[Federal Register Volume 83, Number 241 (Monday, December 17, 2018)]
[Rules and Regulations]
[Pages 64478-64480]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27181]


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FEDERAL MARITIME COMMISSION

46 CFR Part 545

[Docket No. 18-06]
RIN 3072-AC71


Interpretive Rule, Shipping Act of 1984

AGENCY: Federal Maritime Commission.

ACTION: Final rule.

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SUMMARY: The Federal Maritime Commission (FMC or Commission) is 
revising its interpretation of the scope of the Shipping Act 
prohibition against failing to establish, observe, and enforce just and 
reasonable regulations and practices relating to or connected with 
receiving, handling, storing, or delivering property. Specifically, the 
Commission is clarifying that the proper scope of that prohibition in 
the Shipping Act of 1984 and the conduct covered by it is guided by the 
Commission's interpretation and precedent articulated in several 
earlier Commission cases, which require that a regulated entity engage 
in a practice or regulation on a normal, customary, and continuous 
basis and that such practice or regulation is unjust or unreasonable in 
order to violate that section of the Shipping Act.

DATES: This final rule is effective December 17, 2018.

FOR FURTHER INFORMATION CONTACT: Rachel E. Dickon, Secretary; Phone: 
(202) 523-5725; Email: [email protected].

SUPPLEMENTARY INFORMATION: 

I. Introduction

    Through this interpretive rule, the Federal Maritime Commission is 
clarifying its interpretation of the scope of 46 U.S.C. 41102(c) 
(section 10(d)(1) of the Shipping Act of 1984).\1\ Section 41102(c) 
provides that regulated entities ``may not fail to establish, observe, 
and enforce just and reasonable regulations and practices relating to 
or connected with receiving, handling, storing, or delivering 
property.'' This interpretive rule clarifies that in order to violate 
Sec.  41102(c), a regulated entity must engage in an unjust or 
unreasonable practice or regulation on a normal, customary, and 
continuous basis.
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    \1\ Some authorities cited herein refer to Sec.  41102(c) while 
others refer to section 10(d)(1). For ease of reading, we will 
generally refer to Sec.  41102(c) in analyzing these authorities.
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II. NPRM and Summary of Comments

    On September 7, 2018, the Commission issued a Notice of Proposed 
Rulemaking (NPRM) seeking public comment on its proposed 
interpretation.\2\ Five comments were received in response to the NPRM, 
which may be found at the Electronic Reading Room on the Commission's 
website at https://www.fmc.gov/18-06/. Comments were received from the 
American Association of Port Authorities (AAPA), New York New Jersey 
Foreign Freight Forwarders and Brokers Association (NYNJFFF&BA), World 
Shipping Council (WSC), International Trade Surety Association (ITSA) 
and National Customs Brokers and Forwarders Association of America 
(NCBFAA). All five comments received by the Commission were in support 
of the rulemaking.
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    \2\ NPRM: Interpretive Rule, Shipping Act of 1984, 83 FR 45367 
(Sept. 7, 2018).
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    In their submission, AAPA affirms that the rule would bring the 
Commission's interpretation of the Shipping Act's prohibition on unjust 
and unreasonable practices and regulations in line with the plain 
language meaning of the word ``practice,'' Commission precedent and the 
intent of Congress. AAPA does not believe that the rule would leave 
potential claimants without remedies, but that the rule would stop 
individual instances better suited for resolution under the Carriage of 
Goods by Sea Act (COGSA) or other venue from being brought to the 
Commission.
    NYNJFFF&BA also agrees that the intent of Congress and the plain 
language reading of Sec.  41102(c) support this rulemaking. NYNJFFF&BA 
believes that without this rule, ocean transportation intermediaries 
(OTIs) are at risk of violating the Shipping Act over a single 
disagreement or accidental misstep, and this risk hinders resolutions 
through settlement. NYNJFFF&BA argues that this rule would limit the 
risk of frivolous claims being brought and allow OTIs to operate and 
settle claims more fairly and cost effectively. NYNJFFF&BA contends 
that claims that cannot be settled can still be brought through other 
venues.\3\
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    \3\ In addition to its comments on the current interpretive 
rule, NYNJFFF&BA also encourages the Commission to review other 
prohibitions in Sec.  41102 as part of future interpretive 
rulemakings, alleging that its members have been subject to 
penalties for technical violations involving no injured parties and 
that these investigations do not serve the purposes of the Shipping 
Act of 1984. As NYNJFFF&BA notes, these issues are outside the scope 
of this rulemaking, but the Commission will consider these comments 
in determining whether to initiate future rulemakings.
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    In its comment, WSC notes that from 1935 to 2001, the Commission 
precedent was in line with the

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interpretation presented by this rule, but the Commission departed from 
this interpretation between 2010 and 2013. WSC believes that this rule 
will remove the uncertainty in the Commission's precedent and 
interpretation of Sec.  41102(c). WSC argues that the rule will also 
meet the appropriate balance of encouraging meritorious Shipping Act 
cases and discourage matters that should be heard in other forums. WSC 
also does not believe that this interpretation will prevent would-be 
litigants from bringing meritorious claims and that parties will still 
be able to take advantage of the other forums that were used prior to 
the 2010 change in the Commission's interpretation.
    ITSA also fully supports the Commission's proposed interpretation 
of Sec.  41102(c). ITSA states that adoption of this interpretation 
will not cause a barrier to claimants with legitimate disputes. ITSA 
asserts that this rule still allows claimants to seek resolutions 
through the claim procedures in 46 CFR 515.23, the Commission's ADR 
services, presenting a claim to an OTI's surety or bringing an action 
in a proper legal venue.
    Finally, NCBFAA also supports the interpretive rule and believes 
that this rule will bring Sec.  41102(c) back in line with its original 
purpose. NCBFAA believes that, as originally written, the term practice 
was not intended to refer to single instances and from 1935 to 2010, 
Commission precedent supported this interpretation. NCBFAA argues that 
cargo owners will still possess ample civil remedies to resolve 
disputes. NCBFAA also emphasizes the importance of Sec.  41102(c) for 
stopping systemic malpractices and believes that this rule will assist 
the Commission in returning their focus and priorities to the 
activities that negatively affect the broader shipping public.

III. Final Rule

    For the reasons stated in the NPRM and by the commenters, the 
Commission is adopting the proposed interpretive rule without change. 
Section 41102(c) provides that regulated entities ``may not fail to 
establish, observe, and enforce just and reasonable regulations and 
practices relating to or connected with receiving, handling, storing, 
or delivering property.'' Beginning with the Houben \4\ decision in 
2010 and presented in full in the Commission's 2013 decision in Kobel 
v. Hapag-Lloyd,\5\ the Commission has held in a line of recent cases 
that discrete conduct with respect to a single shipment, if determined 
to be unjust or unreasonable, represents a violation of Sec.  41102(c). 
As discussed in the NPRM, this recent interpretation runs contrary to 
the original intent of Congress, the rules of statutory construction, 
and Commission precedent.\6\ This rule restores the Commission's 
interpretation of Sec.  41102(c) to its pre-2010 understanding and 
returns the Commission's focus and priorities to the activities of 
maritime regulated entities that negatively affect the broader shipping 
public.
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    \4\ Houben v. World Moving Services, Inc., 31 S.R.R. 1400 (FMC 
2010).
    \5\ Kobel v. Hapag-Lloyd A.G., 32 S.R.R. 1720, 1731 (2013).
    \6\ See 83 FR at 45368-45373.
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    Section 41102(c) was never intended to be a method of resolving 
every dispute that arises in the receiving, handling, storing or 
delivering of cargo. In drafting the 1916 Act, and through its 
revisions and reenactment in 1984, Congress chose the word ``practice'' 
and the phrase, ``establish, observe, and enforce just and reasonable 
regulations and practices,'' to describe actions or omissions engaged 
in on a normal, customary, and continuous basis. From its origin and as 
recently as 2001,\7\ Sec.  41102(c) was interpreted in line with this 
understanding. To find a violation of Sec.  41102(c), the Commission 
consistently required that the unreasonable regulation or practice was 
the normal,\8\ customary, often repeated,\9\ systematic,\10\ 
uniform,\11\ habitual,\12\ and continuous manner \13\ in which the 
regulated common carrier was conducting business. This understanding as 
to what constitutes ``regulations and practice'' under the Shipping Act 
is supported by multiple accepted rules of statutory construction.\14\
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    \7\ Kamara v. Honesty Shipping Service, 29 S.R.R. 321 (ALJ 
2001).
    \8\ See European Trade Specialists v. Prudential-Grace Lines, 19 
S.R.R. 59, 63 (FMC 1979).
    \9\ See Intercoastal Investigation, 1935, 1 U.S.S.B.B. 400, 432 
(1935).
    \10\ See Whitam v. Chicago, R.I. & P. Ry. Co., 66 F. Supp. 1014 
(N.D. Tex. 1946).
    \11\ See, e.g., Stockton Elevators, 3 S.R.R. 605, 618 (FMC 
1964); Intercoastal Investigation, 1935, 1 U.S.S.B.B. at 432.
    \12\ See Stockton Elevators, 3 S.R.R. at 618.
    \13\ See Stockton Elevators, 3 S.R.R. at 618. See also, McClure 
v. Blackshere, 231 F. Supp. 678, 682 (D. Md. 1964).
    \14\ See 83 FR at 45370-45371.
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    Through this rule, the Commission will return to an interpretation 
consistent with its precedent and consistent with rules of statutory 
construction. The Commission is aware that the interpretive rule may 
prevent some claims from being brought under the Shipping Act. Matters 
that may previously have been brought under Sec.  41102(c) however, can 
still find resolution in other provisions or regulations of the 
Shipping Act \15\ or be adjudicated as matters of contract law, agency 
law, or admiralty law. The Commission believes that existing 
alternative avenues of redress are sufficient to address those cases. 
The Commission believes that this rule returns Sec.  41102(c) to its 
proper purpose and allows the Commission to better meet its mission as 
intended by Congress.
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    \15\ See Total Fitness Equipment, Inc. d/b/a/Professional Gym v. 
Worldlink Logistics, Inc., 28 S.R.R. 45 (ALJ 1997); Brewer v. 
Maralan, 29 S.R.R. 6 (FMC 2001).
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VI. Rulemaking Analyses

Congressional Review Act

    The rule is not a ``major rule'' as defined by the Congressional 
Review Act, codified at 5 U.S.C. 801 et seq. The rule will not result 
in: (1) An annual effect on the economy of $100,000,000 or more; (2) a 
major increase in costs or prices; or (3) significant adverse effects 
on competition, employment, investment, productivity, innovation, or 
the ability of United States-based companies to compete with foreign-
based companies. 5 U.S.C. 804(2).

Regulatory Flexibility Act

    The Regulatory Flexibility Act (codified as amended at 5 U.S.C. 
601-612) provides that whenever an agency promulgates a final rule 
after being required to publish a notice of proposed rulemaking under 
the Administrative Procedure Act (APA) (5 U.S.C. 553), the agency must 
prepare and make available for public comment a final regulatory 
flexibility analysis (FRFA) describing the impact of the rule on small 
entities. 5 U.S.C. 604. An agency is not required to publish a FRFA, 
however, for the following types of rules, which are excluded from the 
APA's notice-and-comment requirement: Interpretive rules; general 
statements of policy; rules of agency organization, procedure, or 
practice; and rules for which the agency for good cause finds that 
notice and comment is impracticable, unnecessary, or contrary to public 
interest. See 5 U.S.C. 553(b).
    Although the Commission elected to seek public comment, the rule is 
an interpretive rule. Therefore, the APA did not require publication of 
a notice of proposed rulemaking in this instance, and the Commission is 
not required to prepare a FRFA.

National Environmental Policy Act

    The Commission's regulations categorically exclude certain

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rulemakings from any requirement to prepare an environmental assessment 
or an environmental impact statement because they do not increase or 
decrease air, water or noise pollution or the use of fossil fuels, 
recyclables, or energy. 46 CFR 504.4. This rule regards the 
Commission's interpretation of the scope of 46 U.S.C. 41102(c) and the 
elements necessary for a successful claim for reparations under that 
section. This rulemaking thus falls within the categorical exclusion 
for matters related solely to the issue of Commission jurisdiction and 
the exclusion for investigatory and adjudicatory proceedings to 
ascertain past violations of the Shipping Act. See 46 CFR 504.4(a)(20), 
(22). Therefore, no environmental assessment or environmental impact 
statement is required.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) (PRA) 
requires an agency to seek and receive approval from the Office of 
Management and Budget (OMB) before collecting information from the 
public. 44 U.S.C. 3507. The agency must submit collections of 
information in proposed rules to OMB in conjunction with the 
publication of the notice of proposed rulemaking. 5 CFR 1320.11. This 
rule does not contain any collections of information as defined by 44 
U.S.C. 3502(3) and 5 CFR 1320.3(c).

Executive Order 12988 (Civil Justice Reform)

    This rule meets the applicable standards in E.O. 12988 titled, 
``Civil Justice Reform,'' to minimize litigation, eliminate ambiguity, 
and reduce burden.

Regulation Identifier Number

    The Commission assigns a regulation identifier number (RIN) to each 
regulatory action listed in the Unified Agenda of Federal Regulatory 
and Deregulatory Actions (Unified Agenda). The Regulatory Information 
Service Center publishes the Unified Agenda in April and October of 
each year. You may use the RIN contained in the heading at the 
beginning of this document to find this action in the Unified Agenda, 
available at http://www.reginfo.gov/public/do/eAgendaMain.

List of Subjects in 46 CFR part 545

    Antitrust, Exports, Freight forwarders, Maritime carriers, Non-
vessel-operating common carriers, Ocean transportation intermediaries, 
Licensing requirements, Financial responsibility requirements, 
Reporting and recordkeeping requirements.

    For the reasons set forth above, the Federal Maritime Commission 
amends 46 CFR part 545 as follows:

PART 545--INTERPRETATIONS AND STATEMENTS OF POLICY

0
1. The authority citation for part 545 continues to read as follows:

    Authority: 5 U.S.C. 553; 46 U.S.C. 305, 40307, 40501-40503, 
41101-41106, and 40901-40904; 46 CFR 515.23.


0
2. Add Sec.  545.4 to read as follows:


Sec.  545.4  Interpretation of Shipping Act of 1984--Unjust and 
unreasonable practices.

    46 U.S.C. 41102(c) is interpreted to require the following elements 
in order to establish a successful claim for reparations:
    (a) The respondent is an ocean common carrier, marine terminal 
operator, or ocean transportation intermediary;
    (b) The claimed acts or omissions of the regulated entity are 
occurring on a normal, customary, and continuous basis;
    (c) The practice or regulation relates to or is connected with 
receiving, handling, storing, or delivering property;
    (d) The practice or regulation is unjust or unreasonable; and
    (e) The practice or regulation is the proximate cause of the 
claimed loss.

    By the Commission.
Rachel E. Dickon,
Secretary.
[FR Doc. 2018-27181 Filed 12-14-18; 8:45 am]
 BILLING CODE 6731-AA-P