95-8572. Great Lakes Pilotage Rate Methodology  

  • [Federal Register Volume 60, Number 69 (Tuesday, April 11, 1995)]
    [Rules and Regulations]
    [Pages 18366-18373]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 95-8572]
    
    
    
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    DEPARTMENT OF TRANSPORTATION
    
    Office of the Secretary
    Coast Guard
    
    46 CFR Parts 401, 403, and 404
    
    [OST Docket No. 50248]
    [CGD 92-072]
    RIN 2105-AC21
    
    
    Great Lakes Pilotage Rate Methodology
    
    AGENCY: Office of the Secretary, DOT.
    
    ACTION: Final rule; request for comments.
    
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    SUMMARY: The Department of Transportation (the Department) is amending 
    the regulations concerning Great Lakes pilotage by amending the 
    procedures for determining Great Lakes pilotage rates, and revising the 
    financial reporting requirements mandated for Great Lakes pilot 
    associations. The purpose of these changes is to improve the ratemaking 
    process. This final rule does not change the existing Great Lakes 
    pilotage rates and charges.
    
    DATES: This rule is effective on June 12, 1995. Comments must be 
    received on or before May 11, 1995. Late-filed comments will be 
    considered only to the extent practicable.
    
    ADDRESSES: Comments should be sent, preferably in triplicate, to Docket 
    Clerk, OST Docket No. 50248, U.S. Department of Transportation, 400 7th 
    St. SW., room PL-401, Washington, DC 20590. Comments will be available 
    for inspection at this address from 9 a.m. to 5:30 p.m., Monday through 
    Friday. Commenters who wish the receipt of their comments to be 
    acknowledged should include a stamped, self-addressed postcard with 
    their comments. The Docket Clerk will date-stamp the postcard and mail 
    it back. Unless otherwise indicated, documents referred to in this 
    preamble are also available for inspection or copying at this address. 
    Comments should not be sent to the Coast Guard docket.
    
    FOR FURTHER INFORMATION CONTACT: Scott A. Poyer, Project Manager, 
    Merchant Vessel Personnel Division, Office of Marine Safety, Security 
    and Environmental Protection (G-MVP/12) room 1210, U.S. Coast Guard 
    Headquarters, 2100 Second Street, SW., Washington, DC 20593-0001, (202) 
    267-6102, or Steven B. Farbman, Office of the Assistant General Counsel 
    for Regulation and Enforcement, 400 7th St. SW., room 10424, 
    Washington, DC 20590, (202) 366-9306.
    
    Regulatory History
    
        On December 7, 1988, the Department of Transportation published the 
    Great Lakes Pilotage Study Final Report (1988 DOT Pilotage Study). The 
    study revealed weaknesses in accounting for the expenses incurred by 
    the pilot associations and the need to formally establish the factors 
    used in establishing pilotage rates. On April 25, 1990, the Coast Guard 
    published a final rule (55 FR 17580) establishing improved audit 
    requirements and general guidelines and procedures to be followed in 
    ratemaking (CGD 92-072).
        In May 1990, the Inspector General (IG) for the Department of 
    Transportation initiated an audit of Coast Guard oversight of Great 
    Lakes pilotage. The final report of the audit (Audit of the U.S. Coast 
    Guard's Oversight and Management of the Great Lakes Pilotage Program), 
    detailing further issues affecting the basis for Great Lakes pilotage 
    rates, was issued on December 14, 1990.
        On August 2, 1991, a DOT Task Force was formed to: (1) Develop an 
    interim rate adjustment; and (2) establish a new pilotage ratemaking 
    methodology. On June 5, 1992, an interim rate increase was published 
    (CGD 89-104). The DOT Task Force then developed a new pilotage 
    ratemaking methodology, which the Coast Guard published in a notice of 
    proposed rulemaking (NPRM) (59 FR 17303) dated April 12, 1994.
        The NPRM proposed to amend the Great Lakes pilotage regulations by 
    establishing new procedures for determining Great Lakes pilotage rates 
    and revising the financial reporting requirements mandated for Great 
    Lakes pilot associations (CGD 92-072). The NPRM also announced a public 
    hearing that was held in Cleveland, OH on May 20, 1994. The comment 
    period for the NPRM ended on July 11, 1994.
        In response to the NPRM and the public hearing, the Coast Guard 
    received 31 comments and two requests for additional public meetings to 
    explain the proposals contained in the NPRM. In the Federal Register 
    (59 FR 18774) on April 20, 1994, the Coast Guard announced that it 
    would conduct two public meetings. The first public meeting was held in 
    Chicago, IL on May 3, 1994. The second public meeting was held in 
    Massena, NY on May 5, 1994.
        The Coast Guard also received one request to extend the comment 
    period for the NPRM. Because the comment period for the NPRM was 90 
    days, the Coast Guard determined that there was sufficient time to 
    submit comments. Therefore, the comment period was not extended.
    
    Background and Purpose
    
        Under the Great Lakes Pilotage Act of 1960 (Pub. L. 86-555, 46 
    U.S.C. 9301 et seq.) (the Act), vessels of the United States operating 
    on register and foreign vessels must engage a U.S. or Canadian 
    registered pilot when traversing the waters of the Great Lakes. The Act 
    vests the Secretary of Transportation with responsibility for setting 
    pilotage rates. Section 9303 of the Act provides that the Secretary 
    shall prescribe by regulation rates and charges for pilotage services, 
    giving consideration to the public interest and the costs of providing 
    the services. This authority, except for the authority to enter into, 
    revise or amend arrangements with Canada, has been delegated to the 
    Commandant of the Coast Guard by 49 CFR 1.46(a). This authority has 
    been further delegated to the Director, Great Lakes Pilotage (the 
    Director).
        Currently, the navigable waters of the Great Lakes are divided into 
    eight pilotage areas. United States registered pilots, along with their 
    Canadian counterparts, provide pilotage services in areas 1, 2, 4, 5, 
    6, 7, and 8. Pilotage area 3 (the Welland Canal) is currently a wholly-
    Canadian area where only Canadian pilots provide services. Pilotage 
    areas 2, 4, 6, and 8 are ``undesignated waters.'' Pilotage areas 1, 5, 
    and 7 are ``designated waters.'' Pilots are required to direct 
    navigation of vessels in designated waters. Pilots are required to be 
    on board and available to direct navigation in undesignated waters. The 
    seven U.S. pilotage areas are grouped together into three pilotage 
    districts. District 1 consists of areas 1 and 2. District 2 consists of 
    areas 4 and 5. District 3 consists of areas 6, 7, and 8. Each district 
    has its own pilot association.
        Section 9305 of the Pilotage Act provides that the Secretary of 
    Transportation, subject to the concurrence of the Secretary of State, 
    may make agreements with the appropriate agency of Canada to prescribe 
    joint or identical rates and [[Page 18367]] charges. The latest 
    Memorandum of Arrangements between the United States and Canada, dated 
    January 18, 1977, specifies that the Secretary of Transportation of the 
    United States of America and the Minister of Transport of Canada will 
    establish regulations imposing identical rates. A copy of this 
    Memorandum of Arrangements is available in the docket and may also be 
    obtained by writing to Mr. Scott Poyer at the address listed under FOR 
    FURTHER INFORMATION CONTACT, above. In the past, consultations between 
    the United States and Canada resulted in nominally identical U.S. and 
    Canadian rates.
        However, there are differences in the cost bases and in the 
    operating organizations of the U.S. and Canadian pilots, particularly 
    with regard to pilot compensation. These differences need to be taken 
    into account in reaching identical U.S. and Canadian rates. As a 
    result, the ratemaking methodology contained in this final rule would 
    not translate directly into new rates, but rather would form the basis 
    for proposals to be negotiated with Canada.
    
    Discussion of Comments and Changes
    
        Although the Coast Guard issued the NPRM under authority delegated 
    to the Commandant by the Secretary, the Secretary is issuing the final 
    rule. Under 49 CFR 1.43(a), the Secretary may exercise powers and 
    duties delegated or assigned to officials other than the Secretary.
        Because the Secretary is issuing this final rule, the Department is 
    consolidating Coast Guard Docket No. 92-072 into OST Docket No. 50248. 
    All further pleadings should be filed in the new docket at the docket 
    address listed above.
        The Coast Guard received 31 comments on the NPRM. Twenty comments 
    were from Great Lakes Pilots, Great Lakes Pilot Associations, or 
    employees of these associations. Six comments were from shippers, 
    ports, and associations representing the Great Lakes maritime industry. 
    Five comments were from unions or professional organizations that 
    represent pilots. Some of the comments addressed issues that were not 
    the subject of this rulemaking. The Department is responding only to 
    those comments relating to this rulemaking.
        All comments were carefully considered, and in response to the 
    comments significant changes have been made to the proposals that were 
    published in the NPRM. The NPRM proposed changes to 46 CFR part 403, 
    which deals with accounting and financial reporting requirements, and 
    46 CFR part 404, which details ratemaking procedures.
        Most of the comments criticized the NPRM for being overly complex 
    and unwieldy. In response to this criticism, the regulations that were 
    proposed in the NPRM have been cut by approximately two thirds, with no 
    sacrifice of fairness or substance. Accounting requirements have been 
    streamlined for easier use, financial reporting requirements have been 
    reduced, and the proposed ratemaking methodology has been revised to 
    make it less complex.
        The NPRM elements that received the strongest objections from the 
    public were proposals to change the way pilotage rates are charged on 
    the Great Lakes. Almost everyone who commented on the proposed rule 
    objected to the proposals to create a class of ``ancillary services'' 
    and to recalculate point-to-point pilotage charges based on hourly 
    fees. These proposals were found in Step 7 of appendix A to part 404. 
    The majority of commenters felt that the proposals for hourly pilotage 
    fees would degrade safety by creating an incentive for vessels to go 
    faster in order to avoid or reduce pilotage costs. Commenters also 
    objected to labeling some pilotage services such as docking and 
    undocking as ``ancillary services'' and allowing fees for these 
    services to be set purely at the discretion of the Director. There were 
    concerns that purely discretionary rates would not be predictable for 
    shippers or pilots.
        In response to the comments from pilots, shippers, unions and most 
    other commenters, the NPRM proposal to charge fees on an hourly basis 
    has been modified. The Department agrees with the expressed concerns 
    regarding undue complexity and possible disincentives for operational 
    safety, and has therefore rewritten Step 7 of appendix A to part 404. 
    This final rule retains the current method for charging pilotage rates 
    to various users, which specifies charges for specific travel segments. 
    If concerns are raised in the future regarding the equity of the way in 
    which pilotage rates are charged, this issue may be reopened. However, 
    no changes will be made without a proceeding that provides for public 
    involvement.
        There were many objections from pilots and shippers to the proposal 
    that the timing of rate reviews be determined by the Director of Great 
    Lakes Pilotage. Several alternatives were suggested, but most comments 
    indicated that it would be more appropriate if a rate review were 
    conducted at least every one, two, or three years in order to keep 
    pilotage rates current. The Department agrees with these comments. The 
    provision in 46 CFR 404.1(b), which gave the Director authority to 
    determine the timing of rate reviews, has been revised in response to 
    the public comments received. Section 404.1(b) now requires the 
    Director to conduct a detailed audit of pilot association expenses and 
    use the ratemaking procedures in appendix A of part 404 to set base 
    pilotage rates at least once every five years. The Director of Great 
    Lakes Pilotage will initiate the new methodology as soon as possible 
    after the effective date of this rule using the most current audit 
    reports available. If interested parties request reviews more often 
    than once every five years, the Director can review the request, and 
    conduct a special audit and ratemaking if the Director concludes that a 
    reasonable basis for conducting a review has been established.
        In the intervening years between the five-year or special audits, 
    pilotage rates proposed for coordination with Canada will be reviewed 
    annually using a simplified procedure detailed in appendix C to part 
    404. This annual review procedure addresses public comments that a less 
    complicated ratemaking process would be faster and less burdensome on 
    all parties.
        During the regular five-year audit of the Great Lakes pilot 
    associations and the corresponding rate review, the Director will 
    calculate an ``expense multiplier'' for each pilot association using 
    the most recent regular and/or special audit data. This expense 
    multiplier is the ratio of all other expenses, including a return 
    element, to pilot compensation expense in unit cost terms for the base 
    period analyzed. When target pilot compensation is determined for a 
    prospective annual rate period, total economic costs can be easily 
    determined by increasing such pilot compensation by the multiplier. Use 
    of this ratio avoids the need to recalculate other expenses and the 
    return element each year in order to review the rates. Moreover, since 
    this review procedure focuses on changes in unit costs, i.e., total 
    economic costs per bridge hour, between the base period and the new 
    rate period, the need to project revenues for the new period is also 
    avoided. Finally, this calculation will not change the rate structure; 
    it will merely change proposed rates uniformly by the percentage change 
    in unit costs.
        Most pilots, and organizations representing pilots, commented on 
    the NPRM's proposal to continue the Department policy of maintaining 
    income comparability between Great Lakes Registered Pilots, and 
    masters/chief mates on Great Lakes vessels. This policy was established 
    as a result of the [[Page 18368]] 1988 DOT Pilotage Study, which 
    examined many alternatives and selected the master/chief mate target 
    for pilot compensation. Commenters believed pilots should earn more 
    than masters/chief mates. Among the many alternatives proposed by 
    commenters were: Comparability with State pilots; comparability with 
    Canadian pilots; automatic cost-of-living allowances; overtime bonuses; 
    and work hour/travel time/rest time adjustments. No single alternative 
    appeared to represent a consensus. After considering all the 
    alternatives, the Department is keeping the pilot compensation 
    methodology proposed in the NPRM. This is fully consistent with the 
    recommendation in the 1988 DOT Pilotage Study, which states, ``The 
    study team believes that pilot compensation should be tied to the local 
    economy. The use of local masters and mates pay scales has the 
    important impact of tying pilot compensation to regional industry pay 
    levels. Salaries of pilots, like those of teachers, physicians, 
    lawyers, and other professionals, are tied to the fluctuations of 
    supply and demand for their services in their particular locality. In 
    this fashion, Great Lakes pilots share in the fortunes of the Great 
    Lakes.'' Commenters offered no new information that alters this 
    assessment.
        There were several objections from Great Lakes Pilot Associations 
    and their employees to the proposed new 46 CFR part 403, as published 
    in the NPRM. Commenters objected that this part was unduly burdensome 
    for small pilot associations and should be eliminated in order to 
    streamline the regulations, and reduce costs to the pilot associations. 
    After careful consideration, and in light of the lesser requirements of 
    the procedures for the annual reviews of base pilotage rates, the 
    Department agrees with the public comments and has greatly streamlined 
    part 403. Specific account numbers and detailed account descriptions 
    have been removed in favor of a requirement that financial records of 
    the association be kept in accordance with generally accepted 
    accounting principles. Associations are required to complete and retain 
    annual financial statements and an audit by a certified public 
    accountant. However, reporting requirements have been reduced to 
    require that audits only be forwarded to the Director once every five 
    years, or by special request. At the same time, associations must keep 
    in mind that answers challenging proposed cost disallowances or other 
    applications of the ratemaking methodology, as well as ad hoc requests 
    for rate reviews, must be based on full and adequate financial records.
        Two commenters from two of the three Great Lakes Pilot Associations 
    objected to the proposed requirement that the financial records of the 
    associations be retained for a period of ten years, and proposed an 
    alternative three-year requirement that would conform to Internal 
    Revenue Service (IRS) requirements. The Department does not agree. The 
    Department does not use the financial records of the pilot association 
    for the same purpose as the IRS. On several occasions the Director has 
    accessed historical data to ensure that only reasonable expenses have 
    been included in ratemaking calculations. For this reason, the 
    Department is adopting the proposed requirement regarding the 10-year 
    retention of financial records.
        The Department anticipates implementing all the rate reviews under 
    the methodologies adopted in this rulemaking proceeding through 
    additional public procedures. Following a review, the Department will 
    publish its tentative findings and any proposed rate changes, and it 
    will request the comment of interested parties on the calculations. 
    (Comments seeking reconsideration of our rate methodology will not be 
    addressed through this process.) The Department will then seek to 
    coordinate any proposed change in rates, as modified by any warranted 
    corrections, with Canadian authorities. Following the coordination 
    process, the Department will establish final rates to be effective for 
    the designated future rate period. Both the proposed and final rate 
    documents will be served on the pilot associations and other interested 
    persons requesting in writing to be placed on the service list in this 
    docket; both documents will also be published in the Federal Register.
        Although the Coast Guard received no comments on the section 
    pertaining to the uniform pilot's source form, the Department is making 
    a slight modification to clarify that the format for source forms is 
    approved by the Director of Great Lakes Pilotage and issued by the 
    pilot associations. The ``Pilot's Source Form--Great Lakes Pilotage,'' 
    referred to in the NPRM, is not an official United States Government 
    form.
        The Department is also removing several subparts as part of our 
    streamlining of the accounting regulations. Subparts B, C, D, and G, as 
    contained in the NPRM, have been eliminated, and subparts E, F, and H 
    have been redesignated subparts B, C, and D, respectively.
        There were several objections from employees and representatives of 
    the District 3 pilot association to the proposed revision to 46 CFR 
    404.05, which provided that profit sharing expenses not be recognized 
    for ratemaking purposes. Commenters argued that profit sharing for 
    employees of the District 3 pilot association is part of their 
    recognized pension plan, and employees of this association would be 
    unfairly penalized if this proposal were adopted. The Department agrees 
    and has changed the wording of the proposed paragraph to allow 
    reasonable profit sharing expenses for non-pilot employees only. Profit 
    sharing that benefits pilots will be considered part of pilot 
    compensation.
        Several comments from both pilots and shippers, as part of the 
    overall objection to the complexity of the proposal, argued that the 
    market-equivalent Return-on-Investment (ROI) provisions of 46 CFR 
    404.5(a)(4), Step 5 of appendix A, and the formulas contained in 
    appendix B should not be included. Some members of the public objected 
    to allowing a return on the capital that pilots had invested in their 
    pilot associations on the grounds that this would encourage pilots to 
    make investments that were unrelated to pilotage, and thereby increase 
    pilotage fees. Other commenters believed that the ROI provisions made 
    the ratemaking formula in appendix A too complicated. The Department 
    carefully considered these comments and believes that we have 
    significantly reduced the proposal's complexity and burden. However, a 
    return element is an important component of cost-based rate 
    methodologies. Rates that have been set without a return element have 
    been vulnerable to legal challenge and do not meet the goals of the 
    investigations and audits that underlie this rulemaking. Also, in order 
    to negotiate with the Canadians we must have rates that can withstand 
    scrutiny as to their conformity to sound ratemaking principles. The 
    Department believes it is only fair to allow pilots a return on the 
    capital they invest. The Department also believes that sufficient 
    safeguards against excessive investment are in place because 46 CFR 
    404.5(a)(4) specifically stipulates that capital that is not necessary 
    and reasonable for the provision of pilotage services will not be 
    allowed for ratemaking purposes.
    
    Final Rule With Request for Comments
    
        The Department is issuing this document as a final rule but is also 
    providing an opportunity for comment. This rulemaking document is 
    within the scope of the NPRM. The primary purposes of the final rule 
    have not changed from the NPRM stage: to [[Page 18369]] standardize the 
    financial reporting of Great Lakes pilotage associations, and to 
    clarify the methodology to be used in future ratemakings. We believe 
    that we have responded to all the concerns expressed in the comments to 
    the NPRM. Nevertheless, we want to give the public an additional 
    opportunity to present its views to us, given the changes that we have 
    made to the NPRM. Accordingly, even though the final rule will be 
    effective on June 12, 1995, we will consider any new matters presented 
    to us during the 30-day comment period. We will make revisions to this 
    rule if we believe they are warranted.
    
    Executive Order 12866
    
        This rule is a significant regulatory action under section 3(f) of 
    Executive Order 12866 and has been reviewed by the Office of Management 
    and Budget under that order. It is significant under the regulatory 
    policies and procedures of the Department of Transportation (44 FR 
    11040; February 26, 1979) because a rulemaking affecting the setting of 
    pilotage rates is controversial and of significant interest to the 
    public.
        The Department expects the economic impact of this rule to be 
    minimal. This rule does not represent a significant departure from the 
    current ratemaking process, and there are no expected increases in 
    costs. Therefore, a full regulatory evaluation is not necessary.
    
    Small Entities
    
        Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), the 
    Department must consider whether this final rule will have a 
    significant economic impact on a substantial number of small entities. 
    ``Small entities'' include independently owned and operated small 
    businesses that are not dominant in their field and that otherwise 
    qualify as ``small business concerns'' under section 3 of the Small 
    Business Act (15 U.S.C. 632). This final rule should have little or no 
    impact on small entities that pay pilotage rates or that receive income 
    from pilotage rates. Because it expects the impact of this proposal to 
    be minimal, the Department certifies under 5 U.S.C. 605(b) of the 
    Regulatory Flexibility Act (5 U.S.C. 601 et seq.) that this final rule 
    will not have a significant economic impact on a substantial number of 
    small entities.
    
    Collection of Information
    
        This rule contains collection-of-information requirements. The 
    Department has submitted the requirements to the Office of Management 
    and Budget (OMB) for review under section 3504(h) of the Paperwork 
    Reduction Act (44 U.S.C. 3501 et seq.), and OMB has approved them. The 
    part numbers are parts 401 and 403 and the corresponding OMB approval 
    number is OMB Control Number 2115-0616.
    
    Federalism
    
        The Department has analyzed this final rule under the principles 
    and criteria contained in Executive Order 12612, and has determined 
    that this rule does not have sufficient federalism implications to 
    warrant the preparation of a Federalism Assessment. Under 49 CFR 
    1.46(a) the Secretary delegates to the Commandant of the authority to 
    carry out the Great Lakes Pilotage Act of 1960, as amended, except the 
    authority to enter into, revise, or amend arrangements with Canada.
        State action addressing pilotage regulation is preempted by 46 
    U.S.C. 9306, which provides that a State or political subdivision of a 
    State may not regulate or impose any requirement on pilotage on the 
    Great Lakes.
    
    Environment
    
        The Department considered the environmental impact of this final 
    rule and concluded that under section 2.B.2 of Commandant Instruction 
    M16475.1B, this rule is categorically excluded from further 
    environmental documentation. The rule is procedural in nature because 
    it deals exclusively with ratemaking and accounting procedures. 
    Therefore, this is included in the categorical exclusion in subsection 
    2.B.2.1,--Administrative actions or procedural regulations and policies 
    that clearly do not have any environmental impact. A Categorical 
    Exclusion Determination has been placed in the docket.
    
    List of Subjects in 46 CFR Parts 401, 403, and 404
    
        Administrative Practice and Procedure, Great Lakes, Navigation 
    (water), Penalties, Reporting and Recordkeeping Requirements, Seamen.
    
        For the reasons set out in the preamble, the Department proposes to 
    amend parts 401, 403, and 404 of title 46 of the Code of Federal 
    Regulations as follows:
    
    PART 401--[AMENDED]
    
        1. The authority citation for part 401 is revised to read as 
    follows:
    
        Authority: 46 U.S.C. 6101, 7701, 8105, 9303, 9304; 49 CFR 1.45, 
    1.46. 46 CFR 401.105 also issued under the authority of 44 U.S.C. 
    3507.
    
        2. In Sec. 401.110 the introductory text of paragraph (a) and 
    paragraph (a)(9) are revised, and paragraph (a)(16) is added to read as 
    follows:
    
    
    Sec. 401.110   Definitions.
    
        (a) As used in this chapter:
    * * * * *
        (9) Director means Director, Great Lakes Pilotage. Communications 
    with the Director may be sent to the following address: Director, Great 
    Lakes Pilotage (G-MVP-7), 2100 2nd St., SW., Washington, DC 20593.
    * * * * *
        (16) Association means any organization that holds or held a 
    Certificate of Authorization issued by the Director of Great Lakes 
    Pilotage to operate a pilotage pool on the Great Lakes.
        3.-4. Part 403 is revised to read as follows:
    
    PART 403--GREAT LAKES PILOTAGE UNIFORM ACCOUNTING SYSTEM
    
    Subpart A--General
    
    Sec.
    403.100  Applicability of system of accounts and reports.
    403.105  Records.
    403.110  Accounting entities.
    403.115  Accounting period.
    403.120  Notes to financial statements.
    
    Subpart B--Inter-Association Settlements
    
    403.200  General.
    
    Subpart C--Reporting Requirements
    
    403.300  Financial reporting requirements.
    
    Subpart D--Source Forms
    
    403.400  Uniform pilot's source form.
    
        Authority: 46 U.S.C. 8105, 9303, 9304; 49 CFR 1.46.
    
    Subpart A--General
    
    
    Sec. 403.100   Applicability of system of accounts and reports.
    
        Each Association shall keep its books of account, records and 
    memoranda, and make reports to the Director in accordance with the 
    guidelines of the Generally Accepted Accounting Principles (GAAP) 
    issued by the Financial Accounting Standards Board. These guidelines 
    are available by writing to the Director, Great Lakes Pilotage at the 
    address listed in Sec. 401.110(a)(9) of this chapter.
    
    
    Sec. 403.105   Records.
    
        (a) Each Association shall maintain the general books of account 
    and all books, records, and supporting memoranda in such manner as to 
    provide, at any time, full information relating to any account. 
    Supporting memoranda must provide sufficient information to verify the 
    nature and character of each entry and its proper 
    classification. [[Page 18370]] 
        (b) Each Association shall maintain all books, records and 
    memoranda in a manner that will readily permit audit and examination by 
    the Director or the Director's representatives. All books, records and 
    memoranda shall be protected from loss, theft, or damage by fire, flood 
    or otherwise, and shall be retained for 10 years unless otherwise 
    authorized by the Director.
    
    
    Sec. 403.110   Accounting entities.
    
        Each Association shall be a separate accounting entity. However, 
    the records shall be maintained with sufficient particularity to 
    allocate items to each pilotage pool operation or nonpool operation and 
    to support the equitable proration of items that are common to two or 
    more pilotage pools.
    
    
    Sec. 403.115   Accounting period.
    
        Each Association subject to this part shall maintain its accounts 
    on a calendar year basis unless otherwise approved by the Director.
    
    
    Sec. 403.120   Notes to financial statements.
    
        (a) All matters that are not clearly identified in the body of the 
    financial statements of the Association, but which may materially 
    influence interpretations or conclusions that may reasonably be drawn 
    in regard to financial condition or earnings of the Association, shall 
    be clearly and completely stated as footnotes to the financial 
    statements.
        (b) Financial items that are not otherwise required to be reported 
    in the Association financial statements, but which may affect 
    ratemaking calculations, are required to be reported to the Director in 
    the notes to the financial statements. Any financial items that are not 
    reported to the Director will not be considered by the Director during 
    ratemaking procedures contained in part 404 of this chapter.
    
    Subpart B--Inter-Association Settlements
    
    
    Sec. 403.200   General.
    
        Each Association that shares revenues and expenses with the 
    Canadian Great Lakes Pilotage Authority (GLPA) shall submit settlement 
    statements regarding these activities. The settlement statements shall 
    be completed in accordance with the terms of agreements between the 
    United States and Canada and guidance from the Director of Great Lakes 
    Pilotage.
    
    Subpart C--Reporting Requirements
    
    
    Sec. 403.300   Financial reporting requirements.
    
        (a) General:
        (1) The financial statements shall list each active account, 
    including subsidiary accounts.
        (2) The financial statements, together with any other required 
    statistical data, shall be submitted to the Director within 30 days of 
    the end of the reporting period, unless otherwise authorized by the 
    Director.
        (3) An officer of the Association shall certify the accuracy of the 
    financial statements.
        (b) Required Reports:
        (1) Every five years, or when specially requested by the Director, 
    each Association shall furnish the Director the Association's annual 
    financial statements audited in accordance with generally accepted 
    auditing standards by an independent certified public accountant.
        (2) Each Association shall furnish the Director a copy of all 
    settlement statements annually.
    
    Subpart D--Source Forms
    
    
    Sec. 403.400   Uniform pilot's source form.
    
        (a) Each Association shall record pilotage transactions on a form 
    approved by the Director. The approved form shall be issued to pilots 
    by authorized United States pilotage pools.
        (b) Pilots shall complete forms in detail as soon as possible after 
    completion of assignment and return the entire set to the dispatching 
    office, together with adequate support for reimbursable travel 
    expenses.
        (c) Upon receipt by the Association, the forms shall be completed 
    by insertion of rates and charges as specified in part 401 of this 
    chapter.
        (d) Copies of the form shall be distributed as follows:
        (1) Original to accompany invoice;
        (2) First copy to Director;
        (3) Second copy to billing office for accounting record;
        (4) Third copy to pilot's own Association for pilot's personal 
    record;
        (5) Fourth copy to corresponding Canadian Association or agency for 
    office use.
        (e) Associations shall account by number for all pilot source forms 
    issued.
        5. Part 404 is revised to read as follows:
    
    PART 404--GREAT LAKES PILOTAGE RATEMAKING
    
    Sec.
    404.1  General ratemaking provisions.
    404.5  Guidelines for the recognition of expenses.
    404.10  Ratemaking Procedures and Guidelines.
    Appendix A to Part 404--Ratemaking analyses and methodology.
    Appendix B to Part 404--Ratemaking definitions and formulas.
    Appendix C to Part 404--Procedures for Annual Review of Base 
    Pilotage Rates
    
        Authority: 46 U.S.C. 8105, 9303, 9304; 49 CFR 1.46.
    
    
    Sec. 404.1   General ratemaking provisions.
    
        (a) The purpose of this part is to provide guidelines and 
    procedures for Great Lakes pilotage ratemaking. Included in this part 
    are explanations of the steps followed in developing a pilotage rate 
    adjustment, the analysis used, and the guidelines followed in arriving 
    at the pilotage rates contained in part 401 of this chapter.
        (b) Great Lakes pilotage rates shall be reviewed and, if necessary, 
    adjusted annually in accordance with the procedures detailed in 
    appendix C to this part. At least once every five years the Director 
    shall complete a thorough audit of pilot association expenses and 
    establish pilotage rates in accordance with the procedures detailed in 
    Sec. 404.10. An interested party or parties may also petition the 
    Director for a review at any time. The petition must present a 
    reasonable basis for concluding that a review may be warranted. If the 
    Director determines, from the information contained in the petition, 
    that the existing rates may no longer be reasonable, a full review of 
    the pilotage rates will be conducted. If the full review shows that 
    pilotage rates are within a reasonable range of their target, no 
    adjustment to the rates will be initiated.
    
    
    Sec. 404.5   Guidelines for the recognition of expenses.
    
        (a) The following is a listing of the principal guidelines followed 
    by the Director when determining whether expenses will be recognized in 
    the ratemaking process:
        (1) Each expense item included in the rate base is evaluated to 
    determine if it is necessary for the provision of pilotage service, and 
    if so, what dollar amount is reasonable for that expense item. Each 
    Association is responsible for providing the Director with sufficient 
    information to show the reasonableness of all expense items. The 
    Director will give the Association the opportunity to defend any 
    expenses that are questioned. However, subject to the terms and 
    conditions contained in other provisions of this part, expense items 
    that the Director determines are not reasonable and necessary for the 
    provision of pilotage services will not be recognized for ratemaking 
    purposes.
        (2) In determining reasonableness, each expense item is measured 
    against one or more of the following: [[Page 18371]] 
        (i) Comparable or similar expenses paid by others in the maritime 
    industry,
        (ii) Comparable or similar expenses paid by other industries, or
        (iii) U.S. Internal Revenue Service guidelines.
        (3) Lease costs for both operating and capital leases are 
    recognized for ratemaking purposes to the extent that they conform to 
    market rates. In the absence of a comparable market, lease costs are 
    recognized for ratemaking purposes to the extent that they conform to 
    depreciation plus an allowance for return on investment (computed as if 
    the asset had been purchased with equity capital). The portion of lease 
    costs that exceed these standards is not recognized for ratemaking 
    purposes.
        (4) For each Association, a market-equivalent return-on-investment 
    is allowed for the net capital invested in the Association by its 
    members. Assets subject to return on investment provisions are subject 
    to reasonableness provisions. If an asset or other investment is not 
    necessary for the provision of pilotage services, the return element is 
    not allowed for ratemaking purposes.
        (5) For ratemaking purposes, the revenues and expenses generated 
    from Association transactions that are not directly related to the 
    provision of pilotage services are included in ratemaking calculations 
    as long as the revenues exceed the expenses from these transactions. 
    For non-pilotage transactions that result in a net financial loss for 
    the Association, the amount of the loss is not recognized for 
    ratemaking purposes. The Director reviews non-pilotage activities to 
    determine if any adversely impact the provision of pilotage service, 
    and may make ratemaking adjustments or take other steps to ensure the 
    provision of pilotage service.
        (6) Medical, pension, and other benefits paid to pilots, or for the 
    benefit of pilots, by the Association are treated as pilot 
    compensation. The amount recognized for each of these benefits is the 
    cost of these benefits in the most recent union contract for first 
    mates on Great Lakes vessels. Any expenses in excess of this amount are 
    not recognized for ratemaking purposes.
        (7) Expense items that are not reported to the Director by the 
    Association are not considered by the Director in ratemaking 
    calculations.
        (8) Expenses are appropriate and allowable if they are reasonable, 
    and directly related to pilotage. Each Association must substantiate 
    its expenses, including legal expenses. In general, the following are 
    not recognized as reasonable expenses for ratemaking purposes:
        (i) Undocumented expenses;
        (ii) Expenses for lobbying;
        (iii) Expenses for personal matters;
        (iv) Expenses that are not commensurate with the work performed; 
    and
        (v) Any other expenses not directly related to pilotage.
        (9) In any Great Lakes pilotage district where revenues and 
    expenses from Canadian pilots are commingled with revenues and expenses 
    from U.S. pilots, Canadian revenues and expenses are not included in 
    the U.S. calculations for setting pilotage rates.
        (10) Reasonable profit sharing for non-pilot employees of pilot 
    associations will be allowed as an expense for ratemaking purposes. 
    Profit sharing that benefits pilots will be treated as part of pilot 
    compensation.
    
    
    Sec. 404.10  Ratemaking procedures and guidelines.
    
        (a) Appendix A to this part is a description of the types of 
    analyses performed and the methodology followed in the development of a 
    base pilotage rate. Ratemaking calculations in appendix A of this part 
    are made using the definitions and formulas contained in appendix B of 
    this part. Appendix C of this part is a description of the methodology 
    followed in the development of annual reviews to base pilotage rates. 
    Pilotage rates actually implemented may vary from the results of the 
    calculations in appendices A, B and C of this part, because of 
    agreements with Canada requiring identical rates, or because of other 
    circumstances to be determined by the Director. Additional analysis may 
    also be performed as circumstances require. The guidelines contained in 
    Sec. 404.05 are applied in the steps identified in appendix A to this 
    part.
        (b) A separate ratemaking calculation is made for each of the 
    following U.S. pilotage areas:
    
    Area 1--the St. Lawrence River;
    Area 2--Lake Ontario;
    Area 4--Lake Erie;
    Area 5--the navigable waters from South East Shoal to Port Huron, 
    MI;
    Area 6--Lakes Huron and Michigan;
    Area 7--the St. Mary's River; and
    Area 8--Lake Superior.
    
    
    Appendix A to Part 404--Ratemaking Analyses and Methodology
    
    Step 1: Projection of Operating Expenses
    
        (1) The Director projects the amount of vessel traffic annually. 
    Based upon that projection, the Director forecasts the amount of 
    fair and reasonable operating expenses that pilotage rates should 
    recover. This consists of the following phases:
        (a) Submission of financial information from each Association;
        (b) determination of recognizable expenses;
        (c) adjustment for inflation or deflation; and
        (d) final projection of operating expenses. Each of these phases 
    is detailed below.
    
    Step 1.A.--Submission of Financial Information
    
        (1) Each Association is responsible for providing detailed 
    financial information to the Director, in accordance with part 403 
    of this chapter.
    
    Step 1.B.--Determination of Recognizable Expenses
    
        (1) The Director determines which Association expenses will be 
    recognized for ratemaking purposes, using the guidelines for the 
    recognition of expenses contained in Sec. 404.05. Each Association 
    is responsible for providing sufficient data for the Director to 
    make this determination.
    
    Step 1.C.--Adjustment for Inflation or Deflation
    
        (1) In making projections of future expenses, expenses that are 
    subject to inflationary or deflationary pressures are adjusted. 
    Costs not subject to inflation or deflation (e.g., depreciation, 
    long-term leases, pilot compensation, etc.) are not adjusted. The 
    inclusion of an inflation or deflation adjustment does not imply 
    that pilotage rates will be automatically adjusted each shipping 
    season. The inflation or deflation adjustment is only made during 
    the expense projection phase of a full-scale pilotage rate review.
        Annual cost inflation or deflation rates will be projected to 
    the succeeding navigation season, reflecting the gradual increase or 
    decrease in cost throughout the year.
        For ratemaking calculations begun after January 1, 1996, the 
    actual annual experienced change in operational costs per pilot 
    assignment for each pilotage area will be used to project the 
    inflation or deflation adjustment. For ratemaking calculations begun 
    prior to January 1, 1996, the inflation or deflation adjustment will 
    be based on the preceding year's change in the North Central 
    Region's Consumer Price Index as calculated by the U.S. Bureau of 
    Labor Statistics.
    
    Step 1.D.--Projection of Operating Expenses
    
        (1) Once all adjustments are made to the recognized operating 
    expenses, the Director projects these expenses for each pilotage 
    area. In doing so, the Director takes into account foreseeable 
    circumstances that could affect the accuracy of the projection. The 
    Director will determine, as accurately as reasonably practicable, 
    the ``projection of operating expenses.''
    
    Step 2: Projection of Target Pilot Compensation
    
        (1) The second step in the Great Lakes pilotage ratemaking 
    methodology is to project the amount of target pilot compensation 
    that pilotage rates should provide in each area. This step consists 
    of the following phases:
        (a) Determination of target rate of 
    compensation; [[Page 18372]] 
        (b) determination of number of pilots needed in each pilotage 
    area; and
        (c) multiplication of the target compensation by the number of 
    pilots needed to project target pilot compensation needed in each 
    area. Each of these phases is detailed below.
    
    Step 2.A.--Determination of Target Rate of Compensation
    
        (1) Target pilot compensation for pilots providing services in 
    undesignated waters approximates the average annual compensation for 
    first mates on U.S. Great Lakes vessels. The average annual 
    compensation for first mates is determined based on the most current 
    union contracts, and includes wages and benefits received by first 
    mates.
        (2) Target pilot compensation for pilots providing services in 
    designated waters approximates the average annual compensation for 
    masters on U.S. Great Lakes vessels. It is calculated as 150% of the 
    compensation earned by first mates on U.S. Great Lakes vessels.
    
    Step 2.B.--Determination of Number of Pilots Needed
    
        (1) The basis for the number of pilots needed in each area of 
    designated waters is established by dividing the projected bridge 
    hours for that area by 1,000. Bridge hours are the number of hours a 
    pilot is aboard a vessel providing basic pilotage service.
        (2) The basis for the number of pilots needed in each area of 
    undesignated waters is established by dividing the projected bridge 
    hours for that area by 1,800.
        (3) In determining the number of pilots needed in each pilotage 
    area, the Director is guided by the results of the calculations in 
    steps 2.A. and 2.B. However, the Director may also find it necessary 
    to make adjustments to these numbers in order to ensure 
    uninterrupted pilotage service in each area, or for other reasonable 
    circumstances that the Director determines are appropriate.
    
    Step 2.C.--Projection of Target Pilot Compensation
    
        (1) The ``projection of target pilot compensation'' is 
    determined separately for each pilotage area by multiplying the 
    number of pilots needed in that area by the target pilot 
    compensation for pilots working in that area.
    
    Step 3: Projection of Revenue
    
        (1) The third step in the Great Lakes pilotage ratemaking 
    methodology is to project the revenue that would be received in each 
    pilotage area if existing rates were left unchanged. This consists 
    of a projection of future vessel traffic and pilotage revenue.
    
    Step 3.A.--Projection of Revenue
    
        (1) The Director generates the most accurate projections 
    reasonably possible of the pilotage service that will be required by 
    vessel traffic in each pilotage area. These projections are based on 
    historical data and all other relevant data available. Projected 
    demand for pilotage service is multiplied by the existing pilotage 
    rates for that service, to arrive at the ``projection of revenue.''
    
    Step 4: Calculation of Investment Base
    
        (1) The fourth step in the Great Lakes pilotage ratemaking 
    methodology is the calculation of the investment base of each 
    Association. The investment base is the recognized capital 
    investment in the assets employed by each Association required to 
    support pilotage operations. In general, it is the sum of available 
    cash and the net value of real assets, less the value of land. The 
    investment base will be established through the use of the balance 
    sheet accounts, as amended by material supplied in the Notes to the 
    Financial Statement. The formula used in calculating the investment 
    base is detailed in Appendix B to this part.
    
    Step 5: Determination of Target Rate of Return on Investment
    
        (1) The fifth step in the Great Lakes pilotage ratemaking 
    methodology is to determine the Target Rate of Return on Investment. 
    For each Association, a market-equivalent return-on-investment (ROI) 
    is allowed for the recognized net capital invested in the 
    Association by its members.
        (2) The allowed ROI is based on the rate of the most recent 
    return on stockholder's equity for a representative cross section of 
    transportation industry companies, including maritime companies, 
    with a minimum rate equal to the interest rate incurred by the 
    Associations for debt capital, and a maximum rate of 20 percent.
        (3) Assets subject to return on investment provisions must be 
    reasonable in both purpose and amount. If an asset or other 
    investment is not necessary for the provision of pilotage services, 
    that portion of the return element is not allowed for ratemaking 
    purposes.
    
    Step 6: Adjustment Determination
    
        (1) The next step in the Great Lakes pilotage ratemaking 
    methodology is to insert the results from steps 1, 2, 3, and 4 into 
    a formula that is based on a basic regulatory rate structure, and 
    comparing the results to step 5. This basic regulatory rate 
    structure takes into account revenues, expenses and return on 
    investment, and is of the following form:
    
    ------------------------------------------------------------------------
     Line               Ratemaking projections for basic pilotage           
    ------------------------------------------------------------------------
    1.      +Revenue (from step 3)                                          
    2.      -Operating Expenses (from step 1)                               
    3.      -Pilot Compensation (from step 2)                               
           -----------------------------------------------------------------
    4.      =Operating Profit/(Loss)                                        
    5.      -Interest Expense (from Audit reports)                          
           -----------------------------------------------------------------
    6.      =Earnings Before Tax                                            
    7.      -Federal Tax Allowance                                          
           -----------------------------------------------------------------
    8.      =Net Income                                                     
    9.      Return Element (Net Income + Interest)                          
    10.     +Investment Base (from step 4)                                  
           -----------------------------------------------------------------
    11.     =Return on Investment                                           
    ------------------------------------------------------------------------
    
        (2) The Director will compare the projected return on investment 
    (as calculated using the formula above) to the target return on 
    investment (from step 5), to determine whether an adjustment to the 
    base pilotage rates is necessary. If the projected return on 
    investment is significantly different from the target return on 
    investment, the revenues that would be generated by the current 
    pilotage rates are not equal to the revenues that would need to be 
    recovered by the pilotage rates.
        (3) The base pilotage revenues that are needed are calculated by 
    determining what change in projected revenue will make the target 
    return on investment equal to the projected return on investment. 
    This ``projection of revenue needed'' is used in determining the 
    basis for proposed adjustments to the base pilotage rates. The 
    mechanism for adjusting the base pilotage rates is discussed in Step 
    7 below. The required return, tax, and interest elements may be 
    considered additions to the operating expenses and pilot 
    compensation components of the base pilotage rates.
    
    STEP 7: Adjustment of Pilotage Rates
    
        The final step in the Great Lakes pilotage ratemaking 
    methodology is to adjust base pilotage rates if the calculations 
    from Step 6 show that pilotage rates in a pilotage area should be 
    adjusted, and if the Director determines that it is appropriate to 
    go forward with a rate adjustment. Rate adjustments are calculated 
    in accordance with the procedures found in this step. However, 
    pilotage rates calculated in this step are subject to adjustment 
    based on requirements of the Memorandum of Arrangements between the 
    United States and Canada, and other supportable circumstances that 
    may be appropriate.
        (2) Pilotage rate adjustments are calculated for each area by 
    multiplying the existing pilotage rates in each area by the rate 
    multiplier. The rate multiplier is calculated by inserting the 
    result from the steps detailed above into the following formula:
    
    ------------------------------------------------------------------------
     Line                        Ratemaking projections                     
    ------------------------------------------------------------------------
    1.      + Revenue Needed (from step 6)                                  
    2.       Revenue (from step 3)                                  
           -----------------------------------------------------------------
    3.      = Rate multiplier                                               
    ------------------------------------------------------------------------
    
    Appendix B to Part 404--Ratemaking Definitions and Formulas
    
        The following definitions apply to the ratemaking formula 
    contained in this appendix.
        (1) Operating Revenue--means the sum of all operating revenues 
    received by the Association for pilotage services, including 
    revenues such as docking, moveage, delay, detention, cancellation, 
    and lock transit.
        (2) Operating Expense--means the sum of all operating expenses 
    incurred by the Association for pilotage services, less the sum of 
    disallowed expenses.
        (3) Target Pilot Compensation--means the compensation that 
    pilots are intended to receive for full time employment. For pilots 
    providing services in undesignated waters, the target pilot 
    compensation is the average annual compensation for first mates on 
    U.S. Great Lakes vessels. For pilots providing services in 
    designated waters, the target pilot compensation is 150% of the 
    average annual [[Page 18373]] compensation for first mates on U.S. 
    Great Lakes vessels.
        (4) Operating Profit/(Loss)--means Operating Revenue less 
    Operating Expense and Target Pilot Compensation.
        (5) Interest Expense--means the reported Association interest 
    expense on operations, as adjusted to exclude any interest expense 
    attributable to losses from non-pilotage operations.
        (6) Earnings Before Tax--means Operating Profit/(Loss), less the 
    Interest Expense.
        (7) Federal Tax Allowance--means the Federal statutory tax on 
    Earnings Before Tax, for those Associations subject to Federal tax.
        (8) Net Income--means the Earnings Before Tax, less the Federal 
    Tax Allowance.
        (9) Return Element (Net Income plus Interest)--means the Net 
    Income, plus Interest Expense. The return element can be considered 
    the sum of the return to equity capital (the Net Income), and the 
    return to debt (the Interest Expense).
        (10) Investment Base (separately determined)--means the net 
    recognized capital invested in the Association, including both 
    equity and debt. Should capital be invested in other than pilotage 
    operations, that capital is excluded from the rate base.
        (11) Return on Investment--means the Return element, divided by 
    the Investment Base, and expressed as a percent.
    
    Investment Base Formula
    
        (1) Regulatory Investment (Investment Base) is the recognized 
    capital investment in the useful assets employed by the pilot 
    groups. In general, it is the sum of available cash and the net 
    value of real assets, less the value of land. The investment base is 
    established through the use of the balance sheet accounts, as 
    amended by material supplied in the Notes to the Financial 
    Statement.
        (2) The Investment Base is calculated using financial data from 
    the Great Lakes pilot associations, as audited and approved by the 
    Director. The Investment Base would be calculated as follows:
    
    Description
    
    Recognized Assets:                                                      
            +Total Current Assets                                           
            -Total Current Liabilities                                      
            +Current Notes Payable                                          
            +Total Property and Equipment (Net)                             
            -Land                                                           
            +Total Other Assets                                             
           -----------------------------------------------------------------
            =Total Recognized Assets                                        
                                                                            
    Non-Recognized Assets                                                   
            +Total Investments and Special Funds                            
           -----------------------------------------------------------------
            =Total Non-Recognized Assets                                    
    Total Assets                                                            
            +Total Recognized Assets                                        
            +Total Non-Recognized Assets                                    
           -----------------------------------------------------------------
            =Total Assets                                                   
                                                                            
    Recognized Sources of Funds                                             
            +Total Stockholders' Equity                                     
            +Long-Term Debt                                                 
            +Current Notes Payable                                          
            +Advances from Affiliated Companies                             
            +Long-Term Obligations-Capital Leases                           
           -----------------------------------------------------------------
            =Total Recognized Sources                                       
                                                                            
    Non-Recognized Sources of Funds                                         
            +Pension Liability                                              
            +Other Non-Current Liabilities                                  
            +Deferred Federal Income Taxes                                  
            +Other Deferred Credits                                         
           -----------------------------------------------------------------
            =Total Non-Recognized Sources                                   
                                                                            
    Total Sources of Funds                                                  
            +Total Recognized Sources                                       
            +Total Non-Recognized Sources                                   
           -----------------------------------------------------------------
            =Total Sources of Funds                                         
                                                                            
    
        (3) Using the figures developed above, the Investment Base is 
    the Recognized Assets times the ratio of Recognized Sources of Funds 
    to Total Sources of Funds.
    
    Appendix C to Part 404--Procedures for Annual Review of Base Pilotage 
    Rates
    
        The ratemaking methodology detailed in appendix A is used by the 
    Director to determine base pilotage rates at least once every five 
    years, as required by Sec. 404.1. In the intervening years the 
    Director will review, if warranted by cost changes, recalculate base 
    pilotage rates proposed for coordination with Canada using the 
    following procedures:
        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;
        Step 8: Adjust the base period rates by the percentage change in 
    unit costs in Step 7. For example if the total economic costs per 
    bridge hour is $30.00 for the base period and $33.00 for the 
    prospective rate period, then the rates established for the base 
    period would be increased by 10% to determine the proposed rates for 
    the prospective rate period, which would then be subject to 
    negotiation with Canada.
    
        Issued in Washington, DC, this 31st day of March, 1995.
    Frederico Pena,
    Secretary of Transportation.
    [FR Doc. 95-8572 Filed 4-10-95; 8:45 am]
    BILLING CODE 4910-62-P
    
    

Document Information

Effective Date:
6/12/1995
Published:
04/11/1995
Department:
Coast Guard
Entry Type:
Rule
Action:
Final rule; request for comments.
Document Number:
95-8572
Dates:
This rule is effective on June 12, 1995. Comments must be received on or before May 11, 1995. Late-filed comments will be considered only to the extent practicable.
Pages:
18366-18373 (8 pages)
Docket Numbers:
OST Docket No. 50248
RINs:
2105-AC21: Great Lakes Pilotage Rate Methodology
RIN Links:
https://www.federalregister.gov/regulations/2105-AC21/great-lakes-pilotage-rate-methodology
PDF File:
95-8572.pdf
CFR: (13)
46 CFR 401.110
46 CFR 403.100
46 CFR 403.105
46 CFR 403.110
46 CFR 403.115
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