[Federal Register Volume 63, Number 233 (Friday, December 4, 1998)]
[Proposed Rules]
[Pages 67030-67036]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32224]


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FEDERAL MARITIME COMMISSION

46 CFR Parts 550, 551, 555, 560, 565, 585, 586, 587, and 588

[Docket No. 98-25]


Amendments to Regulations Governing Restrictive Foreign Shipping 
Practices, and New Regulations Governing Controlled Carriers

AGENCY: Federal Maritime Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Maritime Commission proposes to revise and 
redesignate its regulations relating to section 19 of the Merchant 
Marine Act, 1920, section 13(b)(5) of the Shipping Act of 1984, and the 
Foreign Shipping Practices Act of 1988, and add new regulations 
relating to section 9 of the Shipping Act of 1984, in order to 
incorporate certain amendments made by the Ocean Shipping Reform Act of 
1998 as well as to clarify and reorganize existing regulations.

DATES: Submit comments on or before January 4, 1999.

ADDRESSES: Address all comments concerning this proposed rule to: 
Joseph C. Polking, Secretary, Federal Maritime Commission, 800 North 
Capitol Street N.W., Room 1046, Washington, D.C. 20573-0001.

FOR FURTHER INFORMATION CONTACT: Thomas Panebianco, General Counsel, 
Federal Maritime Commission, 800 North Capitol Street N.W., Washington, 
D.C. 20573-0001, (202) 523-5740.

SUPPLEMENTARY INFORMATION: The Ocean Shipping Reform Act of 1998, 
Public Law 105-258, 112 Stat. 1902 (``OSRA''), amends the Shipping Act 
of 1984 (``1984 Act''), the Merchant Marine Act, 1920 (``1920 Act''), 
and the Foreign Shipping Practices Act of 1988 (``FSPA'') in several 
areas. The Commission's rules at former 46 CFR parts 585, 586, 587, and 
588 effectuate the statutory obligations mandated by the 1984 Act, the 
1920 Act, and the FSPA. The Commission now proposes to update, 
redesignate, and clarify these rules to reflect the changes made by 
OSRA. In addition, the Commission proposes a new regulation, 46 CFR 
part 565, which would implement changes made by OSRA to section 9 of 
the 1984 Act and would gather previously scattered regulations 
affecting

[[Page 67031]]

controlled carriers into a more readily accessible codification.

Clarification and Amendment of Former 46 CFR Part 585

    The proposed rule would amend the Commission's regulations covering 
the provisions of section 19 of the 1920 Act, to incorporate the 
changes made by OSRA. The entire part is redesignated as part 550.
    Changes to redesignated Sec. 550.102 and Sec. 550.301 reflect 
OSRA's clarification that ``pricing practices'' are among the practices 
that could give rise to a condition unfavorable to shipping. The 
changes to the authority citation and to redesignated Sec. 550.103(a) 
reflect the addition of OSRA as an amendment to the 1920 Act. The 
changes to redesignated Secs. 550.103(b), 550.201, 550.202(b), and 
550.301(d) reflect OSRA's use of the new term ``ocean transportation 
intermediary'' in place of the old terms ``ocean freight forwarder'' 
and ``non-vessel-operating common carrier''.
    The amendments instituted by OSRA include the addition of the 
suspension of service contracts to the list of available remedies in 
redesignated Secs. 550.505(a), 550.601(c), and 550.602. The 
Commission's proposed rule reflects this change.

Redesignation of Former 46 CFR Part 586 and Removal of Sec. 586.3

    The proposed rule would redesignate former 46 CFR part 586 as part 
551, Actions To Adjust or Meet Conditions Unfavorable to Shipping in 
the U.S. Foreign Trade. Former 46 CFR 586.3, Conditions unfavorable to 
shipping in the United States/Ecuador trade, is no longer an ongoing 
proceeding and is therefore removed.

Clarification and Amendment of Former 46 CFR Part 587

    The proposed rule would amend the Commission's regulations covering 
the 1984 Act's provisions providing relief for U.S.-flag vessels unduly 
impaired from accessing the ocean trade between foreign ports. See 
section 13(b)(5) of the 1984 Act, 46 U.S.C. app. Sec. 1712(b)(5) 
(renumbered by OSRA as section 13(b)(6)). The entire part is 
redesignated as part 560.
    Changes to redesignated Secs. 560.1(a) (1) and (2) and 560.5(a) are 
changes to reflect renumbering of the Act. Section 560.2(c) refers to 
``fighting ships,'' a term which has been deleted from the definitions 
section of the Act and elsewhere. The removal of this term effects that 
deletion. The changes to redesignated Sec. 560.7(b)(3)(i) reflect 
OSRA's addition of the suspension of service contracts as a section 
11a(e)(1)(B) remedy.

Clarification and Amendment of Former 46 CFR Part 588

    The proposed rule would amend the Commission's regulations covering 
the FSPA's provisions authorizing Commission action to address adverse 
conditions affecting U.S.-flag carriers that do not exist for foreign 
carriers in the United States. The entire part is redesignated as part 
555.
    The change to redesignated Sec. 555.1 makes reference to OSRA as an 
amendment to the FSPA. Changes to redesignated Sec. 555.2 (a) and (d), 
and Sec. 555.4 reflect OSRA's use of the new term ``ocean 
transportation intermediary'' in place of the old terms ``ocean freight 
forwarder'' and ``non-vessel-operating common carrier''. The change to 
redesignated Sec. 555.2(c) corrects an error of word choice and 
corresponds to the language employed in the FSPA.
    The change to redesignated Sec. 555.4(c) improves the clarity of 
the provision. The changes to redesignated Sec. 555.8 reflect OSRA's 
addition of the suspension of service contracts as a remedy.

New 46 CFR Part 565

    The proposed new rule would implement OSRA's revision of section 9 
of the 1984 Act, and would provide procedures for reviewing controlled 
carrier rates, charges, classifications, rules and regulations. The 
proposed rule improves the clarity of regulations governing controlled 
carriers, and gathers into a single part regulations which were 
previously scattered among the tariff and service contract regulations 
in former 46 CFR Part 514.
    In addition to the 1984 Act's prohibitions against ``maintaining'' 
rates or charges below a level that is just and reasonable, OSRA adds 
the prohibition against ``charging or assessing'' such rates. 
Similarly, OSRA adds the prohibition on ``enforcing'' unjust or 
unreasonable rates, charges, classifications, rules or regulations in 
addition to ``establishing and maintaining'' them.
    The change of tariff filing to tariff publication under OSRA is 
also reflected in section 9(a) of the 1984 Act as it applies to 
controlled carriers. Hence, in place of ``filing,'' the Commission is 
authorized to prohibit the ``publication or use'' of any rates, 
charges, classifications, rules or regulations that a controlled 
carrier has failed to show are just and reasonable.
    In a further reflection of the new tariff system, OSRA changes the 
authority of the Commission from ``disapproving'' the ``filing'' to 
``prohibiting and suspending'' the ``publication and use'' of unjust 
and unreasonable rates, charges, classifications, rules or regulations. 
Likewise, the Commission is directed by OSRA to take into account 
whether the rates or charges which have been ``published or assessed'' 
are below a compensatory level.
    OSRA imposes a new time limit on the Commission's decision on 
whether or not a rate, charge, classification, rule or regulation is 
unjust or unreasonable. The Commission must decide such matters within 
120 days of the receipt of information. This is reflected in proposed 
46 CFR 565.8.
    Finally, a significant change was made by OSRA to the regulation of 
controlled carriers in the exceptions found in section 9(f) of the 1984 
Act. Three of the five exceptions were removed by OSRA; the provisions 
of section 9 now apply to all controlled carriers except those that 
are: (1) of a state whose vessels are entitled by a treaty of the 
United States to receive national treatment or Most Favored Nation 
treatment; or (2) in a trade served exclusively by controlled carriers. 
Proposed regulation Sec. 565.5 reflects those changes. In addition to 
requiring ocean common carriers to inform the Commission of any changes 
to their control which might affect their controlled carrier 
classification, Sec. 565.4 also requires newly commencing controlled 
common carrier operations to notify the Commission of the details of 
their ownership or control.
    This document also outlines the proposed restructuring of 
subchapter C of chapter IV, 46 CFR, by revising the subchapter heading 
and adding redesignated parts 550, 555, and 560 and new part 565 to 
subchapter C. Current provisions of part 514 which are proposed here to 
be incorporated into new part 565 will be removed from part 514 in a 
subsequent document.
    In accordance with 44 U.S.C. 3518(c)(1)(B), and except for 
investigations undertaken with reference to a category of individuals 
or entities (e.g., an entire industry), any information requests or 
requirements in 46 CFR parts 585, 586, 587 and 588 are not subject to 
the requirements of section 3507 of the Paperwork Reduction Act because 
such collections of information are pursuant to a civil, administrative 
action or investigation by an agency of the United States against 
specific individuals or entities.
    The reporting requirements contained in 46 CFR Part 565 have been 
submitted to the Office of Management and Budget (OMB). The Commission 
estimates that

[[Page 67032]]

the public burden for this collection of information is estimated to be 
70 annual personhours for all of the estimated 10 annual respondents. 
This estimate includes, as applicable, the time needed to review 
instructions, develop, acquire, install, and utilize technology and 
systems for the purposes of collecting, validating, and verifying 
information, processing and maintaining information, and disclosing and 
providing information; adjust the existing ways to comply with any 
previously applicable instructions and requirements; train personnel to 
respond to a collection of information, search existing data sources, 
gathering and maintain the data needed, and complete and review the 
collection of information; and transmit or otherwise disclose the 
information.
    Send comments regarding the burden estimate to the Office of 
Information and Regulatory Affairs, Office of Management and Budget, 
Attention Desk Officer for the Federal Maritime Commission, New 
Executive Office Building, 725 17th Street, N.W., Washington, D.C. 
20503 within 30 days of publication in the Federal Register.
    The FMC would also like to solicit comments to: (a) evaluate the 
accuracy of the Commission's burden estimates for the proposed 
collection of information; (b) enhance the quality, utility, and 
clarity of the information to be collected; and (c) minimize the burden 
of the collection of information on respondents, including through the 
use of automated collection techniques or other forms of information 
technology. Comments submitted in response to this proposed rulemaking 
will be summarized and/or included in the final rule and will become a 
matter of public record. The OMB control number will be displayed in 
the final rule.
    The Chairman certifies, pursuant to section 605 of the Regulatory 
Flexibility Act, 5 U.S.C. 605, that the proposed amendments will not, 
if promulgated, have a significant impact on a substantial number of 
small entities. The proposed changes affect vessel-operating common 
carriers, entities that are not considered to be small.

List of Subjects

46 CFR Parts 585 and 550

    Administrative practice and procedure, Maritime carriers.

46 CFR Parts 586 and 551

    Japan, Maritime carriers.

46 CFR Parts 587 and 560

    Administrative practice and procedure, Maritime carriers.

46 CFR Parts 588 and 555

    Administrative practice and procedure, Investigations, Maritime 
carriers.

46 CFR Part 565

    Administrative practice and procedure, Maritime carriers, Reporting 
and recordkeeping requirements.

    For the reasons set out in the preamble, the Commission proposes to 
amend 46 CFR parts 585, 586, 587, and 588, and to add new part 565, as 
set forth below:
    1. Revise the title of subchapter C to read:

SUBCHAPTER C--REGULATIONS AND ACTIONS TO ADDRESS RESTRICTIVE 
FOREIGN MARITIME PRACTICES

PART 585--REGULATIONS TO ADJUST OR MEET CONDITIONS UNFAVORABLE TO 
SHIPPING IN THE FOREIGN TRADE OF THE UNITED STATES

PART 585--[REDESIGNATED AS PART 550]

    1. Redesignate part 585 as part 550, and transfer newly designated 
part 550 to subchapter C.
    2. The authority citation for redesignated part 550 is revised to 
read as set forth below:

    Authority: 5 U.S.C. 553; sec. 19 (a)(2), (e), (f), (g), (h), 
(i), (j), (k) and (l) of the Merchant Marine Act, 1920, 46 U.S.C. 
app. 876 (a)(2), (e), (f), (g), (h), (i), (j), (k) and (l), as 
amended by Pub. L. No. 105-258; Reorganization Plan No. 7 of 1961, 
75 Stat. 840; and sec. 10002 of the Foreign Shipping Practices Act 
of 1988, 46 U.S.C. app. 1710a.

    2a. Add a note to newly designated part 550 to read as follows:

    Note to part 550: In accordance with 44 U.S.C. 3518(c)(1)(B), 
and except for investigations undertaken with reference to a 
category of individuals or entities (e.g., an entire industry), any 
information requests or requirements in 46 CFR part 550 are not 
subject to the requirements of section 3507 of the Paperwork 
Reduction Act because such collections of information are pursuant 
to a civil, administrative action or investigation by an agency of 
the United States against specific individuals or entities.

    3. Revise redesignated Sec. 550.102 to read as set forth below:


Sec. 550.102  Scope.

    Regulatory actions may be taken when the Commission finds, on its 
own motion or upon petition, that a foreign government has promulgated 
and enforced or intends to enforce laws, decrees, regulations or the 
like, or has engaged in or intends to engage in practices which 
presently have or prospectively could create conditions unfavorable to 
shipping in the foreign trade of the United States, or when owners, 
operators, agents or masters of foreign vessels engage in or intend to 
engage in competitive methods, pricing practices or other practices 
which have created or could create such conditions.
    4. Revise redesignated Sec. 550.103 (a) and (b) to read as set 
forth below:


Sec. 550.103  Definitions.

* * * * *
    (a) Act means the Merchant Marine Act, 1920, as amended by Pub. L. 
No. 101-595 and as amended by Pub. L. No. 105-258.
    (b) Person means individuals, corporations, partnerships and 
associations existing under or authorized by the laws of the United 
States or of a foreign country, and includes any common carrier, tramp 
operator, bulk operator, shipper, shippers' association, importer, 
exporter, consignee, ocean transportation intermediary, marine terminal 
operator, or any component of the Government of the United States.
* * * * *
    5. Revise redesignated Sec. 550.201(a) to read as set forth below:


Sec. 550.201  Information orders.

* * * * *
    (a) The Commission may, by order, require any person (including any 
common carrier, tramp operator, bulk operator, shipper, shippers' 
association, ocean transportation intermediary, or marine terminal 
operator, or any officer, receiver, trustee, lessee, agent, or employee 
thereof), to file with the Commission a report, answers to questions, 
documentary material, or other information which the Commission 
considers necessary or appropriate;
* * * * *
    6. Revise redesignated Sec. 550.202(b) introductory text and (b)(3) 
to read as set forth below:


Sec. 550.202  Type of information.

* * * * *
    (b) Shipper, shippers' association, or ocean transportation 
intermediary in the affected trade to furnish any or all of the 
following information:
* * * * *
    (3) Amount of brokerage, ocean transportation intermediary 
compensation or other charges collected or paid in connection with 
shipments in the affected trade; and
* * * * *
    7. Revise the introductory text and paragraph (d) of redesignated 
Sec. 550.301 to read as set forth below:

[[Page 67033]]

Sec. 550.301  Findings.

    For the purposes of this part, conditions created by foreign 
governmental action or competitive methods, pricing practices or other 
practices of owners, operators, agents or masters of foreign vessels 
are found unfavorable to shipping in the foreign trade of the United 
States, if such conditions:
* * * * *
    (d) Restrict or burden a carrier's intermodal movements or shore-
based maritime activities, including terminal operations and cargo 
solicitation; agency services; ocean transportation intermediary 
services and operations; or other activities and services integral to 
transportation systems; or
* * * * *
    8. Revise redesignated Sec. 550.601(c) to read as set forth below:


Sec. 550.601  Actions to correct unfavorable conditions.

* * * * *
    (c) Suspend, in whole or in part, tariffs and service contracts for 
carriage to or from United States ports, including a common carrier's 
right to use tariffs of conferences and service contracts of agreements 
in United States trades of which it is a member for any period the 
Commission specifies;
* * * * *
    9. Revise redesignated Sec. 550.602 to read as set forth below:


Sec. 550.602  Penalty.

    A common carrier that accepts or handles cargo for carriage under a 
tariff or service contract that has been suspended under Sec. 550.505 
or Sec. 550.601 of this part, or after its right to use another tariff 
or service contract has been suspended under those sections, is subject 
to a civil penalty of not more than $50,000 for each day that it is 
found to be operating under a suspended tariff or service contract.

PART 586--ACTIONS TO ADJUST OR MEET CONDITIONS UNFAVORABLE TO 
SHIPPING IN THE U.S. FOREIGN TRADE

    1. Redesignate part 586 as part 551, and transfer newly designated 
part 551 to subchapter C.

PART 586--[REDESIGNATED AS PART 551]

    2. The authority citation for redesignated part 551 is revised to 
read as set forth below:

    Authority: 46 U.S.C. app. 876(1)(b); 46 U.S.C. app. 876 (5) 
through (12); 46 CFR part 550; Reorganization Plan No. 7 of 1961, 26 
FR 7315 (August 12, 1961).

    2a. Add a note to newly designated part 551 to read as follows:

    Note to part 551: In accordance with 44 U.S.C. 3518(c)(1)(B), 
and except for investigations undertaken with reference to a 
category of individuals or entities (e.g., an entire industry), any 
information requests or requirements in 46 CFR part 551 are not 
subject to the requirements of section 3507 of the Paperwork 
Reduction Act because such collections of information are pursuant 
to a civil, administrative action or investigation by an agency of 
the United States against specific individuals or entities.

    3. Redesignated Sec. 551.3 is removed.

PART 587--ACTIONS TO ADDRESS CONDITIONS UNDULY IMPAIRING ACCESS OF 
U.S.-FLAG VESSELS TO OCEAN TRADE BETWEEN FOREIGN PORTS

PART 587--[REDESIGNATED AS PART 560]

    1. Redesignate part 587 as part 560, and transfer newly designated 
part 560 to subchapter C.
    2. The authority citation for redesignated part 560 is revised to 
read as set forth below:

    Authority: 5 U.S.C. 553; secs. 13(b)(6), 15 and 17 of the 
Shipping Act of 1984, 46 U.S.C. app. 1712(b)(6), 1714, and 1716, as 
amended by Pub. L. No. 105-258; sec. 10002 of the Foreign Shipping 
Practices Act of 1988 (46 U.S.C. app. 1710a), as amended by Pub. L. 
No. 105-258.

    3. Revise redesignated Sec. 560.1(a) to read as set forth below:


Sec. 560.1  Purpose; general provisions.

    (a)(1) It is the purpose of this part to enumerate certain 
conditions resulting from the action of a common carrier, acting alone 
or in concert with any person, or a foreign government, which unduly 
impair the access of a vessel documented under the laws of the United 
States whether liner, bulk, tramp or other vessel, (hereinafter ``U.S. 
flag vessel'') to ocean trade between foreign ports, which includes 
intermodal movements, and to establish procedures by which the owner or 
operator of a U.S. flag vessel (hereinafter ``U.S. flag carrier'') may 
petition the Federal Maritime Commission for relief under the authority 
of section 13(b)(6)of the Shipping Act of 1984 (``the Act'') (46 U.S.C. 
app. 1712(b)(6)).
    (2) It is the further purpose of this part to indicate the general 
circumstances under which the authority granted to the Commission under 
section 13(b)(6)may be invoked, and the nature of the subsequent 
actions contemplated by the Commission.
    (3) This part also furthers the goals of the Act with respect to 
encouraging the development of an economically sound and efficient U.S. 
flag liner fleet as stated in section 2 of the Act (46 U.S.C. app. 
1701).
* * * * *
    4. Revise redesignated Sec. 560.2(c) to read as set forth below:


Sec. 560.2  Factors indicating conditions unduly impairing access.

* * * * *
    (c) Use of predatory practices, possibly including but not limited 
to below market pricing designed to exclude competition, and use of 
closed conferences employing deferred rebates, which unduly impair 
access of a U.S. flag vessel to the trade.
* * * * *
    5. Revise the first sentence of the introductory text of 
redesignated Sec. 560.5(a) to read as set forth below:


Sec. 560.5  Receipt of relevant information.

    (a) In making its decision on matters arising under section 
13(b)(6)of the Act, the Commission may receive and consider relevant 
information from any owner, operator, or conference in an affected 
trade, or from any foreign government, either directly or through the 
Department of State or from any other reliable source. * * *
* * * * *
    6. Revise redesignated Sec. 560.7(b)(3)(i) to read as set forth 
below:


Sec. 560.7  Decision; sanctions; effective date.

* * * * *
    (b) * * *
    (3)(i) Suspension, in whole or in part, of any or all tariffs or 
service contracts for carriage to or from United States ports for any 
period the Commission specifies, or until such time as unimpaired 
access is secured for U.S. flag carriers in the affected trade.
* * * * *

PART 588--ACTIONS TO ADDRESS ADVERSE CONDITIONS AFFECTING U.S. FLAG 
CARRIERS THAT DO NOT EXIST FOR FOREIGN CARRIERS IN THE UNITED 
STATES

PART 588--[REDESIGNATED AS PART 555]

    1. Redesignate part 588 as part 555, and transfer newly designated 
part 555 to subchapter C.
    2. The authority citation for redesignated part 555 is revised to 
read as set forth below:

    Authority: 5 U.S.C. 553; sec. 10002 of the Foreign Shipping 
Practices Act of 1988 (46 U.S.C. app. 1710a), as amended by Pub. L. 
No. 105-258.


[[Page 67034]]


    2a. Add a note to newly designated part 555 to read as follows:

    Note to part 555: In accordance with 44 U.S.C. 3518(c)(1)(B), 
and except for investigations undertaken with reference to a 
category of individuals or entities (e.g., an entire industry), any 
information requests or requirements in 46 CFR part 555 are not 
subject to the requirements of section 3507 of the Paperwork 
Reduction Act because such collections of information are pursuant 
to a civil, administrative action or investigation by an agency of 
the United States against specific individuals or entities.

    3. Revise redesignated Sec. 555.1 to read as set forth below:


555.1  Purpose.

    It is the purpose of the regulations of this part to establish 
procedures to implement the Foreign Shipping Practices Act of 1988, as 
amended by the Ocean Shipping Reform Act of 1998, which authorizes the 
Commission to take action against foreign carriers, whose practices or 
whose government's practices result in adverse conditions affecting the 
operations of United States carriers, which adverse conditions do not 
exist for those foreign carriers in the United States. The regulations 
of this part provide procedures for investigating such practices and 
for obtaining information relevant to the investigations, and also 
afford notice of the types of actions included among those that the 
Commission is authorized to take.
    4. Revise redesignated Sec. 555.2(a), (c), and (d) to read as set 
forth below:


Sec. 555.2  Definitions.

* * * * *
    (a) Common carrier, marine terminal operator, ocean transportation 
intermediary, ocean common carrier, person, shipper, shippers 
association, and United States have the meanings given each such term, 
respectively, in section 3 of the Shipping Act of 1984 (46 U.S.C. app. 
1702);
* * * * *
    (c) Maritime services means port-to-port carriage of cargo by the 
vessels operated by ocean common carriers;
    (d) Maritime-related services means intermodal operations, terminal 
operations, cargo solicitation, agency services, ocean transportation 
intermediary services and operations, and all other activities and 
services integral to total transportation systems of ocean common 
carriers and their foreign domiciled affiliates on their own and 
others' behalf;
* * * * *
    5. Revise redesignated Sec. 555.4 (a) and (c) to read as set forth 
below:


Sec. 555.4  Petitions.

    (a) A petition for investigation to determine the existence of 
adverse conditions as described in Sec. 555.3 may be submitted by any 
person, including any common carrier, shipper, shippers' association, 
ocean transportation intermediary, or marine terminal operator, or any 
branch, department, agency, or other component of the Government of the 
United States. Petitions for relief under this part shall be in 
writing, and filed in the form of an original and fifteen copies with 
the Secretary, Federal Maritime Commission, Washington, DC 20573.
* * * * *
    (c) A petition which the Commission determines fails to comply 
substantially with the requirements of paragraph (b) of this section 
shall be rejected promptly and the person filing the petition shall be 
notified of the reasons for such rejection. Rejection is without 
prejudice to the filing of an amended petition.
    6. Revise redesignated Sec. 555.8(a)(2) to read as set forth below:


Sec. 555.8  Action against foreign carriers.

    (a) * * *
    (2) Suspension, in whole or in part, of any or all tariffs or 
service contracts, including the right of an ocean common carrier to 
use any or all tariffs or service contracts of conferences in United 
States trades of which it is a member for such period as the Commission 
specifies;
* * * * *

PART 565--[ADDED]

    1. Add part 565 to subchapter C to read as set forth below:

PART 565--CONTROLLED CARRIERS

Sec.
565.1  Purpose and scope.
565.2  Definitions.
565.3  Classification as controlled carrier.
565.4  Notification to Commission of change in control.
565.5  Exceptions.
565.6  Level of rates and charges generally.
565.7  Effective dates.
565.8  Special permission.
565.9  Commission review, suspension and prohibition of rates, 
charges, classifications, rules or regulations.
565.10  Suspension procedures, period and replacement rates.
565.11  Presidential review.
565.12  Stay, postponement, discontinuance or suspension of action.

    Authority: 46 U.S.C. App. 1708, as amended by Pub. L. No. 105-
258.


Sec. 565.1  Purpose and scope.

    (a) Purpose. The regulations of this part are intended to carry out 
the Commission's mandate under section 9 of the Shipping Act of 1984, 
as amended by the Ocean Shipping Reform Act of 1998, to monitor the 
practices of controlled carriers and ensure that they do not:
    (1) Maintain rates or charges in their tariffs and service 
contracts that are below a level that is just and reasonable; nor
    (2) Establish, maintain or enforce unjust or unreasonable 
classifications, rules or regulations in those tariffs or service 
contracts which result or are likely to result in the carriage or 
handling of cargo at rates or charges that are below a just and 
reasonable level.
    (b) Scope. The regulations contained in this part set forth the 
special procedures whereby controlled carriers' tariffs and service 
contracts become effective and are reviewed by the Commission. These 
regulations in no way exempt controlled carriers from other Commission 
regulations or statutory authority to which they may otherwise be 
subject as ocean common carriers. These regulations apply to all 
controlled carriers operating in the foreign commerce of the United 
States unless excepted under section 9(f) of the Shipping Act of 1984, 
as reflected by Sec. 565.5.


Sec. 565.2  Definitions.

    (a) Controlled carrier means an ocean common carrier that is, or 
whose operating assets are, directly or indirectly owned or controlled 
by a government. Ownership or control by a government shall be deemed 
to exist with respect to any ocean common carrier if:
    (1) A majority portion of the interest in the carrier is owned or 
controlled in any manner by that government, by any agency thereof, or 
by any public or private person controlled by that government; or
    (2) That government has the right to appoint or disapprove the 
appointment of a majority of the directors, the chief operating officer 
or the chief executive officer of the carrier.
    (b) Effective date has the same meaning it has in 46 CFR part 520.


Sec. 565.3  Classification as controlled carrier.

    (a) Notification. The Commission will periodically review the ocean 
common carriers operating in the foreign commerce of the United States 
and will notify any ocean common carrier of any change in its 
classification as a controlled carrier.
    (b) Rebuttal of classification. (1) Any ocean common carrier 
contesting such a classification may, within 30 days after

[[Page 67035]]

the date of the Commission's notice, submit a rebuttal statement.
    (2) The Commission shall review the rebuttal and notify the ocean 
common carrier of its final decision.


Sec. 565.4  Notification to Commission of change in control.

    Whenever the operation, control or ownership of an ocean common 
carrier is transferred resulting in a majority portion of the interest 
of that ocean common carrier being owned or controlled in any manner by 
a government, the ocean common carrier shall immediately send written 
notification of the details of the change to the Secretary of the 
Commission. If a carrier is newly commencing ocean common carrier 
operations in a United States trade, and if a majority portion of the 
carrier is owned or controlled by a government, or if a government may 
approve or disapprove the majority of directors or the chief executive 
or operating officer of the carrier, the carrier shall immediately send 
written notification to the Secretary of the details of such ownership 
or control.


Sec. 565.5  Exceptions.

    All controlled carriers shall be subject to provisions of this part 
and section 9 of the Shipping Act of 1984 except those which meet the 
following exceptions:
    (a) When the vessels of the controlling state are entitled by a 
treaty of the United States to receive national or most-favored-nation 
treatment; or
    (b) When the controlled carrier operates in a trade served 
exclusively by controlled carriers.


Sec. 565.6  Level of rates and charges generally.

    No controlled carrier may maintain or enforce rates or charges in 
its tariffs or service contracts that are below a level that is just 
and reasonable. No controlled carrier may establish or maintain unjust 
or unreasonable classifications, rules, or regulations in its tariffs 
or service contracts. An unjust or unreasonable classification, rule or 
regulation means one that results or is likely to result in the 
carriage or handling of cargo at rates or charges that are below a just 
and reasonable level. See Sec. 565.9(a)(2) (Rate standards).


Sec. 565.7  Effective dates.

    (a) Generally. Except for service contracts, the rates, charges, 
classifications, rules or regulations of controlled carriers may not, 
unless the Commission has granted special permission, become effective 
sooner than the 30th day after the date of publication.
    (b) Open rates. (1) Generally. Controlled carriers that are members 
of conference agreements publishing rates for commodities designated as 
open by the conference are subject to the 30-day controlled carrier 
notice requirement, except when special permission is granted by the 
Commission under Sec. 565.8.
    (2) Conference publication of reduced open rates. Notwithstanding 
paragraph (b)(1) of this section, a conference may, on less than 30 
days' notice, publish reduced rates on behalf of controlled carrier 
members for open-rated commodities:
    (i) At or above the minimum level set by the conference; or
    (ii) At or above the level set by a member of the conference that 
has not been determined by the Commission to be a controlled carrier 
subject to section 9 of the Shipping Act of 1984.
    (c) Independent action rates of controlled carriers. Conferences 
may publish on behalf of their controlled carrier members lower 
independent action rates on less than 30 days' notice, subject to the 
requirements of their basic agreements and subject to such rates being 
published at or above the level set by a member of the conference that 
has not been determined by the Commission to be a controlled carrier 
subject to section 9 of the Shipping Act of 1984.


Sec. 565.8  Special permission.

    Section 8(d) of the Shipping Act of 1984 authorizes the Commission, 
in its discretion and for good cause shown, to permit increases or 
decreases in rates, or the issuance of new or initial rates, on less 
than statutory notice under Sec. 565.7. Section 9(c) of the Shipping 
Act of 1984 authorizes the Commission to permit a controlled carrier's 
rates, charges, classifications, rules or regulations to become 
effective on less than 30 days' notice. The Commission may also in its 
discretion and for good cause shown, permit departures from the 
requirements of this part. The Commission will consider such requests 
for special permission by controlled carriers pursuant to its 
procedures set forth at 46 CFR part 520.


Sec. 565.9  Commission review, suspension and prohibition of rates, 
charges, classifications, rules or regulations.

    (a)(1) Request for justification. Within 20 days of a request (with 
respect to its existing or proposed rates, charges, classifications, 
rules or regulations) from the Commission, each controlled carrier 
shall file a statement of justification that sufficiently details the 
controlled carrier's need and purpose for such rates, charges, 
classifications, rules or regulations upon which the Commission may 
reasonably base its determination of the lawfulness thereof.
    (2) Rate standards. (i) In determining whether rates, charges, 
classifications, rules or regulations by a controlled carrier are just 
and reasonable, the Commission shall take into account whether the 
rates or charges which have been published or assessed or which would 
result from the pertinent rates, charges, classifications, rules or 
regulations are below a level which is fully compensatory to the 
controlled carrier based upon that carrier's actual or constructive 
costs.
    (ii) For the purposes of Sec. 565.9(a)(2)(i), ``constructive 
costs'' means the costs of another carrier, other than a controlled 
carrier, operating similar vessels and equipment in the same or a 
similar trade.
    (iii) The Commission may also take into account other appropriate 
factors, including, but not limited to, whether:
    (A) The rates, charges, classifications, rules or regulations are 
the same as or similar to those published or assessed by other carriers 
in the same trade;
    (B) The rates, charges, classifications, rules or regulations are 
required to assure movement of particular cargo in the trade; or
    (C) The rates, charges, classifications, rules or regulations are 
required to maintain acceptable continuity, level or quality of common 
carrier service to or from affected ports.
    (3) Time for determination. The Commission shall determine within 
120 days of the receipt of information requested by the Commission 
under this section, whether the rates, charges, classifications, rules 
or regulations of a controlled carrier may be unjust and unreasonable. 
Whenever the Commission is of the opinion that the rates, charges, 
classifications, rules or regulations published or assessed by a 
controlled carrier may be unjust and unreasonable, the Commission shall 
issue an order to the controlled carrier to show cause why those rates, 
charges, classifications, rules or regulations should not be 
prohibited.
    (b) Suspension. Pending a decision on whether to prohibit the 
rates, charges, classifications, rules or regulations of a controlled 
carrier, the Commission may suspend the rates, charges, 
classifications, rules or regulations. See Sec. 565.10.
    (c) Prohibition. The Commission shall prohibit the use of any 
rates, charges, classifications, rules or regulations that the 
controlled carrier has failed to demonstrate to be just and reasonable. 
In a proceeding under this paragraph, the burden of proof is on the 
controlled

[[Page 67036]]

carrier to demonstrate that its rates, charges, classifications, rules 
or regulations are just and reasonable. The use of rates, charges, 
classifications, rules or regulations published or assessed by a 
controlled carrier that have been suspended or prohibited by the 
Commission is unlawful.
    (d) Publication. All final orders of prohibition shall be published 
in the Federal Register.


Sec. 565.10  Suspension procedures, period and replacement rates.

    (a) (1) Suspension prior to effective date. Pending a determination 
as to their lawfulness in a prohibition proceeding as described in 
Sec. 565.9, the Commission may suspend the rates, charges, 
classifications, rules or regulations at any time before their 
effective date.
    (2) Suspension after effective date. In the case of rates, charges, 
classifications, rules or regulations that have already become 
effective, the Commission may, upon the issuance of an order to show 
cause, suspend those rates, charges, classifications, rules or 
regulations on not less than 30 days' notice to the controlled carrier.
    (b) Period of suspension. In any case, no period of suspension may 
be greater than 180 days.
    (c) Implementation. (1) Upon issuance of an order suspending a 
rate, charge, classification, rule or regulation in whole or in part, 
the Commission shall direct the controlled carrier to remove the 
suspended material from its tariff publication; or
    (2) If the matter subject to the suspension order is not covered by 
paragraph (c)(1) of this section, the Commission shall set forth 
procedures in the order for implementing the suspension.
    (3) Publication. All orders of suspension shall be published in the 
Federal Register.
    (d) Replacement rates. Controlled carriers may publish in tariffs 
or file in service contracts rates, charges, classifications, rules or 
regulations in lieu of the suspended matter (``replacement rates'').
    (1) Effective date. In the case of replacement rates which are 
published in tariffs and which are scheduled to become effective during 
a suspension period, may become effective immediately upon either their 
publication in tariffs or upon the effective date of the suspension, 
whichever is later.
    (2) Rejection of replacement rates. The Commission may reject the 
replacement rates, charges, classifications, rules or regulations 
published in tariffs or filed in service contracts to take effect 
during the suspension period if they are unjust and unreasonable. In 
determining whether to reject replacement rates, charges, 
classifications, rules or regulations, the Commission will consider 
whether they would result in total charges (i.e, rate plus applicable 
surcharges) that are lower than the lowest comparable charges effective 
for a common carrier, other than a controlled carrier, serving the same 
trade.
    (3) At the same time it announces replacement rates, the controlled 
carrier shall submit to the Secretary of the Commission, a letter 
identifying the specific competing common carrier's rates, charges, 
classification or rules resulting in total charges which are equal to 
or lower than its own.


Sec. 565.11  Presidential review.

    The Commission shall transmit all orders of suspension or final 
orders of prohibition to the President of the United States 
concurrently with the submission of such orders to the Federal Register 
pursuant to Sec. 565.9(d) or Sec. 565.10(c)(3). The President may, 
within 10 days of either the receipt or effective date of the order, 
request in writing that the Commission stay the effect of the order for 
reasons of national defense or foreign policy.


Sec. 565.12  Stay, postponement, discontinuance or suspension of 
action.

    The Commission may, on its own motion or upon petition, postpone, 
discontinue, or suspend any and all actions taken by it under the 
provisions of this part. The Commission shall immediately stay the 
effect of any order issued under this part as requested by the 
President pursuant to Sec. 565.11.

    By the Commission.
Joseph C. Polking,
Secretary.
[FR Doc. 98-32224 Filed 12-3-98; 8:45 am]
BILLING CODE 6730-01-P