[Federal Register Volume 59, Number 216 (Wednesday, November 9, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-27756]
[[Page Unknown]]
[Federal Register: November 9, 1994]
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FEDERAL MARITIME COMMISSION
46 CFR Parts 514, 580 and 581
[Docket Nos. 93-22 and 94-26]
Coloading Practices by Non-Vessel-Operating Common Carriers;
Shipper Affiliate Access to Service Contracts and Inquiry into
Statutory Basis for Coloading Practices and Possible Section 16
Exemption for Coloading
AGENCY: Federal Maritime Commission.
ACTION: Notice of inquiry.
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SUMMARY: The Proposed Rule in Docket No. 93-22, which would modify and
clarify the Federal Maritime Commission's coloading regulations, is
held in abeyance, pending an inquiry to explore whether existing
coloading practices are consistent with statutory requirements, and, if
not, whether an exemption proceeding should be initiated. The purpose
of the Inquiry is to serve notice that the Commission has preliminarily
determined that coloading practices appear to contravene the tariff
filing requirements, and to provide another opportunity to the
interested public to comment on whether, absent an exemption under
section 16 of the 1984 Act, a statutory basis for such practices
exists. The Inquiry also solicits comments on whether the Commission
should initiate a proceeding under section 16 to exempt some aspect of
coloading activity from otherwise applicable requirements if no other
statutory basis for coloading exists.
DATES: Comments due on or before December 27, 1994.
ADDRESSES: Send Comments (original and 20 copies) to: Joseph C.
Polking, Secretary, Federal Maritime Commission, 800 North Capitol
Street NW., Washington, DC 20573, (202) 523-5725.
FOR FURTHER INFORMATION CONTACT: Robert D. Bourgoin, General Counsel,
Federal Maritime Commission, 800 North Capitol Street NW., Washington,
DC 20573, (202) 523-5740.
SUPPLEMENTARY INFORMATION: The Federal Maritime Commission
(``Commission'') initiated Docket No. 93-22, Coloading Practices by
Non-Vessel-Operating Common Carriers; Shipper Affiliate Access to
Service Contracts, for the purpose of addressing the practice of non-
vessel-operating common carriers (``NVOCCs'') of rating combined or
consolidated cargoes under privately arranged rates rather than the
rates in their tariffs. In its Notice of Proposed Rulemaking (``NPR''
or ``Proposed Rule''), the Commission noted that its current rules
governing this practice, known as coloading, which were promulgated in
1985, have been variously interpreted by the NVOCC industry, due in
part to apparent ambiguities in the rule's definitions and attendant
enumeration of responsibilities of coloading NVOCCs.
Accordingly, the Commission proposed to revise the definition of
consolidated cargo shipments which qualify to be rated off-tariff as
coload cargo.
In the NPR, the Commission expressed its concern about diverse
interpretations of and ambiguities in its coloading rules as reflected
in coloading activity since 1985. The Commission also noted that a
larger volume of NVOCC-carried cargo was being rated as coload cargo
than was anticipated when the coload regulations were crafted, possibly
resulting in an inordinate percentage of NVOCC shipments being rated
irrespective of the NVOCCs' tariff rates. With coloading being used as
a device to gain access to other NVOCCs' service contracts, the
Commission noted that consolidated cargoes being deemed coload cargo by
some NVOCCs now include multiple full containerloads (``FCLs''), not
just the small, less-than-containerload (``LCL'') shipments that
constituted the objective of the Commission's current coloading rule.
The Commission was also concerned that there was too wide a variety of
interpretations of the regulatory responsibilities of coloading NVOCCs,
with some NVOCCs assiduously adhering to the regulations and others
adopting practices based on looser interpretations of those somewhat
ambiguous rules.
The NPR sought comment on:
1. A proposal to redefine the term ``coloading'' to mean the
combining of cargo pursuant to the rates, charges and terms of an
agreement (vis-a-vis a tariff), which agreement must be in writing and
made available to the Commission;
2. An alternative proposal limiting coloading to LCL cargo;
3. A proposal to prohibit coloaded cargo from being carried under a
service contract; and
4. A proposal to define an ``affiliate'' having access to service
contracts.
The Commission also sought comment on:
5. Whether to restrict applicability of time-volume rates to
coloaded cargo; and
6. Whether to proscribe coloading altogether.
The Proposed Rule generated 58 comments. Conferences of vessel-
operating common carriers (``VOCCs''), and some larger NVOCCs,
generally supported the Proposed Rule, but urged that the Commission go
further and ban coloading altogether. Some of these entities argued
that the Shipping Act of 1984, 46 U.S.C. app. 1701 et seq. (``1984
Act''), provided no basis either for coloading or for unaffiliated
NVOCCs jointly having access to service contracts other than through
the statutorily sanctioned mechanism of a shippers' association, 46
U.S.C. app. 1702(24).
Most of the comments, however, were from smaller to mid-sized
NVOCCs, who opposed the Proposed Rule. With few exceptions, these
parties did not address the legal ramifications of the Proposed Rule,
but instead focused on what they believed to be the practical impact of
the proposal on their operations. The NVOCC community's comments
collectively conveyed the prevalence of coloading, estimated as 40% or
more of NVOCC carryings by one commenter, and characterized coloading
practices as highly beneficial to the many smaller NVOCCs who rely on
coloading to remain competitive.
The threshold question remains, however, whether the very concept
of coloading is, or can be made, consistent with the 1984 Act. Section
8(a)(1) of the Act, 46 U.S.C. app. 1707(a)(1), states: ``[E]ach common
carrier and conference shall file with the Commission, and keep open to
public inspection, tariffs showing all its rates, charges,
classifications, rules, and practices * * * .'' Both NVOCCs and VOCCs
are defined in the 1984 Act as ``common carriers.'' 46 U.S.C. app. 1702
(17), (18). By defining NVOCCs as common carriers, Congress quite
intentionally determined to subject them to the tariff-filing
provisions of section 8. The Senate Commerce Committee Report advised
that ``all `common carriers,' including both vessel operators and non-
vessel operators,'' would have to publish tariffs under the bill. S.
Rep. No. 3, 98th Cong., 1st Sess. 30 (1983). That NVOCCs file tariffs
under the 1984 Act is not an accidental by-product of a complicated
regulatory regime; it is a deliberate statutory mandate to which the
Commission, in implementing that statute, must adhere.
In 1990, Congress reiterated its intention that NVOCCs file tariffs
when it enacted the Non-Vessel-Operating Common Carrier Amendments of
1990 (``1990 Amendments''), section 710 of Pub. L. No. 101-595. The
1990 Amendments were based upon the principle of NVOCC tariff filing
and were devised in part to secure NVOCC compliance with section 8 of
the 1984 Act.
Thus, the current statutory scheme not only includes provisions for
NVOCC tariff filing, but has used that principle as the premise for
other statutory proscriptions and obligations. Meanwhile, the 1984 Act
makes no special provision for, or even acknowledgement of,
consolidators and coloading. The Commission rejects the arguments of
some NVOCCs that this is a signal that Congress intended coloading
activity to remain unfettered by regulation or excused from the general
statutory scheme. The law on its face effectively mandates that an
NVOCC include in its tariff all rates and charges. Those would include
not only those charged the underlying shipper, but also any rate
charged another NVOCC, whatever its arrangement with that NVOCC may be.
An NVOCC is given no express statutory authority to charge off-tariff
rates or make private arrangements for the transportation of cargo in
its capacity as a common carrier.
The Commission therefore makes the preliminary determination that
the off-tariff rating of cargo by NVOCCs under the rubric of coloading
contravenes the tariff-filing requirement of section 8 of the 1984
Act.\1\ If that is the case, there would appear to be no present
statutory basis for either the Proposed Rule on coloading or the
Commission's existing coloading rules as well.
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\1\Another concern of the Commission, raised in the NPR, is that
Congress established the shippers' association mechanism as the
means by which unaffiliated shippers may jointly access service
contracts. The NPR also expressed the view that the 1984 Act
contemplates that service contract rates are available only to the
shipper signatory to the contract. These issues were adequately
addressed by the commenters on the Proposed Rule. Further comment on
the statutory basis for coloading activity is therefore solicited
only as it relates to the issue of section 8's tariff filing
requirement.
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Before disposing of Docket No. 93-22 in accordance with these
conclusions, however, the Commission has determined to provide
interested parties one final opportunity to offer legal arguments as to
whether coloading practices are currently consistent with section 8.
The purpose of this endeavor is to ensure that the Commission has the
benefit of all possible statutory interpretations on this issue. The
policy arguments for and against coloading, which were more than
adequately explored in the comments on the Proposed Rule, should not be
reiterated in this proceeding.
If, after consideration of comments received in response to this
Notice, the Commission remains unpersuaded that there is a present
statutory basis for coloading, it would be its intention to explore
whether a section 16 exemption is appropriate by initiating a separate
proceeding under section 16 of the 1984 Act, 46 U.S.C. app. 1715,
following this Inquiry. That section provides:
The Commission, upon application or on its own motion, may by
order or rule exempt for the future any class of agreements between
persons subject to this Act or any specified activity of those
persons from any requirement of this Act if it finds that the
exemption will not substantially impair effective regulation by the
Commission, be unjustly discriminatory, result in a substantial
reduction in competition, or be detrimental to commerce. The
Commission may attach conditions to any exemption and may, by order,
revoke any exemption. No order or rule of exemption or revocation of
exemption may be issued unless opportunity for hearing has been
afforded interested persons and departments and agencies of the
United States.
To this end, the Commission seeks input from interested parties on
whether a section 16 exemption proceeding should be initiated to
determine if some form and degree of coloading activity should be
exempted from the requirements of section 8 or other relevant
provisions of the 1984 Act. Short of remedial legislation, section 16
would appear to provide the only possible avenue for excusing coloading
NVOCCs from the otherwise applicable provisions of the 1984 Act, should
those provisions be found to preclude existing coloading practices.
If the Commission initiates a section 16 proceeding, whether an
exemption is ultimately deemed appropriate for coloading activities
will depend on several factors. A threshold consideration is the scope
of coloading activity which is proposed to be exempted. Is relief
required for LCL coloading only, or also for FCL coloading by NVOCCs?
How common is the off-tariff rating of FCL cargo as coload cargo? In
assessing the need and desirability of coloading, the Commission is
also desirous of ascertaining the extent to which the discount rates
achieved through coloading inure to the benefit of the underlying
shippers themselves, in addition to the coloading NVOCCs.
Many NVOCCs commenting on the Proposed Rule raised the issue of
certain VOCC space-chartering arrangements, which include off-tariff
compensation, and which were likened to NVOCC coloading arrangements.
Accordingly, the Commission seeks views on whether such arrangements by
VOCCs are inconsistent with the 1984 Act and also whether those
activities should be addressed in any forthcoming section 16 exemption
proceeding.
The major determinant on the appropriateness of a section 16
exemption would be the applicability of the specific criteria listed in
that section. Regardless of the fervency with which coloading NVOCCs
argue that coloading is essential to their operations, no exemption may
issue if doing so would substantially impair the Commission's
regulatory responsibilities, result in unjust discrimination (such as
between shippers, or between carriers), or fail to meet the other
statutorily imposed criteria. Commenters are therefore urged to
address, albeit on a preliminary basis, how exemption of the various
categories of coloading or other activity, discussed supra, would or
would not meet the section 16 criteria. The Commission emphasizes that
the reason for this proceeding is to give the interested public the
opportunity to address these legal issues, and not merely to reiterate
preferences based on the financial interests of the commenters.
The preliminary determinations to find coloading practices
inconsistent with the 1984 Act (absent a formal section 16 exemption)
and to initiate a separate section 16 exemption proceeding following
this Inquiry, may be revised, if comments responding to this notice
persuade the Commission that those determinations are incorrect. The
scope and breadth of any exemption proceeding to be initiated may also
be expected to reflect the arguments advanced by commenting parties.
During the pendency of this proceeding, the Proposed Rule will remain
in abeyance, and will be reconsidered should a resolution of these
issues not result from this Inquiry.
Therefore, it is ordered, That this Notice of Inquiry be published
in the Federal Register; and
It is further ordered, That the Proposed Rule in Docket No. 93-22
is held in abeyance pending further notice.
By the Commission.
Joseph C. Polking,
Secretary.
[FR Doc. 94-27756 Filed 11-8-94; 8:45 am]
BILLING CODE 6730-01-M
