Despite overwhelming opposition, the U.S. Coast Guard has adopted a $26 fee for routine annual documentation renewals and a host of other related services. Read about the rationale and view the fee schedule in this abridged version of the Coast Guard’s Aug. 6 posting on the Federal Register:
On March 4, 2013, the Coast Guard published a notice of proposed rulemaking (NPRM) entitled “Vessel Documentation Renewal Fees” in the Federal Register (78 FR 14053). That NPRM contained the Coast Guard's proposed revision of 46 CFR part 67, setting forth proposed fees for services provided.
The Coast Guard received 2,720 comment responses on the proposed fees. Comments were received from individuals, law firms, commercial vessel documentation services, industry groups, and maritime corporations. We considered all comments in promulgating this final rule. The comments received in response to the proposed rule are discussed below.
Basis and Purpose
The legal basis for this rule is found in 46 U.S.C. 2110. That section provides that the Secretary of the Department in which the Coast Guard is operating (Secretary) shall establish a fee or charge for a service or thing of value that is provided to the recipient or user of that service. The Secretary is empowered in 46 U.S.C. 2104 to delegate the authorities in 46 U.S.C. Subtitle II to the Coast Guard. The Secretary exercised that delegation authority for fees in Department of Homeland Security Delegation No. 0170.1(92)(a).
In establishing these fees, we are required to use the criteria found in31 U.S.C. 9701. Under this provision the fees must be fair, and must be based on the costs to the government, the value of the service or thing to the recipient, and the public policy or interest served (see 31 U.S.C. 9701(b)).Show citation box
The purpose of this rule is to increase the annual Certificate of Documentation (COD) renewal fee collections so that the fees we charge more accurately reflect the actual costs to the Coast Guard of providing the annual documentation renewal services. By doing so, we will comply with the law and continue to provide documentation services by charging fair-value user fees.
Section 10401 of the Omnibus Budget Reconciliation Act of 1990 (101, Nov. 5, 1990, 104 Stat. 1388), codified at 46 U.S.C. 2110, requires that the Coast Guard establish user fees for Coast Guard vessel documentation services. One of the vessel documentation services the Coast Guard provides is renewal of endorsements upon a COD. A COD is required for the operation of a vessel in certain trades, serves as evidence of vessel nationality, and permits owners of vessels to benefit from preferred mortgages (46 CFR 67.1). An Endorsement means an entry that may be made on a COD, and, except for a recreational endorsement, is conclusive evidence that a vessel is entitled to engage in a specified trade (46 CFR 67.3).
The Coast Guard sets fees at an amount calculated to achieve recovery of the costs of providing the service, in a manner consistent with the general user-charges principles set forth in OMB Circular A-25. Under that OMB Circular, each recipient should pay a reasonable user charge for Federal Government services, resources, or goods from which he or she derives a special benefit, at an amount sufficient for the Federal Government to recover the full costs of providing the service, resource, or good (see OMB Circular A-25, sec. 6(a)(2)(a)).
We last promulgated our user fees for vessel documentation services on November 15, 1993 (58 FR 60256), found at 46 CFR part 67, subpart Y-Fees. The fees reflect the Coast Guard's program costs for 1993, with the cost of providing annual COD renewals included as part of overhead costs. Since then, the renewal costs have increased. The existing fees do not cover the operating and overhead costs associated with our vessel documentation and recording activities under 46 U.S.C. chapters 121 and 313.
The COD renewal fee will more accurately reflect the Coast Guard's current operating and overhead costs associated with providing this discrete set of services. While we previously included the cost of providing annual COD renewals as part of its overhead costs, the fees collected in relation to these costs do not nearly cover our operating and overhead costs associated with providing annual COD renewal services. Therefore, we will break out and separately charge an annual-renewal fee of $26 (shown in Table 67.550—Fees) to cover the cost of providing the required annual COD renewal services. The Coast Guard's fiscal year 2010 review of vessel documentation user charges, “Vessel Documentation Biennial User Fee Review,” recommended establishment of an annual fee for COD renewals. The Biennial User Fee Review is available in the docket as indicated underADDRESSES. In accordance with our statutory obligations and thisrecommendation, we proposed to break out and separately charge an annual renewal fee of $26 (shown in Table 67.550—Fees) to cover the cost of providing the required annual COD renewal services. After reviewing the comments, as discussed below, this rule adopts the proposed renewal fee without change.
The Biennial User Fee Review also recommended establishment of a fee for resubmitted requests for services such as applications, determinations, waivers, etc. We elected not to pursue the latter recommendation at this time, but will consider this fee in future studies and possibly in future rulemaking actions. Presently, we charge several other fees associated with vessel documentation and we anticipate that further review (as required by OMB Circular A-25) of these fees and the cost of service will result in additional proposed adjustments to reflect changes in cost and provision of services. Any of these additional proposed adjustments would be the subject of a separate rulemaking.
Discussion of Comments and Changes
Currently, the Coast Guard provides CODs to 265,000 vessels registered in the United States, with average annual renewals issued to 235,000 vessels. The Coast Guard received 2,720 responses to the NPRM, with a total of 4,943 discrete comments, ranging in issue from general support to alternative ways to impose the fee and questions about the fee structure. We grouped the comments into 7 categories of concern, which encompass 45 separate issues. Below, we summarize these categories and the Coast Guard's response to them. No public meeting was requested and none was held.
Eight comments submitted were unclear or duplicate comments, however because they were accompanied by other comments that were categorized, we were able to respond to at least part of the commenter's concerns. We received one submission where the commenter claimed that he already pays the Coast Guard $27.50 for an annual PIN fee. We thank the commenter for his submission, but we are not sure about the fee to which he refers. He also worded his comment such that it does not appear he has documented his vessel. Only one other submission couldn't be categorized, where the commenter stated he “didn't care” because his vessel was not documented, but followed up with the statement that he still paid an annual fee of about $26 to enter the United States from Canada each summer. The Coast Guard thanks these commenters for their submissions, but we have no response, as these are outside of the scope of this rulemaking.
Many commenters (536) responded positively to the proposed rule, including 459 comments in support of the proposed rule and 77 comments that praised the Coast Guard's work. The Coast Guard thanks those commenters for their supportive comments.
Nearly 1,500 (1499) comments expressed disapproval of the proposed rule. Many (228) wrote that they would no longer document their vessel if the rule became final. A further 1,271 referred to the user fee as the imposition of a new “tax” on the boating community. The Coast Guard appreciates this feedback and would like the opportunity to clarify the difference between imposing a tax versus a user fee.
First, a user fee is designed to defray the costs of a regulatory activity (or government service), while a tax is designed to raise general revenue. Second, a true user fee must be proportionate to the necessary costs of the service, whereas a tax may not be. Third, a user fee is charged for requested services, whereas a tax is not. The discussion in the Regulatory Analysis will expand on the costs of the Coast Guard providing the COD service, and demonstrate how the new fee will be proportionate to the cost of providing the service.
The Coast Guard received 412 comments related to the components of the fee and how the fee was calculated. Many commenters (202) suggested that the fee was not reflective of the cost of providing the service. Others (140) suggested that the initial fee paid for documentation was sufficient for service costs for the life of the vessel. Several commenters (55) asked what, if any, new benefits would be provided that required an additional fee. Only 13 commenters suggested that the fee was too low.
The Omnibus Budget Reconciliation Act of 1990 (46 U.S.C. 2110) requires the Coast Guard to charge a fee for services but limits charges to no more than the overall cost of program. The fee calculations are based on the full cost of providing the service. The cost methodology, including process and overhead costs used in the calculation, is available in the docket.
Each service provided for vessel documentation carries associated costs that are considered in that fee. The initial application fee covers that service only; the renewal fee covers services incurred while issuing the renewal and maintaining the information supporting the document.
The Coast Guard recognizes that Federal vessel documentation confers many financial benefits on the vessel owner. However, there are no new benefits as a result of the renewal fee. The renewal fee is only necessary to cover the costs of providing the service as noted in the previous paragraph.
One commenter suggested that there would be extra costs associated with Coast Guard boardings to enforce the fee. The Coast Guard does not charge fees for boardings nor conduct boardings to enforce fees. The fee discussed in this rule is based on the cost to the Coast Guard for issuing the renewal. One commenter suggested the Coast Guard add a lien review to the annual renewal. The Coast Guard disagrees with the idea of implementing a lien review. A lien review is a separate process not connected with annual renewal of endorsements on a COD.
The Coast Guard received 886 comments recommending alternative ways to charge for vessel documentation renewal services. Among those, the most frequent (243) comments suggested that the Coast Guard charge for vessel documentation renewals only under certain circumstances, such as if changes are made to the documentation or if renewals are late (late fees). Additional commenters within this grouping proposed making the COD a permanent document. By regulation, CODs expire one year after issuance, regardless of whether or not there are any changes in information. Similar to current motor vehicle registration renewal processes, (in that an owner must pay to obtain a valid registration, regardless of whether any change to information is necessary), valid documents must be obtained in order to legally operate vessels.
Several commenters also suggested that the Coast Guard add the cost of the renewal service to existing fees or pay for the service through taxes. For example, we received 84 comments that suggested we increase the initial documentation fee, instead of charging the renewal fee. We also received seven comments that suggested the Coast Guard combine these fees with the United States Customs and Border Protection decal fees, but that vessel owners should not have to do both.Another seven comments suggested the Coast Guard recoup costs from fuel taxes.
The Coast Guard is required to charge a cost-based fee for all vessel documentation services provided. Renewal of endorsements on a COD is a service that incurs ongoing costs. Charging a separate fee for renewals allows the Coast Guard to fairly distribute those costs and allows flexibility to ensure the costs are recouped over the entire period of ownership. As discussed earlier taxes and user fees have separate purposes, user fees are charged for specific services, using taxes such as a fuel tax to cover COD expenses would create inequities by causing some boat owners to pay (via fuel charges) for services (COD renewals) that they did not use. Additionally, because the COD renewals are a separate and distinct effort from the Customs and Border Protection decal issuance, these fees cannot be combined.
Many commenters (91) suggested that the Coast Guard provide discounted rates for senior citizens, Auxiliary members, and non-profit organizations. While we understand the desire to provide a reduced rate, the current user fee covers the actual cost of processing a renewal; reducing fees for any one group would shift the cost to another group and this would not meet the fairness requirement of 31 U.S.C. 9701.
Other commenters suggested that documentation of recreational vessels be conducted by States. For example, 89 commenters suggested the Coast Guard do away with Federal COD and instead have States perform the service, or commented that they should not have to pay both Federal and State fees. One hundred ten commenters suggested that the Coast Guard charge States for use of the information the Coast Guard collects. We understand some owners do not want to pay both Federal and State fees; however, holding a valid Federal COD confers additional benefits beyond State registration. Furthermore, it is optional for recreational vessel owners. Recreational vessel owners are not required to request this service or to hold a Federal COD.
Forty-eight comments suggested that renewal fees apply only to commercial vessel owners. Obtaining a COD is already optional for recreational vessel owners. However, when the option to obtain a COD renewal is exercised, the cost of processing renewal CODs is the same, regardless of whether the vessel is operating with a commercial or recreational endorsement.
The Coast Guard also received a variety of comment submissions (197) that decried government size and waste and asserted the need for government spending cuts. Another 10 commenters suggested the Coast Guard privatize or outsource CODs. We note these comments, however they fall outside of the scope of the rulemaking. As noted, the Coast Guard provides this service and is required to charge a fee for incurred costs. The Coast Guard has and continues to minimize the costs and charges to provide this service.
The Coast Guard received 1,316 comments regarding the implementation of the new fee. The majority of these comments suggested the Coast Guard institute a multiyear renewal option program (757) and establish online payment capabilities (288). Others inquired about future adjustments to the fee. In particular, 199 commenters consider the proposed $26 fee too high, with many worried that the fee will continue to increase. Several commenters (30) queried if the fee could be determined by the class, size or value of the vessel. Another 29 commenters questioned the need to document vessels, indicating they had been forced into it.
The Coast Guard has provided annual renewals of endorsements on CODs to reduce the risk of maintaining outdated information and in response to vessel owner needs to maintain preferred mortgage status. The Coast Guard understands the efficiencies of multiyear renewals and will consider this in a future rule making. It cannot be implemented currently since this will require changes to processes, information systems, budgets, regulations and perhaps laws.
Currently, the Coast Guard offers online payment options for certain services, and, along with other Federal agencies, is looking for ways to expand and improve this service. The Coast Guard will continue to work to find efficiencies to reduce costs incurred and minimize fees charged. As processes, automation, information systems, and costs change, future adjustments of this fee will be made through regulation and based on the cost of providing the service.
One commenter requested to know when the fee would start. This regulation will become effective 90 days after the date of publication, on the date specified in the DATES section of this document. Therefore, the fees will start no earlier than 90 days after the date of publication of this regulation.
One commenter requested information on any requirements for renewal when the vessel's COD is “on deposit.” Currently a COD on deposit does not require an annual renewal. This will not change as a result of this rulemaking. This fee will apply only to renewals.
Two commenters requested clarification on endorsements and exemptions. These issues are beyond the scope of this rule. The respondents may contact the Coast Guard National Vessel Documentation Center (NVDC) directly for clarification. Contact and other helpful information is available through the NVDC Web site: http://www.uscg.mil/nvdc/default.asp or by calling 1-800-799-8362.
Two commenters suggested the Coast Guard refund fees when relinquishing CODs. This is not possible because the fee is being charged for services already performed at the time of renewal.
Four commenters suggested that all boaters, not just those holding a document, pay the fee. This is not possible because the Coast Guard may only charge a fee for requested services. The request for service is voluntary, not all boaters request the service. Therefore the Coast Guard has no authority to charge all boaters.
Four commenters asked about enforcement of renewing a COD. Renewal of a COD is a voluntary request. If a COD is not properly renewed, it expires and with it, the benefits conferred also expire.
The Coast Guard received 213 comments with suggestions or questions about how the fee should or would be used. Most of these comments (114) addressed how the fees would be used and the benefits to the owner. Many included suggestions about how the fees should be used for waterway maintenance (21), boating services and safety (23), and to improve the Great Lakes (1). Thirty seven commenters indicated that they would be supportive if the fees go towards the Coast Guard only.
There were eight comments inquiring whether the fees would go towards improving service, and five who viewed the documentation service renewal fee as unnecessary. Four commenters questioned whether the location of their vessel would influence the fees charged, because there is no Coast Guard presence where their boat is kept.
The Coast Guard is limited by law as to how it may use the fees collected. Vessel documentation fees collected from commercial vessel owners are deposited in the general fund of the Treasury as offsetting receipts of the department in which the Coast Guard is operating and ascribed to the CoastGuard activities. Vessel documentation fees collected from recreational vessel owners are used by the Coast Guard's NVDC to perform vessel documentation services for recreational vessel owners.
Overall the fee collected through implementation of this rule is intended to provide additional funds to the NVDC for improvements to documentation service. The Coast Guard understands that the current backlog of requests for service particularly for recreational vessels is excessive and intends to apply the available fees collected from renewals to correct this problem.
The fee for renewing a COD will be the same regardless of the location of the vessel. There is no difference in cost associated with location when renewing a COD because the same documentation services are provided regardless of location of the vessel. Although some endorsements are requested for specific commercial purposes, the locations that a vessel may be used other than for that commercial purpose is not limited by the COD issued.
The Coast Guard received 71 comments regarding the benefits the government would gain with the proposed user fee. We received 35 comments about the expected benefits to the government. A further 26 comments cited the Federal government's ability to contract with documented vessel owners for the use of their vessels during certain national emergencies. The respondents suggested that this resulted in a benefit to the government and should be considered when setting a fee for renewing a COD. Ten commenters suggested public safety would be negatively impacted, as some owners would choose not to hold or renew Federal documents.
For the Federal government to use a documented vessel in times of emergency the vessel must be acquired under a mutually agreed upon contract between the Federal government and the vessel owner. Because the vessel owner would be paid for the use of the vessel this was not a factor in setting the fee. The Coast Guard based the documentation fee on the cost of providing the service, not on benefits received or given by either the government or the vessel owner. The purpose of vessel documentation is to provide the vessel owner with specific benefits and is not intended as a public safety measure.
After considering all comments, the Coast Guard is finalizing the user fee as it was proposed. The Coast Guard appreciates all of the comments received. The Coast Guard is publishing the final rule without changing the requirements stated in the NPRM.
As discussed, this final rule requires an annual renewal fee for endorsement(s) on the CODs. This fee, which is based on the costs that the Federal Government currently incurs to process renewals, along with additional costs due to increased need in labor and capital costs, will cost each vessel owner $26 per renewal.
The renewal fee that will be charged to the public under this final rule is based on the full cost to the Federal Government to provide this service. The renewal fee will allow the Federal Government to recoup those costs. Specifically, the purpose of the renewal fee is to ensure that this service is self-sustaining. As such, the renewal fee was determined by dividing the full, annual cost of providing the service by the average number of renewals over the past 5 years.
The full, annual cost of providing this service includes all current costs, such as labor, capital, and overhead, plus additional labor and capital costs that will be required to process the additional fees collected.
In 2011, we conducted a comprehensive study to more accurately calculate the costs involved with the annual COD renewal process. Our “Full Cost Study for Renewal of Endorsements on Certificates of Documentation” focuses on the cost of annual COD renewals, updates the cost figures, and includes costs for the additional activities required to process collections. The cost study is available in the docket where indicated under the ADDRESSES section in the preamble.
The study indicated that the average number of annual renewals for 2006-2010 was 235,000. The renewals accounted for a subset of the approximately 65,000 commercial and 200,000 recreational vessels documented by the Coast Guard in 2010. Under this final rule, we anticipate that the cost for processing annual COD renewals and their associated fees will be approximately $6 million…
To calculate the annual renewal fee, we divided the total annual costs associated with the renewal program by the average number of annual renewals. We included directly traced personnel costs for those activities in a timed study. These activities represent a small, mostly automated portion of the full process. However, we could not include other direct and indirect costs, such as allocated personnel costs, in the time study due to the complexity of the activities
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Dated: August 6, 2014.
Captain, U.S. Coast Guard,Director of Inspections and Compliance.