[Federal Register Volume 77, Number 154 (Thursday, August 9, 2012)]
[Rules and Regulations]
[Pages 47544-47552]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-19376]


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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

46 CFR Part 2

[Docket No. USCG-2007-27668]
RIN 1625-AB35


Approval of Classification Societies

AGENCY: Coast Guard, DHS.

ACTION: Final rule.

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SUMMARY: Federal law requires that classification societies conducting 
certain work in the United States be approved by the Coast Guard. In 
this rule, we finalize application procedures and performance standards 
that classification societies must meet in order to obtain approval by 
the Coast Guard. Through this final rule, we seek to improve marine 
safety and environmental protection by assuring the consistency and 
quality of work conducted by classification societies that review, 
examine, survey, or certify the construction, repair, or alteration of 
a vessel in the United States.

DATES: This final rule is effective September 10, 2012.
    The incorporation by reference of certain publications listed in 
the rule is approved by the Director of the Federal Register on 
September 10, 2012.

[[Page 47545]]


ADDRESSES: Comments and material received from the public, as well as 
documents mentioned in this preamble as being available in the docket, 
are part of docket USCG-2007-27668 and are available for inspection or 
copying at the Docket Management Facility (M-30), U.S. Department of 
Transportation, West Building Ground Floor, Room W12-140, 1200 New 
Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5 p.m., 
Monday through Friday, except Federal holidays. You may also find this 
docket on the Internet by going to http://www.regulations.gov, 
inserting USCG-2007-27668 in the ``Keyword'' box, and then clicking 
``Search.''

FOR FURTHER INFORMATION CONTACT: If you have questions on this rule, 
call or email LT Alfred Giordano, Office of Design and Engineering 
Standards (CG-ENG-1), Coast Guard; telephone 202-372-1362, email 
[email protected]. If you have questions on viewing the 
docket, call Renee V. Wright, Program Manager, Docket Operations, 
telephone 202-366-9826.

SUPPLEMENTARY INFORMATION:

Table of Contents for Preamble

I. Abbreviations
II. Regulatory History
III. Basis and Purpose
IV. Background
V. Discussion of Comments and Changes
    A. Comments Received After Reopening the Comment Period
    B. Changes Made to Address the 2010 Act
VI. Incorporation by Reference
VII. Regulatory Analyses
    A. Regulatory Planning and Review
    B. Small Entities
    C. Assistance for Small Entities
    D. Collection of Information
    E. Federalism
    F. Unfunded Mandates Reform Act
    G. Taking of Private Property
    H. Civil Justice Reform
    I. Protection of Children
    J. Indian Tribal Governments
    K. Energy Effects
    L. Technical Standards
    M. Environment

I. Abbreviations

ABS American Bureau of Shipping
CFR Code of Federal Regulations
DHS Department of Homeland Security
FR Federal Register
IACS International Association of Classification Societies
ICLL International Convention on Load Lines, 1966
IMO International Maritime Organization
ISO International Organization for Standardization
MARPOL 73/78 International Convention for the Prevention of 
Pollution from Ships, 1973, as modified by the Protocol of 1978 
relating thereto
MOU Memorandum of Understanding
NARA National Archives and Records Administration
NAICS North American Industry Classification System
NEPA National Environmental Policy Act of 1969
NPRM Notice of Proposed Rulemaking
NTTAA National Technology Transfer and Advancement Act
OMB Office of Management and Budget
RO Recognized Organization
SBA Small Business Administration
SOLAS International Convention for the Safety of Life at Sea, 1974, 
as amended
U.S.C. United States Code

II. Regulatory History

    We published a notice of policy and a request for comments that 
outlined the procedures by which classification societies could apply 
for approval with the Coast Guard. See 69 FR 63548 (November 2, 2004). 
This notice of policy was based on the August 9, 2004 enactment of 
Section 413 of the Coast Guard and Maritime Transportation Act of 2004 
(``the 2004 Act'') (Pub. L. 108-293). The 2004 Act amended 46 U.S.C. 
3316 by adding paragraph (c), which prohibits certain activities on a 
vessel in the United States by classification societies that have not 
been approved by the Coast Guard. The 2004 Act mandated that, after 
December 31, 2004, a classification society, including an employee or 
agent of that society, may not review, examine, survey, or certify the 
construction, repair, or alteration of a vessel in the United States 
unless the classification society is either approved by the Coast Guard 
or is a full member of the International Association of Classification 
Societies (IACS).
    After publication of the notice of policy, we received two 
questions from the public that were addressed in a Notice of Proposed 
Rulemaking (NPRM) published in the Federal Register on April 23, 2010. 
The NPRM, entitled ``Approval of Classification Societies'' (75 FR 
21212), outlined the procedures and criteria we would use to evaluate 
classification societies. The comment period closed on July 22, 2010, 
and we received no comments on the proposed rule. No public meeting was 
requested and none was held.
    On October 15, 2010, the enactment of section 622 of the Coast 
Guard Authorization Act of 2010 (the ``2010 Act'') (Pub. L. 111-281) 
amended 46 U.S.C. 3316(c). The 2010 Act changed the provision's 
applicability to require all classification societies, including IACS 
members, to be approved by the Coast Guard prior to conducting any work 
on a vessel in the United States. Because of the 2010 Act's 
applicability changes, we reopened the comment period to allow for any 
additional or updated comments from the public on our plan to remove 
the proposed rule's exemption for IACS members, and apply the proposed 
rule to all classification societies seeking Coast Guard approval, 
including IACS members. See 76 FR 47531 (August 5, 2011). The comment 
period closed on September 6, 2011, and 4 commenters with 11 comments 
responded to the revised proposal. No public meeting was requested and 
none was held.

III. Basis and Purpose

    This final rule codifies into Title 46 of the Code of Federal 
Regulations (CFR) the procedures and criteria to evaluate 
classification societies in accordance with 46 U.S.C. 3316(c) in order 
to have a specific, consistent, and enforceable basis for approval 
determinations.

IV. Background

    To incorporate the requirements of 46 U.S.C. 3316(c) into 
regulations, we deem the International Maritime Organization (IMO) 
Resolution A.739(18), ``Guidelines for the Authorization of 
Organizations Acting on Behalf of the Administration,'' to provide a 
sound and internationally recognized standard on which to base our 
classification society review and approval program.
    The IMO acknowledges that a classification society often acts as a 
Recognized Organization (RO) under authority delegated by a flag state 
administration when it performs technical and survey work on behalf of 
that administration. Recognizing this relationship, IMO Resolution 
A.739(18) adopted guidelines for minimum competency standards for ROs 
that act on behalf of flag state administrations to conduct vessel 
examinations, issue international certificates, perform surveys and 
certifications, and determine vessel tonnage in accordance with 
applicable international requirements. In addition, the IMO guidelines 
are consistent with our minimum standards for a classification society 
to qualify as a Coast Guard-recognized organization in accordance with 
46 CFR part 8, ``Vessel Inspection Alternatives.''
    To perform work on behalf of a flag state administration that uses 
the IMO guidelines, an RO must sufficiently demonstrate that its 
business practices meet or exceed the performance standards described 
in IMO Resolution A.739(18). For example, the RO must show that it--
     Publishes and systematically maintains rules for the 
design, construction, and certification of vessels;

[[Page 47546]]

     Is professionally staffed with strategically placed 
resources for geographic coverage;
     Maintains a high level of professional ethics;
     Is competent;
     Provides timely and quality services; and
     Maintains an internal quality system no less effective 
than the International Organization for Standardization (ISO) 9000 
series certification. (For information on these standards or on ISO, 
see www.iso.ch.)
    When an RO demonstrates these competencies to the satisfaction of 
the flag state administration, its authorization is documented by that 
administration in a formal written agreement under the recommendations 
of IMO Resolution A.739(18).
    Similarly, all classification societies must meet the following 
requirements for approval under the provisions of 46 U.S.C. 3316(c):
     Vessels surveyed by the classification society must have 
an adequate safety record.
     The classification society must have an adequate program 
to--
    [cir] Develop and implement safety standards for the vessels it 
surveys;
    [cir] Make its safety records available in an electronic format;
    [cir] Make the safety records of a vessel survey available to other 
classification societies; and
    [cir] Request safety records from other classification societies 
that previously surveyed a vessel for the purpose of a specific vessel 
survey.
    To better assess classification societies, we evaluate how these 
societies implement safety standards for vessels by examining worldwide 
port state control statistics for each society and the vessels it 
surveys. These data normally appear in annual reports published by the 
world's regional port state control organizations. Some of these annual 
reports are not available online. These organizations include, but are 
not limited to, the following organizations created under regional 
memoranda of understanding (MOU):
     Paris Memorandum of Understanding on Port State Control 
(Paris MOU: www.parismou.org).
     Memorandum of Understanding on Port State Control in the 
Asian-Pacific Region (Tokyo MOU: www.tokyo-mou.org).
     Mediterranean Memorandum of Understanding on Port State 
Control (Med MOU: www.medmou.org).
     Black Sea Memorandum of Understanding on Port State 
Control (Black Sea MOU: www.bsmou.org).
     The Latin American Agreement on Port State Control of 
Vessels (Vina del Mar MOU: www.acuerdolatino.int.ar).
     West and Central Africa Memorandum of Understanding on 
Port State Control (Abuja MOU: www.abujamou.org).
     Riyadh Memorandum of Understanding on Port State Control 
in the Gulf Region (Riyadh MOU: www.riyadhmou.org).
     Indian Ocean Memorandum on Port State Control (Indian 
Ocean MOU: www.iomou.org).
     Caribbean Memorandum of Understanding on Port State 
Control (Caribbean MOU: www.caribbeanmou.org).
    These MOU are regional agreements among countries to share port 
state control inspection results with the aim of eliminating the 
operation of substandard ships. Typically, MOU are managed by 
secretariats that maintain databases of inspection activities and 
results and often compile the data into annual reports. The annual 
reports normally compiled by the MOU secretariats are available to the 
public and identify, among other things--
     Vessel names and particulars;
     Inspection dates and locations;
     Classification societies;
     Deficiencies noted;
     Detentions imposed;
     Detained vessels; and
     Banned and targeted vessels.
    For information on U.S. port state control results and the regional 
MOUs, see www.uscg.mil/hq/g-m/pscweb/index.htm. A copy of the most 
recent annual report from the United States and the regional 
organizations can be found in this docket.
    We can evaluate the performance of a particular classification 
society by scrutinizing the port state control history of the vessels 
it surveys. For example, an annual report from a major MOU secretariat 
typically includes 3 years of data showing the performance of all ships 
listed by administration and RO. The RO is usually a classification 
society.
    These shared port state control data are indispensable in 
evaluating the safety performance of flag state administrations and 
classification societies. Not only can we check performance from the 
data in the annual reports, we can also track trends from year to year.

V. Discussion of Comments and Changes

    We received no comments from the NPRM published on April 23, 2010. 
Since the publication of the NPRM, the 2010 Act required all 
classification societies, without exemption, to seek Coast Guard 
approval prior to working on a vessel located in the United States. 
Accordingly, we reopened the comment period (76 FR 47531).

A. Comments Received After Reopening the Comment Period

    We received 11 comments from 4 commenters in response to the NPRM 
after the reopening of the comment period.
    Two commenters requested that a classification society that has 
qualified as a Coast Guard-recognized organization under 46 CFR part 8 
to conduct work on behalf of the Coast Guard on U.S. flagged vessels be 
exempted from the proposed rule. We have determined that we lack the 
authority to grant wholesale exemptions to the requirement in 46 U.S.C. 
3316(c)(1) that every classification society ``appl[y] for approval 
under this subsection,'' and that section 3316(c)(2) requires us to 
``review[] and approve[] that society'' under that subsection.
    However, we will deem compliance with the application procedures in 
46 CFR part 8 to satisfy the new application procedures under new 46 
CFR subpart 2.45 promulgated by this rule. Consistent with the statute, 
we are requiring any Coast Guard-RO seeking approval as a 
classification society under this rule to explicitly request that the 
Coast Guard evaluate their 46 CFR part 8 application materials under 
this rule as well. Upon receiving such notice, we will treat the part 8 
application materials as an application under this subpart. If we need 
additional information to perform our review, we will take the 
appropriate action to notify the classification society and give them 
an opportunity to submit the information to us.
    One commenter requested that his or her organization be 
automatically approved under 46 U.S.C. 3316(c)(1) and under the 
proposed rule. The commenter argued that such approval was justified 
because the organization is identified in 46 U.S.C. 3316(a) by name as 
an agent on behalf of the U.S. Government in classifying vessels owned 
by the Government. Also, the organization is recognized by the Coast 
Guard and authorized as a recognized organization of the Coast Guard 
pursuant to the requirements of Coast Guard regulations in 46 CFR part 
8 pursuant to 46 U.S.C. 3316(b)(1).
    We agree with the commenter that the organization is identified as 
the sole classification society for U.S. Government-owned vessels. 
However, based on the reasoning previously stated, we cannot 
automatically approve

[[Page 47547]]

any organization as a classification society. Section 3316(c)(1) of 46 
U.S.C. requires that every classification society make application to 
the Coast Guard for approval and that the Coast Guard assess the 
conduct of the classification society under 46 U.S.C. 3316(c)(2). An 
automatic approval would violate both the application requirement and 
the assessment requirement. As stated above, however, we will deem 
compliance with the application procedures in 46 CFR part 8 to satisfy 
the new application procedures under new 46 CFR subpart 2.45, provided 
each applicant submits indication that they all wish to be assessed 
under the new regulations in 46 CFR subpart 2.45 to become an approved 
classification society.
    Additionally, the same commenter asked that we clarify in the final 
rule whether the detention rate is based on all vessel detentions or 
specifically RO-related detentions. We agree that clarification is 
necessary. An RO detention occurs when a vessel is detained due to a 
deficiency which is the result of an activity by an RO. Therefore, we 
will amend the regulatory text to specify that the detention rate is 
based specifically on RO-related detentions.
    One commenter felt that the final rule does not list clear or 
specific criteria for annually reevaluating the records of 
classification societies to ensure they continue to meet the conditions 
for approval. The same commenter also stated that if the re-evaluation 
criteria include data from global port state control regimes, then some 
previously approved classification societies would have poorer records 
than some classification societies that are not approved. The same 
commenter expressed the hope that the requirement in Sec.  2.45-15 
would not amount to annual auditing of classification societies 
performance processes.
    We agree that the proposed rule did not explicitly list the 
criteria for annually reevaluating the performance of a classification 
society. However, as stated in the NPRM (see 75 FR page 21215), we will 
``annually reevaluate the records of approved classification societies 
to ensure they continue to meet the conditions for approval.'' It was 
and remains our intention to use the approval requirements listed in 
Sec.  2.45-15 to annually reevaluate the performance of approved 
classification societies. We also agree that it is possible for us to 
find during a re-evaluation that an approved classification society has 
a poor performance record based on data collected from global port 
state control regimes. If we determine that a previously approved 
classification society no longer meets the requirements in Sec.  2.45-
15, then we will take corrective action per Sec.  2.45-20.
    While we appreciate the commenter's concern, annual review of a 
classification society's performance is necessary to ensure that the 
classification society is in compliance with the requirements set forth 
in the regulations.
    One commenter had six comments, discussed as follows.
    The commenter asked that we clarify the scope of ``repair'' in 
light of the fact that repairs to the hull, equipment, and machinery 
can be made at any time as a result of an accident or survey work. 
Repair includes, but is not limited to, any work done to the hull, 
equipment, or machinery that restores the item to its original design 
or intended operating condition.
    The commenter requested that we clarify whether a classification 
society would be allowed to conduct surveys ``whether they be 
periodical (annual, intermediate and renewal) or occasional and to 
issue certificates even if they are not approved by the Coast Guard.'' 
A classification society that is not approved by the Coast Guard would 
be permitted to conduct surveys and issue certificates to a vessel if 
that vessel is not undergoing or has not completed any construction, 
repair, or alteration in the United States.
    Next, the commenter took issue with the requirement proposed in 
Sec.  2.45-15(a)(6)(i) that a classification society must use a system 
to make its safety records available to the Coast Guard. The commenter 
believes the provision does not define or sufficiently clarify the 
scope of information to be provided as part of a vessel's safety 
records, thereby risking the disclosure of commercially sensitive and 
confidential information of ship owners to parties who should not be 
privy to that information.
    We appreciate the commenter's concern; however, to determine 
whether the vessels surveyed by a classification society have an 
adequate safety record, the classification society would be required to 
provide all records we formally request. We would request only those 
records that are necessary to adequately determine the performance of a 
classification society with respect to safety and, except as required 
by law, would not disclose those records to any parties with competing 
interests.
    The same commenter stated that Sec.  2.45-15(a)(6)(ii), which 
requires a classification society to have in place a system to provide 
its safety records to other classification societies when requested, is 
redundant because of existing procedures for sharing data. We 
appreciate the commenter's concern; however, 46 U.S.C. 
3316(c)(2)(B)(iii) mandates that the Coast Guard require classification 
societies to make their safety records available to all relevant 
parties.
    Next, the commenter was concerned with the proposed requirement in 
Sec.  2.45-15(5) that requires that a country for which a 
classification society is an RO must be a signatory to the 
International Convention for the Safety of Life at Sea, 1974, as 
amended, (SOLAS); the International Convention for the Prevention of 
Pollution from Ships, 1973, as modified by the Protocol of 1978 
relating thereto (MARPOL); and the International Convention on Load 
Lines, 1966 (ICLL). The commenter felt that this requirement may cause 
an adverse situation because a flag state would be compelled to ratify 
the aforementioned international conventions simply to have its RO meet 
the Coast Guard's requirement. We disagree that this requirement would 
create an adverse situation. By ratifying the SOLAS, MARPOL, and ICLL 
conventions, a flag state would join the majority of flag states that 
have ratified these conventions and help ensure that their vessels 
improve their safety record.
    Finally, the commenter requested we clarify whether all countries 
for which a classification society is an RO must be a signatory to each 
of the SOLAS, MARPOL, and ICLL conventions. The commenter was concerned 
because classification societies usually are ROs of many countries, 
including ones that have not ratified some of the international 
conventions. In response, we point out that the regulatory text in 
Sec.  2.45-15(a)(4) clearly states that the classification society must 
have received approval to act as an RO by at least one country that is 
a signatory to the SOLAS, MARPOL, and ICLL conventions. Therefore, at 
least one country would have to be a signatory to these conventions.

B. Changes Made To Address the 2010 Act

    In this final rule, we made changes to several sections from the 
proposed rule based on changes in applicability as required by the 
enactment of the 2010 Act, which amended 46 U.S.C. 3316(c), and to 
improve clarity and ensure accuracy of the information presented in 
this final rule.
    We amended Sec. Sec.  2.45-10(a), 2.45-15(a), and 2.45-30 by 
deleting any references to exemptions for IACS members in accordance 
with the 2010

[[Page 47548]]

Act, which requires all classification societies, without exemption, to 
seek Coast Guard approval prior to working on a vessel located in the 
United States.
    We amended Sec.  2.45-25 by adding new paragraph (c), which states 
that an application submitted to become a Coast Guard-RO under 46 CFR 
part 8, subpart B satisfies the application requirements to become an 
approved classification society as long as the RO's status has not been 
revoked, it submits a request to become an approved classification 
society, and it certifies that the application information submitted 
under 46 CFR part 8, subpart B remains valid. This change, in response 
to commenters seeking an exemption or automatic approval based on RO 
status, avoids requiring organizations to resubmit information they 
have previously provided as part of an application under 46 CFR part 8, 
subpart B. This change permits such organizations to submit a minimal 
application, as long as the Coast Guard has the necessary information 
evidenced by continuing RO status and the certification that the 
previously submitted information is still valid.
    We amended Sec.  2.45-15(a)(1) to clarify we will review the 
detention records of a classification society for vessels it surveys 
during the past 3 years.
    We also amended Sec.  2.45-15(a)(5) to clarify that the country for 
which the classification society is an RO refers to the same country 
referenced in Sec.  2.45-15(a)(4).
    We amended Sec.  2.45-15(a)(5)(ii) by rewording the language of the 
proposed text to clarify that the one country for which the class 
society meets the requirement of Sec.  2.45-15(a)(4) cannot be 
identified as a flag state targeted for additional port state control 
action by the Coast Guard.
    We also made minor changes to the regulatory text. First, the final 
rule deletes the authority citation for 46 CFR 2.45, as this section 
was removed from the CFR on September 30, 1997. See 62 FR 51195. 
Second, the final rule makes minor formatting changes to improve 
clarity, such as adding paragraph designations within some sections. 
Finally, throughout the rule we changed the Coast Guard office 
designator ``CG-521'' to CG-ENG'' to reflect a recent Coast Guard 
organizational change.

VI. Incorporation by Reference

    The Director of the Federal Register has approved the material in 
Sec.  2.45-5 for incorporation by reference under 5 U.S.C. 552 and 1 
CFR part 51. Copies of the material are available from the sources 
listed in that section.

VII. Regulatory Analyses

    We developed this rule after considering numerous statutes and 
executive orders related to rulemaking. Below we summarize our analyses 
based on 13 of these statutes or executive orders.

A. Regulatory Planning and Review

    This rule is not a significant regulatory action under section 3(f) 
of Executive Order 12866, as amended by Executive Order 13563, 
Regulatory Planning and Review, and does not require an assessment of 
potential costs and benefits under section 6(a)(3) of that Order. 
Accordingly, the Office of Management and Budget (OMB) has not reviewed 
it under that Order.
    As previously discussed in section ``V. Discussion of Comments and 
Changes,'' the applicability provision was changed to reflect an 
amendment to the legal authority made by the Coast Guard 
Reauthorization Act of 2010. In summary, the total cost for this rule 
will involve only one-time costs for applications for the initial 
approval, and we estimate the total will be $5,429. Below, we present 
the basis for our estimate of the costs for this final rule that 
accounts for this amendment and the current status of classification 
societies active in the United States.
    We previously approved six classification societies under the 
policy announced in 2004 based on the 2004 Act. Of the six, these two 
are IACS members: Indian Register of Shipping and Polish Register of 
Shipping. The other four that are not IACS members are: Bulgarian 
Register of Shipping, China Corporation Register of Shipping, Hellenic 
Register of Shipping, and International Naval Surveys Bureau. In the 
NPRM, we stated that approved classification societies would not need 
to take additional actions and would not occur any additional costs. We 
are not aware of any information, either from the comments or other 
sources, to alter that assessment. Thus, these six organizations would 
not have any cost burden associated with this rulemaking.
    We identified the remaining members of IACS as the population 
affected by the 2010 Act amendments, which changed the applicability of 
46 U.S.C. 3316(c) to include IACS members in the application and review 
procedures. Table 2 lists these classification societies and indicates 
whether they currently have RO status with the Coast Guard under 46 CFR 
part 8.

      Table 1--IACS Members Without Classification Society Approval
------------------------------------------------------------------------
          Class society                Abbreviation            RO?
------------------------------------------------------------------------
American Bureau of Shipping......  ABS.................  Yes.
Bureau Veritas...................  BV..................  Yes.
China Classification Society.....  CCS.................  No.
Croatian Register of Shipping....  CRS.................  No.
Det Norske Veritas...............  DNV.................  Yes.
Germanischer Lloyd...............  GL..................  Yes.
Korean Register of Shipping......  KRS.................  No.
Lloyd's Register of Shipping.....  LR..................  Yes.
Nippon Kaiji Kyokai..............  NK..................  Yes.
Registro Italiano Navale.........  RINA................  Yes.
Russian Maritime Register of       RS..................  No.
 Shipping.
------------------------------------------------------------------------

    As the table shows, there are seven class societies that are not 
approved but currently have RO status (ABS, BV, DNV, GL, LR, NK, and 
RINA). We assume that they will take advantage of Sec.  2.45-25(c) and 
will submit an application to become approved classification societies.
    Coast Guard subject matter experts in the Naval Architecture 
Division provided estimates of time to process one of these 
applications submitted in accordance with new Sec.  2.45-25(c). The 
classification society will require 1 hour for a junior manager to 
draft the application letter and 0.5 hour for a senior manager to 
review it. Coast Guard processing will require 2 hours for a senior 
staff member or junior manager to review the application, verify the 
data,

[[Page 47549]]

and draft the approval letter, and 0.25 hour for a senior manager to 
review it. Table 2 presents the complete calculations of the unit cost 
for this application, with the same wage rates used in the NPRM, 
``Approval of Classification Societies'' (75 FR 21212).

                   Table 2--Unit Cost of Application for Classification Society With RO Status
----------------------------------------------------------------------------------------------------------------
            Sector                  Position           Hours        Wage  rate     Position cost   Sector  cost
----------------------------------------------------------------------------------------------------------------
Industry......................  Junior Manager..            1.00             $67             $67  ..............
                                Senior Manager..            0.50              88              44  ..............
                                                 ---------------------------------------------------------------
    Industry Total............  ................            1.50  ..............  ..............            $111
                                                 ---------------------------------------------------------------
Government....................  Junior Officer..            2.00              67             134  ..............
                                Senior Officer..            0.25              88              22  ..............
                                                 ---------------------------------------------------------------
    Government Total..........  ................            2.25  ..............  ..............             156
                                                 ---------------------------------------------------------------
        Total Unit Cost.......  ................            3.75  ..............  ..............             267
----------------------------------------------------------------------------------------------------------------

    The total cost for these applications is $1,869 and Table 3 
displays the calculations.

      Table 3--Application Costs for Class Societies With RO Status
------------------------------------------------------------------------
                                                           Unit    Total
                     Sector                        Count   cost    cost
------------------------------------------------------------------------
Industry........................................       7    $111    $777
Government......................................       7     156   1,092
                                                 -----------------------
  Total.........................................       7     267   1,869
------------------------------------------------------------------------

    We anticipate that the other four classification societies that 
currently are not ROs (CCS, CRS, KRS, and RS) will also apply to become 
approved classification societies. They will need to prepare a complete 
application per the requirements of Sec.  2.45-25(b). In the NPRM, we 
estimated the total unit cost for one of these applications at $890 
($712 for industry and $178 for government). We received no additional 
information from either the comments or other sources to cause us to 
modify this estimate. The total cost for these four applications is 
$3,560, and Table 4 presents the calculations.

    Table 4--Application Costs for Class Societies Without RO Status
------------------------------------------------------------------------
                                                       Unit      Total
                   Sector                      Count   cost      cost
------------------------------------------------------------------------
Industry....................................       4    $712      $2,848
Government..................................       4     178         712
                                             ---------------------------
  Total.....................................       4     890       3,560
------------------------------------------------------------------------

    In the NPRM, we stated that based on the historical record, we 
anticipate that the approved classification societies will remain in 
good standing in the foreseeable future. We received no contrary 
information since then. With that assumption, we anticipate that there 
will be no costs associated with suspensions or reapprovals. As stated 
earlier, we also anticipate that only current IACS members will apply 
for approval.
    With these assumptions, the total costs for this rule will involve 
only one-time costs for applications for the initial approval, and we 
estimate the total will be $5,429. Table 5 summarizes these application 
costs, as previously described.

                                        Table 5--Total Application Costs
----------------------------------------------------------------------------------------------------------------
                                                                     Industry       Government
                    RO Status                          Count           costs           costs       Total  costs
----------------------------------------------------------------------------------------------------------------
Currently RO....................................               7            $777          $1,092          $1,869
Not RO..........................................               4           2,848             712           3,560
                                                 ---------------------------------------------------------------
  Total.........................................              11           3,625           1,804           5,429
----------------------------------------------------------------------------------------------------------------

    The benefits of this rule derive from incorporating the amendments 
from the Coast Guard Authorization Act of 2004 and the Coast Guard 
Authorization Act of 2010 and incorporating the standards from IMO 
Resolution A.739(18), ``Guidelines for the Authorization of 
Organizations Acting on Behalf of the Administration,'' to provide a 
sound and internationally recognized standard on which to base our 
review and approval program.

B. Small Entities

    Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have 
considered whether this rule would have a significant economic impact 
on a substantial number of small entities. The term ``small entities'' 
comprises small businesses, not-for-profit organizations that are 
independently owned and operated and are not dominant in their fields, 
and governmental jurisdictions with populations of less than 50,000.
    For-profit classification societies affected by this rule may be 
classified under one of the following North American Industry 
Classification System (NAICS) 6-digit codes for water transportation: 
488330--Navigation Services to Shipping or 488390--Other Support 
Activities for Water Transportation. According to the Small Business 
Administration's (SBA) size standards, a U.S. company classified under 
these NAICS codes with annual revenues of less than $7 million is 
considered a small entity.
    The only predominant U.S. classification society is the American 
Bureau of Shipping (ABS), which is a non-profit organization. We do not 
consider the ABS to be a small entity under the Regulatory Flexibility 
Act. In addition, the costs that we described in the previous section 
are so minimal, we

[[Page 47550]]

do not believe they rise to the level of being a significant economic 
impact. Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that 
this rule will not have a significant economic impact on a substantial 
number of small entities.

C. Assistance for Small Entities

    Under section 213(a) of the Small Business Regulatory Enforcement 
Fairness Act of 1996 (Pub. L. 104-121), we offered to assist small 
entities in understanding the rule so that they could better evaluate 
its effects on them and participate in the rulemaking. The Coast Guard 
will not retaliate against small entities that question or complain 
about this rule or any policy or action of the Coast Guard.
    Small businesses may send comments on the actions of Federal 
employees who enforce, or otherwise determine compliance with, Federal 
regulations to the Small Business and Agriculture Regulatory 
Enforcement Ombudsman and the Regional Small Business Regulatory 
Fairness Boards. The Ombudsman evaluates these actions annually and 
rates each agency's responsiveness to small business. If you wish to 
comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR 
(1-888-734-3247).

D. Collection of Information

    This rule calls for no new collection of information under the 
Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3520).
    This rule comprises application procedures classification societies 
must meet for approval. As stated in Section VII.A, we expect four new 
approvals in the first year after the rule becomes effective. In the 
NPRM, we forecasted that there would be no or very few applications in 
the near future. We received no comments or additional information to 
indicate that there would be 10 or more approvals after the first year. 
Thus, we expect to receive less than 10 approval requests per year. 
This figure is less than the threshold of 10 per 12-month period for 
collection of information reporting purposes under the PRA.
    This rule specifies a separate approval process for classification 
societies that are currently ROs. These ROs will only need to send the 
Coast Guard a letter requesting that we use previously collected data 
as the basis for their approval.
    As stated in Section VII.A, we expect the seven current ROs to use 
this method to apply for approval the first year the rule becomes 
effective. This process does not require any new information and the 
affected population is less than the threshold of 10 per 12-month 
period for collection of information reporting purposes under the PRA.

E. Federalism

    A rule has implications for federalism under Executive Order 13132, 
Federalism, if it has a substantial direct effect on the States, on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government. We have analyzed this rule under that Order and have 
determined that it does not have implications for federalism.

F. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) 
requires Federal agencies to assess the effects of their discretionary 
regulatory actions. In particular, the Act addresses actions that may 
result in the expenditure by a State, local, or tribal government, in 
the aggregate, or by the private sector of $100,000,000 (adjusted for 
inflation) or more in any one year. Although this rule will not result 
in such an expenditure, we do discuss the effects of this rule 
elsewhere in this preamble.

G. Taking of Private Property

    This rule will not cause a taking of private property or otherwise 
have taking implications under Executive Order 12630, Governmental 
Actions and Interference with Constitutionally Protected Property 
Rights.

H. Civil Justice Reform

    This rule meets applicable standards in sections 3(a) and 3(b)(2) 
of Executive Order 12988, Civil Justice Reform, to minimize litigation, 
eliminate ambiguity, and reduce burden.

I. Protection of Children

    We have analyzed this rule under Executive Order 13045, Protection 
of Children from Environmental Health Risks and Safety Risks. This rule 
is not an economically significant rule and does not create an 
environmental risk to health or risk to safety that may 
disproportionately affect children.

J. Indian Tribal Governments

    This rule does not have tribal implications under Executive Order 
13175, Consultation and Coordination with Indian Tribal Governments, 
because it does not have a substantial direct effect on one or more 
Indian tribes, on the relationship between the Federal Government and 
Indian tribes, or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes.

K. Energy Effects

    We have analyzed this rule under Executive Order 13211, Actions 
Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use. We have determined that it is not a ``significant 
energy action'' under that order because it is not a ``significant 
regulatory action'' under Executive Order 12866 and is not likely to 
have a significant adverse effect on the supply, distribution, or use 
of energy. The Administrator of the Office of Information and 
Regulatory Affairs has not designated it as a significant energy 
action. Therefore, it does not require a Statement of Energy Effects 
under Executive Order 13211.

L. Technical Standards

    The National Technology Transfer and Advancement Act (NTTAA) (15 
U.S.C. 272 note) directs agencies to use voluntary consensus standards 
in their regulatory activities unless the agency provides Congress, 
through the Office of Management and Budget, with an explanation of why 
using these standards would be inconsistent with applicable law or 
otherwise impractical. Voluntary consensus standards are technical 
standards (e.g., specifications of materials, performance, design, or 
operation; test methods; sampling procedures; and related management 
systems practices) that are developed or adopted by voluntary consensus 
standards bodies.
    This rule uses the following voluntary consensus standards: IMO 
Resolution A.739(18), ``Guidelines for the Authorization of 
Organizations Acting on Behalf of the Administration.'' The section 
that references this standard and the location where this standard is 
available is listed in 46 CFR 2.45-5.

M. Environment

    We have analyzed this rule under Department of Homeland Security 
Management Directive 023-01 and Commandant Instruction M16475.lD, which 
guide the Coast Guard in complying with the National Environmental 
Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded 
that this action is one of a category of actions that do not 
individually or cumulatively have a significant effect on the human 
environment. This rule is categorically excluded under section 2.B.2, 
figure 2-1, paragraphs (34)(b) and (d) of the Instruction. This rule 
involves regulations concerning internal agency functions and 
regulations concerning

[[Page 47551]]

manning, documentation, admeasurement, inspection, and equipping of 
vessels. An environmental analysis checklist and a categorical 
exclusion determination are available in the docket where indicated 
under ADDRESSES.

List of Subjects in 46 CFR Part 2

    Incorporation by reference, Marine safety, Reporting and 
recordkeeping requirements, Vessels.

    For the reasons discussed in the preamble, the Coast Guard amends 
46 CFR part 2 as follows:

PART 2--VESSEL INSPECTIONS

0
1. The authority citation for part 2 is revised to read as follows:

    Authority:  Sec. 622, Pub. L. 111-281; 33 U.S.C. 1903; 43 U.S.C. 
1333; 46 U.S.C. 2110, 3103, 3205, 3306, 3307, 3703; 46 U.S.C. 
Chapter 701; E.O. 12234, 45 FR 58801, 3 CFR, 1980 Comp., p. 277; 
Department of Homeland Security Delegation No. 0170.1.


0
2. Add subpart 2.45 to read as follows:
Subpart 2.45--Classification Society Activities
Sec.
2.45-1 Definitions.
2.45-5 Incorporation by reference.
2.45-10 General.
2.45-15 Approval requirements.
2.45-20 Probation, suspension, and revocation.
2.45-25 Application for approval.
2.45-30 Penalties.

Subpart 2.45--Classification Society Activities


Sec.  2.45-1  Definitions.

    The following definitions apply to this subpart:
    Administration means the Government of the State whose flag the 
ship is entitled to fly.
    Classification society means an organization that, at a minimum, 
verifies that a vessel meets requirements embodying the technical 
rules, regulations, standards, guidelines and associated surveys, and 
inspections covering the design, construction, and/or through life 
compliance of a ship's structure and essential engineering and 
electrical systems.
    Recognized Organization (RO) means an organization authorized to 
act on behalf of an Administration.
    Regional port state control secretariat means an organization 
established to collect and maintain port state control inspection data 
in addition to other functions under a regional agreement among 
countries.


Sec.  2.45-5  Incorporation by reference.

    (a) Certain material is incorporated by reference into this part 
with the approval of the Director of the Federal Register under 5 
U.S.C. 552(a) and 1 CFR part 51. To enforce any edition other than that 
specified in this section, the Coast Guard must publish notice of 
change in the Federal Register and the material must be available to 
the public. All approved material is available for inspection at the 
National Archives and Records Administration (NARA). For information on 
the availability of this material at NARA, call 202-741-6030 or go to 
http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html. Also, it is available for inspection 
at the Coast Guard's Office of Design and Engineering Systems (CG-ENG), 
2100 Second Street SW., Washington, DC 20593-0001, and is available 
from the sources indicated in this section.
    (b) International Maritime Organization, 4 Albert Embankment, 
London SE1 7SR, U.K. +44 (0)20 7735 7611, http://www.imo.org/.
    (1) IMO Resolution A.739(18), Guidelines for the Authorization of 
Organizations Acting on Behalf of the Administration, adopted 4 
November 1993, incorporation by reference approved for Sec.  2.45-15.
    (2) [Reserved]


Sec.  2.45-10  General.

    (a) A classification society (including an employee or agent of 
that society) must not review, examine, survey, or certify the 
construction, repair, or alteration of a vessel in the United States 
unless it is approved under the provisions of this subpart.
    (b) This subpart applies to a recognized organization that meets 
the definition of a classification society provided in Sec.  2.45-1 of 
this subpart.


Sec.  2.45-15  Approval requirements.

    (a) A classification society may be approved for purpose of Sec.  
2.45-10 if the following conditions are met:
    (1) Vessels surveyed by the classification society must have a 
worldwide port state control detention rate of less than 2 percent 
based on the number of Recognized Organization (RO)-related detentions 
divided by the number of vessel inspections for at least 40 port state 
control inspections for the past 3 years;
    (2) The classification society must not be identified in the most 
recent publication of ``Port State Control in the United States'' as a 
Priority I and as having more than one RO-related detention for the 
past 3 years;
    (3) The classification society must comply with the minimum 
standards for an RO recommended in IMO Resolution A.739(18), Appendix 1 
(incorporated by reference, see Sec.  2.45-5.);
    (4) The classification society must be an RO for at least one 
country under a formal written agreement that includes all of the 
elements described in IMO Resolution A.739(18), Appendix 2 
(incorporated by reference, see Sec.  2.45-5.);
    (5) The referenced country that is cited for satisfaction of the 
requirement of paragraph (a)(4) of this section for which the 
classification society is an RO--
    (i) Must be signatory to each of the following: The International 
Safety of Life at Sea Convention (SOLAS), the International Convention 
on the Prevention of Pollution from Ships (MARPOL 73/78), the 
International Convention on Load Lines (ICLL), 1966, and the Protocol 
of 1988 relating to the ICLL, 1966; and
    (ii) Must not be identified as a flag state targeted for additional 
port state control action by the Coast Guard or any regional port state 
control secretariat.
    (6) The classification society must use a system to--
    (i) Make its safety records and those of persons acting on behalf 
of the classification society available to the Coast Guard in 
electronic format;
    (ii) Provide its safety records and those of persons acting on 
behalf of the classification society to another classification society 
that requests those records for the purpose of conducting surveys of 
vessels; and
    (iii) Request the safety records of a vessel to be surveyed from 
any other classification society that previously surveyed that vessel.
    (b) Where sufficient performance records are not available from a 
regional port state control secretariat, the Coast Guard may consider 
an equivalent safety performance indicator proposed by the 
classification society seeking approval.


Sec.  2.45-20  Probation, suspension, and revocation.

    (a) A classification society approved for the purpose of this 
subpart must maintain the minimum requirements for approval set forth 
in Sec.  2.45-15.
    (b) If an approved classification society fails to maintain 
compliance with paragraph (a) of this section, the Coast Guard may 
place the classification society approval on probation, or suspend or 
revoke the classification society's approval, as appropriate.
    (c) Probation. A classification society on probation is approved 
for the

[[Page 47552]]

purpose of this subpart. The probation continues until the next review 
of the classification society's compliance with paragraph (a) of this 
section.
    (1) If the review shows that compliance with paragraph (a) of this 
section is achieved, the probation may end.
    (2) If the review shows significant improvement but compliance with 
paragraph (a) of this section is not achieved, the probation may be 
extended.
    (3) If the review does not show significant improvement, and 
compliance with paragraph (a) of this section is not achieved, the 
approval may be suspended.
    (d) Suspension. A classification society whose approval is 
suspended is not approved for the purpose of this subpart. Suspension 
will continue until the next review of the classification society's 
compliance with paragraph (a) of this section.
    (1) If the review shows compliance with paragraph (a) of this 
section, the classification society's approval may be restored.
    (2) If the review shows significant improvement toward compliance 
with paragraph (a) of this section, the suspension may be extended.
    (3) If the review does not show significant improvement and 
compliance with paragraph (a) of this section, the classification 
society's approval may be revoked.
    (e) Revocation. A classification society whose approval is revoked 
is not approved for the purpose of this subpart. The classification 
society may reapply for approval when the requirements of Sec.  2.45-15 
are met.
    (f) The Coast Guard's Office of Design and Engineering Standards 
(CG-ENG) administers probations, suspensions, and revocations and makes 
all related notifications to affected classification societies.


Sec.  2.45-25  Application for approval.

    (a) An application for approval must be made in writing and in the 
English language to U.S. Coast Guard, Commandant (CG-ENG), Office of 
Design and Engineering Standards, 2100 Second Street SW. Stop 7126, 
Washington DC 20593-7126.
    (b) The application must--
    (1) Indicate the type of work the classification society intends to 
perform on vessels in the United States;
    (2) Include documentation demonstrating that the classification 
society complies with Sec.  2.45-15;
    (3) Contain a list of the vessels surveyed by the classification 
society over the previous 3 calendar years. The list must include 
vessel names, flags, and IMO numbers, as well as initial vessel 
inspections and detentions; and
    (4) Provide a summary of the safety records of vessels the 
classification society surveys for each of the previous 3 calendar 
years, including initial vessel inspections and detentions for all data 
contained in regional port state control Memoranda of Understanding 
(MOU) and other port state control data sources, including the U.S. 
Coast Guard.
    (c) An application submitted in accordance with 46 CFR part 8, 
subpart B satisfies the application requirements of paragraph (a) of 
this section, provided the applicant:
    (1) Has been notified in writing by the Commandant that it met the 
criteria to be a recognized classification society, and its recognized 
status has not been revoked, under 46 CFR part 8, subpart B;
    (2) Submits in writing and in the English language to the address 
in paragraph (a) of this section a statement that the applicant is 
applying for approval under this subpart; and
    (3) Certifies in the submission under paragraph (c)(2) of this 
section that the information in the application submitted under 46 CFR 
part 8, subpart B remains valid.


Sec.  2.45-30  Penalties.

    The owner, charterer, managing operator, agent, master, or 
individual in charge of a vessel that employs a classification society 
to review, examine, survey, or certify the construction, repair, or 
alteration of a vessel in the United States is subject to civil 
penalties in accordance with Title 46 U.S.C. 3318 if the classification 
society is not approved by the Coast Guard under this subpart.

    Dated: July 26, 2012.
J.G. Lantz,
Director of Commercial Regulations and Standards, U. S. Coast Guard.
[FR Doc. 2012-19376 Filed 8-8-12; 8:45 am]
BILLING CODE 9110-04-P