Service Contracts
| Published date | 14 February 2020 |
| Citation | 85 FR 8527 |
| Record Number | 2020-02561 |
| Section | Proposed rules |
| Court | Federal Maritime Commission |
Federal Register, Volume 85 Issue 31 (Friday, February 14, 2020)
[Federal Register Volume 85, Number 31 (Friday, February 14, 2020)]
[Proposed Rules]
[Pages 8527-8531]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-02561]
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FEDERAL MARITIME COMMISSION
46 CFR Part 530
[Docket No. 20-02]
RIN 3072-AC80
Service Contracts
AGENCY: Federal Maritime Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Federal Maritime Commission (FMC or Commission) proposes
to amend its rules governing Service Contracts. The proposed rule is
intended to reduce regulatory burden.
DATES: Submit comments on or before: April 14, 2020.
In compliance with the Paperwork Reduction Act, the Commission is
also seeking comment on revisions to one information collections. See
the Paperwork Reduction Act section under Regulatory Analyses and
Notices below. Please submit all comments relating to the revised
information collections to the Commission and to the Office of
Management and Budget (OMB) at the address listed in the ADDRESSES
section on or before April 14, 2020. Comments to OMB are most useful if
submitted within 30 days of publication.
ADDRESSES: You may submit comments identified by the Docket No. 20-02
in the heading of this document, by the following methods:
Email: [email protected]. Include in the subject line:
``Docket No. 20-02, Comments on Proposed Service Contract
Regulations.'' Comments should be attached to the email as a Microsoft
Word or text-searchable PDF document. Comments containing confidential
information should not be submitted by email.
Mail: Rachel E. Dickon, Secretary, Federal Maritime
Commission, 800 North Capitol Street NW, Washington, DC 20573-0001.
Phone: (202) 523-5725. Email: [email protected].
Comments regarding the revised information collections
should be submitted to the Commission through one of the preceding
methods and a copy should also be sent to the Office of Information and
Regulatory Affairs, Office of Management and Budget, Attention: Desk
Officer for Federal Maritime Commission, 725 17th Street NW,
Washington, DC 20503; by Fax: (202) 395-5167; or by email:
[email protected].
Instructions: For detailed instructions on submitting comments,
including requesting confidential treatment of comments, and additional
information on the rulemaking process, see the Public Participation
heading of the Supplementary Information section of this document. Note
that all comments received will be posted without change to the
Commission's website, unless the commenter has requested confidential
treatment.
Docket: For access to the docket to read background documents or
comments received, go to the Commission's Electronic Reading Room at:
https://www2.fmc.gov/readingroom/proceeding/20-02/, or to the Docket
Activity Library at 800 North Capitol Street NW, Washington, DC 20573,
9:00 a.m. to 5:00 p.m., Monday through Friday, except Federal holidays.
Telephone: (202) 523-5725.
FOR FURTHER INFORMATION CONTACT: For questions regarding submitting
comments or the treatment of confidential information, contact Rachel
E. Dickon, Secretary. Phone: (202) 523-5725. Email: [email protected].
For technical questions, contact Florence A. Carr, Director, Bureau of
Trade Analysis, Federal Maritime Commission, 800 North Capitol Street
NW, Washington, DC 20573-0001. Phone: (202) 523-5796. Email:
[email protected].
SUPPLEMENTARY INFORMATION:
Introduction
On September 18, 2018, the Federal Maritime Commission (FMC or
Commission) issued a Notice of Filing and Request for Comments to
obtain public comments on Petition No. P3-18, the petition of the World
Shipping Council (WSC), (Petitioner) pursuant to 46 CFR 502.92 ``. . .
for an exemption from service contract filing and essential terms
publication requirements set forth at 46 U.S.C 40502(b) and (d),
respectively . . .'' Petitioner further petitions the Commission for
the initiation of a rulemaking proceeding to
[[Page 8528]]
amend its service contract regulations set forth at 46 CFR part 530 in
a manner consistent with the requested exemption.
Comments were received in support of WSC's petition from Atlantic
Container Line, AB (ACL); the National Industrial Transportation League
(NITL); and the Caribbean Shipowners Association (CSO). Frankford Candy
LLC (Frankford) and Wheaton Grain Inc. (Wheaton) filed comments
opposing the petition.
On December 20, 2019, the Commission issued an order denying in
part and granting in part the petition. Specifically, the Commission
denied WSC's request for an exemption from the requirement in 46 U.S.C.
40502(b) that ocean common carriers file service contracts with the
Commission. Pet'n of the World Shipping Council for an Exemption from
Certain Provisions of the Shipping Act of 1984, as amended, and for a
Rulemaking Proceeding, Pet. No. P3-18, slip op., (FMC Dec. 20, 2019)
(P3-18 Order). In contrast, the Commission granted WSC's request for an
exemption from the requirement in Sec. 40502(d) that carriers publish
ETs with each service contract, determining that an exemption from
Sec. 40502(d) would not result in a substantial reduction in
competition or be detrimental to commerce. Id. The Commission also
determined to initiate a rulemaking to implement the ET publication
exemption. Id.
The Commission is therefore proposing to amend its regulations in
part 530 in accordance with the P3-18 Order and requests comment on the
proposed changes. The Commission emphasizes that the scope of this
rulemaking is limited to amending part 530 in line with the
Commission's decision. The merits of WSC's petition and the
Commission's findings in the P3-18 Order are outside the scope of this
rulemaking.
Background
The Shipping Act of 1984 (the Shipping Act or the Act) introduced
the option for liner services to be priced via negotiated service
contracts between ocean common carriers and their shipper customers,
rather than solely by public tariffs. Pursuant to the Shipping Act and
FMC regulations, ocean freight rates, surcharges, and accessorial
charges had to be published in tariffs, or agreed to via a service
contract filed with the Commission. Contemporaneous with the filing of
service contracts, ocean carriers were required to make publicly
available a statement of the essential terms (ET) of the service
contract, including the line-haul rate, in tariff format.
The Ocean Shipping Reform Act of 1998 (OSRA) amended the Shipping
Act of 1984 to eliminate the requirement that service contract rates be
published in the carrier's public tariff. Public Law 105-258, 106. One
of the primary impacts of OSRA was to render service contract rates
confidential, and thus no longer available to ocean carriers and
shippers as carrier pricing information. In addition, similarly
situated shippers could no longer utilize the rates and terms of
published service contracts. Subsequent to OSRA, the ET publication has
been limited to: origin and destination port ranges, commodities,
minimum volume or portion, and duration. The deletion of rates from the
scope of the ET publication protected U.S. exporters from their foreign
competitors who would be able to ascertain proprietary business
information from these publicly available essential terms. At the same
time, the ET publication was also no longer useful either to shippers
in contract negotiations with carriers, or among carriers as a tool in
potential pricing coordination.
Discussion
As explained in the P3-18 Order, the Commission's experience
indicates that the publication of Statements of Essential Terms
corresponding to individual service contracts is of questionable value.
No commenters claimed a use for these publications, nor does the
Commission use them in-house inasmuch as the Commission has the ability
to access complete service contracts, including rate matrices and
contract terms.
In determining how to best implement the determination to exempt
carriers from the ET publication requirements in 46 U.S.C. 40502(d),
the Commission notes that Sec. 40502(d) and the Commission's
regulations at 46 CFR 530.12 require that carriers publish concise
Statements of Essential Terms corresponding to individual service
contracts in tariff format. In addition to the required Statements of
Essential Terms, carriers often include in their ET tariff rules and
notices that generally apply to all service contracts. An ocean
carrier's ET tariff may therefore comprise two components: (1) Tariff
rules and notices that generally apply to all service contracts; and
(2) the required concise Statements of Essential Terms corresponding to
individual service contracts.
The general tariff rules and notices are rarely amended once
initially published. Indeed, there are significant benefits to
publishing a ``blanket'' rule or notice in the carrier's ET tariff that
applies to most, or all, service contracts, thereby eliminating the
potential need to periodically amend hundreds of individual service
contracts. In contrast, a Statement of Essential Terms is published in
the carrier's tariff when each new service contract is confidentially
filed, and typically must be reviewed by the tariff publisher each time
a contract is amended, whether or not it is ultimately determined that
the public terms must be updated. In some cases, the Statement of
Essential Terms is continuously updated to keep the ET amendment number
in sync with the contract amendment number.
Although the Commission has determined to exempt carriers from the
requirement that they publish Statements of Essential Terms for
individual service contracts, the Commission wants to ensure that
carriers continue to publish generally applicable service contract
tariff rules and notices. The Commission therefore proposes to replace
the requirement in Sec. 530.12 that carriers publish Statements of
Essential Terms for individual service contracts with a requirement
that carriers publish general service contract rules and notices as a
separate part of the individual carrier's automated tariff system. The
Commission is also proposing changes to a number of other sections in
part 530 to reflect the elimination of the Statement of Essential Terms
publication requirements. Finally, the Commission proposes to correct
in part 530 outdated references to FMC bureaus and offices, as well as
correct an outdated reference to a Department of Defense Command.
Public Participation
How do I prepare and submit comments?
Your comments must be written and in English. To ensure that your
comments are correctly filed in the docket, please include the docket
number of this document in your comments.
You may submit your comments via email to the email address listed
above under ADDRESSES. Please include the docket number associated with
this notice and the subject matter in the subject line of the email.
Comments should be attached to the email as a Microsoft Word or text-
searchable PDF document. Only non-confidential and public versions of
confidential comments should be submitted by email.
[[Page 8529]]
You may also submit comments by mail to the address listed above
under ADDRESSES.
How do I submit confidential business information?
The Commission will provide confidential treatment for identified
confidential information to the extent allowed by law. If your comments
contain confidential information, you must submit the following by mail
to the address listed above under ADDRESSES:
A transmittal letter requesting confidential treatment
that identifies the specific information in the comments for which
protection is sought and demonstrates that the information is a trade
secret or other confidential research, development, or commercial
information.
A confidential copy of your comments, consisting of the
complete filing with a cover page marked ``Confidential-Restricted,''
and the confidential material clearly marked on each page. You should
submit the confidential copy to the Commission by mail.
A public version of your comments with the confidential
information excluded. The public version must state ``Public Version--
confidential materials excluded'' on the cover page and on each
affected page, and must clearly indicate any information withheld. You
may submit the public version to the Commission by email or mail.
Will the Commission consider late comments?
The Commission will consider all comments received before the close
of business on the comment closing date indicated above under DATES. To
the extent possible, we will also consider comments received after that
date.
How can I read comments submitted by other people?
You may read the comments received by the Commission at the
Commission's Electronic Reading Room or the Docket Activity Library at
the addresses listed above under ADDRESSES.
Regulatory Notices and Analysis
Regulatory Flexibility Act
The Regulatory Flexibility Act, 5 U.S.C. 601-612, provides that
whenever an agency is required to publish a notice of proposed
rulemaking under the Administrative Procedure Act (APA), 5 U.S.C. 553,
the agency must prepare and make available for public comment an
initial regulatory flexibility analysis describing the impact of the
proposed rule on small entities, unless the head of the agency
certifies that the rulemaking will not have a significant economic
impact on a substantial number of small entities. 5 U.S.C. 603, 605.
Accordingly, the Chairman of the Federal Maritime Commission certifies
that the proposed rule, if promulgated, will not have a significant
impact on a substantial number of small entities. The regulated
business entities that would be impacted by the rule are vessel-
operating common carriers (VOCCs). The Commission has determined that
VOCCs generally do not qualify as small entities under the guidelines
of the Small Business Administration (SBA). See FMC Policy and
Procedures Regarding Proper Consideration of Small Entities in
Rulemakings (Feb. 7, 2003), available at https://www.fmc.gov/wp-content/uploads/2018/10/SBREFA_Guidelines_2003.pdf.
Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521) (PRA)
requires an agency to seek and receive approval from the Office of
Management and Budget (OMB) before collecting information from the
public. 44 U.S.C. 3507. The agency must submit collections of
information in proposed rules to OMB in conjunction with the
publication of the notice of proposed rulemaking. 5 CFR 1320.11.
The information collection requirements in Part 530, Service
Contracts, are currently authorized under OMB Control Number 3072-0065.
If approved, this rule would eliminate for VOCCs the publication of
concise statements of essential terms in their carrier automated tariff
systems. The proposed rule would require VOCCs to continue their
general practice of publishing service contract rules and notices in
their carrier automated tariff systems. The proposed rule does not make
any changes to the requirement to file service contracts with the
Commission.
As background, of the 155 vessel-operating common carriers serving
the U.S. trades, 68 do not file service contracts with the Commission,
and thus would not be impacted by this rulemaking. Further, of the 87
carriers that file service contracts, 31 filed less than ten contracts
or amendments thus far in FY 2019, with ten of those only filing 1
contract this fiscal year. Among VOCCs that utilize service contracts
more extensively as a pricing mechanism, only 31 filed over 100
original contracts this fiscal year.
With respect to the cost savings associated with eliminating the
publication of statements of essential terms corresponding to original
service contracts and amendments, the Commission estimates the savings
to VOCCs as roughly 41,048 man-hours, for an approximate savings of
$1,987,133 annually.\1\ Service contract rules and notices in carrier
automated tariff systems, on the other hand, are rarely published or
revised, inasmuch as they govern a broad swath of carrier contracts,
and many times are intended to quickly and efficiently address an ad
hoc industry situation.\2\ Thus, in any given year, there may be no new
service contract rules or notices published in a carrier's automated
tariff system. The Commission observes that the benefit of maintaining
rules and notices which allow a carrier to avoid revising hundreds of
service contracts greatly outweighs the burden of publishing such a
notice. The Commission invites comment on this.
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\1\ The Commission's previous service contract rulemaking in
Docket No. 16-05 estimated the time associated with preparation of
an individual ET publication as 3 minutes. No commenters opposed
that estimate. More recently, BTA informally interviewed two major
tariff publishers that file service contracts and publish ETs for
multiple VOCCs. These tariff publishers estimated the time required
to prepare an ET to be 3 to 6 minutes. The larger of the two tariff
publishers reported that their 3-minute preparation time was due to
its proprietary technological efficiencies. The above-referenced
savings are based on the 3-minute preparation time estimate, using
the Commission's most recent fiscal year's filing statistics for new
contracts and amendments. In FY 2018, 47,962 new service contracts
and 772,803 amendments were filed.
\2\ As one example, a major ocean carrier published a blanket
notice in its ET tariff applying to hundreds of its service
contracts when it deployed an extra loader vessel to meet unexpected
shipper demand. This notice allowed existing contract rates applying
to a specifically named service string to also apply to cargo moving
on the extra loader vessel, thereby eliminating the VOCC's burden of
amending hundreds of service contracts.
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Regarding the burden associated with the filing of service
contracts with the Commission, a substantial majority of filers, 74
percent, have recognized greater efficiencies by automating their
service contract filing processes using the Commission's ``web
services'' automated filing system. Using FY 2018 figures, BTA staff
estimates the remaining burden associated with service contract filing
to be roughly 3,542 man-hours, or $402,088 annually.\3\ Inclusive of
the burden
[[Page 8530]]
associated with the Service Contract Rules Publication requirement,\4\
the entire burden associated with this information collection is
calculated as $3,482,351 for contract filers, a substantial reduction.
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\3\ In the Commission's previous service contract rulemaking in
Docket No. 16-05, each service contract filing (new or amendment)
was estimated to take 3 minutes. Since that rulemaking, carriers and
tariff publishers comprising the highest volume service contract
filers have continued automating their filing processes. Filers that
implemented the Commission's ``web services'' automated filing
process have advised that minimal software programming was required
to facilitate the automated upload of service contracts and
amendments. Once automated, contract data can be transmitted into
SERVCON in a matter of seconds, without need for human intervention.
\4\ In our OMB filing related to this Information Collection,
the burden of maintaining service contract rules and notices is
estimated at 87 hours.
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In compliance with the PRA, the Commission has submitted the
proposed revised information collection to the Office of Management and
Budget.
Comments are invited on:
Whether the collection of information is necessary for the
proper performance of the functions of the Commission, including
whether the information will have practical utility;
Whether the Commission's estimate for the burden of the
information collection is accurate;
Ways to enhance the quality, utility, and clarity of the
information to be collected;
Ways to minimize the burden of the collection of
information on respondents, including the use of automated collection
techniques or other forms of information technology.
Please submit any comments, identified by the docket number in the
heading of this document, by any of the methods described in the
ADDRESSES section of this document.
National Environmental Policy Act
The Commission's regulations categorically exclude certain
rulemakings from any requirement to prepare an environmental assessment
or an environmental impact statement because they do not increase or
decrease air, water or noise pollution or the use of fossil fuels,
recyclables, or energy. 46 CFR 504.4. The proposed rule amends the
requirements related to the publication of essential terms associated
with service contracts. This rulemaking thus falls within the
categorical exclusion for actions related to the receipt service
contracts (Sec. 504.4(a)(5)). Therefore, no environmental assessment
or environmental impact statement is required.
Executive Order 12988 (Civil Justice Reform)
This rule meets the applicable standards in E.O. 12988 titled,
``Civil Justice Reform,'' to minimize litigation, eliminate ambiguity,
and reduce burden.
Regulation Identifier Number
The Commission assigns a regulation identifier number (RIN) to each
regulatory action listed in the Unified Agenda of Federal Regulatory
and Deregulatory Actions (Unified Agenda). The Regulatory Information
Service Center publishes the Unified Agenda in April and October of
each year. You may use the RIN contained in the heading at the
beginning of this document to find this action in the Unified Agenda,
at http://www.reginfo.gov/public/do/eAgendaMain.
Proposed Rule
For the reasons stated in the supplementary information, the
Federal Maritime Commission proposes to amend 46 CFR part 530 as
follows:
List of Subjects in 46 CFR Part 530
Freight, Maritime carriers, Report and recordkeeping requirements.
PART 530--SERVICE CONTRACTS
0
1. The authority citation for part 530 continues to read as follows:
Authority: 5 U.S.C. 553; 46 U.S.C. 305, 40301-40306, 40501-
40503, 41307.
0
2. Amend Sec. 530.1 by revising the first sentence to read as follows:
Sec. 530.1 Purpose
The purpose of this part is to facilitate the filing of service
contracts as required by section 8(c) of the Shipping Act of 1984
(``the Act'') (46 U.S.C. 40502). * * *
0
3. Amend Sec. 530.3 by revising paragraphs (d) and (o) and removing
paragraph (s) to read as follows:
Sec. 530.3 Definitions.
* * * * *
(d) BTA means the Commission's Bureau of Trade Analysis or its
successor bureau.
* * * * *
(o) OIT means the Commission's Office of Information Technology.
* * * * *
0
4. Amend Sec. 530.5 by revising paragraphs (a) and (c)(1) to read as
follows:
Sec. 530.5 Duty to file.
(a) The duty under this part to file service contracts, amendments,
and notices shall be upon the individual carrier party or parties
participating or eligible to participate in the service contract.
* * * * *
(c) * * *
(1) Application. Authority to file or delegate the authority to
file must be requested by a responsible official of the service
contract carrier in writing by submitting to BTA the Registration Form
(FMC-83) in Exhibit 1 to this part.
* * * * *
0
5. Amend Sec. 530.8 by revising paragraph (d) introductory text and
removing paragraph (d)(4) to read as follows:
Sec. 530.8 Service Contracts.
* * * * *
(d) Every service contract filed with BTA shall include, as set
forth in appendix A to this part by:
* * * * *
Sec. 530.10 [Amended]
0
6. Amend Sec. 530.10 by removing paragraph (f).
0
7. Revise subpart C heading to read as follows.
Subpart C--Publication of Essential Terms
0
8. Revise Sec. 530.12 to read as follows:
Sec. 530.12 Rules and Notices.
(a) Location--(1) Generally. A statement of service contract rules
and notices shall be published as a separate part of the individual
ocean common carrier's automated tariff system.
(2) Multi-party service contracts. For service contracts in which
more than one carrier participates or is eligible to participate, the
statement of service contract rules and notices shall be published:
(i) If the service contract is entered into under the authority of
a conference agreement, then in that conference's automated tariff
system;
(ii) If the service contract is entered into under the authority of
a non-conference agreement, then in each of the participating or
eligible-to-participate carriers' individual automated tariff systems,
clearly indicating the relevant FMC-assigned agreement number.
(b) Certainty of terms. The statement of service contract rules and
notices described in paragraph (a) of this section may not:
(1) Be uncertain, vague, or ambiguous; or
(2) Make reference to terms not explicitly detailed in the
statement of service contract rules and notices, unless those terms are
contained in a publication widely available to the public and well
known within the industry.
(c) Agents. Common carriers, conferences, or agreements may use
agents to meet their publication requirements under this part.
[[Page 8531]]
(d) Commission listing. The Commission will publish on its website,
www.fmc.gov, a listing of the locations of all service contract rules
and notices.
0
9. Amend Sec. 530.13 by revising paragraph (b)(2) to read as follows:
Sec. 530.13 Exceptions and exemptions.
* * * * *
(b) * * *
(2) Department of Defense cargo. Transportation of U.S. Department
of Defense cargo moving in foreign commerce under terms and conditions
negotiated and approved by the Surface Deployment and Distribution
Command and published in a universal service contract. An exact copy of
the universal service contract, including any amendments thereto, shall
be filed with the Commission as soon as it becomes available.
* * * * *
0
10. Amend Sec. 530.15 by revising paragraph (c) to read as follows:
Sec. 530.15 Recordkeeping and audit.
* * * * *
(c) Production for audit within 30 days of request. Every carrier
or agreement shall, upon written request of the FMC's Director, Bureau
of Enforcement, any Area Representative or the Director, Bureau of
Trade Analysis, submit copies of requested original service contracts
or their associated records within thirty (30) days of the date of the
request.
* * * * *
Appendix A to Part 530 [Amended]
0
11. In Appendix A revise all references to ``BTCL'' to read ``BTA'' and
revise all references to ``OIRM'' to read ``OIT''.
By the Commission.
Rachel Dickon,
Secretary.
[FR Doc. 2020-02561 Filed 2-13-20; 8:45 am]
BILLING CODE 6731-AA-P
