Sandra Knapp, Esq.

The USCG recently published a Notice and Request for Comments regarding the mechanisms public companies use to show compliance with US citizenship requirements for establishing coastwise trading privileges.  Federal Register, November 3, 2011, 68203.

For purposes of the the coastwise trade laws, the owner of the vessels must be 75% owned by citizens of the United States.  Each tier of ownership must meet the 75% test in its own right.  The US Coast Guard states that it has long taken the position that “when evidence of possible non-compliance is found, the burden is upon the applicant, or recipient of such privilege, to establish its qualifications.”  The US Coast Guard does not accept presumptions or inferences in the determination.  It is a self-certifying system.

It is not easy for public companies to “prove” that it is owned 75% by US citizens.  Stocks are often held by custodians or entities.  The USCG is asking for information on the mechanisms that companies use to comply with the requirements.  Can those mechanisms insure compliance? What ideas can be shared? 

The USCG states in its Notice that it will not retaliate against commenters.  I wonder whether companies will come out and state their actual methods to the USCG.

It seems strange that there were no comments filed to the “Clarification” notice posted by the Maritime Administration on June 27, 2011 (Docket ID Marad-2011-0087).  Comments were due on July 27, 2011.  Since there has been such an industry uproar over the way the foreign transfer orders have been handled by Marad and the EPA, I figured comments would be filed.  Is it possible that everyone is happy with the new procedure?

The Clarification relates to the approval process for requests relating to transfers to foreign registry.  The approval process now requires the seller to self-certify that the vessel does not contain polychorinated biphenyls (PCBs) in regulated quantities.  Marad will continue to notify the Environmental Protection Agency of any transfer request (see prior blog post).

The self-certification must contain the following language:  “Under civil and criminal penalties of law for the making or submission of false or fraudulent statements or representation (18 U.S.C. 1001 and 15 U.S.C. 2615), to the best of my knowledge and belief.  I hereby certify that after the exercise of reasonable due diligence, the vessel(s) do(es) not contain polychorinated biphenyls (PCBs) in amounts greater than or equal to 50 ppm as regulated by the Toxic Substances Control Act (15 U.S.C. 2601 et seq.).”

On May 11, 2011, the U.S. Coast Guard published a “Notice of Study; request for comments” in the Federal Register.  The U.S. Coast Guard will be conducting a Port Access Route Study of the eastern seaboard. 

The study will be conducted to provide safe access routes for vessel traffic to and from ports with a stated goal of enhancing navigational safety “by examining existing shipping routes and waterway uses”.  The U.S. Coast Guard intends to reconcile this goal with other waterway uses such as offshore renewable energy facilities.

The U.S. Coast Guard plans to coordinate with federal, state and foreign agencies plus the maritime community, environmental groups and other stakeholders.

Since the Department of the Interior determined Wind Energy Areas off the east coast that are primarily near the entrances of major ports, the U.S. Coast Guard study will determine the impact on “safe and efficient” navigation.

The U.S. Coast Guard wants your comments on this notice which asks specific questions for comments.  Comments are due by August 9, 2011.

     In a “Request for Comments” published Friday, February 25, 2011 in the Federal Register, the U.S. Coast Guard is seeking public comments on a petition for rulemaking to amend regulation 46 CFR 67.177 regarding foreign rebuilding determinations.

     A petition for rulemaking was filed on behalf of a “coalition of maritime organizations”, including the Shipbuilder’s Council of America, Crowley Maritime Corporation, Matson Navigation Company, Horizon Lines, Inc., Pasha Hawaii Transport Lines, Overseas Shipholding Group, Inc., Totem Trailer Express, and certain maritime trade organizations.  The petition requests the U.S. Coast Guard to, among other things, amend the major component and considerable parts tests, amend the criteria for submissions to the National Vessel Documentation Center and amend the preliminary rebuilt determination application. 

     The petition also requests that two new paragraphs be added to the existing regulations.  First, it requests a paragraph to require public notices of filed applications and rebuilt determinations plus a procedure to appeal the determinations.  Second, it requests a paragraph to require the owner of a coastwise trade vessel that had work performed outside the United States to submit US. Customs Form 226 not only to Customs but also the USCG Commandant.

   Comments are due May 26, 2011.

Update:  The results are in!  Only three comments were filed with respect to the Petition for Rulemaking and all three were in favor of the Petition.  The Petitioner itself filed one of the comments.  It seems to me that no one would object to having better regulations in this area of foreign rebuilding.  The real issue is what parameters should those regulations adopt.  The issues are in the details.

Changes of PCB Regulations May Impact Management of Certain Classes of PCB-Containing Items On-board Vessels, as well as Applications for Foreign Transfers of Vessels

On April 7, 2010, the U.S. Environmental Protection Agency (EPA) published an Advance Notice of Proposed Rulemaking (ANPRM) in the Federal Register (75 Fed Reg. 17,645) initiating the reassessment of polychlorinated biphenyl (PCB) use authorizations.  PCB compounds have been regulated by the EPA under the Toxic Substances Control Act (TSCA) since 1977.  EPA believes that the balance of risks and benefits from the continued use of remaining equipment containing PCBs may have changed enough since 1977 to consider amending the regulations to phase-out the continued use of PCB containing articles. This ANPRM is being used by the EPA to collect information which it will consider when reassessing PCB use and the need for an amendment to the PCB regulations.

The ANPRM solicits information from the maritime industry regarding PCBs on vessels.  Because this solicits voluntary comments, no action is necessary. The comment period closed on August 20, 2010.

EPA’s solicitation raises several issues which have the potential to impact the maritime industry.

In this ANPRM, the EPA asked many different industries to assess the importance of PCB-containing equipment on their current and future operations.  EPA poses the following specific questions to vessel owners and operators:

1. In what vessel systems is PCB containing equipment still in use on vessels?

2. What percentage of vessel equipment uses liquid PCBs?

3. What percentage of vessel equipment uses non-liquid PCBs?

4. What is the expected life of equipment containing PCBs on vessels now in service before it requires routine servicing?

5. What is the difference in the locations used for liquid filled equipment, versus non-liquid filled equipment located?

6. How much does it cost to identify and test (sample collection, extraction, chemical analysis, and recordkeeping) liquid filled equipment and/or nonliquid filled equipment on vessels to determine the PCB concentration?

7. Other than chemical analysis, what methods (such as application type, nameplate, model number, manufacturer name, etc.) can be used to identify PCB-containing equipment?

8. Do non-liquid PCBs enclosed in cabling pose any greater risk to the health of the public than liquid PCBs enclosed in cabling?

9. Should the ‘‘totally enclosed’’ exemption accorded to liquid PCBs enclosed in cabling be extended to solid PCBs?”

(Reference: 75 FR 17665, April 7, 2010)

On April 9, 2010, the Department of Transportation published its final rule on America’s Marine Highway.  The interim rule was published on October 9, 2008 as a result of the Energy Independence and Security Act of 2007 which required the DOT to establish a short sea transportation program and “designate short sea transportation projects to be conducted under the program to mitigate surface congestion.”

Two years later, we now have final regulations, but no designated corridors.  It is intended that Marine Highway Corridors will integrate America’s Marine Highway to surface transportation.  The corridors will be identified at some unspecified date in the future after applications are received and approved.

A Marine Highway will carry cargo or passengers by vessel from one U.S. port to another U.S. port (including a port in Canada in the Great Lakes system) and mitigate the effects of landside congestion such as “increased emissions and energy inefficiencies.”  It is anticipated that the Marine Highways will lessen the need for new landside infrastructure and will generate fuel savings and efficiencies.

Will it happen in our lifetime?  Will there be public funding for the new or improved ports, terminals and vessels that will be needed?  Will all the jurisdictions along the corridor agree on the routes and the cost-sharing?  Will private enterprise be able to thrive and find funding?

The most interesting statement in the final rule is the reference to a dual use vessel which is capable of being used in this new commercial service and also by the DOD for military sealift uses.  Now, that makes sense.

Since the industry is just learning of the new procedure, this added layer of agency review has led to confusion and significant delays.

The U.S. Maritime Administration (MARAD) is employing a new procedure in connection with foreign vessel transfers and its Request For Transfer of Ownership, Registry and Flag, or Charter of U.S. Documented Vessels process, otherwise known as an MA-29 Application.  Based on our recent experiences, MARAD is notifying the Environmental Protection Agency (EPA) of every Request for Transfer that it receives.  It does not matter whether the transfer is for the recycling or scrapping of the vessel or for future commercial use.

Since the industry is just learning of the new procedure, this added layer of agency review has led to confusion and significant delays. Members of the industry were not consulted or involved in formulating the new procedures and no official announcement has been made.  This procedure will affect the shipowner’s ability to sell the vessel and the timing of transactions.

The timing to receive the Transfer Order from MARAD has been moved from 30 days to 60 days.  We are advising clients to conservatively plan on 90 days.

MARAD will not issue its foreign Transfer Order unless it receives written approval from the EPA.  Based on our experience, the EPA will assign the review to a Regional EPA office.  The Regional office will review the history of the vessel and other pertinent information such as construction records and surveys.

One could argue that the EPA may not have jurisdiction over a vessel that is already overseas or that MARAD is acting ultra vires in adopting this new procedure.  In any event, practically speaking, if one wants to get a deal accomplished, the best tactic to take seems to be cooperating with the EPA and MARAD.  There are no time limits on the EPA review, as far as we know, and MARAD has extended its anticipated review time.

The EPA is concerned about violations of the Toxic Substance Control Act (TSCA) whereby any distribution into commerce or export for disposal of ships that contain PCBs (over 50 ppm) is a violation of the law.  Vessels built prior to 1979 are particularly reviewed since PCBs were outlawed in 1979.

Our maritime and environmental lawyers can assist in navigating this process.  Until specific guidelines or regulations are adopted, the industry is in the dark with no input into the process.  This radical departure from past practices needs to be publicized so owners can plan their agreements and “drop dead dates” accordingly.