Strengthening U.S. Coast Guard Oversight and Support of Recognized Organizations: The Case of the Alternate Compliance Program (2021)

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101 The Statement of Task calls for a comparison of the main features of the U.S. Coast Guard’s (Coast Guard’s) oversight of its third-party delegations of safety inspections, certifications, and other functions with those of other maritime administrations and safety regulators of other transportation modes and related industries. The Coast Guard’s delegations to recognized organizations (ROs) in the Alternate Compliance Program (ACP) are of particular interest to this study. Accordingly, the chapter reviews how the maritime administrations of four jurisdictions—the European Union (EU), Australia, Canada, and the Republic of the Marshall Islands—structure and oversee their delegations to ROs. The overview is based on information provided to the committee by representatives from the jurisdictions through briefings and written materials. Although only Canada has a program that bears close resemblance to the ACP, the review reveals some common fea- tures and challenges of all oversight programs. An addendum to the chapter contains the findings from the committee’s review of several other U.S. safety agencies and their methods for verifying regulatory compliance. Three agencies from the transportation sector are reviewed—the Pipeline and Hazardous Materials Safety Administration (PHMSA), the National Highway Traffic Safety Administration (NHTSA), and the Federal Aviation Administration (FAA). In addition, consideration is given to the approach used by the U.S. Department of the Interior’s Bureau of Safety and Environmental Enforcement (BSEE) for the offshore oil and gas industry. While the reviews show how many agencies rely on third parties to verify regulatory compliance, it is notable that in most cases—except intermodal tanks—the third parties that are used do not have 6 Delegations and Oversight by Foreign Maritime Administrations and Other U.S. Safety Regulatory Agencies

102 STRENGTHENING U.S. COAST GUARD OVERSIGHT AND SUPPORT OF ROs the scale, technical expertise, and experience of the international classi- fication societies. Like other maritime administrations, the Coast Guard benefits from being able to leverage this expertise and experience, the avail- ability of which limits the comparability of the other modes and industries. EUROPEAN MARITIME SAFETY AGENCY The EU flag fleet consists of about 14,000 ships. In 2002, the European Union created the European Maritime Safety Agency (EMSA). Based in Lisbon and with a staff of 270, EMSA serves the 27 EU member states (including 23 coastal states) as well as 2 European Free Trade Association (EFTA) member states, Iceland and Norway. The overarching role of EMSA is to provide technical and scientific assistance to the EU and EFTA member states and to support the development and implementation of EU legislation on maritime safety, security, and prevention of pollution by ships. EMSA does not inspect vessels to issue and endorse certifications, which are responsibilities of each member state; however, one of the agency’s key functions is to serve as the RO oversight agency of the European Com- mission (EC; the European Union’s executive branch). Member states may authorize third parties to conduct vessel inspections and issue international certifications on their behalf, but only by using an RO that is recognized by EMSA. As part of this recognition, EMSA assesses each RO biennially or upon request of a member state using assessment guidelines modeled on the RO Code.1 Currently 12 ROs are recognized by EMSA. The biennial assessments include visits to the RO’s head offices and selected regional and field offices. During these visits, or inspections, EMSA personnel review the RO’s inspection history, safety record of inspected ships, and documentation from a required annual internal review of the organiza- tion’s quality management system (QMS). Reviews of fleet safety records are informed by data in EMSA’s European Marine Casualty Information Platform, which provides a centralized database where member states sub- mit records on marine casualties and incidents. According to EMSA officials who briefed the study committee, a team of about 10 assessors and auditors carries out between 13 and 17 RO inspections per year using teams of two to four personnel per visit. At least one member state will often participate in the RO inspection, especially if it takes place in their own country. The inspections may also include visits to individual ships to verify performance of the RO. The inspections follow a standard procedure, as defined in EU regulations to ensure equal treatment of all ROs. 1 Directive 2009/15/EC of the European Parliament and of the Council of 23 April 2009 on Common Rules and Standards for Ship Inspection and Survey Organisations and for the Relevant Activities of Maritime Administrations, OJ L 131, 28.5.2009, pp. 47–56.

DELEGATIONS AND OVERSIGHT 103 EMSA inspectors and assessors are hired from maritime administra- tions, classification societies, and the shipbuilding sector, as well as retired shipmasters. New hires usually start as trainees working with more expe- rienced staff members. Successful completion of auditor training courses is mandatory for all personnel assigned to inspection teams. Member states are also obligated to engage in their own monitoring of ROs, which EMSA supports through capacity building. Each member state reports on its monitoring activities, and the reports are shared with the other member states to facilitate learning and to identify any common findings pertaining to a particular RO. EMSA personnel also consult the member state reports in preparation for the visits to ROs. Since the RO assessment program commenced in 2004, EMSA has conducted more than 270 visits to ROs. The inspection reports are shared with the ROs, the EC, and the member states, and the results are stored in a database that can be consulted by the inspectors to ensure consistency in the way inspections are carried out and findings are reported. The inspection reports feed into the biennial assessment of each RO by the EC. Further- more, every 2 years the EC, with the support of EMSA, meets with all the ROs as a group. Common findings, problems, and issues are identified and discussed during these meetings. AUSTRALIA In 1991, Australia transferred its authority for flag-state inspections to the Australian Marine Safety Agency (AMSA), a government-owned corporate entity. AMSA, in turn, delegates to seven authorized ROs certain flag-state functions including ship surveying and certification.2 The ROs are required to report to AMSA quarterly on the certificates issued to ships. AMSA can also access survey and certification information through its direct access to RO database portals. AMSA port marine surveyors also inspect flag vessels biannually. These inspections cover the same scope as a routine port-state control (PSC) inspection. All flag-state inspection records are stored in AMSA’s ship inspection record system known as “Shipsys” and the records are only available to AMSA inspectors. AMSA schedules meetings with each RO twice per year for informa- tion exchange. Oversight is facilitated by a program of audits that are scheduled for each RO at intervals that are not to exceed 2.5 years.3 The 2 Australian Maritime Safety Authority. 2020. National Compliance Plan: 2020–2021: Information for Industry. https://www.amsa.gov.au/about/corporate-publications/national- compliance-plan-2020-2021. 3 The content of this section on RO audit procedures was provided by AMSA to the com- mittee in response to the committee’s request, received April 29, 2021. See AMSA. 2021. Audit of Recognized Organizations—Instructions.

104 STRENGTHENING U.S. COAST GUARD OVERSIGHT AND SUPPORT OF ROs audit standard is based on the individual RO agreement and RO Code. Each audit checklist contains information from previous audits to ensure that an improvement process has been implemented by the RO for any nonconformities. The AMSA auditor may visit a vessel survey to observe the RO’s performance. Unscheduled audits may also be arranged to follow up on findings from previous audits, in response to incidents and casualties, if issues are reported from overseas PSC inspections, or if the RO’s own internal audits reveal deficiencies in the RO’s QMS. AMSA audits are usu- ally performed by two auditors who are required to have at least 5 years of experience and completion of an internationally recognized training program. Auditors do not carry out audits within their own region, nor do they undertake consecutive audits of an office or port. Also, the lead auditor must participate in a required number of AMSA audits. According to AMSA’s head of Certifications and Registration, AMSA prioritizes vessels for inspection based on the probability of a ship being detained following an inspection. As an example, vessels are sorted into four groups based on the probability of detention (more than 5 percent, 4 to 5 percent, 2 to 3 percent, and 1 percent or less. The target inspection rates are 80 percent, 60 percent, 40 percent, and 20 percent of vessels, re- spectively, for each group.4 This is the same standard already used for PSC inspections. However, the committee learned that AMSA intends to expand its risk targeting approach to account for both detention and inci dent risk. The agency is in the process of testing a risk profiling routine that will bench- mark the world fleet (using global incident data for more than 70,000 ves- sels) to estimate a set of probabilities and percentile ranks that can be used for risk-based targeting of both flag-state and port-state control inspections.5 When these two risk probabilities are used in combination, they are expected to provide more refined guidance for targeting vessels for inspection. CANADA The modernization of Canada’s flag-state ship inspection program began in 1992 when the Canadian government called on Transport Canada to review the regulatory burden placed on Canadians from the transportation domain. For the maritime sector, Transport Canada recommended greater harmonization of standards and regulations with the international commu- nity, a major reduction in the number of regulations through consolidation, 4 AMSA. 2021. Audit of Recognized Organizations—Instructions. 5 The underlying basis for the risk-based routine is from Heij, C., and, S. Knapp. 2019. Ship- ping inspections, detentions and accidents: An empirical analysis of risk dimensions. Maritime Policy & Management 46(7):866–883; Knapp, S., and C. Heij. 2020. Improved strategies for the maritime industry to target vessels for inspections and to select inspection priority areas. Safety 6(2):18. https://doi.org/10.3390/safety6020018.

DELEGATIONS AND OVERSIGHT 105 and greater delegation of ship inspection activities to industry and classifica- tion societies than already existed.6,7 In recommending more delegations to classification societies and in- dustry, Transport Canada emphasized that this would allow the Ship Safety Branch of the Canadian Coast Guard (CCG) to make more efficient use of its assets and personnel.8 As a supplier of oil to world markets, Canada needed to ensure that sufficient resources were being allocated for flag-state inspec- tions in balance with demands to fulfill other marine safety and pollution prevention responsibilities. At that time, vessel inspections were conducted by the CCG focusing on compliance with Canadian regulatory require- ments. However, in 1994 Canada joined the Paris and Tokyo Memoranda of Understanding (MOUs) for PSC, placing more demands on the CCG. Enactment of the Canada Shipping Act of 2001 gave Transport Canada authority to begin delegating inspection functions to third parties. To do so, Transport Canada created the Delegated Statutory Inspection Program (DSIP) for larger vessels to enroll in voluntarily.9 Similar to vessels enrolled in the U.S. ACP, ROs would perform many inspection functions for Canadian flag vessels enrolled in the DSIP. In creating the DSIP, Transport Canada wanted to ensure that CCG could focus its inspection services on smaller vessels. CCG would still be responsible for monitoring and overseeing the performance of the ROs, including the use of risk-targeted CCG inspections of enrolled vessels. While DSIP originally started as a voluntary program, in 2014 Canada made enrollment mandatory for all vessels 24 meters (~80 feet) or longer, as well as for larger fishing vessels. Today 680 vessels are enrolled in the program. About 100 of the enrolled vessels are classified as Safety of Life at Sea (SOLAS) vessels, while the remaining 580 operate domestically only or are below SOLAS size. Transport Canada currently has agreements with seven ROs to serve the 680 vessels, but two are not fully authorized.10 The 6 Transport Canada. 1993. The Delegation of Ship Inspections. Discussion Paper. Ottawa, Canada: Canadian Coast Guard Ship Safety Branch. https://www.researchgate.net/ publication/233250673_The_privatization_of_ship_safety. 7 There was already some delegation to two class societies for dry cargo ships and tugs under 25 years of age in the coasting trade (domestic shipping). Brooks, M. R. 1996. The privatization of ship safety. Maritime Policy and Management. 23(3):271–288. http://dx.doi. org/10.1080/03088839600000089. 8 Transport Canada. 1993, p. 13. 9 The description of the Canadian DSIP program was provided by Luc Tremblay, Execu- tive Director, Domestic Vessel Regulatory Oversight, Marine Safety and Security, Transport Canada, in a presentation to the committee, Open Meeting 13, August 19, 2021. The current program is the fourth version of the policy since 2001. 10 Lloyd’s Register is the largest of the five with about 50 percent of the vessels. American Bureau of Shipping, DNV, Bureau Veritas, and RINA are the remaining four fully authorized. Neither Class NK nor KR have enough vessels to activate their agreements.

106 STRENGTHENING U.S. COAST GUARD OVERSIGHT AND SUPPORT OF ROs standard agreement with each RO ensures that inspections are performed to verify compliance with Canadian and applicable international require- ments. Compliance with certain Canadian statutory requirements, such as those that pertain to marine security and law enforcement, safe manning, and occupational health and safety regulations, is not delegated to ROs but retained by CCG marine inspectors. Transport Canada’s procedures for RO oversight include audits of RO offices and periodic monitoring of RO inspections on board enrolled ves- sels. The agency’s goal is to observe at least one inspection on all enrolled vessels every 5 years. It also seeks to audit each RO office during the same time period. The audits take into account the RO Code guidelines pub- lished by the International Association of Classification Societies (IACS). In addi tion to this oversight, Transport Canada auditors periodically observe audits conducted by the ROs for compliance with the International Safety Management (ISM) Code. The CCG has organized DSIP to align with its five regional districts— Atlantic, Quebec, Ontario, Prairie and Northern, and Pacific. Each district assigns a program office to coordinate the program with headquarters and to liaison with the ROs. Of the CCG’s 370 marine inspectors, 65 have duties related in some capacity to implementation of DSIP. In 2020, Transport Canada changed its approach for using CCG vessel inspections to monitor the performance of ROs participating in DSIP. Previ- ously, the agency’s risk-based process for targeting vessels had consequence- weighted criteria that generated three risk categories—high, moderate, and low. The approach was changed because some moderate- and low-risk vessels were not being inspected in line with the goal of inspecting all DSIP vessels during a 5-year period. Transport Canada now ensures that 20 per- cent of the total number of vessels are monitored each year to ensure that all enrolled vessels are inspected at least once over 5 years. Results of monitoring inspections are used by Transport Canada to evaluate the performance of ROs, the condition of the vessels enrolled in DSIP, and the overall performance of the DSIP program. Transport Canada has not established key performance indicators for ROs but claims that it is in the process of developing them. As in the United States, ROs are required to provide Transport Canada with direct access to their databases, but the ROs do not have direct access to Transport Canada databases. MARSHALL ISLANDS Founded in 1990, the Republic of the Marshall Islands Ship Registry (RMI) had become the second-largest ship registry in the world by 2017. Today, there are about 4,500 vessels in the registry, most consisting of international trading vessels. RMI is an open registry, where ship owners must apply for

DELEGATIONS AND OVERSIGHT 107 acceptance. Unlike many flag states, RMI does not have any requirements other than those required by international conventions. Nevertheless, the registry’s emphasis on ensuring that its fleet of vessels is safe, secure, and environmentally compliant attracts a young fleet. The average vessel age is 9.4 years. The RMI fleet is “whitelisted” by both the Paris and Tokyo MOUs and it has maintained QUALSHIP 2111 status with the European Union and the Coast Guard for 16 consecutive years. RMI’s administrative and technical support is provided by a private entity, International Registries, Inc. (IRI). IRI requires at least one annual safety inspection of each registered vessel, but inspections may be per- formed more often, depending on assessments of risk. All of these inspec- tions are carried out exclusively by IRI inspectors, as the organization employs about 50 inspectors and contracts out work to more than 250 other inspectors located throughout the world. These inspectors are man- aged by numerous regional offices. If an IRI or contracted inspector detects a serious deficiency, an RMI official will be contacted to make an evaluation of whether a control action is warranted. ROs conduct surveys of RMI-flagged vessels to ensure compliance with flag-state rules and international standards. To pre-qualify as an RO, the classification society must be an IACS member (of which there are currently 12). The majority of the vessels in the RMI fleet use three ROs (approximately 25 percent American Bureau of Shipping [ABS], 25 percent Det Norske Veritas [DNV], and about 20 percent Lloyd’s Register [LR]). The RO Code provides the guidelines for registry oversight of ROs. IRI personnel meet at least annually with each RO to discuss processes and procedures followed. IRI leadership also meets annually with the Class Society Consultative Committee consisting of representatives from each of the ROs. Many of IRI’s technical experts and inspectors (who perform the oversight) are former classification society surveyors. To better target inspections, IRI has established a fleet assessment profile. Vessels are ranked from 1 to 4,500, with a ranking of 1 represent- ing the lowest performance. Ships with low rankings that have a history of compliance problems are subjected to special inspections or reduced inspection intervals. IRI considers several factors in developing the rank- ings. They include performance during a flag-state inspection, considering the record deficiencies and detentions for both the ship and its operator. The other elements of the assessment focus on factors such as ship age and type, how many service extensions the ships has had, how many dispensations have been asked for, and if there are any outstanding class recommendations. 11 See https://www.dco.uscg.mil/Portals/9/DCO%20Documents/5p/CG-5PC/CG-CVC/ CVC2/psc/safety/qualship/QS21_FAQ.pdf.

108 STRENGTHENING U.S. COAST GUARD OVERSIGHT AND SUPPORT OF ROs IRI prepares “watch lists” that it provides monthly to the ROs for their vessels, and the ROs are expected to reciprocate by providing their watch lists to IRI. If a ship cannot maintain required quality standards, it can be removed from the registry. Once a month, IRI regional managers meet with a ship’s fleet operations managers to evaluate ships exhibiting poor compli- ance. These meetings may include a visit to the operations office with the aim of identifying reasons for poor performance and to identify possible remedies. To facilitate this coordination, an emphasis is placed on sharing data between the registry and ROs. IRI has access to all class records through the RO portals. For its inspection planning, the IRI accesses each RO’s portal to review each ship’s class status, survey dates, recommendations, and outstanding deficiencies. This review is currently a manual process because of incompatibilities in the interfaces of IRI and RO data and information technology systems. However, IRI is exploring means for greater automa- tion of the information exchange. IRI invests in the training of both its inspectors and auditors overseeing ROs. Inspectors and auditors have professional backgrounds in a range of specialties, including law, ship management, seafaring, marine engineering, naval architecture, flag-state administration, and class surveying. IRI in- spectors must have at least 3 years of experience in a maritime field in posi- tions such as senior officer, master, chief engineer, class surveyor, or contract inspector. A new inspector goes through a comprehensive familiarization and training program. The program includes both classroom work and field experience in carrying out inspections. Contract inspectors participate in multiday training sessions at least annually. SUMMARY COMPARISON The four maritime jurisdictions reviewed above employ many of the same approaches for verifying regulatory compliance by ocean-going vessels and for delegating functions to ROs and overseeing their performance. Likewise, there are similarities with the U.S. approach and some notable differences. Common to all the maritime jurisdictions is reliance on international classification societies as ROs to perform vessel inspections to verify compliance with international standards. This reliance, endorsed by the Inter national Maritime Organization (IMO), makes abundant sense in the international maritime domain where classification societies have long played an important role in ensuring the safety of engaged vessels in inter- national commerce. In cases where the maritime administration has its own regulatory requirements, classification societies are being leveraged for the purpose of verifying those requirements as well. The United States and

DELEGATIONS AND OVERSIGHT 109 Canada have implemented similar programs—the ACP and the DSIP—to capitalize on the capabilities of classification societies by formally autho- rizing them to provide inspection and certification services on their behalf. Canada requires and provides training for RO surveyors to ensure knowl- edge of Canadian requirements. Both Australia and Canada—like the Coast Guard—perform periodic oversight examinations of vessels that provide an opportunity to judge aspects of the RO’s performance. They are similar in scope to PSC inspec- tions. Whereas the Coast Guard schedules annual examinations, Australia aims for an inspection at least every 2 years. RMI, which does not have its own national regulations to enforce, nevertheless ensures that each vessel in the registry is inspected at least once per year by one or more of its own inspectors (i.e., IRI inspectors and contractors). All jurisdictions have structured programs and processes in place to oversee the performance of ROs, but the details of each differ. Some require formal assessments of ROs within a certain period of time, such as every 2 years by EMSA, every 2.5 years by Australia, and every 5 years by Canada. In each case, the jurisdiction has established assessment guidelines for visiting the ROs headquarters and field offices and observing vessel in- spections. Most have in-house teams of auditors trained for this oversight purpose. In the European Union, vessel inspection and certification respon- sibilities reside with member countries, and thus EMSA can focus its activi- ties on RO oversight. All of the jurisdictions have access to RO databases. EMSA, in particular, stresses the importance of using the 2-year RO assess ments in a constructive manner as opportunities for all parties to learn and make improvements, including the vessel operators, ROs, mem- ber states, and EMSA itself. Although they are not necessarily viewed as an enforcement-like mechanism, these assessments can lead to an RO losing its authorization by the European Commission. Member states may participate in the assessment, including vessel visits, to strengthen their own compli- ance verification and oversight capacities. Assessment reports are shared with ROs as well as any member state that attended the assessment, and EMSA organizes annual meetings with the ROs to discuss results, identify best practices, and discuss where and what improvements can be made. All jurisdictions use some form of risk-based fleet profiling to make more efficient and effective use of inspections for verifying vessel compli- ance and to inform RO performance oversight. While the profiling methods differ, increased emphasis is being placed on accounting for risk as exhib- ited through a vessel or company’s inspection performance (i.e., records of detention and deficiencies), casualty history, and vessel type, service, and inherent characteristics (e.g., age). It appears that a common challenge that all jurisdictions face, like the Coast Guard, is automating this risk profiling process because of the disparate sources of needed data (e.g., across ROs

110 STRENGTHENING U.S. COAST GUARD OVERSIGHT AND SUPPORT OF ROs and PSC inspection data systems) and variability in database and record formats. The comparisons with other maritime administrations also reveal how the Coast Guard is uniquely situated to support and oversee the perfor- mance of the ROs and other third parties that perform functions on its behalf. While most administrations maintain small government inspector workforces who work primarily in their own ports, the Coast Guard’s military and civilian inspectors span the globe to carry out direct flag-state oversight of U.S. vessels and ROs. The Coast Guard’s large force of full- time government inspectors obtains firsthand knowledge of vessel compli- ance and the performance of the ROs that survey and audit them. Evident from this chapter’s review of other maritime domains is that in the years before the El Faro sinking, the Coast Guard had allowed its compliance verification and oversight regime to slip below the norm for vigilant jurisdictions. This report has documented the many concerted steps the Coast Guard has taken since the tragedy to capitalize on its advantages and reinforce and reinvigorate its compliance verification and oversight regime. The additional steps recommended in this report are intended to further augment the Coast Guard’s commitment to being a superior mari- time administration. ADDENDUM: APPROACHES TO COMPLIANCE VERIFICATION BY OTHER U.S. SAFETY AGENCIES In addition to identifying and comparing the main features of the Coast Guard’s RO oversight program with those of the other maritime adminis- trations, the committee was asked to examine the approaches used by other U.S. safety agencies to verify compliance with regulatory requirements and to oversee their third-party delegations where applicable. In response to the study committee’s request for clarification of the task, the Coast Guard suggested that the committee review regulatory agencies in the transporta- tion domain and other related industries. In the sections that follow, there- fore, the methods used by three U.S. Department of Transportation (U.S. DOT) modal agencies (PHMSA, NHTSA, and FAA) are reviewed along with those of the U.S. Department of the Interior’s BSEE, which regulates offshore oil and gas safety. Having undertaken this requested review, the committee chose to document it in this addendum rather than in the main body of the chapter because the results yielded few insights applicable to the Coast Guard.

DELEGATIONS AND OVERSIGHT 111 Pipeline and Hazardous Materials Safety Administration PHMSA regulates and oversees the safe transportation of hazardous materials moved in containers and pipelines. For bulk transportation, its responsibility includes the cargo tanks (or tank trucks) used for truck trans- portation, tank cars used for railroad transportation, and intermodal tanks used in multiple modes. Its Office of Pipeline Safety regulates the safe move- ment of hazardous liquids and gases by transmission pipelines and some other pipeline systems. In each case, PHMSA delegates certain authorities to industry and third parties as described next. It also coordinates with other U.S. DOT modal agencies and with state agencies, particularly for compli- ance inspections and enforcement. Tank Trucks (Cargo Tanks) Although design and engineering criteria for tank trucks (referred to as “cargo tanks” in the regulations) are set by PHMSA, each tank truck manu- facturer is responsible for ensuring that its tanks are designed according to federal requirements. Tank truck manufacturers must have their de- sign plans reviewed by a “design-certifying” engineer meeting PHMSA qualification requirements. The engineer, who may be an employee of the manufacturer, must provide the manufacturer with written certification that the tank design meets all applicable federal requirements. A PHMSA- qualified inspector, who again may be an employee of the manufacturer, must examine and certify the finished tank truck. Certification records are retained by the manufacturer, who also must provide written certification to the owner that all federal safety requirements have been met. Tank truck manufacturers and repairers must register with PHMSA. As a prerequisite for registration, the manufacturer must be certified by the American Society of Mechanical Engineers (ASME), which maintains minimum qualification requirements for tank and boiler makers (through its National Boiler and Pressure Vessel Code). Each tank truck manufacturer must hire an ASME- authorized inspection agency, such as the National Board of Boiler and Pressure Vessel Inspectors, to audit the shop facility for compliance with ASME standards. ASME requires shop recertification reviews every 3 years. All cargo tanks, once in service, are required to be inspected and tested at specified intervals (e.g., shell thickness test every 2 years, pressure test every 5 years). The procedures for the tests, which are federally regulated, must be conducted by a U.S. DOT–qualified and –registered inspector, who can certify the results. The U.S. DOT’s Federal Motor Carrier Safety Administration (FMCSA) along with state police and other enforcement agencies are responsible for enforcing many of the regulations that apply to tank trucks in service. FMCSA inspectors examine tank truck terminals

112 STRENGTHENING U.S. COAST GUARD OVERSIGHT AND SUPPORT OF ROs and shipping facilities. They also periodically examine the records of tank truck repairers to confirm that certification procedures are being followed. Railroad Tank Cars Two U.S. DOT agencies, PHMSA and the Federal Railroad Administra- tion, share responsibility for regulating the design, use, and operations of railroad tank cars that carry hazardous materials. PHMSA regulations provide design criteria, known as DOT specifications, for more than three dozen tank car types. Although PHMSA regulations cover most major as- pects of tank car design, the tank car manufacturing and railroad industries have significant roles in establishing the many detailed requirements and ensuring compliance with them. Many of the U.S. DOT design criteria for tank cars are broadly defined, requiring more precise specifications. For this purpose, PHMSA authorizes the Association of American Railroads (AAR), through its Tank Car Committee (TCC), to establish the manual of specifications and to review individual design drawings to ensure that they are in compliance. The TCC consists of technical representatives from rail- roads, shippers, and tank car builders. In addition to developing U.S. DOT– compliant specification manuals, AAR and its TCC have an important role in enhancing compliance by reviewing construction drawings, component designs, and methods of repair, conversion, and alteration. Tank car builders and repairers are ultimately responsible for inspect- ing and certifying their completed work. After inspecting and testing the finished tank car in accordance with DOT procedures, the builder certifies compliance by submitting a certificate of construction to AAR. However, under U.S. DOT authority, the TCC has established minimum qualification requirements for tank car fabrication and repair shops and has set guide- lines for shops to develop quality control programs. AAR periodically con- ducts audits for compliance with these shop requirements. Recertification is required every 6 years and every 3 years for quality assurance. Once in service, tank cars must be inspected and tested at specified inter- vals for continued qualification to transport hazardous materials. Certain required inspections and tests must be conducted by a U.S. DOT– qualified and –registered inspector. FRA assists PHMSA in ensuring continued com- pliance with regulatory requirements through its railroad inspection pro- gram, including audits of tank car qualification programs. FRA employs hazardous materials specialists who inspect railroads, shippers, and tank car suppliers and repairers.

DELEGATIONS AND OVERSIGHT 113 Intermodal Tank Containers Intermodal tank containers carry many of the same materials as railroad tank cars but in smaller quantities (6,000 gallons or less). Because they cross national borders and may be transported by ship, truck, and rail, federal regulations governing their design and construction are established and enforced principally by PHMSA (rather than individual modal agen- cies), in concert with international standards. Manufacturers of intermodal tanks must apply for approval of the tank design plan by one of a dozen “approval agencies” designated by PHMSA. Most of the major classifica- tion societies (such as ABS) are authorized approval agencies. The approval agencies review design plans submitted by container owners or manufactur- ers to ensure that designs comply with U.S. DOT requirements and inter- national standards. PHMSA regulations prescribe the process that must be followed by the approval agency in conducting the review and certification. After approving the design, the approval agency provides the manufacturer with a certificate, and the tank is marked with the agency’s identification numbers. When intermodal tanks are used in railroad transportation, the AAR’s railroad interchange rules govern acceptability of intermodal tank con- tainers. Tank container owners must certify to AAR that their tanks are designed and manufactured to certain specifications and that a prototype tank container has been impact tested according to AAR requirements. The Coast Guard, which implements international conventions, is responsible for inspecting containers entering the country. Pipelines The United States has about 200,000 miles of hazardous liquid transmission pipelines and 300,000 miles of gas transmission pipelines. PHMSA’s Office of Pipeline Safety establishes minimum safety regulations that apply to these pipelines, but states are allowed to regulate intrastate pipelines as long as their programs are certified by the federal government. Indeed, because of the scope of the pipeline network, PHMSA has come to rely on state public safety agencies to inspect pipelines for compliance with federal and state regulations. About 80 percent of all pipeline inspections are conducted by state personnel, including inspections of interstate transmission pipelines on behalf of PHMSA. Approximately 400 state personnel are authorized to inspect interstate systems for compliance with PHMSA requirements, which far exceeds the number of inspectors PHMSA could deploy.

114 STRENGTHENING U.S. COAST GUARD OVERSIGHT AND SUPPORT OF ROs National Highway Traffic Safety Administration NHTSA is responsible for establishing Federal Motor Vehicle Safety Stan- dards (FMVSS), monitoring and enforcing compliance, and monitoring the safety performance of vehicles on the road. The FMVSS are written to be performance based and intended to be design and technology neutral out of recognition that automotive technologies change over time and vary across manufacturers. In this regard, NHTSA does not know how an FMVSS per- formance requirement will ultimately be met through alternative product designs, materials, and technologies. Original equipment manufacturers (OEMs) are responsible for ensuring that their vehicles meet all of the FMVSS, because NHTSA does not inspect or certify vehicle designs, their manufacturing, or the facilities where they are manufactured or repaired. In this regard, the process is reactive, as NHTSA’s main method for ensuring compliance is through monitoring the in-service, or on-road, fleet for defects. NHTSA’s Office of Defects Investi- gation is responsible for this monitoring through various means such as screening manufacturer technical service bulletins, reviewing complaints by vehicle owners, analyzing crash record databases, and investigating accidents. NHTSA is authorized to require manufacturers to issue recall notices when defects are discovered. It merits noting that some other countries and jurisdictions with large automotive industries give their manufacturers less leeway to define all aspects of their safety assurance processes. The European Union, for ex- ample, requires that manufacturers selling automobiles in member countries demonstrate that they have performed certain tests and followed specified processes during vehicle design, development, and production, such as con- ducting certain safety analyses for software and electronics. To have their vehicle types certified by a member EU country, the OEM must present evidence, usually to independent auditors, confirming that all such steps have been satisfied. As for ensuring that on-road vehicles are maintained in safe condi- tion, in the United States this is the responsibility of the individual vehicle owners in compliance with state laws. Vehicle inspection programs are often administered through state police and motor vehicle administrations using automotive service centers. Vehicle owners are responsible for ensur- ing that their vehicle’s condition is inspected periodically in compliance with state laws. In the case of heavy trucks, they are also subject to FMCSA safety regulations, which are enforced by state and local police.

DELEGATIONS AND OVERSIGHT 115 Federal Aviation Administration FAA establishes regulations and standards that must be met by manu- facturers of aircraft and aircraft engines to ensure airworthiness and crash worthiness. In developing these standards, FAA is authorized to set minimum standards for the design, materials, construction, quality of work, and performance of aircraft and their engines. However, despite its legal authority to prescribe the details of product design and construction, FAA has elected to place greater emphasis on ensuring that aviation equipment performs safely rather than on establishing specific design and construc- tion standards for products. In this important respect, the FAA regulations are comparable with the performance-oriented FMVSS promulgated by NHTSA, as the details of the design and development process are left to the manufacturer. Nevertheless, FAA is more directly involved in design approval and construction certification than are the agencies in the modes previously dis- cussed. Aircraft design approval begins when FAA receives an application from the manufacturer requesting a design “type” certificate. Manufactur- ers of large aircraft initiate the process several years before construction begins, submitting thousands of design drawings, test results, and engineer- ing reports to FAA. Because FAA staff cannot review all of the detailed documentation, senior engineers from the manufacturer are selected by FAA to work with agency staff as FAA “designated engineering representatives,” who are under oath to abide by all FAA requirements. Whereas FAA staff review and approve most major elements of the design and testing methods used to ensure design integrity, manufacturer designees review design details and test results to certify compliance with FAA requirements. To facilitate compliance, FAA advises manufacturers to follow certain preapproved processes for product development. In particular, the agency publishes advisory circulars that define acceptable means of conforming to specific airworthiness regulations. This self-certification process occurs in an environment in which techni- cally qualified FAA staff work closely with the designees. Before construct- ing a type-certified aircraft, the manufacturer must obtain a production certificate from FAA. Before a production certificate is granted, a team of FAA engineers reviews the manufacturing plans and quality control pro- gram to ensure that they meet the requirements of the type certificate and FAA quality control standards. During construction, FAA designates key manufacturer personnel as inspectors, known as “designated manufactur- ing inspection representatives.” These designees report to FAA inspectors assigned to the facility and certify on behalf of FAA (by issuing an air- worthiness certificate) that the completed aircraft conforms to the approved design.

116 STRENGTHENING U.S. COAST GUARD OVERSIGHT AND SUPPORT OF ROs Once in service, aircraft are subject to many FAA requirements for safe operations and maintenance, depending on the aircraft’s size and use. The regulations mandate inspection schedules and recordkeeping conducted by an FAA-authorized inspector. Designees, including consultants and indi- viduals in the employment of airlines and OEMs, are authorized to conduct examinations, perform tests, and issue maintenance certifications on behalf of the FAA. Bureau of Safety and Environmental Enforcement Responsibility for establishing and enforcing safety and environmental pro- tection standards for offshore (outer continental shelf) oil and gas facilities and operations rests with the U.S. Department of the Interior’s BSEE. To fulfill its duties, BSEE has about 850 employees, including approximately 120 inspectors and 130 engineers who review permit applications, facility plans, and company safety programs. Unlike the Coast Guard and many of the regulatory agencies discussed above, BSEE does not delegate inspection functions to third parties. All facility inspections are conducted by BSEE inspectors, three-fourths of whom are stationed in the Gulf of Mexico. Each year BSEE inspectors carry out inspections on about 1,700 to 1,800 facilities, as annual inspections are required for all production plat- forms and monthly inspections are required for mobile drilling rigs. Inspec- tions usually consist of a facility visit, announced or unannounced, in which the inspection team follows a set of guidelines for examining components and equipment using a list of prescriptive regulations. In fact, in 2002, the Coast Guard had authorized BSEE to conduct specific safety inspections aboard oil and gas platforms on its behalf. While the agency does not have plans to delegate inspections to third parties, advances in technologies used for exploration, drilling, and production, including operations in deepwater locations and on the sea floor, have created challenges for BSEE inspectors due to the remoteness, technical complexity, and inaccessibility of facilities. Offshore operators are required to develop safety and environmental management systems plans, comparable to the safety management systems (SMSs) required of vessel operators. BSEE regulations require offshore operators to have their plans audited for compliance with the regulatory requirements. In this regard, the third-party auditor provides a function similar to the SMS audits performed on vessels and vessel companies by ROs. BSEE requires the operator to submit the audit report, and the agency will then follow up with the operator to verify that any observed deficien- cies have been addressed.

DELEGATIONS AND OVERSIGHT 117 Comparative Summary Among the U.S. regulatory agencies reviewed, most delegate at least some compliance verification functions to third parties or the regulated entities themselves, as summarized in Table 6-1. However, the approaches differ widely. PHMSA delegates most pipeline inspections to state regulatory agencies, whereas the FAA delegates most aircraft inspections to the manu- facturers themselves. BSEE does not delegate any inspections of offshore facilities and NHSTA has elected not to use inspections as means of verify- ing compliance with its motor vehicle safety regulations. In cases in which agencies do delegate inspection functions to third-party organizations, it is because the regulatory agency is not able to maintain the large numbers of verification personnel needed or the requisite specialized expertise. The committee has been unable to identify any best practices that should be adopted by the Coast Guard from these other U.S. regulatory agencies. Unlike the other federal regulatory agencies discussed above, the Coast Guard has available as RO classification societies with well-trained and knowledgeable workforces. Classification societies such as ABS, DNV, LR, and Class NK have established rules developed over many years, research capabilities and knowledge in emerging technologies, training programs for surveyors and technical staff, sophisticated databases for documenting inspections and vessel conformance, QMSs with internal and external auditing. Furthermore, the ROs have a global organization net- work in IACS to assist in uniform interpretation of regulations, and through IACS, to direct participation in international rule development at the IMO. The designation of classification societies as ROs to act on behalf of the Coast Guard was a logical and effective means for leveraging this exper- tise. As described in this report, the appropriate path forward is to further enhance Coast Guard capabilities to oversee and audit. The objective of enhancing safety is best achieved through this uniquely maritime partner- ship of sharing expertise and data between the Coast Guard and ROs.

118 T A B L E 6 -1 C om pa ra ti ve S um m ar y of R eg ul at or y C om pl ia nc e V er ifi ca ti on b y Sa fe ty A ge nc ie s in O th er T ra ns po rt at io n M od es a nd R el at ed I nd us tr ie s A ge nc y R ai lr oa d T an k C ar s C ar go T an ks In te rm od al T an ks Pi pe lin es M ot or V eh ic le s A ir cr af t O ff sh or e O il an d G as Pr im ar y re gu la to ry ag en ci es . PH M SA a nd FR A PH M SA a nd FM C SA PH M SA ( w it h in te rn at io na l co nf or m an ce ) PH M SA N H T SA FA A B SE E D el eg at io ns o f in sp ec ti on a nd ce rt ifi ca ti on of d es ig n, m an uf ac tu ri ng , an d m ai nt en an ce . A A R T an k C ar C om m it te e (T C C ) ap pr ov es de si gn s an d co ns tr uc ti on un de r U .S . D O T au th or iz at io n. B ui ld er s el f- in sp ec ts a nd ce rt ifi es a nd se nd s ce rt ifi ca te to A A R . T C C re ce rt ifi es m an uf ac tu ri ng an d re pa ir fa ci lit ie s pe ri od ic al ly . O nc e in se rv ic e, U .S . D O T –q ua lifi ed in sp ec to r m us t te st a nd c er ti fy at d efi ne d in te rv al s. U .S . D O T – ce rt ifi ed d es ig n en gi ne er ap pr ov es de si gn p la ns an d ce rt ifi es co m pl ia nc e w it h re gu la ti on s. U .S . D O T –c er ti fie d in sp ec ti on en gi ne er r ev ie w s an d ce rt ifi es fin is he d ta nk . O nc e in s er vi ce , th e ta nk m us t be in sp ec te d by a U .S . D O T –c er ti fie d in sp ec to r at de fin ed in te rv al s. C er ti fie d en gi ne er s m ay be e m pl oy ee s of m an uf ac tu re rs an d re pa ir er s. D es ig n, co ns tr uc ti on , re pa ir, a nd m ai nt en an ce m us t be ap pr ov ed b y a U .S . D O T – re gi st er ed in te rn at io na l ap pr ov al ag en cy s uc h as A B S. Pi pe lin es se lf -c er ti fy co m pl ia nc e w it h fe de ra l pi pe lin e sa fe ty re gu la ti on s fo r de si gn , co ns tr uc ti on , an d m ai nt en an ce . PH M SA in sp ec to rs a re su pp le m en te d by s ta te in sp ec to rs . O E M s ar e ob lig at ed to c om pl y w ith Fe de ra l M ot or V eh ic le S af et y St an da rd s. T he re ar e no f ed er al in sp ec tio n or ce rt ifi ca tio n re qu ir em en ts f or ne w v eh ic le s. N H T SA m on ito rs sa fe ty p er fo rm an ce an d de fe ct s in t he on -r oa d fle et . S ta te s ha ve la w s ab ou t ve hi cl e m ai nt en an ce an d in sp ec tio n re qu ir em en ts f or re gi st er ed v eh ic le s in s er vi ce . F M C SA ha s ad di tio na l re qu ir em en ts fo r co m m er ci al ve hi cl es . D es ig ne es , in cl ud in g co ns ul ta nt s an d in di vi du al s in th e em pl oy m en t of O E M s an d ai rl in es a re au th or iz ed to c on du ct ex am in at io ns , pe rf or m t es ts , an d is su e m ai nt en an ce ce rt ifi ca ti on s on be ha lf o f FA A . FA A d es ig na te d m an uf ac tu re r re pr es en ta ti ve s re vi ew an d ce rt if y de si gn d et ai ls an d ce rt if y m an uf ac tu ri ng . N o de le ga ti on o f in sp ec ti on s. O ve rs ig ht o f de le ga ti on s. FR A i ns pe ct s ra ilr oa ds , sh ip pe rs , an d m an uf ac tu re rs fo r co m pl ia nc e. FM C SA i ns pe ct s tr uc k te rm in al s, sh ip pe rs , an d re pa ir f ac ili ti es an d th ey m us t be a ud it ed by a n A SM E - au th or iz ed in sp ec ti on ag en cy . In sp ec ti on s of i nt er m od al co nt ai ne rs en te ri ng t he co un tr y ar e co nd uc te d by t he C oa st G ua rd , w hi ch is r es po ns ib le ve ri fy in g co m pl ia nc e w it h re le va nt in te rn at io na l co nv en ti on s. St at e in sp ec to rs a re au th or iz ed to i ns pe ct on P H M SA ’s be ha lf . PH M SA ce rt ifi es th e st at e in sp ec ti on pr og ra m s. N o fo rm al de le ga ti on s to o ve rs ee in sp ec ti on s. FA A e ng in ee rs su pe rv is e an d ce rt if y th e w or k of de si gn ee s an d ar e so m et im es st at io ne d on si te . N ot ap pl ic ab le . N O T E : A A R = A ss oc ia ti on o f A m er ic an R ai lr oa ds ; B SE E = B ur ea u of S af et y an d E nv ir on m en ta l E nf or ce m en t; F A A = F ed er al A vi at io n A dm in is tr a- ti on ; F M C SA = F ed er al M ot or C ar ri er S af et y A dm in is tr at io n; F R A = F ed er al R ai lr oa d A dm in is tr at io n; N H T SA = N at io na l H ig hw ay T ra ffi c Sa fe ty A dm in is tr at io n; P H M SA = P ip el in e an d H az ar do us M at er ia ls S af et y A dm in is tr at io n; T C C = T an k C ar C om m it te e; U .S . D O T = U .S . D ep ar tm en t of T ra ns po rt at io n.

119 T A B L E 6 -1 C om pa ra ti ve S um m ar y of R eg ul at or y C om pl ia nc e V er ifi ca ti on b y Sa fe ty A ge nc ie s in O th er T ra ns po rt at io n M od es a nd R el at ed I nd us tr ie s A ge nc y R ai lr oa d T an k C ar s C ar go T an ks In te rm od al T an ks Pi pe lin es M ot or V eh ic le s A ir cr af t O ff sh or e O il an d G as Pr im ar y re gu la to ry ag en ci es . PH M SA a nd FR A PH M SA a nd FM C SA PH M SA ( w it h in te rn at io na l co nf or m an ce ) PH M SA N H T SA FA A B SE E D el eg at io ns o f in sp ec ti on a nd ce rt ifi ca ti on of d es ig n, m an uf ac tu ri ng , an d m ai nt en an ce . A A R T an k C ar C om m it te e (T C C ) ap pr ov es de si gn s an d co ns tr uc ti on un de r U .S . D O T au th or iz at io n. B ui ld er s el f- in sp ec ts a nd ce rt ifi es a nd se nd s ce rt ifi ca te to A A R . T C C re ce rt ifi es m an uf ac tu ri ng an d re pa ir fa ci lit ie s pe ri od ic al ly . O nc e in se rv ic e, U .S . D O T –q ua lifi ed in sp ec to r m us t te st a nd c er ti fy at d efi ne d in te rv al s. U .S . D O T – ce rt ifi ed d es ig n en gi ne er ap pr ov es de si gn p la ns an d ce rt ifi es co m pl ia nc e w it h re gu la ti on s. U .S . D O T –c er ti fie d in sp ec ti on en gi ne er r ev ie w s an d ce rt ifi es fin is he d ta nk . O nc e in s er vi ce , th e ta nk m us t be in sp ec te d by a U .S . D O T –c er ti fie d in sp ec to r at de fin ed in te rv al s. C er ti fie d en gi ne er s m ay be e m pl oy ee s of m an uf ac tu re rs an d re pa ir er s. D es ig n, co ns tr uc ti on , re pa ir, a nd m ai nt en an ce m us t be ap pr ov ed b y a U .S . D O T – re gi st er ed in te rn at io na l ap pr ov al ag en cy s uc h as A B S. Pi pe lin es se lf -c er ti fy co m pl ia nc e w it h fe de ra l pi pe lin e sa fe ty re gu la ti on s fo r de si gn , co ns tr uc ti on , an d m ai nt en an ce . PH M SA in sp ec to rs a re su pp le m en te d by s ta te in sp ec to rs . O E M s ar e ob lig at ed to c om pl y w ith Fe de ra l M ot or V eh ic le S af et y St an da rd s. T he re ar e no f ed er al in sp ec tio n or ce rt ifi ca tio n re qu ir em en ts f or ne w v eh ic le s. N H T SA m on ito rs sa fe ty p er fo rm an ce an d de fe ct s in t he on -r oa d fle et . S ta te s ha ve la w s ab ou t ve hi cl e m ai nt en an ce an d in sp ec tio n re qu ir em en ts f or re gi st er ed v eh ic le s in s er vi ce . F M C SA ha s ad di tio na l re qu ir em en ts fo r co m m er ci al ve hi cl es . D es ig ne es , in cl ud in g co ns ul ta nt s an d in di vi du al s in th e em pl oy m en t of O E M s an d ai rl in es a re au th or iz ed to c on du ct ex am in at io ns , pe rf or m t es ts , an d is su e m ai nt en an ce ce rt ifi ca ti on s on be ha lf o f FA A . FA A d es ig na te d m an uf ac tu re r re pr es en ta ti ve s re vi ew an d ce rt if y de si gn d et ai ls an d ce rt if y m an uf ac tu ri ng . N o de le ga ti on o f in sp ec ti on s. O ve rs ig ht o f de le ga ti on s. FR A i ns pe ct s ra ilr oa ds , sh ip pe rs , an d m an uf ac tu re rs fo r co m pl ia nc e. FM C SA i ns pe ct s tr uc k te rm in al s, sh ip pe rs , an d re pa ir f ac ili ti es an d th ey m us t be a ud it ed by a n A SM E - au th or iz ed in sp ec ti on ag en cy . In sp ec ti on s of i nt er m od al co nt ai ne rs en te ri ng t he co un tr y ar e co nd uc te d by t he C oa st G ua rd , w hi ch is r es po ns ib le ve ri fy in g co m pl ia nc e w it h re le va nt in te rn at io na l co nv en ti on s. St at e in sp ec to rs a re au th or iz ed to i ns pe ct on P H M SA ’s be ha lf . PH M SA ce rt ifi es th e st at e in sp ec ti on pr og ra m s. N o fo rm al de le ga ti on s to o ve rs ee in sp ec ti on s. FA A e ng in ee rs su pe rv is e an d ce rt if y th e w or k of de si gn ee s an d ar e so m et im es st at io ne d on si te . N ot ap pl ic ab le . N O T E : A A R = A ss oc ia ti on o f A m er ic an R ai lr oa ds ; B SE E = B ur ea u of S af et y an d E nv ir on m en ta l E nf or ce m en t; F A A = F ed er al A vi at io n A dm in is tr a- ti on ; F M C SA = F ed er al M ot or C ar ri er S af et y A dm in is tr at io n; F R A = F ed er al R ai lr oa d A dm in is tr at io n; N H T SA = N at io na l H ig hw ay T ra ffi c Sa fe ty A dm in is tr at io n; P H M SA = P ip el in e an d H az ar do us M at er ia ls S af et y A dm in is tr at io n; T C C = T an k C ar C om m it te e; U .S . D O T = U .S . D ep ar tm en t of T ra ns po rt at io n.