[Federal Register Volume 61, Number 78 (Monday, April 22, 1996)]
[Rules and Regulations]
[Pages 17814-17816]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-9653]




[[Page 17813]]


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Part V





Department of Transportation





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Coast Guard



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46 CFR Part 67



Vessel Rebuilt Determinations; Final Rule

  Federal Register / Vol. 61, No. 78 / Monday, April 22, 1996 / Rules 
and Regulations  

[[Page 17814]]



DEPARTMENT OF TRANSPORTATION

Coast Guard

46 CFR Part 67

[CGD 94-040]
RIN 2115-AE85


Vessel Rebuilt Determinations

AGENCY: Coast Guard, DOT.

ACTION: Final rule.

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SUMMARY: The Coast Guard is amending its regulation to clarify the 
standard for determining when work on a vessel performed outside of the 
U.S. constitutes a foreign rebuilding, which results in a loss of 
coastwise privileges. Clarifying this standard will help vessel owners 
and operators make better business decisions regarding work to be 
performed on their vessels. This rule adopts a notice of proposed 
rulemaking (NPRM) titled Vessel Rebuilt Determinations (CGD 94-040; 60 
FR 17290) published on April 5, 1995, as final with minor changes.

EFFECTIVE DATE: This final rule is effective on June 21, 1996.

ADDRESSES: Unless otherwise indicated, documents referred to in this 
preamble are available for inspection or copying at the office of the 
Executive Secretary, Marine Safety Council (G-LRA/3406) (CGD 94-025), 
U.S. Coast Guard Headquarters, 2100 Second Street SW., Washington, DC 
20593-0001, between 8 a.m. and 3 p.m., Monday through Friday, except 
Federal holidays. The telephone number is (202) 267-1477.

FOR FURTHER INFORMATION CONTACT: LTJG Michael Antonellis, National 
Maritime Center at (703) 235-8447.

SUPPLEMENTARY INFORMATION:

Regulatory History

    Two public meetings were held, both preceded by a notice in the 
Federal Register. The first meeting was on November 16, 1993 (58 FR 
51298), and the second on February 15, 1994 (59 FR 725). The stated 
purpose of the public meetings was to obtain public input concerning 
whether the Coast Guard should undertake rulemaking to develop clearer 
standards for vessel rebuilt determinations.
    On May 10, 1994, the Coast Guard published a policy statement in 
the Federal Register (CGD 93-063; 59 FR 24060) announcing that it was 
planning to undertake rulemaking regarding vessel rebuilt 
determinations.
    As indicated above, on April 5, 1995, the Coast Guard published the 
NPRM. In the NPRM, the Coast Guard proposed to clarify when a vessel is 
deemed to have been rebuilt outside the United States, thereby losing 
the privilege of engaging in the coastwise trade.

Background and Purpose

    When Congress enacted the Merchant Marine Act, 1920 (46 U.S.C. app. 
Sec. 883), popularly referred to as the ``Jones Act,'' it included a 
provision to provide for a protected trade. Section 27 of the Jones Act 
generally prohibited the transportation of merchandise in the coastwise 
trade except in vessels built in and documented under the laws of the 
United States and owned by citizens of the United States.
    In 1956, Congress amended Section 27 by enacting what is known as 
the ``Second Proviso.'' Under the proviso as enacted, a vessel of more 
than 500 gross tons entitled to engage in the coastwise trade which is 
later rebuilt outside the United States permanently loses the right to 
engage in the coastwise trade. Further, the proviso originally required 
the owner of a vessel of more than 500 gross tons documented in the 
United States which is rebuilt outside the United States to make a 
report of the circumstances of the rebuilding to the Secretary of 
Transportation.
    The Second Proviso was amended numerous times as discussed in the 
NPRM and now applies to all vessels engaged in coastwise trade, 
regardless of tonnage. It was implemented by the Coast Guard primarily 
by regulations at 46 CFR Sec. 67.177. The regulatory standard in 
Sec. 67.177 states that a vessel is rebuilt when ``any considerable 
part of its hull or superstructure is built upon or substantially 
altered.'' While the wording of the regulatory standard has remained 
stable over the years, the Coast Guard's administration of the standard 
has changed and is fully discussed in the NPRM.

Discussion of Comments and Changes

    The Coast Guard received three letters in response to the NPRM. Two 
letters specifically complimented the Coast Guard for its efforts in 
providing the industry with clearer standards relating to vessel 
rebuilt determinations. Generally, the three letters addressed the six 
matters discussed below.
    First: Two comments suggested that the Coast Guard provide a list 
of items, such as furnishings and fittings, that could be excluded from 
being considered as part of the hull and superstructure for purposes of 
making vessel rebuilt determinations. In the preamble to the NPRM, the 
Coast Guard identified a number of items which it has previously 
considered to be furnishings and fittings. This list, which is not 
exhaustive, may be used for guidance. The Coast Guard believes that 
providing a specific list would work to the detriment of vessel owners 
and limit the Coast Guard's flexibility to determine whether those 
items not included on the list should or should not be excluded.
    Second: One comment recommended that the numerical lower and upper 
parameters of 5 percent to 10 percent be adjusted to provide greater 
flexibility. Paragraph (b) of Sec. 67.177 of the NPRM establishes 
numerical parameters for rebuilt determinations for vessels, the hull 
and superstructure of which are constructed of steel or aluminum. The 
Coast Guard agrees that adjusting the minimum threshold to 7.5 percent 
is appropriate because that level reflects the Coast Guard's past 
determinations of the percentage of steelweight that does not 
constitute a rebuilding. However, the Coast Guard finds that raising 
the maximum threshold would not reflect past Coast Guard practices. 
Therefore, in order to adopt a standard that is consistent with past 
Coast Guard practices, the numerical lower and upper parameters in the 
final rule are set at 7.5 percent and 10 percent. The Coast Guard's 
National Maritime Center, after consultation with the Maritime 
Administration and the maritime industry, will reevaluate these minimum 
and maximum threshold levels in the future. Based on the history of 
vessel rebuild determinations, the Coast Guard may propose additional 
changes to these levels and perhaps other aspects of vessel rebuilt 
determinations. A shipowner may still apply for a preliminary rebuilt 
determination regardless of the level of work being done.
    Third: One comment favored the use of a ``surface area comparison'' 
as opposed to the ``comparability'' standard proposed for vessels built 
of materials other than steel or aluminum. The comparability approach 
provided in paragraph (c) of Sec. 67.177 of the NPRM requires that the 
applicant for a rebuilt determination calculate to the maximum extent 
practicable what the steelweight of the vessel as a whole would be if 
it were constructed of steel or aluminum. This standard has been tested 
over time and determined to work effectively.
    Fourth: One comment indicated a need for the Coast Guard to clarify 
that repairs in kind should be exempted from the standards applicable 
to vessel rebuilt determinations. The Coast Guard believes that vessels 
undergoing repairs overseas should continue to report these repairs and 
provide the necessary information to ensure that the Coast Guard can 
make an independent

[[Page 17815]]

determination that the vessel has not been rebuilt.
    Fifth: One comment requested that the term ``vessel steelweight'' 
be clarified. Vessel steelweight is the actual weight of the hull and 
superstructure without furnishings and outfit, machinery, and fluids. 
The term ``vessel steelweight'' is intended to mean the same as 
``discounted lightship weight.''
    Sixth: One comment expressed concern that if a vessel is determined 
to be rebuilt, it may also be considered a new vessel and, as a result, 
be subject to the provisions of the Oil Pollution Act of 1990 (OPA) 
(Pub. L. 101-380). A rebuilt determination will not result in a vessel 
being reclassified as a new vessel. If a vessel is subject to this 
regulation and is determined to be rebuilt outside of the U.S. pursuant 
to this rule, then that vessel will lose its coastwise privileges. 
Whether a vessel is subject to the applicability of OPA requirements is 
in no way determined by this rule. That a vessel loses its coastwise 
privileges because it has been determined to have been rebuilt outside 
of the U.S. does not mean necessarily that the vessel will be 
considered essentially a new vessel and subject to OPA requirements.
    After reviewing and considering these comments, the Coast Guard is 
adopting the NPRM as final with minor modifications. In effect, the 
term ``Commandant'' wherever it appeared in the NPRM was replaced with 
the term ``National Vessel Documentation Center'' (NVDC). The final 
rule raises the lower parameter of a rebuilt determination to from 5 
percent to 7.5 percent. The Coast Guard has undergone a significant 
reorganization and, as a result, established the NVDC in West Virginia 
to streamline the vessel documentation program. The public was informed 
of the establishment of NVDC in a Federal Register notice published on 
June 15, 1995 (60 FR 31602).

Regulatory Evaluation

    These regulations are not a significant regulatory action under 
section 3(f) of Executive Order 12866 and do not require an assessment 
of potential costs and benefits under section 6(a)(3) of that order. 
They have not been reviewed by the Office of Management and Budget 
under that order. However, they are considered significant under the 
regulatory policies and procedures of the Department of Transportation 
(DOT) (44 FR 11040; February 26, 1979) due to the interests expressed 
by a segment of the maritime industry and the Government of Canada.
    The Coast Guard expects the economic impact of these regulations to 
be so minimal that a full Regulatory Evaluation under paragraph 10e of 
the regulatory policies and procedures of DOT is unnecessary. These 
regulations merely clarify existing policies and practices followed in 
evaluating rebuilt determinations. As such, the changes are 
administrative in nature and provide better guidance to vessel owners 
planning for work to be performed on their vessels.

Small Entities

    Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), the 
Coast Guard must consider whether these regulations will have a 
significant economic impact on a substantial number of small entities. 
``Small entities'' may include: (1) small businesses and not-for-profit 
organizations that are independently owned and operated and are not 
dominant in their fields; and (2) governmental jurisdictions with 
populations of less than 50,000.
    The Coast Guard expects the economic impact of these regulations to 
be minimal because they clarify existing policy and practices. The 
changes to the existing regulations are administrative in nature and 
are designed to provide better guidance to vessel owners planning to 
perform work on their vessels. Because it expects the impact of this 
rule to be minimal, the Coast Guard certifies under 5 U.S.C. 605(b) 
that these regulations will not have a significant economic impact on a 
substantial number of small entities.

Collection of Information

    Under the Paperwork Reduction Act (44 U.S.C. 3501 et seq.), the 
Office of Management and Budget (OMB) reviews each rule that contains a 
collection-of-information requirement to determine whether the 
practical value of the information is worth the burden imposed by its 
collection. Collection-of-information requirements include reporting, 
recordkeeping, notification, and other similar requirements.
    This regulation contains collection-of-information requirements in 
46 CFR 67.177. However, these collection-of-information requirements 
are the same as those contained in the existing regulations which have 
been previously approved by OMB and assigned Control No. 2115-0110. 
This regulation adds no new or additional collection-of-information 
requirements. The regulations will reduce paperwork submissions by 
providing sufficiently clear guidance that many of the applications for 
preliminary rebuilt determinations may become unnecessary.

Federalism

    This rulemaking has been analyzed in accordance with the principles 
and criteria contained in Executive Order 12612 and it has been 
determined that this rulemaking does not have sufficient federalism 
implications to warrant the preparation of a Federalism Assessment.

Environment

    The Coast Guard considered the environmental impact of this 
rulemaking and concluded that, under paragraph 2.B.2 of Commandant 
Instruction M16475.1B, this rule is categorically excluded from further 
environmental documentation. This rule is administrative in nature and 
will have no significant effect on the environment. A ``Categorical 
Exclusion Determination'' is available in the docket for inspection or 
copying where indicated under ADDRESSES.

List of Subjects in 46 CFR Part 67

    Fees, Incorporation by reference, Vessels.

    For the reasons set out in the preamble, the Coast Guard amends 46 
CFR part 67 as follows:

PART 67--[AMENDED]

    1. The authority citation for part 67 is revised to read as 
follows:

    Authority: 14 U.S.C. 664; 31 U.S.C. 9701; 42 U.S.C. 9118; 46 
U.S.C. 2103, 2107, 2110; 46 U.S.C. app. 841a, 876; 49 CFR 1.45, 
1.46.


Sec. 67.19  [Amended]

    2. In Sec. 67.19(d)(3), remove ``67.177(a)'' and add, in its place, 
``67.177''.


Sec. 67.21  [Amended]

    3. In Sec. 67.21(c), remove ``67.177(a)'' and add, in its place, 
``67.177''.
    4. Section 67.177 is revised to read as follows:


Sec. 67.177  Application for foreign rebuilding determination.

    A vessel is deemed rebuilt foreign when any considerable part of 
its hull or superstructure is built upon or substantially altered 
outside of the United States. In determining whether a vessel is 
rebuilt foreign, the following parameters apply:
    (a) Regardless of its material of construction, a vessel is deemed 
rebuilt when a major component of the hull or superstructure not built 
in the United States is added to the vessel.
    (b) For a vessel of which the hull and superstructure is 
constructed of steel or aluminum--
    (1) A vessel is deemed rebuilt when work performed on its hull or 
superstructure constitutes more than 10

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percent of the vessel's steelweight, prior to the work, also known as 
discounted lightship weight.
    (2) A vessel may be considered rebuilt when work performed on its 
hull or superstructure constitutes more than 7.5 percent but not more 
than 10 percent of the vessel's steelweight prior to the work.
    (3) A vessel is not considered rebuilt when work performed on its 
hull or superstructure constitutes 7.5 percent or less of the vessel's 
steelweight prior to the work.
    (c) For a vessel of which the hull and superstructure is 
constructed of material other than steel or aluminum--
    (1) A vessel is deemed rebuilt when work performed on its hull or 
superstructure constitutes a quantum of work determined, to the maximum 
extent practicable, to be comparable to more than 10 percent of the 
vessel's steelweight prior to the work, calculated as if the vessel 
were wholly constructed of steel or aluminum.
    (2) A vessel may be considered rebuilt when work performed on its 
hull or superstructure constitutes a quantum of work determined, to the 
maximum extent practicable, to be comparable to more than 7.5 percent 
but not more than 10 percent of the vessel's steelweight prior to the 
work, calculated as if the vessel were wholly constructed of steel or 
aluminum.
    (3) A vessel is not considered rebuilt when work performed on its 
hull or superstructure constitutes a quantum of work determined, to the 
maximum extent practicable, to be comparable to 7.5 percent or less of 
the vessel's steelweight prior to the work, calculated as if the vessel 
were wholly constructed of steel or aluminum.
    (d) For a vessel of mixed construction, such as a vessel the hull 
of which is constructed of steel or aluminum and the superstructure of 
which is constructed of fibrous reinforced plastic, the steelweight of 
the work performed on the portion of the vessel constructed of a 
material other than steel or aluminum will be determined, to the 
maximum extent practicable, and aggregated with the work performed on 
the portion of the vessel constructed of steel or aluminum. The 
numerical parameters described in paragraph (b) of this section will 
then be applied to the aggregate of the work performed on the vessel 
compared to the vessel's steelweight prior to the work, calculated as 
if the vessel were wholly constructed of steel or aluminum, to 
determine whether the vessel has been rebuilt.
    (e) The owner of a vessel currently entitled to coastwise, Great 
Lakes, or fisheries endorsements which is altered outside the United 
States and the work performed is determined to constitute or be 
comparable to more than 7.5 percent of the vessel's steelweight prior 
to the work, or which has a major component of the hull or 
superstructure not built in the United States added, must file the 
following information with the National Vessel Documentation Center 
within 30 days following the earlier of completion of the work or 
redelivery of the vessel to the owner or owner's representative:
    (1) A written statement applying for a rebuilt determination, 
outlining in detail the work performed and naming the place(s) where 
the work was performed;
    (2) Calculations showing the actual or comparable steelweight of 
the work performed on the vessel, the actual or comparable steelweight 
of the vessel, and comparing the actual or comparable steelweight of 
the work performed to the actual or comparable steelweight of the 
vessel;
    (3) Accurate sketches or blueprints describing the work performed; 
and
    (4) Any further submissions requested by the National Vessel 
Documentation Center.
    (f) Regardless of the extent of actual work performed, the owner of 
a vessel currently entitled to coastwise, Great Lakes, or fisheries 
endorsements may, as an alternative to filing the items listed in 
paragraph (e) of this section, submit a written statement to the 
National Vessel Documentation Center declaring the vessel rebuilt 
outside the United States. The vessel will then be deemed to have been 
rebuilt outside the United States with loss of trading privileges.
    (g) A vessel owner may apply for a preliminary rebuilt 
determination by submitting:
    (1) A written statement applying for a preliminary rebuilt 
determination, outlining in detail the work planned and naming the 
place(s) where the work is to be performed;
    (2) Calculations showing the actual or comparable steelweight of 
work to be performed on the vessel, the actual or comparable 
steelweight of the vessel, and comparing the actual or comparable 
steelweight of the planned work to the actual or comparable steelweight 
of the vessel;
    (3) Accurate sketches or blueprints describing the planned work; 
and
    (4) Any further submissions requested by the National Vessel 
Documentation Center.

    Note: A statement submitted in accordance with paragraph (f) of 
this section does not constitute an application for a rebuilt 
determination and does not require payment of a fee.

    Dated: March 18, 1996.
A.E. Henn,
Vice Admiral, U.S. Coast Guard, Acting Commandant.
[FR Doc. 96-9653 Filed 4-19-96; 8:45 am]
BILLING CODE 4910-14-M