[Federal Register Volume 61, Number 223 (Monday, November 18, 1996)]
[Notices]
[Pages 58678-58679]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-29427]
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DEPARTMENT OF DEFENSE
Department of the Army
Cargo Liability of Carrier
AGENCY: Military Traffic Management Command (MTMC), DOD.
ACTION: Notice.
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SUMMARY: This is a final notice. Affected rules are MTMC Freight
Traffic Rules Publication No. 1A (MFTRP No. 1A), Items 112, 113, 115,
and 116, effective April 24, 1990. The new liability will be: ``For all
shipments weighing less than 15,000 pounds, the carrier's liability for
lost and/or damaged cargo will be limited to the lowest dollar amount
of either $50,000 or the actual amount of the loss and/or damage to the
article(s). Should a shipper desire to declare and establish a cargo
liability for an amount greater than $50,000, the carrier agrees to
provide this increased liability coverage for $____ per each $100
increase in lost and/or damaged cargo liability over the maximum
liability. For all shipments weighing 15,000 pounds and over, the
carrier's liability for lost and/or damaged cargo will be limited to
the lowest dollar amount of either $150,000 or the actual amount of the
loss and/or damage to the article(s). Should a shipper desire to
declare and establish a cargo liability for an amount greater than
$150,000, the carrier agrees to provide this increased liability
coverage for $____ per each $100 increase in lost and/or damaged cargo
liability over the maximum liability.''
DATES: This change will become effective February 1, 1997.
FOR FURTHER INFORMATION CONTACT: Military Traffic Management Command,
5611 Columbia Pike, Falls Church, VA 22041-5050. Point of contact is
Mr. Julian Jolkovsky, MTOP-T-SR, (703) 681-3440, or Ms. Crystal Hunter,
MTOP-QER, (703) 681-6579.
SUPPLEMENTARY INFORMATION: Based on a careful and thorough review of
comments received by MTMC, the policy change that was recommended on
March 14, 1996, will become effective on February 1, 1997. The original
proposal is in keeping with recommendations made in the General
Accounting Office (GAO) report, ``Defense Transportation: Ineffective
Oversight Contributes to Freight Losses'' (GAO/NSIAD-92-96). GAO
pointed out that under MTMCs current carrier liability limitations,
recoveries on lost or damaged motor freight shipments average 30 cents
for every dollar of actual value of the cargo and have been at or near
this average for at least the previous three fiscal years (October
1992-September 1995). MTMC's own review of FY 96 claims data reveals
that the Government is collecting less than 31 cents from carriers for
every dollar of claims involving lost and/or damaged property. This is
not a responsible use of tax dollars and serves to benefit only the
carrier industry. The proposed change is expected to permit DOD to
recover actual value on at least 90 percent of lost or damaged
shipments.
Notices in the Federal Register (FR), March 14, 1996, and June 6,
1996, provided notice of MTMC's proposed change to motor carrier
liability limitations for Freight All Kinds (FAK) shipments moving
under motor carrier voluntary tenders, other than Guaranteed Traffic.
Only one set of comments on this proposal was received from the carrier
industry by the deadline date of August 5, 1996, from the legal
representatives of the National Motor Freight Traffic Association, the
Regular Common Carrier Conference, and the Transportation Loss
Prevention and Security Council in a letter dated August 2, 1996. One
comment alleged that MTMC is attempting to engage unilaterally in
``rate making'' practices and insisted that current released valuation
policy, which is based on a per pound rate, should be maintained.
Essentially, this comment misconstrues MTMC's intent. With few
exceptions, rate making and rate submissions in response to MTMC
movement requirements are carrier responsibilities. MTMC's intent in
changing the level of carrier liability is to establish levels which
will reasonably reimburse the Government for carrier-caused loss and/or
damage to DOD-sponsored shipments. After careful review of information
presented in the comments, MTMC's position is that to continue the use
of released valuation limitations of $1.75 or $2.50 per pound is not a
prudent use of tax dollars, severely restricts the Government's ability
to obtain reasonable reimbursement for carrier-caused loss and/or
damage to DOD sponsored shipments, and would be in direct conflict with
the recommendations set forth in the June, 1992, GAO report.
Furthermore, these low levels of valuation for loss and/or damage to
Government property may induce carriers to offer less than a full level
of safety, security, care, and handling to these shipments.
As a matter of background information, beginning in December, 1994,
MTMC implemented the same change in carrier liability limits for
Guaranteed Traffic (G/T) shipments. This change raised no complaints
from the carrier industry and has shown positive benefits for the
Government in monetary recoveries from freight claims filed against G/T
carriers for shipments which have incurred loss and/or damage. It is
also noted that many motor freight carriers participate in both the G/T
and voluntary programs; therefore, standardizing carrier liability
levels between the two programs will enhance administrative shipment
planning and movement procedures.
During FY 94, DOD tendered over 1 million freight shipments to
motor carriers at a transportation cost in excess of $400 million. The
total value of goods moved by commercial carriers is indeterminable;
however, the value represents a significant taxpayer investment in the
equipment and supplies used to support the Armed Forces. On any given
day, the motor carrier industry may be entrusted with providing
transportation services for over 50,000 less-than-truckload and
truckload shipments. The timely, damage-and loss-free movement of these
supplies directly impact military readiness. Lost, partially damaged,
or totally destroyed supplies and equipment provide little benefit to
the military services and negatively impact readiness. Furthermore, the
inability of DOD to recoup equitable monetary reimbursement from
carriers because of artificially low carrier liability levels, to
repair or replace damaged or lost supplies, substantially impacts
budgetary and program funding. Increasing carrier liability levels will
cure some of these shortfalls.
The commentator also stated that MTMC was not negotiating with the
carrier industry as required by DOD regulations. MTMC's view is that
regular negotiations are conducted with industry at partnering meetings
and other public forums. Under the Motor Carrier Act of 1980, the level
of carrier liability is negotiable between the shipper and the carrier.
However, at the same time, MTMC, as single transportation manager for
DOD surface freight shipments, is well within its authority to
determine the level of liability that best protects DOD shipments.
Also, the carrier is free to offer any rate that it feels will
adequately compensate it.
MTMC accomplishes ``negotiation'' of terms and conditions of
service through
[[Page 58679]]
the FR, because it is impractical to deal with and discuss the nature
of MTMC's business and its requirements individually with more than 500
approved carriers. Also, such negotiation does not mean that MTMC will
allow carriers to dictate the terms of the program. Under 49 U.S.C.
13712, formerly 49 U.S.C. 10721, motor carriers may quote a reduced
rate to the government; however, it does not provide that the
Government must accept the rates offered. In any event, 49 U.S.C.
section 13712 no longer applies to motor carrier freight. It only
applies to household goods and certain water shipments. Carriers may
now offer any freight rates they want to anyone.
MTMC's procurement authority is derived from the Armed Services
Procurement Act (10 U.S.C. 2301, et seq.) MTMC has the authority to
make its own arrangements, and has the right to contract on its own
terms on behalf of its DOD customers. Accordingly, MTMC's proposed
changes to carrier liability levels has been endorsed by major DOD
shippers, MTMC's customers.
Because the policy change applies only to motor shipments of
general cargo, Freight All Kinds, the motor carriers have the
opportunity to offer whatever rates they hold to be reasonable for the
level of liability that DOD requires. MRMC recognizes that increases in
carrier liability may result in somewhat higher line haul charges.
However, MTMC expects that those carriers which have aggressive safety,
claims prevention, employee training, and quality control programs will
have little or no difficulty in accommodating these changes and will
continue to provide quality service at reasonable rates to the DOD. In
addition, MTMC expects any increase in line haul charges to be offset
by the beneficial aspects of corresponding increases in recoveries from
carriers for lost and damaged freight and, as service improves, a
decrease in administrative costs to process claims. Shifting a greater
level of monetary responsibility to carriers for carrier-caused loss
and damage removes the burden for these occurrences from DOD and the
taxpayer and places them on the carrier. Maintaining artificially low
levels of liability for loss and damage acts as a distinctive to
promoting and maintaining a safe, damage- and loss-free Defense
Transportation System.
An effective date for these changes of February 1, 1997, will
afford carriers an opportunity to adjust their rates, if necessary, to
accommodate any forecasted increases or decreases in their operating-
costs based on their historical incidences of loss and/or damage to
shipments.
Gregory D. Showalter,
Army Federal Register Liaison Officer.
[FR Doc. 96-29427 Filed 11-15-96; 8:45 am]
BILLING CODE 3710-08-M
