Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules 9143

Prevention and Toxics (OPPT),

Document Control Office (7407), Rm. G–

099, 401 M St., SW., Washington, DC

20460.

A public version of the official

rulemaking record supporting this

action, excluding confidential business

information (CBI), is available for

inspection at the TSCA Nonconfidential

Information Center, Rm. NE–B607, 401

M St., SW., Washington, DC 20460, from

12 noon to 4 p.m., Monday through

Friday, except on legal holidays.

All comments that contain

information claimed as CBI must be

clearly marked as such. Three sanitized

copies of any comments containing

information claimed as CBI must also be

submitted and will be placed in the

public record for this rulemaking.

Persons submitting information that

they believe is entitled to treatment as

CBI must assert a business

confidentiality claim in accordance with

40 CFR part 2. This claim must be made

at the time that the information is

submitted to EPA. If a submitter does

not assert a confidentiality claim at the

time of submission, EPA will treat the

information as non-confidential and

may make it available to the public

without further notice to the submitter.

Comments and data may also be

submitted in electronic form by sending

electronic mail (e-mail) to: opptncic@epamail.epa.gov. Such comments

and data must be submitted in an ASCII

file avoiding the use of special

characters and any form of encryption.

Comments and data will also be

accepted on disks in WordPerfect 5.1

file format or ASCII file format. All

comments and data in electronic form

must be identified by (OPPTS–

42187A)(FRL–4869–1). No information

claimed as CBI should be submitted

through e-mail. Comments in electronic

form may be filed online at many

federal depository libraries.

The official record of this action, as

well as the public version, will be

maintained in paper form. EPA will

transfer all comments received

electronically into paper form and will

place the paper copies in the official

record. The official record is the paper

record maintained at the address listed

at the beginning of the ‘‘ADDRESSES’’

section of this notice.

FOR FURTHER INFORMATION CONTACT:

Susan B. Hazen, Director,

Environmental Assistance Division

(7408), Rm. ET–543B, Office of

Pollution Prevention and Toxics, U.S.

Environmental Protection Agency, 401

M St., SW., Washington, DC 20460;

telephone: (202) 554–1404; TDD: (202)

554–0551; e-mail: TSCAHotline@epamail.epa.gov.

For technical information contact:

Richard Leukroth, Project Manager,

Chemical Control Division (7405),

Office of Pollution Prevention and

Toxics, U.S. Environmental Protection

Agency, 401 M St., SW, Washington,

DC, 20460; telephone: (202) 260–0321;

fax: (202) 260–8850; e-mail:

leukroth.rich@epamail.epa.gov.; or Gary

Timm, Senior Technical Advisor,

Chemical Control Division (7405),

Office of Pollution Prevention and

Toxics, U.S. Environmental Protection

Agency, 401 M St., SW., Washington,

DC 20460; telephone: (202) 260–1859;

fax: (202) 260–8168; e-mail:

timm.gary@epamail.epa.gov.

SUPPLEMENTARY INFORMATION: The HAPs

rule proposed testing, under section 4(a)

of the Toxic Substances Control Act

(TSCA), of: 1,1’-biphenyl, carbonyl

sulfide, chlorine, chlorobenzene,

chloroprene, cresols [3 isomers],

diethanolamine, ethylbenzene, ethylene

dichloride, ethylene glycol,

hydrochloric acid, hydrogen fluoride,

maleic anhydride, methyl isobutyl

ketone, methyl methacrylate,

naphthalene, phenol, phthalic

anhydride, 1,2,4-trichlorobenzene,

1,1,2-trichloroethane, and vinylidene

chloride. EPA would use the data

generated under the rule to implement

several provisions of section 112 of the

Clean Air Act and to meet other EPA

data needs and those of other Federal

agencies. In the HAPs proposal, EPA

solicited proposals for enforceable

consent agreements (ECAs) regarding

the performance of pharmacokinetics

(PK) studies which would permit

extrapolation from data developed from

oral exposure studies to predict effects

from inhalation exposure.

On October 18, 1996, EPA extended

the public comment period on the

proposed rule from December 23, 1996

to January 31, 1997 (61 FR 54383)(FRL–

5571–3). This extension was to allow

more time for the submission of

proposals for ECAs on PK and adequate

time for comments on the proposed rule

to be submitted after the Agency has

considered the ECA proposals. EPA has

received several proposals for ECAs on

PK. Due to the complexity of the issues

raised by these proposals, the Agency

extended the public comment period to

March 31, 1997 (61 FR 67516, December

23, 1996) to allow more time to consider

the ECAs and to finalize the test

guidelines to be referenced in the

proposed HAPs test rule.

In the HAPs proposed rule published

on June 26, 1996 (61 FR 33178), testing

would be conducted using the OPPTS

harmonized guidelines that were

proposed on June 20, 1996 (61 FR

31522)(FRL–5367–7). The process of

developing these guidelines is

proceeding at the same time as the

development of the HAPs test rule. As

stated in the original proposal, the

OPPTS harmonization process may

result in the finalization of the

guidelines prior to the end of the

comment period for the proposed rule.

If so, EPA will publish the final

guidelines used in the HAPs rule in

order to allow for public comment on

the applicability of the finalized

guidelines to the HAPs rule.

There has been an additional delay in

finalizing the guidelines. The Agency

has decided to extend the comment

period on the HAPs test rule to allow for

the publication of the final guidelines.

In addition, the Agency anticipates

responding to the submitters of

proposals for ECAs on PK by no later

than March 31, 1997.

Accordingly, EPA is extending the

comment period on the proposed rule to

April 30, 1997.

List of Subjects in 40 CFR Part 799

Environmental protection, Chemicals,

Hazardous substances, Reporting and

recordkeeping requirements.

Dated: February 25, 1997.

Charles M. Auer,

Director, Chemical Control Division, Office

of Pollution Prevention and Toxics.

[FR Doc. 97–5193 Filed 2–27–97; 8:45 am]

BILLING CODE 6560–50–F

DEPARTMENT OF TRANSPORTATION

Maritime Administration

46 CFR Part 382

[Docket No. R–158]

RIN 2133–AB19

Determination of Fair and Reasonable

Guideline Rates for the Carriage of

Bulk and Packaged Preference

Cargoes on U.S.-Flag Commercial

Vessels

AGENCY: Maritime Administration,

Department of Transportation.

ACTION: Notice of proposed rulemaking.

SUMMARY: The regulations at 46 CFR

part 382 prescribe the administrative

procedures and methodology for

determining fair and reasonable rates for

the carriage of dry and liquid bulk and

packaged preference cargoes on United

States commercial cargo vessels.

MARAD proposes to amend those

regulations to prescribe cost averaging

as the methodology used for
9144 Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules

determining rates and to implement

conforming procedural changes.

MARAD also intends to request

approval of a reduced information

collection under these regulations.

DATES: Written comments on this rule,

including information collection

requirements, are requested, and must

be received on or before April 29, 1997.

ADDRESSES: Comments may be mailed

or otherwise delivered to the Secretary,

Maritime Administration, Room 7210,

Department of Transportation, 400

Seventh Street S.W., Washington, D.C.

20590. All comments will be made

available for inspection during normal

business hours at the address above.

Commenters wishing MARAD to

acknowledge receipt of comments

should enclose a stamped, selfaddressed envelope or postcard.

FOR FURTHER INFORMATION CONTACT:

Michael P. Ferris, Director, Office of

Costs and Rates, Maritime

Administration, Washington, D.C.

20590, Tel. (202) 366–2324.

SUPPLEMENTARY INFORMATION: Section

901(b)(1) of the Merchant Marine Act of

1936 (the Act), as amended (46 App.

U.S.C. 1241(b)), cited as the Cargo

Preference Act of 1954, requires that at

least 50 percent of any equipment,

materials or commodities purchased by

the United States or for the account of

any foreign nation without provision for

reimbursement, or acquired as the result

of funds or credits from the United

States, shall be transported on privately

owned U.S.-flag commercial vessels, to

the extent that such vessels are available

at fair and reasonable rates. In 1985,

section 901 was amended to exclude

certain programs from the application of

cargo preference and to raise the U.S.-

flag share to 75 percent on certain

others. Upon request, MARAD provides

fair and reasonable rates (also referred to

as guideline rates) to U.S. shipper

agencies. Section 901(b)(2) of the Act

provides the authority for MARAD (by

delegation from the Secretary of

Transportation) to issue regulations

governing the administration of section

901(b)(1). In 1989, MARAD issued

regulations at 46 CFR Part 382 (‘‘Rule’’),

that initially became effective on

January 1, 1990. The Rule contains

regulations that govern the calculation

of fair and reasonable rates.

Under the current Rule, MARAD

establishes fair and reasonable rates, socalled guideline rates, which apply to

the waterborne portion of cargo

transportation and consist of four

components: (1) Operating costs; (2)

capital costs; (3) port and cargo

handling costs; and (4) brokerage and

overhead. The operating cost

component of the guideline rate for each

participating bulk vessel reflects actual

vessel operating costs that are based on

historical data modified to the current

period by utilizing escalation factors for

wage and non-wage costs. All eligible

annual operating costs are added

together for each vessel and divided by

the total number of operating days for

that vessel to yield a daily operating

cost. The cost is escalated to the current

year and multiplied by estimated total

voyage days to provide the operating

cost segment for the voyage.

There is a fuel cost segment of the

operating costs that MARAD calculates

for each vessel on the basis of actual

reported fuel consumption at sea and in

port. The actual fuel consumption of

each vessel is multiplied by the

corresponding projected number of

voyage days at sea and in port to

calculate total units of fuel consumed.

Current fuel prices are applied to fuel

consumed to produce the fuel segment

of the operating cost component.

MARAD then adds the totals of the fuel

and non-fuel operating cost segments to

produce the operating cost component

for the voyage.

The capital cost component is

presently calculated individually for

each participating bulk vessel and

consists of an allowance for

depreciation and interest, plus a

reasonable return on investment.

Depreciation is calculated by the

straight-line method, based on a 20-year

economic life and utilizing a residual

value of 2.5 percent. However, if the

owner acquired an existing vessel, the

vessel is depreciated by the straight-line

method over the remaining period of its

20-year economic life, but not fewer

than 10 years. Capitalized

improvements are depreciated straightline over the remainder of the 20-year

period, but not fewer than 10 years.

For the purpose of calculating interest

expense, MARAD assumes that original

vessel indebtedness is 75 percent of the

owner’s capitalized vessel cost and that

principal payments are made in equal

annual installments over a 20-year

period. To compute the interest cost, the

owner’s actual interest rate is applied to

the constructed outstanding debt on the

vessel. Where the owner has a variable

interest rate, MARAD uses the owner’s

rate prevailing at the time of calculation,

and if there is no interest rate available,

MARAD selects an appropriate interest

rate.

MARAD allows a return on capital

cost (investment), with two

components, return on equity and

return on working capital. The rate of

return is based upon a five-year average

of the most recent rates of return for a

cross section of transportation industry

companies, including maritime

companies. Equity in the vessel is

assumed to be the vessel’s constructed

net book value less constructed

indebtedness. Working capital is the

dollar amount necessary to cover

operating and voyage expenses. The

annual depreciation, interest, return on

equity and return on working capital are

divided by 300 operating days to

determine a daily amount. The total of

these elements is multiplied by

estimated voyage days to determine the

capital cost component used in the fair

and reasonable rate calculation.

The port and cargo handling cost

component of the guideline rate is

determined for each voyage on the basis

of the actual cargo tender terms for the

commodity, load and discharge ports,

and lot size. Costs used to determine the

port and cargo cost component are

based on the most current data from all

available sources and verified from data

received on completed cargo preference

voyages. The brokerage and overhead

component of the guideline rate is the

aggregate of the cost components for

operating, capital and port and cargo

handling, multiplied by an 8.5 percent

allowance for broker’s commissions and

overhead. The total of these four

components is now divided by cargo

tons (which cannot be less than 70

percent of the vessel’s cargo

deadweight) to determine the guideline

rate.

Under existing regulations, whenever

a vessel carries preference cargo and

subsequently transports additional cargo

prior to its return to the United States,

MARAD reexamines the guideline rate

that it calculated for the preference

voyage. This reexamination may result

in the recalculation of the original

guideline rate, incorporating the

additional voyage itinerary, costs and

revenues which occurred as a result of

the carriage of the additional cargo. If a

vessel is scrapped or sold after

discharging a preference cargo, MARAD

now adjusts the guideline rate to reflect

the termination of the voyage after

discharge. If the rate received by the

operator for the preference cargo

exceeds the adjusted guideline rate for

the one-way voyage, MARAD informs

the shipper agency who may then

require the operator to repay the

difference in the ocean freight.

Advance Notice of Proposed

Rulemaking

MARAD decided that revisions to the

Rule may be necessary to encourage

development of a modern and efficient

merchant marine and to reduce

government-wide cargo preference
Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules 9145

costs. As a result, on April 19, 1995,

MARAD issued an Advance Notice of

Proposed Rulemaking (ANPRM) (60 FR

19559), soliciting comments from the

public. MARAD identified three

alternative methodologies in the

ANPRM, in addition to the current

guideline rate methodology described

above, that it is considering to reduce

cargo preference costs. The three

alternatives were:

Foreign Market Differential—Under

this methodology, MARAD would

calculate the added costs associated

with owning and operating a vessel

under the U.S.-flag resulting from U.S.

laws and regulations and the U.S.

standard of living. This procedure

would identify a modern and efficient

target vessel or vessels available

worldwide and estimate costs under

foreign ownership and under U.S.

ownership, if operated in the most

efficient manner practical. The resulting

cost differential would be prorated over

specific voyages, as cargoes are

tendered, and added to the foreign bids

for such voyages to determine the fair

and reasonable rate for U.S.-flag

operators.

Significant problems exist with this

method, both in terms of economic

impact on U.S.-flag ship owners and the

legislative history of the Cargo

Preference Act. First and foremost of

these problems is the difficulty of

identifying and quantifying all of the

additional costs of U.S.-flag ownership.

While some of these costs, including

wages and benefits, are easily identified,

such costs as the additional cost of

meeting U.S. labor standards, safety and

environmental requirements are not

subject to quantification that would be

undisputed. Secondly, since preference

cargoes historically move between

different geographic areas than

commercial cargoes, a direct

comparison with the ‘‘foreign market’’

may not be possible. Finally, the Cargo

Preference Act of 1954 intended that

only rates for U.S.-flag commercial

vessels are to be considered in the

determination of what is fair and

reasonable. See Comp. Gen. B–95832

(Feb. 17, 1955) (unpublished), cited in

H.R. Rep. No. 80, 84th Cong., 1st. Sess.,

18 (1955). Accordingly, MARAD cannot

employ a foreign market-based system.

Cost Averaging—A methodology

utilizing vessel cost averaging would be

constructed in much the same manner

as the current Rule methodology, except

that average vessel costs would replace

individual vessel costs in the

calculation of the fair and reasonable

rate. There are three basic cost areas

which would be the most likely

candidates for averaging: Vessel

operating costs, vessel capital costs, and

fuel. Any one, or a combination of any

of the three cost areas could be included

in a cost averaging methodology.

Market Based—Under a market based

methodology, a vessel operator’s bid

would be considered fair and reasonable

if it were submitted in a competitive

environment. A competitive

environment would be established if

there were a required number of

qualified bids made by independent and

non-affiliated U.S.-flag vessel operators.

A market-based methodology would

actually be a combination of

methodologies because a cost-based

determination would be made in

instances where an insufficient number

of independent bids were received. The

cost-based rate could be determined as

prescribed in the existing Rule or by use

of some other methodology like those

described above. A review of the

legislative history of the Cargo

Preference Act of 1954, indicates that

adoption by MARAD of a market based

methodology may require additional

enabling legislation.

Comments to ANPRM

Seven sets of comments were received

in response to the ANPRM. Commenters

represented U.S. shipper agencies,

operators and industry associations.

Comments were offered in support of,

and in opposition to all four

alternatives, with no clear consensus.

The U.S. Agency for International

Development (USAID) also offered an

alternative similar to Worldscale for use

in determining guideline rates.

Commenters generally supported the

need for guideline rate reform and were

unanimous that any methodology must

encourage investment in efficient

vessels.

One commenter proposed an

alternative method whereby rates for

U.S.-flag operators would be capped at

defined comparable foreign rates plus a

fixed percentage premium.

Theoretically, this would be a ceiling

rate, and anything less than the ceiling

would be fair and reasonable by

definition. The foreign rates would be

based on averaged foreign rates for

comparable cargoes and cargo lots for

any preceding calendar year. The basis

for any premium would still be the

additional costs of U.S.-flag ownership

and operation.

Public Meetings

After an initial review of the

comments received on the ANPRM,

MARAD believed it would be beneficial

to meet with interested parties to

explore further the need for change and

potential methodologies. MARAD held

two meetings. On July 12, 1995,

members of the shipping community

and other interested parties met with

MARAD. The meeting generated

considerable discussion on the topics of

guideline rate alternatives and the

added costs associated with owning and

operating U.S.-flag vessels. Most

persons present considered that an

enumeration of the legal and regulatory

costs imposed on U.S.-flag vessels

would be very valuable. However, it was

generally believed that it would be too

difficult to construct a methodology

accurately comparing the cost of

operating under the U.S.-flag to the cost

of operating under appropriate

competitive foreign flags. With respect

to a market based system, several

attendees noted that the market should

be left alone to regulate supply and

demand. At the conclusion of the July

12 meeting, there was a consensus that

what was needed were changes to (1)

prevent abnormally high rate fixtures

and (2) encourage efficiency. The

averaging methodology was considered

the best means to accomplish these

goals.

On July 14, 1995, MARAD met on the

same subject with representatives of the

United States Department of Agriculture

(USDA) and the United States Agency

for International Development (USAID),

the major government shipper agencies.

Many of the same issues which arose at

the July 12, 1995 meeting were

discussed at this meeting. The

discussion centered on the foreign

market differential and cost averaging

methodologies. There appeared to be

support for both of these methodologies,

although the shipper agencies expressed

some reservations concerning specific

items, e.g., are there sufficient vessels

available in each category to make

averaging possible and whether or not a

new vessel should serve as the target

vessel of a market based evaluation.

A question also arose regarding the

effect that the proposed changes would

have on the ability of the U.S.-flag

commercial fleet to meet the preference

reservations established by the cargo

preference laws. Those laws currently

require that 75 percent of specified

preference cargoes be reserved for U.S.-

flag participation. There is concern that

the proposed changes would make it

impossible for the commercial fleet to

provide adequate availability to meet

the statutory cargo reservation

requirements. Although some high cost

operators may be adversely affected,

given current and foreseeable market

conditions, sufficient U.S.-flag tonnage

should be available to attain the 75

percent participation level.
9146 Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules

As a result of MARAD’s experience in

determining guideline rates and the

information received from the ANPRM

and meetings with interested parties,

MARAD is proposing to amend the Rule

in order to improve the fair and

reasonable rate-making process. The

following is a discussion of proposed

changes to 46 CFR Part 382.

Averaging

One of the principal criticisms of the

existing Rule, which is based on

individual vessel costs, is that it fails to

provide sufficient incentives for

efficient vessels to operate in the cargo

preference trade. Conversely, the

current methodology has not adequately

controlled the rates provided to the less

efficient operators. Averaging costs

would provide the same operating and

capital cost allowances for all vessels

competing for the carriage of a specific

preference cargo, creating an incentive

for vessels to operate more efficiently.

The resulting lower guideline rates

would prevent the government from

paying excessive rates for the use of less

efficient (more costly) vessels,

especially in times of high market rates

for vessels in the trade. Accordingly,

MARAD proposes that the operating

costs, including fuel consumption,

capital costs and speed, used in the

construction of the guideline rate be

averaged for all vessels within specific

size categories. The averages would be

computed twice a year. MARAD would

calculate the averages more frequently,

if necessary. The impact of the change

to averaging would be a reduction in the

guideline rate levels calculated for less

efficient vessels and an increase in the

guideline rate levels of the more

efficient vessels.

Vessel Categories

In order to administer a guideline rate

system based on average costs

effectively and fairly, MARAD would

place vessels in categories where a

minimal amount of distortion is evident

from cost variations that are solely

based on vessel size. For example, the

maintenance costs for a 15,000 DWT

vessel are less than the maintenance

cost of an 80,000 DWT vessel because,

among other items, the 80,000 DWT

vessel has more surface area to paint. In

choosing size categories, MARAD

examined the sizes and costs of vessels

that have carried preference cargo, the

number of vessels of similar size, and

the cargo amounts carried on individual

voyages in the preference trade.

MARAD also considered the difference

between vessel types (i.e., bulk carriers,

tankers, tug/barges, and general cargo),

and trading patterns in arriving at the

proposed vessel categories. As a result,

MARAD proposes that vessels be placed

in four categories on the basis of CDWT.

The NPRM defines CDWT as Summer

DWT less a five percent allowance for

fuel, stores and other capacity

reductions. MARAD proposes to specify

the following vessel categories:

Category I—Less than 8,000 CDWT

Category II—8,000—19,999 CDWT

Category III—20,000—34,999 CDWT

Category IV—35,000 CDWT and over

Tug/barge combinations would be

included with other vessels of similar

size in computing the average. Tug/

barge combinations are often slower

with lower per diem costs than selfpropelled vessels. Vessel speed will also

be averaged to place vessels and tug/

barge units on a comparable basis. Since

tug/barge combinations sometimes vary

and costs for more tugs than barges are

reported, MARAD proposes to match

the costs of a single tug with a single

barge based on the barge’s operating

history. To the extent tugs or barges are

grouped in the data submission,

MARAD would match classes of vessels.

Cost categories would include an equal

number of tugs and barges. As tug DWT

is minimal and does not factor into

cargo capacities, only the barge Cargo

Deadweight Capacity (CDWT) would be

used in determining the placement of

tug/barge combinations in size

categories. In the unusual case where

more than one barge is towed by the

same tug, the guideline would be based

on the total tonnage carried.

Since speed would be averaged across

vessel types, the separate weather delay

factors in § 382.3(e)(6) would no longer

be necessary. After reviewing actual

vessel speeds on preference voyages,

MARAD believes that a five percent

delay factor is sufficient for all vessel

types. With the weather delay factor

being equalized, specific definitions to

distinguish tug/barge units from other

bulk vessels, including integrated tug/

barge units, would no longer be

necessary. Based on the above

discussions, MARAD proposes to

amend § 382.3(a),(b) and (e)(6) to

implement cost averaging as the new

guideline rate methodology.

Although other categories were

suggested by commenters, MARAD

believes the categories chosen best

reflect the vessel size and cargo

distributions of the existing U.S.-fleet

serving the preference trade. Further,

MARAD believes that the proposed

categories better accommodate small

cargo size shipments. In calculating

guideline rates, MARAD will use costs

from the vessel size category best suited

for the size of the cargo.

Information Collection Requirements

MARAD is proposing to reduce

reporting and auditing requirements to

the maximum extent possible while

continuing to recognize the agency’s

need for accurate cost and financial

information. MARAD is proposing two

changes to reduce the amount of data

reported or the frequency of reporting.

This NPRM proposes that annual

operating cost data for similar vessels

within a category could be provided in

the aggregate on a single schedule rather

than individually for each vessel.

Should the operators take advantage of

this option, a substantial reduction in

the time and cost of operator

preparation is expected to occur. This

proposal would also change the filing of

post voyage reports from a voyage based

requirement (60 days after each voyage)

to a semi-annual requirement. Semiannual reporting with a ninety day lag

time (versus 60 days) will reduce the

paperwork burden on the operators. To

implement these concepts, the agency

proposes to amend § 382.2(b)(8) to

authorize aggregate schedule filings, and

amend § 382.2(c) to change post-voyage

filing to a semi-annual requirement.

Two changes are also proposed to

reduce the audit burden on operators,

the Department of Transportation,

Office of the Inspector General (OIG),

and MARAD. The first proposed change

would allow an operator to have its

submissions certified by an independent

certified public accountant (CPA). This

would alleviate the need for audit by the

OIG. Audits of cargo preference

submissions have proven to be a

significant cost both to the operators

and the government. Since many

operators have other ongoing audit

requirements, MARAD believes that the

certification of the cost submissions

would reduce the burden on most

operators. The second change would

provide a more exact requirement for

the preparation of the accounting data

used for cost submissions. Currently,

submissions must be prepared in

accordance with Uniform Financial

Reporting Requirements (46 CFR Part

232), using generally accepted

accounting principles (GAAP). Part 232

allows the operator to report to MARAD

using an accounting basis that is

different from the one it normally uses

for financial reporting, so long as GAAP

is used. Since GAAP allows different

accounting treatments for certain types

of expense, some operators are reporting

costs to MARAD in the manner most

advantageous to them. The choice can

have a major impact on an individual

vessel’s guideline rate. For example,

drydocking costs, which occur on a
Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules 9147

multi-year cycle, can be accrued over

the cycle (which includes more than

one rate year) or expensed in the current

reporting period. This interpretation has

caused some problems with auditing the

data, increasing costs to the operators

and the government. MARAD proposes

to require the operator to use the

accounting treatment it already uses for

its own records and audited financial

statements. Accordingly, MARAD

proposes to amend § 382.2(a) to provide

the alternative of certification by a CPA

and to amend § 382.2(d) to require the

use of consistent accounting practices

under GAAP.

MARAD is also proposing to make

three minor reporting changes: First, the

Official Coast Guard Identification

Number (official number) would be

used to identify a vessel. Since vessels

change names but the official number

always stays with the vessel, it is a

better identifier. Secondly, § 382.2(b)(2)

would be amended to clarify the DWT

requirement as summer DWT in metric

tons and eliminate the requirement for

Suez and Panama Canal net register

tons. The requirements for canal net

register tons (CNRT) is not necessary.

The original intent was to use CNRT to

estimate canal tolls when calculating

guideline rates, but to date no practical

system has been developed for those

estimations. Finally, § 382.2(b)(9) would

be amended to clarify the definition of

‘‘operating day’’. Days spent waiting,

even when the vessel is seaworthy and

fully manned, in anticipation of booking

a cargo or waiting for laydays to begin,

have never been considered operating

days for the purpose of calculating

guideline rates.

Overall, MARAD estimates changes in

information collection burden as

follows:

Current Proposed

Responses Hours Responses Hours

250 ............ 1,000 125 500

New Vessel Allowance

One goal of this rulemaking is to

encourage newer and more efficient

vessels to enter the cargo preference

market. There are certain conditions

which this regulation cannot affect,

such as the three year waiting period

before foreign-built vessels are eligible

to carry preference cargo, irregular

amount of cargoes available throughout

the year, and depressed market

conditions, which are primarily

responsible for the lack of newer U.S.-

flag vessels in the preference market.

MARAD is proposing that newly

constructed vessels, and vessels

acquired prior to the fifth anniversary of

their construction, receive an additional

allowance for acquisition capital in the

guideline rate that will continue for a

period of five years after acquisition by

the owner. The new vessel allowance

would total ten percent of capitalized

acquisition costs (reduced to a daily

basis for use in the guideline rate based

on a 300 day operating year) for the first

year after acquisition. The amount

would decline by one percentage point

each subsequent year. No allowance

will be included in the guideline rate

after the fifth year following acquisition.

MARAD believes this would offset any

disincentives for newer vessel entrants

in the proposed rule. Therefore, it is

proposed that a new § 382.3(b)(4) be

added to the rule which provides a new

vessel allowance.

Seventy Percent Limitation

The current Rule provides that, for the

purposes of calculating guideline rates,

calculated cargo tonnage shall not be

less than 70 percent of the vessel’s cargo

capacity. This provision was intended

to protect the Government from

excessive rates in cases where a lone

bidder with a large vessel bids on a

small cargo lot. Experience has shown,

however, that the actual result has been

to limit competition. The proposed

system is cargo size driven in that the

category of costs used in determining

the guideline rate will be based on the

total amount of cargo carried. For

example, if 30,000 tons of cargo is

booked for carriage, costs from Category

III will be used to calculate the

guideline rate. As such, the guideline

rate for the carriage of that cargo for a

30,000 CDWT vessel would be the same

as a 50,000 CDWT vessel. In such a

system, the 70 percent rule is not

necessary, and MARAD proposes to

eliminate that restriction.

Determination of Voyage Length

One concern of the bulk operators has

been the method for determining voyage

length in § 382.3(e)(1). One provision

requires that a voyage be calculated on

a round voyage basis. Another requires

adjustment of the guideline rate to

reduce allowable voyage days for

purposes of rate calculation if a

backhaul cargo is obtained. It has been

MARAD’s experience that, together,

these requirements discourage full

participation in the bulk preference

cargo trades and do not consistently

provide equitable treatment in the

guideline rate procedures. These

requirements do not reflect how bulk

operations are conducted.

In the U.S. preference trades, the

majority of cargoes originate in the U.S.

Gulf. As a result, vessels generally

return to Gulf ports after completion of

a voyage to await the next cargo

opportunity. If that opportunity

originates from a point of origin outside

the Gulf, the vessel (1) must position for

the cargo, and (2) will most likely return

to the Gulf. In some instances a

succeeding U.S. load opportunity will

arise before the vessel returns to its

original preference load port and it will

divert directly to the load point for the

successive cargo. In either event, a

point-to-point round voyage does not

occur.

Bulk operators, particularly tankers,

frequently bid on a preference cargo in

consideration of obtaining a backhaul

cargo. If there is a realistic prospect of

carrying a backhaul cargo, the operator

will likely bid lower than where there

is no backhaul cargo. The prospect of

profitable backhauls would also

encourage the participation of more

U.S.-flag vessels in the preference

trades, resulting in more competition

and lower fixture rates. However, with

the backhaul disincentive in the existing

rule, the Government could lose the

benefit of the operator’s incentive to bid

low.

Between May 1, 1990 and June 30,

1995, MARAD calculated 1,029

guideline rates. Of these, only 30

resulted in recalculations because of

backhauls. Because most backhauls are

marginal in nature, they usually

contribute very little revenue above

their costs. As a result, only five of the

30 recalculated rates resulted in

calculated recapture, i.e., a reduction in

payments to the operator. Compared to

the total revenue generated by the

voyages for which backhauls were

calculated, the total recapture has

amounted only to four-tenths of one

percent of total gross revenue. The

expected benefits of recapture are

outweighed by the administrative

expense, higher fixture rates, and lost

competitive opportunities. For these

reasons, MARAD is proposing

elimination of the backhaul adjustment

provision.

MARAD is proposing two changes to

§ 382.3(e)(1) to conform the existing

method of determining voyage length

with the realities of bulk preference

operations. First, instead of requiring

that the rate be based on a round-trip

voyage, MARAD would choose the most

appropriate port range for the return leg

based on the practices of the owner and

the prospects for subsequent

employment at the load port. The

second change would be to eliminate

the requirement for a rate adjustment

when the operator obtains a backhaul

cargo.
9148 Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules

Capital Cost Component

Five changes are being proposed

within this cost category. The purpose

of the proposed changes is to simplify

or clarify rate calculations.

Section 382.3(b)(2)(ii) refers only to

vessels with a 20-year economic life in

determining the interest amount in the

capital cost component of a guideline

rate. In practice, many vessels have been

sold, reconstructed and/or improved,

and periods of economic life vary from

vessel to vessel. In these instances, the

various depreciation periods used to

determine the guideline rate were

defined in paragraph (b)(2)(I) of that

section, but were not explicitly

mentioned in paragraph (b)(2)(ii),

Interest. To clarify paragraph (b)(2)(ii),

MARAD proposes to include therein a

cross reference to paragraph (b)(2)(I)

with respect to the periods of

depreciation to be used in determining

interest expense in the guideline rate.

The second proposed change affects

the method of determining depreciation.

The current Rule uses a residual value

of 2.5 percent of a vessel’s initial book

value as part of the depreciation

calculation. For purposes of

simplification and to conform to

existing conditions for vessel scrapping,

MARAD is proposing to eliminate use of

the residual value in the calculation of

depreciation.

The third proposed change to the

capital cost calculation concerns

situations where interest rates are not

available for certain capitalized items.

When this occurs, the rule now specifies

that a ‘‘current long term rate, the Title

XI [Vessel Financing] rate if available,’’

be used in the guideline rate for

determining the capital component.

MARAD has found that the ten-year

Treasury-bill (T-bill) rate plus one

percent is an appropriate and readily

available substitute. Accordingly,

MARAD proposes to amend

§ 382.3(b)(2)(ii) to specify the ten-year

T-bill rate plus one percent as the rate

used in the fair and reasonable rate

calculation when no interest rate is

available or for vessels without

mortgage debt.

The fourth proposed change also

relates to the interest rate used to

calculate capital costs. Section

382.3(b)(2)(ii) specifies that, when

variable interest rates are part of the

mortgage, the rate ‘‘at the time of the

calculation * * * shall be used.’’ To

assist in the computation of more

flexible guideline rates, MARAD

proposes to use the interest rate in effect

on the first business day of the year or

the first business day on or after July 1,

whichever is appropriate. Therefore,

MARAD proposes to amend

§ 382.3(b)(2)(ii) to specify January 1 and

July 1 as the dates on which the interest

rates in effect would be used in lieu of

variable interest rates for the calculation

of fair and reasonable rates.

The final proposed change to capital

costs is the provision pertaining to the

return on working capital. A statement

would be added to new § 382.3(b)(3)

noting that the return on working

capital is a voyage related capital cost

element.

Port and Cargo Handling Cost

Component

To conform to the proposed new

averaging system, MARAD would

amend § 382.3(c) to specify that port

and cargo costs will be determined by

vessel category.

One-Way Rates

Section 382.3(e)(1) provides for a oneway rate when a vessel is scrapped or

immediately sold after discharge of the

preference cargo. The term

‘‘immediately’’ has created some

confusion. MARAD proposes to amend

this paragraph by striking

‘‘immediately’’ and adding ‘‘and does

not return to the United States as a U.S.-

flag vessel.’’ This language specifies the

conditions under which MARAD

considers a voyage to be one-way, will

assure that an operator selling or

transferring a vessel foreign is not

compensated by a cargo preference

program intended to promote U.S.-flag

vessels.

Total Revenue Rates

On numerous occasions more than

one cargo has been booked on a vessel

subject to the guideline rate regulations.

Also, there have been occasions when

there have been multiple load and/or

discharge ports. These situations often

make the calculation of individual rates

for particular parcels and/or

destinations, as required by § 382.3(f)

and (g), impossible. Accordingly, when

this occurs, MARAD proposes to

calculate a ‘‘Total Revenue Rate’’. The

guideline rate would be calculated

normally, but the final rate would be

expressed as gross revenue for the total

voyage, rather than as a rate per ton. So

long as the revenue from the sum of the

individual parcels does not exceed the

total revenue calculated in the

guideline, the individual rates would be

considered fair and reasonable. Section

382.3(f) would be modified to remove

the references to individual rates for

separate parcels carried on the same

voyage. Paragraph (g) of that section

would also be modified by including

language to allow the use of either a cost

per ton or other measure that MARAD

determines appropriate.

Administrative Practices

MARAD is also proposing to change

certain of its administrative practices for

prescribing guideline rates. While these

changes do not necessitate actual

changes in the regulations, MARAD is

seeking comments with respect to its

proposals. These changes will (1) allow

differentiation between cargo tender

terms when determining delay factors

(for delays in port and days not worked)

to more appropriately reflect the risk of

delay inherent in the terms; (2) expand

the applicability of an initial guideline

rate calculation to cover most substitute

vessels.

Delay Factors

Section 382.3(e)(3) includes in the

calculation of voyage days in port a

factor to account for delays and days not

worked. It has been MARAD’s practice

not to differentiate between cargo tender

terms in arriving at an appropriate delay

factor. In reality, different cargo terms

have different levels of risk of delay

associated with them. For example, Free

In and Out (FIO) terms have defined

load and discharge rates, generally with

payment of demurrage and despatch by

the charterer and vessel owner,

respectively, while FBT (Full Berth

Terms) carry unlimited risk of delay

without compensation. MARAD

proposes to change its practices to

provide delay factors which more

appropriately reflect the risk of delay

inherent in the cargo tender terms. For

example, a guideline rate calculated for

an FIO cargo where the tender included

demurrage and despatch premiums

could use the load and discharge

guarantee rates included in the tender;

for an FBT voyage, historical experience

or current conditions may require using

delay factors in the load or discharge

ports.

Guideline Rate Requests

On average, MARAD calculates two

guideline rates for each cargo actually

fixed. This is generally the result of

substitutions, voyage variations, add-on

cargoes, audits and similar

recalculations. It is currently MARAD’s

practice to provide a guideline rate

when requested by a shipper agency.

MARAD intends to substantially reduce

the incidence of these calculations and

determine only one guideline rate for

each preference cargo which is based on

the initially requested vessel and cargo.

That guideline rate would also be

applicable to all other vessels that might

actually carry the cargo and for amounts

plus or minus five percent of the
Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules 9149

original request, except in the case

where there is a substitution of a vessel

eligible to receive the ‘‘new vessel

allowance’’ for an older vessel, or vice

versa. Rates would also be recalculated,

if requested, for add-on preference

cargoes which increase cargo size by

more than five percent. MARAD will

not recalculate a rate for add-on

commercial cargo.

Revised Rate Methodology

The guideline or fair and reasonable

rates proposed to be established by

MARAD would apply only to the

waterborne portion of cargo

transportation, to consist of four

components: (1) Operating costs; (2)

capital costs; (3) port and cargo

handling costs; and (4) brokerage and

overhead. The operating cost

component of the fair and reasonable

rate would reflect average vessel

operating costs for vessels within the

specified size categories previously

discussed, based on the historical data

submitted in accordance with § 382.2 of

this rule. MARAD would modify the

operating costs to the current period,

utilizing escalation factors for wage and

non-wage costs. To the extent vessels

are time chartered or leased, operators

would submit both operating and

capital costs, including all capitalized

costs and interest rates for vessels

subject to capital leases.

All eligible annual operating costs for

vessels within a category would be

added together and divided by the total

number of operating days for those

vessels to yield a daily operating cost.

The cost would be indexed to the

current year and multiplied by

estimated total voyage days to yield the

operating cost segment for the voyage.

The amount of cargo fixed would be the

basis for selecting which vessel category

of cost averages would be used in

calculating a guideline rate.

Fuel consumption would be figured

on the basis of actual reported fuel

consumption at sea and in port for

vessels within the same category. The

average fuel consumptions of vessels in

the category would be multiplied by the

corresponding projected number of

voyage days at sea and in port to yield

total fuel consumed. MARAD would

obtain from published sources current

spot market fuel prices, at bunkering

ports consistent with sound commercial

practice, and apply them to fuel

consumed to produce the fuel segment

of the operating cost component. The

total of the fuel and non-fuel operating

cost segments would be added together

to yield the operating cost component

for the voyage.

The capital cost component would be

based on participating vessels in the

applicable size category. It would

consist of an allowance for depreciation

and interest and a reasonable return on

investment. Depreciation would be

straight-line based on a 20-year

economic life. However, if the owner

acquired an existing vessel, the vessel

would be depreciated on a straight-line

basis over the remaining period of its

20-year economic life, but not fewer

than 10 years. Capitalized

improvements would be depreciated

straight-line over the remainder of the

20-year period, but not fewer than 10

years, commencing with the

capitalization date for those

improvements.

For the purpose of calculating interest

expense, MARAD would assume that

original vessel indebtedness is 75

percent of the owner’s capitalized vessel

cost and that principal payments are

made in equal annual installments over

the economic life of the vessel. To

compute the interest cost, the owners’

actual interest rates would be applied to

the vessel’s outstanding constructed

debt, using the depreciation schedule in

§ 382.3(b)(2)(ii). Where the owner has a

variable interest rate, the owner’s rate

prevailing at the time of calculation of

the average capital cost component

would be used. In cases where there is

no interest rate available, and for

operators without vessel debt, MARAD

would use the ten-year T-bill rate plus

one percent.

As in the existing Rule, return on

investment would have two

components, return on equity and

return on working capital. The rate of

return would be based upon a five-year

average of the most recent rates of return

for a cross section of transportation

industry companies, including maritime

companies. Equity would be assumed to

be a vessel’s constructed net book value

less constructed principal amounts.

Working capital would be voyage based

and is the dollar amount necessary to

cover operating and voyage expenses.

A new vessel allowance would be

included in the capital component of

newly built vessels and vessels acquired

when five years of age or less. The new

vessel allowance would be paid for the

first five years following construction or

acquisition. This allowance would equal

ten percent of the vessel’s capitalized

costs during the first year following

construction or acquisition, and would

decline by one percentage point each of

the subsequent four years. To arrive at

the voyage allowance, the annual

amount would be divided by 300

operating days and multiplied by

estimated voyage days.

The average annual depreciation,

interest, and return on equity for vessels

in the category would be divided by 300

operating days to determine a daily

amount. The total of these elements

would be multiplied by estimated

voyage days and added to the return on

working capital and the new vessel

allowance to determine the capital cost

component used in the fair and

reasonable rate calculation.

The port and cargo handling cost

component would be determined for

each voyage on the basis of vessels in

the category and the actual cargo tender

terms for the commodity, load and

discharge ports, and lot size. The costs

would include applicable fees for

wharfage and dockage of the vessel,

canal tolls, cargo loading and

discharging, and all other voyage costs

associated with the transportation of

preference cargo. Costs used to

determine the port and cargo cost

component would be based on the most

current data from all available sources

and verified from data received on

completed cargo preference or

commercial voyages.

To determine the brokerage and

overhead component of the fair and

reasonable rate, MARAD would add the

cost components for operating, capital,

and port and cargo handling and

multiply that sum by an 8.5 percent

allowance for broker’s commissions and

overhead. The total of these four

components, expressed as total revenue

or as a rate per ton, whichever is most

applicable, would be the fair and

reasonable rate.

If a vessel is scrapped or sold after

discharging a preference cargo, and the

vessel does not return to the United

States as a U.S.-flag vessel, the guideline

rate would be adjusted to reflect the

termination of the voyage after cargo

discharge. If the rate received by the

operator for the preference cargo

exceeds the adjusted guideline rate for

the one-way voyage, the operator would

be required to repay the difference in

ocean freight to the shipper agency.

In special circumstances, certain

procedures prescribed in this rule may

be waived, so long as the procedures

adopted are consistent with the Act and

with the intent of these regulations.

Rulemaking Analysis and Notices

Executive Order 12866 (Regulatory

Planning and Review); DOT Regulatory

Policies and Procedures; Public Law

104–121.

This rulemaking is not considered an

economically significant regulatory

action under Section 3(f) of E.O. 12866.

It is not considered to be a major rule
9150 Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules

for purposes of Congressional review

under Public Law 104–121. It is

anticipated that savings to the

Government of less than $1 million per

year will result. Accordingly, the

program will not have an annual effect

on the economy of $100 million or

more. While this rule does not involve

any change in important Departmental

policies, it is considered significant

under DOT Regulatory Policies and

Procedures and E.O. 12866 because it

addresses a matter of considerable

importance to the maritime industry

and may be expected to generate

significant public interest. Accordingly,

the Office of Management and Budget

has reviewed this rule.

MARAD has estimated the potential

economic impact of this rulemaking. To

determine what effect the proposed

changes would have had on guideline

rates, 167 rates were recalculated for the

years 1992 through 1995 using the

revised methodology. This sample

represented 25% to 30% of the total

fixtures for each of the four years. The

rate sample chosen was reflective of the

operators and countries in the complete

data base. For 1992 and 1993, the

recalculated rates were below the

original guideline rates 54% of the time.

In 1994 and 1995, the ratio of

recalculated rates falling below original

guideline calculations rose to 60%.

The rates calculated for the sample

were compared to actual cargo fixture

rates to evaluate the ability of averaging

to reduce program costs. The chart

included below summarizes the results

of the sample data. Using averaging,

twelve percent of the rates in the sample

were lower, while only 10 percent rose.

The dollar cost reduction for the rates

compared equates to about one million

dollars over the period. Assuming the

relationship holds constant over the

remainder of the rates calculated in the

period, a savings of $3.3 million could

have been realized.

GUIDELINE RATE CHANGES UNDER AVERAGING METHOD COMPARISON OF HISTORICAL GUIDELINE RATES TO PROPOSAL

Year Sample

size

Preference revenue

Net savings

Direction of change

Original Revised Down Up

1992 ................................................................................ 53 $82,929,000 $82,434,000 $495,000 5 4

1993 ................................................................................ 67 137,344,000 136,812,000 532,000 14 13

1994 ................................................................................ 36 50,607,000 50,607,000 0 0 0

1995 ................................................................................ 11 15,985,000 15,982,000 3,000 1 0

Total ..................................................................... 167 286,865,000 285,835,000 1,030,000 20 17

Total percentage of change ................................. .............. ........................ ........................ .................... 12 10

The data for 1994 and 1995 also

demonstrate how a bad market

depresses the rates offered for

preference cargoes. Even though rates

calculated using the averaging method

fell below the original guideline rate

60% of the time, actual fixture rates

during that period were still below

recalculated guidelines. This result is

neither unexpected nor undesirable. In

fact, it validates the category cost

averaging method as being able to hold

rates down in a very good market while

not being responsible for pushing the

rates to the level of a bad market. Even

though reducing program costs is a goal

of this proposed new method, it is

important that rates still be fair to an

efficient operator.

Federalism

The Maritime Administration has

analyzed this rulemaking in accordance

with the principles and criteria

contained in Executive Order 12612 and

has determined that it would not have

sufficient federalism implications to

warrant the preparation of a Federalism

Assessment.

Regulatory Flexibility Act

The Maritime Administration certifies

that this regulation would not have a

significant economic impact on a

substantial number of small entities.

There are approximately twenty-five

vessel operators that participate in this

program, none of which are small

entities.

Environmental Assessment

This regulation does not significantly

affect the environment. Accordingly, an

Environmental Impact Statement is not

required under the National

Environmental Policy Act of 1969.

Paperwork Reduction Act

This proposed rulemaking reduces the

current requirement for the collection of

information. The Office of Management

and Budget (OMB) has reviewed and

approved the information collection and

record keeping requirements (approval

number 2133–0514) in the current rule

under the Paperwork Reduction Act of

1995 (44 U.S.C. 3501 et seq.).

In accordance with the Paperwork

Reduction Act of 1995, this notice

announces the Maritime

Administration’s (MARAD’s) intentions

to request extension of approval for

three years of a currently approved

information collection. Copies of this

request can be obtained from the Office

of Costs and Rates.

Title of Collection: Determination of

Fair and Reasonable Rates for the

Carriage of Bulk Preference Cargoes (46

CFR Part 382).

Type of Request: Extension of

currently approved information

collection.

OMB Control Number: 2133–0514.

Form Number: None.

Expiration Date of Approval: 9/30/97.

Summary of Collection of

Information: Two different types of data

are required: Vessel Operating Costs and

Capital Costs—Part 382 requires U.S.-

flag vessel Operators to submit this data

to MARAD on an annual basis. The

costs are used by MARAD in

determining fair and reasonable

guideline rates for the carriage of

preference cargoes on U.S.-flag vessels.

Voyage costs and voyage days—(Post

Voyage Report)—This information is

required to be filed by a U.S.-flag

operator after the completion of a cargo

preference voyage.

Need and Use of the Information: The

information collected is used by

MARAD to calculate fair and reasonable

rates for U.S.-flag vessels engaged in the

carriage of preference cargoes. If the

information is not collected, the fair and

reasonable rates could be inaccurate

thus leading to a lack of adequate

protection of the government’s financial

interest in obtaining the lowest possible

U.S.-flag cost for shipping government

cargoes.

Description of Respondents: U.S.-flag

vessels are owned and operated by U.S.

citizens under the U.S.-flag. The vessels
Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules 9151

consist of tug/barges, dry bulk vessels,

break bulk liner vessels, LASH, and

tankers.

Annual Responses: 125 (total)—50

filings of vessel operating costs and

capital costs from U.S. operators; 75

filings of Post Voyage Reports.

Annual Burden: 500 hours—This rule

would not impose any unfunded

mandates.

List of Subjects in 46 CFR Part 382

Agricultural commodities,

Confidential business information,

Government procurement, Loan

programs—foreign relations, Maritime

carriers, Reporting and recordkeeping

requirements.

Accordingly, 46 CFR Chapter II is

hereby proposed to be amended by

revising Part 382, to read as follows:

PART 382—DETERMINATION OF FAIR

AND REASONABLE RATES FOR THE

CARRIAGE OF BULK AND PACKAGED

PREFERENCE CARGOES ON U.S.-

FLAG COMMERCIAL VESSELS

Sec.

382.1 Scope.

382.2 Data submission.

382.3 Determination of fair and reasonable

rates.

382.4 Waiver.

Authority: 46 App. U.S.C. 1114, 1241(b);

49 CFR 1.66.

§ 382.1 Scope.

The regulations in this part prescribe

the type of information that shall be

submitted to the Maritime

Administration (MARAD) by operators

interested in carrying bulk and

packaged preference cargoes, and the

method for calculating fair and

reasonable rates for the carriage of dry

(including packaged) and liquid bulk

preference cargoes on U.S.-flag

commercial vessels, except vessels

engaged in liner trades, as defined in 46

CFR 383.1, pursuant to section 901(b) of

the Merchant Marine Act, 1936, as

amended, 46 App. U.S.C. 1214(b).

§ 382.2 Data submission.

(a) General. The operators shall

submit information, described in

paragraphs (b) and (c) of this section, to

the Director, Office of Costs and Rates,

Maritime Administration, Washington,

D.C. 20590. To the extent a vessel is

time chartered, the operator shall also

submit operating expenses for that

vessel. All submissions shall be certified

by the operators. A further review and

certification by an independent

Certified Public Accountant (CPA) is

recommended. Submissions not

certified by an independent CPA are

subject to verification, at MARAD’s

discretion, by the Office of the Inspector

General, Department of Transportation.

MARAD’s calculations of the fair and

reasonable rates for U.S.-flag vessels

shall be performed on the basis of cost

data provided by the U.S.-flag vessel

operator as specified herein. If a vessel

operator fails to submit the required cost

data, MARAD will not construct the

guideline rate for the affected vessel,

which may result in such vessel not

being approved by the sponsoring

Federal agency.

(b) Required vessel information. The

following information shall be

submitted not later than April 30, 1998,

for calendar year 1997 and shall be

updated not later than April 30 for each

subsequent calendar year. In instances

where a vessel has not previously

participated in the carriage of cargoes

described in § 382.1, the information

shall be submitted not later than the

same date as the offer for carriage of

such cargoes is submitted to the

sponsoring Federal agency, and/or its

program participant, and/or its agent

and/or program’s agent, or freight

forwarder.

(1) Vessel name and official number.

(2) Vessel DWT (summer) in metric

tons.

(3) Date built, rebuilt and/or

purchased.

(4) Normal operating speed.

(5) Daily fuel consumption at normal

operating speed, in metric tons (U.S.

gallons for tugs) and by type of fuel.

(6) Daily fuel consumption in port

while pumping and standing, in metric

tons (U.S. gallons for tugs), by type of

fuel.

(7) Total capitalized vessel costs (list

and date capitalized improvements

separately), and applicable interest rates

for indebtedness (where capital leases

are involved, the operator shall report

the imputed capitalized cost and

imputed interest rate).

(8) Operating cost information, to be

submitted in the format stipulated in 46

CFR 232.1, on Form MA–172, Schedule

301. Operators are encouraged to

provide operating cost information for

similar vessels that the operator

considers substitutable within a

category, as defined in § 382.3(a)(1), in

the aggregate on a single schedule.

Information shall be applicable to the

most recently completed calendar year.

(9) Number of vessel operating days

pertaining to data reported in paragraph

(b)(8) of this section for the year ending

December 31. For purposes of this part,

an operating day is defined as any day

on which a vessel or tug/barge unit is in

a seaworthy condition, fully manned,

and either in operation or standing

ready to begin pending operations.

(c) Required port and cargo handling

information. The port and cargo

handling costs listed in this paragraph

(c) shall be provided semi-annually for

each cargo preference voyage terminated

during the period. The report shall

identify the vessel, cargo and tonnage,

and round-trip voyage itinerary

including dates of arrival and departure

at port or ports of loading and discharge.

The semi-annual periods are as follows:

Period/Due date

April 1–September 30—January 1

October 1–March 31—July 1

(1) Port expenses. Total expenses or

fees, by port, for pilots, tugs, line

handlers, wharfage, port charges, fresh

water, lighthouse dues, quarantine

service, customs charges, shifting

expenses, and any other appropriate

port expense.

(2) Cargo expense. Separately list

expenses or fees for stevedores,

elevators, equipment, and any other

appropriate expenses.

(3) Extra cargo expenses. Separately

list expenses or fees for vacuvators and/

or cranes, lightering (indicate tons

moved and cost per ton), grain-to-grain

cleaning of holds or tanks, and any

other appropriate expenses.

(4) Canal expenses. Total expenses or

fees for agents, tolls (light or loaded),

tugs, pilots, lock tenders and boats, and

any other appropriate expenses. Indicate

waiting time and time of passage.

(d) Other requirements. Unless

otherwise provided, operators shall use

generally accepted accounting

principles and 46 CFR Part 232,

Uniform Financial Reporting

Requirements, for guidance in

submitting cost data. Notwithstanding

the general provisions in 46 CFR

232.2(c) for MARAD program

participants, each operator shall submit

cost data in the format that conforms

with the accounting practices reflected

in the operator’s trial balance and, if

audited statements are prepared, the

audited financial statements. Data

requirements stipulated in paragraph (b)

of this section that are not included

under those reporting instructions shall

be submitted in a similar format. If the

operator has already submitted to

MARAD, for other purposes, any data

required under paragraph (b) of this

section, its submission need not be

duplicated to satisfy the requirements of

this part.

(e) Presumption of confidentiality.

MARAD will initially presume that the

material submitted in accordance with

the requirements of this part is

privileged or confidential within the

meaning of the Freedom of Information

Act (FOIA), 5 U.S.C. 552(b)(4). In the
9152 Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules

event of a subsequent request for any

portion of that data under the FOIA,

MARAD will inform the submitter of

such request and allow the submitter

the opportunity to comment. The

submitter shall claim or reiterate its

claim of confidentiality at that time by

memorandum or letter, stating the basis

for such assertion of exemption from

disclosure, including, but not limited to,

statutory and decisional authorities. The

Freedom of Information Act Officer, or

the Chief Counsel of MARAD, will

inform the submitter of the intention to

disclose any information claimed to be

confidential, after the initial FOIA

request, or after any appeal of MARAD’s

initial decision, respectively.

(Approved by the Office of Management

and Budget under control number 2133–

0514)

§ 382.3 Determination of fair and

reasonable rate.

Fair and reasonable rates for the

carriage of preference cargoes on U.S.-

flag commercial vessels shall be

determined as follows:

(a) Operating cost component—(1)

General. An operating cost component

for each category, based on average

operating costs of participating vessels

within a cargo size category, shall be

determined, at least twice yearly, on the

basis of operating cost data for the

calendar year immediately preceding

the current year that has been submitted

in accordance with § 382.2. The

operating cost component shall include

all operating cost categories, as defined

in 46 CFR 232.5, Form MA–172,

Schedule 301, Operating Expenses. For

purposes of these regulations, charter

hire expenses are not considered

operating costs. MARAD shall index

such data yearly to the current period,

utilizing the escalation factors for wage

and nonwage costs used in escalating

operating subsidy costs for the same

period.

(2) Fuel. Fuel costs within each

category shall be determined based on

the average actual fuel consumptions, at

sea and in port, and current fuel prices

in effect at the time of the preference

cargo voyage(s).

(3) Vessel categories. (i) Vessels shall

be placed in categories by cargo

deadweight capacities (CDWT), as

follows:

Group I—under 8,000 CDWT

Group II—8,000—19,999 CDWT

Group III—20,000—34,999 CDWT

Group IV—35,000 CDWT and over

(ii) For purposes of paragraph (a)(3)(i)

of this section, CDWT is defined as

Summer DWT less five percent.

(b) Capital component—(1) General.

An average capital cost component shall

be constructed, at least twice yearly,

consisting of vessel depreciation,

interest, and return on equity.

(2) Items included. The capital cost

component shall include:

(i) Depreciation. The owner’s

capitalized vessel costs, including

capitalized improvements, shall be

depreciated on a straight-line basis over

a 20-year economic life, unless an

owner purchased or reconstructed the

vessel when its age was greater than 10

years old. To the extent a vessel is

chartered or leased, the operator shall

submit the capitalized cost and imputed

interest rate. In the event these items are

not furnished, MARAD will construct

these amounts. When vessels more than

10 years old are acquired, a depreciation

period of 10 years shall be used.

Capitalized improvements made to

vessels more than 10 years old shall be

depreciated over a 10-year period. When

vessels more than 10 years old are

reconstructed, MARAD will determine

the depreciation period.

(ii) Interest. The cost of debt shall be

determined by applying the vessel

owner’s actual interest rate to the

outstanding vessel indebtedness.

MARAD shall assume that original

vessel indebtedness is 75 percent of the

owner’s capitalized vessel cost,

including capitalized improvements,

and that annual principal payments are

made in equal installments over the

economic life of the vessel as

determined in accordance with

paragraph (b)(2)(i) of this section. Where

an operator uses a variable interest rate,

the operator’s actual interest rate at the

time of calculation of the average capital

cost component shall be used. The tenyear Treasury bill (T-bill) rate plus one

percent on the first business day of the

year or the first business day on or after

July 1 shall be used for operators

without vessel debt and when the actual

rate is unavailable.

(iii) Return on equity. The rate of

return on equity shall be computed in

the same manner as described in

paragraph b)(3) of this section. For the

purpose of determining equity, it shall

be assumed that the vessel’s constructed

net book value, less outstanding

constructed principal, is equity. The

constructed net book value shall equal

the owner’s capitalized cost minus

accumulated straight-line depreciation.

(3) Return on working capital. For

each voyage a return on working capital

shall be included as part of the capital

cost element. Working capital shall

equal the dollar amount necessary to

cover 100 percent of the averaged

operating costs and estimated voyage

costs for the voyage. The rate of return

shall be based on an average of the most

recent return of stockholders’ equity for

a cross section of transportation

companies, including maritime

companies.

(4) New vessel allowance. Newly

constructed vessels and vessels acquired

during or before their fifth year of age

will receive an additional allowance for

acquisition capital as part of the capital

cost element. For the first year following

construction or acquisition by the

operator, a daily amount equal to ten

percent of capitalized acquisition costs,

divided by 300 operating days, shall be

included. This amount shall be reduced

by one percent of capitalized acquisition

costs each subsequent year. No

allowance shall be included after the

fifth year following construction or

acquisition.

(5) Voyage component. The annual

depreciation, interest, and return on

equity shall be divided by 300 vessel

operating days to yield the daily cost

factors. Total voyage days shall be

applied to the daily cost factors and

totaled with the return on working

capital and new vessel allowance for the

voyage to determine the daily capital

cost component.

(c) Port and cargo handling cost

component. MARAD shall calculate an

estimate of all port and cargo handling

costs on the basis of the reported cargo

tender terms. The port and cargo

handling cost component shall be based

on vessels in the category and the most

current information available verified by

information submitted in accordance

with § 382.2(c), or as otherwise

determined by MARAD, such as by

analysis of independent data obtained

from chartering agencies.

(d) Brokerage and overhead

component. An allowance for broker’s

commission and overhead expenses of

8.5 percent shall be added to the sum of

the operating cost component, the

capital cost component, and the port

and cargo handling cost component.

(e) Determination of voyage days. The

following assumptions shall be made in

determining the number of preference

cargo voyage days:

(1) The voyage shall be round-trip

with the return in ballast to a port or

port range selected by MARAD as the

most appropriate, unless the vessel is

scrapped or sold after discharge of the

preference cargo and does not return to

the United States as a U.S.-flag vessel.

In this event, only voyage days from the

load port to the discharge port,

including time allowed to discharge,

shall be included.

(2) Cargo is loaded and discharged as

per cargo tender terms interpreted in

accordance with the ‘‘International

Rules For the Interpretation of Trade
Federal Register / Vol. 62, No. 40 / Friday, February 28, 1997 / Proposed Rules 9153

1 58 FR 12917 (Mar. 8, 1993); 8 FCC Rcd 1589

(1993).

2 Daniels Cablevision, Inc. v. United States, 835

F. Supp. 1 (D.D.C. 1993).

3Time Warner Entertainment Co., L.P. v. FCC, 93

F.3d 957 (D.C. Cir. 1996); petition for rehearing

pending.

4See DBS Public Interest NPRM, 8 FCC Rcd 1589

at ¶¶ 21–28.

5 Id. at ¶ 29.

Terms’’ (INCOTERMS) published by the

International Chamber of Commerce.

(3) Total loading and discharge time

includes the addition of a factor to

account for delays and days not worked.

(4) One extra port day is included at

each anticipated bunkering port.

(5) An allowance shall be included for

canal transits, when appropriate.

(6) Transit time shall be based on the

average speed of vessels in the category

plus an additional five percent to

account for weather conditions.

(f) Determination of cargo carried.

The amount of cargo tonnage and the

category of costs used to calculate the

rate shall be based on the tender offer

or charter party terms. In instances

when separate parcels of preference

cargo are booked or considered for

booking on the same vessel, whether

under a single program or different

programs, a guideline rate shall be

provided based on the combined

voyage.

(g) Total rate. The guideline rate shall

be the total of the operating cost

component, the capital cost component,

the port and cargo handling cost

component, and the broker’s

commission and overhead component.

The fair and reasonable rate can be

expressed as total voyage revenue or be

divided by the amount of cargo to be

carried, as prescribed in paragraph (f) of

this section, and expressed as cost per

ton, whichever MARAD deems most

appropriate.

§ 382.4 Waiver.

In special circumstances and for good

cause shown, the procedures prescribed

in this part may be waived in keeping

with the circumstances of the present,

so long as the procedures adopted are

consistent with the Act and with the

intent of this part.

By Order of the Maritime Administrator.

Dated: February 24, 1997.

Joel C. Richard,

Secretary.

[FR Doc. 97–5017 Filed 2–27–97; 8:45 am]

BILLING CODE 4910–81–P

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Part 76

[MM Docket No. 93–25] [FCC 97–24]

DBS Public Interest Rulemaking

AGENCY: Federal Communications

Commission.

ACTION: Proposed rule; additional

comments sought.

SUMMARY: The Commission solicits

updated comments in this proceeding to

reflect changed circumstances in the

DBS industry since the release in 1993

of the Notice of Proposed Rule Making

to implement section 25 of the 1992

Cable Act. Among the issues on which

the Commission seeks revised public

comment are how sections 312(a)(7) and

315 of the Communications Act should

be applied to DBS providers, how the

requirement to reserve 4–7 percent of

channel capacity for non-commercial

programming should be implemented,

and what public interest or other

requirements, if any, should be imposed

on DBS providers in addition to the

minimum specified requirements.

DATES: Comments must be submitted on

or before March 31, 1997. Replies must

be submitted on or before April 30,

1997.

ADDRESSES: Federal Communications

Commission, Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: John

Stern, International Bureau, (202) 418–

0746 or Brian Carter, International

Bureau, (202) 418–2119.

SUPPLEMENTARY INFORMATION:

1. Section 25 of the Cable Television

Consumer Protection and Competition

Act of 1992 (‘‘1992 Cable Act’’) added

a new Section 335 to the

Communications Act of 1934 that

directed the Commission to initiate a

rulemaking to impose public interest or

other requirements for providing video

programming on direct broadcast

satellite (‘‘DBS’’) service providers. On

March 2, 1993, the Commission released

a Notice of Proposed Rule Making

seeking comment on its proposals to

implement the different provisions of

section 25 (‘‘DBS Public Interest

NPRM’’).1 On September 16, 1993, after

the Commission had received comments

and reply comments in this proceeding,

the United States District Court for the

District of Columbia held that section 25

of the 1992 Cable Act was

unconstitutional.2 This ruling

effectively froze the DBS Public Interest

NPRM pending the Commission’s

appeal of the decision. Nearly three

years later, on August 30, 1996, the

United States Court of Appeals for the

District of Columbia Circuit reversed the

District Court and held that section 25

was constitutional.3

2. In light of the relatively long

interval between release of the DBS

Public Interest NPRM and the Court’s

recent decision upholding section 25,

the Commission, by this public notice,

seeks to update and refresh the record

in this proceeding. The DBS industry

has grown and changed dramatically

over the last four years. Accordingly, the

Commission requests new and revised

comments on each of the issues raised

in the DBS Public Interest Rulemaking

and on any other issues relevant to

implementation of section 25.

Section 25(a) of the 1992 Cable Act

(47 U.S.C. 335(a)) states:

The Commission shall, within 180 days

after the date of enactment of this section,

initiate a rulemaking proceeding to impose,

on providers of direct broadcast satellite

service, public interest or other requirements

for providing video programming. Any

regulations prescribed pursuant to such

rulemaking shall, at a minimum, apply the

access to broadcast time requirement of

section 312(a)(7) and the use of facilities

requirements of section 315 to providers of

direct broadcast satellite service providing

video programming. Such proceeding also

shall examine the opportunities that the

establishment of direct broadcast satellite

service provides for the principle of localism

under this Act, and the methods by which

such principle may be served through

technological and other developments in, or

regulation of, such service.

3. With respect to this section of the

statute we seek updated comments on

issues that include but are not limited

to the following: How should the

requirements of sections 312(a)(7) and

315 of the Communications Act be

applied to DBS providers? 4 What

‘‘public interest or other requirements’’,

if any, should be imposed on DBS

providers in addition to the minimum

requirements described above? In the

1993 DBS Public Interest NPRM we

tentatively proposed not to adopt

additional public service requirements,

based on ‘‘the flexible regulatory

approach taken for DBS and its early

stage of development.’’ 5 Should the

rapid deployment of the DBS industry

over the last several years, including

technological advances that may in the

near future allow DBS providers to offer

some local programming alter this

conclusion? If so, how?

4. We also seek updated comments on

how we should apply the separate

requirements imposed by section 25(b)

of the 1992 Cable Act. Section 25(b)(1)

mandates that a DBS provider ‘‘reserve

a portion of its channel capacity, equal

to not less than 4 percent nor more than