[Federal Register Volume 59, Number 90 (Wednesday, May 11, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-11133]


[[Page Unknown]]

[Federal Register: May 11, 1994]


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DEPARTMENT OF TRANSPORTATION

Maritime Administration

46 CFR Part 381

[Docket No. R-153]
RIN 2133-AB13

 

Cargo Preference--U.S.-Flag Vessels; Available U.S.-Flag 
Commercial Vessels

AGENCY: Maritime Administration, Department of Transportation.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This proposed amendment to the cargo preference regulations of 
the Maritime Administration (MARAD) states that the requirement for the 
carriage of preference cargoes on privately-owned ``available'' U.S.-
flag commercial vessels would be satisfied, during a one-season trial 
period, by U.S.-flag commercial vessels calling at a Canadian 
transshipment terminal outside the St. Lawrence Seaway, to load bulk 
agricultural commodity cargoes subject to the cargo preference laws 
that are transshipped from U.S. ports on the Great Lakes by U.S.-flag 
or foreign-flag vessels; and determinations of ``fair and reasonable 
rates for United States commercial vessels'' would include through 
bills of lading for such available U.S.-flag commercial vessels. This 
amendment would allow Great Lakes ports to compete for agricultural 
commodity preference cargoes.

DATES: Comments on the one-season trial period for this rule must be 
received on or before May 31, 1994, while comments on a permanent rule 
or a rule of greater duration than the one-season trial period must be 
received July 11, 1994.

ADDRESSES: Send an original and two copies of comments to the 
Secretary, Maritime Administration, room 7300, 400 7th St., SW., 
Washington DC 20590.

FOR FURTHER INFORMATION CONTACT: John E. Graykowski, Deputy Maritime 
Administrator for Inland Waterways and Great Lakes, Maritime 
Administration, Washington, DC, 20590, Telephone (202) 366-1718.

SUPPLEMENTARY INFORMATION: United States law requires that at least 50 
percent of cargo ``impelled'' by Federal programs (preference cargoes), 
and transported by sea, be carried on privately-owned United States-
flag commercial vessels, to the extent that such vessels are available 
at fair and reasonable rates. See sections 901(b) (the ``Cargo 
Preference Act'') and 901b, Merchant Marine Act, 1936, as amended 
(``the Act''), 46 App. U.S.C. 1241(b) and 1241f. The Secretary of 
Transportation is desirous of administering that program so that all 
ports and port ranges may participate. As discussed below, to achieve 
these objectives, MARAD is proposing to amend its cargo preference 
regulations to allow Great Lakes ports to compete for agricultural 
commodity preference cargoes for a one-season trial period, 
corresponding to the Great Lakes shipping season when the St. Lawrence 
Seaway system is in use.
    For a number of reasons, United States-flag commercial vessels in 
foreign commerce do not serve the Great Lakes. Consequently, cargoes 
subject to cargo preference are not loaded at Great Lakes ports, 
resulting in significantly less cargo for these ports in comparison 
with ports on other United States coasts. MARAD proposes to permit 
cargoes to be counted toward the preference requirements if they are 
loaded at Great Lakes ports for the trip along the St. Lawrence Seaway 
and then transferred to United States-flag vessels for the ocean 
portion of their carriage. The registry (``flag'') of the vessel 
loading the cargo on the Great Lakes and carrying it through the Seaway 
would not be relevant. This rule would be in effect during a trial 
period corresponding to the current Great Lakes shipping season.
    MARAD has issued a regulation governing compliance with cargo 
preference requirements by shipper agencies, which is published at 46 
CFR 381.8. This proposed rule would add a new section 381.9 to MARAD's 
cargo preference regulations. It would state that: (1) For a one-season 
trial period, the requirement for ``available'' U.S.-flag commercial 
vessels under the Act would be satisfied by U.S.-flag commercial 
vessels calling at a Canadian transshipment terminal outside the St. 
Lawrence Seaway to carry bulk agricultural commodity cargoes subject to 
the cargo preference laws, transshipped from U.S. ports on the Great 
Lakes by U.S.-flag or foreign-flag vessels; and (2) determinations of 
``fair and reasonable rates for United States commercial vessels'' 
under section 901(b) would include through bills of lading for such 
available U.S.-flag vessels. Such combination foreign/U.S.-flag voyages 
would not be allowed if, in the future, all-U.S.-flag carriage, at fair 
and reasonable rates for U.S.-flag commercial vessel service, becomes 
available to load bulk agricultural commodities at U.S. Great Lakes 
ports.
    Based on experience during the trial period, and after reviewing 
comments on this rulemaking, MARAD will consider whether to make this 
rule permanent, or extend it for a period of time longer than the one-
season trial period.
    The need for this rulemaking arises due to changing shipping 
conditions affecting U.S.-flag vessels operating in the Great Lakes, 
resulting in the absence of all-U.S.-flag vessel availability for the 
carriage of cargo between U.S. Great Lakes ports and foreign countries.
    We do not believe that this proposal is precluded by any rulings of 
the Comptroller General. Specifically, in 1960, the Comptroller General 
examined a practice involving shipment of preference cargoes from U.S. 
Great Lakes ports to Canadian St. Lawrence River ports on foreign-flag 
vessels for ``topping off'' U.S.-flag ocean-going vessels which had 
partially loaded at U.S. Great Lakes ports. No. B-140872, 39 Comp. Gen. 
758 (1960). The Comptroller General's opinion found no basis to 
criticize a regulation of the Department of Agriculture holding that 50 
percent of the cargo1 moving between the U.S. Great Lakes ports 
and Canadian St. Lawrence River ports must move on U.S.-flag vessels. 
It should be noted that at that time there was some all-U.S.-flag 
service to U.S. Great Lakes ports.
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    \1\The Comptroller General's 1960 decision predated the 75 
percent requirement instituted by the Food Security Act of 1985.
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    Dramatic changes in shipping conditions have occurred since 1960, 
including the disappearance of any all-U.S.-flag commercial ocean-going 
service to foreign countries from U.S. Great Lakes ports. The static 
configuration of the St. Lawrence Seaway system and the evolving 
greater size of commercial vessels is one significant shipping change. 
In 1960, the average U.S.-flag general cargo vessel had a deadweight 
tonnage of 10,976; while in 1993, the average U.S.-flag general cargo 
vessel had a deadweight tonnage of 17,464.2 In addition, the 
average size of U.S.-flag vessels used for the carriage of bulk 
agricultural product cargoes has increased greatly during the past ten 
years.
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    \2\Source: Maritime Administration, Office of Trade Analysis and 
insurance.
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    The following table shows the total amounts of bulk agricultural 
product preference cargo moving out of the Great Lakes, and the amounts 
moving on U.S.-flag vessels out of the Great Lakes, during the years 
1986-1993. 

  USDA Export Program Cargoes Emanating from the Great Lakes Subject to 
                            Cargo Preference                            
                            [In metric tons]                            
------------------------------------------------------------------------
                                                               Percent  
    Calendar year       American     Foreign       Total        U.S.    
------------------------------------------------------------------------
1986................       10,518      225,708      236,226          4.5
1987................        6,989      251,252      258,246          2.7
1988................       97,581      124,360      221,941         44.0
1989................      119,271       79,766      199,037         59.9
1990................  ...........  ...........  ...........  ...........
1991................  ...........       26,405       26,405  ...........
1992................  ...........       14,505       14,505  ...........
1993................       36,000       10,004       46,004        73.3 
------------------------------------------------------------------------
Source: Department of Agriculture, Kansas City Commodity Office, Export 
  Operations Division.                                                  

    For the period 1986 through 1993, total USDA controlled 
agricultural export tonnage from the Great Lakes was 1,002,364 metric 
tons. The total tonnage carried by U.S.-flag vessels was 270,359 metric 
tons, or 27 percent. However, little preference cargo has moved on 
U.S.-flag vessels out of the Great Lakes since 1989, with the exception 
of the MORMACSKY trial in 1993, discussed below. At present, the Great 
Lakes simply do not have any all-U.S.-flag ocean freight capability for 
carriage of bulk preference cargo. In contrast, the total non-liner 
export nationwide of USDA and AID agricultural assistance program cargo 
subject to cargo preference in the 1992-3 cargo preference year (the 
latest program year for which figures are available) amounted to 
6,297,015 metric tons, of which 4,923,244 mt. or 78.2 percent was 
transported on U.S.-flag vessels. (Source: Maritime Administration data 
base.)
    The disappearance of government-impelled cargo flowing from the 
Great Lakes coincides with the expiration of the Great Lakes ``set 
aside.'' Under the Food Security Act of 1985, Public Law 99-198, 
codified at 46 App. U.S.C. 1241f(c)(2), a certain minimum amount of 
government-impelled cargo was required to be allocated to Great Lakes 
ports during calendar years 1986, 1987, 1988 and 1989. That ``set-
aside'' expired in 1989, and was not renewed by the Congress.
    The 1993 results reflect a unique movement out of the Great Lakes 
involving a U.S.-flag mother ship and two U.S.-flag feeder vessels. Two 
U.S.-flag lake bulk carriers, the J. L. MAUTHE and the AMERICAN 
MARINER, served as feeders bringing wheat from a U.S. Great Lakes port 
to a Canadian transshipment point where the MORMACSKY, a U.S.-flag 
ocean going vessel, loaded the cargo destined to Russia. All the 
vessels were under the control of U.S.-flag carriers. Reportedly, the 
demonstration was possible as a result of commodity prices in the 
Midwest which favored the Great Lakes over other U.S. ports. However, 
the MORMACSKY experiment has not been duplicated. The high cost of 
U.S.-flag feeder carriage involved in such transshipment would normally 
allow future transshipment only if foreign-flag vessels brought the 
cargo to the Canadian transshipment point and resulted in the lowest 
landed cost.
    This rule would not establish a preference or set aside for the 
Great Lakes. Availability of U.S.-flag service would continue to be 
determined on a national basis. The amount of cargo reserved for U.S.-
flag vessels overall would not decrease because the cargo to be moved 
on foreign-flag feeder vessels to Canadian transshipment points would 
not be ``subtracted out'' from the 75 percent of cargoes reserved for 
U.S.-flag carriage.
    This proposed rule recognizes the operational limitations of the 
St. Lawrence Seaway and makes it possible for U.S. ports situated on 
the Great Lakes to compete with ports located on the other coastal 
ranges of the United States for the shipment of bulk agricultural 
product cargoes. It would not guarantee that cargoes will move through 
Great Lakes ports, but would only allow the Great Lakes ports an 
opportunity to compete for such cargoes. Movements out of the Great 
Lakes would still be required to be cost competitive with U.S.-flag 
service from the other coastal ranges in order to attract cargoes.
    This proposed rule would not interfere with the concept of ``lowest 
landed cost'' contained in the regulations of the Commodity Credit 
Corporation (CCC), a unit of the Department of Agriculture responsible 
for obtaining agricultural products for shipment under various foreign 
aid programs. The CCC regulations, at 7 CFR 1496.5, provide that the 
lowest combined total cost of the commodity, plus transportation 
charges to the port of destination calculated on the basis of U.S.-flag 
rates and availability, will prevail with regard to awarding contracts. 
The proposed combined transportation originating at Great Lakes ports 
would compete on the basis of lowest landed cost with U.S.-flag vessel 
availability from the other port ranges.
    As for determining a ``fair and reasonable'' rate for this mixed 
carriage, the U.S.-flag component would be considered under the 
existing regulations at 46 CFR part 382 or part 383, as appropriate, 
with the cost for the foreign-flag component incorporated into the 
U.S.-flag component in the same way as the cost of foreign-flag vessels 
used in lightening operations in the recipient country's territorial 
waters.

Rulemaking Analyses and Notices

    This rulemaking has been reviewed under Executive Order 12866 and 
Department of Transportation Regulatory Policies and Procedures (44 FR 
11034, February 26, 1979). It is not considered to be an economically 
significant regulatory action under section 3(f) of E.O. 12866, since 
it has been determined that it is not likely to result in a rule that 
may have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities. Since this rule would affect other Federal agencies, is of 
great interest to the maritime industry, and has been determined to be 
a significant rule under the Department's Regulatory Policies and 
Procedures, it is considered to be a significant regulatory action 
under E.O. 12866. The abbreviated time for comment on the one-season 
trial period is necessitated by the opening of the St. Lawrence Seaway 
System on April 5, 1994.
    MARAD projects that this rule would allow the movement of up to 
250,000 to 300,000 metric tons of agricultural commodities from Great 
Lakes ports, with a reduction in the shipping cost to the sponsoring 
Federal agencies of up to $2 to $3 per metric ton ($500,000 to 
$900,000).
    This rule has been reviewed by the Office of Management and Budget 
under Executive Order 12866.

Federalism

    The Maritime Administration has analyzed this rulemaking in 
accordance with the principles and criteria contained in Executive 
Order 12612 and has determined that these regulations do not have 
sufficient federalism implications to warrant the preparation of a 
Federalism Assessment.

Regulatory Flexibility Act

    The Maritime Administration certifies that this rulemaking will not 
have a significant economic impact on a substantial number of small 
entities.

Environmental Assessment

    The Maritime Administration has considered the environmental impact 
of this rulemaking and has concluded that an environmental impact 
statement is not required under the National Environmental Policy Act 
of 1969.

Paperwork Reduction Act

    This rulemaking contains no reporting requirement that is subject 
to OMB approval under 5 CFR Part 1320, pursuant to the Paperwork 
Reduction Act of 1980 (44 U.S.C. 3501 et seq.).

List of Subjects in 46 CFR Part 381.

    Freight, Maritime carriers.

    Accordingly, MARAD proposes to amend 46 CFR part 381 as follows:

PART 381--[AMENDED]

    1. The authority citation for Part 381 would be revised to read as 
follows:

    Authority: 46 App. U.S.C. 1114(b), 1122(d), and 1241; 49 CFR 
1.66.

    2. A new Sec. 381.9 would be added to read as follows:


Sec. 381.9  Available U.S.-flag service for 1994.

    For purposes of shipping bulk agricultural commodities from U.S. 
Great Lakes ports during the 1994 shipping season, if direct U.S.-flag 
service, at fair and reasonable rates, is not available at U.S. ports 
in the Great Lakes, a joint service involving a foreign-flag vessel(s) 
carrying cargo no farther than a Canadian port(s) on the Gulf of St. 
Lawrence, with transshipment via a U.S.-flag privately owned commercial 
vessel to the ultimate destination, will be deemed to comply with the 
requirement of ``available'' commercial U.S.-flag service under the 
Cargo Preference Act of 1954. Shipper agencies considering bids 
resulting in the lowest landed cost of transportation based on U.S.-
flag rates and service shall include within the comparison of U.S.-flag 
rates and service, for shipments originating in U.S. Great Lakes ports, 
through rates incorporating a foreign-flag leg from U.S. Great Lakes 
ports to a Canadian port on the Gulf of St. Lawrence and a U.S.-flag 
leg for the remainder of the voyage. The ``fair and reasonable'' rate 
for this mixed service will be determined by considering the U.S.-flag 
component under the existing regula- tions at 46 CFR part 382 or 383, 
as appropriate, and incorporating the cost for the foreign-flag 
component into the U.S.-flag ``fair and reasonable'' rate in the same 
way as the cost of foreign-flag vessels used to lighten U.S.-flag 
vessels in the recipient country's territorial waters.

    Dated: May 4, 1994.

    By order of the Maritime Administrator.
James E. Saari,
Secretary, Maritime Administration.
[FR Doc. 94-11133 Filed 5-10-94; 8:45 am]
BILLING CODE 4910-81-P