Repeal of Marine Terminal Agreement Exemption, 65034-65036 [E9-29369]

Agencies

• Federal Maritime Commission

[Federal Register Volume 74, Number 235 (Wednesday, December 9, 2009)]
[Rules and Regulations]
[Pages 65034-65036]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-29369]


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FEDERAL MARITIME COMMISSION

46 CFR Part 535

[Docket No. 09-02]
RIN 3072-AC 35


Repeal of Marine Terminal Agreement Exemption

AGENCY: Federal Maritime Commission.

ACTION: Final rule.

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SUMMARY: The Federal Maritime Commission repeals the marine terminal 
agreements exemption, which exempted such agreements from the Shipping 
Act's 45-day statutory waiting period, and amends the Commission's 
regulations to transfer an existing definition of the marine terminal 
conference agreement to another section. This rule also corrects a 
typographical error.

DATES: Effective December 10, 2009.

FOR FURTHER INFORMATION CONTACT: Peter J. King, General Counsel, 
Federal Maritime Commission, 800 North Capitol Street, NW., Room 1018, 
Washington, DC 20573-0001, generalcounsel@fmc.gov.

SUPPLEMENTARY INFORMATION: By Notice of Proposed Rulemaking (NPR) 
published in the Federal Register on July 2, 2009, 74 FR 31666, the 
Commission proposed to repeal 46 CFR 535.308, which exempts marine 
terminal agreements from the 45-day waiting period requirement of the 
Shipping Act. The NPR addresses the Commission's findings and concerns 
that agreements filed under section 535.308 could cause anticompetitive 
consequences that the Commission deemed unlikely when it first adopted 
the exemption in 1987.
    The Commission invited comments on the NPR. The comments period was 
later extended to September 8, 2009. 74 FR 41831, Aug. 19, 2009.

Comments

    Three comments were filed with the Commission. Two comments support 
repeal of section 535.308 exemption as proposed in the NPR, and one 
comment opposes the repeal.
    The National Customs Brokers and Forwarders Association of America 
(NCBFAA) is the national trade association representing the interests 
of freight forwarders, NVOCCs, and customs brokers in the ocean 
shipping industry. NCBFAA notes that under section 535.308, exempt 
marine terminal agreements (MTAs) are immunized from the antitrust laws 
immediately upon filing with the Commission. NCBFAA states that 
agreements between terminal operators have evolved in their nature from 
simple landlord-tenant agreements, and that some marine terminal 
operators have begun using the exempt MTAs to ``collectively adopt 
policies, procedures and regulations'' affecting the shipping industry. 
Due to the exemption, parties adversely affected by exempt MTAs, as 
well as the Commission itself, are deprived of opportunities to 
consider the adverse consequences of any exempt MTAs before such 
agreements become effective. Although NCBFAA does not challenge 
continued antitrust immunity under the Shipping Act, it believes that 
MTAs that could have anticompetitive consequences should no longer be 
exempted from the 45-day waiting period established by the Shipping 
Act, 46 U.S.C. 40304.
    The National Industrial Transportation League (NITL) is a national 
association that represents approximately 700 member companies that 
tender goods to carriers for transportation in interstate and 
international commerce or that arrange or perform transportation 
services. NITL's membership includes large multinational and national 
corporations as well as small and medium-sized companies. NITL states 
that MTAs have an impact on the shipment of its members because many of 
them are U.S. importers and exporters. NITL notes that agreement of 
terminal operators have become ``more complex and broader in scope.'' 
This change, NITL states, has created a legitimate concern as to 
whether MTAs should be granted antitrust immunity immediately upon 
filing with the Commission. NITL supports repeal of the exemption for 
MTAs from the 45-day waiting period.
    The Ports of Los Angeles and Long Beach (the Ports) submitted a 
comment objecting to the elimination of the 45-day waiting period 
exemption for MTAs. The Ports allege that the Commission's efforts to 
eliminate the waiting period exemption arise largely out of the efforts 
to delay and block the implementation of agreements the Ports filed in 
connection with their environmental programs. The Ports state that the 
MTA exemption does not impede Commission oversight. The Ports argue 
that elimination of the section 535.308 exemption will cause them ``to 
interrupt and delay operational matters'' to accommodate the 45-day 
waiting period.
    The Ports also argue that the Commission's marine terminal operator 
agreement rules are unclear and provide no guidance regarding the 
degree of specificity and detail required for filed agreements. The 
Ports allege that this confusion stems from the Commission's 
elimination in Docket No. 03-15 of the exemption for ``routine 
operational and administrative matters,'' which were previously 
exempted from filing under 46 CFR 535.407(c) (2003). The Ports assert 
that, in lieu of the section 535.407(c) exemption, the Commission 
provided in section 535.408 a list of exemptions that are specific to 
vessel-operating common carriers and do not address marine terminal 
operators at all. The Ports claim that repeal of the section 308 
exemption will cause long delays for every ``trivial'' amendment to

[[Page 65035]]

any arrangement between marine terminals. The Ports urge that the 
Commission discontinue the instant rulemaking or revisit the issue of 
``routine operational and administrative'' agreement filing by 
undertaking a more thorough effort to clarify and update the 
Commission's agreement rules as applicable to marine terminal 
operators.

Discussion

    After review of the comments and careful consideration, the 
Commission has determined to adopt the NPR as final, and to repeal the 
exemption at 46 CFR 535.308.

I. The Shipping Act Requires the Commission To Repeal Section 535.308

    Pursuant to section 16 of the Shipping Act, 46 U.S.C. 40103, the 
Commission exempted MTAs from the Shipping Act's 45-day waiting period 
requirement after finding that such exemption would not substantially 
impair effective regulation by the Commission, be unjustly 
discriminatory or detrimental to commerce, nor result in a substantial 
reduction in competition within the meaning of Section 16 of the 
Shipping Act. Marine Terminal Agreements, 24 S.R.R. 192, 193-194 (FMC 
1987).
    More recently, the Commission has found that potentially 
anticompetitive agreements could be filed with the Commission claiming 
the exemption under section 535.308. MTAs filed with the Commission 
have revealed the greater complexity of subject matter and the wider 
range of operational issues that the marine terminal industry seeks to 
address in MTAs. MTAs increasingly have the potential to cause the 
anticompetitive consequences that the Commission deemed unlikely when 
it first adopted the exemption.
    Under the current section 535.308, MTAs become effective upon 
filing, depriving the Commission of the opportunity to review the 
agreements during the statutory 45-day waiting period and the 
opportunity to seek additional information from the agreement parties. 
The absence of any waiting period requirement for MTAs may frustrate 
the Commission's function of advance review and analysis of filed 
agreements to prevent a reduction in competition under section 6 of the 
Shipping Act. 46 U.S.C. 40304, 41307.
    The Ports allege that the Commission's efforts to eliminate the 
exemption are intended primarily to delay and block the Ports' 
environmental programs. Contrary to the Ports' allegation, the Shipping 
Act permits the Commission to continue the exemption from the Act's 
requirements only ``if it finds that the exemption will not result in 
substantial reduction in competition or be detrimental to commerce.'' 
46 U.S.C. 40103. When the Commission finds that the section 535.308 
exemption may lead to substantial reduction in competition or be 
detrimental to commerce, the Commission is required under the Shipping 
Act to repeal the exemption.

II. The Current Exemption Under Section 535.308 Frustrates Commission 
Functions Under the Shipping Act

    Under section 6 of the Shipping Act, the Commission may reject a 
filed agreement that does not meet the requirements of the Act. 46 
U.S.C. 40304(b). The Commission may request additional information and 
documents to make the determination required under the Shipping Act. 46 
U.S.C. 40304(d). If, at any time after the filing or effective date of 
an agreement, the Commission determines that the agreement is likely, 
by reduction in competition, to produce an unreasonable reduction in 
transportation service or an unreasonable increase in transportation 
cost, the Commission may bring a civil action to enjoin the operation 
of the agreement. 46 U.S.C. 41307(b).
    The Ports argue that the section 535.308 exemption does not impede 
the Commission's oversight for MTAs. This argument overlooks concerns 
that, under the current section 535.308 exemption, MTAs become 
effective immediately upon filing with the Commission, depriving the 
industry and the Commission of any pre-effectiveness review. Under the 
section 535.308 exemption, the Commission may seek to enjoin 
potentially anticompetitive MTAs only after the MTAs have become 
effective, thereby allowing, by a reduction in competition, an 
unreasonable reduction in transportation service or an unreasonable 
increase in transportation cost. Congress cautioned that the Commission 
should not stand idle while awaiting ``actual commercial harm,'' noting 
that a blanket requirement for such evidence would ``undermine the 
agency's ability to take necessary preventive action.'' Senate Report 
105-61 at 14 (1997).
    NCBFAA and NITL have expressed substantially the same concerns as 
the Commission. NCBFAA states that MTAs should be subject to pre-
effectiveness review. NCBFAA points out that ``Due to the exemption, 
any party adversely affected by a proposed MTA is essentially 
disenfranchised, and is given no opportunity to complain either about 
the agreement's substance or the fact that competing MTO's [sic] may 
have collectively established policies that arguably have adverse 
consequences on competition or transportation costs.'' NCBFAA's 
comments of August 13, 2009, at 2. NCBFAA believes that pre-
effectiveness review of MTAs by the industry and the Commission is both 
helpful and essential to maintaining an efficient and competitive 
shipping industry, especially when the parties are seeking the 
extraordinary benefit of antitrust immunity.
    NITL notes that recent MTA filings with the Commission demonstrate 
the need for greater scrutiny and public review of such agreements 
before they are permitted to take effect. NITL states that removal of 
the existing exemption and reinstitution of the 45-day waiting period 
would provide the Commission and the shipping public with an 
opportunity to review and analyze the potential anticompetitive 
consequences of MTAs before any harm occurs.

Repeal of Section 535.308 Exemption Will Have a Minimal Impact on the 
Industry

    The Ports argue that without the section 535.308 exemption, every 
``trivial'' amendment to any arrangement between marine terminals will 
be subject to delays. This argument fails to consider the fact that 
section 535.308 exempts only certain narrowly defined agreements that 
relate ``solely to marine terminal facilities and/or services * * * 
that completely [set] forth the applicable rates, charges, terms and 
conditions agreed to by the parties for the facilities and/or services 
provided for under the agreement.'' By its express terms, marine 
terminal conference agreements, marine terminal discussion agreements, 
and marine terminal interconference agreements are excluded from the 
exemption. Because of the narrow applicability of the exemption, only 
three agreements have claimed the exemption under the section during 
the last five years.\1\
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    \1\ Most agreements between marine terminals are not the 
narrowly defined MTAs under section 535.308, but are instead marine 
terminal operator agreements under section 535.201(b), for which 
other exemptions will continue to be available. See, e.g., Sections 
535.309 and 535.310.
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    While the Ports' concerns do not warrant discontinuance of this 
rulemaking, the Commission acknowledges that the exemption under 
section 535.408 primarily addresses carrier agreements. Section 535.408 
states that ``technical or operational matters of an agreement's 
affairs established pursuant to express enabling authority in an 
agreement are considered part of the effective

[[Page 65036]]

agreement'' and thus exempts certain amendments having technical or 
operational effects from the Shipping Act's filing requirement. 46 CFR 
535.408. While not part of Docket No. 09-02, the Commission is open to 
reviewing this latter section to determine if additional flexibility 
can be provided for amendments addressing technical or operational 
matters of marine terminal operator agreements.
    In accordance with the Regulatory Flexibility Act, 5 U.S.C. 601-
612, the Chairman of the Federal Maritime Commission certifies that 
this rule, if promulgated, would not have a significant economic impact 
on a substantial number of small entities. The regulated entities that 
would be affected by the rule are limited to marine terminal operators 
and ocean common carriers. Pursuant to the guidelines of the Small 
Business Administration, the Commission has determined that these 
entities do not qualify as small for the purpose of the Small Business 
Regulatory Enforcement Fairness Act. The rule would simply require that 
agreements between marine terminal operators, or between or among 
marine terminal operators and ocean common carriers, become effective 
subject to the requirements of section 6 of the Shipping Act of 1984, 
46 U.S.C 40304, and Commission agreement rules, 46 CFR Part 535.
    This regulatory action is not a ``major rule'' under 5 U.S.C. 
804(2).

List of Subjects in 46 CFR Part 535

    Administrative practice and procedure, Maritime carriers, Terminal 
operators, Reporting and recordkeeping requirements.

0
For the reasons set forth above, the Federal Maritime Commission amends 
46 CFR Part 535 Subpart C as follows:

PART 535--[AMENDED]

Subpart C--Exemptions

0
1. The authority citation for Part 535 continues to read as follows:

    Authority:  5 U.S.C. 553; 46 U.S.C. 305, 40101-40104, 40301-
40307, 40501-40503, 40901-40904, 41101-41109, 41301-41302, and 
41305-41307.


Sec.  535.308  [Removed]

0
2. Remove Sec.  535.308.
0
3. In Sec.  535.309, revise paragraph (b)(1) to read as follows:


Sec.  535.309  Marine terminal services agreements--exemption.

* * * * *
    (b) * * *
    (1) They do not include rates, charges, rules, and regulations that 
are determined through a marine terminal conference agreement. Marine 
terminal conference agreement means an agreement between or among two 
or more marine terminal operators and/or ocean common carriers for the 
conduct or facilitation of marine terminal operations that provides for 
the fixing of and adherence to uniform maritime terminal rates, 
charges, practices and conditions of service relating to the receipt, 
handling, and/or delivery of passengers or cargo for all members; and
* * * * *

0
4. In Sec.  535.604, revise paragraph (b) to read as follows:


Sec.  535.604  Waiting period.

* * * * *
    (b) Unless suspended by a request for additional information or 
extended by court order, the waiting period terminates and an agreement 
becomes effective on the later of the 45th day after the filing of the 
agreement with the Commission or on the 30th day after publication of 
notice of the filing in the Federal Register.
* * * * *

    By the Commission.
Karen V. Gregory,
Secretary.
[FR Doc. E9-29369 Filed 12-8-09; 8:45 am]
BILLING CODE 6730-01-P