[Federal Register Volume 60, Number 75 (Wednesday, April 19, 1995)]
[Proposed Rules]
[Pages 19559-19560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-9681]



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DEPARTMENT OF TRANSPORTATION

Maritime Administration

46 CFR Part 382

[Docket No. R-158]
RIN AB19


Determination of Fair and Reasonable Rates for the Carriage of 
Bulk and Packaged Preference Cargoes on U.S.-flag Commercial Vessels

AGENCY: Maritime Administration, DOT.

ACTION: Advance Notice of proposed rulemaking.

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SUMMARY: The Maritime Administration is soliciting comments from 
interested persons concerning the need for and content of a revised 
methodology for the determination of fair and reasonable rates. Fair 
and reasonable rate determinations are provided to U.S. government 
shippers of preference cargo, thereby creating ceiling rates which 
limit government costs and the revenue U.S.-flag operators receive for 
ocean cargo transportation.

DATES: Comments must be received before June 19, 1995.

ADDRESSES: Comments should be sent to the Secretary, Maritime 
Administration, room 7210, 400 7th St. SW., Washington DC 20590.

FOR FURTHER INFORMATION CONTACT: Michael P. Ferris, Director Office of 
Costs and Rates, Maritime Administration, Washington, DC 20590, 
Telephone (202) 366-2324.

SUPPLEMENTARY INFORMATION: Section 901(b) of the Merchant Marine Act, 
1936, as amended, 46 App. U.S.C. Sec. 1241(b), cited as the Cargo 
Preference Act of 1954, requires that, with respect to certain cargoes 
which are described as ``government-impelled,'' such as food donation 
programs administered by the State Department or the Department of 
Agriculture, the cognizant government agency or agencies must take 
appropriate steps to assure that at least 50 percent of the gross 
tonnage of such cargoes transported on ocean vessels will be 
``transported on privately owned United States-flag commercial vessels, 
to the extent such vessels are available at fair and reasonable rates 
for United States-flag vessels'' (emphasis added). Section 901b of the 
Food Security Act of 1985 increased the 50 percent carriage requirement 
to 75 percent for agricultural commodities or products shipped under 
certain food donation programs. In 1989, MARAD issued regulations (46 
CFR Part 382, hereafter the Rule) that initially became effective on 
January 1, 1990. The Rule contains regulations that govern the 
calculation of fair and reasonable rates (also referred to as guideline 
rates) for the carriage of bulk and packaged preference cargoes on 
U.S.-flag commercial vessels.
    In an effort to encourage the development of a modern and efficient 
U.S.-flag bulk fleet and to help lower government-wide cargo preference 
program costs, the Maritime Administration is considering changes in 
its methodology for the determination of fair and reasonable rates. The 
Rule prescribes a methodology for determining fair and reasonable rates 
based on individual vessel costs. As a result, during periods of strong 
demand for bulk shipping, certain high cost vessels have been able to 
fix cargoes at rates that significantly exceed those of more efficient 
vessels. This poses a question of equity between the operators of these 
two groups of vessels and raises the possibility that under an 
alternative methodology government program costs could be reduced. 
Additionally, a possible result of the existing Rule is that modern, 
efficient low cost vessels are discouraged from entering the trade. The 
lower ceiling rates imposed on the most cost efficient vessels by the 
current methodology may not allow sufficient profit opportunities to 
justify the risk of a high capital cost investment.
    MARAD is considering whether to conduct a rulemaking with respect 
to the present methodology for determining fair and reasonable rates 
and is seeking information from the public as to an appropriate 
methodology to encourage efficient vessels to enter the trade resulting 
in lower program costs. MARAD has identified three alternative 
methodologies which it might consider as part of a rulemaking. In 
addition, the option exists of keeping the present methodology. The 
methodologies are:

Individual Cost (Existing)

    The existing Rule is based on a methodology which utilizes an 
owner's actual costs for owning and operating the specific vessel used 
in the transportation of the preference cargo. Those costs are prorated 
over the cargo preference voyage and added to the voyage and cargo 
related costs. An allowance for overhead and profit is also included in 
the guideline rate.

Foreign Market Differential

    Under this methodology, MARAD would calculate the added costs 
associated with owning and operating a vessel under the U.S.-flag 
resulting from U.S. laws and regulations and the U.S. standard of 
living. This procedure would identify a modern and efficient target 
vessel or vessels available worldwide and estimate its cost under 
foreign ownership and under U.S. ownership, if operated in the most 
efficient manner practical. The resulting cost differential would be 
prorated over specific voyages, as cargoes are tendered, and added to 
the foreign bids for such voyages to determine the fair and reasonable 
rate for U.S.-flag operators.

Cost Averaging

    A methodology utilizing vessel cost averaging would be constructed 
in much the same manner as the current Rule, except that some level of 
average vessel costs would replace individual vessel costs in the 
calculation of the fair and reasonable rate. There are three basic cost 
areas which would be the most likely candidates for averaging: vessel 
operating costs, vessel capital costs, and fuel. Any one or a 
combination of any of the three cost areas could be included in a cost 
averaging methodology.

Market Based

    Under a market based methodology, an operator's bid would be 
considered fair and reasonable if it were submitted in a competitive 
environment. A competitive environment would be established by a 
required number of qualified bids made by independent and 
[[Page 19560]] nonaffiliated U.S.-flag vessel operators. A market based 
methodology would actually be a combination of methodologies because a 
cost based determination would be made in instances where an 
insufficient number of independent bids were received. The cost based 
rate could be determined as prescribed in the existing Rule or by use 
of some other methodology like those described above. A review of the 
legislative history of the Cargo Preference Act of 1954, Sec. 901(b) of 
the Act, would indicate that a market based methodology may require 
legislation to be implemented. Commenters may wish to address the 
legislative aspect of the market based methodology.
    In order to administer cargo preference programs in a cost 
efficient manner, while developing a modern and efficient fleet, it may 
be necessary to change the existing methodology for determining fair 
and reasonable rates for U.S.-flag commercial vessels. Therefore, any 
comments on proposals to change the methodology in the regulations at 
46 CFR Part 382 should specifically address any existing problems with 
the present methodology, specific suggestions for alternative 
methodologies, and a rationale for acceptance of any proposed 
methodologies. Comments will aid MARAD's evaluation of the Rule and the 
development of appropriate alternatives. MARAD is requesting that any 
person, corporation, or other entity having any interest in, or 
desiring to offer views and comments on, MARAD's fair and reasonable 
rate methodology, submit them in writing. After reviewing the comments, 
MARAD will decide whether to propose a change in the methodology 
employed for the determination of fair and reasonable rates, as well as 
what revisions to propose.
    The public is advised that the purpose of this ANPRM is to solicit 
information and views from commenters that MARAD can use in evaluating 
its methodology of determining fair and reasonable rates for the 
carriage of bulk and packaged preference cargoes on U.S.-flag bulk 
vessels and in deciding whether to proceed with a rulemaking to amend 
46 CFR Part 382. MARAD has separate regulations at 46 CFR Part 383 (the 
liner Rule) dealing with the carriage of less-than-shipload lots of 
bulk preference cargoes on vessels in a liner service. Common carrier 
liner services are substantially different from bulk services in their 
cost structure and service requirements. However, the information, 
ideas or views provided by commenters may have some impact on any liner 
rulemaking and the public is invited to comment on such impact.

Rulemaking Analysis and Notices

Executive Order 12866 (Regulatory Planning and Review)

    This advance notice of proposed rulemaking has been reviewed under 
Executive Order 12866 and Department of Transportation Regulatory 
Policies and Procedures (44 FR 11034, February 26, 1979). If a rule is 
actually promulgated, it would not be considered an economically 
significant regulatory action under Section 3(f) of E.O. 12866, since 
it has been determined that it would not result in an annual effect on 
the economy of $100 million or more or adversely affect in a material 
way the economy, productivity, competition, jobs, the environment, 
public health or safety, or State, local, or tribal governments or 
communities.
    While any rule that might be promulgated would not involve any 
change in important Departmental policies, it would be considered 
significant because it addresses a matter of considerable importance to 
the maritime industry and would be expected to generate significant 
public interest. A preliminary regulatory evaluation will be prepared 
based on the comments to this advance notice of proposed rulemaking.

Federalism

    The Maritime Administration has analyzed this advance notice of 
proposed rulemaking in accordance with the principles and criteria 
contained in Executive Order 12612 and has determined that any rule 
that might be subsequently promulgated would not have sufficient 
federalism implications to warrant the preparation of Federalism 
Assessment.

Regulatory Flexibility Act

    The Maritime Administration certifies that any rule that might be 
promulgated subsequent to this advance notice of proposed rulemaking 
would not have a significant economic impact on a substantial number of 
small entities.

Environmental Assessment

    Any rule that might be subsequently promulgated would not 
significantly affect the environment. Accordingly, an Environmental 
Impact Statement would not be required under the National Environmental 
Policy Act of 1969.

Paperwork Reduction Act

    Any rule that might be promulgated would not significantly change 
the current requirement for the collection of information. The Office 
of Management and Budget (OMB) has reviewed the current Rule under the 
Paperwork Reduction Act (44 U.S.C. S3501 et seq.), and has approved it 
under OMB Approval Number 2133-0514.

    By order of the Maritime Administrator.

    Dated: April 13, 1995.
Joel C. Richard,
Secretary.
[FR Doc. 95-9681 Filed 4-18-95; 8:45 am]
BILLING CODE 4910-81-P