Page 24: of Marine News Magazine (October 2012)

COMPLIANCEThe Coast Guard and Maritime Transportation Act of 2004 (Aug. 9, 2004), established new authorities for towing vessels. This act authorized the Coast Guard to draft a regulatory scheme requiring towing vessels to become inspected vessels and obtain a CertiÞ cate of Inspection (COI). Thereafter, the Coast Guard drafted proposed Subchapter M for title 46, U.S.C., which covers CertiÞ cation, Vessel Compliance, Towing Safety Management System (TSMS), Third-Party Organizations, Operations, Life-Saving, Fire Protection, Machinery and Electrical Systems and Equipment, and Construction and Management of towing vessels. In the fall of 2004, the Coast Guard requested that the Towing Safety Advisory Committee (TSAC) assist in developing an inspection regime for towing vessels. Additionally, the Coast Guard contracted with the American Bureau of Shipping Group (ABSG) Consulting, Inc. for assistance with gathering data and categorizing the vessels that make up the towing industry. A MULTIPLE CHOICE QUESTION There are two proposed schemes for owners and managing operators to comply with Subchapter M. One option is to establish a TSMS. A TSMS would require detail processes, procedures, recordkeeping, and auditing. Owners and managing operators who select the TSMS option would have two years from the effective date of a Þ nal rule to create their TSMS, have a third-party approve their TSMS, and have a third-party issue their TSMS certiÞ cate. They would have four years from the date of that TSMS certiÞ cate to bring all vessels under their ownership or management into the TSMS and obtain a COI. The alternative to establishing a TSMS would be having an annual inspection performed by Coast Guard Maritime Inspectors. The inspection option is proposed because a SMS may not be a very cost-effective way to achieve safer operation by some entities. Industry personnel made it clear that effective implementation of an SMS would be a very difÞ cult task for a company that had not previously been highly structured and had not formally documented its policies and procedures. Therefore, an SMS will likely have a large and more devastating impact on smaller companies who do not have the economic means, manpower, or even time to implement a SMS. Owners, managing operators, and towing vessels subject to Subchapter M requirements would need to select the annual Coast Guard inspection option two years from the effective date of the Þ nal rule, if they have not created a TSMS by that point. They would have four years from that date to attain COIs for all vessels under their ownership or management. THE COST (& BREADTH) OF COMPLIANCE ? AND ITS ULTIMATE IMPACT It is estimated that 1,059 owners and operators (companies) would incur signiÞ cant costs from implementing and maintaining compliance with Subchapter M. This scheme would affect a total of 5,208 vessels owned and operated by these companies. The total present value cost to implement Subchapter M to the industry during the Þ rst ten-years after promulgation of the Þ nal rule could range from $129.1 million to $153.9 million. Including governmental costs could bring this range from $141.1 million up to $165.9 million. The government has estimated that more than 92% of the businesses affected would meet the deÞ nition of small, as per the Small Business AdministrationÕs (SBA) standard of less than 500 employees. Additionally, 25% of these businesses would be subject to a signiÞ cant economic impact (more than 1% of revenue) during the phase-in period of years one and two. Furthermore, potentially 49% of these businesses would incur a signiÞ cant economic impact for each of the next eight years. The TSAC Economic Analysis Working Group (EAWG) and the ABSG (http://www.regulations. gov/#!documentDetail;D= USCG-2006-24412-0017) issued reports detailing the costs to the towing industry concerning the implementation of Subchapter M. Table 1 presents the requirements and costs as identiÞ ed by the TSAC EAWG of the new costs that would be incurred in order to bring a company with an existing SMS into compliance with the proposed Subchapter M. This cost could range from $76,200 to $143,700. For companies without an existing SMS, the cost for the initial implementation for an individual company could range from $100,000 to $350,000. The actual costs will The Cost of Compliance USCG Regulations Making All Towing Vessels Inspected Vessels: Requirements, Costs, & Consequences? By Gary E. English24 MNOctober 2012MNOct2012 Layout 18-31.indd 24MNOct2012 Layout 18-31.indd 2410/2/2012 9:37:42 AM10/2/2012 9:37:42 AM