International Management Code for the Safe Operation of Ships and for Pollution Prevention (International Safety Management (ISM) Code)

SUMMARY: In a Notice of Proposed Rulemaking (NPRM) published on May 1,

1997, the Coast Guard proposed national regulations for responsible

persons and their vessel(s) engaged on international and domestic

voyages, to develop safety management systems to enhance vessel

operating safety at sea, prevent human injury or loss of life, and

avoid damage to the environment, in particular to the marine

environment, and to property. Section 602 of the Coast Guard

Authorization Act of 1996 (Pub. L. 104-324) requires this action. This

final rule completes those standards which will allow U.S. vessels that

are certificated to engage on international voyages to meet the

mandatory certification requirements, or voluntarily meet these safety

standards for domestic voyages. It also provides standards to permit

recognized organizations to apply for authorization from the U.S. to

complete external audits and issue international convention

certificates for U.S. vessels on behalf of the U.S.

DATES: This final rule is effective on January 23, 1998. The

incorporation by reference of certain publications listed in the rule

are approved by the Director of the Federal Register on January 23,

1998.

ADDRESSES: Unless 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., Washington, DC 20593-0001,

between 9:30 a.m. and 2 p.m., Monday through Friday, except Federal

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

FOR FURTHER INFORMATION CONTACT: Mr. Robert M. Gauvin, Project Manager,

Vessel and Facility Operating Standards Division (G-MSO-2), U.S. Coast

Guard, 2100 Second Street SW., Washington, DC 20593-0001, telephone

(202) 267-1053, or fax (202) 267-4570.

SUPPLEMENTARY INFORMATION:

Regulatory History

In May of 1994, the ISM Code was adopted as Chapter IX of the

International Convention for the Safety of Life at Sea (SOLAS) 1974, as

amended. The ISM Code's adoption occurred at the International Maritime

Organization's (IMO's) Conference of Contracting Governments to SOLAS

in London at IMO's Headquarters.

On October 19, 1996, the President signed into law the Coast Guard

Authorization Act of 1996 as Pub. L. 104-324, 110 Stat. 3901. Section

602 of the Act added Chapter 32 to Title 46 U.S. Code, ``Management of

Vessels.'' 46 U.S.C. 3203 mandated the Secretary of Transportation to

develop regulations for the implementation of safety management systems

which are consistent with the International Safety Management (ISM)

Code, for vessels and their companies which are engaged on foreign

voyages.

On April 24, 1997, the Secretary of Transportation delegated to the

Commandant of the Coast Guard the responsibilities under 46 U.S.C.

Chapter 32 and 46 U.S.C. 3103 for the implementation and enforcement of

safety management systems on U.S. vessels engaged on foreign voyages.

This delegation was published as a final rule in the Federal Register

(62 FR 19935) and codified in 49 CFR 1.46 (fff) and (ggg).

On May 1, 1997, the Coast Guard published a NPRM (62 FR 23705) in

the Federal Register on implementation standards for safety management

systems for vessels and their companies that are certificated to engage

on international voyages. These proposed regulations provided standards

for:

The development and compliance of safety management

systems for U.S. vessels and their companies;

Mandatory certification of safety management systems to

international levels;

Voluntary certification of safety management systems for

U.S. domestic trading vessels; and

Authorization by the U.S. to organizations to complete

external audits and certification of U.S. vessels required to meet the

U.S. and international safety management system standards.

The NPRM comment period closed on July 30, 1997. During the 90 day

comment period, 51 documents were received that contained 118 comments.

Seventeen comments requested public hearings but none were held.

Reasons for not holding public hearings before the publishing of this

rule are explained in the ``Discussion of Comments and Changes''

section of this rule.

Background and Purpose

This rule is necessary to fulfill the mandates of 46 U.S.C. 3203,

as added by section 602 of the Coast Guard Authorization Act of 1996

(Pub. L. 104-324, 110 Stat. 3901). The purpose of this rule is to

establish national safety management system standards and requirements

for the development, documentation, auditing, and completion of

certification by vessel owners or responsible persons. These vessel

safety management system regulations are consistent with the

international regulations of Chapter IX of the International Convention

for the Safety of Life at Sea (SOLAS) 1974, as amended. Chapter IX of

SOLAS requires that all vessels to which SOLAS is applicable, and their

companies, have effective safety management systems developed to meet

the performance elements of the International Safety Management (ISM)

Code (International Maritime Organization (IMO) Resolution A.741(18)).

The development of these requirements has been fueled by the

continued occurrences of significant marine casualties despite

engineering and technological innovations to stop such casualties over

the last two decades. In an effort to further reduce these casualties,

the Coast Guard evaluated the role of the ``human element'' in the

maritime safety equation. Recent casualty studies concluded that in

excess of 80 percent of all high consequence marine casualties may be

directly or indirectly attributable to the ``human element.''

Consequently, the international maritime community saw the need to

emphasize shipboard safety management practices to minimize human

errors or omissions. These types of errors play a part in virtually

every casualty, including those where structural or equipment failure

may be the direct cause.

The U.S. has been at the forefront providing input, analysis and

direction for the IMO's development of these international regulations.

The U.S. recognized that the human element needed to be addressed and

initiated the Prevention Through People (PTP) program which examines

and defines the critical role that the human element plays in maritime

safety. The PTP concept asserts that safe and profitable operations

require a systematic approach toward the constant and

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balanced interaction between the elements of management, the work

environment, individual behavior, and appropriate technology. The ISM

Code offers a systematic approach to mariners with the policy and

procedures needed to understand their duties and address the human

element issues and risks that can prevent casualties from occurring.

The voluntary certification of safety management systems by U.S.

vessels in domestic trade supports the PTP strategies to bring

government and industry together in making cultural change and

partnerships to address the human element in maritime operations and

pollution prevention.

Accordingly, the Coast Guard endorsed the guidance provided by the

ISM Code in IMO Resolution A.741(18), and provided it as a reference in

Navigation and Vessel Inspection Circular No. 2-94 (NVIC 2-94)

published March 15, 1994, ``Guidance Regarding Voluntary Compliance

with the International Management Code for the Safe Operation of Ships

and for Pollution Prevention.''

In May 1994, Chapter IX of SOLAS, ``Management for the Safe

Operation of Ships,'' was adopted by the U.S. at the IMO's Conference

of Contracting Governments to SOLAS, 1974. Chapter IX of SOLAS mandates

that all vessels subject to SOLAS, and their companies, have effective

safety management systems developed and in use that conform to the

performance elements of the ISM Code (IMO Resolution A.741(18)).

Companies whose U.S. flag vessels trade internationally (engaged on a

foreign voyage) and are subject to SOLAS, must have their safety

management system externally audited and must receive the appropriate

international certificates from the U.S. or from an organization

authorized to act on behalf of the U.S.

The ISM Code marks a significant philosophical shift in the

maritime community's approach to safety by recognizing the human

element's role in preventing marine casualties and ensuring vessels are

operated responsibly in accordance with domestic and international

standards. The ISM Code is seen as a major contributor to industry's

self-evaluation and actions to address the human element concerns. It

is intended to change the current approach of regulatory compliance

from industry's passive defect notification and correction response

mode to an aggressive approach to safety and environmental protection.

Under this proactive approach, potential discrepancies are resolved by

the companies themselves before casualties or incidents that can

adversely impact the marine environment can occur.

The ISM Code performance elements require the development of safety

management systems which document and communicate the owner's operation

policy, chain of authority, and operational and emergency procedures.

It also requires management reviews, internal audits and correction(s)

of non-conformities as directed by company's management procedures. The

documentation of a safety management system provides the basis for

auditing an employee's knowledge, ashore and afloat, of the company's

procedures and policies. It illustrates owner, manager and Master

responsibilities specifically and ensures awareness of national and

international standards in the system's procedures.

The ISM Code performance standards are broad based to allow

flexibility for the differences that each responsible person has to

work with in managing a variety of vessels or just one. A safety

management system is seen as a living system that will change and grow

as the responsible person, his or her managers and shore-based and

vessel-based personnel see the need for change, or as technology and

vessel operations change. The best safety management system is one

where there is commitment from the top management of the company and

its personnel to act safely and in an environmentally responsible

manner at all times. The accessibility of senior management throughout

the development of the safety management system and throughout the

systems life, is also a key factor to its success.

To ensure that the U.S. public and maritime industry understood the

mandatory requirements of the ISM Code, the Coast Guard published a

notice in the Federal Register on October 5, 1995 (60 FR 52143). This

notice explained the adoption of the ISM Code by the Contracting

Parties of SOLAS, and scheduled four public meetings held at the

following times and locations:

October 30, 1995, Federal Building, Seattle, Washington;

November 1, 1995, Port Authority Building, Long Beach, California;

November 13, 1995, Holiday Inn Downtown, New Orleans, Louisiana; and

November 16, 1995, Port Authority Building, New York City, New York.

At these public meetings, the Coast Guard received comments on

implementation of the international requirements and provide a

presentation on the U.S.'s voluntary safety management system

guidelines in NVIC 2-94. Comments received at these meetings were

audiotaped and are a part of this docket.

Discussion of Comments and Changes

The Coast Guard received a total of 51 documents containing 118

comments to the public docket. This section of the preamble discusses

the comments received and the Coast Guard's responses and changes to

the proposed rule. This section is divided into three parts. First, we

discuss the comments that request public hearings. Second, we discuss

the comments on specific CFR cites. Third, we discuss the general

comments concerning other issues relating to this rulemaking and the

implementation of safety management system requirements.

Comments Requesting Public Hearings

Sixteen comments requested a public hearing to discuss the

requirements in 33 CFR 96.250(f)(4), involving the determination of

medical fitness for seafarers. The concern expressed was that this

section permitted amendments to the standards that determined the

medical fitness of mariners. The Coast Guard is not amending any

regulations or standards regarding the determination of medical fitness

for mariners as part of this rulemaking. This rulemaking only requires

that the responsible person provide procedures or policies in the

safety management system on how these existing requirements are managed

by the company. We do not intend to hold public hearings due to these

requests, as they would require actions on regulations outside the

scope of this rulemaking. We understand the importance of these

requests and asked the Executive Director of the Merchant Marine

Personnel Advisory Committee (MERPAC) to place these comments and

concerns on the Committee's working agenda to discuss in its public

meetings with the Coast Guard. The Executive Director of MERPAC and the

Committee's Chairperson agreed to place it on MERPAC's working agenda.

MERPAC is a federal advisory committee appointed by the Secretary

of the Department of Transportation under the Federal Advisory

Committee Act (5 U.S.C. App. 2). MERPAC is composed of marine industry

personnel appointed to advise the Coast Guard on merchant marine

issues. The Committee offers an open forum to hear individuals, groups

or industry specific concerns, then works to provide the Coast Guard

with recommendations as to what actions may be needed. MERPAC has

addressed the issue of mariner's physical fitness

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standards in the past and will, when changes are proposed, address it

in the future. MERPAC's next meeting is scheduled for May 1, 1998. A

notice announcing the Committee's working agenda, schedule and place of

meeting will be published in the Federal Register.

One comment requested a public hearing if the Coast Guard does not

plan to include specific protections for the Northern Right Whale in

the final rule. The focus of the proposed rule is to implement safety

management systems consistent with the ISM Code. The Coast Guard does

not intend to hold a public hearing in response to this request.

Comments about protection of the Northern Right Whale and the ISM Code

are addressed in detail in the final section of these comment

responses.

Comments Relating to Specific CFR Sections

All changes to each section of the rule are discussed within the

following paragraphs.

1. 33 CFR 96.110, 96.210, and 96.310. Four comments were received

on these sections which discussed who these subparts apply to. Two

comments found the use of the terminology ``trades in U.S. waters,'' or

``on an international voyage,'' or ``engaged on a foreign voyage'' to

be confusing in determining which vessels and persons must comply with

the proposed regulations. One comment requested that ``vessel engaged

on a foreign voyage,'' be used throughout the rulemaking as it conforms

to the statutory requirements of 46 U.S.C. 3201. We agree and amend

proposed Secs. 96.110, 96.210 and 96.310, to use the phrase, ``vessel

engaged on a foreign voyage,'' as defined in Sec. 96.120.

For purposes of clarification regarding foreign vessel voyages that

come under U.S. jurisdiction, the Coast Guard amends Secs. 96.110(c),

96.210(a)(3) and 96.310(c), by adding the words, ``bound for ports or

places under the jurisdiction of the U.S.'' This will ensure that a

foreign vessel or self-propelled mobile offshore drilling unit (MODU)

are held accountable to the requirements and certification of safety

management systems when navigating in U.S. waters. A foreign vessel

engaged on a foreign voyage, involving innocent passage through waters

subject to the jurisdiction of the U.S. will not be boarded under these

regulations.

The second and third of these comments also discussed the use of

the phrase, ``on an international voyage'' in 46 CFR 31.40-30(a),

71.75-13(a), 91.60-30(a), 107.415(a), 115.925(a), 126.480(a),

176.925(a), and 189.60-30(a). The Coast Guard does not agree with a

need to change this phrase. ``On an international voyage'' is described

in 46 CFR 2.01-8, entitled ``Application of regulations to vessels or

tankships on an international voyage.'' For consistency throughout

title 46 CFR, we have not changed the final rule.

The fourth comment on these sections recommends that a specific

subpart be developed for foreign vessel requirements, separate from

regulations for U.S. vessels in subparts A, B and C. The comment

suggested that this new subpart include requirements for foreign

vessels whose countries are parties to SOLAS and those vessels whose

countries are not, similar to 33 CFR 96.370. The Coast Guard disagrees

that a separate subpart is needed, but has added language in

Sec. 96.390(a) to ensure that it is understood that actions for safety

management system certification by vessels whose countries are a party

to SOLAS are acceptable as an equivalent to the requirements of 33 CFR

part 96, subparts B and C. Further discussions of this matter are found

in paragraph 27 of this comment reply section of the final rule

preamble.

The Coast Guard amended Sec. 96.210(a)(2)(I) by removing the word

``passenger'' in that sentence. Under 46 U.S.C. 3202(a)(1)(A) ``a

vessel transporting more than 12 passengers * * *'' must comply with

these regulations, not just a passenger vessel. The Coast Guard removed

this word to ensure the meaning that all vessels carrying more than 12

passengers, not just passenger vessels, must comply with these

regulations.

The Coast Guard amended Secs. 96.210(a)(2)(i) and (d)(1)(i),

96.330(a) and (d), 96.340(a) and (d), 96.370(a), and 96.390(a)(2) as

the statements were to require that these sections applied to vessels

transporting or carrying ``more than 12 passengers'' as stated in 46

U.S.C. 3202(a)(1)(A), and not ``12 or more passengers.''

2. 33 CFR 96.120. Five comments were received on definitions in

this section. One comment requested that a definition for ``designated

person'' be added to this section to ensure that this person's

responsibilities for overseeing the safety management system is not

confused with the responsibilities of the ``responsible person.'' It

should also be understood that a responsible person with a large fleet

of vessels can assign the responsibility of the designated person to

more than one employee, or that a designated person could be

responsible for more than one vessel. The Coast Guard agrees with the

comment and has added a definition for designated person to this

section.

One comment requested that the term ``responsible person'' be

replaced by the term ``owner'' because of possible confusion with the

term ``responsible party,'' which is defined in the Oil Pollution Act

of 1990 (OPA 90). The Coast Guard does not agree with this comment and

has not changed the definition of the ``responsible person.''

Responsible party is defined in section 1001(32) of OPA 90 to clarify

liability of the owners and operators of vessels, onshore facilities,

offshore facilities, deepwater ports, and pipelines in the event of an

oil spill. The Coast Guard's definition of responsible person in this

rulemaking clearly relates to responsbility surrounding the development

and use of safety management systems ashore and aboard vessels.

One comment suggested redefining the term ``company'' to include

the definition of an ``operator'' as defined in 30 CFR 250.2 of the

Mineral and Management Service's regulations for offshore oil and gas

exploration. The Coast Guard does not agree. There are times when a

lessee or operator of an offshore oil or gas exploration vessel becomes

responsible by contract with the owner of the vessel to assume the

duties imposed by these rules. When this occurs, a written designation

of that responsibility must be provided by the owner to the lessee or

operator of the contracted vessel and placed in the documentation of

the safety management system as required by the ISM Code. This is part

of the safety management system's documents and reports required by

Sec. 96.250(b)(2), and there is no need to expand on the definition of

``company''.

One comment requested that the term ``recognized organization'' be

changed to a ``member of the International Association of

Classification Societies (IACS).'' The Coast Guard does not agree with

this comment. Other organizations, outside the membership of IACS, may

apply and be recognized if they meet the requirements of 46 CFR part 8.

The regulations of that part do not limit the application or

recognition of any organization because they are or are not, members of

IACS. The Coast Guard has amended the definition of a recognized

organization in this section to be clear on which requirements of 46

CFR part 8, an organization must meet to be accepted. As subparts C and

D of 46 CFR part 8 provides requirements for other international

certificate authorizations and the U.S. Alternate Compliance Program,

which have no effect on U.S. ISM Code certification authorization,

these subparts are removed from the definition. This

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change of definition has also required changes to the language in the

definition of an ``Authorized Organization Acting on behalf of the

U.S.'' and Secs. 96.400(a), 96.410 and 96.430(b) (formerly

Sec. 96.430(a)(5)). Also, we have removed the phrase ``national or

international'' from the recognized organization definition for

consistency with subpart D.

One comment inquired whether the phrase, ``vessel engaged on a

foreign voyage'' includes the operation of U.S. flag oilfield crewboats

to and from foreign ports during operations supporting oil exploration

programs internationally. Such vessels that are offshore supply vessels

(OSVs) of 500 gross tons or more, or are carrying more than 12

passengers, would be considered engaged on a foreign voyage under

paragraph (b) of the term's definition. This definition states that a

vessel is considered to be on a foreign voyage when, ``making a voyage

between places outside the United States'' (Sec. 96.120). These

crewboats must meet the requirements of 33 CFR part 96 and the ISM Code

for safety management systems, when certificated for such voyages. No

changes were made to the final rules in response to this comment.

In November 1997, the SOLAS Conference on the Safety of Bulk

Carriers was held at IMO's headquarters in London. During this

conference, a new Chapter XII of SOLAS was adopted, entitled

``Additional Safety Measures for Bulk Carriers.'' During deliberations

on this new chapter of SOLAS an interpretation was adopted regarding

the definition of a bulk carrier. This interpretation is found in

Resolution 6 of the resolutions adopted by the conference. This

interpretation pertains to the definition of bulk carrier in Regulation

1.6 of Chapter IX of SOLAS on the ISM Code, as well as the new Chapter

XII on Bulk Carrier Safety. The definition in Chapter IX is, ``Bulk

carrier means a ship which is constructed generally with single deck,

top-side tanks and hopper side tanks in cargo spaces, and is intended

primarily to carry dry cargo in bulk, and includes such types as ore

carriers and combination carriers.'' The interpretation removes the

ambiguity of the term ``constructed generally.'' Specifically, the

resolution ``Urges SOLAS Contracting Governments to interpret the

definition of the term ``bulk carrier'' given in regulation IX/1.6, for

the purpose of the application of SOLAS regulation IX/2.1.2 * * * to

mean: ships constructed with a single deck, top-side tanks and hopper

side tanks in cargo spaces and intended primarily to carry dry cargo in

bulk; or ore carriers; or combination carriers.'' Bulk carriers that

meet this interpretation are required to meet the first effective date

of the ISM Code, July 1, 1998. Other vessels, which carry bulk cargoes,

but do not meet this interpretation, must meet the second effective

date of the ISM Code (July 1, 2002), as required by Sec. 96.210. The

U.S. has decided to accept this IMO interpretation to SOLAS. This

rulemaking has not defined bulk carriers, but intends to use all vessel

type definitions as provided by Regulation 1 of Chapter IX of SOLAS.

For clarity, we added a new paragraph (a) to the definition section to

explain that we will use the definitions provided by Chapter IX of

SOLAS, and not the definitions in Title 46 of the U.S. Code.

3. 33 CFR 96.230(a). Four comments were received on this paragraph.

Two requested clarification whether these practices have to be in

writing. One comment noted that requiring written practices would

impose requirements on U.S. vessels that are not required on foreign

vessels. We agree. Requiring these objectives in writing would extend

U.S. vessel requirements beyond requirements for a foreign vessel under

the ISM Code. This change would also require a foreign vessel that

operates in the U.S. to complete further work on their safety

management system that exceeds the requirements of the ISM Code. We

amend the rule to remove the term ``written'' and have reworded the

paragraph to ensure that the objectives required by this section are

consistent with the ISM Code.

The third comment requested clarification of the term ``type'' of

vessel, and suggested that this definition would have the same meaning

as vessel ``category.'' This terminology is required to be used on the

Document of Compliance certificate to illustrate what type of vessel(s)

a company's safety management system is developed to manage. If the

type of vessel(s) a responsible person owns changes, then the safety

management system must be amended to include the specifics of managing

the new or different vessel type. Vessel types are: passenger ship;

passenger high-speed craft; cargo high-speed craft; bulk carrier; oil

tanker; chemical tanker; gas carrier; MODU; and other cargo ship. The

term ``cargo ship'' used to describe a vessel type under SOLAS has the

same meaning as ``freight vessel'' for these regulations.

The final comment on this paragraph noted that, as drafted, the

meaning of this paragraph could be interpreted to require the safety

management system to provide a safe work environment ``for'' the

vessel. The intent of the ISM Code is to require a safe working

environment ``on board'' the vessel. The Coast Guard agrees with the

comment and has reworded the paragraph to clarify its meaning and be

consistent with the ISM Code.

4. 33 CFR 96.230(b) and 96.230(c). Five comments requested that we

amend these paragraphs because the ``listing'' of safeguards and

continuous improvement methods is not the same as ``establishing or

implementing'' those safeguards. The Coast Guard agrees with the

comments and amends paragraphs (b) and (c) accordingly.

5. 33 CFR 96.230(d). One comment requested that this paragraph be

struck from the final rule because ensuring compliance with the many

international, national, industry standards and codes is unworkable and

a second comment requested that the term ``industry guidelines'' be

expanded to ``maritime industry guidelines.'' We disagree that this

paragraph is unworkable or should be struck, but have amended it to

include maritime regulations and standards in the safety management

system. It does not require any more actions than those already

completed by foreign vessels under their ISM Code compliance

responsibilities. The Coast Guard agrees with the comment recommending

the use of the phrase, ``maritime industry guidelines'' and amends this

paragraph in the final rule. To ensure clarity, we amended this

paragraph to use the word ``relevant.''

6. 33 CFR 96.240(b). One comment discussed that this paragraph was

unclear, because as drafted, it appeared that foreign vessels would be

required to comply with U.S. national standards and U.S. regulations

for ship construction and operation not normally applicable to foreign

flag vessels. The comment pointed out that this is inconsistent with

the ISM Code. This was not the intent of the proposed requirements. We

have amended this paragraph to make it clear that foreign vessels need

to follow U.S. regulations applicable to them when they operate in U.S.

waters.

7. 33 CFR 96.240(c). One comment discussed that the documentation

which describes the levels of communication was not a functional

requirement of safety management systems. The comment suggests that

requiring this documentation would be an arduous task with respect to

the operation of a self-propelled MODU, because the organizational

makeup of the vessel changes depending on whether the vessel is

navigating, or is anchored in oil exploration operations. The Coast

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Guard disagrees. The directions and management needed for this type of

operation between the responsible person, the navigating crew, whomever

manages the operational drilling crew and the supervising staff of the

drilling crew aboard the MODU itself, is exactly the situation that

this requirement addresses. No change has been made to this requirement

in the final rule.

8. 33 CFR 96.240(d). One comment questioned the Coast Guard's

authority to require ``near accident reporting'' in this paragraph,

arguing that this was inconsistent with the ISM Code. We disagree.

Section 9.1 of the ISM Code requires that, ``The safety management

system should include procedures ensuring that non-conformities,

accidents and hazardous situations are reported to the company,

investigated and analyzed with the objective of improving safety and

pollution prevention.'' The Coast Guard interprets that near-accident

reporting is hazardous situation reporting. The Coast Guard has also

reinforced the meaning of this requirement in the standards provided by

Sec. 96.250(i).

The comment also suggests amending this paragraph to conform to the

ISM Code. Specifically, the comment suggests revising the language to

say ``procedures for reporting * * * non-conformities with the ISM

Code,'' as opposed to ``non-conformities with the safety management

system.'' The Coast Guard disagrees that only non-conformities with the

ISM Code should be included here. The functional requirements of a

safety management system must ensure the continuous evaluation and

appropriate improvement of the safety management system by the

company's management. However, to ensure clarity this paragraph is

amended.

One comment supported Sec. 96.240(d) as drafted, and emphasized the

importance of near-miss reporting and follow-up to establish lessons

learned. We agree. The Coast Guard, in partnership with the Federal

Maritime Administration (MARAD), is developing a nationwide voluntary

near-miss accident reporting program to compile lessons learned for the

education of mariners and maritime industry. When completed, the Coast

Guard will publish policy on the use of the national near-miss accident

reporting program and a responsible person's ability to use the U.S.

national program to conform with the requirements of near-accident or

hazardous situation reporting required by the ISM Code. The Coast

Guard's program manager for this project is the Chief, Office of

Investigations and Analysis (G-MOA), at Coast Guard Headquarters.

9. 33 CFR 96.240(e). One comment objected to the use of the word

``procedures'' in this paragraph stating that the functional

requirements should define a ``process'' for ensuring an appropriate

response to emergency situations. The Coast Guard disagrees because the

paragraph, as drafted, is interpreted broadly and will define a process

for response as required by the ISM Code. Multiple levels of

management, such as on a MODU and third party managed vessel, need to

define their ``processes'' in terms of procedures in a safety

management system for it to work. Procedures that define these

processes can be used as training tools, tracking tools, and action

tools. This requirement does not require a new process to be developed

if they are already in hand or developed under current regulation or

management procedures. No change is made in response to this comment.

10. 33 CFR 96.240(g). Two comments discussed expanding this

paragraph to include the use of objective internal safety assessments

in place of internal auditing, and stated that safety management

systems should be reviewed to evaluate their efficiency against

established industry evaluation procedures. Both comments contain

merit, and the Coast Guard agrees that the efficiency and measurement

of safety management system impacts and their effectiveness should be

determined. However, the Coast Guard disagrees with the need for such

requirements in the final rule. The suggested requirements would extend

managerial responsibility past the minimum requirements of the ISM

Code. Therefore, no changes are made in response to this comment.

11. 33 CFR 96.250. Five comments were received on this section. One

comment noted that both functional and documentary requirements are

included in the table within Sec. 96.250. The comment recommended

referencing the documentary requirements of Sec. 96.240 to the table

within Sec. 96.250. The Coast Guard does not agree that there is a need

to cross reference the requirements of Sec. 96.240, as the requirements

for performance objectives documentation are already covered within the

requirements of the table in Sec. 96.250.

Four comments suggested that these regulations should contain

provisions to protect records that are maintained as part of a safety

management system. The comments request that the regulations be amended

to prohibit use of these records in civil or administrative

proceedings. Specific concerns were that the documentation and

reporting requirements will contain sensitive company information that,

while essential for purposes of company personnel use, should not be

made publicly available for use in civil proceedings. The Coast Guard

agrees that for a safety management system to work correctly and to be

continuously self-improving, it requires the proactive actions of the

responsible person to have reports completed on non-conformities and

hazardous situations, no matter how minor or major, so that management

reviews can be completed and corrections made to the safety management

system accordingly. However, the Coast Guard cannot provide any

protection for these records because to do so would exceed its

authority granted in 46 U.S.C. Chapter 32. To clarify our intent, a

note has been added at the end of the table in Sec. 96.250, in the

final rule.

12. 33 CFR 96.250(b). Three comments were received on this

paragraph. The first comment requested clarification whether the

requirement for the company's responsibility and authority statement

should extend to all vessels owned by the responsible person, or just

the vessels of the company that must comply with this part. The Coast

Guard contends that it would be to the responsible person's benefit to

have all vessels that he or she owns meet the safety management system

requirements of this part. However, only vessels required to meet 33

CFR part 96, are required to be covered by this requirement.

The second comment discussed the possibility of confusion regarding

the determination of the responsible person on a self-propelled MODU,

between the owner, operator, lessee, or drilling contractor. The

delineation of the relationships of these persons or companies involved

in a MODU's operation should be explained by the company's policies and

procedures. Proper explanation of these relationships in the safety

management system ensures that personnel responsible for specific

duties involving safe operation, and the services provided to the

vessel by contracted personnel, will understand their responsibilities

correctly thereby reducing human element errors which can cause

accidents. It will also enhance the vessel's response to casualties and

accidents, resulting in mitigation damages to the vessel and the

environment, or injury to vessel personnel.

The third comment on this paragraph discussed subparagraph (b)(4),

which requires the safety management system

[[Page 67497]]

to contain a statement that describes the company's responsibilities to

ensure adequate resources. The comment further states that describing

this responsibility in the safety management system does not

necessarily mean that the company bears responsibility. We understand

that vessel resources can be provided by a myriad of contract companies

and personnel not under the direct control of the responsible person.

Safe management does not point fingers but ensures communications so

when problems develop, there are clear policies that employees can

follow to make decisions. The reasoning that the performance objectives

of these safety management system standards are so general is to allow

them to be customized to specific type vessel operation for ease of the

user. No changes have been made to the final rule due to these

comments.

13. 33 CFR 96.250(c). One comment requested that the term

``oversee'' used in this paragraph, be changed to the word ``monitor''

to describe the actions required of the designated person. The Coast

Guard agrees with this comment and amends this paragraph in the final

rule.

14. 33 CFR 96.250(d). Three comments were received on this

paragraph. One comment stated that not all vessels are certificated or

required by the provisions of national regulations to have Masters, but

instead may have Persons-In-Charge. The Coast Guard agrees with this

comment, but has not amended the regulation. The Coast Guard uses the

term Master to be consistent with the ISM Code. Additionally, all U.S.

vessels mandatorily required to meet the safety management system

requirements of this part are certificated to have Masters on board.

The Coast Guard understands that there are vessels which can

voluntarily meet these standards, such as non self-propelled MODUs,

which are not required to have a Master but a Person-In-Charge as

senior manager of the vessel. The Coast Guard is developing a new

chapter in Volume II of it's Marine Safety Manual (MSM), on the U.S.

safety management system compliance and enforcement policies which will

be used by the Coast Guard and organizations authorized, to audit and

certificate safety management systems. The Coast Guard has not amended

this paragraph because the MSM guidance will clarify that the term

``Master'' includes a Person-In-Charge in this situation.

The other two comments questioned whether a vessel's Master is

capable of having responsibility and authority over shore-based

resources, and asked that such contentions be deleted from this

paragraph. During some duties, the Master of the vessel will be the

responsible person's representative contracting and supervising vessel

support from shore-based resources, as well as directing resources from

the vessel managing company. The safety management system should

clearly describe these duties to allow the Master to understand his or

her responsibilities and decision-making policies. This will also help

shore-based resources understand their duties, their importance to the

vessel, and their responsibilities to the vessel Master as a manager.

The Coast Guard does not agree with these comments and has not amended

this paragraph of the final rule.

15. 33 CFR 96.250(e). Two comments were received on this paragraph.

One discussed that the Master of a vessel does not have overall

authority for vessel operation because the Master's authority is

overridden by flag state, coastal state, and numerous other

governmental authorities. We respond that the Master is the responsible

person's representative on the vessel and all authorities that can be

expected of the Master should be supported by the safety management

system. The Master has overriding responsibility and authority to

ensure that the vessel is operated safely, and consistently with all

applicable laws. When the Master is not specified, it is impossible to

expect the individual employed as the Master to provide proper

leadership or decision making clarity. Where the Master follows

international, national, coastal, or local regulations or directions,

regarding management of a vessel, he/she is making decisions on how to

use these factors in the efficient and safe operation of the vessel

taking into account the policies provided by the safety management

system.

The second comment encouraged the Coast Guard to amend this

paragraph by adding a subparagraph (3) which states, ``Responsibility

with the bridge team and officers on watch to monitor navigation,

collision avoidance, and communications while the ship is piloted.''

The Coast Guard does not agree that this statement needs to be added to

this paragraph because this requirement for providing procedures for

shipboard operations is covered by paragraphs (f) and (g) of the table

in Sec. 96.250. The Coast Guard has made no changes to the final rule

due to either of these comments.

16. 33 CFR 96.250(f). Four comments were received on this

paragraph. One comment discussed that the statement in

Sec. 96.250(f)(6) required knowledge of the relevant rules,

regulations, codes and guidelines, which was a subtle difference from

than ``an adequate understanding'' required by the ISM Code. We agree

that this statement may be misinterpreted to require more than what

would be consistent with the ISM Code and have changed the language

accordingly.

One comment discussed that there should be an understanding that

the documentation of training identified and required by other national

regulations or international conventions, can be documented under the

safety management system in compliance with these requirements and also

meet the requirements for training and documentation of the

International Convention on Standards of Training, Certification and

Watchkeeping for Seafarers, 1978, as amended in 1995 (STCW). The Coast

Guard agrees with this comment, and this understanding is stated in

NVIC 4-97 (Guidance on Company Rules and Responsibilities under the

1995 Amendments to the STCW). NVIC 4-97 states, ``If you operate your

vessel under a safety management system (SMS) in compliance with the

International Safety Management (ISM) Code and hold a valid Safety

Management Certificate (SMC) and Document of Compliance issued by the

Coast Guard under 46 U.S.C. 3205, you are presumed to be in compliance

with STCW Regulation I/14.'' On the other hand, NVIC 7-97 (Guidance on

the STCW Quality Standard System (QSS) for Merchant Mariner Courses or

Training Programs), explains that, ``* * * In order for shipping

companies that are ISM Code certified to have their training meet the

STCW QSS requirement, their training program must meet the criteria in

46 CFR 10.309.

It should be remembered that documentation and training requirement

programs developed by a company can cover a magnitude of different

vessel type specific requirements. Each vessel type, under the umbrella

of a company's safety management system, may only need to use those

portions of the training and documentation program of the total company

system that are applicable due to the vessel type, area of operation,

or specific requirements under other conventions, laws or regulations.

No changes were made to this section in response to this comment.

One comment discussed the need to reevaluate federal manning levels

required on U.S. vessels, suggesting that current manning levels do not

reflect the additional personnel which will be needed to satisfy the

requirements of the

[[Page 67498]]

ISM Code. The comment stated that the ISM Code places more duties on

vessel personnel than were expected when manning levels were

established. The Coast Guard disagrees with this comment. We received

comments from companies that have safety management systems in

operation. They developed those safety management systems by initially

reviewing existing company management policies and procedures. By doing

this, they found numerous antiquated, unnecessary or duplicative

management procedures and documentation which could be eliminated.

Thus, they reduced the management overhead that they had been

experiencing before placing the safety management system in operation.

If policies are not needed due to changes in the company, management,

regulations, policies, or for a number of other different reasons, then

they should be removed or amended. By doing this the management system

and oversight reporting is reduced in size, which does not increase the

personnel needed to operate a vessel safely. No changes have been made

to the final rules due to this comment.

The final comment on this paragraph recommends that all personnel

should receive general safety management system familiarization when

joining a vessel and also six further specific levels of training.

These include: three support level training programs; two operational

level training programs; and one level of management training programs.

The Coast Guard supports a company's use of training, at whatever level

necessary to ensure that policies and procedures of the management

system are understood by their staffs aboard a vessel or working ashore

in support of a vessel. We agree that if a company evaluates its safety

management system and finds a need to develop training to ensure the

proper understanding and use of the system, then the training should be

initiated by that company. In NVIC 4-97, the Coast Guard recommended

that ship-specific familiarization include directing a new crew

member's attention to the vessel's safety management system. However,

the Coast Guard has not made changes to this section of the final rule,

as the comment requests additional training which exceeds the

requirements of the ISM Code.

17. 33 CFR 96.250(j). Three comments were received on this

paragraph. One comment requested that the format of the paragraph and

subparagraphs be changed to mirror the ISM Code, and two comments

requested that subparagraph (2) have the word ``non-conformity,''

changed to ``deficiency.'' The Coast Guard disagrees with the first

comment and has not altered the format of this section or table in the

final rule. The Coast Guard agrees that there may be confusion

understanding subparagraph (2) and has added the words ``and

deficiency'' after ``non-conformity'' to ensure that the requirement is

understood.

18. 33 CFR 96.250(k). Two comments were received on the control of

documentation required by this paragraph. One comment requested that

the word ``destroyed'' be changed to ``removed'' in subparagraph (4).

We agree with this request and amend the word in the final rule. The

second comment stated that the meaning of data maintenance is unclear

and that the complete paragraph does not provide specific direction on

data control. The requirements for safety management systems were

written in general performance element style to allow different types

of companies to tailor their systems to their specific needs. Some

companies may use paper based systems, other computer based, a third

company a mixture of both. No matter how this data is displayed or

communicated, it will be controlled equally and in compliance with

these standards. The Coast Guard disagrees that further amendments are

needed, because these standards allow flexibility for development of

systems documentation. Consequently, we have not made any changes to

the final rule due to this comment.

19. 33 CFR 96.250(l). Two comments were received on this paragraph.

One comment requested the word ``deficiencies,'' in subparagraph (4) be

changed to ``non-conformities,'' to conform with the ISM Code. In this

case, the Coast Guard agrees that confusion could occur on what

requires timely action for the system and has added the words ``non-

conformities or'' before the word ``deficiencies'' in subparagraph (4)

in the final rule.

The second comment stated that proposed section Sec. 96.240 of the

regulations should include the requirements of section 12 of the ISM

Code that require evaluating the efficiency of the system and reviewing

the safety management system with established procedures. The Coast

Guard agrees and notes that these requirements are already included in

Sec. 96.250(l)(1). Critical management review of the system, as well as

non-conformity and deficiency reports, are necessary to evaluate

whether the system is running properly. No changes to the text of the

final regulations were made due to this comment.

20. 33 CFR 96.320(f). Three comments were received on this section

regarding the reporting of non-conformities to the company's owner or

vessel's Master at completion of a safety management audit. The

comments requested that this paragraph be amended to require auditors

to issue reports of non-conformities to the company's owner and

vessel's Master. It was also recommended that the safety management

system's designated person receive copies of this reports as well. The

Coast Guard agrees in part and amends this section to require auditors

to provide these reports to a company's owner when the company is

audited, and to a vessel's owners and Master when a vessel is audited.

If a company wants its designated person to receive a copy of this non-

conformity report, it is recommended that this request be made to the

auditors prior to the audit being completed on behalf of the company.

21. 33 CFR 96.330. One comment expressed concern that this section

would require multiple Document of Compliance certificates to be issued

by each flag state for a multi-flagged fleet under one responsible

person's ownership. Multiple certificates may not be required as the

international interpretation for their issuance allows flag states to

agree to accept each others certificates for safety management system

compliance. Each situation may be different and to verify the U.S.

acceptance of other flag state certificates contact Commandant (G-MOC-

2), Vessel Compliance Division, 2100 Second Street SW., Washington DC

20593-0001 in writing, by telephone (202) 267-1464, or by facsimile

(202) 267-0506. No changes were made to this section of the final rule

due to this comment.

22. 33 CFR 96.330(f). One comment requested that this paragraph be

amended because it requires the Document of Compliance certificate to

be verified annually, instead of the company's safety management

system. The Coast Guard agrees and amends this paragraph to ensure the

verification of the system and not the certificate in the final rule.

23. 33 CFR 96.330(g)(1), 96.340(g)(1), and 96.340(f). Four comments

were received on these paragraphs. Two comments requested that the

revocation of a Document of Compliance certificate or Safety Management

Certificate not be based on the failure of the responsible person to

request an audit, but rather on the failure to complete an audit. The

Coast Guard agrees with this comment and amends these paragraphs in the

final rule.

[[Page 67499]]

The next comment pointed out that when a vessel is laid up or taken

out of service for a period of time the Safety Management Certificate

may lapse, if the vessel is unmanned for long periods of time. Because

there are no personnel working under a safety management system when a

vessel is laid up, the certificate cannot be validated or endorsed.

When brought back into service, the responsible person can request that

an initial audit of the vessel be completed when the vessel is

remanned, and a new Safety Management Certificate can be issued. No

change to the final rule was made due to this comment.

The last comment stated that Sec. 96.340(f) should be amended as it

requires foreign vessels to meet U.S. requirements for safety

management system audits. A foreign vessel which is certificated by its

flag state or by an organization who acting on behalf of the flag

state, completes a safety management system audit following the

guidelines of IMO Resolution A.788(19), meeting the same requirements

found in these regulations. The Coast Guard will accept such a

determination as required by the articles of SOLAS. No changes have

been made to this section of the final rule due to this comment.

The Coast Guard has added wording to Sec. 96.330(g), with a new

subparagraph (3), to ensure that their personnel and auditors of an

authorized organization acting on their behalf, can complete audits and

reviews of safety management systems properly and effectively. A

Document of Compliance certificate may be revoked if the Coast Guard or

an authorized organization is denied or restricted access to the

vessel, records, or personnel necessary to ensure compliance with 33

CFR part 96. Neither the Coast Guard, nor an authorized organization

acting on its behalf, should be expected to certificate compliance with

any international convention regulation, unless all needed information

and records for that review are provided by the vessel's or company's

personnel.

24. 33 CFR 96.340(e)(2). One comment requested that the wording in

this section regarding the ``anniversary date'' of the intermediate

verification audit be amended for clarity. The Coast Guard agrees and

amended the final rule with the words ``period of validity'' rather

than the ``anniversary date.''

25. 33 CFR 96.360(a)(2). One comment was received on this section

which requested a determination of ``* * * a U.S. vessel which is new

to the responsible person or their company.'' For an interim Safety

Management Certificate to be issued, this vessel would be considered an

individual vessel that was just purchased by or just brought under the

management of a responsible person. No change to the final rule was

made due to this comment.

26. 33 CFR 96.380. Two comments were received on this section. One

comment stated that the use of a civil penalty under 46 USC 3318 is not

consistent with the law for violations of compliance with documentation

responsibilities under these regulations. The comment went further to

state that a suitable grace period for the production of certificate

copies, or a grace period to bring the vessel into compliance, along

the line of a formal requirement (CG Form 835) be issued prior to

actions to assess a civil penalty. The requirement as written states

that the ``* * * vessel owner, charterer, managing operator, agent,

Master, or any other individual in charge of the vessel that is subject

to this part, may be liable for a civil penalty * * *.'' The proposed

regulations do not say that the Coast Guard must pursue a civil

penalty.

Traditionally, the Coast Guard has considered all possible

administrative actions in dealing with incidents of non-compliance. The

Coast Guard wrote this section to ensure that affected companies and

individuals were aware that civil penalties were a possible sanction

for violations of these regulations. It is the Coast Guard's opinion

that civil penalties authorized under 46 U.S.C. 3318 apply to

violations of these regulations because these penalty provisions are

applicable to violations of laws and regulations issued under the

authority of 46 U.S.C. Part B, which includes 46 U.S.C. Chapter 32.

The second comment discussed concerns surrounding

Sec. 96.380(a)(2), which allows the Coast Guard to board a vessel to

verify that the vessel's crew or shore-based personnel are following

the procedures and policies of the safety management system while

operating the vessel or transferring cargoes. The comment concluded

that this action would go well beyond the authority internationally

recognized for port state control examinations found in SOLAS: Chapter

I, regulation 19; Chapter IX, regulation 6; Chapter XI, regulation 4;

as well as the IMO Procedures for Port State Control. The comment also

requested that we modify this subparagraph to conform with

internationally recognized port state control guidelines. The comment

further requested that we draft Coast Guard policy on these actions and

distribute them for comment to the maritime industry prior to their

implementation.

The Coast Guard is working to complete policy development which

falls into line with this request. A port state control NVIC is being

developed which describes the Coast Guard boarding policy for foreign

vessels including examination of the vessel safety management system

and certificates. This NVIC will discuss normal actions during a port

state control examination of a foreign vessel by the U.S., and what

clear grounds must be found of observed non-compliance with a safety

management system before an expanded Coast Guard examination will be

completed. The Coast Guard expects to have this NVIC published in the

same time frame as this final rule. However, we disagree that this

policy requires review and comment by the maritime industry. These

procedures for safety management system evaluation fall in-line with

the U.S. port state control program already in existence and meets the

port state control regulations of SOLAS and the IMO Procedures for Port

State Control. No changes have been made to this section of the final

rule due to this comment.

27. 33 CFR 96.390(a). One comment stated that this subparagraph

would prohibit Coast Guard acceptance of foreign issued international

management certificates which met SOLAS guidelines, unless they would

attest to full compliance with U.S. regulations. The Coast Guard agrees

that as written, this requirement provides a limitation of acceptance

of foreign issued certificates which is not consistent with SOLAS. This

subparagraph has been amended in the final rule to ensure that such

certificates would be acceptable when issued in accordance with Chapter

IX of SOLAS and the IMO Guidelines for Contracting Parties to SOLAS.

28. 33 CFR 96, Part D. Two comments were received regarding

organizations who have applied to be recognized and are authorized to

complete external audits and certification of safety management systems

for U.S. vessels and their companies. One comment questioned the use of

the term ``expertise,'' and whether that term encompassed the marine

field, quality systems, or both, and whether this authorization should

be limited to classification societies. The comment further stated that

anyone with an appropriate marine business and academic background is

qualified to act on behalf of the U.S. in ISM Code auditing and

certification.

These requirements are based in part, on the guidelines provided by

IMO Resolution A.739(18), which are

[[Page 67500]]

incorporated by reference in Sec. 96.130. These international

guidelines provide minimum standards to ensure organizations authorized

by any flag state, worldwide, will provide uniform actions and

oversight when their personnel complete actions regarding vessel

surveying and auditing in the marine field. This is important to the

owner of a vessel and the flag state, because as it ensures that the

international certificates issued by authorized organizations acting on

behalf of a flag state, will be accepted worldwide, on face value, for

compliance with international conventions. The Coast Guard disagrees

that ``just anyone'' can meet these requirements. Coast Guard

requirements for recognition of organizations are rigorous and conform

to the IMO guidelines. The Coast Guard expects and will ensure that

actions by an organization acting on its behalf are incontestable under

any port state scrutiny. Any organization, with a proven history of

marine experience working with and making decisions based on maritime

industry standards, national standards and regulations, and

international guidelines and conventions, may meet these requirements.

The organization, due to the auditing expertise needed for ISM Code

certification, must also provide a certified level of standards that it

can meet for its personnel to complete audits. The requirements are

restrictive because the Coast Guard must ensure that the U.S. marine

transportation industry is able to operate, uninterrupted, worldwide.

The second comment on this part recommended that organizations

already accepted by the Coast Guard to issue voluntary certificates,

under NVIC 2-94, should be automatically authorized to issue mandatory

ISM Code certificates on behalf of the U.S. without having to reapply

under these regulations. The Coast Guard disagrees and expects these

organizations will apply under this part. No changes were made to this

section of the final rule due to these comments.

29. 33 CFR 96.410. One comment was received on this section which

stated that the term ``safety management certificates'' should not be

used in this section because it has a specific meaning, and should not

be used to refer to these certificates in a general way. The Coast

Guard agrees with this comment and has changed this section to

eliminate confusion. The Coast Guard has also edited this section to

make it easier to read by removing the words ``wish to'' from this

section.

30. 33 CFR 96.430. Four comments were received on this section. One

comment discussed the reciprocity requirement of 46 U.S.C. 3316 for a

foreign classification society to be authorized to act on behalf of the

U.S. to complete external audits and certification of safety management

systems. The comment stated reciprocity with ABS should not be required

because a subsidiary corporate entity of ABS is providing these

functions, not ABS, thus there is no need for the documentation of

reciprocity by a foreign classification society. The Coast Guard does

not agree. Currently, ABS certification comes under the voluntary

system of NVIC 2-94 which is not subject to the provisions of 46 U.S.C.

3316. Under these regulations, all future written agreements for

authorization to act on behalf of the U.S. regarding the mandatory

certification of safety management systems will be made with ABS under

the provisions of 46 U.S.C. 3316. Under this agreement, ABS will not be

able to use subsidiary group offices to complete these actions for the

U.S. No change was made in the final rule due to this comment.

The second comment recommended that the Coast Guard also accept the

quality standards of ASQC Q9002 and quality management standards of

ASQC C9001 and C9002. The Coast Guard disagrees. Under 46 CFR

8.230(a)(15), an organization must meet ANSI/ASQC Q9001 or an

equivalent quality standard to be recognized. No other quality standard

is incorporated in 46 CFR part 8. For purposes of consistency, no

others will be incorporated here either. Quality management standards

(ASQC C9001 and C9002) are not required for recognition of an

organization, so none will be required here. No changes have been made

to this section of the final rule due to this comment.

The third and fourth comments on this section questioned the

terminology used in Sec. 96.430(a)(3), and inquired whether a

recognized organization could use subsidiary organizations and their

auditors to carry out audits and certification in accordance with the

IMO guidelines and the ISM Code. The Coast Guard disagrees and has

explicitly written this subparagraph to ensure that only exclusive

auditors of organizations authorized to act on behalf of the U.S. are

used by these organizations to complete audits under this

authorization. When the Coast Guard reviews an organization's

application for authorization authority under this subpart, quality

standards must: (1) Demonstrate how the organization selected

individuals as auditors; (2) explain training and recertification

methods; and (3) describe the code of ethics the auditors must follow.

An organization's auditor standards will be approved as part of the

organization's application package to be authorized to act on behalf of

the U.S., and will be part of the U.S. written agreement with the

organization as required by Sec. 96.440(c). No change was made to this

section of the final rule due to these comments.

As the reciprocity requirement effects only foreign classification

societies which can be authorized to act on behalf of the Coast Guard

under this section, old paragraph (a)(5) of this section has become a

new paragraph (b) for clarity. Old paragraph (b) is now paragraph (c).

31. 33 CFR 96.480. One comment cautioned that the termination of

authority from an organization acting on behalf of the U.S. could have

extreme consequences on vessel operation for vessels certificated by

that organization. Specific concern was expressed for situations in

which the vessel's Safety Management Certificate is near expiration

when the authorization is terminated. Also, the comment questioned the

obligatory notification requirements of companies and vessels

certificated by the terminated organization. In all cases, the Coast

Guard will request information from the administrative files of the

organization being terminated to understand the effect of termination

on the companies and vessels certificated by the organization. The

Coast Guard will assist any company and vessel to maintain

certification while transferring to another authorized organization.

The original certificates of the terminated organization will remain

valid until expiration or periodic audit which will allow continuity

with a new authorized organization. There should be no extra cost for

the company or vessel as the audit actions required by the new

organization are the same actions that would have been completed by the

original certifying organization. This paragraph was also edited to

ensure clarity.

The Coast Guard will enter into a written agreement with all

organizations receiving authorization under this part, as stated in

Sec. 96.460. Failure to notify affected companies or vessels upon

termination of authority for safety management system certification,

will result in a review by the Coast Guard of the ability of the

organization to complete any actions on behalf of the Coast Guard.

Additionally, this termination could affect any or all other delegated

authorities, in such a

[[Page 67501]]

situation. The final rule was not changed due to these comments.

32. 46 CFR 126.480(a). Three comments were received on this

section. Two comments discussed the use of the phrase ``offshore supply

vessels (OSVs) engaged on foreign voyages'' and questioned the

applicability of the 33 CFR part 96 on OSVs and ocean-going towing

vessels certificated for international voyages. The applicability of

those regulations to OSVs and towing vessels on international voyages

is determined by whether these vessels are over 500 gross tons and are

``vessel(s) engaged on a foreign voyage'' as that term is defined in 46

U.S.C. 3201 and this part. No change was made to the final rule due to

these comments.

The final comment sought clarification when the ISM Code applied to

OSVs and ocean-going towing vessels under the vessel admeasurement

system. The ISM Code applies to vessels engaged on a foreign voyage. In

the case of OSVs and ocean-going towing vessels, the ISM Code applies

only if the vessel is 500 gross tons or greater, as OSVs and towing

vessels are considered freight (cargo) vessels for purposes of SOLAS.

Because the applicability of the statue implementing the ISM Code

provisions is based on tonnage (see 46 U.S.C. 3202) and this statute

was enacted after July 18, 1994, its applicability to vessels is based

on their international convention tonnage because of 46 U.S.C.

14302(b). However, under 46 U.S.C. 14305, a vessel owner may request

that a vessel be measured under the regulatory tonnage system and under

those circumstances the applicability of SOLAS, as well as the other

enumerated statutes, would be based on the vessel's regulatory tonnage.

This means that the owner of an OSV or towing vessel that has a

convention tonnage greater than 500 gross tons could elect to have the

vessel admeasured under the regulatory tonnage system, and if the

vessel had a regulatory tonnage of less than 500 gross tons, these

regulations would not apply. However, the applicability of all other

laws enumerated in 46 U.S.C. 14305 would also be determined based on

the optional regulatory tonnage (see 46 U.S.C. 14305(b)). NVIC 11-93,

Change 2, discusses when regulatory tonnages may be used by a vessel

owner to determine the applicability of SOLAS requirements. No changes

in the final rule have been made as a result of these comments.

33. 46 CFR 175.540(d). Four comments were received on this section.

One comment stated that the applicability of the requirements of 33 CFR

part 96 are mitigated by the addition of paragraph (d) to this section

of the regulations for small passenger vessels. This amendment does not

mitigate or soften the applicability. This paragraph provides an

equivalent means for these small vessel owners to meet the safety

management system requirements. An equivalence is not an exemption. The

Coast Guard developed a job aid with the assistance of a marine

industry working group. This job aid can be used as an example of what

an owner of a small passenger vessel may do to establish an equivalent

safety management system. Section 175.540(d) does not reduce the

effectiveness of the safety management system, but instead provides

direction to these small passenger vessel owners to help them develop

their systems so they can be certificated by the cognizant Coast Guard

OCMI.

Two comments did not support an exemption for small passenger

vessels due to their limited operation or company sizes. The Coast

Guard disagrees. These vessels are not being exempted from the

requirements, but are offered a cost-effective course of action to

implement the regulations due to their size, limitation of operation,

and historical low risk with proven safety records. The Coast Guard job

aid developed for these vessels provides a customized safety management

system program, which will support small passenger vessels with limited

international routes. It does not remove any of the requirements of 33

CFR part 96. A small passenger vessel owner can request a job aid at no

charge from the local cognizant OCMI.

The final comment requested clarification whether the Coast Guard

would allow a small passenger vessel approved and actively using the

Streamlined Inspection Program (SIP) to use that program as an

equivalent to the safety management system requirements. The SIP

program is based on performance elements similar to the safety

management system requirements. The Coast Guard may allow this if an

owner developed a program that included all the requirements of 33 CFR

part 96. This program would be provided to the cognizant OCMI for

review and acceptance after discussion and recommendations are received

from the authorized organization certificating the safety management

system. However, the Coast Guard made no changes or amendments to this

section due to these comments.

General Comments (Non-CFR Specific)

34. Four general comments were received which supported the

proposed rules as written. One comment also requested confirmation that

operation of large passenger vessels around the islands of Hawaii

constituted coastal trade and would not require mandatory development

and certification of a safety management system. A U.S. vessel

certificated to a limited route of coastal operations within the

Hawaiian island chain is not required to meet this part. However, if

the vessel involved in this operation holds an international registry

and a Certificate of Inspection authorizing international voyages, even

though the owner of the vessel limits its operations, this vessel would

have to meet all SOLAS requirements and be certificated to the ISM

Code.

One comment requested that the safety management system

requirements be placed in each part of title 46 of the CFR to

correspond to each type of vessel required to meet the ISM Code. The

Coast Guard does not agree that this should be done as the agency has

actively reduced the number of regulations where possible, including

elimination of redundant parallel regulations in the CFR. The limited

reference in each part of Title 46 affected by the final rules in 33

CFR part 96 will allow ease of reference and continuity of using the

regulations for all vessels affected by these requirements. No change

to the final rule has been completed due to these comments.

35. Two general comments supported the use of plain English in the

development of these regulations by the Coast Guard. Each described the

use of the question and answer format as useful, but both felt that the

style did not provide enough detail to really answer the questions

posed. One comment stated that the questions did not appear to be

answered. The other comment felt that the standards of plain English

were not followed adequately.

The Coast Guard's authority for developing these regulations

required consistency with the ISM Code. The ISM Code's standards are

general in nature to allow flexibility for different types of vessel

companies to meet them without restricting their creativity or

mandating a specific management style. Other international or U.S.

quality standards and management standards are written following the

same logic. No change to the final rule has been made due to these

comments.

36. Two general comments discussed the need to carefully oversee

safety management system development and certification programs for

U.S. and foreign vessels. The comments pointed out that Coast Guard

personnel should

[[Page 67502]]

be specifically trained to oversee these new requirements. We agree.

U.S. Coast Guard marine inspectors and program managers have been

trained to meet national auditing standards. Since 1995, approximately

120 Coast Guard marine inspectors completed a course which is

specifically based on the auditor standards of ANSI ASQC Q 9001 and the

ISM Code. The Coast Guard also reviewed its in-house training programs

for marine safety responsibilities and included compliance and

enforcement of the ISM Code in each basic marine safety training

course. No changes have been made to the final rule due to these

comments.

37. One general comment stated that there are numerous

organizations worldwide, who may be authorized by an Administration to

complete ISM Code audits and certification, whose abilities to act on

behalf of an Administration may be questionable. Two other general

comments alluded to the same problem, and provided suggestions on how

these organizations should be rated for performance and how port state

targeting schemes could be modified when a specific organization fails

to complete its authorized responsibilities.

The Coast Guard agrees. Coast Guard program managers will monitor

and compare compliance with the ISM Code for all flag states,

authorized organizations, companies and foreign flagged vessels.

Because this information will be monitored centrally by Coast Guard

Headquarters program managers, compliance infractions will be tailed

and may affect the targeting scheme for specific foreign vessels, flag

states, and vessel owners or authorized organizations. This information

will enable the Coast Guard to modify its targeting scheme, if

necessary, to ensure that vessels with continuous noncompliance issues

receive a higher level of oversight and boardings when in U.S. ports.

The Coast Guard will use the information collected to provide IMO

and flag states with reports on port state interventions, detentions

and denials of U.S. port entries required by the port state reporting

requirements of SOLAS. If a specific authorized organization

continuously fails to complete its assigned duties, such reports will

illustrate these failures to all SOLAS Contracting Parties, who can

increase their port state control requirements on vessels certificated

by this organization on behalf of any flag state. This will help flag

states recognize the need for extended oversight when continuous

problems are documented, and promote revocation of authorizations by

the flag state when necessary. In the event that these actions do not

appropriately address non-compliance, the Coast Guard will continue to

heighten its oversight and boardings of vessels certificated by these

organizations. This may lead to interventions, detentions and denial of

entry into U.S. ports and places. No change has been made to the final

rule due to these comments.

38. One general comment recommended that a Master's or crew's

unfamiliarity with the company's safety management system and training

requirements of a safety management system should be clear grounds to

perform a more extensive examination of a foreign flag vessel during a

routine boarding by the Coast Guard. The Coast Guard agrees with the

comment and developed its port state control boarding procedures to

allow for an expanded examination of a foreign vessel's safety

management system when this situation is found during a routine Coast

Guard boarding. As the policy for Coast Guard actions required during

port state examinations of foreign vessels are covered in the NVIC on

ISM Code compliance for foreign vessels, the final rule has not been

changed due to this comment.

39. Two general comments recommended the Coast Guard require

foreign vessels to provide information in advance of their U.S. port

arrivals to ensure their compliance with the ISM Code. The Coast Guard

agrees with these comments and on December 11, 1997, published an

Interim Rule in a separate rulemaking (CGD 97-067) to require this

advance notice of arrival requirement (62 FR 65203). No change has been

made to this rulemaking due to these comments.

40. One general comment requested the Coast Guard review all

current regulations that place the responsibility for the safe

operation of a vessel on the vessel's Master, and where appropriate,

share some of that responsibility with the designated person. The Coast

Guard disagrees. As defined in Sec. 96.120, the designated person does

not have a responsibility for operation of the vessel. The designated

person's responsibility is to monitor the safety management system of

the company and the vessel(s), as directed by the responsible person.

If problems arise with the policies and procedures for the safe

operations of the vessel which the Master does not believe he or she

has the right tools to manage, those problems should be communicated to

the vessel's owner. The Master can communicate through the safety

management system, or directly to the vessel owner, or through the

designated person to the vessel's owner. By documenting these

circumstances in the safety management system, a critical review by the

vessel management will be performed and new or corrected policies or

procedures placed into the safety management system to assist the

Master. The Coast Guard has made no change to the final rule due to

this comment.

41. Two general comments recommended that the final rule provide a

list of administrative requirements or detailed guidance on the issues

of revocation of a Document of Compliance certificate or a Safety

Management Certificate. The Coast Guard will provide guidance for such

actions in the new chapter of Volume II of the Coast Guard Marine

Safety Manual on the compliance and enforcement of safety management

systems for U.S. vessels. The Coast Guard determined that placing this

policy in regulations would limit its ability to consider all necessary

circumstances and make decisions on a case-by-case basis.

All Coast Guard actions to enforce safety management system

requirements on U.S. vessels and their companies can be appealed to the

Coast Guard under 46 CFR 1.03, ``Rights to Appeal.'' This section

provides time frames and procedures for use by the maritime industry to

effectively question actions taken by the Coast Guard in enforcing

revocations on these certificates, as needed. No change has been made

to the final rule due to these comments.

42. One comment stated that the proposed regulations do not fully

anticipate problems and provide direction necessary to manage important

day-to-day operations with regard to the endangered Northern Right

Whale. In particular, the comment expressed concern that the ISM Code

regulations were too narrowly focused and sought various clarifications

regarding the application of the regulations to protected species and

their critical habitats. It suggested that the language in proposed

Sec. 96.250(g) be amended to specifically include operation plans and

instructions with respect to protected species in their critical

habitats.

The ISM Code does not define specific operating procedures or

practices, but instead provides broad, general performance elements as

guidelines to be applied by ship owners and their companies to

shoreside operations and to their vessels. Shipping is a varied

industry with numerous types of companies operating under a large range

of different conditions. The ISM Code guidelines

[[Page 67503]]

are based on general principles and objectives to promote the

development of sound management and operating practices within the

industry as a whole. Its purpose is to require companies to establish

operating practices and policies so that company management will be in

a position to ensure that their vessels comply with all applicable

international and U.S. laws for purposes of safety and environmental

protection. It does not seek to define or incorporate detailed

regulatory requirements, but instead to establish the management

structure that will ensure that requirements applicable to vessels are

communicated to shoreside and vessel personnel, and complied with.

Thus, the requirements in this regulation are expressed in broad terms

so they may have widespread application. As expressed in the comment,

the suggestions applicable to protected species are too narrow to be

addressed in this rulemaking.

This does not mean that these regulations will not beneficially

effect endangered species or their critical habitats. Besides the

beneficial effect that company policies and management structures

promoting safe, environmentally sound vessel operations will have on

the marine environment in general, including protected species, the

management structure and policies put in place through the ISM Code

will promote compliance with all applicable laws, including

environmental efforts. Under these regulations, company management

would establish an operational and management structure that would

ensure that vessel Masters and crews within their fleets would be

provided with the applicable safety and environmental requirements for

operations in U.S. waters. Additionally, the system would ensure that

necessary training would be conducted. The system would then be audited

periodically to determine whether the system is working and compliance

is occurring.

An example of how this would work involves the Northern Right

Whale. The Coast Guard is working closely with the National Marine

Fisheries Service and its charter agency, the National Oceanographic

and Atmospheric Administration (NOAA), to develop national programs to

assist in protection of the Northern Right Whale by providing mariners

operating directions for the whale's critical habitat areas on the east

coast of the United States. Part of this effort is the publication of

navigation warnings for the Northern Right Whale in Coast Guard Notices

to Mariners and in the U.S. Coast Pilot publications covering critical

habitat areas of the Northern Right Whale. These warnings include the

requirements of 50 CFR parts 217 and 222 that establish Northern Right

Whale avoidance measures for vessels and reporting criteria for whale

strikes. Coast Guard navigation safety requirements for foreign and

U.S. vessels are established in 33 CFR part 164. These regulations

include requirements for vessels to have aboard the current edition of

the U.S. Coast Pilot for the area in which vessels are operating. In

addition, other regulations require vessels to have aboard proper

operating radiotelephone equipment that will allow vessels to monitor

frequencies over which Notices to Mariners are broadcast. Compliance

with the ISM Code requirements in this part means that companies that

own and operate vessels will have in place the means to ensure that

vessel Master are aware of these requirements, that they comply and

that corporate officers are aware of, and correct, instances of

noncompliance. For these reasons, no change has been made to the final

rule due to these comments.

43. One comment focused on the introduction of injurious exotic

species into U.S. coastal and riparian waters through ballast water

discharges by vessels engaged on foreign voyages to ports or places in

the U.S. The Coast Guard is currently developing new regulations to

address vessel discharges of ballast water into U.S. waters. The Coast

Guard is also monitoring actions at IMO which involve these vessel

operations. No change has been made to the final rule due to this

comment.

44. One general comment requested that an interim rule be published

by the Coast Guard for review and comment on this rulemaking prior to

the final rule being published. We disagree. As written comments on the

proposed rulemaking did not point to any significant problems nor any

problems that have not been addressed in the final rule, the Coast

Guard does not expect that publishing an interim rule would markedly

improve the regulations nor assist vessel owners in complying with the

ISM Code by its first effective date of July 1, 1998. Therefore, the

Coast Guard has completed this rulemaking process by publishing this

final rule.

45. Two general comments were made by one commentor on: (1)

Mandatory requirements for safety management systems on U.S. domestic

vessels; and (2) the benefits that would be reaped by these domestic

vessels compliance with these regulations.

The Coast Guard contends that the use of safety management systems

by all U.S. commercial vessels would result in significant benefits and

we will support the development of such programs. 46 U.S.C. 3202 states

that U.S. domestic vessels may voluntarily meet the requirements of

that Chapter, but does not provide the Coast Guard with the authority

to require such safety management systems on these U.S. domestic

vessels. Thus, the final rule has not been changed due to these

comments.

46. Editorial changes. 46 CFR Secs. 33.40-30 (a) & (b), 71.75-13

(a) & (b), 91.60-30 (a) & (b), 107.415 (a) & (b), 126.480 (a) & (b),

and 186.60-30 (a) & (b). In these sections, paragraphs (a) and (b) have

been combined to make it clear that only those vessels to which 33 CFR

part 96 applies must have the ISM certificates.

33 CFR 96.100. The public law cite was removed and replaced with 46

U.S.C. Chapter 32, which is the authority for this subparts purpose.

33 CFR 96.400(a). In the last sentence of this paragraph, the term

``delegated to'' is replaced with the term ``delegated by''. This will

correctly reflect that audits and certification functions are not

delegated ``to'' the Coast Guard. They are delegated to the recognized

organization ``by'' the Coast Guard.

33 CFR 96.470. In this section, the terms ``of recognized

organizations'' is added to clarify which Commandant's list the removal

may be from.

Incorporation by Reference

The Director of the Federal Register has approved the material in

Sec. 96.130 for incorporation by reference under 5 U.S.C. 552 and 1 CFR

part 51. Copies of the material are available from the sources listed

in that section.

Regulatory Evaluation

This final rule is not a significant regulatory action under

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

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

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

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

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

FR 11040; February 26, 1979).

The basis for the number of vessels effected by this rulemaking was

developed from the Coast Guard's Marine Safety Management System (MSMS)

database on vessel inspection, documentation and certification files.

From this source it was determined that there are 415 vessels with 163-

discreet owners that hold Safety of Life at Sea (SOLAS) certificates

and are considered to be subject to the mandatory

[[Page 67504]]

application of the ISM Code. There are 186 vessels that must comply

with this regulation by July 1, 1998, and 229 vessels that must comply

by July 1, 2002.

Costs

Three distinct processes were used to derive the costs to implement

and maintain the ISM Code. They include developing a safety management

system, certification and audit fees, and training Coast Guard and

authorized organization personnel to conduct management system audits.

The following cost estimates are a result of one set of choices

made by an organization managing relevant U.S. vessels in a normal and

prudent manner, but not having a safety management program that meets

the ISM Code. This scenario and maintenance of a safety management

system assumes the employment of a separate staff person with fleet-

wide responsibility for safety, environmental protection, and general

quality control. On-going distribution of updated safety and technical

documents is a normal company practice. The operator routinely

maintains data-processing and communication capability adequate to

handle the ship-to-shore information flow required by the ISM Code. It

was assumed that the owner or operator is responsible for more than one

vessel.

The start-up costs for initiating a safety management system is

calculated at approximately $150K per company and $2K per vessel, with

recurring expenses estimated to be $10K per vessel for system

maintenance.

To clearly describe the effected population and improve the

regulatory analysis, shipping concerns were separated into three

categories of large, medium and small sized companies. For all

companies, the cost is compiled for a 10-year period (1998-2007

inclusive). For large companies, which is estimated to be 71 of the

total 163 companies effected, the start-up cost is approximately $38.5

million. The average cost for these 71 companies per year is estimated

to be $3.8 million. For medium companies, the total cost for the 27

companies is approximately $7.8 million. The average cost for these

medium companies is estimated to be $780,000 per year. Out of a total

of 65 small companies, only 12 companies face these costs, and the

total cost is approximately $3.2 million. The average cost per year for

these 12 small companies is estimated to be $320,000.

Total Costs

Small Companies: $3.2 million.

Medium Companies: $7.8 million.

Large Companies: $38.5 million.

Total: $49.5 million (1998-2007 inclusive).

The average cost per year: $5.0 million.

Benefits

A study was conducted to identify the significant types and

circumstances of U.S. vessel accidents potentially preventable due to

ISM Code compliance. The data used to support the analysis of ISM Code

benefits was drawn from the MSMS Marine Investigation Module (MINMOD)

and vessel information files. Marine Casualty Investigation Reports

(MCIR's) were included in the study if they involved either currently-

registered U.S. vessels, that would be subject to the ISM Code or if a

Human Factors Supplement was filed in the case. A Human Factors

Supplement contains a standardized ``class'' or ``subclass''

designation of a particular human factor or factors considered by the

investigating officer to have contributed to the accident. Only MCIR

with problems considered by the Coast Guard to be preventable through

ISM Code procedures were retained. There were 214 such cases over the

three year period (1993-1995). These benefits needed to be quantified.

Five factors were used to estimate the cost of the 214 relevant

casualties. The five factors are listed below: (The dollar figures

below reflect a 1997 dollar value.)

1. Vessel and property damage: The total dollar damage value per

casualty has been estimated to be $10,000.

2. Injuries: The total dollar damage value per injury has been

estimated to be $424,174.

3. Deaths: The number of deaths or missing persons shown in the

MCIR record multiplied by $2,700,000. This factor is currently

recommended by DOT for use in regulatory impact estimation.

4. Vessel Downtime: An average vessel downtime cost of $224,337 was

arrived at by averaging all vessel damage evaluations shown in the MICR

records other than for vessels evaluated as either seaworthy or as a

total loss. This is the same factor that was used in the study

completed for the International Convention on Standards of Training,

Certification and Watchkeeping for Seafarers (STCW) rulemaking,

implementation benefits.

5. Environmental Damage: Any spillage recorded in the MCIR record

is converted to 42-gallon barrel terms and multiplied by $15,810. This

is the average cost used in the benefit study done for STCW to

represent per-barrel costs of natural resource damage, loss of

beneficial use of shoreline and cleanup for ``small'' spills.

We identified relevant accidents that occurred between 1993-1995

and developed factors to estimate their cost to society. The following

steps were used to estimate the annual reduction in future marine

casualty costs that may be expected from ISM Code implementation:

1. The projected costs were divided into three categories depending

on the cause of the casualty. The three categories were personnel

nature, any primary nature other than pollution, and pollution

casualties.

2. Based on the study's findings, a percentage range was created.

This range expressed the expectation of future casualties with the

implementation of the ISM Code final rule.

3. The STCW rulemaking creates some of the same benefits as

implementation of the ISM Code. The average annual cost reduction from

the implementation of STCW were taken into account to avoid double

counting of benefits.

4. The expected percentage impact of ISM Code implementation was

then applied to produce the expected cost reduction.

After all of these procedures were followed an estimated benefit

range was determined. The range for the economic benefit of expected

avoided costs of all relevant accident types combined was estimated to

be $6.9 to $12.8 million per year, dominated by the $6.4 to $12.2

million estimated for reduction in the costs of personnel casualties.

Cost-Benefit

The total average cost for this final rule (1998-2007) has been

estimated at $49.5 million. This is approximately $5.0 million per

year. The range for the economic benefit of expected avoided costs of

all relevant accident types combined was estimated to be $6.9 to $12.8

million per year.

The estimated cost-benefit for this final rule was calculated by

dividing the measure's present value cost by the measure's present

value benefit. The estimated cost-benefit range for this rule is 0.39

to 0.72. A rule with a cost-benefit factor of less than 1.0 implies

that efficient standards have been set by balancing the costs of

anticipated abatement against the benefits of expected avoided costs.

Therefore, this rulemaking can be deemed as cost effective.

Small Entities

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

Coast Guard

[[Page 67505]]

considered whether this rule will have a significant economic impact on

a substantial number of small entities. ``Small entities'' include

small businesses, not-for-profit organizations that are independently

owned and operated and are not dominant in their fields, and

governmental jurisdictions with populations of less than 50,000.

Our initial evaluation was that this rule would effect

approximately 72 small entities, whose U.S. small passenger vessels

operate on international voyages. For purposes of the ``small entity''

analysis, the Coast Guard considered the 72 vessels owned by 65

companies as small entities. To ease the burden on small entities 54 of

these are allowed to apply for an equivalence to these requirements to

significantly reduce their cost to develop and certify their safety

management systems, if they opt to do so. No comments or statements

were received during the NPRM on the impact of this rulemaking on small

entities. No change or amendment to the final rule was completed that

would alter the effect already stated in the NPRM on small entities.

Therefore, the Coast Guard certifies under section 605(b) of the

Regulatory Flexibility Act (5 U.S.C. 601 et seq.) that this final rule

will not have a significant economic impact on a substantial number of

small entities.

Assistance for Small Entities

In accordance with section 213(a) of the Small Business Regulatory

Enforcement Fairness Act of 1996 (Pub. L. 104-121), the Coast Guard

offered to assist small entities in understanding the rule so that they

could better evaluate its effects on them and participate in the

rulemaking process. No written requests were received by the Coast

Guard to provided assistance for the development of safety management

systems by small entities. One comment stated that the equivalence

option provided for small passenger vessels as unnecessary, if the

limiting factor is the cost incurred to be certificated by an

organization acting on behalf of the U.S. The Coast Guard disagrees.

This final rule offers an option for small entities to develop an

equivalent safety management system in concert with the cognizant Coast

Guard OCMI. This option will significantly reduce the cost for the

safety management system and will allow direct auditing and

certification by the Coast Guard. No extra fee will be required for

these owners who elect to take advantage of this option.

When developing the small passenger vessel equivalence, the Coast

Guard considered cost issues. Cost was not the only reason used by the

Coast Guard to determine that small passenger vessel operations could

benefit equally by an equivalence to the requirements provided in these

regulations. Their historical operational risk was evaluated, the

traditional policies that are used to regulate international

conventions on these vessels, and the small number of vessels within

this type of vessels which would be impacted. The Coast Guard is also

required by the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), and

the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L.

104-121), to evaluate the impact of new federal regulations and the

ability to assist these businesses. Also, what played a factor was

verbal comments received from operators of such vessels at the public

meetings held at four ports in the October and November 1995 time frame

at the initiation of this rulemaking process. The Coast Guard has seen

great success with using an equivalence option with these vessel types

and agreed that no reduction of safety would be incurred by using this

option in the enforcement of these new regulations. No change has been

made to the final rule due to this comment.

The Coast Guard is also providing these small entity owners with a

job aid on safety management system development which will help them

meet these standards and will cut the cost of their having to go to a

third party source for support and training. These small passenger

vessel owners will be provided with continued support by the local

cognizant OCMI to ensure that their vessels have a properly operating

safety management system which is certificated prior to the effective

date of these requirements.

Collection of Information

This final rule provides for a collection of information under the

Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

Information is collected to show the compliance status of

responsible persons and their U.S. vessels to the Coast Guard by

recognized organizations authorized by the Coast Guard to act on behalf

of the U.S. A responsible person must establish a safety management

system and prepare internal audit reports for the responsible person's

company and vessel(s) which demonstrate compliance with the ISM Code.

Preparation of these reports required a new information collection

request submittal to OMB.

Title 46, chapter 32 also requires that a responsible person's

company and U.S. vessel(s) possess Document of Compliance certificates

and Safety Management Certificates, respectively, as evidence of

compliance with the ISM Code. Recognized organizations authorized to

act on behalf of the U.S. and the Coast Guard will issue these

certificates. To prepare and issue these international management

certificates, an amendment to existing information collection request

2115-0056 was submitted to OMB.

Safety management systems will be externally audited and reported

on by an authorized organization through a review of the internal audit

reports prepared by a company. Since the Coast Guard reviews this

information that documents the ISM Code compliance, existing collection

request 2115-0626 also requires amendment and was submitted to OMB for

approval.

As described above, the Coast Guard submitted new and amended

information collection requests pursuant to the estimates described in

the NPRM. No comments were received to the NPRM docket regarding these

estimates. No change was made to the proposed regulatory text which

would require new information collection requests. Also, no change was

made to the final rule which would affect those estimates.

As required by 5 U.S.C. 3507(d), the Coast Guard submitted a copy

of this rule to the Office of Management and Budget (OMB) for its

review of the collection of information. OMB has approved the

collection. The section numbers are: 33 CFR 96.250, 96.320, 96.330,

96.340, 96.350, 96.360, and 46 CFR 2.01-25, 31.40-30, 71.75-13, 71.75-

20, 91.60-30, 91.60-40, 107.417, 115.925, 126.480, 175.540, 176.925,

176.930,189.60-30, 189.60-40; and the corresponding approval numbers

from OMB are OMB Control Number(s), 2115-0056; 2115-0057, and 2115-

0626, which expire on August 31, 2000.

Persons are not required to respond to a collection of information

unless it displays a currently valid OMB control number.

Federalism

The Coast Guard completed an analysis of this final rule under the

principles and criteria contained in Executive Order 12612 and has

determined that this rule does not have sufficient implications for

federalism to warrant the preparation of a Federalism Assessment.

[[Page 67506]]

Federal Preemption

Historically, the Coast Guard has inspected vessels for their

compliance with Federal regulations and international standards to

which the United States is a party that address the safety of vessels

and protection of the marine environment. These regulations implement

the provisions of the International Convention for the Safety of Life

at Sea, 1974, (SOLAS) as amended, to which the United States is a

party. As a party to this Convention, the United States has agreed to

implement its provisions for vessels flying the flag of the United

States and to apply these provisions to foreign vessels in accordance

with the enforcement regime established within the Convention. In

addition, actions by state and local governments that seek to impose

different standards than those imposed by these regulations would

frustrate the desire of Congress to impose uniform, international

standards relating to the implementation of safety management systems

for vessels when it enacted 46 U.S.C. Chapter 32. It is the Coast

Guard's opinion that the Supremacy Clause of the Constitution would

preempt state and local regulations that seek to impose different or

higher standards than those established in these regulations.

Environment

The Coast Guard considered the environmental impact of this final

rule and concluded during the rulemaking stage that under paragraph

2.B.2.e(34) of Commandant Instruction M16475.1B, this rule is

categorically excluded from further environmental documentation.

Paragraph 2.B.2.e(34)(d) categorically excludes regulations concerning

manning, documentation, measurement, inspection and equipping of

vessels. A ``Categorical Exclusion Determination'' is available in the

docket for inspection or copying where indicated under ADDRESSES.

List of Subjects

33 CFR Part 96

Administrative practice and procedure, Incorporation by reference,

Marine safety, Reporting and recordkeeping requirements, Safety

management systems, Vessels.

46 CFR Part 2

Marine safety, Reporting and recordkeeping requirements, Vessels.

46 CFR Part 31

Cargo vessels, Marine safety, Reporting and recordkeeping

requirements, Safety management systems.

46 CFR Part 71

Marine safety, Passenger vessels, Reporting and recordkeeping

requirements, Safety management systems.

46 CFR Part 91

Cargo vessels, Marine safety, Reporting and recordkeeping

requirements, Safety management systems.

46 CFR Part 107

Marine safety, Oil and gas exploration, Reporting and recordkeeping

requirements, Safety management systems, Vessels.

46 CFR Part 115

Marine safety, Passenger vessels, Reporting and recordkeeping

requirements, Safety management systems.

46 CFR Part 126

Marine safety, Offshore supply vessels, Reporting and recordkeeping

requirements, Safety management systems.

46 CFR Part 175

Marine safety, Passenger vessels, Reporting and recordkeeping

requirements, Safety management systems.

46 CFR Part 176

Marine safety, Passenger vessels, Reporting and recordkeeping

requirements, Safety management systems.

46 CFR Part 189

Marine safety, Oceanographic research vessels, Reporting and

recordkeeping requirements, Safety management systems.

For the reasons discussed in the preamble, the Coast Guard amends

33 CFR Chapter I and 46 CFR Chapter I as follows:

TITLE 33--NAVIGATION AND NAVIGABLE WATERS

1. Add part 96 to read as follows:

PART 96--RULES FOR THE SAFE OPERATION OF VESSELS AND SAFETY

MANAGEMENT SYSTEMS

Subpart A--General

Sec.

96.100 Purpose.

96.110 Who does this subpart apply to?

96.120 Definitions.

96.130 Incorporation by reference.

Subpart B--Company and Vessel Safety Management Systems

96.200 Purpose.

96.210 Who does this subpart apply to?

96.220 What makes up a safety management system?

96.230 What objectives must a safety management system meet?

96.240 What functional requirements must a safety management system

meet?

96.250 What documents and reports must a safety management system

have?

Subpart C--How Will Safety Management Systems Be Certificated and

Enforced?

96.300 Purpose.

96.310 Who does this subpart apply to?

96.320 What is involved to complete a safety management audit and

when is it required to be completed?

96.330 Document of Compliance certificate: what is it and when is

it needed?

96.340 Safety Management Certificate: what is it and when is it

needed?

96.350 Interim Document of Compliance certificate: what is it and

when can it be used?

96.360 Interim Safety Management Certificate: what is it and when

can it be used?

96.370 What are the requirements for vessels of countries not party

to Chapter IX of SOLAS?

96.380 How will the Coast Guard handle compliance and enforcement

of these regulations?

96.390 When will the Coast Guard deny entry into a U.S. port?

Subpart D--Authorization of Recognized Organizations To Act on Behalf

of the U.S.

96.400 Purpose.

96.410 Who does this subpart apply to?

96.420 What authority may an organization ask for under this

regulation?

96.430 How does an organization submit a request to be authorized?

96.440 How will the Coast Guard decide whether to approve an

organization's request to be authorized?

96.450 What happens if the Coast Guard disapproves an

organization's request to be authorized?

96.460 How will I know what the Coast Guard requires of my

organization if my organization receives authorization?

96.470 How does the Coast Guard terminate an organization's

authorization?

96.480 What is the status of a certificate if the issuing

organization has its authority terminated?

96.490 What further obligations exist for my organization if the

Coast Guard terminates its authorization?

96.495 How can I appeal a decision made by an authorized

organization?

Authority: 46 U.S.C. 3201 et. seq.; 46 U.S.C. 3103; 46 U.S.C.

3316, 33 U.S.C. 1231; 49 CFR 1.45, 49 CFR 1.46.

Subpart A--General

Sec. 96.100 Purpose.

This subpart implements Chapter IX of the International Convention

for the Safety of Life at Sea (SOLAS), 1974,

[[Page 67507]]

International Management Code for the Safe Operation of Ships and for

Pollution Prevention (International Safety Management (ISM) Code), as

required by 46 U.S.C. Chapter 32.

Note: Chapter IX of SOLAS is available from the International

Maritime Organization, Publication Section, 4 Albert Embankment,

London, SE1 75R, United Kingdom, Telex 23588. Please include

document reference number ``IMO-190E'' in your request.

Sec. 96.110 Who does this subpart apply to?

This subpart applies to you if--

(a) You are a responsible person who owns a U.S. vessel(s) and must

comply with Chapter IX of SOLAS;

(b) You are a responsible person who owns a U.S. vessel(s) that is

not required to comply with Chapter IX of SOLAS, but requests

application of this subpart;

(c) You are a responsible person who owns a foreign vessel(s)

engaged on a foreign voyage, bound for ports or places under the

jurisdiction of the U.S., which must comply with Chapter IX of SOLAS;

or

(d) You are a recognized organization applying for authorization to

act on behalf of the U.S. to conduct safety management audits and issue

international convention certificates.

Sec. 96.120 Definitions.

(a) Unless otherwise stated in this section, the definitions in

Chapter IX, Regulation 1 of the International Convention for the Safety

of Life at Sea (SOLAS) apply to this part.

(b) As used in this part--

Administration means the Government of the State whose flag the

ship is entitled to fly.

Authorized Organization Acting on behalf of the U.S. means an

organization that is recognized by the Commandant of the U.S. Coast

Guard under the minimum standards of subparts A and B of 46 CFR part 8,

and has been authorized under this section to conduct certain actions

and certifications on behalf of the United States.

Captain of the Port (COTP) means the U.S. Coast Guard officer as

described in 33 CFR 6.01-3, commanding a Captain of the Port zone

described in 33 CFR part 3, or that person's authorized representative.

Commandant means the Commandant, U.S. Coast Guard.

Company means the owner of a vessel, or any other organization or

person such as the manager or the bareboat charterer of a vessel, who

has assumed the responsibility for operation of the vessel from the

shipowner and who on assuming responsibility has agreed to take over

all the duties and responsibilities imposed by this part or the ISM

Code.

Designated person means a person or persons designated in writing

by the responsible person who monitors the safety management system of

the company and vessel and has:

(1) Direct access to communicate with the highest levels of the

company and with all management levels ashore and aboard the company's

vessel(s);

(2) Responsibility to monitor the safety and environmental aspects

of the operation of each vessel; and

(3) Responsibility to ensure there are adequate support and shore-

based resources for vessel(s) operations.

Document of Compliance means a certificate issued to a company or

responsible person that complies with the requirements of this part or

the ISM Code.

International Safety Management (ISM) Code means the International

Management Code for the Safe Operation of Ships and Pollution

Prevention, Chapter IX of the Annex to the International Convention for

the Safety of Life at Sea (SOLAS), 1974.

Non-conformity means an observed situation where objective evidence

indicates the non-fulfillment of a specified requirement.

Major non-conformity means an identifiable deviation which poses a

serious threat to personnel or vessel safety or a serious risk to the

environment and requires immediate corrective action; in addition, the

lack of effective and systematic implementation of a requirement of the

ISM Code is also considered a major non-conformity.

Objective Evidence means quantitative or qualitative information,

records or statements of fact pertaining to safety or to the existence

and implementation of a safety management system element, which is

based on observation, measurement or test and which can be verified.

Officer In Charge, Marine Inspection (OCMI) means the U.S. Coast

Guard officer as described in 46 CFR 1.01-15(b), in charge of an

inspection zone described in 33 CFR part 3, or that person's authorized

representative.

Recognized organization means an organization which has applied and

been recognized by the Commandant of the Coast Guard to meet the

minimum standards of 46 CFR part 8, subparts A and B.

Responsible person means--

(1) The owner of a vessel to whom this part applies, or

(2) Any other person that--

(i) has assumed the responsibility from the owner for operation of

the vessel to which this part applies; and

(ii) agreed to assume, with respect to the vessel, responsibility

for complying with all the requirements of this part.

(3) A responsible person may be a company, firm, corporation,

association, partnership or individual.

Safety management audit means a systematic and independent

examination to determine whether the safety management system

activities and related results comply with planned arrangements and

whether these arrangements are implemented effectively and are suitable

to achieve objectives.

Safety Management Certificate means a document issued to a vessel

which signifies that the responsible person or its company, and the

vessel's shipboard management operate in accordance with the approved

safety management system.

Safety Management System means a structured and documented system

enabling Company and vessel personnel to effectively implement the

responsible person's safety and environmental protection policies.

SOLAS means the International Convention for the Safety of Life at

Sea, 1974, as amended.

Vessel engaged on a foreign voyage means a vessel to which this

part applies that is--

(1) Arriving at a place under the jurisdiction of the United States

from a place in a foreign country;

(2) Making a voyage between places outside the United States; or

(3) Departing from a place under the jurisdiction of the United

States for a place in a foreign country.

Sec. 96.130 Incorporation by reference.

(a) The Director of the Federal Register approves certain material

that is incorporated by reference into this subpart under 5 U.S.C.

552(a) and 1 CFR part 51. To enforce any edition other than that

specified in paragraph (b) of this section, the Coast Guard must

publish notice of the change in the Federal Register and the material

must be available to the public. You may inspect all material at the

Office of the Federal Register, 800 North Capitol St., NW., Suite 700,

Washington, DC and at the U.S. Coast Guard, Office of Design and

Engineering Standards (G-MSE), 2100 Second St., SW., Washington, DC

20593-0001, and receive it from the source listed in paragraph (b) of

this section.

(b) The material approved for incorporation by reference in this

subpart and the sections affected are as follows:

[[Page 67508]]

American National Standards Institute (ANSI)--11 West 42nd St., New

York, NY 10036.

ANSI/ASQC Q9001-1994, Quality Systems--Model for Quality Assurance in

Design, Development, Production, Installation, and Servicing, 1994--

96.430

International Maritime Organization IMO--4 Albert Embankment,

London, SE1 7SR, United Kingdom.

Resolution A.741(18), International Management Code for the Safe

Operation of Ships and for Pollution Prevention, November 4, 1993--

96.220, 96.370

Resolution A.788 (19), Guidelines on Implementation of the

International Safety Management (ISM) Code by Administrations, November

23, 1995--96.320, 96.440

Resolution A.739(18), Guidelines for the Authorization of Organizations

Acting on Behalf of the Administration, November 4, 1993--96.440

Subpart B--Company and Vessel Safety Management Systems

Sec. 96.200 Purpose.

This subpart establishes the minimum standards that the safety

management system of a company and its U.S. flag vessel(s) must meet

for certification to comply with the requirements of 46 U.S.C. 3201-

3205 and Chapter IX of SOLAS, 1974. It also permits companies with U.S.

flag vessels that are not required to comply with this part to

voluntarily develop safety management systems which can be certificated

to standards consistent with Chapter IX of SOLAS.

Sec. 96.210 Who does this subpart apply to?

(a) This subpart applies--

(1) To a responsible person who owns or operates a U.S. vessel(s)

engaged on a foreign voyage which meet the conditions of paragraph

(a)(2) of this section;

(2) To all U.S. vessels engaged on a foreign voyage that are--

(i) A vessel transporting more than 12 passengers; or

(ii) A tanker, a bulk freight vessel, a freight vessel or a self-

propelled mobile offshore drilling unit (MODU) of 500 gross tons or

more; and

(3) To all foreign vessels engaged on a foreign voyage, bound for

ports or places under the jurisdiction of the U.S., and subject to

Chapter IX of SOLAS.

(b) This subpart does not apply to--

(1) A barge;

(2) A recreational vessel not engaged in commercial service;

(3) A fishing vessel;

(4) A vessel operating only on the Great Lakes or its tributary and

connecting waters; or

(5) A public vessel, which includes a U.S. vessel of the National

Defense Reserve Fleet owned by the U.S. Maritime Administration and

operated in non-commercial service.

(c) Any responsible person and their company who owns and operates

a U.S. flag vessel(s) which does not meet the conditions of paragraph

(a), may voluntarily meet the standards of this part and Chapter IX of

SOLAS and have their safety management systems certificated.

(d) The compliance date for the requirements of this part are--

(1) On or after July 1, 1998, for--

(i) Vessels transporting more than 12 passengers engaged on a

foreign voyage; or

(ii) Tankers, bulk freight vessels, or high speed freight vessels

of at least 500 gross tons or more, engaged on a foreign voyage.

(2) On or after July 1, 2002, for other freight vessels and self-

propelled mobile offshore drilling units (MODUs) of at least 500 gross

tons or more, engaged on a foreign voyage.

Sec. 96.220 What makes up a safety management system?

(a) The safety management system must document the responsible

person's--

(1) Safety and pollution prevention policy;

(2) Functional safety and operational requirements;

(3) Recordkeeping responsibilities; and

(4) Reporting responsibilities.

(b) A safety management system must also be consistent with the

functional standards and performance elements of IMO Resolution

A.741(18).

Sec. 96.230 What objectives must a safety management system meet?

The safety management system must:

(a) Provide for safe practices in vessel operation and a safe work

environment onboard the type of vessel the system is developed for;

(b) Establish and implement safeguards against all identified

risks;

(c) Establish and implement actions to continuously improve safety

management skills of personnel ashore and aboard vessels, including

preparation for emergencies related to both safety and environmental

protection; and

(d) Ensure compliance with mandatory rules and regulations, taking

into account relevant national and international regulations,

standards, codes and maritime industry guidelines, when developing

procedures and policies for the safety management system.

Sec. 96.240 What functional requirements must a safety management

system meet?

The functional requirements of a safety management system must

include--

(a) A written statement from the responsible person stating the

company's safety and environmental protection policy;

(b) Instructions and procedures to provide direction for the safe

operation of the vessel and protection of the environment in compliance

with the applicable U.S. Code of Federal Regulations, and international

conventions to which the U.S. is a party (SOLAS, MARPOL, etc.);

(c) Documents showing the levels of authority and lines of

communication between shoreside and shipboard personnel;

(d) Procedures for reporting accidents, near accidents, and non-

conformities with provisions of the company's and vessel's safety

management system, and the ISM Code;

(e) Procedures to prepare for and respond to emergency situations

by shoreside and shipboard personnel;

(f) Procedures for internal audits on the operation of the company

and vessel(s) safety management system; and

(g) Procedures and processes for management review of company

internal audit reports and correction of non-conformities that are

reported by these or other reports.

Sec. 96.250 What documents and reports must a safety management system

have?

The documents and reports required for a safety management system

under Sec. 96.330 or Sec. 96.340 must include the written documents and

reports itemized in Table 96.250. These documents and reports must be

available to the company's shore-based and vessel(s)-based personnel:

[[Page 67509]]

Table 96.250.--Safety Management System Documents and Reports

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

Type of documents and reports Specific requirements

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

(a) Safety and environmental policy (1) Meet the objectives of Sec.

statements. 96.230; and

(2) Are carried out and kept

current at all levels of the

company;

(b) Company responsibilities and (1) The owners name and details

authority statements. of responsibility for

operation of the company and

vessel(s);

(2) Name of the person

responsible for operation of

the company and vessel(s), if

not the owner;

(3) Responsibility, authority

and interrelations of all

personnel who manage, perform,

and verify work relating to

and affecting the safety and

pollution prevention

operations of the company and

vessel(s); and

(4) A statement describing the

company's responsibility to

ensure adequate resources and

shore-based support are

provided to enable the

designated person or persons

to carry out the

responsibilities of this

subpart.

(c) Designation in writing of a person (1) Have direct access to

or persons to monitor the safety communicate with the highest

management system for the company and levels of the company and with

vessel(s). all management levels ashore

and aboard the company's

vessel(s);

(2) Have the written

responsibility to monitor the

safety and environmental

aspects of the operation of

each vessel; and

(3) Have the written

responsibility to ensure there

are adequate support and shore-

based resources for vessel(s)

operations.

(d) Written statements that define the (1) Carry out the company's

Master's responsibilities and safety and environmental

authorities. policies;

(2) Motivate the vessel's crew

to observe the safety

management system policies;

(3) Issue orders and

instructions in a clear and

simple manner;

(4) Make sure that specific

requirements are carried out

by the vessel's crew and shore-

based resources; and

(5) Review the safety

management system and report

non-conformities to shore-

based management.

(e) Written statements that the Master (1) Ability to make decisions

has overriding responsibility and about safety and environmental

authority to make vessel decisions. pollution; and

(2) Ability to request the

company's help when necessary.

(f) Personnel procedures and resources (1) Masters of vessels are

which are available ashore and aboard properly qualified for

ship.. command;

(2) Masters of vessels know the

company's safety management

system;

(3) Owners or companies provide

the necessary support so that

the Master's duties can be

safely performed;

(4) Each vessel is properly

crewed with qualified,

certificated and medically fit

seafarers complying with

national and international

requirements;

(5) New personnel and personnel

transferred to new assignments

involving safety and

protection of the environment

are properly introduced to

their duties;

(6) Personnel involved with the

company's safety management

system have an adequate

understanding of the relevant

rules, regulations, codes and

guidelines;

(7) Needed training is

identified to support the

safety management system and

ensure that the training is

provided for all personnel

concerned;

(8) Communication of relevant

procedures for the vessel's

personnel involved with the

safety management system is in

the language(s) understood by

them; and

(9) Personnel are able to

communicate effectively when

carrying out their duties as

related to the safety

management system.

(g) Vessel safety and pollution (1) Define tasks; and

prevention operation plans and (2) Assign qualified personnel

instructions for key shipboard to specific tasks.

operations..

(h) Emergency preparedness procedures.. (1) Identify, describe and

direct response to potential

emergency shipboard

situations;

(2) Set up programs for drills

and exercises to prepare for

emergency actions; and

(3) Make sure that the

company's organization can

respond at anytime, to

hazards, accidents and

emergency situations involving

their vessel(s).

(i) Reporting procedures on required (1) Report non-conformities of

actions.. the safety management system;

(2) Report accidents;

(3) Report hazardous situations

to the owner or company; and

(4) Make sure reported items

are investigated and analyzed

with the objective of

improving safety and pollution

prevention.

[[Page 67510]]

(j) Vessel maintenance procedures. (1) Inspect vessel's equipment,

(These procedures verify that a hull, and machinery at

company's vessel(s) is maintained in appropriate intervals;

conformity with the provisions of (2) Report any non-conformity

relevant rules and regulations, with or deficiency with its

any additional requirements which may possible cause, if known;

be established by the company.). (3) Take appropriate corrective

actions;

(4) Keep records of these

activities;

(5) Identify specific equipment

and technical systems that may

result in a hazardous

situation if a sudden

operational failure occurs;

(6) Identify measures that

promote the reliability of the

equipment and technical

systems identified in

paragraph (j)(5), and

regularly test standby

arrangements and equipment or

technical systems not in

continuous use; and

(7) Include the inspections

required by this section into

the vessel's operational

maintenance routine.

(k) Safety management system document (1) Procedures which establish

and data maintenance. and maintain control of all

documents and data relevant to

the safety management system.

(2) Documents are available at

all relevant locations, i.e.,

each vessel carries on board

all documents relevant to that

vessels operation;

(3) Changes to documents are

reviewed and approved by

authorized personnel; and

(4) Outdated documents are

promptly removed.

(l) Safety management system internal (1) Periodic evaluation of the

audits which verify the safety and safety management system's

pollution prevention activities. efficiency and review of the

system in accordance with the

established procedures of the

company, when needed;

(2) Types and frequency of

internal audits, when they are

required, how they are

reported, and possible

corrective actions, if

necessary;

(3) Determining factors for the

selection of personnel,

independent of the area being

audited, to complete internal

company and vessel audits; and

(4) Communication and reporting

of internal audit findings for

critical management review and

to ensure management personnel

of the area audited take

timely and corrective action

on non-conformities or

deficiencies found.

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

Note: The documents and reports required by this part are for the

purpose of promoting safety of life and property at sea, as well as

protection of the environment. The documents and reports are intended

to ensure the communication and understanding of company and vessel

safety management systems, which will allow a measure of the systems

effectiveness and its responsible person to continuously improve the

system and safety the system provides.

Subpart C--How Will Safety Management Systems Be Certificated and

Enforced?

Sec. 96.300 Purpose.

This subpart establishes the standards for the responsible person

of a company and its vessel(s) to obtain the required and voluntary,

national and international certification for the company's and vessel's

safety management system.

Sec. 96.310 Who does this subpart apply to?

This subpart applies:

(a) If you are a responsible person who owns a vessel(s) registered

in the U.S. and engaged on a foreign voyage(s), or holds certificates

or endorsement of such voyages;

(b) If you are a responsible person who owns a vessel(s) registered

in the U.S. and volunteer to meet the standards of this part and

Chapter IX of SOLAS;

(c) To all foreign vessels engaged on a foreign voyage, bound for

ports or places under the jurisdiction of the U.S., and subject to

Chapter IX of SOLAS; or

(d) If you are a recognized organization authorized by the U.S. to

complete safety management audits and certification required by this

part.

Sec. 96.320 What is involved to complete a safety management audit and

when is it required to be completed?

(a) A safety management audit is any of the following:

(1) An initial audit which is carried out before a Document of

Compliance certificate or a Safety Management Certificate is issued;

(2) A renewal audit which is carried out before the renewal of a

Document of Compliance certificate or a Safety Management Certificate;

(3) Periodic audits including--

(i) An annual verification audit, as described in Sec. 96.330(f) of

this part, and

(ii) An intermediate verification audit, as described in

Sec. 96.340(e)(2) of this part.

(b) A satisfactory audit means that the auditor(s) agrees that the

requirements of this part are met, based on review and verification of

the procedures and documents that make up the safety management system.

(c) Actions required during safety management audits for a company

and their U.S. vessel(s) are--

(1) Review and verify the procedures and documents that make up a

safety management system, as defined in subpart B of this part.

(2) Make sure the audit complies with this subpart and is

consistent with IMO Resolution A.788(19), Guidelines on Implementation

of the International Safety Management (ISM) Code by Administrations.

(3) Make sure the audit is carried out by a team of Coast Guard

auditors or auditors assigned by a recognized organization authorized

to complete such actions by subpart D of this part.

(d) Safety management audits for a company and their U.S. vessel(s)

are required--

(1) Before issuing or renewing a Document of Compliance

certificate, and to keep a Document of Compliance certificate valid, as

described in Secs. 96.330 and 96.340 of this part.

(2) Before issuing or renewing a Safety Management Certificate, and

to maintain the validity of a Safety

[[Page 67511]]

Management Certificate, as described in Sec. 96.340 of this part.

However, any safety management audit for the purpose of verifying a

vessel's safety management system will not be scheduled or conducted

for a company's U.S. vessel unless the company first has undergone a

safety management audit of the company's safety management system, and

has received its Document of Compliance certificate.

(e) Requests for all safety management audits for a company and its

U.S. vessel(s) must be communicated--

(1) By a responsible person directly to a recognized organization

authorized by the U.S.

(2) By a responsible person within the time limits for an annual

verification audit, described in Sec. 96.330(f) of this part, and for

an intermediate verification audit, described in Sec. 96.340(e)(2) of

this part. If he or she does not make a request for a safety management

annual or verification audit for a valid Document of Compliance

certificate issued to a company or a valid Safety Management

Certificate issued to a vessel, this is cause for the Coast Guard to

revoke the certificate as described in Secs. 96.330 and 96.340 of this

part.

(f) If a non-conformity with a safety management system is found

during an audit, it must be reported in writing by the auditor:

(1) For a company's safety management system audit, to the

company's owner; and

(2) For a vessel's safety management system audit, to the company's

owner and vessel's Master.

Sec. 96.330 Document of Compliance certificate: what is it and when is

it needed?

(a) You must hold a valid Document of Compliance certificate if you

are the responsible person who, or company which, owns a U.S. vessel

engaged on foreign voyages, carrying more than 12 passengers, or is a

tanker, bulk freight vessel, freight vessel, or a self-propelled mobile

offshore drilling unit of 500 gross tons or more.

(b) You may voluntarily hold a valid Document of Compliance

certificate, if you are a responsible person who, or a company which,

owns a U.S. vessel not included in paragraph (a) of this section.

(c) You will be issued a Document of Compliance certificate only

after you complete a satisfactory safety management audit as described

in Sec. 96.320 of this part.

(d) All U.S. and foreign vessels that carry more than 12 passengers

or a tanker, bulk freight vessel, freight vessel, or a self-propelled

mobile offshore drilling unit of 500 gross tons or more, must carry a

valid copy of the company's Document of Compliance certificate onboard

when on a foreign voyage.

(e) A valid Document of Compliance certificate covers the type of

vessel(s) on which a company's safety management system initial safety

management audit was based. The validity of the Document of Compliance

certificate may be extended to cover additional types of vessels after

a satisfactory safety management audit is completed on the company's

safety management system which includes those additional vessel types.

(f) A Document of Compliance certificate is valid for 60 months.

The company's safety management system must be verified annually by the

Coast Guard or by an authorized organization acting on behalf of the

U.S. through a safety management verification audit, within three

months before or after the certificate's anniversary date.

(g) Only the Coast Guard may revoke a Document of Compliance

certificate from a company which owns a U.S. vessel. The Document of

Compliance certificate may be revoked if--

(1) The annual safety management audit and system verification

required by paragraph (f) of this section is not completed by the

responsible person; or

(2) Major non-conformities are found in the company's safety

management system during a safety management audit or other related

survey or inspection being completed by the Coast Guard or the

recognized organization chosen by the company or responsible person.

(3) The Coast Guard or an authorized organization acting on its

behalf is denied, or restricted access to, any vessel, record or

personnel of the company, at any time necessary to evaluate the safety

management system.

(h) When a company's valid Document of Compliance certificate is

revoked by the Coast Guard, a satisfactory safety management audit must

be completed before a new Document of Compliance certificate for the

company's safety management system can be reissued.

Sec. 96.340 Safety Management Certificate: what is it and when is it

needed?

(a) Your U.S. vessel engaged on a foreign voyage must hold a valid

Safety Management Certificate if it carries more than 12 passengers, or

if it is a tanker, bulk freight vessel, freight vessel, or a self-

propelled mobile offshore drilling unit of 500 gross tons or more.

(b) Your U.S. vessel may voluntarily hold a valid Safety Management

Certificate even if your vessel is not required to by paragraph (a) of

this section.

(c) Your U.S. vessel may only be issued a Safety Management

Certificate or have it renewed when your company holds a valid Document

of Compliance certificate issued under Sec. 96.330 of this part and the

vessel has completed a satisfactory safety management audit of the

vessel's safety management system set out in Sec. 96.320 of this part.

(d) A copy of your company's valid Document of Compliance

certificate must be on board all U.S. and foreign vessels which carry

more than 12 passengers, and must be onboard a tanker, bulk freight

vessel, freight vessel, or a self-propelled mobile offshore drilling

unit of 500 gross tons or more, when engaged on foreign voyages or

within U.S. waters.

(e) A Safety Management Certificate is valid for 60 months. The

validity of the Safety Management Certificate is based on--

(1) A satisfactory initial safety management audit;

(2) A satisfactory intermediate verification audit requested by the

vessel's responsible person, completed between the 24th and 36th month

of the certificate's period of validity; and

(3) A vessel's company holding a valid Document of Compliance

certificate. When a company's Document of Compliance certificate

expires or is revoked, the Safety Management Certificate for the

company-owned vessel(s) is invalid.

(f) Renewal of a Safety Management Certificate requires the

completion of a satisfactory safety management system audit which meets

all of the requirements of subpart B in this part. A renewal of a

Safety Management Certificate cannot be started unless the company

which owns the vessel holds a valid Document of Compliance certificate.

(g) Only the Coast Guard may revoke a Safety Management Certificate

from a U.S. vessel. The Safety Management Certificate will be revoked

if--

(1) The vessel's responsible person has not completed an

intermediate safety management audit required by paragraph (e)(2) of

this section; or

(2) Major non-conformities are found in the vessel's safety

management system during a safety management audit or other related

survey or inspection being completed by the Coast Guard or the

recognized organization chosen by the vessel's responsible person.

[[Page 67512]]

Sec. 96.350 Interim Document of Compliance certificate: what is it and

when can it be used?

(a) An Interim Document of Compliance certificate may be issued to

help set up a company's safety management system when--

(1) A company is newly set up or in transition from an existing

company into a new company; or

(2) A new type of vessel is added to an existing safety management

system and Document of Compliance certificate for a company.

(b) A responsible person for a company operating a U.S. vessel(s)

that meets the requirements of paragraph (a) of this section, may send

a request to a recognized organization authorized to act on behalf of

the U.S. to receive an Interim Document of Compliance certificate that

is valid for a period up to 12 months. To be issued the Interim

Document of Compliance certificate the vessel's company must--

(1) Demonstrate to an auditor that the company has a safety

management system that meets Sec. 96.230 of this part; and

(2) Provide a plan for full implementation of a safety management

system within the period that the Interim Document of Compliance

certificate is valid.

Sec. 96.360 Interim Safety Management Certificate: what is it and when

can it be used?

(a) A responsible person may apply for an Interim Safety Management

Certificate when--

(1) A responsible person takes delivery of a new U.S. vessel; or

(2) Takes responsibility for the management of a U.S. vessel which

is new to the responsible person or their company.

(b) An Interim Safety Management Certificate is valid for 6 months.

It may be issued to a U.S. vessel which meets the conditions of

paragraph (a) of this section, when--

(1) The company's valid Document of Compliance certificate or

Interim Document of Compliance certificate applies to that vessel type;

(2) The company's safety management system for the vessel includes

the key elements of a safety management system, set out in Sec. 96.220,

applicable to this new type of vessel;

(3) The company's safety management system has been assessed during

the safety management audit to issue the Document of Compliance

certificate or demonstrated for the issuance of the Interim Document of

Compliance certificate;

(4) The Master and senior officers of the vessel are familiar with

the safety management system and the planned set up arrangements;

(5) Written documented instructions have been extracted from the

safety management system and given to the vessel prior to sailing;

(6) The company plans an internal audit of the vessel within three

months; and

(7) The relevant information from the safety management system is

written in English, and in any other language understood by the

vessel's personnel.

Sec. 96.370 What are the requirements for vessels of countries not

party to Chapter IX of SOLAS?

(a) Each foreign vessel which carries more than 12 passengers, or

is a tanker, bulk freight vessel, freight vessel, or self-propelled

mobile offshore drilling unit of 500 gross tons or more, operated in

U.S. waters, under the authority of a country not a party to Chapter IX

of SOLAS must--

(1) Have on board valid documentation showing that the vessel's

company has a safety management system which was audited and assessed,

consistent with the International Safety Management Code of IMO

Resolution A.741(18);

(2) Have on board valid documentation from a vessel's Flag

Administration showing that the vessel's safety management system was

audited and assessed to be consistent with the International Safety

Management Code of IMO Resolution A.741(18); or

(3) Show that evidence of compliance was issued by either a

government that is party to SOLAS or an organization recognized to act

on behalf of the vessel's Flag Administration.

(b) Evidence of compliance must contain all of the information in,

and have substantially the same format as a--

(1) Document of Compliance certificate; and

(2) Safety Management Certificate.

(c) Failure to comply with this section will subject the vessel to

the compliance and enforcement procedures of Sec. 96.380 of this part.

Sec. 96.380 How will the Coast Guard handle compliance and enforcement

of these regulations?

(a) While operating in waters under the jurisdiction of the United

States, the Coast Guard may board a vessel to determine that--

(1) Valid copies of the company's Document of Compliance

certificate and Safety Management Certificate are on board, or evidence

of the same for vessels from countries not party to Chapter IX of

SOLAS; and

(2) The vessel's crew or shore-based personnel are following the

procedures and policies of the safety management system while operating

the vessel or transferring cargoes.

(b) A foreign vessel that does not comply with these regulations,

or one on which the vessel's condition or use of its safety management

system do not substantially agree with the particulars of the Document

of Compliance certificate, Safety Management Certificate or other

required evidence of compliance, may be detained by order of the COTP

or OCMI. This may occur at the port or terminal where the violation is

found until, in the opinion of the detaining authority, the vessel can

go to sea without presenting an unreasonable threat of harm to the

port, the marine environment, the vessel or its crew. The detention

order may allow the vessel to go to another area of the port, if

needed, rather than stay at the place where the violation was found.

(c) If any vessel that must comply with this part or with the ISM

Code does not have a Safety Management Certificate and a copy of its

company's Document of Compliance certificate on board, a vessel owner,

charterer, managing operator, agent, Master, or any other individual in

charge of the vessel that is subject to this part, may be liable for a

civil penalty under 46 U.S.C. 3318. For foreign vessels, the Coast

Guard may request the Secretary of the Treasury to withhold or revoke

the clearance required by 46 U.S.C. App. 91. The Coast Guard may ask

the Secretary to permit the vessel's departure after the bond or other

surety is filed.

Sec. 96.390 When will the Coast Guard deny entry into a U.S. port?

(a) Except for a foreign vessel entering U.S. waters under force

majeure, no vessel shall enter any port or terminal of the U.S. without

a safety management system that has been properly certificated to this

subpart or to the requirements of Chapter IX of SOLAS if--

(1) It is engaged on a foreign voyage; and

(2) It is carrying more than 12 passengers, or a tanker, bulk

freight vessel, freight vessel, or self-propelled mobile offshore

drilling unit of 500 gross tons or more.

(b) The cognizant COTP will deny entry of a vessel into a port or

terminal under the authority of 46 U.S.C. 3204(c), to any vessel that

does not meet the requirements of paragraph (a) of this section.

[[Page 67513]]

Subpart D--Authorization of Recognized Organizations To Act on

Behalf of the U.S.

Sec. 96.400 Purpose.

(a) This subpart establishes criteria and procedures for

organizations recognized under 46 CFR part 8, subparts A and B, to be

authorized by the Coast Guard to act on behalf of the U.S. The

authorization is necessary in order for a recognized organization to

perform safety management audits and certification functions delegated

by the Coast Guard as described in this part.

(b) To receive an up-to-date list of recognized organizations

authorized to act under this subpart, send a self-addressed, stamped

envelope and written request to the Commandant (G-MSE), 2100 Second

Street SW., Washington, DC 20593-0001.

Sec. 96.410 Who does this regulation apply to?

This subpart applies to all organizations recognized by the U.S.

under 46 CFR part 8, subpart A and B, who wish to seek authorization to

conduct safety management audits and issue relevant international

safety certificates under the provisions of the ISM Code and voluntary

certificates on behalf of the U.S.

Sec. 96.420 What authority may an organization ask for under this

regulation?

(a) An organization may request authorization to conduct safety

management audits and to issue the following certificates:

(1) Safety Management Certificate;

(2) Document of Compliance certificate;

(3) Interim Safety Management Certificate; and

(4) Interim Document of Compliance certificate.

(b) [Reserved]

Sec. 96.430 How does an organization submit a request to be

authorized?

(a) A recognized organization must send a written request for

authorization to the Commandant (G-MSE), Office of Design and

Engineering Standards, 2100 Second Street SW, Washington, DC 20593-

0001. The request must include the following:

(1) A statement describing what type of authorization the

organization seeks;

(2) Documents showing that--

(i) The organization has an internal quality system with written

policies, procedures and processes that meet the requirements in

Sec. 96.440 of this part for safety management auditing and

certification; or

(ii) The organization has an internal quality system based on ANSI/

ASQC C9001 for safety management auditing and certification; or

(iii) The organization has an equivalent internal quality standard

system recognized by the Coast Guard to complete safety management

audits and certification.

(3) A list of the organization's exclusive auditors qualified to

complete safety management audits and their operational area; and

(4) A written statement that the procedures and records of the

recognized organization regarding its actions involving safety

management system audits and certification are available for review

annually and at any time deemed necessary by the Coast Guard.

(b) If the organization is a foreign classification society that

has been recognized under 46 CFR part 8, subparts A and B, and wishes

to apply for authorization under this part, it must demonstrate the

reciprocity required by 46 U.S.C. 3316 for ISM Code certification. The

organization must provide, with its request for authorization an

affidavit from the government of the country in which the

classification society is headquartered. This affidavit must provide a

list of authorized delegations by the flag state of the administration

of the foreign classification society's country to the American Bureau

of Shipping, and indicate any conditions related to the delegated

authority. If this affidavit is not received with a request for

authorization from a foreign classification society, the request for

authorization will be disapproved and returned by the Coast Guard.

(c) Upon the satisfactory completion of the Coast Guard's

evaluation of a request for authorization, the organization will be

visited for an evaluation as described in Sec. 96.440(b) of this part.

Sec. 96.440 How will the Coast Guard decide whether to approve an

organization's request to be authorized?

(a) First, the Coast Guard will evaluate the organization's request

for authorization and supporting written materials, looking for

evidence of the following--

(1) The organization's clear assignment of management duties;

(2) Ethical standards for managers and auditors;

(3) Procedures for auditor training, qualification, certification,

and requalification that are consistent with recognized industry

standards;

(4) Procedures for auditing safety management systems that are

consistent with recognized industry standards and IMO Resolution

A.788(19);

(5) Acceptable standards for internal auditing and management

review;

(6) Record-keeping standards for safety management auditing and

certification;

(7) Methods for reporting non-conformities and recording completion

of remedial actions;

(8) Methods for certifying safety management systems;

(9) Methods for periodic and intermediate audits of safety

management systems;

(10) Methods for renewal audits of safety management systems;

(11) Methods for handling appeals; and

(12) Overall procedures consistent with IMO Resolution A.739(18),

``Guidelines for the Authorization of Organizations Acting on Behalf of

the Administration.''

(b) After a favorable evaluation of the organization's written

request, the Coast Guard will arrange to visit the organization's

corporate offices and port offices for an on-site evaluation of

operations.

(c) When a request is approved, the recognized organization and the

Coast Guard will enter into a written agreement. This agreement will

define the scope, terms, conditions and requirements of the

authorization. Conditions of this agreement are found in Sec. 96.460 of

this part.

Sec. 96.450 What happens if the Coast Guard disapproves an

organization's request to be authorized?

(a) The Coast Guard will write to the organization explaining why

it did not meet the criteria for authorization.

(b) The organization may then correct the deficiencies and reapply.

Sec. 96.460 How will I know what the Coast Guard requires of my

organization if my organization receives authorization?

(a) Your orga

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