[Federal Register Volume 64, Number 18 (Thursday, January 28, 1999)]
[Proposed Rules]
[Pages 4382-4385]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-2046]
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DEPARTMENT OF TRANSPORTATION
Maritime Administration
46 CFR Part 381
[Docket No. MARAD-99-5038]
RIN 2133-AB37
Regulations To Be Followed by All Departments and Agencies Having
Responsibility To Provide a Preference for U.S.-Flag Vessels in the
Shipment of Cargoes on Ocean Vessels
AGENCY: Maritime Administration, Department of Transportation.
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: The Maritime Administration (MARAD) is soliciting public
comment concerning whether MARAD should amend its cargo preference
regulations governing the carriage of agricultural exports. Your
comment is welcome on the questions listed below or on any aspect of
MARAD's oversight of other governmental agencies' ocean shipping
activities under the Cargo Preference Act of 1954, as amended by the
Food Security Act of 1985. Such comments will be considered in any
future decision by MARAD to initiate a rulemaking process applicable to
the carriage of agricultural export cargoes. Present regulations and
policies remain in force. This docket does not address the carriage of
military cargoes.
DATES: You should submit your comments early enough to ensure that
Docket Management receives them not later than March 29, 1999.
ADDRESSES: You should mention the docket number that appears at the top
of this document in your comments and submit your comments in writing
to:
[[Page 4383]]
Docket Clerk, U.S. DOT Dockets, Room PL-401, 400 7th St., SW,
Washington, DC 20590. You may call Docket Management at (202) 366-9324.
You may visit the Docket Room from 10 a.m. to 5 p.m., EST., Monday
through Friday, except Federal Holidays. An electronic version of this
document is available on the World Wide Web at http://dms.dot.gov.
FOR FURTHER INFORMATION CONTACT: For non-legal issues you may call
Thomas W. Harrelson, Director, Office of Cargo Preference at (202) 366-
5515. For legal issues, you may call Murray Bloom, Chief, Division of
Maritime Assistance Programs of the Office of Chief Counsel at (202)
366-5320. You may send mail to both of these officials at Maritime
Administration, 400 Seventh St., S.W., Washington, D.C., 20590.
SUPPLEMENTARY INFORMATION:
Comments
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.
We encourage you to write your primary comments in a concise
fashion. However, you may attach necessary additional documents to your
comments. There is no limit on the length of the attachments. Please
submit two copies of your comments, including the attachments, to
Docket Management at the address given above under ADDRESSES.
How can I be sure that my comments were received?
If you wish Docket Management to notify you upon its receipt of
your comments, enclose a self-addressed, stamped postcard in the
envelope containing your comments. Upon receiving your comments, Docket
Management will return the postcard by mail.
How do I submit confidential business information?
If you wish to submit any information under a claim of
confidentiality, you should submit three copies of your complete
submission, including the information you claim to be confidential
business information, to the Chief Counsel, Maritime Administration, at
the address given above under FOR FURTHER INFORMATION CONTACT. In
addition, you should submit two copies, from which you have deleted the
claimed confidential business information, to Docket Management at the
address given above under ADDRESSES. When you send comments containing
information claimed to be confidential business information, you should
include a cover letter setting forth with specificity the basis for any
such claim.
Will the agency consider late comments?
We will consider all comments that Docket Management receives
before the close of business on the comment closing date indicated
above under DATES. To the extent possible, we will also consider
comments that Docket Management receives after that date. If Docket
Management receives a comment too late for us to consider it in
developing a proposed rule (assuming that one is issued), we will
consider that comment as an informal suggestion for future rulemaking
action.
How can I read the comments submitted by other people?
You may read the comments received by Docket Management at the
address given above under ADDRESSES. The hours of the Docket Room are
indicated above in the same location.
You may also see the comments on the Internet. To read the comments
on the Internet, take the following steps: Go to the Docket Management
System (DMS) Web page of the Department of Transportation (http://
dms.dot.gov/). On that page, click on ``search.'' On the next page
(http://dms.dot.gov/search/), type in the four-digit docket number
shown at the beginning of this document. Example: If the docket number
were ``MARAD-1999-1234,'' you would type ``1234.'' After typing the
docket number, click on ``search.'' On the next page, which contains
docket summary information for the docket you selected, click on the
desired comments. You may download the comments.
Please note that even after the comment closing date, we will
continue to file relevant information in the Docket as it becomes
available. Further, some people may submit late comments. Accordingly,
we recommend that you periodically check the Docket for new material.
The Cargo Preference Act of 1954, Pub. L. 83-664, 68 Stat. 832
(1954), amended the Merchant Marine Act, 1936, by adding Section
901(b), codified at 46 App. U.S.C. 1241(b) ('54 Act). The '54 Act
applies:
``[w]henever the United States shall procure, contract for, or
otherwise obtain for its own account, or shall furnish to or for the
account of any foreign nation without provision for reimbursement,
any equipment, materials, or commodities, within or without the
United States, or shall advance funds or credits or guarantee the
convertibility of foreign currencies in connection with the
furnishing of such equipment, materials, or commodities, * * * ''
Government agencies are required to take such steps as may be
necessary and practicable to assure that at least 50 percent of the
gross tonnage of certain government-sponsored cargoes--
`` * * * (computed separately for dry bulk carriers, dry cargo
liners, and tankers), which may be transported on ocean vessels
shall be transported on privately-owned United States-flag
commercial vessels, to the extent such vessels are available at fair
and reasonable rates for United States-flag commercial vessels, in
such manner as will insure a fair and reasonable participation of
United States-flag commercial vessels in such cargoes by geographic
areas. * * * ''
The Food Security Act of 1985, Pub. L. 99-198, exempted certain
agricultural export enhancement programs from cargo preference, but
increased the U.S.-flag share of humanitarian food aid programs from 50
to 75 percent.
MARAD's oversight role in administration of cargo preference is
founded on section 27 of the Merchant Marine Act of 1970, Pub. L. 91-
469, which added the following subsection to section 901(b) of the
Merchant Marine Act, 1936:
``Every department or agency having responsibility under this
subsection shall administer its programs with respect to this
subsection under regulations issued by the Secretary of
Transportation. The Secretary of Transportation shall review such
administration and shall annually report to the Congress with
respect thereto.'' 46 App. U.S.C. 1241(b).
The Secretary of Transportation has delegated the authority under
this provision to the Maritime Administrator. (49 CFR 1.66(e).) MARAD's
regulations governing administration of cargo preference are located at
46 CFR part 381. Guidance as to the priority of a completely U.S.-flag
service over a mixed U.S./foreign-flag service is contained in a policy
letter issued on June 16, 1986.
MARAD is requesting comment on whether the regulations governing
the '54 Act, last revised in 1996, should be updated. Comments are
requested specifically on the questions presented below:
1. Clarification of Secs. 381.4 and 381.5
Sections 381.4 and 381.5, which address liner and bulk vessels,
respectively, relate to the requirement to fix American-flag tonnage
prior to fixing foreign-flag vessels in order to ensure fair and
reasonable participation of U.S.-
[[Page 4384]]
flag vessels. MARAD has interpreted these provisions to mean that at
least 75 percent, as applicable to packaged or bulk agricultural
products, of the freight generated by each commodity procurement
transaction must be transported on U.S.-flag vessels. Doing so ensures
that the shipper agencies meet their preference obligations on a
current basis during the year. Some shipper agencies have argued that
the language of the two sections may not support MARAD's
interpretation, or in any event, should be modified to allow greater
flexibility. On the other hand, the use of more direct language in
Secs. 381.4 and 381.5 may serve to quell confusion or doubt as the
intent of these provisions. Accordingly, we request your comment on
whether these two provisions should be clarified, and also whether the
two provisions could be combined or otherwise revised.
2. Foreign-Flag Feeder Vessels
MARAD's guidance letter of June 16, 1986, summarizes the holdings
of several long-standing decisions of the Comptroller General (B-
145455, June 12, 1968; B-140872, May 10, 1960; B-165421, Dec. 23, 1968;
and B-155185, Nov. 17, 1969) and provides that an ocean service which
provides for U.S.-flag carriage for the entire voyage has preference
over an ocean service which uses a foreign-flag vessel for a portion of
the transportation. Only in the absence of all-U.S.-flag service is a
mixed U.S.-flag/foreign-flag service considered to be in fulfillment of
the requirements of cargo preference. When two mixed U.S.-flag/foreign-
flag services are vying for the same shipment, the service that makes
the greater use of U.S.-flag vessels (i.e., the service with the longer
leg served by U.S.-flag vessels) wins the cargo.
Shipper agencies note that the guidance sometimes restricts their
ability to ship cargo expeditiously and comply with cargo preference
due to the paucity of direct U.S.-flag service and the relative
abundance of mixed U.S.-flag/foreign-flag service. The shipper agencies
complain that the added cost of all-U.S.-flag service over mixed U.S.-
flag/foreign-flag service results in less funds being available for
purchase of commodities. They also note that large, modern U.S.-flag
container vessels cannot serve many of the recipient developing
nation's ports, or do so economically due to lack of port facilities.
Although 75 percent U.S.-flag carriage is statutorily required, there
may be ways to achieve that required level of U.S.-flag participation
in these cargoes while allowing better use of U.S.-flag vessels and
more efficient routing of shipments. Accordingly, we seek your comment
on whether MARAD may, and if so should, adopt new preference guidance,
which may be incorporated into a rule, such as one that gives equal
preference to all-U.S.-flag service and mixed U.S.-flag/foreign-flag
service, but counts only the ton miles carried by the U.S.-flag vessel
towards the goal of 75 percent U.S.-flag carriage. In other words, can
performance by U.S.-flag vessels of 75 percent of the ton miles
generated by the preference cargoes equate to fulfillment of the
statutory requirement that U.S.-flag vessels carry 75 percent of the
preference cargoes in consonance with the determinations of the
Comptroller General?
3. Basis for Compliance Measurement
In addition to the 75 percent carriage requirement, the statute
requires that U.S.-flag vessels be given fair and reasonable
opportunity to transport such cargoes by liner, tanker and dry bulk
vessels and by geographic areas. The geographic areas referred to in
the statute are foreign geographic areas inasmuch as this provision is
intended to ensure that U.S.-flag vessels participate in the long hauls
as well as the short hauls.
The Food for Progress Act provides for the donation of food to
emerging democratic nations. Section 416 of the Agriculture Act of 1949
provides for the donation of bulk grain and other surplus agricultural
commodities. The foreign assistance programs, popularly known as ``PL-
480,'' established by the Agricultural Trade Development and Assistance
Act of 1954, as amended, consist of three titles. Title I provides
concessional, long-term financing for the sale of U.S. agricultural
commodities to friendly developing countries. Title II provides for the
donation of packaged, processed and bulk commodities to least developed
countries. Title III provides for the donation of food to least
developed countries on a grant basis.
Compliance with cargo preference requirements for programs under
Food for Progress and Section 416 has been measured on a country-by-
country basis for each commodity procurement. Title I shipments are
monitored by a more restrictive requirement that cargo reservation be
measured on a purchase authorization basis by vessel type. Unlike other
PL-480 programs, under Title I requirements, each commodity requires a
separate purchase authorization. Only with regard to the Title II
program has MARAD informally acquiesced to measurement of compliance on
a ``global'' basis by vessel type. This program primarily ships
numerous smaller parcels on liner vessels, where there is reduced
likelihood of disadvantage accruing to the U.S.-flag carrier and
greater difficulty by the program office in meeting compliance by
country by vessel type.
We invite your comments on whether these compliance regimes should
be maintained as is, and memorialized in regulations, standardized or
consolidated or otherwise revised. Should performance in meeting
preference standards for the Title II program be changed to a country
by vessel type basis so as to conform to the requirements for other PL-
480 programs?
4. Definition of ``Liner'' Vessel and ``Transshipment'
While the statute specifies that U.S.-flag carriers be given a fair
and reasonable opportunity for the carriage of food aid cargo by liner,
tanker and bulk vessel, the term ``liner'' does not connote or
adequately define what is a liner vessel. The term ``liner'' relates to
a type of service instead of a type of vessel. A vessel engaged in
liner service, which is regularly scheduled service available for
common carriage, may be a general cargo vessel, a breakbulk vessel, a
container vessel or a tug/deck barge combination. Cargo shipped under
liner service requirements for humanitarian aid programs are contracted
for under booking notices, whereas freight for dry bulk or tanker
vessels are subject to charter parties or contracts of affreightment.
Use of the term ``liner'' in the statute, without further definition in
the regulations, has led to administrative difficulties in adequately
recording shipments subject to cargo preference. Therefore, we welcome
your comments regarding whether MARAD should amend its regulations to
define what type of vessels constitute or should be included under the
term ``liner'' vessels for the purpose of measuring compliance under
cargo preference.
Ocean transportation has changed dramatically since the cargo
preference regulations were last revised. Containerization with hub and
spoke networks, alliances and consortia now dominate the non-bulk
trades. The commercial world and insurance underwriters now
differentiate between ``transshipment'' and ``relay'' between vessels
of the same transportation network manager. Should MARAD recognize and
define ``relay'' versus ``transshipment?'' What should be those
definitions? Should they apply only to containerized cargoes? What
impact
[[Page 4385]]
would this have on preference cargo transportation?
5. Definition of Commercial Terms
The use of special government-defined terms of sale and
transportation for preference cargoes sometimes creates confusion in
the marketplace and increases costs. Commercial suppliers and carriers
use commercial terms for the majority of their business but must use
non-standard government terms when dealing with the U.S. Government.
For example, the U.S. Department of Agriculture (USDA) and the Agency
for International Development (AID) have defined the term ``FAS'' (free
along side) to mean delivery to a point of rest in a terminal rather
than the International Commercial Terms (Incoterms) definition of ``FAS
(* * *named port)'' as ``alongside the vessel on the quay or in the
lighters at the named port of shipment.'' As a result, MARAD interprets
the government definition to not require that a vessel physically call
at the port whereas the commercial Incoterm definition requires a
physical vessel call. Similarly, USDA and AID use other non-standard
terms, such as ``Intermodal-Plant'' and ``Intermodal-Point'' with
different buyer/seller/carrier responsibilities than the commercial
Incoterm ``EXWorks (. . .named place).''
We welcome your comments on whether MARAD should require the use of
commercial terms for cargo preference transactions. Would this clarify
the sales and transportation requirements? Would it simplify the
process and reduce overall government costs?
6. Commercial Practices
The use of non-commercial practices in government cargo preference
transportation contracts may be reducing competition and increasing
costs. For example, USDA and AID transportation contracts do not follow
the general commercial practices of ``freight earned upon loading'' and
``freight payable on loading,'' or ``free-in and out'' for dry bulk
charters. As a result, the ocean carrier has to finance the costs of
moving these government agricultural cargoes. Those added financial
costs to the carrier are reflected in higher freight rates borne by the
Government.
Should MARAD require the use of commercial practices in the
transportation of preference cargoes? If so, what commercial practices
should be implemented? Would such commercial practices simplify the
transportation contracts and reduce costs to the Government?
7. Other Issues
This request for comments concerning the desirability of rulemaking
is not limited to the foregoing. MARAD also seeks comments and/or
suggestions concerning other issues that may affect the implementation
of the cargo preference statutes and whether MARAD's regulations should
be amended or modified in light of such issues.
Rulemaking Analysis and Notices
Executive Order 12866 (Regulatory Planning and Review)
If a rule is actually promulgated, we may consider it an
economically significant regulatory action under section 3(f) of E.O.
12866. In the event that MARAD decides to proceed with a rulemaking, we
will prepare a preliminary regulatory evaluation that reflects the
comments to this advance notice of proposed rulemaking.
Federalism
MARAD has analyzed this advance notice of proposed rulemaking in
accordance with the principles and criteria contained in Executive
Order 12612 and has determined that any rule that might be subsequently
promulgated would not have sufficient federalism implications to
warrant the preparation of a Federalism Assessment.
Regulatory Flexibility Act
The Maritime Administration will evaluate any future proposed rule
under the Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, to
certify whether any rule that might be promulgated subsequent to this
advance notice of proposed rulemaking would have a significant economic
impact on a substantial number of small entities. Companies providing
the carriage of preference cargoes generally are not small entities.
EIS
Any rule that might be subsequently promulgated would not be
expected to significantly affect the environment. Accordingly, an
Environmental Impact Statement may not be required under the National
Environmental Policy Act of 1969.
Paperwork Reduction Act
We would evaluate any rule that might be promulgated to determine
whether it would be expected to significantly change the current
requirement for the collection of information.
By order of the Maritime Administrator.
Dated: January 25, 1999.
Joel C. Richard,
Secretary.
[FR Doc. 99-2046 Filed 1-27-99; 8:45 am]
BILLING CODE 4910-81-P
