[Federal Register Volume 61, Number 97 (Friday, May 17, 1996)]
[Rules and Regulations]
[Pages 24895-24897]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-12188]
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DEPARTMENT OF TRANSPORTATION
Maritime Administration
46 CFR Part 381
[Docket No. R-165]
RIN 2133-AB25
Cargo Preference--U.S.-Flag Vessels; Available U.S.-Flag
Commercial Vessels
AGENCY: Maritime Administration, Department of Transportation.
ACTION: Final rule.
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SUMMARY: This amendment to the cargo preference regulations of the
Maritime Administration (MARAD) provides that during the five year
period beginning with the 1996 Great Lakes shipping season when the St.
Lawrence Seaway is in use, MARAD will consider the legal requirement
for the carriage of bulk agricultural commodity preference cargoes on
privately-owned ``available'' U.S.-flag commercial vessels to have been
satisfied where the cargo is initially loaded at a Great Lakes port on
one or more U.S.-flag or foreign-flag vessels, transferred to a U.S.-
flag commercial vessel at a Canadian transshipment point outside the
St. Lawrence Seaway, and carried on that U.S.-flag vessel to a foreign
destination. This provision will allow U.S. Great Lakes ports to
compete for certain bulk agricultural commodity preference cargoes
under agricultural assistance programs administered by the U.S.
Department of Agriculture (USDA) and the U.S. Agency for International
Development (USAID). This rule will extend that policy for an
additional five years, after which the Agency would assess the merits
of making the rule permanent. MARAD issued substantially identical
rules in 1994 and 1995 related to the Great Lakes Shipping season for
each of those years, respectively.
EFFECTIVE DATE: May 17, 1996.
FOR FURTHER INFORMATION CONTACT: John E. Graykowski, Deputy Maritime
Administrator for Inland Waterways and Great Lakes, Maritime
Administration, Washington, DC, Telephone (202)366-1718.
SUPPLEMENTARY INFORMATION: United States law at sections 901(b) and
901b, Merchant Marine Act, 1936, as amended (the ``Act''), 46 App.
U.S.C. 1241(b) and 1241f, requires that at least 75 percent of certain
agricultural product cargoes ``impelled'' by Federal programs
(preference cargoes), and transported by sea, be carried on privately-
owned United States-flag commercial vessels, to the extent that such
vessels ``are available at fair and reasonable rates for United States-
flag commercial vessels, in such manner as will insure a fair and
reasonable participation of United States-Flag commercial vessels in
such cargoes by geographical areas.'' The Secretary of Transportation
wishes to administer that program so that all ports and port ranges,
including U.S. Great Lakes ports, may participate in the carriage of
preference cargoes under five programs administered by the United
States Department of Agriculture (USDA) and United States Agency for
International Development (USAID), pursuant to Titles I, II and III of
the Agricultural Trade Development and Assistance Act of 1954, as
amended; P.L. 480 (7 U.S.C. 1701-1727); the Agricultural Act of 1949,
as amended (7 U.S.C. 2791(c)); and the Food for Progress Act of 1985,
as amended (7 U.S.C. 1736).
Prior Rulemakings
On August 18, 1994, MARAD published a final rule on this subject in
the Federal Register (59 FR 40261). That rule stated that it was
intended to allow U.S. Great Lakes ports to participate with ports in
other U.S. port ranges in the carriage of bulk agricultural commodity
preference cargoes. It stated that dramatic changes in shipping
conditions have occurred since 1990, including the disappearance of any
all-U.S.-flag commercial ocean-going bulk cargo service to foreign
countries from U.S. Great Lakes ports. The static configuration of the
St. Lawrence Seaway system and the evolving greater size of commercial
vessels contributed to the disappearance of any all-U.S.-flag service.
No bulk grain preference cargo has moved on U.S.-flag vessels out
of the Great Lakes since 1989, with the exception of one trial shipment
in 1993. Under the Food Security Act of 1985, Public Law 99-198,
codified at 46 app. U.S.C. 1241f(c)(2), a certain minimum amount of
Government-impelled cargo was required to be allocated to Great Lakes
ports during the Great Lakes shipping seasons of 1986, 1987, 1988 and
1989. That ``set-aside'' expired in 1989, and was not renewed by the
Congress. The disappearance of
[[Page 24896]]
Government-impelled agricultural cargo flowing from the Great Lakes
coincided with the expiration of the Great Lakes ``set-aside.''
At the time of the opening of the 1994 Great Lakes shipping season
on April 5, 1994, the Great Lakes did not have any all-U.S.-flag ocean
freight capability for carriage of bulk preference cargo. The absence
of any all-U.S.-flag ocean freight capability on the Great Lakes
continues to this day. In contrast, the total export nationwide by non-
liner vessels of USDA and USAID agricultural assistance program cargoes
subject to cargo preference in the 1994-1995 cargo preference year (the
latest program year for which figures are available) amounted to 6.2
million metric tons, of which 4.9 million (78 percent) was transported
on U.S.-flag vessels.
As predicted by numerous commenters, the timing of the 1994 final
rule, published on August 18, 1994, did not allow for a true trial
period since it actually extended for less than one-half of the 1994
Great Lakes Shipping season. Because of the long lead time required for
arranging shipments of bulk agriculture commodity preference cargoes,
there apparently was no real opportunity for U.S.-flag vessel operators
to make the necessary arrangements and bid on preference cargoes.
Accordingly, MARAD proposed to extend this policy to the 1995 Great
Lakes shipping season and issued a final rule that was published in the
Federal Register on May 9, 1995 (60 FR 24560).
Great Lakes participation in cargo preference shipments under the
five programs administered by the USDA and USAID could be significantly
improved if foreign-flag feeder vessels were authorized to transport
bulk grain commodities from Great Lakes ports to Canadian transshipment
points for export on oceangoing U.S.-flag bulk carriers to the final
destination port. MARAD issued its 1994 and 1995 final rules to
authorize the use of foreign-flag feeder vessels for the transportation
of bulk agricultural commodities cargoes from the Great Lakes ports to
Canadian transshipment ports outside the St. Lawrence Seaway during the
1994 and 1995 Great Lakes shipping seasons, respectively. Outside the
St. Lawrence Seaway, the cargo will be transferred to a U.S.-flag
vessel for delivery to its foreign destination.
Subsequently, USDA indicated that section 406(b)(4) of P.L. 480
regulating the payment of freight by USDA for shipments under Title II,
Section 416(b) and the Food For Progress Act of 1985, negatively
impacted on suppliers that bid on Great Lakes cargoes to be transhipped
to Canadian shipping points. USDA indicated that these provisions
prevent them from paying for freight on commodities shipped from a
Canadian port. The P.L. 480 Title I program is not affected by this
provision. As a consequence, the Great Lakes region has been, in
effect, prohibited from utilizing the rule and participating during the
past two years in the shipment of bulk cargo under Title II of P.L.
480, Section 416 of the Agricultural Act of 1949 and the Food for
Progress Act of 1985 programs.
USDA proposed an amendment to Section 406 in the 1996 Farm Bill
which would allow USDA to pay the cost of the foreign-flag Great Lakes
transit leg and for the transshipment from Canadian ports.
MARAD proposed in a new NPRM to extend its policy stated in the
1994 and 1995 rules for an additional five years, after which it would
reassess the merits of making the rule permanent, consistent with the
USDA legislative proposal (61 FR 9670; March 11, 1996). The amendment
proposed by the USDA is included in the Federal Agriculture Improvement
and Reform Act of 1966, Pub. L. 104-127, 110 Stat. 888. It amends
Section 406(b)(4) of the Agricultural Trade, Development and Assistance
Act of 1954, 7 U.S.C. 1736, to accomplish USDA's proposal, above.
Comments on 1996 NPRM
MARAD received 12 comments on this NPRM from 11 commenters
representing business, trade associations, State and local port
authorities, and State Transportation Departments. All commenters were
in favor of the policy stated in the NPRM, without reservation. One
commenter supporting the proposal to establish a five-year trial period
stated, ``Similar rulemakings in the 1994 and 1995 years provided too
limited of a window of opportunity to truly test this concept.'' That
commenter referred to the current common practice in the private sector
of exporting bulk agricultural commodities from Great Lakes ports in
foreign-flag feeder vessels to transshipment points east of the St.
Lawrence Seaway, concluding that ``transshipping Government
agricultural exports should, on occasion, be cost effective.''
Another commenter stated that taxpayers, food aid recipient
countries and vessel owners will benefit from this competition. From
the perspective of U.S. maritime labor, one commenter stated,
``International cargoes are the lifeblood of Great Lakes longshoremen
and return of P.L. 480 cargoes to the Great Lakes will generate
thousands of manhours for dockworkers in virtually every Great Lakes
port.'' Another commenter was hopeful that the trend of increased
international trade ``to the Lakes via the Seaway in the past three
navigation seasons will continue because of this rulemaking.''
One commenter, while acknowledging that the proposed rule offers
some possible relief for Great Lakes-originated cargo, requested MARAD
to issue a rule which allows shipment of bulk agricultural commodities
from Great Lakes ports for the entire voyage from origin to destination
on foreign-flag vessels where U.S.-flag vessels are not available for
such voyages from Great Lakes ports. Unless U.S.-flag vessels are
unavailable from any port range in the United States, MARAD lacks the
authority to issue such a rule under the cargo preference laws of the
United States.
Rulemaking Analyses and Notices
Executive Order 12866 (Regulatory Planning and Review)
This rulemaking is not considered to be an economically significant
regulatory action under section 3(f) of Executive Order 12866. Also, it
is not a major rule under Pub. L. 104-121, 5 U.S.C. 804, or a
significant rule under the Department's Regulatory Policies and
Procedures. Accordingly, it has not been reviewed by the Office of
Management and Budget.
MARAD projects that this rule will allow the annual movement of up
to 300,000 metric tons of agricultural commodities from Great Lakes
ports, with a reduction in the shipping cost to sponsoring Federal
agencies of up to $2 per metric ton ($600,000). MARAD will evaluate the
results of this rulemaking over a five-year trial period before
determining whether to issue a rule to make this provision permanent.
Since the 1996 Great Lakes shipping season opened on March 29,
1996, a delay in the effective date of this rule for 30 days would be
conterproductive to the accomplishment of the purpose of this rule to
allow U.S. Great Lakes ports to compete effectively for agricultural
commodity preference cargo shipments. Accordingly, pursuant to section
553(d) of the Administrative Procedure Act, 5 U.S.C. 553(d), MARAD
finds that good cause exists for the rule to become effective on
publication.
Federalism
The Maritime Administration has analyzed this rulemaking in
accordance with the principles and criteria contained in Executive
Order 12612, and it has been determined that these regulations do not
have sufficient
[[Page 24897]]
federalism implications to warrant the preparation of a Federalism
Assessment.
Regulatory Flexibility Act
The Maritime Administration certifies that this rulemaking will not
have a significant economic impact on a substantial number of small
entities.
Environmental Assessment
The Maritime Administration has considered the environmental impact
of this rulemaking and has concluded that an environmental impact
statement is not required under the National Environmental Policy Act
of 1969.
Paperwork Reduction Act
This rulemaking contains no reporting requirement that is subject
to OMB approval under 5 CFR Part 1320, pursuant to the Paperwork
Reduction Act of 1980 (44 U.S.C. 3501, et seq.)
List of Subjects in 46 CFR Part 381
Freight, Maritime carriers.
Accordingly, MARAD hereby amends 46 CFR Part 381 as follows:
PART 381--[AMENDED]
1. The authority citation for Part 381 continues to read as
follows:
Authority: 46 App. U.S.C. 1101, 1114(b), 1122(d) and 1241; 49
CFR 1.66.
2. Section 381.9 is revised to read as follows:
Sec. 381.9 Available U.S.-flag service.
For purposes of shipping bulk agricultural commodities under
programs administered by sponsoring Federal agencies from U.S. Great
Lakes ports during the 1996-2000 Great Lakes shipping seasons, if
direct all-U.S.-flag service, at fair and reasonable rates, is not
available at U.S. Great Lakes ports, a joint service involving a
foreign-flag vessel(s) carrying cargo no farther than a Canadian
port(s) or other point(s) on the Gulf of St. Lawrence, with
transshipment via a U.S.-flag privately-owned commercial vessel to the
ultimate foreign destination, will be deemed to comply with the
requirement of ``available'' commercial U.S.-flag service under the
Cargo Preference Act of 1954. Shipper agencies considering bids
resulting in the lowest landed cost of transportation based on U.S.-
flag rates and service shall include within the comparison of U.S.-flag
rates and service, for shipments originating in U.S. Great Lakes ports,
through rates (if offered) to a Canadian port or other point on the
Gulf of St. Lawrence and a U.S.-flag leg for the remainder of the
voyage. The ``fair and reasonable'' rate for this mixed service will be
determined by considering the U.S.-flag component under the existing
regulations at 46 CFR Part 382 or 383, as appropriate, and
incorporating the cost for the foreign-flag component into the U.S.-
flag ``fair and reasonable'' rate in the same way as the cost of
foreign-flag vessels used to lighten U.S.-flag vessels in the recipient
country's territorial waters. Alternatively, the supplier of the
commodity may offer the Cargo FOB Canadian transshipment point, and
MARAD will determine fair and reasonable rates accordingly.
Dated: May 10, 1996.
By Order of the Maritime Administrator.
Joel Richard,
Secretary, Maritime Administration.
[FR Doc. 96-12188 Filed 5-16-96; 8:45 am]
BILLING CODE 4910-81-P
