Direct User Fees for Inspection or Examination of U.S. and Foreign Commercial Vessels

SUMMARY: The Omnibus Budget Reconciliation Act of 1990 requires the

Coast Guard to establish user fees for Coast Guard services related to

the inspection and examination of U.S. and foreign commercial vessels.

Fees in this rule are based on existing vessel inspection program

requirements and services. The fees are established for the purpose of

recovering costs associated with providing Coast Guard vessel

inspection services.

EFFECTIVE DATE: This rule is effective on May 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 inquiries and payment information during initial implementation

of the rule, call, toll-free, 1-800-941-3337.

FOR FURTHER INFORMATION CONTACT: Denise J. Mursch, Planning Staff (G-

MP-2), Office of Marine Safety, Security and Environmental Protection,

(202) 267-0785.

SUPPLEMENTARY INFORMATION:

Drafting Information

The principal persons involved in drafting this document are LCDR

John J. Kelly, Project Manager, and LCDR J.K. Gillespie, Office of

Marine Safety, Security and Environmental Protection, and C.G. Green,

Project Counsel, Office of Chief Counsel.

Regulatory History

On December 18, 1991, the Coast Guard published in the Federal

Register (56 FR 65786) a notice of proposed rulemaking (NPRM) entitled

``Direct User Fees for Inspection or Examination of U.S. and Foreign

Commercial Vessels.'' On December 24, 1991, the Coast Guard published a

correction to the proposed rule (56 FR 66766). This correction added

Appendix A, a summary of the preliminary Regulatory Evaluation, to the

NPRM published on December 18, 1991. The initial public comment period

closed on February 18, 1992.

The Coast Guard received numerous comments requesting that public

hearings be held in connection with the vessel inspection user fee

rulemaking. The Coast Guard determined that public hearings would

significantly contribute to this rulemaking, and published a Notice in

the Federal Register on March 24, 1992 (57 FR 10149) to reopen the

public comment period and announce the scheduling of nine public

hearings. The nine public hearings were held between April 13, 1992,

and May 1, 1992, at the following locations: Baltimore, MD; Secaucus,

NJ; Boston, MA; Miami, FL; New Orleans, LA; Chicago, IL; Seattle, WA;

San Francisco, CA; and San Diego, CA. The public comment period closed

on May 18, 1992.

Background and Purpose

The Omnibus Budget Reconciliation Act of 1990 (the Act) amended 46

U.S.C. 2110 and removed long-standing prohibitions against imposing

certain user fees.

As amended by the Act, 46 U.S.C. 2110 now requires the

establishment and collection of user fees for Coast Guard services

provided under Subtitle II of Title 46, United States Code. The Coast

Guard is developing Subtitle II user fees in several separate

rulemakings, each of which covers services provided in an identifiable

program area. On March 19, 1993 (58 FR 15228), the Coast Guard

published the final rule on User Fees for Marine Licensing,

Certification of Registry, and Merchant Mariner Documentation (CGD 91-

002). On November 15, 1993 (58 FR 60256), the Coast Guard published the

final rule on User Fees for Documentation of Vessels and Recording of

Instruments (CGD 89-007). In addition to the fees for inspection or

examination of U.S. and foreign commercial vessels in this rule, the

Coast Guard also plans to establish fees for services related to Coast

Guard equipment approval and factory inspections (CGD 92-013);

inspections for the initial Certificate of Inspection (COI), such as

new vessel construction inspections, inspections of existing vessels

undergoing rebuilding, reflagging, or major conversion; and for

commercial vessel plan review.

Overview of the Rulemaking

This rule revises 46 CFR Part 2 and creates user fees for Coast

Guard inspections or examinations of existing U.S. and foreign

commercial vessels as follows:

For U.S. Vessels

(1) An annual vessel inspection fee which covers all periodic

inspections and follow-on inspections conducted during the course of a

given year for commercial vessels required to have a Coast Guard COI.

(2) An overseas inspection fee for inspections conducted outside

the United States and its territories, except for inspections conducted

in Canada, Mexico, and the British Virgin Islands.

For Foreign Vessels

(1) A fee for the biannual Letter of Compliance (LOC) examination

and for the annual reexamination of tankships carrying hazardous

liquids or liquefied gases in bulk in U.S. waters;

(2) A fee for the annual examination of tankships carrying oil in

bulk in U.S. waters;

(3) A fee for the LOC examination of mobile offshore drilling units

(MODUs) operating on the U.S. outer continental shelf;

(4) An annual vessel inspection fee for all vessels required to

have a Coast Guard COI, including Canadian tank barges and vessels of

nations not signatory to the International Convention for Safety of

Life at Sea (SOLAS).

(5) An overseas examination fee for examinations conducted outside

the United States and its territories, except for examinations

conducted in Canada, Mexico, and the British Virgin Islands.

Vessels Not Covered

This rule does not apply to foreign passenger vessels, to training

vessels operated by State maritime academies, or to public vessels of

the United States which are excluded from the provisions of subtitle II

of Title 46 U.S. Code.

Waivers

Collection of vessel inspection fees is waived for all vessels

whose fees would be paid directly using Federal appropriated funds.

Exemptions

No exemptions were proposed in the NPRM; however, the final rule

contains one exemption for charitable, not-for-profit, youth-oriented

organizations which use their vessel(s) exclusively for training youths

in boating, seamanship, and navigation skills. This exemption is

[[Page 13551]] discussed more fully in the section of this document

entitled Exemptions.

Fee Limit for Tank Barges

Annual vessel inspection fees calculated for tank barges in various

service and route categories all exceeded $500. However, the Act

provides that a user fee for inspection or examination of a non-self-

propelled tank barge may not exceed $500 per year. Thus, the Coast

Guard set the annual vessel inspection fee for tank barges at the

statutory limit of $500.

Types of Inspections Covered under this Rule

Fees established by this rule are based on Coast Guard costs of

providing inspection and examination services. These costs include

marine inspector hours, travel time, mileage costs, administrative

support costs, training costs, and overhead costs. In establishing

these fees, the Coast Guard reviewed all inspection requirements

contained in 46 CFR part 2, as well as the technical requirements for

inspections found in 46 CFR parts 31, 71, 91, 105, 107, 108, 109, 151,

167, 175, 176, 189, and 190 and in 33 CFR parts 140, 143, 151, 155, and

157.

Depending on vessel type, commercial vessels are subject to

periodic inspections at quarterly, 1 year, 1.5 year, 2 year, 2.5 year,

3 year, 5 year or 10 year inspection intervals. Typically, Coast Guard

marine inspectors visit each U.S. commercial vessel a minimum of once

each year to either: Inspect the vessel for reissuance of the COI; to

conduct the annual reinspection; or to inspect the vessel's hull. The

amount of time it takes to conduct any given inspection is often a

function of the type of inspection being conducted, the specific

category of vessel being inspected, the length and in some cases the

tonnage of the vessel being inspected, and the maximum number of

passengers the vessel is authorized to carry under the vessel's COI.

These three periodic inspections, namely the inspection for

certification, the reinspection (or mid-period inspection), and the

hull (or drydock) inspection, generally require the same amount of

inspection time for the majority of vessels in each vessel category.

Follow-on inspections ensure that a vessel remains in compliance

with its COI. The purpose of follow-on inspections varies from one

vessel to the next. However, these inspections typically include, but

are not limited to, any of the following four activities:

(a) Certifying that deficiencies noted during a previous inspection

have been satisfactorily corrected;

(b) Surveying either damaged ship structures or propulsion systems,

or lifesaving, navigation, or firefighting equipment which has failed;

(c) Inspecting, testing, or approving repairs either to damaged

ship structures or propulsion systems, or to lifesaving, navigation, or

firefighting equipment which has failed; or

(d) Verifying that vessel modifications or alterations meet

regulatory requirements.

Wide variations exist relative to the amount of time required to

conduct follow-on inspections, which include, but are not limited to:

Drydock extension inspections; MARPOL compliance inspections;

inspections to clear outstanding requirements issued by a Coast Guard

marine inspector on Coast Guard Form CG-835; damage surveys; repair

inspections; permit to proceed inspections; and non-credit drydock

inspections. These variations are attributable to many factors,

including: The degree to which the vessel is made ready for inspection

by the owner or operator; the knowledge, training, and experience of

shipyard personnel and the ship's crew; the knowledge and training of

the marine inspector; the vessel owner's or operator's management and

operating procedures; the level of coordination with third party

contractors; the nature and extent of the repairs required; and the

size and extent of any deficiency list to be inspected or cleared.

Generally, there are no accurate predictors as to the amount of time

each type of follow-on inspection should take.

Inspection and Examination Fees

For the purposes of this rule, vessels required to have a COI are

inspected, and foreign vessels not required to have a COI are examined.

Annual vessel inspection fees are payable each year on or before the

vessel's user fee anniversary date and entitle a vessel owner or

operator to all periodic and follow-on inspection services needed

during the year. All other inspection or examination-related fees are

payable by the vessel's owner or operator prior to the time that the

Service is provided.

Vessels of nations which are party to SOLAS are examined by the

Coast Guard only to the extent necessary to verify compliance with

their own nation's inspection laws, the requirements of various

international treaties, and any additional domestic regulations which

may be imposed by the United States. This rule does not establish fees

for SOLAS compliance examinations.

Derivation of the Annual Vessel Inspection Fee

Depending on the specific vessel category, COIs are issued for a

period of one, two, or three years. Reinspections are conducted during

the intervening years, on or about the anniversary date of the vessel's

COI. Hull inspection intervals vary from once every twelve months to

once every ten years, depending on the vessel category and whether the

vessel operates in salt water or fresh water. Follow-on inspections, on

the other hand, can occur at any time.

The length of the period for which a COI is issued is only one

factor in the annual vessel inspection fee calculation. Using vessel

inspection data, the Coast Guard determined the average amount of time

needed to conduct periodic and follow-on inspections for vessels in

each vessel category during a twelve month period. For Coast Guard data

capture purposes, hull inspections also included internal structural

inspections, fuel oil tank inspections, and tailshaft inspections,

since these inspections most often coincide or are associated with the

hull inspection.

The annual vessel inspection fee is based upon an equation which

calculates the average expected value (in terms of annual inspector

hours) of inspection services provided to each vessel category during

any given year. The average expected value is the average number of

hours it takes to conduct a type of inspection multiplied by the

probability of that inspection taking place during any given year. It

assumes that the average time to conduct an inspection is

representative for all vessels within a given vessel category; that the

distribution of the average inspection time about the mean is normal;

and that the average inspection time has a relatively small standard

deviation. However, while use of the average expected value worked well

for periodic inspections, it did not work as well for follow-on

inspections, because the standard deviation for many follow-on

inspections was several times the mean.

Constructing annual vessel inspection fees predicated on full

recovery of follow-on inspection costs would have resulted in

shipowners who require less inspection services subsidizing shipowners

who require significantly greater inspection services. For this reason,

the Coast Guard proposed to base charges for follow-on inspections at

50% of cost. Charging only 50% of the cost associated with conducting

follow- [[Page 13552]] on inspections minimized the impact of the large

standard deviations and reduced the potential for inequities within

vessel categories and subcategories. No comments on the NPRM suggested

that there was any disagreement with the proposal. The annual vessel

inspection fees in this final rule are thus based on the total cost of

conducting periodic inspections and half of the costs of conducting

follow-on inspections.

The Coast Guard developed its vessel inspection and examination

fees using information from a workload analysis study, vessel

inspection data contained in the Coast Guard's Marine Safety

Information System (MSIS), and costs associated with conducting vessel

inspection and examination activities by personnel assigned to Coast

Guard Marine Safety Offices and Coast Guard Marine Inspection Offices.

Vessel inspection and examination fees were developed to generate

receipts approximating the total vessel inspection program costs of

providing those services. Vessel inspection program costs include the

cost of personnel, local travel costs for inspectors, a portion of the

annual cost of operating MSIS, and the associated overhead required to

provide Coast Guard inspection and examination services (i.e., office

space; office equipment and supplies such as telephones, computers and

copiers; special training; and other personnel-related costs). Using

information derived from a workload analysis study, the hourly standard

rates provided in the Coast Guard Standard Rate Instruction (COMDTINST

7310.1), and the Coast Guard Staffing Standards Manual (COMDTINST

M5312.11), the Coast Guard calculated the total cost of the vessel

inspection program to be approximately $28.7 million. Of this amount,

an estimated $2.9 million will be the subject of a separate rule

covering fees for inspections associated with new vessel construction

and for commercial vessel plan review services.

Based on the workload analysis study and the total vessel

inspection program cost, the Coast Guard calculated a basic hourly rate

for vessel inspection services of $87 per qualified inspector hour. A

detailed discussion of the calculation of this figure is set out in the

Regulatory Evaluation.

Each fee was calculated based upon the time the Coast Guard would

reasonably expect to spend inspecting or examining vessels in specific

categories during an average year, including travel time to and from

the inspection site. All fees were rounded down to the nearest $5.00

increment. The costs associated with inspecting the different types of

MODUs were determined using Coast Guard historical information, because

workload data was not captured based on the type of drilling unit.

Consistent with guidance provided by the Office of Management and

Budget (OMB) Circular A-25, and except where otherwise mandated by

statute, the Coast Guard's goal in establishing user fees for Subtitle

II services is full cost recovery. This rule will recover an estimated

$17.2 million of the $25.8 million annual cost of providing Coast Guard

vessel inspection and examination services. An estimated $8.6 million

in costs will not be recovered by user fees due to statutory

prohibitions or limitations; lack of statutory authority; exemptions in

the rule from payment of fees; and administrative reductions during

development of the final fee schedule. These unrecovered costs are

listed in Appendix E of the Regulatory Evaluation for this rule.

OMB Circular No. A-25 requires that all user fees be reviewed

periodically to determine if adjustments or changes to the fees are

necessary. The fees in this rule will be revised if costs change due to

inflation or deflation; if the Coast Guard changes the manner in which

inspection or examination services are provided; or if otherwise deemed

appropriate. Revisions to the fees would be done through rulemaking.

Optional Prepayment of Annual Vessel Inspection Fee

The final rule allows a vessel owner or operator to prepay the

annual vessel inspection fee for any period of not less than three

years and not more than the design life or expected remaining service

life of the vessel. The Coast Guard will calculate the prepayment

amount using the net present value of each annual payment during the

requested prepayment period. The net present value is a discounted

amount which, if deposited in an interest bearing account until the

payment year and when added to the accumulated interest, would equal

the payment amount due. The interest rate used in calculating net

present value will be the 10-year Treasury note rate in effect at the

time of calculation, as adjusted for inflation using the projected rate

for Federal pay increases. Entitlement to inspection services during

the prepayment period is transferable to a subsequent owner of the

vessel, but the entitlement is not transferable to a different vessel.

If a vessel certificated for a single service changes service during

the prepayment period, the fee for the remainder of the prepayment

period must be recalculated using the vessel's new category. The

remaining prepaid balance will be applied to the fee calculated for the

remaining years in the vessel's new category, commencing with the next

user fee anniversary date. With the exception of a vessel that is

removed from Coast Guard certification, as discussed in Sec. 2.10-

105(e), prepayments of fees are non-refundable.

Overseas Inspection and Examination Fees

Approximately 40,000 inspector hours are expended annually in the

overseas inspection of U.S. commercial vessels. These overseas

inspections are conducted at the request of the vessel owner. Vessel

owners and operators reimburse the Coast Guard (under 46 U.S.C. 3317)

for travel and per diem expenses of the marine inspectors, but not for

the personnel costs associated with conducting overseas inspections.

Personnel hours expended during travel to the overseas inspection site

and at the overseas inspection site waiting for a vessel to be made

ready for inspection constitute the extra costs associated with

providing inspection and examination services at overseas locations

which are not included in the annual vessel inspection fees.

The Coast Guard proposed an additional flat fee for each overseas

inspection. The total marine inspector hours expended in conducting

overseas inspections divided by the number of overseas inspections

conducted provides an average time for each inspection of approximately

53 hours travel and delay time. At $87 per qualified inspector hour,

this rule sets the fee for each overseas inspection at $4,585.

Foreign Tankship Fees

Foreign tankships which carry hazardous liquids or liquefied gases

in bulk are issued a LOC, which is valid for two years. These tankships

are also examined annually, at which time the vessel's LOC is endorsed.

Foreign tankships carrying oil in bulk, on the other hand, are issued a

Tank Vessel Examination (TVE) Letter, which is valid for one year. The

time involved to conduct each of these tankship examinations is

essentially the same. The fee for each of the three examinations,

therefore, is the same amount, namely $1,100.

Foreign MODU Fees

Foreign MODUs are examined under the authority of the Outer

Continental Shelf Lands Act, codified in 43 U.S.C. 1356. The regulation

requiring a foreign MODU to obtain a LOC is published in

[[Page 13553]] 33 CFR 143.210. LOCs for foreign MODUs are valid for one

year or until the MODU departs the outer continental shelf, whichever

occurs first. Since certain other foreign vessels are required to pay

user fees for inspections and examinations, and since U.S. MODUs are

generally inspected by and pay fees to foreign agencies when operating

in foreign waters, the Coast Guard has established user fees for

examination services provided to foreign MODUs. Foreign MODU fees are

collected under the authority of 14 U.S.C. 664 and 31 U.S.C. 9701.

Foreign MODU examinations are conducted under 33 CFR 143.207 and

143.210 to ensure compliance with one of the following: (a) The design

and equipment standards for MODU's in 46 CFR part 108; (b) the design

and equipment standards of the documenting nation, if those regulations

have been found to meet or exceed U.S. standards; or, (c) the standards

issued by the International Maritime Organization.

Since examinations conducted to ensure compliance with (a) above

involve essentially the same inspection services provided to U.S.

MODUs, the fees for these foreign MODU examinations are identical to

the annual vessel inspection fees for U.S. MODUs. Likewise, since the

scope of the examinations conducted to ensure compliance with

categories (b) and (c) above are essentially the same, and involve the

same amount of time, the fee for each of these foreign MODU

examinations is the same amount, namely $1,830.

Foreign Passenger Vessel Fees

The Coast Guard examines foreign passenger vessels of nations that

are party to SOLAS to verify that these vessels are in substantial

compliance with the laws of their flag state and the controls imposed

by appropriate international treaties. The Coast Guard initially

proposed to charge the same fee for each initial, annual, and quarterly

foreign passenger vessel examination. However based on further review

and research, the Coast Guard has subsequently determined that the

reciprocity provision contained in 46 U.S.C. 3303(b) does not allow

imposition of a fee for the examination of a foreign passenger vessel

except to the extent that a foreign country charges vessels of the

United States trading to the ports of that country. Since there are no

U.S. passenger vessels being charged examination fees by a foreign

country, and no clear indication that any such fees would be charged,

the Coast Guard has not established a fee for the examination of

foreign passenger vessels under 46 U.S.C. 3303.

Fee Collections

The Coast Guard has established a vessel user fee anniversary date

for each existing vessel currently inspected by the Coast Guard. This

was accomplished by checking MSIS data for the COI anniversary date of

all Coast Guard inspected vessels and assigning the vessel's user fee

anniversary date as the first day of the next month after the COI

anniversary date, exclusive of the year. Once established, the vessel

user fee anniversary date remains the same for the service life of the

vessel. Annual vessel inspection fees are due on or before the vessel's

user fee anniversary date. Coast Guard inspection services will not be

provided until the annual vessel inspection fee for that year has been

paid in full. For new vessels entering service after the effective date

of this rule, the vessel user fee anniversary date will be based upon

the vessel's initial COI issuance date. This same method will be used

for existing vessels coming under Coast Guard certification for the

first time.

Annual vessel inspection fees and foreign vessel examination fees

must be mailed to the address specified in 46 CFR 2.10-20. Overseas

inspection and examination fees, on the other hand, must accompany each

request for an overseas inspection or examination as required by

Sec. 2.10-120.

Fees generated by this rulemaking will be deposited in the general

fund of the U.S. Treasury as offsetting receipts of the Department of

Transportation and ascribed to Coast Guard activities. This means that

the fees will not be added to current Coast Guard appropriations; nor

will the fees directly affect future appropriations used for

administration of the Coast Guard's marine safety programs. The Coast

Guard considers this to be an advantage, since funding for these

programs is more predictable when based on firm appropriations, and

administration of the vessel inspection program will not be dependent

on the amount of fees collected during any given year.

Discussion of the Comments

Overview

During the comment period, the Coast Guard received a total of

1,092 written comments to the docket. In addition, 176 persons either

testified or submitted written statements during the nine public

hearings.

All segments of the industry generally objected to the proposed

imposition of any user fees for the inspections of their vessels. They

also objected to the proposed fee amounts being too high. Many

requested an after-the-fact billing system to charge for the actual

inspection time rather than the proposed annual fees.

The largest number of comments came from owners and operators of

small passenger vessels who were primarily concerned with the

cumulative economic impact of local, State, and Federal fees and the

effect of the fees on their income.

Numerous comments were also received from the freight barge

industry. The industry's primary concerns were that they were not

included in the fee cap for tank barges and that they would be charged

twice for what appears to be identical services conducted by the Coast

Guard and American Bureau of Shipping (ABS).

The oceangoing merchant fleet industry was primarily concerned that

the proposed fees would place their vessels at a competitive

disadvantage relative to their foreign counterparts; that foreign

countries may choose to reciprocate and charge U.S. vessels fees for

operating in their ports; that the Coast Guard should delegate more of

its inspection responsibilities to ABS; that charging an hourly rate

would provide an incentive for owners to have their vessels ready for

inspection; and that if the industry must pay for vessel inspection

services, the Coast Guard needs to improve its efficiency and the

quality of its inspection corps.

The offshore oil industry also submitted numerous comments. The

primary concerns of this industry segment related to the economic

impact the fees would have on individual vessel operators supporting

their industry, i.e. offshore supply vessels (OSVs).

Some comments requested that more information be provided which

specifically shows how the annual inspection fees were derived. The

Coast Guard has included a detailed example of an annual fee

calculation in the final Regulatory Evaluation for this rule.

Exemptions

Under 46 U.S.C. 2110(g), the Coast Guard may exempt a person from

paying fees if it is determined to be in the public interest to do so.

In the NPRM the Coast Guard did not propose any exemptions, but invited

comments on exemptions that could be considered to be in the public

interest. Over 40 exemption requests were received, spanning a wide

range of vessel categories. The categories for which exemptions were

requested included: State, local, and private ferries; vessels

[[Page 13554]] operated by youth-oriented, not for profit, charitable

or educational organizations; vessels operated by nonprofit

organizations or foundations; oceangoing merchant vessels; small

passenger vessels less than 30 feet in length; certain historic

vessels; small entities; small passenger vessels; U.S. vessels engaged

in foreign commerce; small passenger vessels built before December 31,

1990; vessels whose gross profit was less than 20% of the proposed

annual vessel inspection fee; companies engaged in providing passenger

transportation services; auxiliary sailing vessels; sailing school

vessels less than or equal to 65 feet in length; yacht club launches

carrying 12 passengers or less; any small entity negatively impacted by

the fees; tourism vessels; U.S. flag liner vessels; small passenger

vessels less than 100 gross tons; small passenger vessels less than 100

gross tons and engaged in recreational diving and fishing activities;

foreign vessels; and U.S. vessels in general. Of this list, the

greatest number of comments came from the Boy Scouts of America (BSA);

state, local, and private ferries; and various not for profit

organizations. Comments from these groups presented a variety of

reasons to support their requests for exemption.

Most other requests for exemptions simply suggested an exemption

category but failed to provide an articulated rationale in support of

their request.

Several comments requested an exemption for ferries which are owned

and operated by local, state, or private entities and which support

local transportation systems. The comments indicated that ferries

reduced vehicle traffic congestion on area roads and provided access to

remote sites, such as to a barrier island State park, or to the islands

of Martha's Vineyard and Nantucket. The comments also indicated that

many ferries operate on a nonprofit basis in an effort to keep their

fares as low as possible, with fare increases often regulated by a

State Public Utilities Commission. One State transportation department

indicated that it received some type of subsidy from the Federal

Transit Administration (FTA) and stated that it is not logical for the

Federal Government to subsidize water-based nonprofit operations on the

one hand, while imposing a fee for Coast Guard inspection services on

the other hand.

A substantial number of comments requested exemptions for vessels

owned or operated by organizations that are charitable, not for profit,

and youth-oriented, such as the BSA, including the Sea Scouts and Sea

Explorers, Girl Scouts of the United States of America (GSA), and the

Young Men's Christian Association (YMCA) of the United States of

America. These organizations are involved in teaching youths maritime

skills, such as boating, seamanship, and navigational skills. These

organizations argued that since many of their programs rely solely on

volunteers, fund-raising activities, and private donations for their

total funding and support, their ability to continue offering these

programs would be adversely affected if fees were charged for the

inspection of their vessels.

In addition to organizations discussed above, several other

nonprofit organizations requested exemptions for their vessels. These

organizations provide the public with educational programs having an

environmental or historical focus, rather than teaching youths maritime

skills. One organization provides charitable medical care and therefore

has a humanitarian focus.

The Coast Guard acknowledges that there are many charitable

organizations which provide services to the public, and that even

commercial operations, such as ferries, benefit the general public.

However, the Coast Guard does not agree that all organizations which

serve or benefit the public in some manner should be exempted from the

vessel inspection fees.

The Coast Guard has a long-standing record of supporting national

youth programs (Coast Guard Public Affairs Manual--COMDTINST M5728.2B).

Charging fees for inspecting these vessels would not be in keeping with

this long-standing support, nor would it be consistent with other Coast

Guard user fee rulemakings such as the recreational vessel user fee and

merchant marine licensing user fees which have established a similar

exemption. Therefore, consistent with past practice, the Coast Guard

has decided to exempt vessels which are owned or operated by not for

profit, charitable, youth-oriented organizations and which are used

exclusively by those organizations for training youths in boating,

seamanship, and navigation skills.

A vessel meeting the criteria set out in the final rule may be

eligible for an exemption. Vessel owners and operators, including the

BSA, GSA, and YMCA organizations, desiring an exemption must submit a

written request to Commandant (G-MP) via the Officer in Charge, Marine

Inspection (OCMI) of the Marine Inspection Zone in which the vessel

normally operates. Since some of the vessels owned or operated by the

BSA, GSA, and YMCA organizations may not be used exclusively by those

organizations for training youths in boating, seamanship, and

navigation skills, it is expected that some of these vessels may not be

eligible for this exemption.

Historic Vessels

Several comments to the docket asserted that the proposed annual

vessel inspection fees will have an adverse impact on vessels listed on

the National Register of Historic Places and other vessels possessing

either historical character or historical significance. Section 106 of

the National Historic Preservation Act (NHPA) requires Federal agencies

to consider the effects of their actions on historic properties and to

seek comments from an independent reviewing agency, the Advisory

Council on Historic Preservation (ACHP). The purpose of the Section 106

process is to prevent unnecessary harm to historic properties arising

from Federal actions. Regulations for the Section 106 process are

contained in 36 CFR part 800.

Because a number of inspected vessels are listed on the National

Register of Historic Places, the Coast Guard referred this matter to

the Advisory Council on Historic Preservation. In November 1993, the

Advisory Council determined that this rule does not constitute an

undertaking under Section 106 of the National Historic Preservation

Act, therefore the Coast Guard did not do a Section 106 analysis.

Specific Comments

Several comments expressed the opinion that their taxes had already

paid for the cost of providing Coast Guard inspection services, and

that charging fees amounted to nothing more than ``double taxation.''

Some comments stated that the primary beneficiaries of Coast Guard

inspection services include the public, the ship's crew and its

passengers, and the environment, and that fees should be reduced

substantially in recognition of that fact.

The Coast Guard does not agree. The Omnibus Budget Reconciliation

Act of 1990 tasked the Coast Guard with establishing user fees for

services provided under Subtitle II of Title 46, United States Code.

This congressional mandate was aimed at recovering costs associated

with providing Coast Guard services from the recipients of those

services. OMB Circular No. A-25, dated July 15, 1993, states that when

a service or privilege provides special benefits to an identifiable

recipient beyond those that accrue to the general public, a

[[Page 13555]] charge will be imposed to recover the full cost to the

Federal Government for providing the special benefit, or the market

price. The Circular also provides that when the public obtains benefits

as a necessary consequence of an agency's provision of special benefits

to an identifiable recipient (i.e., the public benefits are not

independent of, but merely incidental to, the special benefits), an

agency need not allocate any costs to the public and should seek to

recover from the identifiable recipient either the full cost to the

Federal Government of providing the special benefit or the market

price, whichever applies.

Just as a business cannot operate legally without applicable State

and city business licenses, a U.S. commercial vessel of a certain size

or tonnage cannot legally carry passengers or cargo in U.S. waters

unless it has a valid COI issued by the Coast Guard. The Coast Guard's

position is that the vessel owner or operator is the primary

beneficiary of Coast Guard inspection services.

A few comments asserted that there were no cost controls inherent

in the proposed fees that would help ensure that the fees were

competitive, reasonable, and cost effective. Still others questioned

having 416 FTE (full time equivalents or man-years, as opposed to

actual personnel) associated with the total vessel inspection program

cost, because only about half of the FTE could be accounted for by the

MSIS inspection workload data.

Personnel such as the Chief of the Inspection Department, the

Assistant Chief of the Inspection Department, marine inspector

trainees, clerical and support personnel, and to a lesser extent the

Executive Officer and the Commanding Officer at each of the Marine

Safety Offices, all contribute to the 416 FTE associated with the

administration of the Coast Guard's vessel inspection program. However,

the hours for these support personnel are not in the MSIS inspection

workload data which tracks mainly those who are directly involved in

doing the inspection or processing the reports. The support and

administrative costs not tracked in MSIS are nonetheless necessary to

the vessel inspection program, as are the marine inspectors actually

conducting the onboard inspections.

Others asserted that the Coast Guard intended to charge a separate

fee for reinspections and follow-on inspections.

All reinspections, hull inspections, and follow-on inspections are

encompassed within the annual vessel inspection fee. With the exception

of the overseas inspection fee, the annual vessel inspection fee

represents the only inspection fee most U.S. vessel owners will pay

during any given year. Payment of the annual vessel inspection fee

entitles each owner or operator to a full year of periodic and follow-

on inspections, regardless of when the COI, or any other inspection, is

conducted.

Some comments stated that the Coast Guard's de facto COI issuance

policy is shortening the inspection cycle, causing inspections to occur

more frequently than statutorily required. They indicated the current

Coast Guard practice of listing the COI issuance date as the date that

the inspection was conducted (versus the actual expiration date of the

COI) would cause owners to pay an annual vessel inspection fee while

receiving less than 12 months of Coast Guard inspection services.

The annual vessel inspection fee will be due on the same date each

year, namely the user fee anniversary date, for as long as the vessel

remains in service. Therefore, the COI issuance date will have no

bearing on the amount of annual vessel inspection services provided.

A few comments suggested that inspectors may become even more

vigilant during future inspections so as to find discrepancies and

thereby generate additional user fee receipts for the U.S. Treasury.

Since the annual vessel inspection fee includes all periodic and

follow-on inspections conducted during the course of the year, there

exists no incentive for inspectors to uncover additional discrepancies

to increase fee collections.

A number of comments took exception to the Coast Guard's use of the

term ``privilege of inspection'' in the NPRM and suggested that since

inspections are required by Coast Guard regulations a more appropriate

phrase would be either ``right to be inspected,'' ``eligibility for

inspection,'' or ``entitlement to inspection.'' The Coast Guard agrees,

and the phrase ``privilege of inspection'' has been replaced by

language more correctly indicating that payment of the annual vessel

inspection fee entitles a vessel owner or operator to a full year of

periodic and follow-on inspection services.

Numerous comments suggested that the proposed $500 cap on tank

barge inspection fees was discriminatory and inequitable, especially

when compared to the fees proposed for small passenger vessels and the

fees proposed for freight barges.

The tank barge cap was part of the Act passed by Congress. The

calculated fees for tank barges ranged from an annual fee of $778 to

$1,015. Because the fees as calculated exceeded the statutory limit of

$500, and the Act prohibits charging a fee exceeding $500 per year for

these vessels, the Coast Guard set the annual vessel inspection fee at

the maximum amount allowed by Congress.

Some comments expressed the opinion that in response to the fees

established for foreign vessels under this rule, countries may elect,

in turn, to charge fees for U.S. vessels operating in foreign ports.

The Coast Guard acknowledges the possibility that foreign countries

may consider charging reciprocal fees. However, the Act requires that

fees be established for services provided under Subtitle II of Title 46

United States Code, except as otherwise provided in Title 46 and to the

extent that the fees are not in conflict with the international

obligations of the United States. The Coast Guard has determined that

user fees are enforceable for TVE and LOC examinations conducted on

foreign tankships and MODUs. These examinations are required by 46

U.S.C. Chapter 37 and are not based solely on any international

convention or agreement; rather, they are based on U.S. domestic port

entry requirements aimed at ensuring the protection of U.S. ports, its

waterways, and the environment.

Several comments suggested that annual vessel inspection fees will

place U.S. vessels at a competitive disadvantage relative to foreign

vessels engaging in U.S. or international commerce. One commercial

shipping representative commented that his company was attempting to

compete in an international market, where his competitor's costs

associated with regulatory bodies are limited to those of a

classification society. He objected to having to pay Coast Guard vessel

inspection fees in addition to classification fees stating that the

increased fee burden placed his company at a competitive disadvantage.

Just as the Coast Guard inspects the U.S. commercial vessel fleet,

SOLAS signatory nations inspect vessels belonging to their commercial

vessel fleets. Most of these nations charge their fleets fees for

providing these inspection services. Since these vessels have been

inspected by their ``flag state,'' and have been issued appropriate

international convention certificates prior to entering U.S. waters,

Coast Guard examinations are limited to ensuring compliance only with

U.S. regulations which may supersede international requirements. These

LOC and TVE examinations take less time to conduct than an inspection

for a COI. Thus, these examinations [[Page 13556]] have lower fees.

Vessels of foreign nations not party to SOLAS, and vessels to which

SOLAS does not apply are subject to the same inspection requirements as

U.S. vessels. Because these latter vessels require the same amount of

Coast Guard inspection services as their U.S. counterparts, they must

pay a vessel inspection fee equal to the annual vessel inspection fee

paid by U.S. vessels of the same vessel service category. Thus, foreign

vessels using U.S. ports pay the equivalent amounts for Coast Guard

inspection services as U.S. vessels.

One comment suggested that the proposed vessel examination fee

schedule should be expanded to include inspections of foreign cargo

vessels of nations that are signatory to SOLAS.

As authorized by 46 U.S.C. 3303 and required under 46 CFR 90.05-1,

foreign vessels of a country having inspection laws and standards

similar to those of the United States, and which have an unexpired COI

issued by proper authority of its respective country, receive only a

port state control examination to ensure that the condition of the

vessel is as stated on its COI. User fees solely for port state control

examinations would be inconsistent with the operation of customary

international practice and they are not included in this rule.

A few comments stated that every vessel carrying passengers for

hire should be inspected by the Coast Guard. Others stated that the law

concerning bareboat charters should be changed.

These suggestions would require changes to inspection statutes and

regulations which are beyond the scope of this rulemaking. However,

should additional categories of commercial vessels become subject to

Coast Guard inspection in the future, user fees will be established for

these vessels as well. For example, the Passenger Vessel Safety Act of

1993 now requires that certain additional vessels carrying passengers

for hire be inspected by the Coast Guard. Therefore, the fees

established in this rule also apply to these vessels.

A few comments expressed the concern that fees charged for vessel

inspection services were, in reality, paying for other Coast Guard

services provided to recreational and fishing vessels for which user

fees have not been proposed. The Coast Guard disagrees.

This rule establishes annual vessel inspection fees for those

vessels subject to Coast Guard inspection under 46 U.S.C. 3301.

Recreational vessels and fishing vessels are not currently required to

be inspected.

One comment suggested that the proposed annual vessel inspection

fee for liquefied natural gas tankships (LNG) was not based on the

actual time spent inspecting such vessels. The comment stated that the

proposed fee for LNG tankships was 244% higher than the proposed fee

for a non-LNG tankship, despite the fact that both tankship categories

should take essentially the same amount of time to inspect.

The Coast Guard agrees that if vessel size was the only factor, LNG

tankships should take essentially the same amount of time to conduct

the required inspections as non-LNG tankships. However, Coast Guard-

inspected LNG vessels operate almost exclusively in the overseas trade.

MSIS data indicates that most reinspections of LNG tankships occur

while the vessel is underway, and most drydockings often require the

services of a dedicated inspector for extended periods. The annual

vessel inspection fee for LNG tankships also includes Coast Guard costs

associated with conducting the annual testing of firefighting systems.

All of these factors increase the average annual inspection time.

Because there are only 10 active vessels in the LNG tankship fleet,

the Coast Guard reviewed MSIS data on each of the 10 vessels dating

back to 1987 to establish a more reliable average inspection time. Data

which clearly exceeded the mean inspection time was intentionally

eliminated from this analysis. The results indicated that a reduction

in the proposed annual vessel inspection fee for LNG tankships was, in

fact, justified. However, the recalculated annual vessel inspection fee

for LNG tankships remains almost twice as high as the annual vessel

inspection fee for a conventional tankship.

One comment asked whether a separate fee would be assessed to a

vessel operating part of the year in one region of the country and

operating the rest of the year in another region of the country.

Only one annual vessel inspection fee will be charged per vessel,

regardless of the number of regions in which a vessel operates during

any given year. Payment of the annual vessel inspection fee entitles a

vessel owner to a full year of periodic and follow-on inspections,

regardless of where in the country the vessel chooses to operate and

how often the vessel is inspected.

Several comments suggested that the Coast Guard should consider

billing at the conclusion of the inspection. Other comments expressed

the opinion that fixed annual fees do not provide an incentive for

owners to have their vessels ``ready for inspection.'' These comments

argued that paying an annual fee, in effect, rewards those owners and

operators who are not prepared for the inspection at the expense of

those who are prepared. One commenter said he objected to having his

annual fee become higher because of another company which makes no

attempt to maintain its vessels or prepare adequately for an

inspection. He suggested the Coast Guard establish a published

guideline of thresholds. When the number of visits exceeds that

threshold, the annual fee for that vessel should increase on its next

anniversary, and hopefully other more cooperative and prepared

companies' fees should decline. Generally, these comments stated that

charging for each inspection at a fair, hourly rate would not only be

more equitable, but would also ensure that the fees reflected the

actual amount of time spent on board the vessel.

Hourly fees would more accurately reflect the actual time an

inspector spends on board a vessel and would also likely result in

lower fees for those owners whose vessels were ``ready for inspection''

compared to owners whose vessels were ``not ready for inspection.''

However, the average expected value of services provided each year is

representative of the majority of vessels in each vessel category. In

addition to the average annual amount of time spent on board each

vessel, annual vessel inspection fees also include travel and

administrative (paperwork, review, and research) time.

Billing at the conclusion of each inspection poses essentially the

same problems as charging at an hourly rate. Charging at an hourly rate

would require creating and staffing a billing system that would

increase collection costs by an estimated $1.75 million, resulting in

higher fees for vessel owners and operators. Moreover, OMB Circular No.

A-25 guidance states that user charges will be collected in advance of,

or simultaneously with, the rendering of services unless appropriations

and authority are provided in advance to allow reimbursable services.

Thus, the Coast Guard decided not to bill at the conclusion of the

inspection using an hourly rate.

The small passenger vessel industry was particularly concerned with

the impact of the proposed fees on the ability of many operators,

especially small entities, to stay in business. Citing the poor state

of the economy and their declining revenues in general, they commented

on the cumulative adverse impact of the growing number of Federal,

State, and local fees and [[Page 13557]] regulations. The comments

cited more than 60 different fees and assessments, with the number of

fees applicable to any given vessel owner depending upon such

considerations as the type of operation, the vessel's size, the

geographic area of operation, and the number of passengers carried on

board a given vessel. Included were such fees as harbor maintenance

fees; drug testing fees; State gaming fees; tonnage fees; Animal and

Plant Health Inspection Service fees; State agricultural inspection

fees; Bureau of Land Management fees; State saltwater fishing license

fees; Customs fees; St. Lawrence Seaway tolls; Federal Communications

Commission (FCC) inspection fees; State vessel registration fees; State

and Federal water use fees; dockage fees; National Marine Fisheries

Service permit fees; municipal business registration fees; commercial

use permit fees; Federal reef fishing fees; State business license

fees; Gulf of Mexico Fishery Management Council fees; International

Pacific Halibut Commission permit fees; Mexican Fish Commission permit

fees; State fish and game permit fees; retail fish license fees;

lobster license fees; and Public Utility Commission fees. Other

comments mentioned State and Federal income taxes; State sales and

excise taxes; fuel taxes; corporation taxes; municipal head taxes;

self-employment taxes; unemployment taxes; winter boat storage fees;

lift fees; insurance and maintenance costs; proposed Coast Guard user

fees for marine licensing, vessel documentation, and plan review; and

compliance with the Oil Pollution Act of 1990, the Americans with

Disabilities Act, and the proposed Subchapter T, liferaft, and EPIRB

regulations.

While admitting that the proposed vessel inspection fees alone

would not likely cause them to consider leaving the industry, comments

stated that the increasing costs of operating small passenger vessels

is so overwhelming that some owners or operators will have little

choice but to exit the industry. They were also concerned that if they

went out of business there would be resulting loss of jobs and revenues

in the local communities which often rely on tourist dollars for their

income. Some small passenger vessel owners stated they were reluctant

or unable to pass on the cost of Coast Guard fees by raising their fees

to customers. Other small passenger vessel owners were concerned that

their customers would be unwilling to pay higher fares, and would seek

other, less costly leisure or tourist activities.

The Coast Guard considered the impact that the annual vessel

inspection fees would have, particularly on the ability of small

passenger vessel operators to remain in business. The Coast Guard held

nine public hearings on the proposed rule in order to gather more data

on the likely economic impact of the proposed fees. Based upon the

comments received, both in writing to the docket and during the public

hearings, the Coast Guard reviewed its proposed fees. The Coast Guard

recognizes that the economic impact on each owner or operator depends

on a myriad of factors including seasonal operation, number of

passengers, status of the economy, weather, and the ability to pass on

new costs to paying passengers. While the Coast Guard can calculate the

dollar amount of impact on individual vessel owners, it cannot

calculate the overall economic impact on each vessel owner and the data

in the comments did not support a finding of a significant impact on a

substantial number of small entities.

In the NPRM, the Coast Guard divided the U.S. fleet into 29

different vessel subcategories for the purpose of establishing annual

vessel inspection fees. The Coast Guard selected the fee subcategories

after observing patterns in the amount of time it takes to conduct an

inspection as a function of inspection type, vessel type, and other

factors.

Many comments stated that the costs for inspecting smaller vessels

appeared too high and did not accurately reflect the inspection time

required for these vessels. In response to these comments, the Coast

Guard reexamined its inspection data and found that other breakpoints

could be used to establish additional subcategories (see Figure 1). By

establishing these additional subcategories, the Coast Guard was able

to tier the fees differently in order to achieve a more precise

allocation of program costs. While reexamining the inspection data, the

Coast Guard also identified some outliers in the data that skewed the

average mean inspection time for all vessels of that category. By

disregarding these data outliers in computing the mean inspection time,

the Coast Guard was able to develop mean inspection times that more

precisely represent the average inspection time for each vessel

category resulting, in many cases, in lower fees.

Figure 1.--Number of Annual Vessel Inspection Fee Subcategories

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

Final

Vessel category NPRM\1\ rule

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

Freight Barges...................................... 1 3

Freight Ships....................................... 1 3

Ready Reserve Fleet Freight Ships................... 1 0

Industrial Vessels.................................. 1 2

Mobile Offshore Drilling Units...................... 4 4

Offshore Supply Vessels............................. 1 2

Offshore Supply Vessels in the Alternate

Reinspection Program............................... 0 2

Oceanographic Research Vessels...................... 1 3

Sea-going Towing Vessels............................ 1 1

Tank Barges......................................... 1 1

Tankships........................................... 1 3

Ready Reserve Fleet Tankships....................... 1 0

Liquefied Gas Tankships............................. 1 1

Small Passenger Vessels............................. 6 9

Sailing School Ships\2\............................. 0 3

Passenger Barges.................................... 1 4

Passenger Ships..................................... 5 5

Nautical School Ships............................... 1 3

All Other Inspected Vessels......................... 1 1

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

Totals........................................ 29 50

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

Notes:

\1\Ready Reserve Fleet Freight Ship and Ready Reserve Fleet Tankship are

not included as categories in the final rule.

\2\Sailing School Ships were included with Small Passenger Vessels in

the NPRM.

For instance, the Coast Guard initially proposed a single fee

subcategory for all small passenger vessels less than or equal to 54

feet in length. The annual inspection fee proposed for all vessels in

this category was $820. However, during the review of the proposed fees

for small passenger vessels, the Coast Guard determined that the

inspection data supported creating another subcategory based on length,

and recalculated the annual vessel inspection fees based on these new

subcategories. The Coast Guard also examined its inspection data for

DUKW vessels (ex-Army 2\1/2\ ton amphibian trucks), hydrojet boats,

swamp tour boats, and yacht club launches. Comments stated that due to

these vessels' simplified design, the time required to conduct an

inspection on these types of vessels was considerably less than the

time required for other small passenger vessels. However, MSIS

inspection data supported the creation of separate fee categories for

DUKW vessels and hydrojet boats, but did not [[Page 13558]] indicate a

significant difference in the mean inspection time for ``swamp tour

boats'' and yacht club launches when compared to other small passenger

vessels of the same length. Therefore the following new subcategories

were created for small passenger vessels (SPVs):

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

Annual

New subcategories inspection

fee

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

--DUKW vessels.............................................. $450

--Hydrojet boats............................................ 470

--SPVs length not greater than 30 feet...................... 545

--SPVs more than 30 feet but not more than 54 feet.......... 670

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

Several comments stated that fees should be linked to some measure

of a vessel's ability to generate revenue, such as the number of

passengers a vessel can carry. Others stated that fees should take into

account a vessel's actual gross earnings for the year. For instance,

several comments asserted that the fees failed to take into account the

seasonal nature of many vessel operations, and that vessels operating

3-5 months a year should not be charged the same annual fees as vessels

which operate year-round.

The Coast Guard does not agree. The number of passengers for which

a vessel is certificated is not a direct measure of actual revenues, it

is a measure of potential revenues. The authorized total number of

passengers is not necessarily the same as the actual number of

passengers a vessel carries during any given voyage. Indeed, many small

passenger vessel owner comments indicated that their vessels frequently

sail with fewer than half the authorized number of passengers on board.

Nor is the number of months a vessel may operate during the year an

effective predictor of revenues for that year. For instance, revenue

generated by a vessel carrying one-half its passenger capacity for

twelve months would be comparable to a similar vessel carrying full

passenger capacity for six months.

Although the economic impact of an annual fee may be greater for a

vessel with a short operating season, than for a similar vessel with a

longer season, the amount of resources expended by the Coast Guard to

inspect these vessels is the same whether a vessel operates for one

month or for twelve. The Coast Guard based its annual vessel inspection

fees on the average cost to the Coast Guard of inspecting each category

of vessels.

Some comments expressed the opinion that Coast Guard travel costs

ought to reflect the proximity of the inspector to the job site,

instead of attributing a fixed amount of average travel time to each

vessel per year. Others pointed out that many small passenger vessel

owners and operators, especially those located in remote areas, often

coordinate inspections with other vessel owners and operators in an

effort to minimize Coast Guard travel time.

Coordinating inspections is a common practice within the small

passenger vessel industry. This practice most often applies to

inspection sites located several hours from the Coast Guard inspection

unit. However, Coast Guard MSIS data shows that travel time averages

just over two hours per inspection, regardless of the number of

inspections conducted during a particular inspection trip. It is not

uncommon for inspectors to travel three hours each way to get to an

inspection site. In other cases, one inspector may inspect three

vessels in the same day. The practice of doing multiple inspections

during a single inspection trip allows the Coast Guard to minimize its

travel costs; otherwise, average Coast Guard travel costs would be

greater. Thus, the Coast Guard considers it reasonable that it include

in the vessel owner's annual vessel inspection fee an average of about

two hours travel time per vessel per year.

Comments from various industry segments recommended that the Coast

Guard not impose any user fees until all the proposed user fee rules

have been published, so that the cumulative economic impact of these

fees on owners and operators could be properly evaluated.

The user fee rules under development by the Coast Guard may impact

some of the same segments of the regulated marine community. One

example is the small passenger vessel industry, where vessels are often

owned and operated by the same individual who may be subject to both

marine licensing fees (CGD 91-002) and inspection fees from this rule.

On December 18, 1991, the Coast Guard reopened the comment period for

the Marine Licensing NPRM to run concurrently with the comment period

for the Commercial Vessel Inspection NPRM. Establishing the concurrent

comment period did not provide any new information to the marine

licensing user fee rule, or to this rule concerning cumulative impact

of the fees. Since these two rules are the most likely to have affected

the same segments of the regulated community, and since the Coast Guard

did not receive data from the licensing rule comments during the

concurrent comment period that necessitated changes in this final rule,

the Coast Guard decided not to delay publication of this final rule

pending comments on remaining user fee proposals.

A number of comments expressed concern over the apparent

duplication of inspection services by Coast Guard, ABS, and other

parties for which fees are charged. One commercial shipping

representative suggested that when a classed vessel is surveyed by ABS

that the survey be accepted by the Coast Guard. One barge company

stated that barge owners will incur inspection charges for essentially

the same service from both Coast Guard and ABS, i.e., an inspection and

survey to ensure the structural integrity of the vessel.

The Coast Guard is aware that inspections or surveys done by other

agencies such as FCC, by classification societies like ABS, and by

marine surveyors are subject to fees. Although activities of the same

type done by different agencies may appear to be at least partially

duplicative, the activities have a different purpose. Other third party

inspections or surveys, such as those conducted by marine surveyors,

are also for a different purpose, usually to meet insurance company

requirements.

The Coast Guard agrees that cost savings could result if some

inspections or surveys done by one agency could be used by other

agencies or third parties for several purposes. Acceptance of third

party inspections or surveys as evidence of compliance with Coast Guard

regulations is an issue which is being reviewed by the Coast Guard as

part of its Maritime Regulatory Reform initiative, and could result in

changes to the Coast Guard's marine inspection program. However, such

program changes are beyond the scope of this rule.

A few comments suggested that the Coast Guard should consider

revising its vessel inspection intervals so that the various inspection

requirements such as hull inspection interval and mid-period inspection

or COI inspection interval coincide, thereby reducing the number of

required Coast Guard inspections. One commercial shipping

representative stated that presently, the rules call for drydocking

deep-draft vessels twice in five years with a maximum of three years

between drydockings. In addition, there are two inspections for

certificate renewal and three annual inspections. As it stands now,

some owners will schedule an inspection for certificate renewal at the

two year interval and then drydock the vessel 6 to 12 months later and

again request a new certificate. [[Page 13559]] The existing

certificate expiration schedule and the new drydock provisions do not

complement each other and cause both parties additional inspection time

and delays. He suggested that adopting a 2.5 year COI with a 15 month

reinspection schedule would rectify this situation.

Because the Coast Guard is currently unable to apportion its hull

inspection costs more precisely, it chose to compute the annual vessel

inspection fee based upon the longest hull inspection interval

applicable to each vessel category or subcategory. Although the Coast

Guard is reexamining this subject with a view to minimizing the

intervals to the extent allowed by law, this and other similar

suggestions to revise the Coast Guard inspection intervals would

involve program changes which are beyond the scope of this rule.

Some comments recommended deferring follow-on overseas inspections

until the next scheduled reinspection or inspection for certification.

Follow-on inspections can often be scheduled around or in conjunction

with a periodic inspection. Only in extreme cases is it necessary to

dispatch an inspector overseas solely for the purpose of conducting a

follow-on inspection. Certain deficiencies may impact a vessel's

overall safety and must be corrected prior to the next scheduled

periodic inspection. The OCMI may extend the compliance date for

certain deficiencies which do not jeopardize the safety of the vessel,

its passengers, or its crew. Other deficiencies can be cleared

administratively by the vessel's master or chief engineer submitting

written servicing reports or certifications. The cognizant OCMI

possesses the authority to determine whether a deficiency's compliance

timeframe can be extended or whether it can be cleared

administratively. If it requires a separate overseas trip, then another

overseas fee must be paid. The overseas inspection and examination fee

will apply to each periodic and follow-on inspection conducted

overseas, as well as to each foreign vessel examination conducted

overseas.

Some comments indicated that the overseas inspection or examination

fee would be excessive for inspections or examinations conducted in

locations near the continental U.S. These comments indicated that it

may take less time to travel to the inspection site outside the

continental U.S. than to travel to other inspection sites within the

continental U.S. For instance, one commenter indicated that on occasion

his firm, and at least one other U.S. shipping company, has used a

Canadian shipyard requiring approximately 35 miles of inspector travel

from the Marine Safety Office in Buffalo, New York, for required

inspections.

The Coast Guard agrees. The overseas inspection or examination fee

in the final rule does not apply to inspections or examinations

conducted in Canada, Mexico, or the British Virgin Islands. The

overwhelming majority of inspections or examinations conducted in these

countries involve only a short commute by either car, boat, or plane.

For example, it is not uncommon for Coast Guard inspectors to travel to

sites in Canada and Mexico by car or short plane trip, and sites in the

British Virgin Islands by short boat trip. Coast Guard data indicates

that it actually takes less time to travel to some of these sites than

it does to travel to a remote inspection site in the continental United

States. For this reason the Coast Guard will not charge the additional

overseas inspection or examination fee for these inspections or

examinations.

Another comment stated that it would be more equitable to owners

whose vessels operate overseas if the Coast Guard charged just one

overseas inspection fee per vessel per year instead of charging an

overseas inspection fee each time an overseas inspection is conducted.

Overseas inspections involve travel and delay time of approximately

40,000 hours annually. Much of this time is expended in direct support

of conducting periodic inspections; however, some of the time is

expended conducting follow-on inspections, such as clearing

deficiencies (i.e., CG-835s).

Several comments suggested that the Coast Guard should consider

expanding the OSV alternate reinspection program for mid-period

inspections to MODUs operating outside the U.S. for extended periods.

Currently, OSVs under 400 gross tons, operating outside the continental

U.S., have the option to participate in an alternate reinspection

program, under the regulations contained in 46 CFR 91.27-13. If

accepted into the alternate reinspection program, OSV owners perform an

alternate reinspection of their vessel, in lieu of having a Coast Guard

marine inspector perform the inspection, and then submit results to the

OCMI for review.

This rule establishes a lower annual vessel inspection fee for OSVs

participating in the alternate reinspection program than for those OSVs

which do not participate in the alternate reinspection program. This

lower fee reflects the fact that since a marine inspector is not needed

for the inspection, it takes less time for the Coast Guard simply to

review the results of the alternate reinspection. Although expansion of

the alternate reinspection program to include U.S. MODUs operating

overseas is beyond the scope of this rule, the Coast Guard will examine

this issue independently of this rule.

A few comments suggested that vessel owners should receive either

credit or a refund for ``unused certificate time'' to cover that

portion of a year during which a vessel may be laid up or otherwise

taken out of service.

If the vessel owner pays the annual vessel inspection fee, and the

vessel is subsequently laid up or taken out of service for part of the

year, the Coast Guard will not issue a refund for the portion of the

year for which the vessel was laid up or taken out of service. If a

vessel is laid up or out of service on its user fee anniversary date,

and the vessel is expected to remain laid up or out of service until

its next user fee anniversary date (twelve months later), the vessel

owner or operator will not be required to pay the annual vessel

inspection fee for that year. When the vessel is placed back in

service, however, the owner or operator will be required to pay the

full annual vessel inspection fee before the vessel is inspected.

Additionally, OSVs will occasionally surrender their COI in order

to operate as an oceanographic research vessel. Upon compliance with

the procedures set forth in 46 CFR 3.10, the OCMI issues a Letter of

Designation as an Oceanographic Research Vessel. Uninspected vessels

may also be issued a Letter of Designation. For the purposes of this

rule, vessels operating under a Letter of Designation as an

Oceanographic Research Vessel will not be charged an annual vessel

inspection fee. However, if the vessel returns to inspected service, it

must pay the annual vessel inspection fee for that year before any

inspection services are provided.

Several comments suggested Coast Guard marine inspectors should

conduct FCC radio inspections, thereby saving vessel owners the cost of

the FCC radio inspection fee.

When Coast Guard marine inspectors conduct inspections for COIs or

reinspections, they do not conduct the FCC radio inspection. They only

verify that a vessel has a valid Safety Radiotelephone Certificate

issued by the FCC and ensure that the vessel's radio equipment passes

an operational test. The Coast Guard and FCC have previously considered

this issue and determined it was not feasible to combine these

inspection activities. [[Page 13560]]

Several comments expressed the opinion that if an OSV were to

change its service to a freight vessel at any time during the course of

a given year, the vessel owner should not have to pay the higher annual

vessel inspection fee applicable to freight vessels. Another commenter

suggested that since many OSV crewboats and utility boats are inspected

under Subchapter T, these vessels should not have to pay an OSV fee

that is any higher than the fee for a corresponding small passenger

vessel.

Annual vessel inspection fees for vessels certificated for single

service will not be adjusted for the year in which a change in vessel

service occurs. The vessel's service at the time of its user fee

anniversary date will thus determine which annual vessel inspection fee

the owner must pay. Regardless of whether or not a crewboat or a

utility boat is inspected under Subchapter T or Subchapter I, the

vessel is still an OSV. Annual vessel inspection fees are based on the

COI, reinspection, and hull inspection intervals applicable to each

vessel category, and the average amount of time it takes to conduct

each of these inspections. Thus, since small passenger vessel COIs are

valid for three years and OSV COIs are valid for two years, an OSV

owner should expect to pay a higher annual vessel inspection fee in

comparison to a small passenger vessel of equivalent size.

A few comments asked which fee would apply on vessels operating in

more than one service under their COI. Vessels which are authorized to

operate in more than one service are referred to as ``dual-

certificated.'' In such instances, the vessel owner will pay the higher

annual vessel inspection fee of the two.

Several questions were raised regarding the examination of foreign

vessels and applicable fee payment procedures. For instance, how will

fees be collected, and what billing system will be in place?

As with U.S. vessels, foreign vessel fees must be paid before the

examination is conducted. The fee may be paid by either the vessel

owner, the vessel operator, or some other designated vessel

representative (e.g. the vessel's agent); however, the primary

responsibility for payment of the fees resides with the vessel owner.

Since it is not uncommon for a vessel to arrive in a U.S. port with an

expired TVE Letter or LOC, foreign vessel representatives will need to

plan accordingly. Payment must be received before the examination is

conducted.

The fees listed in Sec. 2.10-125 apply for foreign tank vessel

examinations required by the Coast Guard. For vessels receiving a LOC,

which is valid for two years, the $1,100 fee must be paid for each

initial (or biennial examination, as appropriate), and for the

examination conducted in the intervening years. For foreign tank

vessels receiving a TVE, which is valid for one year only, the $1,100

fee applies to each annual TVE letter examination. As with annual

vessel inspection fees, follow-up visits necessary for corrections of

deficiencies related to the above examinations are included in the fees

established for TVE and LOC examinations.

Foreign vessel examination fees are based on the cost of providing

required examination services, regardless of how many or how few port

calls are made during the course of a given twelve month period. If a

foreign tank vessel carrying oil in bulk has a TVE conducted one year

and does not make another U.S. port call until three years later, its

TVE letter will have expired and the $1,100 fee must be paid before

another TVE is conducted. If, on the other hand, a chemical tankship

has a LOC examination conducted one year and doesn't return to U.S.

waters until thirteen months later, its intervening annual examination

will be due and the $1,100 fee must be paid before the LOC endorsement

examination is conducted.

Comments Beyond the Scope of the Rule

The Coast Guard received many other suggestions for changing the

way the Coast Guard conducts its inspection program. These persons

believed these changes would result in more efficient use of Coast

Guard resources and would reduce the fees. For instance, several small

passenger vessel owners recommended that the Coast Guard accept

inspections by non-Coast Guard inspectors, such as insurance industry

inspectors; qualified members of the marine surveying community

belonging to a recognized professional organization; or qualified

marine surveyors certified by the Coast Guard. These comments asserted

that private sector companies could conduct vessel inspections in a

more cost-effective manner.

Also, a few comments indicated that it takes a significant amount

of time just to inspect lifejackets on large passenger vessels. They

suggested that this activity should be performed by an individual whose

services would cost less than a marine inspector, such as a Coast Guard

petty officer.

All these comments are beyond the scope of this rule, and the Coast

Guard will examine these issues independently of this rule.

Other Changes

In addition to changes discussed in the preceding sections, the

Coast Guard made other substantive changes to the proposed regulations.

Applications for Inspections

In the NPRM, the Coast Guard proposed in Sec. 2.01-1, Applications

for inspections, that application forms would be accompanied by

applicable fees, that evidence of payment would be endorsed on the COI,

and that payment of fees would be verified before the inspection was

scheduled. The Coast Guard has determined that this language is now

redundant or inconsistent with the requirements of subpart 2.10 and,

therefore, has been deleted from the final rule.

Definitions

Most vessel definitions are based on regulations or statutes. In

addition to a few minor revisions to certain proposed definitions which

are editorial in nature, the definition for ``Towing vessel'' has been

changed to ``Sea-going towing vessel.'' A definition for ``Submersible

vessel,'' the ``user fee anniversary date'' and the ``vessel

identification number,'' the latter two of which relate to the

collection process, have been added, and the definition for

Oceanographic research vessel has been corrected to conform with the

definition in 46 U.S.C. 2101.

Also, definitions of the following have been revised to conform to

revisions made by the Passenger Vessel Safety Act of 1993:

1. Offshore supply vessel

2. Passenger vessel

3. Sailing school vessel

4. Small passenger vessel

The revised definitions in the final rule do not change the category in

which a vessel would have been placed by the NPRM. However, the

Passenger Vessel Safety Act of 1993 has resulted in certain previously

uninspected charter vessels now coming under Coast Guard inspection

requirements. When the NPRM was published, these vessels were not

inspected by the Coast Guard and, therefore, were not subject to

inspection user fees. To comport with the statutory change, these

vessels (most of which are now included in the small passenger vessel

category) are subject to Coast Guard inspection and to the

corresponding fees established in this rule.

The language in Table 2.10-101 has been revised so that the

definition for ``all other inspected vessels'' is no longer needed and

has been deleted from the final rule. [[Page 13561]]

Public Vessels of the United States and Other Vessels Owned or Operated

by Federal Agencies

Under 46 U.S.C. 2109, most public vessels of the United States are

excluded from the vessel inspection requirements of Subtitle II of

Title 46 United States Code. The provisions of Subtitle II apply only

to those public vessels of the United States owned or operated by the

Department of Transportation, except for Saint Lawrence Seaway

Development and Coast Guard vessels. That means the Maritime

Administration is the only Federal agency subject to user fees for

subtitle II services provided to their public vessels. Maritime

Administration public vessels include vessels of the Ready Reserve

Fleet and training vessels operated by the U.S. Merchant Marine Academy

and State maritime academies.

Under specific Memorandums of Understanding, the Coast Guard does

inspect public vessels of other agencies such as the Military Sealift

Command. However, these inspections are not required by Subtitle II,

and the cost of providing these services is not recoverable through

user fees; nor can these costs be reallocated to other vessels. In

addition, Federal agencies may own or operate vessels which are not

``public vessels'' because they are engaged in commerce, or are

required for some other reason to be inspected under Subtitle II. The

Coast Guard could charge inspection fees for these vessels; however,

there would be no benefit to charging fees to these agencies for

required inspections. The user fee provisions of the Act are intended

to help reduce the Federal budget deficit and the fees collected by the

Coast Guard are deposited into the general fund of the U.S. Treasury.

Payment of the fees by a Federal agency would result in a payment from

a Federal agency to the U.S. Treasury; it would not increase the

revenues to the U.S. Treasury. Thus, the Coast Guard has decided to

waive collection of annual vessel inspection fees which would be paid

directly using Federal appropriated funds.

Overtime Compensation for Civilian Inspectors

Overtime compensation for civilian inspectors is authorized by 46

U.S.C. 2111 and is currently located in 46 CFR 2.01-60 of the

regulations. The Coast Guard proposed to update Sec. 2.01-60 and

include it with other inspection fees in new Subpart 2.10.

However, the Coast Guard decided not to move this section on

overtime compensation regulations into the user fee regulations.

Although the Coast Guard's intent was to locate requirements for all

inspection fees together, the Coast Guard decided that this action

could cause confusion. The overtime compensation fees are required by a

different statute and are not part of the user fees established in this

rule. Also, since the Coast Guard is authorized to directly recover

these amounts to pay for civilian overtime, different accounting

procedures are in place.

Although the Coast Guard proposed to update the existing

regulations in Sec. 2.01-60, the Coast Guard has decided against doing

so at this time. Instead, these regulations will be revised in a future

rulemaking. Therefore, the regulations in Sec. 2.01-60 have not been

changed in this rulemaking and apply to inspections where civilian

inspector overtime is involved.

Excursion Permit Fee

The NPRM proposed to charge a fee for excursion permits. Vessel

operators desiring to carry passengers in excess of the number listed

on the vessel's COI must apply to the cognizant OCMI for issuance of an

excursion permit. Excursion permits are issued by the OCMI only after

the vessel has been inspected to ensure that the proposed excursion

would meet minimum safety requirements. The MSIS data indicates that

only a limited number of these permits are issued each year (79 in

1989, 56 in 1990, and 85 in 1991), despite verbal comments during the

public hearings which suggested that a substantially greater number of

such permits are issued annually. Because the MSIS data on these permit

inspections is incomplete, proposed section 2.10-106 has been deleted

from this rule. The Coast Guard may, however, propose an excursion

permit fee when more data becomes available in the future.

Collection Procedures

Since the NPRM was published, a collection system has been

established for the payment of annual vessel inspection fees, foreign

vessel examination fees, and overseas inspection fees. As a result,

specific collection procedures have been added to this rule.

This rule specifies that payments may be made by check or money

order only. Wire transfers and credit cards are not available payment

options at this time. If desired, vessel owners and operators may pay

inspection or examination fees for several different vessels in the

same transaction, provided that the vessel name and vessel

identification number of each vessel for which a payment is being made

accompanies the payment. All inspection and examination fees must be

paid before the inspection or examination service is provided.

Regarding payment of the annual vessel inspection fee, proposed

Sec. 2.10-101(b) indicated that a U.S. vessel owner would pay the

annual vessel inspection fee on the anniversary date of the COI. This

requirement has been changed. The vessel owner must pay the annual

inspection fee on or before the vessel's user fee anniversary date, as

defined in Sec. 2.10-25. Approximately six weeks prior to this date,

the Coast Guard will send a user fee notification letter to the owner

of each U.S. commercial vessel inspected by the Coast Guard. The

notification letter will include the vessel's name, its official

number, the vessel's user fee anniversary date (payment due date), the

amount due, and the address to which the payment must be sent to ensure

that the fee is credited to the proper vessel.

All user fee payments will be processed by NationsBank in Atlanta,

Georgia. Inspection and examination fee payments will not be accepted

at Coast Guard Marine Safety or Marine Inspection Offices. The only

exception to this policy involves payment of overseas inspection and

examination fees, which must accompany the request for an overseas

inspection or examination. Under the computerized payment tracking

system established by the Coast Guard, all payment histories should be

updated within one business day following receipt of the payment by

NationsBank. An 800 number has also been established to handle start-up

user fee inquiries and to provide payment information. The number, 1-

800-941-3337 will remain in effect during initial implementation of the

rule.

Penalties for Failure To Pay

Section 2110 of Title 46 U.S.C. authorizes a civil penalty of up to

$5,000 for failure to pay fees and authorizes the Secretary of the

Treasury to withhold customs clearance for vessels which fail to pay

fees, when so requested by the Secretary of Transportation. Inspection

and examination services will not be provided unless the Coast Guard

can verify that the appropriate fees have been paid. The Coast Guard

will treat checks returned due to insufficient funds, account closed,

or any other such reason, as a delinquent payment and will seek to

recover appropriate collection and enforcement costs from the

appropriate party as permitted by law. [[Page 13562]]

Renumbered Sections

This rule renumbers and reorganizes many of the sections in the

proposed regulations (see Figure 2).

Figure 2.--Changes to Section Numbers in the Regulation

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

NPRM Final Rule

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

(None).................................................. Sec. 2.10-1

(None).................................................. Sec. 2.10-5

(None).................................................. Sec. 2.10-10

Sec. 2.10-11............................................ (None)

(None).................................................. Sec. 2.10-20

Sec. 2.10-1............................................. Sec. 2.10-25

Sec. 2.10-101........................................... Sec. 2.10-101

Sec. 2.10-103........................................... Sec. 2.10-105

Sec. 2.10-105........................................... Sec. 2.10-115

Sec. 2.10-106........................................... (None)

Sec. 2.10-107........................................... Sec. 2.10-120

Sec. 2.10-109........................................... Sec. 2.10-125

Sec. 2.10-110........................................... Sec. 2.10-130

Sec. 2.10-13............................................ Sec. 2.10-135

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

Regulatory Evaluation

This rule is a significant regulatory action under section 3(f) of

Executive Order 12866 but does not require an assessment of potential

costs and benefits under section 6(a)(3) of that order. It has been

reviewed by the Office of Management and Budget under that order. It is

significant under the regulatory policies and procedures of the

Department of Transportation (DOT) (44 FR 11040; February 26, 1979).

Fees are mandated by the Omnibus Budget Reconciliation Act of 1990,

which amended 46 U.S.C. 2110 to remove long-standing prohibitions

against charging fees for Coast Guard commercial vessel inspection and

examination services.

The Act required the Coast Guard to establish fees for services

provided under Subtitle II of Title 46 United States Code. These

services include: Licensing and documentation of merchant marine

personnel; commercial vessel documentation; commercial vessel

inspections and examinations; equipment approval and factory

inspections; and vessel plan review and new vessel construction.

Whereas the total cost of these user fees is expected to be less than

$35 million, this rulemaking deals only with vessel inspection user

fees, which are estimated at $17.2 million annually. Projected receipts

are well below the $100 million threshold which would make this subject

to the provisions of section 6(a)(3) of Executive Order 12866, however

the Coast Guard has prepared a final Regulatory Evaluation. The

Regulatory Evaluation is available in the docket for inspection or

copying where indicated under ADDRESSES. It concluded that the

financial impact on the public, including most of the individuals

subject to the user fees in this rule, is expected to be minimal.

Small Entities

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

Coast Guard must consider whether this rule will have a significant

economic impact on a substantial number of small entities. ``Small

entities'' include independently owned and operated small businesses

that are not dominant in their field and that otherwise qualify as

``small business concerns'' under section 3 of the Small Business Act

(15 U.S.C. 632).

Based upon a careful review of the public comments and public

testimony, the Coast Guard developed a fee structure which is intended

to help reduce the impact on owners and operators of small business

entities. Based on the establishment of additional vessel

subcategories, which resulted in lower fees in many instances, the

Coast Guard certifies under 5 U.S.C. 605(b) that these fees are not

expected to have a significant economic impact on a substantial number

of small entities.

Collection of Information

This rule contains additional collection of information

requirements under the Paperwork Reduction Act (44 U.S.C. 3501 et

seq.). Existing requirements for applications for inspection are

covered under OMB control number 2115-0007. Additional requirements

under this rule involve the collection of funds, and of such

information as is required to calculate the annual vessel inspection

fee due and to ensure proper collection of fees. This information

includes the name of the vessel, the vessel identification number, and

other identifying information which will permit follow-up action if an

incorrect fee amount is submitted or a payment instrument fails to

clear NationsBank.

A new requirement is established for those owners choosing to pay

annual vessel inspection fees for future years in advance. The owner

must, in a written request to the Coast Guard, indicate the vessel

identification number and the number of years for which the owner

desires to prepay the annual vessel inspection fee. If a vessel is

permanently removed from Coast Guard certification, the owner may seek

a refund of the remaining prepayment amount by submitting a written

request to the Coast Guard.

Another new requirement is established for organizations seeking an

exemption from the annual vessel inspection fee for vessels owned or

operated by their organization. In order to be eligible for an

exemption, organizations must submit a written request to the Coast

Guard and provide evidence that their organization is charitable in

nature, not for profit, and youth-oriented, and that each vessel is

owned or operated by the organization and is used exclusively for

training youths in boating, seamanship, and navigation skills.

Finally, a new requirement is established for Federal agencies

owning or operating inspected vessels for which fees would be paid

directly using Federal appropriated funds. The Coast Guard will waive

collection of the annual vessel inspection fee for these vessels.

However, by October 1 of each year, agencies owning or operating

eligible vessels must provide the Coast Guard with the name and the

vessel identification number of each vessel to which the waiver will

apply.

The additional collection of information burden placed on the

public by this rule is expected to be minimal. These new collection of

information requirements were approved by OMB and are covered under OMB

control number 2115-0617.

Federalism

The Coast Guard has analyzed this rule in accordance with the

principles and criteria contained in Executive Order 12612 and has

determined that the final rule does not have sufficient federalism

implications to warrant the preparation of a Federalism Assessment.

This final rule establishes user fees for vessel inspection and

examination services. This rule will result in the payment of fees by

States, State agencies, and local governments for inspection services

provided to vessels owned by such entities. The impact of these fees on

these entities is expected to be minimal. While some States and local

governments may be required to pay fees, the fees will be solely due to

the fact that the entity owns or operates the vessel, not due to a

mandate imposed on them as a government entity.

Environment

The Coast Guard has considered the environmental impact of this

rule and has concluded that, under section 2.B.2 of Commandant

Instruction M16475.1B, this rule is categorically excluded from further

environmental documentation. Section 2.B.2 of that instruction excludes

``administrative actions and procedural regulations and policies which

clearly do not have any environmental impacts.'' A Categorical

[[Page 13563]] Exclusion Determination is available in the docket for

inspection or copying.

List of Subjects

33 CFR Part 143

Continental shelf, Fees, Marine safety, Occupational safety and

health, Vessels.

46 CFR Part 2

Fees, Marine safety, Reporting and recordkeeping requirements,

Vessels.

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

Title 33, Chapter I, Subchapter N, Part 143 and Title 46, Chapter I,

Subchapter A, Part 2 as follows:

Title 33--[Amended]

SUBCHAPTER N--OUTER CONTINENTAL SHELF ACTIVITIES

PART 143--DESIGN AND EQUIPMENT

1. The authority citation for Part 143 is revised to read as

follows:

Authority: 43 U.S.C. 1333(d)(1), 1348(c), 1356; 49 CFR 1.46;

section 143.210 is also issued under 14 U.S.C. 664 and 31 U.S.C.

9701.

2. Section 143.210 is amended by adding a new paragraph (c) to read

as follows:

Sec. 143.210 Letter of Compliance.

* * * * *

(c) The owner or operator of a foreign mobile offshore drilling

unit requiring a letter of compliance examination must pay the fee

prescribed in 46 CFR 2.10-130.

Title 46--[Amended]

SUBCHAPTER A--PROCEDURES APPLICABLE TO THE PUBLIC

PART 2--VESSEL INSPECTIONS

3. The authority citation for Part 2 is revised to read as follows:

Authority: 14 U.S.C. 664; 31 U.S.C. 9701; 33 U.S.C. 1903; 43

U.S.C. 1333, 1356; 46 U.S.C. 2110, 3306, 3703, 5115, 8105; E.O.

12234, 45 FR 58801, 3 CFR 1980 Comp., p. 277; 49 CFR 1.46; Subpart

2.45 also issued under the authority of Act Dec. 27, 1950, Ch. 1155,

secs 1, 2, 64 Stat 1120 (see 46 U.S.C. App. note prec. 1).

PART 2--VESSEL INSPECTIONS

4. In section 2.01-1 paragraph (b) is revised to read as follows:

Sec. 2.01-1 Applications for inspections.

(a) * * *

(b) To whom submitted. The completed form must be submitted to the

Officer in Charge, Marine Inspection, in the Marine Inspection Zone

within which the inspection is to be conducted.

* * * * *

5. In section 2.01-6 the section heading is revised, paragraph

(a)(2) is redesignated as paragraph (a)(2)(i) and a new paragraph

(a)(2)(ii) is added to read as follows:

Sec. 2.01-6 Certificates issued to foreign vessels.

(a) * * *

(2) (i) * * *

(ii) Letter of Compliance--issued to Foreign Mobile Offshore

Drilling Units engaged in Outer Continental Shelf activities under 33

CFR 143.210.

* * * * *

6. A new Subpart 2.10 is added to read as follows:

Subpart 2.10--Fees

Sec.

2.10-1 Applicability.

2.10-5 Exemptions.

2.10-10 Waivers.

2.10-20 General requirements.

2.10-25 Definitions.

2.10-101 Annual vessel inspection fee.

2.10-105 Prepayment of annual vessel inspection fees.

2.10-115 Changes in vessel service.

2.10-120 Overseas inspection and examination fees.

2.10-125 Fees for examination of foreign tankships.

2.10-130 Fees for examination of foreign mobile offshore drilling

units.

2.10-135 Penalties.

Subpart 2.10--Fees

Sec. 2.10-1 Applicability.

(a) This subpart establishes vessel inspection fees for all vessels

required to have a Certificate of Inspection and vessel examination

fees for all foreign vessels required to have either a Letter of

Compliance or a Tank Vessel Examination Letter.

(b) The fees in this subpart do not apply to:

(1) Vessels being inspected for the initial issuance of a

Certificate of Inspection;

(2) Foreign passenger vessels;

(3) Training vessels operated by State maritime academies; and

(4) Public vessels of the United States, except for Maritime

Administration vessels.

Sec. 2.10-5 Exemptions.

(a) Vessels owned or operated by an organization which is

charitable in nature, not for profit, and youth-oriented may be

exempted from the fees required by this subpart provided that the

vessels are used exclusively for training youths in boating,

seamanship, and navigation skills.

(b) Vessel owners or operators must submit a written request for

exemption to the Officer in Charge, Marine Inspection of the Marine

Inspection Zone in which the vessel normally operates. The exemption

request must provide the vessel name, the vessel identification number,

and evidence that the organization and the vessel meet the criteria set

forth in paragraph (a) of this section.

Sec. 2.10-10 Waivers.

The Commandant (G-MP) will waive collection of vessel inspection

fees in this subpart for a Federally-owned or operated vessel if the

fee would be directly paid by an agency acting as the vessel owner

using Federal appropriated funds. By October 1 of each year, Federal

agencies shall provide Commandant (G-MP) with a list of the names and

vessel identification numbers of vessels for which a fee waiver is

requested.

Sec. 2.10-20 General requirements.

(a) Unless otherwise specified, vessel owners must pay the fees

required by this subpart before inspection or examination services are

provided.

(b) Fees required by this subpart must be paid in U.S. currency by

check or money order, drawn on a U.S. bank, and made payable to the

U.S. Treasury.

(c) All payments must be accompanied by the vessel name and its

vessel identification number.

(d) Unless otherwise specified, fees required by this subpart must

be mailed to the following address: USCG Inspection Fees, PO Box

105663, Atlanta, GA 30348-5663.

(e) For purposes of this subpart, the address for Commandant (G-MP)

is: Commandant (G-MP), United States Coast Guard, 2100 Second Street

S.W., Washington, DC 20593-0001.

(f) Information concerning a vessel's user fee anniversary date may

be obtained from any Coast Guard Marine Safety or Marine Inspection

Office.

Sec. 2.10-25 Definitions.

The following definitions apply to this subpart:

Drill ship MODU means a mobile offshore drilling unit with a ship

shape displacement hull intended for operation in the floating

condition.

Freight barge means a non-self-propelled vessel carrying freight

for hire.

Freight ship means a self-propelled freight vessel.

Freight vessel means a motor vessel of more than 15 gross tons that

carries freight for hire, except an oceanographic research vessel or an

offshore supply vessel. [[Page 13564]]

Industrial vessel means a vessel which, by reason of its special

outfit, purpose, design, or function engages in certain industrial

ventures. For the purposes of this subpart, this classification

includes such vessels as dredges, cable layers, derrick barges, and

construction and wrecking barges, but does not include vessels which

carry passengers or freight for hire, OSVs, oceanographic research

vessels, or vessels engaged in the fisheries.

Liquefied gas tankship means a self-propelled vessel equipped with

cargo tanks primarily designed to carry liquefied or compressed gases

in bulk.

Mobile offshore drilling unit (MODU) means a vessel capable of

engaging in drilling operations for the exploration or exploitation of

subsea resources that is: seagoing and 300 or more gross tons and self-

propelled by machinery; Seagoing and 100 or more gross tons and non-

self-propelled; or more than 65 feet in length and propelled by steam.

Nautical school vessel means a vessel operated by or in connection

with a nautical school or an educational institution under section 13

of the Coast Guard Authorization Act of 1986, Public Law 99-640.

Oceanographic research vessel means a vessel that is being employed

only in instruction in oceanography or limnology, or both, or only in

oceanographic or limnological research, including those studies about

the sea such as seismic, gravity meter, and magnetic exploration and

other marine geophysical or geological surveys, atmospheric research,

and biological research.

Offshore supply vessel means a motor vessel that is of at least 15

gross tons and less than 500 gross tons, and that regularly carries

goods, supplies, individuals in addition to the crew, and equipment in

support of exploration, exploitation, or production of offshore mineral

or energy resources.

Passenger barge means a non-self-propelled passenger vessel,

including a prison barge or a barge which carries occupied recreational

vehicles.

Passenger ship means a self-propelled passenger vessel.

Passenger vessel means a vessel of at least 100 gross tons:

(1) Carrying more than 12 passengers, including at least one

passenger for hire;

(2) That is chartered and carrying more than 12 passengers; or

(3) That is a submersible vessel carrying at least one passenger

for hire.

Sailing school vessel means a vessel of less than 500 gross tons,

carrying more than 6 individuals who are sailing school instructors or

sailing school students, principally equipped for propulsion by sail

even if the vessel has an auxiliary means of propulsion, and owned or

demise chartered and operated by a qualified organization during such

times as the vessel is operated exclusively for the purposes of sailing

instruction.

Sea-going towing vessel means a sea-going commercial vessel engaged

in or intending to engage in the service of pulling, pushing or hauling

alongside, or any combination of pulling, pushing or hauling alongside.

Self-elevating MODU means a mobile offshore drilling unit with

movable legs capable of raising its hull above the surface of the sea.

Semi-submersible MODU means a mobile offshore drilling unit with

the main deck connected to an underwater hull by columns or caissons,

that is intended for drilling operations in the floating condition.

Small passenger vessel means a vessel of less than 100 gross tons:

(1) Carrying more than 6 passengers, including at least one

passenger for hire;

(2) That is chartered with the crew provided or specified by the

owner or the owner's representative and carrying more than 6

passengers;

(3) That is chartered with no crew provided or specified by the

owner or the owner's representative and carrying more than 12

passengers; or

(4) That is a submersible vessel carrying at least one passenger

for hire.

Submersible MODU means a mobile offshore drilling unit intended for

drilling operations in the bottom-bearing condition, having the main

deck connected to an underwater hull or pontoons by way of columns or

caissons.

Submersible vessel means a vessel that is capable of operating

below the surface of the water.

Tank barge means any tank vessel not equipped with means of

propulsion.

Tank vessel means a vessel that is constructed or adapted to carry,

or that carries, oil or hazardous material in bulk as cargo or cargo

residue.

Tankship means any tank vessel propelled by power or sail,

including an integrated tug and barge designed to operate together only

in the pushing mode.

User fee anniversary date means the date on which a vessel's annual

inspection fee is due each year. Once established by the Coast Guard, a

vessel's user fee anniversary date remains fixed for as long as the

vessel remains in service.

Vessel identification number (VIN) means a U.S. official number, a

number assigned by a State, a number assigned by the Coast Guard, or a

Lloyd's Register of Shipping identification number issued to a U.S. or

foreign commercial vessel for purposes of vessel identification. For

U.S. vessels, VIN means the number listed on the Certificate of

Inspection. For foreign vessels, VIN means either the Lloyd's Register

of Shipping identification number or the number assigned by the Coast

Guard.

Sec. 2.10-101 Annual vessel inspection fee.

(a)(1) Unless otherwise provided by this subpart, each vessel

required to have a Certificate of Inspection is subject to the annual

vessel inspection fee listed in Table 2.10-101 for its vessel category.

(2) A vessel certificated for more than one service must pay only

the higher of the two applicable fees in Table 2.10-101 of this

section.

(b) The vessel owner or operator must pay the annual vessel

inspection fee each year on or before the vessel's user fee anniversary

date, unless the fee has been prepaid under Sec. 2.10-103 of this

subpart.

(c) Payment of the annual vessel inspection fee entitles a vessel

to all inspection services related to compliance with its Certificate

of Inspection, including but not limited to the inspection for renewal

of the Certificate of Inspection, reinspections (midperiod

inspections), hull (drydock) inspections, deficiency inspections,

damage surveys, repair and modification inspections, change in vessel

service inspections, permit to proceed inspections, drydock extension

inspections, and all inspections required for the issuance of

international certificates.

(d) Entitlement to inspection services for the current year remains

with the vessel if it is sold. The entitlement to inspection services

may not be transferred to any other vessel.

[[Page 13565]]

Table 2.10-101.--Annual Vessel Inspection Fees for U.S. and Foreign

Vessels Requiring a Certificate of Inspection

Any inspected vessel not listed in this table.............. $1,030

Freight Barges:

Length not greater than 150 feet....................... 495

More than 150 feet but not more than 300 feet.......... 610

More than 300 feet..................................... 955

Freight Ships:

Length not greater than 100 feet....................... 1,425

More than 100 feet but no more than 300 feet........... 1,870

More than 300 feet..................................... 5,410

Industrial Vessels:

Length not greater than 200 feet....................... 1,435

More than 200 feet..................................... 2,550

Mobile Offshore Drilling Units (MODUs):

Drill ship MODUs....................................... 6,710

Submersible MODUs...................................... 4,695

Self-elevating MODUs................................... 4,695

Semi-submersible MODUs................................. 8,050

Nautical School Vessels:

Length not greater than 100 feet....................... 835

More than 100 feet but not more than 200 feet.......... 1,450

More than 200 feet..................................... 7,205

Oceanographic Research Vessels:

Length not greater than 170 feet....................... 840

More than 170 feet but not more than 240 feet.......... 1,980

More than 240 feet..................................... 3,610

Offshore Supply Vessels:

Length not greater than 140 feet....................... 1,135

More than 140 feet..................................... 1,470

Offshore Supply Vessels: Alternate Reinspection Program*:

Length not greater than 140 feet....................... 940

More than 140 feet..................................... 1,260

Passenger Barges:

Less than 100 gross tons and:

Certified for fewer than 150 passengers............ 825

Certified for 150 or more passengers............... 1,110

100 gross tons or more and:

Certified for fewer than 150 passengers............ 2,215

Certified for 150 or more passengers............... 2,525

Passenger Ships:

Length not greater than 250 feet:

Certified for fewer than 150 passengers............ 3,600

Certified for 150 or more passengers............... 4,050

More than 250 feet but not more than 350 feet.......... 5,330

More than 350 feet but not more than 450 feet.......... 6,835

More than 450 feet..................................... 14,650

Sailing School Vessels:

Length not greater than 30 feet........................ 530

More than 30 feet but not more than 65 feet............ 560

More than 65 feet...................................... 980

Sea-going Towing Vessels................................... 2,915

Small Passenger Vessels:

DUKW vessels........................................... 450

Hydrojet boats......................................... 470

All other small passenger vessels:

Length not greater than 30 feet.................... 545

More than 30 feet but not more than 54 feet........ 670

More than 54 feet but not more than 65 feet........ 750

More than 65 feet but not more than 130 feet....... 975

More than 130 feet but not more than 160 feet:.....

Certified for fewer than 150 passengers........ 1,215

Certified for 150 or more passengers........... 2,585

More than 160 feet................................. 2,585

Tank Barges................................................ 500

Tankships:

Length not greater than 100 feet....................... 1,295

More than 100 feet but not more than 300 feet.......... 2,310

More than 300 feet..................................... 5,805

Liquefied Gas Tankships.................................... 12,120

*Note: Eligibility for the reduced annual vessel inspection fee for

Offshore Supply Vessels is contingent upon the vessel's continued

acceptance in the alternative reinspection program by the cognizant

Officer in Charge, Marine Inspection.

[[Page 13566]]

Sec. 2.10-105 Prepayment of annual vessel inspection fees.

(a) Vessel owners may prepay the annual vessel inspection fee for

any period of not less than three years, and not more than the design

life or remaining expected service life of the vessel.

(b) To prepay the annual vessel inspection fee for a period of

three or more years, the owner must submit a written request to

Commandant (G-MP) specifying the vessel identification number and the

period for which prepayment is to be made.

(c) The total of the annual fees for the requested prepayment

period will be discounted to its net present value using the following

formula:

[GRAPHIC][TIFF OMITTED]TR13MR95.000

Where:

PV is the Present Value of the series of annual user fees to be prepaid

(the net amount to be prepaid)

RO is the published user fee of the vessel

i is the interest rate for 10-year Treasury notes at the time of

prepayment calculation

is the rate of inflation (based on projected military

personnel costs at the time of prepayment calculation)

n is the total number of years to be prepaid

t is the number of years after prepayment of the fee, for each annual

increment (t=0, 1, 2, 3 ... n)

(d) When the annual vessel inspection fee has been prepaid, the

entitlement to inspection services for the prepayment period attaches

to the vessel and remains with the vessel if it is sold. The

entitlement to inspection services may not be transferred to any other

vessel.

(e) If a vessel is removed from Coast Guard certification and the

vessel owner surrenders the vessel's Certificate of Inspection, the

owner may request a refund of the remaining prepayment amount. The

annual vessel inspection fee will not be refunded for the year in which

the Certificate of Inspection is surrendered. The request for refund

must be submitted to the Officer in Charge, Marine Inspection to whom

the Certificate of Inspection is surrendered.

Sec. 2.10-115 Changes in vessel service.

(a) If a vessel certificated for a single service changes service,

the annual vessel inspection fee is not adjusted during the year in

which a change in service occurs. The annual vessel inspection fee for

the new vessel category is payable on the vessel's user fee anniversary

date immediately following the date of the change in service.

(b) If a change in service occurs and the annual vessel inspection

fee has been prepaid, Commandant (G-MP) will recalculate the prepayment

amount based on the new vessel category and advise the owner of

available prepayment options.

Sec. 2.10-120 Overseas inspection and examination fees.

(a) In addition to any other fee required by this subpart, an

overseas inspection and examination fee of $4,585 must be paid for each

vessel inspection and examination conducted outside the United States

and its territories. This fee does not apply to vessel inspections and

examinations conducted in Canada, Mexico, or the British Virgin

Islands.

(b) The overseas inspection and examination fee for each vessel

must accompany each request to the cognizant Officer in Charge, Marine

Inspection for an overseas inspection or examination.

Sec. 2.10-125 Fees for examination of foreign tankships.

Each foreign tankship of a country party to the International

Convention for the Safety of Life at Sea, 1974 as amended, must pay:

(a) For examination for the issuance of a Letter of Compliance

under Sec. 2.01-6(a)(2)(i) of this part, or examination for the annual

endorsement to a Letter of Compliance, a fee of $1,100.

(b) For examination for the issuance of a Tank Vessel Examination

Letter under Sec. 2.01-6(a)(3) of this part, a fee of $1,100.

Sec. 2.10-130 Fees for examination of foreign mobile offshore drilling

units.

Each foreign mobile offshore drilling unit must pay:

(a) For examination for the issuance of a Letter of Compliance

indicating compliance with the design and equipment standards of either

the documenting nation or the International Maritime Organization Code

for Construction and Equipment of Mobile Offshore Drilling Units, a fee

of $1,830.

(b) For examination for the issuance of a Letter of Compliance

indicating compliance with the design and equipment standards of 46 CFR

part 108, the inspection fee listed in Table 2.10-101 of this subpart

for the same type of mobile offshore drilling unit.

Sec. 2.10-135 Penalties.

(a) A vessel owner or operator who fails to pay a fee or charge

established under this subpart is liable to the United States

Government for a civil penalty of not more than $5,000 for each

violation.

(b) In addition to the fees established in this subpart, the Coast

Guard may recover collection and enforcement costs associated with

delinquent payments of, or failure to pay, a fee. Coast Guard

inspection and examination services may also be withheld pending

payment of outstanding fees owed to the Coast Guard for inspection and

examination services provided.

(c) Each District Commander or Officer in Charge Marine Inspection

may request the Secretary of the Treasury, or the authorized

representative thereof, to withhold or revoke the clearance required by

46 U.S.C. app. 91 of a vessel for which a fee or charge established

under this part has not been paid or until a bond is posted for the

payment.

Dated: March 2, 1995.

A.E. Henn,

Vice Admiral, U.S. Coast Guard Acting Commandant.

[FR Doc. 95-6034 Filed 3-10-95; 8:45 am]

BILLING CODE 4910-14-P