[Federal Register Volume 85, Number 31 (Friday, February 14, 2020)]
[Proposed Rules]
[Pages 8527-8531]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-02561]



46 CFR Part 530

[Docket No. 20-02]
RIN 3072-AC80

Service Contracts

AGENCY: Federal Maritime Commission.

ACTION: Notice of proposed rulemaking.


SUMMARY: The Federal Maritime Commission (FMC or Commission) proposes 
to amend its rules governing Service Contracts. The proposed rule is 
intended to reduce regulatory burden.

DATES: Submit comments on or before: April 14, 2020.
    In compliance with the Paperwork Reduction Act, the Commission is 
also seeking comment on revisions to one information collections. See 
the Paperwork Reduction Act section under Regulatory Analyses and 
Notices below. Please submit all comments relating to the revised 
information collections to the Commission and to the Office of 
Management and Budget (OMB) at the address listed in the ADDRESSES 
section on or before April 14, 2020. Comments to OMB are most useful if 
submitted within 30 days of publication.

ADDRESSES: You may submit comments identified by the Docket No. 20-02 
in the heading of this document, by the following methods:
     Email: [email protected]. Include in the subject line: 
``Docket No. 20-02, Comments on Proposed Service Contract 
Regulations.'' Comments should be attached to the email as a Microsoft 
Word or text-searchable PDF document. Comments containing confidential 
information should not be submitted by email.
     Mail: Rachel E. Dickon, Secretary, Federal Maritime 
Commission, 800 North Capitol Street NW, Washington, DC 20573-0001. 
Phone: (202) 523-5725. Email: [email protected].
     Comments regarding the revised information collections 
should be submitted to the Commission through one of the preceding 
methods and a copy should also be sent to the Office of Information and 
Regulatory Affairs, Office of Management and Budget, Attention: Desk 
Officer for Federal Maritime Commission, 725 17th Street NW, 
Washington, DC 20503; by Fax: (202) 395-5167; or by email: 
[email protected].
    Instructions: For detailed instructions on submitting comments, 
including requesting confidential treatment of comments, and additional 
information on the rulemaking process, see the Public Participation 
heading of the Supplementary Information section of this document. Note 
that all comments received will be posted without change to the 
Commission's website, unless the commenter has requested confidential 
    Docket: For access to the docket to read background documents or 
comments received, go to the Commission's Electronic Reading Room at: 
https://www2.fmc.gov/readingroom/proceeding/20-02/, or to the Docket 
Activity Library at 800 North Capitol Street NW, Washington, DC 20573, 
9:00 a.m. to 5:00 p.m., Monday through Friday, except Federal holidays. 
Telephone: (202) 523-5725.

FOR FURTHER INFORMATION CONTACT: For questions regarding submitting 
comments or the treatment of confidential information, contact Rachel 
E. Dickon, Secretary. Phone: (202) 523-5725. Email: [email protected]. 
For technical questions, contact Florence A. Carr, Director, Bureau of 
Trade Analysis, Federal Maritime Commission, 800 North Capitol Street 
NW, Washington, DC 20573-0001. Phone: (202) 523-5796. Email: 
[email protected].



    On September 18, 2018, the Federal Maritime Commission (FMC or 
Commission) issued a Notice of Filing and Request for Comments to 
obtain public comments on Petition No. P3-18, the petition of the World 
Shipping Council (WSC), (Petitioner) pursuant to 46 CFR 502.92 ``. . . 
for an exemption from service contract filing and essential terms 
publication requirements set forth at 46 U.S.C 40502(b) and (d), 
respectively . . .'' Petitioner further petitions the Commission for 
the initiation of a rulemaking proceeding to

[[Page 8528]]

amend its service contract regulations set forth at 46 CFR part 530 in 
a manner consistent with the requested exemption.
    Comments were received in support of WSC's petition from Atlantic 
Container Line, AB (ACL); the National Industrial Transportation League 
(NITL); and the Caribbean Shipowners Association (CSO). Frankford Candy 
LLC (Frankford) and Wheaton Grain Inc. (Wheaton) filed comments 
opposing the petition.
    On December 20, 2019, the Commission issued an order denying in 
part and granting in part the petition. Specifically, the Commission 
denied WSC's request for an exemption from the requirement in 46 U.S.C. 
40502(b) that ocean common carriers file service contracts with the 
Commission. Pet'n of the World Shipping Council for an Exemption from 
Certain Provisions of the Shipping Act of 1984, as amended, and for a 
Rulemaking Proceeding, Pet. No. P3-18, slip op., (FMC Dec. 20, 2019) 
(P3-18 Order). In contrast, the Commission granted WSC's request for an 
exemption from the requirement in Sec.  40502(d) that carriers publish 
ETs with each service contract, determining that an exemption from 
Sec.  40502(d) would not result in a substantial reduction in 
competition or be detrimental to commerce. Id. The Commission also 
determined to initiate a rulemaking to implement the ET publication 
exemption. Id.
    The Commission is therefore proposing to amend its regulations in 
part 530 in accordance with the P3-18 Order and requests comment on the 
proposed changes. The Commission emphasizes that the scope of this 
rulemaking is limited to amending part 530 in line with the 
Commission's decision. The merits of WSC's petition and the 
Commission's findings in the P3-18 Order are outside the scope of this 


    The Shipping Act of 1984 (the Shipping Act or the Act) introduced 
the option for liner services to be priced via negotiated service 
contracts between ocean common carriers and their shipper customers, 
rather than solely by public tariffs. Pursuant to the Shipping Act and 
FMC regulations, ocean freight rates, surcharges, and accessorial 
charges had to be published in tariffs, or agreed to via a service 
contract filed with the Commission. Contemporaneous with the filing of 
service contracts, ocean carriers were required to make publicly 
available a statement of the essential terms (ET) of the service 
contract, including the line-haul rate, in tariff format.
    The Ocean Shipping Reform Act of 1998 (OSRA) amended the Shipping 
Act of 1984 to eliminate the requirement that service contract rates be 
published in the carrier's public tariff. Public Law 105-258, 106. One 
of the primary impacts of OSRA was to render service contract rates 
confidential, and thus no longer available to ocean carriers and 
shippers as carrier pricing information. In addition, similarly 
situated shippers could no longer utilize the rates and terms of 
published service contracts. Subsequent to OSRA, the ET publication has 
been limited to: origin and destination port ranges, commodities, 
minimum volume or portion, and duration. The deletion of rates from the 
scope of the ET publication protected U.S. exporters from their foreign 
competitors who would be able to ascertain proprietary business 
information from these publicly available essential terms. At the same 
time, the ET publication was also no longer useful either to shippers 
in contract negotiations with carriers, or among carriers as a tool in 
potential pricing coordination.


    As explained in the P3-18 Order, the Commission's experience 
indicates that the publication of Statements of Essential Terms 
corresponding to individual service contracts is of questionable value. 
No commenters claimed a use for these publications, nor does the 
Commission use them in-house inasmuch as the Commission has the ability 
to access complete service contracts, including rate matrices and 
contract terms.
    In determining how to best implement the determination to exempt 
carriers from the ET publication requirements in 46 U.S.C. 40502(d), 
the Commission notes that Sec.  40502(d) and the Commission's 
regulations at 46 CFR 530.12 require that carriers publish concise 
Statements of Essential Terms corresponding to individual service 
contracts in tariff format. In addition to the required Statements of 
Essential Terms, carriers often include in their ET tariff rules and 
notices that generally apply to all service contracts. An ocean 
carrier's ET tariff may therefore comprise two components: (1) Tariff 
rules and notices that generally apply to all service contracts; and 
(2) the required concise Statements of Essential Terms corresponding to 
individual service contracts.
    The general tariff rules and notices are rarely amended once 
initially published. Indeed, there are significant benefits to 
publishing a ``blanket'' rule or notice in the carrier's ET tariff that 
applies to most, or all, service contracts, thereby eliminating the 
potential need to periodically amend hundreds of individual service 
contracts. In contrast, a Statement of Essential Terms is published in 
the carrier's tariff when each new service contract is confidentially 
filed, and typically must be reviewed by the tariff publisher each time 
a contract is amended, whether or not it is ultimately determined that 
the public terms must be updated. In some cases, the Statement of 
Essential Terms is continuously updated to keep the ET amendment number 
in sync with the contract amendment number.
    Although the Commission has determined to exempt carriers from the 
requirement that they publish Statements of Essential Terms for 
individual service contracts, the Commission wants to ensure that 
carriers continue to publish generally applicable service contract 
tariff rules and notices. The Commission therefore proposes to replace 
the requirement in Sec.  530.12 that carriers publish Statements of 
Essential Terms for individual service contracts with a requirement 
that carriers publish general service contract rules and notices as a 
separate part of the individual carrier's automated tariff system. The 
Commission is also proposing changes to a number of other sections in 
part 530 to reflect the elimination of the Statement of Essential Terms 
publication requirements. Finally, the Commission proposes to correct 
in part 530 outdated references to FMC bureaus and offices, as well as 
correct an outdated reference to a Department of Defense Command.

Public Participation

How do I prepare and submit comments?

    Your comments must be written and in English. To ensure that your 
comments are correctly filed in the docket, please include the docket 
number of this document in your comments.
    You may submit your comments via email to the email address listed 
above under ADDRESSES. Please include the docket number associated with 
this notice and the subject matter in the subject line of the email. 
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.

[[Page 8529]]

    You may also submit comments by mail to the address listed above 

How do I submit confidential business 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 by mail 
to the address listed above under ADDRESSES:
     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 
     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.

Will the Commission consider late comments?

    The Commission will consider all comments received before the close 
of business on the comment closing date indicated above under DATES. To 
the extent possible, we will also consider comments received after that 

How can I read comments submitted by other people?

    You may read the comments received by the Commission at the 
Commission's Electronic Reading Room or the Docket Activity Library at 
the addresses listed above under ADDRESSES.

Regulatory Notices and Analysis

Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601-612, provides that 
whenever an agency is 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 an 
initial regulatory flexibility analysis describing the impact of the 
proposed rule on small entities, unless the head of the agency 
certifies that the rulemaking will not have a significant economic 
impact on a substantial number of small entities. 5 U.S.C. 603, 605. 
Accordingly, the Chairman of the Federal Maritime Commission certifies 
that the proposed rule, if promulgated, will not have a significant 
impact on a substantial number of small entities. The regulated 
business entities that would be impacted by the rule are vessel-
operating common carriers (VOCCs). The Commission has determined that 
VOCCs generally do not qualify as small entities under the guidelines 
of the Small Business Administration (SBA). See FMC Policy and 
Procedures Regarding Proper Consideration of Small Entities in 
Rulemakings (Feb. 7, 2003), available at https://www.fmc.gov/wp-content/uploads/2018/10/SBREFA_Guidelines_2003.pdf.

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.
    The information collection requirements in Part 530, Service 
Contracts, are currently authorized under OMB Control Number 3072-0065. 
If approved, this rule would eliminate for VOCCs the publication of 
concise statements of essential terms in their carrier automated tariff 
systems. The proposed rule would require VOCCs to continue their 
general practice of publishing service contract rules and notices in 
their carrier automated tariff systems. The proposed rule does not make 
any changes to the requirement to file service contracts with the 
    As background, of the 155 vessel-operating common carriers serving 
the U.S. trades, 68 do not file service contracts with the Commission, 
and thus would not be impacted by this rulemaking. Further, of the 87 
carriers that file service contracts, 31 filed less than ten contracts 
or amendments thus far in FY 2019, with ten of those only filing 1 
contract this fiscal year. Among VOCCs that utilize service contracts 
more extensively as a pricing mechanism, only 31 filed over 100 
original contracts this fiscal year.
    With respect to the cost savings associated with eliminating the 
publication of statements of essential terms corresponding to original 
service contracts and amendments, the Commission estimates the savings 
to VOCCs as roughly 41,048 man-hours, for an approximate savings of 
$1,987,133 annually.\1\ Service contract rules and notices in carrier 
automated tariff systems, on the other hand, are rarely published or 
revised, inasmuch as they govern a broad swath of carrier contracts, 
and many times are intended to quickly and efficiently address an ad 
hoc industry situation.\2\ Thus, in any given year, there may be no new 
service contract rules or notices published in a carrier's automated 
tariff system. The Commission observes that the benefit of maintaining 
rules and notices which allow a carrier to avoid revising hundreds of 
service contracts greatly outweighs the burden of publishing such a 
notice. The Commission invites comment on this.

    \1\ The Commission's previous service contract rulemaking in 
Docket No. 16-05 estimated the time associated with preparation of 
an individual ET publication as 3 minutes. No commenters opposed 
that estimate. More recently, BTA informally interviewed two major 
tariff publishers that file service contracts and publish ETs for 
multiple VOCCs. These tariff publishers estimated the time required 
to prepare an ET to be 3 to 6 minutes. The larger of the two tariff 
publishers reported that their 3-minute preparation time was due to 
its proprietary technological efficiencies. The above-referenced 
savings are based on the 3-minute preparation time estimate, using 
the Commission's most recent fiscal year's filing statistics for new 
contracts and amendments. In FY 2018, 47,962 new service contracts 
and 772,803 amendments were filed.
    \2\ As one example, a major ocean carrier published a blanket 
notice in its ET tariff applying to hundreds of its service 
contracts when it deployed an extra loader vessel to meet unexpected 
shipper demand. This notice allowed existing contract rates applying 
to a specifically named service string to also apply to cargo moving 
on the extra loader vessel, thereby eliminating the VOCC's burden of 
amending hundreds of service contracts.

    Regarding the burden associated with the filing of service 
contracts with the Commission, a substantial majority of filers, 74 
percent, have recognized greater efficiencies by automating their 
service contract filing processes using the Commission's ``web 
services'' automated filing system. Using FY 2018 figures, BTA staff 
estimates the remaining burden associated with service contract filing 
to be roughly 3,542 man-hours, or $402,088 annually.\3\ Inclusive of 
the burden

[[Page 8530]]

associated with the Service Contract Rules Publication requirement,\4\ 
the entire burden associated with this information collection is 
calculated as $3,482,351 for contract filers, a substantial reduction.

    \3\ In the Commission's previous service contract rulemaking in 
Docket No. 16-05, each service contract filing (new or amendment) 
was estimated to take 3 minutes. Since that rulemaking, carriers and 
tariff publishers comprising the highest volume service contract 
filers have continued automating their filing processes. Filers that 
implemented the Commission's ``web services'' automated filing 
process have advised that minimal software programming was required 
to facilitate the automated upload of service contracts and 
amendments. Once automated, contract data can be transmitted into 
SERVCON in a matter of seconds, without need for human intervention.
    \4\ In our OMB filing related to this Information Collection, 
the burden of maintaining service contract rules and notices is 
estimated at 87 hours.

    In compliance with the PRA, the Commission has submitted the 
proposed revised information collection to the Office of Management and 
    Comments are invited on:
     Whether the collection of information is necessary for the 
proper performance of the functions of the Commission, including 
whether the information will have practical utility;
     Whether the Commission's estimate for the burden of the 
information collection is accurate;
     Ways to enhance the quality, utility, and clarity of the 
information to be collected;
     Ways to minimize the burden of the collection of 
information on respondents, including the use of automated collection 
techniques or other forms of information technology.
    Please submit any comments, identified by the docket number in the 
heading of this document, by any of the methods described in the 
ADDRESSES section of this document.

National Environmental Policy Act

    The Commission's regulations categorically exclude certain 
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. The proposed rule amends the 
requirements related to the publication of essential terms associated 
with service contracts. This rulemaking thus falls within the 
categorical exclusion for actions related to the receipt service 
contracts (Sec.  504.4(a)(5)). Therefore, no environmental assessment 
or environmental impact statement is required.

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, 
at http://www.reginfo.gov/public/do/eAgendaMain.

Proposed Rule

    For the reasons stated in the supplementary information, the 
Federal Maritime Commission proposes to amend 46 CFR part 530 as 

List of Subjects in 46 CFR Part 530

    Freight, Maritime carriers, Report and recordkeeping requirements.


 1. The authority citation for part 530 continues to read as follows:

    Authority:  5 U.S.C. 553; 46 U.S.C. 305, 40301-40306, 40501-
40503, 41307.

2. Amend Sec.  530.1 by revising the first sentence to read as follows:

Sec.  530.1  Purpose

    The purpose of this part is to facilitate the filing of service 
contracts as required by section 8(c) of the Shipping Act of 1984 
(``the Act'') (46 U.S.C. 40502). * * *
3. Amend Sec.  530.3 by revising paragraphs (d) and (o) and removing 
paragraph (s) to read as follows:

Sec.  530.3  Definitions.

* * * * *
    (d) BTA means the Commission's Bureau of Trade Analysis or its 
successor bureau.
* * * * *
    (o) OIT means the Commission's Office of Information Technology.
* * * * *
 4. Amend Sec.  530.5 by revising paragraphs (a) and (c)(1) to read as 

Sec.  530.5  Duty to file.

    (a) The duty under this part to file service contracts, amendments, 
and notices shall be upon the individual carrier party or parties 
participating or eligible to participate in the service contract.
* * * * *
    (c) * * *
    (1) Application. Authority to file or delegate the authority to 
file must be requested by a responsible official of the service 
contract carrier in writing by submitting to BTA the Registration Form 
(FMC-83) in Exhibit 1 to this part.
* * * * *
5. Amend Sec.  530.8 by revising paragraph (d) introductory text and 
removing paragraph (d)(4) to read as follows:

Sec.  530.8  Service Contracts.

* * * * *
    (d) Every service contract filed with BTA shall include, as set 
forth in appendix A to this part by:
* * * * *

Sec.  530.10  [Amended]

6. Amend Sec.  530.10 by removing paragraph (f).
7. Revise subpart C heading to read as follows.

Subpart C--Publication of Essential Terms

8. Revise Sec.  530.12 to read as follows:

Sec.  530.12  Rules and Notices.

    (a) Location--(1) Generally. A statement of service contract rules 
and notices shall be published as a separate part of the individual 
ocean common carrier's automated tariff system.
    (2) Multi-party service contracts. For service contracts in which 
more than one carrier participates or is eligible to participate, the 
statement of service contract rules and notices shall be published:
    (i) If the service contract is entered into under the authority of 
a conference agreement, then in that conference's automated tariff 
    (ii) If the service contract is entered into under the authority of 
a non-conference agreement, then in each of the participating or 
eligible-to-participate carriers' individual automated tariff systems, 
clearly indicating the relevant FMC-assigned agreement number.
    (b) Certainty of terms. The statement of service contract rules and 
notices described in paragraph (a) of this section may not:
    (1) Be uncertain, vague, or ambiguous; or
    (2) Make reference to terms not explicitly detailed in the 
statement of service contract rules and notices, unless those terms are 
contained in a publication widely available to the public and well 
known within the industry.
    (c) Agents. Common carriers, conferences, or agreements may use 
agents to meet their publication requirements under this part.

[[Page 8531]]

    (d) Commission listing. The Commission will publish on its website, 
www.fmc.gov, a listing of the locations of all service contract rules 
and notices.
9. Amend Sec.  530.13 by revising paragraph (b)(2) to read as follows:

Sec.  530.13  Exceptions and exemptions.

* * * * *
    (b) * * *
    (2) Department of Defense cargo. Transportation of U.S. Department 
of Defense cargo moving in foreign commerce under terms and conditions 
negotiated and approved by the Surface Deployment and Distribution 
Command and published in a universal service contract. An exact copy of 
the universal service contract, including any amendments thereto, shall 
be filed with the Commission as soon as it becomes available.
* * * * *
10. Amend Sec.  530.15 by revising paragraph (c) to read as follows:

Sec.  530.15  Recordkeeping and audit.

* * * * *
    (c) Production for audit within 30 days of request. Every carrier 
or agreement shall, upon written request of the FMC's Director, Bureau 
of Enforcement, any Area Representative or the Director, Bureau of 
Trade Analysis, submit copies of requested original service contracts 
or their associated records within thirty (30) days of the date of the 
* * * * *

Appendix A to Part 530 [Amended]

11. In Appendix A revise all references to ``BTCL'' to read ``BTA'' and 
revise all references to ``OIRM'' to read ``OIT''.

    By the Commission.
Rachel Dickon,
[FR Doc. 2020-02561 Filed 2-13-20; 8:45 am]