[Federal Register Volume 73, Number 22 (Friday, February 1, 2008)]
[Proposed Rules]
[Pages 6085-6099]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 08-474]


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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

46 CFR Part 401

[Docket No. USCG-2007-0039]
RIN 1625-AB23


2008 Rates for Pilotage on the Great Lakes

AGENCY: Coast Guard, DHS.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Coast Guard is proposing to update the rates for pilotage 
on the Great Lakes. Based on our review, we propose to adjust the 
pilotage rates an average of 8.17% for the 2008 shipping season to 
generate sufficient revenue to cover allowable expenses, target pilot 
compensation, and returns on investment. We also are proposing a 
clarification of the duty of pilots and pilot associations to cooperate 
with lawful authority. This rulemaking promotes the Coast Guard 
strategic goal of maritime safety.

DATES: Comments and related material must reach the Docket Management 
Facility on or before March 3, 2008.

ADDRESSES: You may submit comments identified by Coast Guard docket 
number USCG-2007-0039 to the Docket Management Facility at the U.S. 
Department of Transportation. To avoid duplication, please use only one 
of the following methods:
    (1) Online: http://www.regulations.gov.
    (2) Mail: Docket Management Facility (M-30), U.S. Department of 
Transportation, West Building Ground Floor, Room W12-140, 1200 New 
Jersey Avenue, SE., Washington, DC 20590-0001.
    (3) Hand delivery: Room W12-140 on the Ground Floor of the West 
Building, 1200 New Jersey Avenue, SE., Washington, DC 20590, between 9 
a.m. and 5 p.m., Monday through Friday, except Federal holidays. The 
telephone number is 202-366-9329.
    (4) Fax: 202-493-2251.

FOR FURTHER INFORMATION CONTACT: For questions on this proposed rule, 
call Mr. Michael Sakaio, Program Analyst, Great Lakes Pilotage Branch, 
Commandant (CG-54122), U.S. Coast Guard, at 202-372-1538, by fax 202-
372-1929, or by e-mail at <a href="/cdn-cgi/l/email-protection#de93b7bdb6bfbbb2f08dbfb5bfb7b19eabadbdb9f0b3b7b2"><span class="__cf_email__" data-cfemail="74391d171c1511185a27151f151d1b34010717135a191d18">[email protected]</span></a>. For questions on 
viewing or submitting material to the docket, call Renee V. Wright, 
Program Manager, Docket Operations, telephone 202-366-9826.

SUPPLEMENTARY INFORMATION:

[[Page 6086]]

Table of Contents

I. Public Participation and Request for Comments
    A. Submitting Comments
    B. Viewing Comments and Documents
    C. Public Meeting
    D. Privacy Act
II. Program History
III. Purpose of the Proposed Rule
    A. Proposed Pilotage Rate Changes--Summarized
    B. Calculating the Rate Adjustment
    Step 1: Calculate total economic cost for the base period (cost 
per bridge hour by area for the base period).
    Step 2. Calculate the expense multiplier.
    Step 3. Calculate annual projection of target pilot 
compensation.
    Step 4: Increase the projected target pilot compensation in Step 
3 by the expense multiplier in Step 2.
    Step 5: Adjust the result in Step 4, as required, for inflation 
or deflation, and calculate projected total economic cost.
    Step 6: Divide the result in Step 5 by projected bridge hours to 
determine total unit costs (adjusted cost per bridge hour by area).
    Step 7: Divide prospective unit costs in Step 6 by the base 
period unit costs in Step 1.
    Step 8: Adjust the base period rates by the percentage change in 
unit costs in Step 7.
    C. Amending 46 CFR 401.700 and 710
IV. Regulatory Evaluation
    A. Small Entities
    B. Assistance for Small Entities
    C. Collection of Information
    D. Federalism
    E. Unfunded Mandates Reform Act
    F. Taking of Private Property
    G. Civil Justice Reform
    H. Protection of Children
    I. Indian Tribal Governments
    J. Energy Effects
    K. Technical Standards
    L. Environment

I. Public Participation and Request for Comments

    We encourage you to participate in this rulemaking by submitting 
comments and related materials. All comments received will be posted, 
without change, to http://www.regulations.gov and will include any 
personal information you have provided. We have an agreement with the 
Department of Transportation (DOT) to use the Docket Management 
Facility. Please see DOT's ``Privacy Act'' paragraph below.

A. Submitting Comments

    If you submit a comment, please include the docket number for this 
rulemaking (USCG-2007-0039), indicate the specific section of this 
document to which each comment applies, and give the reason for each 
comment. We recommend that you include your name and a mailing address, 
an e-mail address, or a phone number in the body of your document so 
that we can contact you if we have questions regarding your submission. 
For example, we may ask you to resubmit your comment if we are not able 
to read your original submission. You may submit your comments and 
material by electronic means, mail, fax, or delivery to the Docket 
Management Facility at the address under ADDRESSES; but please submit 
your comments and material by only one means. If you submit them by 
mail or delivery, submit them in an unbound format, no larger than 8\1/
2\ by 11 inches, suitable for copying and electronic filing. If you 
submit them by mail and would like to know that they reached the 
Facility, please enclose a stamped, self-addressed postcard or 
envelope. We will consider all comments and material received during 
the comment period. We may change this proposed rule in view of them.

B. Viewing Comments and Documents

    To view comments, as well as documents mentioned in this preamble 
as being available in the docket, go to http://www.regulations.gov at 
any time and click on ``Search for Dockets,'' and enter the docket 
number for this rulemaking (USCG-2007-0039) in the Docket ID box, and 
click enter. You may also visit the Docket Management Facility in Room 
W12-140 on the ground floor of the DOT West Building, 1200 New Jersey 
Avenue, SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday 
through Friday, except Federal holidays.

C. Public Meeting

    We do not plan to hold a public meeting. But you may submit a 
request for one to the Docket Management Facility at the address under 
ADDRESSES explaining why one would be beneficial. If we determine that 
one would aid this rulemaking, we will hold one at a time and place 
announced by a later notice in the Federal Register.

D. Privacy Act

    Anyone can search the electronic form of all comments received into 
any of our dockets by the name of the individual submitting the comment 
(or signing the comment, if submitted on behalf of an association, 
business, labor union, etc.). You may review the Department of 
Transportation's Privacy Act Statement in the Federal Register 
published on April 11, 2000 (65 FR 19477), or you may visit http://DocketsInfo.dot.gov.

II. Program History

    This notice of proposed rulemaking (NPRM) is issued pursuant to 
Coast Guard regulations in 46 CFR Chapter III, Parts 401-404. Those 
regulations implement the Great Lakes Pilotage Act of 1960, 46 U.S.C. 
Chapter 93, which requires foreign-flag vessels and U.S.-flag vessels 
in foreign trade to use federally registered Great Lakes pilots while 
transiting the St. Lawrence Seaway and the Great Lakes system, and 
which requires the Secretary of Homeland Security to ``prescribe by 
regulation rates and charges for pilotage services, giving 
consideration to the public interest and the costs of providing the 
services.'' 46 U.S.C. 9303(f).
    The U.S. waters of the Great Lakes and the St. Lawrence Seaway are 
divided into three pilotage Districts. Pilotage in each District is 
provided by an association certified by the Director of Great Lakes 
Pilotage to operate a pilotage pool. It is important to note that, 
while the Coast Guard sets rates, it does not control the actual 
compensation that pilots receive. This is determined by each of the 
three District associations, which use different compensation 
practices.
    District One, consisting of Areas 1 and 2, includes all U.S. waters 
of the St. Lawrence River and Lake Ontario. District Two, consisting of 
Areas 4 and 5, includes all U.S. waters of Lake Erie, the Detroit 
River, Lake St. Clair, and the St. Clair River. District Three, 
consisting of Areas 6, 7, and 8, includes all U.S. waters of the St. 
Mary's River, Sault Ste. Marie Locks, and Lakes Michigan, Huron, and 
Superior. Area 3 is the Welland Canal, which is serviced exclusively by 
the Canadian Great Lakes Pilotage Authority and, accordingly, is not 
included in the U.S. rate structure. Areas 1, 5, and 7 have been 
designated by Presidential Proclamation, pursuant to the Great Lakes 
Pilotage Act of 1960, to be waters in which pilots must at all times be 
fully engaged in the navigation of vessels in their charge. These 
waters were ``designated'' because they are difficult waters to 
navigate. Areas 2, 4, 6, and 8 have not been so designated because they 
are open bodies of water. Under the Great Lakes Pilotage Act of 1960, 
pilots assigned to vessels in these areas are only required to ``be on 
board and available to direct the navigation of a vessel at the 
discretion of and subject to the customary authority of the master.'' 
46 U.S.C. 9302(a)(1)(A) and (B).
    The Coast Guard pilotage regulations require annual reviews of 
pilotage rates and the setting of new rates at least once every five 
years, or sooner, if annual

[[Page 6087]]

reviews show a need. 46 CFR 404.1. To assist in calculating pilotage 
rates, the pilotage associations are required to submit to the Coast 
Guard annual financial statements prepared by certified public 
accounting firms. In addition, every fifth year, in connection with the 
mandatory rate adjustment, the Coast Guard contracts with an 
independent accounting firm to conduct a full audit of the accounts and 
records of the pilotage associations and prepare and submit financial 
reports relevant to the ratemaking process. In those years when a full 
ratemaking is conducted, the Coast Guard generates the pilotage rates 
using Appendix A to 46 CFR Part 404. Between the five-year full 
ratemaking intervals, the Coast Guard annually reviews the pilotage 
rates using Appendix C to Part 404, and adjusts rates when deemed 
appropriate. Terms and formulas used in Appendix A and Appendix C are 
defined in Appendix B to Part 404.
    The last full ratemaking using the Appendix A methodology was 
concluded on April 3, 2006 (71 FR 16501). Rates for the 2007 shipping 
season were adjusted based on an Appendix C review (interim rule, 72 FR 
8115, Feb. 23, 2007; final rule, 72 FR 53158, Sep. 18, 2007). The 
present rulemaking proposes rate adjustments for the 2008 shipping 
season, based once again on an Appendix C review.

III. Purpose of the Proposed Rule

    The pilotage regulations require that pilotage rates be reviewed 
annually. If the annual review shows that pilotage rates are within a 
reasonable range of the base target pilot compensation set in the 
previous ratemaking, no adjustment to the rates will be initiated. 
However, if the annual review indicates that an adjustment is 
necessary, then the Coast Guard will establish new pilotage rates 
pursuant to 46 CFR 404.10 and applying either Appendix A or Appendix C.

A. Proposed Pilotage Rate Changes--Summarized

    The Appendix C ratemaking methodology is intended for use during 
the years between Appendix A full ratemaking reviews and adjustments. 
This section summarizes the rate changes proposed for 2008, and then 
discusses in detail how the proposed changes were calculated under 
Appendix C. We are proposing an average increase of 8.17 percent across 
all Districts over the last pilotage rate adjustment. Table 1 
summarizes the rate increases proposed for each Area.

                                        Table 1.--2008 Area Rate Changes
----------------------------------------------------------------------------------------------------------------
                                                             Then the percentage increases over the current rate
            If pilotage service is required in:                                      is:
----------------------------------------------------------------------------------------------------------------
Area 1 (Designated waters).................................                                                 7.78
Area 2 (Undesignated waters)...............................                                                 8.41
Area 4 (Undesignated waters)...............................                                                 8.50
Area 5 (Designated waters).................................                                                 7.98
Area 6 (Undesignated waters)...............................                                                 8.37
Area 7 (Designated waters).................................                                                 7.83
Area 8 (Undesignated waters)...............................                                                 8.31
----------------------------------------------------------------------------------------------------------------

    Rates for ``Cancellation, delay or interruption in rendering 
services (Sec.  401.420)'' and ``Basic rates and charges for carrying a 
U.S. pilot beyond [the] normal change point, or for boarding at other 
than the normal boarding point (Sec.  401.428)'' have been increased by 
8.17 percent. These changes are the same in every Area.

B. Calculating the Rate Adjustment

    The Appendix C ratemaking calculation involves eight steps:
    Step 1: Calculate the total economic costs for the base period 
(i.e. pilot compensation expense plus all other recognized expenses 
plus the return element) and divide by the total bridge hours used in 
setting the base period rates;
    Step 2: Calculate the ``expense multiplier,'' the ratio of other 
expenses and the return element to pilot compensation for the base 
period;
    Step 3: Calculate an annual ``projection of target pilot 
compensation'' using the same procedures found in Step 2 of Appendix A;
    Step 4: Increase the projected pilot compensation in Step 3 by the 
expense multiplier in Step 2;
    Step 5: Adjust the result in Step 4, as required, for inflation or 
deflation;
    Step 6: Divide the result in Step 5 by projected bridge hours to 
determine total unit costs;
    Step 7: Divide prospective unit costs in Step 6 by the base period 
unit costs in Step 1; and
    Step 8: Adjust the base period rates by the percentage changes in 
unit cost in Step 7.
    The base data used to calculate each of the eight steps comes from 
the 2007 Appendix C review. The Coast Guard also used the most recent 
union contracts between the American Maritime Officers' (AMO) union and 
vessel owners and operators on the Great Lakes to determine target 
pilot compensation. Bridge hour projections for the 2008 season have 
been obtained from historical data, pilots, and industry. Bridge hours 
are the number of hours a pilot is aboard a vessel providing pilotage 
service. All documents and records used in this rate calculation have 
been placed in the public docket for this rulemaking and are available 
for review at the addresses listed under ADDRESSES.
    Some values may not total exactly due to format rounding for 
presentation in charts and explanations in this section. The rounding 
does not affect the integrity or truncate the real value of all 
calculations in the ratemaking methodology described below.
    Step 1: Calculate the total economic cost for the base period. In 
this step, for each Area, we add the total cost of target pilot 
compensation, all other recognized expenses, and the return element 
(net income plus interest). We divide this sum by the total bridge 
hours for each Area. The result is the cost in each Area of providing 
pilotage service per bridge hour. Tables 2 through 4 summarize the Step 
1 calculations:

[[Page 6088]]



                           Table 2.--Total Economic Cost for Base Period, District One
----------------------------------------------------------------------------------------------------------------
                                                                    Area 1  St.    Area 2  Lake        Total
                                                                  Lawrence River      Ontario      District One
----------------------------------------------------------------------------------------------------------------
Base operating expense..........................................        $431,313        $436,283        $867,596
Base target pilot compensation..................................     +$1,368,253       +$825,760      +2,194,013
Base return element.............................................         +$8,802        +$13,493        +$22,295
                                                                 -----------------------------------------------
    Subtotal....................................................     =$1,808,368     =$1,275,536     =$3,083,904
Base bridge hours...............................................          /5,661          /7,993         /13,654
Base cost per bridge hour.......................................        =$319.44        =$159.58        =$225.86
----------------------------------------------------------------------------------------------------------------


                           Table 3.--Total Economic Cost for Base Period, District Two
----------------------------------------------------------------------------------------------------------------
                                                                                       Area
                                                                   Area 4  Lake      Southeast         Total
                                                                       Erie        Shoal to Port   District Two
                                                                                     Huron, MI
----------------------------------------------------------------------------------------------------------------
Base operating expense..........................................        $499,328        $737,052      $1,236,380
Base target pilot compensation..................................       +$825,760     +$1,596,295     +$2,422,055
Base return element.............................................        +$26,280        +$30,711        +$56,991
                                                                 -----------------------------------------------
    Subtotal....................................................     =$1,351,368     =$2,364,058     =$3,715,426
Base bridge hours...............................................          /8,490          /6,395         /14,885
Base cost per bridge hour.......................................        =$159.17        =$369.67        =$249.61
----------------------------------------------------------------------------------------------------------------


                          Table 4.--Total Economic Cost for Base Period, District Three
----------------------------------------------------------------------------------------------------------------
                                                   Area 6  Lakes
                                                     Huron and      Area 7  St.    Area 8  Lake        Total
                                                     Michigan      Mary's River      Superior     District Three
----------------------------------------------------------------------------------------------------------------
Base operating expense..........................        $810,612        $319,193        $511,262      $1,641,067
Base target pilot compensation..................     +$1,651,520       +$912,168     +$1,156,064     +$3,719,752
Base return element.............................        +$33,776         +$9,872        +$15,812        +$59,460
                                                 ---------------------------------------------------------------
    Subtotal....................................     =$2,495,908     =$1,241,233     =$1,683,138     =$5,420,279
Base bridge hours...............................         /18,000          /3,863         /11,390         /33,253
Base cost per bridge hour.......................        =$138.66        =$321.50        =$147.77        =$163.00
----------------------------------------------------------------------------------------------------------------

    Step 2. Calculate the expense multiplier. In this step, for each 
Area, we add the base operating expense and the base return element. 
Then we divide the sum by the base target pilot compensation to get the 
expense multiplier for each Area. The expense multiplier expresses, in 
percentage form, the relationship between all non-pilot compensation, 
all expenses, and pilot compensation for the base period. Tables 5 
through 7 show the Step 2 calculations.

                                   Table 5.--Expense Multiplier, District One
----------------------------------------------------------------------------------------------------------------
                                                                    Area 1  St.    Area 2  Lake        Total
                                                                  Lawrence River      Ontario      District One
----------------------------------------------------------------------------------------------------------------
Base operating expense..........................................        $431,313        $436,283        $867,596
Base return element.............................................         +$8,802        +$13,493        +$22,295
                                                                 -----------------------------------------------
    Subtotal....................................................       =$440,115       =$449,776       =$889,891
Base target pilot compensation..................................     /$1,368,253       /$825,760     /$2,194,013
Expense multiplier..............................................         =.32166         =.54468         =.40560
----------------------------------------------------------------------------------------------------------------


                                   Table 6.--Expense Multiplier, District Two
----------------------------------------------------------------------------------------------------------------
                                                                                      Area 5
                                                                   Area 4  Lake      Southeast         Total
                                                                       Erie        Shoal to Port   District Two
                                                                                     Huron, MI
----------------------------------------------------------------------------------------------------------------
Base operating expense..........................................        $499,328        $737,052      $1,236,380
Base return element.............................................        +$26,280        +$30,711        +$56,991
                                                                 -----------------------------------------------

[[Page 6089]]

 
    Subtotal....................................................       =$525,608       =$767,763     =$1,293,371
Base target pilot compensation..................................       /$825,760     /$1,596,295     /$2,422,055
Expense multiplier..............................................         =.63651         =.48097         =.53400
----------------------------------------------------------------------------------------------------------------


                                  Table 7.--Expense Multiplier, District Three
----------------------------------------------------------------------------------------------------------------
                                                   Area 6  Lakes
                                                     Huron and      Area 7  St.    Area 8  Lake        Total
                                                     Michigan      Mary's River      Superior     District Three
----------------------------------------------------------------------------------------------------------------
Base operating expense..........................        $810,612        $319,193        $511,262      $1,641,067
Base return element.............................        +$33,776         +$9,872        +$15,812        +$59,460
                                                 ---------------------------------------------------------------
    Subtotal....................................       =$844,388       =$329,065       =$527,074     =$1,701,247
Base target pilot compensation..................     /$1,651,520       /$912,168     /$1,156,064     /$3,719,752
Expense multiplier..............................         =.51128         =.36075         =.45592         =.45716
----------------------------------------------------------------------------------------------------------------

    Step 3. Calculate annual projection of target pilot compensation. 
In this step, which duplicates Step 2 from Appendix A, we determine the 
new target rate of compensation and the new number of pilots needed in 
each pilotage Area, in order to determine the new target pilot 
compensation for each Area.
    a. Determine new target rate of compensation. Target pilot 
compensation for pilots is based on the average annual compensation of 
first mates and masters on U.S. Great Lakes vessels. Compensation 
includes wages and benefits. For pilots in undesignated waters, we 
approximate the first mates' compensation, and in designated waters we 
approximate the masters' compensation (first mates' wages multiplied by 
150% plus benefits). To determine first mates' and masters' average 
annual compensation, we use data from the most recent AMO union 
contracts with the U.S. companies engaged in Great Lakes shipping. 
Where different AMO union agreements apply to different companies, we 
apportion the compensation provided by each agreement according to the 
percentage of tonnage represented by companies under each agreement.
    Our research for the 2007 ratemaking showed six companies operating 
under contract with the AMO union. Three of the six operated under one 
set of agreements and the other three operated under modified 
agreements. Since the 2007 ratemaking, one of the six companies has 
gone out of business, and a second no longer operates under an AMO 
union contract.
    On August 16, 2007, the Coast Guard received two new sets of 
agreements that updated wage and benefit information for the four 
companies now operating under AMO union contracts. The agreements 
involved a 5% wage rate increase effective August 1, 2006 and a 3% 
increase effective August 1, 2007. Under one set of agreements 
(``Agreement A''), the daily wage rate increased from $226.96 to 
$245.46, while under the other set of agreements (``Agreement B'') the 
daily wage rate was raised from $279.55 to $302.33.
    To calculate monthly wages, we apply the new Agreement A and 
Agreement B monthly multiplier of 49.5 to the daily rate. The new 
monthly multiplier is decreased from the multiplier of 54 that was 
contained in the 2003 contracts. It represents 30.5 average working 
days per month, 16 vacation days, and 3 bonus days. To calculate 
average annual compensation, we multiply monthly figures by 9 months, 
the length of the Great Lakes shipping season.
    Table 8 shows new wage calculations based on Agreements A and B.

                             Table 8.--Wages
------------------------------------------------------------------------
                                                           Pilots on
                                        Pilots on      designated waters
         Monthly component             undesignated     (undesignated x
                                          waters             150%)
------------------------------------------------------------------------
AGREEMENT A:
    $245.46 daily rate x 49.5 days            $12,150            $18,225
AGREEMENT A:
    Monthly total x 9 months =                109,352            164,029
     total wages..................
AGREEMENT B:
    $302.33 daily rate x 49.5 days             14,965             22,488
AGREEMENT B:
    Monthly total x 9 months =                134,688            202,032
     total wages..................
------------------------------------------------------------------------

    Benefits under Agreements A and B include a health contribution 
rate of $66.69 per man-day and a pension plan contribution rate of 
$33.35 per man-day under Agreement A, and $43.55 per man-day under 
Agreement B. The AMO 401K employer matching rate remained at 5% of the 
wage rate. A clerical contribution included in the 2003 contracts was 
eliminated. Per the AMO union, the multiplier used to calculate monthly 
benefits is 45.5 days.

[[Page 6090]]



                           Table 9.--Benefits
------------------------------------------------------------------------
                                        Pilots on
         Monthly component             undesignated        Pilots on
                                          waters       designated waters
------------------------------------------------------------------------
AGREEMENT A:
    Employer contribution, 401(K)             $607.51            $911.27
     plan (Monthly Wages x 5%)....
    Pension = $33.35 x 45.5 days..          $1,517.43          $1,517.43
    Health = $66.69 x 45.5 days...          $3,034.40          $3,034.40
AGREEMENT B:
    Employer contribution, 401(K)             $748.27          $1,122.40
     plan (Monthly Wages x 5%)....
    Pension = $43.55 x 45.5 days..           1,981.53           1,981.53
    Health = $66.69 x 45.5 days...          $3,034.40          $3,034.40
AGREEMENT A:
    Monthly total benefits........         =$5,159.33         =$5,463.09
AGREEMENT A:
    Monthly total benefits x 9               =$46,434           =$49,168
     months.......................
AGREEMENT B:
    Monthly total benefits........         =$5,764.19         =$6,138.32
AGREEMENT B:
    Monthly total benefits x 9               =$51,878           =$55,245
     months.......................
------------------------------------------------------------------------

    Table 10 totals the wages and benefits under each agreement.

        Table 10.--Total Wages and Benefits Under Each Agreement
------------------------------------------------------------------------
                                          Pilots on         Pilots on
                                        undesignated       designated
                                           waters            waters
------------------------------------------------------------------------
AGREEMENT A: Wages..................          $109,352          $164,029
AGREEMENT A: Benefits...............          +$46,434          +$49,168
AGREEMENT A: Total..................         =$155,786         =$213,196
AGREEMENT B: Wages..................          $134,688          $202,032
AGREEMENT B: Benefits...............          +$51,878          +$55,245
AGREEMENT B: Total..................         =$186,566         =$257,277
------------------------------------------------------------------------

    Table 11 shows that, for the four U.S. Great Lakes shipping 
companies currently operating under AMO union contracts, approximately 
29% of their total deadweight tonnage belongs to companies operating 
under Agreement A, and approximately 71% belongs to companies operating 
under Agreement B.

          Table 11.--Deadweight Tonnage by AMO Union Agreement
------------------------------------------------------------------------
               Company                   Agreement A       Agreement B
------------------------------------------------------------------------
American Steamship Company..........  ................           664,215
Mittal Steel USA, Inc...............  ................            96,544
HMC Ship Management.................            12,656  ................
Key Lakes, Inc......................           303,145  ................
    Total tonnage, each agreement...           315,801           760,759
    Percent tonnage, each agreement.         315,801 /         760,759 /
                                             1,076,560         1,076,560
                                             =29.3343%         =70.6657%
------------------------------------------------------------------------

    Table 12 applies the percentage of tonnage represented by each 
agreement to the wages and benefits provided by each agreement, to 
determine the projected target rate of compensation on a tonnage-
weighted basis.

            Table 12.--Projected Target Rate of Compensation
------------------------------------------------------------------------
                                        Undesignated       Designated
                                           waters            waters
------------------------------------------------------------------------
AGREEMENT A: Total wages and                $155,786 x        $213,196 x
 benefits x percent tonnage.........        29.3343% =        29.3343% =
                                               $45,699           $62,540
AGREEMENT B: Total wages and                $186,566 x        $257,277 x
 benefits x percent tonnage.........        70.6657% =        70.6657% =
                                              $131,838          $181,807
                                     -----------------------------------

[[Page 6091]]

 
    Total weighted average wages and         $45,699 +         $62,540 +
     benefits = projected target            $131,838 =        $181,807 =
     rate of compensation...........          $177,537          $244,346
------------------------------------------------------------------------

    b. Determine number of pilots needed. Subject to adjustment by the 
Director of Great Lakes Pilotage to ensure uninterrupted service, we 
determine the number of pilots needed in each Area by dividing each 
Area's projected bridge hours, either by 1,000 (designated waters) or 
by 1,800 (undesignated waters).
    Bridge hours are the number of hours a pilot is aboard a vessel 
providing pilotage service. Projected bridge hours are based on the 
vessel traffic that pilots are expected to serve. Based on historical 
data and information provided by pilots and industry, the Coast Guard 
projects that traffic for the 2008 navigation season will remain the 
same as it did in 2007.
    Table 13 shows the projected bridge hours needed for each Area, and 
the total number of pilots needed after dividing those figures either 
by 1,000 or 1,800 and rounding up to the next whole pilot:

                   Table 13.--Number of Pilots Needed
------------------------------------------------------------------------
                                                Divided by
                                                  1,000
                                  Projected    (designated      Pilots
         Pilotage area           2008 bridge    waters) or      needed
                                    hours         1,800        (total =
                                              (undesignated      44)
                                                 waters)
------------------------------------------------------------------------
Area 1.........................        5,661         1,000             6
Area 2.........................        7,993         1,800             5
Area 4.........................        8,490         1,800             5
Area 5.........................        6,395         1,000             7
Area 6.........................       18,000         1,800            10
Area 7.........................        3,863         1,000             4
Area 8.........................       11,390         1,800             7
------------------------------------------------------------------------

    c. Determine the projected target pilot compensation for each Area. 
The projection of new total target pilot compensation is determined 
separately for each pilotage Area by multiplying the number of pilots 
needed in each Area by the projected target rate of compensation for 
pilots working in that Area. Table 14 shows this calculation.

                                 Table 14.--Projected Target Pilot Compensation
----------------------------------------------------------------------------------------------------------------
                                                                                Multiplied by   Projected target
                       Pilotage area                          Pilots needed    target rate of         pilot
                                                              (total = 44)      compensation      compensation
----------------------------------------------------------------------------------------------------------------
Area 1....................................................                 6        x $244,346        $1,466,077
Area 2....................................................                 5        x $177,537           887,684
                                                           -----------------------------------------------------
    Total, District One...................................  ................  ................         2,353,761
 
Area 4....................................................                 5        x $177,537           887,684
Area 5....................................................                 7        x $244,346         1,710,424
                                                           -----------------------------------------------------
    Total, District Two...................................  ................  ................         2,598,108
 
Area 6....................................................                10        x $177,537         1,775,368
Area 7....................................................                 4        x $244,346           977,385
Area 8....................................................                 7        x $177,537         1,242,758
                                                           -----------------------------------------------------
    Total, District Three.................................  ................  ................         3,995,511
----------------------------------------------------------------------------------------------------------------

    Step 4: Increase the projected pilot compensation in Step 3 by the 
expense multiplier in Step 2. This step yields a projected increase in 
operating costs necessary to support the increased projected pilot 
compensation. Table 15 shows this calculation.

[[Page 6092]]



Table 15.--Projected Pilot Compensation, Multiplied by the Expense Multiplier Equals Projected Operating Expense
----------------------------------------------------------------------------------------------------------------
                                                            Projected target    Multiplied by       Projected
                       Pilotage area                              pilot            expense          operating
                                                              compensation       multiplier          expense
----------------------------------------------------------------------------------------------------------------
Area 1....................................................        $1,466,077          x .32166        = $471,581
Area 2....................................................           887,684          x .54468        = $483,505
                                                           -----------------------------------------------------
    Total, District One...................................         2,353,761          x .40560        = $954,685
 
Area 4....................................................           887,684          x .63651        = $565,024
Area 5....................................................         1,710,424          x .48097        = $822,655
                                                           -----------------------------------------------------
    Total, District Two...................................         2,598,108          x .53400      = $1,387,383
 
Area 6....................................................         1,775,368          x .51128        = $907,709
Area 7....................................................           977,385          x .36075        = $352,592
Area 8....................................................         1,242,758          x .45592        = $566,600
                                                           -----------------------------------------------------
    Total, District Three.................................         3,995,511          x .45716      = $1,826,593
----------------------------------------------------------------------------------------------------------------

    Step 5: Adjust the result in Step 4, as required, for inflation or 
deflation, and calculate projected total economic cost. Based on data 
from the U.S. Department of Labor's Bureau of Labor Statistics, we have 
multiplied the results in Step 4 by a 1.024 inflation factor, 
reflecting an average inflation rate of 2.4% in ``Midwest Economy--
``Consumer Prices'' between 2005 and 2006, the latest years for which 
data are available. Table 16 shows this calculation and the projected 
total economic cost.

Table 16.--Projected Operating Expense, Adjusted for Inflation, and Added to Projected Target Pilot Compensation
                                      Equals Projected Total Economic Cost
----------------------------------------------------------------------------------------------------------------
                                                              B. increase,
                                            A. projected      multiplied by     C. projected      D. projected
              Pilotage area                   operating     inflation factor    target pilot     total economic
                                               expense        (= A x 1.024)     compensation      cost  (= B+C)
----------------------------------------------------------------------------------------------------------------
Area 1..................................          $471,581          $482,899        $1,466,077        $1,948,977
Area 2..................................           483,505           495,109           887,684         1,382,793
                                         -----------------------------------------------------------------------
    Total, District One.................           954,685           977,597         2,353,761         3,331,359
 
Area 4..................................           565,024           578,584           887,684         1,466,268
Area 5..................................           822,655           842,399         1,710,424         2,552,822
                                         -----------------------------------------------------------------------
    Total, District Two.................         1,387,383         1,420,680         2,598,108         4,018,788
 
Area 6..................................           907,709           929,494         1,775,368         2,704,862
Area 7..................................           352,592           361,054           977,385         1,338,439
Area 8..................................           566,600           580,198         1,242,758         1,822,956
                                         -----------------------------------------------------------------------
    Total, District Three...............         1,826,593         1,870,432         3,995,511         5,865,942
 
----------------------------------------------------------------------------------------------------------------

    Step 6: Divide the result in Step 5 by projected bridge hours to 
determine total unit costs. Table 17 shows this calculation.

                                    Table 17.--Prospective (Total) Unit Costs
----------------------------------------------------------------------------------------------------------------
                                                                                                   Prospective
                                                              A. projected      B. projected      (total) unit
                       Pilotage area                         total economic      2008 bridge    costs (A divided
                                                                  cost              hours             by B)
----------------------------------------------------------------------------------------------------------------
Area 1....................................................        $1,948,977             5,661           $344.28
Area 2....................................................         1,382,793             7,993            173.00
                                                           -----------------------------------------------------
    Total, District One...................................         3,331,359            13,654            243.98
 
Area 4....................................................         1,466,268             8,490            172.71
Area 5....................................................         2,552,822             6,395            399.19
                                                           -----------------------------------------------------
    Total, District Two...................................         4,018,788            14,885            269.99
 
Area 6....................................................         2,704,862            18,000            150.27
Area 7....................................................         1,338,439             3,863            346.48
Area 8....................................................         1,822,956            11,390            160.05
                                                           -----------------------------------------------------

[[Page 6093]]

 
    Total, District Three.................................         5,865,942            33,253            176.40
----------------------------------------------------------------------------------------------------------------

    Step 7: Divide prospective unit costs (total unit costs) in Step 6 
by the base period unit costs in Step 1. Table 18 shows this 
calculation, which expresses the percentage change between the total 
unit costs and the base unit costs. The results, for each Area, are 
identical with the percentage increases listed in Table 1.

                      Table 18.--Percentage Change, Prospective vs. Base Period Unit Costs
----------------------------------------------------------------------------------------------------------------
                                                                                                  C. percentage
                                                                                                change from base
                       Pilotage area                         A. prospective    B. base period   (A divided by B;
                                                               unit costs        unit costs     result expressed
                                                                                                 as percentage)
----------------------------------------------------------------------------------------------------------------
Area 1....................................................           $344.28           $319.44              7.78
Area 2....................................................            173.00             159.5              8.41
                                                           -----------------------------------------------------
    Total, District One...................................            243.98            225.86              8.02
 
Area 4....................................................            172.71            159.17              8.50
Area 5....................................................            399.19            369.67              7.98
                                                           -----------------------------------------------------
    Total, District Two...................................            269.99            249.61              8.16
 
Area 6....................................................            150.27            138.66              8.37
Area 7....................................................            346.48            321.31              7.83
Area 8....................................................            160.05            147.77              8.31
                                                           -----------------------------------------------------
    Total, District Three.................................            176.40            163.00              8.22
----------------------------------------------------------------------------------------------------------------

    Step 8: Adjust the base period rates by the percentage change in 
unit costs in Step 7. Table 19 shows this calculation.

                   Table 19.--Base Period Rates Adjusted by Percentage Change in Unit Costs\1\
----------------------------------------------------------------------------------------------------------------
                                                         B. percentage
                                    A. base period      change in unit      C. increase in     D. adjusted rate
          Pilotage area                  rate         costs (multiplying  base rate (A x B%)  (A + C, rounded to
                                                            factor)                             nearest dollar)
----------------------------------------------------------------------------------------------------------------
Area 1..........................  ..................       7.78 (1.0778)  ..................  ..................
    Basic pilotage..............      $13/km, $23/mi  ..................  $1.01/km, $1.79/mi      $14/km, $25/mi
    Each lock transited.........                 288  ..................               22.41                 310
    Harbor movage...............                 943  ..................               73.37               1,016
    Minimum basic rate, St.                      629  ..................               48.94                 678
     Lawrence River.............
    Maximum rate, through trip..               2,761  ..................              214.81               2,976
Area 2..........................  ..................       8.41 (1.0841)  ..................  ..................
    6-hr. period................                 477  ..................               40.12                 517
    Docking or undocking........                 455  ..................               38.27                 493
Area 4..........................  ..................       8.50 (1.0850)  ..................  ..................
    6 hr. period................                 641  ..................               54.49                 695
    Docking or undocking........                 494  ..................               41.99                 536
    Any point on Niagara River                 1,261  ..................              107.19               1,368
     below Black Rock Lock......
Area 5 between any point on or    ..................       7.98 (1.0798)  ..................  ..................
 in:............................
    Toledo or any point on Lake                1,004  ..................               80.12               1,084
     Erie W. of Southeast Shoal.
    Toledo or any point on Lake                1,699  ..................              135.58               1,835
     Erie W. of Southeast Shoal
     & Southeast Shoal..........
    Toledo or any point on Lake                2,206  ..................              176.04               2,382
     Erie W. of Southeast Shoal
     & Detroit River............
    Toledo or any point on Lake                1,699  ..................              135.58               1,835
     Erie W. of Southeast Shoal
     & Detroit Pilot Boat.......
    Port Huron Change Point &                  2,959  ..................              236.13               3,195
     Southeast Shoal (when
     pilots are not changed at
     the Detroit Pilot Boat)....

[[Page 6094]]

 
    Port Huron Change Point &                  3,428  ..................              273.55               3,702
     Toledo or any point on Lake
     Erie W. of Southeast Shoal
     (when pilots are not
     changed at the Detroit
     Pilot Boat)................
    Port Huron Change Point &                  2,223  ..................              177.40               2,400
     Detroit River..............
    Port Huron Change Point &                  1,729  ..................              137.97               1,867
     Detroit Pilot Boat.........
    Port Huron Change Point &                  1,229  ..................               98.07               1,327
     St. Clair River............
    St. Clair River.............               1,004  ..................               80.12               1,084
    St. Clair River & Southeast                2,959  ..................              236.13               3,195
     Shoal (when pilots are not
     changed at the Detroit
     Pilot Boat)................
    St. Clair River & Detroit                  2,223  ..................              177.40               2,400
     River/Detroit Pilot Boat...
    Detroit, Windsor, or Detroit               1,004  ..................               80.12               1,084
     River......................
    Detroit, Windsor, or Detroit               1,699  ..................              135.58               1,835
     River & Southeast Shoal....
    Detroit, Windsor, or Detroit               2,206  ..................              176.04               2,382
     River & Toledo or any point
     on Lake Erie W. of
     Southeast Shoal............
    Detroit, Windsor, or Detroit               2,223  ..................              177.40               2,400
     River & St. Clair River....
    Detroit Pilot Boat &                       1,229  ..................               98.07               1,327
     Southeast Shoal............
    Detroit Pilot Boat & Toledo                1,699  ..................              135.58               1,835
     or any point on Lake Erie
     W. of Southeast Shoal......
    Detroit Pilot Boat & St.                   2,223  ..................              177.40               2,400
     Clair River................
Area 6..........................  ..................       8.37 (1.0837)  ..................  ..................
    6 hr. period................                 479  ..................               40.09                 519
    Docking or undocking........                 455  ..................               38.08                 493
Area 7 between any point on or    ..................       7.83 (1.0783)  ..................  ..................
 in:............................
    Gros Cap & De Tour..........               1,718  ..................              134.52               1,853
    Algoma Steel Corp. Wharf,                  1,718  ..................              134.52               1,853
     Sault Ste. Marie, Ont. & De
     Tour.......................
    Algoma Steel Corp. Wharf,                    647  ..................               50.66                 698
     Sault Ste. Marie, Ont. &
     Gros Cap...................
    Any point in Sault Ste.                    1,440  ..................              112.75               1,553
     Marie, Ont., except the
     Algoma Steel Corp. Wharf &
     De Tour....................
    Any point in Sault Ste.                      647  ..................               50.66                 698
     Marie, Ont., except the
     Algoma Steel Corp. Wharf &
     Gros Cap...................
    Sault Ste. Marie, MI & De                  1,440  ..................              112.75               1,553
     Tour.......................
    Sault Ste. Marie, MI & Gros                  647  ..................               50.66                 698
     Cap........................
    Harbor movage...............                 647  ..................               50.66                 698
Area 8..........................  ..................       8.31 (1.0831)  ..................  ..................
    6 hr. period................                 464  ..................               38.56                 503
    Docking or undocking........                 441  ..................               36.65                478
----------------------------------------------------------------------------------------------------------------
\1\ Rates for ``Cancellation, delay or interruption in rendering services ( Sec.   401.420)'' and ``Basic Rates
  and charges for carrying a U.S. pilot beyond the normal change point, or for boarding at other than the normal
  boarding point (Sec.   401.428)'' are not reflected in this table but have been increased by 8.17% across all
  areas.

C. Amending 46 CFR 401.700 and 710

    The Coast Guard also proposes to amend 46 CFR 401.700 and 401.710 
to clarify the obligation imposed on Great Lakes registered pilots and 
authorized pilotage pools to fully and professionally cooperate in the 
course of performing their duties with U.S. and Canadian Coast Guard 
units and personnel, vessel traffic service personnel, and other lawful 
authority.
    This amendment is required because foreign trade vessels piloted by 
U.S. pilots on the St. Lawrence Seaway and Great Lakes system routinely 
cross and re-cross the international boundary between the U.S. and 
Canada. Frequently numerous crossings are made in a single voyage with 
both sovereigns exercising authority at various points of a transit. 
The post 9/11 period of heightened security makes it imperative to 
clearly state the obligation of U.S. Great Lakes pilots and their 
associations to immediately and professionally comply with any legal 
directions received, and requests for information, from both U.S. and 
Canadian law enforcement authority and with those administrative 
personnel responsible for ensuring the safety and security of the 
system.

IV. Regulatory Evaluation

    Executive Order 12866, ``Regulatory Planning and Review,'' 58 FR 
51735, October 4, 1993, requires a determination whether a regulatory 
action is ``significant'' and therefore subject to review by the Office 
of Management and Budget (OMB) and subject to the requirements of the 
Executive Order. This rulemaking is not significant under Executive 
Order 12866 and will not be reviewed by OMB.
    The Coast Guard is required to conduct an annual review of pilotage 
rates on the Great Lakes and, if necessary, adjust these rates to align 
compensation levels between Great Lakes pilots and industry. (See the 
``Background'' section for a detailed explanation of the legal 
authority and requirements for the Coast Guard to conduct an annual 
review and provide possible adjustments of pilotage rates on the Great 
Lakes.) Based on our review, we are proposing an adjustment to the 
pilotage rates for the 2008 shipping season to generate sufficient 
revenue to cover allowable expenses, target pilot compensation, and 
returns on investment.
    This proposed rule would implement an 8.17 percent average rate 
adjustment

[[Page 6095]]

per area for the Great Lakes system over the rate adjustment found in 
the 2007 final rule. These adjustments to Great Lakes pilotage rates 
meet the requirements set forth in 46 CFR part 404 for similar 
compensation levels between Great 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 proposed rule would 
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. However, the 
Coast Guard issued a policy position several years ago stating 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 
proposed 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 reviewed a sample of pilot source forms, which are the forms 
used to record pilotage transactions on vessels, and discovered very 
few cases of U.S. Great Lakes vessels (i.e., domestic vessels without 
registry operating only in the Great Lakes) that purchased pilotage 
services. There was one case where the vessel operator purchased 
pilotage service in District One to presumably leave the Great Lakes 
system. We assume some vessel owners and operators may also choose to 
purchase pilotage services if their vessels are carrying hazardous 
substances or were navigating the Great Lakes system with inexperienced 
personnel. Based on information from the Coast Guard Office of Great 
Lakes Pilotage, we have determined that these vessels voluntarily chose 
to use pilots and, therefore, are exempt from pilotage requirements.
    We updated our estimates of affected vessels for the proposed rule 
by using recent vessel characteristics, documentation, and arrival 
data. We used 2005-2006 vessel arrival data from the National Vessel 
Movement Center (NVMC) and 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 217 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 
vessels often make more than one distinct stop, docking, loading, and 
unloading at facilities in Great Lakes ports. Of the total trips for 
the 217 vessels, there were approximately 917 annual U.S. port arrivals 
before the vessels left the Great Lakes system, based on 2005-2006 
vessel data from the NVMC and MISLE.
    We used district pilotage revenues from the independent 
accountant's reports of the Districts' financial statements to estimate 
the additional cost to shippers of the rate adjustments in this 
proposed rule. These revenues represent the direct and indirect 
pilotage costs that shippers must pay for pilotage services in order to 
transit their vessels in the Great Lakes. Table 1 shows historical 
pilotage revenues by District.

                                           Table 1.--District Revenues
                                                     [$U.S.]
----------------------------------------------------------------------------------------------------------------
              Year                   District one        District two       District three           Total
----------------------------------------------------------------------------------------------------------------
1998............................           2,127,577           3,202,374           4,026,802           9,356,753
1999............................           2,009,180           2,727,688           3,599,993           8,336,861
2000............................           1,890,779           2,947,798           4,036,354           8,874,931
2001............................           1,676,578           2,375,779           3,657,756           7,710,113
2002............................           1,686,655           2,089,348           3,460,560          7,236,563
----------------------------------------------------------------------------------------------------------------
Source: Annual independent accountant's reports of the Districts to the Coast Guard's Office of Great Lake
  Pilotage.

    While the revenues have decreased over time, the Coast Guard 
adjusts pilotage rates to achieve a target pilot compensation similar 
to masters and first mates working on U.S. vessels engaged in the Great 
Lakes trade. Pilotage rates are set by the Coast Guard for revenues to 
equal the estimated costs of pilotage. Table 2 displays projected costs 
from the 2006 and 2007 final rules and the 2002 revenue from Table 1.

                          Table 2.--Revenues and Costs Through the 2007 Rate Adjustment
                                                   [$U.S.]\1\
----------------------------------------------------------------------------------------------------------------
            District                 District one        District two       District three         Total \2\
----------------------------------------------------------------------------------------------------------------
2002 District Revenues..........           1,686,655           2,089,348           3,460,560           7,236,563
2006 Total Projected Economic              2,692,426           3,238,337           4,722,162          10,652,925
 Cost...........................
2007 Total Projected Economic              3,083,904           3,715,426           5,420,279         12,219,609
 Cost...........................
----------------------------------------------------------------------------------------------------------------
\1\ For the calculation of the 2006 and 2007 projected economic costs, see the ``Discussion of Rule'' sections
  of the 2006 and 2007 final rules published in the Federal Register.
\2\ Some values may not total due to rounding.

    We estimate the additional cost of the rate adjustment in this 
proposed rule to be the difference between the total revenue needed to 
cover costs based on the 2007 rate adjustment and the total projected 
economic cost in this

[[Page 6096]]

proposed rule. Table 3 compares projected economic costs in 2007 and 
costs of the proposed rule to industry by district.

                   Table 3.--Rate Adjustment Factors and Additional Cost of This Proposed Rule
                                                     [$U.S.]
----------------------------------------------------------------------------------------------------------------
            District                 District one        District two       District three         Total \1\
----------------------------------------------------------------------------------------------------------------
Total Projected Economic Cost in           3,083,904           3,715,426           5,420,279          12,219,609
 2007...........................
Proposed Rate Adjustment \2\....              1.0802              1.0816              1.0822              1.0817
Total Projected Economic Cost in           3,331,359           4,018,788           5,865,942          13,216,089
 2008...........................
Additional Revenue Required or               247,455             303,362             445,663            996,480
 Cost of this Rulemaking \3\....
----------------------------------------------------------------------------------------------------------------
\1\ Some values may not total due to rounding.
\2\ See steps 5(b) and 7 of the ``Calculating the Rate Adjustment'' section of this proposed rule for the
  ``Proposed Rate Adjustment'' and the ``Total Projected Economic Cost in 2008''.
\3\ Additional revenue or cost of this rule = ``Total Projected Economic Cost in 2008''--``Total Projected
  Economic Cost in 2007''.

    After applying the rate change in this proposed rule, the resulting 
difference between the adjusted economic cost in 2007 and the projected 
economic cost in 2008 is the annual cost to shippers from this proposed 
rule. This figure will be equivalent to the total additional payments 
that shippers will make for pilotage services from this proposed rule.
    The annual cost of the rate adjustment in this proposed rule to 
shippers is approximately $1.0 million (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 proposed 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 proposed rule over a five-year period instead of a 
ten-year period. The total five-year (2008-2012) present value cost 
estimate of this proposed rule to shippers is $4.4 million discounted 
at a seven percent discount rate and $4.7 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 we anticipate that industry 
would most likely begin to incur costs immediately upon publication of 
this proposed rule during the 2008 Great Lakes shipping season which is 
generally less than a calendar year. We also considered a middle-of-
year discounting process to account for the payments occurring over the 
course of the year but the difference was small considering the overall 
cost of the proposed rule.

A. Small Entities

    Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have 
considered whether this proposed rule would 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.
    We expect entities affected by the proposed rule would be 
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.
    For the proposed rule, we reviewed recent company size and 
ownership data from 2005-2006 Coast Guard MISLE data and business 
revenue and size data provided by reference USA and Dunn and 
Bradstreet. We were able to gather revenue and size data or link the 
entities to large shipping conglomerates for 22 of the 24 affected 
entities in the United States. We found that large, mostly foreign-
owned, shipping conglomerates or their subsidiaries owned or operated 
all vessels engaged in foreign trade on the Great Lakes. We assume that 
new industry entrants will be comparable in ownership and size to these 
shippers.
    There are three U.S. entities affected by the proposed rule that 
would receive the additional revenues from the rate adjustment. These 
are the three pilot associations that are the only entities providing 
pilotage services within the Great Lakes districts. Two of the 
associations operate as partnerships and one operates as a corporation. 
These associations are classified with the same NAICS industry 
classification and small entity size standards described above, but 
they have far fewer than 500 employees: approximately 65 total 
employees combined. However, they are not adversely impacted with the 
additional costs of the rate adjustments, but instead receive the 
additional revenue benefits for operating expenses and pilot 
compensation.
    Therefore, the Coast Guard has found that this proposed rule would 
not have a significant impact on a substantial number of U.S. small 
entities under 5 U.S.C. 605(b). If you think that your business, 
organization, or governmental jurisdiction qualifies as a small entity 
and that this proposed rule would have a significant economic impact on 
it, please submit a comment to the Docket Management Facility at the 
address under ADDRESSES. In your comment, explain why you think it 
qualifies and how and to what degree this proposed rule would 
economically affect it.

B. Assistance for Small Entities

    Under section 213(a) of the Small Business Regulatory Enforcement 
Fairness Act of 1996 (Pub. L. 104-121), we offered to assist small 
entities in understanding the proposed rule so that they could better 
evaluate its effects on them and participate in the rulemaking.

[[Page 6097]]

If the proposed rule would affect your small business, organization, or 
governmental jurisdiction and you have questions concerning its 
provisions or options for compliance, please call Mike Sakaio, Great 
Lakes Pilotage Branch, (CG-54122), U.S. Coast Guard, telephone 202-372-
1538 or send him e-mail at <a href="/cdn-cgi/l/email-protection#2f62464c474e4a43017c4e444e46406f5a5c4c4801424643"><span class="__cf_email__" data-cfemail="367b5f555e57535a1865575d575f597643455551185b5f5a">[email protected]</span></a>. Small businesses 
may send comments on the actions of Federal employees who enforce, or 
otherwise determine compliance with, Federal regulations to the Small 
Business and Agriculture Regulatory Enforcement Ombudsman and the 
Regional Small Business Regulatory Fairness Boards. The Ombudsman 
evaluates these actions annually and rates each agency's responsiveness 
to small business. If you wish to comment on actions by employees of 
the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247).

C. Collection of Information

    This proposed rule would call for no new collection of information 
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). This 
rule does not change the burden in the collection currently approved by 
the Office of Management and Budget (OMB) under OMB Control Number 
1625-0086, Great Lakes Pilotage Methodology.

D. Federalism

    A rule has implications for federalism under Executive Order 13132, 
Federalism, if it has a substantial direct effect on State or local 
governments and would either preempt State law or impose a substantial 
direct cost of compliance on them. We have analyzed this rule under 
that Order and have determined that it does not have implications for 
federalism because there are no similar State regulations, and the 
States do not have the authority to regulate and adjust rates for 
pilotage services in the Great Lakes system.

E. Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) 
requires Federal agencies to assess the effects of their discretionary 
regulatory actions. In particular, the Act addresses actions that may 
result in the expenditure by a State, local, or tribal government, in 
the aggregate, or by the private sector of $100,000,000 or more in any 
one year. Though this rule would not result in such expenditure, we do 
discuss the effects of this rule elsewhere in this preamble.

F. Taking of Private Property

    This rule would not affect a taking of private property or 
otherwise have taking implications under Executive Order 12630, 
Governmental Actions and Interference with Constitutionally Protected 
Property Rights.

G. Civil Justice Reform

    This rule meets applicable standards in sections 3(a) and 3(b)(2) 
of Executive Order 12988, Civil Justice Reform, to minimize litigation, 
eliminate ambiguity, and reduce burden.

H. Protection of Children

    We have analyzed this rule under Executive Order 13045, Protection 
of Children from Environmental Health Risks and Safety Risks. This rule 
is not an economically significant rule and does not create an 
environmental risk to health or risk to safety that may 
disproportionately affect children.

I. Indian Tribal Governments

    This rule does not have tribal implications under Executive Order 
13175, Consultation and Coordination with Indian Tribal Governments, 
because it does not have a substantial direct effect on one or more 
Indian tribes, on the relationship between the Federal Government and 
Indian tribes, or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes.

J. Energy Effects

    We have analyzed this rule under Executive Order 13211, Actions 
Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use. We have determined that it is not a ``significant 
energy action'' under that order because it is not a ``significant 
regulatory action'' under Executive Order 12866 and is not likely to 
have a significant adverse effect on the supply, distribution, or use 
of energy. The Administrator of the Office of Information and 
Regulatory Affairs has not designated it as a significant energy 
action. Therefore, it does not require a Statement of Energy Effects 
under Executive Order 13211.

K. Technical Standards

    The National Technology Transfer and Advancement Act (NTTAA) (15 
U.S.C. 272 note) directs agencies to use voluntary consensus standards 
in their regulatory activities unless the agency provides Congress, 
through the Office of Management and Budget, with an explanation of why 
using these standards would be inconsistent with applicable law or 
otherwise impractical. Voluntary consensus standards are technical 
standards (e.g., specifications of materials, performance, design, or 
operation; test methods; sampling procedures; and related management 
systems practices) that are developed or adopted by voluntary consensus 
standards bodies. This rule does not use technical standards. 
Therefore, we did not consider the use of voluntary consensus 
standards.

L. Environment

    We have analyzed this rule under Commandant Instruction M16475.lD, 
which guides the Coast Guard in complying with the National 
Environmental Policy Act of 1969 (NEPA)(42 U.S.C. 4321-4370f), and have 
made a preliminary determination that there are no factors in this case 
that would limit the use of a categorical exclusion under section 2.B.2 
of the Instruction. Therefore, we believe that this rule should be 
categorically excluded, under figure 2-1, paragraph (34)(a), of the 
Instruction, from further environmental documentation. Paragraph 34(a) 
pertains to minor regulatory changes that are editorial or procedural 
in nature. This rule adjusts rates in accordance with applicable 
statutory and regulatory mandates. An ``Environmental Analysis Check 
List'' is available in the docket where indicated under the ``Public 
Participation and Request for Comments'' section of this preamble. 
Comments on this section will be considered before we make the final 
decision on whether this rule should be categorically excluded from 
further environmental review.

List of Subjects in 46 CFR Part 401

    Administrative practice and procedure, Great Lakes, Navigation 
(water), Penalties, Reporting and recordkeeping requirements, Seamen.

    For the reasons discussed in the preamble, the Coast Guard proposes 
to amend 46 CFR part 401 as follows:

PART 401--GREAT LAKES PILOTAGE REGULATIONS

    1. The authority citation for part 401 continues to read as 
follows:

    Authority: 46 U.S.C. 2104(a), 6101, 7701, 8105, 9303, 9304; 
Department of Homeland Security Delegation No. 0170.1 46 CFR 401.105 
also issued under the authority of 44 U.S.C. 3507

    2. In Sec.  401.405, revise paragraphs (a) and (b) to read as 
follows:


Sec.  401.405  Basic rates and charges on the St. Lawrence River and 
Lake Ontario.

* * * * *
    (a) Area 1 (Designated Waters):

------------------------------------------------------------------------
                  Service                        St. Lawrence River
------------------------------------------------------------------------
Basic Pilotage............................  $14 per Kilometer or $25 per
                                             mile. \1\

[[Page 6098]]

 
Each Lock Transited.......................  $310. \1\
Harbor Movage.............................  $1,016. \1\
------------------------------------------------------------------------
\1\ The minimum basic rate for assignment of a pilot in the St. Lawrence
  River is $678, and the maximum basic rate for a through trip is
  $2,976.

    (b) Area 2 (Undesignated Waters):

------------------------------------------------------------------------
                         Service                           Lake Ontario
------------------------------------------------------------------------
Six-Hour Period.........................................            $517
Docking or Undocking....................................             493
------------------------------------------------------------------------

    3. In Sec.  401.407 revise paragraphs (a) and (b) to read as 
follows:


Sec.  401.407  Basic rates and charges on Lake Erie and the navigable 
waters from Southeast Shoal to Port Huron, MI.

* * * * *
    (a) Area 4 (Undesignated Waters):

------------------------------------------------------------------------
                                             Lake Erie
                                             (East of
                 Service                     Southeast        Buffalo
                                              Shoal)
------------------------------------------------------------------------
Six-Hour Period.........................            $695            $695
Docking or Undocking....................             536             536
Any Point on the Niagara River below the             N/A          $1,368
 Black Rock Lock........................
------------------------------------------------------------------------

    (b) Area 5 (Designated Waters):

----------------------------------------------------------------------------------------------------------------
                                                   Toledo or any
                                                   point on Lake
       Any point on or in            Southeast     Erie west of    Detroit River   Detroit Pilot     St. Clair
                                       Shoal         Southeast                         Boat            River
                                                       Shoal
----------------------------------------------------------------------------------------------------------------
Toledo or any port on Lake Erie           $1,835          $1,084          $2,382          $1,835             N/A
 west of Southeast Shoal........
Port Huron Change Point.........       \1\ 3,195           3,702           2,400           1,867          $1,327
St. Clair River.................       \1\ 3,195             N/A           2,400           2,400           1,084
Detroit or Windsor or the                  1,835           2,382           1,084             N/A           2,400
 Detroit River..................
Detroit Pilot Boat..............           1,327           1,835             N/A             N/A          2,400
----------------------------------------------------------------------------------------------------------------
\1\ When pilots are not changed at the Detroit Pilot Boat.

    4. In Sec.  401.410, revise paragraphs (a), (b), and (c) to read as 
follows:


Sec.  401.410  Basic rates and charges on Lakes Huron, Michigan, and 
Superior, and the St Mary's River.

* * * * *
    (a) Area 6 (Undesignated Waters):

------------------------------------------------------------------------
                                                            Lakes Huron
                         Service                           and Michigan
------------------------------------------------------------------------
Six-Hour Period.........................................            $519
Docking or Undocking....................................             493
------------------------------------------------------------------------

    (b) Area 7 (Designated Waters):

----------------------------------------------------------------------------------------------------------------
                              Area                                    De Tour        Gros Any       Cap harbor
----------------------------------------------------------------------------------------------------------------
Gros Cap........................................................          $1,853             N/A             N/A
Algoma Steel Corporation Wharf at Sault Ste. Marie, Ontario.....           1,853             698             N/A
Any point in Sault Ste. Marie, Ontario, except the Algoma Steel            1,553            $698             N/A
 Corporation Wharf..............................................
Sault Ste. Marie, MI............................................           1,553             698             N/A
Harbor Movage...................................................             N/A             N/A            $698
----------------------------------------------------------------------------------------------------------------

    (c) Area 8 (Undesignated Waters):

------------------------------------------------------------------------
                         Service                           Lake Superior
------------------------------------------------------------------------
Six-Hour Period.........................................            $503
Docking or Undocking....................................             478
------------------------------------------------------------------------

Sec.  401.420  [Amended]

    5. In Sec.  401.420--
    a. In paragraph (a), remove the number ``$86'' and add, in its 
place, the number ``$93''; and remove the number ``$1,349'' and add, in 
its place, the number ``$1,459''.
    b. In paragraph (b), remove the number ``$86'' and add, in its 
place, the number ``$93''; and remove the number ``$1,349'' and add, in 
its place, the number ``$1,459''.
    c. In paragraph (c)(1), remove the number ``$510'' and add, in its 
place, the number ``$552''; in paragraph (c)(3), remove the number 
``$86'' and add, in its place, the number ``$93''; and, also in 
paragraph (c)(3), remove the number ``$1,349'' and add, in its place, 
the number ``$1,459''.


Sec.  401.428  [Amended]

    6. In Sec.  401.428, remove the number ``$520'' and add, in its 
place, the number ``$562''.
    7. Revise Sec.  401.700 to read as follows:


Sec.  401.700  Operating requirements for U.S. registered pilots.

    Each U.S. registered pilot shall--
    (a) Provide pilotage service when dispatched by his pool;
    (b) Comply with the dispatching orders of the Director under Sec.  
401.720(b);
    (c) Comply immediately and professionally, consistent with the safe 
navigation of the vessel, with all lawful requests and directions 
received from U.S. and Canadian Coast Guard units and personnel, vessel 
traffic service personnel, and other lawful authority; and
    (d) A violation of any of these provisions may be punished in 
accordance with 46 CFR 401.500 and be grounds for the suspension or 
revocation of a pilots registration pursuant to 46 CFR 401 subpart F.
    8. In Sec.  401.710, revise paragraphs (f) and (g) and add 
paragraphs (h) and (i) to read as follows:

[[Page 6099]]

Sec.  401.710  Operating requirements for holders of Certificates of 
Authorization

* * * * *
    (f) Comply with all accounting procedures and the reporting 
requirements in this chapter;
    (g) Make available to the Commandant all of its financial and 
operating records;
    (h) Comply immediately and professionally with all lawful requests 
and directions received from U.S. and Canadian Coast Guard units and 
personnel, vessel traffic service personnel, and other lawful 
authority; and
    (i) A violation of any of these provisions may be punished in 
accordance with 46 CFR 401.500 and be grounds for the suspension or 
revocation of a pilot association's certificate of authorization to 
operate a pool pursuant to 46 CFR 401.335.

    Dated: January 29, 2008.
Brian M. Salerno,
Rear Admiral, U.S. Coast Guard, Assistant Commandant for Marine Safety, 
Security & Stewardship.
[FR Doc. 08-474 Filed 1-30-08; 8:45am]
BILLING CODE 4910-15-P


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