Federal Register, Volume 74, Number 2, January 5, 2009, Pages 201-392 Page: 230
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Federal Register/Vol. 74, No. 2/Monday, January 5, 2009 /Rules and Regulations
Lakes pilots and industry. They also
include adjustments for inflation and
changes in association expenses to
maintain these compensation levels.
The increase in pilotage rates will be
an additional cost for shippers to transit
the Great Lakes system. This rule will
result in a distributional effect that
transfers payments (income) from vessel
owners and operators to the Great Lakes'
pilot associations through Coast Guard
regulated pilotage rates.
The shippers affected by these rate
adjustments are those owners and
operators of domestic vessels operating
on register (employed in the foreign
trade) and owners and operators of
foreign vessels on a route within the
Great Lakes system. These owners and
operators must have pilots or pilotage
service as required by 46 U.S.C. 9302.
There is no minimum tonnage limit or
exemption for these vessels. It is the
Coast Guard's interpretation that the
statute applies only to commercial
vessels and not to recreational vessels.Owners and operators of other vessels
that are not affected by this rule, such
as recreational boats and vessels only
operating within the Great Lakes
system, may elect to purchase pilotage
services. However, this election is
voluntary and does not affect the Coast
Guard's calculation of the rate increase
and is not a part of our estimated
national cost to shippers.
We updated our estimates of affected
vessels for the rule by using recent
vessel characteristics, documentation,
and arrival data. We used 2006-2007
vessel arrival data from the Coast
Guard's Marine Inspection, Safety, and
Law Enforcement (MISLE) system to
estimate the average annual number of
vessels affected by the rate adjustment
to be 208 vessels that journey into the
Great Lakes system. These vessels
entered the Great Lakes by transiting
through or in part of at least one of the
three pilotage Districts before leaving
the Great Lakes system. These vesselsoften make more than one distinct stop,
docking, loading, and unloading at
facilities in Great Lakes ports. Of the
total trips for the 208 vessels, there were
approximately 923 annual U.S. port
arrivals before the vessels left the Great
Lakes system, based on 2006-2007
vessel data from MISLE.
The cost of the rate adjustment to
shippers is estimated from the district
pilotage revenues. These revenues
represent the direct and indirect costs
that shippers must pay for pilotage
services. The Coast Guard sets rates so
that revenues equal the estimated cost of
pilotage.
We estimate the cost of the revised
rate adjustment in this rule to be the
difference between the total economic
costs based on the 2007 rate adjustment
and the total projected economic cost in
this final rule. Table 20 compares
projected economic costs in 2007 and
costs of the rule to industry by district.TABLE 20-RATE ADJUSTMENT FACTORS AND ADDITIONAL COST OF THIS FINAL RULE (COSTS ARE IN $U.S.)
District District One District Two District Three Total 1
Total Economic Cost in 2007 (Base Period) ........................... 3,083,904 3,715,426 5,420,279 12,219,609
Final Rate Adjustment2 ...... ...................................... 1.1521 0.9665 1.1542 1.0965
Total Projected Economic Cost in 2008 ........................ 3,552,949 3,590,802 6,255,945 13,399,696
Additional Revenue Required or Cost of this Rulemaking 3 .... 469,045 - 124,624 835,666 1,180,087
1 Some values may not total due to rounding.
2 See steps 5 and 7 of the "Calculating the Rate Adjustment" section of this final rule for the 'Final Rate Adjustment' and the 'Total Projected
Economic Cost in 2008'.
3Additional revenue or cost of this rule = 'Total Projected Economic Cost in 2008' -'Total Projected Economic Cost in 2007'.After applying the revised rate in this
final rule, the resulting difference
between the economic cost in 2007 and
the projected economic cost in 2008 is
the annual cost to shippers from this
rule. This figure is equivalent to the
total additional payments that shippers
make for pilotage services from the 2008
rate adjustments.
The annual cost of the revised rate
adjustment in this final rule to shippers
is approximately $1.2 million (non-
discounted). The annual cost of the
additional 9.95% rate adjustment to
shippers in this final rule is
approximately $183,607 (non-
discounted). To calculate an exact cost
per vessel is difficult because of the
variation in vessel types, routes, port
arrivals, commodity carriage, time of
season, conditions during navigation,
and preferences for the extent of
pilotage services on designated and
undesignated portions of the Great
Lakes system. Some owners and
operators will pay more and some will
pay less depending on the distance and
port arrivals of their vessels' trips.However, the annual cost reported
above does capture all of the additional
cost the shippers face as a result of the
rate adjustment in this rule.
In addition to the annual reviews and
possible partial rate adjustments, the
Coast Guard is required to determine
and, if necessary, perform a full
adjustment of Great Lakes pilotage rates
at a minimum of once every five years.
Due to the frequency of the full rate
adjustments, we estimated the total cost
to shippers of the rate adjustments in
this final rule over a five-year period
instead of a ten-year period. The total
five-year (2008-2012) present value cost
estimate of this final rule to shippers is
$5.2 million discounted at a seven
percent discount rate and $5.6 million
discounted at a three percent discount
rate. For the calculation of the total five-
year present value cost estimate, we
chose not to discount first-year costs
and instead began discounting in the
second year, because industry will incur
costs from this rule during the 2008
Great Lakes shipping season.A. Small Entities
Under the Regulatory Flexibility Act
(5 U.S.C. 601-612), we have considered
whether this rule will 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.
Entities affected by this rule are
classified under the North American
Industry Classification System (NAICS)
code subsector 483-Water
Transportation, which includes one or
all of the following 6-digit NAICS codes
for freight transportation: 483111-Deep
Sea Freight Transportation, 483113-
Coastal and Great Lakes Freight
Transportation, and 483211-Inland
Water Freight Transportation.
According to the Small Business
Administration's definition, a U.S.
company with these NAICS codes and
employing less than 500 employees is
considered a small entity.230
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United States. Office of the Federal Register. Federal Register, Volume 74, Number 2, January 5, 2009, Pages 201-392, periodical, January 5, 2009; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc132864/m1/37/: accessed April 19, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.