[Federal Register Volume 60, Number 75 (Wednesday, April 19, 1995)]
[Proposed Rules]
[Pages 19559-19560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-9681]
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DEPARTMENT OF TRANSPORTATION
Maritime Administration
46 CFR Part 382
[Docket No. R-158]
RIN AB19
Determination of Fair and Reasonable Rates for the Carriage of
Bulk and Packaged Preference Cargoes on U.S.-flag Commercial Vessels
AGENCY: Maritime Administration, DOT.
ACTION: Advance Notice of proposed rulemaking.
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SUMMARY: The Maritime Administration is soliciting comments from
interested persons concerning the need for and content of a revised
methodology for the determination of fair and reasonable rates. Fair
and reasonable rate determinations are provided to U.S. government
shippers of preference cargo, thereby creating ceiling rates which
limit government costs and the revenue U.S.-flag operators receive for
ocean cargo transportation.
DATES: Comments must be received before June 19, 1995.
ADDRESSES: Comments should be sent to the Secretary, Maritime
Administration, room 7210, 400 7th St. SW., Washington DC 20590.
FOR FURTHER INFORMATION CONTACT: Michael P. Ferris, Director Office of
Costs and Rates, Maritime Administration, Washington, DC 20590,
Telephone (202) 366-2324.
SUPPLEMENTARY INFORMATION: Section 901(b) of the Merchant Marine Act,
1936, as amended, 46 App. U.S.C. Sec. 1241(b), cited as the Cargo
Preference Act of 1954, requires that, with respect to certain cargoes
which are described as ``government-impelled,'' such as food donation
programs administered by the State Department or the Department of
Agriculture, the cognizant government agency or agencies must take
appropriate steps to assure that at least 50 percent of the gross
tonnage of such cargoes transported on ocean vessels will 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 vessels'' (emphasis added). Section 901b of the
Food Security Act of 1985 increased the 50 percent carriage requirement
to 75 percent for agricultural commodities or products shipped under
certain food donation programs. In 1989, MARAD issued regulations (46
CFR Part 382, hereafter the Rule) that initially became effective on
January 1, 1990. The Rule contains regulations that govern the
calculation of fair and reasonable rates (also referred to as guideline
rates) for the carriage of bulk and packaged preference cargoes on
U.S.-flag commercial vessels.
In an effort to encourage the development of a modern and efficient
U.S.-flag bulk fleet and to help lower government-wide cargo preference
program costs, the Maritime Administration is considering changes in
its methodology for the determination of fair and reasonable rates. The
Rule prescribes a methodology for determining fair and reasonable rates
based on individual vessel costs. As a result, during periods of strong
demand for bulk shipping, certain high cost vessels have been able to
fix cargoes at rates that significantly exceed those of more efficient
vessels. This poses a question of equity between the operators of these
two groups of vessels and raises the possibility that under an
alternative methodology government program costs could be reduced.
Additionally, a possible result of the existing Rule is that modern,
efficient low cost vessels are discouraged from entering the trade. The
lower ceiling rates imposed on the most cost efficient vessels by the
current methodology may not allow sufficient profit opportunities to
justify the risk of a high capital cost investment.
MARAD is considering whether to conduct a rulemaking with respect
to the present methodology for determining fair and reasonable rates
and is seeking information from the public as to an appropriate
methodology to encourage efficient vessels to enter the trade resulting
in lower program costs. MARAD has identified three alternative
methodologies which it might consider as part of a rulemaking. In
addition, the option exists of keeping the present methodology. The
methodologies are:
Individual Cost (Existing)
The existing Rule is based on a methodology which utilizes an
owner's actual costs for owning and operating the specific vessel used
in the transportation of the preference cargo. Those costs are prorated
over the cargo preference voyage and added to the voyage and cargo
related costs. An allowance for overhead and profit is also included in
the guideline rate.
Foreign Market Differential
Under this methodology, MARAD would calculate the added costs
associated with owning and operating a vessel under the U.S.-flag
resulting from U.S. laws and regulations and the U.S. standard of
living. This procedure would identify a modern and efficient target
vessel or vessels available worldwide and estimate its cost under
foreign ownership and under U.S. ownership, if operated in the most
efficient manner practical. The resulting cost differential would be
prorated over specific voyages, as cargoes are tendered, and added to
the foreign bids for such voyages to determine the fair and reasonable
rate for U.S.-flag operators.
Cost Averaging
A methodology utilizing vessel cost averaging would be constructed
in much the same manner as the current Rule, except that some level of
average vessel costs would replace individual vessel costs in the
calculation of the fair and reasonable rate. There are three basic cost
areas which would be the most likely candidates for averaging: vessel
operating costs, vessel capital costs, and fuel. Any one or a
combination of any of the three cost areas could be included in a cost
averaging methodology.
Market Based
Under a market based methodology, an operator's bid would be
considered fair and reasonable if it were submitted in a competitive
environment. A competitive environment would be established by a
required number of qualified bids made by independent and
[[Page 19560]] nonaffiliated U.S.-flag vessel operators. A market based
methodology would actually be a combination of methodologies because a
cost based determination would be made in instances where an
insufficient number of independent bids were received. The cost based
rate could be determined as prescribed in the existing Rule or by use
of some other methodology like those described above. A review of the
legislative history of the Cargo Preference Act of 1954, Sec. 901(b) of
the Act, would indicate that a market based methodology may require
legislation to be implemented. Commenters may wish to address the
legislative aspect of the market based methodology.
In order to administer cargo preference programs in a cost
efficient manner, while developing a modern and efficient fleet, it may
be necessary to change the existing methodology for determining fair
and reasonable rates for U.S.-flag commercial vessels. Therefore, any
comments on proposals to change the methodology in the regulations at
46 CFR Part 382 should specifically address any existing problems with
the present methodology, specific suggestions for alternative
methodologies, and a rationale for acceptance of any proposed
methodologies. Comments will aid MARAD's evaluation of the Rule and the
development of appropriate alternatives. MARAD is requesting that any
person, corporation, or other entity having any interest in, or
desiring to offer views and comments on, MARAD's fair and reasonable
rate methodology, submit them in writing. After reviewing the comments,
MARAD will decide whether to propose a change in the methodology
employed for the determination of fair and reasonable rates, as well as
what revisions to propose.
The public is advised that the purpose of this ANPRM is to solicit
information and views from commenters that MARAD can use in evaluating
its methodology of determining fair and reasonable rates for the
carriage of bulk and packaged preference cargoes on U.S.-flag bulk
vessels and in deciding whether to proceed with a rulemaking to amend
46 CFR Part 382. MARAD has separate regulations at 46 CFR Part 383 (the
liner Rule) dealing with the carriage of less-than-shipload lots of
bulk preference cargoes on vessels in a liner service. Common carrier
liner services are substantially different from bulk services in their
cost structure and service requirements. However, the information,
ideas or views provided by commenters may have some impact on any liner
rulemaking and the public is invited to comment on such impact.
Rulemaking Analysis and Notices
Executive Order 12866 (Regulatory Planning and Review)
This advance notice of proposed rulemaking has been reviewed under
Executive Order 12866 and Department of Transportation Regulatory
Policies and Procedures (44 FR 11034, February 26, 1979). If a rule is
actually promulgated, it would not be considered an economically
significant regulatory action under Section 3(f) of E.O. 12866, since
it has been determined that it would not result in an annual effect on
the economy of $100 million or more or adversely affect in a material
way the economy, productivity, competition, jobs, the environment,
public health or safety, or State, local, or tribal governments or
communities.
While any rule that might be promulgated would not involve any
change in important Departmental policies, it would be considered
significant because it addresses a matter of considerable importance to
the maritime industry and would be expected to generate significant
public interest. A preliminary regulatory evaluation will be prepared
based on the comments to this advance notice of proposed rulemaking.
Federalism
The Maritime Administration 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 Federalism
Assessment.
Regulatory Flexibility Act
The Maritime Administration certifies that any rule that might be
promulgated subsequent to this advance notice of proposed rulemaking
would not have a significant economic impact on a substantial number of
small entities.
Environmental Assessment
Any rule that might be subsequently promulgated would not
significantly affect the environment. Accordingly, an Environmental
Impact Statement would not be required under the National Environmental
Policy Act of 1969.
Paperwork Reduction Act
Any rule that might be promulgated would not significantly change
the current requirement for the collection of information. The Office
of Management and Budget (OMB) has reviewed the current Rule under the
Paperwork Reduction Act (44 U.S.C. S3501 et seq.), and has approved it
under OMB Approval Number 2133-0514.
By order of the Maritime Administrator.
Dated: April 13, 1995.
Joel C. Richard,
Secretary.
[FR Doc. 95-9681 Filed 4-18-95; 8:45 am]
BILLING CODE 4910-81-P
