Facsimile Filing of Instruments

DEPARTMENT OF TRANSPORTATION

Coast Guard

46 CFR Part 67

[CGD 94-070]

RIN 2115-AE98

Facsimile Filing of Instruments

AGENCY: Coast Guard, DOT.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Coast Guard proposes to amend 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 is one way in which a centralized vessel documentation

center can deliver timely services to distant vessel documentation

customers and be responsive to time sensitive matters. Filing

commercial instruments by facsimile should further streamline the

vessel documentation process.

DATES: Comments must be received on or before May 5, 1995.

ADDRESSES: Comments may be mailed to the Executive Secretary, Marine

Safety Council (G-LRA/3406) (CGD 94-070), U.S. Coast Guard

Headquarters, 2100 Second Street SW., Washington, DC 20593-0001, or may

be delivered to room 3406 at the same address between 8 a.m. and 3

p.m., Monday through Friday, except Federal holidays. The telephone

number is (202) 267-1477.

The Executive Secretary maintains the public docket for this

rulemaking. Comments will become part of this docket and will be

available for [[Page 12189]] inspection or copying at room 3406, U.S.

Coast Guard Headquarters, between 8 a.m. and 3 p.m., Monday through

Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT:

Lieutenant Commander Don M. Wrye, Vessel Documentation and Tonnage

Survey Branch; (202) 267-1492.

SUPPLEMENTARY INFORMATION:

Request for Comments

The Coast Guard encourages interested persons to participate in

this rulemaking by submitting written data, views, or arguments.

Persons submitting comments should include their names and addresses,

identify this rulemaking (CGD 94-070) and the specific section of this

proposal to which each comment applies, and give the reason for each

comment. Please submit two copies of all comments and attachments in an

unbound format, no larger than 8\1/2\ by 11 inches, suitable for

copying and electronic filing. Persons wanting acknowledgment of

receipt of comments should enclose stamped, self-addressed postcards or

envelopes.

The Coast Guard will consider all comments received during the

comment period. It may change this proposal in view of the comments.

The Coast Guard plans no public hearing. Persons may request a

public hearing by writing to the Marine Safety Council at the address

under ADDRESSES. The request should include the reasons why a hearing

would be beneficial. If it determines that the opportunity for oral

presentations will aid this rulemaking, the Coast Guard will hold a

public hearing at a time and place announced by a later notice in the

Federal Register.

Drafting Information

The principal persons involved in drafting this document are

Lieutenant Commander Don M. Wrye, Project Manager, and C. G. Green,

Project Counsel, Office of Chief Counsel.

Background and Purpose

Significant changes to the vessel documentation program were made

in 1988 by Public Law 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. The report further

advocates the use of a central computer system to facilitate access to

data. The report noted that the ``Secretary should also consider

allowing private vessel documentation services to submit applications

electronically, with appropriate paper document backup for legal

purposes * * *'' This proposal would implement some of the suggestions

the report made concerning office automation and should realize some of

the benefits expected to flow from modernization.

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

revising 46 CFR part 67 implementing the substantive changes made by

the statute. The final rule became effective on January 1, 1994.

Under subpart O of the current regulations, instruments to be filed

and recorded with the Coast Guard are first submitted to the

appropriate port of record. An instrument submitted for filing and

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

submitted. If the instrument submitted meets the minimal requirements

for filing, it is filed and stamped with a date and time. If all of the

necessary elements for recording the instrument are present when it is

filed, it can be promptly recorded. 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 window is provided

for correction. If corrected within the 90-day period, the instrument

may then be recorded with the recording date and time ``relating back''

to the date and time filed. If the instrument is not corrected within

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

returned. In order 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 current regulations. However, the

submission of an instrument by facsimile for filing will start the

process earlier, resulting in an earlier date and time for filing and

recording purposes.

The Coast Guard is proceeding with the consolidation of its 14

regional vessel documentation offices into one central location. This

centralization will conclude the effort begun in 1983 when a number of

field offices were consolidated into regional offices. Although most

vessel documentation transactions are currently completed by ordinary

mail, a number of persons have expressed concern with regard to

centralization for those cases where ``over-the-counter'' service is

desired. As an example, some lending institutions will not advance

funds under a ship mortgage until assured that the mortgage has been

filed and recorded so as to acquire preferred status. In such cases,

the Coast Guard documentation officer will verify over the telephone

that the mortgage has been filed and recorded and the lending

institution will advance funds immediately. The Coast Guard anticipates

that the desire for such service will continue. Therefore, the Coast

Guard is contemplating further use of office automation technology as

part of the centralization effort. One such use of office automation

technology is the filing of certain forms and instruments by facsimile.

This document proposes amendments to the Coast Guard's regulations to

permit optional submission by facsimile of certain forms and

instruments for filing.

Discussion of Proposed Rules

The Coast Guard proposes to add to 46 CFR part 67 a new Sec. 67.219

to provide for filing commercial instruments by facsimile submission.

Paragraph (a) of proposed Sec. 67.219 would limit the instruments that

could be filed by facsimile submission to those identified as eligible

for filing and recording in Sec. 67.200. Those instruments are: bills

of sale and similar instruments; deeds of gift; mortgages and

assignments, assumptions, supplements, amendments, subordinations,

satisfactions, and releases thereof; preferred mortgages and

assignments, assumptions, supplements, amendments, subordinations,

satisfactions, and releases thereof; interlender agreements affecting

mortgages, preferred mortgages, and related instruments; and notices of

claim of lien and assignments, amendments, and satisfactions and

releases thereof. Paragraph (a) of proposed Sec. 67.219 would also list

the facsimile telephone number for the National Vessel Documentation

Command to which facsimile submissions may be made. Finally, paragraph

(a) of proposed Sec. 67.219 would require that the vessel to which the

instrument relates either be currently documented or be the subject of

an application for documentation. [[Page 12190]]

In accordance with Sec. 67.203, no instrument will be accepted for

filing unless it pertains to a documented vessel or a vessel for which

a properly completed application for documentation, redocumentation, or

deletion from documentation is filed. The Coast Guard deems an

instrument filed contemporaneously with a properly completed

application for documentation, redocumentation, or deletion from

documentation of the related vessel to meet the requirements of the

regulation. Therefore, if the vessel related to the instrument being

submitted by facsimile for filing is not a currently documented vessel,

a completed application would also have to be submitted by facsimile

with the instrument.

Paragraph (b) of proposed Sec. 67.219 would require that the person

submitting an instrument by facsimile for filing within 10 days submit

the original instrument in duplicate to the National Vessel

Documentation Command. One of the duplicate instruments submitted would

have to bear original signatures. The 10-day period would begin to run

at the time the instrument is received by facsimile at the National

Vessel Documentation Command. Since the instrument being submitted by

facsimile must be a completed and executed document, the submitter

should be able to take it from the facsimile machine, place it in an

envelope with the original of any required application and the

appropriate fee, and mail the original and a copy to the National

Vessel Documentation Command without delay. Thus, the 10-day period is

considered a sufficient mailing window. The duplicate submission

requirement proposed in paragraph (b) would meet the submission

requirement for the filing of all instruments in Sec. 67.209, while

obtaining the earlier filing date for those instruments submitted by

facsimile. In addition, paragraph (b) of proposed Sec. 67.219 would

require that the original of any application required to be submitted

by paragraph (a) of this section, which is not already on file, also be

submitted to the National Vessel Documentation Command.

Paragraph (c) of proposed Sec. 67.219 would provide that upon

receipt of the duplicate instruments and the original of any required

application, the date and time of recording of the instrument ``relates

back'' to the date and time that the instrument submitted by facsimile

was filed. Provided that the instrument submitted by facsimile for

filing meets the minimal requirements for filing, it would be filed at

the date and time received by facsimile. The objective of submitting an

instrument by facsimile for filing is to obtain an earlier filing date

than could otherwise be acquired. Because the instrument submitted by

facsimile is itself filed, the process should work well to meet that

objective, even during weekends. For example, if an instrument were

submitted by facsimile for filing late Friday evening, it would not be

reviewed to ensure that it met the filing requirements until the next

regular workday. On a regular weekend that would be the following

Monday. On most holiday weekends, that would be the following Tuesday.

Therefore, it is possible that an instrument submitted by facsimile for

filing would not be reviewed to determine whether it met the minimal

filing requirements until as many as four days after it was submitted.

However, if the instrument submitted by facsimile does meet the filing

requirements, then it would be stamped filed and the date and time of

filing would be the date and time received by facsimile. The filing of

the instrument would then be indexed on the vessel's General Index or

Abstract of Title (form CG-1332). Of course, the 10-day period for

submitting the duplicate instruments would also start running on the

date the instrument is submitted by facsimile. Therefore, persons

submitting an instrument by facsimile for filing must exercise due

diligence to ensure that the duplicate instruments required by

paragraph (b) arrive within the 10-day period. When the duplicate

instruments arrive, they would be compared with the instrument filed by

facsimile and, if not subject to termination under paragraph (f) of

this section, the instrument would be recorded.

Paragraph (d) of proposed Sec. 67.219 would require that all

instruments filed by facsimile be clearly legible as received, that

they be originally submitted from 8\1/2\-inch by 11-inch paper in not

less than 10-point type size, and that they be accompanied by a cover

sheet. This requirement would provide for minimum quality control of

the instruments submitted by facsimile for filing. In addition, clear

legibility of the instrument as received will assist Coast Guard

personnel to ensure that the instrument meets minimum requirements for

filing and recording pending receipt of the duplicate instruments in

accordance with paragraph (b).

Paragraph (e) of proposed Sec. 67.219 would indicate that the

facsimile cover sheet required by paragraph (d) should contain the

name, address, telephone number and facsimile telephone number of the

person submitting the instrument by facsimile, and the number of pages

submitted. This information will assist Coast Guard personnel to verify

receipt of the complete instrument and will provide a point of contact

should a difficulty arise in facsimile transmission.

Paragraph (f) of proposed Sec. 67.219 would state the conditions

upon which the filing of an instrument submitted by facsimile would be

terminated. First, if the duplicate instruments required by paragraph

(b) are not received within the 10-day period following submission of

the instrument by facsimile, the filing is terminated and the

instrument submitted by facsimile is returned to the submitter. Second,

if there is any variance between the instrument submitted by facsimile

and the duplicate instruments required by paragraph (b), the filing is

terminated and the instrument submitted by facsimile is returned to the

submitter. The provision for termination because of a variance would

ensure that the instrument being submitted by facsimile for filing is

not being submitted for the purpose of reserving an earlier filing date

for a different or amended instrument submitted as the duplicate

instruments required by paragraph (b). The instrument being submitted

by facsimile for filing must be a complete and executed instrument at

the time it is submitted, as is the case for any instrument submitted

for filing under Subpart O of the current regulations.

Paragraph (g) of proposed Sec. 67.219 would provide that where the

filing of an instrument submitted by facsimile is terminated pursuant

to paragraph (f)(3) because of a variance with the duplicate

instruments submitted in accordance with paragraph (b), the duplicate

instruments would be treated as an original submission for filing.

Provided this instrument meets the minimal requirements for filing, it

would be filed but would be subject to termination under

Sec. 67.217(a)(1). This instrument would be subject to termination

because of the variance with the earlier instrument submitted by

facsimile. The termination of filing and distribution of instruments

procedures described in Sec. 67.217 (b) and (c) would apply. The reason

for treating this instrument as subject to termination is that the same

transaction has been addressed by two different instruments with a

variance between them. Therefore, the veracity of the facts of the

transaction as reflected in the two instruments is in question. The

instrument submitted as the duplicate instruments would be subject to

the 90-day termination period in which the variance may be explained,

thereby curing the defect and allowing for recording of the instrument.

In this [[Page 12191]] instance, the recording date and time would

relate back to the date and time that the ``duplicate instruments''

were filed subject to termination. A letter from the person who

submitted the instrument by facsimile for filing explaining that the

instrument submitted by facsimile has been superseded by the duplicate

instruments would be sufficient.

Paragraph (a) of Sec. 67.500 would be revised to clarify the Coast

Guard's current practice to not perform any vessel documentation

service which is subject to a fee until the required fee is paid. As is

current practice, the person requesting the documentation service would

submit the fee at the time the service is requested. As applied to the

submission by facsimile of instruments for filing, the payment of the

fee would accompany the submission of the duplicate instruments

submitted in accordance with paragraph (b) of this section.

A new Sec. 67.540 would be added to clearly state that a handling

fee would be charged for processing an instrument submitted by

facsimile for filing. This fee would not alter the current per page fee

charged for filing and recording services, but would be an additional

per page fee.

An appropriate entry in Table 67.550--FEES in Sec. 67.550 would be

added to reflect the amount of the fee added to address the handling

fee. This additional fee is justified because of the additional time

Coast Guard personnel would have to expend in processing the facsimile

submission, and to cover the added expense of facsimile machines. For

example, Coast Guard personnel would have to receive and sort the

facsimile submission, review it to ensure that it met minimal filing

requirements, assign a filing date and time, store the facsimile

submission, retrieve it when the duplicate instruments were received,

and compare the facsimile with the duplicate instruments. Based on the

additional personnel handling required for an instrument submitted by

facsimile for filing, and additional equipment costs, a fee of $2.00

per page is proposed.

Regulatory Evaluation

This proposal 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

proposal 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 proposed as an

optional method of presenting documents for filing. A party may always

use regular mail or personal delivery if desired. Therefore, any

additional costs to the public associated with this proposal would be

due to an election to use the optional method.

In order to more fully anticipate the costs and benefits associated

with this proposal, the Coast Guard specifically solicits information

from the public concerning potential use of the option of filing by

facsimile.

Small Entities

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

Guard must consider whether this proposal, if adopted, 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 proposal, if adopted,

would merely add an optional method of submitting certain forms and

instruments to the Coast Guard for filing. Since filing by facsimile

would be 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, would 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 expects the impact of this proposal to be minimal.

Because it expects the impact of this proposal to be minimal, the

Coast Guard certifies under 5 U.S.C. 605(b) that this proposal, if

adopted, will not have a significant economic impact on a substantial

number of small entities.

Collection of Information

This proposal contains no collection-of-information requirements

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

proposal merely describes an optional method of submitting instruments

for filing and recording.

Federalism

The Coast Guard has analyzed this proposal under the principles and

criteria contained in Executive Order 12612 and has determined that

this proposal does not have sufficient federalism implications to

warrant the preparation of a Federalism Assessment.

Environment

The Coast Guard considered the environmental impact of this

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

Instruction M16475.1B, this proposal is categorically excluded from

further environmental documentation. This proposal has been determined

to be categorically excluded because the changes proposed 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 proposes

to amend 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.

2. 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 Command at [telephone number to be

inserted in final rule]. 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 an [[Page 12192]] application for deletion from documentation

must already be on file with the National Vessel Documentation Command

or must be submitted by facsimile with the instrument being submitted

by facsimile for filing.

(b) Within 10 days of submitting an instrument by facsimile for

filing, the person submitting the instrument by facsimile must submit

the instrument in duplicate to the National Vessel Documentation

Command, [address to be inserted in final rule]; at least one copy must

bear original signatures. If not already on file, the original of any

application required by paragraph (a) of this section must also be

submitted with the original instrument to the National Vessel

Documentation Command.

(c) Upon receipt of the instrument in duplicate in accordance with

paragraph (b) of this section, the date and time of recording of the

instrument is the date and time the instrument submitted by facsimile

was filed.

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

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

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

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

section should indicate the name, address, telephone number and

facsimile telephone number of the person submitting the instrument by

facsimile, and the number of pages submitted by facsimile.

(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 instrument required to be submitted in duplicate in

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

the 10-day period; or

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

facsimile for filing and the instrument submitted in duplicate in

accordance with paragraph (b) of this section.

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

terminated for a variance in accordance with paragraph (f)(3) of this

section, the instrument submitted in duplicate in accordance with

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

under this subpart subject to termination under Sec. 67.217(a)(1). The

instrument submitted in duplicate will be deemed not in substantial

compliance with the applicable regulations in this part because of the

variance between it and the instrument submitted by facsimile. The

procedures for termination of filing and disposition of instruments

described in paragraphs (b) and (c) of Sec. 67.217 will apply.

3. 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 appropriate fee

has been paid. Fees are contained in Table 67.550.

* * * * *

4. 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.

5. 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

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Activity Reference Fee

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* * * *

* * *

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

* * * *

* * *

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\1\Per page.

* * * * *

Dated: February 28, 1995.

N.W. Lemley,

Acting Chief, Office of Marine Safety, Security and Environmental

Protection.

[FR Doc. 95-5387 Filed 3-3-95; 8:45 am]

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