[Federal Register Volume 59, Number 126 (Friday, July 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16034]


[[Page Unknown]]

[Federal Register: July 1, 1994]


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Part VII





Department of Transportation





_______________________________________________________________________



Coast Guard



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33 CFR Parts 4, 130, et al.




Financial Responsibility for Water Pollution (Vessels); Final Rule
DEPARTMENT OF TRANSPORTATION

Coast Guard

33 CFR Parts 4, 130, 131, 132, 137, and 138

[CGD 91-005]
RIN 2115-AD76

 
Financial Responsibility for Water Pollution (Vessels)

AGENCY: Coast Guard, DOT.

ACTION: Interim rule with request for comments.

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

SUMMARY: The Coast Guard is promulgating interim regulations to 
implement the provisions concerning financial responsibility for 
vessels under the Oil Pollution Act of 1990 and the Comprehensive 
Environmental Response, Compensation, and Liability Act, as amended 
(Acts). These provisions require owners and operators of vessels (with 
certain exceptions) to establish and maintain evidence of insurance or 
other evidence of financial responsibility sufficient to meet their 
potential liability under the Acts for discharges or threatened 
discharges of oil or hazardous substances. The regulations are 
administrative in nature and concern procedures for evidencing 
financial responsibility.

DATES: Effective Date. This rule is effective on July 1, 1994.
    Comment Closing Date. Comments must be received on or before 
September 29, 1994.
    Implementation Date. The Coast Guard will issue new Certificates of 
Financial Responsibility under this rule beginning December 28, 1994, 
following the implementation schedule described in this preamble.

ADDRESSES: Comments may be mailed to the Executive Secretary, Marine 
Safety Council (G-LRA/3406) (CGD 91-005), U.S. Coast Guard 
Headquarters, 2100 Second Street SW., Washington, DC 20593-0001, or may 
be delivered to room 3406 at the same address between 8 a.m. and 3 
p.m., Monday through Friday, except Federal holidays. The telephone 
number is (202) 267-1477.
    The Executive Secretary maintains the public docket for this 
rulemaking. Comments will become part of this docket and will be 
available for inspection or copying at room 3406, U.S. Coast Guard 
Headquarters, between 8 a.m. and 3 p.m., Monday through Friday, except 
Federal holidays. Unless otherwise indicated, documents referred to in 
this preamble also are available in this docket.

FOR FURTHER INFORMATION CONTACT: Mr. Robert M. Skall, (703) 235-4704, 
or Mr. Robert S. Horowitz, (703) 235-4792, National Pollution Funds 
Center. Procedural questions may be directed to Mr. Richard Castellano 
at (703) 235-4810.

SUPPLEMENTARY INFORMATION:

Request for Comments

    The Coast Guard encourages interested persons to participate in 
this rulemaking by submitting written comments on the implementation 
schedule as well as other changes to the NPRM. Commenters are requested 
not to resubmit or restate comments already filed to the docket, as 
those comments have been considered in promulgating this rule. Persons 
submitting comments should include their names and addresses, identify 
this rulemaking (CGD 91-005) and the specific section of this rule to 
which each comment applies, and give the reason for each comment. 
Please submit two copies of all comments and attachments in an unbound 
format, no larger than 8\1/2\ by 11 inches, suitable for copying and 
electronic filing. Persons wanting acknowledgment of receipt of 
comments should enclose stamped, self-addressed postcards or envelopes.
    The Coast Guard will consider all comments received during the 
comment period. It may change this rule in view of the comments.
    The Coast Guard plans no public hearing. Persons may request a 
public hearing by writing to the Marine Safety Council at the address 
under ADDRESSES. The request should include the reasons why a hearing 
would be beneficial. If it determines that the opportunity for oral 
presentations will aid this rulemaking, the Coast Guard will hold a 
public hearing at a time and place announced by a later notice in the 
Federal Register.

Drafting Information

    The principal persons involved in drafting this document are Mr. 
Robert M. Skall, Project Manager, and Mr. Robert S. Horowitz, Project 
Counsel, National Pollution Funds Center.

Regulatory Information

    This interim rule is being made effective on the date of 
publication for the reasons given in the ``Implementation Schedule'' 
section of this preamble. Therefore, the Coast Guard for good cause 
finds, under 5 U.S.C. 553(d)(3), that this rule should be made 
effective in less than 30 days after publication. An interim, rather 
than a final, rule is being issued to enable the public to comment on 
the changes that have been made to the notice of proposed rulemaking 
(NPRM).

Regulatory History

    On September 26, 1991, the Coast Guard published an NPRM titled 
``Financial Responsibility for Water Pollution (Vessels)'' in the 
Federal Register (56 FR 49006). The Coast Guard received over 300 
letters commenting on this proposal. On July 21, 1993, the Coast Guard 
published a notice of availability of a Preliminary Regulatory Impact 
Analysis (PRIA) in the Federal Register (58 FR 38994). The Coast Guard 
received over 60 letters commenting on this PRIA.
    Several of the commenters requested a public hearing. Extensive 
comments were provided to the public docket, both concerning the NPRM 
and the PRIA, during this extended comment period. In addition, on 
November 9, 1991, the House Subcommittee on Coast Guard and Navigation 
of the House Committee on Merchant Marine and Fisheries held a 
Congressional hearing concerning the substance of the NPRM. 
Certificates of Financial Responsibility Under the Oil Pollution Act: 
Hearing Before the Subcommittee on Coast Guard and Navigation of the 
House Committee on Merchant Marine and Fisheries, 102d Cong., 1st Sess. 
(1991). Witnesses' oral and written statements at this hearing are very 
similar to comments supplied to this rulemaking docket. The Coast Guard 
determined that a public hearing would not further illuminate the 
detailed comments provided to the docket or otherwise facilitate 
development of the rule. Accordingly, a public hearing was not held by 
the Coast Guard.
    The Coast Guard also received about eight letters concerning this 
rulemaking in response to a request for comments to the regulatory 
review docket associated with former President Bush's regulations 
moratorium and review (Coast Guard Docket No. CGD 92-005 and DOT Docket 
No. 92-1). These comments sound the same themes as the comments to this 
docket (CGD 91-005). This preamble, the PRIA and the final RIA that 
accompanies this rule address the issues raised by these comments.

Background and Purpose

    On August 18, 1990, the President signed into law the Oil Pollution 
Act of 1990 (Pub. L. 101-380; 33 U.S.C. 2701 et seq.) (OPA 90). Under 
Federal law before that date, several statutes dealt with the issue of 
oil spill liability and compensation. Each was different and narrow in 
scope.
    To remedy this situation, OPA 90 repealed or superseded certain oil 
spill liability provisions under the Federal Water Pollution Control 
Act (33 U.S.C. 1321) (FWPCA), title III of the Outer Continental Shelf 
Lands Act Amendments of 1978 (43 U.S.C. 1814) (OCSLAA), the Trans-
Alaska Pipeline Authorization Act (43 U.S.C. 1653) (TAPAA), and the 
Deepwater Port Act of 1974 (33 U.S.C. 1517) (DPA). The financial 
responsibility provisions of those acts (i.e., the provisions requiring 
vessel owners and operators to maintain evidence of financial 
responsibility sufficient to meet their potential liability under each 
of those Acts) were replaced by a single financial responsibility 
regime under section 1016 of OPA 90 (33 U.S.C. 2716). This new 
financial responsibility regime is keyed to the broader and higher 
limits of liability under OPA 90.
    In addition to OPA 90, which is limited to all types of oil, the 
Comprehensive Environmental Response, Compensation, and Liability Act, 
as amended (42 U.S.C. 9601 et seq.) (CERCLA or Superfund) also concerns 
pollution liability and compensation. CERCLA establishes a financial 
responsibility regime for hazardous substances other than oil. The 
Conference Report on OPA 90 (H. Rep. No. 653, 101st Cong., 2d Sess. 120 
(1990) (Conference Report) states:

    To avoid undue administrative burdens, the regulations for 
financial responsibility for vessels should be consolidated, 
wherever possible, with those under other Federal statutes. In this 
manner, only one certificate would be required for vessels to meet 
the requirements for financial responsibility for the statutes 
consolidated by this Act, and other pollution laws such as the 
Comprehensive Environmental Response, Compensation, and Liability 
Act of 1980.

    This rulemaking, therefore, consolidates financial responsibility 
requirements for vessels under both OPA 90 and CERCLA. It allows the 
issuance of a single, unified Certificate of Financial Responsibility 
(COFR or Certificate) for vessels, replacing the separate certificates 
and financial responsibility regimes under the FWPCA, OCSLAA, TAPAA, 
and DPA. This new, unified COFR and financial responsibility regime 
(under new part 138) also make it unnecessary for a separate 
Certificate and regime under CERCLA. In effect, this rule alleviates 
the need for five separate sets of regulations and certificates, as 
well as the accompanying paperwork burden on government and industry.

Discussion of Comments and Changes

General Issues

    This rulemaking proceeding has been contentious due to a number of 
factors, most of which are not directly germane to the specifics of the 
rule itself. Many in the maritime industry opposed title I of OPA 90 as 
enacted, preferring instead the international liability and 
compensation scheme for oil, namely the International Convention on 
Civil Liability for Oil Pollution Damage of 1969 (1969 CLC) and its 
companion International Convention on the Establishment of an 
International Fund for Compensation for Oil Pollution Damage (1971 Fund 
Convention). (These Conventions may be replaced by 1992 Protocols, 
which incorporate amendments made in 1984 Protocols.) Under the 1969 
CLC, insurers such as the Protection and Indemnity Clubs (P&I Clubs) 
provide financial responsibility guaranties on behalf of their 
shipowner members. These guaranties subject the Clubs to direct action 
by all claimants and do not allow the use of policy defenses. The lower 
shipowner limits of liability under the 1969 CLC are practically 
unbreachable compared to OPA 90. Although this is not an issue directly 
related to this rulemaking, it has, nevertheless, been the reason why 
this rulemaking has been drawn out and contentious. In short, this 
rulemaking has become the victim of the non-rulemaking-related 
opposition to OPA 90.
    The U.S. Congress, after the EXXON VALDEZ catastrophe, essentially 
adopted the 1969 CLC's financial responsibility scheme, but rejected 
its unbreachable limit of liability scheme, and instead enacted OPA 90. 
Thus, although OPA 90's financial responsibility concept and mechanism 
is very similar to that of the 1969 CLC, OPA 90 potentially exposes 
owners and operators to far greater liabilities for removal costs and 
damages from oil spills. OPA 90's philosophy is that, in general, the 
spiller--not U.S. consumers and taxpayers--should bear the lion's share 
of costs and damages.
    In addition, under OPA 90, owners and operators remain subject to 
potential unlimited liabilities under State laws as well. Adoption of 
the 1969 CLC would have required preemption of State laws. These issues 
are not matters within the Coast Guard's discretion to affect. 
Nevertheless, these issues have impeded drastically the course of this 
rulemaking.
    Oceangoing shipowners and their wholly owned insurers, the P&I 
Clubs that are members of the International Group of P&I Clubs, 
objected to OPA 90's liability and compensation scheme before 
enactment, after enactment, and in several comments to this rulemaking 
docket. These commenters have emerged OPA 90's liability provisions 
with financial responsibility issues, complicating this rulemaking 
proceeding. The most serious commingling of the issues is the 
unsubstantiated allegation by the P&I Clubs and their principal 
reinsurer, Lloyd's of London, that, somehow, despite OPA 90's clear 
statement to the contrary, the American court system would make 
insurers serving as OPA 90 guarantors subject to unlimited liability. 
Although it is true that no insurer can survive a legal system that 
imposes unlimited liability on insurers, it is equally true that 
Congress always has been well aware of that fact and paid sufficient 
attention to that matter when it drafted OPA 90's provisions. No one 
disputes the fact that vessel owners and operators are subject to 
potential unlimited liability under OPA 90 (for example, when there is 
gross negligence), but that fact should not be confused with the 
alleged potential for guarantors to be liable without limit because of 
this rule. There simply is no support in OPA 90 or in law for the 
insurers' assertions.
    The P&I Clubs, in particular, by stating early on that under no 
circumstances would they open themselves up to unlimited liability by 
continuing to provide 1969 CLC-type insurance guaranties to the Coast 
Guard, placed an understandable fear in many segments of the maritime 
industry. This fear was that, because the P&I Clubs have a virtual 
monopoly on relatively inexpensive marine pollution liability 
insurance, no vessel could demonstrate acceptable evidence of financial 
responsibility without the P&I Clubs. The obvious consequence was said 
to be that, if the Coast Guard adopted the NPRM, neither oil nor other 
commodities would move in United States trade, thereby severely 
disrupting the United States and global economies. In later comments to 
the docket, the P&I Clubs confirmed that their shipowner boards of 
directors would not permit the P&I Clubs to soften their stand. Thus, 
the main focus of the debate has been whether the P&I Clubs would, in 
fact, not provide these guaranties, and on the assumption that they 
would not, whether there are other options (obtainable commercial 
insurance or bonds) available to avoid this alleged economic 
disruption. In fact, no commenters objected to the time-tested 
mechanics of the proposed rule, which mechanics have been in place and 
worked well for 23 years in the United States, and since 1975 in the 
rest of the world under the 1969 CLC.
    In order to explore all possible options, the Coast Guard has 
examined all comments carefully, and looked at the suggested 
alternatives to the NPRM. The PRIA, made available on July 21, 1993, 
and open for public comment, refined the issues and elicited several 
amplifying comments.
    All issues now have been aired, and the Coast Guard has decided to 
adopt the essence of the NPRM, subject to technical changes adopting 
many of the commenters' suggestions and, hopefully, alleviating the 
comments that P&I Clubs and other guarantors could somehow become 
subject to unlimited liability. These changes are identified in the 
discussion that follows. The Coast Guard has decided on this course of 
action because it believes that the central objections of the 
commenters to the rule are objections to OPA 90 itself (for example, 
potential unlimited liability of vessel owners and operators), and, if 
necessary, should be dealt with by the Congress and not the Coast 
Guard. The central issue germane to this rulemaking is whether owners 
and operators will be able to obtain financial responsibility 
guaranties if the P&I Clubs, as they have declared, do not provide 
guaranties of insurance. From the letters submitted to the regulatory 
docket, the Coast Guard concludes that even if the P&I Clubs do not 
provide these guaranties, alternative financial responsibility sources 
will be available. These include commercial insurance entities and 
surety bond companies, as well as the potential greater use of self-
insurance and financial guaranties. These alternatives are described 
more fully in the final regulatory impact analysis (RIA) that 
accompanies this rule, a summary of which appears under the heading 
``Regulatory Impact Analysis'' in this preamble. The Coast Guard has 
determined that the approach in the NPRM best fulfills the intent of 
Congress to assure prompt and certain compensation by the polluter to 
victims of oil spills and hazardous substance releases. Other suggested 
alternatives do not satisfy that intent. Among these alternatives are: 
treating P&I Club membership as an asset for self-insurance purposes; 
treating P&I Club membership, with a provision making the Oil Spill 
Liability Trust Fund a ``loss-payee,'' as a form of self-insurance; and 
adoption through legislation of a ``Mandatory Excess Insurance 
Facility.'' These alternatives are discussed in detail in the final RIA 
accompanying this rule. The alternatives have not been adopted. That 
was the main issue in this proceeding. The other issues primarily 
concern specific technical aspects of each section of the rules.

Part and Section Numbers

    The NPRM proposed that preexisting part 130 be replaced by a 
completely new part 130, that parts 131 and 132 be removed, and that 
subpart D of part 137 be removed and reserved. In order to phase in the 
new rules with the least disruption and cost to the maritime industry, 
an orderly compliance schedule is being adopted. This schedule allows 
existing Certificates for non-tank vessels to be used until their 
regularly scheduled expiration dates, as described in the section of 
this preamble labeled, ``Implementation Schedule.'' Because of this 
phased approach, preexisting parts 130, 131, and 132, and subpart D of 
part 137, must temporarily remain effective after the effective date of 
this rule. Accordingly, a new part 138 has been designated for the rule 
that will replace preexisting parts 130, 131, and 132, and subpart D of 
part 137. Conforming amendments have been made to 33 CFR parts 130, 
131, and 132, and subpart D of part 137. The following table shows the 
location in the new part 138 of the corresponding sections of the NPRM:

------------------------------------------------------------------------
           NPRM Part 130                           Part 138             
------------------------------------------------------------------------
130.1(b)...........................  138.10.                            
130.1(a); 130.2(b) (``vessel'')....  138.12.                            
                                     138.15 [new].                      
130.2..............................  138.20.                            
130.3..............................  138.30.                            
130.4..............................  138.40.                            
130.5..............................  138.50.                            
130.6..............................  138.60.                            
130.1(c)...........................  138.65.                            
130.7..............................  138.70.                            
130.8..............................  138.80.                            
130.9..............................  138.90.                            
130.10.............................  138.100.                           
130.11.............................  138.110.                           
130.12.............................  138.120.                           
130.13.............................  138.130.                           
130.14.............................  138.140.                           
130.15.............................  138.150.                           
Appendix A.........................  Appendix A.                        
Appendix B.........................  Appendix B.                        
Appendix C.........................  Appendix C.                        
Appendix D.........................  Appendix D.                        
Appendix E.........................  Appendix E.                        
Appendix F.........................  Appendix F.                        
Appendix G.........................  138.80(f).                         
------------------------------------------------------------------------

Implementation Schedule

    Section 1016(h) of OPA 90 (33 U.S.C. 2716(h)) states that financial 
responsibility regulations under acts repealed or superseded by OPA 90 
remain in effect until superseded by new regulations issued under OPA 
90. Therefore, the financial responsibility requirements in 33 CFR part 
130 (FWPCA), 33 CFR part 131 (TAPAA), 33 CFR part 132 (OCSLAA), and 33 
CFR part 137, subpart D (DPA) will remain in effect with respect to 
individual vessels in the manner prescribed by section 138.15 of this 
rule. The intent of the implementation schedule (which could also be 
termed a compliance schedule) is to allow for an orderly transition to 
part 138 by allowing, as some commenters recommended, COFRs issued 
under the preexisting regulations to remain valid until their 
expiration dates. The Coast Guard is adopting that comment, but only 
with respect to non-tank vessels. (As explained below, tank vessels 
will be required to demonstrate financial responsibility under the new 
part 138 on a more expedited schedule.) This phased-in transition will 
also enable the Coast Guard to issue new Certificates in an orderly 
manner utilizing existing resources. Rather than attempting to issue 
approximately 23,000 new COFRs by a single, mandatory date, the Coast 
Guard expects the future Certificate renewal cycle, applicable to 
Certificates issued under this rule, to result in the renewal of about 
one-third that number each year. No new Coast Guard resources would be 
required for that routine renewal cycle.
    The existing operators of non-tank vessels which presently are 
subject to the regulations issued under one or more of the preexisting 
CFR parts may continue to comply with those preexisting regulations 
for, in some cases, three and one half years after publication of this 
rule in the Federal Register, depending upon the expiration dates of 
their preexisting COFRs. These operators also have the option of 
choosing to comply with this rule soon after its initial implementation 
date, which is 180 days after the publication date, i.e., ``effective 
date''.
    On the other hand, self-propelled tank vessels, followed by non-
self-propelled tank vessels, will be required to comply with this rule 
sooner than non-tank vessels because of the generally greater danger of 
large and possibly catastrophic spills from tank vessels. Self-
propelled tank vessels will be required to submit, not later than 180 
days after publication of this rule in the Federal Register, at least 
the evidence of financial responsibility required by this rule (new 
application forms will be required later). Non-self-propelled tank 
vessels (i.e., tank barges) will be required to submit, not later than 
one year after publication of this rule in the Federal Register, 
application forms as well as evidence of financial responsibility 
required by this rule.
    Although this phased transition to the new rule may appear 
complicated it is designed to impose the least burdensome requirements 
on the regulated community while balancing the need of potential 
claimants to be assured that the vessels posing the greatest pollution 
threat, tank vessels, are in compliance within a reasonable time. It 
also accounts for the administrative needs of the Coast Guard. A 
reading of the actual regulation (Sec. 138.15) is encouraged to ensure 
a full understanding of the compliance deadlines.
    There are three dates germane to this implementation schedule. The 
first is the ``effective date''. The other two can be termed the 
``initial implementation date'' and the ``final implementation date''. 
The effective date, as already discussed, is the date of publication in 
the Federal Register. The initial implementation date is the date 180 
days after the effective date. The final implementation date is the 
date three years plus 180 days after the effective date. The final 
implementation date is the date by which every vessel subject to OPA 
90/CERCLA financial responsibility provisions is required to have an 
OPA 90/CERCLA COFR issued under this new part 138.
    Effective Date: The effective date of this rule is the date of its 
publication in the Federal Register (see DATES at the beginning of this 
preamble), for the following reasons:
    (1) The phased implementation schedule imposes both a benefit and a 
condition on current Certificate holders. The benefit is the ability to 
use, temporarily, an existing Certificate. The condition is that the 
Coast Guard will not accept the surrender (for the purpose of obtaining 
a new Certificate with an extended expiration date) of a Certificate 
during the 179 day period beginning on the effective date (publication 
date) of this rule. Otherwise, Certificate holders simply could 
surrender their existing Certificates and request the Coast Guard to 
issue new Certificates with new three-year expiration dates. Were the 
Coast Guard to allow this, the Coast Guard would be encouraging vessel 
owners and operators to unreasonably delay compliance with the law and 
this new rule. The likely result would be that thousands of COFRs would 
be surrendered with requests for reissuance with new three-year 
expiration dates, as would otherwise be permitted by the preexisting 
rules. This would be an intolerable situation--one not contemplated by 
Congress, and wholly inconsistent with the intent of the orderly 
implementation schedule now being adopted.
    (2) A second reason for the immediate effective date is to enable 
vessel owners and operators that either are required, or wish, to carry 
new Certificates under the new rule on or soon after the initial 
implementation date, to file their applications as soon as possible. 
For example, operators who already purchase OPA 90/CERCA liability 
insurance and whose insurers' agree to issue the insurance guaranty 
appended to this rule, may wish to apply for OPA 90/CERCLA COFRs on or 
shortly after the effective date of this rule. The same applies to 
operators who can obtain OPA 90/CERCLA surety bond or financial 
guaranties, or who can self-insure.
    (3) Although this rule is being made effective immediately, no 
vessel is required to possess a new OPA 90/CERCLA COFR (part 138 COFR) 
until at least the initial implementation date (180 days after the 
effective date). Therefore, there is no burden placed upon any vessel 
owner or operator by making the effective date immediate. For these 
reasons, the Coast Guard has determined under 5 U.S.C. 553(d)(3) that 
good cause exists for making the rule effective in less than 30 days 
after publication in the Federal Register.
    Initial and Final Implementation Dates: New Sec. 138.15 (and the 
conforming new Secs. 130.0, 131.0, 132.0, and 137.300 in the 
preexisting regulations) sets forth the effects of these dates on all 
vessels, including vessels having existing COFRs issued under the 
preexisting regulations, i.e., issued before the initial implementation 
date of this new rule. The discussion in this preamble under 
Sec. 138.15 explains these requirements.
    Upon the final implementation date, 33 CFR parts 130, 131, and 132 
and subpart D of part 137 (which concern vessel financial 
responsibility under the FWPCA, TAPAA, OCSLAA, and DPA for water 
pollution) will be removed. Title 33 CFR part 138 will then be the sole 
rule governing vessel financial responsibility for oil spill incidents 
and hazardous substance releases. ``Incidents'' and ``releases'' are 
statutory terms with legal significance under OPA 90 and CERCLA, 
respectively.

Mobile Offshore Drilling Units (MODUs)

    Requirements for OPA 90 COFRs for offshore facilities per se do not 
fall under the jurisdiction of the U.S. Coast Guard and, therefore, are 
not included in this rule. However, COFRs issued to vessels which are 
MODUs under this rule will cover not only the general (i.e., non-tank 
vessel) liability of MODUs (section 1004(a)(2) of OPA 90) but their 
tank vessel liability as well (section 1004(b)(1) of OPA 90). 
Specifically, MODUs, when being used as offshore facilities, are deemed 
by OPA 90 to be tank vessels with respect to discharges of oil on or 
above the surface of the water. This rule, therefore, concerns only 
vessel financial responsibility, not offshore facility financial 
responsibility. Financial responsibility requirements for offshore 
facilities under OPA 90 are administered by the Department of 
Interior's Minerals Management Service.
    Some commenters observed that the delineation of responsibility 
between a MODU operator and an offshore leaseholder should be clarified 
by these rules. The Coast Guard believes there are two distinct issues 
here: (1) Demonstration of financial responsibility, and (2) liability 
in the event of an oil discharge or substantial threat of a discharge. 
(Clarification of what constitutes a MODU is accomplished in 
Sec. 138.12(b) and in the definition of ``self-elevating lift vessel''. 
See discussion associated with Secs. 138.12 and 138.20.) As to 
financial responsibility, since a MODU, when operating as an offshore 
facility, has the potential for liability as a ``tank vessel'', a MODU 
must demonstrate financial responsibility that would apply to both non-
tank vessel and tank vessel situations. All of the guaranty forms 
provide for such all-purpose coverage.
    It could be argued that questions of allocating liability lie 
outside the scope of this rulemaking respecting financial 
responsibility. However, the Coast Guard is aware of the importance to 
responsible parties and guarantors of assessing liability exposure in 
making decisions relating to the provision of coverage, and hence 
financial responsibility, for that exposure. Consequently, while 
recognizing that the courts will determine matters of liability under 
the provisions of OPA 90, the Coast Guard believes the following 
legislative history is pertinent to the determination of Congressional 
intent as to the scope of liability respecting MODUs operating as 
offshore facilities.
    The enactment of title I of OPA 90 represented the culmination of 
the work of many Congresses on comprehensive oil pollution liability 
and compensation at the federal level. The text of subsection (b) of 
section 1004 of OPA 90, 33 U.S.C. 2704(b), which concerns the 
delineation of MODU owner and operator and lessee or permittee 
liability, derived from related provisions in bills considered by prior 
Congresses.
    The first bills concerning comprehensive oil spill liability and 
compensation in which this delineation was made were H.R. 2222 and 
2368, introduced and considered by the 98th Congress. Chairman Studds 
of the House Coast Guard and Navigation Subcommittee of the House 
Merchant Marine and Fisheries Committee, at a hearing of that 
Subcommittee relating to those bills and H.R. 2115 held on April 20, 
1983, called attention to the addition of text relating to that 
delineation:

    Mr. Biaggi has introduced H.R. 2115, which is identical to the 
bill approved by our committee in the last Congress.
    I have introduced H.R. 2222, which incorporates the main themes 
of past legislation with three significant variations. First, it 
incorporates the proposed change in allocating liability between oil 
contractors and lessees which was included in H.R. 5906 last year; * 
* *. Oil Pollution Liability: Hearing on H.R. 2222 (H.R. 2115, H.R. 
2368), before the Subcomm. on Coast Guard and Navigation of the 
House Comm. on Merchant Marine and Fisheries, 98th Cong., 1st Sess. 
1 (1983).

    The bill referred to by Mr. Studds, H.R. 5906 (97th Cong.), as 
being the one in which the related change originated, passed the House 
of Representatives on December 13, 1982. 128 Cong. Rec. 30336 (1982). 
That bill would have amended title III of the Outer Continental Shelf 
Lands Act Amendments of 1978, the extant federal statute concerning oil 
pollution liability and compensation relative to vessels and facilities 
engaged in Outer Continental Shelf Lands Act activities. Mr. Studds, 
speaking on behalf of H.R. 5906, informed the House that one of the 
goals of that bill was:

    To reapportion the liability among the parties operating on the 
OCS to reflect more closely the industry practice that prevailed 
prior to enactment of the OCSLAA.
* * * * *
    Finally, the reapportionment of liability mandated by H.R. 5906 
will allocate the risks associated with OCS development more 
equitably among the participants in that development. While title 
III presently imposes liability solely upon the owners and operators 
of offshore facilities and vessels, H.R. 5906, as amended, will 
apportion it among the holders of leases, permits, and easements 
issued under the OCSLAA, as well as the owners and operators of 
vessels, mobile offshore drilling units and pipelines. Id. at 30334.

    In the ensuing remarks during the House's consideration of H.R. 
5906, those of Mr. Breaux were of special pertinence to the particular 
scope of the intended liability of the MODU owner or operator:

    The current statute has resulted in Coast Guard interpretations 
holding the drilling contractors solely responsible for all oil 
spills and the major oil company lessees free from liability.
* * * * *
    Essentially, the amendment enacts into statute the preferred 
industry practice for the apportionment of liability. The general 
rule, therefore, is the imposition of liability on oil company 
lessee for any oil spill emanating from their lease and the oil 
reservoir contained therein. * * * The Committee intends that the 
point of origin of an uncontrolled flow of oil determines where an 
oil pollution incident originates, and not where the oil and water 
first come into contact with one another. For example, the Pemex Bay 
of Campeche oil spill originated below the surface of the water.
    Within this general rule, the amendment would impose liability 
on the drilling contractor operating on a lease for those oil spills 
originating on or above the surface of the water. Our intent in 
dividing liability in this manner is to hold the contractor 
responsible only for the required petroleum and other oil that is 
present on the rig in order for it to conduct its operations and 
which are clearly under the control of the rig owner. (Emphasis 
added) Id. at 30335.

    A careful examination of the legislative history of the succeeding 
bills relating to comprehensive oil spill liability and compensation 
has failed to disclose any expressed alteration in Congressional intent 
respecting the allocation of liability for MODUs engaged in drilling 
operations.
    This apparent Congressional intent comports with the position 
advocated by some commenters. Moreover, if the words ``on or above the 
surface'' were applied literally, a result certainly unintended by 
Congress could easily occur. That result would be to invite liability 
considerations to take precedence over safety and environmental 
protection decisions. Clearly, in this comprehensive environmental 
legislation, it would be unreasonable to interpret the statute in a way 
that could easily degrade safety and the environment. By recognizing 
that when the source of a discharge is below the seabed, the spill is 
not an above the surface spill, emergency response actions will be 
predicated on the best and safest means to abate the blowout, rather 
than on the means (e.g., shutting in the blowout preventer and risking 
a pressure buildup that could result in a catastrophic sub-seabed well 
blowout) which would shift liability without regard to safety or the 
environment. If the parties involved (the leaseholder and the MODU 
owner or operator) so choose, they can enter into indemnification 
agreements to allocate among themselves an apportionment of liability. 
The indemnification agreements cannot be used, however, to avoid 
completely liability to a claimant under OPA 90.

Paperless COFRs

    One commenter recommended that the Fleet Certificate concept (which 
concerns non-tank barges) be expanded to cover tank barges as well, and 
that no COFR or copy be required aboard any barge on inland waters. In 
view of its evolving computer technology for COFR enforcement purposes, 
the Coast Guard may be able to adopt that recommendation in the future. 
However, the Coast Guard's computer network has not yet evolved to a 
level where this suggestion can be implemented. When it becomes 
possible for the Coast Guard to adopt such a system, a notice proposing 
this change will be published in the Federal Register.

Applicable Amounts of Financial Responsibility

    Appendices B through F are guaranty form for evidencing financial 
responsibility. Each contains an ``Applicable Amount Table''. Appendix 
G of the NPRM, which also contained the Applicable Amount Table, has 
been moved to a new paragraph (f) of Sec. 138.80. Section 138.80(f) and 
the Applicable Amount Table in each form set out the means by which 
applicants and guarantors calculate the amounts of financial 
responsibility required to be established and maintained under this 
rule.
    The amount of financial responsibility which must be established 
and maintained with respect to each vessel to be covered under section 
1016(a) of OPA 90 (33 U.S.C. 2716(a)) (i.e., the amount applicable to 
the vessel under OPA 90) is calculated by applying the appropriate 
formula specified in Sec. 138.80(f)(1) (Part I of the Applicable Amount 
Table in the forms) in accordance with the type of vessel and its size 
in gross tons. The formulae set out in Sec. 138.80(f)(1) and Part I are 
based upon the provisions of paragraphs (a)(1) and (a)(2) of section 
1004 of OPA 90 (33 U.S.C. 2704), as mandated by section 1016(a) of OPA 
90.
    With respect to CERCLA, the NPRM proposed that all vessels 
demonstrate financial responsibility at the minimum amount of $5 
million, by applying the formula specified under Part II of the Table, 
as proposed. The formula was derived from the provisions of section 
108(a)(1) of CERCLA. In deriving the formula for Part II as proposed, 
the Coast Guard took cognizance of practical considerations of which 
Congress must be deemed to have been aware when drafting CERCLA. The 
term ``hazardous substances'' as defined for the purposes of CERCLA (42 
U.S.C. 9601(14)) includes an almost limitless number of materials. In 
addition, there are numerous methods by which any one of those 
materials, especially in small amounts, may be carried as cargo aboard 
vessels. At the time a CORF application for a particular vessel is 
processed, and even after a COFR is issued, there is no known way for 
the Coast Guard to determine that a hazardous substance is not being 
carried, or will not be carried (especially in small amounts), aboard 
that vessel as cargo.
    Consequently, in order to assure that the statutorily required 
amount of financial responsibility had been calculated and established 
and would be maintained for every subject vessel, it was considered 
necessary to assume that all vessels subject to the provisions of 
section 108(a)(1) of CERCLA carry, or might carry, hazardous substances 
as cargo. For this reason, the formula in part II of the Table as 
proposed prescribed a minimum of $5,000,000 for all vessels. Comments 
were encouraged regarding possible means by which a determination could 
be made at the time of certification that, in fact, a particular vessel 
is not carrying and will not carry hazardous substances as cargo.
    Some commenters, however, object to having to demonstrate financial 
responsibility at this minimum $5 million level. They assert that this 
is inconsistent with CERCLA in that CERCLA recognizes that for vessels 
not carrying hazardous substances as cargo, the liability limit is a 
minimum of ``(500,000 (section 108(a)(1) of CERCLA requires financial 
responsibility to cover the liability prescribed under section 
107(a)(1), and that section in paragraph (B) establishes a minimum 
liability limit of $500,000 for vessels not carrying hazardous 
substances as cargo). One commenter states that if the Coast Guard can 
rely upon a declaration of a vessel owner that the vessel is a non-tank 
vessel, a similar declaration should be allowed for carriage of 
hazardous substances as cargo. Another commenter alleges that vessels 
carrying hazardous substances as cargo can only do so in accordance 
with Coast Guard safety regulations, and that it is inappropriate to 
assume that vessels will operate in violation of those regulations.
    In adjusting this rule, the Coast Guard has adopted revisions that 
balance two of CERCLA's apparently contrary mandates: (1) That the 
Coast Guard certify that the required minimum amount of financial 
responsibility ($5 million) is maintained by a responsible party in the 
event of a release or threatened release of a hazardous substance 
carried as cargo; and (2) the provision in CERCLA that vessels that do 
not carry hazardous substances as cargo need demonstrate financial 
responsibility only at the greater of $500,000 or $300 per gross ton. 
The Coast Guard concludes that the fairest way to accommodate these two 
opposing interests is by allowing the vessel operator and the provider 
of financial responsibility to decide the matter between themselves. 
For example, if an insurer or surety company is satisfied that its 
insured or principal in fact does not and will not carry hazardous 
substances as cargo, then the cost of the insurance or surety bond 
guaranty with respect to CERCLA may be priced at the $500,000/$300 per 
gross ton premium. The proposed and now adopted wording of the 
insurance and the financial guaranty forms, as well as the new wording 
of the surety bond guaranty, is such that, should a release occur and 
the facts show that a vessel was carrying a hazardous substance as 
cargo, the limit of the guaranty will automatically be raised to the 
higher amount, i.e., the greater of $300 per gross ton or $5 million. 
(The guaranty forms have also been amended to achieve a parallel result 
with respect to OPA 90 financial responsibility if the vessel is in 
fact a tank vessel.) This will not affect the qualifications of self-
insurers or financial guarantors who, as proposed, still must 
demonstrate working capital and net worth according to the $300 per 
gross ton/$5 million formula. Only by methods such as these may the 
Coast Guard certify that financial responsibility requirements have 
been met, whether or not hazardous substances are carried as cargo. The 
Coast Guard has determined that this protection is necessary given the 
peculiar nature of hazardous substance carriage, and the inability to 
be assured ahead of time that no hazardous substances are being or will 
be carried as cargo. Section 138.80(f)(2) (Part II of the Applicable 
Amount Table in the forms) has been adjusted to reflect this decision.
    The Coast Guard also notes that, with respect to carriage of 
hazardous substances, this decision only affects vessels under 16,666 
gross tons. Above 16,666 gross tons, at $300 per gross ton a vessel 
would have to meet the $5 million minimum threshold. However, those 
operators of smaller vessels who can assure their financial 
responsibility providers that hazardous substances are not and will not 
be carried as cargo, may obtain a cost savings by being able to 
purchase guaranties of financial responsibility at the $500,000/$300 
per gross ton premium level.
    Section 138.80(f)(3) (Part III of the Table in the forms) is simply 
the addition of the amounts of financial responsibility required by 
paragraphs (f)(1) and (f)(2) of Sec. 138.80 (Parts I and II of the 
Table in the forms). This sum is termed the ``total applicable 
amount''. The formula is derived from the provisions of section 1004 of 
OPA 90 and section 107(a) of CERCLA (as noted above) and reflects the 
fact that liability stemming from one event may arise under both Acts. 
In such a circumstance, and only in such a circumstance, it is 
necessary that two separate and distinct amounts of financial 
responsibility be available to meet equally separate and distinct 
amounts of liability under the Acts. The ``total applicable amount'' is 
not an aggregate amount applicable to a guarantor's liability under 
just one of the Acts.
    One company commented that some of its barges are unable to carry 
both oil and hazardous substances at the same time, and therefore, that 
it should not have to establish an amount of financial responsibility 
reflecting both OPA and CERCLA with respect to such single-commodity 
barges. The Coast Guard concluded, however, that it is not in a 
position to issue a special tank barge COFR just for OPA 90 and a 
separate tank barge COFR just for CERCLA. In the first place, the Coast 
Guard could never be certain that a particular tank barge, which had 
been issued only a CERCLA COFR, was not carrying oil, or vice versa. In 
order to become certain that a barge's COFR matched its permissible 
cargo, it would be necessary to physically detain the barge, test its 
cargo and determine whether it was either an OPA 90-regulated oil or a 
CERCLA-regulated hazardous substance derivative of oil, and then match 
such cargo against the type of COFR being carried that particular day. 
The tremendous cost, delay and burden such an enforcement system would 
entail, both for the barge industry and the Coast Guard, would not 
justify separate certification and enforcement procedures.

Section-by-Section Discussion

    A number of drafting changes have been made to improve readability 
and to specify the persons upon whom obligations are placed. These 
changes are considered non-substantive and are not further explained. 
Also, new sections have been added to add further clarity to the rule. 
These are: Sec. 138.12 (applicability); Sec. 138.15 (implementation 
schedule); and Sec. 138.65 (issuance and carriage of Certificates). 
Only Sec. 138.15 contains entirely new text, reflecting the compliance 
schedule adopted by this rule.

Section 138.10  Scope

    This section addresses the general purpose of these regulations, 
namely that they establish the procedures for establishing and 
maintaining evidence of financial responsibility under OPA 90 and 
CERCLA. This section is derived from proposed Sec. 130.1(b). (Proposed 
Sec. 130.1(a) is new Sec. 138.12(a), and proposed Sec. 130.1(b) is new 
Sec. 138.65.) Section 138.10 clarifies the proposed text by adding the 
term ``demise charterer'' to the class of persons who must be covered 
by the evidence of financial responsibility required under this part. 
This clarification is being made because both OPA 90 and CERCLA define 
an ``owner or operator'' of a vessel as including any demise charterer 
of the vessel. Thus, if any vessel subject to this part simultaneously 
has an owner, a demise charterer and an ``operator'' (as defined in 
this part), all three of those entities automatically will be covered 
by the guaranty of insurance or other evidence of financial 
responsibility submitted under this part. Demise charterer, as used in 
this part, is synonymous with the common parlance term ``bareboat 
charterer''.
    Section 130.1(d) of the NPRM, which concerned ``public vessels'', 
has been deleted. New Sec. 138.12(d) provides that 33 CFR part 138 does 
not apply to any public vessel. Thus, it will not be necessary for 
public vessels to apply for COFRs. However, all public vessels which 
are not readily identifiable as such (i.e., vessels which are not naval 
war ships, Coast Guard cutters, etc.) and which are crewed by 
nongovernmental personnel, are strongly encouraged to carry appropriate 
government documentation indicating that the vessels are, in fact, 
public vessels, i.e., vessels owned or bareboat chartered by a 
government and not engaged in commerce. Such documentation, including a 
copy of any bareboat charter party, will serve to avoid 
misunderstandings with enforcement personnel who are not readily able 
to determine whether a particular vessel, especially a vessel owned and 
operated by private interests, and engaged in business which could be 
construed as commercial in nature (e.g., dredging), is or is not a 
public vessel.

Section 138.12  Applicability

    New Sec. 138.12 has been created to state clearly the applicability 
of part 138. This section is comprised of parts of proposed 
Sec. 130.1(a), and of the definition of ``vessel'' from proposed 
Sec. 130.2(b).
    Paragraph (a)(1): In response to comments, this paragraph, which is 
derived from proposed Sec. 130.1(a)(1), has been amended to make it 
clear that ``vessels of any size using the waters of the exclusive 
economic zone to transship or lighter oil'' means both delivering and 
receiving vessels. The term ``vessel of any size'' does not include the 
towing/pushing vessel (tug) that has custody of a barge transshipping 
or lightering oil within the exclusive economic zone. That is, a tug of 
300 gross tons or less would not be made a tank barge (i.e., would not 
be made subject to the financial responsibility requirements of this 
rule) just because it had custody of a transshipping or lightering 
vessel.
    Paragraph (a)(2): This paragraph is derived from proposed 
Sec. 130.1(a)(2). The FWPCA excluded from the requirement to establish 
and maintain evidence of financial responsibility, a non-self-propelled 
``barge'' that does not carry oil as cargo or fuel. Section 1016(a)(1) 
of OPA 90 excludes from that requirement a non-self-propelled 
``vessel'' that does not carry oil as cargo or fuel. In this rule, the 
Coast Guard considers OPA 90's use of the term ``non-self-propelled 
vessels'' to mean non-self-propelled barges. This construction is 
consistent with a similar exception in CERCLA. Therefore, in 
Sec. 138.12(a)(2)(ii) of this rule, the exception refers to ``barges'' 
rather than ``vessels''.
    Paragraph (b): This paragraph concerns MODU liability and is 
derived from the proposed definition of the term, ``vessel''. Some 
commenters asserted that a mobile offshore drilling unit (MODU) should 
not be treated as a tank vessel when drilling. The Coast Guard cannot 
adopt this suggestion as the liability ascribed to a MODU when drilling 
has been fixed by Congress. Therefore, paragraph (b) of Sec. 138.12 has 
been amended to make it clear that under OPA 90, when there is an ``on 
or above the surface of the water'' discharge or substantial threat of 
a discharge of oil from a MODU, the MODU is treated as tank vessel (for 
purposes of determining the limits of liability and the identity of the 
responsible party) (33 U.S.C. 2704(b)). Since a MODU has potential 
liability as a tank vessel, the MODU operator must demonstrate 
financial responsibility at tank vessel limits to cover the time that 
the MODU is operating as an offshore facility and has a spill ``on or 
above the surface of the water.''
    Paragraph (c): This paragraph has been added to make it clear that 
CERCLA's financial responsibility provisions and this rule apply to 
self-propelled vessels which exceed 300 gross tons, even if they do not 
carry hazardous substances. Congress mandated that owners, demise 
charterers, and operators of all self-propelled vessels over 300 gross 
tons comply with CERCLA's financial responsibility provisions, without 
regard to whether or not the vessels actually carry hazardous 
substances. In this connection, the following points may be indicative 
of Congressional thinking: Most, if not all, self-propelled vessels 
over 300 gross tons carry hazardous substances in one form or another 
(e.g., ships' stores); and insurance coverage for liabilities 
concerning releases of hazardous substances from brown water vessels 
has never been unavailable or subject to high premiums in the United 
States (viz: coverage provided by the Water Quality Insurance 
Syndicate, New York, NY). Further, with respect to blue water 
(oceangoing) vessels, the International Group of P&I Clubs 
traditionally has provided unlimited liability coverage for releases of 
hazardous substances, and still does; and P&I Club premiums for this 
coverage (while not broken out from the total calls and premiums for 
P&I cover) are understood to be relatively low. Accordingly, prudent 
vessel operators would choose to take advantage of the available, 
relatively inexpensive insurance and carry such coverage as a matter of 
course. Whatever the reason for the Congressional mandate may have 
been, the Coast Guard has no rulemaking flexibility where the law is 
clear on its face.
    Paragraph (d): This paragraph recites that 33 CFR part 138 does not 
apply to public vessels.

Section 138.15  Implementation Schedule

    This new section sets forth the implementation schedule for vessels 
requiring COFRs under OPA 90 and CERCLA by specifying mandatory 
compliance dates for categories of vessels. As discussed earlier under 
``Implementation Schedule,'' this section establishes a phased 
compliance schedule, based on two categories of vessels--tank vessels 
(which are broken into two groups, self-propelled and non-self-
propelled), and non-tank vessels. As to the latter category, this 
section, for the most part, allows vessels to operate with their 
prexisting COFRs until they expire. This section also prevents vessel 
owners and operators from surrendering prexisting COFRs solely for the 
purpose of obtaining, under the preexisting rules, new COFRs with 
extended expiration dates.
    Paragraph (a): This paragraph governs the compliance schedule for 
tank vessels. Paragraph (a)(1) provides that a self-propelled tank 
vessel may continue to carry its preexisting COFR (or obtain one and 
carry it) until December 28, 1995, so long as acceptable evidence of 
financial responsibility has been submitted under the new part 138 by 
December 28, 1994. A non-self-propelled tank vessel may continue to 
carry its preexisting COFR (or obtain one and carry it) until July 1, 
1995.
    Paragraph (a)(2) concerns self-propelled tank vessels and requires 
that they submit evidence of financial responsibility under the new 
part 138 by December 28, 1994. An application form for a new COFR may 
be submitted at a later date. For administrative convenience, 
preexisting Certificates issued under 33 CFR parts 130, 131, or 132 may 
continue to be carried on these self-propelled tank vessels so long as 
the new part 138 evidence of financial responsibility has been 
submitted. If this new evidence of financial responsibility is not 
submitted by December 28, 1994, the preexisting Certificates for that 
vessel will be revoked on that date. By December 28, 1995, a self-
propelled tank vessel must have applied for, and be carrying, a new 
part 138 Certificate, regardless of the expiration date on any 
preexisting Certificates.
    Paragraph (a)(3) concerns the requirements for a self-propelled 
tank vessel that does not possess a preexisting COFR issued under 33 
CFR part 130 before December 28, 1994. This vessel may not operate on 
or after that date unless it carries a new part 138 COFR. Accordingly, 
this vessel must apply for a new part 138 COFR following the procedures 
specified in Secs. 138.50 and 138.60.
    Paragraph (a)(4) requires a non-self-propelled tank vessel to 
submit evidence of financial responsibility and a new application form 
under this new rule at least 21 days before July 1, 1995. (The 21 days 
refers to a time constraint imposed by Sec. 138.50.) By July 1, 1995, a 
non-self-propelled tank vessel must carry a new OPA 90/CERCLA (part 
138) COFR. On that date, preexisting COFRs for non-self-propelled tank 
vessels will be revoked.
    Paragraph (b): This paragraph governs the compliance schedule for 
non-tank vessels. Paragraph (b)(1) provides that a non-tank vessel must 
carry a part 138 Certificate no later than December 28, 1997, provided 
that before that date, the vessel carries a non-expired, part 130 
Certificate. A part 132 Certificate, if applicable to that vessel, must 
also be carried. A non-tank vessel subject to part 138 may apply for a 
part 138 Certificate any time on or after July 1, 1994.
    Paragraph (b)(2) provides that on and after December 28, 1994, and 
before December 28, 1997, a Certificate issued to replace an existing 
33 CFR part 130 or 132 Certificate for non-tank vessels will bear the 
same expiration date as the Certificate being replaced. The 
circumstances where this might occur are when a Certificate has been 
lost, or there is a vessel name change or operator name change. A 
change in legal identity is not a mere name change. This paragraph also 
provides that during this interval, the expiration date on a renewal 
Certificate issued under 33 CFR part 132 will be the same as the 
expiration date on the 33 CFR part 130 Certificate for that vessel.
    Paragraph (b)(3) provides that a non-tank vessel holding a 33 CFR 
part 130 Certificate issued before December 28, 1994, may continue to 
operate with that Certificate until it expires.
    Paragraphs (b)(4) and (b)(5) provide that new Certificates issued 
under 33 CFR parts 130 and 132 on or after July 1, 1994, and before 
December 28, 1994, will bear an expiration date three years after the 
date of issuance, except that a Certificate surrendered during that 
interval with a request for the issuance of a new Certificate for that 
same vessel will bear an expiration date the same as the expiration 
date appearing on the surrendered Certificate.
    Paragraph (c): This paragraph provides that after the effective 
date of this rule, a vessel that is 300 gross tons or less and, 
therefore, does not carry a Certificate under 33 CFR part 130, need no 
longer carry a Certificate issued under 33 CFR part 131 (relating to 
TAPAA) or part 132 (relating to OCSLAA), so long as that vessel is not 
required by OPA 90 to obtain a Certificate because the vessel is 
engaged in lightering in the Exclusive Economic Zone. A vessel of this 
size engaged in lightering is required to maintain its part 131 or 132 
Certificate until the vessel obtains a certificate under paragraph (a) 
or (b) of this section, as may be applicable.

Section 138.20  Definitions

    Cargo: At the suggestion of one commenter, the definition of cargo 
has been amended to make it clear that neither hazardous substances nor 
oil, when carried solely for use aboard vessels (oil to power or lube 
onboard machinery; paints; cleaners; degreasers; etc.), are included in 
the definition of cargo.
    Demise Charterer: A definition has been added to make it clear that 
this term is synonymous with the common term ``bareboat charterer''.
    Fish tender vessel and fishing vessel: A definition was added for 
these terms in order to indicate that the terms have the same meaning 
as set forth in 46 U.S.C. 2101. This will aid in determining the 
meaning of the term ``tank vessel''. Section 5209 of Pub. L. 102-587 
provided that each of these types of vessel is not a tank vessel. This 
law was enacted after the NPRM was published.
    Guarantor: For the sake of convenience to persons who must comply 
with this rule, a definition of ``guarantor'', based on the definition 
in OPA 90 and CERCLA, was added to the rule.
    Hazardous material: Some commenters observed that this term is 
different from ``hazardous substances'' as used in CERCLA, and were 
concerned that tank vessel liability not be ascribed to vessels 
carrying non-liquid hazardous substances. A definition of this term has 
been added to make clear that a vessel carrying liquid hazardous 
materials is a tank vessel. In the Conference Report, at page 102, 
Congress stated, ``The term `tank vessel' has the same meaning as that 
term has under section 2101 of title 46, United States Code.'' This 46 
U.S.C. 2101 definition of tank vessel uses the term ``hazardous 
material,'' which is defined in 46 U.S.C. 2101(14), and that definition 
of hazardous material controls.
    Insurer: This definition has been amended to clarify the meaning of 
``insurer'' or ``insurers'' as used in this rule (see, for example, 
Sec. 138.80(b)(1) concerning insurance guaranties). The words ``is a 
type of guarantor'' have been added to make it clear that, insofar as 
insurers are concerned, this rule applies only to that class of 
insurers who choose to be guarantors.
    Offshore supply vessel: A definition of this term was added to 
indicate that it has the same meaning as set forth in 46 U.S.C. 2101, 
and will assist in the determination of the term ``tank vessel''. 
Section 5209 Public Law 102-587, enacted after the NPRM was published, 
provided that an offshore supply vessel is not a tank vessel.
    Operator: Some commenters felt this definition was confusing and 
some recommended that the term ``responsible party'' be used instead. 
Accordingly, the definition of operator was amended first, to narrow 
its scope by deleting the words ``including but not limited to'' and, 
second, to clarify its meaning by adding the words ``or who agree by 
contract to become responsible'' [for a vessel in the capacity of an 
operator]. The first change was made to make the definition less open 
ended. There are entities, such as agents, ``manager'', traditional 
time charterers and traditional voyage charterers (i.e., charterers who 
do not take operational responsibility for the vessels they charter) 
that are not intended to be included in this definition. The second 
change was made for the benefit of persons, such as ship repair yards, 
who objected to the word ``repairer'' in the definition of operator. 
For example, one commenter stated that the owner or operator who brings 
a vessel to the shipyard remains absolutely the owner or operator, and 
there is no transfer of rights or responsibilities to the repair 
facility. In a case such as this, the term ``operator'' would not apply 
to repair facilities. However, in a case where a ship repair yard 
either is responsible under law, or for commercial reasons agrees with 
owners to become responsible for pollution liability in connection with 
a vessel under the repairer's custody, that repair facility is and has 
been subject to vessel financial responsibility requirements since 
1971. See discussion at 43 FR 35705, August 11, 1978. In short, this 
rule does not transform non-liable repairers of vessels into legally 
liable ``operators'' of those vessels. Shipyards and other persons who 
would not otherwise be responsible for vessels are free, of course, to 
contract with vessel owners, as they may see fit, with respect to 
becoming responsible for (i.e., becoming the operators of) vessels in 
their custody. As always, if repairers or other person are not 
responsible for the non-owned vessels in their custody, this rule will 
not apply to them. In a case such as that, any valid COFR, issued to a 
vessel's owner, operator, or bareboat charterer, will remain valid and 
must be retained aboard the vessel while in the repairer's custody. The 
third change to the definition of ``operator'' was the addition of the 
word ``custodian''. This change was made merely to confirm that a 
person who is responsible for a vessel need not physically operate the 
vessel--move it from place to place--to be its ``operator'' for 
purposes of this rule.
    Public Vessel: In accordance with a ruling by the General Counsel 
of the Department of Transportation interpreting the statutory 
definition of ``public vessel'', this definition has been modified by 
deleting the words ``and operated''. Accordingly, any vessel owned or 
bareboat chartered by the United States, or by a State or political 
subdivision of a State, or by a foreign nation, is a public vessel 
except when engaged in a commercial service. (An example of a 
commercial service is holding oneself out for hire to carry passengers 
or cargo, and the lack of profit is not necessarily determinative of a 
commercial service.)
    Accordingly, it is no longer necessary that a vessel be physically 
operated by a governmental entity or under its direct day-to-day 
control in order to qualify as a public vessel, i.e., vessels owned or 
bareboat chartered by governmental agencies may be crewed by commercial 
entities and remain ``public vessels'', for the purpose of this 
regulation, provided the vessels engage only in governmental 
(noncommercial) service.
    Self-elevating lift vessel: This definition was added because OPA 
90 defines a ``mobile offshore drilling unit'' (MODU) as a vessel, 
other than a ``self-elevating lift vessel'', capable of use as an 
offshore facility. It has been argued that because a self-elevating 
lift vessel can, literally, be a type of MODU known as a jack-up 
drilling rig, Congress intended the term ``self-elevating lift vessel'' 
to include a jack-up drilling rig, i.e., that MODUs do not include 
jack-up drilling rigs. One argument to the contrary is that Congress 
could not have meant to exclude jack-up drilling rigs from the 
definition of MODUs because jack-up drilling rigs constitute the most 
common type of MODU; had Congress intended to exclude from the 
classification of MODUs the most common type of MODU (jack-up drilling 
rigs), it surely would have at least hinted at that result, in the 
law's legislative history. Another argument to the contrary is that had 
Congress intended to exclude jack-up drilling rigs, it would have used 
the term ``self-elevating drilling vessel'', not ``self-elevating lift 
vessel.'' The Coast Guard interprets OPA 90's use of the term ``self-
elevating lift vessel'' to mean a self-elevating, offshore work boat 
(or work barge) that does not engage in actual drilling operations.
    Tank Vessel: This definition has been changed by deleting the 
proposed regulatory definition and substituting the definition in 
section 1001(34) of OPA 90 (33 U.S.C. 2701(34)), with three 
clarifications. This accords with Congressional intent expressed in the 
Conference Report at page 102. First, the word ``liquid'' has been 
inserted before the words ``hazardous material'', in accordance with 
the definition of hazardous material in 46 U.S.C. 2101(14) (see 
explanation under ``hazardous material''). Second, specific exclusions 
to the definition of ``tank vessel'' have been added in accordance with 
section 5209 of Public Law 102-587, which was enacted after the NPRM 
was published. Third, in accordance with one comment, the definition 
has been amended to make it clear that a vessel towing or pushing, or 
having in its custody, a tank barge, cannot for those reasons alone, be 
deemed included in the definition of tank vessel. Some carriers of 
liquefied natural gas (LNG) argued that they should be able to 
demonstrate lower levels of financial responsibility than is required 
for oil-carrying tank vessels. Tank vessel limits are set by Congress 
and the Coast Guard is not empowered to lower those limits. A vessel 
carrying LNG clearly meets the definition of ``tank vessel''.

Section 138.30  General

    Paragraph (a): A number of commenters were concerned that the NPRM 
was ambiguous, possibly multiplying the liability limit with respect to 
a vessel by three--that is, the owner, operator, and demise charterer 
would each have liability up to the specified limit, and their 
liabilities would be added together. That was not the intent of the 
NPRM. Nevertheless, potential guarantors were likewise concerned that 
they might be liable for three times the amount of the guaranty. The 
Coast Guard believes that OPA 90 and CERCLA impose only one limit of 
liability, per incident or release or threatened release, under each 
Act for a guarantor with respect to a vessel. Therefore, this 
subsection has been amended to clarify the fact that even though the 
owner, demise charterer, and operator of a vessel are jointly and 
severally liable, and must all be covered by the evidence of financial 
responsibility submitted for a COFR, the amount of that financial 
responsibility provided by a guarantor is for the single limit. For 
example, if the operator of a 40,000 gross ton tanker spills oil and 
the $1,200 per gross ton limit of liability is not broken, the owner, 
demise charterer, operator, and guarantor would be jointly and 
severally liable for that incident, and the guarantor's liability 
(without regard to whether the limit is broken) under OPA 90 should the 
owner, demise charterer, and operator pay nothing, cannot exceed the 
amount of financial responsibility provided by the guarantor, in this 
case $48 million ($1,200  x  40,000).
    This section also has been amended to confirm that the total amount 
of financial responsibility provided by a guarantor is not applicable 
to an incident or release or threatened release of just oil or just 
hazardous substances--only the amount guarantied for an oil incident is 
available for that incident, and only the amount guarantied for a 
hazardous substance release or threatened release is available for that 
event.
    Paragraph (b): As recommended by some commenters, this paragraph 
has been amended to state that this rule does not apply to time 
charterers or voyage charterers, i.e., charterers who do not assume, 
and do not have imposed upon them by contract or otherwise, the 
responsibility associated with operation of a vessel.
    Paragraphs (c)-(f): Potential insurance guarantors commented that 
guarantors should be able to rely upon official tonnage certificates, 
particularly with respect to tank vessels under OPA 90. A tank vessel 
greater than 3,000 gross tons carries a minimum liability of ten 
million dollars while a tank vessel of 3,000 gross tons or less carries 
a minimum liability of two million dollars. Guarantors justifiably 
relying on tonnage set out in tonnage certificates understandably wish 
to avoid situations where, after incidents involving tank vessels, they 
could find themselves exposed in a direct action to a ten million 
dollar liability rather than the anticipated lower limit applicable to 
tank vessels of 3,000 gross tons or less.
    Thus, in a case where a tank vessel's official, applicable tonnage 
document declares the vessel's official tonnage to be (for example) 
2,990 gross tons, the Coast Guard agrees that the vessel's guarantor 
should be able to rely on a maximum liability under OPA 90 of 
$3,588,000 (2,990 tons  x  $1,200 per ton) even if it develops that 
2,990 gross tons was a typographical error on the official, applicable 
tonnage certificate or the vessel was incorrectly measured, and that 
the vessel's true tonnage is over 3,000 gross tons. The rule has been 
amended in order to provide that protection to guarantors, except where 
a guarantor knew or should have known that the applicable tonnage 
certificate was incorrect. (This additional defense is reflected in the 
various guaranty forms appended to this rule.) Paragraphs (c), (d), and 
(e) have been revised slightly to clarify the appropriate tonnage to 
use for various vessel types and flags, and a clause has been added to 
each section to clarify the appropriate tonnage used for determining 
the limits of liability under OPA 90 CERCLA.

Section 138.50  Time to Apply

    Paragraph (a): Paragraph (a) was amended at the request of one 
commenter, to provide that the Coast Guard may waive the requirement to 
file an application for a Certificate of Financial Responsibility at 
least 21 days before the Certificate is required. This same amendment 
was made in Sec. 138.70(a), concerning applications to renew 
Certificates. An example of a circumstance when the 21-day requirement 
might be waived is when a tank vessel, not having a current COFR and 
not planning on entering the United States, does not have an 
opportunity to file an application 21 days in advance because it is 
redirected on short notice to call at a United States port. The Coast 
Guard makes every attempt to accommodate unusual circumstances.

Section 138.60  Application, General Instructions

    Paragraph (c): This paragraph was amended at the request of one 
commenter, by deleting the words ``other empowered'' and substituting 
therefore the more correct words ``the chief executive officer, or any 
other duly authorized'', to describe who may sign an application on 
behalf of a corporate applicant.
    Paragraph (d): This paragraph was amended at the request of one 
commenter, to change ``days'' to ``business days'' in order to provide 
more time for an applicant to inform the Coast Guard of a change in the 
information provided in an application. For the same reason, ``days'' 
was changed to ``business days'' in Sec. 138.80(b)(3)(iii)(B).

Section 138.65  Issuance and Carriages of Certificates

    This new section is derived from the text of proposed 
Sec. 130.1(c). It is placed more properly in a section other than 
``scope.''
    The text has been amended to make it clear that vessels are not 
subject to sanctions for failure to carry a valid Certificate of 
Financial Responsibility in cases where a COFR is removed from a vessel 
temporarily, at the request of U.S. law enforcement personnel.

Section 138.70  Renewal of Certificates

    A new paragraph (c) was added to clarify that the first time a 
Certificate is required under part 138, to replace a Certificate issued 
under 33 CFR part 130, a new full application form, rather than a 
letter, is required. However, the Coast Guard is not requiring a 
``first time'' application fee under these circumstances, recognizing 
that under preexisting practice, a ``first time'' fee is not required 
for a renewal application. Once a new application form has been filed 
for a part 138 Certificate, any additional Certificates may be applied 
for by letter.

Section 138.80  Financial Responsibility, How Established

    A number of changes, explained under each paragraph, were made to 
address several comments. These changes concern use of multiple 
guarantors, defenses available to guarantors, and the addition of a 
catchall method, ``other evidence of financial responsibility''.
    Paragraph (b)(1) (Insurance): In the proposed phrase ``executed by 
an insurer that has been approved by * * * the Director, NPFC, for 
purposes of this part'', the word ``approved'' was deleted and the 
words ``found acceptable'' were substituted. The word ``acceptable'' is 
preferred because it is used in the definition of ``Insurer'' in 
Sec. 138.20(b). Section 138.80(b)(1) also has been amended to clarify 
the fact that more than one insurer may execute an insurance guaranty, 
and that the subscribing insurers shall be jointly and severally liable 
unless percentages of participation are provided on the guaranty by 
each subscribing insurer. For purposes of this part, and as discussed 
below, a percentage means a vertical percentage (rather than a 
horizontal layering).
    One commenter recommended that the Coast Guard incorporate 
standards for approval of insurers, sureties, and financial guarantors. 
Standards for sureties are set by the Department of the Treasury, as 
OPA 90 requires bonding companies to be authorized to do business in 
the United States, a reference to Treasury-approved sureties. Financial 
guarantors must meet the detailed standards for self-insurers. Insurers 
must be acceptable to the Coast Guard, and for many years, 
acceptability had been determined by the Federal Maritime Commission 
(FMC) on a case-by-case basis. The Coast Guard has followed the 
criteria established by these decisions. Any insurer desiring to be 
recognized, as an acceptable insurer may telephone, write to, or meet 
with the Coast Guard to review the factors considered. The Coast Guard 
is evaluating the possibility of a future rulemaking adopting 
acceptability standards, but has decided not to develop these standards 
through this financial responsibility rule.
    Paragraph (b)(2) (Surety bond): This paragraph was amended to 
clarify the fact that more than one surety may execute a surety bond 
guaranty form. As in the cage of insurers, sureties must state vertical 
percentages of participation if they wish to avoid joint and several 
liability.
    Paragraph (b)(3) (Self-insurance): A number of commenters 
recommended that the Coast Guard adjust the net worth and working 
capital formulae by allowing worldwide assets rather than only U.S.-
based assets to be counted in the asset side of the equation. The Coast 
Guard has not adopted this suggestion. The reasons are explained fully 
in the Regulatory Impact Analysis associated with this rulemaking. 
Paragraph (b)(3)(vi) permits the Coast Guard to waive the working 
capital requirement under certain circumstances. Under paragraph 
(b)(3)(vi)(A) the Coast Guard may waive the working capital requirement 
for prospective self-insurers who are regulated public utilities, 
municipal or other governmental entities, or charitable, non-profit 
making organizations under section 501(c) of the Internal Revenue Code. 
One commenter stated that it is a tax-exempt, not-for-profit U.S. oil 
spill response corporation, that operates vessels for that purpose. It 
commented that it does not believe it will be able to obtain a surety 
bond, insurance or financial guaranty, or be able to qualify as a self-
insurer under the proposed rule. It, therefore, believes that the 
proposed rule will hamper ``reliable'' response organizations and thus, 
undermine an essential purpose of OPA 90--a quick, effective response 
to oil spills. It proposes, among other things, that the section in 
question be amended so that the availability of the working capital 
waiver would not be limited to charitable organizations; i.e., that the 
waiver be made available to any non-profit response organization 
qualifying as a social welfare organization under section 501(c)(4) of 
the Internal Revenue Code.
    This comment requesting an extension of the applicability of the 
working capital requirement under proposed Sec. 130.8(b)(3)(vi)(A) 
apparently does not take into consideration the next paragraph (i.e., 
Sec. 138.80(b)(3)(vi)(B)) of the rule which allows an alternative basis 
for certain organizations to apply for waivers. Accordingly, paragraph 
(b)(3)(vi)(A) of Sec. 138.80 has not been amended. The Coast Guard does 
not believe that this rule will inhibit the commenter's ability to 
obtain COFRs, or otherwise undermine any essential purpose of the law. 
The essential purpose of OPA 90 to be implemented by this rule is to 
deny the use of United States waters to entities which do not have the 
financial capacity to meet OPA 90 and CERCLA liability, by 
demonstrating self-insurance capacity, or by purchasing an insurance or 
surety bond guaranty or by obtaining a financial guaranty.
    Paragraph (b)(4) (Financial Guaranty): This paragraph was amended, 
consistent with the insurance and surety bond guaranty methods, to 
allow more than one financial guarantor to execute a financial guaranty 
form. Financial guarantors also must state vertical (i.e., non-layering 
type) percentages of participation to avoid joint and several 
liability.
    Paragraph (b)(5) (Other evidence): This is a new paragraph which 
has been added to the rule as a result of the numerous comments 
requesting the Coast Guard to accept evidence of financial 
responsibility by methods other than the four proposed methods. This 
new paragraph will permit ``other evidence of financial 
responsibility'' if it meets the criteria set forth in this new 
paragraph and in expanded Sec. 138.80(d). ``Other evidence'' meeting 
that criteria, if being submitted for the first time, must be submitted 
at least 45 days before a Certificate is required. The Coast Guard will 
not accept an ``other evidence'' method that merely alters or deletes a 
provision of one of the established methods. For example, a proposed 
``other evidence'' guaranty form that includes a clause requiring COFRs 
to be renewed each year rather than every three years as provided in 
the rule would not be accepted. Some commenters suggested that the use 
of letters of credit be authorized. The use of letters of credit is 
discussed at the end of this section. Since commenters stated they 
would not utilize this method, it has not been included separately. 
However, it is a method that could be proposed under paragraph (b)(5). 
An applicant seeking approval of ``other evidence'' must submit a 
sample, proposed guaranty form.
    Paragraph (c): This paragraph has been amended in response to 
comments that neither OPA 90 nor CERCLA specifically requires the Coast 
Guard to make co-subscribers to an insurance, surety bond, or financial 
guaranty jointly and severally liable. The Coast Guard agrees with 
these comments.
    The gist of these comments is that if the Coast Guard would permit 
co-subscribers to be liable only up to their individual limits of 
participation on a particular bond, no individual amount of financial 
responsibility required by OPA 90 and CERCLA (the Total Applicable 
Amount) would be impossible to write. For example, a major surety 
broker commented that at least 32 Treasury-approved sureties have 
indicated to that broker an interest in writing surety bond guaranties. 
One of these companies is approved to write bonds in excess of $200 
million, and the 32 companies have an approved, combined underwriting 
capacity in excess of $1 billion. Accordingly, the Coast Guard has 
acceded to this request and has amended proposed Sec. 130.8(c) (new 
Sec. 138.80(c)) to specifically allow limited (i.e., non-joint and 
several as among themselves) participation on a single bond or other 
guaranty.
    The Coast Guard will only accept, for purposes of a guaranty, 
percentages of participation on a vertical, non-layered basis (tiers, 
one in excess of another, are not acceptable). For example, four 
insurers may each limit their participation to 25 percent. If a spill 
results in $10,000 in costs and damages, each insurer would be liable 
as a guarantor for $2,500. The Coast Guard will not accept a horizontal 
arrangement whereby one insurer subscribes to a first tier of $2,500, a 
second insurer to the next tier of $2,500, and so forth. Under this 
latter, layered arrangement, if the total costs and damages were 
$10,000, but the first insurer, subscribing for only the first $2,500 
layer was bankrupt, the other insurers may be under no obligation to 
pay. The Coast Guard cannot accept this result.
    In addition, the Coast Guard has limited this shared participation 
to no more than four guarantors executing a guaranty form. The Coast 
Guard believes this limitation is needed to provide a manageable 
process for claimants dealing with guarantors. More than four insurers 
or sureties, however, can still participate in a guaranty by appointing 
a lead underwriter or surety to act on their behalf, such as is done by 
Lloyd's Underwriters. Further, in order to facilitate dealing with 
multiple guarantors and to avoid complications that might ensue if the 
guarantors do not all agree on a particular action, the Coast Guard is 
requiring the guarantors to appoint a lead guarantor to act on behalf 
of, and have the authority to bind, the co-guarantors. Paragraph (c) 
further provides that if one or more guarantors do not specify 
percentages of participation, then as between or among them, they share 
joint and several liability for the total of the unspecified portion. 
Those guarantors specifying percentages will be liable only up to 
respective specified limits, as noted above. The Coast Guard considers 
this an important incentive to permit new providers of financial 
responsibility to become guarantors under OPA 90 and CERCLA.
    Paragraph (d) (Direct action): This paragraph has been rewritten in 
response to comments requesting clarification of the exposure and 
limits of liability of guarantors under OPA 90 and CERCLA. Anything 
that might be considered new, e.g., a guarantor's right to limit its 
liability to the tonnage on an official tonnage document, has already 
been discussed herein, or is discussed below in connection with 
specific guaranty forms. It is appropriate to note in this section of 
the preamble, however, that a claim against an insurer or a surety in 
connection with an insurance or surety bond guaranty established under 
this part does not entitle a claimant to somehow ``cut-through'' the 
guarantor and reach the guarantor's ensuring entity. No right of direct 
action against a guarantor relating to financial responsibility 
provided under this part endows a claimant with rights against a 
guarantor's reinsurer. This is not to say, of course, that a guarantor 
and its reinsurer are in any way precluded from entering into a 
reinsurance arrangement that permits cut-throughs by claimants against 
reinsurers. Such cut-through clauses, however, are not imposed by this 
rule.
    Letters of Credit: Section 1016(e) of OPA 90 allows the Coast Guard 
to consider inclusion of a letter of credit in the permissible methods 
of establishing financial responsibility. The use of letters of credit 
as evidence of financial responsibility has never been and is not now 
being requested by the international vessel operating industry. Years 
ago, lengthy, in-depth exploration of this matter was undertaken with 
one of the largest U.S. financial institutions in an effort to 
determine the value of irrevocable letters of credit as evidence of 
financial responsibility under direct action statutes. It was concluded 
by all concerned that such instruments were of little or no value for 
such purposes. One of the reasons for that conclusion was that, unlike 
insurance companies defending their own money, banks and other 
financial institutions that issue letters of credit generally would 
have no interest in providing the legal and other resources necessary 
to seriously investigate or defend claims against their principals' 
money for removal costs and economic damages.
    During this rulemaking, not one financial institution came forward 
to state that it would be willing to issue letters of credit as OPA 90 
guaranties, and no commenter explained how letters of credit could be 
structured so that they could become appropriate mechanisms for the 
financial responsibility purposes of OPA 90 and CERCLA. Nor has any 
vessel operator come forward to state that it would be willing to allow 
a bank to act as a guarantor and put at risk millions of dollars of the 
operator's money without a vigorous defense mechanism.
    In the proposal stage of this rulemaking, it was assumed that there 
may be some vessel operators who did not wish to use insurance, 
financial or surety bond guaranties. The Coast Guard, therefore, 
encouraged comments on how letters of credit might be used as evidence 
of financial responsibility. Several commenters stated that letters of 
credit were not viable options for demonstrating financial 
responsibility.
    Although no commenter stated that it would or could use a letter of 
credit as evidence of financial responsibility, some commenters argued 
that, nevertheless, the non-inclusion of letters of credit constituted 
a fatal flaw in the NPRM. The Coast Guard does not agree, given the 
general convergence of views among the commenters. Therefore, no change 
is being made, i.e., letters of credit are not being specifically 
included in this final rule.
    No door on any financial responsibility method is being closed with 
finality, however. The Coast Guard has taken the advice of several 
commenters that an additional category, permitted by section 1016(e) of 
OPA 90, be included in the rule, and has added a catchall category, 
``other evidence of financial responsibility'' (see discussion under 
Sec. 138.80(b)(5)). If an applicant and bank wish to use a letter of 
credit, it can be proposed, in a specific situation, as ``other 
evidence'' under the guidelines established in Sec. 138.80(b)(5).
    Paragraph (f): This new paragraph has been added to incorporate the 
``Applicable Amount Table'' that was contained in Appendix G of the 
NPRM. This paragraph (and the corresponding applicable amount table in 
each guaranty form) sets out the means by which applicants and 
guarantors calculate the amounts of financial responsibility required 
to be established and maintained under this rule. As discussed earlier, 
this calculation has been amended to reflect the actual limits of 
liability applicable to vessels under CERCLA, rather than just the 
limit applicable to vessels carrying hazardous substances as cargo.

Section 138.90  Individual and Fleet Certificates

Fleet Certificates
    This rule will further reduce the existing burden on operators of 
non-tank barges that sometimes carry oily cargo or small amounts of oil 
or hazardous substances. Such operators currently bear the expense and 
paperwork burden of obtaining individual COFRs and paying certification 
fees for a COFR for each barge, just on the chance that one or more of 
those barges may technically become subject to financial responsibility 
requirements. Examples of such non-tank barges are deck or hopper 
barges that might occasionally carry a few barrels of oil, oily metal 
shavings or non-bulk hazardous substances. Upon request (and with the 
cooperation of a guarantor), a single COFR, designated as a Fleet 
Certificate, may now be issued to the operator of these non-tank 
barges. Only a certified copy of that single Fleet COFR would need to 
be carried on each barge, and then only when that barge had oil or 
hazardous substances aboard. See Sec. 138.90(b) of this rule.
    Paragraph (b): Paragraph (b) has been changed in one respect. In 
the proposal, only an insurance guaranty was envisioned as being an 
appropriate method of establishing financial responsibility for Fleet 
Certificates. Upon reflection, there is no reason why other types of 
guaranties should be excluded. This paragraph reflects this broader 
approach.
    Paragraphs (d) and (e): Some of the notice requirements in these 
paragraphs have been stated more precisely by adding specific time 
limits.

Section 138.120  Certificates, Denial or Revocation

    Some commenters recommended that this section be revised to afford 
more procedural protections to certificants whose Certificates are 
subject to revocation. Proposed Sec. 130.12 (new Sec. 138.120) has been 
redrafted to afford greater procedural protections to applicants and 
certificants, and to remove ambiguities from the proposed text.
    Paragraph (a): This paragraph governs the circumstances under which 
the issuance of a Certificate may be denied. It is derived from 
paragraphs (a) and (b) of proposed Sec. 130.12.
    Paragraph (b): This paragraph governs the circumstances under which 
a Certificate may be revoked. It also is derived from paragraphs (a) 
and (b) of proposed Sec. 130.12.
    Paragraph (c): Paragraph (c) governs the circumstances under which 
a Certificate is automatically revoked, without prior notice. It is 
derived from paragraph (b) of proposed Sec. 130.12(b).
    Paragraph (d): This paragraph is derived from proposed 
Sec. 130.12(c) and provides that before a Certificate is denied under 
paragraph (a) of this section or revoked under paragraph (b), the Coast 
Guard will advise the applicant or certificant, in writing, of the 
proposed denial or revocation, and the reasons therefore.
    Paragraph (e): This paragraph is derived from proposed 
Sec. 130.12(d) and provides that proposed revocations due to failure to 
file required financial statements and other information become 
effective within 10 days of the notice, unless the certificant 
demonstrates that the information has been filed.
    Paragraph (f): This paragraph is derived from proposed 
Sec. 130.12(e) and provides an applicant or certificant the opportunity 
to present information showing why a proposed denial under paragraph 
(a)(1) or (a)(3) of this section or revocation under paragraph (b)(1) 
or (b)(2) is unwarranted. A new sentence is added to clarify that a 
Certificate remains valid pending a decision under this paragraph. Note 
that these procedures do not apply to an immediate revocation under 
paragraph (c) of this section.
    Paragraph (g): Paragraph (g) is new, and provides an applicant or 
certificant the opportunity to request reconsideration of an 
unfavorable decision on issuance or revocation. This paragraph states 
the applicable procedures for filing a request for reconsideration, and 
also provides that a revoked certificate remains invalid pending a 
decision on reconsideration.

Section 138.130  Fees

    A few commenters objected to the doubling of the fees charged for 
applications and for Certificates. The preexisting fees were instituted 
in 1977 to implement the general user fee statute, now codified at 31 
U.S.C. 9701. Since that time the U.S. Consumer Price Index has more 
than doubled. Office of Management and Budget revised Circular Number 
A-25 provides general guidelines for calculating the proper level of 
fees. Applying these principles, the Coast Guard calculates that 
currently, average COFR revenues do not cover average COFR costs. COFR 
costs include salaries, rent, computers and other office equipment, 
travel, and supplies. Doubling the fees, as proposed, will more closely 
recover for the Coast Guard the costs of administering the vessel 
financial responsibility certification program. Accordingly, to fulfill 
the intent of 31 U.S.C. 9101, this rule maintains the fees at the 
levels proposed. Calculations showing these program costs and projected 
revenues from the fees are available for inspection in the docket.
    The justification for the assessment of different fees for new 
``first-time'' applications than for Certificates is based upon the 
amount of processing time required by vessel certification program 
personnel. On average, it takes twice as long to process a new 
application and issue a new Certificate than it does to issue 
additional or modified Certificates.
    Although vessel certification fees must be paid, the Coast Guard 
has decided not to collect the application fee for an application filed 
to obtain a Certificate under part 138 that will replace an existing 
Certificate issued under 33 CFR 130. This is reflected in the first 
clause of Sec. 138.130(c), which references Sec. 138.70(c). This 
approach continues the scheme currently in place whereby an application 
fee is not paid each time a Certificate is replaced or renewed. The 
only fee collected in that circumstance is the certification fee.

Section 138.140  Enforcement

    Some commenters believed the penalties identified in this section 
are unfair. This section simply restates, for the convenience of the 
user, the sanctions prescribed by Congress in OPA 90 and CERCLA. The 
Coast Guard has no discretion to alter these potential sanctions. 
Another commenter recommended that an appeals process be incorporated 
in connection with the Coast Guard's detention of a vessel. This 
suggestion is beyond the scope of this rulemaking, which deals with 
methods for demonstrating financial responsibility, and associated 
matters. It is noted that actions by Coast Guard enforcement personnel 
are governed by other regulations. For example, certain actions taken 
by Coast Guard Captains of the Port may be appealed according to 
procedures elaborated in 33 CFR part 160.

Section 138.150  Service of Process

    Text has been added to this section to reflect responsibilities 
placed upon responsible parties and guarantors by OPA 90, such as 
receipt of a notice of designation of source. The additional text 
clarifies that the persons designated by applicants and guarantors as 
agents to receive service of process also may be served with notices of 
designations and presentations of claims under the Acts. The 
Application Form and guaranty forms have also been amended to reflect 
this clarification.

Appendix A--Application for Certificate

    The application form was left basically the same as in the 
proposal. Substantive changes are as follows:
    Part I, Question 4: This portion of the application was amended to 
permit United States applicants the option of appointing themselves as 
U.S. agents for service of process, as is currently permitted under 
part 130. Doing so would preclude the need for the applicant and U.S. 
agent to complete part IV, Concurrence of Agent. As is presently the 
case, Certificates will not be issued to vessel operators who have not 
appointed U.S. agents for service of process, with accompanying written 
concurrence by such agents. This is the purpose of part IV of the 
application form. Since 1971, each P&I Club has arranged for a blanket 
concurrence of agent for service of process to be maintained on file 
with the Coast Guard's National Pollution Funds Center. This makes it 
unnecessary for vessel owners and operators who are members of the P&I 
Clubs, or their U.S. agents for service of process, to complete part IV 
of the application form.
    Because vessel owners and operators who are members of P&I Clubs 
apparently will not currently permit their Clubs to act as guarantors 
for purposes of this rule, it has to be further assumed that the P&I 
Clubs will not be permitted to continue to arrange blanket concurrences 
of U.S. agents for service of process for purposes of this rule. 
Accordingly, each applicant who is a member of a P&I Club now will have 
to: (1) Locate in the United States an entity willing to act as that 
applicant's agent for service of process and; (2) mail to that agent 
part IV of an application form, with a request to forward the 
completed, executed part IV-A to the National Pollution Funds Center 
(part IV-B is to be completed by the applicant before mailing to the 
agent). Applicants are encouraged to mail parts I, II and III, fees, 
and any evidence of financial responsibility directly to the National 
Pollution Funds Center to minimize mail handling. In most cases, 
guarantors are instructed by vessel operators to mail guaranties 
directly to the National Pollution Funds Center.
    A U.S. agent for service of process who is willing to act as agent 
for an operator's entire fleet of vessels need complete part IV-A only 
once. An agent for service of process, acting solely as agent, does not 
incur any OPA 90/CERCLA liability for removal costs or damages. An 
agent's responsibilities are as agreed between itself and the vessel 
operator on whose behalf the agent agrees to act.
    Part II, column (d): As proposed, column (d) requested an applicant 
to indicate a vessel's ``Registration Number''. As amended, column (d) 
requests a ``Documentation Number'' for U.S.-flag vessels and an ``IMO 
Number'' for non-U.S.-flag vessels. A ``Registration Number'' is 
requested if an ``IMO Number'' has not been assigned.
    Part III, question 11: Question 11 is an addition to the proposed 
Part II, and was necessary to accommodate an applicant who wishes to 
establish evidence of financial responsibility other than by self-
insurance, insurance guaranties, surety bond guaranties, or financial 
guaranties. If that is the case, new question 11 requests the applicant 
to provide, separately, all of the information required by 
Sec. 138.80(b)(5) of this rule (see discussion under 
Sec. 138.80(b)(5)).

Appendices B Through F

    These appendices are, respectively, the insurance guaranty form, 
the master insurance guaranty form, the surety bond guaranty form, the 
financial guaranty form and the master financial guaranty form. Each of 
these guaranty forms has undergone numerous changes in format and 
wording which have no impact on meaning or content. However, each 
guaranty form has undergone the following common substantive 
amendments:
    Defenses: The defenses are those enumerated in Sec. 138.80(d). 
Rather than merely say that in the event of a direct action a guarantor 
may invoke only the rights and defenses specifically permitted by the 
Acts, those rights and defenses are now mentioned in more detail in 
each guaranty form. These statutorily permitted rights and defenses 
comprise defense numbers one and two of a new section in each guaranty 
form, which new section lists the rights and defenses available to 
guarantors in the event of a direct action. Right or defense number 
three confirms that a guarantor shall have the right to limit its OPA 
90/CERCLA liability under its guaranty to the amount of that guaranty, 
despite the number of claimants and venues in which claims are brought 
against the guarantor for the same incident, release or threatened 
release. Number four, in this new listing of rights and defenses, 
provides that a guarantor shall have the right to limit its liability 
to the amount obtained by using the gross tonnage entered on the 
involved vessel's international tonnage certificate or other 
certificate of measurement, whichever is the vessel's official, 
applicable declaration of tonnage, except where the guarantor knew or 
should have known that the applicable tonnage certificate was 
incorrect. The Coast Guard intends the right to so limit liability to 
be available to guarantors despite any higher or different tonnage 
which may be listed on the COFR application form or guaranty form. 
Indeed, the Coast Guard intends this right of a guarantor to so limit 
its liability to apply even if it is determined after an incident or 
release that the official tonnage document is incorrect and that a 
vessel's correctly admeasured tonnage exceeds the tonnage listed on the 
incorrect tonnage document. The Coast Guard agrees with a commenter 
that a guarantor should be able to rely on a vessel's official tonnage 
document rather than find itself liable for a $10 million tank vessel 
liability when it accepted an exposure and a premium based on a tonnage 
document that indicated a substantially lesser amount of liability (see 
the liability minimums for tank vessels under section 1004(a) of OPA 
90). This right is being extended to guarantors under the general 
rulemaking authority contained in OPA 90 and CERCLA to define terms 
such as gross tons, and under section 1016(e) of OPA 90. Only a 
guarantor may invoke this right or defense. The responsible party's 
liability is based on the actual gross tonnage of the vessel.
    Right or defense number five in the new section of the guaranty 
forms is that ``the claim is not one made under either of the Acts.'' 
Potential guarantors were concerned that by executing the guaranty 
form, they would be subjecting themselves to direct action under other 
laws as well, whether in federal or state courts. The Coast Guard does 
not believe that this was the intent of Congress. Accordingly, the 
purpose of this defense is to ensure that guarantors are not subject to 
direct actions under other laws solely because they executed the OPA 
90/CERCLA guaranty to the Coast Guard.
    The Coast Guard does not intend, and does not believe Congress 
intended, that execution of a guaranty appended to or acceptable under 
this part in any way indicates that the guarantor is implicitly 
agreeing to liability in an amount or scope different than set forth in 
such guaranty. No guaranty accepted under and executed for purposes of 
this part, without more, is to be construed as subjecting the guarantor 
to unlimited liability in any venue for any purpose. The Coast Guard 
considers this defense to be absolute, and necessary to effectuate the 
purposes of OPA 90, in accordance with section 1016(e) of OPA 90.
    Joint and several liability: The second common change to the 
guaranty forms is the granting of an option to co-subscribing 
guarantors. In the proposed rule, joint guarantors to a single guaranty 
form would be jointly and severally liable for the full amount of the 
guaranty. This second common amendment to the guaranty forms, however, 
permits each joint guarantor the option of limiting its liability to 
less than the full amount of the guaranty by specifying its particular 
percentage of participation in each guaranty it co-executes. However, 
that participation must be in a vertical, non-layered share (see 
discussion under Sec. 138.80(c)). Any co-insurer not specifying a 
percentage of participation would be held liable for the unspecified 
portion of any risk. If no co-insurers specify a percentage of 
participation, each would be held jointly and severally liable up to 
the full amount of the guaranty. The Coast Guard will continue to 
permit acceptable market entities such as the Institute of London 
Underwriters and the Underwriters at Lloyd's to execute a guaranty 
under the signature of a lead underwriter, or underwriters, with each 
co-subscribing, limited-liability signatory counting as only one 
guarantor. Thus, for example, twenty or so Lloyd's syndicates may join 
together under one lead underwriter (i.e., one signature on the 
guaranty form) for 40 percent of a risk, with numerous Institute of 
London Underwriters joining together under one lead underwriter (i.e., 
one signature guaranty on the guaranty form) for the remaining 60 
percent. This method would count as only two guarantors under this new 
rule. Co-guarantors must appoint and name on the form a lead guarantor, 
having authority to bind all co-guarantors. This will facilitate 
handling of claims or other activities under the Acts. The co-
guarantors decide among themselves which guarantor will serve as lead, 
and certainly should specify among themselves how claims or other 
activities under the Acts will be handled.
    Deletion of the sixty-day notice: The third common change made to 
the guaranty forms is the deletion of the proposed requirement for a 
sixty-days written notice of cancellation requirement in connection 
with laden tankers. The Coast Guard concludes that, based on 23 years 
experience, thirty days written notice of cancellation of a guaranty 
will provide adequate notice in almost all cases.
    Service of process: The fourth common change is the clarification 
that an agent designated to receive service of process also is required 
to receive notices of designation or presentations of claims under the 
Acts.
    Total Applicable Amount: The fifth and final common change made to 
the guaranty forms is the relaxation in the method of calculating the 
total applicable amount with respect to vessels carrying hazardous 
substances as cargo. The relaxation (with respect to guaranties) of the 
proposed requirement that financial responsibility always would have to 
be demonstrated at the minimum amount of $5 million, already has been 
discussed in this preamble under the heading ``Applicable Amounts of 
Financial Responsibility.''
    As already discussed, a guarantor and its principal or insured may 
decide among themselves as to the level of premium to be paid for the 
cover, it being understood that the guarantor will in any case be 
liable for the limit of liability applicable to the type of vessel in 
question at the time of the incident, release or threatened release, 
despite the level of premium accepted by the guarantor. This concept of 
full coverage, regardless of the type of vessel, applies under current 
part 130 and was the basis for certain language in all of the guaranty 
forms appended to this part. Nevertheless, in view of the relaxation of 
the total applicable amount calculation, all of the guaranty forms 
appended to this part (except the two insurance guaranty forms) have 
been amended to emphasize that concept of full coverage, including tank 
vessel liability. Thus, the surety bond guaranty form, for example, has 
been amended by adding the following clause:

    Principal and Surety or Sureties further agree that if at the 
time of an incident, release, or threatened release a covered vessel 
is a tank vessel or is carrying a hazardous substance as cargo, the 
penal sum of this surety bond guaranty automatically increases, if 
necessary, to the total applicable amount appropriate for such 
vessel as determined in accordance with the Applicable Amount Table 
below. In no case, however, shall the penal sum be increased to an 
amount greater than the total applicable amount.

    This change is especially appropriate to the surety bond guaranty 
form (Appendix D) because of the bond guaranty's provision for showing 
the penal sum of the guaranty. It was believed appropriate to also 
amend the financial guaranty forms (Appendices E and F) in order to 
remind prospective financial guarantors that the amounts of working 
capital and/or net worth to be demonstrated (in order to qualify as 
financial guarantors) would be based on the minimum $5 million formula 
for CERCLA, and $1,200 per gross ton/$10 million for OPA 90, when 
calculating the total applicable amount to be guarantied.

Appendix D Surety Bond Guaranty Form

    A change peculiar to the bond guaranty form is the addition of the 
following clause:

    If the Principal is responsible for more than one vessel covered 
by this guaranty, then the penal sum is the total applicable amount 
for the vessel having the greatest liability under the Acts.

    This change was made solely to clarify the surety's limit of OPA 
90/CERCLA liability under a bond guaranty, regardless of the actual 
penal sum indicated on the bond guaranty. This new clause, when coupled 
with a second new clause that has been added to the form, permits the 
bond guaranty automatically to cover all of the vessels for which the 
vessel operator-principal is responsible under the Acts, yet provides 
protection to the surety if any of such vessels are specifically named 
in other evidence of financial responsibility (on behalf of the vessel 
operator-principal named on the bond guaranty) applicable during an 
incident, release or threatened release giving rise to a claim against 
the surety or vessel operator-principal. This second new clause appears 
directly above the name of the surety's U.S. agent for service of 
process, and will aid in determining the specific vessels covered by a 
bond guaranty, should such question ever arise.

Assessment

    The NPRM was classified as not ``major'' under former Executive 
Order 12291, which was revoked and replaced by Executive Order 12866 
(September 30, 1993), but was considered significant under the 
regulatory policies and procedures of the Department of Transportation 
(DOT) (44 FR 11040, February 26, 1979) because of substantial public 
interest. Many commenters to the NPRM stated that the proposed should 
be classified as major under Executive Order 12291. In fact, this 
rulemaking has followed most of the procedural aspects of a ``major'' 
rule, notably, the publication of the PRIA for public comment. 
Executive Order 12866 now governs this proceeding.
    This rule is a significant regulatory action under section 3(f) of 
Executive Order 12866 because it is perceived to raise novel legal and 
policy issues. It has been reviewed by the Office of Management and 
Budget under that order. It requires an assessment of potential costs 
and benefits under section 6(a)(3) of that order. It is significant 
under the regulatory policies and procedures of DOT. A Regulatory 
Impact Analysis (``assessment'' under the new Executive Order) has been 
prepared and is available in the docket for inspection or copying where 
indicated under ADDRESSES. The purpose of Executive Order 12866 (and 
its predecessor) is to improve the internal management of the federal 
government and it does not create any procedural or substantive rights 
or benefits enforceable at law by a party against the United States.
    These regulations are promulgated under section 1016(a) of OPA 90 
(33 U.S.C. 2716) and section 108(a)(1) of CERCLA (42 U.S.C. 
9608(a)(1)), concerning the ``establishment and maintenance'' of 
evidence of financial responsibility for vessels. This rulemaking is 
intended to implement that joint statutory mandate and, therefore, 
primarily is limited to matter relating to ``establishment and 
maintenance'' of financial responsibility, such as how to apply for a 
COFR and how to establish evidence of financial responsibility.
    This rule imposes no new paperwork burdens on vessel operators. The 
methods for applying for a COFR and establishing evidence are similar 
to those in the preexisting regulations under the FWPCA, TAPAA, OCSLAA, 
and DPA. Vessel operators will be required to complete and submit a 
prescribed application form for a COFR and, if other than a self-
insurer, a prescribed form, completed by their guarantors, evidencing 
acceptable financial responsibility. A similar requirement, however, is 
being imposed presently under preexisting 33 CFR parts 130, 131, and 
132, and subpart D of part 137. This rule not only adopts these 
application procedures but actually reduces the paperwork burden by 
requiring that only one application be submitted under OPA 90/CERCLA, 
rather than separate applications under the FWPCA, TAPAA, and OCSLAA, 
which is now the case. The implementation schedule, discussed under 
Sec. 138.15, will also alleviate some burden in that, for most vessels, 
new COFRs will only have to be obtained at their normal renewal cycle.
    This rule may affect a slightly different population of vessels 
than under the preexisting regulations. This difference results from 
section 1016(a) of OPA 90 (33 U.S.C. 2716(a)). Before OPA 90 was 
enacted, the most encompassing Federal statute concerning financial 
responsibility (the FWPCA) was limited to vessels over 300 gross tons. 
(TAPAA, OCSLAA, and DPA have no vessel tonnage limits, but very few 
vessels of 300 gross tons or less operate under those regimes.) Under 
section 1016(a)(2) of OPA 90, all vessels ``using the waters of the 
exclusive economic zone to transship or lighter oil destined for a 
place subject to the jurisdiction of the United States'' also must meet 
the financial responsibility requirements. The exact number of vessels 
of 300 gross tons or less engaged in transshipping or lightering oil, 
not already subject to the preexisting regulations, is unknown. The 
Coast Guard requested information on the vessel population not subject 
to a financial responsibility regime under Federal law before enactment 
of OPA 90 and which must now comply with the requirements of section 
1016 of OPA 90, but none was provided.

Regulatory Impact Analysis

General Issues

    Due to the substantial public interest in this rulemaking, on July 
21, 1993, a Preliminary Regulatory Impact Analysis was made available 
for public comment (58 FR 38994), in accordance with the request of 
many commenters to the NPRM. Nearly 600 copies of the PRIA were 
distributed worldwide. The PRIA analyzed the costs and benefits of four 
options, namely: (1) Retain the preexisting rules; (2) adopt the NPRM; 
(3) amend the NPRM to accept entry in a Protection and Indemnity Club 
(P&I Club) as an asset for self-insurance; and (4) amend the NPRM's 
self-insurance formulate (i.e., eliminate the working capital 
requirement and/or the requirement to maintain assets in the United 
States by allowing worldwide assets to be measured against worldwide 
liabilities). The PRIA noted that these were the options (not all of 
which are, necessarily, legally permissible options) most often 
mentioned in comments to the NPRM.
    Over 60 letters commenting on the PRIA were received. The comments 
fall into four general categories: (1) Those that support the NPRM; (2) 
those that support the P&I Club membership as an asset option, with an 
added feature of making the Oil Spill Liability Trust Fund an assignee 
of the member's rights under the Club policy; (3) those that oppose the 
NPRM altogether (primarily the P&I Clubs and Lloyd's of London); (4) 
and those that support enactment of legislation to create a Mandatory 
Excess Insurance Facility (MEIF), to address tank vessel owners' 
desires to be granted higher levels of insurance than appear to be 
available in the commercial marketplace. The MEIF then could also serve 
as a COFR insurance guarantor.
    The central concern expressed by most vessel owners and operators 
is how to provide evidence of financial responsibility if their P&I 
Clubs do not issue insurance guaranties. The Clubs act in unison 
through the International Group of P&I Clubs. They have unequivocally 
stated in their comments that these same vessel owners and operators 
will not permit the Clubs to provide insurance guaranties, and that 
there is no rule change that could be made to induce them to do so. The 
reason for this position has not, in the Coast Guard's judgment, been 
made clear nor has it been adequately justified. Thus, the PRIA and 
final RIA assess the so-called ``train-wreck'' scenario, i.e., the 
unlikely scenario whereby the NPRM is adopted as a rule, the P&I Clubs 
remain prohibited by their shipowner members to provide insurance 
guaranties, and no other sources of financial responsibility exist. The 
final RIA takes into account all the comments and concludes that a 
``train-wreck'' is not likely to occur because it appears that other 
sources of financial responsibility will develop. Even if they do not 
develop, there need not be a ``train-wreck'' because the shipowners can 
vote to permit their Clubs to issue the guaranties. The choice of 
compliance with this rule is entirely up to the shipowners.

Summary of Costs and Benefits

    The options have been measured against the fundamental legislative 
precept, namely, that the polluter should pay promptly and with 
assurance for removal costs and damages resulting from an oil spill or 
release of hazardous substances. The option that most closely fulfills 
this congressional objective is the approach proposed in the NPRM and 
adopted in this rule. It is legally defensible, it enhances claimants' 
rights to compensation, it does not impose undue administrative 
burdens, and it need not impose measurable costs on consumers. On the 
other hand, the other options all lack the Congressionally intended 
assurance that the polluter or its guarantor will pay promptly for 
costs and damages.
    The ``do nothing'' approach means that financial responsibility is 
maintained at much lower levels than are required by OPA 90, and that 
CERCLA vessel financial responsibility remains unimplemented. If an oil 
spill or hazardous substance release occurs under this circumstance, 
there is serious concern whether a guarantor or the spiller will pay 
removal costs and damages that exceed the lower, preexisting limits of 
liability.
    The P&I Club membership-as-an-asset approach is not supported by 
Generally Accepted Accounting Principles, and allows the P&I Clubs to 
avoid paying claims by invoking an unlimited number of policy defenses 
and the pay-to-be-paid rule. Under this rule, a Club only is required 
to ``indemnify'' its shipowner-member for payments actually made by the 
shipowner. In the case of bankruptcy, for example, where the shipowner 
is discharged from paying removal costs and damages, there would be no 
obligation for the shipowner's P&I Club to pay claimants. This option, 
even with the added feature of the assignment clause, offers not much 
greater protection to claimants because policy defenses could still be 
invoked. Additionally, the assignment clause would require the assent 
of the P&I Clubs, and there is no evidence in the record that the Clubs 
would provide this assent. Hence, there is no assurance that shipowners 
would have this method available to them, even if it could be adopted 
under OPA 90 and CERCLA.
    The Mandatory Excess Insurance Facility (MEIF), proposed primarily 
to provide shipowners with very high levels of insurance, could provide 
assurance of payment fulfilling, on the surface, the polluter pays 
concept. This approach, however, requires legislation, a necessarily 
long-term endeavor. Its initially conceived funding mechanisms place 
the cost of this approach on U.S. consumers and taxpayers, but the 
funding mechanisms have not been fully developed. A full assessment of 
the MEIF, including the demands that might be placed on the public 
treasury, has not been possible. Even though the funding details have 
not been fully developed, the MEIF, overall, would be a more costly 
option than the NPRM approach. Its tanker owner proponents have stated 
that their primary objective is to address the lack of high levels of 
insurance to cover a shipowner's potential unlimited liability under 
OPA 90. Most of the MEIF's costs are attributable to the higher levels 
of insurance and not with OPA 90 financial responsibility requirements. 
For these reasons, and since there appear to be commercial alternatives 
to P&I Club insurance guaranties, the MEIF currently is not viewed as a 
timely or practical source of insurance guaranties. Nevertheless, the 
Coast Guard understands tankers owners' concerns regarding the lack of 
very high levels of oil pollution insurance in the commercial 
marketplace. The Coast Guard intends to continue examining the MEIF for 
this purpose, recognizing that this is, fundamentally, a liability 
issue beyond the scope of this rulemaking and one that would have to be 
dealt with through legislation.
    The main concern about the NPRM approach is whether it will cause a 
``train-wreck.'' Representatives of two new insurance entities now 
being formed commented in response to the PRIA that they were 
developing insurance alternatives to P&I Clubs for the purpose of 
providing financial responsibility guaranties. Representatives of 
surety companies commented that surety bonds can be a source of 
financial responsibility guaranties. The major provider of financial 
responsibility backing for FWPCA COFRs for the inland and near coastal 
fleet, the Water Quality Insurance Syndicate, has not stated any 
refusal to issue OPA 90 and CERCL A financial responsibility 
guaranties. One domestic insurance company and one independent P&I Club 
voiced an interest as well, and many domestic and foreign insurance 
companies would be able to issue guaranties immediately, if they chose 
to do so. Thus, the record demonstrates that alternative sources of 
financial responsibility backing are likely to be available, suggesting 
that the ``train-wreck'' will not occur.
    This is not to say that if the P&I Clubs and their members maintain 
their refusal to issue financial responsibility guaranties this rule 
will not result in more costs to the shipowner. Most of those costs are 
likely to be passed to the end consumer, principally in a fractional 
increase in the cost of a gallon of refined product, such as gasoline. 
Assessment of costs is very difficult because, for commercial reasons, 
the intended insurance providers have been unwilling to submit cost 
estimates to the docket. On the other hand, one surety company did 
submit rough cost estimates. The final RIA makes a number of 
assumptions about possible costs, and calculates the possible range of 
costs. The presumed ``worst-case'' cost translates to less than two-
fifths of one cent per gallon of refined product.
    The final RIA, which is available in the docket for inspection or 
copying, as indicated under ADDRESSES, details the cost calculations 
and assumptions. The Coast Guard concludes that the cost of the 
approach taken in this rule is minimal and that the benefits to the 
public justify these costs. Further, since these costs need not be 
incurred, the Coast Guard concludes that cost is not the sole 
controlling factor in the decision on which option to select.

Small Entities

    In the NPRM, the Coast Guard solicited comments from small 
businesses, as defined by the Regulatory Flexibility Act (5 U.S.C. 601 
et seq.), to ascertain whether the proposed rule will have a 
significant economic impact on their business. One commenter, the Delta 
Queen Steamboat Company (``Delta''), seeks exemption from this 
regulation, as it believes is permitted under 5 U.S.C. 603(c)(4).
    Delta states that it is a small cruise line operator, whose two 
overnight, passenger, paddlewheel steamboats operate on the inland 
rivers of the Mississippi, Ohio, Cumberland and Tennessee. The largest 
of those vessels, at 3,364 gross tons, requires combined OPA 90 and 
CERCLA financial responsibility under the NPRM of $7,018,400. Even 
though the company stated it currently has $500,000,000 of oil 
pollution insurance with a P&I Club, the Club has indicated that it 
will not provide a guaranty of insurance for purposes of the COFR rule. 
Delta also states that it cannot demonstrate financial responsibility 
using the other methods listed in the NPRM. Therefore, Delta requests 
exemption from the final COFR rule.
    The Coast Guard believes that Delta will be able to demonstrate 
financial responsibility through alternative means, and is in no 
different position than any other vessel owner or operator. For 
example, one of the alternative insurance companies indicated that it 
believed the cost of insurance for non-tankers would be minimal. The 
amount of financial responsibility required by Delta is within the 
capacity of the Water Quality Insurance Syndicate, which has not 
declared it will not provide the guarantees of insurance, and any 
number of surety companies.
    Title 5 U.S.C. 603(c)(4) provides that consistent with the 
objectives of the relevant statutes (in this case OPA 90 and CERCLA), 
this analysis shall discuss significant alternatives, such as an 
exemption from the rule for small entities. Neither OPA 90 nor CERCLA 
provide a basis to exempt covered vessels from the requirement to 
demonstrate evidence of financial responsibility. Accordingly, no 
provision for exemptions is provided in this rule. As noted above, no 
exemption is warranted in the case of Delta (or similar entities) as 
alternative sources of financial responsibility guaranties are expected 
to be available.
    This rule will have minimal direct economic impact on small 
business. The rule retains procedures presently in effect, and through 
consolidation, eliminates duplication of effort on the part of the 
regulated industry. Therefore, the Coast Guard certifies under section 
605(b) of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) that 
this rule will not have a significant economic impact on a substantial 
number of small entities.

Collection of Information

    This rule contains collection-of-information requirements. The 
Coast Guard has submitted these requirements to the Office of 
Management and Budget (OMB) for review under section 3504(h) of the 
Paperwork Reduction Act (44 U.S.C. 3501 et seq.), and OMB has approved 
them. The information collection requirements under this rule continue 
previous requirements. OMB Control Number 2115-0545 was assigned to 33 
CFR parts 130, 131, 132, and 137. The collection-of-information 
requirements in these four parts are being consolidated into part 138. 
Under this rule, the need to apply for separate Certificates under 
separate laws is eliminated, along with the associated paperwork. 
Because of the phase-in provisions in this rule, the information 
collection requirements in 33 CFR parts 130, 131, 132, and 137 remain 
in effect for varying periods of time. The table in 33 part 4 is being 
amended to show this approval number.

Federalism

    The Coast Guard has analyzed this rule under the principles and 
criteria contained in Executive Order 12612. Section 1018 of OPA 90 
specifically allows states to enact their own liability laws, and many 
states have indeed established their own requirements. Therefore, the 
Coast Guard has determined that this rule does not have sufficient 
federalism implications to warrant the preparation of a Federalism 
Assessment.

Environment

    The Coast Guard considered the environmental impact of this rule 
and concluded that, under section 2.B.2 of Commandant Instruction 
M16475.1B, this rule is categorically excluded from further 
environmental documentation. This rulemaking is administrative in 
nature and has no environmental impact. This rule provides the 
procedure by which a vessel operator establishes evidence of financial 
responsibility.
    A ``Categorical Exclusion Determination'' is available in the 
docket for inspection or copying where indicated under ADDRESSES.

List of Subjects

33 CFR Part 4

    Reporting and recordkeeping requirements.

33 CFR Part 130

    Insurance, Maritime carriers, Reporting and recordkeeping 
requirements, Water pollution control.

33 CFR Part 131

    Alaska, Insurance, Maritime carriers, Oil pollution, Pipelines, 
Reporting and recordkeeping requirements.

33 CFR Part 132

    Continental shelf, Insurance, Maritime carriers, Oil pollution, 
Reporting and recordkeeping requirements.

33 CFR Part 137

    Claims, Harbors, Insurance, Oil pollution, Reporting and 
recordkeeping requirements, Vessels.

33 CFR Part 138

    Insurance, Maritime carriers, Reporting and recordkeeping 
requirements, Water pollution control.

    For the reasons set out in the preamble, the Coast Guard amends 33 
CFR parts 4, 130, 131, 132, and 137, and adds a new part 138, as 
follows:

PART 4--OMB CONTROL NUMBERS ASSIGNED PURSUANT TO THE PAPERWORK 
REDUCTION ACT

    1. The authority citation for part 4 continues to read as follows:

    Authority: 44 U.S.C. 3507; 49 CFR 1.45(a).


Sec. 4.02  [Amended]

    2. In Sec. 4.02, add the following entries in numerical order to 
the table:

Part 130
2115-0545
Part 131
2115-0545
Part 132
2115-0545
Part 138
2115-0545.

PART 130--FINANCIAL RESPONSIBILITY FOR WATER POLLUTION

    3. The authority citation for part 130 is revised to read as 
follows:

    Authority: 33 U.S.C. 2716; 49 CFR 1.46.

    4. Section 130.0 is added to read as follows:


Sec. 130.0  Dates.

    (a) A Certificate will not be issued under this part on or after 
December 28, 1997.
    (b) A Certificate issued under this part on or after July 1, 1994, 
has the expiration date specified in Sec. 138.15 of this chapter.

PART 131--FINANCIAL RESPONSIBILITY FOR OIL POLLUTION--ALASKA 
PIPELINE

    5. The authority citation for part 131 is revised to read as 
follows:

    Authority: 33 U.S.C. 2716; 49 CFR 1.46.

    6. Section 131.0 is added to read as follows:


Sec. 131.0  Dates.

    (a) A Certificate will not be issued under this part on or after 
July 1, 1995.
    (b) A Certificate issued under this part on or after July 1, 1994, 
has the expiration date specified in Sec. 138.15 of this chapter.

PART 132--FINANCIAL RESPONSIBILITY FOR OIL POLLUTION--OUTER 
CONTINENTAL SHELF

    7. The authority citation for part 132 is revised to read as 
follows:

    Authority: 33 U.S.C. 2716; 49 CFR 1.46.

    8. Section 132.0 is added to read as follows:


Sec. 132.0  Dates.

    (a) A Certificate will not be issued under this part on or after 
December 28, 1997.
    (b) A Certificate issued under this part on or after July 1, 1994, 
has the expiration date specified in Sec. 138.15 of this chapter.

PART 137--DEEPWATER PORT LIABILITY FUND

    9. The authority citation for part 137 is revised to read as 
follows:

    Authority: 33 U.S.C. 2716; 49 CFR 1.46.

Subparts B and C--[Removed and Reserved]

    10. Subparts B and C of part 137 are removed and reserved.

Subpart D--[Amended]

    11. Section 137.300 is added to subpart D to read as follows:


Sec. 137.300  Dates.

    (a) The Fund Administrator will not accept certification of 
coverage of a vessel under this part on or after July 1, 1995.
    (b) The Fund Administrator will only accept certification of 
coverage of a vessel under this part if that vessel holds a Certificate 
issued under part 130 of this chapter.

    Note: The functions of the Fund Administrator have been assumed 
by the Director, National Pollution Funds Center, United States 
Coast Guard, 4200 Wilson Boulevard, suite 1000, Arlington, Virginia 
22203-1804, attention: cv. The telephone number is 703-235-4813 and 
the facsimile number is 703-235-4835.

Subpart E--[Removed and Reserved]

    12. Subpart E of part 137 is removed and reserved.
    13. Part 138 is added to read as follows:

PART 138--FINANCIAL RESPONSIBILITY FOR WATER POLLUTION (VESSELS)

Sec.
138.10  Scope.
138.12  Applicability.
138.15  Implementation schedule.
138.20  Definitions.
138.30  General.
138.40  Where to apply for and obtain forms.
138.50  Time to apply.
138.60  Applications, general instructions.
138.65  Issuance and carriage of Certificates.
138.70  Renewal of Certificates.
138.80  Financial responsibility, how established.
138.90  Individual and Fleet Certificates.
138.100  Non-owning operator's responsibility for identification.
138.110  Master Certificates.
138.120  Certificates, denial or revocation.
138.130  Fees.
138.140  Enforcement.
138.150  Service of process.

Appendix A to Part 138--Application Form.
Appendix B to Part 138--Insurance Guaranty Form
Appendix C to Part 138--Master Insurance Guaranty Form
Appendix D to Part 138--Surety Bond Guaranty Form
Appendix E to Part 138--Financial Guaranty Form
Appendix F to Part 138--Master Financial Guaranty Form

    Authority: 33 U.S.C. 2716; 42 U.S.C. 9608; sec. 7(b), E.O. 
12580, 52 FR 2923, 3 CFR, 1987 Comp., p. 198; 49 CFR 1.46; 
Sec. 138.30 also issued under the authority of 46 U.S.C. 2103; 46 
U.S.C. 14302; 49 CFR 1.46.


Sec. 138.10  Scope.

    This part sets forth the procedures by which an operator of a 
vessel may establish and maintain, for itself, and, where the operator 
is not the owner or demise charterer, for the owner and demise 
charterer of the vessel, evidence of financial responsibility to cover 
liability of the owner, operator, and demise charterer arising under--
    (a) Section 1002 of the Oil Pollution Act of 1990 (OPA 90) (33 
U.S.C. 2702); and
    (b) Senate 107(a)(1) of the Comprehensive Environmental Response, 
Compensation, and Liability Act, as amended (CERCLA) (42 U.S.C. 
9607(a)(1)).


Sec. 138.12  Applicability.

    (e) This part applies to--
    (1) A tank vessel of any size, and to a foreign-flag vessel of any 
size, using the waters of the exclusive economic zone to transship or 
lighter oil (whether delivering or receiving) destined for a place 
subject to the jurisdiction of the United States; and
    (2) A vessel using the navigable waters of the United States or any 
port or place subject to the jurisdiction of the United States, 
including an offshore facility subject to the jurisdiction of the 
United States, except--
    (i) A vessel that is 300 gross tons or less; and
    (ii) A non-self-propelled barge that does not carry oil as cargo or 
fuel and does not carry hazardous substances as cargo.
    (b) For the purposes of financial responsibility under OPA 90, a 
mobile offshore drilling unit is treated as a tank vessel when it is 
being used as an offshore facility and there is a discharge, or a 
substantial threat of a discharge, of oil on or above the surface of 
the water. A mobile offshore drilling unit is treated as a vessel other 
than a tank vessel when it is not being used as an offshore facility.
    (c) For the purposes of financial responsibility under CERCLA, this 
part applies to a self-propelled vessel over 300 gross tons, even if it 
does not carry hazardous substances.
    (d) This part does not apply to a public vessel.


Sec. 138.15  Implementation schedule.

    (a) A tank vessel is subject to the following implementation 
schedule:
    (1) Until December 28, 1994, a tank vessel is required to carry a 
Certificate issued under parts 130, 131, and 132 of this chapter, as 
may be applicable to that vessel. On or after that date, and until July 
1, 1995, a non-self-propelled tank vessel must carry a Certificate 
issued under parts 130, 131, and 132 of this chapter, as may be 
applicable to that vessel, unless it carries a Certificate issued under 
this part.
    (2) A self-propelled tank vessel to which this part applies and 
which carries a valid Certificate issued under part 130 of this chapter 
may not operate on or after December 28, 1994, unless the operator of 
that vessel has submitted to the Director, NPFC, before that date 
acceptable evidence of financial responsibility applicable to that 
vessel under this part. A self-propelled tank vessel covered by that 
evidence of financial responsibility before December 28, 1994, may 
continue to operate with the Certificate issued under part 130 of this 
chapter. The expiration date of the Certificate issued under part 130 
of this chapter for that vessel will be deemed to be December 28, 1995, 
regardless of the expiration date appearing on the Certificate. 
Thereafter, a Certificate issued under this part is required.
    (3) A self-propelled tank vessel to which this part applies, but 
which does not carry a valid Certificate issued under part 130 of this 
chapter before December 28, 1994, may not operate on or after that date 
unless it carries a Certificate under this part.
    (4) A non-self-propelled tank vessel to which this part applies may 
not operate on or after July 1, 1995, without a Certificate issued 
under this part. A non-self-propelled tank vessel may continue to 
operate with a Certificate issued under parts 130, 131, and 132 of this 
chapter, as may be applicable to that vessel, until that date.
    (b) A vessel that is not a tank vessel (non-tank vessel) is subject 
to the following implementation schedule:
    (1) Until December 28, 1997, a non-tank vessel is required to carry 
a Certificate issued under parts 130 and 132 of this chapter, as may be 
applicable to that vessel, unless that vessel carries a Certificate 
issued under this part. On or after December 28, 1997, each non-tank 
vessel subject to this part must carry a Certificate issued under this 
part.
    (2) A Certificate is issued, on and after December 28, 1994, and 
before December 28, 1997, under parts 130 and 132 of this chapter only 
to replace a lost Certificate or to replace a Certificate due to a 
vessel or operator name change (a change of legal identity, such as 
reincorporation or other reorganization, is not considered a name 
change). The expiration date that will appear on the replacement 
Certificate will be the same as the expiration date of the Certificate 
being replaced. During that three-year time period, with respect to 
part 132 of this chapter, the expiration date that will appear on a 
Certificate being replaced, or on an existing Certificate being 
renewed, will be adjusted to coincide with the expiration date of the 
Certificate, if any, for that vessel issued under part 130 of this 
chapter.
    (3) A non-tank vessel that has a Certificate issued before December 
28, 1994, under part 130 of this chapter is not required to carry a 
Certificate under this part until the date of expiration of the 
Certificate issued under part 130 of this chapter.
    (4) Except as provided in paragraph (b)(5) of this section, a 
Certificate issued on and after July 1, 1994, and before December 28, 
1994, under parts 130 and 132 of this chapter is issued with an 
expiration date three years from the date of issuance.
    (5) If a Certificate issued under part 130 of this chapter with an 
expiration date of December 28, 1994, or later is surrendered, and a 
new Certificate is requested for the same non-tank vessel before 
December 28, 1994, the new Certificate will have the same expiration 
date as that of the surrendered Certificate.
    (c) On or after July 1, 1994, a vessel that is subject to either 
part 131 or 132, or both, of this chapter but that is not subject to 
part 130 of this chapter because the vessel is 300 gross tons or less 
is not required to comply with part 131 or 132 of this chapter, unless 
that vessel is subject to this part under Sec. 138.12(a)(1).


Sec. 138.20  Definitions.

    (a) As used in this part (including the appendices to this part), 
the following terms have the same meaning as set forth in--
    (1) Section 1001 of the Oil Pollution Act of 1990 (33 U.S.C. 2701), 
respecting the financial responsibility referred to in 
Sec. 138.10(b)(1): claimant, damages, discharge, exclusive economic 
zone, navigable waters, mobile offshore drilling unit, natural 
resources, offshore facility, oil, person, remove, removal, removal 
costs, and United States; and
    (2) Section 101 of the Comprehensive Environmental Response, 
Compensation, and Liability Act (42 U.S.C. 9601), respecting the 
financial responsibility referred to in Sec. 138.10(b)(2): claimant, 
damages, environment, hazardous substance, navigable waters, natural 
resources, person, release, remove, removal, and United States.
    (b) As used in this part (including the appendices to this part)--
    Acts means OPA 90 and CERCLA.
    Applicant means an operator who has applied for a Certificate or 
for the renewal of a Certificate under this part.
    Application means ``Application for Vessel Certificate of Financial 
Responsibility (Water Pollution)'', as illustrated in Appendix A of 
this part.
    Cargo means goods or materials on board a vessel for purposes of 
transportation, whether proprietary or nonproprietary. A hazardous 
substance or oil carried solely for use aboard the carrying vessel is 
not ``cargo''.
    CERCLA means title I of the Comprehensive Environmental Response, 
Compensation, and Liability Act, as amended (42 U.S.C. 9601 et seq.).
    Certificant means an operator who has been issued a Certificate 
under this part.
    Certificate means a ``Vessel Certificate of Financial 
Responsibility (Water Pollution)'' issued under this part, unless 
otherwise indicated.
    Director, NPFC, means the head of the U.S. Coast Guard National 
Pollution Funds Center (NPFC).
    Financial responsibility means statutorily required financial 
ability to meet liability under the Acts.
    Fish tender vessel and fishing vessel have the same meaning as set 
forth in 46 U.S.C. 2101.
    Fuel means any oil or hazardous substance used or capable of being 
used to produce heat or power by burning, including power to operate 
equipment.
    Guarantor means any person who provides evidence of financial 
responsibility, under the Acts, on behalf of a vessel owner, operator, 
and demise charterer. A vessel operator who can qualify as a self-
insurer may act as both a self-insurer of vessels it operates and as a 
financial guarantor of other vessels, under Sec. 138.80(b)(4).
    Hazardous material means a liquid material or substance that is--
    (1) Flammable or combustible;
    (2) Designated a hazardous substance under section 311(b) of the 
Federal Water Pollution Control Act (33 U.S.C. 1221); or
    (3) Designated a hazardous material under section 104 of the 
Hazardous Material Transportation Act (49 App. U.S.C. 1803).
    Incident means any occurrence or series of occurrences having the 
same origin, involving one or more vessels, facilities, or any 
combination thereof, resulting in the discharge or substantial threat 
of discharge of oil into or upon the navigable waters or adjoining 
shorelines or the exclusive economic zone.
    Insurer is a type of guarantor and means one or more insurance 
companies, associations of underwriters, shipowners' protection and 
indemnity associations, or other persons, each of which must be 
acceptable to the Coast Guard.
    Master Certificate means a Certificate issued under this part to a 
person acting as vessel operator in its capacity as a builder, 
repairer, scrapper, or seller of vessels.
    Offshore supply vessel has the same meaning as set forth in 46 
U.S.C. 2101.
    OPA 90 means title I of the Oil Pollution Act of 1990 (33 U.S.C. 
2701 et seq.).
    Operator means a person who is an owner, a demise charterer, or 
other contractor, who conducts the operation of, or who is responsible 
for the operation of, a vessel. A builder, repairer, scrapper, or 
seller who is responsible, or who agrees by contract to become 
responsible, for a vessel is an operator.
    Owner means any person holding legal or equitable title to a 
vessel. In a case where a Certificate of Documentation or equivalent 
document has been issued, the owner is considered to be the person or 
persons whose name or names appear thereon as owner. For purposes of 
CERCLA only, ``owner'' does not include a person who, without 
participating in the management of a vessel, holds indicia of ownership 
primarily to protect the owner's security interest in the vessel.
    Public vessel means a vessel
    Owned or bareboat chartered by the United States, or by a State or 
political subdivision thereof, or by a foreign nation, except when the 
vessel is engaged in commerce.
    Self-elevating lift vessel means a vessel with movable legs capable 
of raising its hull above the surface of the sea and that is an 
offshore work boat (such as a work barge) that does not engage in 
drilling operations.
    Tank vessel means a vessel (other than an offshore supply vessel, a 
fishing or fish tender vessel of 750 gross or less that transfers fuel 
without charge to a fishing vessel owned by the same person, or a 
towing or pushing vessel (tug) simply because it has in its custody a 
tank barge) that is constructed or adapted to carry, or that carries, 
oil or liquid hazardous material in bulk as cargo or cargo residue, and 
that--
    (1) Is a vessel of the United States;
    (2) Operates on the navigable waters; or
    (3) Transfers oil or hazardous material in a place subject to the 
jurisdiction of the United States.
    Total Applicable Amount means the amount determined under 
Sec. 138.80(f)(3).
    Vessel means every description of watercraft or other artificial 
contrivance used, or capable of being used, as a means of 
transportation on water.


Sec. 138.30  General.

    (a) The regulations in this part set forth the procedures whereby 
an operator of a vessel subject to this part can demonstrate that it 
and the owner and demise charterer of the vessel are financially able 
to meet potential liability for costs and damages in the amounts 
established by this part. The owner, operator, and demise charterer are 
strictly, jointly, and severally liable for the costs and damages 
resulting from an incident or a release or threatened release, but 
together they need only establish and maintain an amount of financial 
responsibility equal to the single limit of liability per incident, 
release, or threatened release. Only that portion of the evidence of 
financial responsibility under this part with respect to--
    (1) OPA 90 is required to be made available by a guarantor for the 
costs and damages related to an incident where there is not also a 
release or threatened release; and
    (2) CERCLA is required to be made available by a guarantor for the 
costs and damages related to a release or threatened release where 
there is not also an incident. A guarantor (or a self-insurer for whom 
the exceptions to limitations of liability are not applicable), 
therefore, is not required to apply the entire amount of financial 
responsibility to an incident involving oil alone or a release or 
threatened release involving a hazardous substance alone.
    (b) Where a vessel is operated by its owner, or the owner is 
responsible for its operation, the owner is considered to be the 
operator and shall submit the application for a Certificate. In all 
other cases, the vessel operator shall submit the application. A time 
or voyage charterer that does not assume responsibility for the 
operation of the vessel is not considered an operator for the purposes 
of this part.
    (c) For a United States-flag vessel, the applicable gross tons or 
gross tonnage, as referred to in this part, is determined as follows:
    (1) For a documented U.S. vessel measured under both 46 U.S.C. 
Chapters 143 (Convention Measurement) and 145 (Regulatory Measurement). 
The vessel's regulatory gross tonnage is used to determine whether the 
vessel exceeds 300 gross tons where that threshold applies under the 
Acts. If the vessel's regulatory tonnage is determined under the Dual 
Measurement System in 46 CFR part 69, subpart D, the higher gross 
tonnage is the regulatory tonnage for the purposes of the 300 gross ton 
threshold. The vessel's gross tonnage as measured under the 
International Convention on Tonnage Measurement of Ships, 1969 
(``Convention''), is used to determine the vessel's required amount of 
financial responsibility, and limit of liability under section 1004(a) 
of OPA 90 and under section 107(a) of CERCLA.
    (2) For all other United States vessels. The vessel's gross tonnage 
under 46 CFR part 69 is used for determining both the 300 gross ton 
threshold, the required amount of financial responsibility, and limit 
of liability under section 1004(a) of OPA 90 and under section 107(a) 
of CERCLA. If the vessel is measured under the Dual Measurement System, 
the higher gross tonnage is used in all determinations.
    (d) For a vessel of a foreign country that is a party to the 
Convention, gross tonnage, as referred to in this part, is determined 
as follows:
    (1) For a vessel assigned, or presently required to be assigned, 
gross tonnage under Annex I of the Convention. The vessel's gross 
tonnage as measured under Annex I of the Convention is used for 
determining the 300 gross ton threshold, if applicable, the required 
amount of financial responsibility, and limit of liability under 
section 1004(a) of OPA 90 and under section 107(a) of CERCLA.
    (2) For a vessel not presently required to be assigned gross 
tonnage under Annex I of the Convention. The highest gross tonnage that 
appears on the vessel's certificate of documentation or equivalent 
document and that is acceptable to the Coast Guard under 46 U.S.C. 
chapter 143 is used for determining the 300 gross ton threshold, if 
applicable, the required amount of financial responsibility, and limit 
of liability under section 1004(a) of OPA 90 and under section 107(a) 
of CERCLA. If the vessel has no document or the gross tonnage appearing 
on the document is not acceptable under 46 U.S.C. chapter 143, the 
vessel's gross tonnage is determined by applying the Convention 
Measurement System under 46 CFR part 69, subpart B, or if applicable, 
the Simplified Measurement System under 46 CFR part 69, subpart E. The 
measurement standards applied are subject to applicable international 
agreements to which the United States Government is a party.
    (e) For a vessel of a foreign country that is not a party to the 
Convention, gross tonnage, as referred to in this part, is determined 
as follows:
    (1) For a vessel measured under laws and regulations found by the 
Commandant to be similar to Annex I of the Convention. The vessel's 
gross tonnage under the similar laws and regulations is used for 
determining the 300 gross ton threshold, if applicable, the required 
amount of financial responsibility, and limit of liability under 
section 1004(a) of OPA 90 and under section 107(a) of CERCLA. The 
measurement standards applied are subject to applicable international 
agreements to which the United States Government is a party.
    (2) For a vessel not measured under laws and regulations found by 
the Commandant to be similar to Annex I of the Convention. The vessel's 
gross tonnage under 46 CFR part 69, subpart B, or, if applicable, 
subpart E, is used for determining the 300 gross ton threshold, if 
applicable, the required amount of financial responsibility, and limit 
of liability under section 1004(a) of OPA 90 and under section 107(a) 
of CERCLA. The measurement standards applied are subject to applicable 
international agreements to which the United States is a party.
    (f) A person who agrees to act as a guarantor or a self-insurer is 
bound by the vessel's gross tonnage as determined under paragraphs (c), 
(d), or (e) of this section, regardless of what gross tonnage is 
specified in an application or guaranty form illustrated in the 
appendices to this part. Guarantors, however, may limit their liability 
under a guaranty of financial responsibility to the applicable gross 
tonnage appearing on a vessel's International Tonnage Certificate or 
other official, applicable certificate of measurement and shall not 
incur any greater liability with respect to that guaranty, except when 
the guarantors knew or should have known that the applicable tonnage 
certificate was incorrect.


Sec. 138.40  Where to apply for and obtain forms.

    (a) An operator shall file an application for a Certificate and a 
renewal of a Certificate together with fees and evidence of financial 
responsibility, with the Coast Guard National Pollution Funds Center at 
the following address: U.S. Coast Guard, National Pollution Funds 
Center (cv), 4200 Wilson Boulevard, Suite 1000, Arlington, VA 22203-
1804, telephone (703) 235-4813, Telex 248324 (Answerback CGNPFC UR), 
Telefax (703) 235-4835.
    (b) Forms may be obtained at the address in paragraph (a) of this 
section, and all requests for assistance, including telephone 
inquiries, in completing applications should be directed to the U.S. 
Coast Guard at that same address.


Sec. 138.50  Time to apply.

    (a) A vessel operator who wishes to obtain a Certificate shall file 
a completed application form, evidence of financial responsibility and 
appropriate fees at least 21 days prior to the date the Certificate is 
required. The Director, NPFC, may waive this 21-day requirement.
    (b) The Director, NPFC, generally processes applications in the 
order in which they are received at the National Pollution Funds 
Center.


Sec. 138.60  Applications, general instructions.

    (a) The application for a Certificate (Form CG-5585) is illustrated 
in Appendix A of this part. An application and all supporting documents 
must be in English. All monetary terms must be expressed in United 
States dollars.
    (b) An authorized official of the applicant shall sign the 
application. The title of the signer must be shown in the space 
provided on the application.
    (c) The application must be accompanied by a written statement 
providing authority to sign, where the signer is not disclosed as an 
individual (sole proprietor) applicant, a partner in a partnership 
applicant, or a director, chief executive officer, or any other duly 
authorized officer of a corporate applicant.
    (d) If, before the issuance of a Certificate, the applicant becomes 
aware of a change in any of the facts contained in the application or 
supporting documentation, the applicant shall, within five business 
days of becoming aware of the change, notify the Director, NPFC, in 
writing, of the change.


Sec. 138.65  Issuance and carriage of Certificates.

    Upon the satisfactory demonstration of financial responsibility and 
payment of fees, the Director, NPFC, issues a Vessel Certificate of 
Financial Responsibility (Water Pollution), the original of which 
(except as provided in Secs. 138.90 (a) and (b) and 138.110(f)) is to 
be carried aboard the vessel covered by the Certificate. The carriage 
of a valid Certificate or authorized copy indicates compliance with 
these regulations. Failure to carry a valid Certificate or authorized 
copy subjects the vessel to enforcement action, except where a 
Certificate is removed temporarily from a vessel for inspection by a 
United States Government official.


Sec. 138.70  Renewal of Certificates.

    (a) An operator shall file a written application for the renewal of 
a Certificate at least 21 days, but not earlier than 90 days, before 
the expiration date of the Certificate. Except as provided in paragraph 
(c) of this section, a letter may be used for this purpose. The 
Director, NPFC, may waive this 21-day requirement.
    (b) The applicant shall identify in the renewal application any 
changes which have occurred since the original application for a 
Certificate was filed, and set forth the correct information in full.
    (c) An applicant that applies for the first time for a Certificate 
issued under this part to replace a Certificate issued under part 130 
of this chapter shall submit an application form illustrated in 
Appendix A of this part. An applicant is not required to pay an 
application fee under Sec. 138.130(c) for this first-time application.


Sec. 138.80  Financial responsibility, how established.

    (a) General. In addition to submitting an application and fees, an 
applicant shall submit, or cause to be submitted, evidence of financial 
responsibility in an amount determined under Sec. 138.80(f). A 
guarantor may submit directly to the Director, NPFC, the evidence of 
financial responsibility.
    (b) Methods. An applicant shall establish evidence of financial 
responsibility by one or more of the following methods:
    (1) Insurance. By filing with the Director, NPFC, an insurance 
guaranty form CG-5586, illustrated in Appendix B of this part (or, when 
applying for a Master Certificate, a master insurance guaranty form CG-
5586-1, illustrated in Appendix C of this part), executed by not more 
than four insurers that have been found acceptable by and remain 
acceptable to the Director, NPFC, for purposes of this part.
    (2) Surety bond. By filing with the Director, NPFC, a surety bond 
guaranty form CG-5586-2, illustrated in Appendix D of this part, 
executed by not more than four acceptable surety companies certified by 
the United States Department of the Treasury with respect to the 
issuance of Federal bonds in the maximum penal sum of each bond to be 
issued under this part.
    (3) Self-insurance. By filing the financial statements specified in 
paragraph (b)(3)(i) of this section for the applicant's last fiscal 
year preceding the date of application and by demonstrating that the 
applicant maintains, in the United States, working capital and net 
worth each in amounts equal to or greater than the total applicable 
amount calculated in accordance with Sec. 138.80(f), based on a vessel 
carrying hazardous substances as cargo. As used in this paragraph, 
working capital means the amount of current assets located in the 
United States, less all current liabilities anywhere in the world; and 
net worth means the amount of all assets located in the United States, 
less all liabilities anywhere in the world. After the initial 
submission, for each of the applicant's fiscal years, the applicant or 
certificant shall submit statements as follows:
    (i) Initial and annual submissions. An applicant or certificant 
shall submit annual, current, and audited non-consolidated financial 
statements with the associated notes, certified by an independent 
Certified Public Accountant. These financial statements must be 
accompanied by an additional statement from the Treasurer (or 
equivalent official) of the applicant or certificant certifying both 
the amount of current assets and the amount of total assets included in 
the accompanying balance sheet, which are located in the United States. 
If the financial statements cannot be submitted in non-consolidated 
form, a consolidated statement may be submitted if accompanied by an 
additional statement prepared by the same Certified Public Accountant, 
certifying to the amount by which the applicant's or certificant's--
    (A) Total assets, located in the United States, exceed its total 
(i.e., worldwide) liabilities; and
    (B) Current assets, located in the United States, exceed its total 
(i.e., worldwide) current liabilities. This additional statement must 
specifically name the applicant or certificant, indicate that the 
amounts so certified relate only to the applicant or certificant, apart 
from any other affiliated entity, and identify the consolidated 
financial statement to which it applies.
    (ii) Semiannual submissions. When the applicant's or certificant's 
demonstrated net worth is not at least ten times the total applicable 
amount of financial responsibility, the applicant's or certificant's 
Treasurer (or equivalent official) shall file affidavits covering the 
first six months of the applicant's or certificant's fiscal year. The 
affidavits must state that neither the working capital nor the net 
worth have, during the first six months of the current fiscal year, 
fallen below the applicant's or certificant's required amount of 
financial responsibility as determined in accordance with this part.
    (iii) Additional submissions. An applicant or certificant--
    (A) Shall, upon request of the Director, NPFC, submit additional 
financial information; and
    (B) Who establishes financial responsibility under paragraph (b)(3) 
of this section shall notify the Director, NPFC, within five business 
days of the date the applicant or certificant knows, or has reason to 
believe, that the working capital or net worth has fallen below the 
amounts required by this part.
    (iv) Time for submissions. All required annual financial statements 
must be received by the Director, NPFC, within 90 days after the close 
of the applicant's or certificant's fiscal year, and all affidavits 
required by paragraph (b)(3)(ii) of this section within 30 days after 
the close of the applicable six-month period. Upon written request, the 
Director, NPFC, may grant an extension of the time limits for filing 
the annual financial statements or affidavits. An applicant or 
certificant that requests an extension must set forth the reason for 
the extension and deliver the request at least 15 days before the 
statements or affidavits are due. The Director, NPFC, will not consider 
a request for an extension of more than 60 days.
    (v) Failure to submit. The Director, NPFC, may revoke a certificate 
for failure of the certificant to submit any statement, data, 
notification, or affidavit required by paragraph (b)(3) of this 
section.
    (vi) Waiver of working capital. The Director, NPFC, may waive the 
working capital requirement for any applicant or certificant that--
    (A) Is a regulated public utility, a municipal or higher-level 
governmental entity, or an entity operating solely as a charitable, 
non-profit making organization qualifying under section 501(c) Internal 
Revenue Code. The applicant or certificant must demonstrate in writing 
that the grant of a waiver would benefit a local public interest; or
    (B) Demonstrates in writing that working capital is not a 
significant factor in the applicant's or certificant's financial 
condition. An applicant's or certificant's net worth in relation to the 
amount of its required amount of financial responsibility and a history 
of stable operations are the major elements considered by the Director, 
NPFC.
    (4) Financial Guaranty. By filing with the Director, NPFC, a 
Financial Guaranty Form CG-5586-3, illustrated in Appendix E of this 
part (when applying for a Master Certificate, a Master Financial 
Guaranty Form CG-5586-4, illustrated in Appendix F of this part), 
executed by not more than four financial guarantors, such as a parent 
or affiliate acceptable to the Coast Guard. A financial guarantor shall 
comply with all of the self-insurance provisions of paragraph (b)(3) of 
this section. In addition, a person that is a financial guarantor for 
more than one applicant or certificant shall have working capital and 
net worth no less than the aggregate total applicable amounts of 
financial responsibility provided as a guarantor for each applicant or 
certificant, plus the amount required to be demonstrated by a self-
insurer under this part, if also acting as a self-insurer.
    (5) Other evidence of financial responsibility. The Director, NPFC, 
will not accept a self-insurance method other than the one described in 
paragraph (b)(3) of this section. An applicant may in writing request 
the Director, NPFC, to accept a method different from one described in 
paragraph (b) (1), (2), or (4) of this section to demonstrate evidence 
of financial responsibility. An applicant submitting a request under 
this paragraph shall submit the request to the Director, NPFC, at least 
45 days prior to the date the Certificate is required. The applicant 
shall describe in detail the method proposed, the reasons why the 
applicant does not wish to use or is unable to use one of the methods 
described in paragraph (b) (1), (2), or (4) of this section, and how 
the proposed method assures that the applicant is able to fulfill its 
obligation to pay costs and damages in the event of an incident or a 
release or threatened release. The Director, NPFC, will not accept a 
method under this paragraph that merely deletes or alters a provision 
of one of the methods described in paragraph (b) (1), (2), or (4) of 
this section (for example, one that alters the termination clause of 
the insurance guaranty form illustrated in Appendix B of this part). An 
applicant that makes a request under this paragraph shall provide the 
Director, NPFC, a proposed guaranty form that includes all the elements 
described in paragraphs (c) and (d) of this section. A decision of the 
Director, NPFC, not to accept a method requested by an applicant under 
this paragraph is final agency action.
    (c) Forms--(1) Multiple guarantors. Four or fewer insurers (a lead 
underwriter is considered to be one insurer) may jointly execute an 
insurance guaranty form. Four or fewer sureties (including lead 
sureties) may jointly execute a surety bond guaranty form. Four or 
fewer financial guarantors may jointly execute a financial guaranty 
form. If more than one insurer, surety, or financial guarantor executes 
the relevant form--
    (i) Each is bound for the payment of sums only in accordance with 
the percentage of vertical participation specified on the relevant form 
for that insurer, surety, or financial guarantor. Participation in the 
form of layering (tiers, one in excess of another) is not acceptable; 
only vertical participation on a percentage basis is acceptable unless 
none of the participants specifies a percent of participation. If no 
percentage of participation is specified for an insurer, surety, or 
financial guarantor, the liability of that insurer, surety, or 
financial guarantor is joint and several for the total of the 
unspecified portions; and
    (ii) The guarantors must designate a lead guarantor having 
authority to bind all guarantors for actions required of guarantors 
under the Acts, including but not limited to receipt of designation of 
source, advertisement of a designation, and receipt and settlement of 
claims.
    (2) Operator name. An applicant shall ensure that each form 
submitted under this part sets forth in full the correct legal name of 
the vessel operator to whom a certificate is to be issued.
    (d) Direct Action. (1) Acknowledgment. Any evidence of financial 
responsibility submitted under this part must contain an acknowledgment 
by the insurer or other guarantor that an action in court by a claimant 
(including a claimant by right of subrogation) for costs and damage 
claims arising under the provisions of the Acts, may be brought 
directly against the insurer or other guarantor. The evidence of 
financial responsibility must also provide that, in the event an action 
is brought under the Acts directly against the insurer or other 
guarantor, the insurer or other guarantor may invoke only the following 
rights and defenses:
    (i) The incident, release, or threatened release was caused by the 
willful misconduct of the person for whom the guaranty is provided.
    (ii) Any defense that the person for whom the guaranty is provided 
may raise under the Acts.
    (iii) A defense relating to the amount of a claim or claims, filed 
in any action in any court or other proceeding, that exceeds the amount 
of the guaranty with respect to an incident or with respect to a 
release or threatened release.
    (iv) A defense relating to the amount of a claim or claims that 
exceeds the amount of the guaranty, which amount is based on the gross 
tonnage of the vessel as entered on the vessel's International Tonnage 
Certificate or other official, applicable certificate of measurement, 
except when the guarantor knew or should have known that the applicable 
tonnage certificate was incorrect.
    (v) The claim is not one made under either of the Acts.
    (2) Limitation on guarantor liability. A guarantor that 
participates in any evidence of financial responsibility under this 
part shall be liable because of that participation, with respect to an 
incident or a release or threatened release, in any proceeding only for 
the amount and type of costs and damages specified in the evidence of 
financial responsibility. A guarantor shall not be considered to have 
consented to direct action under any law other than the Acts, or to 
unlimited liability under any law or in any venue, solely because of 
the guarantor's participation in providing any evidence of financial 
responsibility under this part. In the event of any finding that 
liability of a guarantor exceeds the amount of the guaranty provided 
under this part, that guaranty is considered null and void with respect 
to that excess.
    (e) Public access to data. Financial data filed by an applicant, 
certificant, and any other person is considered public information to 
the extent required by the Freedom of Information Act (5 U.S.C. 552) 
and permitted by the Privacy Act (5 U.S.C. 552a).
    (f) Total applicable amount. (1) The applicable amount under OPA 90 
is determined as follows:
    (i) For a tank vessel--
    (A) Over 300 gross tons (and a vessel of 300 gross tons or less 
using the waters of the United States Exclusive Economic Zone to 
transship or lighter oil destined for a place subject to the 
jurisdiction of the United States, as specified in Sec. 138.12(a)(1)) 
but not exceeding 3,000 gross tons, the greater of $2,000,000 or $1,200 
per gross ton; and
    (B) Over 3,000 gross tons, the greater of $10,000,000 or $1,200 per 
gross ton.
    (ii) For a vessel other than a tank vessel, over 300 gross tons, 
the greater of $500,000 or $600 per gross ton.
    (2) The applicable amount under CERCLA is determined as follows:
    (i) For a vessel over 300 gross tons carrying a hazardous substance 
as cargo, the greater of $5,000,000 or $300 per gross ton.
    (ii) For any other vessel over 300 gross tons, the greater of 
$500,000 or $300 per gross ton.
    (3) The total applicable amount is the maximum applicable amount 
calculated under paragraph (f)(1) of this section plus maximum 
applicable amount calculated under paragraph (f)(2) of this section.


Sec. 138.90  Individual and Fleet Certificates.

    (a) The Director, NPFC, issues an individual Certificate for each 
vessel listed on a completed application when the Director, NPFC, 
determines that acceptable evidence of financial responsibility has 
been provided and appropriate fees have been paid, except where a Fleet 
Certificate is issued under this section or where a Master Certificate 
is issued under Sec. 138.110. Each Certificate of any type issued under 
this part is issued only in the name of a vessel operator and is 
effective for not more than three years from the date of issue, as 
indicated on each Certificate. An authorized official of the applicant 
may submit to the Director, NPFC, a letter requesting that additional 
vessels be added to a previously submitted application for an 
individual Certificate. The letter must set forth all information 
required in item 5 of the application form. The authorized official 
shall also submit or cause to be submitted acceptable evidence of 
financial responsibility, if required, and certification fees for these 
additional vessels. The certificant shall carry the original individual 
Certificate on the vessel named on the Certificate, except that a 
legible copy (certified as accurate by a notary public or other person 
authorized to take oaths in the United States) may be carried instead 
of the original if the vessel is an unmanned barge and does not have a 
document carrying device which the vessel operator believes would offer 
suitable protection for the original Certificate. If a notarized copy 
of an individual Certificate is carried aboard a barge, the Certificate 
shall retain the original in the United States and shall make it 
readily available for inspection by United States Government officials.
    (b) An operator of two or more barges that are not tank vessels and 
that from time to time may be subject to this part (e.g., a hopper 
barge over 300 gross tons when carrying oily metal shavings or similar 
cargo), so long as the operator of such a fleet is a self-insurer or 
arranges with an acceptable guarantor to cover, automatically, all such 
barges for which the operator may from time to time be responsible, may 
apply to the Director, NPFC, for issuance of a Fleet Certificate. A 
legible copy of the Fleet Certificate, certified as accurate by a 
notary public or other person authorized to take oaths in the United 
States, must be carried on each barge when subject to this part. In 
addition, the certificant shall retain in the United States the 
original Fleet Certificate and shall make it readily available for 
inspection by United States Government officials. The original Fleet 
Certificate, when invalid, must be completed on the reverse side and 
returned immediately to the Director, NPFC, and all copies must be 
destroyed. When the certificant ceases to be responsible for a barge 
covered by a Fleet Certificate, the certificant shall immediately 
destroy the copy of the Fleet Certificate carried aboard that barge.
    (c) A person shall not make any alteration on any Certificate 
issued under this part or copy of that Certificate, except the 
notarized certifications permitted in Sec. 138.110(f) and paragraphs 
(a) and (b) of this section. A Certificate or copy containing any 
alteration is void.
    (d) If, at any time after a Certificate has been issued, a 
certificant becomes aware of a change in any of the facts contained in 
the application or supporting documentation, the certificant shall 
notify the Director, NPFC, in writing within 10 days of becoming aware 
of the change. A vessel or operator name change or change of a 
guarantor shall be reported as soon as possible by telefax or other 
electronic means to the Director, NPFC, and followed by a written 
notice sent within three business days.
    (e) Except as provided in Sec. 138.90(f), at the moment a 
certificant ceases to be the operator of a vessel for any reason, 
including a vessel that is scrapped or transferred to a new operator, 
the individual Certificate naming the vessel, and any copies of the 
Certificate, are void and their further use is prohibited. In that 
case, the certificant shall, within 10 days of the Certificate becoming 
void, complete the reverse side of the original individual Certificate 
naming the involved vessel and return the Certificate to the Director, 
NPFC. If the Certificate cannot be returned because it has been lost or 
destroyed, the certificant shall, within three business days, submit 
the following information in writing to the Director, NPFC:
    (1) The number of the individual Certificate and the name of the 
vessel.
    (2) The date and reason why the certificant ceased to be the 
operator of the vessel.
    (3) The location of the vessel on the date the certificant ceased 
to be the operator.
    (4) The name and mailing address of the person to whom the vessel 
was sold or transferred.
    (f) In the event of the temporary transfer of custody of an 
unmanned barge certificated under this part, where the certificant 
transferring the barge continues to be liable under the Acts and 
continues to maintain on file with the Director, NPFC, acceptable 
evidence of financial responsibility with respect to the barge, the 
existing individual Certificate remains in effect. A temporary new 
individual Certificate is not required. A transferee is encouraged to 
require the transferring certificant to acknowledge in writing that the 
transferring certificant agrees to remain responsible for pollution 
liabilities.


Sec. 138.100  Non-owning operator's responsibility for identification.

    (a) Each operator that is not an owner of a vessel certificated 
under this part, other than an unmanned barge, shall ensure that the 
original or a legible copy of the demise charter-party (or other 
written document on the owner's letterhead, signed by the vessel owner, 
which specifically identifies the vessel operator named on the 
Certificate) is maintained on board the vessel.
    (b) The demise charter-party or other document required by 
paragraph (a) of this section must be presented, upon request, for 
examination to a United States Government official.


Sec. 138.110  Master Certificates.

    (a) A contractor or other person who is responsible for a vessel in 
the capacity of a builder, a scrapper, or seller (including a repairer 
who agrees to be responsible for a vessel under its custody) may apply 
for a Master Certificate instead of applying for an individual 
Certificate for each vessel. A Master Certificate covers all of the 
vessels subject to this part held by the applicant solely for purposes 
of construction, repair, scrapping, or sale. A vessel which is being 
operated commercially in any business venture, including the business 
of building, repairing, scrapping, or selling (e.g., a slop barge used 
by a shipyard) cannot be covered by a Master Certificate. Any vessel 
for which a Certificate is required, but which is not eligible for a 
Master Certificate, must be covered by either an individual Certificate 
or a Fleet Certificate.
    (b) An applicant for a Master Certificate shall submit an 
application form in the manner prescribed by Sec. 138.60. An applicant 
shall establish evidence of financial responsibility in accordance with 
Sec. 138.80, by submission, for example, of an acceptable Master 
Insurance Guaranty Form, Surety Bond Guaranty Form, Master Financial 
Guaranty Form, or acceptable self-insurance documentation. An 
application must be completed in full, except for Item 5. The applicant 
shall make the following statement in Item 5: ``This is an application 
for a Master Certificate. The largest tank vessel to be covered by this 
application is [insert applicable gross tons] gross tons. The largest 
vessel other than a tank vessel is [insert applicable gross tons] gross 
tons.'' The dollar amount of financial responsibility evidenced by the 
applicant must be sufficient to meet the amount required under this 
part.
    (c) Each Master Certificate issued by the Director, NPFC, 
indicates--
    (1) The name of the applicant (i.e., the builder, repairer, 
scrapper, or seller);
    (2) The date of issuance and termination, encompassing a period of 
not more than three years; and
    (3) The gross tons of the largest tank vessel and gross tons of the 
largest vessel other than a tank vessel eligible for coverage by that 
Master Certificate. The Master Certificate does not identify the name 
of each vessel covered by the Certificate.
    (d) Each additional vessel which does not exceed the respective 
tonnages indicated on the Master Certificate and which is eligible for 
coverage by a Master Certificate is automatically covered by that 
Master Certificate. Before acquiring a vessel, by any means, including 
conversion of an existing vessel, that would have the effect of 
increasing the certificant's required amount of financial 
responsibility (above that provided for issuance of the existing Master 
Certificate), the certificant shall submit to the Director, NPFC, the 
following:
    (1) Evidence of increased financial responsibility.
    (2) A new certification fee.
    (3) Either a new application or a letter amending the existing 
application to reflect the new gross tonnage which is to be indicated 
on a new Master Certificate.
    (e) A person to whom a Master Certificate has been issued shall 
submit to the Director, NPFC, every six months beginning the month 
after the month in which the Master Certificate is issued, a report 
indicating the name, previous name, type, and gross tonnage of each 
vessel covered by the Master Certificate during the preceding six-month 
reporting period and indicating which vessels, if any, are tank 
vessels.
    (f) The certificant shall ensure that a legible copy of the Master 
Certificate (certified as accurate by a notary public or other person 
authorized to take oaths in the United States) is carried aboard each 
vessel covered by the Master Certificate. The certificant shall retain 
the original Master Certificate at a location in the United States and 
shall make it readily available for inspection by United States 
Government officials.
    (g) Upon revocation or other invalidation of the Master 
Certificate, the certificant shall return the original Certificate 
within 10 days to the Director, NPFC. The certificant shall ensure that 
all copies of the Certificate are destroyed.


Sec. 138.120  Certificates, denial or revocation.

    (a) The Director, NPFC, may deny a Certificate when an applicant--
    (1) Willfully or knowingly makes a false statement in connection 
with an application for an initial or renewal Certificate;
    (2) Fails to establish acceptable evidence of financial 
responsibility as required by this part;
    (3) Fails to pay the required application or certificate fees;
    (4) Fails to comply with or respond to lawful inquiries, 
regulations, or orders of the Coast Guard pertaining to the activities 
subject to this part; or
    (5) Fails to timely file required statements, data, notifications, 
or affidavits.
    (b) The Director, NPFC, may revoke a Certificate when a 
certificant--
    (1) Willfully or knowingly makes a false statement in connection 
with an application for an initial or a renewal Certificate, or in 
connection with any other filing required by this part;
    (2) Fails to comply with or respond to lawful inquiries, 
regulations, or orders of the Coast Guard pertaining to the activities 
subject to this part; or
    (3) Fails to timely file required statements, data, notifications, 
or affidavits.
    (c) A Certificate is immediately invalid, and considered revoked, 
without prior notice, when the certificant--
    (1) Fails to maintain acceptable evidence of financial 
responsibility as required by this part;
    (2) Is no longer the responsible operator of the vessel in 
question; or
    (3) Alters any Certificate or copy of a Certificate except as 
permitted by this part in connection with notarized certifications of 
copies.
    (d) The Director, NPFC, advises the applicant or certificant, in 
writing, of the intention to deny or revoke a Certificate under 
paragraph (a) or (b) of this section and states the reason therefor. 
Written advice from the Director, NPFC, that an incomplete application 
will be considered withdrawn unless it is completed within a stated 
period, is the equivalent of a denial.
    (e) If the intended revocation under paragraph (b) of this section 
is based on failure to timely file the required financial statements, 
data, notifications, or affidavits, the revocation is effective 10 days 
after the date of the notice of intention to revoke, unless, before 
revocation, the certificant demonstrates to the satisfaction of the 
Director, NPFC, that the required documents were timely filed or have 
been filed.
    (f) If the intended denial is based on paragraph (a)(1) or (a)(4) 
of this section, or the intended revocation is based on paragraph 
(b)(1) or (b)(2) of this section, the applicant or certificant may 
request, in writing, an opportunity to present information for the 
purpose of showing that the applicant or certificant is in compliance 
with the part. The request must be received by the Director, NPFC, 
within 10 days after the date of the notification of intention to deny 
or revoke. A Certificate subject to revocation under this paragraph 
remains valid until the Director, NPFC, issues a written decision 
revoking the Certificate.
    (g) An applicant or certificant whose Certificate has been denied 
under paragraph (a) of this section or revoked under paragraph (b) or 
(c) of this section may request the Director, NPFC, to reconsider the 
denial or revocation. The certificant shall file a request for 
reconsideration, in writing, to the Director, NPFC, within 20 days of 
the date of the denial or revocation. The certificant shall state the 
reasons for reconsideration. The Director, NPFC, issues a written 
decision on the request within 30 days of receipt, except that failure 
to issue a decision within 30 days shall be deemed an affirmance of a 
denial or revocation. Until the Director, NPFC, issues this decision, a 
revoked certificate remains invalid. A decision by the Director, NPFC, 
affirming a denial or revocation, is final agency action.


Sec. 138.130  Fees.

    (a) The Director, NPFC, will not issue a Certificate until the fees 
set forth in paragraphs (c) and (d) of this section have been paid.
    (b) Fees must be paid in United States currency by check, draft, or 
postal money order made payable to the ``U.S. Coast Guard''. Cash will 
not be accepted.
    (c) Except as provided in Sec. 138.70(c), an applicant that submits 
an application for the first time under this part, shall pay an 
initial, non-refundable application fee of $150 for each type of 
application (i.e., individual Certificate(s), Fleet Certificate, and 
Master Certificate). An applicant that submits an application for an 
additional (i.e., supplemental) individual Certificate, or to replace, 
amend or renew an existing Certificate, is not required to pay a new 
application fee. However, if an applicant for any reason withdraws or 
permits the withdrawal of an application for an individual 
Certificate(s) and the applicant holds no valid individual 
Certificate(s), in order to reapply for an individual Certificate(s) 
covering the same or different vessels the applicant shall submit a new 
application form and an application fee of $150. Similarly, an 
applicant shall submit a new application form and fee to obtain a new 
Fleet or Master Certificate following invalidation of a Fleet or Master 
Certificate.
    (d) In addition to the application fee of $150, an applicant shall 
also pay a certification fee of $80 for each Certificate requested. An 
applicant shall submit the certification fee for each vessel listed in, 
or later added to, an application for an individual Certificate(s). An 
applicant shall submit the $80 certification fee to renew or to reissue 
a Certificate for any reason, including, but not limited to, a vessel 
or operator name change or a lost certificate.
    (e) A certification fee is refunded, upon receipt of a written 
request, if the application is denied or withdrawn before issuance of 
the Certificate. Overpayments of application and certification fees are 
refunded, on request, only if the refund is for $50 or more. However, 
any overpayments not refunded will be credited, for a period of three 
years from the date of receipt of the monies by the Coast Guard, for 
the applicant's possible future use or transfer to another applicant 
under this part.


Sec. 138.140  Enforcement.

    (a) Any person who fails to comply with this part with respect to 
evidence of financial responsibility under section 1016 of OPA 90 (33 
U.S.C. 2716) is subject to a civil penalty of not more than $25,000 per 
day of violation, in accordance with section 4303(a) of OPA 90 (33 
U.S.C. 2716a(a)). In addition, under section 4303(b) of that Act (33 
U.S.C. 2716a(b)), the Attorney General may secure such relief as may be 
necessary to compel compliance with this part including termination of 
operations. Further, any person who fails to comply with this part with 
respect to evidence of financial responsibility under section 108(a)(1) 
of CERCLA (42 U.S.C. 9608(a)(1)) is subject to a Class I administrative 
civil penalty of not more than $25,000 per violation and a Class II 
administrative civil penalty or judicial penalty of $25,000 per day of 
violation (or $75,000 per day in the case of a second or subsequent 
violation), in accordance with section 109(a) of CERCLA (42 U.S.C. 
9609(a)).
    (b) The Secretary of the Treasury shall withhold or revoke the 
clearance required by section 4197 of the Revised Statutes (46 U.S.C. 
91) to any vessel subject to this part that does not produce evidence 
of financial responsibility required by this part.
    (c) The Coast Guard may deny entry to any port or place in the 
United States or the navigable waters of the United States, and may 
detain at a port or place in the United States in which it is located, 
any vessel subject to this part, which, upon request, does not produce 
evidence of financial responsibility required by this part.
    (d) Any vessel subject to this part which is found in the navigable 
waters without the necessary evidence of financial responsibility is 
subject to seizure by and forfeiture to the United States.
    (e) Knowingly and willfully using an invalid Certificate, or any 
copy thereof, is fraud.


Sec. 138.150  Service of process.

    (a) When executing the forms required by this part, each applicant 
and guarantor shall designate thereon a person located in the United 
States as its agent for service of process for purposes of this part 
and for receipt of notices of designations and presentations of claims 
under the Acts (collectively referred to as ``service of process''). 
Each designated agent shall acknowledge the designation in writing 
unless the agent has already furnished the Director, NPFC, with a 
``master'' (i.e., blanket) concurrence showing that it has agreed in 
advance to act as the United States agent for service of process for 
the applicant, certificant, or guarantor in question.
    (b) If any applicant, certificant, or guarantor desires, for any 
reason, to change any designated agent, the applicant, certificant, or 
guarantor shall notify the Director, NPFC, of the change and furnish 
the relevant information, including the new agent's acknowledgment in 
accordance with paragraph (a) of this section, if a ``master'' 
concurrence is not applicable. In the event of death, disability, or 
unavailability of a designated agent, the applicant, certificant, or 
guarantor shall designate another agent in accordance with paragraph 
(a) of this section within 10 days of knowledge of any such event. The 
applicant, certificant, or guarantor shall submit the new designation 
to the Director, NPFC. The Director, NPFC, may revoke a certificate if 
an applicant, certificant, or guarantor fails to designate and maintain 
an agent for service of process.
    (c) If a designated agent can not be served because of death, 
disability, unavailability, or similar event and another agent has not 
been designated under this section, then service of process on the 
Director, NPFC, will constitute valid service of process. Service of 
process on the Director, NPFC, will not be effective unless the 
server--
    (1) Sends the applicant, certificant, or guarantor (by registered 
mail, at its last known address on file with the Director, NPFC), a 
copy of each document served on the Director, NPFC; and
    (2) Attests to this registered mailing, at the time process is 
served upon the Director, NPFC, indicating that the intent of the 
mailing is to effect service of process on the applicant, certificant, 
or guarantor and that service on the designated agent is not possible, 
stating the reason why.

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    Dated: June 27, 1994.
Robert E. Kramek,
Admiral, U.S. Coast Guard Commandant.
[FR Doc. 94-16034 Filed 6-30-94; 8:45 am]
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