[Federal Register Volume 60, Number 78 (Monday, April 24, 1995)]
[Proposed Rules]
[Pages 20069-20072]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-10016]



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DEPARTMENT OF TRANSPORTATION

Maritime Administration

46 CFR Part 383

[Docket No. R-156]
RIN 2133-AB16


Determination of Fair and Reasonable Guideline Rates for the 
Carriage of Less-Than-Shipload Lots of Bulk and Packaged Preference 
Cargoes on U.S.-Flag Commercial Liner Vessels

AGENCY: Maritime Administration, DOT.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The regulations at 46 CFR part 383 (``Rule'') specify the 
procedures for the calculation of fair and reasonable guideline rates 
for certain preference cargoes carried in U.S.-flag vessels employed in 
a liner service. Currently, the rule applies only to less-than-shipload 
lots of dry bulk preference cargoes on U.S.-flag vessels. The United 
States Department of Agriculture (USDA) and the Agency for 
International Development (AID), the major U.S. government shipper 
agencies, have requested that the Maritime Administration (MARAD) 
provide them with guideline rates for bagged and packaged agricultural 
commodities and to clarify MARAD's policy for prioritization of U.S.-
flag shipping services for compliance with the cargo preference 
requirements of the Cargo Preference Act of 1954. MARAD provides 
guideline rates for such commodities on bulk vessels, under a similar 
regulation for bulk vessels at 46 CFR part 382, but does not now 
provide guideline rates for bagged or packaged cargoes in less-than-
shipload lots on vessels in a liner service. This amendment will extend 
the scope of the rule to cover bagged or packaged agricultural 
commodities in parcels of 5,000 tons and greater on vessels in a liner 
service. Prioritization is outside the scope of these regulations; 
MARAD will address this issue separately at a later date.

 [[Page 20070]] DATES: Comments on the proposed rule must be received 
on or before June 23, 1995.

ADDRESSES: Send an original and two copies of the comments to 
Secretary, Maritime Administration, Room 7210, 400 7th St., SW., 
Washington DC 20590. To expedite reviewing the comments the agency 
requests, but does not require, submission of an additional ten (10) 
copies. All comments will be made available for inspection during 
normal business hours at the above address. Commenters wishing MARAD to 
acknowledge receipt of comments should enclose a stamped self-addressed 
envelope or postcard.

FOR FURTHER INFORMATION CONTACT: Michael P. Ferris, Director, Office of 
Costs and Rates, Maritime Administration, Washington, DC 20590, 
Telephone (202) 366-2324.

SUPPLEMENTARY INFORMATION: Section 901(b) of the Merchant Marine Act, 
1936, as amended, cited as the Cargo Preference Act of 1954, requires 
that, with respect to certain cargoes which could be described as 
``government-impelled,'' such as food donation programs administered by 
the State Department or the Department of Agriculture, the cognizant 
government agency or agencies must take appropriate steps to assure 
that at least 50 percent of the gross tonnage of such cargoes 
transported on ocean vessels will be ``transported on privately owned 
United States-flag commercial vessels, to the extent such vessels are 
available at fair and reasonable rates for United States-flag 
commercial vessels'' (46 App. U.S.C. 1241(b)). Section 901b of the Act, 
cited as the Food Security Act of 1985, increased the 50 percent 
carriage requirement to 75 percent for agricultural commodities or 
products shipped under certain food donation programs (46 App U.S.C. 
1241f). The rule (46 CFR part 383) was promulgated to govern the 
determination of ``fair and reasonable rates'' (also referred to as 
guideline rates) for the carriage of dry bulk preference cargoes, in 
less-than-shipload lots, on U.S.-flag vessels employed in a liner 
service. It was originally issued on and became effective November 9, 
1987. It was subsequently modified, effective January 2, 1992 (57 FR 
21036).
    Liner operators provide important services to the public as well as 
shippers of packaged agricultural commodities, for example, 
consolidations of cargo, intermodal movements and scheduled services. 
These services are frequently needed and sought by shippers of 
government impelled cargo. USDA's Commodity Credit Corporation (CCC) 
through a system of monthly invitations for the purchase of 
agricultural products and transportation services is the major 
government contractor of agricultural liner cargo. U.S.-flag liner 
operators offer transportation bids for the carriage of certain liner 
cargoes, and the cargo is allocated as to load and discharge ranges 
based on product prices and these bids. The CCC may then seek lower 
bids from U.S. liner and bulk operators for the 75% allocation or book 
the cargo at the rates originally bid.
    In general, liner services have complex cost and operating 
structures which frequently make the determination of guideline rates 
difficult and impractical. When the Rule was originally proposed in 
1986, liner operators carrying most agricultural preference cargoes 
operated in this more structured environment carrying a wide variety of 
cargoes to and from numerous domestic and foreign ports. It was also 
believed, since packaged liner preference cargoes were generally 
transported under conference freight tariffs filed with the Federal 
Maritime Commission, that the rates charged were subject to sufficient 
competition to assure reasonableness. Additionally, the numerous types 
of parcels in a wide variety of sizes, many below 1,000 metric tons, 
shipped to various locations would pose substantial administrative and 
technical problems if guideline rates calculations were to be 
attempted.
    However, MARAD now believes that a significant portion of the 
bagged and packaged agricultural preference cargoes are carried on 
voyages in large parcel lots, frequently a consolidation of several 
small parcels. In these instances, where large parcel lots are being 
carried, the liner voyage often takes on enough of the pricing 
characteristics of a bulk voyage that it should be treated on an equal 
basis with bulk voyages. Also, many of the administrative and technical 
restraints are eliminated or minimized when guideline rates are only 
determined for large parcels. As such, it is appropriate and feasible 
that MARAD furnish a shipper agency with a guideline rate for large 
parcels when it is requested.
    MARAD also recognizes that certain sizes or amounts of cargo are 
well suited for carriage by a vessel in a common carrier liner service, 
while larger amounts are better suited for carriage outside the liner 
service system. This recognition, which was expounded in the 
Administration's proposed maritime reform legislation, has resulted in 
the decision to calculate a fair and reasonable guideline rate when a 
vessel carries a 5,000 ton parcel of preference cargo. Parcels smaller 
than 5,000 tons pose administrative and technical restraints that 
prevent calculation of rates that can be reliably termed fair and 
reasonable, so these parcels will continue to be subject only to the 
common carrier rate process.
    Since U.S. shipper agencies may consolidate two or more distinct 
cargoes from the same port or region to the same discharge port or 
region, and those cargoes may individually be less than 5,000 metric 
tons, but collectively exceed 5,000 metric tons, a clear definition of 
the term ``parcel'' is required. To determine the most functional 
definition, MARAD evaluated over 2,000 bills of lading, pertaining to 
over 1.0 million metric tons of agricultural liner parcels shipped by 
U.S. shipper agencies during the period October 1, 1992 to September 
30, 1993. The data showed that various agricultural preference cargoes 
destined for the same country were frequently carried on the same 
voyage.
    In analyzing this sample, MARAD consolidated preference cargoes 
into parcel lots under three different definitions for a parcel, all of 
which were at least 5,000 metric tons. The first, equal to 
approximately one-third of the sample, was preference cargo in parcel 
lots shipped on voyages from a single U.S. port to a single foreign 
port. The second definition used an expanded load range which included 
all the ports within a U.S. load port range (i.e., U.S. Gulf) to a 
single foreign port. This expansion increased the amount of sample 
tonnage covered to about 45 percent of the sample cargo. The third 
definition used a further expansion to include a discharge range of all 
ports of the recipient country. This third definition of parcel covered 
over two-thirds of the cargo analyzed.
    As part of the analysis, MARAD reviewed the three options for 
complexity of determining guideline rates and for their conformity with 
MARAD's policy goals of providing guideline rates that are reasonable 
for the shipper agencies and fair to an efficient U.S.-flag operator. 
The first option, parcels over 5,000 metric tons shipped from a single 
load to a single discharge port, would involve the simplest ratemaking 
but would have the least impact on the number of shipments subject to 
fair and reasonable guideline rate calculations. The third option, 
parcels over 5,000 metric tons shipped from a single U.S port range to 
a port or ports within a single discharge country, would have the 
greatest level of cargo coverage but results in a slightly more 
complicated ratemaking process. [[Page 20071]] The second option falls 
between the other options in both considerations. MARAD believes that 
it would be feasible within the current regulations to determine fair 
and reasonable guideline rates under any of the three options. Since 
the third option provides guideline rate coverage to the largest amount 
of cargo and is most consistent with MARAD policy goals stated above, 
this definition for parcel is being proposed.
    As a result of this analysis, for purposes of this rulemaking a 
parcel will be defined as any group of cargoes subject to cargo 
preference laws offered by a U.S. shipper agency, host country and/or 
Private Voluntary Organization (PVO), individually or in combination, 
loaded in a port or ports within a single U.S. coastal port range (U.S. 
Gulf coast, U.S. East coast, U.S. West coast, U.S. Great Lakes, Alaska 
and Hawaii) and discharged at a port or ports of a single foreign 
country or destined for a single foreign country.
    Accordingly, this rulemaking proposes to change the scope of the 
Rule to include bagged and packaged preference parcels of 5,000 metric 
tons and greater which are offered for carriage to U.S.-flag operators. 
In addition, certain conforming changes will be necessary to parts of 
the existing regulation to administratively facilitate the proposed 
amendment.

Rulemaking Analysis and Notices

Executive Order 12866 (Regulatory Planning and Review)

    This regulation has been reviewed under Executive Order 12866 and 
Department of Transportation Regulatory Policies and Procedures (44 FR 
11034, February 26, 1979). It is not considered to be an economically 
significant regulatory action under section 3(f) of E.O. 12866, since 
it has been determined that it will not result in an annual effect on 
the economy of $100 million or more or adversely affect in a material 
way the economy, productivity, competition, jobs, the environment, 
public health or safety, or State, local, or tribal governments or 
communities.
    While this rulemaking does not involve any change in important 
Departmental policies, it is considered significant because it 
addresses a matter of considerable importance to the maritime industry 
and may be expected to generate significant public interest. MARAD has 
estimated the potential economic impact of this rulemaking based on a 
sample of approximately 2,000 individual liner parcels totalling over 
1.0 million metric tons booked during the period October 1, 1992 to 
September 30, 1993. Based on this data, MARAD estimates that guideline 
rates for approximately 700,000 metric tons could have been calculated 
and proffered to the responsible shipper agency. If guideline rates 
were calculated using this rulemaking and the actual fixture reduced to 
guideline rate, when appropriate, freight charges paid by the 
government would have declined resulting in a reduction in shipper 
revenue and government expenditures of approximately 2 to 4 percent. 
During this period, estimated freight charges paid by government 
agencies for agricultural liner cargoes were about $200 million. Under 
market conditions characterizing the study period, total savings are 
estimated to be $4 to 8 million annually. Because the economic impact 
should be minimal relative to the total freight costs for agricultural 
preference cargoes, further regulatory evaluation is not necessary.

Federalism

    The Maritime Administration has analyzed this rulemaking in 
accordance with the principles and criteria contained in Executive 
Order 12612 and has determined that these regulations do not have 
sufficient federalism implications to warrant the preparation of a 
Federalism Assessment.

Regulatory Flexibility Act

    The Maritime Administration certifies that this regulation will not 
have a significant economic impact on a substantial number of small 
entities.

Environmental Assessment

    This regulation does not significantly affect the environment. An 
Environmental Impact Statement is not required under the National 
Environmental Policy Act of 1969.

Paperwork Reduction Act

    This proposed regulation does not significantly change the current 
requirement for the collection of information. The Office of Management 
and Budget (OMB) has reviewed the current regulation under the 
Paperwork Reduction Act (44 U.S.C. 3501 et seq.), and has approved it 
under OMB Approval Number 2133-0515.

List of Subjects in 46 CFR Part 383

    Agricultural commodities, Cargo vessels, Government procurement, 
Grant programs--foreign relations, Loan programs--foreign relations, 
Water transportation.

    MARAD hereby proposes to amend 46 CFR part 383, as follows:
    1. The authority citation for part 383 would continue to read as 
follows:

    Authority: 46 App U.S.C. 1114(b), 1241(b), 49 CFR 1.66.

    2. The heading is proposed to be revised to read as follows:

PART 383--DETERMINATION OF FAIR AND REASONABLE RATES FOR THE 
CARRIAGE OF LESS-THAN-SHIPLOAD LOTS OF BULK AND PACKAGED PREFERENCE 
CARGOES ON U.S.-FLAG COMMERCIAL LINER VESSELS

    3. Section 383.1 is proposed to be revised to read as follows:


Sec. 383.1  Scope.

    Part 383 prescribes regulations applying to the waterborne 
transportation of bulk and packaged preference cargoes in less than 
full shiploads on U.S.-flag commercial liner vessels. Full shiploads of 
preference cargo and preference cargoes carried by vessels not operated 
in the liner trades are covered under 46 CFR Part 382. These 
regulations contain the method that the Maritime Administration (MARAD) 
shall use in calculating fair and reasonable rates, and the type of 
information that shall be submitted by liner operators interested in 
carrying such preference cargoes. For the purpose of these regulations 
the term less-than full shipload shall include: All cargoes in bulk; 
or, bagged and/or packaged parcels greater than or equal to 5,000 
metric tons and up to the full deadweight capacity of the specific 
vessel. A U.S.-flag commercial liner vessel is any vessel used by the 
operator which has previously carried cargo (except newly purchased or 
constructed vessels) in the liner trades and will carry the subject 
preference cargo in a liner trade previously established by the 
operator. For these purposes, liner trades is defined as service 
provided on an advertised schedule, giving relatively frequent sailing 
between specific U.S. ports or ranges and designated foreign ports or 
ranges; parcel is defined as any group of cargoes subject to cargo 
preference laws offered by a U.S. shipper agency, host country or 
Private Voluntary Organization (PVO), singularly or in combination, 
loaded in a port or ports within a single U.S. coastal port range and 
discharged at a port or ports of a single foreign country or destined 
for a single foreign country.


Sec. 383.2  [Amended]

    4. Section 383.2 Data Submission is proposed to be amended in 
paragraph (a) General, in the first sentence, by removing the term 
``dry bulk''. [[Page 20072]] 
    5. Section 383.3 is proposed to be amended by revising paragraph 
(g) to read as follows:


Sec. 383.3  Determination of fair and reasonable rates.

* * * * *
    (g) Total rate. The operating cost component, capital cost 
component, fuel cost component and port and cargo handling cost 
component shall be added together to yield a total cost element. This 
total shall be multiplied by 13.5 percent to yield an allowance for 
broker's commissions, and general and administrative expenses. This 
allowance shall be added to the total cost element and divided by the 
cargo tonnage to yield the guideline rate, generally expressed as a 
cost per ton, except in those circumstances where a cost per ton rate 
is not appropriate; for example, where two or more cargoes are carried 
on the same voyage at differing rates per ton. In the event a cost per 
ton rate is inappropriate, the rate shall be expressed in terms 
appropriate to the circumstance.

    By order of the Maritime Administrator.
Joel C. Richard,
Secretary.
[FR Doc. 95-10016 Filed 4-21-95; 8:45 am]
BILLING CODE 4910-81-P