U.S. Coast Guard Proposes Significant Updates to Marine Casualty Reporting Damage Thresholds

Mainbrace | March 2017 (No. 2)

Sean T. Pribyl and Jeanne M. Grasso

01n January 23, 2017, the U.S. Coast Guard published a Notice of Proposed Rulemaking (“NPRM”) that proposes to amend the monetary property damage threshold amounts for reporting a marine casualty and serious marine incident (“SMI”). ­Industry stakeholders should be aware of the significant changes in the NPRM, potentially easing the reporting burden.

Marine Casualty Reporting Requirements

When vessel-related accidents occur on the navigable waters of the United States, the owner, operator, master, or person in charge of the vessel involved may have an obligation to report the incident to the U.S. Coast Guard. See 46 CFR Subpart 4. Generally, federal regulations deem a marine casualty reportable when meeting defined criteria; for example, when the incident results in property damage meeting defined monetary thresholds. To illustrate, a vessel owner, operator, master, or person in charge must report a marine casualty involving property damage in excess of $25,000, including the cost of labor and material to restore the property to its pre-damaged condition. 46 CFR §4.05-1.

Additionally, an SMI includes any reportable marine casualty that results in property damage exceeding $100,000. 46 CFR §4.03-2. At the time of occurrence of a marine casualty, the owner, operator, master, or person in charge must make a timely, good faith determination as to whether the incident is, or is likely to become, an SMI, as SMIs require drug testing of crew members directly involved in the incident.

As stated in this NPRM, the U.S. Coast Guard has long considered monetary value as a reporting threshold based upon the premise that increased repair costs are indicative of the increased seriousness of a marine casualty. However, these thresholds have remained unchanged since the initial promulgation of casualty reporting regulations in the early 1980s. Attendant to these reporting requirements are mandatory alcohol and drug testing procedures that require the crewmembers involved in an SMI to take a chemical test. 46 CFR §4.06-3. Consequently, drug testing following SMIs has also been affected by these regulations and has been conducted for casualties that are less significant than envisioned by the originally promulgated regulations.

Notably, the responsibility for determining whether an occurrence meets the criteria for notifying the U.S. Coast Guard falls on an owner, operator, master, or person in charge. For years, these notification procedures have been the subject of much confusion and consternation as to which occurrences constitute reportable marine casualties. Moreover, the threshold amounts have generally been viewed as too low, requiring relatively minor casualties to be reported, demanding overly burdensome investment of time and effort by stakeholders in completing the Coast Guard Form 2692. In response, and as discussed in our earlier Blank Rome Maritime advisories (February 2014, August 2015), the U.S. Coast Guard has taken steps to offer guidance to assist vessel owners/operators with the casualty reporting process, including most recently in the Navigation and Vessel Inspection Circular 01-15 (“NVIC 01-15”). While guidance has assisted industry stakeholders in interpreting the regulations, the thresholds have remained stagnant for decades.

Proposed Changes

The stated purpose of this NPRM is to update the dollar threshold amounts for property damage to specifically account for inflation. The NPRM acknowledges U.S. Coast Guard and stakeholder consensus that these decades-old property damage monetary threshold amounts have not kept pace with inflation, and have resulted in excessive administrative and financial burden on vessel owners and operators. Consequently, the NPRM proposes the following significant changes to the current regulations:

  • Replaces the dollar threshold for an SMI involving damage to property of $100,000 to “in excess of $200,000.” 46 CFR §4.03-2.
  • Replaces the dollar threshold for reportable marine casualty to occurrences causing property damage of $25,000 to “in excess of $72,000.” 46 CFR §4.05-1.

With these upwardly adjusted monetary limit amounts, the proposed changes to the NPRM also serve a corollary purpose of reducing the cost and time burden on vessel owners and operators by an anticipated decrease in the overall number of reports received on an annual basis. According to the NPRM, between 2012 through 2014, there was an average of 5,967 marine casualty reports per year. Of the 5,967 marine casualty reports, approximately 5.3 percent were for a reportable marine casualty with property damage between $25,000.01 and $72,000, and 4.5 percent involved an SMI. As a result of this threshold adjustment, the U.S. Coast Guard expects approximately 316 fewer required marine casualty reports and a reduction of 21 SMI reports on an annual basis. Consequently, “vessel owners and operators would benefit from a reduction in the time burden associated with a crewmember no longer having to prepare and submit the required marine casualty reporting paperwork.” Moreover, since each vessel crewmember involved in an SMI is required to take a chemical test, the NPRM effectively reduces the overall number of mandatory drug testing following these reportable occurrences since fewer qualifying occurrences are expected. The U.S. Coast Guard recognizes in the NPRM that the marine employer incurs lost time and actual costs of the chemical test it takes for a crewmember to take the chemical test, such as collection kits, collector fees, alcohol-testing swabs, and overnight mailing.

Impact of New Administration

On January 20, 2017, the White House released a Memorandum for the Heads of Executive Departments and Agencies, Regulatory Freeze Pending Review (“Regulatory Freeze”), which calls on federal agencies to withdraw, postpone, or delay certain regulatory action depending on its status in the rulemaking process, including those related to notices of proposed rulemaking. And, on February 3, 2017, the White House published Executive Order 13771 (“Reducing Regulation and Controlling Regulatory Costs”) mandating that “for every one new regulation issued, at least two prior regulations be identified for elimination.” In this case, the U.S. Coast Guard released this NPRM for public review essentially the same day the White House published the Regulatory Freeze Memorandum, and the NPRM was published before Executive Order 13771, raising the question as to whether the U.S. Coast Guard will take any action to delay or withdraw the NPRM.

At the moment, the NPRM and docket remain unchanged, and the public has submitted only one comment to the NPRM thus far. Overall, the NPRM is relatively non-controversial, and does not raise a substantial question of law or policy. However, in determining whether the final rule is appropriate, the U.S. Coast Guard has indicated it will consider all comments received from the public while considering the impact of both the Regulatory Freeze Memorandum and Executive Order 13771. As such, stakeholders should continue to monitor the Federal Register for any changes to the comment period or NPRM.

Conclusion and Recommendation

With this NPRM, the U.S. Coast Guard has taken a significant step in addressing long overdue industry-wide marine casualty reporting concerns, and in bringing the regulations more in-line with their intended purpose. By adjusting for inflation and upwardly amending reporting thresholds, the NPRM provides real opportunity for reducing both the number of reportable casualties and the burden incurred by owners and operators. In sum, industry stakeholders should carefully review the NPRM and evaluate whether to submit comments before the comment period ends on March 24, 2017.

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