[Federal Register Volume 61, Number 97 (Friday, May 17, 1996)]
[Rules and Regulations]
[Pages 24895-24897]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-12188]

Maritime Administration
46 CFR Part 381
[Docket No. R-165]
RIN 2133-AB25

Cargo Preference--U.S.-Flag Vessels; Available U.S.-Flag 
Commercial Vessels
AGENCY: Maritime Administration, Department of Transportation.

ACTION: Final rule.


SUMMARY: This amendment to the cargo preference regulations of the 
Maritime Administration (MARAD) provides that during the five year 
period beginning with the 1996 Great Lakes shipping season when the St. 
Lawrence Seaway is in use, MARAD will consider the legal requirement 
for the carriage of bulk agricultural commodity preference cargoes on 
privately-owned ``available'' U.S.-flag commercial vessels to have been 
satisfied where the cargo is initially loaded at a Great Lakes port on 
one or more U.S.-flag or foreign-flag vessels, transferred to a U.S.-
flag commercial vessel at a Canadian transshipment point outside the 
St. Lawrence Seaway, and carried on that U.S.-flag vessel to a foreign 
destination. This provision will allow U.S. Great Lakes ports to 
compete for certain bulk agricultural commodity preference cargoes 
under agricultural assistance programs administered by the U.S. 
Department of Agriculture (USDA) and the U.S. Agency for International 
Development (USAID). This rule will extend that policy for an 
additional five years, after which the Agency would assess the merits 
of making the rule permanent. MARAD issued substantially identical 
rules in 1994 and 1995 related to the Great Lakes Shipping season for 
each of those years, respectively.

EFFECTIVE DATE: May 17, 1996.

FOR FURTHER INFORMATION CONTACT: John E. Graykowski, Deputy Maritime 
Administrator for Inland Waterways and Great Lakes, Maritime 
Administration, Washington, DC, Telephone (202)366-1718.

SUPPLEMENTARY INFORMATION: United States law at sections 901(b) and 
901b, Merchant Marine Act, 1936, as amended (the ``Act''), 46 App. 
U.S.C. 1241(b) and 1241f, requires that at least 75 percent of certain 
agricultural product cargoes ``impelled'' by Federal programs 
(preference cargoes), and transported by sea, be carried on privately-
owned United States-flag commercial vessels, to the extent that such 
vessels ``are available at fair and reasonable rates for United States-
flag commercial vessels, in such manner as will insure a fair and 
reasonable participation of United States-Flag commercial vessels in 
such cargoes by geographical areas.'' The Secretary of Transportation 
wishes to administer that program so that all ports and port ranges, 
including U.S. Great Lakes ports, may participate in the carriage of 
preference cargoes under five programs administered by the United 
States Department of Agriculture (USDA) and United States Agency for 
International Development (USAID), pursuant to Titles I, II and III of 
the Agricultural Trade Development and Assistance Act of 1954, as 
amended; P.L. 480 (7 U.S.C. 1701-1727); the Agricultural Act of 1949, 
as amended (7 U.S.C. 2791(c)); and the Food for Progress Act of 1985, 
as amended (7 U.S.C. 1736).

Prior Rulemakings

    On August 18, 1994, MARAD published a final rule on this subject in 
the Federal Register (59 FR 40261). That rule stated that it was 
intended to allow U.S. Great Lakes ports to participate with ports in 
other U.S. port ranges in the carriage of bulk agricultural commodity 
preference cargoes. It stated that dramatic changes in shipping 
conditions have occurred since 1990, including the disappearance of any 
all-U.S.-flag commercial ocean-going bulk cargo service to foreign 
countries from U.S. Great Lakes ports. The static configuration of the 
St. Lawrence Seaway system and the evolving greater size of commercial 
vessels contributed to the disappearance of any all-U.S.-flag service.

    No bulk grain preference cargo has moved on U.S.-flag vessels out 
of the Great Lakes since 1989, with the exception of one trial shipment 
in 1993. Under the Food Security Act of 1985, Public Law 99-198, 
codified at 46 app. U.S.C. 1241f(c)(2), a certain minimum amount of 
Government-impelled cargo was required to be allocated to Great Lakes 
ports during the Great Lakes shipping seasons of 1986, 1987, 1988 and 
1989. That ``set-aside'' expired in 1989, and was not renewed by the 
Congress. The disappearance of

[[Page 24896]]

Government-impelled agricultural cargo flowing from the Great Lakes 
coincided with the expiration of the Great Lakes ``set-aside.''
    At the time of the opening of the 1994 Great Lakes shipping season 
on April 5, 1994, the Great Lakes did not have any all-U.S.-flag ocean 
freight capability for carriage of bulk preference cargo. The absence 
of any all-U.S.-flag ocean freight capability on the Great Lakes 
continues to this day. In contrast, the total export nationwide by non-
liner vessels of USDA and USAID agricultural assistance program cargoes 
subject to cargo preference in the 1994-1995 cargo preference year (the 
latest program year for which figures are available) amounted to 6.2 
million metric tons, of which 4.9 million (78 percent) was transported 
on U.S.-flag vessels.
    As predicted by numerous commenters, the timing of the 1994 final 
rule, published on August 18, 1994, did not allow for a true trial 
period since it actually extended for less than one-half of the 1994 
Great Lakes Shipping season. Because of the long lead time required for 
arranging shipments of bulk agriculture commodity preference cargoes, 
there apparently was no real opportunity for U.S.-flag vessel operators 
to make the necessary arrangements and bid on preference cargoes. 
Accordingly, MARAD proposed to extend this policy to the 1995 Great 
Lakes shipping season and issued a final rule that was published in the 
Federal Register on May 9, 1995 (60 FR 24560).
    Great Lakes participation in cargo preference shipments under the 
five programs administered by the USDA and USAID could be significantly 
improved if foreign-flag feeder vessels were authorized to transport 
bulk grain commodities from Great Lakes ports to Canadian transshipment 
points for export on oceangoing U.S.-flag bulk carriers to the final 
destination port. MARAD issued its 1994 and 1995 final rules to 
authorize the use of foreign-flag feeder vessels for the transportation 
of bulk agricultural commodities cargoes from the Great Lakes ports to 
Canadian transshipment ports outside the St. Lawrence Seaway during the 
1994 and 1995 Great Lakes shipping seasons, respectively. Outside the 
St. Lawrence Seaway, the cargo will be transferred to a U.S.-flag 
vessel for delivery to its foreign destination.
    Subsequently, USDA indicated that section 406(b)(4) of P.L. 480 
regulating the payment of freight by USDA for shipments under Title II, 
Section 416(b) and the Food For Progress Act of 1985, negatively 
impacted on suppliers that bid on Great Lakes cargoes to be transhipped 
to Canadian shipping points. USDA indicated that these provisions 
prevent them from paying for freight on commodities shipped from a 
Canadian port. The P.L. 480 Title I program is not affected by this 
provision. As a consequence, the Great Lakes region has been, in 
effect, prohibited from utilizing the rule and participating during the 
past two years in the shipment of bulk cargo under Title II of P.L. 
480, Section 416 of the Agricultural Act of 1949 and the Food for 
Progress Act of 1985 programs.
    USDA proposed an amendment to Section 406 in the 1996 Farm Bill 
which would allow USDA to pay the cost of the foreign-flag Great Lakes 
transit leg and for the transshipment from Canadian ports.
    MARAD proposed in a new NPRM to extend its policy stated in the 
1994 and 1995 rules for an additional five years, after which it would 
reassess the merits of making the rule permanent, consistent with the 
USDA legislative proposal (61 FR 9670; March 11, 1996). The amendment 
proposed by the USDA is included in the Federal Agriculture Improvement 
and Reform Act of 1966, Pub. L. 104-127, 110 Stat. 888. It amends 
Section 406(b)(4) of the Agricultural Trade, Development and Assistance 
Act of 1954, 7 U.S.C. 1736, to accomplish USDA's proposal, above.

Comments on 1996 NPRM

    MARAD received 12 comments on this NPRM from 11 commenters 
representing business, trade associations, State and local port 
authorities, and State Transportation Departments. All commenters were 
in favor of the policy stated in the NPRM, without reservation. One 
commenter supporting the proposal to establish a five-year trial period 
stated, ``Similar rulemakings in the 1994 and 1995 years provided too 
limited of a window of opportunity to truly test this concept.'' That 
commenter referred to the current common practice in the private sector 
of exporting bulk agricultural commodities from Great Lakes ports in 
foreign-flag feeder vessels to transshipment points east of the St. 
Lawrence Seaway, concluding that ``transshipping Government 
agricultural exports should, on occasion, be cost effective.''
    Another commenter stated that taxpayers, food aid recipient 
countries and vessel owners will benefit from this competition. From 
the perspective of U.S. maritime labor, one commenter stated, 
``International cargoes are the lifeblood of Great Lakes longshoremen 
and return of P.L. 480 cargoes to the Great Lakes will generate 
thousands of manhours for dockworkers in virtually every Great Lakes 
port.'' Another commenter was hopeful that the trend of increased 
international trade ``to the Lakes via the Seaway in the past three 
navigation seasons will continue because of this rulemaking.''
    One commenter, while acknowledging that the proposed rule offers 
some possible relief for Great Lakes-originated cargo, requested MARAD 
to issue a rule which allows shipment of bulk agricultural commodities 
from Great Lakes ports for the entire voyage from origin to destination 
on foreign-flag vessels where U.S.-flag vessels are not available for 
such voyages from Great Lakes ports. Unless U.S.-flag vessels are 
unavailable from any port range in the United States, MARAD lacks the 
authority to issue such a rule under the cargo preference laws of the 
United States.

Rulemaking Analyses and Notices

Executive Order 12866 (Regulatory Planning and Review)

    This rulemaking is not considered to be an economically significant 
regulatory action under section 3(f) of Executive Order 12866. Also, it 
is not a major rule under Pub. L. 104-121, 5 U.S.C. 804, or a 
significant rule under the Department's Regulatory Policies and 
Procedures. Accordingly, it has not been reviewed by the Office of 
Management and Budget.
    MARAD projects that this rule will allow the annual movement of up 
to 300,000 metric tons of agricultural commodities from Great Lakes 
ports, with a reduction in the shipping cost to sponsoring Federal 
agencies of up to $2 per metric ton ($600,000). MARAD will evaluate the 
results of this rulemaking over a five-year trial period before 
determining whether to issue a rule to make this provision permanent.
    Since the 1996 Great Lakes shipping season opened on March 29, 
1996, a delay in the effective date of this rule for 30 days would be 
conterproductive to the accomplishment of the purpose of this rule to 
allow U.S. Great Lakes ports to compete effectively for agricultural 
commodity preference cargo shipments. Accordingly, pursuant to section 
553(d) of the Administrative Procedure Act, 5 U.S.C. 553(d), MARAD 
finds that good cause exists for the rule to become effective on 


    The Maritime Administration has analyzed this rulemaking in 
accordance with the principles and criteria contained in Executive 
Order 12612, and it has been determined that these regulations do not 
have sufficient

[[Page 24897]]

federalism implications to warrant the preparation of a Federalism 

Regulatory Flexibility Act

    The Maritime Administration certifies that this rulemaking will not 
have a significant economic impact on a substantial number of small 

Environmental Assessment

    The Maritime Administration has considered the environmental impact 
of this rulemaking and has concluded that an environmental impact 
statement is not required under the National Environmental Policy Act 
of 1969.

Paperwork Reduction Act

    This rulemaking contains no reporting requirement that is subject 
to OMB approval under 5 CFR Part 1320, pursuant to the Paperwork 
Reduction Act of 1980 (44 U.S.C. 3501, et seq.)

List of Subjects in 46 CFR Part 381

    Freight, Maritime carriers.

    Accordingly, MARAD hereby amends 46 CFR Part 381 as follows:


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

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

    2. Section 381.9 is revised to read as follows:

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

    For purposes of shipping bulk agricultural commodities under 
programs administered by sponsoring Federal agencies from U.S. Great 
Lakes ports during the 1996-2000 Great Lakes shipping seasons, if 
direct all-U.S.-flag service, at fair and reasonable rates, is not 
available at U.S. Great Lakes ports, a joint service involving a 
foreign-flag vessel(s) carrying cargo no farther than a Canadian 
port(s) or other point(s) on the Gulf of St. Lawrence, with 
transshipment via a U.S.-flag privately-owned commercial vessel to the 
ultimate foreign destination, will be deemed to comply with the 
requirement of ``available'' commercial U.S.-flag service under the 
Cargo Preference Act of 1954. Shipper agencies considering bids 
resulting in the lowest landed cost of transportation based on U.S.-
flag rates and service shall include within the comparison of U.S.-flag 
rates and service, for shipments originating in U.S. Great Lakes ports, 
through rates (if offered) to a Canadian port or other point on the 
Gulf of St. Lawrence and a U.S.-flag leg for the remainder of the 
voyage. The ``fair and reasonable'' rate for this mixed service will be 
determined by considering the U.S.-flag component under the existing 
regulations at 46 CFR Part 382 or 383, as appropriate, and 
incorporating the cost for the foreign-flag component into the U.S.-
flag ``fair and reasonable'' rate in the same way as the cost of 
foreign-flag vessels used to lighten U.S.-flag vessels in the recipient 
country's territorial waters. Alternatively, the supplier of the 
commodity may offer the Cargo FOB Canadian transshipment point, and 
MARAD will determine fair and reasonable rates accordingly.

    Dated: May 10, 1996.

    By Order of the Maritime Administrator.
Joel Richard,
Secretary, Maritime Administration.
[FR Doc. 96-12188 Filed 5-16-96; 8:45 am]