[Federal Register Volume 64, Number 32 (Thursday, February 18, 1999)]
[Rules and Regulations]
[Pages 8007-8013]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-3757]
=======================================================================
-----------------------------------------------------------------------
FEDERAL MARITIME COMMISSION
46 CFR Parts 550, 551, 555, 560, 565, 585, 586, 587, and 588
[Docket No. 98-25]
Amendments to Regulations Governing Restrictive Foreign Shipping
Practices, and New Regulations Governing Controlled Carriers
AGENCY: Federal Maritime Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Federal Maritime Commission is revising and redesignating
its regulations relating to section 19 of the Merchant Marine Act,
1920, section 13(b)(5) of the Shipping Act of 1984, and the Foreign
Shipping Practices Act of 1988, and adding new regulations relating to
section 9 of the Shipping Act of 1984, in order to incorporate certain
amendments made by the Ocean Shipping Reform Act of 1998 as well as to
clarify and reorganize existing regulations.
DATES: This rule is effective May 1, 1999.
FOR FURTHER INFORMATION CONTACT: Thomas Panebianco, General Counsel,
Federal Maritime Commission, 800 North Capitol Street N.W., Washington,
D.C. 20573-0001, (202) 523-5740.
SUPPLEMENTARY INFORMATION: On December 4, 1998, the Federal Maritime
Commission (``Commission'') published a proposed rule to revise its
regulations on restrictive foreign shipping practices and controlled
carriers. 63 FR 67030. The proposed rule implemented changes made by
the Ocean Shipping Reform Act of 1998, Pub. L. 105-258, 112 Stat. 1902
(``OSRA''), and also clarified existing regulations. Interested parties
were given the opportunity to submit comments on the proposed rule. The
Commission received four comments from industry groups and regulated
entities.
The first comment received by the Commission is from the Council of
European and Japanese National Shipowners' Associations (``CENSA''),
which has three specific comments to the proposed rule. CENSA first
addresses Secs. 550.102 and 550.301, which explicate the regulatory
action that may be taken by the Commission in the event it finds
foreign shipping practices to create conditions unfavorable to
shipping. The proposed regulations indicate that the Commission may
take action when it finds that ``competitive methods, pricing practices
or other practices'' have created conditions unfavorable to shipping.
This language tracks verbatim OSRA's changes to section 19(a)(2)
(formerly section 19(1)(b)) of the Merchant Marine Act, 1920. CENSA
fears that this provision expands the Commission's power over
privately-operated shipping companies with respect to their commercial
pricing practices. CENSA states that Organisation for Economic
Cooperation and Development (``OECD'') member nations have agreed to
reach a uniform consensus as to the appropriate measures to be taken to
address unfair or non-commercial practices. CENSA believes that such
issues must be taken up in inter-governmental fora rather than by the
Commission. CENSA requests that the Commission state that it will not
pursue any matter under section 19 of the Merchant Marine Act, 1920
regarding the pricing practices of owners or operators of vessels of a
foreign country unless those practices have been shown to be otherwise
in violation of the Shipping Act of 1984 (``1984 Act'').
CENSA's comment would have the Commission affirmatively abdicate
its statutory responsibility to combat conditions unfavorable to
shipping vested in it by Congress for the purpose of permitting other
bodies, like the OECD, to establish uniform rules. By including in OSRA
references to ``pricing practices,'' Congress has bestowed upon the
Commission the specific responsibility to review and retaliate against
such practices where they create conditions unfavorable to shipping in
the U.S. foreign trade. The Commission cannot disregard this duty;
should Congress determine through legislation to defer to the OECD or
some other such forum, then the Commission would change its approach
accordingly. We note, moreover, that the addition of ``pricing
practices'' to the statute is a clarification of existing law and
authority, rather than an expansion of such. The Commission has long
interpreted ``pricing practices'' to be included within the meaning of
``practices'' generally, and has on numerous occasions acted
accordingly. The Commission has therefore determined not to incorporate
CENSA's comment into the final rule.
CENSA then addresses Sec. 560.2(c), in which the Commission
proposed to eliminate the term ``fighting ships'' from its regulation,
and substitute in its place language forbidding ``below market pricing
designed to exclude competition.'' CENSA states that the Commission's
determination to eliminate the term ``fighting ships'' must be taken in
concert with what CENSA views as the survival of the fighting ship
concept, though not the term, in OSRA. CENSA argues that Congress did
not intend to eliminate the concept of fighting ships, but instead
meant to recognize current conditions in which predatory practices
would often be undertaken by multiple ship combinations rather than by
a single ``fighting ship.'' CENSA points to section 10(b)(6) of the
1984 Act as amended by OSRA as evidence of the survival of the fighting
ship concept. That section indicates that ``(n)o common carrier, either
alone or in conjunction with any other person, directly or indirectly,
may use a vessel or vessels in a particular trade for the purpose of
excluding, preventing, or reducing competition, by driving another
ocean common carrier out of that trade.'' Prior to the enactment of
OSRA, the section (previously designated as section 10(b)(7)) indicated
that ``(n)o common carrier, either alone or in conjunction with any
other person, directly or indirectly, may employ a fighting ship.''
CENSA argues that the replacement of the term ``fighting ship''
reflects a refinement of the concept. CENSA fears that the proposed
regulation proffered by the Commission is too vague and could lead to
an overly broad interpretation to the detriment of competitive pricing
mechanisms. For this reason, CENSA proposes that the Commission include
the language from section 10(b)(6) in place of the term ``fighting
ship'' in 46 CFR 560.2(c).
The deletion of the term ``fighting ship'' from Sec. 560.2(c) was
undertaken to reflect the deletion of that term from the 1984 Act.
However, the definition of ``predatory practices'' in Sec. 560.2(c), as
CENSA has made clear, should continue to include the concept of a
reduction in competition through the use of pricing mechanisms designed
to push a common carrier out of a particular trade.
[[Page 8008]]
The section as proposed indicated that predatory practices may be but
are not limited to below cost pricing and the use of closed conferences
employing deferred rebates. Other actions or practices may very well
fall into the definition of ``predatory practices,'' as the list is not
exhaustive. However, CENSA's comment in this regard does serve to
clarify and refine the concept the Commission attempted to propose in
section 560.2(c); accordingly, the Commission has determined to amend
Sec. 560.2(c) to read as follows:
(c) Use of predatory practices, possibly including but not
limited to the use of a vessel or vessels in a particular trade for
the purpose of excluding, preventing, or reducing competition by
driving another ocean common carrier out of that trade, and closed
conferences employing deferred rebates, which unduly impair access
of a U.S. flag vessel to the trade.
Finally, CENSA addresses Sec. 560.7(b)(3)(i), in which the
Commission proposed to include the suspension of service contracts as a
possible remedy to address restrictive foreign shipping practices under
section 13(b)(6) of the 1984 Act. CENSA argues that OSRA did not amend
section 13(b)(6) of the 1984 Act to include the suspension of service
contracts, although it did amend other sections of the Act to reflect
this penalty.
CENSA is mistaken. The Foreign Shipping Practices Act of 1988
(``FSPA'') as amended by OSRA indicates that ``the actions against
foreign carriers authorized in subsections (e) and (f) * * * may be
used in the administration and enforcement of section 13(b)(6) of the
Shipping Act of 1984.'' See subsection 11a(h). The actions in
subsections (e) and (f) include, at subsection (e)(1)(B), ``suspension,
in whole or in part, of any or all tariffs and service contracts.'' The
suspension of service contracts is authorized by OSRA's modification to
the FSPA, and is correctly included in Sec. 560.7(b)(3)(i).
The second comment is from the National Industrial Transportation
League (``NITL''), a shipper organization. The comment examines
redesignated part 560, which implements section 13(b)(6) of the
Shipping Act of 1984, as revised (and renumbered--it was formerly
section 13(b)(5)) by OSRA. The comment specifically addresses
Sec. 560.2(c), in which the Commission proposed to amend its
regulations relating to ``predatory practices'' by including in the
description of such practices the definition ``possibly including but
not limited to below market pricing designed to exclude competition.''
NITL states that this amendment is not necessitated by OSRA, is vague,
and is not supported by well-developed law. NITL states that it is
concerned that the precedent established by this proposed rule, if
implemented, could be used in other contexts, like claims under section
10 of the 1984 Act, and that such usage would be inappropriate.
NITL argues that case law indicates that the term ``predatory
practices'' is taken to mean pricing activity below costs, not below
market pricing, citing inter alia Brooke Group, Ltd. v. Brown and
Williamson Tobacco Corp., 509 U.S. 209 (1993). NITL concludes that the
reference to ``below market pricing designed to exclude competition''
should be eliminated.
As explained above, in response to CENSA's comment, Sec. 560.2(c)
has been amended to remove the reference to ``below market pricing.''
For this reason, NITL's concerns with the use of the ``below market''
language appear to have been mooted. Accordingly, no further change in
the amended rule is necessitated.
The third comment received by the Commission is from the China
Ocean Shipping Company (``COSCO''). COSCO notes that OSRA has
eliminated several exceptions to the Commission's controlled carrier
program, which elimination will have the effect of imposing on COSCO
controlled carrier regulations in the trade between the U.S. and China
from which it was previously exempt. COSCO further states that it
should not be considered a controlled carrier, as it allegedly does not
receive any allocations or subsidies from the Chinese government.
COSCO's comments are in the nature of a policy-based objection to
the scope of the controlled carrier provisions, and Congress's deletion
of certain exceptions. Therefore, no changes to the rule are warranted
by COSCO's comments.
The final comment received by the Commission is from Fruit Shippers
Ltd. This comment, captioned as a response to Docket No. 98-25, in fact
addresses issues as to the definition of ``common carrier'' in
Secs. 514.2 and 572.104(f), which were raised in Docket No. 98-29, 63
FR 70368. Because the comment relates only to those sections, and does
not address any of the issues in this docket, the Commission will
consider the comment in the context of that proceeding.
In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601 et
seq., the Chairman of the Federal Maritime Commission has certified to
the Chief Counsel for Advocacy, Small Business Administration, that the
rule will not have a significant impact on a substantial number of
small entities. In its Notice of Proposed Rulemaking, the Commission
stated its intention to certify this rulemaking because the proposed
changes affect vessel-operating common carriers, entities that are not
considered to be small. The comments received did not dispute the
Commission's intention to certify; therefore, the certification is
continued.
This regulatory action is not a ``major'' rule under 5 U.S.C.
804(2).
List of Subjects
46 CFR Parts 550 and 585
Administrative practice and procedure, Maritime carriers.
46 CFR Part 551 and 586
Japan, Maritime carriers.
46 CFR Parts 560 and 587
Administrative practice and procedure, Maritime carriers.
46 CFR Parts 555 and 588
Administrative practice and procedure, Investigations, Maritime
carriers.
46 CFR Part 565
Administrative practice and procedure, Maritime carriers, Reporting
and recordkeeping requirements.
For the reasons set out in the preamble, the Commission amends 46
CFR parts 550, 551, 555, 560, 585, 586, 587, and 588, and adds new part
565, as set forth below:
1. Revise the heading of subchapter C to read:
SUBCHAPTER C--REGULATIONS AND ACTIONS TO ADDRESS RESTRICTIVE FOREIGN
MARITIME PRACTICES
PART 585--REGULATIONS TO ADJUST OR MEET CONDITIONS UNFAVORABLE TO
SHIPPING IN THE FOREIGN TRADE OF THE UNITED STATES [REDESIGNATED AS
PART 550]
1. Redesignate part 585 as part 550, and transfer newly designated
part 550 to subchapter C.
2. The authority citation for redesignated part 550 is revised to
read as set forth below:
Authority: 5 U.S.C. 553; sec. 19 (a)(2), (e), (f), (g), (h),
(i), (j), (k) and (l) of the Merchant Marine Act, 1920, 46 U.S.C.
app. 876 (a)(2), (e), (f), (g), (h), (i), (j), (k) and (l), as
amended by Pub. L. 105-258; Reorganization Plan No. 7 of 1961, 75
Stat 840; and sec. 10002 of the Foreign Shipping Practices Act of
1988, 46 U.S.C. app. 1710a.
2A. Add a note to newly designated Part 550 to read as follows:
[[Page 8009]]
Note to Part 550: In accordance with 44 U.S.C. 3518(c)(1)(B),
and except for investigations undertaken with reference to a
category of individuals or entities (e.g., an entire industry), any
information requests or requirements in this part 550 are not
subject to the requirements of section 3507 of the Paperwork
Reduction Act because such collections of information are pursuant
to a civil, administrative action or investigation by an agency of
the United States against specific individuals or entities.
3. Revise redesignated Sec. 550.102 to read as follows:
Sec. 550.102 Scope.
Regulatory actions may be taken when the Commission finds, on its
own motion or upon petition, that a foreign government has promulgated
and enforced or intends to enforce laws, decrees, regulations or the
like, or has engaged in or intends to engage in practices which
presently have or prospectively could create conditions unfavorable to
shipping in the foreign trade of the United States, or when owners,
operators, agents or masters of foreign vessels engage in or intend to
engage in competitive methods, pricing practices or other practices
which have created or could create such conditions.
4. Revise redesignated Sec. 550.103(a) and (b) to read as follows:
Sec. 550.103 Definitions.
* * * * *
(a) Act means the Merchant Marine Act, 1920, as amended by Pub. L.
101-595 and as amended by Pub. L. 105-258.
(b) Person means individuals, corporations, partnerships and
associations existing under or authorized by the laws of the United
States or of a foreign country, and includes any common carrier, tramp
operator, bulk operator, shipper, shippers' association, importer,
exporter, consignee, ocean transportation intermediary, marine terminal
operator, or any component of the Government of the United States.
* * * * *
5. Revise redesignated Sec. 550.201(a) to read as follows:
Sec. 550.201 Information orders.
* * * * *
(a) The Commission may, by order, require any person (including any
common carrier, tramp operator, bulk operator, shipper, shippers'
association, ocean transportation intermediary, or marine terminal
operator, or any officer, receiver, trustee, lessee, agent, or employee
thereof), to file with the Commission a report, answers to questions,
documentary material, or other information which the Commission
considers necessary or appropriate;
* * * * *
6. Revise redesignated Sec. 550.202(b) introductory text, and
(b)(3) to read as follows:
Sec. 550.202 Type of information
* * * * *
(b) Shipper, shippers' association, or ocean transportation
intermediary in the affected trade to furnish any or all of the
following information:
* * * * *
(3) Amount of brokerage, ocean transportation intermediary
compensation or other charges collected or paid in connection with
shipments in the affected trade; and
* * * * *
7. Revise the introductory text and paragraph (d) of redesignated
Sec. 550.301 to read as follows:
Sec. 550.301 Findings.
For the purposes of this part, conditions created by foreign
governmental action or competitive methods, pricing practices or other
practices of owners, operators, agents or masters of foreign vessels
are found unfavorable to shipping in the foreign trade of the United
States, if such conditions:
* * * * *
(d) Restrict or burden a carrier's intermodal movements or shore-
based maritime activities, including terminal operations and cargo
solicitation; agency services; ocean transportation intermediary
services and operations; or other activities and services integral to
transportation systems; or
* * * * *
8. Revise redesignated Sec. 550.601(c) to read as follows:
Sec. 550.601 Actions to correct unfavorable conditions.
* * * * *
(c) Suspend, in whole or in part, tariffs and service contracts for
carriage to or from United States ports, including a common carrier's
right to use tariffs of conferences and service contracts of agreements
in United States trades of which it is a member for any period the
Commission specifies;
* * * * *
9. Revise redesignated Sec. 550.602 to read as follows:
Sec. 550.602 Penalty.
A common carrier that accepts or handles cargo for carriage under a
tariff or service contract that has been suspended under Sec. 550.505
or Sec. 550.601 of this part, or after its right to use another tariff
or service contract has been suspended under those sections, is subject
to a civil penalty of not more than $50,000 for each day that it is
found to be operating under a suspended tariff or service contract.
PART 586--ACTIONS TO ADJUST OR MEET CONDITIONS UNFAVORABLE TO
SHIPPING IN THE U.S. FOREIGN TRADE [REDESIGNATED AS PART 551]
1. Redesignate part 586 as part 551, and transfer newly designated
part 551 to subchapter C.
2. The authority citation for redesignated part 551 is revised to
read as follows:
Authority: 46 U.S.C. app. 876(1)(b); 46 U.S.C. app. 876 (5)
through (12); 46 CFR part 550; Reorganization Plan No. 7 of 1961, 26
FR 7315 (August 12, 1961).
2A. Add a note to newly designated Part 551 to read as follows:
Note to Part 551: In accordance with 44 U.S.C. 3518(c)(1)(B),
and except for investigations undertaken with reference to a
category of individuals or entities (e.g., an entire industry), any
information requests or requirements in this part 551 are not
subject to the requirements of section 3507 of the Paperwork
Reduction Act because such collections of information are pursuant
to a civil, administrative action or investigation by an agency of
the United States against specific individuals or entities.
Sec. 551.3 [Removed]
3. Redesignated Sec. 551.3 is removed.
PART 587--ACTIONS TO ADDRESS CONDITIONS UNDULY IMPAIRING ACCESS OF
U.S.-FLAG VESSELS TO OCEAN TRADE BETWEEN FOREIGN PORTS
[REDESIGNATED AS PART 560]
1. Redesignate part 587 as part 560, and transfer newly designated
part 560 to subchapter C.
2. The authority citation for redesignated part 560 is revised to
read as follows:
Authority: 5 U.S.C. 553; secs. 13(b)(6), 15 and 17 of the
Shipping Act of 1984, 46 U.S.C. app. 1712(b)(6), 1714, and 1716, as
amended by Pub. L. 105-258; sec. 10002 of the Foreign Shipping
Practices Act of 1988 (46 U.S.C. app. 1710a), as amended by Pub. L.
105-258.
3. Revise redesignated Sec. 560.1(a) to read as follows:
Sec. 560.1 Purpose; general provisions.
(a)(1) It is the purpose of this part to enumerate certain
conditions resulting from the action of a common carrier, acting alone
or in concert with any person, or a foreign government, which unduly
impair the access of a vessel
[[Page 8010]]
documented under the laws of the United States whether liner, bulk,
tramp or other vessel, (hereinafter ``U.S. flag vessel'') to ocean
trade between foreign ports, which includes intermodal movements, and
to establish procedures by which the owner or operator of a U.S. flag
vessel (hereinafter ``U.S. flag carrier'') may petition the Federal
Maritime Commission for relief under the authority of section
13(b)(6)of the Shipping Act of 1984 (``the Act'') (46 U.S.C. app.
1712(b)(6)).
(2) It is the further purpose of this part to indicate the general
circumstances under which the authority granted to the Commission under
section 13(b)(6)may be invoked, and the nature of the subsequent
actions contemplated by the Commission.
(3) This part also furthers the goals of the Act with respect to
encouraging the development of an economically sound and efficient U.S.
flag liner fleet as stated in section 2 of the Act (46 U.S.C. app.
1701).
* * * * *
4. Revise redesignated Sec. 560.2(c) to read as follows:
Sec. 560.2 Factors indicating conditions unduly impairing access.
* * * * *
(c) Use of predatory practices, possibly including but not limited
to the use of a vessel or vessels in a particular trade for the purpose
of excluding, preventing, or reducing competition by driving another
ocean common carrier out of that trade, and closed conferences
employing deferred rebates, which unduly impair access of a U.S. flag
vessel to the trade.
* * * * *
5. Revise the first sentence of the introductory text of
redesignated Sec. 560.5(a) to read as follows:
Sec. 560.5 Receipt of relevant information.
(a) In making its decision on matters arising under section
13(b)(6)of the Act, the Commission may receive and consider relevant
information from any owner, operator, or conference in an affected
trade, or from any foreign government, either directly or through the
Department of State or from any other reliable source. * * *
6. Revise redesignated Sec. 560.7(b)(3)(i) to read as follows:
Sec. 560.7 Decision; sanctions; effective date.
* * * * *
(b) * * *
(3)(i) Suspension, in whole or in part, of any or all tariffs or
service contracts for carriage to or from United States ports for any
period the Commission specifies, or until such time as unimpaired
access is secured for U.S. flag carriers in the affected trade.
* * * * *
PART 588--ACTIONS TO ADDRESS ADVERSE CONDITIONS AFFECTING U.S. FLAG
CARRIERS THAT DO NOT EXIST FOR FOREIGN CARRIERS IN THE UNITED
STATES [REDESIGNATED AS PART 555]
1. Redesignate part 588 as part 555, and transfer newly designated
part 555 to subchapter C.
2. The authority citation for redesignated part 555 is revised to
read as follows:
Authority: 5 U.S.C. 553; sec. 10002 of the Foreign Shipping
Practices Act of 1988 (46 U.S.C. app. 1710a), as amended by Pub. L.
105-258.
2A. Add a note to newly designated part 555 to read as follows:
Note to Part 555: In accordance with 44 U.S.C. 3518(c)(1)(B),
and except for investigations undertaken with reference to a
category of individuals or entities (e.g., an entire industry), any
information requests or requirements in this part 555 are not
subject to the requirements of section 3507 of the Paperwork
Reduction Act because such collections of information are pursuant
to a civil, administrative action or investigation by an agency of
the United States against specific individuals or entities.
3. Revise redesignated Sec. 555.1 to read as follows:
Sec. 555.1 Purpose.
It is the purpose of the regulations of this part to establish
procedures to implement the Foreign Shipping Practices Act of 1988, as
amended by the Ocean Shipping Reform Act of 1998, which authorizes the
Commission to take action against foreign carriers, whose practices or
whose government's practices result in adverse conditions affecting the
operations of United States carriers, which adverse conditions do not
exist for those foreign carriers in the United States. The regulations
of this part provide procedures for investigating such practices and
for obtaining information relevant to the investigations, and also
afford notice of the types of actions included among those that the
Commission is authorized to take.
4. Revise redesignated Sec. 555.2(a), (c), and (d) to read as
follows:
Sec. 555.2 Definitions.
* * * * *
(a) Common carrier, marine terminal operator, ocean transportation
intermediary, ocean common carrier, person, shipper, shippers'
association, and United States have the meanings given each such term,
respectively, in section 3 of the Shipping Act of 1984 (46 U.S.C. app.
1702);
* * * * *
(c) Maritime services means port-to-port carriage of cargo by the
vessels operated by ocean common carriers;
(d) Maritime-related services means intermodal operations, terminal
operations, cargo solicitation, agency services, ocean transportation
intermediary services and operations, and all other activities and
services integral to total transportation systems of ocean common
carriers and their foreign domiciled affiliates on their own and
others' behalf;
* * * * *
5. Revise redesignated Sec. 555.4(a) and (c) to read as follows:
Sec. 555.4 Petitions.
(a) A petition for investigation to determine the existence of
adverse conditions as described in Sec. 555.3 may be submitted by any
person, including any common carrier, shipper, shippers' association,
ocean transportation intermediary, or marine terminal operator, or any
branch, department, agency, or other component of the Government of the
United States. Petitions for relief under this part shall be in
writing, and filed in the form of an original and fifteen copies with
the Secretary, Federal Maritime Commission, Washington, DC 20573.
* * * * *
(c) A petition which the Commission determines fails to comply
substantially with the requirements of paragraph (b) of this section
shall be rejected promptly and the person filing the petition shall be
notified of the reasons for such rejection. Rejection is without
prejudice to the filing of an amended petition.
6. Revise redesignated Sec. 555.8 (a)(2) to read as follows:
Sec. 555.8 Action against foreign carriers.
(a) * * *
(2) Suspension, in whole or in part, of any or all tariffs or
service contracts, including the right of an ocean common carrier to
use any or all tariffs or service contracts of conferences in United
States trades of which it is a member for such period as the Commission
specifies;
* * * * *
1. Add part 565 to subchapter C to read as follows:
PART 565--CONTROLLED CARRIERS
Sec.
565.1 Purpose and scope.
565.2 Definitions.
[[Page 8011]]
565.3 Classification as controlled carrier.
565.4 Notification to Commission of change in control.
565.5 Exceptions.
565.6 Level of rates and charges generally.
565.7 Effective dates.
565.8 Special permission.
565.9 Commission review, suspension and prohibition of rates,
charges, classifications, rules or regulations.
565.10 Suspension procedures, period and replacement rates.
565.11 Presidential review.
565.12 Stay, postponement, discontinuance or suspension of action.
565.13 OMB control number assigned pursuant to the Paperwork
Reduction Act
Authority: 46 U.S.C. App. 1708, as amended by Pub. L. 105-258.
Sec. 565.1 Purpose and Scope.
(a) Purpose. The regulations of this part are intended to carry out
the Commission's mandate under section 9 of the Shipping Act of 1984,
as amended by the Ocean Shipping Reform Act of 1998, to monitor the
practices of controlled carriers and ensure that they do not:
(1) Maintain rates or charges in their tariffs and service
contracts that are below a level that is just and reasonable; nor
(2) Establish, maintain or enforce unjust or unreasonable
classifications, rules or regulations in those tariffs or service
contracts which result or are likely to result in the carriage or
handling of cargo at rates or charges that are below a just and
reasonable level.
(b) Scope. The regulations contained in this part set forth the
special procedures whereby controlled carriers' tariffs and service
contracts become effective and are reviewed by the Commission. These
regulations in no way exempt controlled carriers from other Commission
regulations or statutory authority to which they may otherwise be
subject as ocean common carriers. These regulations apply to all
controlled carriers operating in the foreign commerce of the United
States unless excepted under section 9(f) of the Shipping Act of 1984,
as reflected by Sec. 565.5.
Sec. 565.2 Definitions.
(a) Controlled carrier means an ocean common carrier that is, or
whose operating assets are, directly or indirectly owned or controlled
by a government. Ownership or control by a government shall be deemed
to exist with respect to any ocean common carrier if:
(1) A majority portion of the interest in the carrier is owned or
controlled in any manner by that government, by any agency thereof, or
by any public or private person controlled by that government; or
(2) That government has the right to appoint or disapprove the
appointment of a majority of the directors, the chief operating officer
or the chief executive officer of the carrier.
(b) Effective date has the same meaning it has in 46 CFR part 520.
Sec. 565.3 Classification as controlled carrier.
(a) Notification. The Commission will periodically review the ocean
common carriers operating in the foreign commerce of the United States
and will notify any ocean common carrier of any change in its
classification as a controlled carrier.
(b) Rebuttal of classification. (1) Any ocean common carrier
contesting such a classification may, within 30 days after the date of
the Commission's notice, submit a rebuttal statement.
(2) The Commission shall review the rebuttal and notify the ocean
common carrier of its final decision.
Sec. 565.4 Notification to Commission of change in control.
Whenever the operation, control or ownership of an ocean common
carrier is transferred resulting in a majority portion of the interest
of that ocean common carrier being owned or controlled in any manner by
a government, the ocean common carrier shall immediately send written
notification of the details of the change to the Secretary of the
Commission. If a carrier is newly commencing ocean common carrier
operations in a United States trade, and if a majority portion of the
carrier is owned or controlled by a government, or if a government may
approve or disapprove the majority of directors or the chief executive
or operating officer of the carrier, the carrier shall immediately send
written notification to the Secretary of the details of such ownership
or control.
Sec. 565.5 Exceptions.
All controlled carriers shall be subject to provisions of this part
and section 9 of the Shipping Act of 1984 except those which meet the
following exceptions:
(a) When the vessels of the controlling state are entitled by a
treaty of the United States to receive national or most-favored-nation
treatment; or
(b) When the controlled carrier operates in a trade served
exclusively by controlled carriers.
Sec. 565.6 Level of rates and charges generally.
No controlled carrier may maintain or enforce rates or charges in
its tariffs or service contracts that are below a level that is just
and reasonable. No controlled carrier may establish or maintain unjust
or unreasonable classifications, rules, or regulations in its tariffs
or service contracts. An unjust or unreasonable classification, rule or
regulation means one that results or is likely to result in the
carriage or handling of cargo at rates or charges that are below a just
and reasonable level. See Sec. 565.9(a)(2) (Rate standards).
Sec. 565.7 Effective dates.
(a) Generally. Except for service contracts, the rates, charges,
classifications, rules or regulations of controlled carriers may not,
unless the Commission has granted special permission, become effective
sooner than the 30th day after the date of publication.
(b) Open rates--(1) Generally. Controlled carriers that are members
of conference agreements publishing rates for commodities designated as
open by the conference are subject to the 30-day controlled carrier
notice requirement, except when special permission is granted by the
Commission under Sec. 565.8.
(2) Conference publication of reduced open rates. Notwithstanding
paragraph (b)(1) of this section, a conference may, on less than 30
days' notice, publish reduced rates on behalf of controlled carrier
members for open-rated commodities:
(i) At or above the minimum level set by the conference; or
(ii) At or above the level set by a member of the conference that
has not been determined by the Commission to be a controlled carrier
subject to section 9 of the Shipping Act of 1984.
(c) Independent action rates of controlled carriers. Conferences
may publish on behalf of their controlled carrier members lower
independent action rates on less than 30 days' notice, subject to the
requirements of their basic agreements and subject to such rates being
published at or above the level set by a member of the conference that
has not been determined by the Commission to be a controlled carrier
subject to section 9 of the Shipping Act of 1984.
Sec. 565.8 Special permission.
Section 8(d) of the Shipping Act of 1984 authorizes the Commission,
in its discretion and for good cause shown, to permit increases or
decreases in rates, or the issuance of new or initial rates, on less
than statutory notice under Sec. 565.7. Section 9(c) of the Shipping
Act of 1984 authorizes the Commission to permit a controlled carrier's
rates, charges, classifications, rules or regulations to become
effective on less than 30 days' notice. The Commission may also in its
[[Page 8012]]
discretion and for good cause shown, permit departures from the
requirements of this part. The Commission will consider such requests
for special permission by controlled carriers pursuant to its
procedures set forth at 46 CFR part 520.
Sec. 565.9 Commission review, suspension and prohibition of rates,
charges, classifications, rules or regulations.
(a) (1) Request for justification. Within 20 days of a request
(with respect to its existing or proposed rates, charges,
classifications, rules or regulations) from the Commission, each
controlled carrier shall file a statement of justification that
sufficiently details the controlled carrier's need and purpose for such
rates, charges, classifications, rules or regulations upon which the
Commission may reasonably base its determination of the lawfulness
thereof.
(2) Rate standards. (i) In determining whether rates, charges,
classifications, rules or regulations by a controlled carrier are just
and reasonable, the Commission shall take into account whether the
rates or charges which have been published or assessed or which would
result from the pertinent rates, charges, classifications, rules or
regulations are below a level which is fully compensatory to the
controlled carrier based upon that carrier's actual or constructive
costs.
(ii) For the purposes of paragraph (a)(2)(i) of this section,
constructive costs means the costs of another carrier, other than a
controlled carrier, operating similar vessels and equipment in the same
or a similar trade.
(iii) The Commission may also take into account other appropriate
factors, including, but not limited to, whether:
(A) The rates, charges, classifications, rules or regulations are
the same as or similar to those published or assessed by other carriers
in the same trade;
(B) The rates, charges, classifications, rules or regulations are
required to assure movement of particular cargo in the trade; or
(C) The rates, charges, classifications, rules or regulations are
required to maintain acceptable continuity, level or quality of common
carrier service to or from affected ports.
(3) Time for determination. The Commission shall determine within
120 days of the receipt of information requested by the Commission
under this section, whether the rates, charges, classifications, rules
or regulations of a controlled carrier may be unjust and unreasonable.
Whenever the Commission is of the opinion that the rates, charges,
classifications, rules or regulations published or assessed by a
controlled carrier may be unjust and unreasonable, the Commission shall
issue an order to the controlled carrier to show cause why those rates,
charges, classifications, rules or regulations should not be
prohibited.
(b) Suspension. Pending a decision on whether to prohibit the
rates, charges, classifications, rules or regulations of a controlled
carrier, the Commission may suspend the rates, charges,
classifications, rules or regulations. See Sec. 565.10.
(c) Prohibition. The Commission shall prohibit the use of any
rates, charges, classifications, rules or regulations that the
controlled carrier has failed to demonstrate to be just and reasonable.
In a proceeding under this paragraph, the burden of proof is on the
controlled carrier to demonstrate that its rates, charges,
classifications, rules or regulations are just and reasonable. The use
of rates, charges, classifications, rules or regulations published or
assessed by a controlled carrier that have been suspended or prohibited
by the Commission is unlawful.
(d) Publication. All final orders of prohibition shall be published
in the Federal Register.
Sec. 565.10 Suspension procedures period and replacement rates.
(a)(1) Suspension prior to effective date. Pending a determination
as to their lawfulness in a prohibition proceeding as described in
Sec. 565.9, the Commission may suspend the rates, charges,
classifications, rules or regulations at any time before their
effective date.
(2) Suspension after effective date. In the case of rates, charges,
classifications, rules or regulations that have already become
effective, the Commission may, upon the issuance of an order to show
cause, suspend those rates, charges, classifications, rules or
regulations on not less than 30 days' notice to the controlled carrier.
(b) Period of suspension. In any case, no period of suspension may
be greater than 180 days.
(c) Implementation. (1) Upon issuance of an order suspending a
rate, charge, classification, rule or regulation in whole or in part,
the Commission shall direct the controlled carrier to remove the
suspended material from its tariff publication; or
(2) if the matter subject to the suspension order is not covered by
paragraph (c)(1) of this section, the Commission shall set forth
procedures in the order for implementing the suspension.
(3) Publication. All orders of suspension shall be published in the
Federal Register.
(d) Replacement rates. Controlled carriers may publish in tariffs
or file in service contracts rates, charges, classifications, rules or
regulations in lieu of the suspended matter (``replacement rates'').
(1) Effective date. In the case of replacement rates which are
published in tariffs and which are scheduled to become effective during
a suspension period, may become effective immediately upon either their
publication in tariffs or upon the effective date of the suspension,
whichever is later.
(2) Rejection of replacement rates. The Commission may reject the
replacement rates, charges, classifications, rules or regulations
published in tariffs or filed in service contracts to take effect
during the suspension period if they are unjust and unreasonable. In
determining whether to reject replacement rates, charges,
classifications, rules or regulations, the Commission will consider
whether they would result in total charges (i.e, rate plus applicable
surcharges) that are lower than the lowest comparable charges effective
for a common carrier, other than a controlled carrier, serving the same
trade.
(3) At the same time it announces replacement rates, the controlled
carrier shall submit to the Secretary of the Commission, a letter
identifying the specific competing common carrier's rates, charges,
classification or rules resulting in total charges which are equal to
or lower than its own.
Sec. 565.11 Presidential review.
The Commission shall transmit all orders of suspension or final
orders of prohibition to the President of the United States
concurrently with the submission of such orders to the Federal Register
pursuant to Sec. 565.9(d) or Sec. 565.10(c)(3). The President may,
within 10 days of either the receipt or effective date of the order,
request in writing that the Commission stay the effect of the order for
reasons of national defense or foreign policy.
Sec. 565.12 Stay, postponement, discontinuance or suspension of
action.
The Commission may, on its own motion or upon petition, postpone,
discontinue, or suspend any and all actions taken by it under the
provisions of this part. The Commission shall immediately stay the
effect of any order issued under this part as requested by the
President pursuant to Sec. 565.11.
[[Page 8013]]
Sec. 565.13 OMB control number assigned pursuant to the Paperwork
Reduction Act
The Commission has received OMB approval for this collection of
information pursuant to the Paperwork Reduction Act of 1995, as
amended. In accordance with that Act, agencies are required to display
a currently valid control number. The valid control number for this
collection of information is 3072-0060.
By the Commission.
Bryant L. VanBrakle,
Secretary.
[FR Doc. 99-3757 Filed 2-17-99; 8:45 am]
BILLING CODE 6730-01-P
