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Federal Register / Vol. 86, No. 181 / Wednesday, September 22, 2021 / Proposed Rules
Benefits The proposed rule would amend the Coast Guards existing regulations see 33 CFR 187 subpart D, Guidelines for State Vessel Titling Systems to better align with UCOTAV. The proposed rule would encourage uniformity amongst the States through the adoption of the UCOTAV model, in its entirety or in part, and, as mentioned in the Background section of this NPRM, Section IV, it would follow recommendations by the NBSAC and NASBLA. Although the movement to harmonize State titling laws has existed for some time, not all States have pursued legislation. Some States have chosen to wait for the Coast Guard to pass the UCOTAV regulation.
The proposal would also promote consumer protection against fraud. A
large number of recreational vessels are resold annually. In 2017, there were approximately 981,600 pre-owned vessels sold in the United States.43
Given this large number, the industry is vulnerable to the types of fraud UCOTAV is designed to prevent.
The proposed rule would facilitate the procurement of secured loans on vessels. If the Coast Guard does not certify a State titling system, then a State cannot confer preferred mortgage status on a mortgage or security interest for a vessel, which functions as a security measure for financial entities.
Many financial institutions require eligible vessels to be documented and to have their preferred mortgages recorded.
A preferred mortgage is considered more secure, with less risk to the lender.
This places the lender in a position to provide lower interest rates over longer terms to the consumer. In turn, the lender earns more over the term of the loan with less risk. More specifically, the lender would have a lower risk of loans defaulting; therefore, the lenders loan portfolio would provide better returns despite the lower interest rates offered to borrowers.
The consumer would benefit as well.
With preferred loans, the borrower would have a loan with better terms.
Relative to non-preferred loan, the consumer would pay less per month due to the lower interest rate on preferred loans.
In addition, consistent titling procedures across States would deter the practice of title washing, whereby after the sale of a damaged vessel for salvage, the buyer makes cosmetic repairs and resells the vessel without 43 https www.nmma.org/press/article/21678
U.S. Boat Sales Strong Heading into 2018, Poised for Another Year of Growth, January 9, 2018.
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disclosing its previous damage.
Recreational boaters may benefit from this proposed rule by being able to assist States and law enforcement in recovering their lost or stolen vessels.
Additionally, we intend the proposed rule to promote maritime security by facilitating State participation in the VIS. After the September 2001 terrorist attacks, a Coast Guard gap analysis showed that law enforcement agencies, including the Coast Guard, lacked the ability to easily and verifiably identify recreational vessels and their owners and operators, especially when a vessel is registered in a State other than that in which the law enforcement agency operates. This inability deprives law enforcement agencies of critical tools for deterring crime and maritime-based terrorism.
Since its inception in 2007, the VIS
has remedied this inability by collecting and providing verifiable data for vessels in VIS-participating States. However, 16
States still do not participate in the VIS.44 Facilitating full VIS participation by these States would enhance maritime security. Because of the high level of interest among the States in aligning their vessel titling systems with UCOTAV, aligning our subpart D
regulations with UCOTAV would make it easier for States to obtain subpart D
certification.
Alternatives Considered Alternative 1Take no action. This alternative would allow existing regulations to remain in conflict with State laws and UCOTAV. For States complying with the existing regulations, this alternative would result in them not receiving the benefits of deterred title washing, recovery and identification of abandoned vessels, consumer fraud protection, and security measures for financial entities. Participation in the VIS would continue at its current low rate. This alternative would result in no additional costs, as no new regulations would be implemented, but would also result in no benefits, as there would be no changes to current practice.
Therefore, we rejected this alternative.
Alternative 2This is the preferred alternative. This alternative would change the guidelines in subpart D so that any State that adopts UCOTAV
and participates in the VIS would be in compliance. This would encourage compliance and participation and provide benefits to States, lenders, and consumers. The cost implications associated with this alternative are specified in the Costs section of this RA
and assume 100 percent participation 44 As
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from all 56 States. The total 7 percent discounted cost over 10 years would be $176,570. The qualitative benefits would be increased mitigation of fraudulent ownership, the creation of uniformity amongst the States, which will help facilitate transfers of vessel ownership, to deter theft of vessels and aid law enforcement agencies by making recovery of stolen vessels across State lines easier, promote consumer protection, and facilitate making secured loans on vessels. Therefore, this is the preferred alternative.
Alternative 3This alternative would repeal existing guidelines for certification of State titling requirements and allow States to regulate vessel titling with no coordination or oversight. This would remove the ability for States to establish separate programs to enable vessels to gain preferred mortgage status and discourage participation in the VIS. In this scenario, each State would have a unique vessel titling system; this alternative would produce varying costs and benefits, which may be beneficial to the States as they could customize a titling program to meet their specific needs. However, we are unable to estimate the costs due to the number of possibilities offered, and they would occur without coordination or oversight from the Coast Guard. Harmonization of regulations across States would be impossible. As this would not satisfy the goals of this potential regulatory action, we rejected this alternative.
B. Small Entities The Regulatory Flexibility Act of 1980
5 U.S.C. 601612 RFA and Executive Order 13272 Consideration of Small Entities in Agency Rulemaking require a review of proposed and final rules to assess their impacts on small entities.
An agency must prepare an initial regulatory flexibility analysis unless it determines and certifies that a rule, if promulgated, would not have a significant impact on a substantial number of small entities.
Under the RFA, we have considered whether this proposed rule would have a significant economic impact on a substantial number of small entities.
The term small entities comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000. Based on the analysis above, this proposed rule would affect 56 States and U.S.

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