[Federal Register Volume 86, Number 77 (Friday, April 23, 2021)]
[Rules and Regulations]
[Pages 21651-21662]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-08276]



[[Page 21651]]

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FEDERAL MARITIME COMMISSION

46 CFR Part 530

[Docket No. 20-22]
RIN 3072-AC84


Service Contracts

AGENCY: Federal Maritime Commission.

ACTION: Final rule.

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SUMMARY: The Federal Maritime Commission is amending its service 
contract filing requirements to permit ocean common carriers to file 
original service contracts up to 30 days after the contract goes into 
effect.

DATES: This rule is effective June 2, 2021.

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

SUPPLEMENTARY INFORMATION: 
I. Executive Summary
II. Background
    A. Service Contract Requirements
    B. 2016-2018 Rulemakings
    C. 2018 World Shipping Council Petition for Exemption
    D. 2020-2021 Exemptions
III. Summary of Proposed Changes
IV. Comment Summary
V. Revisions to Service Contract Regulations and Response to 
Comments
    A. Delayed Filing for Original Service Contracts
    1. General Issues
    2. Definition of ``Effective Date'' (Sec.  530.3)
    3. Service Contract Filing Requirements (Sec.  530.8)
    4. Service Contract Implementation Requirements (Sec.  530.14)
    B. Technical Amendments
    1. Definition of ``Authorized Person'' (Sec.  530.3)
    2. Exceptions and Exemptions (Sec.  530.13)
VI. Rulemaking Analyses and Notices

I. Executive Summary

    The Shipping Act of 1984, as amended (46 U.S.C. 40101-41309) 
(Shipping Act or Act) permits ocean common carriers and shippers to 
enter into individual, confidential service contracts for the 
international transportation of cargo, and requires that these 
contracts be filed with the Federal Maritime Commission. Under the 
current regulations in 46 CFR part 530, original service contracts must 
be filed on or before their effective date, while service contract 
amendments must be filed within 30 days after they go into effect. The 
disparate treatment of original service contracts versus amendments was 
the result of a 2016-2017 rulemaking in which the Commission determined 
to allow delayed filing for amendments while retaining the requirement 
that original service contracts be filed on or before their effective 
date.
    In response to the COVID-19 pandemic and its impact on service 
contract negotiation and filing, the Commission recently granted a 
temporary exemption permitting original service contracts, like 
amendments, to be filed up to 30 days after their effective date. Based 
on the Commission's experience during the exemption period and the 
perceived benefits of allowing delayed filing for original service 
contracts, the Commission issued a notice of proposed rulemaking (NPRM) 
on January 19, 2021, to make the status quo permanent.\1\ The 
Commission proposed to revise its service contract regulations in part 
530 to allow original service contracts, like amendments, to be filed 
up to 30 days after they go into effect. The Commission also proposed 
several technical amendments to the service contract regulations.
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    \1\ 86 FR 5106.
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    The Commission received eight comments from a broad range of 
stakeholders including an ocean carrier trade association, shipper and 
intermediary trade associations, parties to an ocean carrier agreement, 
and individual shippers/ocean transportation intermediaries. All but 
one of the commenters generally supported the proposal. Several 
expressed concerns about potential carrier abuse of the contracting 
process, while others objected to specific language proposed by the 
Commission.
    The Commission has carefully considered the comments and determined 
to adopt the proposed rule with certain changes based on the comments 
received. Although the Commission is adopting without change the 
proposed definition of ``Effective date'' in Sec.  530.3(i), the 
Commission is clarifying its interpretation of that provision to 
address concerns about the language tying the effective date to the 
date the parties sign the contract. In addition, the Commission is 
including a provision in Sec.  530.8(a) to make clear that failure to 
timely file a service contract or amendment will not affect the 
applicability of the contract or amendment to shipments received on or 
after the effective date, even if those shipments were received more 
than 30 days before the carrier files the contract or amendment.

II. Background

A. Service Contract Requirements

    The Shipping Act permits ocean common carriers and shippers to 
enter into individual, confidential service contracts for the 
international transportation of cargo, and requires that these 
contracts be filed with the Federal Maritime Commission.\2\ For many 
years, the Commission's implementing regulations required that ocean 
common carriers file all service contracts and amendments with the 
Commission before the contract or amendment could go into effect.\3\
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    \2\ See 46 U.S.C. 40502.
    \3\ See, e.g., 46 CFR 530.8(a) (2016).
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B. 2016-2018 Rulemakings

    In 2016, the Commission published an advanced notice of proposed 
rulemaking (ANPRM) to revise its regulations governing service 
contracts and non-vessel-operating common carrier (NVOCC) negotiated 
service arrangements (NSAs).\4\ The rulemaking was based on the 
Commission's retrospective review of its regulations and feedback from 
the industry and shippers. One suggestion from ocean common carriers 
was to allow service contract amendments to go into effect before 
filing with the Commission, provided that the amendment was filed 
within 30 days after the earlier of: (1) The date the parties agreed to 
the amendment; or (2) the date the carrier received cargo to which the 
amendment applied.\5\ Beneficial cargo owners and NVOCCs that provided 
feedback to the Commission, however, indicated that filing amendments 
prior to the acceptance of cargo protected rate and contract 
commitments, and these shippers were confident ocean common carriers 
would honor the rates and contract commitments knowing that the 
contracts were filed with the Commission.\6\ Notwithstanding these 
concerns, the Commission requested comment on the carriers' 
proposal.\7\
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    \4\ ANPRM: Service Contracts and NVOCC Service Arrangements, 81 
FR 10198 (Feb. 29, 2016).
    \5\ Id. at 10201.
    \6\ Id.
    \7\ Id.
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    The Commission subsequently published an NPRM in 2016 that 
proposed, among other things, to allow service contract amendments to 
be filed up to 30 days after the effective date.\8\ The Commission 
noted that the majority of commenters to the ANPRM supported the change 
and some advocated extending the same relief to the filing of

[[Page 21652]]

original service contracts.\9\ Responding to the these comments, the 
Commission initially discussed how the existing requirements protected 
shipper interests by demonstrating agreement among the parties prior to 
the movement of cargo, and that shippers had expressed confidence in 
this process knowing that both the shipper and carrier would honor the 
commitment of their service contract filed with the Commission.\10\ The 
Commission moved on to distinguish original service contracts from 
service contract amendments, describing an original service contract as 
``a comprehensive agreement between the parties that encompasses the 
commodities that are to be shipped, the origins and destinations 
between which cargo is to move, the rates for the transportation of 
that cargo, as well as terms and conditions governing the 
transportation of goods for the shipper.'' \11\ The Commission 
described service contract amendments, on the other hand, as ``more 
limited in scope, generally adding new commodities and/or rates.'' \12\ 
The Commission therefore proposed to allow filing of service contract 
amendments up to 30 days after going into effect, but declined to 
propose extending the same treatment to original service contracts 
``given their nature and the Commission's belief that doing so would 
diminish its oversight abilities.'' \13\
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    \8\ NPRM: Amendments to Regulations Governing Service Contracts 
and NVOCC Service Arrangements, 81 FR 56559 (Aug. 22, 2016).
    \9\ Id. at 56562.
    \10\ Id.
    \11\ Id.
    \12\ Id.
    \13\ Id.
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    The Commission published a final rule in 2017 adopting, among other 
changes, the proposed change to permit filing of service contract 
amendments up to 30 days after the effective date.\14\ Carriers and 
shippers had asserted in their comments that the service contract 
effective date requirement was overly restrictive, particularly with 
respect to service contract amendments, and stated that the majority of 
amendments were for minor revisions to commercial terms, such as a 
revised rate or the addition of a new origin/destination or 
commodity.\15\ The Commission also cited carrier claims that, in 
certain instances, parties had agreed to amend a service contract, but 
the cargo was received before the carrier filed the amendment with the 
Commission, meaning that the rates and terms in the amendment could not 
be applied to the cargo under the Commission's regulations.\16\ The 
Commission concluded that permitting delayed filing was warranted 
because: (1) It would reduce the filing burdens on the industry by 
allowing carriers to file multiple amendments made within a 30-day 
period at the same time rather than on a piecemeal basis; (2) it would 
avoid the commercial harm associated with failing to timely file an 
amendment and allow the parties to apply the agreed rates and terms to 
the intended shipments; and (3) the Commission would maintain the 
ability to protect the shipping public.\17\
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    \14\ Final Rule: Amendments to Regulations Governing Service 
Contracts and NVOCC Service Arrangements, 82 FR 16288 (Apr. 4, 
2017).
    \15\ Id. at 16290.
    \16\ Id.
    \17\ Id.
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    In discussing a related proposal that the service contract 
correction process be amended to permit carriers to submit 
inadvertently unfiled original service contracts and amendments to the 
Commission within 180 days, the Commission determined that ``[i]n the 
case of original service contracts, shipper protections at the time of 
contracting and for the ensuing contract term are best assured by 
requiring that the agreement be contemporaneously filed as the best 
evidence of the actual agreement between the parties when first 
reached.'' \18\ The Commission expressed concern that delayed filing of 
service contracts could negatively affect its ability to investigate 
and enforce the Shipping Act because ``[u]nlike those limited and 
modest revisions to accommodate industry needs for correction of 
contract amendments, failure to file the original contract may conceal 
the very existence of a contractual arrangement in a given trade lane 
or lanes, avoiding early detection of market-distorting practices by 
individual carriers.'' \19\
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    \18\ Id. at 16293.
    \19\ Id.
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    Following publication of the 2017 service contract/NSA final rule, 
the Commission initiated a separate rulemaking in 2017 to address 
regulatory revisions proposed by the National Customs Brokers and 
Forwarders Association of America in a 2015 petition.\20\ Although this 
rulemaking focused on NSAs and NVOCC Negotiated Rate Arrangements 
(NRAs), the Commission discussed the World Shipping Council's (WSC) 
comments on the 2015 petition regarding the implementation of similar 
changes to the service contract requirements.\21\ The Commission noted 
that these comments predated the 2016-2017 service contract/NSA 
rulemaking, and with the publication of the final rule in that 
proceeding, the Commission had substantially met the WSC's request for 
regulatory relief for ocean common carriers.\22\ The Commission stated 
that any further relief related to service contracts could be 
undertaken after the Commission had an opportunity to analyze the 
impact of the recent changes on carrier operations and shippers.\23\
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    \20\ NPRM: Amendments to Regulations Governing NVOCC Negotiated 
Rate Arrangements and NVOCC Service Arrangements, 82 FR 56781 (Nov. 
30, 2017).
    \21\ Id. at 56785.
    \22\ Id.
    \23\ Id.
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C. 2018 World Shipping Council Petition for Exemption

    In 2018, the WSC petitioned the Commission for an exemption from 
the service contract filing and essential terms publication 
requirements.\24\ The Commission denied the request for exemption from 
the service contract filing requirements but granted the request for 
exemption from the essential terms publication requirements.\25\ 
Although the petition and subsequent Commission decision were focused 
on eliminating the service contract filing requirement entirely, 
delayed filing was discussed. For example, as part of the Commission's 
analysis of the potential economic harm that could result from 
eliminating the filing requirement, the Commission pointed to the 
shipper comments discussed in the 2016-2017 service contract/NSA 
rulemaking indicating that the filing requirement encouraged ocean 
common carriers to adhere to contract terms and deterred them from 
introducing unreasonable terms into service contract boilerplate 
language.\26\ The Commission also stated that delayed filing for 
service contract amendments addressed a number of the issues raised by 
commenters.\27\ Finally, in response to WSC's argument that maintaining 
the filing requirement would negatively impact the ability of NVOCCs to 
use the expedited contract acceptance and effective date provisions 
implemented by the Commission in the recent 2017-2018 NSA/NRA 
rulemaking, the Commission pointed out that WSC's assertion was based 
on the premise that service contract filing delays the effectiveness of 
service contracts.\28\ The Commission noted that WSC had not alleged 
that such a delay

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existed nor had Commission experience shown such a delay, and in the 
absence of such a showing, the Commission did not believe that granting 
WSC's petition was necessary to give full effect to the changes made in 
the 2018 NSA/NRA final rule.\29\
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    \24\ See Pet. of World Shipping Council for an Exemption from 
Certain Provisions of the Shipping Act of 1984, as amended, for a 
Rulemaking Proceeding, 1 F.M.C.2d 504 (FMC 2019).
    \25\ Id.
    \26\ Id. at 510 (citing ANPRM: Service Contracts and NVOCC 
Service Arrangements, 81 FR 10198, 10201 (Feb. 29, 2016).
    \27\ Id. at 513.
    \28\ Id. at 514-515 (referring to Final Rule: Amendments to 
Regulations Governing NVOCC Negotiated Rate Arrangements and NVOCC 
Service Arrangements, 83 FR 34780 (July 23, 2018)).
    \29\ Id. at 515.
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D. 2020-2021 Exemptions

    The spread of coronavirus disease 2019 (COVID-19) in 2020 had a 
significant effect on the global freight delivery system, including 
service contract negotiation and implementation.\30\ Many businesses 
began working remotely because of social distancing guidance and stay-
at-home orders.\31\ For some entities, this situation, combined with 
other COVID-19-related disruptions to commercial operations, made 
complying with service contract filing requirements difficult.
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    \30\ Temporary Exemption from Certain Service Contract 
Requirements, 2 F.M.C.2d 65 (FMC 2020).
    \31\ Id. at 65.
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    To allow parties time to adapt to the increased pressures from 
COVID-19 and minimize disruptions to the contracting process, the 
Commission issued a temporary blanket exemption on April 27, 2020, 
extending the filing flexibilities for service contract amendments to 
original service contracts.\32\ The exemption is conditioned on 
carriers continuing to file original service contracts, subject to the 
same delayed filing requirements as service contract amendments (i.e., 
original service contracts must be filed within 30 days after the 
effective date). The exemption was originally set to expire December 
31, 2020, but the Commission recently extended it until June 1, 
2021.\33\
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    \32\ Id. at 65-67.
    \33\ Temporary Exemption from Certain Service Contract 
Requirements, Docket No. 20-06, 2020 FMC LEXIS 206 (FMC Oct. 1, 
2020) (85 FR 63274, Oct. 7, 2020).
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    On October 7, 2020, CMA CGM, S.A. and its corporate affiliates 
petitioned the Commission for an exemption from the service contract 
filing and tariff publishing requirements to mitigate the effects of a 
cyberattack on their information systems.\34\ On March 24, 2021, K Line 
filed a nearly identical petition for exemption.\35\ While the carriers 
stated that they appreciated the flexibility afforded by the temporary 
exemption, they requested further exemption from the filing 
requirements with respect to original service contracts and amendments 
to permit them to be filed more than 30 days after they went into 
effect. The Commission granted an exemption to CMA CGM and its 
affiliates on October 20, 2020, and granted an exemption to K Line on 
April 9, 2021.
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    \34\ Pet. of CMA CGM, S.A., Pet. No. P2-20, slip op. (FMC Oct. 
20, 2020).
    \35\ Pet. of Kawasaki Kisen Kaisha, Ltd., Pet. No. P1-21, slip 
op. (FMC Apr. 9, 2021).
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III. Summary of Proposed Changes 36
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    \36\ 86 FR at 5108-5109.
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    In the NPRM, the Commission stated that while it had expressed 
concern about permitting original service contracts to be filed after 
their effective date during the 2016-2017 service contract/NSA 
rulemaking and decided to limit delayed filing to amendments, it had 
not permanently foreclosed future changes to the service contract 
requirements, citing statements in the 2017 NSA/NRA NPRM that further 
relief related to service contracts could be undertaken after the 
Commission had an opportunity to analyze the impact of the 2017 final 
rule on carriers and shippers. In line with this statement, the 
Commission reexamined the issue of allowing delayed filing for original 
service contracts after considering both the agency's experience with 
delayed filing of amendments and the recent experience with delayed 
filing of original service contracts under the current temporary 
exemption.
    The Commission tentatively concluded that permanently allowing 
delayed filing of original service contracts would provide the same 
type of benefits as delayed filing of service contract amendments, 
namely avoiding the commercial harm associated with situations in which 
cargo is received after the parties have agreed to a service contract 
but before the service contract is filed with the Commission. The 
Commission noted recent events supporting the need for this 
flexibility, including the commercial disruption, social distancing, 
and stay-at-home orders stemming from COVID-19, which has impacted 
carriers' ability to file service contracts and prompted the Commission 
to grant a temporary exemption. And the Commission cited CMA CGM's 
recent exemption petition in response to a cyberattack, in which the 
carrier noted with appreciation the flexibility afforded by the ability 
to file service contracts and amendments after their effective date. 
The Commission stated that these recent events demonstrated that, in 
certain circumstances, requiring that service contracts be filed before 
they go into effect can potentially delay performance under the 
contract to the detriment of shippers.
    The Commission also tentatively concluded that allowing original 
service contracts to be filed up to 30 days after the effective date 
would not materially impact the agency's ability to provide oversight 
and protect the shipping public. The Commission noted that, at the 
time, it had not received any shipper complaints regarding delayed 
filing of amendments or the recent exemption allowing delayed filing of 
original service contracts. The Commission tentatively concluded that 
the service contract filing requirement would continue to ensure 
adherence to service contract terms and deter the introduction of 
unreasonable terms, regardless of whether original service contracts 
are filed before, on, or after the effective date.\37\ The Commission 
emphasized that the proposed amendments would make clear that original 
service contracts and amendments would continue to be prospective in 
nature, ensuring that the parties have reached agreement before cargo 
moves under the contract.
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    \37\ As discussed above, the Commission recently reaffirmed its 
commitment to retaining the service contract filing requirement in 
its decision to deny WSC's exemption request. Pet. of World Shipping 
Council, 1 F.M.C.2d 504.
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    Although the Commission recognized that original service contracts 
are more comprehensive in scope than amendments, the Commission 
tentatively concluded that this difference did not support different 
filing requirements. The Commission pledged to continue to monitor 
filed service contracts and observed that delayed filing would not 
negatively impact the Commission's ability to investigate potential 
Shipping Act violations given the relatively short filing period being 
proposed (30 days after the effective date).\38\
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    \38\ The Commission's concerns in the 2017 service contract/NSA 
final rule regarding the impact of delayed filing on enforcement 
were made in response to comments stating that the correction 
process should allow carriers to submit inadvertently unfiled 
service contracts with the Commission within a much longer period 
(180 days).
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    Based on the foregoing, the Commission proposed to revise its 
service contract regulations in part 530 to allow original service 
contracts, like amendments, to be filed up to 30 days after the 
effective date. The proposed revisions were also intended to clarify 
that the trigger for the 30-day filing period would be the effective 
date of the service contract or amendment.
    In addition, the Commission proposed technical amendments to the 
service contract regulations following the Commission order and 
subsequent rulemaking to exempt ocean common carriers from the 
requirement to publish

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service contract essential terms.\39\ These amendments would: (1) 
Remove a reference to essential terms publication that was 
inadvertently retained; and (2) add language describing the exemption 
to ensure that ocean common carriers and other stakeholders that may 
not know the history of the matter were aware of the exemption.
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    \39\ Pet. of World Shipping Council, 1 F.M.C.2d at 515-516. See 
Final Rule: Service Contracts, 85 FR 38086 (June 25, 2020).
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    The Commission requested comments on these proposed amendments and 
any other amendments necessary to implement delayed filing for original 
service contracts.

IV. Comment Summary

    The Commission received eight comments in response to the NPRM from 
the following stakeholders:
     The National Industrial Transportation League (NITL), 
which represents shippers and receivers of goods, as well as third 
party intermediaries, logistics companies and other entities engaged in 
the transportation of goods.
     The Green Coffee Association (GCA), a trade association 
representing companies importing, trading, and roasting green coffee 
beans as well as those companies involved with transporting, storing, 
handling, insuring, or financing coffee shipments.
     WSC,\40\ a non-profit trade association that represents 
the liner shipping industry. WSC members operate approximately 90% of 
the world's liner vessels.
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    \40\ FMC Agreement No. 201349.
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     The Caribbean Shipowners' Association (CSO),\41\ a group 
of ocean common carriers that serve the trades between the U.S. and 
various countries in and bordering on the Caribbean Sea.
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    \41\ FMC Agreement No. 010979.
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     BassTech International, a company that supplies specialty 
raw materials. BassTech's comments were drafted by Lori Fellmer, 
BassTech's VP Logistics & Carrier Management, a logistics professional 
with decades of experience in ocean transportation, both on the ocean 
carrier and beneficial cargo owner (BCO) sides of the business.
     Poseidon Logistics, Inc., an NVOCC and ocean freight 
forwarder in California.
     De Well Group, an NVOCC with multiple offices in the U.S. 
and Asia.
     Fracht FWO, Inc., an NVOCC and ocean freight forwarder in 
Texas.
    All but one of the commenters generally supported the proposal to 
permit delayed filing for original service contracts, though several 
commenters expressed concerns about potential carrier abuse of the 
contracting process. In addition, some commenters identified specific 
concerns with the proposed language and requested clarification from 
the Commission or specific changes to address these issues.

V. Revisions to Service Contract Regulations and Response to Comments

A. Delayed Filing for Original Service Contracts

1. General Issues
a. Comments
    Most of the commenters supported the general proposal to allow 
delayed filing for original service contracts. NITL stated that, 
overall, it concurred with the Commission's findings in the NPRM and 
supported the proposal to permit original service contracts to be filed 
up to 30 days after the effective date.\42\ NITL concurred that the 
proposal would address carrier and shipper contracting needs and 
shipping requirements and would not materially impact the Commission's 
ability to oversee and protect the shipping public given the 30-day 
deadline to file. NITL argued that contract filings impose a regulatory 
cost on the industry and that administrative efficiencies will flow 
from the Commission's adoption of the proposal. GCA was similarly 
supportive of the proposal in general and emphasized the group's 
continued support for the requirement that carriers file service 
contracts with the Commission.\43\ WSC generally supported the 
proposal, stating that although it would not eliminate the service 
contract filing requirement (as WSC has urged in the past), it would 
provide ocean carriers with additional flexibility.\44\ CSO also 
generally supported the proposal.\45\ De Well Group, Poseidon 
Logistics, and Fracht FWO indicated their support for the proposal with 
no further comment.
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    \42\ NITL Comments at 2-3.
    \43\ GCA Comments at 1.
    \44\ WSC Comments at 2.
    \45\ CSO Comments at 5.
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    NITL noted that its support was tempered by the concerns of several 
of its shipper members that the relaxed filing requirement could 
adversely impact small and mid-sized shippers.\46\ NITL asserted that 
with increasing concentration among ocean carriers and the impact of 
the alliance structure, NITL members have growing concerns about ocean 
carrier rates and practices, including the carriers' failure to follow 
their service contract terms. NITL commented that small and mid-sized 
shippers, in particular, lack the negotiating leverage of larger 
shippers and are concerned that carriers may use the modified filing 
requirement to pressure shippers into accepting unfavorable contract 
rates or terms by manipulating the contract effective date to the 
carrier's benefit based on the spot market or other industry 
conditions. NITL stated that these concerns are exacerbated by the 
current market disruption and the problems shippers face with enforcing 
their existing contract rates and terms and getting timely access to 
equipment and vessel capacity. NITL therefore requested the Commission 
closely monitor ocean carrier contracting practices if the proposal is 
adopted and address any unreasonable contracting practices that may 
develop.
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    \46\ NITL Comments at 2, 4.
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    GCA echoed some of NITL's concerns, stating that the Commission 
should make clear that the 30-day filing window may not be used by 
carriers as an ``option'' which they may hold for 30 days without full 
commitment to the shipper.
    BassTech did not support the proposal,\47\ stating that while the 
Commission's temporary exemption was a fair and considered action to 
prevent potential commercial harm that may have resulted from the 
carriers' inability to comply with the original service contract filing 
requirements during the initial disruption from the COVID-19 pandemic, 
organizations have now creatively adapted to meeting all sorts of 
obligations in the new environment, and with the end of the pandemic in 
sight, the reasons for the temporary exemption do not justify making 
the change permanent. BassTech expressed skepticism that ocean carriers 
find that timely filing a service contract with the Commission, which 
is as difficult as attaching a file to an email, is too burdensome or 
unable to be simplified through technology. Rather, BassTech argued 
that the persistent request for service contract filing deregulation, 
exemplified by the WSC's petition seeking an exemption from the service 
contract filing requirements, seemed to be based on ulterior motives 
and will have a negative impact on U.S. commerce.
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    \47\ BassTech Comments at 1-2.
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    BassTech stated that even when there is no protracted debate over 
rates or terms, the contracting process often requires multiple 
document iterations that take days or weeks before the carrier produces 
a document that reflects the intended agreement well enough to be 
signed, leading to practices such as extending expiring service

[[Page 21655]]

contracts for 30 days to cover any potential lapse in coverage or 
signing and filing less-than-perfect service contracts with an 
understanding that a subsequent amendment will be prepared to correct 
outstanding anomalies.\48\ BassTech expressed skepticism that carrier 
performance in this area will be better or faster without the pressure 
of a filing obligation, which it argued would potentially diminish the 
already weak negotiating position of small or medium-sized shippers 
anxious to keep their cargo moving. BassTech asserted that the reality 
of the negotiation process driven by the carriers, combined with an 
enormous imbalance of power between the parties, would lend itself to 
cargo moving on a ``promise'' prior to the service contract being in 
force (notwithstanding the fact that this would not be permitted under 
the proposed rule).
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    \48\ BassTech Comments at 2-3.
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    BassTech asserted that the real benefit carriers will see from the 
proposal is the ability use single shipment ``mini'' service contracts 
through online rate quotation applications (with non-negotiable 
boilerplate contract terms, no-show penalties, and confidentiality 
pledges) to offer small and medium shippers very-short-term pricing 
while circumventing the 30-day notice requirement for tariff 
increases.\49\ According to BassTech, this allows ocean carriers the 
ability to fill space not reserved for cargo moving under long-term 
service contracts at the best possible market levels. BassTech asserted 
that for larger shippers, carriers have and will push requests for 
additional space outside of the existing long-term service contract to 
the carrier's online rate quote application, relegating this cargo to 
the spot market without the service guarantees and predictable service 
that a service contract affords. BassTech further contended that this 
will further enable carriers to exclude small and medium shippers from 
long-term service contracts, and could harm NVOCCs by improving the 
ease of entering into short-term service contracts with beneficial 
cargo owners (BCOs) directly.
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    \49\ BassTech Comments at 4-6.
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    Finally, BassTech discussed concerns that the effects of the 
proposal will add to the increasing lack of transparency that 
disadvantages the shipping public.\50\ Specifically, BassTech stated 
that the earlier elimination of the essential terms publication 
requirements, combined with the tariff becoming unused and effectively 
pointless and shippers bound by confidentially provisions in short-term 
service contracts for spot-market traffic, will create a situation in 
which the shipping public will be ill-equipped to challenge an ocean 
carrier's stance that its policy prevents it from entering into a 
service contract of the type being proposed by a shipper. BassTech 
concluded by stating that although the proposal on its face may benefit 
shippers by preventing any negative impact of delays in carrier filing 
of service contracts, eliminating any regulation that will reduce 
transparency and meaningful Commission oversight of ocean carrier 
behavior will have a negative impact on U.S. businesses that rely on 
importing and exporting by ocean transportation.
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    \50\ BassTech Comments at 6.
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b. Discussion
    The general concerns about the proposal fall into two broad 
categories: (1) Potential carrier abuse of the service contract 
negotiation and filing process; and (2) carriers using the relaxed 
filing requirements to make increased use of single shipment service 
contracts.
    The first issue appears to center around concern that carriers may 
take advantage of small and medium-sized shippers anxious to ship their 
cargo by getting them to agree to an informal ``handshake'' agreement 
with the promise that a pending contract document reflecting terms to 
the shipper's satisfaction will be presented for signing and then, 
within the 30-day filing period and after shipments have begun, 
pressuring those shippers to accept less favorable terms in the final 
contract document. Per the commenters, these concerns are exacerbated 
by problems shippers are facing in enforcing the terms of existing 
service contracts in the current market. NITL and GCA continued to 
support the proposal notwithstanding these concerns, with NITL 
requesting the Commission closely monitor ocean carrier contracting 
practices if the proposal is adopted and address any unreasonable 
contracting practices that may develop. On the other hand, BassTech 
opposed the proposal given these and other concerns.
    The Commission is very concerned about the allegations that some 
ocean carriers may not be abiding by the terms of their existing 
service contracts or may seek to use the delayed filing to pressure 
shippers to accept unfavorable contract terms. Depending on the 
specific facts at issue, the carrier contracting practices described in 
the comments could violate the Shipping Act. In particular, the 
Shipping Act prohibits carriers from providing service that is not in 
accordance with the terms of a service contract (46 U.S.C. 
41104(a)(2)(A)) and unreasonably refusing to deal or negotiate (46 
U.S.C. 41104(a)(10)). But the Commission agrees with NITL and GCA that 
these concerns do not support rejecting the proposal for delayed filing 
for original service contracts. Delayed filing will provide benefits to 
the ocean transportation industry, addressing shipper and carrier 
contracting needs and avoiding commercial harm that can result from the 
current requirement that a service contract be filed before it can 
become effective. And the revised definition of ``Effective date'' 
clarifying that a service contract may go into effect only after the 
parties sign will limit a carrier's ability to engage in the type of 
bait-and-switch tactics described in the comments.
    To the extent that delayed filing creates any increased risk of 
carrier abuse of the contracting process, the Commission believes that 
in line with NITL's request, increased Commission monitoring of carrier 
contracting practices and the use of Commission and private enforcement 
tools to address prohibited conduct will help deter such conduct and 
mitigate its harm if it does occur.
    Under the final rule, service contracts will continue to be filed 
and subject to Commission oversight and, as discussed in the NPRM, 
delayed filing will not negatively impact the Commission's ability to 
investigate potential Shipping Act violations given the relatively 
short filing period. If the Commission's monitoring uncovers conduct 
that may violate the Shipping Act, the Commission will investigate and 
take enforcement action as necessary. The Commission may also consider 
future rulemaking efforts to address such conduct.
    In addition to the Commission's own monitoring and investigatory 
efforts, the Commission encourages shippers that have been harmed by 
prohibited conduct (e.g., a carrier's unreasonable refusal to deal or 
negotiate) to file a formal or informal complaint seeking reparations 
(damages) with the Commission.\51\ Further, if a shipper believes that 
a carrier has breached the terms of a service contract, the shipper may 
bring an action in an appropriate court or other forum agreed to by the 
parties (the Shipping Act precludes the Commission from adjudicating 
breach of service contract claims).\52\ And it is the Commission's 
opinion that because,

[[Page 21656]]

under the final rule, service contracts do not need to be filed with 
the Commission before going into effect, the filing date should have no 
bearing on the enforceability of a service contract, i.e., if a carrier 
breaches a service contract within the 30-day window between the 
effective date and filing date, the fact that the service contract is 
not yet filed should not preclude the shipper from bringing a breach of 
contract action in court or other agreed-upon forum. This point is 
further reinforced by additional language the Commission is adding to 
Sec.  530.8(a) to make clear that failure to timely file a service 
contract or amendment does not affect the applicability of the contract 
or amendment to cargo received on or after the effective date 
(discussed in more detail in Section V.A.3).
---------------------------------------------------------------------------

    \51\ Additional information about how to file a complaint can be 
found on the Commission's website: https://www.fmc.gov/resources-services/attorneys-litigants/.
    \52\ 46 U.S.C. 40502(f).
---------------------------------------------------------------------------

    The second area of concern, increased use of single shipment 
service contracts through online rate quotation systems, centers on 
matters that are beyond the scope of this rulemaking. Carrier decisions 
on which instrument to use for spot market cargo (service contracts or 
tariffs), increasing use of digital platforms, and the potential impact 
on shippers involve complex issues only tangentially related to service 
contract filing. In short, this rulemaking does not directly impact 
such ``mini'' service contracts; they are not currently prohibited 
under part 530 and will continue to be permitted under the final rule. 
Delayed filing will, however, increase the flexibility of carriers and 
shippers to enter into all types of service contracts, including those 
limited to single shipments. The Commission is not making any changes 
to the final rule in response to the comments on this issue, but the 
Commission will continue to monitor the broader trends identified in 
the comments to determine whether Commission action in this area is 
warranted.
2. Definition of ``Effective Date'' (Sec.  530.3)
a. NPRM \53\
---------------------------------------------------------------------------

    \53\ 86 FR at 5109.
---------------------------------------------------------------------------

    The current definition of ``Effective date'' describes: (1) What an 
effective date is; (2) the relationship between the effective date and 
the filing date for both original service contracts and amendments 
(i.e., the effective date may not be before the filing date for 
original service contracts or more than 30 days prior to the filing 
date for amendments); and (3) the specific time on the effective date 
when an original service contract or amendment is effective (12:01 a.m. 
Eastern Standard Time).
    In the NPRM, the Commission proposed to amend the definition of 
``Effective date'' by removing the language tying the effective date to 
the filing date. Reflecting the tentative determination to extend 
delayed filing to original service contracts, the Commission proposed 
to delete the sentence stating that the effective date for original 
service contracts cannot be prior to the filing date. The Commission 
also proposed to delete the sentence stating that the effective date of 
an amendment can be no more than 30 days prior to the filing date 
because this sentence simply repeats the filing requirement in Sec.  
530.8(a)(2). The Commission tentatively determined that Sec.  530.8(a), 
as amended by the proposed revisions, would adequately describe the 
filing requirement and the deadline for filing, and repeating the 
requirement in Sec.  530.3(i) was therefore unnecessary.
    The Commission also proposed to clarify the time on the effective 
date when a service contract or amendment goes into effect. Currently, 
Sec.  530.3(i) provides that a service contract or amendment is 
effective at 12:01 a.m. Eastern Standard Time. The proposed revision 
added the equivalent time zone relative to Coordinated Universal Time 
(UTC) for added clarity (i.e., UTC-05:00) given that ocean cargo often 
originates and moves through non-U.S. time zones and to avoid any 
confusion regarding the part of the year when daylight saving time is 
in effect in parts of the U.S.
    Finally, the Commission proposed to add language to the definition 
to clarify that although service contracts and amendments may be filed 
after the effective date, the Commission was retaining the requirement 
that service contracts and amendments must be prospective in nature and 
cannot have retroactive effect. Under the current regulations, service 
contract amendments may only have prospective effect.\54\ And, prior to 
the recent temporary exemption, original service contracts could not 
become effective prior to being filed with the Commission and were 
therefore also limited to having prospective effect. Because the 
Commission proposed to allow original service contracts to be filed 
after they go into effect, the Commission also proposed to add language 
to the definition of ``Effective date'' to reflect the continuing 
requirement that service contracts and amendments may only have 
prospective effect. The proposed language specified that the effective 
date cannot be earlier than the date on which all the parties have 
signed the service contract or amendment.
---------------------------------------------------------------------------

    \54\ Sec.  530.10(a)(1).
---------------------------------------------------------------------------

b. Comments
    NITL supported the proposed amendments to Sec.  530.3 to the extent 
they clarify that the effective date of the original service contract 
is the date upon which the service contract is scheduled to go into 
effect and not the filing date.\55\ NITL agreed that the effective date 
should be no earlier than the date on which all parties have signed the 
service contract and that service contracts and amendments should have 
prospective effect, ensuring that contract performance may not begin 
until the parties have agreed upon the terms and effective date.
---------------------------------------------------------------------------

    \55\ NITL Comments at 3.
---------------------------------------------------------------------------

    GCA expressed concerns regarding the proposed definition of 
effective date, specifically the part specifying that the effective 
date cannot be earlier than the date on which all parties have signed 
the service contract or amendment.\56\ GCA stated that, in most cases, 
service contracts are prepared and presented unsigned by the ocean 
carrier to the shipper for review and acceptance, and once all of the 
rates, terms, and conditions are agreed to, the shipper signs the 
contract handwritten or electronically and returns it to the carrier 
for signature and filing with the Commission. GCA asserted that the 
shipper oftentimes does not receive a copy of the fully executed 
contract with the carrier's signature but relies on the assumption that 
the contract is in fact signed by the carrier and filed with the 
Commission. GCA contended that there has been a ``meeting of the 
minds'' between the ocean carrier and shipper when the shipper signs 
the service contract prepared and presented by the carrier, and that 
the carrier should be obligated to perform under the service contract 
at that point.
---------------------------------------------------------------------------

    \56\ GCA Comments at 1-2.
---------------------------------------------------------------------------

    BassTech questioned the assumptions underlying the proposed 
definition of effective date, stating that the definition presumes that 
carriers find challenging the filing of service contracts while 
foreseeing no difficulty in accomplishing the more complex tasks of 
negotiating, drafting, and obtaining signatures for service contracts 
in time to meet commercial deadlines, urgent shipping needs, or prior 
service contract expirations.\57\
---------------------------------------------------------------------------

    \57\ BassTech Comments at 2-3.
---------------------------------------------------------------------------

    WSC and CSO expressed concern that the proposed definition of 
``Effective date'' would have unintended consequences that would limit 
the usefulness of the proposed regulatory

[[Page 21657]]

changes.\58\ WSC and CSO asserted that under the current regulations, 
service contract amendments may be filed no later than 30 days after 
cargo moves under the amendment and, citing the NPRM, argued that 
linking the deadline for filing to the movement of cargo rather than 
the execution of the contract amendment helped avoid difficulties 
encountered when cargo is tendered before an amendment is signed by the 
shipper. WSC and CSO asserted that the proposed definition of 
``Effective date'' would withdraw this existing relief and perpetuate 
this problem for both original service contracts and amendments. 
Specifically, WSC and CSO pointed to the provision stating that the 
effective date can be no earlier than the date all parties sign the 
service contract or amendment. WSC argued that this provision is 
unnecessarily narrow in light of modern electronic contract formation 
and documentation practices. CSO asserted that the change will once 
again force carriers to choose between commercial understandings that 
have been reached but not signed and adhering to their statutory 
obligations.
---------------------------------------------------------------------------

    \58\ WSC Comments at 2-3; CSO comments at 2.
---------------------------------------------------------------------------

    WSC emphasized that it is not objecting at this time to the 
Commission's intent behind the provision, namely to reflect that 
original service contracts and amendments may only have prospective 
effect.\59\ Rather, WSC and CSO viewed the use of signatures as the 
sole trigger for contract effectiveness as unnecessarily restrictive 
and out of step with the general contract law principles of offer and 
acceptance.\60\ CSO stated that it is difficult to explain to some 
customers that they cannot have their cargo rated pursuant to an 
understanding reached via phone, text, or email because the carrier 
does not have a signature. WSC and CSO pointed to section 2-206 of the 
Uniform Commercial Code (UCC) and section 30(2) of the Restatement 
(Second) of Contracts, which provide that an offer invites acceptance 
in any manner and by any medium reasonable in the circumstances. WSC 
argued that the proposed definition of ``Effective date'' would 
contravene these principles by requiring that a service contract offer 
may be accepted only by signature. CSO stated that it is unclear why 
tendering cargo is not a reasonable means of accepting an offer and why 
customers should be subject to contract acceptance formalities beyond 
those applicable in other industries.
---------------------------------------------------------------------------

    \59\ WSC Comments at 3.
    \60\ WSC Comments at 3-4; CSO Comments at 2-3.
---------------------------------------------------------------------------

    CSO argued that requiring a service contract or amendment be signed 
before implementation would treat service contracts differently than 
other types of contractual arrangements subject to Commission 
jurisdiction.\61\ Specifically, CSO contended that tender of cargo can 
constitute acceptance of an NRA under 46 CFR 532.5(c)(3) and that the 
Commission does not require signature as a prerequisite to the 
implementation of an NSA under 46 CFR 531.3(f).
---------------------------------------------------------------------------

    \61\ CSO Comments at 3-4.
---------------------------------------------------------------------------

    WSC also stated that the concept of what constitutes a signature 
has evolved over time, particularly to address electronic commerce.\62\ 
WSC described as an example a shipper requires a quote, the carrier 
providing terms in response, and the shipper pressing a button or key 
to accept. WSC asserted that it is unclear whether the reference to the 
date the parties sign the service contract or amendment in the proposed 
definition would include such processes, but recommended that it 
should. WSC cited the definition of ``electronic signature'' in the 
Electronic Signatures in Global and National Commerce Act (E-SIGN Act) 
and stated that this definition reflects that an intent to form an 
agreement can be expressed by a variety of actions, is consistent with 
the UCC and the Restatement (Second) of Contracts, and recognizes the 
reality of today's modern business environment.
---------------------------------------------------------------------------

    \62\ WSC Comments at 4-5.
---------------------------------------------------------------------------

    WSC therefore urged the Commission to revise the last sentence of 
the proposed definition of ``Effective date'' to read: \63\
---------------------------------------------------------------------------

    \63\ WSC Comments at 5-6.

    The effective date may not be earlier than the date on which all 
parties have taken actions that manifest their mutual agreement to 
the terms of the service contract or amendment, or the date on which 
performance documentable as associated with that service contract or 
---------------------------------------------------------------------------
amendment begins.

WSC asserted that the suggested revision would allow parties to 
implement service contracts and amendments on whatever documentable 
contract formation process to which they agree and avoid the 
difficulties outlined in its comments. CSO also urged the Commission to 
adopt the WSC's proposed revision, claiming that it would allow parties 
to implement a contract or amendment without first obtaining physical 
signatures, or any signature.\64\ WSC and CSO claimed that this change 
would not undermine the prohibition against retroactive service 
contracts and amendments, since the Commission would still be able to 
obtain the service contract records necessary to determine the date on 
which performance began or the service contract/amendment was agreed to 
by the parties.
---------------------------------------------------------------------------

    \64\ CSO Comments at 4-5.
---------------------------------------------------------------------------

c. Discussion
    For the reasons stated in the NPRM and the discussion below, the 
Commission has determined to adopt the proposed definition of 
``Effective date'' in Sec.  530.3(i). The comments on the definition 
focused on the last sentence, which states that the effective date may 
be no earlier than the date all parties have signed the service 
contract or amendment. While NITL supported this provision, WSC and CSO 
asserted that requiring signatures before the contract may go into 
effect was unnecessarily restrictive and out of step with general 
contract law principles. GCA opined that the shipper's signature should 
be sufficient for effectiveness.\65\ The comments opposing this 
provision appear to be based on a misunderstanding of the purpose and 
nature of the provision. The Commission believes that additional 
explanation and clarification of the provision will address these 
concerns.
---------------------------------------------------------------------------

    \65\ BassTech's comment, though referencing the proposed 
definition of ``Effective date,'' was focused primarily on the 
general concerns discussed above in Section V.A.1.
---------------------------------------------------------------------------

    Under the current regulations, service contracts must be signed 
before they go into effect, and the filed contract must identify who 
signed the contract and the date it was signed.\66\ The proposed 
definition of ``Effective date'' was intended to provide flexibility to 
the service contract filing process by allowing delayed filing while 
ensuring that service contracts continued to be prospective agreements, 
i.e., the parties reach agreement before performance begins. To 
accomplish this latter goal, the proposed definition retained the 
current requirement that service contracts must be signed before going 
into effect. Because filed service contracts already include the date 
of signature as well as the effective date, the Commission is easily 
able to verify that the effective date is on or before the signature 
date and therefore that the parties reached agreement before the 
contract went into effect and cargo began to move. In other words, the

[[Page 21658]]

proposed definition was not intended to address service contract 
formation or what constitutes offer and acceptance but merely reflected 
a current requirement that could be used to ensure contracts are 
prospective in nature. None of the commenters objected to service 
contracts retaining their prospective nature.
---------------------------------------------------------------------------

    \66\ Sec.  530.8(b)(9) (requiring that the filed contract 
include the names, titles and addresses of the representatives 
signing the contract for the parties and the date upon which the 
service contract was signed) and Sec.  530.3(i) (defining the 
effective date for original service contracts as no earlier than the 
filing date).
---------------------------------------------------------------------------

    One of WSC's primary concerns was that it was unclear what 
constituted an acceptable signature under the proposed definition. WSC 
pointed to the broad definition of ``electronic signature'' in the E-
SIGN Act \67\ and stated that the definition reflects that an intent to 
form an agreement can be expressed by a variety of actions, is 
consistent with the UCC and the Restatement (Second) of Contracts, and 
recognizes the reality of today's modern business environment.
---------------------------------------------------------------------------

    \67\ Public Law 106-229 (2000) (codified at 15 U.S.C. 7001-
7006).
---------------------------------------------------------------------------

    The Commission appreciates the opportunity to clarify the 
intersection between the E-SIGN Act and the Commission's regulations 
and what constitutes a signature for purposes of the service contract 
regulations in part 530. The E-SIGN Act was enacted on June 30, 2000, 
and effective on October 1, 2000.\68\ The E-SIGN Act provides, in 
relevant part, that notwithstanding any statute, regulation, or other 
rule of law, a signature, contract, or other record related to a 
transaction may not be denied legal effect, validity, or enforceability 
solely because it is in electronic format nor may a contract related to 
the transaction be denied legal effect, validity, or enforceability 
solely because an electronic signature or electronic record was used in 
its formation.\69\ The E-SIGN Act goes on to define an ``electronic 
signature'' as an electronic sound, symbol, or process, attached to or 
logically associated with a contract or other record and executed or 
adopted by a person with the intent to sign the record.\70\ To further 
clarify, an ``electronic signature'' will suffice to demonstrate 
agreement between the parties and allow a service contract to go into 
effect, as the E-SIGN Act's definition of ``electronic signature'' is 
based on, and nearly identical to, the definition of ``electronic 
signature'' in the Uniform Electronic Transactions Act (UETA), model 
state legislation developed in 1999, and the commentary to the UETA 
makes clear that the definition includes the standard web page click-
through process for obtaining goods or services (e.g., clicking a box 
accepting the terms of the agreement).
---------------------------------------------------------------------------

    \68\ 15 U.S.C. 7001 note.
    \69\ 15 U.S.C. 7001.
    \70\ 15 U.S.C. 7006(5).
---------------------------------------------------------------------------

    Consistent with the E-SIGN Act, the Commission interprets the 
requirements in part 530 that service contracts be signed as being met 
with electronic signatures as defined in the E-SIGN Act. This 
interpretation extends to the reference to signing in the proposed 
definition of ``Effective date.'' In other words, from the Commission's 
perspective, the act of signing a service contract can be accomplished 
by electronic signature, which is broadly defined under the E-SIGN Act. 
This means that carriers and shippers have great flexibility and 
discretion in determining what form signature will take. Based on WSC's 
positive comments regarding the E-SIGN Act and the definition of 
``electronic signature,'' the Commission believes that this 
interpretation addresses both WSC and CSO's concerns, which appear to 
have been based on fears that the Commission had a narrower concept of 
what constitutes a service contract signature than the E-SIGN Act.\71\ 
This clarification should also alleviate GSA's concerns because the 
broad definition of ``electronic signature'' also applies to carriers.
---------------------------------------------------------------------------

    \71\ CSO's concerns also appear to be based on a 
misunderstanding of the Commission regulations governing NSAs and 
NRAs. Specifically, CSO contended that the proposed definition of 
``Effective date'' in part 530 would treat service contracts 
differently than NRAs and NSAs. Specifically, CSO argued that tender 
of cargo can constitute acceptance of an NRA under 46 CFR 
532.5(c)(3) and that the Commission does not require signature as a 
prerequisite to the implementation of an NSA under 46 CFR 531.3(f). 
Neither of these statements is correct. Section 532.5(c)(3) states 
that booking a shipment can constitute shipper acceptance of an NRA 
so long as the NRA includes a specific notice to that effect in the 
NRA. In the 2018 final rule that added this provision, however, the 
Commission expressly rejected the idea that tender of cargo alone 
constitutes acceptance, stating that allowing tender prior to 
agreement would create the potential for an unfair environment for 
shippers and increase transactional confusion, instead retaining the 
requirement that the NRA had to be agreed to by both shipper and 
NVOCC prior to the receipt of cargo. 83 FR at 34789. As for NSAs, 
the same 2018 final rule expressly stated that NSAs must be signed 
by both the NVOCC and shipper and are binding upon signature of the 
parties. Id. at 34790.
---------------------------------------------------------------------------

    Based on the foregoing, the Commission has determined to adopt the 
proposed definition of ``Effective date.'' Because the proposed 
definition, as interpreted above, addresses the concerns raised by WSC, 
the Commission concludes that it is unnecessary to adopt the substitute 
language offered by WSC. The Commission has determined that it is more 
prudent to rely on the universal definition of ``electronic signature'' 
in the E-SIGN Act than adopt its own, separate definition in part 
530.\72\ In addition, WSC's definition would nullify one of the primary 
advantages of the proposed definition, i.e., the Commission's ability 
to confirm from the face of the filed contract that it is prospective 
in nature by comparing the effective date and date of signature. As WSC 
admits, the Commission would have to obtain specific service contract 
records in order to determine when the service contract was agreed to 
by the parties if the Commission were to adopt its proposed language. 
Finally, as discussed above in Section V.A.1, tying the effective date 
to the date of signature will limit carriers' ability to use the type 
of bait-and-switch tactics certain commenters fear could occur with 
delayed filing.
---------------------------------------------------------------------------

    \72\ At this time, the Commission is not formally incorporating 
into its regulations any definitions or requirements from the E-SIGN 
Act, but may revisit this issue in the future.
---------------------------------------------------------------------------

3. Service Contract Filing Requirements (Sec.  530.8)
a. NPRM \73\
---------------------------------------------------------------------------

    \73\ 86 FR at 5109-5110.
---------------------------------------------------------------------------

    Section 530.8 sets forth the filing requirements for service 
contracts and amendments. Under the current regulations, amendments 
must be filed no later than 30 days after cargo moves pursuant to the 
amendment, and, prior to the temporary exemption, original service 
contracts had to be filed before any cargo moved pursuant to the 
service contract.\74\ In the NPRM, the Commission proposed to allow a 
30-day filing period for both original service contracts and amendments 
and combine Sec.  530.8(a)(1) and (2) into a single provision at Sec.  
530.8(a). The revised Sec.  530.8(a) would require that ocean common 
carriers file service contracts and amendments no later than 30 days 
after the effective date.
---------------------------------------------------------------------------

    \74\ Sec.  530.8(a)(1), (2).
---------------------------------------------------------------------------

    The trigger for the filing period under the proposed revisions thus 
differed from the current requirement for service contract amendments 
in Sec.  530.8(a)(2). The current regulations include two trigger 
events. Current Sec.  530.3(i) requires that the effective date for the 
amendment be no more than 30 days prior to the filing date, while 
current Sec.  530.8(a)(2) requires that an amendment be filed no later 
than 30 days after cargo moves pursuant to the amendment. In accordance 
with Sec.  530.14(a), performance under an original service contract or 
amendment may not begin until the effective date, and therefore the 
effective date could be earlier than the date cargo moves under the 
contract or amendment.

[[Page 21659]]

Accordingly, in order to comply with both Sec. Sec.  530.3(i) and 
530.8(a)(2), ocean common carriers must file service contract 
amendments no later than 30 days after the effective date. Based on 
this interpretation, the Commission published guidance on its website 
shortly after the 2017 final rule was issued to make clear that service 
contract amendments must be filed no later than 30 days after their 
effective date.\75\ The Commission therefore proposed a single trigger 
(effective date) for the 30-day filing period for both original service 
contract and amendments in order to make clear when service contracts 
must be filed and allow the Commission to readily assess compliance.
---------------------------------------------------------------------------

    \75\ https://web.archive.org/web/20190321030253/https://www.fmc.gov/resources/amended_service_contract_nsas_rule.aspx (last 
visited April 9, 2021).
---------------------------------------------------------------------------

    The Commission also proposed amendments to Sec.  530.8(e) to 
reflect the 30-day filing period for original service contracts. 
Section 530.8(e) currently provides that if the Commission's service 
contract filing system is unable to receive filings for 24 hours or 
more, affected parties are not subject to the requirements in 
Sec. Sec.  530.8(a) and 530.14(a) that a service contract must be filed 
before cargo is shipped under the contract. This exception is 
conditioned on the affected service contracts being filed within 24 
hours after the Commission filing system returns to service.
    The proposed amendments to Sec. Sec.  530.8(a) and 530.14(a) 
required corresponding changes to Sec.  530.8(e). The proposed changes 
to Sec.  530.8(e) provided that if the Commission's service contract 
filing system is down for 24 hours or more, any service contract or 
amendment that must be filed during that period (i.e., because the 30-
day filing period concludes while the system is down) will be 
considered timely filed so long as the contract or amendment is filed 
no later than 24 hours after the Commission filing system returns to 
service. The proposed revisions to Sec.  530.8(e) also deleted the 
reference to Sec.  530.14(a) given the proposed revisions to the latter 
section.
b. Comments
    NITL supported the proposed changes to Sec.  530.8. NITL stated 
that a single trigger for the 30-day filing period for original service 
contracts and amendments is appropriate and concurred with the proposed 
changes addressing how filings are treated when the Commission's system 
is down.\76\ NITL also requested that the Commission clarify that a 
shipper that tenders cargo under a service contract during the 30-day 
filing window will not be penalized if the carrier fails to file the 
service contract within the window (e.g., by having shipments re-rated 
under tariff rates). NITL stated that shippers typically get notice of 
the filing date from the carrier so they know when the contract rates 
and terms apply, but with a 30-day filing period, the shipper will base 
its shipments on the effective date and not the filing date.
---------------------------------------------------------------------------

    \76\ NITL Comments at 3-4.
---------------------------------------------------------------------------

    Other commenters echoed this last point. GCA asserted that the 
carrier should bear full responsibility to file service contracts 
within the 30-day filing period and should bear any burden or 
consequence stemming from the failure to timely file the contract.\77\ 
BassTech stated that it is important for any new rule to specify what 
happens to the rating of cargo that has shipped during the 30-day 
filing window if the carrier neglects to timely file the service 
contract and suggested that the rule expressly state that any duly 
signed service contract will prevail regardless of filing status.\78\
---------------------------------------------------------------------------

    \77\ GCA Comments at 2.
    \78\ BassTech Comments at 2.
---------------------------------------------------------------------------

c. Discussion
    The Commission agrees that shippers should not be penalized for an 
ocean carrier's failure to timely file a service contract. As the 
commenters note, shippers will base their shipments on the effective 
date of the contract or amendment and have no control over whether the 
carrier files the contract or amendment within 30 days. Retroactive re-
rating of cargo received more than 30 days prior to the filing date 
would unnecessarily punish the shipper for the ocean carrier's failure 
to comply with the filing requirements and permit the ocean carrier to 
collect the generally higher tariff rate for those shipments. To 
address this issue, the final rule adopts the text of proposed 
paragraph (a) in Sec.  530.8 as paragraph (a)(1) and includes a new 
paragraph (a)(2) that expressly states that failure to timely file a 
service contract or amendment does not affect the applicability of the 
contract or amendment to cargo received on or after the effective date.
    This change does not mean, however, that the Commission will 
overlook an ocean carrier's failure to timely file a service contract 
or amendment. The Commission will continue to closely monitor carrier 
compliance with the filing requirements and take enforcement action 
against violators, including the assessment of civil penalties.
    In addition to revising Sec.  530.8(a), the Commission is adopting 
without change the proposed revisions to Sec.  530.8(b) and (e) for the 
reasons described above and in the NPRM.
4. Service Contract Implementation Requirements (Sec.  530.14)
    NITL supported the proposed revisions to Sec.  530.14 and stated 
that performance under a service contract should not begin until the 
effective date.\79\ None of the other commenters discussed the changes. 
Accordingly, for the reasons stated in the NPRM \80\ and below, the 
Commission is adopting the proposed revisions without change.
---------------------------------------------------------------------------

    \79\ NITL Comments at 3.
    \80\ 86 FR at 5110.
---------------------------------------------------------------------------

    Section 530.14 provides that performance under a service contract 
or amendment may not begin until the effective date and conditions 
performance on compliance with the relevant filing requirements, i.e., 
performance under an original service contract may not begin until the 
contract is filed while performance under an amendment may begin on the 
effective date provided that the amendment is filed no later than 30 
days after the effective date.
    Given that the changes to Sec.  530.8(a) prescribe the same filing 
period for original service contracts and amendments (30 days after the 
effective date), the Commission is replacing the separate requirements 
for original service contracts and amendments in Sec.  530.14(a) with a 
single requirement that performance under either may not begin until 
the effective date. The Commission is also removing the language tying 
performance to the filing date as it simply repeats the filing 
requirement in Sec.  530.8(a). The Commission determined that Sec.  
530.8(a), as amended, will adequately describe the filing requirement 
and the deadline for filing, and repeating the requirement in Sec.  
530.14(a) was therefore unnecessary. This change will also help avoid 
confusion regarding the applicability of a service contract or 
amendment if the carrier fails to file the contract or amendment within 
the 30-day filing period. As discussed above, a carrier's failure to 
timely file a contract or amendment will not affect the applicability 
of the contract or amendment to shipments received on or after the 
effective date, even if those shipments were received more than 30 days 
before filing.
    The Commission is adding a new sentence to Sec.  530.14(a) to 
clarify that original service contracts and amendments may apply only 
to cargo

[[Page 21660]]

received by the carrier on or after the effective date. As noted in the 
NPRM, this provision is implied by the current language of Sec. Sec.  
530.8(a) (describing when a service contract or amendment must be filed 
in relation to when cargo moves under the contract) and 530.14(a) 
(prohibiting performance under a service contract or amendment until 
the effective date) and had been stated in previous rulemakings.\81\ 
Because the Commission is amending Sec.  530.8(a) so that the filing 
period is tied to the effective date rather than the date cargo moves, 
the Commission is including language in Sec.  530.14(a) clearly stating 
that service contracts and amendments may only apply to cargo received 
on or after the effective date.
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    \81\ See, e.g., 82 FR at 16290 (noting that because of the 
previous requirement that amendments had to filed before cargo could 
move under the terms of the amendment, ``[c]arriers have cited 
instances in which the parties have agreed to amend the contract, 
however, due to unavoidable circumstances, the cargo was received 
before the carrier filed the amendment with the Commission'' and 
``[i]n such cases, the amendment's rates and terms may not be 
applied to that cargo pursuant to the Commission's rules.'').
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B. Technical Amendments

    The NPRM proposed additional technical amendments to part 530 to 
implement the Commission's December 2019 decision to grant in part 
WSC's petition and exempt ocean common carriers from the essential 
terms publication requirements.\82\ NITL supported all of the proposed 
technical amendments.\83\ No other commenters discussed the technical 
amendments. Accordingly, for the reasons stated in the NPRM \84\ and 
below, the Commission is adopting the proposed technical amendments 
without change.
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    \82\ Pet. of World Shipping Council, 1 F.M.C.2d at 515-516.
    \83\ NITL at 4.
    \84\ 86 FR at 5110.
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1. Definition of ``Authorized Person'' (Sec.  530.3)
    The definition of ``Authorized person'' in Sec.  530.3(c) includes 
a reference to publishing statements of essential terms. The definition 
also cross-references a nonexistent paragraph (Sec.  530.5(d)) when 
referring to the registration requirements for filing service 
contracts. The Commission is amending the definition by removing the 
reference to essential terms publication and including the correct 
citation for the registration requirements (Sec.  530.5(c)).
2. Exceptions and Exemptions (Sec.  530.13)
    The Commission is adding a new paragraph (e) to Sec.  530.13 to 
reflect the exemption granted by the Commission from the essential 
terms publication requirements. Although the Commission recently 
eliminated the essential terms publication requirements in part 530, 
ocean common carriers that are not aware of the exemption may be 
confused as to whether the statutory requirement in 46 U.S.C. 40502(d) 
continues to apply. Accordingly, the Commission is including a new 
provision reflecting the exemption from section 40502(d).

VI. Rulemaking Analyses and Notices

Effective Date

    The Administrative Procedure Act generally requires a minimum of 30 
days before a final rule can go into effect but excepts from this 
requirement: (1) Substantive rules which grant or recognize an 
exemption or relieve a restriction; (2) interpretive rules and 
statements of policy; and (3) when an agency finds good cause for a 
shorter period of time and includes those findings with the rule. 5 
U.S.C. 553(d).
    The final rule is a substantive rule relieving a restriction and 
warrants an earlier effective date under 5 U.S.C. 553(d). The rule 
provides relief from the requirement that original service contracts be 
filed with the Commission before they may go into effect. The rule also 
revises part 530 so that failure to timely file an original service 
contract or amendment will no longer affect the applicability of the 
service contract or amendment to shipments received more than 30 days 
before filing.
    The Commission also finds good cause for an effective date of June 
2, 2021, under 5 U.S.C. 553(d)(3). Because the current temporary 
exemption allowing original service contracts to go into effect up to 
30 days before filing expires on June 1, 2021, a delayed effective date 
would create a gap period during which original service contracts would 
need to be filed before going into effect, which would be contrary to 
the public interest. A June 2, 2021 effective date ensures no gap 
between the exemption and the final rule. The remaining amendments are 
technical updates to reflect the 2019 exemption from the essential 
terms publication requirements and to correct certain cross-references, 
and a delayed effective date for these revisions is unnecessary.

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 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 a 
final 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. 604-605. 
Based on the analysis below, the Chairman of the Federal Maritime 
Commission certifies that this rule will not have a significant 
economic impact on a substantial number of small entities. The 
regulated business entities that would be impacted by the rule are 
ocean common carriers (i.e., vessel-operating common carriers). The 
Commission has determined that ocean common carriers 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.

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 final rule allows ocean 
common carriers to file original service contracts up to 30 days after 
their effective date. This rulemaking thus falls within the categorical 
exclusion for actions related to the receipt of service contracts 
(Sec.  540.4(a)(5)). 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.

[[Page 21661]]

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 associated with the service 
contract filing requirements in part 530 are currently authorized under 
OMB Control Number 3072-0065. In compliance with the PRA, the 
Commission submitted the proposed revised information collection to the 
Office of Management and Budget in conjunction with publication of the 
NPRM and provided notice of the revised information collection in the 
NPRM. Comments received regarding the proposed changes, as well as the 
Commission's responses, are discussed above. No comments specifically 
addressed the revised information collection in part 530.
    Title: 46 CFR part 530--Service Contracts and Related Form FMC-83.
    OMB Control Number: 3072-0065.
    Abstract: 46 U.S.C. 40502 and 46 CFR part 530 require ocean common 
carriers to file certain service contracts confidentially with the 
Commission.
    Current Action: The final rule amends the service contract filing 
requirements to allow ocean common carriers to file original service 
contracts up to 30 days after the effective date. Currently, part 530 
requires that ocean common carriers file original service contracts on 
or before the effective date, while amendments must be filed within 30 
days after the effective date.
    Type of Request: Revision of a previously approved collection.
    Needs and Uses: The Commission monitors service contract filings to 
ensure compliance with the Shipping Act of 1984.
    Frequency: Frequency of filings is determined by the ocean common 
carrier and its customers. When parties enter into a service contract 
or amend the contract, the service contract or amendment must be filed 
with the Commission.
    Type of Respondents: Ocean common carriers or their duly appointed 
agents are required to file service contracts and amendments with the 
Commission.
    Number of Annual Respondents: The Commission does not anticipate 
that the revisions will affect the number of respondents. As a general 
matter, however, the number of respondents has decreased since the last 
revision to the information collection. The Commission estimates an 
annual respondent universe of 86 ocean common carriers.
    Estimated Time per Response: The Commission does not anticipate 
that the revisions will affect the estimated time per response, which 
will continue to range from 0.0166 to 1 person-hours for reporting and 
recordkeeping requirements contained in the regulations, and 0.1 
person-hours for completing Form FMC-83.
    Total Annual Burden: The Commission does not anticipate that the 
revisions will affect the number of service contracts filed or the 
burden associated with each filing and, therefore, will not affect the 
total annual burden. Due to the decrease in the number of respondents 
since the last revision, however, the Commission expects that the total 
annual burden will decrease. The Commission estimates the total person-
hour burden at 30,448 person-hours.

Executive Order 12988 (Civil Justice Reform)

    This final rule meets the applicable standards in E.O. 12988 
titled, ``Civil Justice Reform,'' to minimize litigation, eliminate 
ambiguity, and reduce burden. Section 3(b) of E.O. 12988 requires 
agencies to make every reasonable effort to ensure that each new 
regulation: (1) Clearly specifies the preemptive effect; (2) clearly 
specifies the effect on existing Federal law or regulation; (3) 
provides a clear legal standard for affected conduct, while promoting 
simplification and burden reduction; (4) clearly specifies the 
retroactive effect, if any; (5) adequately defines key terms; and (6) 
addresses other important issues affecting clarity and general 
draftsmanship under any guidelines issued by the Attorney General. This 
document is consistent with that requirement.

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 530

    Freight, Maritime carriers, Report and recordkeeping requirements.

    For the reasons set forth above, the Federal Maritime Commission 
amends 46 CFR part 530 as follows:

PART 530--SERVICE CONTRACTS

0
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.

0
2. Amend Sec.  530.3 by revising paragraphs (c) and (i) to read as 
follows:


Sec.  530.3   Definitions.

* * * * *
    (c) Authorized person means a carrier or a duly appointed agent who 
is authorized to file service contracts on behalf of the carrier party 
to a service contract and is registered by the Commission to file under 
Sec.  530.5(c) and appendix A to this part.
* * * * *
    (i) Effective date means the date upon which a service contract or 
amendment is scheduled to go into effect by the parties to the 
contract. A service contract or amendment becomes effective at 12:01 
a.m. Eastern Standard Time (Coordinated Universal Time (UTC)-05:00) on 
the effective date. The effective date may not be earlier than the date 
on which all parties have signed the service contract or amendment.
* * * * *

0
3. Amend Sec.  530.8 by:
0
a. Revising paragraph (a);
0
b. Adding a heading to paragraph (b); and
0
c. Revising paragraph (e).
    The revisions and addition read as follows:


Sec.  530.8   Service Contracts.

    (a) Filing. (1) Authorized persons shall file with BTA, in the 
manner set forth in appendix A of this part, a true and complete copy 
of every service contract and every amendment to a service contract no 
later than thirty (30) days after the effective date.
    (2) Failure to file a service contract or amendment in accordance 
with paragraph (a)(1) of this section does not affect the applicability 
of the service contract or amendment to cargo received on or after the 
effective date by the ocean common carrier or its agent.
    (b) Required terms. * * *
* * * * *
    (e) Exception in case of malfunction of Commission filing system. 
In the event that the Commission's filing systems are not functioning 
and cannot receive service contract filings for twenty-four (24) 
continuous hours or more, an original service contract or amendment 
that must be filed during that period in accordance with paragraph 
(a)(1) of this section will be considered timely filed so long as the

[[Page 21662]]

service contract or amendment is filed no later than twenty-four (24) 
hours after the Commission's filing systems return to service.

0
4. Amend Sec.  530.13 by adding paragraph (e) to read as follows:


Sec.  530.13   Exceptions and exemptions.

* * * * *
    (e) Essential terms publication exemption. Ocean common carriers 
are exempt from the requirement in 46 U.S.C. 40502(d) to publish and 
make available to the general public in tariff format a concise 
statement of certain essential terms when a service contract is filed 
with the Commission.

0
5. Amend Sec.  530.14 by revising paragraph (a) to read as follows:


Sec.  530.14   Implementation.

    (a) Generally. Performance under an original service contract or 
amendment may not begin until the effective date. An original service 
contract or amendment may apply only to cargo received on or after the 
effective date by the ocean common carrier or its agent, including 
originating carriers in the case of through transportation.
* * * * *

    By the Commission.
Rachel E. Dickon,
Secretary.
[FR Doc. 2021-08276 Filed 4-22-21; 8:45 am]
BILLING CODE 6730-02-P