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Federal Register / Vol. 86, No. 181 / Wednesday, September 22, 2021 / Proposed Rules relating to, among other things, the ownership of vessels titled under the law of a State. Finally, section 31322d allows a mortgage that is filed, or perfected under State law, to be deemed a preferred mortgage if the Secretary certifies that the State titling system complies with the guidelines set forth in 46 U.S.C. 13107. The Secretarys authority under these statutes has been delegated to the Coast Guard in Department of Homeland Security DHS Delegation No. 0170.1II 92.a and 92.h. Pursuant to that authority, the Coast Guard has promulgated regulations governing the certification of State laws to determine eligibility for preferred mortgages.
IV. Background A. Current 33 CFR Part 187, Subpart D
A mixture of both Federal and State laws govern the titling of vessels in the United States.1 Documented vessels are typically larger commercial vessels documented with the Coast Guard National Vessel Documentation Center.
Over 99 percent of vessels in the United States are not required to be documented and are considered undocumented, which the Coast Guard is not required to document. The registration and titling of these vessels falls under State law. State law governing the titling of vessels varies considerably from State to State, and many States do not have a certificate of title law for vessels.
While the Federal Government does not title undocumented vessels, it does have an interest in certain aspects of policy that would ordinarily be covered by State titling requirements.
Specifically, the Coast Guard has an interest in information about vessels and their owners for both law enforcement and maritime domain awareness purposes. For these reasons, pursuant to statute, the Coast Guard created the VIS, which is a centralized database of information relating to these subjects.2 However, the VIS relies on information generated by States through their titling and other recordation processes for information about undocumented vessels. Currently, only 38 States participate in the information exchange aspects of the VIS. Because participation in the VIS is voluntary and entirely at the States discretion, Congress created an incentive for States 1 As used throughout this notice of proposed rulemaking NPRM, State means any of the 56
jurisdictions 50 States, the District of Columbia, American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands that administer Coast Guard-approved recreational vessel numbering systems.
2 See 46 U.S.C. 12501.

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to provide the requisite information, in the form of eligibility for preferred mortgages.
Under maritime law, a preferred mortgage is a mortgage that is filedor perfectedin compliance with certain statutory requirements that are set forth in 46 U.S.C. 31321. A preferred mortgage creates a lien against the mortgaged vessel in the amount of the mortgage indebtedness 46 U.S.C. 31322
and 31325. A preferred mortgage is a perfected lien that has priority over certain other maritime liens and all nonmaritime liens in an in rem admiralty foreclosure 46 U.S.C. 31326.3
Acquiring a preferred mortgage is beneficial to the owners of vessels, because a preferred mortgage generally has a substantially lower interest rate than a mortgage secured by a nonperfected lien. While documented vessels are eligible for a preferred mortgage, undocumented vessels can receive such a mortgage only if the State in which it is titled satisfies the applicable Federal requirements and receives approval from the Coast Guard.4
To encourage States to participate in and share information with the VIS, the Coast Guard requires certification before maritime liens can be perfected. The guidelines that cover what a State must do to have its titling laws certified by the Coast Guard are located in Title 33
of the Code of Federal Regulations CFR, part 187, and specifically in subpart DState Vessel Titling Systems.
In addition to the specific titling requirements, subpart D contains a requirement that the State must comply with the VIS participation requirements of 187.11 and subpart C
of this part and make vessel information it collects available to VIS. 5
Despite the incentive of being able to provide owners of undocumented vessels access to preferred mortgages, currently no States have titling laws that comply with the Coast Guard guidelines in subpart D. This is because of a conflict between the guidelines in subpart D and provisions of the Uniform Commercial Code UCC, specifically Articles 2 and 9, which govern the titling of property. Because most States rely on compliance with the UCC to facilitate an array of commercial transactions, they have been unable to modify their laws to comply with the Coast Guards certification guidelines in subpart D.
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perfected lien is generally a lien that has been filed with the appropriate filing agent in order to make the securing interest in a collateral asset binding. See 46 U.S.C. 31321.
4 See 46 U.S.C. 31322d.
5 See 33 CFR 187.301 and 33 CFR 187.201.

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B. UCOTAV
The National Conference of Commissioners on Uniform State Laws NCCUSL drafted UCOTAV 6 with input from members of the National Association of State Boating Law Administrators NASBLA, boat manufacturers and dealers, banking interests, and the Coast Guard, which continues to be supportive of it.
Unanimously approved by the NCCUSL
in July 2011, UCOTAV provides a consistent consumer protection measure that allows the identification of vessels that have been deemed unsafe, preventing them from being sold without disclosure.
The NASBLA membership adopted UCOTAV as a model act of the association at its annual business meeting in September 2011. Through one of its policy committees, NASBLA
has continued to work with NCCUSL in promoting and supporting UCOTAV
adoption by the States. Currently, five States have adopted the act and five other States are at various stages of preparation to do so. The NCCUSL set forth several principal objectives when writing UCOTAV. The objectives for UCOTAV are to:
1 Qualify as a State titling law that the Coast Guard will approve;
2 Facilitate transfers of ownership of a vessel;
3 Deter and impede the theft of vessels by making information about the ownership of vessels available to both government officials and those interested in acquiring an interest in a vessel;
4 Accommodate existing financing arrangements for vessels;
5 Work seamlessly with the UCC;
6 Manage, to the extent possible, the complications that can arise from a vessels transition in or out of Federal documentation;
7 Provide clear rules on the consequences of compliance or noncompliance;
8 Impose minimal or no new burdens or costs on State titling offices;
and 9 Protect buyers and others acquiring an interest in an undocumented vessel by requiring that the title for the vessel be branded if a casualty or sinking has caused significant damage to the vessels hull integrity.7
6 A copy of UCOTAV is located in the docket at https www.regulations.gov, as indicated in the Public Participation and Request for Comments portion of this preamble.
7 See 46 U.S.C. 12503, Information available to the system. In addition to the vessel identification
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