A View from Here

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Federal regulations are ‘sinking the marine industry’

The president of the Marine Industries Association of South Florida will tell a congressional subcommittee on Thursday how a rule the Department of Labor issued is hurting the yacht repair industry.

MIASF president and small business operator Kristina Hebert will testify before the House Small Business Subcommittee on Investigations, Oversight and Regulations about making affordable workers’ compensation insurance available to the thousands of workers who repair pleasure boats.

The hearing is titled “Sinking the Marine Industry: How Regulations are Affecting Today’s Maritime Businesses.”

Hebert told me in an interview Tuesday that she will be addressing how a 2011 Labor Department rule misinterprets the industry’s exemption from the federal Longshore and Harbor Workers’ Compensation Act.

The chief operating officer of Ward’s Marine Electric in Fort Lauderdale, Hebert worked for about eight years to get Congress to give companies that repair and service large yachts a much needed insurance break by allowing them to cover their employees with much cheaper state workers’ compensation insurance rather than longshoremen’s coverage. The Longshore Act is the law that covers workers in shipyards that build everything from aircraft carriers to tankers.

Speaking for MIASF and the United States Superyacht Association, Hebert will tell the subcommittee Thursday that by ignoring the congressional intent behind changes made in 2009 to the Longshore Act, the Labor Department limited rather than expanded the exemption for the recreational marine repair industry.

“The new rule has instead created confusion in both the recreational marine repair industry and the insurance industry,” Hebert states in written testimony she intends to submit to the subcommittee. “The misapplication of the exemption brought thousands of workers under duplicative coverage or, even worse, left them without any coverage at all. For these reasons the rulemaking seriously missed the mark and will serve only to cost American jobs and drive economic activity offshore.”

In addition to looking at the regulatory actions of the Labor Department in terms of the Longshore Act, the hearing will examine the planning and permitting process of the Army Corps of Engineers regarding the dredging of navigable waterways and the intrastate taxation of small businesses. The issues will be viewed through the lens of small business job creation and economic growth.

Mark Ducharme, vice president and chief financial officer of Monterey Boats, will testify on behalf of the NMMA.

About 95 percent of MIASF members are small businesses, which more or less mirrors the broad U.S. recreational marine industry.

“An agency should not have the power to come in and exceed the legislative intent and put small businesses at risk,” Hebert told me. “Agencies need to be working with small businesses to provide incentives, rather than disincentives. … Boating is viewed by many as a hobby, but we are an industry. We are not subsidized by government. There are no bailouts. We just want to be able to operate competitively.”

Not every federal agency and department represents a hurdle. Hebert says the MIASF has good working relationships with the U.S. Customs and Border Protection agency, the State Department and the Coast Guard over the comings and goings of yachts into U.S. ports for repairs, service, provisioning and so forth.

“They’ve been great,” she says.

Comments

9 comments on “Federal regulations are ‘sinking the marine industry’

  1. Bill

    So why not just fix the regulation? If there is duplication or gaps in coverage, it should not be hard to do that. No need to rant about “government regulations” that are “sinking the industry”. The vast majority of government regulations are important to our health, safety, etc. Just fix the ones that need fixing.

  2. enginecom

    You need to spell out to your readers the exact regulation. What I understood was workers on yachts greater than 65′ were required to be covered by longshoremans instead of the standard comp insurance. That was the old rule. There was supposed to be an exemption to that but it looks like the Oblaimer administration is pandering to the longshoremans union or the insurance companies. Longshoremans insurance is much more expensive than comp and was putting a damper on many port servicing of larger non commercial yachts. The exact regs and costs need to be spelled out as the above poster looks to be not familiar with the early or new rules.

  3. Jim

    What needs fixing is the people in Washington that are strangling the entire manufacturing process in this country.
    Start with the White House and work your way down. Get rid of them and the entire economy will rebound as will boat sales ….. boat building and on down the line. Not just the marine industry, the entire economy.
    Wake up, Bill!

  4. Alycia McGlone, CMIP, VP Commercial Marine

    I would like to break this down in as simple as terms as possible:
    Basically, in 2009 the 65′LOA wording strickend from the federal act for recreational repairers (intent was to apply to small marine repair shops, boat dealers with small repair shops, marina with repair shops, etc.). However, there was confusion regarding the definition of “recreational vessel” and who determined the definition, is it the manufacturer, the end user (owner), the USCG, etc. This led to confusion amongst industries, maritime and insurance industries alike as to when a boat is considered recreational and not subjec to USLHWCA. The confusion surrounding coverage under state comp vs. federal, whether coverage exists or not was exasperated, in my opinion, by a quick reaction by many to remove their federal coverage from their policies, thus creating a gap. If the coverage had remained on their policies, even on a small payroll basis, or if any basis, the coverage is there and legal defense is present providing the business owner with both coverage, and paying minimal costs for both. Now, recently in January 2012, the RECREATIONAL VESSEL REGULATIONS Longshore was updated within the USC Definitions. Clarifiying whether a vessel is considered recreational and exempt from Longshore or if it is considered Commercial and subject to Longshore.

    If I can be of further assistance, please feel free to contact me directly.
    Alycia Napier McGlone, CMIP (Certified Marine Insurance Professional)
    Vice President
    Commercial Marine Insurance
    WWW Marine, St. Pete, Fl, USA

  5. Alycia McGlone, CMIP, VP Commercial Marine

    A quick look at the differences:
    701.501 What is a Recreational Vessel?
    (a) Recreational vessel means a vessel-
    (1) Being manufactured or operated primarily for pleasure; or
    (2) Leased, rented, or chartered to another for the latter’s pleasure. (BUT only if bareboat and under 12 passengers).
    Recreational – Exempt from Longshore
    *Bareboat charter 12 or less passengers
    *Passenger Vessels and Submersibles with no “passengers for hire” (BUT NOT Ferry’s)
    *100% Pleasure use
    *Federal State of Local Government Vessels
    *Not more than “infrequent” commercial use

    COMMERCIAL VESSELS -Subject to Longshore
    *ALL Ferry
    *ALL Skippered charter (Captained, could be paid or owner captain/skippers)
    *ALL Passenger carrying vessels and Submersibles with at least one passenger for hire
    *Bareboat Charter over 12 people
    *Commercial Use & Military Vessels

    I have more information if anyone is interested, please email me and I will be happy to forward additional details.

  6. Bill

    So as it turns out an effort has been made to clarify the “recreational” exemption to the requirement of Longshore coverage requirements. And it appears from the comment of the above poster that in 2012, some clarity was produced in the regulations. My point is that folks like to jump on any regulation as being a “strangling” matter. I’ve owned manufacturing companies for over 30 years, and have not found regulations to be a big issue. The headline to Sisson’s article (sinking the industry) is terribly misleading and, quite frankly, nonsense.

  7. Alycia McGlone, CMIP, VP Commercial Marine

    To Bill: I am not in disagreement with your statement. I believe there is still a lot of education that needs to happen across the board regarding this matter before final assumption or should be made.

    I provide this type of coverage and specialize in the maritime industry relating to risk management, insurance, EEOC, Safety and OSHA Maritime Training certifications. It is not uncommon to have clients and prospective clients who suffer from “sticker shock” on their work comp with USLH and MEL (Maritime Employers Liability) policies as the rates and final premiums are much higher than they expect when it comes to the higher governing class codes and rates on USLH.

    Of course, the larger marine facilities are well aware and expectant of the costs as they have been in business for the most part, a whole lot longer than the smaller shops. It’s the smaller marine repair facilities who have a hard time digesting the costs associated with obtaining and maintaining the proper coverages in place. Thus, I find many either don’t want to pay the price, or they have no idea that they have the exposures for USLH. If there agent does not possess the knowledgeable in this area or misinforms them of their risks they than go without the proper coverage in place and the legal defense that goes along with it….hoping there is not a day where a claim is filed and they have no coverage or legal defense.

    The Federal Act can pierce the Corporate veil and hold officers accountable both civilly and criminally, which many people do not realize. Again, back to education of the subject matter. With this being said, there is no defense in “I didn’t know”.

    In terms of premium costs, there are ways to keep premium costs down with the proper record keeping and safety programs, if indeed you have exposure with working on commercial vessels, i.e. Captained Charter boats.

    The business owner should seek consultation from a Marine Insurance Professional who is very familiar and knowledegable about class codes, markets, the differences in exposures and who has credibility in the industry to best handle their marine business insurance needs.

  8. Bill

    Bill,

    RE: headline. The hearing was titled:“Sinking the Marine Industry: How Regulations are Affecting Today’s Maritime Businesses.”

    Editor

  9. Henry Markant

    Seventy percent of new jobs are created by small business. Yet the Small Business Administration issued a study in 2010 that reported businesses with fewer than twenty employees are stuck with regulatory costs 42 percent higher than firms of 20 499 employees. In addition, when it comes to environmental regulations, the cost to small business is 364 percent higher. Tax compliance? 206 percent higher. The annual cost of government regulations on small businesses is estimated at $10,428 per employee even before Obamacare. Is it any wonder why job creation is at a standstill? We read of case after case where small business owners are quitting because their business is not worth the hassle. In 2010, 9,435 pages of new regulations were added to the Federal Register that then contained 81,405 pages. In 1936 with the New Deal at its height, there were 2,620 pages.
    Government regulators are too often incompetent, comatose, lackadaisical, and late to the task. While the structure and procedures that the FDA exhibits can be improved, most agree it is functional, though inefficient. However, the SEC, CFTC, Controller of the Currency, Federal Reserve, and Federal Trade Commission—all failed to prevent the recent economic meltdown. Despite the fact that they had all the powers necessary, they were either incompetent or asleep or afraid to act (and offend favored special interests).

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