative errors is too short. NITL, 17. This
deadline, however, has been a longstanding requirement of the
regulations and the Commission is unaware of complaints of hardship in
the past. Furthermore, given the recent advances in communication
technologies, 45 days would be more than adequate time for parties to
detect clerical errors in their service contracts. Also, the
requirement that such request be filed within a 45-day period for a
service fee encourages contract parties to carefully review contracts
before submitting them to the Commission and to take corrective action
without undue delay. Finally, the Commission has previously fully
assessed the time period required for requesting a correction, and it
is not apparent why this analysis would have changed. Docket No. 88-61,
54 FR 1363 (Jan. 13, 1989).

[[Page 11200]]

The correction procedure set forth under Sec. 530.10 will serve a
useful purpose and will be maintained. Experience has shown that there
will likely be only a minimal need to file such requests: during FY
1998, only four such requests were filed with the Commission and this
number is not anticipated to increase significantly in the future,
particularly given the Commission's determination to encourage contract
parties to file their actual arrangements rather than arrangements
``translated'' into FMC formats.
Commenters complain that Sec. 530.10(c)(2)(cancellation) is
anachronistic and urge the Commission to delete the provision. One
commenter complains that these provisions are inconsistent with general
principles of contract law and would penalize shippers in situations
where both the shipper and the carrier believe the termination is in
their self-interest, and as such is not appropriate in a marketplace
oriented system, such as the one OSRA contemplates. AImpSA, 1-2. NCBFAA
complains that the proposed rule is burdensome and inappropriately
harms shippers when the carrier may not have suffered any damages due
to unilateral cancellation of a service contract. NCBFAA 3,4. NCBFAA
also complains that it is unfairly punitive to re-rate at tariff rates
when a shipper cancels a service contract. NCBFAA, 3,4.
The Commission has concluded to redraft this section to reflect the
very limited situations in which re-rating will be required. First, we
point out that the rejection provision has been eliminated. Second, re-
rating, as discussed below, will only be required in situations where a
filed service contract has not contemplated and which the parties have
not determined to amend the contract. If there is a liquidated damages,
or another fall-back rate provision, there will be no need to re-rate
cargo which has already been carried. Therefore, most of the shippers'
concerns that they may be held unreasonably accountable for a carrier-
filer's filing mistakes are removed.
The Commission first added the allowance that parties prospectively
may amend their filed service contracts in Docket 92-21, 57 FR 46318
(Oct. 8, 1992). There, the Commission noted that the parties may make
retroactive corrections of clerical or administrative errors through
the corrections procedure. Id. at 46318. Second, the Commission noted,
the parties can similarly provide for substantive modifications through
contingency clauses. As pointed out below, examples of such contingency
clauses had been listed in Sec. 514.17 (d)(7)(viii).6 As
further discussed in the supplemental information to this regulation,
any of the terms of the service contract may be amended with
prospective effect. 57 FR at 46322.
---------------------------------------------------------------------------

\6\ That section read, in pertinent part, Later events causing
deviation from ET (if any); Where a contract clause provides that
there can be a deviation from an original essential term of a
service contract, based upon any stated event occurring subsequent
to the execution of the contract (this term) shall include a clear
and specific description of the event, the existence or occurrence
of which shall be readily verifiable and objectively measurable.
This requirement applies, inter alia, to the following types of
situations:
(A) Retroactive rate adjustments based upon experienced costs;
(B) Reductions in the quantity of cargo or amount of revenues
required under the contract;
(C) Failure to meet a volume requirement during the contract
duration, in which case the contract shall set forth a rate, charge,
or rate basis which will be applied;
(D) Options for renewal or extension of the contract duration
without any change in the contract rate or rate schedule;
(E) Discontinuance of the contract;
(F) Assignment of the contract; (or]
(G) Any other deviation from any original essential term of the
contract.
---------------------------------------------------------------------------

The terms amendment, correction and cancellation are clarified by
the revised section. It is apparent that commenters are confused about
the reasoning behind the distinction the Commission has made in the
past. Further, we point out that the Commission's Bureau of Tariffs,
Certification and Licensing (``BTCL'') received only four petitions for
correction last year. This is simply an issue which has not been a
problem in the past, but which the Commission will continue to monitor
against the abuse of procedures such as correction to evade the
prescriptions and prohibitions of the Act.
Therefore, due to the apparent confusion of the comments over the
distinction between the terms correction, amendment, and cancellation
the proposed regulations are revised to include definitions of these
terms.

Section 530.12 Publication of Essential Terms

OSRA continues to require the publication of certain essential
terms of service contracts and instructs carrier parties to service
contracts to make these essential terms available to the public ``in
tariff format.'' Section 530.12 of the proposed regulation suggested
that carriers and conferences should be able to satisfy this obligation
in the same way they publish their tariff information under proposed 46
CFR part 520. Further, in an effort to assist the shipping public to
find statements of essential terms published according to this part,
the Commission proposed making a list of the locations of all such
publications available on the FMC website. 46 CFR 530.12(f).
OCWG comments that the proposed regulation's requirement that
essential terms be published with the tariffs is misplaced because that
is just format, not location. OCWG, 18. The proposed rule cross-
referenced many of the technical requirements of the newly proposed
tariff publication regulations to effectuate the essential terms
publication required under this part, in an effort to ease the burden
on carriers, and to allow them to take advantage of means by which they
would already publish their tariff information. The Carrier Automated
Tariff regulation, Commission Docket No. 98-29, gives carriers a wide
array of options regarding the location at and method by which they
publish. Therefore, requiring carriers to publish statements of
essential terms alongside their tariffs would not create any new
burdens. Indeed, requiring that a different location be used would
appear to be much more burdensome, as it would not allow carriers to
take advantage of publications they must already make in accordance
with the tariff regulations.
However, the Commission is again faced with issues which arise when
a service contract is entered by members of a non-conference agreement
which does not publish a common tariff with which its service contract
essential terms may be published. One commenter supports the proposal
that individual service contracts are published by the individual, and
that multiparty service contracts are filed by one party, but published
by all the parties. P&O, 8. However, the comments request that the
Commission clarify that for individual service contracts, essential
terms would be published on the carrier's own essential terms
publication and not on a conference's essential terms publication. P&O,
8. We agree that this remains the simplest approach.
Individual carrier service contracts are to be published alongside
that carrier's tariff matter, in a separate document, as outlined in
Sec. 530.12. 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, but note
must be made of the

[[Page 11201]]

relevant FMC-designated Agreement number. Commenters assert that, by
requiring a list of fellow carrier participants, the proposed
regulation was adding a non-statutory public essential term: the names
of the carrier parties. With that in mind, together with the
limitations which exist as to tariff-associated statements of essential
terms publication, reference to the agreement number will allow the
public to ascertain whether certain activity is joint or independent.
This approach, while it does not provide the public with a list of
which member is or is not participating in an agreement-authorized
multi-party service contract, will indicate that the service contract
is not an independent, sole-carrier service contract.
One commenter suggested that rather than require all individual
carriers to publish the full text of their non-conference agreement
contract statements of essential terms, simply a reference to where the
published essential terms may be found would be adequate and less
burdensome to carriers. COSCO, 2. Due to the automated nature and the
limited terms which are required to be published in a statement of
essential terms under OSRA, the burden appears to be rather light on
carriers, in comparison to the benefits it provides the shipping
public.
P&O further requests that the Commission clarify the different
publication requirements for non-conference agreement multi-party
service contracts, conference agreement multi-party service contracts
where the conference is the signatory but not all members are
participants, and conference agreement multi-party service contracts
where the carriers themselves are the signatories. P&O, 8. We agree
that for statements of essential terms, because the terms are public in
contrast to the balance of the filed matters, there is no corresponding
issue of confidentiality. The clarification in Sec. 530.12 will
indicate that service contracts which are entered jointly by members of
conferences, regardless of signatory, must be published with the
conference's tariff and not in the individual carrier's publication.
For an independent service contract, the statement of essential terms
will be published with the individual carrier's tariff publication, but
not with the conference's tariff. Allowing such would lead to public
confusion.
ETM requests that the Commission provide further clarification
regarding the failure to make published essential terms
contemporaneously available. ETM, 1. We reiterate that such liability
would rest on the carrier parties to a service contract under the
Commission's jurisdiction, regardless of the appointed agent for
publishing.

Section 530.13 Exceptions

One commenter asks the Commission to clarify in supplementary
statements that service contracts which are limited to the carriage of
used military household goods and personal effects, or shipments of
used household goods and personal effects of civilian executive
agencies tendered to OTIs under the International Household goods
program, administered by GSA, or both, are required to be filed with
the Commission. HGFAA, 3. The exemption for used military household
goods, granted by the Commission under section 16 of the Act, exempts
those services from the tariff filing requirement only. The language in
the rule as revised should remove any confusion.
The inclusion of the phrase, ``as those terms are defined in
section 3 of the Act'' appears to adequately address any concerns
regarding the definitions for exempted commodities. The one exception
to this is for the term ``motor vehicle'' which is not defined by the
Act. Therefore, the addition of that term to the definitions,
Sec. 530.3, which mirrors the terms definition in the Commission's
regulation on Carrier Automated Tariffs Systems (Docket 98-29) will
adequately address such concern. It does not appear necessary to
further repeat other definitions here.
The proposed regulations also provided for ``non-acceptance,'' a
new term reflecting the congressional mandate that the Commission not
accept for filing service contracts which cover only excepted
commodities. It appears now that this was a confusing new term. The
term ``non-acceptance'' has been removed from the regulation, and the
provisions in this section should otherwise adequately address
``mixed'' contracts.
The Commission will retain the provision requiring any service
contracts which are filed to relate to commodities or services for
which a tariff rate can be established. This is because the situation
may arise in which the Commission would require re-rating, and for such
re-rating, an ``otherwise applicable rate'' would be required. While
such need may be very rare, those concerns remain for replacement
applicable rates for such situations.
Finally, issues arise similar to those discussed under the sections
on rejection and re-rating. For the reasons discussed, mixed commodity
contracts may only be filed if a replacement rate is available. We
therefore revise the proposed regulations to clarify this approach.
Finally, as it was repetitious, Sec. 530.15, as originally numbered in
the proposed regulation, entitled ``non-acceptance'' is deleted
entirely, and the following sections have been accordingly renumbered.

Proposed Sec. 530.15--Rejection

Several comments remark on the Commission's authority and criteria
it would use for rejection of service contracts as presented in
proposed Sec. 530.15. Commenters generally argue that the Commission
may only reject service contracts submitted for filing if they do not
meet the requirements of the Act, but that the Commission does not have
the authority to reject them on the basis that they do not meet the
requirements of the Commission's regulations. OCWG, 19-20; CENSA, 3;
P&O, 6; NITL, 19. IBP urges the Commission to revise the regulation,
and to provide more guidance on when a service contract could be
rejected and suggests that rather than a general reference to the Act,
this section refer to the requirements in Sec. 530.8 (as renumbered).
IBP, 1. Finally, P&O complains that the Commission is wrongfully
attempting to intrude on the commercial nature of service contracts
through rejection. P&O, 6.
Commission regulations currently outline the procedures for
rejection of service contracts and essential terms filed with the
Commission. 46 CFR 514.7(j). The Commission rejects service contract
essential terms publications filed into the ATFI system which do not
conform to the requirements of the Act or Commission regulation,
including timeliness of filing and adequacy and accuracy of the
publication of the statement of essential terms. The proposed
regulation attempted to adapt the current rejection rules as necessary
to meet the changes to the Act made by OSRA.
JUSEFC recommends the re-insertion of Sec. 514.7(j)(2) which
specifies that rejection is limited to those instances where parties
fail to file a corre

[Text truncated at 120,000 characters. The full text is on the page linked above.]

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A99-5365. Public record. Not legal advice.