[Federal Register Volume 81, Number 89 (Monday, May 9, 2016)]
[Rules and Regulations]
[Pages 27992-28018]
[FR Doc No: 2016-10725]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

33 CFR Parts 97 and 160

46 CFR Part 97

[Docket No. USCG-2000-7080]
RIN 1625-AA25 [Formerly RIN 2115-AF97]

Cargo Securing Manuals

AGENCY: Coast Guard, DHS.

ACTION: Interim rule and request for comment.

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SUMMARY: The Coast Guard is issuing an interim rule to require U.S. and
foreign self-propelled cargo vessels of 500 gross tons or more,
traveling on international voyages and carrying cargo that is other
than solid or liquid bulk cargo, to have cargo securing manuals (CSMs)
on board. The rule also requires those vessels to comply with certain
provisions of the International Convention for the Safety of Life at
Sea, 1974 as amended (SOLAS), authorizes recognized classification
societies or other approval authorities to review and approve CSMs on
behalf of the Coast Guard; and prescribes when and how

the loss or jettisoning of cargo at sea must be reported.
    The Coast Guard requests public comment on its intention to extend,
in a subsequent final rule, this interim rule's requirement for vessel
CSMs to self-propelled cargo vessels under 500 gross tons, if these
vessels carry dangerous goods in packaged form on international
voyages. This interim rule promotes the Coast Guard's maritime safety
and stewardship (environmental protection) missions, helps fulfill U.S.
treaty obligations, and could help prevent or mitigate the consequences
of vessel cargo loss.

DATES: This interim rule is effective June 8, 2016. Comments must be
received by August 8, 2016. The incorporation by reference of certain
documents in this rule is approved by the Director of the Federal
Register as of June 8, 2016.

ADDRESSES: You may submit comments identified by docket number USCG-
2000-7080 using the Federal eRulemaking Portal at http://www.regulations.gov. See the ``Public Participation and Request for
Comments'' portion of the SUPPLEMENTARY INFORMATION section for further
instructions on submitting comments.

FOR FURTHER INFORMATION CONTACT: For information about this document,
call or email Mr. Ken Smith, Project Manager, U.S. Coast Guard
Headquarters, Vessel and Facility Operating Standards Division,
Commandant (CG-OES-2); telephone<PHONE_NUMBER>, email
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Table of Contents for Preamble

I. Public Participation and Comments
II. Abbreviations
III. Basis and Purpose
IV. Background and Regulatory History
V. Summary of the Rule
VI. Discussion of Comments on SNPRM and Changes
VII. Incorporation by Reference
VIII. Regulatory Analyses
    A. Regulatory Planning and Review
    B. Small Entities
    C. Assistance for Small Entities
    D. Collection of Information
    E. Federalism
    F. Unfunded Mandates Reform Act
    G. Taking of Private Property
    H. Civil Justice Reform
    I. Protection of Children
    J. Indian Tribal Governments
    K. Energy Effects
    L. Technical Standards
    M. Environment

I. Public Participation and Comments

    We view public participation as essential to effective rulemaking,
and will consider all comments and material received during the comment
period. Your comment can help shape the outcome of this rulemaking. If
you submit a comment, please include the docket number for this
rulemaking, indicate the specific section of this document to which
each comment applies, and provide a reason for each suggestion or
recommendation.
    We encourage you to submit comments through the Federal eRulemaking
Portal at http://www.regulations.gov. If your material cannot be
submitted using http://www.regulations.gov, contact the person in the
FOR FURTHER INFORMATION CONTACT section of this document for alternate
instructions. Documents mentioned in this notice, and all public
comments, are in our online docket at http://www.regulations.gov and
can be viewed by following that Web site's instructions. Additionally,
if you go to the online docket and sign up for email alerts, you will
be notified when comments are posted or a final rule is published.
    We accept anonymous comments. All comments received will be posted
without change to http://www.regulations.gov and will include any
personal information you have provided. For more about privacy and the
docket, you may review a Privacy Act notice regarding the Federal
Docket Management System in the March 24, 2005, issue of the Federal
Register (70 FR 15086).
    We are not planning to hold a public meeting but will consider
doing so if public comments indicate a meeting would be helpful. We
would issue a separate Federal Register notice to announce the date,
time, and location of such a meeting.

II. Abbreviations

ABS American Bureau of Shipping
BLS U.S. Bureau of Labor Statistics
CFR Code of Federal Regulations
CSAP Cargo Safe Access Plan
CSM Cargo Securing Manual
CSS Code Code of Safe Practice for Cargo Stowage and Securing
E.O. Executive Order
FR Federal Register
FRFA Final Regulatory Flexibility Analysis
IMO International Maritime Organization
IRFA Initial Regulatory Flexibility Analysis
MARAD U.S. Department of Transportation's Maritime Administration
MBARI Monterey Bay Aquarium Research Institute
MSC Maritime Safety Committee
MISLE Marine Information for Safety and Law Enforcement
NAICS North American Industry Classification System
NPRM Notice of Proposed Rulemaking
NVIC Navigation and Vessel Inspection Circular
OMB Office of Management and Budget
RFA Regulatory Flexibility Act of 1980
Sec.  Section Symbol
SANS Ship Arrival Notification System
SBA Small Business Administration
SNPRM Supplemental Notice of Proposed Rulemaking
SOLAS International Convention for the Safety of Life at Sea, 1974
as amended
U.S.C. United States Code
WSC World Shipping Council

III. Basis and Purpose

    Sections 2103 and 3306 of Title 46, United States Code (U.S.C.),
provide the statutory basis for this rulemaking. Section 2103 gives the
Secretary of the department in which the Coast Guard is operating
general regulatory authority to implement Subtitle II (Chapters 21
through 147) of Title 46, which includes statutory requirements in 46
U.S.C. Chapter 33 for inspecting the vessels to which this rulemaking
applies. Section 3306 gives the Secretary authority to regulate an
inspected vessel's operation, fittings, equipment, appliances, and
other items in the interest of safety. The Secretary's authority under
both statutes has been delegated to the Coast Guard in DHS Delegation
No. 0170.1, para. II (92.a) and (92.b).
    The purpose of this rule is to align Coast Guard regulations with
the requirements for cargo securing manuals in the International
Convention for the Safety of Life at Sea, 1974 as amended (SOLAS), and
apply those requirements to certain self-propelled U.S. cargo vessels
operating anywhere in the world, and to certain foreign-flagged self-
propelled cargo vessels operating in U.S. waters. Another purpose of
this rule is to specify when and how the loss or jettisoning of cargo
at sea must be reported.

IV. Background and Regulatory History

    This rule aims to help ensure that maritime cargo is properly
secured. A recent survey by the World Shipping Council (WSC) estimated
that an average of 1,679 containers are lost overboard annually.\1\ The
number of damaged and lost containers has risen over the years due to
the increased traffic in containerized cargo and the increasing size of
containerships.
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    \1\ Survey report is on WSC Web site: http://www.worldshipping.org/industry-issues/safety/Containers_Lost_at_Sea_-_2014_Update_Final_for_Dist.pdf.
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    Several incidents since the early 1990s demonstrated that
improperly secured cargo can cause serious injury or death, vessel
loss, property damage, and environmental damage. For example, a Coast
Guard board of inquiry

concluded that the loss of 21 containers--4 of which contained toxic
arsenic trioxide--off the coast of New Jersey in 1992 was caused by
cargo-securing failures, bad weather, and human error.\2\ With the
support of other International Maritime Organization (IMO) member
governments, the United States led a proposal to include new
requirements for cargo securing manuals (CSMs) in SOLAS. In 1994, the
IMO amended SOLAS \3\ to provide that, after 1997, vessels of 500 gross
tons or more engaged in international trade and carrying cargo other
than solid or liquid bulk material must carry a flag state-approved
CSM; load, stow, and secure cargo in compliance with the CSM; and meet
strength requirements for securing devices and arrangements.
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    \2\ See NVIC 10-97 (Nov. 7, 1997), ``Guidelines for Cargo
Securing Manual Approval,'' available at http://www.uscg.mil/hq/cg5/nvic/pdf/1997/n10-97.pdf.
    \3\ See SOLAS, Ch. VI/5.6 and Ch. VII/5.
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    The SOLAS CSM requirements are included as an annex to a Coast
Guard guidance document issued in 1997,\4\ but a vessel owner or
operator's compliance with that guidance is only voluntary. This
interim rule makes compliance with the SOLAS standards mandatory for
self-propelled vessels over 500 gross tons on international voyages
that are subject to SOLAS.
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    \4\ NVIC 10-97.
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    Previously in this rulemaking, we issued a notice of proposed
rulemaking (NPRM) \5\ in 2000 and a supplemental notice of proposed
rulemaking (SNPRM) \6\ in 2013. Although it was not part of this
rulemaking, in 1999 we held a public meeting on topics related to cargo
securing.\7\ In the SNPRM, we discussed the comments we received on the
2000 NPRM and public input from the 1999 meeting. We discuss the
comments we received on the 2013 SNPRM later in this preamble.
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    \5\ 65 FR 75201 (Dec. 1, 2000).
    \6\ 78 FR 68784 (Nov. 15, 2013). Although not part of this
rulemaking, in 1999 we announced (64 FR 1648; Jan. 11, 1999, docket
USCG-1998-4951) and held a public meeting on related topics.
Comments received at that meeting were discussed in the SNPRM, 78 FR
at 68786, col. 2.
    \7\ 64 FR 1648 (Jan. 11, 1999); docket USCG-1998-4951.
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V. Summary of the Rule

    This section summarizes the changes made in this interim rule.
    33 CFR part 97--Rules for the Safe Operation of Vessels, Stowage
and Securing of Cargoes. The interim rule adds this part, which is
structured to allow for future regulations covering other aspects of
vessel operation and cargo stowage and securing. At this time, the part
contains only subpart A, which deals with CSMs.
    Section 97.100 contains the applicability provisions of subpart A
and provides for electronic submission of any documents required by the
part. Subpart A applies to self-propelled cargo vessels of 500 gross
tons or more traveling on international voyages and carrying any cargo
other than solid or liquid bulk cargo. We expect very few vessels to be
affected by the new requirements, as most foreign vessels operating in
U.S. waters are already subject to their flag state's SOLAS CSM-aligned
requirements, and all U.S. vessels already voluntarily comply with
those requirements in order to obtain SOLAS certificates that are
necessary for entering foreign ports. Subpart A also applies to self-
propelled vessels less than 500 gross tons if their owners or operators
choose voluntarily to have it apply to them and submit CSMs for
approval.
    We have revised the text of Sec.  97.100 as it appeared in the
SNPRM by removing seagoing barges and other non-self propelled vessels
from the applicability of subpart A, which were inadvertently included
in the proposed regulatory text of the SNPRM. This interim rule applies
only to self-propelled cargo vessels that are subject to SOLAS Chapter
VI/5.6 or Chapter VII/5.
    As we discussed in Part V, Discussion of Comments, in our SNPRM, a
commenter suggested extending the applicability of subpart A to self-
propelled cargo vessels below 500 gross tons carrying dangerous goods
in packaged form on international voyages. We agree with the
commenter's assessment that the cargo securing manual requirements of
Chapter VII/5 of SOLAS apply to all vessels covered by other SOLAS
provisions and to vessels below 500 gross tons that carry dangerous
goods in packaged form. As previously stated, one of our intentions in
this rule is to align our regulations with SOLAS requirements for cargo
securing manuals, and therefore we propose modifying the final rule to
more accurately align with SOLAS by applying it to self-propelled cargo
vessels less than 500 gross tons carrying dangerous goods in packaged
form on international voyages, as well as to larger vessels. We
specifically request public comment on that proposed change.
    Section 97.105 defines terms used in subpart A, and Sec.  97.110
provides for the incorporation in subpart A, by reference, of pertinent
IMO circulars describing how vessels may comply with the SOLAS CSM
requirements, as well as an IMO resolution providing guidelines for
third parties acting on behalf of a government agency like the Coast
Guard.
    Section 97.115 requires any accidental loss or deliberate
jettisoning of a container or other cargo at sea to be reported
immediately under 33 CFR 160.215. This is because any such loss or
jettisoning creates a ``hazardous condition'' within the meaning of 33
CFR 160.204. The section also requires the loss or jettisoning of cargo
containing hazardous material to be reported as soon as possible in
accordance with the U.S. Department of Transportation's Pipeline and
Hazardous Materials Safety Administration regulations at 49 CFR 176.48.
    Section 97.120 requires each vessel to which subpart A applies to
have a flag state-approved CSM that complies with applicable IMO
resolutions. Coast Guard personnel may board any vessel in U.S. waters
to verify compliance with this section. Note that any container vessel
with a keel laid on or after January 1, 2015, needs to include a cargo
safe access plan. Under the applicable IMO guidance, such a plan must
provide detailed information on safe access for persons stowing and
securing cargo on vessels that are specifically designed and fitted for
carrying containers.
    Section 97.200 describes how a U.S.-flagged vessel owner or
operator applies for Coast Guard approval of the vessel's CSM. Third-
party approval authorities review and approve CSMs on the Coast Guard's
behalf. This section also describes the contents of approval
statements, the procedure to follow when a CSM is disapproved, and
document retention requirements.
    Section 97.205 describes when a CSM must be resubmitted for
approval, and Sec.  97.210 contains provisions for appeal from a CSM
approval authority's decision.
    Section 97.300 designates the organizations that are initially
authorized to act as CSM approval authorities, and Sec. Sec.  97.305
through 97.315 discuss who may request that authorization in the
future, the criteria for authorization, and the requirements for
approval authorities. We modified this section from what we originally
published in the SNPRM by removing specific reference to the American
Bureau of Shipping (ABS) and Lloyd's Register, because they are already
included on the list of recognized classification societies to which
the Coast Guard has delegated authority for the issuance of a Cargo
Ship Safety Equipment Certificate in accordance with 46 CFR 8.320(b)(4)
and covered

under the paragraph recognizing those classification societies. Section
97.320 provides for the revocation of authorization if an approval
authority fails to maintain standards acceptable to the Coast Guard.
    33 CFR part 160--Ports and Waterways Safety--General. The only
change made to part 160 is an amendment to Sec.  160.215, to prescribe
the information to be reported when a hazardous condition is created by
the loss or jettisoning of cargo.
    46 CFR part 97--[Cargo and Miscellaneous Vessel] Operations. The
interim rule amends the subpart 97.12 operational rules for vessels
carrying bulk solid cargoes by adding Sec.  97.12-10, which requires
such vessels to have on board a CSM that complies with 33 CFR part 97.

VI. Discussion of Comments on SNPRM and Changes

    The SNPRM drew public comments from 12 sources: 7 Individuals (one
of whom submitted 2 comments, which we consider together), 2 barge
companies, 1 shipping industry organization, 1 trade association, and 1
environmental advocacy organization. The docket also contains 1 comment
from another Federal agency.
    General. All three organizations and six individuals expressed
support for the Coast Guard's proposal.
    The environmental advocacy organization and two individuals said
that the loss of cargo containers is a serious problem. The
organization said container loss has an immediate impact by changing
deep sea habitats, and a long term impact by changing the natural
distribution of species, including the threat of introducing invasive
species. One individual said container loss is a major threat to the
environment, to pleasure craft, and to commercial shipping. This
commenter suggested that the insurance industry should welcome our
proposal because of the economic impact of container losses. The other
individual said we should require containers to be weighed so that
weight can be distributed for safety.
    We share these commenters' concern for the safety and environmental
hazards that can be caused by the loss of containers or other cargo at
sea, and we agree with most of their comments. However, we decline to
require containers to be weighed, because this information is the
subject of several existing Federal and International Maritime
Organization (IMO) requirements. The Occupational Safety and Health
Administration requires a container to be weighed before it can be
handled by U.S. workers, and the Department of Transportation has
stringent notification and certification requirements for intermodal
containers.\8\ With the Coast Guard's full participation, the IMO
recently amended an international convention to require shippers to
verify a container's gross mass to a vessel's master before it is
loaded on board.\9\ The existence of these requirements makes it
unnecessary for the Coast Guard to issue separate and potentially
overlapping provisions on the topic.
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    \8\ See 29 CFR 1918.85 and 49 U.S.C. 5902 for the Occupational
Safety and Health Administration and Department of Transportation
requirements, respectively.
    \9\ The International Convention for the Safety of Life at Sea,
1974, and its Protocol of 1988. See Regulation VI/2, which enters
into force July 1, 2016. The International Maritime Organization
previously issued guidance to help ensure accurate pre-loading
container weighing; see Maritime Safety Committee Circular MSC.1/
Circ. 1475, Guidelines Regarding the Verified Gross Mass of a
Container Carrying Cargo.
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    The shipping organization said that, whereas the SNPRM based its
cost analysis on an IMO estimate of 4,000 containers lost at sea per
year worldwide, the shipping organization's own analysis found that, on
average, only 1,679 containers are lost at sea each year. We appreciate
the shipping organization's analysis and are using their most current
estimate in the regulatory analysis for this interim rule. Please see
Section VIII, Regulatory Analyses, for details.
    The two towing companies expressed appreciation that we do not
propose to regulate cargo securing on barges in coastwise trade, but
opposed our SNPRM's proposed extension \10\ of such regulations to
seagoing barges in international commerce. The companies said that
barges have a strong safety record and are not subject to cargo
securing requirements under SOLAS. Therefore, they should not be
required to undertake the work of developing unique CSMs for each type
of cargo. They also pointed out that, if seagoing barges are included,
the universe of affected vessels will be far greater than the 26 U.S.-
flagged vessels the Coast Guard estimates will be impacted in its
regulatory analysis. They specifically requested that the Coast Guard
clarify that ``barges on international voyages will also be exempt from
this rulemaking.'' We agree with the commenters and the interim rule
amends the applicability provisions of new 33 CFR 97.100 so that part
97, subpart A, applies only to self-propelled vessels that are subject
to SOLAS Chapter VI/5.6 or Chapter VII/5. SOLAS does not apply to non
self-propelled vessels and the barge industry has demonstrated a strong
safety record in the past. Therefore, we do not intend to require non-
self-propelled vessels to have CSMs at this time.
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    \10\ 78 FR at 68788, col. 1.
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    Proposed change for final rule. One of the individual commenters
said that, to conform to Chapter VII/5 of SOLAS, we should regulate
cargo securing on cargo vessels below 500 gross tons as well as on
vessels of 500 gross tons and above. We agree with the commenter's
assessment that the cargo securing manual requirements of Chapter VII/5
of SOLAS apply to all vessels covered by other SOLAS provisions and to
vessels below 500 gross tons that carry dangerous goods in packaged
form. As previously stated, one of our intentions in this rule is to
align our regulations with SOLAS requirements for cargo securing
manuals, and, therefore, we propose modifying the final rule to more
accurately align with SOLAS by extending the applicability provisions
of 33 CFR 97.100 to self-propelled cargo vessels less than 500 gross
tons carrying dangerous goods in packaged form on international
voyages. We specifically request public comment on that proposal.

VII. Incorporation by Reference

    The Director of the Federal Register has approved the material in
33 CFR 97.110 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 Sec.  97.110. The following paragraphs summarize the material
incorporated by reference.
    IMO Assembly Resolution A.739(18) (Res.A.739(18)), Guidelines for
the Authorization of Organizations Acting on Behalf of the
Administration, November 22, 1993: International guidelines developed
to establish a uniform program for controlling and assigning authority
of organizations to act on behalf of administrations in conducting
surveys, certifications, and determination of tonnages.
    IMO Maritime Safety Committee Circular 1352 (MSC.1/Circ.1352),
Amendments to the Code of Safe Practice for Cargo Stowage and Securing
(CSS Code) Annex 14, Guidance on Providing Safe Working Conditions for
Securing of Containers on Deck, June 30, 2010: International guidance
developed to ensure persons engaged in carrying out container securing
operations on deck have safe working conditions including safe access,
and appropriate securing equipment.
    IMO Maritime Safety Committee Circular 1353 (MSC.1/Circ. 1353/
Rev.1), Revised Guidelines for the Preparation

of the Cargo Securing Manual, December 15, 2014: International
guidelines providing information on developing cargo securing manuals,
including required contents and details for stowing and securing non-
standardized and semi-standardized cargo.

VIII. Regulatory Analyses

    We developed this interim rule after considering numerous statutes
and Executive Orders (E.O.s) related to rulemaking. Below we summarize
our analyses based on these statutes or E.O.s.

A. Regulatory Planning and Review

    Executive Orders 12866, Regulatory Planning and Review, and 13563,
Improving Regulation and Regulatory Review, direct agencies to assess
the costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility.
    This rule has not been designated a ``significant regulatory
action'' under section 3(f) of E.O. 12866, Regulatory Planning and
Review, as supplemented by E.O. 13563, Improving Regulation and
Regulatory Review, and does not require an assessment of potential
costs and benefits under section 6(a)(3) of that E.O. Accordingly, the
rule has not been reviewed by the Office of Management and Budget
(OMB). A final Regulatory Assessment for the interim rule follows.
1. Summary
    This interim rule amends the CFR by adding the following
provisions:
     Requirements for the reporting of lost or jettisoned
cargo;
     The CSM requirements of SOLAS, for vessels of 500 gross
tons or more;
     Extending the CSM requirements to self-propelled cargo
vessels that travel on international voyages and carry cargo other than
solid or liquid bulk cargo that is designated as a dangerous good
carried in packaged form; and
     Procedures for authorization of third-party organizations
to review and approve CSMs on the Coast Guard's behalf.
    Table 1 presents a summary of our analysis.

                           Table 1--Summary of the 10-Year Regulatory Economic Impacts
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                                                                    Costs (7% discount rate)
           Changes               Description        Affected    --------------------------------     Benefits
                                                   population      Annualized         Total
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1. Reporting of lost or        Codify lost or   U.S.- and                  $578          $4,063  Better tracking
 jettisoned cargo.              jettisoned       foreign-                                         and response
                                cargo as a       flagged                                          of lost or
                                hazardous        vessels                                          jettisoned
                                condition and    engaged in                                       cargo.
                                specify data     transport to
                                to be reported.  or from a U.S.
                                                 port.
2. CSM requirements..........  Codify SOLAS     Owners/                 212,226       1,490,587  Increased
                                rules and        operators of                                     enforcement
                                guidance from    6,436 vessels:                                   authority.
                                NVIC 10-97.      83 U.S.-
                                                 flagged, 6,353
                                                 foreign-
                                                 flagged.
3. Approval of authorized      Codify guidance  6 currently                   0               0  Increased
 organizations.                 from NVIC 10-    approved                                         enforcement
                                97.              organizations,                                   authority.
                                                 others
                                                 applying for
                                                 approval
                                                 status.
                                                                --------------------------------
    Total....................  ...............  ...............         212,804       1,494,649
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Note: Due to independent rounding, the totals may not equal the sum of the components.

    Table 2 presents a summary of the 10-year cost schedule, showing
total costs on an undiscounted basis and discounted at 7-percent and 3-
percent interest rates.

       Table 2--Summary of the 10-Year Total Cost to the International Cargo Industry and U.S. Government
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                                                   Undiscounted                             Discounted
              Year               -------------------------------------------------------------------------------
                                     Industry       Government         Total            7%              3%
----------------------------------------------------------------------------------------------------------------
1...............................        $757,015         $90,514        $847,529        $792,083        $822,844
2...............................          99,403          10,013         109,416          95,568         103,135
3...............................          99,417          10,023         109,440          89,336         100,153
4...............................          99,430          10,034         109,464          83,510          97,257
5...............................         107,068          10,044         117,112          83,499         101,022
6...............................         107,081          10,055         117,136          78,053          98,100
7...............................         107,108          10,076         117,184          72,976          95,281
8...............................         107,121          10,086         117,207          68,216          92,524
9...............................         114,759          10,097         124,856          67,913          95,692
10..............................         114,786          10,118         124,904          63,495          92,940
                                 -------------------------------------------------------------------------------
    Total.......................       1,713,188         181,060       1,894,248       1,494,649       1,698,948
                                 -------------------------------------------------------------------------------
Annualized......................  ..............  ..............  ..............         212,804         199,169
----------------------------------------------------------------------------------------------------------------

2. Changes From SNPRM
    Because there are no changes between the requirements proposed in
the SNPRM and those contained in this interim rule, and because we
received no public comments that affect the Regulatory Assessment, we
retained the structure of the economic analyses from the SNPRM, but
updated our analysis with the most current data. The data elements that
we revised for this analysis are as follows:
     Affected vessel population, U.S.- and foreign-flagged
vessels used 2011 through 2013 data.
     Visits to U.S. ports, updated with data from 2011 through
2013.
     Wage rates for commercial and Coast Guard employees,
updated with current data.
     Container ship traffic data, updated with current data.
3. Affected Population
    The affected population, those vessels subject to the regulations
in this interim rule, consists of U.S.- and foreign-flagged self-
propelled vessels that--
     Are engaged in international trade as indicated by
currently having a SOLAS Cargo Ship Safety Certificate;
     Are 500 gross tons or more; and
     Carry any cargo other than solid or liquid bulk
commodities.
    The United States is a signatory state to SOLAS, and U.S.-flagged
vessels in international trade must meet SOLAS requirements, including
the CSM rules, to receive a SOLAS certificate. A 2013 extract from the
Coast Guard's Marine Information for Safety and Law Enforcement (MISLE)
database identified 83 U.S.-flagged vessels as meeting the above
tonnage and cargo criteria.
    The applicable foreign-flagged vessels are those that transit U.S.
waters. The source for data on these vessels was the Coast Guard's Ship
Arrival Notification System (SANS) database. This database contains
data on notifications of arrival and departure of vessels to and from
U.S. ports and is supplemented by data from MISLE. We extracted from
SANS the most recent 3 years of data available, 2011 through 2013. This
data produced a list of 6,353 foreign-flagged vessels that had one or
more visits to a U.S. port and met the tonnage and cargo-type criteria.
Table 3 presents the affected population of 6,436 vessels categorized
by flag status, SOLAS status, and tonnage class (less than 500 gross
tons, 500 gross tons or more).

                             Table 3--Applicable Population, Non-Bulk Cargo Vessels
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----------------------------------------------------------------------------------------------------------------
          Flag class                 SOLAS status         Tonnage class in gross              Vessels
                                                                   tons
                              ----------------------------------------------------------------------------------
U.S..........................  SOLAS...................  500 gross tons or more.  ..............              83
Foreign......................  SOLAS...................  500 gross tons or more.           6,314  ..............
                               Non-SOLAS...............  500 gross tons or more.              39  ..............
                               Foreign Total...........  .......................           6,353  ..............
                                                                                -------------------------------
    Total....................  ........................  .......................  ..............           6,436
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Notes:
(1) All U.S. vessels are SOLAS and in the 500 GT or more class.
(2) Foreign-flagged vessels will follow SOLAS CSM rules.

4. Economic Analyses
    The economic analyses include--
     An analysis of the costs, benefits, and alternatives for
each of the interim rule's three provisions: (a) Requirements for the
reporting of lost or jettisoned cargo, (b) CSM requirements, and (c)
Approval of authorized organizations. A summary of the costs and
benefits for the entire rule; and
     A preliminary analysis of expanding the affected
population.
    a. Requirements for the reporting of lost or jettisoned cargo.
    i. Current practices, applicable population, and description of
changes and edits. As noted in Section IV, Background and Regulatory
History, of this preamble, the current regulations require the Coast
Guard to be notified immediately when a hazardous condition is caused
by a vessel or its operation. Incidents of lost or jettisoned cargo
\11\ are considered hazardous conditions and must be reported. However,
current industry practice does not correspond with that interpretation.
According to Captain James J. McNamara, President of the National Cargo
Bureau in 2000, ``When a container or containers are lost overboard,
usually there is no news release and seldom is the fact publicized. The
loss is only revealed to those in a need-to-know situation, i.e., the
ship owner, shipper, receiver, and insurer.'' \12\ As we will discuss
in detail, our research indicates a significant underreporting of lost
or jettisoned cargo to the Coast Guard. Coast Guard and other vessels
cannot respond to these unreported incidents, so they represent a risk
to navigation and the marine environment. The underreporting also
prevents the Coast Guard and other interested parties from accurately
tracking the extent and trends of lost cargo incidents.
---------------------------------------------------------------------------

    \11\ All data and industry reports refer only to containers when
describing incidents involving lost or jettisoned cargo. We will
assume that containers will continue as the only lost cargo in the
future and refer to containers as the generic description of the
involved cargo for this analysis.
    \12\ McNamara, James J., ``Containers and Cargoes Lost
Overboard,'' National Cargo Bureau; conference of the International
Union of Marine Insurers; September 13, 2000, http://www.iumi.com/images/stories/IUMI/Pictures/Conferences/London2000/Wednesday/02%20mcnamara%20cargo.pdf.
---------------------------------------------------------------------------

    In this interim rule we include requirements for the immediate
reporting of lost or jettisoned cargo. We anticipate that adoption of
these requirements will correct this underreporting and lead to some
increased costs to industry. Table 4 presents the change matrix for
modifying the reporting of hazardous conditions and summarizes the
specific edit or change, the affected population, and the economic
impact.

 Table 4--Change Matrix for Reporting of Hazardous Conditions in 33 CFR
------------------------------------------------------------------------
                                       Affected
    Reference and description         population        Economic impact
------------------------------------------------------------------------
97.100 Applicability:
    . . . (a)(1), U.S. vessels..  U.S. cargo vessels  None,
                                   and non-U.S.        administrative
                                   cargo vessels in    only.
                                   U.S. waters.

97.105 Definitions..............  All vessels and     None,
                                   approval            administrative
                                   organizations.      only.
97.110 Incorporation by           All affected        None,
 reference, lists IBR references.  vessels and         administrative
                                   approval            only.
                                   organizations.
97.115 Situation requiring        Vessels subject to  Costs for
 report, criteria for reporting    the rule that       correction of
 lost cargo.                       lose cargo          noncompliance
                                   overboard.          with existing
                                                       requirements.
160.215(a), requirement to        Operators of        No change, new
 report hazardous condition.       vessels involved    label of existing
                                   in incident         text.
                                   resulting in
                                   hazardous
                                   condition.
160.215(b), data to be reported.  Operators of        This requirement
                                   vessels involved    references 97.115
                                   in incident         and all costs are
                                   resulting in        included there.
                                   hazardous
                                   condition.
------------------------------------------------------------------------
Source: Coast Guard analysis.

    ii. Affected population. This interim rule applies to both U.S.-
and foreign-flagged vessels engaged in transport to or from U.S. ports.
Therefore, the costs for reporting the lost or jettisoned cargo must be
accounted for throughout the entire applicable population of 6,436
vessels, as reported in Table 3.
    For the years 2009 through 2013, there were only five incidents of
containers lost or damaged at sea and reported to the Coast Guard. As
previously noted, industry experts assert that many incidents of lost
or jettisoned cargo are not reported to the appropriate authorities. To
test this assertion, we developed an estimate of lost or jettisoned
cargo incidents that are subject to Coast Guard rules.
    As the base of our estimate, we used the annual estimate of 1,679
containers lost at sea worldwide, as reported by the World Shipping
Council (WSC) in its 2014 report \13\ to the IMO's Sub-Committee on
Carriage of Cargoes and Containers.\14\ The WSC's estimate is based on
a survey of their membership. The survey respondents accounted for 70
percent of the world's container-ship capacity. The WSC adjusted the
survey data to account for the 30 percent non-respondents. They also
prepared two estimates, one without catastrophic events and the other
that included the less-frequent catastrophic ones with large numbers of
lost containers. We reviewed the WSC's methodology and we are satisfied
that it produced a valid estimate. As we are using a 10-year forecast
for our analysis, we needed to account for the low frequency-high
consequence events, and used the higher annual estimate that included
the catastrophic events.
---------------------------------------------------------------------------

    \13\ The report is on WSC's Web site: http://www.worldshipping.org/industry-issues/safety/Containers_Lost_at_Sea_-_2014_Update_Final_for_Dist.pdf.
    \14\ Report number CCC 1/NF 9, dated June 27, 2014.
---------------------------------------------------------------------------

    However, the WSC report was not categorized by route or flag of the
vessel. We derived the U.S. share of global container traffic using
data reported by the U.S. Department of Transportation's Maritime
Administration (MARAD), which reported in 2011 that there were 376,389
container ship visits worldwide,\15\ and that, out of this total,
22,089 were at U.S. ports.\16\ Thus, the U.S. share of global container
traffic is 5.9 percent (22,089/376,389).
---------------------------------------------------------------------------

    \15\ See http://www.marad.dot.gov/documents/Vessel_Calls_at_US_Ports_Snapshot.pdf, p. 7, ``Global Vessel Calls
by Country, 2011.''
    \16\ See http://www.marad.dot.gov/documents/Vessel_Calls_at_US_Ports_Snapshot.pdf, p. 3. ``Containership Calls
at U.S. Ports by Size, 2006-2011.''
---------------------------------------------------------------------------

    We used that 5.9 percent share to estimate that about 99 containers
in U.S. traffic are lost annually (1,679 containers lost world-wide x
5.9 percent U.S. share of traffic, rounded). The 5 incidents resulted
in a loss of a total of 25 containers, so we estimate on average there
were 5 lost containers per incident. Using those data, we estimate that
there will be 20 reports of lost containers to the Coast Guard (99
containers lost/5 containers per incident, rounded to the nearest 10)
in the first year the rule becomes effective.
    The Tioga Group, a freight transportation services consulting
firm,\17\ in its report \18\ on the container market to the port
authorities of Los Angeles and Long Beach, presents estimates of 4.9
percent annual compounded growth rate for the United States in
container traffic from 2010 to 2020. We assume that the number of lost
container incidents will grow proportionally with the growth in
container trade. We applied the Tioga Group's estimate of 4.9 percent
growth rate to the base estimate of 20 lost containers in Years 2
through 10 in this cost analysis. This yields an estimate of 31
incidents by Year 10 (the complete series is shown in the ``Estimated
Incidents'' column of Table 6).
---------------------------------------------------------------------------

    \17\ For information on The Tioga Group, see www.tiogagroup.com.
    \18\ The Tioga Group, Inc. and IHS Global Insight, ``San Pedro
Bay Container Forecast Update'', Exhibit 33: Total U.S. Loaded Total
TEU and CAGRs, p. 33, www.portoflosangeles.org/pdf/spb_container_forecast_update_073109.pdf.
---------------------------------------------------------------------------

    iii. Costs. When cargo is lost or jettisoned, the vessel staff
already collects data for company purposes.\19\ Thus, the only
additional cost for compliance with this rule is the time to report the
data to the Coast Guard and for the Coast Guard to record the data.
Coast Guard staff who are familiar with vessel operations and incident
reporting estimated that it will take 0.25 hours for a Master or other
senior ship's officer to compile a report and transmit it to the Coast
Guard.
---------------------------------------------------------------------------

    \19\ Captain James J. McNamara, ``Containers and Cargo Lost
Overboard'', p. 2. National Cargo Bureau; conference of the
International Union of Marine Insurers; September 13, 2000, http://www.iumi.com/images/stories/IUMI/Pictures/Conferences/London2000/Wednesday/02%20mcnamara%20cargo.pdf.
---------------------------------------------------------------------------

    The wage rate for the Master was obtained from the U.S. Bureau of
Labor Statistics (BLS), using Occupational Series 53-5021, Captains,
Mates, and Pilots of Water Vessels. The BLS reports that the hourly
rate for a Master is $36.34 per hour.\20\ To account for benefits, the
load factor, or ratio between total compensation and wages is
calculated at 1.44,\21\ using BLS data. The fully loaded wage rate for
a Master is estimated at $53 per hour ($36.34 base wages x 1.44 load
factor, rounded up to capture the entire cost). The cost for the
additional time to report an incident is $13.25 ($53 x 0.25).
---------------------------------------------------------------------------

    \20\ Mean wage, http://www.bls.gov/oes/2013/may/oes535021.htm.
    \21\ Load Factor calculation, source: http://www.bls.gov/news.releases/archives/ecec_09112013.htm, all Workers Total
compensation, $31,00/Wages and salaries, $21.44.
---------------------------------------------------------------------------

    Similarly, we estimate that it will take a quarter of an hour for
Coast Guard personnel at the E-4 level to record the data. The fully
loaded wage rate for an E-4 rating is $42, per Commandant Instruction
7310.1N. \22\ The unit cost for the Coast Guard is $10.50 ($42 per hour
x 0.25 hours).
---------------------------------------------------------------------------

    \22\ http://www.uscg.mil/directives/ci/7000-7999/CI_7310_1N.pdf.

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

    As shown in Table 5, the unit cost for reporting lost or jettisoned
cargo is $23.75.

                            Table 5--Unit Cost for Reporting Lost or Jettisoned Cargo
----------------------------------------------------------------------------------------------------------------
                              Task                                 Time (hours)      Wage rate         Cost
----------------------------------------------------------------------------------------------------------------
Master to report................................................            0.25             $53          $13.25
CG data entry (E4)..............................................            0.25              42           10.50
                                                                 -----------------------------------------------
    Total.......................................................  ..............  ..............           23.75
----------------------------------------------------------------------------------------------------------------
Sources: BLS, Coast Guard estimates.

    The baseline estimate of lost or jettisoned cargo incidents, the
growth rate, and the unit cost data provide the inputs into the 10-year
cost schedule. Table 6 displays the input data and the resulting cost
estimates on an undiscounted basis and discounted at 7-percent and 3-
percent interest rates.

                                              Table 6--Cost Schedule for Reporting Lost or Jettisoned Cargo
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Discounted
                  Year                       Estimated        Rounded      Industry cost    Coast Guard     Total cost   -------------------------------
                                             incidents       incidents                         cost                             7%              3%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................              20              20            $265            $210            $475            $444            $461
2.......................................           20.98              21             278             221             499             436             470
3.......................................           22.01              22             292             231             523             427             479
4.......................................           23.09              23             305             242             547             417             486
5.......................................           24.22              24             318             252             570             406             492
6.......................................           25.41              25             331             263             594             396             497
7.......................................           26.66              27             358             284             642             400             522
8.......................................           27.97              28             371             294             665             387             525
9.......................................           29.34              29             384             305             689             375             528
10......................................           30.78              31             411             326             737             375             548
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................  ..............  ..............           3,313           2,628           5,941           4,063           5,008
                                         ---------------------------------------------------------------------------------------------------------------
Annualized..............................  ..............  ..............  ..............  ..............  ..............             578             587
--------------------------------------------------------------------------------------------------------------------------------------------------------

    To provide an estimate of costs by flag status, we extracted from
the Coast Guard's SANS database the vessels calling on U.S. ports in
2011.\23\ We divided the vessels into U.S.- and foreign-flagged status.
Table 7 presents the data and shows that in 2013, U.S.-flagged vessels
accounted for 11.8 percent of the visits by vessels that would be
subject to this interim rule.
---------------------------------------------------------------------------

    \23\ 2011 is the most recent year of verified data.

  Table 7--2013 Visits to U.S. Ports by Flag-Status of Vessels Non-Bulk
                                  Trade
------------------------------------------------------------------------
                  Flag                        Visits          Percent
------------------------------------------------------------------------
United States...........................           2,955            11.8
Foreign.................................          22,001            88.2
                                         -------------------------------
    Total...............................          24,956           100.0
------------------------------------------------------------------------

    We produced an estimate for U.S. costs of lost or jettisoned cargo
by applying the 11.8 percent of visits by U.S.-flagged vessels from
Table 7 to the cost estimates from Table 6. Note that U.S. costs
include both costs to U.S.-flagged vessels and the Coast Guard. Table 8
displays the data for the U.S. costs.

                                 Table 8--Cost Schedule for U.S.-Flagged Vessels for Reporting Lost or Jettisoned Cargo
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Discounted
                          Year                                Rounded      Industry cost      CG cost       Total cost   -------------------------------
                                                             incidents                                                          7%              3%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................               2             $27             $21             $48             $45             $47
2.......................................................               2              27              21              48              42              45
3.......................................................               3              40              32              72              59              66
4.......................................................               3              40              32              72              55              64
5.......................................................               3              40              32              72              51              62
6.......................................................               3              40              32              72              48              60
7.......................................................               3              40              32              72              45              59
8.......................................................               3              40              32              72              42              57
9.......................................................               3              40              32              72              39              55
10......................................................               4              53              42              95              48              71
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................  ..............             387             308             695             474             586
                                                         -----------------------------------------------------------------------------------------------
Annualized..............................................  ..............  ..............  ..............  ..............              67              69
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We obtained the costs of reporting lost or jettisoned cargo for
non-U.S.-flagged vessels by subtracting the U.S. costs, as reported in
Table 8, from the costs as displayed in Table 6. Table 9 presents the
results of these calculations.

                               Table 9--Cost Schedule for Non-U.S.-Flagged Vessels for Reporting Lost or Jettisoned Cargo
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Discounted
                          Year                                Rounded      Industry cost    Coast Guard     Total cost   -------------------------------
                                                             incidents                         cost                             7%              3%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................              18             239             189             428             400             416
2.......................................................              19             252             200             452             395             426
3.......................................................              19             252             200             452             369             414
4.......................................................              20             265             210             475             362             422
5.......................................................              21             278             221             499             356             430
6.......................................................              22             292             231             523             348             438
7.......................................................              24             318             252             570             355             463
8.......................................................              25             331             263             594             346             469
9.......................................................              26             345             273             618             336             474
10......................................................              27             358             284             642             326             478
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................  ..............           2,930           2,323           5,253           3,593           4,430
                                                         -----------------------------------------------------------------------------------------------
Annualized..............................................  ..............  ..............  ..............  ..............             512             519
--------------------------------------------------------------------------------------------------------------------------------------------------------

    iv. Benefits. A 2011 news release from the Monterey Bay Aquarium
Research Institute (MBARI) \24\ stated that containers that fall from
ships can ``float at the surface for months'' and that ``most
eventually sink to the seafloor.'' While they float they can present a
hazard to navigation. However, sunken containers may pose immediate and
long-term threats to the marine environment. The MBARI news release
also stated that ``[N]o one knows what happens to these containers once
they reach the deep seafloor'' and that ``[p]erhaps 10 percent of
shipping containers carry household and industrial chemicals that could
be toxic to marine life.'' The small number of MISLE incidents provides
additional information. Of the 25 containers, one container held 22,500
pounds of used batteries and another held an unspecified hazardous
material.
---------------------------------------------------------------------------

    \24\ http://www.mbari.org/news/news_releases/2011/containers/containers-release.html.
---------------------------------------------------------------------------

    The immediate benefit of the reporting provisions is that they will
enhance the Coast Guard's ability to identify potential problems with
securing equipment, locate and warn mariners about drifting containers
that endanger safe navigation, and assess and respond to any potential
environmental hazard created by the cargo loss. In the longer term,
having complete and accurate data on lost cargo incidents will enable
the Coast Guard and other parties to identify industry trends and track
potential long-term threats to the marine environment from sunken
containers.
    v. Alternatives. We considered possible alternatives to this rule.
One possibility, as suggested in the SNPRM, would be to limit the
reporting of lost containers to only those containing hazardous
materials. However, we consider any overboard container to be a
potential hazard to navigation and, as noted above, the contents may
pose a long-term threat to the marine environment. To ensure safety of
navigation and the marine environment, we believe all lost or
jettisoned cargo should be reported. As one commenter noted, the
containers may not disintegrate for hundreds of years once they reach
the floor. Thus, the long-term impacts on the environment are extremely
hard to assess.
    Another alternative we considered was to reduce the amount of
information to be sent to the Coast Guard in order to minimize
recordkeeping burden. We examined the data specified in this rule and
determined that all of it would be needed by the Coast Guard in order
to completely evaluate the situation and determine the appropriate
response. Therefore, we believe that the reporting requirements in this
rule will provide the Coast Guard with sufficient

information to fulfill its missions of maritime safety and marine
environmental protection while minimizing the vessel's recordkeeping
and reporting burdens.
    b. CSM Requirements.
    i. Current practices, applicable population, and description of
changes and edits. As stated in Section IV of this preamble, Background
and Regulatory History, the Coast Guard has developed guidance,\25\
based on IMO Circular 1353, for implementing SOLAS provisions for cargo
securing manuals.
---------------------------------------------------------------------------

    \25\ NVIC 10-97.
---------------------------------------------------------------------------

    Under the Coast Guard's safety and security vessel examinations
program, the Coast Guard checks that the subject vessels in U.S. ports
have CSMs and that the crews follow them. MISLE data show that from
2011 through 2013, the 83 U.S.-flagged vessels that are part of the
affected population were subject to 646 inspections. In all of these
inspections there were no citations for a deficient CSM.
    MISLE also recorded that from 2011 through 2013, the Coast Guard
conducted 14,358 vessel inspections of foreign-flagged vessels and
found problems relating to CSMs in only 9 instances. These data
indicate an ongoing compliance process for both U.S.- and foreign-
flagged vessels subject to CSM rules. Therefore, the Coast Guard
anticipates that the only costs regarding the CSM requirement, once the
requirements of SOLAS and Coast Guard guidance are moved into the CFR,
would be those associated with owners or operators of the few deficient
vessels who are prompted to ensure their CSMs are fully compliant with
SOLAS prior to entering U.S. waters.
    Tables 10 and 11 present the change matrix for the edits to Titles
33 and 46 of the CFR, respectively, that relate to the CSM requirements
of the interim rule. Each matrix summarizes the specific edit or
change, the affected population, and the economic impact.

      Table 10--Change Matrix for Adding CSM Requirements to 33 CFR
------------------------------------------------------------------------
   Reference & description     Affected population     Economic impact
------------------------------------------------------------------------
97.100 Applicability:
    . . . (a)(1), U.S.        U.S. cargo vessels,   None, administrative
     vessels.                  non-U.S. cargo        only.
                               vessels of 500
                               gross tons or more
                               in U.S. waters.
    . . . (a)(2), voluntary   U.S. vessels          No change, codifies
     compliance.               requesting coverage.  guidance currently
                                                     located in NVIC.
    . . . (b), exemption for  Ready Reserve and     None, these vessels
     Ready Reserve and         public vessels.       currently are
     public vessels.                                 exempted.
    . . . 97.105 Definitions  All vessels and       None, administrative
                               approval              only.
                               organizations.
    . . . 97.110              All affected vessels  None, administrative
     Incorporation by          and approval          only.
     reference (lists IBR      organizations.
     references).
97.120 Cargo Securing
 Manuals:
    . . . (a)(1), CSMs        SOLAS vessels and     Cost of developing
     required.                 non-U.S., non-SOLAS   CSM for
                               vessels noted with    noncompliant
                               deficient CSMs by     vessels.
                               Coast Guard.
    . . . (a)(2), CSAP        Non-SOLAS vessels...  Edit to close
     required after 2015.                            regulatory gap. No
                                                     costs, no current
                                                     vessels affected
                                                     and none expected
                                                     in future.
    . . . (b), authorizes CG  All U.S.- and         No cost, provides
     enforcement.              foreign-flagged       authority for
                               vessels subject to    current CG
                               the rule.             compliance
                                                     activities.
------------------------------------------------------------------------
Source: Coast Guard analysis.

 Table 11--Change Matrix for Edits to 46 CFR 97 That Apply to U.S. SOLAS
                                 Vessels
------------------------------------------------------------------------
   Reference & description     Affected population     Economic impact
------------------------------------------------------------------------
97.12-10 Cargo securing       Owners and operators  Administrative edit,
 manuals, new section to       of U.S. SOLAS         all costs accounted
 reference new 33 CFR 97.120.  vessels.              for in 33 CFR
                                                     97.120.
------------------------------------------------------------------------
Source: Coast Guard analysis.

    ii. Affected population. As stated earlier, the Coast Guard's
current safety and security examinations include checking to see if a
subject vessel has a current CSM and that the crew follows it. The
inspection results indicate that the 83 U.S.-flagged vessels in
international trade are all in the 500 gross tons or more class and
that they comply with the SOLAS CSM rules. Under an assumption that
they will continue with those practices, this establishes a baseline of
current compliance throughout the 10-year analysis period. In this
scenario, the U.S.-flagged vessels will incur no additional costs from
this rule. However, to conduct a thorough regulatory analysis, we
included the 83 U.S.-flagged vessels in the analysis and assumed that
they will obtain a SOLAS-compliant CSM in the first year the rule is in
effect. A review of the year-built data for these vessels shows that
the most recently built was in 2009. We assume that this trend of no
new builds will continue and that the population will remain stable at
83 vessels per year throughout the 10-year analysis period.
    Additionally, the interim rule requires that a CSM must be revised
if one of these two criteria are met:
    1. The vessel changes its type. As an example, a former break-bulk
carrier is modified to become a container ship.
    2. An existing vessel changes 15 percent of its cargo securing
systems or more than 15 percent of its portable securing devices.
    MISLE data indicates that none of the subject U.S.-flagged vessels
have changed vessel type from 2001 through 2012. We assume that this
trend will continue and that no vessels will change type during our
analysis period. From information provided by an approved

organization,\26\ we estimated that, on an annual basis, 11.3 percent
of the U.S.-flagged fleet revises it CSM based on the second criterion
described above. We applied this rate to the subject 83 U.S-flagged
vessels to estimate that 9 vessels per year will revise their CSMs (83
x 11.3 percent, rounded) in Years 2 through 10 of the analysis period.
---------------------------------------------------------------------------

    \26\ To protect proprietary information, we cannot provide the
name of the organization.
---------------------------------------------------------------------------

    Foreign-flagged vessels that are 500 gross tons or more follow
SOLAS rules and current Coast Guard guidance. We estimated the costs of
compliance for these vessels based on the following assumptions:
    (1) In the absence of the rule, the current deficiency rate for
subject foreign-flagged vessels would continue.
    (2) Under the rule, the increased enforceability posture from
codifying the CSM rules will lead all vessels to comply with the SOLAS
standards and current Coast Guard guidance prior to entering U.S.
waters. That is, the deficiency rate will be reduced to zero for
foreign-flagged vessels.
    We reported above that there were nine deficiencies related to CSMs
from 2011through 2013. These deficiencies are comprised of five that
were missing approval from an authorized organization, three that did
not have a CSM on the vessel, and one that had a CSM with missing
sections. Table 12 presents the data from 2011 through 2013 for the
calculation of a deficiency rates by year and an annual average for the
3 years.

                                      Table 12--Annual CSM Deficiency Rate
----------------------------------------------------------------------------------------------------------------
                                                                      Vessel            CSM         Deficiency
                              Year                                 examinations    deficiencies   rate (percent)
----------------------------------------------------------------------------------------------------------------
2011............................................................           5,135               2            0.04
2012............................................................           4,464               4            0.09
2013............................................................           4,759               3            0.06
                                                                 -----------------------------------------------
    Total.......................................................          14,358               9          * 0.06
----------------------------------------------------------------------------------------------------------------
* Average deficiency rate.

    We used the average deficiency rate of 0.06 percent throughout our
10-year analysis period. The estimate of the number of deficient CSMs
in any year equals the estimate of the vessel population for that year
multiplied by the deficiency rate.
    As reported in Table 3 in the ``SOLAS Class'' subtotal, there are
6,353 foreign-flagged vessels that are currently subject to the CSM
requirements. Applying the 0.06 percent deficiency rate from Table 12
yields an estimate of four vessels that will need to remedy deficient
CSMs in the first year the rule comes into effect.
    In the analysis of the reporting requirements, we cited the Tioga
Group's report on the container market that growth in container
shipments to the United States is expected to increase,\27\ so a flat
extrapolation of the seven CSMs in the first year through Years 2
through 10 of the analysis period would result in an underestimate.
---------------------------------------------------------------------------

    \27\ The Tioga Group, Inc. and IHS Global Insight, ``San Pedro
Bay Container Forecast Update'', Exhibit 33: Total U.S. Loaded Total
TEU and CAGRs, p. 33, www.portoflosangeles.org/pdf/spb_container_forecast_update_073109.pdf.
---------------------------------------------------------------------------

    We used the Tioga Group's estimate of a 4.9 percent rate for our
estimate for growth in our 10-year analysis period. Currently, we do
not have detailed information on the current and projected capacity
utilization of container ships visiting U.S. ports, so we posited that
the trips per year of the affected vessels would remain constant
through the analysis period. With that assumption, we applied the 4.9
percent annual growth rate to the fleet of foreign-flagged vessels
serving U.S. ports.
    For Years 2 through 10, the base population is the base population
from the previous year multiplied by the 4.9 percent growth rate. The
resulting estimates of the base populations are shown in the ``Base
Population'' column of Table 14.
    iii. Costs. To obtain a current estimate for the cost of developing
a CSM, we contacted industry cargo securing subject matter experts in
2013.\28\ These experts are familiar with the entire development of
CSMs, including vessel survey, evaluation of cargo securing equipment
and procedures, preparation of manuals, and training of crews. From the
information they provided, we estimate that the cost to develop a CSM
will range between $7,500 and $10,000, depending on factors such as the
size and type of vessel. We used the midpoint of this range, $8,750
(($7,500 + $10,000)/2), as the unit cost of developing a CSM.
---------------------------------------------------------------------------

    \28\ The data obtained contain proprietary information and are
not available publicly.
---------------------------------------------------------------------------

    We anticipate that a CSM will be revised to either remedy a
deficiency or because the vessel met the previously discussed criterion
of new cargo securing systems. We do not have detailed descriptions of
each deficiency or changes in cargo securing equipment, so for the unit
cost, we assume that a vessel will revise the CSM using an existing
survey of the vessel. A 2013 study conducted by ABS Consulting, Inc.
for the Coast Guard provided estimates on the costs of a suite of
marine engineering and naval architecture services.\29\ That study
estimated that the average cost of a survey for a freight ship is
$1,125. We estimate the unit cost to remedy a deficiency as the average
cost of developing a CSM [$8,750 = ($7,500 + $10,000)/2)] less the
average cost of a survey. This yields an estimated unit cost of $7,625
($8,750 - $1,125).
---------------------------------------------------------------------------

    \29\ ABS Consulting, Inc, ``Study of Marine Engineering and
Naval Architecture Costs for Use in Regulatory Analyses,'' Table 5,
p. 26. A copy of this study can be found in the docket for this
rulemaking.
---------------------------------------------------------------------------

    The costs to the Federal government are accounted for by the
oversight actions performed by the authorized approval organizations.
These actions include reviewing new or revised CSMs, issuing letters of
approval, and, for CSMs that are not approved, issuing letters that
explain why the CSMs were not approved. We anticipate that the reviews
of the CSM will be conducted by a marine engineer or naval architect.
We estimate that each review will take on average 2 working days and
another hour will be needed to prepare the appropriate correspondence
to the vessel's managers. Thus, the attributed burden to the Federal
government for each review is 17 hours ((2 x 8) + 1 = 17).
    We estimate that the average loaded (including benefits) hourly
wage for a marine architect or naval engineer is

$64 per hour.\30\ The unit cost to review one CSM is $1,088 (17 hours x
$64 per hour). Table 13 shows the undiscounted costs to industry and
the Federal government for the 10-year analysis period.
---------------------------------------------------------------------------

    \30\ Mean hourly wage of $44.10 for a marine engineer/naval
architect from the Bureau of Labor Statistics (http://www.bls.gov/oes/2011/may/oes172121.htm) multiplied by load factor of 1.44 to
account for benefits (ftp://ftp.bls.gov/pub/special.requests/ocwc/ect/ececqrtn.pdf).
---------------------------------------------------------------------------

Costs for Foreign-Flagged Vessels
    As foreign-flagged vessels are obtaining and revising CSMs under
the auspices of their flag states, their only cost for this interim
rule is to remedy deficiencies. The cost in each year is the number of
deficient vessels times the unit cost of $7,625. Table 13 presents the
undiscounted cost estimate for foreign-flagged vessels over the 10-year
period.

                         Table 13--Costs to Foreign-Flagged Vessels for Developing CSMs
----------------------------------------------------------------------------------------------------------------
                                                       Base
                      Year                          population       Remedied        Unit cost      Total cost
----------------------------------------------------------------------------------------------------------------
1...............................................           6,353               4          $7,625         $30,500
2...............................................           6,664               4           7,625          30,500
3...............................................           6,991               4           7,625          30,500
4...............................................           7,334               4           7,625          30,500
5...............................................           7,693               5           7,625          38,125
6...............................................           8,070               5           7,625          38,125
7...............................................           8,465               5           7,625          38,125
8...............................................           8,880               5           7,625          38,125
9...............................................           9,315               6           7,625          45,750
10..............................................           9,771               6           7,625          45,750
                                                 ---------------------------------------------------------------
    Total.......................................  ..............              48  ..............         366,000
----------------------------------------------------------------------------------------------------------------

Costs for U.S.-Flagged Vessels
    As discussed previously, all 83 U.S.-flagged vessels have CSMs and
have operated under them for over a decade. In addition, current
business practices, particularly the requirements of insurers, would
also indicate the use of a CSM. For these reasons, and as presented in
the Regulatory Analysis of the NPRM, the requirements in this interim
rule are not expected to result in a change in practice or incur a cost
for the 83 U.S.-flagged vessels.
    For the purposes of this regulatory analysis, we also compute costs
assuming a baseline without CSMs for the 83 U.S.-flagged vessels. The
cost for U.S.-flagged vessels to develop CSMs is presented in Table 14.

           Table 14--Costs of Developing CSMs for U.S. Vessels to Industry and the Federal Government
----------------------------------------------------------------------------------------------------------------
                                                                                Federal
              Year                     Base        Industry CSM    Industry cost    Government      Total cost
                                    population         cost                            cost
----------------------------------------------------------------------------------------------------------------
1...............................              83          $8,750        $726,250         $90,304        $816,554
2...............................               9           7,625          68,625           9,792          78,417
3...............................               9           7,625          68,625           9,792          78,417
4...............................               9           7,625          68,625           9,792          78,417
5...............................               9           7,625          68,625           9,792          78,417
6...............................               9           7,625          68,625           9,792          78,417
7...............................               9           7,625          68,625           9,792          78,417
8...............................               9           7,625          68,625           9,792          78,417
9...............................               9           7,625          68,625           9,792          78,417
10..............................               9           7,625          68,625           9,792          78,417
                                 -------------------------------------------------------------------------------
    Total.......................             164  ..............       1,343,875         178,432       1,522,307
----------------------------------------------------------------------------------------------------------------

    Table 15 presents the total costs for foreign-flagged vessels and
U.S.-flagged vessels assuming a pre-CSM baseline on an undiscounted
basis and the total costs discounted at rates of 7 percent and 3
percent. As shown in Table 15, the total 10-year cost for upgrading
CSMs at a 7-percent discount rate is $1,490,587, or $212,226 on an
annualized basis.

  Table 15--CSMs--Undiscounted Component and Total Costs; and Total Costs at Discount Rates of 7 Percent and 3
                                                     Percent
----------------------------------------------------------------------------------------------------------------
                                                   Undiscounted                             Discounted
                                 -------------------------------------------------------------------------------
              Year                 U.S- flagged      Foreign-
                                       cost        flagged cost     Total cost          7%              3%
----------------------------------------------------------------------------------------------------------------
1...............................        $816,554         $30,500        $847,054        $791,639        $822,383
2...............................          78,417          30,500         108,917          95,132         102,665

3...............................          78,417          30,500         108,917          88,909          99,674
4...............................          78,417          30,500         108,917          83,092          96,771
5...............................          78,417          38,125         116,542          83,093         100,530
6...............................          78,417          38,125         116,542          77,657          97,602
7...............................          78,417          38,125         116,542          72,577          94,759
8...............................          78,417          38,125         116,542          67,829          91,999
9...............................          78,417          45,750         124,167          67,539          95,164
10..............................          78,417          45,750         124,167          63,120          92,392
                                 -------------------------------------------------------------------------------
    Total.......................       1,522,307         366,000       1,888,307       1,490,587       1,693,939
                                 -------------------------------------------------------------------------------
Annualized......................  ..............  ..............  ..............         212,226         198,581
----------------------------------------------------------------------------------------------------------------

    iv. Benefits. The benefit of adding the SOLAS requirements and
current Coast Guard guidance on CSMs to the CFR is increased Coast
Guard enforcement authority. We previously cited the statistics from
the Coast Guard's CSM inspection activities from 2009 through 2011 for
both U.S.- and foreign-flagged vessels. However, as noted in Section
IV, Background and Regulatory History, of this preamble, the only
current U.S. implementation of the CSM is via current Coast Guard
guidance, which is unenforceable. Incorporating these rules into the
CFR elevates the guidelines and standards to being a Federal
regulation. As described in Section III, Basis and Purpose, of this
preamble, the Coast Guard has existing authorities to inspect vessels,
regulate an inspected vessel's operation, fittings, equipment, and
appliances, and implement SOLAS. The Coast Guard believes that it can
enforce the provisions of this rule under these authorities.
    v. Alternatives. Alternatives to this provision of the rule that we
considered include various ways to apply the requirements to prepare
and implement CSMs to U.S.-flagged vessels in coastwise trade. The NPRM
published in 2000 presented five options for applying CSM regulations
to U.S. domestic voyages. Table 16 presents descriptions of these
options and a summary of the comments.

  Table 16--Options To Extend CSM Requirements to U.S. Domestic Voyages
------------------------------------------------------------------------
       Option No.              Description          Summary of comments
------------------------------------------------------------------------
1......................  Extend SOLAS             4 supported, 5 opposed
                          requirements to          for these reasons:
                          domestic voyages.
                                                   Preferred
                                                   compromise of Options
                                                   1 & 2;
                                                   Not requiring
                                                   regular reviews;
                                                   Too
                                                   restrictive;
                                                   Require too
                                                   much standardization;
                                                   and
                                                   Would not
                                                   work for seagoing
                                                   barges as no two
                                                   barge cargoes are
                                                   identical.
2......................  Vessel specific          1 supported, 5 opposed
                          standards, Coast Guard   for these reasons:
                          approval.
                                                   Evaluate
                                                   against experience
                                                   with continuous
                                                   examination program
                                                   and noted similarity
                                                   with Option 5;
                                                   Too many
                                                   variables causing
                                                   unneeded burden;
                                                   Would not
                                                   work, but did not
                                                   give specific
                                                   reasons;
                                                   Second
                                                   choice; and
                                                   Preferred
                                                   compromise of Options
                                                   1 and 2.
3......................  Certificate for          One commenter stated
                          carrying hazardous       its decision would
                          materials.               depend on specific
                                                   requirements, and 3
                                                   commenters opposed
                                                   for these reasons:
                                                   Surveyors for
                                                   multiple voyages not
                                                   feasible for cost and
                                                   availability;
                                                   Could not
                                                   ensure surveyor
                                                   availability; and
                                                   High costs of
                                                   surveyors.
4......................  Allow each vessel to     One commenter noted
                          choose from among        that companies
                          Options 1, 2, and 3.     supporting domestic
                                                   rules would find this
                                                   attractive, but did
                                                   not state its own
                                                   opinion. Another
                                                   stated that it
                                                   combined the
                                                   strengths and
                                                   weaknesses of the
                                                   other Options. One
                                                   opposed for unstated
                                                   reasons and another
                                                   was opposed because
                                                   the ``menu of
                                                   options'' would cause
                                                   confusion.
5......................  Standards developed      Three comments
                          with industry.           supported, 1 for
                                                   unstated reasons and
                                                   2 because of its
                                                   flexibility; and 1
                                                   commenter was opposed
                                                   because it would not
                                                   ensure meeting needs
                                                   of different vessel
                                                   types and operations.
------------------------------------------------------------------------

    The options presented in the NPRM were only outlined and did not
have cost estimates. We developed a cost estimate for Option 1 that
would extend SOLAS requirements to domestic vessels. We added these
details to Option 1 to make the calculations:
     The affected population will be U.S.-flagged vessels in
coastwise trade. The geographic identification was vessels with
coastwise route certifications. We identified 688 vessels from MISLE
that met these requirements, comprised of 195 freight barges, 160
freight ships, and 333 offshore supply vessels.
     In general, the vessels in the U.S. affected population
for this alternative are smaller than the foreign-flagged vessels that
comprise the affected population of the regulation. Data comparisons
for the U.S. fleet shows average gross tons of 8,165 and average length
of 326 feet. The comparable data for the foreign-flagged vessels is
average gross tonnage of 31,306 and average length of 619 feet.
Therefore, for the unit cost of the U.S. coastwise vessels, we assigned
the low-end value of $7,500, which came from the range supplied by the
subject matter experts we contacted. The recent history of new builds
is projected to continue through the 10-year analysis period. MISLE
reported 22 new vessels per year from 2009 through 2012, and we used
this in our analysis.
     A phase-in period was not in the NPRM, but we added a 3-
year phase-in period to this interim rule to mitigate the burden on
both vessel owners and the authorized approval organizations. We assume
that vessel owners will distribute the certification of the manuals for
their vessels evenly over the phase-in period. This will enable vessel
owners and authorized approval organizations to schedule cargo securing
approvals in conjunction with vessel down-time, such as scheduled
examinations or times of vessel repairs and upgrades.
    With these parameters, we developed a 10-year cost schedule for
Option 1. Because the costs to foreign-flagged vessels would be the
same for Option 1 as for the preferred alternative, the data presented
show the marginal costs for Option 1. The annualized cost, using a 7-
percent discount rate, would be $807,605. The cost estimates are
displayed in Table 17.

                                    Table 17--Cost Estimate for Option 1, Extend CSM Requirements to Domestic Vessels
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Discounted
                  Year                       Existing       New vessels    Total vessels     Unit cost      Total cost   -------------------------------
                                              vessels                                                                           7%              3%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................             229              22             251          $7,500      $1,882,500      $1,759,346      $1,827,670
2.......................................             229              22             251           7,500       1,882,500       1,644,248       1,774,437
3.......................................             230              22             252           7,500       1,890,000       1,542,803       1,729,618
4.......................................               0              22              22           7,500         165,000         125,878         146,600
5.......................................               0              22              22           7,500         165,000         117,643         142,330
6.......................................               0              22              22           7,500         165,000         109,946         138,185
7.......................................               0              22              22           7,500         165,000         102,754         134,160
8.......................................               0              22              22           7,500         165,000          96,032         130,253
9.......................................               0              22              22           7,500         165,000          89,749         126,459
10......................................               0              22              22           7,500         165,000          83,878         122,775
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................             688             220             908                       6,810,000       5,672,277       6,272,487
                                         ---------------------------------------------------------------------------------------------------------------
Annualized..............................  ..............  ..............  ..............  ..............  ..............         807,605         735,327
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The goal of Option 1 is to reduce the occurrence and impacts of
lost containers in U.S. coastwise trade. However, the comments to the
NPRM indicate that this is not a significant problem. One commenter
stated that cargo losses from barges are rare, another stated that
seagoing barges ``are generally safe from cargo loss,'' and another
commenter stated that ``most cargo losses result from container
structural problems that the vessel owner or operator cannot know about
or prevent.'' However, as described above, the reporting of these
incidents is uncertain. We anticipate that, with the more accurate
reporting required by this interim rule, we will be able to validate
this assertion. Additionally, our initial cost estimates, as presented
in Table 17, indicate that industry would incur annualized costs,
discounted at 7 percent, of $807,605 beyond what is in this rule.
Therefore, this interim rule focuses exclusively on vessels in
international trade. However, the Coast Guard can reevaluate this
position and initiate another rulemaking for the U.S. coastwise trade
if new information indicates either underreporting or an upward trend
of lost containers.
 c. Approval of Authorized Organizations
    The Coast Guard authorizes classification societies and other
organizations to review and approve CSMs on its behalf. The procedures
for these organizations are currently found in Coast Guard guidance and
cover selection criteria, information required by organizations
applying for authorization status, and the Coast Guard's application
review procedures, termination of authorization procedures, and appeals
procedures.
    Following the procedures in current Coast Guard guidance, the Coast
Guard has authorized these six classification societies to review and
approve CSMs: American Bureau of Shipping (ABS), Det Norske Veritas
(DNV), Lloyd's Register of Shipping (LR), Germanischer Lloyd (GL), RINA
S.p.A, and ClassNK (NK).\31\ We anticipate that no other classification
societies will be applying for CSM approval authority in the near
future.\32\
---------------------------------------------------------------------------

    \31\ List of classification societies authorizations: http://www.uscg.mil/hq/cg5/acp/docs/ClassSocietyAuths22Dec2013.pdf.
    \32\ For more information see the final rule ``Approval of
Classification Societies'', VII. A, ``Regulatory Planning and
Review'', 77 FR 47548, RIN 1625-AB35).
---------------------------------------------------------------------------

    However, current Coast Guard guidance is not legally enforceable.
This interim rule will incorporate these procedures from guidance into
the CFR with only some minor editorial changes, such as updating the
address of Coast Guard Headquarters. Therefore, we believe there will
be no additional regulatory costs associated with the codification of
these application procedures. Table 18 presents the change matrix for
the codification of the class society approval guidance into the CFR
and summarizes the specific edit or

change, the affected population, and the economic impact.

    Table 18--Change Matrix for Incorporating Class Society Approval
                         Procedures Into 46 CFR
------------------------------------------------------------------------
   Reference & description     Affected population     Economic impact
------------------------------------------------------------------------
97.100 Applicability:
    . . . (a)(4),             New applicants......  No impact,
     organizations applying                          incorporates
     for CSM approval                                current guidance
     authority.                                      into regulations.

97.115 Situation requiring    Vessels subject to    Costs for correction
 report, criteria for          the rule that lose    of noncompliance
 reporting lost cargo.         cargo overboard.      with existing
                                                     requirements.
97.200 CSM approval for U.S.
 vessels on international
 voyages:
    . . . (a)(1), authorized  Owners, operators,    Administrative
     applicants include        and agents, of new    change, guidance
     owner, operator, or       U.S. vessels in       only referenced
     agent.                    international trade.  owner.
    . . . (a)(2), CG          Organizations         No change,
     oversight of approval     applying for CSM      incorporates
     authority applications.   approval authority.   current guidance
                                                     into regulations.
    . . . (a)(3),             U.S. vessels in       No change,
     application procedures.   international trade.  incorporates
                                                     current guidance
                                                     into regulations.
    . . . (a)(4), approval    Authorized approval   No change,
     authority retains a       organizations.        incorporates
     copy.                                           current guidance
                                                     into regulations.
    . . . (b), approval       Authorized approval   No change,
     letter contents.          organizations.        incorporates
                                                     current guidance
                                                     into regulations
    . . . (c), disapproval    Authorized approval   No change,
     procedures.               organizations.        incorporates
                                                     current guidance
                                                     into regulations.
    . . . (d), resubmit       Owners or operators   No change,
     procedures.               resubmitting a CSM.   incorporates
                                                     current guidance
                                                     into regulations.
    . . . (e), documents      Owners or operators   No change,
     kept on vessel.           of U.S. vessels       incorporates
                               subject to the rule.  current guidance
                                                     into regulations.
97.205 Requirements for       Owners or operators   No change,
 amending an approved CSM,     of U.S. vessels       incorporates
 amending procedures.          subject to the rule.  current guidance
                                                     into regulations.
97.210 Appeals, appeals       Owners or operators   No change,
 procedures.                   of U.S. vessels       incorporates
                               subject to the rule   current guidance
                               and authorized        into regulations
                               approval
                               organizations.
97.300 Authorized CSM         ABS, DNV, LR, GL,     No change,
 approval authorities, lists   RINA, NK, National    incorporates
 approved organizations.       Cargo Bureau.         current guidance
                                                     into regulations.
97.305 Requests for           Organizations         No change,
 authorization, application    seeking to become     incorporates
 process.                      approved              current guidance
                               organizations.        into regulations.
97.310 Criteria for           CG and organizations  No change,
 authorization, evaluation     seeking to become     incorporates
 criteria.                     approved              current guidance
                               organizations.        into regulations.
97.315 Requirements for       CG and authorized     No change,
 authorized approval           approval              substantively
 organizations,                organizations.        incorporates and
 responsibilities of CG and                          rewords current
 authorized approval                                 guidance into
 organizations.                                      regulations.
97.320 Revocation of          CG and referenced     No change,
 authorization, procedures     organizations.        substantively
 for CG revoking an                                  incorporates and
 authorization.                                      rewords current
                                                     guidance into
                                                     regulations.
------------------------------------------------------------------------
Source: Coast Guard analysis.

    We considered alternatives to these changes and edits, and we
concluded that there were no viable alternatives. The procedures in
current Coast Guard guidance provide a complete description of all
processes needed for approval and oversight of the subject
organizations. Reducing or eliminating any of them, such as the one
covering appeals, would leave a gap in the approval or oversight
processes. We did not identify any weaknesses or gaps in the current
Coast Guard guidance, other than the editorial changes. We also
concluded that the recordkeeping information in the current Coast Guard
guidance provides complete documentation for all the involved parties--
vessel owners or operators, and approved organizations. Reducing or
eliminating any of the recordkeeping rules would run the risk of
producing a gap in the documentation. Conversely, adding additional
recordkeeping rules would only increase associated burdens, but not
provide any additional useful information.
    In summary, the rules governing organizations approved to issue
CSMs will codify current procedures with no associated costs to
industry or the government. The benefit of these rules is that they
will provide a regulatory basis for the Coast Guard's oversight of
organizations authorized to approve CSMs.
    d. Review of Costs and Benefits. The total cost of this interim
rule is for the two cost elements: (1) Reporting of lost or Jettisoned
Cargo; and (2) CSM Requirements. Table 19 presents the 10-year total
cost schedule assuming a pre-CSM baseline for undiscounted costs, and
the discounted costs at 7-percent and 3-percent interest rates.

 Table 19--Summary of the 10-Year Total Cost of Interim Rule, Undiscounted and Discounted at Interest Rates of 7
                                              Percent and 3 Percent
----------------------------------------------------------------------------------------------------------------
                                                   Undiscounted                             Discounted
                                 -------------------------------------------------------------------------------
              Year                    Lost or
                                    jettisoned       CSM plans         Total            7%              3%
                                       cargo
----------------------------------------------------------------------------------------------------------------
1...............................            $475        $847,054        $847,529        $792,083        $822,844
2...............................             499         108,917         109,416          95,568         103,135
3...............................             523         108,917         109,440          89,336         100,153
4...............................             547         108,917         109,464          83,510          97,257
5...............................             570         116,542         117,112          83,499         101,022
6...............................             594         116,542         117,136          78,053          98,100
7...............................             642         116,542         117,184          72,976          95,281
8...............................             665         116,542         117,207          68,216          92,524
9...............................             689         124,167         124,856          67,913          95,692
10..............................             737         124,167         124,904          63,495          92,940
                                 -------------------------------------------------------------------------------
    Total.......................           5,941       1,888,307       1,894,248       1,494,649       1,698,948
                                 -------------------------------------------------------------------------------
Annualized......................  ..............  ..............  ..............         212,804         199,169
----------------------------------------------------------------------------------------------------------------

    Table 20 summarizes the undiscounted costs disaggregated by flag,
requirement, and sector.

                      Table 20--10-Year Undiscounted Costs by Flag, Requirement, and Sector
----------------------------------------------------------------------------------------------------------------
                                                                                Federal
                 Flag                          Requirement           Industry       Government         Total
----------------------------------------------------------------------------------------------------------------
United States.........................  Lost Cargo..............            $387            $308            $695
                                        CSM.....................       1,343,875         178,432       1,522,307
                                                                 -----------------------------------------------
                                           U.S. Total...........       1,344,262         178,740       1,523,002
* Foreign.............................  Lost Cargo..............           2,930           2,323         * 5,253
                                        CSM.....................         366,000               0         366,000
                                                                 -----------------------------------------------
                                           Foreign Total........         368,930           2,323         371,253
                                                                 -----------------------------------------------
    Total.............................  ........................       1,713,192         181,063       1,894,255
----------------------------------------------------------------------------------------------------------------
Note: Subtotals and Totals do not match with those in other tables due to independent rounding.

    The primary benefit of this interim rule is that it places into the
CFR rules and procedures for the cargo securing plans, the approval and
oversight of organizations authorized to approve CSMs, and the
reporting of lost or jettisoned cargo. Additionally, the reporting
requirements for the lost or jettisoned cargo will provide the Coast
Guard with additional information to track and monitor the effects on
both navigation and the environment, and to take any appropriate
enforcement actions. Overall, the interim rule will support the Coast
Guard's missions of maritime safety and stewardship.
    e. Preliminary analysis of expanding the affected population.
    In Section V, Summary of the Rule, and Section VI, Discussion of
Comments on SNPRM and Changes, we requested comments on our proposal to
include self-propelled vessels less than 500 gross tons in the affected
population. We conducted a preliminary analysis of the economic impacts
of the proposal and summarize our findings below.
    The proposal would add an additional 45 foreign-flagged vessels,
resulting in a new total of 6,398 foreign-flagged vessels. Combined
with the 83 U.S.-flagged vessels, the total affected population would
be 6,481 vessels.
    The only requirement that would be affected is the one requiring a
subject vessel to have and follow an approved CSM. Of the 45 new
vessels, 42 currently hold SOLAS cargo safety certificates. For this
preliminary analysis we assumed that the three vessels without a cargo
safety certificate would need to obtain an approved CSM. This would add
an additional 26,250 (3 vessels x 8,750 per new CSM). A revised 10-year
cost estimate for this requirement based on these assumptions is
presented in Table 21.

  Table 21--Cost of CSM Plans Under the Proposed Rule (Adding Vessels Under 500 GT to Interim Rule Estimates),
                             Undiscounted and Discounted at 7 Percent and 3 Percent
----------------------------------------------------------------------------------------------------------------
                                   U.S.-flagged      Foreign-
              Year                     cost           flagged       Total cost          7%              3%
----------------------------------------------------------------------------------------------------------------
1...............................        $816,554         $53,375        $869,929        $813,018        $844,591
2...............................          78,417          30,500         108,917          95,132         102,665

3...............................          78,417          30,500         108,917          88,909          99,674
4...............................          78,417          30,500         108,917          83,092          96,771
5...............................          78,417          38,125         116,542          83,093         100,530
6...............................          78,417          38,125         116,542          77,657          97,602
7...............................          78,417          38,125         116,542          72,577          94,759
8...............................          78,417          38,125         116,542          67,829          91,999
9...............................          78,417          45,750         124,167          67,539          95,164
10..............................          78,417          45,750         124,167          63,120          92,392
                                 -------------------------------------------------------------------------------
    Total.......................       1,522,307         388,875       1,911,182       1,511,966       1,716,147
                                 -------------------------------------------------------------------------------
Annualized......................  ..............  ..............  ..............         215,270         201,185
----------------------------------------------------------------------------------------------------------------

    The 7-percent annualized cost for the proposed modification to the
CSM requirement is 215,270, compared to 212,226 for the interim rule,
as shown in Table 15. Table 22 presents a revised 10-year schedule. It
adds the 26,250 cost of new CSMs for the 3 vessels under 500 gross tons
to the other requirements for reporting lost or jettisoned cargo and
approval of classification societies.

  Table 22--Summary of the 10-Year Total Cost of the Proposed Rule (Adding Vessels Under 500 GT to Interim Rule
                  Estimates) by Sector, Undiscounted and Discounted at 7 Percent and 3 Percent
----------------------------------------------------------------------------------------------------------------
              Year                   Industry       Government         Total            7%              3%
----------------------------------------------------------------------------------------------------------------
1...............................        $779,890         $90,514        $870,404        $813,462        $845,052
2...............................          99,403          10,013         109,416          95,568         103,135
3...............................          99,417          10,023         109,440          89,336         100,153
4...............................          99,430          10,034         109,464          83,510          97,257
5...............................         107,068          10,044         117,112          83,499         101,022
6...............................         107,081          10,055         117,136          78,053          98,100
7...............................         107,108          10,076         117,184          72,976          95,281
8...............................         107,121          10,086         117,207          68,216          92,524
9...............................         114,759          10,097         124,856          67,913          95,692
10..............................         114,786          10,118         124,904          63,495          92,940
                                 -------------------------------------------------------------------------------
    Total.......................       1,736,063         181,060       1,917,123       1,516,028       1,721,156
                                 -------------------------------------------------------------------------------
Annualized......................  ..............  ..............  ..............         215,848         201,772
----------------------------------------------------------------------------------------------------------------

    With the addition of self-propelled vessels that are less than 500
gross tons, the annualized cost at a 7-percent discount rate increases
to 215,848, compared to 212,804 for the interim rule, as shown in Table
19.

B. Small Entities

1. Summary of Findings
    The Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et seq.) (RFA)
and Executive Order (E.O.) 13272 require a review of proposed and final
rules to assess their impacts on small entities. An agency must prepare
an initial regulatory flexibility analysis (IRFA) unless it determines
and certifies that a rule, if promulgated, would not have a significant
impact on a substantial number of small entities. During the SNPRM
stage, we published an IRFA to aid the public in commenting on the
potential small business impacts of the proposals in the SNPRM. All
interested parties were invited to submit data and information
regarding the potential economic impact that would result from adoption
of the proposals in the SNPRM.
    Under the RFA, we have considered whether this rule would have a
significant economic impact on a substantial number of small entities.
The term ``small entities'' comprises 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.
    We determined that this interim rule affects a variety of large and
small businesses, not-for-profit organizations, and governments (see
the ``Description of the Potential Number of Small Entities'' section
below). Based on the information from this analysis, we found--
     Using size standards from the Small Business
Administration (SBA), the 83 U.S-flagged vessels are controlled by 21
entities, none of which are small. The 6,353 foreign-flagged vessels
are controlled by 1,023 entities. A review of the entities that control
these vessels found that one foreign-flagged vessel is controlled by a
non-U.S. not-for-profit entity that is not considered to be small, 7
foreign-flagged vessels are controlled by government agencies, and the
remaining 6,345 foreign-flagged vessels are controlled by businesses.
An analysis of a sample of the businesses controlling these vessels
indicates that 48 percent are considered small.
     Compliance actions will consist of upgrading deficient
CSMs and reporting lost or jettisoned cargo.
     Of the small entities in our sample with revenue
information, 62 percent of them had an impact of less than 1 percent,
and 28 percent had an impact within the 1 percent to 3 percent range.
    The Regulatory Flexibility Act also requires an agency to conduct a
final

regulatory flexibility analysis (FRFA) unless it determines and
certifies that a rule is not expected to have a significant impact on a
substantial number of small entities. We are not able to certify that
the interim rule will not have a significant economic impact on a
substantial number of small entities. Therefore, we have prepared the
following FRFA.
2. FRFA
    The RFA establishes ``as a principle of regulatory issuance that
agencies shall endeavor, consistent with the objectives of the rule and
of applicable statutes, to fit regulatory and informational
requirements to the scale of the businesses, organizations, and
governmental jurisdictions subject to regulation. To achieve this
principle, agencies are required to solicit and consider flexible
regulatory proposals and to explain the rationale for their actions to
assure that such proposals are given serious consideration.''
    This FRFA was developed in accordance with Section 604(a) of the
RFA. An FRFA must provide and/or address--
    a. A statement of the need for, and objectives of, the rule;
    b. A statement of the significant issues raised by the public
comments in response to the initial regulatory flexibility analysis, a
statement of the assessment of the agency of such issues, and a
statement of any changes made in the rule as a result of such comments;
    c. The response of the agency to any comments filed by the Chief
Counsel for Advocacy of the SBA in response to the rule, and a detailed
statement of any change made to the interim rule as a result of the
comments;
    d. A description of and an estimate of the number of small entities
to which the rule will apply or an explanation of why no such estimate
is available;
    e. A description of the projected reporting, recordkeeping, and
other compliance requirements of the rule, including an estimate of the
classes of small entities that will be subject to the requirement and
the type of professional skills necessary for preparation of the report
or record;
    f. A description of the steps the agency has taken to minimize the
significant economic impact on small entities consistent with the
stated objectives of applicable statutes, including a statement of the
factual, policy, and legal reasons for selecting the alternative
adopted in the interim rule and why each one of the other significant
alternatives to the rule considered by the agency which affect the
impact on small entities was rejected;
    g. For a covered agency, as defined in section 609(d)(2), a
description of the steps the agency has taken to minimize any
additional cost of credit for small entities.
    a. A statement of the need for, and objectives of, the rule. The
Coast Guard undertook this rulemaking to align U.S. regulations with
the CSM requirements of SOLAS. The provisions of this rule also
authorize recognized classification societies to review and approve
CSMs on behalf of the Coast Guard, prescribe how other organizations
can become CSM approval authorities, and prescribe when and how the
loss or jettisoning of cargo must be reported. Enforcing those
requirements should help prevent or mitigate the consequences of vessel
cargo loss, and promote the Coast Guard maritime safety and stewardship
missions.
    Sections 2103 and 3306 of 46 U.S.C. provide the statutory basis for
this rule. Section 2103 gives the Secretary of the department in which
the Coast Guard is operating general regulatory authority to implement
Subtitle II (Chapters 21 through 147) of Title 46, which includes
statutory requirements in 46 U.S.C. Chapter 33 for inspecting the
vessels to which this rule applies. Section 3306 gives the Secretary
authority to regulate an inspected vessel's operation, fittings,
equipment, appliances, and other items in the interest of safety. The
Secretary's authority under both statutes has been delegated to the
Coast Guard in Department of Homeland Security Delegation No.
0170.1(92)(a) and (b). Additionally, the United States is a party to
SOLAS. Where SOLAS must be enforced through U.S. regulations, those
regulations are authorized by E.O. 12234.
    b. A statement of the significant issues raised by the public
comments in response to the initial regulatory flexibility analysis, a
statement of the assessment of the agency of such issues, and a