Regulatory Roundup

Critical decisions in towing vessel inspection

It seems that whenever a new rulemaking is in progress an entire new industry evolves. This was the case with the Oil Pollution Act of 1990, as well as the Maritime Transportation Security Act of 2002.

Both, however, may pale in comparison to the economic opportunity provided by Subchapter M. The towing vessel inspection rule may prove to be a potential gold mine for some professional services companies and maritime entrepreneurs. Unfortunately, for towing vessel operators, the amount of information being dumped on them may add confusion and stress when they try to make the best decisions for their companies.

Major Point of Confusion — Subchapter M of Title 46 of the Code of Federal Regulations (CFR) was established by the Coast Guard to regulate the inspection of U.S.-flagged towing vessels. In addition to the standard protocol of having the Coast Guard send a marine inspector to inspect and certify a towing vessel, the proposed rule for Subchapter M offers an option for operators to adopt a Towing Safety Management System (TSMS). Vessel operators should understand that this is only an option. There is no requirement in the proposed rule for any towing vessel to have a safety management system of any kind, including a TSMS. Even if a company already operates under a safety management system, there is no requirement in the proposed rule for such a company to choose that option for Subchapter M compliance. Such companies can continue to operate under their safety management system but choose the standard Coast Guard vessel inspection option in order to obtain their certificates of inspection (COIs).

Liability — The TSMS option permits certain third-party organizations to conduct audits and surveys on behalf of the government. There are some unanswered questions regarding the liability of third-party organizations and surveyors under Subchapter M. While there have been some interesting discussions, there is still no answer. Those answers are best left to the attorneys. But I offer these recent instances to consider: after 10 years of litigation, the American Bureau of Shipping (ABS) was cleared of liability in the case of the M/V Prestige, a vessel that broke apart, creating a large oil spill off the coast of Spain; and a case was dismissed against the Coast Guard, where the Coast Guard was sued for alleged errors made during certification of a vessel which eventually capsized resulting in loss of life. Yet a third-party flag surveyor was sentenced to prison for making false statements and certifying a vessel as safe, which was subsequently found to be deficient by the Coast Guard. So what will be the liability issues for third-party organizations acting on behalf of the government? I hope Coast Guard headquarters will come up with some guidance on this issue.

It remains to be seen if Subchapter M will be a gold mine or a land mine for third parties. But one thing is certain: Towing vessel operators should proceed with caution.