[Federal Register Volume 60, Number 230 (Thursday, November 30, 1995)]
[Rules and Regulations]
[Pages 61472-61479]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28474]
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DEPARTMENT OF TRANSPORTATION
Office of the Secretary
14 CFR Parts 221 and 292
[Docket No. 49827]
RIN 2105-AC09
Exemption From Property Tariff-Filing Requirements
AGENCY: Office of the Secretary, DOT.
ACTION: Final rule.
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SUMMARY: The Department is exempting U.S. and foreign air carriers from
their statutory and regulatory duty to file international property
(``cargo'') tariffs with DOT, subject to the reimposition of the duty
in specific cases when consistent with the public interest. Commencing
with the date of effectiveness of the final rule, currently effective
rate tariffs are canceled as a matter of law, pending tariff
applications are dismissed, and new tariffs will not be accepted for
filing. In response to comments, currently effective cargo rules
related to carrier
[[Page 61473]]
rights and/or obligations, set forth in general governing rules
tariffs, may continue in legal effect for 90 days from the date of
effectiveness of the final rule, although carriers may elect to cancel
them earlier and also may deviate from such rules through express
contract. This action is taken on the Department's initiative in order
to streamline government operations and eliminate unjustified
regulatory burdens.
DATES: This regulation is effective on November 30, 1995.
However the cancellation of certain tariffs pursuant to the first
sentence of Sec. 292.22(b) will take place on March 1, 1996.
FOR FURTHER INFORMATION CONTACT: Mr. Keith A. Shangraw or Mr. John H.
Kiser, Office of the Secretary, Office of International Aviation, X-43,
Department of Transportation, 400 Seventh Street SW., Washington, DC
20590. Telephone: (202) 366-2435.
SUPPLEMENTARY INFORMATION:
Background
Section 41504 of Title 49 of the United States Code requires every
U.S. and foreign air carrier to file with the Department, and to keep
open for public inspection, tariffs showing all prices for foreign air
transportation between points served by that carrier, as well as all
rules relating to that transportation to the extent required by the
Department. This includes prices and rules for the carriage of cargo.
Over the years, cargo rate tariffs have provided U.S. regulatory
authorities with a means to exercise close regulatory supervision over
cargo pricing, either for consumer protection and other public policy
reasons, or in the context of bilateral aviation relations. While much
less frequent, regulatory supervision of cargo rules was also
occasionally exercised. During the last two decades, however, cargo
tariff requirements have been reduced substantially by both legislative
and regulatory action in favor of placing primary reliance on
competitive market forces to achieve essential public policy
objectives.1 For this and other reasons discussed in our Notice of
Proposed Rulemaking (NPRM), published October 24, 1994 (59 FR 53377),
we have tentatively found that the remaining cargo rate tariffs are no
longer necessary to protect the public interest, and that this tariff
regime is costly and burdensome to everyone associated with it.
\1\ In the cargo area, only international scheduled cargo rate
tariffs continue to be filed with the Department. Domestic scheduled
service cargo tariffs were eliminated in 1978 by Regulation ER-1080,
43 FR 53635, November 16, 1978. Similarly, both domestic and
international charter rate tariffs were eliminated in 1979 by ER-
1125, 44 FR 33056, June 8, 1979, while domestic and international
tariffs of air freight forwarders (part of a class of carriers
called ``indirect cargo air carriers'' or ``foreign indirect air
carriers'') were eliminated by ER-1094, 44 FR 6634, February 1,
1979, and by ER-1159, 44 FR 69635, December 4, 1979.
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As discussed in the NPRM, the Department's regulatory policy
regarding international cargo rates appears at 14 CFR Sec. 399.41.
Under this regulation, carrier prices in most international cargo rate
categories are effectively deregulated.2 Barring extreme
circumstances, the only tariff rates over which we continue to exercise
regulatory supervision are general cargo rates (GCRs) up to and
including the 500 kilogram weightbreak, and certain non-standard
``exception'' rates.3 Even this oversight is not applicable to
markets governed by bilateral air transport agreements that establish
liberal entry and pricing regimes.
\2\ Agreements containing international cargo rates that
carriers coordinate through the tariff conferences of the
International Air Transport Association (IATA) must be filed with
and approved by the Department before they can be implemented. These
agreements are subject to economic justification requirements and
Department analysis that are independent of its tariff policy and
procedures. The new rule is not intended to affect the review of
IATA agreements in any way.
\3\ Section 399.41 set zones of pricing flexibility for GCRs up
to 500 kilograms, and established a Standard Foreign Rate Level
(SFRL) for each market as the basis for these zones of flexibility.
The SFRL is recalculated periodically to reflect changes in the cost
experiences of the carriers. The SFRL zones also govern exception
rates, priced at levels higher than comparable GCRs for shipments of
live animals, perishable goods and other kinds of specialized cargo.
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Since the regulation's adoption in 1983, virtually no complaints
have been received against filed cargo tariffs, and in many markets
carriers have not used the upward flexibility available to them to
raise rates to the SFRL ceilings. The international cargo market has
continued to evolve to the point where today we believe we no longer
need to rely on the routine government supervision of cargo tariffs to
protect the public.
Yet, carriers are still filing, and we are still processing,
thousands of pages of tariff material each year that has little, if
any, meaningful regulatory consequence.4 Requiring carriers to
continue filing cargo tariffs thus burdens the industry unnecessarily,
and continuing the physical processing and storage of such tariffs at
the Department needlessly wastes scarce and diminishing governmental
resources.
\4\ In 1994 alone, we received and processed 9,721 pages of
cargo tariffs.
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We have therefore proposed to amend our tariff regulations to end
the routine filing and review of price and other tariff information
relating to the scheduled foreign air transportation of cargo, i.e. to/
from U.S. points. As in the case of the previous elimination of
domestic and other cargo tariffs, this proposal would take the form of
an exemption of U.S. and foreign carriers from their statutory and
regulatory duty to file with the Department, and adhere to, tariffs
containing rates or any other rules or conditions of service relating
to such transportation. The exemption would encompass all material
currently filed in international cargo tariffs with the
Department.5 Similarly, the exemption would be mandatory; it would
not permit such filings. However, the duty to file tariffs in any
respect could be reimposed in particular cases where consistent with
the public interest.
\5\ Part 221 provides for the filing of up to four seperate
kinds of international cargo tariffs: rates tariffs, governing rules
tariffs, rate classification tariffs, and restricted articles
tariffs.
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Comments
We received comments on our proposal from Aeromexpress, S.A. de
C.V.; the Air Freight Association (AFA); the Air Transport Association
of America (ATA); American Airlines, Inc. (American); Athearn
Transportation Consultants, Inc. (Athearn); British Airways PLC (BA);
Evergreen International Airlines, Inc. (Evergreen); Haupauge Industrial
Association (HIA); the International Air Transport Association (IATA);
International Support Systems (ISS); Korean Air Lines, Co. (KAL);
Nippon Cargo Airlines Co., Ltd. (Nippon); Ocean Freight Consultants,
Inc. (OFC); Pakistan International Airlines (PIA); and United Air
Lines, Inc. (UAL).
In general, the carriers, ATA and AFA support the proposal; IATA
takes no position on the elimination of the requirement to file rate
tariffs, but supports the continued filing of cargo rules tariffs; HIA
wants the Department to require carriers to make information on their
cargo rates available to shippers within a reasonable amount of time;
and Athearn, ISS and OFC oppose the proposal in its entirety.
ATA, AFA, and several carriers, however, condition their support
upon several modifications or clarifications to the proposal regarding
(1) its effect on their ability to incorporate contract terms by
reference and/or provide requisite public notice, and (2) its effect
[[Page 61474]]
on federal preemption of State law governing contracts or the
regulation of common carriers. Their position on both issues coincides
in certain fundamental respects with IATA's reasons for urging the
continued filing of cargo rules tariffs, and therefore we will discuss
these comments together. Then we will address the arguments of the
parties who support the continuation of cargo rates tariffs as well.
Decision
We have decided to adopt the NPRM substantially as proposed.
However, we are making certain minor changes in response to the
comments. First, as a transition measure, we will permit the carriers
to maintain in effect as official tariffs their current rules relating
to the general conditions of carriage,6 for a period of up to
ninety days, in order to maintain the legal framework for current
contracts while the carriers are drafting new language for air waybill
and/or other documents to provide acceptable forms of actual notice to
shippers of such terms. We do not find a similar transitional need for
cargo rate tariffs, including related applicability rules,7
because pricing is a key term negotiated and stated in every contract.
At the same time, we are providing expressly that carriers may cancel
any or all rules tariffs prior to 90 days, and that they may deviate
from any filed rules by express contract provision. Second, we are
providing explicitly that carrier compliance with the notice
requirements set forth in 14 CFR 221.177 permits incorporation of
contract terms as a matter of federal law, and that such requirements
supercede any contrary State contract law requirements relating to
incorporation by reference. On the other hand, we are also making clear
that terms cannot be enforced against shippers without proper notice.
We also make explicit, in our discussion below, that this cargo tariff
exemption is not intended to undermine in any respect the scope of the
statutory preemption of State economic regulation provided under 49
U.S.C. 41713.
\6\ This would include all rules in separate governing rules
tariffs and separate restricted articles tariffs.
\7\ This would include rate ``classification'' tariffs, which,
as IATA notes, may be filed in the rate tariffs or separately.
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We find that this final rule should be made effective immediately
upon publication in the Federal Register because it grants an exemption
from costly regulatory burdens and relieves certain restrictions.
Discussion of Comments and Issues
1. Notice. Most of the concerns raised by our proposal involve the
issue of legal notice of contract terms. While taking no position on
the elimination of the requirement to file cargo rate tariffs, IATA
contends that the proposed rule should be amended to permit the
continued filing of cargo rules tariffs governing such matters as
consignments, liability for loss, claims procedures, handling of
dangerous or other restricted goods, acceptability of cargo, and other
general matters of concern to shippers of cargo to/from U.S. points. It
argues primarily that such rules should continue to be deemed a part of
each contract of carriage as a matter of tariff law, regardless of any
actual notice to shippers of their existence or content.8 ATA,
AFA, American and United support the elimination of all official
tariffs, but want the proposed rule amended or clarified so that a
carrier's continued publication of its cargo tariffs or the ``filing of
its rates and rules with a named tariff publishing agent'' will
``provide constructive notice to the public of their contents.'' 9
In the alternative, ATA and American request that cargo tariffs be
permitted to remain in effect for 180 days in order to allow carriers
to revise existing air waybill language to provide adequate notice of
all contract terms. British Airways requests at least a 90-day
transition period, paralleling the action of the Civil Aeronautics
Board (CAB) in eliminating charter tariffs, forwarder tariffs and
carrier tariffs for domestic cargo transportation.
\8\ See, e.g. Slick Airways, Inc. v. U.S., 292 F. 2d 515 (1961).
\9\ ATA comments, page 3.
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IATA joins ATA, American and British Airways in arguing that an
immediate elimination of official rules tariffs will cause a disruption
in the administration of existing contracts because most waybills state
only generally that carriage is subject to the carrier's ``applicable
tariffs.'' 10 We are persuaded, as was the CAB in taking similar
actions, that a brief transition period of 90 days is justified to
permit clarification of any existing contracts that may be rendered
ambiguous by reference to rules tariffs no longer officially on file
with the Department and to facilitate the redrafting of waybills and
other contract documents to provide acceptable actual notice of any
missing terms, whether through incorporation by reference or otherwise.
A longer period may cause confusion and appears unnecessary. Carriers
are neither required nor expected to completely replace their current
waybill stock in this 90-day period. The period should be sufficient,
however, for them to print notices or other supplemental contractual
materials to conform such stock to the new environment until it can be
replaced. Carriers needing less time should be able to cancel their
rules tariffs when ready, while no carrier should be bound to tariffs
on file during the transition where negotiations with shippers suggest
a different result.
\10\ The argument presumes that such a general reference would
not constitute a valid ``incorporation by reference'' of tariff
provisions into the contract of carriage under State contract law,
nor would it fully comply with the Department's notice regulations
in 14 CFR Part 221. Without the specificity of certain tariff
provisions, these parties contend, the waybill contract might be
rendered ambiguous or uncertain.
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IATA argues that in the longer term eliminating rules tariffs will
not only force carriers to incur the cost of redrafting waybills or
other contract documents to provide adequate forms of notice of
contract terms, but also that efforts to incorporate terms by reference
could engender litigation under State contract law. It also contends
that many matters not now subject to direct carrier-shipper negotiation
would become so, with the effect of reducing uniformity among carriers,
complicating transactions, and hindering the introduction of a
paperless ``electronic data interface.'' In IATA's view, such burdens
greatly outweigh the perceived cost savings related to the elimination
of rules which assertedly change infrequently and impose relatively few
administrative costs on DOT and filing parties. IATA contends that the
Department's ``narrow cost-benefit analysis'' fails to recognize that
the tariff system provides the most efficient means of establishing
uniform, binding and predictable contract conditions of carriage, and
that therefore the Department has failed to demonstrate that the
exemption is ``compelled'' by the public interest.
At the outset, we note that IATA's position contains two
fundamental errors. First, the filing of rules tariffs is not a
statutory requirement. Rather, rules are to be filed to the extent that
the Secretary requires by regulation. It is sufficient to find that the
continued filing and review of such tariffs can no longer be justified
by the public interest factors underlying the promulgation of the
original filing requirement in Part 221, which is certainly the case.
Secondly, we do not presume that carriers will cease publishing their
rates and rules in tariff-like formats. To the contrary, we assume that
the carriers will continue to promulgate, publish and disseminate,
directly or through
[[Page 61475]]
agents, a number of documents containing both rules and rates, as
indicated by ATA, American and United. In addition to foreign tariff-
filing requirements, the carriers indicate that such publications are
necessary to reach potential customers and to incorporate terms into
the waybill by reference, where necessary.
IATA's characterization of constructive notice of official tariff
material as more ``efficient'' than the forms of actual notice that
have been used successfully where cargo tariffs have been eliminated
is, in our view, questionable. More fundamentally, its emphasis on
official tariffs as a means to produce ``uniformity'' among carrier
rules ignores many of the considerations of procompetitive and market-
oriented public policy that underlay previous reductions in filing
requirements. Those considerations are equally present here and form an
additional basis for our conclusion that the continued filing of
international cargo rates and rules tariffs is no longer in the public
interest.
Most of IATA's arguments relating to the long-run desirability of
maintaining constructive notice of cargo rules through filed tariffs
are similar to those found unpersuasive by the Civil Aeronautics Board
when it eliminated domestic cargo tariffs and international air freight
forwarder tariffs.11 More importantly, IATA has not effectively
challenged the reasons given in the NPRM for concluding that the
elimination of filed tariffs should have no significant impact on the
ability of carriers and shippers to deal with the general terms and
conditions of carriage.
\11\ Moreover, when it adopted uniform rules for incorporation
by reference of domestic passenger conditions in 14 CFR Part 253,
the CAB found that insufficient grounds had been presented to
warrant extending those rules to domestic cargo transportation.
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Thus, the NPRM noted that domestic cargo tariffs were eliminated
without significant difficulty; that international forwarder tariffs
were eliminated in 1979 with no apparent adverse effect on the
forwarders' ability to do business with their customers, many of whom
are smaller shippers; that most international small shipper traffic is
handled by large forwarder intermediaries and small package specialists
who are familiar with direct carrier services and are able to negotiate
the best price/service options; that most areas of potential carrier
and shipper concern are governed directly by provisions of the Warsaw
Convention and that, largely as a result of its requirements, the basic
conditions of service for international cargo transportation are
already stated in the carriers' waybills; and that to the extent that
shippers have questions about the application or interpretation of
certain contract provisions, it is likely that they consult the carrier
directly rather than its tariffs. IATA has not demonstrated that the
elimination of cargo rules tariffs in the past has created any of the
longer-term difficulties it describes, nor has it even alleged that to
be the case. Moreover, IATA does not address the fact that domestic
cargo carriers have functioned effectively without the presumed
advantage of federal incorporation rules, since 14 CFR Part 253 was
limited to passenger transportation. All general conditions of domestic
carriage are either fully stated on contract documents or are
incorporated by reference to other sources accessable to shippers
without apparent significant risk of challenge under State contract law
requirements.12
\12\ A typical domestic waybill incorporates by reference the
``rates, rules and classifications set forth in the most recent
Official Airline Cargo Rate Tariff,'' an unofficial carrier
document. All other terms and conditions are stated on the waybill.
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While IATA and AFA both assert that international rates,
classifications, and rules are more complex than domestic ones, they
have not cited significant differences, nor have they indicated how
current international waybills or other transportation documents would
need to be revised to provide sufficient actual notice of all necessary
conditions of carriage.13 AFA has not discussed examples of
revisions required by the elimination of international forwarder
tariffs in 1979. Moreover, no party has challenged the Department's
observation that international waybills are already drafted with
considerable specificity to accommodate the detailed requirements of
the Warsaw Convention, which governs major elements of the contract of
carriage regardless of the existence of filed tariffs, as well as other
important matters. Indeed, of the important general rules cited by
IATA, all are governed by the Warsaw Convention and are dealt with
specifically in the IATA waybill, which is a model for many
carriers.14
\13\ IATA claims that the development of ``paperless
transactions'' will suffer, but does not explain how the electronic
medium is any less adapted to providing information, including
requisite notice, than the paper medium. The incorporation by
reference rules in 14 CFR 221.177 already contemplate notice through
electronic media.
\14\ The IATA waybill states that carriage is subject to the
Warsaw Convention, and, where not in conflict with it, to the
carrier's ``general conditions of carriage,'' applicable domestic
laws and regulations, and ``applicable tariffs'' of such carrier.
Tariffs, which are not necessarily filed officially in many
countries, are at most one of several means of supplementing the
basic conditions of contract.
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There is therefore no record basis for concluding that the
elimination of international cargo rules tariffs will impose
significant economic or administrative burdens on carriers or shippers.
However, the NPRM noted that, to the extent that tariffs might set
forth certain conditions of carriage in greater detail than does the
current waybill, such details could be incorporated into the contract
if notice is given in conformity with the Department's alternative
posting requirements in 14 CFR Sec. 221.177, which are incorporation-
by-reference standards essentially identical to those provided for
domestic passenger transportation by 14 CFR Part 253.15 In giving
the carriers an alternative to the paper tariff notice requirement,
which most had found difficult to comply with, it was the Department's
intention to shift from a constructive to an actual notice system
consonent with contract principles. To the extent that carriers wish to
rely upon such an incorporation mechanism for cargo, Part 221.177 is
already in place and it is likely that some, if not many, carriers are
already complying with its graduated notice provisions in preference to
the earlier requirement in Part 221.170 that complete paper tariffs be
made available for inspection at each sales office.
\15\ Under section 221.177, carriers must give written notice,
on or with the waybill or other contract instrument, that the
contract of carriage may include terms incorporated by law from
public tariffs or by reference from other sources; that the customer
may inspect the full text of such terms at any carrier sales office
and request a mailed copy thereof; and that the customer may receive
an immediate explanation of any terms covering carrier liability
limits, claims restrictions, service modification rights, or
contract modification rights. In addition, direct written notice of
the salient features of incorporated terms that restrict refunds,
impose monetary penalties, or permit price changes must be provided
on or with the waybill or other contract instrument.
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While ATA, AFA, American and United support the elimination of all
official tariffs in favor of an incorporation by reference mechanism,
they request that the final rule make the provisions of section 221.177
more explicit in certain respects, including a specific request by ATA,
AFA and United that carriers be authorized to incorporate terms and
conditions of service included in a ``tariff'' published either
individually or through a recognized and identified agent. All four
commenters, plus IATA, emphasize a need for assurance that carrier
reliance upon federal incorporation by reference requirements will be
protected from challenge under possibly divergent State law
requirements.
AFA questions whether the provisions of 14 CFR Sec. 221.177 permit
[[Page 61476]]
the incorporation by reference of material filed in unofficial carrier
tariffs or other documents, since the current language of subsection
221.177(b)(1) refers to notice of the possible incorporation of ``terms
and conditions filed in public tariffs with U.S. authorities.''
Supporting ATA's request, AFA suggests that this reference be changed
to cover unofficial tariffs filed with a recognized tariff publishing
agent, or that a similar provision be made in proposed Part 292.
While the NPRM proposed a ``rule of construction'' in section
292.20 which would implicitly permit such incorporation by reference,
subject to the various specific notice requirements set forth in
section 221.177, we agree with the commenters that the final rule
should be clarified in this and several other respects. We have decided
to add provisions to Part 292 which will expressly authorize carriers
exempt from filing tariffs under that Part to incorporate any terms by
reference into their contracts for the carriage of cargo in scheduled
foreign air transportation upon compliance with all of the notice,
inspection, explanation and other requirements set forth in section
221.177.16 Completing the basic parallel to 14 CFR Part 253, we
will also expressly provide that shippers are not bound by incorporated
terms unless the carrier complies with such requirements, and that the
requirements are intended to preempt any State requirements governing
incorporation of contract terms by reference. The NPRM contained a
similar preemption statement in the explanatory section, but, given the
concerns of the carriers and AFA on this subject, we will clarify our
intention in Part 292 itself.
\16\ Amending section 221.177 itself is neither necessary nor
desirable, since tariff-filing requirements could be reimposed in
specific cases. To correct ambiguities in existing language, it is
sufficient to provide in Part 292 that the sign required by
subsection 221.177(a)(3) is not required of exempt carriers, and
that notices required of such carriers under subsection 221.177(b)
shall refer to the title or general nature of the publication or
document containing the referenced terms rather than to ``terms and
conditions filed in public tariffs with U.S. authorities.'' See
section 292.21(a)(1).
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At the same time, we are not prepared to consider weakening the
notice requirements contained in Section 221.177 to further simplify
incorporation by reference of terms for cargo carriage. The graduated
system of written notice and right of immediate inspection for most
general terms coupled with direct notice and/or a right to immediate
explanation of certain more important terms constitutes a deliberate
balance between ease of contract formation and the importance of
informed assent. Once on actual notice that terms may be incorporated
by reference, the customer is under an obligation to inquire and
understand them. A general desire to minimize necessary modifications
to existing waybills is not, in our view, a justification for modifying
this balance.17
\17\ Moreover, a DOT rule defining tariffs published by carriers
or their agents as ``official,'' ``filed,'' ``applicable'' or any
other term suggesting legal effect in order to accommodate existing
waybill language would be potentially misleading.
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American, and to some extent United, are also concerned that
carriers will continue to face a public notice requirement that is
currently satisfied by the filing of tariffs. American points to the
statement in the NPRM that 14 CFR Part 249 and section 221.177 will
continue to require each carrier, individually and through its agents,
to maintain pertinent information on its cargo prices and rules, and to
make that information available to the public upon request. The
carriers have apparently misunderstood the scope of that statement,
which was a narrow reference to the record retention requirements of
Part 249 and the notice provisions of section 221.177 applicable solely
in cases of incorporation by reference.18 We construe the term
``tariff information'' in section 221.170 to mean tariffs filed with
the Department. Thus, in their absence, there is no general ``duty'' to
make such information public. Our experience with the elimination of
domestic cargo tariffs and other tariffs has demonstrated clearly that
carriers have ample marketplace incentives to disseminate their rates
and rules as broadly as possible, and that the threat of administrative
enforcement action to compel a general duty in this regard has little
influence. Similarly, our experience has been that carriers have strong
economic incentives to maintain evidence of past rates and rules, as
well as specific waybills beyond the time requirement of Part 249, as a
defense against litigation. Such evidence is discoverable by other
parties in the event of litigation. Therefore, we have not proposed a
general public notice requirement for exempted carriers, nor have the
comments persuaded us that one is necessary.
\18\ Where no incorporation of rules by reference to unofficial
sources is made, shippers will have direct notice of all contract of
carriage terms on the waybill or other accompanying document.
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2. Preemption. In addition to the requests of ATA, AFA, American,
United, and IATA that the final rule make as clear as possible that
State contract law requirements governing incorporation by reference
differing from those in 14 CFR Sec. 221.177 are preempted, several of
these commenters have also expressed concern that the tariff exemption
itself might be construed by some courts as evidence that State
regulatory requirements might have increased applicability to airline
activities. We do not believe such a concern to be well founded. While
the legal effect of filed tariffs was at one time an important element
in the consideration of the scope of federal preemption by the courts,
Congress in 1978 adopted a broad preemption provision protecting the
``rates, routes and services'' of carriers with federal authority
19 in anticipation of the statutory sunset of domestic tariffs and
other public utility regulation. The statute has been given a broad
reading by the courts, most recently in American Airlines, Inc. v.
Wolens, 115 S. Ct. 817, 130 L. Ed. 2d 63 (1995). IATA's argument that
the absence of a federal rules tariff facility ``actively supervised by
the Department'' may generate unnecessary and costly litigation over
both State contract and public utility law requirements ignores the
fact that domestic cargo carriage has flourished without the benefit of
either filed tariffs or federal incorporation rules for well over a
decade. As noted above, domestic waybills do make some use of
incorporation by reference. Some litigation may be inevitable in this
area, in part because the statute also preserves many remedies at
common law. However, we see no reason to assume that the elimination of
the tariff requirement for cargo rules will result in an increased risk
of litigation for the carriers.
\19\ Now codified as 49 U.S.C. 41713.
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3. Rates and other issues. Athearn, ISS and OFC, shipping
consultants which, as part of their services, audit international
shipping invoices to determine if their customers have been properly
charged, all oppose the proposal.20 In general, they contend that
the proposal will deny shippers and/or their auditors the only assured,
complete source of factual information on international carrier rates
and rules; that carriers are reluctant to provide customers with
precise rate information while cargo agents, whose commissions are
based on gross sales, will not always quote the best rates; that
existing alternative sources of tariff information,
[[Page 61477]]
such as The Air Cargo Tariff (TACT), are inadequate since they are
infrequently issued and incomplete; that these sources often do not
include all rates available, especially the lowest ones; and that
shipper costs will increase due to de facto cargo rate increases.
\20\ OFC also seeks an extension of the comment period, arguing
that the proposal has not been well publicized among the shipping
community. We do not believe such an extension to be necessary. The
NPRM was published in the Federal Register, which is legal notice,
and the breadth of the comments received indicates industry
awareness of the proposal.
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In addition, the shipping consultants assert that, because these
tariffs are a matter of public record, they also serve to protect
unsophisticated shippers by discouraging carriers from engaging in
unreasonable practices and charging unfair rates; that the proposal
will undermine this public benefit, which facilitates the recovery of
thousands of dollars annually from overcharges; that the elimination of
easily monitored, published tariffs, defining carriers' maximum rates,
would increase forwarders' opportunities for misrating; and that
without filed tariffs, shippers will lose their ability to apply
reasonable controls on shipping expenses.21
\21\ OFC asks that any final rule give shippers access to the
Department's resources so as to ensure that carriers will furnish
complete information on their cargo rates and rules to shippers on
request and within a reasonable amount of time. We do not believe
this to be necessary. Normal contract law has the tools needed to
accomplish these goals.
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ISS contends that the lack of complaints indicates that the current
system is working, and provides important protection to consumers; and
that while many shipments tendered by large volume forwarders or
``consolidators'' are governed by negotiated ``contract rates,'' most
of the air waybills issued by forwarders acting as carrier agents are
governed by filed tariffs and are often misrated. Athearn contends that
the Department has overstated the proposal's cost savings since, even
with the exemption, carriers will still bear the costs of disseminating
their prices. If the Department needs to reduce costs, it should
recognize that paper tariffs are obsolete, and explore converting them
to less expensive electronic media so that they will continue to be
available to the public at one central location.
These commenters have not substantiated their basic contention that
filed tariffs are an essential source of pricing information that is
not, or will not be, available to shippers through normal marketplace
incentives and mechanisms. Notwithstanding the contrary experience
following domestic cargo and international forwarder tariff
deregulation, Athern states that it is ``questionable'' whether
carriers will continue to publish and routinely make available to the
public the comprehensive rate information contained in tariffs.
However, Athern also states that the general source of international
rate information for forwarders today is the unofficial memorandum
tariff identified as TACT, and further that ``because most rates have
been available through tariff publication firms, there has not been the
need by shippers or their auditors to deal with each carrier.'' This
corresponds with the Department's experience that very few requests are
received each year from the public for certified copies of present or
past cargo tariffs, as well as with our findings in support of the
alternative notice requirement in 14 CFR 221.177 that most carrier
tariffs maintained at sales offices were incomplete, inaccessible and
infrequently used by the public.22 In general, both the CAB and
the Department have found that filed tariffs are not an effective means
of informing the public of a carrier's prices and services. The airline
commenters in this proceeding agree, affirming that they will continue
to publish international rates and rules in formats similar to those
used now for both legal and promotional reasons.23
\22\ 53 FR 52677, December 29, 1988.
\23\ IATA also concurs that shippers and interested agent/
intermediaries can access applicable rates directly from carriers
``as efficiently as through tariff filings.''
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Finally, the rate consultants have not substantiated their
contentions that tariff-filing discourages unreasonable carrier
practices and prices, and acts as a necessary check on ``misrating.''
As the Department has found, it is competition in the marketplace, not
the filing of tariffs or the Department's substantive review policies,
that keeps prices and practices within reasonable bounds. The concepts
of ``overcharging'' and ``misrating'' used by these commenters have
meaning only in the context of approved tariffs, not the free
marketplace where shippers are free to negotiate the best deal for each
contract and may be expected to place their business with carriers and/
or agents that provide the best information and the best rate options.
It is this competition and this freedom to negotiate which provides the
greatest economic benefits to the shipping public. The rate consultants
have provided no sound basis for their argument that cargo tariffs
should continue to be required.
Regulatory Analyses and Notices
Executive Order 12866 and DOT Regulatory Policies and Procedures
The Department has determined that this rule is not significant
under Executive Order 12866 and the Department's Regulatory Policies
and Procedures (44 CFR 11034; Feb. 26, 1979). A regulatory evaluation
in this Docket shows that the benefits of the proposed rule exceed the
costs to the industry and the Federal government significantly, since
it eliminates a regulatory burden, without imposing other requirements.
This rule could result in net savings to the airlines of approximately
$600,000 per year.
Executive Order 12612
This final rule has been analyzed in accordance with the principles
and criteria contained in Executive Order 12612 (``Federalism''), and
the Department has determined the rule does not have sufficient
federalism implications to warrant the preparation of a Federalism
Assessment.
Regulatory Flexibility Act
I certify that this rule will not have a significant economic
impact on a substantial number of small entities, because the tariff
filing requirements apply to scheduled service air carriers. The vast
majority of the air carriers filing international (``foreign'') air
cargo tariffs are large operators with revenues in excess of several
million dollars each year. Small air carriers operating aircraft with
60 seats or less and 18,000 pounds payload or less that offer on-demand
air-taxi service are not required to file such tariffs.
Paperwork Reduction Act
With respect to the Paperwork Reduction Act, this rule eliminates
information collection requirements that require the approval of the
Office of Management and Budget pursuant to the Act. This proposal
reduces paperwork burdens, as described in detail in the Regulatory
Evaluation in this docket.
The implementation of these regulations will reduce tariff filings
of cargo rates, rules and charges by almost 10,000 cargo tariff pages
and about 200 Cargo Special Tariff Permission Applications (STPA's)
filed each year, saving the air carriers a filing fee of $2 a cargo
page and $12 a cargo STPA (which generally consists of about three
double-sided pages for each STPA form).
Such filing fees, now paid to DOT, total about $22,400 or less
annually. In addition, ATPCO charges carriers $18 for preparing each
STPA for submission to the Department, which amounts to an additional
$3,600 per year for an average of 200 STPA's.
Air carriers and their cargo filing agents also will avoid the
burden of filing the tariffs with DOT, estimated to be about 5.34 hours
for each of the 10,200 cargo tariff pages and STPA
[[Page 61478]]
forms, or about 54,468 burden hours, which at an estimated industry
salary rate of about $10.40 an hour would indicate a savings of
approximately $566,467.
In addition, other costs incurred by carriers to formulate and
disseminate the cargo rate and rule pages to their customers (by the
air carriers or their agent, such as the Airline Tariff Publishing
Company (ATPCO) or Cargo Rate Services (CRS)) may be affected.
Elimination of government filing may favorably affect some portion of
their overall cost other than the DOT filing fee; for instance, $48 for
an international cargo tariff page publication/distribution cost in
1994 by the Airline Tariff Publishing Company (ATPCO) in Cargo Tariff
Bulletin No. 19, dated November 18, 1993.
The reporting and recordkeeping requirements associated with this
rule are being submitted to OMB for approval in accordance with 44
U.S.C. chapter 35 under OMB NO. 2137-AC48; Administration: Department
of Transportation; TITLE: Exemption From Property Tariff-Filing
Requirements; NEED FOR INFORMATION: Exempts a data page filing
requirement; PROPOSED USE OF INFORMATION: Exemption is based on ``de
minimis'' regulatory use; FREQUENCY: Currently, an initial tariff
filing is required of each respondent; changes are voluntary, whenever
an air carrier elects; BURDEN ESTIMATE: 5.34 hours for an STPA or a
cargo rate page; RESPONDENTS: 45; FORM(S): 10,200 pages or forms per
annum; AVERAGE BURDEN HOURS PER RESPONDENT: 1,210 hours.
For further information on paperwork reduction contact: The
Information Requirements Division, M-34, Office of the Secretary of
Transportation, 400 Seventh Street SW., Washington, D.C. 20590, (202)
366-4735 or Edward Clarke, Office of Management and Budget, New
Executive Office Building, Room 3228, Washington, D.C. 20503.
Any comments regarding the burden estimate or any aspect of these
information requirements, including suggestions for reducing the
burden, may be sent to: Director, Office of International Aviation, X-
40, U.S. Department of Transportation, Office of the Secretary, 400
Seventh Street SW., Room 6402, Washington, D.C. 20590-0001 as well as
the above contact.
Regulation Identifier Number
A regulation identifier number (RIN) is assigned to each regulatory
action listed in the Unified Agenda of Federal Regulations. The
Regulatory Information Service Center publishes the Unified Agenda in
April and October of each year. The RIN number contained in the heading
of this document can be used to cross-reference this action with the
Unified Agenda.
List of Subjects
14 CFR Part 221
Air rates and fares, Freight, Reporting and recordkeeping
requirements.
14 CFR Part 292
Air rates and fares, Freight, Reporting and recordkeeping
requirements, Preemption.
For the reasons set forth herein, and under the authority delegated
in 49 CFR 1.56(j)(2)(ii), the Department of Transportation amends 14
CFR Part 221 and adds a new Part 292 as follows:
PART 221--TARIFFS
1. The authority citation for Part 221 is revised to read as
follows:
Authority: 49 U.S.C. 40101, 40109, 40113, 46101, 46102, Chapter
411, Chapter 413, Chapter 415 and Subchapter I of Chapter 417.
2. Section 221.3 is amended by removing the period at the end of
paragraph (d)(8) and adding a semicolon in its place, and by adding a
new paragraph (d)(9) to read as follows:
Sec. 221.3 Carrier's duty.
* * * * *
(d) * * *
(9) Part 292, International Cargo Transportation, except as
provided in 292.
* * * * *
3. A new Part 292 is added to read as follows:
PART 292--INTERNATIONAL CARGO TRANSPORTATION
Subpart A--General
Sec.
292.1 Applicability.
292.2 Definitions.
Subpart B--Exemption From Filing Tariffs
292.10 Exemption.
292.11 Revocation of exemption.
Subpart C--Effect of Exemption
292.20 Rule of construction.
292.21 Incorporation of contract terms by reference.
292.22 Effectiveness of tariffs on file.
Authority: 49 U.S.C. 40101, 40105, 40109, 40113, 40114, 41504,
41701, 41707, 41708, 41709, 41712, 46101; 14 CFR 1.56(j)(2)(ii).
Subpart A--General
Sec. 291.1 Applicability.
This part applies to direct air carriers providing scheduled
transportation of cargo in foreign air transportation.
Sec. 292.2 Definitions.
For purposes of this part:
Cargo means property other than baggage accompanied or checked by
passengers, or mail.
Cargo tariff means a tariff containing rates, charges or provisions
governing the application of such rates or charges, or the conditions
of service, applicable to the scheduled transportation of cargo in
foreign air transportation.
Direct air carrier means an air carrier or foreign air carrier
directly engaged in the operation of aircraft under a certificate,
regulation, order, exemption or permit issued by the Department or its
predecessor, the Civil Aeronautics Board.
Subpart B--Exemption From Filing Tariffs
Sec. 292.10 Exemption.
Direct air carriers are exempted from the requirement to file cargo
tariffs with the Department of Transportation provided in 49 U.S.C.
41504 and 14 CFR Part 221.
Sec. 292.11 Revocation of exemption.
(a) The Department, upon complaint or upon its own initiative, may,
immediately and without hearing, revoke, in whole or in part, the
exemption granted by this part with respect to a carrier or carriers,
when such action is in the public interest.
(b) Any such action will be taken in an order issued by the
Assistant Secretary for Aviation and International Affairs, and will
identify:
(1) The tariff matter to be filed; and
(2) The deadline for carrier compliance.
(c) Revocations under this section will have the effect of
reinstating all applicable tariff requirements and procedures specified
in the Department's regulations for the tariff material to be filed,
unless otherwise specified by Department order.
Subpart C--Effect of Exemption
Sec. 292.20 Rule of construction.
Carriers holding an effective exemption from the duty to file
tariffs under this part shall not, unless otherwise directed by order
of the Department, be subject to tariff posting, notification or
subscription requirements set forth in 49 U.S.C. 41504 or 14 CFR part
221, except as provided in Sec. 292.21 of this part.
Sec. 292.21 Incorporation of contract terms by reference.
(a) Carriers holding an effective exemption from the duty to file
tariffs under this part may incorporate contract
[[Page 61479]]
terms by reference (i.e. without stating their full text) into the
waybill or other document embodying the contract of carriage for the
scheduled transportation of cargo in foreign air transportation,
provided that:
(1) The notice, inspection, explanation and other requirements set
forth in 14 CFR 221.177(a)(1), (a)(2), (a)(4), (b), (c) and (d) are
complied with, to the extent applicable, except that the notice
required under 14 CFR 221.177(b)(1) shall refer to the title or general
nature of the publication(s) or document(s) containing the full text of
the referenced terms rather than to ``terms and conditions filed in
public tariffs with U.S. authorities'';
(b) In addition to other remedies at law, a carrier may not claim
the benefit as against a shipper or consignee of, and a shipper or
consignee shall not be bound by, any contract term which is
incorporated by reference under this part unless the requirements of
paragraph (a)(1) of this section are complied with, to the extent
applicable; and
(c) The purpose of this section is to set uniform disclosure
requirements, which preempt any State requirements on the same subject,
for terms incorporated by reference into contracts of carriage for the
scheduled transportation of cargo in foreign air transportation.
Sec. 292.22 Effectiveness of tariffs on file.
(a) Cargo rate tariffs on file with the Department, including
related classification and/or applicability rules, cease to be
effective as tariffs under 49 U.S.C. 41504 and 41510, as well as under
the provisions of 14 CFR Part 221, and they are canceled by operation
of law.
(b) As of March 1, 1996, all remaining cargo tariffs on file with
the Department cease to be effective as tariffs under 49 USC 41504 and
the provisions of 14 CFR part 221, and are cancelled by operation of
law. Any such tariffs may be cancelled voluntarily prior to that date.
With respect to terms expressly agreed in the contract of carriage,
carriers, agents and other persons are relieved from the requirement of
adherence to filed tariffs in 49 USC 41510 and the related provisions
of 14 CFR part 221 as of November 30, 1995.
(c) Applications for filing and/or effectiveness of any cargo
tariffs pending on November 30, 1995 are dismissed by operation of law.
No new filings or applications will be permitted except as provided
under Sec. 292.11.
Issued in Washington, D.C. on November 13, 1995.
Patrick V. Murphy,
Deputy Assistant Secretary for Aviation and International Affairs.
[FR Doc. 95-28474 Filed 11-29-95; 8:45 am]
BILLING CODE 4910-62-P