03-4574. Ocean Freight Claims Administrative Appeal Process

AGENCIES:

Commodity Credit Corporation, USDA, and Agency for International Development.

ACTION:

Proposed rule.

SUMMARY:

This rule would establish an administrative appeals procedure that would be used by the Commodity Credit Corporation (CCC) with respect to ocean transportation cargo loss and damage claims arising under shipments of agricultural commodities made available by CCC under various foreign donation programs. Whether or not title to the commodities has passed from CCC to a cooperating sponsor, which may be a foreign government, private voluntary organization, or private entity, CCC either retains the right or may be assigned the right to initiate, prosecute, and, with certain limited exceptions, retain the proceeds of cargo loss and damage claims. The rule would require that any recipient of CCC-donated commodities must include in the contract for the ocean transportation of the commodities a provision that the maritime carrier agrees to participate in this administrative appeal process.

For CCC claims initiated on behalf of the United States Agency for International Development (USAID), the rule would also require consultations between agencies and the crediting of funds collected into USAID accounts.

DATES:

Comments must be submitted on or before April 2, 2003, to be assured of consideration.

ADDRESSES:

All comments concerning these proposed regulations should be addressed to Steve Mikkelsen, Director, Procurement and Donations Division, USDA/FSA/PDD/STOP 0551, 1400 Independence Avenue, SW., Washington, DC 20250-0551 or sent electronically to: [e-mail]. Persons with disabilities who require alternative means for communication (braille, large print, audiotape, etc.) should contact USDA's Target Center at [phone] (voice and TDD).

Comments concerning USAID programs should also be addressed to Lauren Landis, Director, Office of Food For Peace, Bureau for Democracy, Conflict, and Humanitarian Assistance, U.S. Agency for International Development, Room 7.06-157, Ronald Reagan Building, 1300 Pennsylvania Avenue, NW., Washington, DC 20523 or sent electronically to: [e-mail].

FOR FURTHER INFORMATION CONTACT:

Steve Mikkelsen of CCC on [phone], or Jeffrey Drummond of USAID on [phone].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This proposed rule is issued in conformance with Executive Order 12866 and has been determined to be not significant.

Regulatory Flexibility Act

It has been determined that the Regulatory Flexibility Act is not applicable to this rule because neither CCC nor the United States Agency for International Development (USAID) is required by 5 U.S.C. 553 or any other provision of law to publish a notice of proposed rulemaking with respect to the subject matter of this rule.

Environmental Evaluation

It has been determined by an environmental evaluation that this action will have no significant impact on the quality of the human environment. Therefore, neither an environmental assessment nor an Environmental Impact Statement is needed.

Executive Order 12372

This program is not subject to the provisions of Executive Order 12372, which require intergovernmental consultation with State and local officials. See the notice related to 7 CFR part 3015, subpart V, published at 48 FR 29115 (June 24, 1983).

Executive Order 12988

This rule has been reviewed in accordance with Executive Order 12988. The provisions of this rule preempt State laws to the extent such laws are inconsistent with the provisions of this rule. Before any judicial action may be brought concerning the provisions of this rule, the administrative remedies must be exhausted.

Unfunded Mandates Reform Act of 1995

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public Law 104-4, establishes requirements for Federal agencies to assess the effects of their proposed and final rules with Federal mandates that may result in expenditures to State, local, or tribal governments, or the private sector, in the aggregate of $100 million or more in any 1 year. This rule contains no Federal mandates under the regulatory provisions of title II of the UMRA for State, local, and tribal governments or the private sector. Therefore, this rule is not subject to the requirements of sections 202 and 205 of the UMRA.

Paperwork Reduction Act

The information collection requirements imposed by this rule have been previously submitted to the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1980 (44 U.S.C. chapter 35). OMB has assigned control number 0051-0035 for this information collection. This regulation does not change any of the information collection requirements.

Background

The regulations set forth at 7 CFR part 1499 establish the general terms and conditions governing CCC's donation of commodities to cooperating sponsors under section 416(b) of the Agricultural Act of 1949 and the Food for Progress programs. Under 7 CFR 1499.15(d)(1), notwithstanding the transfer of title, CCC has the right to file, pursue and, with certain exceptions, retain the proceeds from claims arising from ocean transportation cargo loss and damage arising out of shipments of commodities provided to governmental cooperating sponsors. Under 7 CFR 1499.15(d)(8), if a nongovernmental cooperating sponsor is unable to effect collection of a claim or negotiate an acceptable compromise, the nongovernmental cooperating sponsor is required to assign its rights to the claim to CCC. Nongovernmental cooperating sponsors must also assign their claim rights to CCC upon CCC's request.

The regulations set forth at 22 CFR part 211 establish the general terms and conditions governing the U.S. Agency for International Development's (USAID) food donation programs under title II, Public Law 480. CCC makes the agricultural commodities available to USAID for use in these programs. Under 22 CFR 211.9(c)(2)(i), whether or not title to commodities is transferred from CCC to the cooperating sponsor, if USAID contracted for the ocean transportation, CCC has the right to initiate, prosecute, and retain the proceeds of all claims against maritime carriers for cargo loss and damage arising out of shipments of commodities made available by CCC. Under 22 CFR 211.9(c)(2)(ii)(F), if a nongovernmental cooperating sponsor is unable to effect collection of a claim or negotiate an acceptable compromise, the nongovernmental cooperating sponsor is required to assign its rights to the claim to CCC. Nongovernmental sponsors must also assign their claim rights to CCC upon CCC's request.

If the commodity is lost or damaged in transit due to the fault of the carrier, existing admiralty law principles control whether the party contracting for the transportation of the goods may recover damages from the carrier. The provisions of the Carriage of Goods by Sea Act (46 U.S.C. 1300 et seq.) either apply by law, or are incorporated by reference into the cargo bookings and charter parties.

CCC does not have an established administrative appeal process to handle the internal review of these cargo claims before the claims are referred to the U.S. Department of Justice for collection through litigation. This rule would establish an administrative appeal process. CCC intends that independent hearing officers would make written determinations with respect to the claims. Once the administrative appeal was completed, if the carrier was determined to be liable for the loss and damage to cargo, CCC would follow the CCC debt settlement policies and procedures set forth in 7 CFR part 1403 to collect the debt. This would include but would not be limited to the administrative offset of the amount of the debt against other freight earned by the carrier which had not been paid or freight earned in the future.

Section 212(e) of the Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994 (Pub. L. 103-354) provides that, notwithstanding any other provision of law, a person shall exhaust all administrative appeal procedures established by the Secretary of Agriculture before a person may bring an action in a court of competent jurisdiction against the Secretary, the Department of Agriculture, or agency, office, officer or employee of the Department. Therefore, a carrier would have to participate in the administrative appeals procedure before it could file an action in court contesting the establishment of the debt or possible subsequent offset of the debt. The court's review would be limited to the administrative record established in the administrative appeal.

This rule also establishes a consultative process between USAID and CCC for claims pursued under title II, Public Law 480 food donation programs. It also requires CCC to credit the appropriate title II account for any funds collected by or remitted to CCC pursuant to 22 CFR 211.9(c)(2).

List of Subjects

7 CFR Part 1405

• Administrative practice and procedure
• Agricultural commodities
• Cargo claims
• Cooperating sponsor
• Maritime carriers

7 CFR Part 1499

• Agricultural commodities
• Cooperating sponsor

22 CFR Part 211

• Agricultural commodities
• Cooperating sponsor

• Accordingly, for the reasons set forth in the preamble
• CCC proposes to amend

7 CFR CHAPTER XIV

PART 1405—LOANS, PURCHASES AND OTHER OPERATIONS

1. The authority citation for 7 CFR part 1405 continues to read as follows:

Authority: 15 U.S.C. 714(b) and 714(c).

2. Add § 1405.100 to read as follows:

§ 1405.100

Cargo claims appeal process.

(a) Applicability. (1) The administrative appeals process set forth in this section is applicable to all ocean transportation cargo loss and damage claims arising under shipments of agricultural commodities made available by CCC under section 416(b) of the Agricultural Act of 1949, the Food for Progress Act of 1985, and Title II of the Agricultural Trade Development and Assistance Act of 1954, commonly known as Public Law 480, and any other regulation or contract that incorporates by reference the provisions of this section. This includes the movement of cargoes under through bills of lading to inland destinations.

(2) This section is applicable to any determination made by CCC relating to the resolution of disputed cargo loss and damage claims between CCC and the maritime carrier.

(b) Delegations of authority. (1) The Deputy Vice President, CCC, who is Deputy Administrator for Commodity Operations of the Farm Service Agency (Deputy Administrator), shall be responsible for administering this section. The Deputy Administrator may delegate the authority provided in this section in the manner deemed appropriate by the Deputy Administrator.

(2) The Executive Vice President, CCC, who is the Administrator for the Farm Service Agency, may modify or reverse any action of the Deputy Administrator or a designee of the Deputy Administrator made with respect to this section.

(c) Appeal procedure. (1) If CCC determines that a maritime carrier is liable for loss and damage that occurred during the transportation of commodities made available by CCC, CCC will notify the carrier in writing of the nature of the violation. The carrier will be given 30 days in which to appeal the determination to CCC and request either a hearing before a hearing officer or a hearing by telephone. CCC will provide to the carrier a written acknowledgment of their appeal and request for a hearing.

(2) If the carrier requests to pursue an appeal but not a hearing, CCC will allow the carrier to submit, in writing, the reasons why the carrier believes the determination of CCC to be in error. The carrier will be given 30 days from the receipt of the acknowledgment to file any statements and documents in support of its appeal. The carrier will be given an additional 15 days to respond to any new issues raised by CCC in response to the carrier's initial submission.

(3) If the carrier requests to pursue an appeal and requests a hearing, CCC will notify the carrier of the date of the hearing. All hearings will be held at the Kansas City Commodity Office of the Farm Service Agency, 6501 Beacon Drive, Kansas City, Missouri 64133-4675, except as may be determined by CCC. If a hearing is requested, the carrier will be notified of the date of the hearing and will be afforded 30 days from the receipt of the notification of the scheduling of the hearing to submit any statements and documents in support of the appeal. The carrier will be given an additional 15 days following the date of the hearing to submit any additional material that may have been determined necessary due to issues raised at the hearing.

(4) Determinations of the hearing officer shall be final and no further appeal within CCC shall be available except as may be specified in the final determination of the hearing officer.

(d) Exhaustion of administrative remedy. A carrier may not initiate an action in any court of competent jurisdiction prior to the exhaustion of the administrative appeal process set forth in this section.

PART 1499—FOREIGN DONATION PROGRAMS

3. The authority citation for 7 CFR part 1499 continues to read as follows:

Authority: 7 U.S.C. 1431(b), 7 U.S.C. 1736o, E.O. 12752.

4. Amend § 1499.15 by adding paragraph (j) to read as follows:

§ 1499.15

Liability for loss, damage, or improper distribution of commodities—claims and procedures.

* * * * *

(j) Required contract term. Any cooperating sponsor must include the following provision in the contract for the transportation of the commodity made available by CCC: “The provisions of 7 CFR 1405.100 shall be applicable to this contract and are incorporated by reference in their entirety.”

22 CFR CHAPTER II

PART 211—TRANSFER OF FOOD COMMODITIES FOR FOOD USE IN DISASTER RELIEF, ECONOMIC DEVELOPMENT AND OTHER ASSISTANCE

5. The authority citation for 22 CFR part 211 continues to read as follows:

Authority: Section 207(c) of the Agricultural Trade Development and Assistance Act of 1954, as amended; see Public Law 101-624, 104 Stat. 3632, 3641, 7 U.S.C. 1726a(c).

6. Amend § 211.9 by adding paragraph (c)(2)(v) to read as follows:

§ 211.9

Liability for loss damage or improper distribution of commodities.

* * * * *

(c) * * *

(2) * * *

(v) Any funds collected by or remitted to CCC pursuant to this section shall be credited to the appropriate Title II account. CCC shall also consult with USAID's Office of Food For Peace in Washington, DC (USAID/FFP) before it authorizes the settlement, compromise, or termination of a claim. CCC shall also consult with USAID/FFP before it authorizes a CS to compromise a claim pursuant to paragraph (c)(2)(ii)(E) of this section.

* * * * *

(i) Required contract term. Any cooperating sponsor must include the following provision in the contract for carriage of the commodity donated by CCC: “The provisions of 7 CFR 1405.100 shall be applicable to this contract and are incorporated by reference in their entirety.”

Dated: February 18, 2003.

James R. Little,

Executive Vice President, Commodity Credit Corporation.

Dated: January 17, 2003.

Roger P. Winter,

Assistant Administrator, DCHA, Agency for International Development.