[Federal Register Volume 64, Number 44 (Monday, March 8, 1999)]
[Rules and Regulations]
[Pages 11186-11215]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-5365]
[[Page 11185]]
_______________________________________________________________________
Part IV
Federal Maritime Commission
_______________________________________________________________________
46 CFR Part 530
Service Contracts Subject to the Shipping Act of 1984; Interim Final
Rule
Federal Register / Vol. 64, No. 44 / Monday, March 8, 1999 / Rules
and Regulations
[[Page 11186]]
FEDERAL MARITIME COMMISSION
46 CFR Parts 514 and 530
[Docket No. 98-30]
Service Contracts Subject to the Shipping Act of 1984
AGENCY: Federal Maritime Commission.
ACTION: Interim final rule.
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SUMMARY: The Federal Maritime Commission has revised its regulations
governing service contracts between shippers and ocean common carriers
to implement changes made to the Shipping Act of 1984 (``Act'') by Pub.
L. 105-258 (the Ocean Shipping Reform Act of 1998) and section 424 of
Pub. L. 105-383 (the Coast Guard Authorization Act of 1998).
Specifically, the Commission has revised its regulations implementing
section 8(c) of the Act and has created a new 46 CFR part 530 to govern
service contract filing. The interim nature of this rule is due to a
major revision of the proposed regulation, which did not include the
internet-based filing system of the interim final rule. The proposed
regulations have been revised to accommodate the alternative system.
Portions of the proposed rule have been redrafted for clarity,
repetitive sections have been deleted and the remaining sections are
accordingly renumbered.
DATES: Effective date May 1, 1999. Submit comments on this interim
final rule on or before April 1, 1999.
ADDRESSES: Address all comments to: Bryant L. VanBrakle, Secretary,
Federal Maritime Commission, 800 North Capitol Street, NW., Room 1046,
Washington, DC 20573-0001.
FOR FURTHER INFORMATION CONTACT:
Thomas Panebianco, General Counsel, Federal Maritime Commission, 800
North Capitol Street, NW., Washington, DC 20573-0001, (202) 523-5740
Austin L. Schmitt, Director, Bureau of Tariffs, Certification and
Licensing, Federal Maritime Commission, 800 North Capitol Street, NW.,
Washington, DC 20573-0001, (202) 523-5796
SUPPLEMENTARY INFORMATION: On December 23, 1998, the Federal Maritime
Commission (``Commission'') issued proposed regulations to implement
changes to the Shipping Act of 1984 (``Act'') mandated by the Ocean
Shipping Reform Act of 1998, Pub. L. 105-258, 112 Stat. 1902
(``OSRA''), enacted on October 14, 1998. 63 FR 71062-71076. OSRA made
several changes to the existing system by which the Federal Maritime
Commission regulates ocean shipping in the foreign commerce of the
United States, particularly to the provisions governing service
contracts under the Act.
As noted in the Notice of Proposed Rulemaking (``NPR''), the
Commission sought to balance the general deregulatory intent of OSRA
with the important oversight role that Congress has assigned to it,
through the proposed rules. The difficulty in achieving that balance is
apparent in the reactions the proposal received from members of the
industry. Further, while the Commission recognized that the filing
requirements must be crafted with an appreciation for regulated
entities' interests in simple, speedy and straightforward filing
procedures, the Commission also noted in the NPR that the procedures
must enable the Commission to fulfill its statutory duty to guard
against section 10 violations and perform its section 6 functions. As
several of the comments urge, this responsibility on the part of the
Commission is especially important as service contracts will be
confidential and potentially aggrieved parties will have to rely on the
Commission for oversight. This will be complicated by the predicted
increase in the sheer number of service contracts filed. It was with
these goals in mind that the Commission originally proposed the draft
regulations, designed to enable the Commission to fulfill its
regulatory mandate while imposing a minimal burden on regulated
parties.
Comments
The Commission received twenty-eight (28) responses to the NPR,
from the following: Seaboard Marine (``Seaboard''); International
Longshoremen's Association (``ILA''); Cargo Brokers International, Inc.
(``CBI''); China Ocean Shipping (Group) Company (``COSCO''); Effective
Tariff Management Corporation (``ETM''); Trans-Atlantic Conference
Agreement (``TACA'') (endorses OCWG comments); Household Goods
Forwarders Association of America, Inc. (``HGFAA''); Council of
European & Japanese National Shipowners' Association (``CENSA'');
Bicycle Shippers' Association, Inc. (``BSA''); United States Council
for International Business, Sea Transportation Committee (``USCIB'');
International Longshore & Warehouse Union (``ILWU'') (endorses ILA
comments); IBP, Inc. (``IBP''); National Industrial Transportation
League (``NITL''); Japan-United States Eastbound Freight Conference
(``JUSEFC''); American Institute for Shippers' Associations, Inc.
(``AISA''); Ocean Carrier Working Group Agreement (``OCWG''); National
Customs Brokers & Forwarders Association of America, Inc. (``NCBFAA'');
American Import Shippers' Association (``AImpSA''); E.I. DuPont de
Nemours and Company (``DuPont''); Conagra, Inc. (``Conagra''); P&O
Nedlloyd, Ltd. (``P&O''); Pacific Coast Tariff Bureau (``PTCB'');
American President Lines, Ltd., Sea-Land Service, Inc., Crowley
Maritime Corporation, Farrell Lines, Inc., Lykes Lines Ltd., LLC, the
Transportation Institute, the American Maritime Congress, and the
Maritime Institute for Research and Development (joint comments)
(``Carriers''); Chemical Manufacturers Association (``CMA''); American
President Lines, Ltd. and APL Co. Pte. Ltd. (``APL'') (endorses OCWG
comments); Sea-Land Service, Inc. (``Sea-Land'') (endorses OCWG and
TACA comments); American International Freight Association and
Transportation Intermediaries Association (``AIFA'') (joint comments)
(endorses NITL comments); and Wal-Mart Stores, Inc. (``Wal-Mart'').
These comments reflected the views of large, beneficial interest
shippers (DuPont, Wal-Mart, Conagra, and IBP), shippers' associations
and representatives (BSA, NITL, AISA, AImpSA, and CMA), labor
organizations (ILA and ILWU), carriers, conferences, agreements and
carrier associations (APL, COSCO, P&O, CENSA, OCWG, TACA, JUSEFC, Sea-
Land Service, Inc., Crowley Maritime Corporation, Farrell Lines, Inc.,
Lykes Lines Ltd., LLC, the Transportation Institute, the American
Maritime Congress, and the Maritime Institute for Research and
Development), ocean transportation intermediaries (CBI, HGFAA, NCBFAA,
AIFA and the Transportation Intermediaries Association), third-party
filing services (ETM and PTCB), and, finally, the American affiliate of
the International Chamber of Commerce, representing the general
business interests of shippers and carriers (USCIB).
A significant number of comments generally oppose the proposed
regulations as inflexible, overly technical, rigid, burdensome and
costly, and, as such, inconsistent with the deregulatory aims of OSRA.
OCWG; NITL; USCIB; P&O; Sea-Land; Seaboard; CENSA and Conagra. Most of
the opposition to the proposed regulation is aimed at the Commission's
proposal to adapt an electronic system already in its possession, and
the technical constraints that would accompany the use of that system.
There are also comments that applaud the Commission's proposal as a
[[Page 11187]]
conscientious effort to implement a key feature of OSRA in a timely
manner, but which also express concern that some of the provisions may
be at odds with OSRA. Conagra.
Several other comments are just as strongly in favor of the
regulations as proposed, and support them as a fair reflection and
implementation of the changes intended to be made by Congress through
OSRA. AISA; AImpSA; NCBFAA; and BSA. Shipper groups urge the Commission
to be mindful that, under OSRA, smaller shippers will be disadvantaged
and thus will rely more on FMC oversight. Therefore, they argue, OSRA
has placed a heightened obligation on the Commission to oversee and
prevent potential service contract discrimination, and unreasonable
refusals to deal or negotiate. They also comment that while the
proposed regulations represent positive initial steps the Commission
must take to fulfill its oversight role, they fail to propose
adequately strong regulations to enforce section 10's anti-
discrimination prohibitions. The shippers further argue that OSRA
directed the Commission to concentrate on discrimination based on
shipper status, and the regulations fall short in this respect as well.
Section 530.3 Definitions
One commenter takes issue with the proposed definition of
``conference,'' being different from the statute, and not referring to
the requirement of a common tariff. APL, 1. The comment suggests that
the definition track the statute. The change to the definition of
``conference'' in this rule conforms with the changes made in the
Commission's rulemaking on agreements, Docket No. 98-26, and tariffs,
Docket No. 98-29.
Similarly, the Commission in this proceeding had proposed a new
definition of ``ocean common carrier'' to match that proposed in the
agreements rulemaking. However, upon receipt of opposition to that
proposal from one commenter and little input from other industry
interests, the Commission has determined to carry over its former
definition of ``ocean common carrier'' and take the matter up in a
later, separate rulemaking. See, Docket No. 98-26.
APL also questioned the proposed definition of ``service
contract.'' APL, 1-2. The comment urges the Commission to adopt a
definition of ``service contract'' which would correct a ``persisting
drafting error in OSRA'' as a contract between one or more shippers and
an ocean common carrier or an agreement between or among carriers. APL,
1-2. APL complains that this definition literally contemplates an
agreement that is a party to an agreement, a circular and legally
impossible definition. APL, 2. The comment suggests either redefining
or interpreting OSRA so that wherever the statute refers to ``an
agreement,'' that the meaning will be two or more ocean common carriers
acting pursuant to an agreement on file with the Commission or exempt
from such filing. APL, 2.
Prior to revisions made by OSRA, the Act provided that only a
certain type of agreement between ocean common carriers, namely a
conference agreement, could enter into service contracts. OSRA changed
the definition of service contract from ``a contract between a shipper
and an ocean common carrier or conference'' to ``a written contract,
other than a bill of lading or a receipt, between one or more shippers
and an individual ocean common carrier or an agreement between or among
ocean common carriers.'' This had two effects. First, it allows a group
of two or more unrelated (i.e. not a shippers' association) shippers to
jointly enter into a service contract. Second, it allows any ocean
common carrier agreement (not just a conference agreement) to enter
into service contracts. Therefore, the definition of service contract
in the regulation is revised to appear as it does in the Act. APL's
observation appears correct. The authority to enter into service
contracts extends to carriers acting collectively pursuant to a filed
agreement, even if the agreement does not provide for any central
administrative entity.
For the sake of clarity, the definitions of ``effective date'' and
``expiration date'' are moved from the Appendix to the definitions
section, Sec. 530.3. Finally, a definition of ``motor vehicle'' is
added, comporting with the definition of that term in the Commission's
tariff regulation, Docket No. 98-29. See also infra, discussion of
exempt commodities.
Section 530.4 Confidentiality
Carriers, shippers and one filing service commented on Sec. 530.4
of the proposed rule. While most agree that the Commission has the
authority to share service contract information with other federal
agencies, they also request clarification on how the Commission intends
to ensure that other agencies maintain confidentiality. CMA, 3; DuPont,
5. One suggests the following addition to the section:
any information from or access to service contracts to another
agency of the Federal government shall, to the full extent permitted
by law, also will be (sic) held in confidence by such other agency
or notice of the confidentiality of such information will be
provided by the Commission to such other agency.
ETM, 1.
Another suggests,
The Commission shall seek to ensure, prior to providing access
to confidential service contract information to another Government
agency, that such other agency will protect the confidentiality of
the service contract information.
NITL, 23.
Two comments suggest that the regulations should ensure that
information shared not be inadvertently publicized through the Freedom
of Information Act (``FOIA'') or other means, and that the same level
of protection afforded within the Commission should follow the
information when it is shared with another federal agency. DuPont, 5;
NITL, 23.
Exemption 4 of FOIA would presumably protect service contract
information confidentially filed with the Commission from requests for
public disclosure. 5 U.S.C. 552(b)(4)(1994). Exemption 4 of FOIA
protects ``commercial or financial information obtained from a person
(that is) privileged or confidential.'' The exemption affords
protection to those submitters who are required to furnish commercial
or financial information to the government by safeguarding them from
the competitive disadvantages that could result from disclosure. See
U.S. Department of Justice, Office of Information and Privacy, Freedom
of Information Act Guide and Privacy Act Overview, at 123.
Another comment suggests this provision should be amended to
provide that all confidential information will be provided to other
government agencies which have a Memorandum of Understanding (``MOU'')
agreeing that they will maintain confidentiality of the information in
accordance with the letter and spirit of OSRA. Conagra, 4. The
Commission has concluded that it will provide confidential service
contract information only to federal government agencies with which it
has an MOU ensuring that the recipient agency will accordingly protect
the information from public disclosure. This should adequately address
the reasonable concerns expressed in the comments.
One commenter asserts that the confidentiality requirement of the
Act applies to the Commission only, and does not give the Commission
any authority to review the parties' complaints for breach of a
[[Page 11188]]
confidentiality clause in the contract itself. Such a breach, they
argue is purely a contract matter and as such, for a court to decide.
APL, 2. The comment suggests that in order to clarify this point, the
phrase ``by the Commission'' should be added at the end of the first
sentence. APL, 2. The statute appears to be adequately clear on this
matter, and there is no need for further clarification at this time.
Wal-Mart is concerned that disclosure of the actual international
freight rate required by U.S. Customs Service (``USCS'') (form CF 7501)
will provide an opportunity for unscrupulous customs brokers to obtain
confidential rate information and disclose it. Wal-Mart, 1. Wal-Mart is
concerned that, even with a confidentiality agreement with the broker,
the monitoring and enforcement of such confidentiality agreements may
prove difficult, or impossible. Wal-Mart, 2. Wal-Mart therefore
requests the Commission coordinate with other federal government
agencies, especially USCS, in its final implementation of the
regulations to ensure that the confidentiality of service contracts be
preserved by those other agencies, and suggests that one approach may
be to declare average or estimated freight rates on the CF 7501 form
supplemented by actual data directly to USCS without using the broker.
Wal-Mart, 2.
The commenter's request is outside the Commission's jurisdiction.
While it understands Wal-Mart's concerns, the Commission has no
authority to dictate to other agencies what information they may or may
not require from the entities they regulate. Therefore, the comment is
more appropriately directed towards USCS.
In contrast, one commenter argues that the proposed regulations do
not acknowledge limitations on the Commission's authority to release
service contract information, recognize the complexity of the
associated issues, or provide procedures for making a determination to
release information. Carriers, 2. First, the Carriers argue, the
Commission's authority to disclose confidential service contract
information to other federal government agencies at all is
questionable. Carriers, 2. These comments argue that the colloquy
between Senators McCain and Hutchison is of limited value for the
purpose of legislative history because it followed, rather than
preceded, the adoption of the bill which became OSRA. Carriers, 2 n.1.
This argument is unconvincing, however, as we note that Senator
Hutchison, with specific reference to section 8(c)(2) of S. 414 (which
remained unchanged in the final passage of OSRA), remarked on April 21,
1998, that the Commission ``is encouraged to work with affected Federal
agencies to address'' their concerns about how they are to ensure rate
compliance with U.S. cargo preference law in an era of service contract
rate confidentiality. Cong. Rec S3320 (daily ed., April 21, 1998)
(statement of Sen. Hutchison). While the statute itself reads only,
``each contract entered into under this subsection * * * shall be filed
confidentially with the Commission'' (section 8(c)(2) of OSRA), and
``[w]hen a service contract is filed confidentially with the
Commission, a concise statement of the essential terms * * * shall be
published and made available to the general public in tariff format''
(section 8(c)(3)), taken with the remarks made on the same day the
Senate passed S. 414, the legislative history indicates that it was the
intent of the drafters that the confidentiality provision not hamper
other federal government agencies which have legitimate need to access
the confidentially filed information in order to carry out their
respective duties.
There is further indication that the drafters intended that the
confidentiality provision would apply to preclude Commission disclosure
to the public. As Senator Hutchison remarked in the aforementioned
floor colloquy, ``(o)f course * * * confidential service contract
information would remain protected from disclosure to the public
consistent with the Shipping Act of 1984, as amended by the Ocean
Shipping Reform Act and other applicable Federal laws.'' Cong. Rec.
S11302 (daily ed. Oct. 1, 1998) (Statement of Sen. Hutchison) (emphasis
added). This emphasized the importance of the Commission protecting
information filed confidentially with it from disclosure to the public,
but does not limit the Commission's right to disclose such information
to other federal agencies where clearly warranted and justified.
Finally, the Commission noted in the NPR that it would only ``allow
access to filed contracts to Federal government agencies where
appropriate; any such disclosure will not jeopardize the statutory aim
of non-disclosure of confidential service contract information to non-
governmental entities.'' 63 FR 71065. This continues to correctly
express Commission policy on the subject.
The Carriers argue further that even if the authority of the
colloquy is accepted, the only exception to the statutory requirement
that the Commission keep service contract information confidential is
``to ensure compliance of U.S.-flag ocean common carriers with cargo
preference law shipping rate requirements.'' Carriers, 3. Therefore,
they contend that this does not authorize the Commission to disclose
such information when a government agency is acting in a proprietary
capacity as shipper. Carriers, 2. This implies that the following
language of the second sentence of proposed Sec. 530.4 is at least over
broad: ``Nothing contained in this part shall preclude the Commission
from providing certain information from or access to service contracts
to another agency of the Federal government of the United States.'' The
Carriers are concerned that there is too large a potential for
procurement officials to use such information to drive down rates.
Carriers, 4.
The Carriers question whether any statutory requirements, including
the cargo preference laws, actually exist which would require
information from confidentially filed service contracts and further
question the relevancy of the information, as procurement is typically
based on ``competitively bid, lowest landed cost awards.'' Carriers, 4.
We are not persuaded that service contract information should be
withheld from agencies that ship cargo with ocean carriers. The
Commission, however, is not attempting in these regulations to predict
every situation in which the requested information may or may not be
relevant to the purposes of the requesting agency. This would be
another matter most appropriately addressed by an MOU.
The Carriers' reference to the pending litigation against the
Department of Defense (``DoD'') serves to further illustrate this
point. Carriers, 5. The Commission simply does not have the ability to
predict in what situations confidential service contract information
may or may not be relevant to the execution of the requesting agency's
statutory duties, but can require that the agency support its request
with a good faith argument for relevancy, in an accordingly drafted
MOU.
Furthermore, because Congress did not indicate that it wished to
limit the agencies with which the Commission should cooperate, but
instead used the term ``other federal agencies,'' the Commission
interprets this admonition to include agencies other than DoD and laws
other than the Cargo Preference Act of 1904. Again, as the Commission
cannot presently predict which statutory requirements other agencies
may have for confidential service contract information, the Commission
declines to add to its regulations at this
[[Page 11189]]
time any such limitation on its future action. Rather, the Commission
asserts that disclosure of confidentially filed service contract
information will only be made to other federal government agencies with
which it has negotiated an MOU which will protect the information from
disclosure to the public.
The Carriers complain that the proposed regulations do not provide
for procedures for informed comment on and consideration of the
conflicting interests, but rather appear to envision an approach to
such interagency requests on a unilateral and ad hoc basis. Carriers,
2. The Carriers assert that they are entitled to a ``careful and open
appraisal'' based on an informed record before the Commission, rather
than the approach contemplated by the proposed rule. Carriers at 6. The
Carriers' comments appear to request that the Commission create a
formal review proceeding for each request before any service contract
information is released to a requesting Federal government agency.
Again, the MOU should adequately address the Carriers' concerns without
requiring that the Commission initiate an adversary proceeding which
would require the Commission to implement new procedures, and undertake
the time and expense which would accompany each evaluation.
Finally, the Carriers comment that if the Commission does not
delete the provision in question, that a separate proceeding should be
initiated to ``permit full ventilation of the issues by concerned
parties.'' Carriers at 6. On the contrary, it appears that the notice
and comment period in this rulemaking proceeding has given the Carriers
an opportunity, of which they have availed themselves, to address such
issues.
For the foregoing reasons, therefore, the Commission shall require
a requesting federal agency to enter into a Memorandum of Understanding
that it will protect the confidentiality of any information it receives
from the Commission and that such information is necessary to its
statutory functions, and adopts as final the language in Sec. 530.4 of
the proposed regulations.
Section 530.5 Duty to File
As stated in the NPR, the Commission's past regulations generally
imposed on a conference the duty to file and publish service contract
material on behalf of its members. 46 CFR 514.4(d) (duty and authority
to file). Specifically, the Commission's former regulation placed the
duty to file service contracts and publish their essential terms on
either: A service contract signatory carrier which is not a member of a
conference for the service covered by the contract; or the conference
which is signatory or has one or more members for service otherwise
covered by the conference agreement. Conferences could file for and on
behalf of one or more of its member lines for service outside the scope
of the conference agreement. Sec. 514.4(d)(5)(B)(ii). In such case, the
statement of essential terms was to be filed simultaneously in both the
essential terms publication of the conference and the carriers
involved.1
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\1\ While it related to the responsibility to file tariffs,
Sec. 514.4(d)(4)(ii)(A) reminded carrier participants in a
conference tariff that they are not relieved from the necessity of
complying with Commission regulations and the requirements of
section 8(a)(1) of the Act.
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The Commission's past approach distinguished duty to file based on
the subject matter of the contract itself. In this respect, for
contracts entered into by a member of a conference but which fell
outside the scope of that conference, the duty to file and publish fell
on the signatory carrier. For contracts which concerned subject matter
within the scope of a conference agreement, the duty to file and
publish fell upon the conference which was the signatory to the
contract or whose member or members were signatories. Conferences,
under the Commission's prior regulations, were authorized to file and
publish for their member lines for services outside the scope of the
conference. Sec. 514.4(d)(5)(ii). For such filing, essential terms were
required to be published by both individual carrier and conference. Id.
OCWG suggests that the Commission continue this approach, and merely
revise the previous regulations by changing the term ``conference'' to
``agreement.''
In the proposed rule, the Commission recognized that agreement
service contracts would pose somewhat different problems for filing and
publishing than did conferences, which unlike some other agreements,
maintain a central authority or secretariat. The proposed regulation
sought to anticipate situations in which members of an agreement
without a central authority enter a service contract. The proposal
would have allowed members of such an agreement to delegate the filing
duty to one member, but also indicated that such delegation would not
relieve the other carrier parties from any liability should there be a
failure to comply with the filing requirements of the regulations.
OCWG objects to the proposed rules' provisions placing filing
requirements generally on individual carriers. OCWG asserts that a
carrier breach of contract confidentiality 2 is not a
violation of the Act, citing Senator Hutchison's April 21, 1998 floor
remarks. OCWG further asserts that a carrier could publish confidential
service contract information in the New York Times and not violate the
Act. OCWG at 16. We note, however, that some disclosures could raise
issues under section 10(b)(13) of the Act which prohibits any common
carrier, either alone or in conjunction with any other person,
indirectly or directly, from knowingly disclosing, offering,
soliciting, or receiving any information concerning the nature, kind,
quantity, destination, consignee or routing of any property tendered or
delivered to a common carrier without the consent of the shipper or
consignee if that information may be used to the detriment or prejudice
of the shipper or consignee, may improperly disclose its business
transaction to a competitor, or may be used to the detriment or
prejudice of any common carrier.
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\2\ We agree with the comments that for publication, no
confidentiality issue exists. The underlying duty to publish,
however, is identical as that for filing. For publication, the
Commission's concern lies primarily in ensuring that the public not
be misled by the location of the statement of essential terms. When
an essential terms publication appears in an individual carrier's
tariff, there must be some indication of whether the underlying
service contract was made by that carrier independently or jointly
as part of an agreement. For further discussion of publication
requirements, see infra, Sec. 530.12.
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Carriers and conferences urge they should have the ability to take
advantage of the efficiencies membership in an agreement provides for
the accomplishment of such ministerial acts as filing. OCWG, 13; CENSA,
2; COSCO, 2; JUSEFC, 2-5. The comments of BSA reveal serious concerns
shippers rightfully may have about filing done by agents closely
controlled by agreement authorities. The comments of COSCO and JUSEFC
also recognize this legitimate shipper concern.
The Commission has determined to revise Sec. 530.5 and simplify the
filing duties in accordance with the comments. Section 530.5, as
revised, places the duty to file on the individual carrier party to a
service contract, as Commission regulations always have. For multi-
party service contracts, the duty to file falls equally upon all the
carrier parties participating or eligible to participate in the
contract. Multi-party service contracts must indicate the agreement
(conference or otherwise) under whose authority the contract is
entered. Carrier parties may designate any agent they choose for
filing, including an agreement secretariat. The
[[Page 11190]]
Commission shall closely monitor filing or other ministerial tasks
undertaken by central authorities for violations of section 10(b)(13)
and other activities which may have implications for the Commission's
section 6(g) oversight.
Contrary to the assertion of OCWG, simply adopting the former
regulation language and substituting the term ``agreement'' for
``conference'' will not account for the individual member of an
agreement which wishes to take independent action within the scope of
the agreement, but which does not wish to disclose the service contract
information to the agreement. The regulation, therefore, makes clear
provision for the contract parties' election on who shall be authorized
as filer. Furthermore, the regulation would allow shippers to negotiate
a requirement, for filing done by a conference or agreement
secretariat, for example, that provisions for confidentiality be
undertaken, e.g., through the use of ``firewalls.'' Finally, the use of
an agent for filing does not relieve the carrier parties in any way for
a failure to duly file or publish. They are unquestionably responsible
for ensuring their agents comply with these regulatory requirements.
Section 530.6 Certification of Shipper Status
Proposed Sec. 530.6(a) requires each shipper party to a service
contract to sign and certify on the signature page of the service
contract its shipper status and the status of all its affiliates which
have access to the service contract. NITL, AIFA, and DuPont oppose the
proposed regulation, and particularly complain that the rationale for
the requirement is unclear and the certification itself is burdensome.
NITL, 21; AIFA, 3; DuPont, 3. They recommend that this requirement
should only apply when the shipper is an NVOCC. DuPont, 3; AIFA, 3,
NITL, 21.
NITL, APL and DuPont assert that contracting parties should be able
to resolve on their own the capacity in which a particular shipper is
acting with respect to the service contract as a matter of negotiation
between the parties, not one mandated by the Commission. NITL, 21; APL,
3; DuPont, 3.
The regulation as proposed, however, does not appear to impose any
limitations on the commercial negotiations of service contracts. The
parties are free to contract with any individual or entity entitled to
enter into service contracts under the Act, and in certain capacities
(e.g., no NVOCCs as carrier parties).3 This was one of the
compromises made by OSRA: In return for confidentiality, the parties
would report their operations to the Commission, in order that it would
continue to be able to monitor the industry for prohibited acts.
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\3\ CBI comments that NVOCCs should be able to offer
confidential service contract to their shippers. This was explicitly
rejected by Congress when it rejected the Gorton Amendment (No.
2287) to S. 414, which would have so allowed. Cong. Rec. S3306-11
(daily ed.) (April 21, 1998).
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DuPont is concerned that the requirement would unnecessarily
increase the Commission's workload. DuPont, 3. NITL comments that there
are less burdensome ways for the Commission to obtain information about
the status of a shipper party. For instance, they suggest that the
Commission could request the information informally after the service
contract has been executed. Further, AIFA comments that the proposed
regulation would require the parties to make fine legal judgments.
AIFA, 3.
Contrary to several comments, it appears that the certification
does not create an unreasonable burden for shippers. Proposed
Sec. 530.7 (here renumbered Sec. 530.6) was adopted nearly verbatim
from the Commission's current regulation, 46 CFR 514.7(e)(1), which
requires the shipper party to certify its status. Original
Sec. 514.7(e)(1) had the same intent, namely to enable the Commission
to monitor service contract arrangements for discrimination. Rather
than increasing any burden on the parties to service contracts, or
creating additional workload for the Commission, Sec. 530.6(a)
continues to enable the Commission to monitor service contracts for
trends in practices and to guard against OSRA's prohibition on refusals
to deal and on concerted unjust discrimination based on shipper status.
The burden on the shipper signatory is also minimal. Contrary to the
comments of AIFA, determining the shipper's status should be relatively
simple and shippers have been doing this since the rules were first
implemented.
While NITL is correct that there are other ways for the Commission
to obtain this information, the method promulgated herein is not
unreasonable because the burden it places on service contract parties
is light, and it is of high utility to the Commission, not only because
of its intrinsic nature, but also because of the early point at which
it is provided. Finally, contrary to the concerns of DuPont, the
maintenance of this provision will not create an additional burden on
the Commission.
Some commenters suggest that the certification provision should be
deleted altogether or redrafted. APL, 3; AIFA, 3; NITL, 22. NITL
suggests the proposed regulation be revised to read as follows:
If the shipper contract party or any affiliate or member of a
shippers' association entitled to access a service contract is an
NVOCC, it shall sign and certify on the signature page of the
service contract that its status under the service contract is that
of an NVOCC.
NITL, 22.
With respect to the first purpose of the proposed regulation, NITL
and DuPont incorrectly assert that OSRA prohibits discriminatory
treatment and refusal to deal towards NVOCCs only. As the shippers'
comments correctly point out, smaller shippers which negotiate for
service contracts through their shippers' associations are also
entitled to such protection, as are all shippers, regardless of whether
they are beneficial cargo interests, their representatives, or
unaffiliated groups of shippers. OSRA prohibits discrimination and
refusals to deal based on anything other than valid transportation
factors (such as volumes) and the regulation as proposed intends to
guard against such discrimination, prohibited by section 10(b)(10) of
the Act.
The comments of several shippers' organizations point to the
competing congressional mandates with which the Commission must craft
these regulations: to allow parties to negotiate their commercial
arrangements with as little interference as possible while maintaining
its ability to monitor for discrimination and refusals to deal in
violation of section 10. AISA, 5. AISA's comments remind the Commission
that with confidential contracts, smaller shippers will be
disadvantaged and will, therefore, rely more on the Commission's
oversight. AISA, 3. AISA asserts that the Act places an affirmative
obligation upon carriers to negotiate and deal in good faith with
shippers' associations and to offer them competitively equivalent
contracts to those offered to beneficial shippers for the same volumes
and goods between the same ports. AISA, 5.
AISA asserts that OSRA requires the Commission to establish
mechanisms by which it and the public can discover such discrimination,
and point out that filing and publishing essential terms of
confidential contracts, as well as establishing a listing on the
Commission's website is only a first step in the right direction. AISA,
3-6. AISA is disappointed with the proposed regulations because they
fail to be strong enough to enforce section 10 anti-
[[Page 11191]]
discrimination prohibitions. Further, they allege that the Commission
is wrong in saying the law does not continue to prohibit carrier
actions which unreasonably discriminate against small- and medium-sized
shippers and shippers' associations. AISA, 3-6.
One commenter urges the Commission to acknowledge Congress' intent
that anti-discrimination protections be strengthened and expanded as
they apply to shippers' associations and OTIs. BSA, 13-15. NCBFAA
believes OSRA directs the Commission to concentrate on discrimination
based on a shipper's status as an OTI. NCBFAA, 1. For AImpSA, OSRA's
direction to the Commission is to concentrate on status-based
discrimination against shippers' associations or OTIs. AImpSA, 2-3.
While NCBFAA is concerned about the possibility of collusive,
discriminatory and anti-competitive behavior by carrier agreements, it
recognizes that Congress intended to allow parties to service contracts
to behave like private contract parties in a deregulated environment.
NCBFAA, 1. NCBFAA, also, however, recognizes a need for the service
contract regulations to be sufficient for Commission oversight in order
to combat discriminatory practices such as those which have been
carried out by the carriers in the past. NCBFAA, 1.
The opposition of some shipper parties, especially NVOCCs, to this
provision is puzzling. Shippers should be willing to assist the
Commission in its enforcement of the Act's prohibition on
discrimination against them due to their status and refusals to deal
because of shipper status. Indeed, the comments of shippers'
associations (BSA, AISA, AImpSA) and OTIs (NCBFAA) urge the Commission
to adopt strong regulations to protect against shipper status-based
discrimination by carriers. This provision serves the simultaneous
functions of giving shipper parties to contracts an additional reminder
of the capacity in which they may act (e.g., not as an ``agent,''
``broker'' or ``freight forwarder'') while also decreasing the need for
investigations which may unnecessarily burden shippers.
One commenter urges the Commission to establish a separate docket
to address regulations to specifically guard against section 10
violations. AImpSA, 2-3. We decline, and point out that the regulations
in all the areas that the Commission regulates were drafted with an eye
toward our responsibilities in this regard. There is no need for
another, separate rulemaking to address this issue at this point. The
certification requirement has served the Commission well in the past
and appears to continue to be a useful tool for monitoring without
being an intrusion into commercial contract negotiations or an overly
burdensome reporting requirement. Whether other regulations will be
necessary will be a question better answered after the Commission has
had some experience with and insight into the way the industry will
develop in the new era of confidential service contracting.
BSA requests that the Commission give notice to the shipping public
of the extent to which shippers' associations can rely on DOJ safe
harbor guidelines for unaffiliated shippers entering joint contracts.
BSA, 2-5. The Commission, in Docket 92-31, revised its definition of
``shippers' association'' and found that ``such associations between or
among shippers will remain subject to anti-trust laws.'' 57 FR 49665,
49666 (Nov. 3, 1992). Presumably, therefore, shippers operating in
informal groups would be similarly subject to the antitrust laws, and
could rely on DOJ guidelines for their behavior.
APL complains that the proposed regulation's requirement that
carriers identify NVOCC parties and determine that they are compliant
is ``overkill.'' APL, 3. The provision, they complain, unreasonably
delegates the policing of NVOCCs to ocean common carriers. APL, 3. APL
offers that there are other effective and less burdensome ways of
ensuring that NVOCC members of shippers' associations are compliant:
For instance, requiring an association in the contract to warrant that
any of its NVOCC members are compliant and providing evidence of such
compliance. APL recommends that Sec. 530.6(b) be deleted or redrafted
by changing the word ``signing'' to ``implementing'' and deleting ``or
an affiliate or member of a shippers' association''. APL, 3.
Section 530.6(b) as proposed was intended to ensure that carriers
do not violate section 10(b)(11) of the Act, which forbids the knowing
or willful acceptance of cargo for the account of unbonded or
unlicensed NVOCCs. Similar to the benefit to shippers provided by
Sec. 530.6(a), Sec. 530.6(b) also inures to the benefit of the carrier
party, as certification of its belief that the NVOCC with whom it
contracts is in compliance with Commission regulation may assist in
establishing it did not act knowingly and/or willfully if later the
Commission finds the NVOCC was not properly licensed or bonded.
Furthermore, the burden on the carrier signatory has been
significantly reduced, as carriers will now have the ability to confirm
an NVOCC's bond status by checking the Commission's website (see, 46
CFR 515.27(d)) and its license by reference to an NVOCC's letterhead,
as required by 46 CFR 515.31(b). Finally, this provision does not
appear to intrude into the negotiations between contract parties, as
parties generally would already have a desire to either assert their
status, or have good commercial reasons for avoiding entering into
business arrangements with a non-compliant entity. Proposed Sec. 530.6,
entitled ``service contracts with NVOCCs'' was seen to be repetitive of
the certification language of final Sec. 530.6(b). That section is
therefore deleted, and the remaining sections are renumbered. For the
foregoing reasons, the provision is adopted as it appeared in the
notice of proposed rulemaking, except that it is renumbered as
Sec. 530.6.
Section 530.7 Duty to Labor Organizations
The proposed regulation included a definition of ``reasonable
period of time'' by which a carrier must respond to a labor
organization's request. Section 530.7(a)(2). This definition was
crafted with sensitivity toward labor organizations' interests in
knowing about cargo that is due to arrive in port before it arrives, so
that the movement of that cargo may be ``claimed'' as labor work.
However, labor interests contend that the definition is inadequate
as it will not ensure a timely response, which they claim should be
within 24 hours of receipt of request. ILA, 4. If the carrier is unable
to respond, labor argues, the regulation should specify that it shall
so state and explain. ILA, 4.
Carrier interests, on the other hand, object to any definition of
the term, and assert that it should be determined on a case-by-case
basis. OCWG, 21-22. Several argue that the Commission contravenes OSRA
by defining the term at all. One maintains that implicit in the concept
of ``reasonable'' is the phrase ``under the circumstances.'' APL, 3. If
Congress had intended the term to be defined on anything other than a
case-by-case basis, it would have defined the term itself in OSRA. APL,
3. It is arbitrary, they argue, for the Commission to fix a reasonable
time for reporting. Furthermore, consideration should be given to the
carrier's situation and reasonable ability to respond to the request.
APL, 3; Sea-Land, 6. Sea-Land asserts that because the Commission
determines what is reasonable for other matters (e.g., Sections 6(g);
10(b)(8),(9),(10); 10(c)(8); and 10(d)(1)) on a case-by-case basis, it
should do the same in this context. Sea-Land, 7.
[[Page 11192]]
The carriers argue that fixing a reasonable period of time is
unfair because it gives the labor organization the exclusive control of
the timetable in that it is labor who starts the clock with the
request. APL, 3; Sea-Land, 6. Also, the comments urge, the requests
might be repetitious or unclear, or the labor organization could
inundate the carrier with hundreds of requests at a time in which it
could not possibly respond in the time allotted by this definition.
Sea-Land, 6.
One carrier comments that because service contracts run for terms
of many months, no significant union work will be irrevocably lost if
the information is not acted on within a matter of hours or days. APL,
3. This assertion is in direct contradiction to the emphatic comments
by the ILWU and the ILA that time is most certainly of the essence in
these matters. Another carrier is concerned that imposing a specific
time limit may be inconsistent with obligations under collective
bargaining agreements or labor laws. Sea-Land, 7.
It appears that the approach taken by the Commission in the
proposed rule will achieve a workable compromise and protect both
carrier and labor interests. But we note the objections of the carriers
that the definition of ``reasonable period of time'' as two or four
days would not appear to recognize that the reasonableness of any
response may depend on the circumstances. Requests may, for example, be
made in large batches, or at a time when a two or four day response is
not reasonably achievable. It is also unknown at this time how often
labor organizations will invoke these provisions, and how simple or
burdensome it will be for the carriers to supply the appropriate
response. To this end, the Commission amends the definition to include
the word ``ordinarily.'' The definition provides the sense, at this
pre-implementation stage, of what should normally constitute a
reasonable, good faith response to a legitimate request. Any complaints
of deviations from these standards resulting in harm to labor
organizations would be adjudged in the context of the particular
circumstances and the Commission's overall experience with this new
provision of the statute.
The Commission is not persuaded by the arguments of the carriers
that no definition of reasonable time is appropriate. OSRA is replete
with general guidelines and standards for which the Commission is
expected to supply more detailed qualifications of elements such as
time and dollar amounts. Here, the amended rule provides only general
guidelines of what the Commission expects will meet the general
standard, in hopes that such guidance will help obviate the need for
more formal complaints and procedures. As to the carrier concern that
the time limit contravenes collective bargaining agreements or labor
laws, it is impossible for the Commission to respond in a meaningful
way, as it has no direct involvement in administering either.
Labor organizations criticize other provisions of this section as
falling short of the mark. ILA, 1; ILWU, 1-2. They recommend that the
Commission add a requirement that a response be adequate as well as
timely. The required response, they argue, should include supporting
documentation, such as bills of lading, delivery orders, and other non-
privileged documents. This is a determination that the Commission must
make on a case-by-case basis, as the text of the statute requires only
that the response state ``whether'' the carrier is responsible. While
one floor remark by Senator Hutchison alludes to the requirement that
further documentation be produced,4 it is unclear what the
Commission's role in the disclosure of this information may be and
therefore, the Commission declines to assume the authority to impose a
requirement that particular documents be produced.
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\ 4\ ``Section 8(c)(4) envisions the release of information not
necessarily contained in the service contract (and that provision)
may require the use of documents other than the service contract.''
Cong. Rec. S3320 (daily ed., April 21, 1998)(Statement of Sen.
Hutchison).
---------------------------------------------------------------------------
ILWU and ILA comments recommend that a particular Commission
investigator be assigned in advance to all of the investigations which
might arise out of complaints of non-compliance with this section. The
ILWU suggests that the regulations include a requirement that requests
for information be concurrently filed with the Commission to help avoid
disputes over whether a given response was made within a reasonable
period of time. ILWU, 5-6. Then, the ILWU suggests, the regulation
should require that the Commission shall promptly solicit the carrier's
written position on the complaint and conduct an administrative
investigation on the merits of the complaint. The recommended procedure
further includes the requirement that the Commission's investigator
issue a report within thirty days, including findings to recommend a
formal proceeding or dismissal and penalties. ILA, 5; ILWU, 1,2.
There is no requirement that such a procedure be contained in the
regulations, and no indication from the legislative history of OSRA
that it was the intent of Congress for the Commission to use any
procedures other than its current complaint procedures to address
violations of this section of the Act. An early version of the bill,
which was to become OSRA, did include specific procedures which the
Commission would undertake to enforce the responsiveness of ocean
common carriers to labor requests for information. The April 3, 1998
version of S. 414 included a different version of section 8(c)(4) and
included a section 8(c)(5), which read:
(4) Disclosure of Certain Unpublished Terms.--A party to a
collective-bargaining agreement may petition the Commission for the
disclosure of any service contract terms not required to be
published by paragraph (3) which that party considers to be in
violation of that agreement. The petition shall include evidence
demonstrating that
(A) A specific ocean common carrier is a party to a collective-
bargaining agreement with the petitioner;
(B) The ocean common carrier may be violating the terms and
conditions of that agreement; and
(C) The alleged violation involves the moment [sic] of cargo
subject to this Act.
(5) Action By Commission.--The Commission, after reviewing a
petition under paragraph (4), the evidence provided with the
petition, and the filed service contracts of the carrier named in
the petition, may disclose to the petitioner only such unpublished
terms of that carrier's service contracts that the Commission
reasonably believes may constitute a violation of the collective-
bargaining agreement. The Commission may not disclose any
unpublished service contract terms with respect to a collective-
bargaining agreement term or condition determined by the Commission
to be in violation of this Act.
Cong. Rec. S3194 (daily ed., April 3, 1998).
Between the version of April 3, 1998 and the bill as finally
adopted by the Senate on April 21, 1998, this section underwent
significant change. It is clear, therefore, that Congress specifically
considered requiring the Commission's involvement in disclosing
confidential carrier information to labor organizations. In the final
analysis, Congress rejected such Commission involvement, and chose
instead to minimize the role of the Commission in implementing the
objectives of this section of the statute. The Commission indicated in
the NPR that it ``expects that aggrieved labor organizations will use
existing Commission processes in the event of noncompliance by a
carrier. The Commission would entertain proposals for more specific and
stringent rules if the existing standards and procedures prove
inadequate in practice.'' 63 F.R. 71064. We are hopeful that labor
organizations and carriers will
[[Page 11193]]
operate diligently and in good faith in exercising their rights and
responsibilities in implementing this section of the Act. The
Commission expects not to have to initiate programs or promulgate
particularized procedures to ensure what should be the routine and
noncontentious transmittal of information. We reiterate, however, that
the Commission will revisit these issues if experience under the
provision suggests such a need. Therefore, the proposed rule in
Sec. 530.7 will be finalized, except that the term ``ordinarily'' is
added to the definition of ``reasonable period of time'' in Sec. 530.7
(a)(2), and the placement of the provisions defining relevant terms
have been re-organized for clarity.
Section 530.8 Filing Provisions
The proposed regulation requires service contracts to be filed in
their entirety (except for signatures) in a system which would be
modified from the current ATFI essential terms publication system. The
proposed regulations make no provision for waiver, transition, or other
filing options. As stated in the supplemental information to the
proposed rule, the Commission proposed that, ``due to the volume of
service contract filings * * * expect[ed] after May 1, 1999, adoption
of an electronic, as opposed to paper-based, system appears to be the
most practical approach.'' 63 F.R. at 71063. Further, the Commission
noted that while the ``only viable approach to implementing an
electronic system at this juncture would be to create a system adapted
from the Commission's currently used filing system for Essential Terms
of service contracts,'' it also sought comment on other ``approaches to
establishing a new system * * * treating the proposed system as a
transitional solution.'' Id. Furthermore, comment on continuing the
paper filing of service contracts was specifically requested. Id.
The comments generally oppose the use of any modified ATFI system
for filing, even as an optional system. Seaboard; CENSA; USCIB; NITL;
AIFA; OCWG; P&O; Conagra; and Sea-Land. Several commenters assert that
using ATFI (as modified) is inconsistent with the deregulatory thrust
of OSRA, and the regulations should allow for filing by any electronic
means which ``meet the OSRA objective.'' CENSA, 1-2; Sea-Land, 3; NITL,
5-8. Two comments assert that because Congress expressly rejected
continuing ATFI for tariffs, it could not have intended to continue its
use for service contract filing. NITL, 5-6; Sea-Land, 3.
NITL urges that the Commission, rather than ``clinging to an
outmoded electronic system'' for filing common carrier tariffs, and
imposing that system on a very different contracting environment, give
up its reliance on ATFI in the face of systems for communication that
are changing for the better on a daily basis. NITL 5-8. Sea-Land
contends that the Commission's assertion that ATFI is the ``only viable
approach'' is incorrect and that there are other viable approaches, as
evidenced by other agencies which have adopted electronic filing
systems using ``off the shelf'' software. Sea-Land, 3.
Generally, CMA and other commenters are concerned that the Appendix
requirements are too detailed and would restrict the freedom of parties
to negotiate terms. CMA, 2; NITL, 14-15; DuPont, 4. NITL urges the
Commission to delete the Appendix entirely because it is completely
unworkable, unnecessarily burdensome, very costly and because there is
no statutory basis for its requirements. NITL, 14. Further, NITL is
concerned that the risks of contract rejection, and its associated
costs and penalties, are heightened by the inclusion of so many
technical details. NITL, 14.
Two comments object to the regulation as proposed because it
appears that it was designed for the administrative ease of the agency
without regard to the convenience to the parties. NITL, 5-8; OCWG. 3-4.
While electronic filing is the preferred long-term approach, OCWG
comments that the proposal to use ATFI would impose substantial burdens
on carriers. OCWG, 3-4. OCWG objects to using ATFI because, like CENSA,
it believes that the proposal would require filers to create two
documents: One for the commercial transaction, and another for FMC
filing. CENSA, 1.
These concerns appear somewhat justified. While in the past filers
have been required to file an ``essential terms publication'' in ATFI
format, the Commission concludes that applying ATFI-like restrictions
on the entirety of a filed service contract may not fully benefit both
filers and the Commission. In the ATFI-based system, filers may be
required to either re-format their commercial agreement or draft it in
ATFI format in the first place, or the system may make it difficult for
filers to provide the Commission with the true and complete terms of
the contract.
On the other hand, several commenters support the draft
regulation's proposal to modify and utilize ATFI. ETM; PTCB; AISA; and
NCBFAA. Others accept the modification of ATFI provided that there is
at least one alternative means of filing. JUSEFC; COSCO. JUSEFC finds
the Commission's proposal to use ATFI ``logical.'' JUSEFC, 6. NCBFAA
comments that the detailed filing requirements of the proposed
regulation (and appendix A) are required if the Commission is to be
able to police prohibited conduct. NCBFAA, 1. NCBFAA asserts that the
industry will not be able to monitor for prohibited conduct because
public essential terms will be limited. NCBFAA, 2. Furthermore, NCBFAA
presents, as indication that this was the intent of Congress, that
while OSRA specifically eliminates tariff filing, it also retains the
requirement that service contracts be filed with the Commission.
NCBFAA, 2.
Other commenters oppose any justification of the filing
requirements based on section 10(b)(2) monitoring. NITL, 5-8. They
suggest rather than imposing strict filing requirements, that the
Commission determine whether carriers are providing service in
accordance with the rates in their service contracts in the same way
that shippers and carriers themselves will monitor each other's
contract compliance, namely by consulting the terms of the contracts,
and comparing those terms to the actual billed amounts. NITL, 5-8.
Similarly, Sea-Land comments that the Commission's interest in
oversight for unjust discrimination is limited to protecting ports,
shippers' associations and OTIs due to their status and that carriers
are relieved by the Act of any affirmative obligations towards
shippers. Sea-Land, 5-6. It asserts that the Commission's enforcement
of section 10 does not require continuation of ATFI in any form. Sea-
Land, 5.
P&O complains that continuing the use of ATFI is not a secure
option because it will require third party compilers and filers who
will have access to confidential information. P&O, 3-4. BSA also
worries that the proposal to ``grandfather'' previously approved
software might not ensure confidentiality. BSA, 6. It requests
clarification from the Commission on the ability of the proposed system
to ensure rate confidentiality, and urges the use of new software and
systems which would provide total assurance of confidentiality. BSA, 6-
7. BSA recommends that the Commission draft specific regulations to
address technical qualifications which software must meet to ensure and
guarantee to shippers that service contract information will be
confidential during filing, and that the Commission also draft
regulations which include penalties for violating the security of the
websites and
[[Page 11194]]
computer systems which contain service contract information
(``hacking''). BSA, 8.
Similar to the preceding comments expressing concern for modernity
and the ability to upgrade any system based on ATFI, BSA suggests that
the Commission require that all common carrier websites are ``Y2K''
compliant. BSA, 6-7. As the internet is a communication line, and
digital, this is not a concern for filing.
With regard to the registration requirements in the proposed
regulation, PTCB urges the Commission to allow current ATFI registrants
to maintain their current registrations and organization records
without having to re-register. PTCB, 3. PTCB agrees that requiring
batch filers to re-register for new log-ons and passwords is
acceptable, but requests clarification that the organization number
will remain the same, thus avoiding a requirement that filing services'
clients amend their organizational records in order to re-authorize.
PTCB, 4.
The Commission has directed its Office of Information Management
(``OIRM'') to allow filers who intend to use either the internet-based
system (discussed infra) or the dial-ups system to apply for
registration and obtain log-on IDs and passwords prior to May 1, 1999
in order that they may be ready on May 1 for filing on that date.
Organization numbers will remain the same in the service contract
database. OIRM will notify via U.S. mail all presently-registered
organization record holders to ensure that the individual will remain
the same. If the ``org. holder'' will not be the same individual, a
registration form will be included in the letter for the recipient to
respond regarding who would ``own'' the organizational I.D. Any other
log-ons will have to re-register.
Also, PTCB requests that the Commission continue, as is currently
the case in ATFI, the method by which delegation of authority to file
is done, namely by revising the organizational record. PTCB, 4. PTCB
points out a deficiency in proposed Form FMC-83: It does not have a
place to indicate delegation. PTCB, 4. Finally, PTCB requests that the
Commission delete the requirement that individuals only (as opposed to
organizations) are registered for filing because this unnecessary
limitation is time-consuming and expensive. PTCB, 4.
The Commission must deny PTCB's request to allow log-on IDs and
passwords to be granted to organizations, not individuals, due to
security concerns and the requirements of the Computer Security Act.
Therefore, the requirement that individuals, rather than organizations
will be the registered filers will continue. Filing authority and
delegation will be indicated on the Registration Form, FMC-83.
Four of the comments opposing the proposed regulation's adaptation
of the ATFI system for service contract filings offer alternatives.
Seaboard; OCWG; NITL; and P&O. Seaboard, OCWG, and P&O propose that the
Commission allow filing in a generic word processing format as an
attachment via electronic mail (``e-mail''). Seaboard, 1. OCWG suggests
the Commission adopt a system based on commercially available software
already in common use in the industry, but does not suggest precisely
what that may be. OCWG, 4. NITL and OCWG offer generally that there are
electronic alternatives to the proposed regulation which include filing
via e-mail, internet, and diskettes. NITL, 7; OCWG, 8. OCWG proposes
that the only technical requirements which would arise from using
``off-the-shelf'' software would be the assignment of user
identification codes and security. OCWG, 4. Sea-Land recommends that
filers be allowed to file their service contracts via the internet on a
confidential site established by the Commission or via diskette, which
apparently would be mailed to the Commission. Sea-Land, 4. They assert
that this would be simple, flexible, inexpensive, complete, accessible
and accurate and would fulfill all statutory requirements. Sea-Land, 4.
Finally, while DuPont praises the Commission's desire to use modern
electronic means, it recommends that the Commission approach the U.S.
Customs Service to ascertain whether a joint system, or at least a
compatible system, could be created to serve both agencies and their
``customers.'' DuPont, 5.
NITL recommends that the Commission revise proposed Sec. 530.8(a)
to read:
Authorized persons pursuant to Sec. 530.5 of this part shall
file with the Commission electronically or in paper format a true
and complete copy of every service contract before any cargo moves
pursuant to that service contract. Service contracts filed
electronically may be submitted via electronic mail, the internet,
or on diskettes using software that is compatible with the
Commission's computer systems.
NITL, 14-15.
P&O offers the most detailed suggestion. P&O suggests the
Commission adopt an electronic filing system which allows the carrier/
filer to send the entire text of the service contract via e-mail as an
attachment to a Commission-designated e-mail address, which would be
based on the filer's current organizational record. P&O, 2-3. Upon
receipt of the service contract, P&O suggests, the Commission then open
a directory for each carrier into which it downloads the service
contract and therefore would be able to organize the information
according to its own needs. P&O, 3. This information could be easily
organized because all word-processing programs are searchable. P&O, 3.
P&O analogizes the management of this system to the Commission's
current maintenance of a list of filed agreements, which is done on a
WordPerfect file. P&O, 3. Finally, P&O recommends that the Commission
use passwords for confidentiality. P&O, 3.
Other Federal Agencies' Approaches
Several comments urge the Commission to follow the examples of
other Federal government agencies in crafting its approach to
electronic service contracts filing, namely the Federal Communication
Commission (``FCC'') and the Surface Transportation Board (``STB'').
NITL, 7; OCWG, 8. It appears that, after review of the approaches of
these agencies, as well as that of the Federal Energy Regulatory
Commission (``FERC''), the Commission is still faced with limitations
of time and resources which might make the adoption of one of these
systems inappropriate for the FMC.
1. Federal Communications Commission
Under the Telecommunications Act of 1996, the FCC receives tariff
filings for its common carrier tariffs via its website. This process
was developed over two years. The FCC requires that tariff publications
be filed in both paper copy and on diskette, subject to various format
requirements.5 Filers must submit a cover letter on paper
with the diskette and changes (amendments) to the tariff must be made
by re-filing the entire tariff on a new diskette, with the changed
material, and indicating the changes. The FCC also receives filing via
its internet homepage. This filing system was designed and is managed
by a private contractor.
---------------------------------------------------------------------------
\5\ The diskette must be 3\1/4\ inch, IBM-compatible form and
use MS-DOS 5.0 and WordPerfect 5.1 software, in ``read-only'' mode,
and labeled with the carrier's name, tariff number, and date of
submission.
---------------------------------------------------------------------------
2. Surface Transportation Board
One commenter suggested that because the STB ``requires the filing
of pleadings and reports in electronic form, which permits those
agencies to analyze filings electronically,'' that modifying ATFI is
not the only feasible
[[Page 11195]]
approach available to the Commission. NITL, 7. A review of the STB
regulations on filing methods, however, indicates that the STB has not
reached an electronic panacea for filing. For the filing of summaries
of railroad contracts for the transportation of agricultural products,
the STB requires that ``two copies of each contract summary'' be filed.
49 CFR 1313.4(a)(1). There does not appear to be an electronic option
for this type of filing. For the filing of tariffs for the
transportation of cargo by or with a water carrier in a noncontiguous
domestic trade, the STB requires that ``tariffs shall be printed on
paper not larger than 8\1/2\ x 11 inches.'' 49 CFR 1312.4(b). Filers
for these tariffs do have the option of electronic filing; however,
that option is accomplished through the FMC's ATFI system. 49 CFR
1312.17. Obviously, this option will be eliminated with the removal of
the ATFI system, and there appears to be no contemplation by the STB
for the implementation of a new method for receiving these filings
electronically after ATFI is discarded.
The notice requirements, on the other hand, under STB regulations
may be achieved electronically, but only where there is agreement
between the parties. See, e.g., 49 CFR Sec. 1300.2(b); 1300.4(b);
1305.2(b),(c); 1305.3; and 1305.4(a),(b). These notice requirements are
between carrier and shipper and are not official filings.
3. Federal Energy Regulatory Commission
While none of the comments referred to the approach of FERC, the
Commission has investigated FERC's approach to the crafting of a viable
electronic filing system. FERC issued a Notice of Inquiry on May 19,
1998 (Docket No. PL98-1-000, 63 FR 27529-27533) requesting comments on
various issues which arise with the implementation of electronic
filing, including formats, citations, signatures, methods of
transmission, confidentiality, security, attestation and service. FERC
held a conference on electronic filing on October 22, 1998. FERC has
since taken a broader, agency-wide approach for completely re-
engineering its methods for accepting filings and managing documents.
For the present, the official copies of filed documents are still in
paper form. FERC staff manually scans those documents which are not
filed electronically (about 120,000 pages per month) but hopes to
achieve a system which would provide for hyper-linking all public
filings in a particular docket to the docket sheet so the user has the
ability to select a document on the docket sheet list and go to the
full text of the document immediately.
Due to the general response in opposition to adapting the ATFI
filing system for service contract filings, the Commission will make
available an option which will address most of the commenters' concerns
that the proposed regulations would be too rigid, cumbersome and
costly. Interactive internet filing of service contracts with the
Commission will be provided, and while the dial-up system will be
available, the Commission expects to phase it out as soon as possible,
but certainly no later than the end of Fiscal Year 1999.
Specific details on internet-based filing will be made available on
the Commission's website (http://www.fmc.gov) when final development
and testing is complete. This option will provide for interactive
internet filing of service contracts via the Commission's homepage.
Individuals filing service contracts will presumably already have filed
Form FMC-1, registering them as tariff publishers, and will have been
assigned an organization number. Upon review, the Commission will
provide prospective service contract filers with a user ID and
password. A service contract filer will sign on to the Commission's
website and provide its user ID and password. A screen will then
indicate several options (e.g., filing a single contract, amendment or
batches of contracts or amendments) in addition to detailed filing
instructions. A single initial service contract will be filed by
providing certain basic information such as a carrier contract number
(which will enable linking of amendments to the initial contract),
effective date, organization number, and the location of the service
contract file which will be uploaded to the Commission upon activating
the screen's ``submit'' button. Amendment filings will be done in the
same manner, with the addition of a filer-provided service contract
amendment number. Batch filings will require similar information for
each contract, but will enable the filer to submit more than one
contract per session. Finally, the Commission foresees assessing user
fees at a later date, as the Commission gains experience and the
details of the system are completed.
Therefore, Sec. 530.8 and appendix A to this part, in which the
options for filing are detailed, are accordingly revised to reflect the
addition of internet-based filing.
Section 530.8 and Appendix A Transition Issues
Several commenters request that the Commission accept paper filings
of service contracts as well as electronic filings for a transitional
period. COSCO, 1-2; CMA, 3; JUSEFC, 5-7; OCWG, 6; P&O, 4; NITL, 7;
DuPont, 5. OCWG recommends that such a transition period be at least
one year. OCWG, 6 n.1. OCWG also asserts that there is no need to have
a system in place on May 1, 1999. OCWG, 5. P&O also suggests that if
the Commission needs more time to put an electronic system into place,
it can receive paper filings. P&O, 4. Only BSA and the filing services
(PTCB and ETM) support the immediate adoption of electronic-only
filing. BSA, 5.
A satisfactory response to the commenters' general opposition to
the modification of the Automated Tariff Filing Information (``ATFI'')
system and their general support for electronic filing is achieved by
the Commission's determination to offer an alternative filing method to
the modified ATFI filing which is internet filing (herein referred to
as ``internet-based'' or ``option 1''). This option offers filers great
ease and flexibility, while allowing the Commission to receive the
entirety of the contract information and to organize those filings for
the Commission's monitoring and enforcement duties. Furthermore, most
of the commenters' concerns about the rigidity and the cumbersome
nature of the dial-up filing system are removed with the implementation
of this filing method.
While most comments oppose any transitional system which does not
include a paper option, the flexibility of the new system will make it
extremely easy to file. Filers need only have created their contract on
one of several word-processing systems and have access to the internet.
It is not unreasonable to expect that carriers have access to this
equipment, or that if they do not, they may choose to out source the
filing. Removal of the requirement that they use a dial-up system
appears to enable all carriers to do their own filing, if they wish to
do so, thus removing any confidentiality concerns they expressed in the
comments regarding the use of third party filing services.
The Commission intends to allow the filing of service contracts
which have an effective date of May 1, 1999 or later in advance of May
1, 1999, as soon as filing systems are ready. The Commission
contemplates that the systems could be ready in the week
[[Page 11196]]
prior to May 1, 1999. The Commission will issue further advisory
notices of the status of the availability of the revised filing systems
as information becomes available.
Again, due to the expense of maintaining the dial-up service, the
Commission expects to phase it out as soon as possible, but certainly
by the end of FY 1999. Finally, the Commission will request further
industry input, if necessary, as it refines the internet-based system.
Section 530.8(c) and 530.12 Cross Referencing
Two comments generally voice support for the regulation allowing
for the cross-referencing to tariffs and general rules filing as part
of service contract register. BSA, 16; JUSEFC, 7. BSA recommends that
the Commission make available on its FMC website the general rules
tariff of any carrier or conference and periodically inspect that
tariff to determine that changes made by amendments have been made, and
thereby ensure that the shipping public will be able to obtain
necessary information regarding applicable items (e.g. rules for
hazardous cargo). BSA, 16.
P&O comments that the proposed regulation's prohibition against
cross-referencing has no support in OSRA and no reasonable regulatory
purpose, and that as such it should be withdrawn and the regulations
should allow cross-referencing to a carrier's own tariff as well as its
conference tariffs. P&O, 8. NITL and OCWG, as a means to allow greater
commercial flexibility, both support revision of Sec. 530.8(c)(2) to
allow cross-referencing not only to tariffs but also to ``widely
available public information.'' OCWG, 19; NITL, 13. OCWG recommends
that the Commission add to Sec. 530.8(c)(2) the phrase, ``or unless
those terms are available in a regularly published and readily
available public source commonly known in the industry.'' OCWG, 18-19.
NITL also believes that this change will ensure that the Commission
could obtain all of the contract's terms. NITL, 13.
The Commission, in an effort to make filing less burdensome for
carriers, but while ensuring that it had the entire contents of, or
access to, the service contract terms, proposed that carriers may
``cross-reference'' their own tariff publications or their conference
tariff publications in their filed service contracts. This provision
was intended to allow carriers to refer to rules of general
applicability (free time and demurrage, bunkering rates, currency
matters, etc.) for the ``boilerplate'' or terms which appear in all
their contracts. Further, the Commission recognized that it was
Congress' intent, by lifting the requirement that tariffs be filed with
the Commission, to allow parties to service contracts more freedom and
flexibility in their commercial arrangements. For those reasons, the
proposed rule, originally numbered Sec. 530.9(c)(2), was drafted to
permit filed service contracts to refer to terms outside the four
corners of the filed service contract, but only if they are contained
in the carrier's or conference's tariff publication. P&O appears to
have misread the proposed rules as not allowing any cross-referencing
whatsoever. This was not the intent of the proposed rules. Rather, the
regulation would have allowed cross-referencing, but only to matter
contained in a published tariff of the carrier or conference of which
it was a member.
However, in response to comments that allowing cross-referencing
only to published tariff matter would unduly stifle the parties'
contract terms, the Commission has decided to allow cross-reference to
a ``publication widely available to the public and well known within
the industry.'' Sec. 530.8(c)(2). The Commission wishes to stress,
however, that exact terms of the contract must be determinable and
certain, in keeping with the requirements of the Act. In response to a
comment by COSCO that this approach would undermine the confidentiality
of the contract terms, we point out that any term, except of course
published essential terms, can be kept confidential by inclusion in a
general rules filing or by filing in the text of the contract itself.
The Commission is confident that this approach will satisfy both the
concerns of filers for confidentiality, and the requirement that the
complete contract be filed.
Section 530.8(b)(9) Naming Affiliates
AISA believes that proposed Sec. 530.8(b)(9) should be amended to
remove the requirement that shippers' associations name all of their
members. They assert that this requirement is not mandated by any
change made by OSRA and is contrary to current Commission regulation
and policy which requires only such naming if the contract specifically
excludes or includes specific members. AISA, 7. AISA is concerned that
such disclosure would give carriers blackmail potential, as was found
in Fact Finding 15, and Docket 91-1. AISA, 8.
AISA suggests the provision be revised to read as follows:
(9) The legal names and business addresses of the contract
parties; the legal names of affiliates entitled to access the
contract, except that in the case of a contract entered into by a
shippers' association, individual members need not be named unless
the contract includes or excludes specific members; the names,
titles and addresses of the representatives signing the contract for
the parties; and the date upon which the service contract was
signed. An agreement service contract must identify the FMC
Agreement Number(s) under which the service contract is filed.
Carriers, conferences, and/or agreements which enter into contracts
that include affiliates must in each instance either: (further
unchanged).
AISA, 10.
CMA and NITL agree that reporting all names and addresses of
shippers would be unnecessarily burdensome. CMA, 2; NITL, 12-13. NITL
questions the purpose of this requirement. NITL, 12. If the Commission
has a question about identity or location of a particular affiliate,
NITL suggests that it obtain the information informally, on a case-by-
case basis. Therefore, NITL argues, this requirement should be either
deleted or the production period of 10 days should be increased. NITL,
12.
The deletion of the exception for shippers' associations being
required to list all members in a service contract was a drafting
oversight. We therefore re-insert the exception. However, the
production period of 10 days was fully explored when the currently
effective rule was put into place and this will be unchanged. OSRA
makes no changes which would have an impact on this requirement.
APL complains that proposed Sec. 530.8(b)(9)(ii) (identifying
affiliates) is unintelligible, as it is unclear to whom the
certification information must be provided. APL, 4. Further, it asserts
that the last two sentences of the paragraph seem to be unrelated to
clause 9(ii), and requests clarification of the regulation. APL, 4.
Section 530.8(b)(9) as proposed reads, (the filed contract or
amendment shall include)
(9) the legal names and business addresses of the contract
parties; the legal names of affiliates entitled to access the
contract; the names, titles and addresses of the representatives
signing the contract for the parties; and the date upon which the
service contract was signed. An agreement service contract must
identify the FMC Agreement Number(s) under which the service
contract is filed. Carriers, conferences and/or agreements which
enter into contracts that include affiliates must in each instance
either:
(i) list the affiliates' business addresses; or
(ii) certify that this information will be provided to the
Commission upon request within ten (10) business days of such
request. However, the requirements of this section do not apply to
amendments to contracts that have been filed in accordance with the
[[Page 11197]]
requirements of this section unless the amendment adds new parties
or affiliates. Subsequent references in the contract to the contract
parties shall be consistent with the first reference (e.g., (exact
name), ``carrier,'' ``shipper,'' or ``association,'' etc.);
The Commission has re-drafted this provision for clarity, and these
alterations should sufficiently address the reasonable concerns of the
commenters.
Appendix A General Rules Filings
COSCO and JUSEFC comment that allowing filers to make general rules
filings or register filings is beneficial and will allow carriers to
avoid repetitious filing. COSCO, 1; JUSEFC, 7. COSCO urges that
publishing general rules in a tariff would be unacceptable because of
the confidentiality issues and, further are concerned that such
publication would require a thirty-day delay for the implementation of
such rules. COSCO, 1.
ETM is concerned that the proposed regulations are unclear as to
whether the Commission would allow for multiple service contract
registers, and whether the registers are to be based on strict location
group application or if overlapping scopes are allowed. ETM 2-3. Both
ETM and PTCB foresee future problems if the Commission intends for the
registers to be unique, such as by location group, without conflicting
scopes or overlapping of scopes and does not allow different and
overlapping scopes between registers. These problems may include
amendment numbering, effective dates and contract terms. ETM 2-3; PTCB,
9.
Other comments disfavor allowing service contract registers as
being unnecessary, burdensome and without meaningful regulatory
purpose. P&O, 7. P&O further comments that using a service contract
register for general rules filing seems contrary to the continued
requirement to publish essential terms where carriers have
traditionally published, and they assume would continue to publish,
their ``boilerplate.'' P&O, 7.
The provision for a ``general rules'' filing is somewhat
complicated by the fact that there may be two electronic filing systems
in place. However, the Commission allowance of more liberal cross-
referencing as well as a filing system which would accept the full text
of the document in a word processing format (i.e., the same as the
document signed by the parties), this should relieve any burden on
filers to file with the Commission anything other than the commercially
agreed upon service contract, and should be adequate for the Commission
to determine the terms of the contract with precision.
Other Term Requirements
Many of the system requirements and restrictions opposed in the
comments diminish, if not completely disappear, with the addition of
the option for a web-based filing system. First, PTCB's concern that
ATFI will not accept port ranges disappears when filers file the full
and original text of their contract on-line. PTCB, 5. The Commission
has revised the regulations relating to the ATFI-based system to allow
the filed matter+ to reflect the true agreement of the parties, to the
maximum extent possible, given some inherent technical limitations of
that system.
The same is true for location and commodity descriptions: There
would be no need to require NIMA or WPI locations, or to use the
Harmonized Schedule for commodity descriptions in a ``free text''
system. OCWG, 21; P&O, 8; NITL, 11; Conagra, 4. The Commission agrees
that this unduly limited the parties in contracting and might cause
confusion, and so has removed references to the US HTS, NIMA and WPI in
the interim final rule.
For duration requirements, however, the Commission will continue to
require service contracts to have specific effective and expiration
dates. P&O, 7; NITL, 12. This is required by the statutory definition,
that a service contract be ``a commitment * * * over a fixed time
period.'' Section 2(19) of the Act. See below, discussion on amendments
for renewal of service contracts.
System requirements may also dictate the Commission's ability to
allow filers to have access to their filed contracts for reviewing and
auditing. PTCB, 3. At first blush, this may create confidentiality/
security issues which are, at present, unforeseen. While the new system
may give the filer the ability to review (on a read-only basis) its
filings, the contents of a filed service contract may only be changed
through a subsequent filed amendment or correction.
Finally, the Commission will make the addition of a provision which
requires agreement-authorized service contracts to include the filed
agreement number, Sec. 530.8(d)(3), and a provision for filers to
inform the Commission where the statement of essential terms will be
filed, Sec. 530.8(d)(4). For the reasons described above, the proposed
regulation is revised to add the alternative system, remove unnecessary
requirements and further simplify the filing procedures.
Section 530.9 Notices
Proposed Sec. 530.9 (as renumbered) requires the carrier party to a
service contract to notify the Commission within 10 days of the
occurrence of certain events which affect the service contract. Those
events include: Correction ((a)(1)); cancellation ((a)(2)); termination
not covered by the contract ((a)(3)); adjustment of accounts (by re-
rating, liquidated damages, or otherwise under Sec. 530.16)((a)(4));
final settlement of any account adjusted as described in Sec. 530.16
((a)(5)); and any changes to the name of a basic contract party or the
list of affiliates, including changes to legal names and business
addresses, of any contract party entitled to receive or authorized to
offer services under the contract ((a)(6)).
Commenters suggest that there is no need for the Commission to
receive notice of matters which are affected by amendment of the
service contract because such amendments are filed with the Commission.
NITL, 15. They suggest that the events which are enumerated in the
proposed regulation are events that would require such amendment.
CMA and NITL believe that requiring changes to be reported within
ten days is overly burdensome. CMA, 2. NITL suggests that if the
proposal is not completely deleted, the time period should be
lengthened to ninety days. NITL, 15-17. In the original regulation,
found at Sec. 514.7(g)(2), notices were required to inform the
Commission within thirty days of such events, and that period of time
was based on the commercial practice for settlements of accounts.
The proposed rules reduced the time in which notification must be
made from thirty to ten days based on an understanding that this would
be in line with the speed at which these transactions now occur and
that, therefore, no additional burden would be created for regulated
entities. However, due to the commentary to the contrary, the
Commission has decided to simply revert to the former requirement of
thirty days.
NITL and DuPont comment that the requirements cover too many
events, and are overly broad. DuPont asserts that such notices should
only be required to be reported when events occur which affect the
essential terms of the service contract. DuPont, 2. The proposed
regulation would give the Commission power to limit, restrict and
dictate the content of changes to service contracts. DuPont, 2.
Contrary to these assertions, the Commission will continue to
require that all changes to a filed service
[[Page 11198]]
contract must be filed with the Commission, not only those which effect
the essential terms. The Commission must monitor the operation of
service contracts for acts prohibited by the statute and simply cannot
fulfill this duty if it is not guaranteed of having all the terms of
service contracts within its jurisdiction.
The comments suggest the proposed regulation be altered to permit
periodic reporting, perhaps on a semi-annual basis in a prescribed
format (but not one which would restrict the parties right to mutually
alter, modify or terminate) of routine changes which effect essential
terms. DuPont, 2,3. CMA suggests this approach for changes to shipper
affiliates only. CMA, 2.
Proposed Sec. 530.9 (as renumbered) was adapted from original
Sec. 581.5(b) (52 FR at 23939, 23999), which the Commission asserted
was
necessary to enable the Commission to perform its contract
surveillance role and ensure the terms of contracts are met. The
notice requirements should not be burdensome since such information
is exchanged in the normal course of business by the contract
parties. Compliance with the notice requirement can be met merely by
providing the Commission with a copy of whatever documents are
exchanged between the parties under such circumstances.
The Commission continues to have such a surveillance role, which is
made more important by the fact that service contracts will not be
publicly available. Furthermore, the Commission particularly reminds
filers that any changes to the public essential terms must be updated
in the essential terms publication, regardless of such notification to
the Commission. See Sec. 530.12 (publication).
NITL is correct not only that the Commission ``would like'' to
receive notice, but that it must receive notice of changes in service
contracts in order that it have the complete terms of the contract
which are in effect, and to be aware that a certain filed contract is
no longer in effect. NITL, 15. Also, NITL argues that corrections
should be handled through amendments. NITL, 15-17. If the filer uses
the modified ATFI, the filer will receive a special case number with
which it will make its own corrections. As the Commission itself does
not enter the corrections into the system, the Commission must know
when that is done. The introduction of an alternate system filing may
or may not have the capability of alerting the Commission when a
correction is made, so while there may be no need for notice, the
Commission will continue to require it at this point. See, discussion
regarding correction, Sec. 530.10.
As cancellations (Sec. 530.10(a)(2)) are necessarily only those not
anticipated by the terms of the contract, there is a clear need for the
Commission to have notice of that event. If the termination has
occurred as anticipated by the service contract, we agree, in
accordance with the rationale above, that there is no need for
additional notice to the Commission. If, however, an event has occurred
which was not contemplated by the parties in the service contract but
which affects its operation, the Commission must be so notified in
order to assess whether the parties are employing an unjust device to
obtain rates otherwise not applicable. Similarly, for terminations not
covered by the contract (Sec. 530.10(a)(3)), the parties will no longer
have the right to use the rates in the service contract and there are
section 10(a)(1) concerns.
Several commenters assert that the notification requirements of
Secs. 530.10 (a)(4), (a)(5) and (b) for account adjustments are
unnecessary and arbitrary, intrude into the commercial relationship,
create needless burdens and are outside the Commission's oversight
functions. OCWG, 20; Conagra, 4-5; NITL, 15-17. Notice of account
adjustments and final settlement which are made pursuant to the terms
of the service contract filed with the Commission appear to have no
legitimate basis. NITL, 16. They appear to stem from prior ``me-too''
requirements. NITL, 16.
Again, and contrary to the comments, however, the Commission must
know what the adjustments or final settlements of an account may be,
not to impose the rate differential on the carrier or shipper, but to
ensure that no section 10 violations are being carried out. There is
little burden on the filers in providing this information, as they may
simply copy the information to the Commission as they send it to the
shipper.
Similarly, for final settlement of any account adjusted, the
Commission requires notice. Both of these notice requirements were
``intended to apply to only those service contracts where there has
been a change to the basic compensation required by the terms of the
service contract.'' 52 FR at 23999. The applicable rate must be
determinable at any given time, to ensure compliance with the Act and
section 10(a)(1). Therefore, while parties are free to provide for
liquidated damages, contingencies, etc., in their service contracts,
using a rate from a service contract which is not lawful under the Act
would create section 10(a)(1) and possibly other violations.
NITL comments that changes to names of parties (requirement of
which is discussed supra) should be handled through amendments, and
that additional notice of these should therefore not be required. NITL
15-17. NCBFAA and CMA suggest that there is no need to notify the
Commission of changes to lists of shipper affiliates as required in
Sec. 530.9(a)(6)(ii). NCBFAA, 2; CMA, 2. Furthermore, this is too
burdensome to shippers. NCBFAA, 2; CMA, 2. DuPont recommends that
Sec. 530.9(a)(6)(ii) be altered to eliminate the requirement to report
all names and addresses of shippers (except NVOCC) because identity of
shippers is not an essential term, is not reported to the public and
could be required to be maintained in the records of the carrier,
records which can be obtained by the FMC through subpoena power.
DuPont, 2-3.
Notice to the Commission of changes to shipper parties arises from
the same concerns the Commission has when any other term of the filed
service contract changes. The Commission must have the ability at any
time to examine the filed service contract and assess whether or not
parties (or non-parties) are operating in conformity to the service
contract, or whether they may be employing an unjust means or device to
elude the requirements of the Act. The Commission must be able to
ascertain at any given moment who has the right to access a service
contract.
Furthermore, there appears to be no reason at this juncture for the
Commission to consider whether periodic reporting of changes to who may
have access to a service contract (affiliates) would be adequate to
meet its responsibilities. No change to OSRA mandates such a change,
and the regulation was carried over from prior Commission regulation
found at 46 CFR 514.7(g)(2).
OCWG complains that proposed Sec. 530.9(b) (notice to contract
party) fails to acknowledge commercial realities, including the
sometimes protracted negotiations and communications delays relating to
the covered subject matter and, further, that carriers and shippers
have both regulatory and commercial incentives to promptly pursue their
contract rights. Thus, they argue, there is no reason to graft further
deadlines onto the commercial relationship. OCWG, 20-21.
Originally, this provision was crafted with respect to the general
commercial practice of settling accounts in thirty days; additional
time was provided, and the regulation as adopted required notice to the
shipper party of the final settlement of account within 60 days of
[[Page 11199]]
the termination of the contract. 52 FR 23999.
OSRA shifts parties' remedies to their common law contract rights,
and as such, this provision appears to be no longer necessary, as it
was originally intended to protect the shipper party. With the
deregulatory goals of OSRA, parties are expected to protect their own
contract rights and as such the Commission's role as mediator between
the parties for contract disputes is removed. Accordingly,
Sec. 530.10(b)(as originally numbered) is deleted completely.
Section 530.10 Amendment, Correction and Cancellation
The proposed regulation provides that either party to a filed
service contract may request permission to correct clerical or
administrative errors in a filed service contract by filing a request
with the Commission's Office of the Secretary within 45 days of the
contract's filing with the Commission, for a fee of $233 pursuant to
Sec. 530.11(c)(4). Any notices in connection with the filing of such
corrections would be filed with the Commission under Sec. 530.9 within
10 days. Amendments are intended by the rule as proposed to be filed in
the same manner as initial service contracts. Finally, cancellation of
the service contract is provided for by this section.
COSCO requests clarification about what rules, and specifically
whether confidentiality, will apply to service contract amendments
filed after May 1, 1999, where the original service contract was filed
before May 1, 1999. COSCO, 2.
Amendments filed on or after May 1, 1999 to service contracts filed
before May 1, 1999 must comply with the regulations in effect as of May
1, 1999. The Commission expects that many parties to service contracts
entered into before May 1, 1999 may wish to obtain confidentiality for
more of their service contract terms under OSRA, and therefore will
terminate the contracts, write new ones and file them in their entirety
rather than simply making amendments. As we previously indicated, the
Commission will strive to have the filing systems ready to accept
service contracts in the week prior to May 1, 1999 and thereby allow
the filing of service contracts which have an effective date of May 1,
1999 or later as soon as possible.
Two commenters believe that requiring a formal correction
proceeding and justification for correcting clerical errors of proposed
Sec. 530.10(b) incorrectly carries over provisions from the previous
regulations on ``me-too,'' which has been eliminated by OSRA. CMA, 2;
DuPont, 3. It appears that confusion has arisen among the commenters
regarding the differences between the terms ``correction'' and
``amendment'' to a service contract filed with the Commission under the
Act. Parties to a filed service contract are free to amend its terms
prospectively at any time, by filing their amendments pursuant to
Sec. 530.8. Meanwhile, the ability to correct clerical or
administrative errors retroactively helps contract parties avoid undue
hardships in instances where the parties discover, subsequent to filing
a contract with the Commission, that a clerical or an administrative
error had been made.
There is utility to having in place a procedure by which the
parties may correct inadvertent errors through the correction
procedure. However, this procedure must be structured so as to enable
the Commission to distinguish between legitimate requests and requests
crafted to avoid the statutory requirements of the Act, regardless of
the fact that me-too rights have been eliminated by OSRA. The ability
to change provisions retroactively without Commission scrutiny would
undermine the clear intent of section 10(b)(2)(A) which provides that
no common carrier, either alone or in conjunction with any other
person, directly or indirectly may provide service in the liner trade
that is not in accordance with the rates, charges, classifications,
rules, and practices contained in a tariff published or a service
contract entered into under section 8 of OSRA.
Furthermore, allowing parties to ``correct'' retroactively terms of
the filed service contract would make any such agreement illusory and
thereby bring it outside the requirements contained in section 2(19) of
the Act that a service contract be certain and contain commitments on
the parts of both parties. It appears that allowing for corrections
(retroactive) and amendments (prospective) to filed service contracts
provides more than adequate flexibility for parties to take advantage
of their commercially negotiated arrangements while ensuring adherence
to the Act's requirements.
CMA asserts that the Commission has no authority to accept or
reject a contract change, as it is a matter for the parties. CMA, 2;
DuPont, 3. NITL believes it is nonsensical to require permission to
correct a clerical error. NITL, 17. We disagree. The authority for the
Commission to scrutinize a retroactive change to a service contract is
based on the requirement of section 8(c) of the Act that service
contracts be filed with the Commission and that they reflect certain,
meaningful commitments. Thus, allowing parties to make retroactive
corrections devoid of any review or oversight would render that
statutory requirement meaningless.
CMA argues that there should be no distinction between changes that
are made prospectively (amendments) and changes that are made
retrospectively (corrections). CMA, 2. Again, we disagree, and point
out that the Commission has made such a distinction: the terms of
corrections, but not those of amendments, are subject to Commission
review before they may be made.
Two commenters complain that the correction procedure is
excessively burdensome. NITL, 15; NCBFAA, 2. Further, NITL argues, the
fee for corrections is too high. NITL, 17. The service fee associated
with such requests became effective November 2, 1998, and reflects the
costs incurred by the Commission in providing this service to the
parties which elect to use it. Correction requires a significant amount
of work by Commission staff, because the request must be scrutinized to
ensure it is not an attempt to circumvent the requirements of the Act.
Again, the need for notice of correction (see Sec. 530.9(a)) will
depend on the capabilities of the filing system.
PTCB comments that filers should have access to their filings to
check them for errors and to audit them. PTCB, 1. The read-only access
to filings may be possible, but certainly filers will have no ability
to change their filings (except by amendment) once submitted to the
Commission's database for the reasons set forth above.
NITL comments that the 45-day period by which filers must report
clerical and administrative errors is too short. NITL, 17. This
deadline, however, has been a longstanding requirement of the
regulations and the Commission is unaware of complaints of hardship in
the past. Furthermore, given the recent advances in communication
technologies, 45 days would be more than adequate time for parties to
detect clerical errors in their service contracts. Also, the
requirement that such request be filed within a 45-day period for a
service fee encourages contract parties to carefully review contracts
before submitting them to the Commission and to take corrective action
without undue delay. Finally, the Commission has previously fully
assessed the time period required for requesting a correction, and it
is not apparent why this analysis would have changed. Docket No. 88-61,
54 FR 1363 (Jan. 13, 1989).
[[Page 11200]]
The correction procedure set forth under Sec. 530.10 will serve a
useful purpose and will be maintained. Experience has shown that there
will likely be only a minimal need to file such requests: during FY
1998, only four such requests were filed with the Commission and this
number is not anticipated to increase significantly in the future,
particularly given the Commission's determination to encourage contract
parties to file their actual arrangements rather than arrangements
``translated'' into FMC formats.
Commenters complain that Sec. 530.10(c)(2)(cancellation) is
anachronistic and urge the Commission to delete the provision. One
commenter complains that these provisions are inconsistent with general
principles of contract law and would penalize shippers in situations
where both the shipper and the carrier believe the termination is in
their self-interest, and as such is not appropriate in a marketplace
oriented system, such as the one OSRA contemplates. AImpSA, 1-2. NCBFAA
complains that the proposed rule is burdensome and inappropriately
harms shippers when the carrier may not have suffered any damages due
to unilateral cancellation of a service contract. NCBFAA 3,4. NCBFAA
also complains that it is unfairly punitive to re-rate at tariff rates
when a shipper cancels a service contract. NCBFAA, 3,4.
The Commission has concluded to redraft this section to reflect the
very limited situations in which re-rating will be required. First, we
point out that the rejection provision has been eliminated. Second, re-
rating, as discussed below, will only be required in situations where a
filed service contract has not contemplated and which the parties have
not determined to amend the contract. If there is a liquidated damages,
or another fall-back rate provision, there will be no need to re-rate
cargo which has already been carried. Therefore, most of the shippers'
concerns that they may be held unreasonably accountable for a carrier-
filer's filing mistakes are removed.
The Commission first added the allowance that parties prospectively
may amend their filed service contracts in Docket 92-21, 57 FR 46318
(Oct. 8, 1992). There, the Commission noted that the parties may make
retroactive corrections of clerical or administrative errors through
the corrections procedure. Id. at 46318. Second, the Commission noted,
the parties can similarly provide for substantive modifications through
contingency clauses. As pointed out below, examples of such contingency
clauses had been listed in Sec. 514.17 (d)(7)(viii).6 As
further discussed in the supplemental information to this regulation,
any of the terms of the service contract may be amended with
prospective effect. 57 FR at 46322.
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\6\ That section read, in pertinent part, Later events causing
deviation from ET (if any); Where a contract clause provides that
there can be a deviation from an original essential term of a
service contract, based upon any stated event occurring subsequent
to the execution of the contract (this term) shall include a clear
and specific description of the event, the existence or occurrence
of which shall be readily verifiable and objectively measurable.
This requirement applies, inter alia, to the following types of
situations:
(A) Retroactive rate adjustments based upon experienced costs;
(B) Reductions in the quantity of cargo or amount of revenues
required under the contract;
(C) Failure to meet a volume requirement during the contract
duration, in which case the contract shall set forth a rate, charge,
or rate basis which will be applied;
(D) Options for renewal or extension of the contract duration
without any change in the contract rate or rate schedule;
(E) Discontinuance of the contract;
(F) Assignment of the contract; (or]
(G) Any other deviation from any original essential term of the
contract.
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The terms amendment, correction and cancellation are clarified by
the revised section. It is apparent that commenters are confused about
the reasoning behind the distinction the Commission has made in the
past. Further, we point out that the Commission's Bureau of Tariffs,
Certification and Licensing (``BTCL'') received only four petitions for
correction last year. This is simply an issue which has not been a
problem in the past, but which the Commission will continue to monitor
against the abuse of procedures such as correction to evade the
prescriptions and prohibitions of the Act.
Therefore, due to the apparent confusion of the comments over the
distinction between the terms correction, amendment, and cancellation
the proposed regulations are revised to include definitions of these
terms.
Section 530.12 Publication of Essential Terms
OSRA continues to require the publication of certain essential
terms of service contracts and instructs carrier parties to service
contracts to make these essential terms available to the public ``in
tariff format.'' Section 530.12 of the proposed regulation suggested
that carriers and conferences should be able to satisfy this obligation
in the same way they publish their tariff information under proposed 46
CFR part 520. Further, in an effort to assist the shipping public to
find statements of essential terms published according to this part,
the Commission proposed making a list of the locations of all such
publications available on the FMC website. 46 CFR 530.12(f).
OCWG comments that the proposed regulation's requirement that
essential terms be published with the tariffs is misplaced because that
is just format, not location. OCWG, 18. The proposed rule cross-
referenced many of the technical requirements of the newly proposed
tariff publication regulations to effectuate the essential terms
publication required under this part, in an effort to ease the burden
on carriers, and to allow them to take advantage of means by which they
would already publish their tariff information. The Carrier Automated
Tariff regulation, Commission Docket No. 98-29, gives carriers a wide
array of options regarding the location at and method by which they
publish. Therefore, requiring carriers to publish statements of
essential terms alongside their tariffs would not create any new
burdens. Indeed, requiring that a different location be used would
appear to be much more burdensome, as it would not allow carriers to
take advantage of publications they must already make in accordance
with the tariff regulations.
However, the Commission is again faced with issues which arise when
a service contract is entered by members of a non-conference agreement
which does not publish a common tariff with which its service contract
essential terms may be published. One commenter supports the proposal
that individual service contracts are published by the individual, and
that multiparty service contracts are filed by one party, but published
by all the parties. P&O, 8. However, the comments request that the
Commission clarify that for individual service contracts, essential
terms would be published on the carrier's own essential terms
publication and not on a conference's essential terms publication. P&O,
8. We agree that this remains the simplest approach.
Individual carrier service contracts are to be published alongside
that carrier's tariff matter, in a separate document, as outlined in
Sec. 530.12. Multi-party service contracts entered into under the
authority of a conference must be published alongside the conference
tariff, and not in the individual member's tariff.
For service contracts jointly entered into by multiple parties of a
non-conference agreement, the publication of the statement of essential
terms will be published as for individual service contracts, but note
must be made of the
[[Page 11201]]
relevant FMC-designated Agreement number. Commenters assert that, by
requiring a list of fellow carrier participants, the proposed
regulation was adding a non-statutory public essential term: the names
of the carrier parties. With that in mind, together with the
limitations which exist as to tariff-associated statements of essential
terms publication, reference to the agreement number will allow the
public to ascertain whether certain activity is joint or independent.
This approach, while it does not provide the public with a list of
which member is or is not participating in an agreement-authorized
multi-party service contract, will indicate that the service contract
is not an independent, sole-carrier service contract.
One commenter suggested that rather than require all individual
carriers to publish the full text of their non-conference agreement
contract statements of essential terms, simply a reference to where the
published essential terms may be found would be adequate and less
burdensome to carriers. COSCO, 2. Due to the automated nature and the
limited terms which are required to be published in a statement of
essential terms under OSRA, the burden appears to be rather light on
carriers, in comparison to the benefits it provides the shipping
public.
P&O further requests that the Commission clarify the different
publication requirements for non-conference agreement multi-party
service contracts, conference agreement multi-party service contracts
where the conference is the signatory but not all members are
participants, and conference agreement multi-party service contracts
where the carriers themselves are the signatories. P&O, 8. We agree
that for statements of essential terms, because the terms are public in
contrast to the balance of the filed matters, there is no corresponding
issue of confidentiality. The clarification in Sec. 530.12 will
indicate that service contracts which are entered jointly by members of
conferences, regardless of signatory, must be published with the
conference's tariff and not in the individual carrier's publication.
For an independent service contract, the statement of essential terms
will be published with the individual carrier's tariff publication, but
not with the conference's tariff. Allowing such would lead to public
confusion.
ETM requests that the Commission provide further clarification
regarding the failure to make published essential terms
contemporaneously available. ETM, 1. We reiterate that such liability
would rest on the carrier parties to a service contract under the
Commission's jurisdiction, regardless of the appointed agent for
publishing.
Section 530.13 Exceptions
One commenter asks the Commission to clarify in supplementary
statements that service contracts which are limited to the carriage of
used military household goods and personal effects, or shipments of
used household goods and personal effects of civilian executive
agencies tendered to OTIs under the International Household goods
program, administered by GSA, or both, are required to be filed with
the Commission. HGFAA, 3. The exemption for used military household
goods, granted by the Commission under section 16 of the Act, exempts
those services from the tariff filing requirement only. The language in
the rule as revised should remove any confusion.
The inclusion of the phrase, ``as those terms are defined in
section 3 of the Act'' appears to adequately address any concerns
regarding the definitions for exempted commodities. The one exception
to this is for the term ``motor vehicle'' which is not defined by the
Act. Therefore, the addition of that term to the definitions,
Sec. 530.3, which mirrors the terms definition in the Commission's
regulation on Carrier Automated Tariffs Systems (Docket 98-29) will
adequately address such concern. It does not appear necessary to
further repeat other definitions here.
The proposed regulations also provided for ``non-acceptance,'' a
new term reflecting the congressional mandate that the Commission not
accept for filing service contracts which cover only excepted
commodities. It appears now that this was a confusing new term. The
term ``non-acceptance'' has been removed from the regulation, and the
provisions in this section should otherwise adequately address
``mixed'' contracts.
The Commission will retain the provision requiring any service
contracts which are filed to relate to commodities or services for
which a tariff rate can be established. This is because the situation
may arise in which the Commission would require re-rating, and for such
re-rating, an ``otherwise applicable rate'' would be required. While
such need may be very rare, those concerns remain for replacement
applicable rates for such situations.
Finally, issues arise similar to those discussed under the sections
on rejection and re-rating. For the reasons discussed, mixed commodity
contracts may only be filed if a replacement rate is available. We
therefore revise the proposed regulations to clarify this approach.
Finally, as it was repetitious, Sec. 530.15, as originally numbered in
the proposed regulation, entitled ``non-acceptance'' is deleted
entirely, and the following sections have been accordingly renumbered.
Proposed Sec. 530.15--Rejection
Several comments remark on the Commission's authority and criteria
it would use for rejection of service contracts as presented in
proposed Sec. 530.15. Commenters generally argue that the Commission
may only reject service contracts submitted for filing if they do not
meet the requirements of the Act, but that the Commission does not have
the authority to reject them on the basis that they do not meet the
requirements of the Commission's regulations. OCWG, 19-20; CENSA, 3;
P&O, 6; NITL, 19. IBP urges the Commission to revise the regulation,
and to provide more guidance on when a service contract could be
rejected and suggests that rather than a general reference to the Act,
this section refer to the requirements in Sec. 530.8 (as renumbered).
IBP, 1. Finally, P&O complains that the Commission is wrongfully
attempting to intrude on the commercial nature of service contracts
through rejection. P&O, 6.
Commission regulations currently outline the procedures for
rejection of service contracts and essential terms filed with the
Commission. 46 CFR 514.7(j). The Commission rejects service contract
essential terms publications filed into the ATFI system which do not
conform to the requirements of the Act or Commission regulation,
including timeliness of filing and adequacy and accuracy of the
publication of the statement of essential terms. The proposed
regulation attempted to adapt the current rejection rules as necessary
to meet the changes to the Act made by OSRA.
JUSEFC recommends the re-insertion of Sec. 514.7(j)(2) which
specifies that rejection is limited to those instances where parties
fail to file a corrected copy. JUSEFC, 8-9. The filer, they comment,
should be given a chance to cure even if the deficiencies are major,
and a notice of intent to reject be sent to the shipper party, because
the sanction of re-rating is too harsh on the shipper who relies on the
carrier party to do the filing. IBP, 2. This argument is considerably
diminished, as the Commission under section 13(f)(1) of the Act as
revised by OSRA no longer has the ability to order shippers to pay the
undercharge if there is an
[[Page 11202]]
enforceable agreement in writing.7 See infra, discussion of
re-rating at Sec. 530.14, originally numbered Sec. 530.16 in the
proposed regulation.
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\7\ This does not, however, relieve parties of liability for
acting pursuant to an unfiled service contract.
---------------------------------------------------------------------------
Several commenters request that the Commission decrease the
``review period'' and increase the ``cure period'' proposed in the
regulations. COSCO requests that the Commission shorten the review
period from 20 days to 1 day. COSCO, 2. OCWG also recommends a no-
penalty cure period of 20 days. OCWG, 20.
NITL suggests amending Sec. 530.15(b) as proposed to read:
Within 20 days after the initial filing of an initial or amended
service contract, the Commission may reject a service contract that
does not conform to the requirements of section 8(c) of the 1984
Act. Prior to rejection, the Commission shall provide notice to the
filing party of the deficiencies in the contract and shall provide
such party 20 days to cure the deficiencies. A failure to cure the
deficiencies within the stated time period will result in rejection
of the contract. The filer of the contract shall notify the shipper
of any contract rejection within 10 days of its receipt of notice of
rejection. Until the cause for potential rejection is cured, no
cargo may be transported under the contract following the receipt of
notice of the rejection by the shipper.
NITL, 21
JUSEFC suggests a two-tier approach to review. First, they suggest,
a short period (3 days) in which the Commission would determine whether
there is a serious enough breach as to require rejection ab initio,
notify the filer and give it the opportunity to make corrections. Then,
a second period (10 days)(if the deficiency is not corrected) for
continuing review, after which (again if not corrected), rejection
would be effective as of the close of the correction period, but not as
of the date the contract was originally filed. JUSEFC, 8-9. JUSEFC's
proposal would appear to allow the contract rates to be effective for a
period of up to 13 days, even if the deficiencies are never cured, and
to allow the contract rates to be lawful. JUSEFC, 8-9. This procedure,
JUSEFC claims, would comply with the Commission's practice with respect
to tariff rates rejected after they have become effective as well as
the Filed Rate Doctrine as affirmed in Maislin Industries, Inc. v.
Primary Steel, Inc., 497 U.S. 116 (1990).8
---------------------------------------------------------------------------
\8\ The Supreme Court in Maislin construed the Interstate
Commerce Act (``ICA'') requirement that tariffs be filed (49 U.S.C.
10762(a)(1)(1982 ed.)), that carriers were prohibited from providing
services at any other rate other than the filed rate (49 U.S.C.
10761(a)(1982 ed.), and that the Interstate Commerce Commission
(``ICC'') assess those rates for reasonableness. Like the Commission
under the 1984 Act as amended by OSRA, the ICC had the authority to
impose civil penalties for deviation from the filed rate (49 U.S.C.
11902-11904(1982)). However, unlike the Commission under OSRA, the
ICC was directed by statute to order that the difference between the
filed rate and the actual rate be paid. With the addition of the
second sentence to section 13(f)(1) to the Act, the Commission no
longer has either that mandate or authority.
---------------------------------------------------------------------------
With the changes the Commission has made to the filing system, and
the relief from many of the technical requirements which accompany
those changes, the Commission will completely remove the rejection
procedure in the proposed regulation. There will therefore be no
requirement that the Commission conduct a review of service contract
filings according to any deadline. Of course, this would have no effect
on the Commission's ability to review service contract filings for
statutory and regulatory compliance and pursue investigatory or
enforcement action as it deems necessary.
JUSEFC's concern that the Commission has compromised the right of
filing parties to amend their contracts to meet the Commission's
objections and preserve the original effective dates of their contracts
is misplaced. The assertion that parties have a right to ``correct'' or
``cure'' their deficient service contracts and preserve the filing date
is unsupported by any statutory requirement. Commenters who argue for
the Commission to give filers time to correct deficiencies appear to
suggest that the Commission must review filings for facial defects as
they are filed, and further, that if the Commission does not notify the
filer of a deficiency, that the service contract is compliant with the
Act and regulations. While it has been the past policy and practice of
the Commission in the past to review essential terms documents as they
were filed with the ATFI system and its ability to conduct associative
checks, there is no statutory requirement that the Commission give
parties time to ``cure'' their defective filings during which they may
operate under the defective service contract.
The rejection procedure was originally intended to, first, be a
service to filers and, second, to preserve the system integrity of the
data in the ATFI-based statements of essential terms. When transmission
to ATFI failed, BTCL, through the rejection procedure outlined in the
proposed regulations, would notify filers that the essential terms
publication they had attempted to file was defective. The automated
nature of conformity checks made this possible.
Acceptance by the Commission of a document, including an
electronically-filed statement of essential terms does not and never
did, indicate the Commission's ``approval'' of a service contract. The
Commission expects that BTCL, as it detects minor deficiencies in filed
service contracts, may notify the filers and allow for re-filing within
a reasonable period of time, at their discretion, but will not be
required to do so. Therefore, the rejection procedures are deleted
entirely.
Carrying cargo under a service contract before it has been filed
with the Commission is prohibited by proposed Commission regulation
Sec. 530.8(a). Carrying cargo under a defective service contract (for
example, one which does not contain one of the eight essential terms or
which fails to state them with adequate certainty; or does not contain
the shipper certification; or does not conform to the filing
requirements of Sec. 530.8; or does not concurrently publish the four
public essential terms) would be a violation of the Act, and subject to
penalties of section 13 of the Act. The comments reveal confusion on
this point which the Commission wishes to dispel. The filing of a
service contract does not, nor did it ever, imbue the service contract
with any type of Commission approval or imprimatur, any more than would
the filing of a tax return with the Internal Revenue Service.
It has, however, been the past practice of BTCL to informally
notify filers of deficiencies in their service contract filings. BTCL
would provide filers of essential terms statements an opportunity to
cure the defects by re-transmitting the electronic data to the ATFI
system. Furthermore, it appears that BTCL has rarely, if ever, invoked
the predecessor section of this regulation. However, the reception of
the entirety of service contracts in electronic form will significantly
change the method by which the Commission may review the filings.
Therefore, with that, and the following discussion in mind, the
Commission has concluded that the rejection provision of the proposed
rule will be removed.
A service contract is defined by section 2(19) of the Act, as
revised by OSRA, as
a written contract, other than a bill of lading or a receipt,
between one or more shipper and an individual ocean common carrier
or an agreement between or among ocean common carriers in which the
shipper or shippers makes a commitment to provide a certain volume
or portion of cargo over a fixed period of time, and the ocean
common carrier or the agreement commits to a certain rate or rate
schedule and a defined service
[[Page 11203]]
level, such as assured space, transit time, port rotation, or
similar service features. The contract may also specify provisions
in the event of nonperformance on the part of any party.
Two specific requirements for service contracts are found in
section 8(c)(2): First, that the service contract be filed with the
Commission; and second, that it contain seven specific terms. Section
(8)(c)(2)(A)-(G). If the service contract either (1) does not meet the
definition in the Act; (2) is not filed with the Commission; or (3)
does not contain one of the terms required by the Act, it is not a
service contract as defined by the Act.
Finally, the comments agree that the Commission should accept for
filing mixed contracts, but recommend that the requirement that exempt
commodities in such filed service contracts have a tariff rate be
deleted, as there is no need for the Commission to regulate exempt
commodity rates, charges and conditions of service in a mixed exempt
and non-exempt commodity service contract any more than the Commission
has a need to regulate contracts that are exclusively exempt
commodities. P&O, 5. The exempt commodities to which P&O refers are
those exempted from tariff publication and from service contract filing
by the Act in section 8. A service contract of mixed exempt and non-
exempt commodities therefore may not have corresponding tariff rates.
Therefore, in the unlikely event that the service contract is canceled
as described in Sec. 530.10 (as renumbered), and there is no provision
for such cancellation in the terms of the contract itself, there would
be no corresponding tariff rate at which the exempt cargo would be re-
rated. Therefore, some ``general rate'' must be available if an exempt
commodity is to be filed in a service contract, and the proposed rule
will not be amended in this regard. As this is adequately provided for
in Sec. 530.13 as revised, and with regard to the foregoing discussion
of rejection, Sec. 530.15 is deleted entirely and the following
sections are accordingly renumbered.
Proposed Regulation Sec. 530.16--Implementation, Prohibition and Re-
Rating
The proposed regulations in Sec. 530.16 (as originally numbered)
had carried over some of the provisions of current Sec. 514.7(l)(ii)
which read,
In the event of a contract which is not provided for in the
contract itself and which results from mutual agreement of the
parties or because the shipper * * * has failed to tender the
minimum quantity required by the contract: * * * (B) The cargo
previously carried under the contract shall be re-rated according to
the otherwise applicable tariff provisions of the carrier or
conference in effect at the time of each shipment.
The proposed regulations anticipated re-rating 9 for
service contracts with non-conference agreements, but did not address
how the regulations should be changed in recognition of the new
limitations to penalties added by section 13(f)(1) of OSRA. Re-rating
under the proposed rules would take place only if the contract did not
contemplate mutual termination or if the shipper failed to meet minimum
cargo requirements. Many comments generally appear to misconstrue the
congressional intent of the prohibition of 13(f)(1), and the Commission
seeks to clarify the matter in this supplemental information and in the
revised text of the regulations.
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\9\ Such re-rating was proposed to be pursuant to regulation 46
CFR part 530 subpart E, at the tariff rate of the carrier which
actually carried the cargo in question.
---------------------------------------------------------------------------
Commenters have three basic objections to proposed regulation
Sec. 530.16, namely that re-rating by the Commission is: (1) Contrary
to section 13(f)(1) of the Act as amended by OSRA; (2) contrary to the
deregulatory spirit of OSRA; and (3) unfair to the shipper parties to
service contracts.
Several comments point to section 13(f)(1) of OSRA as expressly
forbidding the re-rating provision in the proposed rules. Conagra, 5;
P&O, 6. Other commenters express the belief that re-rating for
rejection based on failure to meet regulatory, as opposed to statutory
requirements. BSA, 11; CMA, 2; Dupont, 4; NITL, 19-20. NITL asserts
that re-rating either for termination by the parties or for rejection
by the Commission would be contrary to OSRA. NITL, 18. NITL comments
that section 13(f)(1) of the revised Act ``expressly prohibits the
Commission or a court from ordering a shipper to pay the difference
between rates that the shipper and carrier agree upon in writing and
that are billed by the carrier, and the rates that are set forth in a
tariff or service contract that would otherwise cover the
transportation movements.'' NITL, 18-19.
BSA remarks that re-rating during the period between initial filing
and rejection by the Commission under Sec. 530.16 is counter to the
deregulatory spirit of OSRA. BSA, 11. Commenters also point to this
deregulatory spirit to support their assertion that Congress intended
parties resolve the question of re-rating due to FMC rejection as a
private contractual matter. BSA, 11. Further, P&O comments, re-rating
is not consistent with the ability of service contract terms to include
liquidated damages or amendments to reduce minimum volume requirements.
P&O, 6. NITL also complains that proposed Sec. 530.10(c)(2) (as
renumbered) appears to be mandating liquidated damages terms (i.e., the
tariff rate) even though parties did not do so. NITL, 19-20.
Comments also cite OSRA's permission to parties to resolve
undercharge matters with a written agreement. Dupont, 4. The proposed
provisions for re-rating, Dupont complains, would deprive parties of
their right to mutually determine settlement of outstanding charges.
Dupont, 3-4. Therefore, if there is any Commission rejection at all,
the regulations should require the Commission to also notify the
shipper of the rejection, and either limit re-rating to shipments made
after receipt of such notice or impose penalty on the carrier alone.
Dupont, 4.
Shippers complain that re-rating for rejection penalizes the
shipper, when it is the carrier who has the responsibility of complying
with the filing requirements. Conagra, 4; Dupont, 4; NITL, 19-20; IBP,
2. Several comments suggest that a solution to this injustice would be
for the regulations to require the filing of corrections within a
specific period of time and to impose a monetary penalty on the filing
carrier for significant filing errors. Conagra, 6; Dupont, 4.
NCBFAA complains that proposed Sec. 530.10(c)(2)(ii) (as
renumbered), which requires all cargo to be re-rated in the event the
service contract is canceled, is arbitrary and punitive. NCBFAA, 20.
Furthermore, proposed Sec. 530.16(b)(2) (as originally numbered) would
unfairly impose the higher tariff rates on the shipper when it is the
carrier who is at fault, especially in a situation, for instance, in
which the Commission rejects a service contract six months after
filing. NCBFAA 4, 5. Our response to rejection arguments is outlined in
the previous discussion of proposed Sec. 530.15 (as originally
numbered) which has been deleted from this interim final rule.
As the comments correctly indicate, OSRA adds a new limitation to
the remedies the Commission may impose on parties with an added
sentence to section 13(f)(1) of the Act, which as revised reads
[n]either the Commission nor any court shall order any person to pay
the difference between the amount billed and agreed upon in writing
with a common carrier or its agent and the amount set forth in any
tariff or service contract by that common carrier for the
transportation service provided.
As explained by Senator Hutchison as she introduced the amendment to S.
414
[[Page 11204]]
which added the above language, the drafters intended to
[r]evise section 13(f) of the 1984 Act to make clear that, while a
common carrier may be penalized for charging shippers less than its
tariff or service contract rates, a carrier should not be able to
collect from the shipper the difference between the tariff or
contract rate and the rate actually charged and agreed upon in
writing. The collection of these so-called ``undercharges'' was a
major problem for shippers when the trucking industry was
deregulated. We want to avoid any recurrence of that problem in
connection with ocean shipping reform.
144 Cong. Rec. S1068 (March 4, 1998) (Statement of Sen. Hutchison).
The intent of the provision was not, contrary to the assertion of
some comments, that parties to a meaningless service contract may
circumvent the prohibitions of sections 10(a) and (b) of the Act. Nor
was it Congress' intent that parties which wrongfully terminate a
service contract have the ability to impose higher rates on an innocent
party for cargo that has already moved. The redrafted regulations at
Secs. 530.10 (as renumbered) and 530.14 (as renumbered) therefore make
it clear that if a service contract does not contemplate termination,
neither can the parties have illegal access to contract rates, nor can
the carrier which wrongfully terminates bill the shipper at the higher
tariff rates. Section 530.14 (as renumbered) indicates re-rating is
only applicable to such cancellation, and prohibition or suspension of
service contracts pursuant to the Commission's authority under sections
9 and 11 of the Act. See, Docket No. 98-25; 46 CFR 560.7.
In regard to comments on the unfairness of re-rating after
rejection, the concerns of the commenters generally become moot with
the elimination of the rejection provisions. The regulations have been
redrafted with these particular shipper concerns in mind. First, the
Commission points out that it is in the best interests of both parties
that a service contract make provision for mutual termination,
unilateral termination, and termination for failure to meet minimum
cargo commitments. It is only in the absence of such provisions in the
terms of the contract itself that the re-rating provisions will apply.
The regulations are intended to ensure that parties conform to sections
10(a)(1) 10 (illusory contract or failure to meet minimum
quantity commitment); 10(b)(1) 11 (carrier billing contract
rate when shipper fails to meet minimum quantity commitment); and
10(b)(2) 12 (failing to charge rate other than that in a
filed and valid service contract) of the Act.
---------------------------------------------------------------------------
\10\ Section 10(a)(1) prohibits any person to, knowingly and
willfully, directly or indirectly, by means of false billing, false
classification, false weighing, false report of weight, false
measurement, or by any other unjust or unfair device or means obtain
or attempt to obtain ocean transportation for property at less than
the rates or charges that would otherwise be applicable.
\11\ Section 10(b)(1) prohibits a common carrier from,
allow[ing] any person to obtain transportation for property at less
than the rates or charges established by the carrier in its * * *
service contract by means of false billing, false classification,
false weighing, false measurement, or by any other unjust or unfair
device or means.
\12\ Section 10(b)(2)(A) prohibits a common carrier to provide
service in the liner trade that
(A) is not in accordance with the rates, charges,
classifications, rules and practices contained in a * * * service
contract entered into under section 8 of this Act unless excepted or
exempted under section 8(a)(1) or 16 of this Act.
---------------------------------------------------------------------------
If a carrier has entered into a contract with a shipper, that
contract would appear to satisfy the requirements of section 13(f)
(``an amount agreed upon in writing'') which would in turn protect the
shipper from having the cargo re-rated; the charged rates would be
those in the service contract. The carrier would likely be hard-pressed
to seek to enforce contract obligations upon a shipper where the
carrier has unilaterally terminated. Finally, depending on the
circumstances, the carrier may be in violation of various proscriptions
of section 10, or the shipper may have a cause of action in court for
breach of contract.
The Commission finds that section 13(f)(1) was particularly
intended to avoid the type of requirement ordered by the Supreme Court
in Maislin. In Maislin, the trustee in bankruptcy of a carrier sought
to recover the difference between amount billed (negotiated rate) and
the tariff rate. Maislin at 135. In response to the deregulatory spirit
of the Motor Carrier Act, the Interstate Commerce Commission (``ICC'')
had instituted a ``Negotiated Rates Policy,'' namely, that the ICC
would not order the shipper to pay the shortfall between a negotiated
rate and a tariff rate. The Court found that the ICC was required by
the Interstate Commerce Act (``ICA'') to review for reasonableness the
rates charged to shippers. Because ``secret'' (negotiated) rates were
unreasonable under the ICA, in the event that those rates were not in
conformity to the tariff rates, the ICC was required by the Interstate
Commerce Act to order the shippers to pay the difference between the
filed rate and the negotiated rate (the ``filed rate'' doctrine).
Maislin at 129. The Court further found that ``if strict adherence to *
* * the filed rate doctrine has become an anachronism in the wake of
the MCA, it is the responsibility of Congress to modify or eliminate
these sections.'' Maislin at 135. With this background squarely in
mind, taken together with the balance of the Act and the remarks of the
sponsors of the bill as finally adopted, it is clear that section
13(f)(1), as added by OSRA, only limits the Commission from ordering a
shipper to pay the undercharge in a Maislin-type situation. The
limitation of section 13(f)(1) was not intended to allow shippers and
carriers to use service contracts as an ``unfair or unjust means or
device'' to avoid the application of the ``otherwise applicable rate''
contrary to other provisions in the Act. If there are no provisions
which anticipate the shipper's failure to meet the minimum cargo
requirements of the service contract and the cargo is not subject to
re-rating, the contract would appear to be illusory. Allowing the
parties to take advantage of an illusory contract would be contrary to
the prohibitions of section 10 and the intent of the Act.
Proposed regulations Secs. 530.10 and 530.14 (as renumbered) are
revised to reflect OSRA's intent that parties to a service contract may
not use that agreement as an unfair means or device to avoid the
otherwise applicable rate.13 Thus, the regulations require
re-rating for cargo which has already moved under a service contract
which is nullified due to a shipper shortfall (unless due to carrier
misconduct) and which is not contemplated by the contract's terms.
---------------------------------------------------------------------------
\13\ The provision will also require re-rating if the service
contract has been prohibited or suspended under sections 9 or 11 of
the Act, pursuant to Sec. 560.7 of this chapter.
---------------------------------------------------------------------------
Finally, subpart D is re-titled, ``Exceptions and Implementation,''
proposed regulation Sec. 530.15 is deleted, and proposed regulation
Sec. 530.16 is retitled ``Implementation'' and correspondingly
renumbered Sec. 530.14.
Section 530.15 (as Renumbered)--Recordkeeping and Audit
P&O comments that the notice of proposed rulemaking did not
adequately explain why this rule is necessary or appropriate. P&O, 7.
Further, it complains, there is no statutory authority for the
requirement, and it is pointless because the service contract is
already subject to a filing requirement. P&O, 7. Also it questions why
there is no provision for confidentiality for records obtained by the
Commission under this provision of the proposed regulations. P&O, 7.
[[Page 11205]]
Section 530.15 (as renumbered) was carried over nearly verbatim from
the current Secs. 514.7(m)(1) and 514.7(m)(3), which read:
(1) Every common carrier or conference shall maintain service
contract records in an organized, readily accessible or retrievable
manner for a period of five years from the termination of each
contract.
* * * * *
(3) Every common carrier or conference shall, upon written
request from the FMC's Director, Bureau of Enforcement or any Area
Representative, submit requested service contract records within 30
days from the date of the request.
The purpose and statutory authority for these provisions has been
examined previously by the Commission and its regulated entities when
Secs. 514.7(m)(1) and (m)(3) were added to the Commission's regulation.
The electronic filing options that the Commission has chosen to
offer, in an effort to reduce burdens on ocean common carrier filers
and at their urging, both fall short in one significant respect: The
electronic versions of the documents will not have the ability to
capture the signature of the parties. Because the Commission will still
need to examine the originally executed service contracts, the
shortcoming of the electronic filing system continues to make the
language in the proposed regulation necessary. While it is true that
the Commission has the authority to obtain the information in any event
under section 12 of the Act, the Commission has found it useful to
reiterate that authority here in order to impress upon carriers that
their executed service contracts and related records must be retained
and ready for inspection.
It is difficult to imagine how this provision would create any
additional burden on filers, as they would presumably retain the
originally executed service contract to protect their rights under that
contract. With respect to P&O's concerns about confidentiality, the
statute already provides for the confidentiality of service contracts
and there appears to be no need for further clarification of the issue
through rulemaking. For the foregoing reasons, the regulation in this
section will be adopted as proposed.
Global Service Contracts
The Commission, in an effort to minimize burden on filers, and
encourage them to structure their commercial negotiations based on
market forces rather than to conform them to regulatory requirements,
requested comment on the filing of global service contracts. Comments
generally commend the Commission for recognizing the commercial
desirablility of global service contracting. Dupont, Conagra, NITL,
CENSA, P&O, P&O and CENSA request confirmation from the Commission that
the voluntary inclusion of extrajurisidictional matter in a filed
service contract would not expand the Commission's jurisdiction over
those matters.
The Commission's intent was to allow parties to enter into service
contracts which fit their commercial needs, and relieve them of the
burden of negotiating contracts which ``carve out'' the U.S. trades
simply because of U.S. filing requirements. Again we confirm that
Commission will not assert jurisdiction over foreign-to-foreign matters
due solely to the fact that they are included in a service contract
filed with the Commission. We also note, however, that the extent to
which the U.S. trade matters are affected by, contingent on or reliant
on foreign-to-foreign movements, the Commission will have the statutory
duty and jurisdiction to obtain the relevant records.
While voluntary filing of global contracts will not subject the
non-U.S. matters to FMC jurisdiction, as discussed above, there is a
difficulty with how the statement of essential terms shall be made.
There is too great a danger that the public will be misled if only the
``U.S. trade'' volumes, for instance, are published, when those volumes
are affected by foreign-to-foreign volumes. Therefore, the interim
final rules require that the statement of essential terms for filed
contracts which include both U.S. trade and non-U.S. trade matters
which affect those terms must indicate that the contract includes
matter outside the Commission's jurisdiction. Failing to require this
disclaimer has too great a potential for confusion by the public
reviewing those essential terms. See, Sec. 530.12 (publication section
regarding exempt and global service contracts).
Inland European Movements in Conference Contracts
In the NPR, the Commission noted the difference in the approaches
by the United States and the European Commission (``E.C.'') to the
question of inland rate setting by conferences. The NPR requested
comment on how the Commission may treat carriers which participate in a
conference service contract covering U.S.-Europe ocean movements but
sign an individual service contract covering European inland transport
for the same shipper customer. The Commission noted in the NPR that it
would appear that filing would be consistent with statutory
requirements to the extent the contracts establish the European inland
portion of a through rate charged by a carrier in a U.S.-Europe
intermodal movement. However, the Commission wished to make an effort
to minimize the regulatory burdens occasioned by these differences in
regulatory regimes, to the extent it may do so given its own statutory
responsibility.
The comments make three basic arguments with respect to inland
rates in Europe. First, to the extent that service contracts for inland
movements in Europe are within the Commission's jurisdiction, they
should be exempt from filing because the EU regulates them adequately.
BSA and TACA. Second, that they are completely outside the Commission's
jurisdiction. BSA. Finally, P&O comments that European charges, if
included in a service contract, must be filed with the Commission and
are part of the filed essential terms, but not the public essential
terms.
P&O's approach appears to be sound. As rate information is not one
of the essential terms required to be published by the Act, any
regulatory requirement would not order rate information to be
published, although it would be filed. As discussed in the filing of
``mixed contracts'' it would appear that the allowance of such filing
is for the ease of the filer.
TACA suggests that sections of a service contract relating to
inland movements of cargo in Europe should not be required to be filed
with the Commission. TACA, 8. TACA proposes that sections of service
contracts stating the terms and conditions of European inland transport
of shipments covered by the service contract be available from the
individual carrier upon request from the Commission (in electronic or
paper format at the option of the carrier) within ten days of the
request. TACA, 8-9. This would ease the burden on the Commission,
completely harmonize with E.C. law, ensure no breach of confidentiality
that might take place due to filing via third parties, and ensure
public access to the information. TACA, 9.
The disparity between Commission and E.C. requirements generally
only becomes problematic when a conference or members of an agreement
enter into a service contract in which the rate calculation for port-
to-port rates are included, but for which the inland movements in
Europe are not included because of the E.C. prohibition on joint rate
setting for inland rates. The conference contract filed with the
[[Page 11206]]
Commission would presumably include a ``multi-factor through rate''
which would be the ocean transport rate as laid out in the contract,
plus an unspecified rate arising from the inland portion of the
transportation. If the conference is required by the Commission to file
the independent inland rate so that the Commission can calculate the
total through rate, the conference may be in violation of the E.C.''s
prohibition on confidentiality.
P&O argues that it is clear that inland European charges, if
included in a service contract, would have to be filed with the FMC.
P&O points out that carriers and shippers may choose to construct
multi-factor through rates to and from Europe by using a confidential
port/port rate, or a point/port and then adding a published European
inland tariff rate to construct a ``multi-factor through rate.''
TACA's suggestion that the Commission exempt these inland movements
from filing is a substantial deviation from the filing requirements
under the Act. Such an exemption is more properly adopted after a full
examination of the matter under Section 16 of the Act. For these
reasons and because the change is not mandated by OSRA, the Commission
will continue to require that the service contracts in question be
filed.
Interim Final Rule Status
As the Commission is introducing substantial matters which were not
explored in the NPR, this shall be an interim final rule, under the
Commission's authority granted by section 17(b) of the Act.
Regulatory Flexibility Act Analysis
In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601 et
seq., the Chairman of the 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 NPR, the Commission stated that it intended to certify the
rulemaking since the affected universe of parties is limited to vessel-
operating common carriers. The Commission has determined that such
entities do not typically qualify as small under the Small Business
Administration guidelines. No comments disputed the Commission's
intention to certify. The certification is, therefore, continued.
The Commission has received Office of Management and Budget (OMB)
approval for the collection of this information required in this part.
Section 530.91 displays the control numbers assigned by OMB to
information collection requirements of the Commission in this part by
the 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. In this regard, the valid control number for this
collection of information is 3072-0065.
This regulatory action is not a ``major rule'' under 5 U.S.C.
804(2).
List of Subjects for 46 CFR Part 530
Freight, Maritime carriers, Reporting and recordkeeping
requirements.
For the reasons set out in the preamble, the Commission removes 46
CFR part 514 and add new 46 CFR part 530, to subchapter B to read as
follows:
PART 514--[REMOVED]
PART 530--SERVICE CONTRACTS
Subpart A--General Provisions
Sec.
530.1 Purpose.
530.2 Scope and applicability.
530.3 Definitions.
530.4 Confidentiality.
530.5 Duty to file.
530.6 Certification of shipper status.
530.7 Duty to labor organizations.
Subpart B--Filing Requirements
530.8 Service contracts.
530.9 Notices.
530.10 Amendment, correction, and cancellation.
530.11 Filing fees and other costs.
Subpart C--Publication of Essential Terms
530.12 Publication.
Subpart D--Exceptions and Implementation
530.13 Exceptions.
530.14 Implementation.
Subpart E--Recordkeeping and Audit
530.15 Recordkeeping and audit.
530.91 OMB control numbers assigned pursuant to the Paperwork
Reduction Act.
Appendix A to Part 530--Instructions for the Filing of Service
Contracts
Exhibit 1 to Part 530--Service Contract Registration [Form FMC-83]
Authority: 5 U.S.C. 553; 46 U.S.C. App. 1704, 1705, 1707, 1716.
Subpart A--General Provisions
Sec. 530.1 Purpose.
The purpose of this part is to facilitate the filing of service
contracts and the publication of certain essential terms of those
service contracts as required by section 8(c) of the Shipping Act of
1984 (``Act''). This part enables the Commission to review service
contracts to ensure that these contracts and the parties to them
comport with the requirements of the Act. This part also implements
electronic filing provisions for service contracts to facilitate
compliance and minimize the filing burdens on the oceanborne commerce
of the United States.
Sec. 530.2 Scope and applicability.
An individual ocean common carrier or an agreement between or among
ocean common carriers may enter into a service contract with one or
more shippers subject to the requirements of the Act.
Sec. 530.3 Definitions.
When used in this part:
(a) Act means the Shipping Act of 1984 as amended by the Ocean
Shipping Reform Act of 1998.
(b) Agreement means an understanding, arrangement, or association
(written or oral) and any modification or cancellation thereof which
has been filed and effective under part 535 of this chapter with the
Commission. The term does not include a maritime labor agreement.
(c) Authorized person means a carrier or a duly appointed agent who
is authorized to file service contracts on behalf of the carrier party
to a service contract and to publish the corresponding statement of
essential terms and is registered by the Commission to file under
Sec. 530.5(d) and appendix A to this part.
(d) BTCL means the Commission's Bureau of Tariffs, Certification
and Licensing or its successor bureau.
(e) Commission means the Federal Maritime Commission.
(f) Common carrier means a person holding itself out to the general
public to provide transportation by water of passengers or cargo
between the United States and a foreign country for compensation that:
(1) Assumes responsibility for the transportation from the port or
point of receipt to the port or point of destination; and
(2) Utilizes, for all or part of that transportation, a vessel
operating on the high seas or the Great Lakes between a port in the
United States and a port in a foreign country, except that the term
does not include a common carrier engaged in ocean transportation by
ferry boat, ocean tramp, or chemical parcel tanker, or by a vessel when
primarily engaged in the carriage of perishable agricultural
commodities:
(i) If the common carrier and the owner of those commodities are
wholly owned, directly or indirectly, by a
[[Page 11207]]
person primarily engaged in the marketing and distribution of those
commodities and
(ii) Only with respect to those commodities.
(g) Conference means an agreement between or among two or more
ocean common carriers which provides for the fixing of and adherence to
uniform rates, charges, practices and conditions of service relating to
the receipt, carriage, handling and/or delivery of passengers or cargo
for all members. The term does not include joint service, pooling,
sailing, space charter, or transshipment agreements.
(h) 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.
(i) Effective date means the date upon which a service contract or
amendment is scheduled to go into effect by the parties to the
contract. A service contract or amendment becomes effective at 12:01
a.m. Eastern Standard Time on the beginning of the effective date. The
effective date cannot be prior to the filing date of the service
contract or amendment with the Commission.
(j) Expiration date means the last day after which the entire
service contract is no longer in effect.
(k) File or filing (of service contracts or amendments thereto)
means use of the Commission's electronic filing system for receipt of a
service contract or an amendment thereto by the Commission, consistent
with one of the methods set forth in appendix A to this part, and the
recording of its receipt by the Commission.
(l) Labor agreement means a collective-bargaining agreement between
an employer subject to the Act, or group of such employers, and a labor
organization or an agreement preparatory to such a collective-
bargaining agreement among members of a multi-employer bargaining
group, or an agreement specifically implementing provisions of such a
collective-bargaining agreement or providing for the formation,
financing, or administration of a multi-employer bargaining group, but
the term does not include an assessment agreement.
(m) Motor vehicle means an automobile, truck, van or other motor
vehicle used for the transportation of passengers and cargo; but does
not include equipment such as farm or road equipment which has wheels,
but whose primary purpose is other than transportation.
(n) Ocean common carrier means a vessel-operating common carrier.
(o) OIRM means the Commission's Office of Information and Resources
Management.
(p) Non-vessel-operating common carrier (``NVOCC'') means an ocean
transportation intermediary as defined by section 3(17)(B) of the Act.
(q) Service contract means a written contract, other than a bill of
lading or receipt, between one or more shippers and an individual ocean
common carrier or an agreement between or among ocean common carriers
in which the shipper makes a commitment to provide a certain minimum
quantity or portion of its cargo or freight revenue over a fixed time
period, and the individual ocean common carrier or the agreement
commits to a certain rate or rate schedule and a defined service level,
such as, assured space, transit time, port rotation, or similar service
features. The contract may also specify provisions in the event of
nonperformance on the part of any party.
(r) Shipper means a cargo owner; the person for whose account the
ocean transportation is provided; the person to whom delivery is to be
made; a shippers' association; or an NVOCC that accepts responsibility
for payment of all applicable charges under the service contract.
(s) Statement of essential terms means a concise statement of the
essential terms of a service contract required to be published under
Sec. 530.12 of this part.
Sec. 530.4 Confidentiality.
All service contracts and amendments to service contracts filed
with the Commission shall, to the full extent permitted by law, be held
in confidence. Nothing contained in this part shall preclude the
Commission from providing certain information from or access to service
contracts to another agency of the Federal government of the United
States.
Sec. 530.5 Duty to file.
(a) The duty under this part to file service contracts, amendments
and notices, and to publish statements of essential terms shall be upon
the individual carrier party or parties participating or eligible to
participate in the service contract.
(b) Filing may be accomplished by any duly agreed-upon agent, as
the parties to the service contract may designate, and subject to
conditions as the parties may agree.
(c) Registration. (1) Application. For filing pursuant to dial-up
filing (option 2 as outlined in appendix A to this part), authority to
file or delegate the authority to file must be requested by a
responsible official of the service contract carrier party in writing,
by submitting to BTCL the Registration Form in Exhibit 1 to this part
and the appropriate fee as defined under Sec. 530.11.
(2) Approved registrations. OIRM shall provide approved Registrants
a log-on ID and password for filing and amending service contracts and
so notify Registrants via U.S. mail.
(3) Software certification. For filing pursuant to dial-up filing
(option 2 as outlined in appendix A to this part), certification of
software may be requested by appointment through OIRM and payment of
the appropriate fee as set forth in Sec. 530.11. OIRM will test the
software as set out in appendix A to this part. Organizations certified
prior to May 1, 1999 for the batch filing of ``Essential Terms
Publications'' (``ETs'') in the Commission's former ``Automated Tariff
Filing Information System'' (``ATFI'') are not required to re-certify
their software but may if they so choose using the same procedure as
for initial certification.
(4) Emergencies. In an emergency, a person, already authorized to
maintain and edit its firm's organization record under appendix A to
this part, may change its designated ``publisher'' under appendix A to
this part, verbally notify BTCL, and promptly submit the proper
documents.
(5) Prior registration and certification. Each organization
registered to file essential terms publications in the Commission's
dial-up system before May 1, 1999 will be issued a log-on ID and
password for access to file service contracts under the Commission's
electronic filing system pursuant to option 2 as set forth in Appendix
A to this part.
Sec. 530.6 Certification of shipper status.
(a) Certification. The shipper contract party shall sign and
certify on the signature page of the service contract its shipper
status (e.g., owner of the cargo, shippers' association, NVOCC, or
specified other designation), and the status of every affiliate of such
contract party or member of a shippers'
[[Page 11208]]
association entitled to receive service under the contract.
(b) Proof of tariff and financial responsibility. If the
certification completed by the contract party under paragraph (a) of
this section identifies the contract party or an affiliate or member of
a shippers' association as an NVOCC, the ocean common carrier,
conference or agreement shall obtain proof that such NVOCC has a
published tariff and proof of financial responsibility as required
under sections 8 and 19 of the Act before signing the service contract.
An ocean common carrier, conference or agreement can obtain such proof
by the same methods prescribed in Sec. 515.27 of this chapter.
(c) Joining shippers' association during term of contract. If an
NVOCC joins a shippers' association during the term of a service
contract and is thereby entitled to receive service under the contract,
the NVOCC shall provide to the ocean common carrier, agreement or
conference the proof of compliance required by paragraph (b) of this
section prior to making any shipments under the contract.
(d) Reliance on NVOCC proof; independent knowledge. An ocean common
carrier, agreement or conference executing a service contract shall be
deemed to have complied with section 10(b)(12) of the Act upon meeting
the requirements of paragraphs (a) and (b) of this section, unless the
carrier party had reason to know such certification or documentation of
NVOCC tariff and bonding was false.
Sec. 530.7 Duty to labor organizations.
(a) Terms. When used in this section, the following terms will have
these meanings:
(1) Dock area and within the port area shall have the same meaning
and scope as defined in the applicable collective bargaining agreement.
(2) Reasonable period of time ordinarily means:
(i) If the cargo in question is due to arrive in less than five (5)
days from the date of receipt of the request as defined in paragraph
(b) of this section, two (2) days from the date of receipt of the
request; but
(ii) If cargo in question is due to arrive in more than five (5)
days from the date of receipt of the request as defined in paragraph
(b) of this section, four (4) days from the date of receipt of the
request.
(3) Movement includes, but is not necessarily limited to, the
normal and usual aspects of the loading and discharging of cargo in
containers; placement, positioning and re-positioning of cargo or of
containers; the insertion and removal of cargo into and from
containers; and the storage and warehousing of cargo.
(4) Assignment includes, but is not limited to, the carrier's
direct or indirect control over the parties which, the manner by which,
or the means by which the shipper's cargo is moved, regardless of
whether such movement is completed within or outside of containers.
(5) Transmit means communication by first-class mail, facsimile,
telegram, hand-delivery, or electronic mail (``e-mail'').
(b) Procedure. In response to a written request transmitted from a
labor organization with which it is a party or is subject to the
provisions of a collective bargaining agreement with a labor
organization, an ocean common carrier shall state, within a reasonable
period of time, whether it is responsible for the following work at
dock areas and within port areas in the United States with respect to
cargo transported under a service contract:
(1) The movement of the shipper's cargo on a dock area or within
the port area or to or from railroad cars on a dock area or within a
port area;
(2) The assignment of intraport carriage of the shipper's cargo
between areas on a dock or within the port area;
(3) The assignment of the carriage of the shipper's cargo between a
container yard on a dock area or within the port area and a rail yard
adjacent to such container yard; or
(4) The assignment of container freight station work and
maintenance and repair work performed at a dock area or within the port
area.
(c) Applicability. This section requires the disclosure of
information by an ocean common carrier only if there exists an
applicable and otherwise lawful collective bargaining agreement which
pertains to that carrier.
(d) Disclosure not deemed admission or agreement. No disclosure
made by an ocean common carrier shall be deemed to be an admission or
agreement that any work is covered by a collective bargaining
agreement.
(e) Dispute resolution. Any dispute regarding whether any work is
covered by a collective bargaining agreement and the responsibility of
the ocean common carrier under such agreement shall be resolved solely
in accordance with the dispute resolution procedures contained in the
collective bargaining agreement and the National Labor Relations Act,
and without reference to this section.
(f) Jurisdiction and lawfulness. Nothing in this section has any
effect on the lawfulness or unlawfulness under the Shipping Act of
1984, the National Labor Relations Act, the Taft-Hartley Act, the
Federal Trade Commission Act, the antitrust laws, or any other federal
or state law, or any revisions or amendments thereto, of any collective
bargaining agreement or element thereof, including any element that
constitutes an essential term of a service contract under section 8(c)
of the Act.
Subpart B--Filing Requirements
Sec. 530.8 Service Contracts.
(a) Authorized persons shall file with BTCL, in one of the manners
set forth in appendix A to this part, a true and complete copy of every
service contract or amendment to a filed service contract before any
cargo moves pursuant to that service contract or amendment.
(b) Every service contract filed with the Commission shall include
the complete terms of the service contract including, but not limited
to, the following:
(1) The origin port ranges in the case of port-to-port movements
and geographic areas in the case of through intermodal movements;
(2) The destination port ranges in the case of port-to-port
movements and geographic areas in the case of through intermodal
movements;
(3) The commodity or commodities involved;
(4) The minimum volume or portion;
(5) The service commitments;
(6) The line-haul rate;
(7) Liquidated damages for non-performance (if any);
(8) Duration, including the
(i) Effective date; and
(ii) Expiration date;
(9) The legal names and business addresses of the contract parties;
the legal names of affiliates entitled to access the contract; the
names, titles and addresses of the representatives signing the contract
for the parties; and the date upon which the service contract was
signed, except that in the case of a contract entered under the
authority of an agreement or by a shippers' association, individual
members need not be named unless the contract includes or excludes
specific members. Subsequent references in the contract to the contract
parties shall be consistent with the first reference (e.g., (exact
name), ``carrier,'' ``shipper,'' or ``association,'' etc.). Carrier
parties which enter into contracts that include affiliates must either:
(i) List the affiliates' business addresses; or
(ii) Certify that this information will be provided to the
Commission upon
[[Page 11209]]
request within ten (10) business days of such request. However, the
requirements of this section do not apply to amendments to contracts
that have been filed in accordance with the requirements of this
section unless the amendment adds new parties or affiliates;
(10) A certification of shipper status;
(11) A description of the shipment records which will be maintained
to support the service contract and the address, telephone number, and
title of the person who will respond to a request by making shipment
records available to the Commission for inspection under Sec. 530.15 of
this part; and
(12) All other provisions of the contract.
(c) Certainty of terms. The terms described in paragraph (b) of
this section may not:
(1) Be uncertain, vague or ambiguous; or
(2) Make reference to terms not explicitly contained in the service
contract filing itself, unless those terms are contained in a
publication widely available to the public and well known within the
industry.
(d) Other requirements. Every service contract filed with BTCL
shall include, as set forth in appendix A to this part by:
(1) A unique service contract number of more than one (1) but less
than ten (10) alphanumeric characters in length (``SC Number''); and
(2) A consecutively numbered amendment number no more than three
digits in length, with initial service contracts using
``0''(``Amendment number'');
(3) The filed FMC Agreement Number(s) assigned by the Commission
under 46 CFR part 535 (if applicable); and
(4) An indication of the method by which the statement of essential
terms will be published.
Sec. 530.9 Notices.
Within thirty (30) days of the occurrence of any event listed
below, there shall be filed with the Commission, pursuant to the same
procedures as those followed for the filing of an amendment pursuant to
Sec. 530.10 and appendix A to this part, a detailed notice of:
(a) Correction (clerical or administrative errors);
(b) Cancellation (as defined in Sec. 530.10(a)(3));
(c) Adjustment of accounts, by re-rating, liquidated damages, or
otherwise;
(d) Final settlement of any account adjusted as described in
paragraph (c) of this section; and
(e) Any change to:
(1) The name of a basic contract party; or
(2) The list of affiliates under Sec. 530.8(b)(9), including
changes to legal names and business addresses, of any contract party
entitled to receive or authorized to offer services under the contract.
Sec. 530.10 Amendment, correction, and cancellation.
(a) Terms. When used in this section, the following terms will have
these meanings:
(1) Amendment means any change to a service contract which has
prospective effect and which is mutually agreed upon by the service
contract parties.
(2) Correction means any change to a service contract which has
retroactive effect.
(3) Cancellation means an event which is unanticipated by the
service contract, in liquidated damages or otherwise, and is due to the
failure of the shipper party to tender minimum cargo as set forth in
the contract, unless such tender was made impossible by an action of
the carrier party.
(b) Amendment. Service contracts may be amended by mutual agreement
of the parties to the contract. Amendments shall be filed
electronically with the Commission in the manner set forth in
Sec. 530.8 and Appendix A to this part.
(1) Where feasible, service contracts should be amended by amending
only the affected specific term(s) or subterms.
(2) Each time any part of a service contract is amended, the filer
shall assign a consecutive amendment number (up to three digits),
beginning with the number ``1.''
(3) Each time any part of the service contract is amended, the
``Filing Date'' will be the date of filing of the amendment.
(c) Corrections. Either party to a filed service contract may
request permission to correct clerical or administrative errors in the
terms of a filed contract. Requests shall be filed, in duplicate, with
the Commission's Office of the Secretary within forty-five (45) days of
the contract's filing with the Commission, and shall include:
(1) A letter of transmittal explaining the purpose of the
submission, and providing specific information to identify the initial
or amended service contract to be corrected;
(2) A paper copy of the proposed correct terms. Corrections shall
be indicated as follows:
(i) Matter being deleted shall be struck through; and
(ii) Matter to be added shall immediately follow the language being
deleted and be underscored;
(3) An affidavit from the filing party attesting with specificity
to the factual circumstances surrounding the clerical or administrative
error, with reference to any supporting documentation;
(4) Documents supporting the clerical or administrative error; and
(5) A brief statement from the other party to the contract
concurring in the request for correction.
(6) If the request for correction is granted, the carrier,
agreement or conference shall file the corrected contract provisions
using a special case number as described in appendix A to this part.
(d) Cancellation. (1) An account may be adjusted for events and
damages covered by the service contract. This shall include adjustment
necessitated by either liability for liquidated damages under
Sec. 530.8(b)(8), or the occurrence of an event described in paragraph
(d)(2) of this section.
(2) In the event of cancellation as defined in Sec. 530.10(a)(3):
(i) Further or continued implementation of the service contract is
prohibited; and
(ii) The cargo previously carried under the contract shall be re-
rated according to the otherwise applicable tariff provisions.
(e) If the amendment, correction or cancellation affects an
essential term required to be published under Sec. 530.12 of this part,
the statement of essential terms shall be changed as soon as possible
after the filing of the amendment to accurately reflect the change to
the contract terms.
Sec. 530.11 Filing Fees and other costs.
(a) Under the authority of the Independent Offices Appropriation
Act, 31 U.S.C 9701, the Commission assesses a filing fee for the filing
of service contracts, modifications and corrections thereto. Unless
otherwise provided in this part, checks, drafts or money orders shall
be remitted and made payable to Federal Maritime Commission, 800 N.
Capitol Street, NW., Washington, DC 20573.
(b) Unless otherwise specified, overdue payments will be charged
interest in accordance with the rate established by the Department of
the Treasury for each 30-day period or portion thereof that the payment
is overdue. In addition to any other remedy and penalty provided by law
and regulation, if payment is overdue for ninety (90) days the
Commission
[[Page 11210]]
may suspend or terminate electronic filing access.
(c) Fees. (1) Service contracts and amendments. For filing pursuant
to option 2, as set forth in Appendix A to this part (``dial-up
filing''), the filing fee shall be $1.63 per filing for all initial and
amended service contract filings.
(2) Filer registration. For filing pursuant to option 2, filer
registration fee shall be $91 for initial registration for one firm and
one individual; and $91 for additions and changes. No fee will be
assessed to continue filer registration for organizations registered
for batch filing with the Commission prior to May 1, 1999.
(3) Filing Guide. For filing pursuant to option 2, filing guides
shall cost $25 for diskette; $49 for paper format. Requests for filing
guides should be made in writing and addressed to: ``BTCL Manuals,''
Federal Maritime Commission, 800 N. Capitol Street, NW, Washington, DC
20753.
(4) Corrections. The fee for corrections to service contracts under
Sec. 530.10(c) shall be $233.
(5) Software certification. For filing pursuant to option 2, the
fee for software certification shall be $496 per test submission.
Subpart C--Publication of Essential Terms
Sec. 530.12 Publication.
(a) Contents. All authorized persons who have a duty to file
service contracts under Sec. 530.5 are also required to make available
to the public, contemporaneously with the filing of each service
contract with the Commission, and in tariff format, a concise statement
of the following essential terms:
(1) The port ranges:
(i) Origin; and
(ii) Destination;
(2) The commodity or commodities involved;
(3) The minimum volume or portion; and
(4) The duration.
(b) Certainty of terms. The terms described in paragraph (a) of
this section may not:
(1) Be uncertain, vague or ambiguous; or
(2) Make reference to terms not explicitly detailed in the
statement of essential terms, unless those terms are contained in a
publication widely available to the public and well known within the
industry.
(c) Location. (1) The statement of essential terms shall be
published as a separate part in the filer's automated tariff
publication, conforming to the format requirements set forth in part
520 of this chapter.
(2) Multi-party service contracts. For contracts in which more than
one carrier party participates or is eligible to participate, the
statement of essential terms may be published:
(i) As a separate part of the parties' relevant conference tariff;
or
(ii) By each of the parties as a separate part of their individual
tariff publication pursuant to part 520 of this chapter, clearly
indicating the relevant FMC-assigned agreement number.
(c) References. The statement of essential terms shall contain a
reference to the same number as that for the confidentially filed
service contract (``SC Number'' as described in Sec. 530.8(d)(1)).
(d) Terms. (1) The publication of the statement of essential terms
shall accurately reflect the terms as filed confidentially with the
Commission.
(2) If any of the published essential terms include information not
required to be filed with the Commission but filed voluntarily, the
statement of essential terms shall so note.
(e) Agents. Common carriers, conferences, or agreements may use
agents to meet their publication requirements under this part.
(f) Commission listing. The Commission will publish on its website,
www.fmc.gov, a listing of the locations of all service contract
essential terms publications.
(g) Updating statements of essential terms. To ensure that the
information contained in a published statement of essential terms is
current and accurate, the statement of essential terms publication
shall include a prominent notice indicating the date of its most recent
publication or revision. When the published statement of essential
terms is affected by filed amendments, corrections, or cancellations,
the current terms shall be changed and published as soon as possible in
the relevant statement of essential terms.
Subpart D--Exceptions and Implementation
Sec. 530.13 Exceptions.
(a) Generally. The Commission will not accept for filing service
contracts which exclusively concern bulk cargo, forest products,
recycled metal scrap, new assembled motor vehicles, waste paper or
paper waste, as those terms are defined in section 3 of the Act or
Sec. 530.3 of this part, or service contracts which relate solely to
commodities or services exempted from service contract filing by the
Commission under Section 16 of the Act.
(b) Inclusion in service contracts. An excepted commodity or
exempted service, as listed in paragraph (a) of this section, may be
included in a service contract filed with the Commission, but only if:
(1) There is a tariff of general applicability for the
transportation, which contains a specific commodity rate for the
excepted commodity; or
(2) The contract itself sets forth a rate or charge which will be
applied if the contract is canceled, as defined in Sec. 530.10(a)(3).
(c) Waiver of exemption. Upon filing under this section, the
service contract shall be subject to the same requirements as those for
service contracts generally.
Sec. 530.14 Implementation
(a) Generally. Performance under a service contract or amendment
thereto may not begin before the day it is effective and filed with the
Commission.
(b) Prohibition or suspension. When the filing parties receive
notice that an initial or amended service contract has been prohibited
under section 9(d) or suspended under section 11a(e)(1)(B) of the Act:
(1) Further or continued implementation of the service contract is
prohibited;
(2) All services performed under the contract shall be re-rated in
accordance with the otherwise applicable tariff provisions for such
services with notice to the shipper within five (5) days of the date of
prohibition or suspension; and
(3) Detailed notice shall be given to the Commission under
Sec. 530.9 within thirty (30) days of:
(i) The re-rating or other account adjustment resulting from
prohibition or suspension under paragraph (b)(2) of this section; or
(ii) Final settlement of the account adjusted under Sec. 530.10.
(c) Agreements. If the prohibited or suspended service contract was
that of an agreement with no common tariff, the re-rating shall be in
accordance with the published tariff rates of the carrier which
transported the cargo in effect at the time.
Subpart E--Recordkeeping and Audit
Sec. 530.15 Recordkeeping and audit.
(a) Records retention for five years. Every common carrier,
conference or agreement shall maintain original signed service
contracts, amendments, and their associated records in an organized,
readily accessible or retrievable manner for a period of five (5) years
from the termination of each contract.
[[Page 11211]]
(b) (paragraph (b) is stayed until further notice.) Where
maintained. (1) Service contract records shall be maintained in the
United States, except that service contract records may be maintained
outside the United States if the Chairman or Secretary of an agreement
or President or Chief Executive Officer of the carrier certifies
annually by January 1, on a form to be supplied by the Commission, that
service contract records will be made available as provided in
paragraph (c) of this section.
(2) Penalty. If service contract records are not made available to
the Commission as provided in paragraph (c) of this section, the
Commission may cancel any carrier's or agreement's right to maintain
records outside the United States pursuant to the certification
procedure of paragraph (b) of this section.
(c) Production for audit within 30 days of request. Every carrier
or agreement shall, upon written request of the FMC's Director, Bureau
of Enforcement, any Area Representative or the Director, Bureau of
Economics and Agreements Analysis, submit copies of requested original
service contracts or their associated records within thirty (30) days
of the date of the request.
(d) Agreement service contracts. In the case of service contracts
made by agreements, the penalties for a failure to maintain records
pursuant to this section shall attach jointly and severally on all of
the agreement members participating in the service contract in
question.
Sec. 530.91 OMB control numbers 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 3072-0065.
Appendix A--Instructions for the Filing of Service Contracts
Service contracts shall be filed in accordance with one of the
methods described in this appendix, at the filer's option.
I. Registration, Log-On ID and Password
A. For filing pursuant to dial-up filing (option 2 as outlined
in this appendix A), system identifications for filing log-on
(``log-on IDs'') and initial password are obtained by submitting the
Service Contract Registration Form (Form FMC-83, Exhibit 1 to this
part), along with the proper fee under Sec. 530.11 and other
necessary documents, including delegation of authority, as
prescribed by this part, to BTCL. A separate Service Contract
Registration Form is required for each individual that will file
service contracts. However, each organization certified prior to May
1, 1999 to perform batch filing of Essential Terms Publications in
the Commission's former Automated Tariff Filing Information
(``ATFI'') system, will be issued a new log-on ID and password for
access to file service contracts. Filers who wish a third party
(publisher) to file their service contracts must so indicate on Form
FMC-83. Authority for organizational filing can be transferred by
submitting an amended registration form requesting the assignment of
a new log-on ID and password. The original log-on ID will be
canceled when a replacement log-on ID is issued.
B. Log-on IDs and passwords may not be shared with or loaned to
or used by any individual other than the individual registrant. The
Commission reserves the right to disable any log-on ID that is
shared with, loaned to or used by parties other than the registrant.
C. Authority for organizational filing can be transferred by
submitting an amended registration form requesting the assignment of
a new log-on ID and password. The original log-on ID will be
canceled when a replacement log-on ID is issued.
Option 1--Interactive Internet-based Filing
I. General Instructions
Filers who wish to file service contracts via the internet shall
do so in accordance with the instructions found on the Commission's
home page, http://www.fmc.gov. Internet-based filers must first
register with BTCL which, upon review of the registration, will
direct OIRM to provide the filer with a log-on ID and a password.
After receiving a log-on ID and password from OIRM, the filer will
be able to log on to the service contract filing area on the
Commission's home page and file service contracts.
The filing screen will request such information as: Filer name,
Registered Persons Index (``RPI'') number and carrier RPI number (if
different); Service Contract and Amendment Number; and effective
date. The filer will attach the entire service contract file and
submit it into the system. When the service contract has been
submitted for filing, the system will assign a filing date and an
FMC control number, both of which will be included in the
acknowledgment/confirmation message.
Option 2--Dial-up Filing
I. General Instructions
Filers who wish to file service contracts directly in the
Commission's database via dial-up filing shall do so in accordance
with the instructions found in the Service Contract Filing Guide
(``Filing Guide''). Filers may inspect a copy of the Filing Guide at
the office of BTCL, 800 N. Capitol St., NW, Suite 940, Washington,
DC 20753. The Filing Guide may be purchased from BTCL for the fee
specified in 46 CFR 530.11.
The Filing Guide includes the following items:
(a) Transaction set. The transaction set format includes all
transaction set segments and segment definitions.
(b) Data Element Dictionary (``DED''). The data element
dictionary contains the definition of data elements (e.g., amendment
number, date formats, etc.)
II. Filing
The dial-up system assigns the filing date, which is the date an
electronically transmitted (``on-line batch'') filing session file
transfer is initiated, assuming there has been a successful file
transfer. After the filing is processed, a filing-results message is
placed in the filer's electronic mailbox on the central site system.
A. Procedure. Filing by dial-up is performed by transmission of
prepared service contract material to the FMC system over dial-up
lines from the filer's own computer, using Filing Guide service
contract transaction set formats and the KERMIT or ZMODEM file
transfer protocols. The conclusion of the file transfer sequence is
a positive keyboard entry to initiate the transfer and a response
that indicates completion of that submission.
B. General format requirements.
1. Database format. The FMC service contract database is
structured from service contract data elements and the service
contract terms formed by logical grouping of those elements.
2. Transmission. On-line batch transmission of service contracts
to the FMC computer is governed by the transaction sets contained in
the Filing Guide. Service contract filings not complying with the
regulations in this part or the formats and valid codes contained in
the Filing Guide will not be accepted by the system.
3. Adding new transaction data. Requests for major changes or
additions to the transaction set format and/or data shall be
submitted in writing to BTCL, with sufficient detail and reasons for
each proposed change. A contact person and telephone number also
should be provided in case of questions.
(a) A proposed major change (other than a correction), such as
one made to a transaction set, will require formal configuration
management procedures and a minimum of thirty (30) days' advance
notice of the change in the Federal Register and the ``Service
Contract System News,'' available at system log-on, and by other
established Commission communications procedures.
(b) Minor changes will be entered into the system and published
as soon as possible. Such minor changes include additions to any of
the standard terminology published in appendix A to part 520 of this
chapter.
C. Hardware and software requirements.
The basic equipment necessary to file service contracts is a
personal computer (``PC''), a VT-100 emulation software package, and
a modem. The modem must be v.34 compatible. The transmitted filing
session must be formatted to comply with the transaction sets. The
transmission may be via the use of KERMIT or ZMODEM file transfer
protocols after establishing a link for on-line batch filing with
the FMC central site computer.
The Commission will not make available to the public software
packages for firms to use in formulating service contract filings
for the dial-up system. The Commission has released
[[Page 11212]]
the Filing Guide (with transaction set format) into the public
domain so that qualified commercial firms can develop filing
software for the general market. Firms which develop filing
software, must, by appointment through the Commission's Office of
Information Resources Management and payment of the fee set forth in
Sec. 530.11 of this part, test their formatting of service contract
transaction set format by submission of that data to the FMC central
site computer before they will be permitted to transmit any filings.
The data must be submitted via on-line batch transmission over dial-
up telecommunications links using the required file transfer
protocols. Testing will require submission of sample service
contract filings to the FMC system, with an evaluation of the actual
results of the attempted filings to ensure that the transaction set
formats are properly employed and that the filing results are
consistent with the filer's expectations. Organizations certified
prior to May 1, 1999 for the batch filing of Essential Terms
Publications in the Commission's former ATFI system are not required
to re-test their software but may if they so choose using the same
procedure as for initial registrants.
D. Connecting to the Service Contract Filing System.
The dial-up procedures are set forth in the Filing Guide.
E. Major menu selections.
Proper connection will lead the filer to the ``Logo Menu,''
which allows selections by any filer for ``Organization Maint.,''
``Mailbox,'' ``Service Contract System News,'' ``Change Password,''
``Screen Setup,'' and ``Logout.'' Additionally, a registered filer
can access ``Begin File Transfer'' to initiate the on-line batch
filing of a service contract. Upon the selection of ``Begin File
Transfer'' the filer will be presented the option to select KERMIT
or ZMODEM and to commence the file transfer.
F. Conformity checks.
Certain service contract data submitted to the FMC for filing
via dial-up may be automatically screened for compliance with
conformity checks. The conformity checks are syntax checks, validity
checks and associative checks. The system will generally not accept
service contracts which fail conformity checks. Filers may be
notified of automatic conformity check problems at this stage by
electronic mail, with a follow-up letter if the electronic mail has
not been read within ten (10) days of dispatch. The conformity
checks are:
1. Syntax Checks. Service contracts will be checked for file
integrity, proper data types, field lengths, and logical sequence
according to the Filing Guide's transaction sets.
2. Validity Checks. Certain data elements of filed service
contracts will also be checked for data validity by type against the
DED's published reference tables, such as amendment codes, amendment
numbers and valid dates.
3. Associative Checks. The system uses associative checks to
identify logical conformity with the requirements of the Act and
Commission regulations. The following are some representative types
of associative checks performed by the system.
(a) Any initial service contract or amendment must have:
(i) A valid organization number.
(ii) No suspended carrier or object status.
(iii) Appropriate filing authority.
(iv) Filing date (system-assigned) equal to or less than the
effective date.
(v) Valid and appropriate filing/amendment codes.
(vi) Valid and appropriate filing, effective, and expiration
dates.
(vii) When used, valid special case number and filing/amendment
code ``S,'' with no other filing/amendment codes entered.
(viii) Each service contract must have a new (unique to carrier/
conference/agreement) service contract number. The service contract
number must be paired with a unique essential terms number and the
pair must remain constant for all amendments and must be consistent
between the filed service contracts and the published statement of
essential terms.
G. Filing/amendment codes.
1. Codes. Filing/amendment codes must be valid Filing Guide
codes and the effective, termination (if any) and expiration dates
must match the corresponding dates published in the statement of
essential terms.
2. Multiple symbols. Filed service contracts frequently can be
coded with more than one symbol. Accordingly, the field, ``Amendment
Type,'' will allow up to three different, compatible symbols
(amendment codes and definitions are presented in the Filing Guide
and the Standard Terminology appendix to 46 CFR part 520).
H. Control dates and history.
1. Filing date. Filers will have a filing date automatically
assigned to all service contracts and amendments filed according to
the start time of the file transfer, for file transfers that are
successfully completed (U.S. Eastern Standard Time).
2. Effective date. The effective date is the date upon which a
service contract or amendment is scheduled to go into effect by the
parties to the contract. A service contract or amendment becomes
effective at 12:01 a.m. on the beginning of the effective date. The
effective date cannot be prior to the filing date of the service
contract or amendment with the Commission.
3. Expiration date. The expiration date is the last day, after
which the entire service contract is no longer in effect.
III. Organization Record and Register
A. Organization Record. The organization record is the master
record for all service contract information in the system for a
specific firm. Upon registration, a ``shell'' organization record,
specific to the requestor, is established and contains the
organization number, organization name and organization type. The
firm's authorized representative can then access the newly
established organization record, using the special access log-on ID
and password to file the address for the firm's home office, and
complete the affiliations, d/b/as, and publisher lists as
appropriate. To maximize security of the data, review and
maintenance of the organization record will be permitted only to the
individual in the firm holding the special access log-on ID and
password for organization record maintenance.
B. Service Contract Register. Each organization must create a
service contract register (``register'') prior to the filing of any
service contracts or amendments thereto (and including ``general
rules'' filings). The register is a directory subordinate to which
service contracts and their amendments are filed. Each organization
may create more than one register according to any criteria they
wish (e.g., according to location groups). Each register must
include a record reflecting the filer's name and organization
number. At the option of the filer, the register may also include
the filer's service contract rules of general applicability,
(``boilerplate'') i.e., the standard terms and conditions set by the
carrier party to a service contract which govern the application of
service contract rates, charges and other matters.
IV. Format Requirements
Each service contract filed by Option 2 (``dial-up'') shall
contain the following:
A. Service Contract Title. The filer's title of the service
contract (generally descriptive of the commodity and/or service).
B. SC Number (Service contract number). The ``SC Number'' is
defined by the filer and shall be entered in the appropriate field.
C. ET Number (statement of essential terms number). The ``ET
Number'' is defined by the filer and shall be entered in the
appropriate field. (Note: Service contracts must have a new (unique
to carrier/conference/agreement) service contract number for the
initial filing. The service contract number must be paired with a
unique essential terms number and the pair must remain constant for
all amendments and must be consistent between the filed service
contracts and the published essential terms documents.)
D. Amendment Number. Where feasible, service contracts should be
amended by amending only the affected specific term(s) or subterms.
Each time any part of a service contract is amended, the filer shall
assign a consecutive amendment number (up to three digits),
beginning with the number ``1.'' The amendment number field must be
``0'' or void for the initial filing. Each time any part of the
service contract is amended, the filing date will be the date of
filing of the amendment.
E. FMC File Number. The FMC File Numbers will be system-assigned
as initial service contract filings are received and processed. The
FMC File Numbers will be assigned sequentially and will start at a
number designated by the FMC. The FMC File Number will be provided
to filers in the acknowledgment message (via electronic mail).
F. Effective Date. The service contract must indicate the
effective date and the expiration date governing the duration of the
contract. The duration must also be set forth in Term No. 8 where
the duration of the contract shall be stated as a specific fixed
time period, with an effective date and an ending date.
G. Amendment Codes. All amendment codes listed in the Filing
Guide, except ``G'' and ``S'', may be used in any combination, but
limited to three amendment codes per amendment.
H. Special case symbol and number. The ``S'' amendment code must
be used singly, and in conjunction with a validated special case
number for corrections to service contracts.
[[Page 11213]]
I. Filing Date. The filing date is automatically set by the
system whenever a service contract or amendment thereto is filed.
J. Contract terms (``terms''). Nos. 1 to 11 shall address the
subjects and bear the terms' titles for the respective numbers
exactly as provided in this section. (Note: If a subject is not
included, such as No. 12, the number must be listed with the
appropriate title and the designation ``NA.'' All terms may be
subdivided into subterms to facilitate amendment).
1. Origin (No. 1). ``Origin'' includes the origin port range(s)
in the case of port-to-port movements, and the origin geographic
area(s) in the case of through intermodal movements, except that the
origin and destination of cargo moving under the contract need not
be stated in the form of ``port ranges'' or ``geographic areas,''
but shall reflect the actual locations agreed to by the contract
parties.
2. Destination (No. 2). ``Destination'' includes the destination
port range(s) in the case of port-to-port movements, and the
destination geographic area(s) in the case of through intermodal
movements, except that the origin and destination of cargo moving
under the contract need not be stated in the form of ``port ranges''
or ``geographic areas,'' but shall reflect the actual locations
agreed to by the contract parties.
3. Commodities (No. 3). Term No. 3 shall include all commodities
covered by the service contract. For each commodity filed in this
term, a separate formatted commodity index entry is required.
4. Minimum quantity or portion (No. 4). Term No. 4 shall address
the minimum quantity or portion of cargo and/or amount of freight
revenue necessary to obtain the rate or rate schedule(s). The
minimum quantity or cargo committed by the shipper may be expressed
as a fixed percentage of the shipper's cargo.
5. Service commitments (No. 5). Term No. 5 shall address the
service commitments of the carrier party(ies), such as assured
space, transit time, port rotation or similar service features.
6. Rates or rate schedule(s) (No. 6). Term No. 6 shall contain
the contract rates or rate schedules, including any additional or
other charges (e.g., general rate increases, surcharges, terminal
handling charges, etc.) that apply, and any and all conditions and
terms of service or operation or concessions which in any way affect
such rates or charges.
7. Liquidated damages for non-performance, if any (No. 7). Term
No. 7 shall include liquidated damages for non-performance, if the
parties have seen fit to so provide.
8. Duration of the contract (No. 8). The duration of the
contract shall be stated as a specific, fixed time period, with an
effective date and an expiration date.
9. Signature date/contract parties/signatories & any affiliates
(No. 9). The identification of contract parties must be included as
follows:
(a) The legal names and business addresses of the contract
parties. (Note: if the service contract is entered into under the
authority of an agreement, this shall include the corresponding
agreement number on file with the Commission);
(b) The legal names, titles, and addresses of representatives
signing the contract for the parties and the date the contract was
signed; and
(c) The legal name(s) and business address(es) of affiliates
entitled to access the contract, if any. Subsequent references in
the contract to the contract parties shall be consistent with the
first reference (e.g., (exact name), ``carrier,'' ``shipper,'' or
``association,'' etc.). (Note: This term must name every affiliate
of each contract party named under Sec. 530.8(b)(9) entitled to
receive or authorized to offer services under the contract, except
that in the case of a contract entered into by all the members of a
conference, agreement or shippers' association, individual members
need not be named unless the contract includes or excludes specific
members.)
10. Shipper's Status Certification and Affiliates, if any. (No.
10). The shipper signatory(ies) must certify its status and that of
any affiliates in accordance with Sec. 530.6 of this part.
11. Records (No. 11). Term No. 11 must contain:
(a) A description of the shipment records which will be
maintained to support the contract; and
(b) The address, title, and telephone number of the person who
will respond to a request by making the original signed service
contract and shipment records available to the Commission for
inspection under Sec. 530.15 of this part.
12. Other Provisions of the Contract (No. 100-999). Any term of
a service contract not otherwise specifically provided for in this
section shall be entered after the above terms and in numerical
order, beginning with No. 100.
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Instructions for Form FMC-83
Instructions
Line 1. Registration. Indicate whether this is the initial
(first time) registration or an amendment to an existing Service
Contract Registration.
Line 2. Registrant. This must be the full legal name of the firm
or individual registering for the FMC's Service Contract Filing
System and any trade names. The registrant name should match the
corporate charter or business license, conference membership, etc.
It should be noted that the registrant name cannot be changed by the
registrant after the registration without submission of an amended
registration fee.
Line 3. Address of Home Office. The complete street address
should be shown in addition to the post office box. Also, provide
the registrant's Federal Taxpayer Identification Number (``TIN''
Number).
Line 4. Billing Address if Different. This should be completed
if the billing address differs from the home office address. Show
the firm name (if different from the registrant), street address and
post office box (if applicable).
Line 5. Organization Number. Complete if known. (Regulated
Persons Index or ``RPI'' number.)
Line 6. Registrant Type. Indicate the type of organization. A
registrant cannot be more than one type. This data cannot be changed
by the registrant after registration without submission of an
amended registration form.
Line 7. Permissions Requested and Person Granted These
Permissions. Delegation of the authority to file should be noted
here.
Maintenance of Organization Record--The person listed in line 8
is authorized to access the organization maintenance functions
(i.e., modify organization information, assign publishers,
affiliations, and d/b/as).
Service Contract Filing--The person listed in line 8 is
authorized only to submit filings.
Line 8. Certified for Batch Filing. Indicate whether the
registrant was registered with software certified to perform batch
filings prior to May 1, 1999. Otherwise, the registrant must first
be certified for batch filing as outlined in 46 CFR part 530. After
certification, the registrant can submit an amended registration
form to request permission for a person in their organization to
perform the batch filing. If the person already has an existing log-
on, the log-on (not the password) should be listed on the
registration form. Also, the certification date received from the
FMC should be listed on the registration form.
By the Commission.
Bryant L. VanBrakle,
Secretary.
[FR Doc. 99-5365 Filed 3-5-99; 8:45 am]
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