Source: http://test.jurist.org/documents/rulemaking/2016-04263.php
Timestamp: 2019-03-21 07:35:14
Document Index: 392053206

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Comments closed on 2016-04-04
The Federal Maritime Commission (FMC or Commission) has issued this advance notice to obtain public comments on proposed modifications to its regulations in 46 CFR part 535, Ocean Common Carrier and Marine Terminal Operator Agreements Subject to the Shipping Act of 1984, and 46 CFR 501.27, Delegation to and redelegation by the Director, Bureau of Trade Analysis. The Commission has reviewed these regulations in conformity with the objectives of Executive Order 13579 (E.O. 13579 or Order), Regulation and Independent Regulatory Agencies, issued on July 11, 2011. Specifically, E.O. 13579 stated that independent regulatory agencies should strive to promote a regulatory system that protects public health, welfare, safety and our environment while promoting economic growth, innovation, competitiveness, and job creation. In this regard, the Order encouraged agencies to develop and release to the public a plan for the periodic review of their existing regulations to determine whether they could be modified, streamlined, expanded, or repealed so as to make their regulatory programs more effective or less burdensome in achieving their regulatory objectives.
In response, the Commission developed and published its Plan for the Retrospective Review of Existing Rules (Retrospective Review) and affirmed its intention to review all of its existing regulations and programs. [1] As part of its plan, the Commission requested that the public submit comments and information on how to improve its existing regulations and programs.
Summary of Comments on Part 535 Back to Top
On May 18, 2012, comments [2] specific to part 535 were submitted by ocean carrier members of the major discussion agreements that are currently in effect under the Shipping Act. [3] In their comments, the carriers raised three major issues regarding part 535.
Review of Regulations by Commission Back to Top
I. The Definition of Capacity Rationalization in § 535.104(e), a New Exemption for Space Charter Agreements in § 535.308, and the Exemption for Low Market Share Agreements in § 535.311 Back to Top
The exemption from the 45-day waiting period for low market share agreements in § 535.311 applies to agreements that do not contain certain types of authority, such as rate or capacity rationalization authority, [5] and with market shares in any sub-trade of less than 30 percent (if all of the parties are members of an agreement in the same trade or sub-trade with one of the listed authorities (e.g., rate or capacity rationalization)) or 35 percent (if at least one party is not a member of such an agreement in the same trade or sub-trade). The low market share exemption and the related definition of capacity rationalization in § 535.104(e) were first introduced in the Commission's preceding rulemaking of part 535 in FMC Docket No. 03-15, Ocean Common Carrier and Marine Terminal Operator Agreements Subject to the Shipping Act of 1984, Final Rule. 69 FR 64398 (Nov. 4, 2004).
These regulatory changes originated from the Commission's Notice of Inquiry (NOI) in FMC Docket No. 99-13, The Content of Ocean Common Carrier and Marine Terminal Operator Agreements Subject to the Shipping Act of 1984. [6] In its NOI, the Commission requested comments on whether there were types of agreements that could be partially or completely exempted from the Shipping Act requirements. [7]
In response to the NOI, ocean carriers and shipowners' associations identified agreements with little or no competitive effect, such as operational and slot charter agreements, as being eligible for an exemption from the filing requirements of the Act. [8] Carriers further specified that agreements that typically have little or no competitive effect (such as those that do not authorize discussion or agreement on rates, vessel operating costs, shared vessel usage, service contracts or capacity) should be completely exempted from the filing requirements of the Act. [9]
Ultimately, the Commission decided on an exemption from the 45-day waiting period for agreements with limited authority that fell below specified market share thresholds. This form of exemption was based on the principle of providing a “safety zone” for collaboration between competitors in activities that would be unlikely to have an anticompetitive impact and require investigation. The Commission's low market share exemption was modeled after the “safety zone” principle adopted by the Federal Trade Commission and the U.S. Department of Justice (FTC/DOJ or Agencies) in their Antitrust Guidelines for Collaboration among Competitors, April 2000, (Guidelines) and the European Commission (EC) in its regulations for consortia agreements between liner shipping companies. [10]
Under the FTC/DOJ Guidelines, the Agencies will not generally challenge collaborations between competitors whose combined market share is less than 20 percent, except in cases where an agreement: (1) Is per se illegal, [11] (2) would be challenged without a detailed market analysis, or (3) would be analyzed under the merger rules. Guidelines at p. 26.
Similarly, the regulations adopted by the EC provided that consortia agreements between carriers that did not involve price-fixing were exempted from the competition laws of the European Union (EU) in cases where the combined market share of the parties was less than 30 percent (if operating within a conference), or 35 percent (if not operating within a conference). [12] Based on these policies of other competition agencies and the responses from commenters, the low market share exemption evolved through the rulemaking process into its present final form in the regulations in § 535.311. [13]
Agreements that contain capacity rationalization authority do not qualify for an exemption from the waiting period under the low market share regulations in § 535.311. Further, such agreements are assigned specific Information Form and Monitoring Report requirements. The intent behind expanding the definition was to limit the application of the low market share exemption and to recognize that parties to agreements with authority to discuss and agree on capacity, especially those with exclusivity provisions, [15] can control the supply of vessel capacity in the marketplace and affect ocean transportation services and costs within the meaning of section 6(g) of the Act.
Operational agreements that manage capacity have changed and their use has expanded since the last rulemaking, which further supports the need to update and modify the present regulations. Carriers have expanded their cooperation of services through larger alliance agreements spanning multiple trade lanes, and some of these agreements use service centers to manage the parties' capacity levels more effectively. These new forms of alliance agreements include the Maersk/MSC Vessel Sharing Agreement, FMC No. 012293; the G6 Alliance Agreement, FMC No. 012194; the COSCO/KL/YMUK/HANJIN/ELJSA Slot Allocation and Sailing Agreement, FMC No. 012300; and the CSCL/UASC/CMA CGM Vessel Sharing and Slot Exchange Agreement, FMC No. 012299.
Another issue with the low market share exemption regulations concerns the requirement that the market share threshold be applied on a country by country sub-trade basis. As noted in their comments to the Retrospective Review Plan, carriers believe that the market share threshold for the exemption should be modified from a sub-trade to an agreement-wide basis or, alternatively, be applied using only those sub-trades that account for over 20 percent of the total cargo volume moved under the geographic scope of the agreement. In FMC Docket No. 03-15, the carriers requested a similar modification to the market share threshold in their comments to the proposed rule. [16] In response, the Commission rejected the request of carriers, stating:
In contrast, carriers that join together to form VSAs have likely conducted long range plans and analyses to weigh the benefits of such cooperative ventures, and such arrangements justify a more thorough initial review by the Commission to assess their potential impact. Moreover, § 535.605 of the regulations provides a procedure whereby parties to any agreement subject to filing under the Act and part 535 may request a shortened review period for good cause, such as operational urgency.
The Commission tentatively concludes that the modified low market share exemption, as proposed, would not have any adverse competitive effects. The proposed modification to the definition of capacity rationalization would make capacity agreements, such as VSAs and alliances, ineligible for the low market share exemption. Only simple operational agreements would be eligible for the exemption, such as space charter and sailing agreements, [17] that would not otherwise be automatically exempted under the proposed space charter exemption in § 535.308.
Limiting the low market share exemption to simple operational agreements that do not authorize agreement on service or trade capacity reduces the competitive concerns about the parties' participation in other agreements in the same trade or sub-trade, and eliminates the need for the lower 30 percent market share threshold. The rationale for the lower 30 percent threshold was based on the concern that parties in operational agreements with overriding rate or capacity rationalization authority in the same trade or sub-trade [through their participation in a conference, rate discussion, or capacity rationalization agreement] were more anticompetitive than operational agreements without such overriding authority. This competitive concern would be mitigated under the proposed regulatory modifications to part 535, and the Commission believes that a threshold of 35 percent or less for the exemption of the waiting period would provide a sufficient “safety zone” for simple operational agreements. [18]
II. Marine Terminal Services Agreements in § 535.309 Back to Top
Section 535.309 provides an exemption from the filing and waiting period requirements of the Act for terminal services agreements [19] between marine terminal operators (MTOs) and ocean carriers to the extent that the rates, charges, rules, and regulations of such agreements were not collectively agreed upon under a MTO conference agreement. [20] Parties may optionally file their terminal services agreements with the Commission. 46 CFR 535.301(b). If the parties decide not to file the agreement, however, no antitrust immunity is conferred with regard to terminal services provided under the agreement. 46 CFR 535.309(b)(2). Parties to any agreement exempted from filing by the Commission under Section 16 of the Act, 46 U.S.C. 40103, are required to retain the agreement and make it available upon request by the Bureau during the term of the agreement and for a period of three years after its termination. 46 CFR 535.301(d).
In 1992, under Section 16, the Commission exempted terminal services agreements from its MTO tariff filing regulations and the agreement filing requirements in Section 5 of the Act by final rule in FMC Docket No. 91-20, Exemption of Certain Marine Terminal Agreements. [21] At the time, the Commission by regulation [22] required that the rates, charges, and rules assessed by MTOs for terminal services be subject to public tariff filing at the Commission. [23] As an alternative to the tariff rates, an MTO and an ocean carrier could individually negotiate their own rates and terms for terminal service through a terminal services agreement that by statute is required to be filed with the Commission. [24]
The rule establishing the exemption resulted from an extensive review by the Commission of the terminal services market and its jurisdiction and regulation of MTOs that began in 1986. [25] The primary reason for the review and eventual exemption was the practice of MTOs charging ocean carriers a flat throughput rate for combined terminal and stevedoring services in terminal services agreements but not filing these rates with the Commission. Petitions from associations of MTOs and stevedoring companies were filed with the Commission requesting exemptions from such requirements under Section 16 of the Act. Petitioners argued that the MTO filing requirements were unduly burdensome given the difficulty of distinguishing between rates for stevedoring and terminal services. Further, they believed that the negotiated throughput rates were commercially sensitive data that should be kept confidential and not subject to public filing requirements. Upon review, the Commission issued the exemption because it reasoned at the time that exempting such arrangements had the potential to be more pro-competitive than enforcing the tariff and agreement filing requirements. [26]
Most recently, the submission of terminal services agreements became an issue when the Commission sought specific data and information from the parties to PPOIA. PPOIA became effective under the Shipping Act on April 17, 2015. It is an agreement with significant market power because its parties include the major ocean carriers and MTOs operating on the U.S. Pacific Coast. It authorizes the parties to discuss and agree on a broad range of terminal services affecting U.S. Pacific port operations. The Commission's staff requested certain data and information from the PPOIA parties, including current copies of their terminals services agreement, to evaluate the agreement. Even though parties to exempted agreements are required to provide such information under § 535.301(d), the Commission's staff had difficulty obtaining complete information from the PPOIA parties, and the Commission found it necessary to issue an Order under Section 15 of the Act to obtain the required terminal services agreements from the ocean carrier parties to PPOIA. [27]
Given these recent developments and the increased activities of MTOs under agreements, the Commission believes that it is appropriate to establish, as a standard Monitoring Report requirement in part 535 of the regulations, a rule to require that all of the MTOs, participating in any conference or discussion agreement on file and in effect at the FMC, submit to the FMC all of their effective terminal services agreements and amendments thereto. Such a Monitoring Report requirement would readily provide the Commission with the necessary market data on a consistent basis to analyze and monitor MTO agreement activities, without requiring the Commission to take additional measures or actions to obtain data, which can result in lag times, gaps and incomplete information.
III. Complete and Definite Agreements in § 535.402, and Activities That May Be Conducted Without Further Filings in § 535.408 Back to Top
The current language in §§ 535.402 and 535.408 was promulgated by the Commission in a 2004 final rule to clarify the filing requirements. In its rulemaking, the Commission recognized that agreement parties might be confused about the required level of detail for filed agreements and the extent to which parties could engage in further agreements without filing such further agreements with the FMC. [28]
As originally envisioned, the Commission intended to limit the exemptions in § 535.408(b) to routine operational and administrative matters that require day-to-day flexibility or activities that the Commission does not need information on to assess the relationship of the agreement parties. [29] To eliminate any ambiguity in the regulations and ensure adequate Commission review of agreements involving MTOs, the Commission is considering eliminating the current exemption and replacing it with a list of more narrowly defined, specific services that are suitable for an exemption in conformity with the limits originally intended by the Commission.
The Commission invites comments on the proposed modifications to § 535.402 and § 535.408 under consideration. In particular, the Commission is interested in comments on what specific services should be included in § 535.408(b) to replace § 535.408(b)(3). The Commission is also interested in how such exempted services should be properly defined to avoid any confusion. [30] In addition, the Commission requests comments on whether “the operation of tonnage centers and other joint container marshaling facilities,” as listed in § 535.408(b)(3), continues to be a relevant and suitable exempted activity relating to terminal services.
IV. The Information Form Requirements in Subpart E of Part 535 Back to Top
The Commission is considering proposing that the instructions to the Information Form be streamlined by removing many of the same definitions repeated throughout each section of the Form and stating them in paragraphs at the beginning of the Form with the understanding that they apply to each section. The Commission believes that this proposed modification would improve the clarity and readability of the instructions.
V. Comments in § 535.603, and Requests for Additional Information in § 535.606 Back to Top
VI. Agreement Reporting Requirements in Subpart G of Part 535 Back to Top
The Commission believes that three or more carriers agreeing on the supply of capacity in a trade or service would provide a reasonable threshold to capture and monitor the most meaningful capacity agreements without being overly burdensome. However, there are agreements below this threshold that the Commission may need to monitor. In such cases, the Commission may decide to prescribe reporting requirements to monitor the agreement pursuant to its authority in § 535.702(d). [32]
Section II of the Monitoring Report applies to carrier agreements with rate authority with a market share of 35 percent or more. Parties to these agreements are required to submit quarterly reports with data on market share by sub-trade, average revenue, revenue and cargo volume on the top ten major moving commodities, vessel capacity and utilization, and a narrative statement on any significant operational changes that occurred during the quarter in the services operated by the parties to the agreement. The Commission is considering proposing that the requirements for these agreements be reduced by eliminating the market share, commodity components, and the narrative statement on significant operational changes.
VII. Modifications Requested by the Ocean Carriers in Their Comments Back to Top
The Commission believes that the proposed definition is more descriptive of an actual agreement between carriers with limited sailing authority than the present definition, which includes authority to agree on the size and capacity of the vessels to be deployed by the parties. [33] The Commission believes that the present definition is more broadly descriptive of the authority of carriers in a vessel sharing agreement where the parties would conceivably rationalize capacity.
As previously discussed, the authority of the Commission under Section 16 of the Shipping Act, 46 U.S.C. 40103, to issue an exemption from the requirements of the statute is conditioned on the determination that the exemption would not result in a substantial reduction in competition or be detrimental to commerce. The Commission has already determined that agreements exempted under subpart C of part 535 from the filing requirements of the Shipping Act do not raise competitive concerns. As such, there is no need for a waiting period in cases where parties to an exempt agreement choose to file the agreement optionally with the Commission. An optionally filed exempt agreement should become effective upon filing;
8. The Commission is considering proposing that the formatting requirements for the filing of agreement modifications in § 535.406 apply to all agreements identified in § 535.201 and subject to the filing regulations of part 535, except assessment agreements. [34] Currently, the regulations exempt modifications to marine terminal agreements from these requirements, which was based on an earlier exemption of certain marine terminal agreements from the waiting period statute which has since been repealed by the Commission; [35]
15. The Commission is considering proposing that in § 535.702(b), rather than using market share data filed by the parties to agreements, the Bureau of Trade Analysis would notify the parties of any changes in their reporting requirements. [36] As discussed above, the Commission is considering proposing that the market share requirement of the Monitoring Report regulations for agreements with rate authority be discontinued. As such, parties to rate agreements would no longer be filing market share data. Commission staff could use its own subscriptions of commercial data to determine any changes in the reporting requirements of rate agreements and notify the parties accordingly; and
1. See Plan for Retrospective Review of Existing Rules (November 4, 2011) and Update to Plan for Retrospective Review of Existing Rules (February 13, 2013) from the Web site of the FMC at http://www.fmc.gov/ under About the FMC/Reports, Strategies & Budgets.
2. See Comments of Ocean Common Carriers to Retrospective Review of Existing Rules, dated May 18, 2012, on the Web site of the FMC at http://www.fmc.gov/ under background documents to FMC Docket No. 16-04.
27. Section 15 Order Regarding the Pacific Ports Operational Improvements Agreement and Marine Terminal Services and Chassis-Related issues at the United States Pacific Coast Ports, Federal Maritime Commission (July 10, 2015) from the Web site of the FMC at http://www.fmc.gov/ under View All News/June 24, 2015/Commission Takes Action on Several Regulatory Matters.
Citation: 81 FR 10188
citation:81 FR 10188 comments_close:2016-04-04 date: docnum:2016-04263 effective_date: html:https://www.federalregister.gov/articles/2016/02/29/2016-04263/ocean-common-carrier-and-marine-terminal-operator-agreements-subject-to-the-shipping-act-of-1984 pdf:https://www.gpo.gov/fdsys/pkg/FR-2016-02-29/pdf/2016-04263.pdf