Federal Register, Volume 63 Issue 240 (Tuesday, December 15, 1998)

[Federal Register Volume 63, Number 240 (Tuesday, December 15, 1998)]
[Proposed Rules]
[Pages 69034-69044]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33182]

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FEDERAL MARITIME COMMISSION

46 CFR Parts 535 and 572

[Docket No. 98-26]

Ocean Common Carrier and Marine Terminal Operator Agreements
Subject to the Shipping Act of 1984

AGENCY: Federal Maritime Commission.

ACTION: Proposed rule.

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SUMMARY: The Federal Maritime Commission proposes to amend its
regulations governing agreements among ocean common carriers and marine
terminal operators to reflect changes made to the Shipping Act of 1984
by the recently enacted Ocean Shipping Reform Act of 1998, Pub. L. 105-
258. In accordance with that Act, the Commission is proposing to
establish new rules for ocean carrier agreements regarding carriers'
service contracts with shippers, amend the scope of marine terminal
agreements subject to the Act, establish rules for agreements on
freight forwarder compensation, reduce the mandatory notice period for
carriers' independent action on tariff rates, and make other conforming
changes. The Commission is also proposing to delete much of its format
requirements for filed agreements, clarify the definition of ``ocean
common carrier'', and make other technical amendments to the filing
rules for clarity and administrative efficiency.

DATES: Comments due January 14, 1999.

ADDRESS: Send comments (original and fifteen copies) to: Joseph C.
Polking, Secretary, Federal Maritime Commission, 800 North Capitol
Street, NW, Room 1046, Washington, DC 20573-0001.

FOR FURTHER INFORMATION CONTACT:

Thomas Panebianco, General Counsel, Federal Maritime Commission, 800
North Capitol Street, NW, Washington, DC 20573-0001 (202) 523-5740
Austin L. Schmitt, Director, Bureau of Economics and Agreement
Analysis, Federal Maritime Commission, 800 North Capitol Street, NW.,
Washington, DC 20573-0001 (202) 523-5787

SUPPLEMENTARY INFORMATION:

Background

On October 14, 1998, the Ocean Shipping Reform Act, Pub. L. 105-
258, 112 Stat. 1902, (``OSRA'') was signed into law. That law makes
several changes to the Federal Maritime Commission's (``FMC'' or
``Commission'') authorities and responsibilities under the Shipping Act
of 1984, 46 U.S.C. app. 1701 et seq. (``1984 Act''). In particular, in
an effort to foster competition and other aims, Congress made a number
of changes regarding the treatment of agreements between and among
vessel-operating common carriers and marine terminal operators, which
are subject to Commission oversight. Section 203 of

[[Page 69035]]

OSRA requires that ``[n]ot later than March 1, 1999, the Federal
Maritime Commission shall prescribe final regulations to implement the
changes made by this Act.''
On November 13, 1998 the President signed the Coast Guard
Authorization Act of 1998, 1999 and 2000, Pub. L. 105-383, 112 Stat.
3411 (November 13, 1998). That Act also included amendments to the
Shipping Act of 1984. Accordingly, the Commission now proposes to
update its agreement-related regulations to conform with these new
laws. The Commission is also proposing to amend its rules to eliminate
certain unnecessary formal requirements and make other clarifications
and changes.

OSRA Changes to FMC Agreement Oversight

The most notable feature made to the 1984 Act by OSRA involves
ocean carrier agreements and service contracting. Specifically, OSRA
amends section 5 of the 1984 Act to provide that ocean common carrier
agreements may not prohibit or restrict members from negotiating
service contracts with one or more shippers, and may not require
members to disclose the terms and conditions of a service contract or a
negotiation on a service contract. In its report on OSRA, the Senate
Commerce, Science, and Transportation Committee stated that ``the right
of individual and independent service contracts is the most important
change made by the bill''; the change was made ``to foster intra-
agreement competition, promote efficiencies, modernize ocean shipping
arrangements, and encourage individual shippers and carriers to develop
economic partnerships that better suit their business needs.'' S. Rep.
No. 2, 105th Cong., 1st Sess. 16-17 (1997). Under the new law, ocean
common carrier agreements are prohibited from adopting mandatory rules
or requirements affecting a member's right to negotiate and enter into
service contracts. OSRA does provide, however, that an agreement may
issue voluntary guidelines relating to the terms and procedures of
members' service contracts, if they state that members are not required
to follow the guidelines. Agreement guidelines are required to be
submitted confidentially to the FMC.
Other notable changes in OSRA include reducing the notice period
for independent action on tariff rates and service items from ten
calendar days to five, and establishing that the right of independent
action applies to all rates and charges fixed by a conference. In
addition, OSRA (while it eliminates many of the Act's prohibitions on
discriminatory treatment) adds new sections 10(c) (7) and (8) applying
to service contract carriage, barring carrier groups from subjecting
shippers' associations or ocean transportation intermediaries to unjust
discrimination or unreasonable prejudice or disadvantage based on their
status as associations or intermediaries. This section shows Congress's
recognition that these ``middlemen'' are an important part of the
market's competitive structure and are worthy of special protections.
The standards in section 16 for granting exemptions from
requirements of the Act also have been liberalized. Maintaining
effective FMC regulation and averting unjust discrimination are no
longer part of the analysis. The Commission now must establish only
that an exemption will ``not result in substantial reduction in
competition or be detrimental to commerce.'' \1\
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\1\ While the grant of particular exemptions under the new
standard is beyond the scope of this proposed rule, the Commission
will entertain comments on whether any classes of agreements would
be appropriate for full or qualified exemption under the new test.
Such comments, if meritorious, may form the basis for future
proceedings.
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The new law also rectifies ambiguity that arose in the wake of the
1995 repeal of the Shipping Act, 1916 (which applied to domestic
waterborne commerce; see Pub. L. 104-88, 109 Stat. 803) as to the scope
of the Commission's authority over marine terminal operations involving
domestic commerce. OSRA changes the definition of ``marine terminal
operator'' (formerly section 3(15), now 3(14)) to make clear that it
applies to the furnishing of terminal facilities not just in connection
with ``common carriers'' (i.e., wholly international commerce), but
also in connection with ``a common carrier and a water carrier subject
to subchapter II of chapter 135 of title 49, United States Code.'' Put
another way, the definition of marine terminal operator (and thus, our
jurisdiction) now extends to terminal operations involving both
international and domestic waterborne commerce, but not to terminal
operations involving solely domestic transport.
A corresponding change is made in section 4(b) of the 1984 Act,
which specifies the types of agreements subject to the Act. The amended
Shipping Act thus will apply to agreements among terminal operators to
discuss, fix or regulate rates or services applicable to both
international and domestic commerce. However, agreements involving
terminal operators to ``engage in exclusive, preferential, or
cooperative working arrangements'' will only be subject to the Act ``to
the extent such agreements involve ocean transportation in the foreign
commerce of the United States.''
While OSRA made no changes to the general economic standard for
evaluating agreements in section 6(g) of the Act, the legislative
history explains that evolving market conditions require the Commission
to take a more vigorous and forward-looking approach to enforcing the
general standard. The Committee stated, in part:

* * * [I]nternational liner shipping is becoming a more
concentrated industry. The Committee is concerned that trade-wide
agreements established by the potential oligopoly of mega-carriers
and global strategic alliances, composed of fewer and more
homogeneous members than are today's agreements, may effectively
dominate the major U.S. trade lanes in the near future.
The section contemplates the use of reasoned projections and
forward-looking analyses by the agency, based on its substantial
industry expertise. It appears that the FMC thus far has given the
section a restrictive reading, suggesting that an injunction cannot
be won without direct evidence of actual commercial harm suffered by
shippers as a result of agreement activity. While evidence of
shipper harm may indeed be relevant in certain cases, a blanket
requirement for such evidence is not consistent with the text of the
statute, and would undermine the agency's ability to take necessary
preventive action. Indeed, the Committee directs the agency not to
allow the disruption of ocean borne commerce while it seeks to
quantify such disruption for evidentiary purposes.

S. Rep. No. 2, 105th Cong., 1st Sess. 8-9 (1997).

The Committee also set forth a detailed analytical approach to the
section, developed in cooperation with the Commission and other
interested parties. While no specific changes on the Commission's rules
appear to be warranted to implement these policies, the Commission will
be tailoring and refining its agreement analysis to conform with the
Committee's admonitions.

The Proposed Rule

The proposed rule redesignates the Commission's agreement rules,
formerly 46 CFR part 572, as part 535, and makes changes to its
authority citations to reflect ISRA's passage. References in the
following discussion will be to the redesignated part number.
The following discussion first covers the three groups of proposed
rule amendments that require a degree of detailed explanation: (1)
changes regarding service contracts; (2) changes in agreement form; and
(3) a revised definition of ocean common carrier.

[[Page 69036]]

Following those three matters is a discussion of the remainder of the
proposed changes, in the order they appear in the rule.

Proposed Amendments Regarding Service Contracts

A new policy statement is added in Sec. 535.103 to reflect the
Act's new limits on carrier agreements affecting service contracts. The
definitions of ``service contract'' and ``shipper'' in Sec. 535.104
(cc) and (dd) are changed to reflect changes in the Act. Also, to
conform with OSRA, the former reference to regulating and prohibiting
service contracts in the list of agreements subject to the Act
(Sec. 535.201(7)) is changed to ``discuss and agree to any matter
related to service contracts.''
Section 535.802 is entirely new. It reflects the new provisions in
section 5(c) (1) and (2) of the Act barring carriers from collectively
agreeing to prohibitions or restrictions on service contract
negotiations, or requirements for disclosure of contract terms or
negotiations. It makes clear that these prohibitions in section 5(c)
(1) and (2) apply whether or not the carriers' agreed-upon
prohibitions, restrictions, or requirements are legally enforceable or
backed by sanctions or penalties.
While OSRA bars carrier groups from establishing binding rules for
contracts, it allows them to adopt voluntary guidelines to guide
members in their contract dealings with shippers. Section 535.802(c)
reflects the Act's new section 5(c)(3) barring carriers from
collectively adopting mandatory rules or requirements for contracts.
Section 535.802 (d)-(g) addresses the use of voluntary service contract
guidelines. The term ``voluntary guidelines'' is defined to clarify
that it applies to the terms of service contracts and the procedures
carriers follow in their dealing with shipper customers, and not to
procedures for carriers' discussions or decision making among
themselves, which would effectively restrict independent service
contracting. The rule also makes clear that use of such guidelines must
be wholly at the option of the individual carrier.
Section 535.802(f) states that voluntary guidelines may not include
procedures whereby carriers agree to disclose service contract terms or
negotiations, pre-clear proposed service contracts, submit to
compliance checks or are subject to sanctions for non-compliance. Such
``guidelines'' would be inconsistent with the voluntariness requirement
in the statute, the Act's prohibition on disclosure requirements and
agreement restrictions on service contracting, and would undermine
Congress' intent to eliminate collective control of service
contracting.
A new Sec. 535.802(h) is added in recognition that, inasmuch as the
Act allows multi-carrier agreements, carriers must agree among
themselves on procedures for entering into and administering such
contracts. Such procedures must be reflected in the carriers' filed
agreement.
Another new section, Sec. 535.803, is added reflecting the new
statutes' mandate that carriers may not agree to limit freight
forwarder compensation to less than 1.25 percent of charges, and must
be allowed to take independent action on freight forwarder compensation
on not more than five days' notice.

Proposed Changes Regarding Form of Agreements

The Commission at this time also is proposing to eliminate many of
the form and manner requirements for agreements set forth in Subpart D.
While Congress did not address this matter directly in OSRA, both the
law and the legislative history make it clear that Congress intended
that the industry be afforded more administrative flexibility to
respond to the marketplace. For example, OSRA provides carriers
substantially more flexibility in structuring tariffs. Also, in its
discussion of agreements, the Commerce Committee Report emphasized
``prompt agreement review, minimal government intervention, and
continued flexibility in structuring agreements.'' In light of these
factors it does not seem appropriate to continue the requirement that
carriers structure their agreements to accord with a highly structured,
tariff-type form.
Therefore, Sec. 535.402(a) is amended to remove paper size and
margin requirements, and clarify that agreements in other languages
must include a translation. The title page requirement in
Sec. 535.402(b) is modified slightly. In addition, a revised
Sec. 535.402(d) clarifies that agreements are signed by each individual
contracting party or its designated agent, as opposed to a single
official or agent of the group as a whole, ensuring that filed
agreements comport with general statute of frauds principles and
indicate on their face the assent of each individual party. Another
amendment to section 535.402(d), permitting faxed or photocopied
signatures, will minimize any administrative delay.
The ordering and pagination requirements in Secs. 535.402(e) and
403 are almost entirely removed. Only those requirements necessary to
the processing and oversight of the agreement are retained. Thus,
agreements must either include or be accompanied by a table of
contents, and by information such as contact names, addresses, and
specific geographic scope involved. Of course, in deleting the form
requirements, the Commission is in no way indicating that particular
agreement provisions are no longer required to be filed; indeed, the
completeness requirement of Sec. 535.407 is unchanged. Rather, it is
the Commission's intent that parties be free to draft their
arrangements to best suit their commercial objectives.
Section 535.404 is revised to delete the requirement that
conference-specific agreement language be ordered in a particular
fashion. However, the content requirements, which track section 5 of
the 1984 Act's provisions, are largely retained.
The agreement modification section, Sec. 535.405, is simplified.
The Commission wishes the amendment process to be as expedient and
practical as possible. Therefore, it is continuing the customary
practice of allowing changes to exist language to be made through the
submission of ``revised pages,'' with accompanying market-up pages
submitted for illustration purposes. Also, the elimination of the form
requirements implicitly provides carriers more flexibility to amend
their understandings by filing additional agreement pages or sections.
Mandatory republication is eliminated, replaced with a new
Sec. 535.405(e), providing that the Commission may mandate
republication when it is deemed necessary to maintain the clarity of an
agreement. In addition, the waiting period exemption for miscellaneous
amendments, set forth in Sec. 535.309, is amended to remove specific
form requirements.

Proposed Revised Definition of Ocean Common Carrier

An amended definition of ``ocean common carrier'' is proposed to
resolve uncertainty generated by the 1984 Act's definition, which is
simply ``a vessel-operating common carrier.'' At issue is part of the
regulatory dividing line between ocean common carriers and non-vessel-
operating common carriers (``NVOCCs''). The distinction, which was
first codified in 1984, has significant implications for the regulatory
scheme, inasmuch as the 1984 Act afforded ocean carriers, but not
NVOCCs, antitrust immunity and other rights and responsibilities under
the 1984 Act. The need for clarity in this area is continued by OSRA,
which continues to differentiate between vessel-operating and non-
vessel

[[Page 69037]]

operating lines with regard to service contracting and other areas.
At first glance, it is difficult to see the ambiguity in the phrase
``vessel-operating.'' However, the Commission staff has encountered a
number of complex or debatable administrative issues regarding where
and when vessels are operated, and what types of vessels are involved.
The staff has long taken a position (albeit an uncodified one) in its
dealings with the industry that an ``ocean common carrier'' is a common
carrier that, in providing a common carrier service, operates a vessel
calling at a U.S. port. If a carrier is an ocean common carrier in one
trade, it has been reasoned, it is an ocean common carrier for all
trades. For example, if a carrier operates vessels from the U.S. East
Coast to northern Europe, it has the legal ``status'' of ocean common
carrier to enter into space charter agreements for any U.S.-foreign
trade.
The proposed definition would codify the staff's approach. It would
continue the practice of determining status on a multi-trade basis
(i.e., an ocean common carrier in one trade has that status in all
trades). Any interpretation of the statute requiring status
determinations to be made on a trade-by-trade basis would be
administratively impractical and likely would prompt less than
efficient redeployment of vessels in the U.S. trades for purely legal
purposes.
The proposed definition would also clarify the issue whether
companies that operate vessels only outside the U.S.--i.e., if they
have no vessel operations to U.S. ports--can be deemed ``ocean common
carriers.'' While the staff's view has been negative, the lack of
precedent or formal guidance on this issue warrants that the issue now
be resolved by the Commission after an opportunity for interested
parties to be heard.
It appears that the legislative intent of the 1984 Act was to view
vessel operators as those whose vessels call at U.S. ports and to
classify all other common carriers in U.S. commerce as non-vessel-
operating common carriers. For example, in its report on the 1984 Act,
the Senate Commerce, Science, and Transportation Committee observed:

The Committee strongly believes that it is in our national
interest to permit cooperation among carriers serving our foreign
trades to permit efficient and reliable service * * *. Our carriers
need; a stable, predictable, and profitable trade with a rate of
return that warrants reinvestment and a commitment to serve the
trade; greater security in investment * * *.

S. Rep. No. 3, 98th Cong., 1st Sess. 9 (1983). Accordingly, we do not
believe that Congress intended to provide special privileges or
protections to carriers that have not made the financial commitment to
providing vessel service to the United States.
A definition of ocean common carrier that encompassed companies
that operate vessels only in foreign-to-foreign trades would
substantially broaden the scope of antitrust immunity potentially to
include a number of small operators whose wholly foreign vessel
operations would be difficult for the Commission to monitor or verify.
Such a finding would remove such companies from the scope of the Act's
NVOCC bonding requirements, even though they have no vessels or assets
in the United States that can be attached to satisfy a Commission or
U.S. court judgment; it would remove them from OSRA's licensing
requirements as well. Such an approach would also seem to contravene
the longstanding judicial policy of narrowly construing antitrust
exemptions. See, e.g., Federal Maritime Commission v. Seatrain Lines,
Inc., 411 U.S. 726, 733 (1973). In addition, from the text of the Act
it appears likely that when Congress used the unadorned term ``vessel''
in the definition of ocean common carrier, it was referring to the
vessels specified in the definition of common carrier, i.e., those that
operate on the high seas or Great Lakes between the United States and a
foreign country.
The proposed definition would continue the policy that the vessels
in question must be used in a common carrier service. If an NVOCC
operates tankers, tramps, or cruise ships wholly apart from its common
carrier service, it does not secure ocean common carrier status from
those vessel operations.

Other Proposed Changes

Redesignated Sec. 535.102 is amended to reflect that marine
terminal agreements are no longer limited to solely international
commerce.
The definition of ``common carrier'' in Sec. 535.104(f) is amended
to reflect changes made in the 1984 Act by section 424(d) of the Coast
Guard Authorization Act. That act inserted a qualified exception in the
definition for certain vessels carrying perishable agricultural
commodities.
The definition of ``conference agreement,'' in redesignated
Sec. 535.104(g) is changed to clarify that the term (and the rule
sections that apply it, such as the mandatory independent action
requirements) extends only to ocean common carrier conferences, and not
to marine terminal conferences, which are defined elsewhere in this
part. The definition is also changed to eliminate two seemingly
superfluous elements that do not appear to correspond with the
statutory text: (1) the requirement that, to be a conference, carriers
must agree to collective administrative affairs, and (2) the statement
that carriers may have a common tariff and must participate in some
tariff. The definition is also amended to reflect that an agreement may
offer agreement service contracts without being designated a
conference.
The definition of ``effective agreement'' in redesignated
Sec. 535.104(j) is changed to remove references to the Shipping Act,
1916, and the definition of ``information form'' in paragraph (m) is
amended to clarify that it extends to some types of agreement
modifications. ``Marine terminal operator'' is redefined in paragraph
(q) to accord with the new definition in OSRA, as discussed above, and
the definition of NVOCC is removed, as it no longer appears in this
part.
OSRA's changes regarding jurisdiction over marine terminal
operators are also reflected in redesignated Sec. 535.201, the list of
agreements subject to the Act. Also in that section, the reference to
cooperative working agreements with non-vessel-operating common
carriers, which the Commission has always found to be irreconcilable
with the service contract requirements of the Act, is deleted in
accordance with OSRA. Also, references to NVOCC and freight forwarder
agreements are removed from the non-subject agreements section,
redesignated Sec. 535.202 (f) and (g).
The exemption provisions in redesignated Sec. 535.301 are changed
to comport with the new law's more liberal standard. The exemption
procedures are being moved to a general (i.e., not agreements-specific)
exemption section in the Commission's Rules of Practice and Procedure.
In the marine terminal agreements exemption, redesignated
Sec. 535.307, the definition of ``marine terminal conference'' in
paragraph (b) is amended to reflect that such agreements do not have to
involve solely international commerce. Also, the extraneous references
to collective administrative affairs and tariff filing are removed (as
with the definition of ``conference agreement'' in redesignated
Sec. 535.104(g)). In the marine terminal services exemption in
redesignated Sec. 535.310, a definition of marine terminal services is
incorporated in paragraph (a), and paragraph (a)(2), which excepts
previously filed agreements from the exemption, is removed.
Redesignated Sec. 535.501(a) is amended, and a new Sec. 535.503(b)
is

[[Page 69038]]

added to make clear that agreement modifications that expand the
geographic scope or change the class designation of the underlying
agreement must be accompanied by an appropriate information form. Also,
redesignated Sec. 535.706(c)(1) is amended to accord with OSRA's
changed tariff requirements.
The mandatory provisions for independent action for conferences in
redesignated Sec. 535.801 are changed to reflect that shortened notice
period, from ten to five days. Also, the rules are amended to reflect
the statutory change that conferences must allow independent action on
all rates and service items, not just those required to be included in
tariffs. That is, if a conference fixes a rate on a commodity exempt
from tariff publication, for example, waste paper, it must allow
members to take independent action on the waste paper rates. If the
conference publishes a waste paper rate in its tariff (it does not have
to, but it can do so voluntarily), then it must publish the member's IA
waste paper rates as well. Section 535.801(i), a transitional provision
that applied to the 90-day period immediately after the IA rules were
adopted, is deleted.
The Commission is also proposing to add a new reporting requirement
to Appendices A, C and D, to effectively implement OSRA's new
prohibitions in section 10(c)(7-8), discussed above, barring
discrimination against ocean transportation intermediaries and
shippers' associations based on status. The amendment would require
each member of an agreement to provide summary statistics on its
service contract activities, by class of shipper. The report would be
required for both the benchmark information form filed with Class A/B
agreements, and for the ongoing quarterly monitoring reports filed for
Class A and B agreements. It is incumbent upon the Commission to
actively monitor these practices, as violations of the new 10(c)(7-8)
may well go undiscovered by affected parties, given the new
confidentiality of service contracts.
The reporting, recordkeeping and disclosure requirements contained
in this proposed rule have been submitted to the Office of Management
and Budget (OMB). This proposed regulation reduces the overall public
burden of collection of information by 4.57%. The proposed regulation
would reduce the average personhours per response from 43.3 to 41.3.
These estimates include, 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 estimates 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, NW, Washington, DC 20503
within 30 days of publication in the Federal Register.
The FMC would also like to solicit comments to: (a) evaluate
whether the proposed collection of information is necessary for the
proper performance of the functions of the agency, including whether
the information will have practical utility; (b) evaluate the accuracy
of the Commission's burden estimates for the proposed collection of
information; (c) enhance the quality, utility, and clarity of the
information to be collected; and (d) minimize the burden of the
collections 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 Chairman certifies, pursuant to section 605 of the Regulatory
Flexibility Act, 5 U.S.C. 605, that the proposed rules will not, if
promulgated, have a significant impact on a substantial number of small
entities. The affected universe of parties is limited to ocean common
carriers, passenger vessel operators, and marine terminal operators.
The Commission has determined that these entities do not come under the
programs and policies mandated by the Small Business Regulatory
Enforcement Fairness Act as they typically exceed the threshold figures
for number of employees and/or annual receipts to qualify as a small
entity under Small Business Administration Guidelines.

List of Subjects in 46 CFR Parts 535 and 572

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

Therefore, for the reasons set forth above, Title 46, Code of
Federal Regulations, is proposed to be amended as follows:

PART 572--AGREEMENTS BY OCEAN COMMON CARRIERS AND OTHER PERSONS
SUBJECT TO THE SHIPPING ACT OF 1984

1. The authority citation for part 572 is revised to read as
follows:

Authority: 5 U.S.C. 553; 46 U.S.C. app. 1701-1707, 1709-1710,
1712 and 1714-1717; Pub. L. 104-88, 109 Stat. 803, (49 U.S.C. 101
note).

2. Redesignate part 572 as part 535 of subchapter B, chapter IV of
46 CFR.
3. Revise redesignated Sec. 535.101 to read as follows:

Sec. 535.101 Authority.

The rules in this part are issued pursuant to the authority of
section 4 of the Administrative Procedure Act (5 U.S.C. 553), sections
2, 3, 4, 5, 6, 7, 8, 10, 11, 13, 15, 16, 17 and 19 of the Shipping Act
of 1984 (``the Act''), and the Ocean Shipping Reform Act of 1998, Pub.
L. 104-88, 109 Stat. 803.
4. Amend redesignated section 535.102 to remove the parenthetical
phrase ``(to the extent the agreements involve ocean transportation in
the foreign commerce of the United States)''.
5. Amend redesignated section 535.103 to add paragraph (h) to read
as follows:

Sec. 535.103 Policies.

* * * * *
(h) In order to promote competitive and efficient transportation
and a greater reliance on the marketplace, the Act places limits on
carriers' agreements regarding service contracts. Carriers may not
enter into an agreement to prohibit or restrict members from engaging
in contract negotiations, may not require members to disclose service
contract negotiations or terms and conditions (other than those
required to be published), and may not adopt mandatory rules or
requirements affecting the right of an agreement member or agreement
members to negotiate and enter into contracts. However, agreement
members may adopt voluntary guidelines covering the terms and
procedures of members' contracts.
6. Amend redesignated Sec. 535.104 as follows: paragraphs (f), (g),
(j), (m) and (q) are revised, paragraph (u) is removed, paragraph (v)
is redesignated (u) and revised, paragraphs (w), (x), (y),(z), (aa),
(bb) and (cc) are redesignated (v), (w), (x), (y), (z), (aa) and (bb),
paragraph (dd) is redesignated (cc) and revised, paragraph (ee) is

[[Page 69039]]

redesignated (dd) and revised, paragraphs (ff), (gg), (hh), (ii), (jj),
and (kk) are redesignated (ee), (ff), (gg), (hh), (ii) and (jj), as
follows:

Sec. 535.104 Definitions.

* * * * *
(f) Common carrier means a person holding itself out to the general
public to provide transportation by water of passengers or cargo
between the United States and a foreign country for compensation that:
(1) Assumes responsibility for the transportation from the port or
point of receipt to the port or point of destination; and
(2) Utilizes, for all or part of that transportation, a vessel
operating on the high seas or the Great Lakes between a port in the
United States and a port in a foreign country, except that the term
does not include a common carrier engaged in ocean transportation by
ferry boat, ocean tramp, or chemical parcel tanker, or by a vessel when
primarily engaged in the carriage of perishable agricultural
commodities:
(i) If the common carrier and the owner of those commodities are
wholly owned, directly or indirectly, by a person primarily engaged in
the marketing and distribution of those commodities and
(ii) Only with respect to those commodities.
(g) Conference agreement means an agreement between or among two or
more ocean common carriers which provides for the fixing of and
adherence to uniform tariff rates, charges, practices and conditions of
service relating to the receipt, carriage, handling and/or delivery of
passengers or cargo for all members. The term does not include joint
service, pooling, sailing, space charter, or transshipment agreements.
* * * * *
(j) Effective agreement means an agreement effective under the Act.
* * * * *
(m) Information form means the form containing economic information
which must accompany the filing of certain kinds of agreements and
agreement modifications.
* * * * *
(q) Marine terminal operator means a person engaged in the United
States in the business of furnishing wharfage, dock, warehouse, or
other terminal facilities in connection with a common carrier, or in
connection with a common carrier and a water carrier subject to
subchapter II of chapter 135 of Title 49 U.S.C. This term does not
include shippers or consignees who exclusively furnish marine terminal
facilities or services in connection with tendering or receiving
proprietary cargo from a common carrier or water carrier.
* * * * *
(u) Ocean common carrier means a common carrier that operates, for
all or part of its common carrier service, a vessel on the high seas or
the Great Lakes between a port in the United States and a port in a
foreign country, except that the term does not include a common carrier
engaged in ocean transportation by ferry boat, ocean tramp, or chemical
parcel-tanker.
* * * * *
(cc) Service contract means a written contract, other than a bill
of lading or a receipt, between one or more shippers and an individual
ocean common carrier or an agreement between or among ocean common
carriers in which the shipper or shippers make a commitment to provide
a certain volume or portion of cargo over a fixed time period, and the
ocean common carrier or the agreement commits to a certain rate or rate
schedule and a defined service level--such as assured space, transit
time, port rotation, or similar service features. The contract may also
specify provisions in the event of nonperformance on the part of any
party.
(dd) Shipper means:
(1) A cargo owner;
(2) The person for whose account the ocean transportation is
provided;
(3) The person to whom delivery is to be made;
(4) A shippers' association; or
(5) A non-vessel-operating common carrier (i.e., a common carrier
that does not operate the vessels by which the ocean transportation is
provided and is a shipper in its relationship with an ocean common
carrier) that accepts responsibility for payment of all charges
applicable under the tariff or service contract.
* * * * *
7. Amend redesignated Sec. 535.201 to revise paragraphs (a)(5),
(a)(6), (a)(7) and (b) to read as follows:

Sec. 535.201 Subject agreements.

(a) * * *
(5) Engage in exclusive, preferential, or cooperative working
arrangements among themselves or with one or more marine terminal
operators;
(6) Control, regulate, or prevent competition in international
ocean transportation; or
(7) Discuss and agree on any matter related to service contracts.
(b) Marine terminal operator agreements. This part applies to
agreements among marine terminal operators and among one or more marine
terminal operators and one or more ocean carriers to:
(1) Discuss, fix, or regulate rates or other conditions of service;
or
(2) Engage in exclusive, preferential, or cooperative working
arrangements, to the extent that such agreements involve ocean
transportation in the foreign commerce of the United States.
8. Amend redesignated Sec. 535.202 to revise paragraphs (d) and (e)
and to remove paragraphs (f) and (g) to read as follows:

Sec. 535.202 Non-subject agreements.

* * * * *
(d) Any agreement among common carriers to establish, operate, or
maintain a marine terminal in the United States; and
(e) Any agreement among marine terminal operators which exclusively
and solely involves transportation in the interstate commerce of the
United States.
9. Amend Sec. 535.301 to revise paragraphs (a) and (c), to remove
paragraphs (d) and (e), and to redesignate paragraph (f) as paragraph
(d) and revise it to read as follows:

Sec. 535.301 Exemption procedures.

(a) Authority. The Commission, upon application or its own motion,
may by order or rule exempt for the future any class of agreements
between persons subject to the Act from any requirement of the Act if
it finds that the exemption will not result in substantial reduction in
competition or be detrimental to commerce.
* * * * *
(c) Application for exemption. Applications for exemptions shall
conform to the general filing requirements for exemptions set forth at
Sec. 502.67 of this title.
(d) Retention of agreement by parties. Any agreement which has been
exempted by the Commission pursuant to section 16 of the Act shall be
retained by the parties and shall be available upon request by the
Bureau of Economics and Agreement Analysis for inspection during the
term of the agreement and for a period of three years after its
termination.
10. Amend redesignated Sec. 535.307 to revise paragraph (b) to read
as follows:

Sec. 535.307 Marine terminal agreements--exemption.

* * * * *
(b) Marine terminal conference agreement means an agreement between
or among two or more marine terminal operators and/or ocean common
carriers for the conduct or facilitation of marine

[[Page 69040]]

terminal operations which provides for the fixing of and adherence to
uniform maritime terminal rates, charges, practices and conditions of
service relating to the receipt, handling, and/or delivery of
passengers or cargo for all members.
* * * * *
11. Amend redesignated Sec. 535.309 to revise paragraphs (a)(2)(i),
(a)(2)(ii), and (a)(2)(iii) to read as follows:

Sec. 535.309. Miscellaneous modifications to agreements--exemptions.

(a) * * *
(2) Any modification to the following:
(i) Parties to the agreement (limited to conference agreements,
voluntary ratemaking agreements having no other anticompetitive
authority (e.g., pooling authority or capacity reduction authority),
and discussion agreements among passenger vessel operating common
carriers which are open to all ocean common carriers operating
passenger vessels of a class defined in the agreements and which do not
contain ratemaking, pooling, joint service, sailing or space chartering
authority.
(ii) Officials of the agreement and delegations of authority.
(iii) Neutral body policing (limited to the description of neutral
body authority and procedures related thereto).
* * * * *
12. Amend redesignated Sec. 535.310 by revising paragraph (a) to
read as follows:

Sec. 535.310 Marine terminal services agreements--exemptions.

(a) Marine terminal services agreement means an agreement,
contract, understanding, arrangement or association, written or oral
(including any modification, cancellation or appendix) between a marine
terminal operator and an ocean common carrier that applies to marine
terminal services, including checking; dockage; free time; handling;
heavy lift; loading and unloading; terminal storage; usage; wharfage;
and wharf demurrage and including any marine terminal facilities which
may be provided incidentally to such marine terminal services) that are
provided to and paid for by an ocean common carrier. The term ``marine
terminal services agreement'' does not include any agreement which
conveys to the involved carrier any rights to operate any marine
terminal facility by means of a lease, license, permit, assignment,
land rental, or similar other arrangement for the use of marine
terminal facilities or property.
* * * * *
13. Amend redesignated Sec. 535.402 to revise paragraphs (a), (b)
introductory text, (d) and (e) and remove paragraphs (f) and (g) to
read as follows:

Sec. 535.402 Form of agreements.

* * * * *
(a) Agreements shall be clearly and legibly written. Agreements in
a language other than English shall be accompanied by an English
translation.
(b) Every agreement shall include or be accompanied by a title page
indicating:
* * * * *
(d) Each agreement and/or modification filed will be signed in the
original by an official or authorized representative of each of the
parties and shall indicate the typewritten full name of the signing
party and his or her position, including organizational affiliation.
Faxed or photocopied signatures will be accepted if replaced with an
original signature as soon as practicable before the effective date.
(e) Every agreement shall include or be accompanied by a Table of
Contents providing for the location of all agreement provisions.
14. Revise redesignated Sec. 535.403 to read as follows:

Sec. 535.403 Agreement provisions.

If the following information (necessary for the expeditious
processing of the agreement filing) does not appear fully in the text
of the agreement, it shall be indicated in an attachment or appendix to
the agreement, or on the title page:
(a) Details regarding parties. Indicate the full legal name of each
party, including any FMC-assigned agreement number associated with that
name; and the address of its principal office (to the exclusion of the
address of any agent or representative not an employee of the
participating carrier or association).
(b) Geographic scope of the agreement. State the ports or port
ranges to which the agreement applies and any inland points or areas to
which it also applies with respect to the exercise of the collective
activities contemplated and authorized in the agreement.
(c) Officials of the agreement and delegations of authority.
Specify, by organizational title, the administrative and executive
officials determined by the parties to the agreement to be responsible
for designated affairs of the agreement and the respective duties and
authorities delegated to those officials. At a minimum, specify:
(1) The officials with authority to file agreements and agreement
modifications and to submit associated supporting materials or with
authority to delegate such authority; and
(2) A statement as to any designated U.S. representative of the
agreement required by this chapter.
15. Revise redesignated Sec. 535.404 to read as follows:

Sec. 535.404 Organization of conference and interconference
agreements.

(a) Each conference agreement shall include the following:
(1) Neutral body policing. State that, at the request of any
member, the conference shall engage the services of an independent
neutral body to fully police the obligations of the conference and its
members. Include a description of any such neutral body authority and
procedures related thereto.
(2) Prohibited acts. State affirmatively that the conference shall
not engage in conduct prohibited by section 10(c)(1) or 10(c)(3) of the
Act.
(3) Consultation: Shippers' requests and complaints. Specify the
procedures for consultation with shippers and for handling shippers'
requests and complaints.
(4) Independent action. Include provisions for independent action
in accordance with Sec. 535.801 of this part.
(b) (1) Each agreement between carriers not members of the same
conference must provide the right of independent action for each
carrier.
(2) Each interconference agreement must provide the right of
independent action for each conference and specify the procedures
therefor.
16. Amend redesignated Sec. 535.405 by revising paragraphs (a),
(b), (c), (d) and (e), and removing paragraphs (f) and (g) to read as
follows:

Sec. 535.405 Modification of agreements.

* * * * *
(a) Agreement modifications shall be: filed in accordance with the
provisions of Sec. 535.401 and in the format specified in Sec. 535.402.
(b) Agreement modifications shall be made by reprinting the entire
page on which the matter being changed is published (``revised
pages''). Revised pages shall indicate the consecutive denomination of
the revision (e.g., ``1st Revised Page 7''). Additional material may be
published on a new original page. New pages inserted between existing
pages shall be numbered with an appropriate suffix (e.g., a page
inserted between page 7 and page 8 shall be numbered 7a, 7.1, or
similarly).
(c) If the modification is made by the use of revised pages, the
modification shall be accompanied by a page, submitted for illustrative
purposes only, indicating the language being modified

[[Page 69041]]

in the following manner (unless such marks are apparent on the face of
the agreement):
(1) Language being deleted or superseded shall be struck through;
and,
(2) New and initial or replacement language shall immediately
follow the language being superseded and be underlined.
(d) If a modification requires the relocation of the provisions of
the agreement, such modification shall be accompanied by a revised
Table of Contents page which shall report the new location of the
agreement's provisions.
(e) When deemed necessary to ensure the clarity of an agreement,
the Commission may require parties to republish their entire agreement,
incorporating such modifications as have been made. No Information Form
requirements apply to the filing of a republished agreement.
17. Revise redesignated Sec. 535.501(a) to read as follows:

Sec. 535.501 General requirements.

(a) Certain agreement filings must be accompanied with an
Information Form setting forth information and data on the filing
parties' prior cargo carryings, revenue results and port service
patterns.
* * * * *
18. Amend redesignated Sec. 535.502 by revising paragraphs (a)(1),
(a)(3), (a)(4), (a)(5), (b)(1), and (b)(2) to read as follows:

Sec. 535.502 Subject agreements.

* * * * *
(a) * * *
(1) A rate agreement as defined in Sec. 535.104(aa);
(2) * * *
(3) A pooling agreement as defined in Sec. 535.104(x);
(4) An agreement authorizing discussion or exchange of data on
vessel-operating costs as defined in Sec. 535.104(jj); or
(5) An agreement authorizing regulation or discussion of service
contracts as defined in Sec. 535.104(cc).
(b) * * *
(1) A sailing agreement as defined in Sec. 535.104(bb); or
(2) A space charter agreement as defined in Sec. 535.104(gg).
19. Amend redesignated Sec. 535.503 by redesignating the text as
one paragraph (a) and by adding new paragraph (b) to read as follows:

Sec. 535.503 Information form for Class A/B agreements.

(a) * * *
(b) Modifications to Class A/B agreements that expand the
geographic scope of the agreement or modifications to Class C
agreements that change the class of the agreement from C to A/B must be
accompanied by an Information Form for Class A/B agreements.
20. Amend redesignated Sec. 535.706 by revising paragraph (c)(1) to
read as follows:

Sec. 535.706 Filing of minutes---including shippers' requests and
complaints, and consultations.

* * * * *
(c) * * *
(1) Rates that, if adopted, would be required to be published in
the pertinent tariff except that this exemption does not apply to
discussions limited to general rate policy, general rate changes, the
opening or closing of rates, or service or time/volume contracts; or
* * * * *
21. Amend Subpart H--Conference Agreements by revising the title to
read as follows:

Subpart H--Mandatory and Prohibited Provisions

22. Amend redesignated Sec. 535.801 by: revising paragraphs (a),
(b)(1), (d), (e), the final sentence of paragraph (f)(1), and (f)(2);
removing paragraph (i); and redesignating paragraphs (j) as (i) and (k)
as (j), to read as follows:

Sec. 535.801 Independent action.

(a) Each conference agreement shall specify the independent action
(``IA'') procedures of the conference, which shall provide that any
conference member may take independent action on any rate or service
item upon not more than 5 calendar days' notice to the conference and
shall otherwise be in conformance with section 5(b)(8) of the Act.
(b)(1) Each conference agreement that provides for a period of
notice for independent action shall establish a fixed or maximum period
of notice to the conference. A conference agreement shall not require
or permit a conference member to give more than 5 calendar days' notice
to the conference, except that in the case of a new or increased rate
the notice period shall conform to the tariff publication requirements
of this chapter.
* * * * *
(d) A conference agreement shall not require a member who proposes
independent action to attend a conference meeting, to submit any
further information other than that necessary to accomplish the
publication of the independent tariff item, or to comply with any other
procedure for the purpose of explaining, justifying, or compromising
the proposed independent action.
(e) A conference agreement shall specify that any new rate or
service item proposed by a member under independent action (except for
exempt commodities not published in the conference tariff) shall be
included by the conference in its tariff for use by that member
effective no later than 5 calendar days after receipt of the notice and
by any other member that notifies the conference that it elects to
adopt the independent rate or service item on or after its effective
date.
(f)(1) * * * Additionally, if a party to an agreement chooses to
take on an IA of another party, but alters it, such action is
considered a new IA and must be published pursuant to the IA
publication and notice provisions of the applicable agreement.
(2) An IA TVR published by a member of a ratemaking agreement may
be adopted by another member of the agreement, provided that the
adopting member takes on the original IA TVR in its entirety without
change to any aspect of the original rate offering (except beginning
and ending dates in the time period) (i.e., a separate TVR with a
separate volume of cargo but for the same duration). Any subsequent IA
TVR offering which results in a change in any aspect of the original IA
TVR, other than the name of the offering carrier or the beginning date
of the adopting IA TVR, is a new independent action and shall be
processed in accordance with the provisions of the applicable
agreement. The adoption procedures discussed above do not authorize the
participation by an adopting carrier in the cargo volume of the
originating carrier's IA TVR. Member lines may publish and participate
in joint IA TVRs, if permitted to do so under the terms of their
agreement; however, no carrier may participate in an IA TVR already
published by another carrier.
* * * * *
23. Revise redesignated Sec. 535.802 to read as follows:

Sec. 535.802 Service contracts.

(a) Carriers may not agree among themselves (whether on an
enforceable basis or otherwise) to prohibit or restrict themselves from
engaging in negotiations for service contracts with one or more
shippers, and may not adopt any policy, practice, or procedures that
have the effect of prohibiting or restricting such negotiations.
(b) Carriers may not agree among themselves (whether on an
enforceable basis or otherwise) to require

[[Page 69042]]

themselves to disclose a negotiation on a service contract, or the
terms and conditions of a service contract, other than those terms or
conditions required by the Act to be published, and may not adopt any
policy, practice, or procedures that have the effect of requiring such
disclosures.
(c) Carriers may not adopt mandatory rules or requirements
affecting their rights to negotiate or enter into service contracts.
(d) Carriers may adopt voluntary guidelines for service contracts.
Voluntary guidelines are non-binding policies, outlines, directions or
models for:
(1) the contract terms a carrier or carriers may include in the
texts of their individual contracts; or
(2) the procedures that a carrier or carriers may follow in
negotiating, modifying, or terminating contracts with shipper
customers.
(e) Carriers may consult voluntary guidelines as guidance for
negotiating and considering service contracts. Whether voluntary
guidelines are utilized shall be wholly at the option of the
negotiating carrier. Voluntary guidelines must state explicitly the
right of members of the agreement not to follow these guidelines.
(f) Voluntary guidelines may not include commitments, policies, or
procedures for: auditing by or reporting to agreement officials or
other carriers regarding compliance with guideline terms or procedures;
notification or pre-clearance of negotiations or proposed service
contract terms with other carriers or agreement officials; or
imposition or acceptance of any liability or sanction whatsoever for
non-compliance with guideline terms.
(g) Voluntary guidelines shall be submitted to the Director, Bureau
of Economics and Agreement Analysis, Federal Maritime Commission,
Washington, DC 20573. Use of voluntary guidelines prior to their
submission is prohibited. Voluntary guidelines shall be kept
confidential in accordance with section 535.608 of this part.
(h) Carriers may adopt procedures for discussing, voting on, and
administering agreement-wide or multi-carrier service contracts (and
negotiations therefor). Such provisions shall be included in the
parties' agreement filing with the Commission.
24. Amend Subpart H--Mandatory and Prohibited Provisions by adding
new Sec. 535.803 to read as follows:

Sec. 535.803 Ocean freight forwarder compensation.

No conference or group of two or more ocean common carriers may
(a) deny to any member of such conference or group the right, upon
notice of not more than 5 calendar days, to take independent action on
any level of compensation paid to an ocean freight forwarder; or
(b) agree to limit the payment of compensation to an ocean freight
forwarder to less than 1.25 percent of the aggregate of all rates and
charges applicable under the tariff assessed against the cargo on which
the forwarding services are provided.
25. Amend Part IX of Appendix A to Part 535--Federal Maritime
Commission Information Form for Certain Agreements by or among Ocean
Common Carriers, by redesignating it as Part X.
26. Amend Appendix A to Part 535 by adding new Part IX to read as
follows:

Part IX

For each agreement member line that served all or any part of the
geographic area covered by the entire agreement during all or any part
of the most recent 12-month period for which complete data are
available, state the total number of service contract requests
received, the total number adopted, and the total number denied. Of the
total number of service contract requests received, adopted and denied,
state how many were for Beneficial Cargo Owners, how many were for
Ocean Transportation Intermediaries (formerly NVOCCs), how many were
for Shippers' Associations, and how many were for any other shipper
designation. The information should be provided in the format below:

Time Period
[Same as that used in responding to Part V]
----------------------------------------------------------------------------------------------------------------
Carrier A
--------------------------------------------------------------------------
Requested Adopted Denied
----------------------------------------------------------------------------------------------------------------
Beneficial Cargo Owner...............
Ocean Transportation Intermediary
(formerly NVOCCs).
Shippers' Association................
Other*...............................
--------------------------------------------------------------------------
Total...........................
----------------------------------------------------------------------------------------------------------------
* Identify type

----------------------------------------------------------------------------------------------------------------
Carrier B
--------------------------------------------------------------------------
Requested Adopted Denied
----------------------------------------------------------------------------------------------------------------
Beneficial Cargo Owner...............
Ocean Transportation Intermediary
(formerly NVOCCs).
Shippers' Association................
Other*...............................
--------------------------------------------------------------------------
Total............................
----------------------------------------------------------------------------------------------------------------
* Identify type

27. Amend Appendix C to Part 535--Monitoring Report for Class A
Agreements Between or Among Ocean Common Carriers FORM, by
redesignating Part X as Part XI.

[[Page 69043]]

28. Amend Appendix C to Part 535--Monitoring Report for Class A
Agreements Between or Among Ocean Common Carriers FORM, by adding new
Part X to read as follows:

Part X

For each agreement member line, state the total number of service
contract requests received, the total number adopted, and the total
number denied during the calendar quarter. Of the total number of
service contract requests received, adopted and denied during the
calendar quarter, state how many were for Beneficial Cargo Owners, how
many were for Ocean Transportation Intermediaries (formerly NVOCCs),
how many were for Shippers' Associations, and how many were for any
other shipper designation. The information should be provided in the
format below:

Calendar Quarter
----------------------------------------------------------------------------------------------------------------
Carrier A
--------------------------------------------------------------------------
Requested Adopted Denied
----------------------------------------------------------------------------------------------------------------
Beneficial Cargo Owner...............
Ocean Transportation Intermediary
(formerly NVOCCs).
Shippers' Association................
Other*...............................
--------------------------------------------------------------------------
Total............................
----------------------------------------------------------------------------------------------------------------
* Identify type

29. Amend Appendix D to Part 535--Monitoring Report for Class B
Agreements Between or Among Ocean Common Carriers [FORM], by
redesignating Part VI as Part VII.
30. Amend Appendix D to Part 535--Monitoring Report for Class B
Agreements Between or Among Ocean Common Carriers [FORM], by adding new
Part VI to read as follows:

Part VI

[[Page 69044]]

By the Commission.
Joseph C. Polking,
Secretary.
[FR Doc. 98-33182 Filed 12-14-98; 8:45 am]
BILLING CODE 6730-01-P