[Federal Register Volume 60, Number 95 (Wednesday, May 17, 1995)]
[Notices]
[Pages 26409-26411]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-12071]



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DEPARTMENT OF DEFENSE
Department of the Army


International Personal Property Program--Synopsis of Comments 
Received

AGENCY: Military Traffic Management Command, DOD.

ACTION: Notice (Provide industry a synopsis of comments received from 
the carrier industry regarding the increase in carrier liability for 
international shipments and the elimination of the valuation charges 
for domestic shipments).

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SUMMARY: The following synopsis includes the comments received from a 
total of six carriers/associations/bureaus and MTMC's response to each 
of these comments:
    1. Comment: MTMC's proposal states that it is based upon the 
results of a [[Page 26410]] General Accounting Office (GAO) study. This 
study has not yet been released by GAO in final form. Thus any attempt 
to implement the so-called findings of this study is premature.
    MTMC Response: MTMC recognizes the proposal to increase liability 
to $1.25 times the net shipment weight is based on a draft GAO report. 
MTMC anticipates the final study will recommend the increase in carrier 
liability. However, MTMC will review its proposal should GAO decide to 
change the final study recommendations.
    2. Comment: Concerned that GAO has misinterpreted the data 
collected and thus drawn some erroneous conclusions. Believe that GAO 
has used an inflation index that has overstated the actual level of 
inflation between 1986 and 1993.
    MTMC Response: MTMC changes to the domestic and international 
solicitations will be based on a GAO's recommendations.
    3. Comment: Change to the $1.25 carrier liability will expose the 
Government to significant additional risk of stranding shipments by 
increasing the possibility of carriers going bankrupt and out of the 
program. Any increase in carrier liability beyond the base liability of 
$.60 per pound per article must be accompanied by an appropriate 
compensatory valuation charge, as in commercial practice. Failure to 
pay this charge will inappropriately transfer costs onto the shoulders 
of private industry. Nothing is accomplished in carrier liability in 
the international program except to transfer liability from the 
military to the mover.
    MTMC Response: MTMC believes international carriers will be able to 
adapt to the increase in carrier liability to $1.25 times the net 
shipment weight just as carriers have adapted to a similar increase in 
the domestic program and the increase in carrier liability to $1.80 per 
pound per article in the international program. MTMC feels confident 
that carriers will be able to adjust their rates appropriately, to 
include costs for the increase in carrier liability. In addition, as 
recommended by GAO, MTMC will compensate carriers with an appropriate 
valuation charge.
    4. Comment: By making household goods carriers liable for much more 
of the claims costs, the Government simply transferred responsibility 
for paying these costs to the carriers. This shifting of claims costs 
can be characterized as more of a tax than a savings.
    MTMC Response: MTMC's desire is to transfer responsibility for loss 
and damage to carriers and to improve carrier quality control and 
assurance programs. Limited or undervalued liability provisions do not 
incentivize carriers to provide quality service. In addition, after 
MTMC raised the domestic carrier liability in May 1987, carrier rated 
did not significantly increase. A study of selected personal property 
shipping offices (PPSOs) did not show significant increases. Some 
decrease in rates occurred. Carriers with successful programs to reduce 
loss and damage will be subjected to a reduced frequency of claims and 
reduction in overall claims cost, to include personnel costs associated 
with claims processing.
    5. Comments: If increase in carrier liability to $1.25 did not have 
the desired effect in the domestic market, there is no reason to expect 
that it would work in the international market.
    MTMC Response: Changes to the domestic and international 
solicitations will be based on GAP's recommendations. GAO concluded the 
$1.25 minimum released valuation for domestic shipments and resulted in 
reducing shipment loss and damage and overall program cost.
    6. Comment: Nothing is accomplished by the increase in carrier 
liability in the program except to transfer liability from the military 
to the mover. The liability level should either be returned to the $.60 
per pound per article, or carriers should be adequately compensated for 
the additional liability.
    MTMC Response: MTMC's desire is to transfer responsibility for less 
and damage to carriers and to improve carrier quality control and 
assurance programs. Limited or undervalued liability provisions do not 
incentive carriers to provide quality service. In addition, after MTMC 
raised the domestic carrier liability in May 1987, carrier rates did 
not significantly increase. A study of selected PPSOs did not show 
significant increase. Some decrease in rates occurred. Carriers with 
successful programs to reduce loss and damage will be subjected to 
reduced frequency of claims and reduction in overall claims cost, to 
include personnel costs associated with claims processing.
    7.Comment: MTMC proposes to set the valuation charge for 
international shipments at $1.28 for $100 declared value. The GAO 
report shows that this level with be inadequate. It must be increased 
to a reasonable level.
    MTMC Response: MTMC is revising the compensation charge originally 
proposed in the Federal Register for international shipments. The 
following are the valuation charges in effect for 3 years: $2.04 for 
the first year (1 Oct 95-30 Sep 96); $1.36 for the second year (1 Oct 
96-30 Sep 97); and $.68 for the third year (1 Oct 97-30 Sep 98). 
Effective 1 Oct 98, the valuation charge will be eliminated.
    8. Comment: Table 3.2 of the GAO draft report shows an average cost 
to carriers of $6.2 million over FY 89 to FY 91, with liability at 60 
cents per pound per article. When the liability is increased to $1.25, 
GAO projects a recovery from carriers of $22.5 million. To compensate 
carriers for the $16.3 million difference, a valuation charge of $2.31 
would be required. If MTMC is not willing to pay this compensation, it 
should return carrier liability to the 60 cents per pound per article 
level.
    MTMC Response: MTMC does not agree with the recommendation to 
compensate carriers with a valuation charge of $2.31 for each $100 
declared value. However, MTMC is implementing the following valuation 
charge, which will be in effect for 3 years: $2.04 for the first year 
(1 Oct 95-30 Sept 96); $1.36 for the second year (1 Oct 96-30 Sep 97); 
$.68 for the third year (1 Oct 97-30 Sep 98). The valuation charge will 
be eliminated effective 1 Oct 98.
    9. Comment: Strongly agree with GAO's recommendation to shorten the 
time that a DOD member is given to file his/her claim for damages to 
one year from the current 2 years.
    MTMC Response: Claims matters are under the purview of the U.S. 
Army Claims Service. Comments regarding claims will be forwarded to 
them for review.
    10. Comment: The two most important cost components which affect 
increase or decrease in the transportation rate level, in addition to 
carrier liability, are steamship costs and fluctuation in foreign 
currency. These factors do not exist in connection with the domestic 
program and their very absence underscores the unreliability and 
illogic of using domestic experience as a predictor of the impact of 
the $1.25 liability on the international program.
    MTMC Response: MTMC has established a separate compensation factor 
for international shipments. See MTMC response to comment number 8.
    11. Comment: Suggest MTMC let carriers settle claims directly with 
the member, both for the International and Domestic programs. This is 
what is really going to save the Government money, not the proposal in 
the Federal Register.
    MTMC Response: At this time, MTMC proposes no changes to the claims 
settlement process. However, MTMC is considering direct claims 
settlement as part of the reengineering initiative.
    12. Comment: In the Domestic program, the current valuation charge 
of [[Page 26411]] $.64 per $100 of declared value should not only be 
retained, but increased to $1.35 per $100 of declared value. Removing 
the $.64 valuation charge will simply serve to take even more money 
away from carriers, with no valid reason. Unless liability level is 
returned to $.60 per pound per article, the valuation charge is needed 
in return.
    MTMC Response: MTMC agrees with GAO's recommendation that the 
valuation charge is unnecessary. Carriers should include appropriate 
claims costs in their rates. MTMC is examining alternatives to phase 
out/eliminate the valuation charge.
    13. Comment: The Total Quality Assurance Program and the High Risk 
Item Protection Program and the present carrier liability should be 
used for evaluation and utilized to reach a supportable decision.
    MTMC Response: The commenter has mixed evaluation of carrier 
services with liability for loss and damage. Each of these areas is 
separate and distinct. Also, the industry's HRIP is an excellent 
initiative to reduce loss and damage; however, this also is a quality 
control/assurance tool and should not be confused with carrier 
liability when loss/damage does occur.
    14. Comment: It is unfair and not justified to hold international 
carriers responsible for the full value of damages incurred on an 
international move. The movement in international trade is many times 
outside the carrier's direct control, such as movement by vessel, 
aircraft, or the movement of goods in foreign lands. It is just and 
right that the Government should take part in a portion of that risk.
    MTMC Response: MTMC recognizes international personal property 
shipments require additional handling and over-ocean movement. 
Accordingly, MTMC expects carriers to subcontract with ocean and 
linehaul carriers and other parties that provide quality service and 
damage-free movement. MTMC also expects carriers to have appropriate 
provisions in their contracts with underlying service providers, which 
include adequate reimbursement options for loss and damage.

FOR FURTHER INFORMATION CONTACT: Questions should be referred to Mr. 
Alex Moreno, MTOP-T-NP, (703) 756-2383.
Gregory D. Showalter,
Army Federal Register Liaison Officer.
[FR Doc. 95-12071 Filed 5-16-95; 8:45 am]
BILLING CODE 3710-08-M