[Federal Register Volume 60, Number 89 (Tuesday, May 9, 1995)]
[Rules and Regulations]
[Pages 24560-24562]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11272]



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DEPARTMENT OF TRANSPORTATION

Maritime Administration

46 CFR Part 381

[Docket No. R-153]
RIN 2133-AB17


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

AGENCY: Maritime Administration, Department of Transportation.

ACTION: Final rule.

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SUMMARY: This amendment to the cargo preference regulations of the 
Maritime Administration (MARAD) would provide that during the 1995 
shipping season when the St. Lawrence Seaway is in use, MARAD will 
consider the legal requirement for the carriage of bulk agricultural 
commodity preference cargoes on privately-owned ``available'' U.S.-flag 
commercial vessels to have been satisfied where the cargo is initially 
loaded at a Great Lakes port on one or more U.S.-flag or foreign-flag 
vessels, transferred to a U.S.-flag commercial vessel at a Canadian 
transshipment point outside the St. Lawrence Seaway, and carried on 
that U.S.-flag vessel to a foreign destination. This amendment allows 
Great Lakes ports to compete for agricultural commodity preference 
cargoes during an entire season trial period.

EFFECTIVE DATE: This final rule is effective on May 9, 1995.

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 at 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, requires that 
at least 75 percent of certain agricultural product cargoes 
``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.'' The Secretary of Transportation intends to 
administer that program so that all ports and port ranges may 
participate.

1994 Rulemaking

    On August 8, 1994, MARAD published a final rule on this subject in 
the Federal Register (59 FR 40261). That rule stated that it was 
intended to allow U.S. Great Lakes ports to participate with ports in 
other U.S. port ranges in the carriage of bulk agricultural commodity 
preference cargoes. It cited as justification for the rule dramatic 
changes in shipping conditions that 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. It further stated 
that the static configuration of the St. Lawrence Seaway system and the 
evolving greater size of commercial vessels contributed to the 
disappearance of any all-U.S.-flag service.
    No preference cargo has moved on U.S.-flag vessels out of the Great 
Lakes since 1989, with the exception of one trial shipment in 1993. 
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 Great Lakes ``set-
aside'' expired in 1989, and was not renewed by Congress. The 
disappearance of Government-impelled cargo flowing from the Great Lakes 
coincided with the expiration of the Great Lakes ``set aside.''
    At the time of the opening of the 1994 Great Lakes shipping season 
on April 5, 1994, the Great Lakes did not have any all-U.S.-flag ocean 
freight service for carriage of bulk preference cargo. In contrast, the 
total export nationwide by non-liner vessels of USDA and USAID 
agricultural assistance program cargoes subject to cargo preference in 
the 1992-1993 cargo preference year (the latest program year for which 
figures are available) amounted to 6,297,015 metric tons, of which 
4,923,244, or 78.2 percent, was transported on U.S.-flag vessels. 
(Source: Maritime Administration database.)
    MARAD issued the 1994 rule to provide Great Lakes ports with the 
opportunity to compete for agricultural commodity preference cargoes 
for only the 1994 Great Lakes shipping season cargoes, and to assess 
the results.

Inadequate 1994 Trial Period

    As predicted by numerous commenters on the first notice of proposed 
rulemaking (NPRM), published on May 11, 1994 (59 FR 24390), the timing 
of the final rule did not allow for a true trial period since it was 
actually in effect for less than one-half of the 1994 Great Lakes 
shipping season. Because of the long lead time required for arranging 
shipments of bulk agricultural commodity preference cargoes, there was 
no real opportunity [[Page 24561]] for U.S.-flag vessel operators to 
make the necessary arrangements to bid on preference cargoes.

Second NPRM

    Because the publication of the 1994 final rule occurred too late to 
allow participants in the shipment of agricultural commodity preference 
cargoes to arrange shipments from Great Lakes ports, no shipments 
occurred in 1994. Accordingly, MARAD was not able to evaluate the 
impact of the 1994 amendment, and issued a second NPRM on February 1, 
1995 (60 FR 6068), that proposed to extend the trial period for 
applying its policy for shipment of preference cargoes on available 
U.S.-flag vessels through the 1995 Great Lakes shipping season.
    MARAD received twelve (12) comments on this second NPRM from 
individual Great Lakes ports, a Federal shipper agency, Great Lakes 
grain carriers, grain producers and exporters, and a commodity 
exchange. All commenters enthusiastically supported the amendment as a 
minimal initial action that would allow Great Lakes ports to 
participate in the bulk agricultural cargo preference trade by being 
able to offer service at competitive rates. Most commenters supported a 
longer trial period, or requested that the rule be made permanent. They 
cited equity as being the paramount justification.
    In reiterating last year's statement that the trial period should 
extend for several navigation seasons or until U.S.-flag vessels resume 
operations on the Great Lakes, a commenter asserted that not only is it 
difficult to assess any benefits based on only one shipping season, but 
that shippers are reluctant to change their shipping patterns for a 
short period of time, knowing that they must revert back to the ``old 
way,'' irrespective of their recognition of a cost advantage during 
that short period. MARAD will issue another proposed rule to extend the 
trial period for at least three years if it determines that this 
amendment actually was responsible for the carriage of agricultural 
commodity cargoes from Great Lakes ports to foreign destinations on 
available U.S.-flag vessels during the 1995 Great Lakes shipping 
season.
    Another commenter urged MARAD to promulgate a rule that allows 
shipment of agricultural commodities from a Great Lakes port for the 
entire voyage, from origin to destination, on foreign-flag vessels 
where U.S.-flag vessels are not available for such voyages from Great 
Lakes ports. The commenter argued that this policy will allow the Great 
Lakes ports greater participation in USDA and USAID agricultural 
assistance program cargoes. That proposal is contrary to the provisions 
and intent of the Cargo Preference Act of 1954, and of this rulemaking.
    Based on the unequivocal support of all the commenters for 
modification of the interpretation of ``available'' U.S.-flag 
commercial vessels for the carriage of bulk agricultural commodity 
preference cargoes from Great Lakes ports, MARAD is adopting as a final 
rule, without change, the text of the NPRM.

Rulemaking Analyses and Notices

Executive Order 12866 (Regulatory Planning and Review)

    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. However, 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.
    MARAD expects that this rule could allow, in the 1995 Great Lakes 
season, the movement of up to 300,000 metric tons of agricultural 
commodities from Great Lakes ports, with a reduction in the shipping 
cost to sponsoring Federal agencies of up to $3 per metric ton 
($900,000). Because the Great Lakes shipping season opened on March 24, 
MARAD has determined, pursuant to 5 U.S.C. 553(d), that good cause 
exists to make this rule effective on publication.
    MARAD will evaluate the results of the one-season trial period 
before determining whether to issue a rule to make this arrangement 
permanent.
    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 it has been determined that it does 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 hereby amends 46 CFR part 381 as follows:

PART 381--[AMENDED]

    1. The authority citation for Part 381 continues to read as 
follows:

    Authority: 46 App. U.S.C. 1101, 1114(b), 1122(d) and 1241; 49 
CFR 1.66.

    2. Section 381.9 is revised to read as follows:


Sec. 381.9  Available U.S.-flag service for 1995.

    For purposes of shipping bulk agricultural commodities under 
programs administered by sponsoring Federal agencies from U.S. Great 
Lakes ports during the 1995 shipping season, if direct U.S.-flag 
service, at fair and reasonable rates, is not available at U.S. Great 
Lakes ports, a joint service involving a foreign-flag vessel(s) 
carrying cargo no farther than a Canadian port(s) or other point(s) on 
the Gulf of St. Lawrence, with transshipment via a U.S.-flag privately 
owned commercial vessel to the ultimate foreign 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 (if offered) to a Canadian port 
or other point on the Gulf of St. Lawrence and [[Page 24562]] 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 regulations 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. Alternatively, 
the supplier of the commodity may offer the Cargo FOB Canadian 
transshipment point, and MARAD will determine fair and reasonable rates 
accordingly.

    Dated: May 3, 1995.

    By Order of the Maritime Administrator.
Joel Richard,
Secretary, Maritime Administration.
[FR Doc. 95-11272 Filed 5-8-95; 8:45 am]
BILLING CODE 4910-81-P