Federal Register / Vol. 73, No. 22 / Friday, February 1, 2008 / Proposed Rules 6085 

accounting procedures not addressed in 

the Report? If so, please elaborate. 

3. If a simplified approach should not 

be used, what approach should be used 

and why? 

Section 3 of the Report (at 25–29) 

addresses difficulties with identifying 

and valuing assets and liabilities of the 

CPF, noting, for example, that efforts to 

determine each asset’s theoretical 

enterprise origin and usage could be a 

significant undertaking that, in any 

event, might yield less than satisfactory 

results. Id. at 26. Treasury suggests four 

potential methods to attempt to assign 

assets to the theoretical competitive 

enterprise. Id. at 26–27. It notes that one 

of its methods is similar to the approach 

in section 2011(e)(5)(B). Id. at 27. 

Treasury observes that the PAEA does 

not contain a similar test for assigning 

liabilities. Id. at 29. Recognizing the 

significant tax implications raised by 

the various methods, Treasury suggests 

that ‘‘[a] possible approach to 

simplifying the assumed tax calculation 

to maximize net income after taxes and 

still meet the PAEA ‘shall be the greater 

of’ total assets CPF quantification test, is 

to use the theoretical [Postal Service] 

Competitive enterprise income before 

taxes and apply an appropriate, set 

effective tax rate.’’ Id. 

Lastly, Treasury indicates that the 

CPF should be subject to a reasonable 

level of management and reporting 

oversight and, further that the reporting 

should be subject to independent review 

to ensure that it is fairly stated in all 

material respects. Id. 

1. Does the PAEA allow a simplified 

approach to assigning assets to the 

competitive products fund for financial 

disclosure purposes and/or calculating 

an assumed Federal income tax? 

2. If a simplified approach is allowed, 

should it be used? 

3. Section 3 of the Report notes that 

the PAEA does not define assets, but 

that the PAEA’s requirement to pay 

principal or interest on obligations 

issued for the provision of competitive 

products in section 2011(e)(5) supports 

the conclusion that it is permissible to 

define assets as net assets. The 

Commission asks commenters to 

address whether or not this is a 

reasonable assumption. 

4. Does the PAEA require an 

assignment of liabilities to the CPF? If 

so, on what basis should they be 

assigned? 

5. Should a full set of financial 

statements, including income statement, 

balance sheet and statement of cash 

flow, be prepared for the CPF? 

6. What level of oversight should 

apply to the CPF? 

7. What accounting principles should 

apply to the CPF? 

8. What level of independent review 

of the Postal Service’s CPF accounting 

and financial statements is sufficient 

and necessary under the PAEA? 

9. What type (public or private) of 

entity would be best suited to perform 

that independent review? 

10. Is there any information, not 

required to be reported under the PAEA, 

which should be included in the reports 

required under section 

2011(h)(2)(B)(i)(III)? 

V. Public Representative 

Section 505 of title 39 requires the 

designation of an officer of the 

Commission in all public proceedings to 

represent the interests of the general 

public. The Commission hereby 

designates Patricia A. Gallagher to serve 

as the Public Representative, 

representing the interests of the general 

public. Pursuant to this designation, she 

will direct the activities of Commission 

personnel assigned to assist her and, 

will, upon request, provide their names 

for the record. Neither Patricia A. 

Gallagher nor any of the assigned 

personnel will participate in or provide 

advice on any Commission decision in 

this proceeding. 

VI. Ordering Paragraphs 

It is Ordered: 

1. As set forth in the body of this 

notice, Docket No. PI2008–2 is 

established for the purpose of receiving 

comments regarding Treasury’s Report 

and recommendations as well as 

questions posed by the Commission in 

response to the Report. 

2. Interested persons may submit 

comments no later than 60 days from 

the date of publication of this notice in 

the Federal Register. 

3. Reply comments also may be filed 

no later than 90 days from the date of 

publication of this notice in the Federal 

Register. 

4. Patricia A. Gallagher is designated 

as the Public Representative 

representing the interests of the general 

public in this proceeding. 

5. The Secretary shall cause this 

notice to be published in the Federal 

Register. 

By the Commission. 

Dated: January 28, 2008. 

Steven W. Williams, 

Secretary. 

[FR Doc. E8–1893 Filed 1–31–08; 8:45 am] 

BILLING CODE 7710–FW–P 

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 Michael.Sakaio@uscg.mil. For 

questions on viewing or submitting 

material to the docket, call Renee V. 

Wright, Program Manager, Docket 

Operations, telephone 202–366–9826. 

SUPPLEMENTARY INFORMATION: 


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6086 Federal Register / Vol. 73, No. 22 / Friday, February 1, 2008 / Proposed Rules 

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 81⁄2 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 


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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

If pilotage service is required in: Then the percentage increases over the current rate 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 

(§ 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 (§ 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: 


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TABLE 2.—TOTAL ECONOMIC COST FOR BASE PERIOD, DISTRICT ONE

Area 1 

St. Lawrence 

River 

Area 2 

Lake Ontario 

Total 

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 4 

Lake Erie 

Area 

Southeast 

Shoal to Port 

Huron, MI 

Total 

District Two 

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 Michigan 

Area 7 

St. Mary’s 

River 

Area 8 

Lake Superior 

Total 

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 nonpilot 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. Lawrence 

River 

Area 2 

Lake Ontario 

Total 

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 4 

Lake Erie 

Area 5 

Southeast 

Shoal to Port 

Huron, MI 

Total 

District Two 

Base operating expense .............................................................................................................. $499,328 $737,052 $1,236,380 

Base return element .................................................................................................................... +$26,280 +$30,711 +$56,991 


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TABLE 6.—EXPENSE MULTIPLIER, DISTRICT TWO—Continued 

Area 4 

Lake Erie 

Area 5 

Southeast 

Shoal to Port 

Huron, MI 

Total 

District Two 

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 Michigan 

Area 7 

St. Mary’s 

River 

Area 8 

Lake Superior 

Total 

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

Monthly component Pilots on undesignated waters 

Pilots on designated waters 

(undesignated × 

150%) 

AGREEMENT A: 

$245.46 daily rate × 49.5 days ............................................................................................................. $12,150 $18,225 

AGREEMENT A: 

Monthly total × 9 months = total wages ............................................................................................... 109,352 164,029 

AGREEMENT B: 

$302.33 daily rate × 49.5 days ............................................................................................................. 14,965 22,488 

AGREEMENT B: 

Monthly total × 9 months = total wages ............................................................................................... 134,688 202,032 

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. 


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TABLE 9.—BENEFITS

Monthly component Pilots on undesignated waters 

Pilots on designated waters 

AGREEMENT A: 

Employer contribution, 401(K) plan (Monthly Wages × 5%) ................................................................ $607.51 $911.27 

Pension = $33.35 × 45.5 days ............................................................................................................. $1,517.43 $1,517.43 

Health = $66.69 × 45.5 days ................................................................................................................ $3,034.40 $3,034.40 

AGREEMENT B: 

Employer contribution, 401(K) plan (Monthly Wages × 5%) ................................................................ $748.27 $1,122.40 

Pension = $43.55 × 45.5 days ............................................................................................................. 1,981.53 1,981.53 

Health = $66.69 × 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 × 9 months ........................................................................................................ =$46,434 =$49,168 

AGREEMENT B: 

Monthly total benefits ........................................................................................................................... =$5,764.19 =$6,138.32 

AGREEMENT B: 

Monthly total benefits × 9 months ........................................................................................................ =$51,878 =$55,245 

Table 10 totals the wages and benefits 

under each agreement. 

TABLE 10.—TOTAL WAGES AND BENEFITS UNDER EACH AGREEMENT

Pilots on undesignated waters Pilots on designated 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 

÷1,076,560 

=29.3343% 

760,759 ÷ 

1,076,560 

=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 

waters 

Designated 

waters 

AGREEMENT A: Total wages and benefits × percent tonnage ..................................................................... $155,786 × 

29.3343% = 

$45,699 

$213,196 × 

29.3343% = 

$62,540 

AGREEMENT B: Total wages and benefits × percent tonnage ..................................................................... $186,566 × 

70.6657% = 

$131,838 

$257,277 × 

70.6657% = 

$181,807 


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TABLE 12.—PROJECTED TARGET RATE OF COMPENSATION—Continued 

Undesignated 

waters 

Designated 

waters 

Total weighted average wages and benefits = projected target rate of compensation .......................... $45,699 + 

$131,838 = 

$177,537 

$62,540 + 

$181,807 = 

$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

Pilotage area 

Projected 

2008 bridge 

hours 

Divided by 

1,000 (designated waters) or 

1,800 (undesignated 

waters) 

Pilots 

needed 

(total = 44) 

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

Pilotage area Pilots needed 

(total = 44) 

Multiplied by 

target rate of 

compensation 

Projected target 

pilot 

compensation 

Area 1 .............................................................................................................................. 6 × $244,346 $1,466,077 

Area 2 .............................................................................................................................. 5 × $177,537 887,684 

Total, District One ..................................................................................................... ............................ ............................ 2,353,761 

Area 4 .............................................................................................................................. 5 × $177,537 887,684 

Area 5 .............................................................................................................................. 7 × $244,346 1,710,424 

Total, District Two ..................................................................................................... ............................ ............................ 2,598,108 

Area 6 .............................................................................................................................. 10 × $177,537 1,775,368 

Area 7 .............................................................................................................................. 4 × $244,346 977,385 

Area 8 .............................................................................................................................. 7 × $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. 


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6092 Federal Register / Vol. 73, No. 22 / Friday, February 1, 2008 / Proposed Rules 

TABLE 15.—PROJECTED PILOT COMPENSATION, MULTIPLIED BY THE EXPENSE MULTIPLIER EQUALS PROJECTED

OPERATING EXPENSE

Pilotage area 

Projected target 

pilot compensation 

Multiplied by expense multiplier Projected operating expense 

Area 1 .............................................................................................................................. $1,466,077 × .32166 = $471,581 

Area 2 .............................................................................................................................. 887,684 × .54468 = $483,505 

Total, District One ..................................................................................................... 2,353,761 × .40560 = $954,685 

Area 4 .............................................................................................................................. 887,684 × .63651 = $565,024 

Area 5 .............................................................................................................................. 1,710,424 × .48097 = $822,655 

Total, District Two ..................................................................................................... 2,598,108 × .53400 = $1,387,383 

Area 6 .............................................................................................................................. 1,775,368 × .51128 = $907,709 

Area 7 .............................................................................................................................. 977,385 × .36075 = $352,592 

Area 8 .............................................................................................................................. 1,242,758 × .45592 = $566,600 

Total, District Three .................................................................................................. 3,995,511 × .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

Pilotage area A. projected operating expense 

B. increase, 

multiplied by inflation factor (= A 

× 1.024) 

C. projected 

target pilot 

compensation 

D. projected total 

economic 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

Pilotage area A. projected total 

economic cost 

B. projected 

2008 bridge 

hours 

Prospective 

(total) unit costs 

(A divided 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 


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Federal Register / Vol. 73, No. 22 / Friday, February 1, 2008 / Proposed Rules 6093 

TABLE 17.—PROSPECTIVE (TOTAL) UNIT COSTS—Continued 

Pilotage area A. projected total 

economic cost 

B. projected 

2008 bridge 

hours 

Prospective 

(total) unit costs 

(A divided by B) 

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

Pilotage area A. prospective 

unit costs 

B. base period 

unit costs 

C. percentage 

change from 

base (A divided 

by B; 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 COSTS1

Pilotage area A. base period rate 

B. percentage 

change in unit 

costs 

(multiplying factor) 

C. increase in base 

rate (A × B%) 

D. adjusted rate (A 

+ C, rounded to 

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. Lawrence River ................. 629 48.94 678 

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 below Black Rock Lock 1,261 107.19 1,368 

Area 5 between any point on or in: ................................. 7.98 (1.0798) 

Toledo or any point on Lake Erie W. of Southeast 

Shoal ..................................................................... 1,004 80.12 1,084 

Toledo or any point on Lake Erie W. of Southeast 

Shoal & Southeast Shoal ...................................... 1,699 135.58 1,835 

Toledo or any point on Lake Erie W. of Southeast 

Shoal & Detroit River ............................................ 2,206 176.04 2,382 

Toledo or any point on Lake Erie W. of Southeast 

Shoal & Detroit Pilot Boat ..................................... 1,699 135.58 1,835 

Port Huron Change Point & Southeast Shoal (when 

pilots are not changed at the Detroit Pilot Boat) .. 2,959 236.13 3,195 


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TABLE 19.—BASE PERIOD RATES ADJUSTED BY PERCENTAGE CHANGE IN UNIT COSTS1—Continued 

Pilotage area A. base period rate 

B. percentage 

change in unit 

costs 

(multiplying factor) 

C. increase in base 

rate (A × B%) 

D. adjusted rate (A 

+ C, rounded to 

nearest dollar) 

Port Huron Change Point & Toledo or any point on 

Lake Erie W. of Southeast Shoal (when pilots are 

not changed at the Detroit Pilot Boat) .................. 3,428 273.55 3,702 

Port Huron Change Point & Detroit River ................ 2,223 177.40 2,400 

Port Huron Change Point & Detroit Pilot Boat ......... 1,729 137.97 1,867 

Port Huron Change Point & St. Clair River .............. 1,229 98.07 1,327 

St. Clair River ........................................................... 1,004 80.12 1,084 

St. Clair River & Southeast Shoal (when pilots are 

not changed at the Detroit Pilot Boat) .................. 2,959 236.13 3,195 

St. Clair River & Detroit River/Detroit Pilot Boat ...... 2,223 177.40 2,400 

Detroit, Windsor, or Detroit River ............................. 1,004 80.12 1,084 

Detroit, Windsor, or Detroit River & Southeast 

Shoal ..................................................................... 1,699 135.58 1,835 

Detroit, Windsor, or Detroit River & Toledo or any 

point on Lake Erie W. of Southeast Shoal ........... 2,206 176.04 2,382 

Detroit, Windsor, or Detroit River & St. Clair River .. 2,223 177.40 2,400 

Detroit Pilot Boat & Southeast Shoal ....................... 1,229 98.07 1,327 

Detroit Pilot Boat & Toledo or any point on Lake 

Erie W. of Southeast Shoal .................................. 1,699 135.58 1,835 

Detroit Pilot Boat & St. Clair River ........................... 2,223 177.40 2,400 

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 in: ................................. 7.83 (1.0783) 

Gros Cap & De Tour ................................................ 1,718 134.52 1,853 

Algoma Steel Corp. Wharf, Sault Ste. Marie, Ont. & 

De Tour ................................................................. 1,718 134.52 1,853 

Algoma Steel Corp. Wharf, Sault Ste. Marie, Ont. & 

Gros Cap ............................................................... 647 50.66 698 

Any point in Sault Ste. Marie, Ont., except the 

Algoma Steel Corp. Wharf & De Tour .................. 1,440 112.75 1,553 

Any point in Sault Ste. Marie, Ont., except the 

Algoma Steel Corp. Wharf & Gros Cap ................ 647 50.66 698 

Sault Ste. Marie, MI & De Tour ................................ 1,440 112.75 1,553 

Sault Ste. Marie, MI & Gros Cap ............................. 647 50.66 698 

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 ( § 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 (§ 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 


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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 Cost .............................. 2,692,426 3,238,337 4,722,162 10,652,925 

2007 Total Projected Economic Cost .............................. 3,083,904 3,715,426 5,420,279 12,219,609 

1For 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. 2Some 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 


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6096 Federal Register / Vol. 73, No. 22 / Friday, February 1, 2008 / Proposed Rules 

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 2007 .......................... 3,083,904 3,715,426 5,420,279 12,219,609 

Proposed Rate Adjustment 2 ............................................ 1.0802 1.0816 1.0822 1.0817 

Total Projected Economic Cost in 2008 .......................... 3,331,359 4,018,788 5,865,942 13,216,089 

Additional Revenue Required or Cost of this Rulemaking 3 ........................................................................ 247,455 303,362 445,663 996,480 

1Some values may not total due to rounding. 

2See 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’’. 3Additional 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 (nondiscounted). 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 fiveyear 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-ofyear 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. 


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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 email at Michael.Sakaio@uscg.mil. 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 § 401.405, revise paragraphs (a) 

and (b) to read as follows: 

§ 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


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6098 Federal Register / Vol. 73, No. 22 / Friday, February 1, 2008 / Proposed Rules 

Service St. Lawrence River 

Each Lock Transited $310. 1

Harbor Movage ......... $1,016. 1

1The 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 § 401.407 revise paragraphs (a) 

and (b) to read as follows: 

§ 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): 

Service 

Lake Erie 

(East of 

Southeast 

Shoal) 

Buffalo 

Six-Hour Period ....................................................................................................................................................... $695 $695 

Docking or Undocking ............................................................................................................................................. 536 536 

Any Point on the Niagara River below the Black Rock Lock .................................................................................. N/A $1,368 

(b) Area 5 (Designated Waters): 

Any point on or in Southeast 

Shoal 

Toledo or any 

point on Lake 

Erie west of 

Southeast 

Shoal 

Detroit River Detroit Pilot 

Boat St. Clair River 

Toledo or any port on Lake Erie west of Southeast Shoal $1,835 $1,084 $2,382 $1,835 N/A 

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 Detroit River ................................ 1,835 2,382 1,084 N/A 2,400 

Detroit Pilot Boat .................................................................. 1,327 1,835 N/A N/A 2,400 

1When pilots are not changed at the Detroit Pilot Boat. 

4. In § 401.410, revise paragraphs (a), 

(b), and (c) to read as follows: 

§ 401.410 Basic rates and charges on 

Lakes Huron, Michigan, and Superior, and 

the St Mary’s River. 

* * * * * 

(a) Area 6 (Undesignated Waters): 

Service Lakes Huron 

and Michigan 

Six-Hour Period .................... $519 

Service Lakes Huron 

and Michigan 

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 Corporation Wharf ................ 1,553 $698 N/A 

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 

§ 401.420 [Amended] 

5. In § 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’’. 

§ 401.428 [Amended] 

6. In § 401.428, remove the number 

‘‘$520’’ and add, in its place, the 

number ‘‘$562’’. 

7. Revise § 401.700 to read as follows: 

§ 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 

§ 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 § 401.710, revise paragraphs (f) 

and (g) and add paragraphs (h) and (i) 

to read as follows: 


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§ 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 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Part 76 

[CS Docket No. 98–120; FCC 07–170] 

Carriage of Digital Television 

Broadcast Signals 

AGENCY: Federal Communications 

Commission. 

ACTION: Proposed rule. 

SUMMARY: While the Third Report and 

Order resolves the major questions 

about material degradation and 

viewability after the transition, we now 

seek comment on a number of related 

issues which were not specifically 

raised in the Second Further Notice of 

Proposed Rulemaking. Now that the 

general rules are in place, the 

Commission believes it is appropriate to 

move toward an expeditious resolution 

of these outstanding matters so that all 

parties will have sufficient time to 

prepare for compliance with these new 

rules. 

DATES: Comment Date: March 3, 2008. 

Reply Comment Date: March 17, 2008. 

ADDRESSES: Federal Communications 

Commission, 445 12th Street, SW., 

Washington, DC 20554. 

FOR FURTHER INFORMATION CONTACT: For 

additional information on this 

proceeding, please contact Lyle Elder, 

Lyle.Elder@fcc.gov, or Eloise Gore, 

Eloise.Gore@fcc.gov, of the Media 

Bureau, Policy Division, (202) 418–

2120. 

SUPPLEMENTARY INFORMATION: This is a 

summary of the Federal 

Communications Commission’s Third 

Further Notice of Proposed Rule Making 

(Third FNPRM) in CS Docket No. 98–

120, FCC 07–170, adopted September 

11, 2007, and released November 30, 

2007. The full text of this document is 

available for public inspection and 

copying during regular business hours 

in the FCC Reference Center, Federal 

Communications Commission, 445 12th 

Street, SW., CY–A257, Washington, DC 

20554. These documents will also be 

available via ECFS (http://www.fcc.gov/ 

cgb/ecfs/). (Documents will be available 

electronically in ASCII, Word 97, and/ 

or Adobe Acrobat.) The complete text 

may be purchased from the 

Commission’s copy contractor, 445 12th 

Street, SW., Room CY–B402, 

Washington, DC 20554. To request this 

document in accessible formats 

(computer diskettes, large print, audio 

recording, and Braille), send an e-mail 

to fcc504@fcc.gov or call the 

Commission’s Consumer and 

Governmental Affairs Bureau at (202) 

418–0530 (voice), (202) 418–0432 

(TTY). 

Summary of the Third Notice of 

Proposed Rule Making 

A. Issues Related to Downconversion 

1. Channel Placement: Section 

614(b)(6) generally provides that 

commercial television stations carried 

pursuant to the mandatory carriage 

provision are entitled to be carried on a 

cable system on the same channel 

number on which the station broadcasts 

over-the-air. Under Section 615(g)(5) 

noncommercial television stations 

generally have the same right. The Act 

also permits commercial and 

noncommercial television stations to 

negotiate a mutually beneficial channel 

position with the cable operator. In the 

First Report and Order, the Commission 

found that it was unnecessary to place 

broadcast signals on a specific 

frequency in order to ensure 

nondiscriminatory treatment of 

television stations by cable operators. 

Instead, the Commission required that 

channel mapping information be passed 

through as part of the program and 

system information protocol (‘‘PSIP’’), 

linking the digital channel number with 

the appropriate primary video and 

program-related content. How should 

these channel positioning rules apply to 

operators carrying more than one 

version of a station’s signal? We seek 

comment on this question. For systems 

that provide analog service, we propose 

that the analog version be physically 

located on the appropriate channel as 

determined by the channel placement 

rules, and that the version as broadcast 

appear on that same channel for digital 

subscribers who can view it. We seek 

comment on this proposal. We also seek 

comment on whether it will be 

technically possible for multiple digital 

versions to appear on the same channel 

from a subscriber perspective (e.g., 

channel 35 in HD for subscribers with 

HD, and the same channel 35 in SD for 

subscribers with SD). If so, should we 

adopt such a requirement? 

2. Format: NAB and MSTV raise the 

point that ‘‘[w]hen digital programming 

is broadcast in a 16:9 format, 

downconversion of the signal to analog 

generally requires that the program be 

reformatted to fit the 4:3 analog aspect 

ratio.’’ Broadcasters may broadcast not 

only in different resolutions—HD, ED, 

SD—but also in different formats—16:9 

or 4:3. When a digital signal is 

downconverted, particularly from HD to 

analog, it is likely to be a 16:9 signal 

being adjusted for display on a 4:3 

screen. However, at times, particularly 

during the early years of the posttransition period, even HD broadcasters 

are likely to occasionally show images 

in a 4:3 aspect ratio, adding static bars 

to the edge of the broadcast picture to 

compensate. How should the 

downconverted signal be adjusted 

(letterboxing, centering, etc.), and if the 

Commission does not adopt a rule, who 

should make that decision? NAB 

proposes that, for signals converted at 

the headend, broadcasters make the 

determination, and for signals converted 

at a converter box, the boxes be required 

to allow the consumer to determine the 

format (as in the NTIA boxes). NCTA 

responds with a proposal to allow 

operators to determine the format of 

downconverted signals, arguing that 

operators are best able to determine how 

to ‘‘serve the needs of their analog 

viewing customers.’’ We seek comment 

on the appropriate approach for the 

Commission to take, and the costs and 

benefits of these proposals and any 

others offered by commenters. 

B. Material Degradation Issues 

3. As NAB and MSTV note, the 

Commission found in 1993 that the 

material degradation rules apply equally 

to must carry stations and 

retransmission consent stations. They 

argue that this should be the case after 

the transition as well. NCTA, however, 

notes that in the First Report and Order, 

the Commission said that: 


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