New Era In Towboating: The Year Of The Inspected Vessel

Subchapter M To Hit New Milestone This Summer

The Navy and Coast Guard call the first cruise of a new vessel a “shakedown cruise,” during which its performance is assessed, its operational characteristics are tested, and any bugs are worked out.

The final version of Subchapter M—the comprehensive regulations that, for the first time, make inland towboats “inspected vessels”—was published June 20, 2016. But it is still on its shakedown cruise. Unlike a vessel that launches at one time, the various parts of Subchapter M are being launched by the Coast Guard in phases on a timeline to help ease the transition to the inspected era.

This July 20, a significant Subchapter M deadline takes effect: parts 140-144 kick in for all vessels that do not already have a certification of inspection (COI). However, only a certain percentage will need to obtain COIs during that first year. Those sections govern requirements for operations, lifesaving, fire protection, machinery and electrical systems and equipment, and the “construction and arrangement” of the vessel.

According to Josh Lavire, regional vice president at the American Bureau of Shipping (ABS), “The majority of the present issues [we are seeing today with our clients] arise from the equipment requirements contained in the machinery and electrical section, Part 143 of Subchapter M. Third parties should work with clients to identify potential issues and determine if there is an alternative way to comply without reducing safety levels; 90-minute emergency lighting batteries that do not meet the two-hour requirement contained in Part 143.410 (b) (1) for existing vessels are an example.”

Compliance Clock Is Ticking

Over the past decade, the towing industry has worked closely with the Coast Guard, especially through the Towing Safety Advisory Committee, to provide input on the development of the regulations. Through a safety partnership between The American Waterways Operators (AWO) and the Coast Guard, AWO also supported the Coast Guard in establishing the Towing Vessel Bridging Program to ensure compliance with existing requirements and prepare both towing vessel operators and Coast Guard personnel for the transition to inspection.

But even now, after years of discussion and preparation and a year and a half after the final publication of Subchapter M, a number of sources in the inland industry, both among companies and approved third-party organizations (TPOs), say “the industry is waiting” to see what the total effects of Subchapter M will be.

It is normal for any set of new regulations, especially ones as comprehensive as Subchapter M, to go through a period of interpretation and adjustment. All parties have the same goal: greater safety for mariners and greater protection for the environment in a transportation mode that already leads all others in both worker safety and environmental protection.

The fact that barge rates have been low for the past year and a half may have contributed to hesitations by some companies, especially smaller ones.

Marine CFO, which develops Subchapter M compliance software packages, said last July on its website, “For the vast majority of towing vessel owners and operators, this past year has been an exercise of ‘wait and see.’ Operators have been working towards developing a properly structured Towing Safety Management System (TSMS), to then secure a TPO-issued TSMS certificate.”

Gray Areas

Kara Babb, a specialist in regulatory compliance at Conley Marine Services who has been involved in Subchapter M for several years, told The Waterways Journal, “If there is one word that sums up what Subchapter M means, and what it requires, that word is ‘communication.’ There are still a lot of gray areas” in Subchapter M that require interpretation, she said. Babb, a King’s Point graduate who spent years as a blue-water merchant officer and has worked for a marine class society, also worked on inland vessels and first got involved in Subchapter M work in 2008.

Echoing Babb, Heather Hilley, a manager at Quality Maritime Training (QMT), said, “There are still a lot of gray areas in Subchapter M, and we’re trying to figure them out as we move along,” She said QMT has three auditors who are also qualified as surveyors, with three more in the pipeline. “Business is picking up; it seems like we have suddenly been getting a lot more calls in the past couple of weeks,” she said.

Angie Fay, vice president of quality assurance and corporate compliance for Blessey Marine, concurs. “We feel that the biggest issue that remains [with Subchapter M] is ‘the unknown.’ Several parts of Subchapter M are vague and do not provide industry with the desired certainty or specificity. While the Coast Guard has provided some guidance, along with the leadership of AWO, there still remain questions which only time will tell how they are addressed.”

Lavire said, “In general, the industry has been very engaged in discussing and implementing the new regulation, as evidenced by the information found in the Subchapter M preamble and attendance at industry meetings. ABS has already issued TSMS certificates for a number of companies and is helping others to make the required changes to their safety-management systems. We have also been conducting surveys of vessels to determine individual levels of compliance.”

But he added, “There remain, however, a number of companies that have not decided on a compliance option nor partner. The clock is ticking for these companies.”

No Drydock Rush—Yet

Some have speculated that there might be a rush to shipyards by vessels seeking last-minute compliance. But Caitlyn Stewart, director of regulatory affairs for AWO, told The Waterways Journal, “Most companies will not need to spend a lot of time in shipyards before July 2018.” She said it is always a good idea for towing companies to have prior conversations with their OCMIs [Coast Guard officers in charge of marine inspection] before their vessels go into the shipyard.

“The towing industry and the Coast Guard are working together effectively to assure readiness for Subchapter M. We have been assured that the Coast Guard’s top priority is that Subchapter M implementation does not disrupt commerce,” Stewart said.

As Lavire points out, “Vessels operating in salt water are not required to undergo an internal structural exam and drydocking survey until 30 months after they receive their first COI; those operating in fresh water are not required to undergo an internal structural exam and drydocking survey until five years after the first COI. So while the yards’ associated activity may be quiet at present, drydock demand will increase in 2-1/2 to five years from the July 2018 deadline.”

Policy Letters Address Issues

The Coast Guard’s first tool for clarifying potentially ambiguous points is policy letters. These are often published after repeated queries from industry draw attention to a potential issue.

On May 24, 2017, the Coast Guard Released CG-CVC Policy Letter 17-02, titled “Subchapter M and the Requirement for a TPO.”

The letter said the Coast Guard “may” recognize a company’s safety management system (SMS) as a Towing Safety Management System under Subchapter M—if it is compliant with International Safety Management (ISM) Code. The AWO Responsible Carrier Program (RCP) was accepted as an SMS.

The letter also said this: “For vessels operating under an existing ISM or other Coast Guard-accepted safety management system, the owner or managing operator must have valid ISM or TSMS certificate(s), respectively, and provide the Coast Guard objective evidence that the vessel complies with Subchapter M prior to the issuance of the initial COI.”

That “and” implies that what a later section of the letter makes explicit: “The Coast Guard may issue an initial COI to a TSMS vessel after receiving objective evidence that the owner or managing operator is in compliance with the TSMS and the vessel meets the applicable stability, structures, and essential system requirements. Since the TSMS certificate alone does not indicate that the vessel meets the applicable portions of Subchapter M, objective evidence, such as a survey report issued by the TPO, is necessary.”

A vessel must operate under a TSMS for at least six months before it becomes eligible for a COI. Companies that have not yet developed or TSMS, nor hired a third party to develop one for them, may be persuaded that the Coast Guard inspection option is easier, even though it entails annual inspections.

Reporting Clarity

On November 28, the Coast Guard released another letter, CG-CVC Policy Letter 17-10, that addresses how third-party organizations (TPOs) are to report nonconformities, and especially how such reporting is to be stored on official Coast Guard databases.

When a TPO finds a nonconformity, it must report it to the database, called the Marine Information for Safety and Law Enforcement (MISLE).

But the policy letter specifies that nonconformities, including major nonconformities, will be listed in the database as “work list items” and stored in a non-public section of the database, not in the Coast Guard’s public-facing Port State Information Exchange (PSIX) vessel database.

The letter allows some discretion to the OCMI in deciding whether and what corrective actions to impose. “If necessary, the OCMI may impose control actions to ensure the vessel does not pose an unnecessary safety hazard to people, the waterway, or the environment. The identification of the non-conformity and the successful resolution of the condition, with the concurrence of the OCMI, demonstrate that the vessel’s TSMS is functioning properly.”

The OCMI may allow the TPO to correct the nonconforming conditions, but only with written permission from the OCMI.

In its December 20 newsletter, AWO said the policy letter “is a meaningful demonstration of the Coast Guard’s intent to encourage use of the TSMS option and its support of safety management systems as the best way to ensure continuous regulatory compliance.”

The letter may have also removed a fear among some companies that even minor non-conformities might be listed in a publicly available database.

Changing Role

Chris Parsonage, president and executive director of the Towing Vessel Inspection Bureau (TVIB), told The Waterways Journal, “Traditionally, the Coast Guard’s role has been to perform the inspections themselves. Each district has a support staff of marine inspectors to help them with that. But they have already been pretty busy even before Subchapter M. Supervising inspections by third parties is a new role for them.”

Parsonage said that in his view, the 17-10 letter is the first written indication of how the Coast Guard will handle this supervisory role.

TVIB has trained more than 100 auditors, and many surveyors. In the current class of 25 auditors he is teaching, said Parsonage, five are Coast Guard members sitting in. “We [at TVIB] are of the opinion that it is a very good thing for as many marine inspectors as possible to become familiar with who we are and what we do, and what our auditors are telling companies to expect.”

How Ready Is The Coast Guard?

In New Orleans, along with Houston perhaps the highest-density area of towing activity, Lt. Cmdr. Jason Boyle, chief of the inspections division in Sector New Orleans, told The Waterways Journal, “Sector New Orleans is proactively taking steps in developing policy on how Subchapter M will be implemented in our zone. We recognize that the risk profile of the towing community has not changed with the implementation of the new regulations, and our goal is to help our fleets come into compliance regardless of whether they choose a Coast Guard option or a TPO. We are exploring opportunities where we can work with industry for inspector training and to streamline the process before we begin issuing COIs.”

He added, “I think our biggest challenge at this point is how many operators will choose the Coast Guard option and how that will affect our current domestic vessel inspections.”

The Coast Guard has consistently said it is relying on TPOs to assume a lot of the burden and that it does not plan a hiring surge of marine inspectors. Some of its policy letters incentivize towing companies to choose TPOs and the TSMS option.

What if more companies than expected decide to go with the Coast Guard inspection option? Lavire said, “We had expected the majority of towing companies to opt for the TSMS option, and this has proven true. But interest in the Coast Guard option is proving stronger than anticipated, and appears to be driven by smaller companies that may not have safety-management systems already in place.”

Cmdr. Andrew Bender, director of the Towing Vessel National Center of Expertise (TVNCOE) in Paducah, Ky., told The Waterways Journal that that to date, there are no requests for the Coast Guard option under Subchapter M entered into MISLE.

However, it was only on January 16 that the Coast Guard announced on its Maritime Commons blog that it will begin issuing COIs to vessels using the Towing Safety Management System (TSMS) option to comply with Subchapter M. It is not yet issuing COIs to vessels choosing the Coast Guard inspection option; it said it would announce on the Maritime Commons site if it is ready to issue them before July 20.

It is, however, accepting applications for Coast Guard inspections from companies that submit Form CG-3752. The Coast Guard advises companies to list several possible dates when vessels may be available for inspection, to increase flexibility.

Right now, there is no user fee for the initial COI issuance, but a statutory fee of $1,030 will be assessed annually on the anniversary of the date the COI is issued. Bender said that fee could change at a later date.

Approved TPOs

In addition to the eight existing recognized marine classification societies, the Coast Guard has approved eight TPOs, for a total of 16 organizations: TVIB, American Global Maritime, Decatur Marine Audit & Survey (just approved in December), Marine Compliance LLC, QMT, Sabine Surveyors Ltd., Tompkins Consulting LLC, and Wavecrest Offshore Solutions Inc. (One of the classification societies, the International Register of Shipping or IRS, is authorized to develop TSMSs, but is not yet approved and has not applied to survey towing vessels or to issue survey reports.) While the Coast Cuard requires a list of approved auditors from each TPO, it does not approve each auditor itself.

The Coast Guard has recognized TPOs that have issued 44 TSMS certificates to date, Bender said, covering about 700 vessels in total.

The towing industry has roughly 5,600 towing vessels to be inspected, excepting some of those that are under 26 feet long and do not push petroleum barges, and thus do not fall under Subchapter M. The ones using TPOs will be inspected on a five-year schedule. The ones choosing Coast Guard inspections will be inspected each year, but their COIs will also be renewed on a five-year schedule.

Deep Dive

Companies using the Coast Guard inspection option can expect the first inspection—the one that results in the first issuance of a vessel’s COI—to be a “deep dive” in to every aspect of the vessel’s operation, safety and structure. In theory, each subsequent annual inspection could be as thorough, but the OCMI has some discretion here as well.

The Coast Guard is using a staggered phase-in approach. By July 22, 2019, 25 percent of a company’s fleet must have a valid COI, except for companies with only one vessel. By July 22, 2020, that percentage will jump to 50 percent, 75 percent by the following year and 100 percent by July 19, 2022.

Certain sections of Subchapter M (46 CFR 143.450) dealing with pilothouse alerter systems and towing machinery, will only kick in over a seven-year window. It is only in 2027 that the implementation of Subchapter M will be deemed fully “complete” according to the Coast Guard’s timeline

Two Companies’ Approaches

Higman Marine, which owns 76 boats, early on decided on an aggressive compliance approach using a TSMS. Higman has been operating with an electronic-based TSMS since 2014. Under the guidance of its TPO, Wavecrest Marine, it had its TSMS approved by the Coast Guard last February. The boats that were audited in 2017 will now have required six-month window of operating under the approved TSMS before they were eligible to apply for COIs.

According to Amy Kappes, Higman’s compliance and vetting manager, now that the Coast Guard has announced that it is ready to issue COIs to vessels using a TSMS, Higman will be applying to obtain COIs for 12 of its boats, at the rate of one or two a month. “We have to stagger the requests so that the renewals don’t pile up five years from now,” said Kappes.

Blessey Marine is another company that chose the TSMS option. In fact, Fay told The Waterways Journal, “Throughout the public comment period, Blessey advocated for Subchapter M to provide solely for the TSMS option to the exclusion of any U.S. Coast Guard option. We believe that the TSMS option fosters better development of a true safety culture.”

Like Higman, Blessey is well on its way to full compliance. “We have been preparing our vessels for quite some time now,” said Fay. “We received our TSMS certificate from ABS in May 2017, so we are well positioned to transition into the new regulatory landscape. Currently we are scheduling the TPO audits and annual surveys for the first 25 percent of vessels that will obtain COIs before July 29, 2019. … Additionally, our 100-percent compliance with the Uninspected Towing Vessel (UTV) program gives us flexibility going forward.”

Costs Of Compliance

On the costs of complying with Subchapter M, Fay says, “The issue of costs associated with Subchapter M is a tricky one, as the costs of compliance are frontloaded to the compliance date and not to the date that a vessel obtains a COI. Budgeting is essential. But…we compiled a list of items that needed attention and we budgeted accordingly.

“Obviously, the costs of complying with Subchapter M are greater than simply complying with the requirements of the RCP; however, we identify those items, and as boats enter a shipyard for scheduled drydocks or repairs, we address those items at that time. We did briefly look at the cost comparison between the two options; however, our Quality Management System already incorporation all essential RCP certification requirements…as well as Subchapter M TSMS options. Hence, the cost difference was irrelevant, in our opinion. More important, with the size of our fleet, and with the benefits provided [by] using the TSMS for compliance with Subchapter M, the TSMS option provides us with the most flexibility from a commercial standpoint.”

As Subchapter M takes effect, AWO has been adjusting its policies for its Responsible Carrier Program (RCP), the industry-created set of safety and operational standards developed two decades ago. On December 6, it issued a policy letter for companies that want to use safety management systems that are neither RCP nor ISM Code.

To retain AWO membership, companies must maintain third-party audited compliance with an SMS. Even if a company chooses Coast Guard inspections as a way to comply with Subchapter M, it must still maintain compliance with the AWO’s Responsible Carrier Program (RCP) “or an equivalent SMS” to keep AWO membership.

Because some of the RCP’s requirements are stricter than those of Subchapter M, a company can use an ISM Code program to comply, “provided that the company demonstrates compliance with [those] RCP requirements that exceed the requirements of the ISM Code.” The company’s TPO must provide a “gap analysis” to the AWO, demonstrating compliance with RCP requirements that exceed the ICM Code.