[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.''
---------------------------------------------------------------------------

    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