[Federal Register Volume 81, Number 39 (Monday, February 29, 2016)]
[Proposed Rules]
[Pages 10188-10198]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-04263]


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FEDERAL MARITIME COMMISSION

46 CFR PARTS 501 and 535

[Docket No. 16-04]
RIN 3072-AC54


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

AGENCY: Federal Maritime Commission.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The Federal Maritime Commission is seeking public comments on 
possible modifications to its rules governing agreements by or among 
ocean common carriers and/or marine terminal operators subject to the 
Shipping Act of 1984, and possible modifications to its rules on the 
delegation of authority and redelegation of authority by the Director, 
Bureau of Trade Analysis.

DATES: Submit comments on or before: April 4, 2016.

ADDRESSES: You may submit comments by the following methods:
     Email: [email protected]. Include in the subject line: 
``Docket 16-04, [Commentor/Company name].'' Comments should be attached 
to the email as a Microsoft Word or text-searchable PDF document. Only 
non-confidential and public versions of confidential comments should be 
submitted by email.
     Mail: Karen V. Gregory, Secretary, Federal Maritime 
Commission, 800 North Capitol Street NW., Washington, DC 20573-0001.
    Docket: For access to the docket to read background documents or 
comments received, go to the Commission's Electronic Reading Room at: 
http://www.fmc.gov/16-04.
    Confidential Information: The Commission will provide confidential 
treatment for identified confidential information to the extent allowed 
by law. If your comments contain confidential information, you must 
submit the following:
     A transmittal letter requesting confidential treatment 
that identifies the specific information in the comments for which 
protection is sought and demonstrates that the information is a trade 
secret or other confidential research, development, or commercial 
information.
     A confidential copy of your comments, consisting of the 
complete filing with a cover page marked ``Confidential-Restricted,'' 
and the confidential material clearly marked on each page. You should 
submit the confidential copy to the Commission by mail.
     A public version of your comments with the confidential 
information excluded. The public version must state ``Public Version--
confidential materials excluded'' on the cover page and on each 
affected page, and must clearly indicate any information withheld. You 
may submit the public version to the Commission by email or mail.

FOR FURTHER INFORMATION CONTACT: For questions regarding submitting 
comments or the treatment of confidential information, contact Karen V. 
Gregory, Secretary. Phone: (202) 523-5725. Email: [email protected]. 
For technical questions, contact Florence A. Carr, Director, Bureau of 
Trade Analysis. Phone: (202) 523-5796. Email: [email protected]. 
For legal questions, contact Tyler J. Wood, General Counsel. Phone: 
(202) 523-5740. Email: [email protected].

SUPPLEMENTARY INFORMATION: The Federal Maritime Commission (FMC or 
Commission) has issued this advance notice to obtain public comments on 
proposed modifications to its regulations in 46 CFR part 535, Ocean 
Common Carrier and Marine Terminal Operator Agreements Subject to the 
Shipping Act of 1984, and 46 CFR 501.27, Delegation to and redelegation 
by the Director, Bureau of Trade Analysis. The Commission has reviewed 
these regulations in conformity with the objectives of Executive Order 
13579 (E.O. 13579 or Order), Regulation and Independent Regulatory 
Agencies, issued on July 11, 2011. Specifically, E.O. 13579 stated that 
independent regulatory agencies should strive to promote a regulatory 
system that protects public health, welfare, safety and our environment 
while promoting economic growth, innovation, competitiveness, and job 
creation. In this regard, the Order encouraged agencies to develop and 
release to the public a plan for the periodic review of their existing 
regulations to determine whether they could be modified, streamlined, 
expanded, or repealed so as to make their regulatory programs

[[Page 10189]]

more effective or less burdensome in achieving their regulatory 
objectives.
    In response, the Commission developed and published its Plan for 
the Retrospective Review of Existing Rules (Retrospective Review) and 
affirmed its intention to review all of its existing regulations and 
programs.\1\ As part of its plan, the Commission requested that the 
public submit comments and information on how to improve its existing 
regulations and programs.
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    \1\ See Plan for Retrospective Review of Existing Rules 
(November 4, 2011) and Update to Plan for Retrospective Review of 
Existing Rules (February 13, 2013) from the Web site of the FMC at 
http://www.fmc.gov/ under About the FMC/Reports, Strategies & 
Budgets.
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Summary of Comments on Part 535

    On May 18, 2012, comments \2\ specific to part 535 were submitted 
by ocean carrier members of the major discussion agreements that are 
currently in effect under the Shipping Act.\3\ In their comments, the 
carriers raised three major issues regarding part 535.
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    \2\ See Comments of Ocean Common Carriers to Retrospective 
Review of Existing Rules, dated May 18, 2012, on the Web site of the 
FMC at http://www.fmc.gov/ under background documents to FMC Docket 
No. 16-04.
    \3\ These agreements are the Transpacific Stabilization 
Agreement, Westbound Transpacific Stabilization Agreement, Central 
America Discussion Agreement, West Coast South America Discussion 
Agreement, Venezuela Discussion Agreement, ABC Discussion Agreement, 
United States Australasia Discussion Agreement, and Australia New 
Zealand United States Discussion Agreement.
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    First, on the waiting period exemption for low market share 
agreements in Sec.  535.311, the carriers requested that the 
calculation to derive the market share of an agreement be modified from 
a sub-trade \4\ to an agreement-wide basis. In the alternative, the 
carriers requested that an agreement be allowed to qualify for the 
exemption using only those agreement sub-trades that account for over 
20 percent of the total volume of cargo moved by the parties in the 
entire geographic scope of the agreement during the most recent 
calendar quarter.
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    \4\ In Sec.  535.104(hh), sub-trade is defined to mean the scope 
of ocean liner cargo carried between each U.S. port range and each 
foreign country within the scope of the agreement. The U.S. port 
ranges are the U.S. ports spanning the Atlantic and Gulf coasts as a 
single range and the U.S. ports spanning the Pacific coast as a 
single range.
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    Carriers argued that under the present regulations, agreements that 
should qualify for the exemption are subject to the waiting period due 
to one or two minor sub-trades, which in many cases are solely 
transshipment ports to and from other services, such as ports in Malta 
or nations in the Mediterranean or Caribbean islands.
    Second, the carriers requested that agreement modifications to 
reflect changes in the number or size of vessels within the range 
specified in an agreement should be exempt from the waiting period as 
non-substantive modifications under the regulation in Sec.  535.302. 
Carriers argued that even though parties may adjust vessels without 
filing an amendment to their agreements, if they choose to amend their 
agreement to reflect the actual changes, the amendment is subject to 
the 45-day waiting and review period of the Act. 46 U.S.C. 40304(c).
    Finally, the carriers requested that the Commission adopt rules and 
procedures to permit the electronic filing of carrier and marine 
terminal operator agreements, which they claimed would reduce the 
burden and expense of filing on the industry.

Review of Regulations by Commission

    The Commission has conducted a comprehensive review of its 
regulations in parts 501 and 535, including review of the modifications 
requested in the comments submitted by the ocean carriers. Based on its 
review, the Commission is considering certain modifications to these 
regulations and seeks comments from interested parties through this 
advance notice on the suitability and probable impact of these proposed 
changes to the regulations. Following receipt and consideration of 
comments to this advance notice, the Commission intends to issue a 
Notice of Proposed Rulemaking and invite additional public comments on 
its proposals.
    The proposed modifications under consideration include possible 
changes to the following regulations: (I) The definition of capacity 
rationalization in Sec.  535.104(e), a new waiting period exemption for 
space charter agreements in Sec.  535.308, and the waiting period 
exemption for low market share agreements in Sec.  535.311; (II) the 
agreement filing exemption of marine terminal services agreements in 
Sec.  535.309; (III) the standards governing complete and definite 
agreements in Sec.  535.402 and agreement activities that may be 
conducted without further filing in Sec.  535.408; (IV) the Information 
Form requirements in subpart E of part 535; (V) the filing of comments 
on agreements in Sec.  535.603 and the request for additional 
information on agreements in Sec.  535.606; (VI) the agreement 
reporting requirements in subpart G of part 535; (VII) the 
modifications requested by the ocean carriers in their comments; and 
(VIII) non-substantive modifications to update and clarify the 
regulations in parts 501 and 535.

I. The Definition of Capacity Rationalization in Sec.  535.104(e), a 
New Exemption for Space Charter Agreements in Sec.  535.308, and the 
Exemption for Low Market Share Agreements in Sec.  535.311

    The Shipping Act of 1984 (Shipping Act or Act) grants immunity from 
the U.S. antitrust laws to permit agreements by or among ocean common 
carriers and/or marine terminal operators. 46 U.S.C. 40307. To receive 
this immunity, the Act requires that parties file a true copy of their 
agreement with the Commission. 46 U.S.C. 40302. Unless specifically 
exempted, agreements and their modifications are subject to an initial 
review period of 45 days before they may become effective. 46 U.S.C. 
40304(c). The Act requires that agreements be reviewed, upon their 
initial filing, to ensure compliance with all applicable statutes and 
empowers the Commission to obtain information to conduct that review. 
46 U.S.C. 40302(c), 40304. Further, the Act empowers the Commission to 
seek a legal injunction of an agreement, whether at the initial review 
stage or thereafter, if it determines that the agreement through a 
reduction in competition would likely result in unreasonable 
transportation cost increases and/or service decreases. 46 U.S.C. 
41307(b). Where feasible, the Act provides leeway for the Commission to 
exempt by order or rule any class of agreements or activities of 
parties to agreements if it finds that the exemption will not result in 
a substantial reduction in competition or be detrimental to commerce. 
46 U.S.C. 40103.
    The exemption from the 45-day waiting period for low market share 
agreements in Sec.  535.311 applies to agreements that do not contain 
certain types of authority, such as rate or capacity rationalization 
authority,\5\ and with market shares in any sub-trade of less than 30 
percent (if all of the parties are members of an agreement in the same 
trade or sub-trade with one of the listed authorities (e.g., rate or 
capacity rationalization)) or 35 percent (if at least one party is not 
a member of such an agreement in the same trade or sub-trade). The low 
market share exemption and the related definition of capacity

[[Page 10190]]

rationalization in Sec.  535.104(e) were first introduced in the 
Commission's preceding rulemaking of part 535 in FMC Docket No. 03-15, 
Ocean Common Carrier and Marine Terminal Operator Agreements Subject to 
the Shipping Act of 1984, Final Rule. 69 FR 64398 (Nov. 4, 2004).
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    \5\ These authorities are listed under Sec.  535.502(b) as: (1) 
The discussion of, or agreement upon, whether on a binding basis 
under a common tariff or a non-binding basis, any kind of rate or 
charge; (2) the discussion of, or agreement on, capacity 
rationalization; (3) the establishment of a joint service; (4) the 
pooling or division of cargo traffic, earnings, or revenues and/or 
losses; or (5) the discussion of, or agreement on, any service 
contract matter.
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    These regulatory changes originated from the Commission's Notice of 
Inquiry (NOI) in FMC Docket No. 99-13, The Content of Ocean Common 
Carrier and Marine Terminal Operator Agreements Subject to the Shipping 
Act of 1984.\6\ In its NOI, the Commission requested comments on 
whether there were types of agreements that could be partially or 
completely exempted from the Shipping Act requirements.\7\
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    \6\ 64 FR 42057 (Aug. 3, 1999).
    \7\ Ibid at 42058.
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    In response to the NOI, ocean carriers and shipowners' associations 
identified agreements with little or no competitive effect, such as 
operational and slot charter agreements, as being eligible for an 
exemption from the filing requirements of the Act.\8\ Carriers further 
specified that agreements that typically have little or no competitive 
effect (such as those that do not authorize discussion or agreement on 
rates, vessel operating costs, shared vessel usage, service contracts 
or capacity) should be completely exempted from the filing requirements 
of the Act.\9\
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    \8\ Notice of proposed rulemaking, Ocean Common Carrier and 
Marine Terminal Operator Agreements Subject to the Shipping Act of 
1984. 68 FR 67510, 67513 (Dec. 2, 2003).
    \9\ Ibid.
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    Ultimately, the Commission decided on an exemption from the 45-day 
waiting period for agreements with limited authority that fell below 
specified market share thresholds. This form of exemption was based on 
the principle of providing a ``safety zone'' for collaboration between 
competitors in activities that would be unlikely to have an 
anticompetitive impact and require investigation. The Commission's low 
market share exemption was modeled after the ``safety zone'' principle 
adopted by the Federal Trade Commission and the U.S. Department of 
Justice (FTC/DOJ or Agencies) in their Antitrust Guidelines for 
Collaboration among Competitors, April 2000, (Guidelines) and the 
European Commission (EC) in its regulations for consortia agreements 
between liner shipping companies.\10\
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    \10\ Ibid at 67519-67520.
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    Under the FTC/DOJ Guidelines, the Agencies will not generally 
challenge collaborations between competitors whose combined market 
share is less than 20 percent, except in cases where an agreement: (1) 
Is per se illegal,\11\ (2) would be challenged without a detailed 
market analysis, or (3) would be analyzed under the merger rules. 
Guidelines at p. 26.
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    \11\ FTC/DOJ stipulated that the types of agreements that have 
been held per se illegal include agreements among competitors to fix 
prices or output, rig bids, or share or divide markets by allocating 
customers, suppliers, territories, or lines of commerce. The courts 
conclusively presume such agreements, once identified, to be 
illegal, without inquiring into their claimed business purposes, 
anticompetitive harms, procompetitive benefits, or overall 
competitive effects. Guidelines at p. 3.
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    Similarly, the regulations adopted by the EC provided that 
consortia agreements between carriers that did not involve price-fixing 
were exempted from the competition laws of the European Union (EU) in 
cases where the combined market share of the parties was less than 30 
percent (if operating within a conference), or 35 percent (if not 
operating within a conference).\12\ Based on these policies of other 
competition agencies and the responses from commenters, the low market 
share exemption evolved through the rulemaking process into its present 
final form in the regulations in Sec.  535.311.\13\
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    \12\ Subsequently, the EU repealed its block exemption for liner 
shipping conferences in 2008. However, the EC continues to provide a 
block exemption for liner shipping consortia agreements with a 
market share of 30 percent or less, Commission Regulation (EC) No. 
906/2009. This exemption was extended until April 25, 2020, 
Commission Regulation (EU) No. 697/2014.
    \13\ 69 FR 64398, 64399-64400 (Nov. 4, 2004).
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    In conjunction with creating the low market share exemption in FMC 
Docket No. 03-15, the Commission expanded the definition of capacity 
management \14\ to the present definition of capacity rationalization, 
which is defined in Sec.  535.104(e) as a concerted reduction, 
stabilization, withholding, or other limitation in any manner 
whatsoever by ocean common carriers on the size or number of vessels or 
available space offered collectively or individually to shippers in any 
trade or service.
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    \14\ Previously, the definition in Sec.  535.104(e) was limited 
to capacity management, which was defined as an agreement between 
two or more ocean common carriers which authorizes withholding some 
part of the capacity of the parties' vessels from a specified 
transportation market, without reducing the real capacity of those 
vessels.
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    Agreements that contain capacity rationalization authority do not 
qualify for an exemption from the waiting period under the low market 
share regulations in Sec.  535.311. Further, such agreements are 
assigned specific Information Form and Monitoring Report requirements. 
The intent behind expanding the definition was to limit the application 
of the low market share exemption and to recognize that parties to 
agreements with authority to discuss and agree on capacity, especially 
those with exclusivity provisions,\15\ can control the supply of vessel 
capacity in the marketplace and affect ocean transportation services 
and costs within the meaning of section 6(g) of the Act.
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    \15\ Exclusivity provisions place conditions or restrictions on 
the parties' agreement participation, and/or use or offering of 
competing services within the geographic scope of the agreement. In 
effect, they are non-compete clauses.
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    In applying the definition of capacity rationalization, the 
Commission has in practice limited it to agreements that fix the supply 
of capacity, such as vessel sharing and alliance arrangements, which 
also place exclusivity provisions on the ability of the parties to 
operate outside of the agreement. At the time when the last rulemaking 
took effect in 2005, many of the more complex vessel sharing and 
alliance agreements, which required monitoring, contained exclusivity 
clauses and even rate authority. However, as written, the breadth of 
the definition could conceivably include almost any form of operational 
agreement involving capacity.
    The ambiguity of the present definition of capacity rationalization 
has created uncertainty as to which agreements actually meet the 
definition and, in turn, qualify for the low market share exemption and 
become effective upon filing. Since the time of the Commission's last 
rulemaking in 2004, carriers have been forming more complex agreements 
that bring into question the application of the exemption. In their 
present form, the application of the low market share exemption and the 
definition of capacity rationalization have become subject to 
interpretation, and this lack of clarity could cause the regulations to 
be applied inconsistently and unfairly. The Commission does not believe 
that such a dilemma was foreseen when these regulations were adopted in 
2004. On the contrary, the exemption was adopted as a filing relief 
measure for the industry and was intended to be straightforward to 
apply.
    Operational agreements that manage capacity have changed and their 
use has expanded since the last rulemaking, which further supports the 
need to update and modify the present regulations. Carriers have 
expanded their cooperation of services through larger alliance 
agreements spanning multiple trade lanes, and some of these agreements 
use service centers to manage the parties' capacity levels more 
effectively. These new forms of alliance agreements include the Maersk/
MSC

[[Page 10191]]

Vessel Sharing Agreement, FMC No. 012293; the G6 Alliance Agreement, 
FMC No. 012194; the COSCO/KL/YMUK/HANJIN/ELJSA Slot Allocation and 
Sailing Agreement, FMC No. 012300; and the CSCL/UASC/CMA CGM Vessel 
Sharing and Slot Exchange Agreement, FMC No. 012299.
    Agreements, such as these alliances, authorize the parties to 
exchange vessel space and agree on capacity to form and operate 
collective services and vessel sharing agreements (VSAs) in the global 
liner trades. The Commission believes that agreements with such 
authority fall within the definition of capacity rationalization, 
regardless of whether exclusivity provisions are imposed on the 
parties. As such, agreements of this type should not be exempted under 
Sec.  535.311. In particular, the Commission does not believe that the 
low market share exemption should apply to agreements that authorize 
the parties to fix capacity through shared vessels in collectively 
operated services, especially in the case of alliances that can involve 
multiple collective services on a global scale and service centers that 
manage and maintain set capacity levels among the parties.
    Another issue with the low market share exemption regulations 
concerns the requirement that the market share threshold be applied on 
a country by country sub-trade basis. As noted in their comments to the 
Retrospective Review Plan, carriers believe that the market share 
threshold for the exemption should be modified from a sub-trade to an 
agreement-wide basis or, alternatively, be applied using only those 
sub-trades that account for over 20 percent of the total cargo volume 
moved under the geographic scope of the agreement. In FMC Docket No. 
03-15, the carriers requested a similar modification to the market 
share threshold in their comments to the proposed rule.\16\ In 
response, the Commission rejected the request of carriers, stating:
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    \16\ 69 FR 64389, 64399.

    We decline, however, to adopt the commenters' suggestion to make 
the exemption based upon the entire agreement trade, and find that 
basing the market share limit on sub-trades is a better measure for 
competitive concerns, as the geographic scope of an agreement may be 
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extremely broad.

69 FR 64398, 64400.

    The Commission has considered the more recent request from the 
carriers but tentatively concludes that the sub-trade requirement is a 
better approach for the same reasons cited in the prior rulemaking. A 
threshold based on the entire combined geographic scope of the 
agreement, or even on the top sub-trades, could result in agreements 
taking effect upon filing without an initial review where the parties 
hold a competitively significant share of the market in the smaller 
sub-trades. Further, using an agreement-wide threshold may encourage 
parties to structure their agreements as broadly as possible to evade 
the waiting period by setting their scopes at a regional, continental, 
or worldwide level rather than by the applicable trade lane. The 
Commission does not believe that the exemption should be expanded in 
this manner.
    The Commission recognizes, however, that the market share analysis 
by sub-trade may be overly complicated and burdensome and may not be 
necessary for certain types of simple operational agreements, such as 
space charter agreements. Further, the Commission believes that the 
application of low market share regulations should be simplified, as 
explained below.
    From its experience in administering the present regulations and 
given the changes in agreements that have occurred since the last 
rulemaking, the Commission is considering proposing modifications to 
the definition of capacity rationalization and the low market share 
exemption regulations, and is considering adding a new exemption for 
certain space charter agreements. In particular, the Commission is 
considering modifying the definition of capacity rationalization to 
mean the authority in an agreement by or among ocean common carriers to 
discuss, or agree on, the amount of vessel capacity supplied by the 
parties in any service or trade within the geographic scope of the 
agreement.
    In the Commission's opinion, this simplified definition would 
better reflect the types of authority contained in more recent 
agreements and would be easier to apply in administering the 
regulations. The proposed definition would apply to voluntary 
discussion agreements between carriers where the parties discuss and/or 
agree on the amount of vessel capacity supplied in a trade. On an 
operational level, the proposed definition would apply to all forms of 
vessel sharing agreements between carriers where the parties discuss 
and/or agree on the number, capacity, and/or allocation of vessels or 
vessel space to be shared in the operation of a service between the 
parties to the agreement. Further, to avoid confusion, the proposed 
definition would apply to all such identified capacity agreements 
regardless of whether they contain any form of exclusivity clauses. As 
such, this definition would exclude all vessel sharing agreements 
(VSAs) from qualifying for a low market share exemption.
    The Commission realizes that most forms of operational agreements 
relating to the liner services of carriers affect capacity to some 
extent. However, for purposes of administering regulatory oversight, 
the Commission distinguishes certain operational agreements, such as 
VSAs and alliances, as having the most direct impact on the supply of 
capacity. In this regard, the Commission recognizes that these types of 
carrier agreements can promote economic efficiencies and cost savings 
in the offering of liner services to shippers, as intended and allowed 
by the immunity granted under the Shipping Act. However, depending on 
market conditions, agreements having such a direct impact on capacity, 
especially in trades where their parties may discuss and agree on 
rates, can potentially be used to reduce competition and unreasonably 
affect transportation services and costs within the meaning of section 
6(g), which justifies a thorough initial review of their competitive 
impact under the full 45-day waiting period.
    The Commission believes that the proposed modification to the 
definition of capacity rationalization for a low market share exemption 
would provide the necessary clarity in the application of the 
regulations. While we recognize that some VSAs, such as large 
alliances, raise more competitive concerns than others, the Commission 
believes that distinguishing between VSAs in applying an exemption 
would continue to cause the same ambiguity and uncertainty that exists 
in the present regulations.
    The Commission believes that an exemption from the waiting period 
may be better suited for agreements that have an operational urgency to 
become effective upon filing, such as certain space charter agreements. 
In many cases, space charter agreements have a more imminent need to 
become effective upon filing because they may be formed quickly in 
response to market volatility and/or operating urgency.
    In contrast, carriers that join together to form VSAs have likely 
conducted long range plans and analyses to weigh the benefits of such 
cooperative ventures, and such arrangements justify a more thorough 
initial review by the Commission to assess their potential impact. 
Moreover, Sec.  535.605 of the regulations provides a procedure whereby 
parties to any agreement subject to filing under the Act and part

[[Page 10192]]

535 may request a shortened review period for good cause, such as 
operational urgency.
    Given the transactional nature of the slot charter market, the 
Commission believes that certain space charter agreements should be 
exempt from the waiting period and that the exemption should not be 
subject to a market share threshold. Accordingly, we are considering 
proposing a new exemption, located at Sec.  535.308, that would apply 
to agreements among ocean common carriers that contain non-exclusive 
authority to charter or exchange vessel space between two individual 
carriers and does not contain any authorities identified in Sec.  
535.502(b), such as rate or capacity rationalization authority. By non-
exclusive authority, the Commission means authority that contains no 
provisions that place conditions or restrictions on the parties' 
agreement participation, and/or use or offering of competing services.
    The Commission believes that such agreements could become effective 
upon filing without resulting in any serious negative competitive 
effects under section 6(g) of the Act. The exemption would provide 
greater clarity in the application of the regulations and reduce the 
burden of having to justify the exemption with a market share analysis 
by sub-trade as required under the current low market share exemption. 
Moreover, the exemption would allow carriers to respond easily and 
quickly to market forces in the liner shipping trades.
    In conjunction with the proposed modifications discussed above, the 
Commission believes that the present low market share regulations would 
benefit from simplification. We are considering proposing to eliminate 
the lower market share threshold of 30 percent in cases where the 
parties to the agreement are members of another agreement in the same 
trade or sub-trade containing any of the authorities identified in 
Sec.  535.502(b) [i.e., forms of rate, pooling, service contract or 
capacity rationalization authorities]. Under the proposed exemption, 
the market share threshold would be set at 35 percent or less 
regardless of whether the parties to the agreement participate in any 
other agreements in the same trade or sub-trade.
    The Commission has tentatively concluded that the application of 
the tiered 30 and 35 percent threshold [based on the parties' 
participation in other agreements by sub-trade] is unnecessarily 
complicated and time consuming for the industry to analyze. The 
complexity of applying the tiered threshold regulations has resulted in 
protracted analyses over simple operational agreements. The Commission 
does not believe that this complication was an intended effect of the 
exemption. As explained, the exemption was adopted as a relief measure 
intended to reduce the filing burden on the industry. The Commission 
believes that the proposed modification would substantially simplify 
the application of the regulations and reduce the time burden on the 
industry.
    The Commission tentatively concludes that the modified low market 
share exemption, as proposed, would not have any adverse competitive 
effects. The proposed modification to the definition of capacity 
rationalization would make capacity agreements, such as VSAs and 
alliances, ineligible for the low market share exemption. Only simple 
operational agreements would be eligible for the exemption, such as 
space charter and sailing agreements,\17\ that would not otherwise be 
automatically exempted under the proposed space charter exemption in 
Sec.  535.308.
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    \17\ As discussed in part VIII of this notice, the Commission is 
also considering proposing to amend the definition of sailing 
agreement in Sec.  535.104(bb).
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    Limiting the low market share exemption to simple operational 
agreements that do not authorize agreement on service or trade capacity 
reduces the competitive concerns about the parties' participation in 
other agreements in the same trade or sub-trade, and eliminates the 
need for the lower 30 percent market share threshold. The rationale for 
the lower 30 percent threshold was based on the concern that parties in 
operational agreements with overriding rate or capacity rationalization 
authority in the same trade or sub-trade [through their participation 
in a conference, rate discussion, or capacity rationalization 
agreement] were more anticompetitive than operational agreements 
without such overriding authority. This competitive concern would be 
mitigated under the proposed regulatory modifications to part 535, and 
the Commission believes that a threshold of 35 percent or less for the 
exemption of the waiting period would provide a sufficient ``safety 
zone'' for simple operational agreements.\18\
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    \18\ In terms of the impact of the proposed modifications on 
agreement filings, the Commission estimates that the filing burden 
to carriers could actually be reduced. Based on new and amended 
agreement filings for fiscal year 2014, the Commission estimates 
that 15 filings that were effective on filing under the low market 
share exemption would be subject to the 45-day waiting period as new 
VSAs or amendments thereof. Conversely, 20 filings that were subject 
to the 45-day waiting period would be effective on filing as new 
two-party space charter agreements or amendments thereof. In fiscal 
year 2014, there were a total of 186 agreement filings, including 
new and amended agreements.
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II. Marine Terminal Services Agreements in Sec.  535.309

    Section 535.309 provides an exemption from the filing and waiting 
period requirements of the Act for terminal services agreements \19\ 
between marine terminal operators (MTOs) and ocean carriers to the 
extent that the rates, charges, rules, and regulations of such 
agreements were not collectively agreed upon under a MTO conference 
agreement.\20\ Parties may optionally file their terminal services 
agreements with the Commission. 46 CFR 535.301(b). If the parties 
decide not to file the agreement, however, no antitrust immunity is 
conferred with regard to terminal services provided under the 
agreement. 46 CFR 535.309(b)(2). Parties to any agreement exempted from 
filing by the Commission under Section 16 of the Act, 46 U.S.C. 40103, 
are required to retain the agreement and make it available upon request 
by the Bureau during the term of the agreement and for a period of 
three years after its termination. 46 CFR 535.301(d).
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    \19\ Section 535.309(a) defines marine terminal services 
agreement to mean an agreement, contract, understanding, 
arrangement, or association, written or oral, (including any 
modification or appendix) between a marine terminal operator and an 
ocean common carrier that applies to marine terminal services that 
are provided to and paid for by an ocean common carrier. These 
services include: Checking, docking, free time, handling, heavy 
lift, loading and unloading, terminal storage, usage, wharfage, and 
wharf demurrage and including any marine terminal facilities that 
may be provided incidentally to such marine terminal services.
    \20\ Section 535.309(b)(1) defines a marine terminal conference 
agreement as an agreement between or among two or more marine 
terminal operators and/or ocean common carriers for the conduct or 
facilitation of marine terminal operations that 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.
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    In 1992, under Section 16, the Commission exempted terminal 
services agreements from its MTO tariff filing regulations and the 
agreement filing requirements in Section 5 of the Act by final rule in 
FMC Docket No. 91-20, Exemption of Certain Marine Terminal 
Agreements.\21\ At the time, the Commission by regulation \22\ required

[[Page 10193]]

that the rates, charges, and rules assessed by MTOs for terminal 
services be subject to public tariff filing at the Commission.\23\ As 
an alternative to the tariff rates, an MTO and an ocean carrier could 
individually negotiate their own rates and terms for terminal service 
through a terminal services agreement that by statute is required to be 
filed with the Commission.\24\
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    \21\ 57 FR 4578 (Feb. 6, 1992).
    \22\ By final rule in FMC Docket No. 875, Filing of Tariffs by 
Terminal Operators, 30 FR 12681 (Oct. 5, 1965), the Commission 
implemented tariff-filing regulations governing MTOs pursuant to its 
authority in Sections 17 and 21 of the 1916 Act. Section 17 required 
regulated persons to observe just and reasonable regulations and 
practices in the receiving, handling, storing, or delivery of 
property and authorized the Commission to prescribe and enforce such 
regulations. Section 21 authorized the Commission to require 
periodic or special reports from any person subject to the 1916 Act.
    \23\ Subsequently, the Ocean Shipping Reform Act of 1998 (OSRA) 
replaced the mandatory tariff filing requirements with a provision 
(Section 8(f) of the Act, 46 U.S.C. 40501(f)) allowing MTOs to 
optionally publish their own schedule of rates, rules and practices. 
Public Law 105-258, 106(e), 112 Stat. 1902, 1907 (1998).
    \24\ Sections 4, 5, and 6 of the Act.
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    The rule establishing the exemption resulted from an extensive 
review by the Commission of the terminal services market and its 
jurisdiction and regulation of MTOs that began in 1986.\25\ The primary 
reason for the review and eventual exemption was the practice of MTOs 
charging ocean carriers a flat throughput rate for combined terminal 
and stevedoring services in terminal services agreements but not filing 
these rates with the Commission. Petitions from associations of MTOs 
and stevedoring companies were filed with the Commission requesting 
exemptions from such requirements under Section 16 of the Act. 
Petitioners argued that the MTO filing requirements were unduly 
burdensome given the difficulty of distinguishing between rates for 
stevedoring and terminal services. Further, they believed that the 
negotiated throughput rates were commercially sensitive data that 
should be kept confidential and not subject to public filing 
requirements. Upon review, the Commission issued the exemption because 
it reasoned at the time that exempting such arrangements had the 
potential to be more pro-competitive than enforcing the tariff and 
agreement filing requirements.\26\
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    \25\ Starting in 1986, the Commission took numerous actions to 
obtain information and evaluate the impact the shipping statutes and 
regulations had on the terminal services market. In sequential 
order, these actions included: (1) Notice of Waiver of Penalties, 
Marine Terminal Service Agreements, 51 FR 23154 (June 25, 1986); (2) 
Supplemental Notice of Waiver of Penalties, Marine Terminal Service 
Agreements, 51 FR 36755 (Oct. 15, 1986; (3) Order of Investigation, 
Fact Finding Investigation No. 17, Rates, Charges and Services 
Provided at Marine Terminal Facilities, 52 FR 18743 (May 19, 1987); 
(4) Second Supplemental Notice of Waiver of Penalties, Marine 
Terminal Service Agreements, 52 FR 18744 (May 19, 1987); (5) Report 
of Fact Finding Officer, Fact Finding Investigation No. 17, Rates, 
Charges and Services Provided at Marine Terminal Facilities, 24 
S.R.R. 1260 (1988); (6) Order to Discontinue Fact Finding 
Investigation No. 17, and FMC Docket No. 90-6, Notice of Inquiry, 
Marine Terminal Operator Regulations, 55 FR 5626 (Feb. 16, 1990); 
(7) Order to Discontinue FMC Docket No. 90-6, Notice of Inquiry, 
Marine Terminal Operator Regulations, and FMC Docket No. 91-20, 
Notice of Proposed Rulemaking, Exemption of Certain Marine Terminal 
Services Arrangements, 56 FR 22384 (May 15, 1991); and (8) FMC 
Docket No. 91-20, Final Rule, Exemption of Certain Marine Terminal 
Arrangements, 57 FR 4578 (Feb. 6, 1992).
    \26\ 56 FR at 22386.
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    As part of the current regulatory review, the Commission has 
reassessed this exemption and believes that there is now a need for 
certain terminal services agreement information to be filed with the 
FMC given the increased cooperation of MTOs in conference and 
discussion agreements. Within the past decade, MTOs at major U.S. ports 
have become more active in cooperating through agreements to implement 
new programs addressing security and safety measures, environmental 
standards, and port operations and congestion. While such programs may 
be beneficial, agreements between MTOs can also affect competition in 
the terminal services market and impact transportation services and 
costs within the meaning of Section 6(g), such as agreements on the 
levels of free-time, detention, and demurrage charged by MTOs to port 
users. It is the responsibility of the Commission to analyze and 
monitor the competitive impact of MTO agreements and take necessary 
action to seek to prevent or enjoin activities that would likely result 
in an unreasonable decrease in transportation service or an 
unreasonable increase in transportation cost.
    Some notable MTO agreements that are presently in effect under the 
Shipping Act include the West Coast MTO Agreement (WCMTOA), FMC No. 
201143; the Port of NY/NJ Sustainable Services Agreement, FMC No. 
201175; the Oakland MTO Agreement (OAKMTOA), FMC No. 201202; and the 
Pacific Ports Operational Improvement Agreement (PPOIA), FMC No. 
201227. A major program implemented by the MTO parties to WCMTOA is 
PierPASS, which assesses extra fees to shippers to operate container 
terminals at off-peak hours at the Ports of Los Angeles/Long Beach. The 
parties to OAKMTOA are proposing to implement a similar program, 
OAKPASS, at the Port of Oakland.
    Terminal services agreements are relevant in analyzing the 
competitive impact of programs and actions of MTOs in conference and 
discussion agreements. Terminal services agreements provide firsthand 
comprehensive data and information on the terminal services market at 
U.S. ports, including the services and rates MTOs make available to 
ocean carriers. Such information would enable the Commission to analyze 
and determine the competitive market structure of MTOs at U.S. ports. 
Under the exemption, as MTOs have increased their cooperation under 
agreements, no empirical data on the terminal services market has been 
readily available to the Commission to analyze the competitive impact 
of such cooperative programs and activities. The filing of terminal 
services agreements would provide the Commission with timely market 
data to analyze and monitor the competitive impact of programs and 
activities of MTOs in agreements. The Commission could use this 
information to identify and safeguard against any possible market 
distortions resulting from the activities of MTOs in agreements. A 
serious market distortion at U.S. ports due to the actions of MTOs 
could potentially disrupt the international supply chain of container 
cargo and affect U.S. commerce in contravention of the Shipping Act.
    Most recently, the submission of terminal services agreements 
became an issue when the Commission sought specific data and 
information from the parties to PPOIA. PPOIA became effective under the 
Shipping Act on April 17, 2015. It is an agreement with significant 
market power because its parties include the major ocean carriers and 
MTOs operating on the U.S. Pacific Coast. It authorizes the parties to 
discuss and agree on a broad range of terminal services affecting U.S. 
Pacific port operations. The Commission's staff requested certain data 
and information from the PPOIA parties, including current copies of 
their terminals services agreement, to evaluate the agreement. Even 
though parties to exempted agreements are required to provide such 
information under Sec.  535.301(d), the Commission's staff had 
difficulty obtaining complete information from the PPOIA parties, and 
the Commission found it necessary to issue an Order under Section 15 of 
the Act to obtain the required terminal services agreements from the 
ocean carrier parties to PPOIA.\27\
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    \27\ Section 15 Order Regarding the Pacific Ports Operational 
Improvements Agreement and Marine Terminal Services and Chassis-
Related issues at the United States Pacific Coast Ports, Federal 
Maritime Commission (July 10, 2015) from the Web site of the FMC at 
http://www.fmc.gov/ under View All News/June 24, 2015/Commission 
Takes Action on Several Regulatory Matters.
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    Given these recent developments and the increased activities of 
MTOs under agreements, the Commission believes

[[Page 10194]]

that it is appropriate to establish, as a standard Monitoring Report 
requirement in part 535 of the regulations, a rule to require that all 
of the MTOs, participating in any conference or discussion agreement on 
file and in effect at the FMC, submit to the FMC all of their effective 
terminal services agreements and amendments thereto. Such a Monitoring 
Report requirement would readily provide the Commission with the 
necessary market data on a consistent basis to analyze and monitor MTO 
agreement activities, without requiring the Commission to take 
additional measures or actions to obtain data, which can result in lag 
times, gaps and incomplete information.
    As a Monitoring Report requirement, the terminal services 
agreements would be filed and retained at the FMC as confidential 
information pursuant to the terms in Section 6(j) of the Act, 46 U.S.C. 
40306, and the regulations in Sec.  535.701(i). As such, the submission 
of terminal services agreements would not be subject to the agreement 
filing requirements of the Act and public disclosure, which were 
primary issues of contention in the Commission's previous review of the 
matter when it issued the exemption. However, the Commission would 
require that terminal services agreements filed as Monitoring Reports 
reflect the true and complete copy of the agreement in accordance with 
the regulations in Sec.  535.402, which are applicable to agreements 
filed under the Act. A complete copy of a terminal services agreement 
would include the total throughput rate agreed to by the parties.
    The Commission specifically invites public comments on its proposed 
Monitoring Report requirements for parties to MTO conference and 
discussion agreements, along with estimates of the probable reporting 
burden of such requirements. The Commission also invites 
recommendations from commenters on alternative Monitoring Report 
requirements for such MTO agreement parties that would sufficiently 
address its concerns as discussed herein.
    In Sec.  535.301, the Commission believes that it is necessary to 
set a definitive deadline for the submission of exempted agreements in 
response to requests from Commission staff. Specifically, the 
Commission is considering proposing a procedure by which staff would 
send a written request for exempted agreements and parties would have 
15 days to provide the requested agreements. We request comment on this 
tentative proposal.

III. Complete and Definite Agreements in Sec.  535.402, and Activities 
That May Be Conducted Without Further Filings in Sec.  535.408

    The Shipping Act requires that a true copy of every agreement be 
filed with the Commission. 46 U.S.C. 40302(a). In administering these 
requirements, the Commission has endeavored to provide parties to 
agreements with guidance and clarity on what constitutes a ``true 
copy'' of an agreement through its regulations in Sec.  535.402, which 
require that an agreement filed under the Act must be clear and 
definite in its terms, must embody the complete, present understanding 
of the parties, and must set forth the specific authorities and 
conditions under which the parties to the agreement will conduct their 
operations and regulate the relationships among the agreement members.
    Section 535.408 exempts from the filing requirements certain types 
of agreements arising from the authority of an existing, effective 
agreement. Specifically, agreements based on the authority of effective 
agreements are permitted without further filing to the extent that: (1) 
The effective agreement itself is exempted from filing, pursuant to 
subpart C of part 535, or (2) it relates to one of several technical or 
operational matters of the effective agreement's express enabling 
authority. Such matters include stevedoring, terminal, and related 
services. 46 CFR 535.408(b)(3).
    The current language in Sec. Sec.  535.402 and 535.408 was 
promulgated by the Commission in a 2004 final rule to clarify the 
filing requirements. In its rulemaking, the Commission recognized that 
agreement parties might be confused about the required level of detail 
for filed agreements and the extent to which parties could engage in 
further agreements without filing such further agreements with the 
FMC.\28\
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    \28\ See Ocean Common Carrier and Marine Terminal Operator 
Agreements Subject to the Shipping Act of 1984, 69 FR 64398 (Nov. 4, 
2004); Ocean Common Carrier and Marine Terminal Operator Agreements 
Subject to the Shipping Act of 1984, 68 FR 67510, 67515-19 (proposed 
Dec. 2, 2003).
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    Despite these previous efforts, the Commission is concerned about 
continuing confusion among regulated entities regarding the requirement 
that further agreements arising from the authority of a filed agreement 
must generally be filed with the Commission. This confusion may stem 
from the absence of a clear, affirmative requirement in the regulations 
stating that they must be filed. Section 535.402, the general 
requirement to file agreements, and Sec.  535.408, which specifies the 
types of further agreements that are permitted without filing, 
establish such a requirement, but it may not be clear to agreement 
parties. To address this issue, the Commission is considering proposing 
to amend Sec.  535.402 to expressly state that an agreement that arises 
from the authority of an effective agreement, but whose terms are not 
fully set forth in the effective agreement to the extent required by 
the current text of Sec.  535.402, must be filed with the Commission 
unless exempted under Sec.  535.408.
    The Commission is also concerned that the filing exemption for 
further agreements addressing stevedoring, terminal, and related 
services is unclear and could be interpreted broadly by regulated 
entities.
    There are many agreements between MTOs and/or ocean carriers, such 
as WCMTOA and PPOIA, which authorize the parties to discuss and agree 
on terminal and related services. Some agreement parties may interpret 
Sec.  502.408(b)(3) as exempting from further filing agreements 
establishing joint programs related to such services, no matter how 
large or potentially costly such programs may be. In addition, the 
open-ended terminology in the regulations creates uncertainty and 
confusion for parties to agreements over which types of further 
agreements relating to terminal services need to be filed with the FMC.
    As originally envisioned, the Commission intended to limit the 
exemptions in Sec.  535.408(b) to routine operational and 
administrative matters that require day-to-day flexibility or 
activities that the Commission does not need information on to assess 
the relationship of the agreement parties.\29\ To eliminate any 
ambiguity in the regulations and ensure adequate Commission review of 
agreements involving MTOs, the Commission is considering eliminating 
the current exemption and replacing it with a list of more narrowly 
defined, specific services that are suitable for an exemption in 
conformity with the limits originally intended by the Commission.
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    \29\ Ibid at 67518.
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    The Commission invites comments on the proposed modifications to 
Sec.  535.402 and Sec.  535.408 under consideration. In particular, the 
Commission is interested in comments on what specific services should 
be included in Sec.  535.408(b) to replace Sec.  535.408(b)(3). The 
Commission is also interested in how such exempted services should be 
properly defined to avoid any

[[Page 10195]]

confusion.\30\ In addition, the Commission requests comments on whether 
``the operation of tonnage centers and other joint container marshaling 
facilities,'' as listed in Sec.  535.408(b)(3), continues to be a 
relevant and suitable exempted activity relating to terminal services.
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    \30\ In this regard, the regulations in Sec.  525.1(c)(19) and 
Sec.  535.309(a) define terminal services to include checking, 
docking, free time, handling, heavy lift, loading and unloading, 
terminal storage, usage, wharfage, wharf demurrage, and marine 
terminal facilities provided for such services. These terminal 
services are individually defined in Sec.  525.1.
    The Commission has traditionally viewed stevedoring as the 
business of hiring and furnishing longshore labor and related 
facilities and equipment for the transfer of cargo between a vessel 
and a point of rest on a marine terminal facility (the point of rest 
is the place at which inbound cargo is tendered for delivery to the 
consignee and outbound cargo is received from shippers for loading 
on a vessel). 56 FR at 22385.
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IV. The Information Form Requirements in Subpart E of Part 535

    There are presently five sections of the Information Form that 
apply to carrier agreements subject to filing under the Act, which 
require certain data and information in order to analyze the potential 
competitive impacts of the agreement. The sections of the Information 
Form apply depending on the authorities contained in the agreement, 
which determines the extent of data and information that is required. 
Simple operational agreements provide the least amount of data, while 
agreements with rate authority provide the most data.
    Section I of the Information Form applies to all carrier 
agreements, except those exempted from the waiting period under Sec.  
535.311, and requires the parties to state the name and purpose of the 
agreement, identify their participation in all other agreements within 
the same geographic scope, and identify the authorities contained in 
the proposed agreement.
    The Commission is considering proposing to modify section I to 
specify that space charter agreements exempted under the new proposed 
exemption at Sec.  535.308 would not be subject to an Information Form, 
and to revise or add the proposed modifications to the definitions of 
agreement authorities in Sec.  535.104 to the list of authorities in 
Section I.
    Section II of the Information Form applies to simple operational 
agreements, not exempted under Sec.  535.311, and requires the parties 
to list the number of their port calls for the preceding 12 months for 
the agreement services and provide a narrative statement on any 
significant operational changes to be implemented under the proposed 
agreement.
    Section III of the Information Form applies to agreements with 
capacity rationalization authority and requires the parties to provide 
data on their vessel capacity and utilization of the agreement services 
for a calendar quarter, port calls, and a narrative statement on any 
significant operational changes to be implemented under the proposed 
agreement.
    The Commission is considering proposing to eliminate the 
Information Form requirements in Section II for simple operational 
agreements not exempted under Sec.  535.311. The Commission believes 
that the present requirements for such agreements may be overly 
burdensome and unnecessary. Instead, the necessary information to 
evaluate the parties' operations under the agreement could be obtained 
from the authority and content of the agreement and commercial sources 
of data.
    The Commission is considering proposing that Section III be 
renumbered as Section II and modified to apply to agreements with 
authority to charter vessel space [unless exempted under Sec.  535.308 
or Sec.  535.311], or with authority to discuss or agree on capacity 
rationalization. The Commission believes that parties to agreements 
with such authority should provide before and after data on their 
service strings, vessel deployments, port itinerary, annual capacity, 
and vessel space allocation for the services pertaining to the 
agreement. Such data would provide the Commission with a clearer 
understanding of any service changes and the competitive impact of 
those changes. Further, the Commission is considering proposing that 
parties to such agreements provide vessel capacity and utilization data 
for the services pertaining to the agreement for each month of the 
preceding calendar quarter, as well as a narrative statement discussing 
any significant operational changes \31\ to be implemented under the 
agreement and the impact of those changes.
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    \31\ The Commission believes that the definition of significant 
operational changes should be standardized and applied consistently 
throughout the regulations to mean an increase or decrease in a 
party's liner service, ports of call, frequency of vessel calls at 
ports, and/or amount of vessel capacity deployment for a fixed, 
seasonally planned, or indefinite period of time. The amended 
definition would exclude incidental or temporary alterations or 
changes that have little or no operational impact.
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    Section IV of the Information Form applies to agreements with rate 
authority. These agreements are required to provide data on market 
share by sub-trade, average revenue, revenue and cargo volume on the 
top ten major moving commodities, vessel capacity and utilization, port 
calls, and a narrative statement on any significant operational changes 
that are anticipated to occur in the services operated by the parties.
    The Commission is considering proposing that Section IV be 
renumbered as Section III and that the requirements for rate agreements 
be reduced to data on market share by agreement-wide trade instead of 
sub-trade, average revenue, vessel capacity and utilization, and a 
narrative statement on any anticipated or planned significant 
operational changes and their impact. The Commission believes that 
market share data derived on the total geographic scope of the 
agreement, rather than by sub-trade, should be sufficient for its 
analysis and less burdensome on the parties. If the Commission needs 
more detailed data, it could use its subscriptions to commercial data 
sources to evaluate market share in greater detail.
    The Commission favors eliminating data regarding the revenue and 
cargo volume of the top ten major moving commodities. It is our view 
that carriers in rate discussion agreements are focusing more of their 
pricing efforts on guidelines for trade-wide or regional general rate 
increases (GRIs) rather than specific commodities. As such, the 
Commission relies on total average revenue data as a more accurate 
gauge of pricing trends in the marketplace. Also, the Commission 
believes that the reporting burden to prepare revenue and cargo data by 
commodity exceeds the value of such data; however, in cases where 
specific commodity data is essential for an agreement analysis, the 
Commission would be able to request the data.
    For similar reasons, the Commission is considering proposing to 
eliminate the requirement for data on the number of port calls. The 
Commission does not believe that the port call data is essential for 
such agreements. The impact of any anticipated or planned significant 
operational changes in the services operated by the parties could be 
identified and discussed in the narrative statement.
    Section V of the Information Form requires contact information and 
a signed certification of the Form. No changes to the requirements in 
Section V are under consideration at this time, other than renumbering 
it as Section IV.
    The Commission is considering proposing that the instructions to 
the Information Form be streamlined by removing many of the same 
definitions

[[Page 10196]]

repeated throughout each section of the Form and stating them in 
paragraphs at the beginning of the Form with the understanding that 
they apply to each section. The Commission believes that this proposed 
modification would improve the clarity and readability of the 
instructions.

V. Comments in Sec.  535.603, and Requests for Additional Information 
in Sec.  535.606

    Section 535.603(a) provides that persons may file with the 
Secretary written comments regarding a filed agreement, and if 
requested, such comments and any accompanying material shall be 
accorded confidential treatment to the fullest extent permitted by law. 
However, where a determination is made to disclose all or a portion of 
a comment, notwithstanding a request for confidentiality, the party 
requesting confidentiality will be notified prior to disclosure.
    Under Sec.  535.606, during the 45-day waiting and review period of 
a filed agreement, the Commission may formally issue a request for 
additional information (RFAI) on the parties to a filed agreement for 
information necessary to complete the statutory review required by the 
Act. When the Commission issues an RFAI, the effective date of the 
filed agreement is suspended, and a new 45-day waiting and review 
period begins when the Commission receives a response to the RFAI from 
the agreement parties. As a matter of public notice for comment, the 
regulations provide that the Commission will give notice in the Federal 
Register that an RFAI of a filed agreement has been issued, but such 
notice will not specify what additional information is being requested.
    Section 6(j) of the Act, 46 U.S.C. 40306, and the regulations in 
Sec.  535.608 provide for the confidentiality of agreement-related 
information submitted to the Commission. Specifically, Sec.  535.608 
provides that except for an agreement filed under Section 5 of the Act, 
all of the information submitted to the Commission by parties to a 
filed agreement will be exempt from disclosure under 5 U.S.C. 552, 
including the Information Form, voluntary submissions of information, 
reasons for non-compliance, and responses to RFAIs.
    It has been the general policy of the Commission that questions 
issued by the Commission in an RFAI and comments submitted on a filed 
agreement by third parties not be released for public disclosure, even 
though the regulations on confidentiality in Sec.  535.608 only 
explicitly identify information submitted to the FMC by the parties to 
a filed agreement. Under this advance notice, the Commission invites 
comments on its general policy of not releasing RFAI questions and 
third-party comments for public disclosure and whether this policy 
should be modified, and if so, what form of modifications to these 
regulations would be appropriate.

VI. Agreement Reporting Requirements in Subpart G of Part 535

    Under subpart G of part 535, parties to agreements that contain 
certain authority are required to file periodic Monitoring Report and/
or other prescribed reports. Further, parties to agreements with rate 
authority are required to provide minutes of their meetings.
    There are currently three sections of the Monitoring Report. 
Sections I and II apply according to the authorities contained in the 
agreement. Section III applies to all agreements subject to Monitoring 
Reports and requires contact information and a signed certification of 
the Report.
    Section I of the Monitoring Report applies to agreements with 
capacity rationalization authority and requires data on vessel capacity 
and utilization for the preceding calendar quarter for the liner 
services pertaining to the agreement. Further, parties to such 
agreements are required to provide an advance notice of any significant 
reductions in vessel capacity no later than 15 days after an agreed 
upon reduction but prior to its implementation. In addition, the 
parties are required to provide a narrative statement on any other 
significant operational changes implemented under the agreement during 
the quarter.
    The Commission is considering proposing that Section I be modified 
to apply to agreements between or among three or more ocean common 
carriers that contain the authority to discuss or agree on capacity 
rationalization. Under this proposal, agreements subject to reporting 
under Section I would include vessel sharing and alliance agreements 
among three or more carriers regardless of whether such agreements 
contain exclusivity clauses. This proposed application of the 
Monitoring Report requirements is consistent with the proposed 
modification to the definition of capacity rationalization.
    The Commission believes that three or more carriers agreeing on the 
supply of capacity in a trade or service would provide a reasonable 
threshold to capture and monitor the most meaningful capacity 
agreements without being overly burdensome. However, there are 
agreements below this threshold that the Commission may need to 
monitor. In such cases, the Commission may decide to prescribe 
reporting requirements to monitor the agreement pursuant to its 
authority in Sec.  535.702(d).\32\
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    \32\ In this regard, the Commission is also considering 
proposing to clarify the wording of Sec.  535.702(d) to make clear 
that it applies to any agreement filed, not merely those agreements 
subject to the monitoring report requirements. Further, the 
Commission is considering proposing to move this authority from 
Sec.  535.702(d) under the Monitoring Reports section to Sec.  
535.701(c) under the general requirements section for reporting 
requirements in subpart G of part 535. Sections 535.701(c)-(j) of 
the current regulations would be redesignated sequentially.
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    Alternatively, there may be capacity agreements between three or 
more carriers where the parties believe it unnecessary to file 
Monitoring Reports, such as where the parties may only agree on one 
service string in a highly competitive trade lane. In such cases, the 
parties may apply and the Commission shall consider an application for 
waiver of some or all of the Monitoring Report requirements in 
accordance with Sec.  535.705.
    In terms of requirements, the Commission is considering proposing 
to require that parties to capacity agreements subject to Section I 
submit quarterly Reports with data on their vessel capacity and 
utilization separately showing each month of the quarter for the liner 
services pertaining to the agreement. The proposed requirement to 
report capacity data on a monthly basis would be a change from the 
present requirement for quarterly data; however, monthly data would 
provide the Commission with additional data observations by which to 
conduct more relevant statistical analyses. The provision for advance 
notice of significant reductions in capacity would be retained along 
with the narrative statement on any other significant operational 
changes implemented during the quarter.
    Section II of the Monitoring Report applies to carrier agreements 
with rate authority with a market share of 35 percent or more. Parties 
to these agreements are required to submit quarterly reports with data 
on market share by sub-trade, average revenue, revenue and cargo volume 
on the top ten major moving commodities, vessel capacity and 
utilization, and a narrative statement on any significant operational 
changes that occurred during the quarter in the services operated by 
the parties to the agreement. The Commission is considering proposing 
that the

[[Page 10197]]

requirements for these agreements be reduced by eliminating the market 
share, commodity components, and the narrative statement on significant 
operational changes.
    The market share requirement delays the Report because most of the 
carriers supply this information using commercial data sources, which 
causes a lag in the Report of 75 days after the end of the quarter. 46 
CFR 535.701(f). The Commission subscribes to commercial sources of data 
and can run periodic data reports as needed. Without the market share 
requirement, the Commission is considering proposing that the filing 
deadline for the Report be shortened from 75 to 45 days after the end 
of each quarter, which would provide more timely data.
    Further, the Commission is considering proposing that the reporting 
requirement for data by commodity be eliminated for the Monitoring 
Report. Carriers in rate discussion agreements generally set guidelines 
for GRIs to a greater extent than commodity rates. The Commission 
tentatively concludes that the burden associated with preparing this 
data is likely greater than its value. However, when essential to 
monitoring an agreement, the Commission could prescribe specific 
commodity data pursuant to its authority.
    The Commission is considering proposing that parties to rate 
agreements no longer be required to report on the significant 
operational changes in their services. The Commission believes that 
reporting this information under VSA and alliance agreements should 
provide a sufficient understanding of significant operational changes 
in the U.S. trade lanes, especially with the broadened application of 
the proposed definition of capacity rationalization. When needed, the 
Commission could always request specific operational information from 
the parties.
    With the elimination of these requirements, the Commission is 
considering proposing that parties to rate agreements with a market 
share of 35 percent or more submit quarterly Monitoring Reports with 
data on their average revenue for the quarter, and their vessel 
capacity and utilization for each month of the quarter for the liner 
services operated by the parties within the geographic scope of the 
agreement.
    As with the Information Form, the Commission is considering 
proposing that the Monitoring Report instructions be streamlined by 
removing definitions repeated within each section and stating them in 
paragraphs at the beginning of the Report with the understanding that 
they apply to each section.
    Section 535.704(b) defines the meaning of a meeting between the 
parties to an agreement for the purpose of the filing of meeting 
minutes with the Commission. The Commission is considering proposing 
that the definition be modified to clarify that the discussions of 
parties using different forms of technology (e.g., telephone, 
electronic device, electronic mail, file transfer protocol, electronic 
or video chat, video conference) still constitute discussions for the 
purpose of filing minutes.

VII. Modifications Requested by the Ocean Carriers in Their Comments

    As discussed above, the Commission has tentatively concluded not to 
propose the carriers' requested modifications to the market share 
threshold because they might encourage parties to structure the 
geographic scopes of their agreements as broadly as possible to evade 
the waiting period requirements. Instead, the Commission believes that 
the regulations should be simplified as discussed by its proposed 
modifications to the definition of capacity rationalization, the low 
market share exemption regulations, and the new exemption for space 
charter agreements.
    On the issue of exempting from the waiting period agreement 
amendments on changes in the number or size of vessels within the range 
stated in the agreement, the Commission tentatively agrees with the 
logic of an exemption and is considering proposing to add such 
agreement amendments to the list of non-substantive modifications that 
are effective upon filing in Sec.  535.302(a). The Commission expects 
that this modification to Sec.  535.302(a) would encourage carriers to 
amend their agreements accordingly with more accurate information, 
which would improve the clarity of the agreement.
    On the issue of electronic filing, the Commission agrees with the 
merits of electronic filing and is presently working on the 
implementation of an electronic filing system for agreement filings 
that it plans to introduce in a separate rulemaking.

VIII. Non-Substantive Modifications To Update and Clarify the 
Regulations in Parts 501 and 535

    In addition to the aforementioned proposals, the Commission invites 
comments on the following proposals under consideration to update and 
clarify the regulations:
    1. The Commission is considering proposing that the CFR citation 
for the delegated authority of the Director of the Bureau of Trade 
Analysis to prescribe reporting requirements in Sec.  501.27(o) be 
revised from Sec.  535.702(d) to Sec.  535.701(c) to reflect the 
aforementioned proposal to move this regulation from the Monitoring 
Report section in 535.702 to the general requirements section in 
535.701;
    2. The Commission is considering proposing that the delegated 
authority of the Director of the Bureau of Trade Analysis in Sec.  
501.27(p) should be deleted. The authority permits the Bureau Director 
to require parties to agreements subject to the Monitoring Report 
regulations to report commodity data on a sub-trade basis. Such 
authority would be obsolete if the commodity data requirement is 
eliminated as proposed;
    3. The Commission is considering proposing that the definition of 
sailing agreement in Sec.  535.104(bb) should be revised to mean an 
agreement by or among ocean common carriers to coordinate their 
respective sailing or service schedules of ports, and/or the frequency 
of vessels calls at ports. The term does not include joint service 
agreements, or capacity rationalization agreements.
    The Commission believes that the proposed definition is more 
descriptive of an actual agreement between carriers with limited 
sailing authority than the present definition, which includes authority 
to agree on the size and capacity of the vessels to be deployed by the 
parties.\33\ The Commission believes that the present definition is 
more broadly descriptive of the authority of carriers in a vessel 
sharing agreement where the parties would conceivably rationalize 
capacity.
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    \33\ Section 535.104(bb) presently defines a sailing agreement 
as an agreement between ocean common carriers to provide service by 
establishing a schedule of ports that each carrier will serve, the 
frequency of each carrier's calls at those ports, and/or the size 
and capacity of the vessels to be deployed by the parties. The term 
does not include joint service agreements, or capacity 
rationalization agreements.
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    4. The Commission is considering proposing that exempt agreements 
optionally filed with the Commission under Sec.  535.301(b) be exempt 
from the 45-day waiting period.
    As previously discussed, the authority of the Commission under 
Section 16 of the Shipping Act, 46 U.S.C. 40103, to issue an exemption 
from the requirements of the statute is conditioned on the 
determination that the exemption would not result in a substantial 
reduction in competition or be detrimental to commerce. The Commission 
has already determined that agreements exempted under subpart C of part 
535 from the filing

[[Page 10198]]

requirements of the Shipping Act do not raise competitive concerns. As 
such, there is no need for a waiting period in cases where parties to 
an exempt agreement choose to file the agreement optionally with the 
Commission. An optionally filed exempt agreement should become 
effective upon filing;
    5. The Commission is considering proposing that the CFR reference 
on the application for exemption procedures cited in Sec.  535.301(c) 
be corrected and revised from Sec.  502.67 to Sec.  502.74. The 
reference is outdated and was not revised at the time when the 
exemption procedures were renumbered in a previous rulemaking;
    6. The Commission is considering proposing that Sec.  535.302(d) be 
revised to specify that agreement parties may seek assistance from the 
Director of the Bureau of Trade Analysis on whether an agreement 
modification would qualify for an exemption based on the types of 
exemptions strictly listed and identified in Sec.  535.302, as 
intended, and not on a general basis as parties have mistakenly 
interpreted the regulation. The Commission tentatively finds the 
current regulation to be too open-ended and subject to 
misinterpretation;
    7. The Commission is considering proposing that Sec.  535.404(b) be 
revised to require that where parties reference port ranges or areas in 
the geographic scope of their agreement, the parties identify the 
countries included in such ranges or areas so that the Commission can 
accurately evaluate the agreement;
    8. The Commission is considering proposing that the formatting 
requirements for the filing of agreement modifications in Sec.  535.406 
apply to all agreements identified in Sec.  535.201 and subject to the 
filing regulations of part 535, except assessment agreements.\34\ 
Currently, the regulations exempt modifications to marine terminal 
agreements from these requirements, which was based on an earlier 
exemption of certain marine terminal agreements from the waiting period 
statute which has since been repealed by the Commission; \35\
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    \34\ Section 535.104(d) defines assessment agreements to mean an 
agreement, whether part of a collective bargaining agreement or 
negotiated separately, that provides for collectively bargained 
fringe benefit obligations on other than a uniform man-hour basis 
regardless of the cargo handled or type of vessel or equipment 
utilized. Section 535.401(e) requires that assessment agreements be 
filed and effective upon filing with the FMC.
    \35\ FMC Docket No. 09-02, Repeal of Marine Terminal Agreement 
Exemption, 74 FR 65034 (Dec. 9, 2009).
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    9. The Commission is considering proposing that, in Sec.  
535.501(b) on the electronic submission of the Information Form, the 
reference to diskette or CD-ROM be replaced with an external digital 
device. The use of diskettes to store information digitally has become 
outdated on most modern computers and replaced with more advanced 
technological devices;
    10. The Commission is considering proposing that in Sec.  
535.502(b)(1) in reference to rate authority in an agreement that the 
phrase ``whether on a binding basis under a common tariff or a non-
binding basis'' be deleted. This distinction of rate authority dates to 
a period when conferences were more prevalent and is no longer 
relevant;
    11. The Commission is considering proposing that in Sec.  
535.502(c) the expansion of membership, in addition to the expansion of 
geographic scope as presently provided, be a modification that requires 
an Information Form for agreements with any authority identified in 
Sec.  535.502(b), i.e., rate, pooling, capacity, or service 
contracting. As with an expansion of geographic scope, an expansion of 
membership could have a competitive impact that would need to be 
analyzed with current Information Form data;
    12. The Commission is considering proposing, for the same reasons 
discussed above, that in Sec.  535.701(e) [as redesignated from the 
current Sec.  535.701(d)] on the electronic submission of Monitoring 
Reports, the reference to diskette or CD-ROM be replaced with external 
digital device;
    13. The Commission is considering proposing that Sec.  535.701(f) 
[as redesignated from the current Sec.  535.701(e)] be revised to state 
simply that the submission of reports and meeting minutes pertaining to 
agreements that are required by these regulations may be filed by 
direct secure electronic transmission in lieu of hard copy, and that 
detailed information on electronic transmission is available from the 
Commission's Bureau of Trade Analysis.
    The regulations under this section in its current state pertain to 
procedures that are now obsolete and should be deleted to avoid any 
confusion on the part of filers;
    14. The Commission is considering proposing, for the reasons 
discussed above, that the phrase ``whether on a binding basis under a 
common tariff or a non-binding basis'' in Sec.  535.702(a)(2)(i) be 
deleted in reference to rate authority;
    15. The Commission is considering proposing that in Sec.  
535.702(b), rather than using market share data filed by the parties to 
agreements, the Bureau of Trade Analysis would notify the parties of 
any changes in their reporting requirements.\36\ As discussed above, 
the Commission is considering proposing that the market share 
requirement of the Monitoring Report regulations for agreements with 
rate authority be discontinued. As such, parties to rate agreements 
would no longer be filing market share data. Commission staff could use 
its own subscriptions of commercial data to determine any changes in 
the reporting requirements of rate agreements and notify the parties 
accordingly; and
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    \36\ Only parties to rate agreements with a combined market 
share of 35 percent or more are required to file Monitoring Reports. 
46 CFR 535.702(a)(2). If the market share of a rate agreement drops 
below 35 percent, the Bureau would notify the parties that the 
agreement is no longer subject to the Monitoring Report regulations.
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    16. The Commission is considering proposing that regulations on the 
commodity data requirements of the Monitoring Report in Sec.  
535.703(d) be deleted. As discussed, the Commission is considering 
proposing that the commodity data requirements be discontinued, and if 
adopted, this section would be obsolete.

    By the Commission.
Karen V. Gregory,
Secretary.
[FR Doc. 2016-04263 Filed 2-26-16; 8:45 am]
 BILLING CODE 6731-AA-P