[Federal Register Volume 78, Number 221 (Friday, November 15, 2013)]
[Proposed Rules]
[Pages 68784-68809]
[FR Doc No: 2013-26886]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

33 CFR Parts 97 and 160, and 46 CFR Part 97

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

Cargo Securing Manuals

AGENCY: Coast Guard, DHS.

ACTION: Supplemental notice of proposed rulemaking.

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SUMMARY: The Coast Guard proposes requiring cargo securing manuals
(CSMs) on vessels of 500 gross tons or more traveling on international
voyages and carrying cargo that is other than solid or liquid bulk
cargo. The proposed regulations would authorize recognized
classification societies or other approval authorities to review and
approve CSMs on behalf of the Coast Guard. They would also prescribe
when and how the loss or jettisoning of cargo at sea must be reported.
The proposed regulations would help fulfill U.S. treaty obligations and
could help prevent or mitigate the consequences of vessel cargo loss.
This rulemaking promotes the Coast Guard's maritime safety and
stewardship missions.

DATES: Comments and related material must either be submitted to the
Coast Guard's online docket via http://www.regulations.gov on or before
February 13, 2014 or reach the Docket Management Facility by that date.
Comments sent to the Office of Management and Budget (OMB) on
collection of information must reach OMB on or before February 13,
2014.

ADDRESSES: You may submit comments identified by docket number USCG-
2000-7080 using any one of the following methods:

    (1) Federal eRulemaking Portal: http://www.regulations.gov.
    (2) Fax:<PHONE_NUMBER>.
    (3) Mail: Docket Management Facility (M-30), U.S. Department of
Transportation, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue SE., Washington, DC 20590-0001.
    (4) Hand delivery: Same as mail address above, between 9 a.m. and 5
p.m., Monday through Friday, except Federal holidays. The telephone
number is<PHONE_NUMBER>.
    To avoid duplication, please use only one of these four methods.
See the ``Public Participation and Request for Comments'' portion of
the SUPPLEMENTARY INFORMATION section below for instructions on
submitting comments.
    Collection of Information Comments: If you have comments on the
collection of information discussed in section VIII.D. of this
preamble, you must also send comments to the Office of Information and
Regulatory Affairs (OIRA), Office of Management and Budget. To ensure
that your comments to OIRA are received on time, the preferred methods
are by email to<EMAIL_ADDRESS>(include the docket number
and ``Attention: Desk Officer for Coast Guard, DHS'' in the subject
line of the email) or fax at<PHONE_NUMBER>. An alternate, though slower,
method is by U.S. mail to the Office of Information and Regulatory
Affairs, Office of Management and Budget, 725 17th Street NW.,
Washington, DC 20503, ATTN: Desk Officer, U.S. Coast Guard.
    Viewing incorporation by reference material: You may inspect the
material proposed for incorporation by reference at room 1210, U.S.
Coast Guard Headquarters, 2100 Second Street SW., Stop 7126,
Washington, DC 20593-7126 between 9 a.m. and 4 p.m., Monday through
Friday, except Federal holidays. The telephone number is<PHONE_NUMBER>.
Copies of the material are available as indicated in the
``Incorporation by Reference'' section of this preamble.

FOR FURTHER INFORMATION CONTACT: If you have questions on this proposed
rule, 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>If you have questions on viewing or submitting
material to the docket, call Renee V. Wright, Program Manager, Docket
Operations, telephone<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

Table of Contents for Preamble

I. Public Participation and Request for Comments
    A. Submitting Comments
    B. Viewing Comments and Documents
    C. Privacy Act
    D. Public Meeting
II. Abbreviations
III. Basis and Purpose
IV. Background and Regulatory History
V. Discussion of Comments and Changes
VI. Discussion of the Proposed Rule
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 Request for Comments

    We encourage you to participate in this rulemaking by submitting
comments and related materials. All comments received will be posted
without change to http://www.regulations.gov and will include any
personal information you have provided.

A. Submitting Comments

    If you submit a comment, please include the docket number for this
rulemaking (USCG-2000-7080), indicate the specific section of this
document to which each comment applies, and provide a reason for each
suggestion or recommendation. You may submit your comments and material
online or by fax, mail, or hand delivery, but please use only one of
these means. We recommend that you include your name and a mailing
address, an email address, or a phone number in the body of your
document so that we can contact you if we have questions regarding your
submission.
    To submit your comment online, go to http://www.regulations.gov,
and follow the instructions on that Web site. If you submit your
comments by mail or hand delivery, submit them in an unbound format, no
larger than 8\1/2\ by 11 inches, suitable for copying and electronic
filing. If you submit comments by mail and would like to know that they
reached the Facility, please enclose a stamped, self-addressed postcard
or envelope.
    We will consider all comments and material received during the
comment period and may change this proposed rule based on your
comments.

B. Viewing Comments and Documents

    To view comments, as well as documents mentioned in this preamble
as being available in the docket, go to http://www.regulations.gov, and
follow the instructions on that Web site. If you do not have access to
the internet, you may view the docket online by visiting the Docket
Management Facility in Room W12-140 on the ground floor of the
Department of Transportation West Building, 1200 New Jersey Avenue SE.,
Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday,
except Federal holidays. We have an agreement with the Department of
Transportation to use the Docket Management Facility.

C. Privacy Act

    Anyone can search the electronic form of comments received into any
of our dockets by the name of the individual submitting the comment (or
signing the comment, if submitted on behalf of an association,
business, labor union, etc.). You may review a Privacy Act notice
regarding our public dockets in the January 17, 2008, issue of the
Federal Register (73 FR 3316).

D. Public Meeting

    We do not now plan to hold a public meeting. But you may submit a
request for one to the docket using one of the methods specified under
ADDRESSES. In your request, explain why you believe a public meeting
would be beneficial. If we decide to hold a public meeting, we will
announce its time and place in a later notice in the Federal Register.

II. Abbreviations

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
IMO International Maritime Organization
MARAD U.S. Department of Transportation's Maritime Administration
MSC Maritime Safety Committee
MISLE Marine Information for Safety and Law Enforcement
NPRM Notice of proposed rulemaking
NVIC Navigation and Vessel Inspection Circular
OMB Office of Management and Budget
OSHA Occupational Safety and Health Administration
Sec.  Section symbol
SANS Ship Arrival Notification System
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

III. Basis and Purpose

    Sections 2103 and 3306 of Title 46, U.S. Code, 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 Department of Homeland Security
Delegation No. 0170.1(92)(a) and (b). In addition, the Secretary has
regulatory authority to implement the International Convention for the
Safety of Life at Sea, 1974 (SOLAS), under Executive Order (E.O.)
12234.
    The purpose of this rulemaking is to align Coast Guard regulations
with SOLAS requirements for cargo securing manuals and apply those
requirements to U.S. vessels and foreign vessels in U.S. waters, and to
specify when and how the loss or jettisoning of cargo at sea must be
reported.

IV. Background and Regulatory History

    Improperly secured maritime cargo threatens the safety of life,
property, and the environment. Several maritime incidents dating from
the early 1990s to the recent past underscore the risk of serious
injury or death, vessel loss, property damage, and environmental damage
caused by improperly secured cargo aboard vessels. A Coast Guard board
of inquiry established to review an incident off the coast of New
Jersey in 1992, which involved the loss of 21 containers, 4 of which
contained the hazardous material arsenic oxide, revealed that the
incident was caused by cargo securing failures and poor operational
planning. The Commandant of the Coast Guard approved the board's
recommendation that the Coast Guard adopt the International Maritime
Organization's (IMO) guidelines on cargo securing manuals. With the
support of other IMO member governments, the U.S. led a proposal to
include new requirements for CSMs in SOLAS. In 1994, the IMO amended
SOLAS in response to the growing international concern over maritime
incidents involving improperly secured cargo. The amendments provided
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 and load, stow, and
secure cargo in compliance with the CSM. Shortly before the SOLAS
amendments took effect, the Coast Guard issued Navigation and Vessel
Inspection Circular (NVIC) No. 10-97 to provide guidance concerning the
SOLAS CSM standards until Coast Guard regulations could be developed.
Compliance with NVIC 10-97 is voluntary. In 2009, in response to
questions raised about lost containers during a Congressional hearing,
the Coast Guard estimated that between 500 and 2,000 containers are
lost at sea annually. In a recent paper submitted by the International
Organization for Standardization (ISO) to the IMO, ``Development of
Measures to Prevent Loss of Containers,'' the ISO notes that 10,000
containers are damaged during sea transport each year, of which 3,000
to 4,000 are lost overboard. The number of damaged and lost containers
has risen and continues to rise partly because of the growth in
container transports, and partly because of the larger impacts from
ever-larger containerships. In addition to the dangers that improperly
secured cargo and containers pose to vessels and crewmembers that
handle and transport them, they also pose dangers to the environment
and vessels at sea when lost overboard.
    The SOLAS CSM requirements outline what a CSM must contain and
establish strength requirements for securing devices and arrangements.
They also describe how to stow and secure containers and other cargo.
These SOLAS requirements are not yet mandatory for U.S. vessels or for
foreign vessels operating in U.S. waters.
    In a notice (64 FR 1648; Jan. 11, 1999) announcing a February 3,
1999, public meeting to discuss the SOLAS CSM requirements and cargo
securing issues, we suggested that the SOLAS CSM requirements for
vessels in international trade might be beneficial for U.S. vessels in
coastwise (domestic) trade as well. Two written comments were submitted
at the meeting. You may view them at http://regulations.gov under
docket number USCG-1998-4951. One commenter offered to review and
approve CSMs and the other urged Coast Guard to align any Coast Guard
regulations with those of the Occupational Safety and Health
Administration (OSHA). Under 29 U.S.C. 653(b)(1), OSHA's authority does
not extend to shipboard personnel who are subject to Coast Guard
regulations. Nevertheless, the Coast Guard has coordinated with OSHA to
ensure alignment of our regulations.
    The first publication in this rulemaking was a notice of proposed
rulemaking (NPRM) published December 1, 2000 (65 FR 75201) entitled
``Cargo Securing on Vessels Operating in U.S. Waters.'' The NPRM
proposed incorporating SOLAS requirements for CSMs into Coast Guard
regulations and requested comment on five options for regulating cargo
securing on U.S. vessels in coastwise trade. The Coast Guard received
17 letters from industry and labor groups in response to the NPRM. We
address these comments in section V of this preamble.

V. Discussion of Comments and Changes

    The 2000 NPRM drew comments from 15 sources, with two sources
submitting two letters. Twelve commenters were companies or trade
associations involved with maritime transportation. Two unions
commented, as did a Maritime Administration official. In addition, a
Coast Guard memorandum commemorating a meeting between Coast Guard
personnel and industry representatives, and the final report of the
Towing Safety Advisory Committee's (TSAC's) working group on cargo
securing, are treated in the docket as ``public submissions.''
    TSAC is a committee that advises the Coast Guard under the Federal
Advisory Committee Act. The TSAC working group found that there are few
cargo losses from barges, and that the variety of cargo configurations
and cargo securing practices in the barge industry make it difficult to
apply a single cargo securing standard for those vessels. The working
group identified cargo securing best practices used by the barge
industry, and recommended that barge operators should voluntarily
develop, document, and periodically update cargo securing plans, train
personnel in procedures covered by those plans, and audit the results.
A barge operator agreed with the working group. An organization
representing barge operators, and one other commenter, agreed that
cargo loss from barges is extremely rare, and agreed that barge
operators should voluntarily develop cargo securing plans. Two other
commenters said they agree with the organization representing barge
operators. Another commenter said that seagoing barges are generally
safe from cargo loss. The relatively low rate of cargo loss in U.S.
coastwise trade is a major reason why we have decided not to extend
SOLAS-style cargo securing requirements to that trade.

    Two transportation companies (and a third company that said it
agreed with one of the two) said that the NPRM's proposed regulatory
text for 46 CFR 97.210(e) (cargo securing manual contents) and 46 CFR
97.230 (inspection and maintenance of cargo securing devices) would
make useful additions to the SOLAS cargo securing requirements. Those
provisions have been omitted from this supplemental notice of proposed
rulemaking (SNPRM); the SNPRM addresses their topics by requiring CSMs
to comply with applicable standards contained in the IMO's 2010
Maritime Safety Committee Circulars (MSC.1/Circ.) 1352 (``Cargo Stowage
and Securing (CSS Code) Annex 14 Guidance on Providing Safe Working
Conditions for Securing of Containers on Deck'') and 1353 (``Revised
Guidelines for the Preparation of the Cargo Securing Manual''). These
two commenters also said that following a continuous examination
program would ensure good equipment maintenance and be less burdensome
than CSM regulatory requirements. Our SNPRM would allow, but not
require, operators to follow a continuous examination program. It would
describe, in proposed 33 CFR 97.205, when an approved CSM must be
amended and re-approved. The two commenters recommended that fixed and
portable cargo handling equipment be treated identically for regulatory
purposes. Our proposed regulations would not require the use of either
fixed or portable equipment. However, if portable equipment is used, it
is subject to special provisions set out in the IMO Circulars, and
incorporated by reference in proposed 33 CFR 97.110.
    Two transportation companies said we needed to ensure that our
rulemaking does not create confusion between Coast Guard and OSHA
regulations. This topic was also discussed in the Coast Guard's meeting
with industry representatives. As discussed in section IV of this
preamble, we have aligned our regulations with OSHA's, to minimize
confusion.
    One transportation company said the NPRM should have approached
safety issues relating to lashing cargo to decks. The same company said
the NPRM should have addressed vertical tandem loading and cargo
lifting devices. It said the Coast Guard should provide guidance to
shoreside personnel on segregating damaged or unserviceable cargo
equipment, and on dealing with cargo containers on which one of the
doors has been removed.
    These safety issues were also discussed in the Coast Guard's
meeting with industry representatives, at which time the Coast Guard
said the issue was beyond the scope of this rulemaking but could become
an issue for IMO consideration in the future. Our proposed rule
addresses many of the safety issues by incorporating by reference IMO
Circulars MSC.1/Circ. 1352 and 1353, which take into account the IMO's
2010 Code of Safe Practice for Cargo Stowage and Securing (CSS Code).
The CSS Code contains new provisions for the safety of personnel
engaged in lashing operations which includes crew members and dock
workers alike.
    The same company that raised the safety issues also expressed
concern that Coast Guard personnel might be inconsistent, in different
locations, in how they apply cargo securing policy guidance. We
encourage members of the regulated public who think they are being
treated unfairly or arbitrarily by Coast Guard personnel to bring the
matter to our attention. The Coast Guard will not retaliate against
persons or businesses that question or complain about any policy or
action of the Coast Guard.
    Another transportation company expressed support for developing
cargo securing standards that would apply specifically to seagoing
barges. The commenter said the NPRM did not adequately assess the
economic impact of applying cargo securing regulations to seagoing
barges. The NPRM did not propose specific regulations for those vessels
and thus did not calculate any regulatory economic impact on them.
Seagoing barges in coastwise trade would not be affected by this SNPRM.
    A third transportation company said that most cargo losses result
from container structural problems that the vessel operator cannot know
about or prevent. To guard against such risks, this commenter said that
hazardous material containers should be stowed as low as possible on
the deck. We agree that once containers are loaded onto a vessel it is
very difficult for a vessel operator to know about or prevent
structural problems which have gone undetected. In this regard, much
responsibility is placed on personnel associated with activities
related to the transportation of the container through the supply chain
before delivery of the container at a terminal, including personnel
involved in packing the contents and personnel involved in storing and
loading containers from shore. These personnel routinely conduct
internal and external inspections to ensure that the container is
suitable for transporting cargo and being lifted by container handling
equipment. These routine periodic inspections help reduce the
likelihood that structurally deficient containers will be loaded aboard
a vessel. Vessel operators are then responsible for ensuring that the
containers are stowed and secured in accordance with the CSM. Vessel
operators who identify a structural deficiency in a container after it
has been loaded should take whatever action is considered necessary to
ensure the container is safely secured, handled, or removed as the
specific situation may dictate. Stowage and transportation of hazardous
materials on vessels is guided by 49 CFR Part 176 and the IMO Dangerous
Goods Code which address hazardous materials according to each specific
type of cargo, recognizing that various types of hazardous materials
require special levels of handling. Our proposed rule addresses
container integrity and stowage as it relates to the securing of cargo
for safe transport by sea and incorporates by reference IMO Circulars
MSC.1/Circ. 1352 and 1353 concerning that issue.
    A fourth transportation company said that no insured company would
transport $20 million worth of cargo without first having a qualified
surveyor approve how it is lashed to the deck. This commenter also said
that many small entities would be affected by domestic CSM regulations.
We recognize that the lashing and securing of some types of cargo may
receive increased scrutiny because of their overall value, and we
recognize that such cargo poses minimal risk for transport by sea.
However, since such surveys currently are not required by law, securing
arrangements are currently evaluated for only a few types of cargo. We
propose requiring CSMs on vessels of 500 gross tons or more traveling
on international voyages that are carrying any cargo that is other than
solid or liquid bulk cargo. Neither the NPRM nor this SNPRM proposes
specific domestic regulations and thus we have not calculated the small
entity impact that domestic CSM regulations could have. We request
additional public input on the topic and may conduct further analysis
based on that input.
    A fifth transportation company said that regulatory language
suitable for larger ships would be unsuitable for smaller vessels in
coastwise trade. This commenter also expressed concern over how much
time would be needed for CSM approvals. As noted above, we have decided
not to apply SOLAS-style cargo securing requirements to coastwise
trade. By facilitating the use of third party organizations to approve
CSMs, we hope to avoid lengthy delays. If you are preparing a CSM for
approval,

we encourage you to consult with your approval authority upfront to
help eliminate unnecessary delays.
    A cargo gear company cautioned us against incorporating outdated
industry standards in our regulations. This SNPRM proposes
incorporating only IMO Circulars MSC.1/Circ. 1352 and 1353, which take
into account the IMO's 2010 CSS Code. We invite public comment on that
proposal.
    The Maritime Administration commenter said our regulations should
not apply to Administration-owned ships in the Ready Reserve Force. We
provide an exception for those vessels in proposed 33 CFR 97.100(b).
    A seagoing barge operator said it was unclear whether the NPRM
covers seagoing barges, and whether it relates only to hazardous
materials or would cover non-hazardous materials as well. The NPRM
discussed the possible extension of SOLAS-style cargo securing
requirements to seagoing barges or other vessels in coastwise trade,
but we have decided against that extension. The NPRM did not
specifically limit its discussion to coastwise vessels carrying
hazardous material. This SNPRM proposes regulations that would apply to
seagoing barges in international trade. The regulations would also
apply to vessels carrying any cargo that is not solely in liquid or
solid bulk form.
    The NPRM invited comments on five options for extending SOLAS
requirements for cargo securing on international voyages to voyages in
U.S. coastwise trade. We have decided against such an extension because
the cargo loss record of coastwise trade does not justify the
regulatory costs that coastwise industry would have to bear.
Nevertheless, the following discussion summarizes the public comment on
the five options.
    Nine commenters commented on Option 1. Option 1 proposed extending
SOLAS requirements to coastwise voyages. Two companies and the two
unions chose Option 1 as their preferred option. One company said it
would prefer a ``compromise'' between Options 1 and 2, with vessel-
specific standards that would comply with or exceed SOLAS standards.
The cargo gear company criticized Option 1 for not requiring regular
CSM review. One company said Option 1 is too restrictive, and another
company said it would require too much standardization. A seagoing
barge operator said Option 1 would not work for seagoing barges,
because no two barge cargoes are the same.
    Five commenters commented on Option 2. Option 2 proposed allowing
each coastwise voyage vessel to set and document its own standards,
subject to Coast Guard approval. The cargo gear company said this
option should be evaluated in light of the Coast Guard's experience
with continuous examination programs, and noted similarities between
Options 2 and 5. One company said Option 2 requires an overly
burdensome consideration of too many variables. A seagoing barge
operator said Option 2 would not work for seagoing barges, but did not
explain the reasons for this statement. Another company said, without
explanation, that Option 2 would be its second choice of the options
presented. Another company said it would prefer a ``compromise''
between Options 1 and 2, with vessel-specific standards that would
comply with or exceed SOLAS standards.
    Four commenters commented on Option 3. Option 3 proposed requiring
a coastwise voyage vessel to obtain a surveyor's certificate of loading
and securing, prior to departure, if the voyage would also be subject
to Pipeline and Hazardous Materials Safety Administration regulations
in 49 CFR part 176. The cargo gear company said its reaction to Option
3 would depend on the specific standards the Coast Guard would propose
for incorporation. A transportation company said the use of surveyors
for multiple voyages would not be feasible due to cost and surveyor
availability. A seagoing barge operator agreed that it would be
difficult or impossible to ensure a surveyor's availability. Another
company opposed Option 3 due to the high cost of hiring surveyors.
    Four commenters commented on Option 4. Option 4 proposed developing
regulations that would allow each coastwise vessel owner to choose from
among Options 1, 2, and 3. One commenter opposed Option 4, but did not
make its reasons clear. The cargo gear company said Option 4 should be
attractive to those who favor cargo securing regulations for domestic
voyages, but did not express its own preference or opposition. A
seagoing barge operator said the ``menu of options'' provided by Option
4 could cause confusion. A company said it opposes Option 4 because it
combines the strengths, but also the weaknesses, of Options 1 through
3.
    Four commenters commented on Option 5. Option 5 proposed
incorporating yet-to-be-developed coastwise voyage standards that
industry might draft in cooperation with TSAC. One company expressed
support but did not explain its preference for Option 5. Two companies
expressed preference for Option 5 because it would allow for the
development of standards that would be appropriate for different types
of vessel and operational needs; one of the two said the exact language
of Option 5 should be modified. A seagoing barge operator opposed
Option 5 because it would not ensure the development of appropriate
standards for different vessel types and operational needs.

VI. Discussion of Proposed Rule

    We are issuing this SNPRM, rather than proceeding directly to a
final rule, for two reasons. First, much of the NPRM focused on the
possible extension of SOLAS requirements to coastwise voyages. We wish
to make it clear that we are no longer considering that extension, and
that our proposed regulations would apply only to international
voyages. Second, this SNPRM proposes some regulatory changes that were
not discussed in the NPRM. For example, we propose additional language
to help clarify what information needs to be reported when a cargo loss
or jettisoning event occurs, and what constitutes such an event; and we
propose new provisions for the use of classification societies or other
third parties in approving CSMs.
    This SNPRM proposes incorporating by reference IMO Circulars MSC.1/
Circ. 1352 and 1353. These Circulars provide much of the guidance that
we attempted to provide in our 2000 NPRM, which was based on the more
limited guidance then available from the IMO's 1996 Circular MSC.1/
Circ. 745 (``Guidelines for the preparation of the Cargo Securing
Manual''). Table 1 shows where the NPRM's proposed regulatory text is
paralleled in the SNPRM.

           Table 1--Regulatory Text Comparison, NPRM and SNPRM
      [All references are to proposed sections in 33 CFR, part 97]
------------------------------------------------------------------------
                      NPRM                                SNPRM
------------------------------------------------------------------------
General, 97.100-97.130.........................            97.100-97.115
Cargo Securing Manual, 97.200-97.280...........                   97.120

How will Cargo Securing Manual Requirements be             97.200-97.215
 Approved and Enforced?, 97.300-97.350.........
Authorization of an Organization to Act on                 97.300-97.320
 Behalf of the U.S., 97.400-97.480.............
------------------------------------------------------------------------

    Reporting loss or jettisoning of cargo. We propose prescribing in
33 CFR parts 97 and 160 when and how the accidental loss or deliberate
jettisoning of cargo at sea must be reported. Currently, 33 CFR 160.215
requires a vessel owner or operator to immediately notify the Coast
Guard whenever there is a hazardous condition caused by a vessel or its
operation. ``Hazardous condition'' is defined in 33 CFR 160.204 as
``any condition that may adversely affect the safety of any vessel or
the environmental quality of any port, harbor, or navigable waterway of
the United States.'' In our view, any loss or jettisoning of cargo at
sea must be considered a hazardous condition because, at a minimum, it
poses a navigational hazard by threatening vessel safety. We propose
making that explicit in part 97. We would also amend 33 CFR 160.215 by
prescribing specific information to be included in the notification if
the hazardous condition involves the loss or jettisoning of cargo. This
should enhance our ability to identify potential problems with securing
equipment, locate and warn mariners about drifting debris before it
endangers safe navigation, and assess and respond to any environmental
hazard created by the cargo loss.
    An additional concern is containers that sink. Sunken containers
may no longer be a hazard to navigation, but they may pose long-term
threats to the environment. Our proposed reporting and recordkeeping
requirements would facilitate the long-term monitoring of sunken
containers and any needed salvage or remediation.
    Incorporating SOLAS. We propose adding 33 CFR part 97 to
incorporate the existing SOLAS requirements for CSMs on vessels of 500
gross tons or more traveling on international voyages and carrying any
cargo other than solid or liquid bulk cargo. Smaller vessels would only
have to follow those requirements if they so choose--but if they choose
to have a CSM they would be bound by these proposed regulations just as
if they were vessels of 500 gross tons or more, including the
requirement that the CSM would need to be approved by an organization
that we have authorized to do so under proposed 33 CFR part 97. As a
practical matter, all existing vessels to which proposed 33 CFR part 97
would apply are already in compliance with SOLAS CSM requirements. Most
foreign countries are parties to SOLAS and already enforce the SOLAS
CSM requirements on their vessels. All U.S. vessels are already in
compliance because they need SOLAS certificates to enter foreign ports
and, to obtain those certificates, they have voluntarily complied with
Coast Guard NVIC 10-97.
    NVIC 10-97 was based in part on IMO guidance contained in IMO
Circular MSC.1/Circ. 745. That MSC Circular was updated on June 30,
2010, by IMO Circular MSC.1/Circ. 1353, and since that time Coast
Guard-approved CSMs have had to meet Circular 1353 guidelines at a
minimum. Our proposed regulations would require vessels to meet the
Circular 1353 standards. CSMs approved before June 30, 2010 would not
need to be updated.
    We propose provisions for approving and amending CSMs, and for
handling disputes over CSM approval. We would cross-reference those
provisions in the bulk solid cargo operations regulations in 46 CFR
subpart 97.12.
    We propose that, as required by MSC Circular 1352, ``Amendments to
the Code of Safe Practice for Cargo Stowage and Securing (CSS Code),''
any container vessel, subject to SOLAS, whose keel is laid on or after
January 1, 2015, will need to include a cargo safe access plan that is
consistent with chapter 5 of the Annex to IMO Circular MSC.1/Circ.
1353, which in turn references Annex 14 (``Guidance on Providing Safe
Working Conditions for the Securing of Containers'') of the IMO 2010
CSS Code. A cargo safe access plan provides detailed information on
safe access for persons stowing and securing cargo on container ships
that are specifically designed and fitted for the purpose of carrying
containers.
    Classification societies. Finally, proposed 33 CFR part 97 would
provide for our authorization of recognized classification societies
and other third party organizations to review and approve CSMs on our
behalf.

VII. Incorporation by Reference

    Material proposed for incorporation by reference appears in
proposed 33 CFR 97.110. You may inspect this material at U.S. Coast
Guard Headquarters where indicated under ADDRESSES. Copies of the
material are available from the sources listed in Sec.  97.110. Before
publishing a binding rule, we will submit this material to the Director
of the Federal Register for approval of the incorporation by reference.

VIII. Regulatory Analyses

    We developed this proposed rule after considering numerous statutes
and 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 proposed rule is not a significant regulatory action under
section 3(f) of E.O. 12866 (as supplemented by E.O. 13563) and does not
require an assessment of potential costs and benefits under section
6(a)(3) of that Order. The Office of Management and Budget (OMB) has
not reviewed it under that Order. Nonetheless, we developed an analysis
of the costs and benefits of the proposed rule to ascertain its
probable impacts on industry. We consider all estimates and analysis in
this Regulatory Analysis to be preliminary and subject to change in
consideration of public comments. A preliminary regulatory assessment
follows.

1. Summary
    This proposed rule would amend the CFR by adding the following
provisions:
     Requirements for the reporting of lost or jettisoned
cargo;
     The CSM requirements of SOLAS and the guidance in NVIC 10-
97; and
     Procedures for authorization of third party organizations
to review and approve CSMs on the Coast Guard's behalf.
    Please reference Table 2 below for a summary of our analysis.

                                 Table 2--Summary of Regulatory Economic Impacts
----------------------------------------------------------------------------------------------------------------
                                                                         Costs  (7% discount
                                                        Affected                rate)
       Proposed changes            Description         population    --------------------------     Benefits
                                                                       Annualized     Total
----------------------------------------------------------------------------------------------------------------
1. Reporting of lost or         Codify lost or     U.S. and foreign-       $1,420       $9,970  Better tracking
 jettisoned cargo.               jettisoned cargo   flag vessels                                 and response of
                                 as a hazardous     engaged in                                   lost or
                                 condition and      transport to or                              jettisoned
                                 specify data to    from a U.S. port.                            cargo.
                                 be reported.
2. CSM requirements...........  Codify SOLAS       Owners/operators       $45,903     $322,403  Increased
                                 rules and          of 7,163                                     enforcement
                                 guidance from      vessels: 26 U.S.-                            authority.
                                 NVIC 10-97.        flagged, 7,137
                                                    foreign-flagged.
3. Approval of authorized       Codify guidance    6 currently                 $0           $0  Increased
 organizations.                  from NVIC 10-97.   approved                                     enforcement.
                                                    organizations,
                                                    others applying
                                                    for approval
                                                    status.
----------------------------------------------------------------------------------------------------------------

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

       Table 3--Summary of the 10-Year Total Cost to the International Cargo Industry and U.S. Government
----------------------------------------------------------------------------------------------------------------
                                                              Undiscounted                  Total, discounted
                      Year                      ----------------------------------------------------------------
                                                   Industry    Government     Total          7%           3%
----------------------------------------------------------------------------------------------------------------
1..............................................      $38,788         $500      $39,288      $36,718      $38,144
2..............................................       38,814          520       39,334       34,356       37,076
3..............................................       38,854          550       39,404       32,165       36,060
4..............................................       46,519          580       47,099       35,932       41,847
5..............................................       46,558          610       47,168       33,630       40,688
6..............................................       46,598          640       47,238       31,477       39,561
7..............................................       54,263          670       54,933       34,210       44,666
8..............................................       54,303          700       55,003       32,012       43,420
9..............................................       54,342          730       55,072       29,956       42,208
10.............................................       62,020          770       62,790       31,919       46,722
                                                ----------------------------------------------------------------
Total..........................................      481,059        6,270      487,329      332,375      410,392
    Annualized.................................  ...........  ...........  ...........       47,323       48,110
----------------------------------------------------------------------------------------------------------------

2. Affected Population
    The applicable population (those vessels subject to the proposed
regulation) consists of U.S. and foreign-flagged vessels that:
     Measure 500 gross tons or more,
     Are engaged in international trade as indicated by
currently having a SOLAS Cargo Ship Safety Certificate, 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. An extract from the
Coast Guard's Marine Information for Safety and Law Enforcement (MISLE)
database identified 26 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 three full years of data available, 2009 through
2011. This produced a list of 7,137 foreign-flagged vessels that had
one or more visits to a U.S. port and met the tonnage and cargo type
criteria. Table 4 summarizes the total applicable population data.

Table 4--Total Applicable Population, Non-Bulk Cargo Vessels, 500+ Gross
                                  Tons
------------------------------------------------------------------------
                             Flag                                Vessels
------------------------------------------------------------------------
U.S...........................................................        26
Foreign.......................................................     7,137
                                                               ---------
  Total.......................................................     7,163
------------------------------------------------------------------------
Sources: MISLE & SANS.

3. Economic Analyses
    We include an analysis of the costs, benefits, and alternatives for
each of the proposed rule's three provisions:
     Requirements for the reporting of lost or jettisoned
cargo;
     CSM requirements; and
     Approval of authorized organizations.

    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 VI of this preamble, the current
regulations require the Coast Guard to be immediately notified when a
hazardous condition is caused by a vessel or its operation. Our
interpretation is that incidents of lost or jettisoned cargo \1\ should
be considered hazardous conditions and must be reported. However,
current industry practice does not correspond with that interpretation.
Captain James J. McNamara, President of the National Cargo Bureau,
wrote: ``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.'' \2\ 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
residual 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.
---------------------------------------------------------------------------

    \1\ 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.
    \2\ 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 proposed 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 5 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 5--Change Matrix for Reporting of Hazardous Conditions in 33 CFR
------------------------------------------------------------------------
   Reference & description     Affected population     Economic impact
------------------------------------------------------------------------
                          97.100 Applicability
------------------------------------------------------------------------
. . . (a)(1), U.S. vessels..  U.S. cargo vessels    None, administrative
                               500+ GT, non-U.S.     only.
                               cargo vessels in
                               U.S. waters 500+ GT.
97.105 Definitions..........  All vessels and       None, administrative
                               approval              only.
                               organizations.
97.110 Incorporation by       All affected vessels  None, administrative
 reference, lists IBR          and approval          only.
 references.                   organizations.
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.
160.215(a), requirement to    Operators of vessels  No change, new label
 report hazardous condition.   involved in           of existing text.
                               incident resulting
                               in hazardous
                               condition.
160.215(b), data to be        Operators of vessels  This requirement
 reported.                     involved in           references 97.115
                               incident resulting    and all costs are
                               in hazardous          included there.
                               condition.
------------------------------------------------------------------------
Source: Coast Guard analysis.

    ii. Affected population and costs. The proposed 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 7,163 vessels, as reported in Table 4.
    For 2009 through 2011 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. In
order to test this, 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 4,000
containers lost at sea worldwide, as reported in the October 2010 issue
of the Register Expert, the journal of the Netherlands Institute of
Registered Insurance Experts, and cited by the IMO.\3\ The report cited
by IMO only contained a global estimate; there were no break-outs 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
2010 that there were 369,155 container ship visits world-wide \4\ and
that 22,222 were at U.S. ports.\5\ Thus, the U.S. share of global
container traffic is 6.0 percent (22,222/369,155).
---------------------------------------------------------------------------

    \3\ IMO Maritime Safety Committee report 89/22/11, p. 1. A copy
of this report is in the rulemaking docket.
    \4\ See http://www.marad.dot.gov/documents/Vessel_Calls_at_US_Ports_Snapshot.pdf, p. 7, ``Global Vessel Calls by Country,
2011.''
    \5\ 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 6.0 percent share to estimate that about 240
containers in U.S. traffic are lost annually (4,000 containers lost
world-wide * U.S. 6.0 percent share of traffic, rounded). The five
incidents lost a total of 25 containers, so we estimate on average
there were five lost containers per incident. Using those data, we
estimate that there will be 50 reports of lost containers to the Coast
Guard (240 containers lost/5 containers per incident, rounded to the
nearest 10) in the first year the rule would become effective.
    The Tioga Group, a freight transportation services consulting
firm,\6\ in its report \7\ 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 U.S. 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 50 lost containers to years 2 through 10 in this

cost analysis. This yields an estimate of 77 incidents by year 10 (the
complete series is shown in the ``Estimated Incidents'' column of Table
7).
---------------------------------------------------------------------------

    \6\ For information on The Tioga Group see www.tiogagroup.com.
    \7\ 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.
---------------------------------------------------------------------------

    When cargo is lost or jettisoned, the vessel staff already collects
data for company purposes.\8\ Thus, the only additional cost for
compliance with the proposed 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 would take 0.25 hours for a Master or other senior
ship's officer to compile a report and transmit it to the Coast Guard.
---------------------------------------------------------------------------

    \8\ 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,
Masters, and Pilots of Water Vessels. BLS reports that the hourly rate
for a Master is $34.50 per hour.\9\ To account for benefits, the load
factor, or ratio between total compensation and wages is calculated at
1.52,\10\ using BLS data. The fully loaded wage rate for a Master is
estimated at $53 per hour ($34.50 base wages * 1.52 load factor,
rounded up to capture the entire cost).
---------------------------------------------------------------------------

    \9\ Mean wage, http://www.bls.gov/oes/2011/may/oes535021.htm.
    \10\ Load Factor calculation, source: ftp://ftp.bls.gov/pub/special.requests/ocwc/ect/ececqrtn.pdf.
---------------------------------------------------------------------------

    Similarly, it would take 0.25 hour for Coast Guard personnel at the
E-4 level to record the data. The wage rate for an E-4 rating is $40,
per Commandant Instruction 7310.1M.\11\ The unit cost for the Coast
Guard is $10.00 ($40 per hour * 0.25 hours).
---------------------------------------------------------------------------

    \11\ http://www.uscg.mil/directives/ci/7000-7999/CI_7310_1M.pdf.
---------------------------------------------------------------------------

    As shown in Table 6, the unit cost for reporting a lost or
jettisoned cargo is $23.25.

  Table 6--Unit Cost for Reporting a Lost Container or Jettisoned Cargo
------------------------------------------------------------------------
                                              Time      Wage
                   Task                      (hours)    rate      Cost
------------------------------------------------------------------------
Master to report incident.................      0.25       $53    $13.25
Coast Guard data entry (E4)...............      0.25        40     10.00
                                           -----------------------------
    Total.................................  ........  ........     23.25
------------------------------------------------------------------------
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 7 displays the input data and the resulting cost
estimates on an undiscounted basis and discounted at 7 percent and 3
percent interest rates.

                                              Table 7--Cost Schedule for Reporting Lost or Jettisoned Cargo
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Discounted
                  Year                       Estimated        Rounded      Industry cost      CG Cost       Total cost   -------------------------------
                                             incidents       incidents                                                          7%              3%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................           50                 50            $663            $500          $1,163          $1,087          $1,129
2.......................................           52.45              52             689             520           1,209           1,056           1,140
3.......................................           55.02              55             729             550           1,279           1,044           1,170
4.......................................           57.72              58             769             580           1,349           1,029           1,199
5.......................................           60.55              61             808             610           1,418           1,011           1,223
6.......................................           63.52              64             848             640           1,488             992           1,246
7.......................................           66.63              67             888             670           1,558             970           1,267
8.......................................           69.89              70             928             700           1,628             948           1,285
9.......................................           73.31              73             967             730           1,697             923           1,301
10......................................           76.90              77           1,020             770           1,790             910           1,332
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................  ..............  ..............           8,309           6,270          14,579           9,970          12,292
Annualized..............................  ..............  ..............  ..............  ..............  ..............           1,420           1,441
--------------------------------------------------------------------------------------------------------------------------------------------------------

    To provide a breakout of costs by flag status, we extracted from
the Coast Guard's SANS database the vessels calling on U.S. ports in
2011. We divided the vessels into U.S. and foreign-flag status. Table 8
presents the data and shows that in 2011, U.S. flag-vessels accounted
for 2.5% of the visits by vessels subject to this rule.

 Table 8--2011 Visits to U.S. Ports by Flag-Status of Vessels 500 Gross
                      Tons or More, Non-Bulk Trade
------------------------------------------------------------------------
                        Flag                           Visits    Percent
------------------------------------------------------------------------
U.S.................................................       514       2.5
Foreign.............................................    20,242      97.5
                                                     -------------------
  Total.............................................    20,756     100.0
------------------------------------------------------------------------
Source: USCG, SANS database.

    We produced a breakout for U.S. costs of lost or jettisoned cargo
by applying the 2.5 percent of visits by U.S. flag vessels from Table 8
to the cost estimates from Table 7. Please note that U.S. costs include
both costs to U.S.-flagged vessels and the Coast Guard. Table 9
displays the data for the U.S. costs.

                                         Table 9--Schedule for U.S. Costs for Reporting Lost or Jettisoned Cargo
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Discounted
                  Year                       Estimated        Rounded     Industry  cost     CG  cost       Total  cost  -------------------------------
                                             incidents       incidents                                                          7%              3%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................           50                  1             $13             $10             $23             $21             $22
2.......................................           52.45               1              13              10              23              20              22
3.......................................           55.02               1              13              10              23              19              21
4.......................................           57.72               1              13              10              23              18              20
5.......................................           60.55               1              13              10              23              16              20
6.......................................           63.52               2              27              20              47              31              39
7.......................................           66.63               2              27              20              47              29              38
8.......................................           69.89               2              27              20              47              27              37
9.......................................           73.31               2              27              20              47              26              36
10......................................           76.90               2              27              20              47              24              35
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................  ..............  ..............             200             150             350             231             290
Annualized..............................  ..............  ..............  ..............  ..............  ..............              33              34
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The costs of reporting lost or jettisoned cargo for non-U.S.-flag
vessels are obtained by subtracting the U.S. costs, as reported in
Table 9, from the costs as displayed in Table 7. Table 10 presents the
results of these calculations.

                                      Table 10--Schedule for Non-U.S. Costs for Reporting Lost or Jettisoned Cargo
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Discounted
                  Year                       Estimated        Rounded      Industry cost      CG cost       Total cost   -------------------------------
                                             incidents       incidents                                                          7%              3%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................           50                 49            $649            $490          $1,139          $1,064          $1,106
2.......................................           52.45              51             676             510           1,186           1,036           1,118
3.......................................           55.02              54             716             540           1,256           1,025           1,149
4.......................................           57.72              57             755             570           1,325           1,011           1,177
5.......................................           60.55              60             795             600           1,395             995           1,203
6.......................................           63.52              62             822             620           1,442             961           1,208
7.......................................           66.63              65             861             650           1,511             941           1,229
8.......................................           69.89              68             901             680           1,581             920           1,248
9.......................................           73.31              71             941             710           1,651             898           1,265
10......................................           76.90              75             994             750           1,744             887           1,298
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................  ..............  ..............           8,110           6,120          14,230           9,738          12,001
Annualized..............................  ..............  ..............  ..............  ..............  ..............           1,386           1,407
--------------------------------------------------------------------------------------------------------------------------------------------------------

    iii. Benefits. A 2011 news release from the Monterey Bay Aquarium
Research Institute (MBARI) \12\ stated that containers that fall from
ships can ``float at the surface for months, 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 contained
22,500 pounds of used batteries and another contained an unspecified
hazardous material.
---------------------------------------------------------------------------

    \12\ http://www.mbari.org/news/news_releases/2011/containers/containers-release.html.
---------------------------------------------------------------------------

    The immediate benefit of the reporting provisions is that they
would 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 would
enable the Coast Guard and other parties to identify industry trends
and track potential long-term threats to the marine environment from
sunken containers.
    iv. Alternatives. We considered possible alternatives to the
proposed rule. One possibility, as suggested in the NPRM, 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.
    Another option would be 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 the proposed rule and determined that
all 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 the proposed rule would
provide the Coast Guard with sufficient information to fulfill its
missions of maritime safety and protection of the marine environment
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, current requirements for CSMs are located in SOLAS, with
further implementing guidance included in NVIC 10-97. The Coast Guard's
current reference for the minimum standards of a CSM is IMO's Circular
1353.
    Enforcement in U.S. ports is carried out by the Coast Guard's
safety and security vessel examinations program. As part of these
examinations, the Coast Guard checks that the subject vessels have a
CSM and that the crew follows it. MISLE data show that from 2009
through 2011, the 26 U.S.-flag vessels that are part of the affected
population were subject to 176 inspections. In all of these inspections
there were no citations for a deficient CSM. MISLE also recorded that
in 2009 through 2011, the Coast Guard conducted 11,989 vessel
inspections of foreign-flag vessels and found problems relating to CSMs
in only 8 instances. These data indicate an ongoing compliance process
for both U.S.- and foreign-flagged vessels subject to CSM rules. As a
result, the Coast Guard anticipates that the only costs regarding the
CSM requirement is that moving the requirements from SOLAS and the
implementing guidelines from NVIC 10-97 into the CFR could prompt
owners and operators of the few deficient vessels to ensure their CSMs
were fully compliant with SOLAS prior to entering U.S. waters.
    Tables 11 and 12 present the change matrix for the edits to Title
33 and Title 46 of the CFR, respectively, that relate to the CSM
requirements. Each matrix summarizes the specific edit or change, the
affected population, and the economic impact.

      Table 11--Change Matrix for Adding CSM Requirements to 33 CFR
------------------------------------------------------------------------
   Reference & description     Affected population     Economic impact
------------------------------------------------------------------------
                          97.100 Applicability
------------------------------------------------------------------------
. . . (a)(1), U.S. vessels..  U.S. cargo vessels    None, administrative
                               500+ GT, non-U.S.     only.
                               cargo vessels in
                               U.S. waters 500+ GT.
. . . (a)(2), voluntary       U.S. vessels less     No change, codifies
 compliance.                   than 500 GT           guidance currently
                               requesting coverage.  located in NVIC.
. . . (b), exemption for      Ready Reserve and     None, these vessels
 Ready Reserve and public      public vessels.       currently exempted.
 vessels.
97.105 Definitions..........  All vessels and       None, administrative
                               approval              only.
                               organizations.
97.110 Incorporation by       All affected vessels  None, administrative
 reference, lists IBR          and approval          only.
 references.                   organizations.
------------------------------------------------------------------------
                      97.120 Cargo Securing Manuals
------------------------------------------------------------------------
. . . (a)(1), CSMs required.  SOLAS vessels and     Cost of developing
                               non-U.S., non-SOLAS   CSM for
                               vessels noted with    noncompliant
                               deficient CSMs by     vessels.
                               Coast Guard.
. . . (a)(2), CSAP required   Non-SOLAS vessels...  Edit to close
 after 2015.                                         regulatory gap. No
                                                     costs, no current
                                                     vessels affected
                                                     and none expected
                                                     in future.
. . . (b), authorizes CG      All U.S. and foreign- No cost, provides
 enforcement.                  flagged vessels       authority for
                               subject to the rule.  current CG
                                                     compliance
                                                     activities.
------------------------------------------------------------------------
Source: Coast Guard analysis.

 Table 12--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 and costs. As stated in the preceding
section VIII.A.3.i, 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
U.S.-flagged vessels in international trade currently comply with the
SOLAS CSM rules and will continue with those practices. For foreign-
flagged vessels that visit U.S. ports, we estimated the costs of
compliance based on the following assumptions:
    (1) In the absence of the proposed rule, the current deficiency
rate for subject foreign-flagged vessels would continue.
    (2) Under the proposed rule, the increased enforceability posture
from codifying the CSM rules will lead all vessels to comply with the
SOLAS standards and NVIC guidance prior to entering U.S. waters. That
is, the deficiency rate will be reduced to zero for foreign-flagged
vessels.
    In the preceding section VIII.A.3.i, we reported that there were 8
deficiencies related to CMS from 2009-2011. These deficiencies are
comprised of 4 that were missing sections or certain technical data, 3
that were missing approval from an authorized organization, and 1 that
did not have its CSM on the vessel. Table 13 presents the data from
2009 through 2011 for the calculation of a deficiency rates by year and
an annual average for the three years.

                                      Table 13--Annual CSM Deficiency Rate
----------------------------------------------------------------------------------------------------------------
                                                                                Deficiency
                              Year                                    Vessel            CSM            rate
                                                                   examinations    deficiencies      (percent)
----------------------------------------------------------------------------------------------------------------
2009............................................................           3,901               3            0.08
2010............................................................           4,148               3            0.07
2011............................................................           3,930               2            0.05
                                                                 -----------------------------------------------
    Total (Sum for examinations and deficiencies, average for             11,979               8            0.07
     rate)......................................................
----------------------------------------------------------------------------------------------------------------

    The population in year 1 of the estimate period is the foreign-
flagged component of the affected population--7,137 vessels, as
reported in Table 4. 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 U.S. is expected to increase,\13\ so a flat
extrapolation of the baseline over years 2 through 10 of the analysis
period would result in an underestimate.
---------------------------------------------------------------------------

    \13\ See. ``U.S. Port and Inland Waterways Preparing for Post
Panamax Vessels'', p. 10--``Forecast and Containerized Cargo'':
http://www.iwr.usace.army.mil/docs/portswaterways/rpt/June_20_U.S._Port_and_Inland_Waterways_Preparing_for_Post_Panamax_Vessels.pdf.
---------------------------------------------------------------------------

    We used the Tioga Group's estimate of a 4.9 percent rate for our
estimate for growth in our ten-year analysis period. The SANS data used
for an estimate of the affected population showed that each vessel
averaged 3.5 visits per year to U.S. ports in the three years of data
collection, 2009 through 2011.
    At this time 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, starting with the baseline
population of 7,137 vessels. The resulting estimates are shown in the
``Affected Vessels'' column of Table 14.
    The estimate of the number of deficient CSMs in any year equals the
estimate of the vessel population that year times the deficiency rate.
For example, the estimate for Year 1 is CSMs for 5 new foreign-flagged
vessels (7,137 vessels * 0.07 percent).
    To obtain a current estimate for the cost of developing a cargo
securing manual we contacted industry cargo securing subject matter
experts in 2013 \14\. These experts are familiar with the entire
development of cargo securing manuals, including vessel survey,
evaluation of the cargo securing equipment and procedures, preparing
the manuals, and training the 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 do not have detailed descriptions of each deficiency, so for
the unit cost, we will assume that in order to ensure compliance the
company will revise the CSM using an existing survey of the vessel. A
recently completed 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 \15\. That study estimates
that the average cost of a survey for a freight ship is $1,125. We
estimated 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). The total cost for any year is the number of new CSMs to
remedy deficiencies, times the unit cost of $7,625. Table 14 presents
the cost estimate over the ten-year period at both an undiscounted
value and discounted at 7 percent and 3 percent interest rates. As
noted, these costs are for noncompliant foreign vessels; all U.S.
vessels in international trade are assessed as already complying.
---------------------------------------------------------------------------

    \14\ These sources preferred not to be identified in order to
protect proprietary information.
    \15\ ABS Consulting, Inc, ``Study of Marine Engineering and
Naval Architecture Costs for Use in Regulatory Analyses,'' Table 5,
p. 26. A copy is included in the docket.

                                                       Table 14--Cost of Upgrading Deficient CSMs
                                                       [undiscounted and discounted at 7% and 3%]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            (C)  Annual                                             Discounted
                        (A)  Year                          (B)  Affected    deficiency     (D)  New CSMs   (E)  CSM Cost -------------------------------
                                                              vessels     rate (percent)       (B*C)        (D*$7,625)          7%              3%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................................           7,137            0.07               5         $38,125         $35,631         $37,015
2.......................................................           7,487            0.07               5          38,125          33,300          35,936
3.......................................................           7,854            0.07               5          38,125          31,121          34,890
4.......................................................           8,239            0.07               6          45,750          34,902          40,648
5.......................................................           8,643            0.07               6          45,750          32,619          39,464
6.......................................................           9,067            0.07               6          45,750          30,485          38,315
7.......................................................           9,511            0.07               7          53,375          33,239          43,399
8.......................................................           9,977            0.07               7          53,375          31,065          42,135
9.......................................................          10,466            0.07               7          53,375          29,032          40,907
10......................................................          10,979            0.07               8          61,000          31,009          45,390
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................  ..............  ..............  ..............         472,750         322,403         398,099
Annualized..............................................  ..............  ..............  ..............  ..............         $45,903         $46,669
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As shown in Table 14, the total 10-year cost for upgrading CSMs at
a 7% discount rate is $45,903. We anticipate that the Coast Guard will
continue its current inspection regime, so there are no additional
government costs or

resource impacts to the Coast Guard for new, upgraded or revised CSMs.
    iii. Benefits. The benefit of adding the SOLAS requirements and the
NVIC 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 of this
preamble, the only current U.S. implementation of the CSM is via NVIC
10-97, which is unenforceable. Incorporating these rules into the CFR
elevates the requirements to regulation status. As described in section
III 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 the proposed rule under
these authorities.
    iv. Alternatives. Alternatives were considered in this proposed
rule. Alternatives include various ways to apply the requirements to
prepare and implement CSMs to U.S.-flagged vessels in coastwise trade.
As described in section V of this preamble, the 2000 NPRM presented
five options for applying CSM regulations to U.S. domestic voyages.
Table 15 presents descriptions of these options and a summary of the
comments.

  Table 15--Options to Extend CMS 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
                                                   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
                                                   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
                                                   opposed for these
                                                   reasons:
                                                   Surveyors for
                                                   multiple voyages not
                                                   feasible for cost and
                                                   availability
                                                   Could not
                                                   ensure surveyor
                                                   availability
                                                   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      3 supported, 1 for
                          with industry.           unstated reasons and
                                                   2 because of its
                                                   flexibility; and 1
                                                   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 of
500 gross tons or more in coastwise trade. The geographic
identification was vessels with coastwise route certifications. We
identified 675 vessels from MISLE that met these requirements, which is
comprised of 215 freight barges, 125 freight ships, and 335 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 proposed 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, we assigned for the unit cost of the U.S. coastwise
vessels the low-end value of $7,500 from the range supplied by the
subject matter experts we contacted. The recent history of new builds
will continue through the ten-year analysis period. MISLE reported 22
new vessels per year from 2009-2012 and we used this in our analysis.
     A phase-in period was not in the NPRM, but we added a
three-year phase-in period, to mitigate the burden on both vessel
owners and the authorized approval organizations. We assume that vessel
owners would distribute the certification of the manuals for their
vessels evenly over the phase-in period. This would 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. As the costs to foreign-flagged vessels would be the same for
Option 1 as the preferred alternative, the data presented show the
marginal costs for Option 1. The annualized cost, using a 7 percent
discount rate would be $759,524. The cost estimates are displayed in
Table 16.

                                    Table 16--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.......................................             225              22             247          $7,500      $1,852,500      $1,731,308      $1,798,544
2.......................................             225              22             247           7,500       1,852,500       1,618,045       1,746,159
3.......................................             225              22             247           7,500       1,852,500       1,512,192       1,695,300
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...............................             675             220             895  ..............       6,712,500       5,587,425       6,180,765
Annualized..............................  ..............  ..............  ..............  ..............  ..............         795,524         724,574
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The goal of this alternative would be 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 operator cannot know about or
prevent.'' Recent data from MISLE supports the commenters.
Specifically, MISLE has only five incidents from 2009-2011 of lost or
damaged containers involving U.S. vessels in coastwise voyages.
Additionally, our initial cost estimates, as presented in Table 16,
indicate that industry would incur annualized costs, discounted at 7
percent, of nearly $800,000. Therefore, the focus of this rulemaking is
exclusively 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 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 NVIC 10-97 and cover
selection criteria, information required by organizations applying for
authorization status, the Coast Guard's application review procedures,
authorization termination, and appeals processes.
    Following the procedures in NVIC 10-39, the Coast Guard has
authorized these six classification societies to review and approve
CSMs: American Bureau of Shipping, Det Norske Veritas, Lloyd's Register
of Shipping, Germanischer Lloyd, RINA S.p.A, and ClassNK.\16\ We
anticipate that no other classification societies will be applying for
CSM approval authority in the near future.
---------------------------------------------------------------------------

    \16\ List of classification societies authorizations: http://www.uscg.mil/hq/cg5/acp/docs/ClassSocietyAuths29May2013.pdf.
---------------------------------------------------------------------------

    However, the NVIC is a guidance document only, and not legally
enforceable. The proposed rule would incorporate these procedures from
the NVIC into the CFR with only some minor editorial changes.
Therefore, we believe there would be no additional regulatory costs
associated with the codification of these application procedures. Table
17 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 17--Change Matrix for Incorporating Class Society Approval
                         Procedures into 46 CFR
------------------------------------------------------------------------
   Reference & description     Affected population     Economic impact
------------------------------------------------------------------------
                          97.100 Applicability
------------------------------------------------------------------------
. . .(a)(3), organizations    New applicants......  No impact, codifies
 applying for CSM approval                           application
 authority.                                          guidance currently
                                                     prescribed by NVIC.
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 owner,     and agents, of new    change, NVIC only
 operator, or agent.           U.S. vessels in       referenced owner.
                               international trade.
. . .(a)(2), CG oversight of  Organizations         No change, codifies
 approval authority            applying for CSM      application
 applications.                 approval authority.   guidance currently
                                                     located in NVIC.
. . .(a)(3), application      U.S. vessels in       No change, codifies
 procedures.                   international trade.  application
                                                     guidance currently
                                                     located in NVIC.
. . .(a)(4), approval         Authorized approval   No change, codifies
 authority retains a copy.     organizations.        NVIC.
. . .(b), approval letter     Authorized approval   No change, codifies
 contents.                     organizations.        NVIC.
. . .(c), disapproval         Authorized approval   No change, codifies
 procedures.                   organizations.        application
                                                     guidance currently
                                                     located in NVIC.

. . .(d), resubmit            Owners and operators  No change, codifies
 procedures.                   resubmitting a CSM.   application
                                                     guidance currently
                                                     located in NVIC.
. . .(e), documents kept on   Owners and operators  No change, codifies
 vessel.                       of U.S. vessels       application
                               subject to the rule.  guidance currently
                                                     located in NVIC.
97.205 Requirements for       Owners and operators  No change, codifies
 amending an approved CSM,     of U.S. vessels       application
 amending procedures.          subject to the rule.  guidance currently
                                                     located in NVIC.
97.210 Appeals, appeals       Owners and operators  No change, codifies
 procedures.                   of U.S. vessels       application
                               subject to the rule   guidance currently
                               and authorized        located in NVIC.
                               approval
                               organizations.
97.300 Authorized CSM         ABS, Lloyds, Nat'l    No change, codifies
 approval authorities, lists   Cargo Bureau.         application
 approved organizations.                             guidance currently
                                                     located in NVIC.
97.305 Requests for           Organizations         No change, codifies
 authorization, application    seeking to become     application
 process.                      approved              guidance currently
                               organizations.        located in NVIC.
97.310 Criteria for           CG and organizations  No change, codifies
 authorization, evaluation     seeking to become     application
 criteria.                     approved              guidance currently
                               organizations.        located in NVIC.
97.315 Requirements for       CG and authorized     No change, rewords
 authorized approval           approval              and codifies
 organizations,                organizations.        application
 responsibilities of CG and                          guidance currently
 authorized approval                                 located in NVIC.
 organizations.
97.320 Revocation of          CG and referenced     No change, revises
 authorization, procedures     organizations.        and codifies
 for CG revoking an                                  application
 authorization.                                      guidance currently
                                                     located in NVIC.
------------------------------------------------------------------------
 Source: Coast Guard analysis.

    We considered alternatives to the proposed changes and edits,
however, we concluded that there are no viable alternatives. The
procedures in the NVIC 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 current weaknesses or gaps in the NVIC, other than the
proposed editorial changes. We also concluded that the recordkeeping
guidance in the NVIC provides complete documentation for all the
involved parties--vessel owners, approved organizations. Reducing or
eliminating any of the proposed 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 proposed rules governing organizations approved to
issue CSMs would codify current procedures with no associated costs to
industry or the government. The benefit of these proposed rules is that
it would 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 the proposed
rule is for the two cost elements: (1) Lost or Jettisoned Cargo and (2)
CSM Requirements. Table 18 presents the ten-year cost schedule for
undiscounted costs and discounted costs at 7 percent and 3 percent
rates.

                           Table 18--Summary of the 10-Year Total Cost to the International Cargo Industry and U.S. Government
--------------------------------------------------------------------------------------------------------------------------------------------------------
                   (A)                          (B)             (C)             (D)             (E)             (F)             (G)             (H)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                CSM                                       Total industry    Total cost              Discounted
                                           requirements
                                                (1)        Lost or jettisoned cargo (2)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                  Year                       Industry        Industry           CG             (B+C)           (D+E)            7%              3%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.......................................         $38,125            $663            $500         $38,788         $39,288         $36,718         $38,144
2.......................................          38,125             689             520          38,814          39,334          34,356          37,076
3.......................................          38,125             729             550          38,854          39,404          32,165          36,060
4.......................................          45,750             769             580          46,519          47,099          35,932          41,847
5.......................................          45,750             808             610          46,558          47,168          33,630          40,688
6.......................................          45,750             848             640          46,598          47,238          31,477          39,561
7.......................................          53,375             888             670          54,263          54,933          34,210          44,666
8.......................................          53,375             928             700          54,303          55,003          32,012          43,420
9.......................................          53,375             967             730          54,342          55,072          29,956          42,208
10......................................          61,000           1,020             770          62,020          62,790          31,919          46,722
                                         ---------------------------------------------------------------------------------------------------------------
    Total...............................         472,750           8,309           6,270         481,059         487,329         332,375         410,392
Annualized..............................  ..............  ..............  ..............  ..............  ..............          47,323          48,110
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table 19 presents the U.S.-based breakout of the 10-year cost data.
The CSM plans would affect only foreign-flagged vessels and there are
no associated U.S. government costs, so the only inputs to U.S. costs
are those associated with the proposed reporting requirements for lost
or jettisoned cargo. As described earlier, these requirements would
accrue costs to both industry and government. The estimates for both
sectors are in Table 18.

  Table 19--Costs to U.S.-Flagged Vessels in International Cargo Industry and U.S. Government for Reporting of
                                            Lost or Jettisoned Cargo
----------------------------------------------------------------------------------------------------------------
                                         Undiscounted                                                  Total
             Year              --------------------------------      Total        Discounted   --------------------
                                   Industry       Government                                          7%
-------------------------------------------------------------------------------------------------------------- ----
1.............................             $13            $500            $513            $479            $498
2.............................              13             520             533             466             502
3.............................              13             550             563             460             515
4.............................              13             580             593             452             527
5.............................              13             610             623             444             537
6.............................              27             640             667             444             559
7.............................              27             670             697             434             567
8.............................              27             700             727             423             574
9.............................              27             730             757             412             580
10............................              27             770             797             405             593
                               ---------------------------------------------------------------------------------
    Total.....................             200           6,270           6,470           4,419           5,452
Annualized....................  ..............  ..............  ..............             629             639
----------------------------------------------------------------------------------------------------------------

    Table 20 displays the breakout of the 10-year cost schedule for
foreign-flagged vessels. These foreign-flagged vessels would incur
costs involving both proposed requirements: CSM plans and reporting of
lost and jettisoned cargo. Estimates for both requirements and the
total cost are included in Table 20.

        Table 20--Costs for Foreign-Flagged Vessels in International Cargo Industry for CSM Requirements
----------------------------------------------------------------------------------------------------------------
                                                   Undiscounted                             Discounted
                                 -------------------------------------------------------------------------------
                                                   Reporting of
              Year                                    lost or
                                     CSM plans      jettisoned         Total            7%              3%
                                                       cargo
----------------------------------------------------------------------------------------------------------------
1...............................         $38,125            $649         $38,774         $36,237         $37,645
2...............................          38,125             676          38,801          33,890          36,574
3...............................          38,125             716          38,841          31,706          35,545
4...............................          45,750             755          46,505          35,478          41,319
5...............................          45,750             795          46,545          33,186          40,150
6...............................          45,750             822          46,572          31,033          39,003
7...............................          53,375             861          54,236          33,775          44,099
8...............................          53,375             901          54,276          31,589          42,846
9...............................          53,375             941          54,316          29,544          41,629
10..............................          61,000             994          61,994          31,515          46,129
                                 -------------------------------------------------------------------------------
    Total.......................         472,750           8,110         480,860         327,953         404,939
Annualized......................  ..............  ..............  ..............          46,693          47,471
----------------------------------------------------------------------------------------------------------------

    The primary benefit of this proposed rule is that it would place
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 would provide the Coast
Guard with additional information to monitor the effects on both
navigation and the environment. Overall, the proposed rule would
support the Coast Guard's missions of maritime safety and stewardship.

B. Small Entities

1. Summary of Findings
    Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have
considered whether this proposed 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 proposed 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). We have prepared the following initial regulatory
flexibility analysis assessing the impact on small entities from the
rule. Based on the information from this analysis, we found:
     There are an estimated 1,217 entities that control the
7,163 vessels that could be economically impacted by the proposed rule.
Using size standards from the Small Business Administration, the 26
U.S-flagged vessels are controlled by 18 companies and none of them are
small. The 7,137 foreign-flagged vessels are controlled by 1,199
companies. 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 which is not small, 32 foreign-flagged vessels are
controlled by government agencies, and the remaining 7,104 foreign-
flagged vessels are controlled by businesses. An analysis of a sample
of the businesses controlling these vessels indicates that 69 percent
are considered small.
     Compliance actions would consist of upgrading deficient
CSMs and reporting lost or jettisoned cargo.
     Of the small entities in our sample with revenue
information, 60 percent of them had an impact of less than 1 percent
and 20 percent had an impact within the 1 percent to 3 percent range.

2. Initial Regulatory Flexibility Analysis
    The Regulatory Flexibility Act of 1980 (5 U.S.C. 601 et seq.) (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.''
    Under the RFA, we are required to consider if this rule will have a
significant economic impact on a substantial number of small entities.
Agencies must perform a review to determine whether a rule will have
such an impact. If the agency determines that it will, the agency must
prepare an initial regulatory flexibility analysis as described in the
RFA.
    Under Section 603(b) and (c) of the RFA, the initial regulatory
flexibility analysis must provide and/or address:
     A description of the reasons why action by the agency is
being considered;
     A succinct statement of the objectives of, and legal basis
for, the proposed rule;
     A description of and, where feasible, an estimate of the
number of small entities to which the proposed rule will apply;
     A description of the projected reporting, recordkeeping
and other compliance requirements of the proposed rule, including an
estimate of the classes of small entities which will be subject to the
requirement and the type of professional skills necessary for
preparation of the report or record;
     An identification, to the extent practicable, of all
relevant Federal rules which may duplicate, overlap, or conflict with
the proposed rule; and
     Descriptions of any significant alternatives to the
proposed rule which accomplish the stated objectives of applicable
statutes and which minimize any significant economic impact of the
proposed rule on small entities.
    a. A description of the reasons why action by the agency is being
considered. Agencies take regulatory action for various reasons. One
reason is to harmonize the CFR with requirements and guidance located
in other sources. The primary purpose of this proposed rule is to
incorporate into the CFR the cargo securing manual rules from SOLAS, as
the U.S. is a signatory state to that treaty.
    Another of the reasons is the failure of the market to compensate
for negative externalities caused by commercial activity. A negative
externality can be the by-product of a transaction between two parties
that is not accounted for in the transaction. As discussed in the
regulatory analysis, this proposed rule is addressing a negative
externality, which is that unreported lost or jettisoned cargo could
collide with other vessels with hazardous consequences to other
vessels, human health, or the environment. The proposed rule mandates
that all occurrences of lost or jettisoned cargo must be reported to
the Coast Guard.
    b. A statement of the objectives of, and legal basis for, the
proposed rule. The Coast Guard proposes this rulemaking to align U.S.
regulations with the CSM requirements of SOLAS. The provisions of this
rulemaking 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 strategic goals of
maritime safety and environmental protection.
    Sections 2103 and 3306 of Title 46, U.S. Code, 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 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.
    c. A description of and, where feasible, an estimate of the number
of small entities to which the proposed rule will apply.

              Table 21--Non-U.S. Vessels by Type of Entity
------------------------------------------------------------------------
                  Entity type                      Count       Percent
------------------------------------------------------------------------
Business \17\.................................        7,104        99.54
Government....................................           32         0.45
Not-for-Profit................................            1         0.01
                                               -------------------------
  Total.......................................        7,137       100.00
------------------------------------------------------------------------

    All the government entities exceed the threshold for being
classified as a small entity as they are either agencies of a foreign
government or exceed the 50,000 population threshold. We excluded these
government entities from the revenue impact analysis. The single not-
for-profit entity is also deemed not small as it is part of an
international organization.
---------------------------------------------------------------------------

    \17\ A vessel may have a separate owner, operator, and
charterer. Operational control may be with any one of these
companies, depending on type of owner (i.e., a passive ownership by
a financial institution) or the type of operating or chartering
contract. Also, the country that the vessel is registered in can be
different than the country of the owner.
---------------------------------------------------------------------------

    To analyze the potential impact on the businesses, we produced a
random sample with a 95 percent confidence level and a confidence
interval of 5 percent.\18\ The resulting sample consisted of 299
businesses. We researched public and proprietary databases for the
location of the company, entity type (subsidiary or parent company),
primary line of business, employee size, revenue, and other
information.\19\ During the initial research we found 6 duplicated
businesses and an additional one whose business was out of the scope of
this rulemaking. Deleting these 7 businesses from our initial sample of
299 resulted in a working sample consisting of 292 businesses. We found
that 217 of the companies in our sample are based in countries other
than the U.S. We therefore excluded these non-U.S. companies from this
revenue impact analysis.
---------------------------------------------------------------------------

    \18\ We selected a statistical sample so we would not need to
research and collect employee size and revenue information for the
entire affected operator population. We selected the operators in
the sample through a random number generator process available in
most statistical or spreadsheet software.
    \19\ We used information and data from Manta (http://Manta.com)
and ReferenceUSA (http://www.referenceusa.com).
---------------------------------------------------------------------------

    The population for the revenue impact analysis consists of the
remaining 75 businesses from the working sample. Of those 75, we found
address information that locates 70 of them in the U.S. The remaining
five are businesses for whom we could find no information; we assumed
that they are located in the U.S. and are small businesses.

    We researched and compiled the employee size and revenue data for
the 70 U.S. businesses and we compared this information to the Small
Business Administration's (SBA) ``Table of Small Business Size
Standards'' to determine if an entity is small in its primary line of
business as classified in the North American Industry Classification
System (NAICS).\20\ We determined that 23 businesses exceeded the SBA
small business size standards, and 20 businesses are small by the SBA
standards. We could not find employee size or revenue data for 27
businesses that are located in the United States and assumed they are
small businesses. Thus, 52 businesses, accounting for 69.4% of the
sample, are considered to be small. The information on location and
size determination is summarized in Table 22.
---------------------------------------------------------------------------

    \20\ The SBA lists small business size standards for industries
described in the North American Industry Classification System. See
http://www.sba.gov/content/table-small-business-size-standards.

                                  Table 22--U.S. Business by Size Determination
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