Facsimile Filing of Instruments

SUMMARY: The Coast Guard is amending its vessel documentation

regulations to provide for optional filing of commercial instruments by

facsimile, and to establish a filing and recording handling fee for

filing instruments by facsimile. The option of filing commercial

instruments by facsimile complements the centralization of Coast Guard

vessel documentation services. Facsimile filing of commercial

instruments will assist the centralized vessel documentation center to

deliver timely services to distant vessel documentation customers and

is responsive to time sensitive matters. Filing commercial instruments

by facsimile will further streamline the vessel documentation process.

EFFECTIVE DATE: This rule is effective on October 1, 1995.

ADDRESSES: Unless otherwise indicated, documents referred to in this

preamble are available for inspection or copying at the office of the

Executive Secretary, Marine Safety Council (G-LRA/3406), U.S. Coast

Guard Headquarters, 2100 Second Street SW., room 3406, Washington, DC

20593-0001 between 8 a.m. and 3 p.m., Monday through Friday, except

Federal holidays. The telephone number is (202) 267-1477.

FOR FURTHER INFORMATION CONTACT: Ms. Patricia Williams, National Vessel

Documentation Center; (800) 799-8362.

SUPPLEMENTARY INFORMATION:

Drafting Information

The principal persons involved in drafting this document are

Lieutenant Commander Don M. Wrye, Project Manager, National Vessel

Documentation Center and C. G. Green, Project Counsel, Office of Chief

Counsel.

Regulatory History

On March 6, 1995, the Coast Guard published a notice of proposed

rulemaking titled ``Facsimile Filing of Instruments'' in the Federal

Register (60 FR 12188). The Coast Guard received 11 letters commenting

on the proposal. No public hearing was requested and none was held.

Background and Purpose

Significant changes to the vessel documentation program were made

in 1988 by Pub. L. 100-710 (the ``statute''). Among other things, the

statute added chapter 313 to title 46, U.S. Code, to revise,

consolidate, and codify into positive law the ship mortgage laws

administered by the Department of Transportation. The statute made

certain substantive changes to then-existing law to modernize ship

mortgages and the filing and recording process.

The legislative history for the statute is contained in House

Report No. 100-918. That report noted that one of the primary purposes

of chapter 313 of title 46, U.S. Code, is to provide third parties with

notice of the existence of mortgages and liens. This rule implements

one aspect of the suggestions the report made concerning office

automation.

On November 15, 1993, the Coast Guard published a final rule (58 FR

60266) revising 46 CFR Part 67 implementing the substantive changes

made by the statute. That rule became effective on January 1, 1994. On

June 15, 1995, the Coast Guard published a final rule (60 FR 31602)

consolidating all vessel documentation functions in the National Vessel

Documentation Center (NVDC) in Martinsburg, WV. That rule became

effective on August 1, 1995. In accordance with that final rule, after

August 1, 1995, all documents related to vessel documentation functions

must be submitted to the NVDC. However, to assist the public in

adjusting to the consolidation, all of the previous 14 regional vessel

documentation offices will have someone present to receive documents

relating to vessel documentation functions on behalf of the NVDC until

September 30, 1995. After September 30, 1995, only the office in New

Orleans, LA, will have persons attached to receive such documents.

Under subpart O of 46 CFR part 67, instruments to be filed and

recorded with the Coast Guard are submitted to the National Vessel

Documentation Center. Any instrument submitted for filing and recording

must be a completed, executed instrument at the time it is submitted.

Upon receipt of the instrument at or on behalf of the NVDC, it is

stamped with a date and time received. If the instrument submitted

meets the minimal requirements for filing, it is marked ``Filed'' and

the stamped date and time received is noted as the date and time filed.

If the instrument submitted does not meet the minimal requirements for

filing, it is rejected and returned to the submitter. Under the terms

of 46 U.S.C. 31321(a)(2), filing the instrument with the Coast Guard is

the legally significant act which makes it valid against third parties.

If all of the necessary elements for recording the instrument are

present when it is filed, it can be promptly recorded. Recording the

instrument consists of indexing the filed instrument with a book and

page number, which serves as a locator for the document, and placing it

in the appropriate ``book'' according to its sequential page number(s).

If an instrument is filed but cannot be recorded because of an error or

omission, the instrument is deemed ``filed subject to termination'' and

a 90-day period is provided for correction. If corrected within the 90-

day period, the instrument may then be recorded and will retain the

date and time originally filed. If the instrument is not corrected

within the 90-day period, the filing is terminated and the instrument

is returned. To preserve the notice purpose of the statute, any

instrument filed with the Coast Guard, even if the filing is terminated

and the instrument not recorded, is indexed on the vessel's General

Index or Abstract of Title (form CG-1332). Allowing for the submission

of an instrument by facsimile for filing would not change any of the

procedural steps provided in the regulations. However, the submission

of an instrument by facsimile for filing will start the process earlier

and will result in an earlier date and time of filing.

Discussion of Comments and Changes

Many of the comments addressed concerns beyond the scope of the

proposed rule. For example, some comments wanted information regarding

how to directly access the Coast Guard's vessel documentation data base

and what kind of computer hardware and software were needed for that

purpose. Other comments expressed concerns about the impact that

consolidation of the Coast Guard's vessel documentation field offices

would have on services and suggested that certain functions be

privatized. These concerns will not be addressed in this rulemaking.

Only those comments that pertain to the proposed rule will be addressed

in this document.

One comment requested an extension of the comment period. The

person submitting the comment represented an organization scheduled to

meet late in the comment period to discuss the proposed rule. It is

noted that the individual who requested the extension to the comment

period did submit a comment, on behalf of the organization represented,

within the original

[[Page 40239]]

comment period. The Coast Guard has consolidated its vessel

documentation function to the NVDC in Martinsburg, WV. In order to

better serve its vessel documentation customers, the Coast Guard

decided that it would be in the public interest to make facsimile

submission of instruments for filing available at the earliest feasible

date. Therefore, the comment period was not extended.

Three comments questioned the legal authority of the Coast Guard to

accept instruments submitted by facsimile for filing. The Coast Guard

anticipated this comment in the early stages of this rulemaking and

conducted research into this matter. At issue is language in 46 U.S.C.

31321(b) that to be filed an instrument must ``be signed and

acknowledged.'' The comments opined that this language means that only

the original of an instrument may be accepted for filing. One of the

comments stated that acceptance of a reproduced instrument, whether

reproduced by photocopy or facsimile, would constitute an impermissible

attempt to amend the statute.

The filing and recording system administered by the Coast Guard is

an informational system intended to provide to interested parties

public notice regarding the existence of security interests or maritime

liens on a vessel. In this regard, it is similar to the notice filing

system employed by Article 9 of the Uniform Commercial Code (UCC).

Under both Article 9 of the UCC and 46 U.S.C. 31321, the critical

element in determining whether the filing will be effective against

third parties is the adequacy of the information contained in the

instrument filed to alert potential searchers of the records to

preexisting security interests. Another purpose of the filing and

recording system of 46 U.S.C. 31321 is to establish the priority of a

preferred ship mortgage over various other maritime liens enforceable

in Federal courts under admiralty jurisdiction. For this purpose, it is

important that the instrument filed not only contain adequate

information for a notice filing system, but that the instrument also be

a valid document.

The requirements of 46 U.S.C. 31321 that to be filed the instrument

must contain all of the informational elements necessary for notice and

that it be ``signed and acknowledged'', are designed to meet both

purposes. The purpose of the signature and acknowledgment on the

instrument is to demonstrate that the instrument is genuine, that it is

what it purports to be, and that it is a validly executed and completed

instrument. Further, the statute requires that the parties ``shall use

diligence to ensure that the parts of the instrument * * * for which

they are responsible are in substantial compliance with the filing and

documentation requirements.'' This placement of the burden of accuracy

and completeness on the parties to the instrument was designed to

remove the burden from the Coast Guard to carefully check each element

of an instrument presented for filing to ensure that it was authentic.

Therefore, the scope of the Coast Guard's responsibility regarding the

acceptance of an instrument for filing is more of a ministerial

function than a quality assurance function.

The primary premise to acceptance of an instrument submitted by

facsimile for filing is that it is a completed and executed instrument

that has been signed and properly acknowledged, and that has been

submitted for filing by use of a reliable medium that accurately

reproduces the original instrument. The safeguard to the system is that

the filing accomplished by initial facsimile submission is temporary;

unless the original is received by the Coast Guard within 10 days of

submission by facsimile, the filing is terminated. In addition, a

comparison between the original instrument and the duplicate received

by facsimile will be made to ensure that the instrument submitted by

facsimile was an accurate reproduction of the original. If the original

instrument bears any alteration from the duplicate received by

facsimile, the filing accomplished by facsimile submission will be

terminated. Therefore, the Coast Guard's position is that acceptance of

an instrument submitted by facsimile for filing fosters the purposes of

the filing and recording system of 46 U.S.C. 31321, and that such

acceptance complies with the requirements of the statute.

The comments further noted that language proposed for inclusion in

the 1995 Coast Guard Authorization Act (H.R. 1361) renders the

rulemaking moot. The Coast Guard disagrees. The proposed language, if

enacted, is not self-effecting; implementing regulations would be

required. In addition, the proposed language would authorize filing

instruments ``electronically.'' Electronic filing is far broader in

scope than the submission of instruments by facsimile. The Coast

Guard's view of the proposed language is that it would authorize a

paperless filing system. This rule permitting the submission of

instruments by facsimile for filing purposes does not authorize

electronic filing.

Two of the comments requested that the time period for receipt of

the original and duplicate of the instrument submitted by facsimile for

filing be increased from 10 days to 15 days. The Coast Guard intends

the primary use of facsimile submission of instruments for filing to be

for those situations where time is of the essence. In such cases, the

original and duplicate of the instrument should be mailed in such a

manner that prompt receipt by the Coast Guard is ensured. Extending the

receipt period could encourage batch processing of routine matters for

facsimile submission. The Coast Guard does not want to encourage such

use of the facsimile submission option. After the Coast Guard and the

public have gained some experience with the facsimile submission

option, the Coast Guard will examine whether expansion is warranted.

Further, it is noted that the proposed language in the 1995 Coast Guard

Authorization Act also requires receipt of the original within 10 days

of facsimile submission. Therefore, the period within which the

original and duplicate of any instrument submitted by facsimile for

filing and the original of any accompanying forms must be received by

the NVDC will remain 10 calendar days.

One comment suggested that the original and duplicate of the

instrument submitted by facsimile for filing should be received by the

NVDC within the 10-day period rather than merely be submitted to the

NVDC within the time period. The Coast Guard agrees with the comment

and the language in paragraph (b) of Sec. 67.219 has been changed

accordingly.

Three comments objected to the paper size limitation of 8\1/2\ by

11 inches for the original instrument which may be submitted by

facsimile. Over the years, the standard paper size for pleadings and

other documents in the Federal Courts has become 8\1/2\ by 11 inches.

The Coast Guard has followed the lead of the Federal Courts in the

vessel documentation program and has reformatted all of its forms,

certificates, and other documents to 8\1/2\ by 11 inches. This effort

has been well received by the courts and attorneys who often submit

vessel documentation related documents as exhibits to pleadings. The

NVDC has acquired plain paper sheet-by-sheet type facsimile machines.

The Coast Guard's experience is that this type of facsimile machine

produces a high quality reproduction that is durable and easy to

maintain. Although the machines have the capability to receive

instruments larger than 8\1/2\ by 11 inches the Coast Guard has decided

to maintain the 8\1/2\

[[Page 40240]]

by 11 inch size limitation. This decision is based on the need to

ensure that the facsimile transmission reproduces the instrument page-

for-page to reduce the risk of error and to facilitate comparison of

the instrument submitted by facsimile with the original instrument.

Therefore, original instruments on other than 8\1/2\-inch by 11-inch

paper may not be submitted by facsimile for filing.

Four comments objected to the 10-point type size requirement for

instruments submitted by facsimile for filing. The principal complaint

was that the application for documentation (CG-1258) is not in 10-point

size and yet for a vessel not currently documented, an application must

accompany the instrument submitted by facsimile. The 10-point type size

limitation applies only to the instrument submitted by facsimile for

filing, not additional documents accompanying the instrument. The

purpose of the 10-point size requirement is to ensure that instruments

submitted by facsimile are easily readable and capable of ready

comparison with the original when received. Therefore, the 10-point

type size limitation is not changed.

Three comments addressed the contents of the facsimile cover sheet.

While the comments agreed with the need for the cover sheet, they

suggested that the cover sheet also contain the name of the vessel,

either the official number or hull identification number of the vessel,

and the name(s) of the vessel owner(s). The Coast Guard agrees with

these comments and the change has been made in Sec. 67.219(e).

One comment requested that some sort of confirmation of receipt of

the facsimile submission be included. The Coast Guard has decided as a

matter of policy that it will provide facsimile confirmation within 24

hours of receipt of an instrument sumbitted for filing by facsimile. No

change to the regulation is required by this policy determination.

One comment suggested that the word ``instrument'' in paragraphs

(e) through (g) of Sec. 67.219 be changed to the word ``document''

since applications for documentation can be submitted in certain

situations. This suggestion appears to be based on the page and type

size limitations previously discussed. These requirements are intended

to assist in the accurate reproduction and readability of instruments

submitted by facsimile for filing. The application form is already on

8\1/2\-inch by 11-inch paper, and the type size limitation does not

apply. Therefore, the suggestion is not accepted. The language in the

rule carefully distinguishes between instruments and other documents

which may also be submitted by facsimile.

Two comments expressed concern about the language in paragraph

(f)(3) of Sec. 67.219 that the filing of an instrument submitted by

facsimile will be terminated if there is ``any variance'' between the

instrument submitted by facsimile and the original. The comments

expressed concern that a transmission error of the instrument by

facsimile could cause the filing to be terminated. The Coast Guard's

intent is to discourage the use of the facsimile submission option to

submit an instrument that is incomplete or subject to change for the

purpose of reserving an early filing date and time. An instrument

submitted by facsimile for filing must be a completed, executed, and

acknowledged instrument to meet the requirements for filing of 46

U.S.C. 31321. However, the Coast Guard understands the concern over the

term ``any variance'' with regard to possible facsimile transmission

errors. Therefore, the term has been changed to read ``any alteration''

to preserve the prohibition against any intentional change of the

original instrument after submission by facsimile. As explained earlier

in this preamble, the Coast Guard will compare the instrument submitted

by facsimile to the original instrument and will terminate the filing

of an instrument submitted by facsimile if the original bears any

alteration. The filing of an instrument submitted by facsimile will not

be terminated for errors that are determined by comparison with the

original to have been caused by transmission problems. If the filing of

an instrument submitted by facsimile is terminated, the person

submitting the original instrument would also be liable for the fees

associated with submission of the instrument by facsimile.

Three comments addressed the proposed fee associated with

submitting an instrument by facsimile for filing. One of the comments

opined that the fee was too low to cover the costs to the Coast Guard.

The Coast Guard has been charging user fees for vessel documentation

services since January 1, 1995, when the revision to Part 67 became

effective. The fee proposed for the submission of instruments by

facsimile was determined by using established personnel costs and

projected equipment costs, and projecting the handling time and costs

for each instrument. The Coast Guard realizes that the $2.00 per page

fee may not reflect the exact cost of the program. However, the Coast

Guard periodically reviews its user fees and the basis for those fees,

and will make necessary adjustments as experience requires. The $2.00

per page fee applies only to the instrument(s) submitted by facsimile

for filing and does not apply to any additional documents submitted

that will not themselves be filed and recorded. Therefore, the $2.00

per page fee does not apply to any application required by paragraph

(a), or to the facsimile cover sheet required by paragraph (d).

Two of the comments regarding fees stated that the Coast Guard

should provide for payment of fees by credit card and should establish

payment accounts for frequent customers. While the Coast Guard does not

currently permit payment of vessel documentation user fees by charge or

credit card or the use of credit/debit accounts, it is exploring those

options. Any change to fee payment procedures would be published in the

Federal Register.

An amendment to the definition of the NVDC in Sec. 67.3 has been

included in this rule. This amendment adds a telephone number for the

NVDC.

An amendment to Sec. 67.13 has been included in this rule. That

amendment merely changes the address of the location in the Coast Guard

where material incorporated by reference in part 67 may be inspected.

Regulatory Evaluation

This regulation is not a significant regulatory action under

section 3(f) of Executive Order 12866 and does not require an

assessment of potential costs and benefits under section 6(a)(3) of

that order. It has not been reviewed by the Office of Management and

Budget under that order. It is not significant under the regulatory

policies and procedures of the Department of Transportation (DOT) (44

FR 11040, February 26, 1979).

The Coast Guard expects the economic impact of this regulation to

be so minimal that a full Regulatory Evaluation under paragraph 10e of

the regulatory policies and procedures of DOT is unnecessary. The Coast

Guard anticipates that optional filing by facsimile will be used only

in a limited number of cases. For example, when additional financing is

being negotiated; when an assignment or assumption of an existing

mortgage is pending; when financing at favorable rates is time

critical; or when a vessel owner desires to meet a specific sailing

date and filing an instrument is critical to that date, are situations

when filing by facsimile could be advantageous. Nevertheless,

submission by facsimile is an optional method of presenting instruments

for filing. A party may always use regular mail or personal delivery if

desired. Therefore, any additional costs to the

[[Page 40241]]

public associated with this regulation would be due to an election to

use the optional method.

Small Entities

Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), the

Coast Guard must consider whether this regulation will have a

significant economic impact on a substantial number of small entities.

``Small entities'' may include (1) small businesses and not-for-profit

organizations that are independently owned and operated and are not

dominant in their fields and (2) governmental jurisdictions with

populations of less than 50,000.

As explained earlier in this preamble, this regulation merely adds

an optional method of submitting certain forms and instruments to the

Coast Guard for filing and recording. Since filing by facsimile is

optional, any additional costs borne by any users would be at their

election. Current methods of submitting instruments for filing, at no

increase in costs, remain available. In addition, it is anticipated

that the option of filing by facsimile would be used only in limited

situations where time is of the essence. Therefore, the Coast Guard

certifies under section 605(b) of the Regulatory Flexibility Act (5

U.S.C. 601 et seq.) that this regulation will not have a significant

economic impact on a substantial number of small entities.

Collection of Information

This regulation contains no collection-of-information requirements

under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.). This

regulation merely describes an additional method which may be used as

an option to submit vessel documentation related instruments to the

Coast Guard for filing and recording.

Federalism

The Coast Guard has analyzed this regulation under the principles

and criteria contained in Executive Order 12612 and has determined that

it does not have sufficient federalism implications to warrant the

preparation of a Federalism Assessment.

Environment

The Coast Guard considered the environmental impact of this

regulation and concluded that under paragraph 2.B.2 of Commandant

Instruction M16475.lB, it is categorically excluded from further

environmental documentation. This regulation has been determined to be

categorically excluded because the changes made are administrative and

procedural in nature, relate solely to the documentation of vessels,

and clearly have no environmental impact. A ``Categorical Exclusion

Determination'' is available in the docket for inspection or copying

where indicated under ADDRESSES.

List of Subjects in 46 CFR Part 67

Fees, Incorporation by reference, Vessels.

For the reasons set out in the preamble, the Coast Guard amends 46

CFR part 67 as follows:

PART 67--[AMENDED]

1. The authority citation for part 67 continues to read as follows:

Authority: 14 U.S.C. 664; 31 U.S.C. 9701; 42 U.S.C. 9118; 46

U.S.C. 2103, 2107, 2110; 46 U.S.C. app. 841a, 876; 49 CFR 1.46.

Sec. 67.3 [Amended]

2. In Sec. 67.3, the definition of ``National Vessel Documentation

Center'' is amended by adding at the end the words ``Telephone: (800)

799-VDOC (8362)''.

Sec. 67.13 [Amended]

3. In Sec. 67.13, paragraph (a) is amended by removing the words

``Merchant Vessel Inspection and Documentation Division, 2100 Second

Street SW., Washington, DC 20593-0001'' and adding in their place the

words ``National Vessel Documentation Center, 2039 Stonewall Jackson

Drive, Falling Waters, WV 25419''.

4. Section 67.219 is added to read as follows:

Sec. 67.219 Optional filing of instruments by facsimile.

(a) Any instrument identified as eligible for filing and recording

under Sec. 67.200 may be submitted by facsimile for filing to the

National Vessel Documentation Center at (304) 271-2400. If the

instrument submitted by facsimile for filing pertains to a vessel that

is not a currently documented vessel, a properly completed Application

for Initial Issue, Exchange, or Replacement Certificate of

Documentation; or Redocumentation (form CG-1258); or a letter

application for deletion from documentation must already be on file

with the National Vessel Documentation Center or must be submitted by

facsimile with the instrument being submitted by facsimile for filing.

(b) Within 10 days of submission by facsimile for filing, the

original and one copy of any instrument submitted by facsimile for

filing must be received by the National Vessel Documentation Center. If

not already on file, the original of any application required by

paragraph (a) of this section must also be received by the National

Vessel Documentation Center within 10 days of submission of the

instrument by facsimile for filing.

(c) Upon receipt of the original instrument and copy in accordance

with paragraph (b) of this section, the instrument may be recorded

provided it complies with the requirements of this part.

(d) All instruments submitted by facsimile for filing must be

clearly legible, be submitted from 8\1/2\-inch by 11-inch paper in not

less than 10-point type size, and be accompanied by a cover sheet.

(e) The facsimile cover sheet required by paragraph (d) of this

section should indicate:

(1) The name, address, telephone number, and facsimile telephone

number of the person submitting the instrument by facsimile;

(2) The number of pages submitted by facsimile; and

(3) The name of the vessel, official number or hull identification

number of the vessel, and the name(s) of the owner(s) of the vessel to

which the instrument relates.

(f) The filing of any instrument submitted by facsimile is

terminated and the instrument will be returned to the submitter if:

(1) The instrument is subject to termination for any cause under

Sec. 67.217(a);

(2) The original instrument and copy required to be submitted in

accordance with paragraph (b) of this section is not received within

the 10-day period; or

(3) There is any alteration between the instrument submitted by

facsimile for filing and the original instrument and copy received in

accordance with paragraph (b) of this section.

(g) When the filing of an instrument submitted by facsimile is

terminated for an alteration in accordance with paragraph (f)(3) of

this section, the original instrument and copy received in accordance

with paragraph (b) of this section will be deemed to be an original

filing under this subpart subject to termination. The procedures for

written notification of the termination of the filing and for the

disposition of instruments described in paragraphs (b) and (c) of

Sec. 67.217 will apply.

5. In Sec. 67.500, paragraph (a) is revised to read as follows:

Sec. 67.500 Applicability.

(a) This subpart specifies documentation services provided for

vessels for which fees are applicable. No documentation service for

which a fee is applicable will be performed until the

[[Page 40242]]

appropriate fee has been paid. Fees are contained in Table 67.550.

* * * * *

6. Section 67.540 is added to read as follows:

Sec. 67.540 Facsimile handling fee.

A handling fee is charged for processing an instrument submitted by

facsimile for filing in accordance with subpart O of this part.

7. In Sec. 67.550, Table 67.550 is amended by adding ``Facsimile

submission handling'' as an entry following the entry ``Notice of claim

of lien and related instruments'' under the category ``Filing and

recording:'' to read as follows:

Sec. 67.550 Fee table.

* * * * *

Table 67.550.--Fees

------------------------------------------------------------------------

Activity Reference Fee

------------------------------------------------------------------------

* * * *

* * *

Facsimile submission handling.. Subpart O................. \1\ 2.00

* * * *

* * *

------------------------------------------------------------------------

\1\ Per page.

* * * * *

Dated: July 27, 1995.

J.D. Card,

Rear Admiral, U.S. Coast Guard, Chief, Office of Marine Safety,

Security and Environmental Protection.

[FR Doc. 95-19345 Filed 8-4-95; 8:45 am]

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