Vessel Safety: The Coast Guard Conducts Recurrent Inspections and Has Issued Guidance to Address Emergency Preparedness

In October 2015, the U.S cargo vessel EL FARO sank after encountering heavy seas and winds from Hurricane Joaquin, killing all 33 crew members. Subsequent investigations cited deficiencies in the vessel's SMS plans as a factor that may have contributed to the vessel's sinking. Some in Congress have raised questions about the effectiveness of vessel SMS plans and the Coast Guard's oversight of third parties responsible for ensuring vessels comply with international standards and federal regulations.

The Hamm Alert Maritime Safety Act of 2018 included a provision for GAO to review Coast Guard oversight and enforcement of vessel SMS plans. Accordingly, this report addresses (1) how the Coast Guard (a) verifies domestic commercial vessels' SMS plans comply with federal regulations and (b) conducts oversight of ROs, and (2) the extent to which domestic vessels' SMS plans identify potential shipboard emergencies and include applicable response procedures.

To address these objectives, GAO reviewed Coast Guard regulations and guidance, accompanied marine inspectors on vessel inspections and audits, and analyzed available data on identified vessel deficiencies. GAO also reviewed the format and content of a nongeneralizable sample of 12 SMS plans representing various types of vessels and interviewed relevant Coast Guard and RO officials.

The Coast Guard verifies that domestic commercial vessels comply with safety management system (SMS) requirements through activities that include conducting annual inspections of applicable U.S.-flagged vessels. In practice, the Coast Guard delegates primary vessel SMS compliance activities to third party entities, called Recognized Organizations (ROs). Among their responsibilities, ROs coordinate with vessel operators to review SMS plans, issue applicable vessel certificates, and conduct SMS compliance audits at the company level and aboard each vessel. Because the Coast Guard relies on ROs to perform SMS certification services on its behalf, it has initiated a series of efforts to enhance its oversight of ROs since 2018. The efforts include:

establishing a new group within the Coast Guard to monitor ROs,

developing new SMS-related guidance and work instructions,

increasing direct observations of ROs performing SMS audits,

developing key performance indicators for assessing ROs, and

requesting internal investigations for certain RO deficiencies.

It is too soon to assess the effectiveness of these efforts; however, GAO believes these are positive steps toward enhancing the Coast Guard's oversight of ROs.

Each of the 12 domestic vessel SMS plans GAO reviewed include potential shipboard emergencies and applicable response procedures to address them. None of the plans address all 21 potential shipboard emergencies included in 2018 Coast Guard guidance. However, these 21 potential emergencies are not required to be included in SMS plans; rather, they are suggested as part of the 2018 guidance. Further, GAO found that the SMS plans may not address all potential shipboard emergencies because not all emergency scenarios are applicable for each type of vessel or geographical operating area. Also, vessel operators may still be in the process of revising their SMS plans to include additional emergency scenarios and applicable response procedures.

In October 2015, all 33 crew members of the U.S.-flagged cargo vessel  EL FARO were killed when the ship encountered heavy winds and seas  produced by Hurricane Joaquin and sank en route to Puerto Rico.  Subsequent investigations by the National Transportation Safety Board  and the U.S. Coast Guard cited deficiencies in the vessel’s safety  management system (SMS) as a factor that may have contributed to the  vessel’s sinking and the loss of lives. In its 2017 report, the National  Transportation Safety Board also cited ongoing concerns regarding the  Coast Guard’s reliance on third-party organizations to carry out some of  its vessel safety responsibilities. As a result of the EL FARO incident,  some in Congress have raised questions about the effectiveness of SMS  plans and the Coast Guard’s oversight of third parties responsible for ensuring that SMS plans for applicable U.S.-flagged vessels are in  compliance with relevant international standards and federal regulations.

The International Safety Management (ISM) Code was established in the  1990s to provide an international standard for the safe management and  operation of ships and for pollution prevention. The ISM Code requires  ship owners to maintain an SMS that, among other things, spells out  safety procedures and guides ship operations in emergency situations.  These procedures are to be documented and compiled in a Safety  Management Manual, a copy of which is to be kept onboard the vessel.

The Coast Guard is the lead federal agency responsible for ensuring that  applicable U.S.-flagged vessels comply with the ISM Code by maintaining  and implementing an SMS that aligns with domestic regulations. In  practice, the Coast Guard delegates principal SMS compliance activities  to third-party entities, called Recognized Organizations (ROs), as  authorized by federal law. Among their responsibilities, ROs are to  coordinate with vessel operators to review SMS plans, issue applicable  vessel certificates, and conduct SMS compliance audits at the company  level and aboard each vessel. To provide oversight and help ensure that  ROs are fulfilling their authorized roles, the Coast Guard also conducts its  own SMS compliance verifications as part of annual vessel inspections  aboard U.S.-flagged vessels, among other activities.

The Hamm Alert Maritime Safety Act of 2018 includes a provision that  GAO review the implementation and effectiveness of the Coast Guard’s  oversight and enforcement of SMS plans and evaluate the effectiveness  of the plans to address the impact of heavy weather. This report  responds to that provision and, in particular, addresses the following  research objectives:  (1) How does the Coast Guard (a) verify that domestic commercial  vessels’ SMS plans comply with federal regulations and (b) conduct  oversight of ROs?  (2) To what extent do domestic commercial vessels’ SMS plans identify  the potential for specific shipboard emergencies and include applicable  response procedures?

To determine how the Coast Guard verifies that domestic commercial  vessels’ SMS plans comply with federal regulations and conducts related  oversight of ROs, we reviewed and analyzed relevant Coast Guard  regulations, policies, and guidance to identify the key processes and  standards to be used for (1) evaluating SMS compliance during vessel  inspections, (2) documenting any deficiencies and taking applicable  enforcement actions, and (3) conducting oversight of ROs responsible for  SMS certifications and associated audits. We also reviewed relevant  criteria, such as the International Safety Management Code, as well as  related guidelines issued by the International Maritime Organization and  the International Association of Classification Societies. We also  obtained information from the Coast Guard’s Marine Information and  Safety Law Enforcement database to identify the total number of SMS  deficiencies cited for U.S.-flagged vessels since April 2018 (when the  Coast Guard reported it began to collect such data). In addition, we  observed the Coast Guard performing two annual vessel inspections and  conducting oversight of an RO during an annual company SMS audit.  These observations cannot be generalized across all vessel inspections,  but they provided us with first-hand information on the procedures used  and the standards applied by the ROs. Further, we interviewed relevant  Coast Guard officials and representatives of two ROs—the American  Bureau of Shipping and DNV-GL—that, collectively, account for over 99  percent of the SMS certificates issued to U.S.-flagged vessels on the  Coast Guard’s behalf.

To determine the extent to which SMS plans for domestic commercial  vessels identify the potential for specific shipboard emergencies and  include applicable response procedures, we obtained and reviewed a  nongeneralizable sample of 12 SMS plans representing five different  vessel types (general cargo/container, chemical/oil carrier, offshore  supply/support, towing/tugboats, and passenger ferries). To develop the  SMS plans sample, we obtained data from the Coast Guard identifying all  U.S.-flagged commercial vessels with a valid Safety Management  Certificate and grouped these into the five unique vessel types identified  above. We then used a random number generator to assign a value to all  vessels in each category and then sorted these lists from the highest to  the lowest number. We used this sorted list to select the top four to five  vessels from each category, for a total of 25 vessels. We determined that  the American Bureau of Shipping performs ISM certification services for  each of these 25 vessels, so we also selected three additional vessels  serviced by DNV-GL using the same random selection process to provide  us with information on a second RO.

Given that the Coast Guard reported it does not maintain SMS plan  documents and that the plans may contain sensitive, proprietary  information, we worked through the American Bureau of Shipping and  DNV-GL to obtain copies of the SMS plans from the vessel operators on  our behalf. We received 11 SMS plans (or applicable excerpts) from the  American Bureau of Shipping representing 18 of the 25 vessels  selected. We also received one additional SMS plan from DNV-GL for a  total of 12 in our review sample. We reviewed each of these plans to  evaluate the extent to which they address the 21 specific shipboard  emergency scenarios contained in guidance issued by the Coast Guard in  April 2018. Results from our nongeneralizable sample cannot be used  to make inferences about the population of all SMS plans. However, we  believe that information from these SMS plans, combined with interviews conducted with Coast Guard and RO officials, provide useful insights into  the general composition of SMS plans and the extent that potential  emergency scenarios may be addressed within these plans across a  range of different vessel types.

We conducted this performance audit from June 2019 to April 2020 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

Background International Safety Management (ISM) Code and Safety Management System (SMS) Requirements

The ISM Code was established to provide an international standard for  the safe management and operation of ships and for pollution prevention.  The code establishes safety management objectives, such as preventing  human injury or loss of life, and identifies a framework of key elements  required to be considered for inclusion in an SMS. According to the ISM  Code, each vessel operator should develop, implement, and maintain an  SMS that is to include functional requirements, such as procedures to  prepare for and respond to emergency situations. An SMS is typically  not a single plan and can take different forms. It is up to the vessel  operator to determine how best to operationalize these requirements. The  SMS plan documents generally contain proprietary information and are  not retained by the Coast Guard or the ROs performing services on the  Coast Guard’s behalf.

Key Entities Involved in Vessel SMS Activities

There are three key entities involved in vessel SMS activities—vessel  operators, ROs, and the U.S. Coast Guard. These entities’ SMS  responsibilities are described below.

Vessel operators are responsible for developing an SMS in accordance  with ISM Code requirements if they operate U.S-flagged vessels that are  subject to the ISM Code, such as a vessel engaged in a foreign voyage  that is carrying more than 12 passengers, or a tanker or freight vessel of  at least 500 gross tons, among other vessel types. Vessel operators are  required to perform an internal audit of their company’s SMS each year to  ensure it is being implemented effectively. Vessel operators are also  responsible for obtaining the requisite evidence that the company and  each of its applicable vessels are in compliance with the ISM Code. In  practice, this means that the vessel operators obtain certification from  ROs, which are described below. According to the Coast Guard, there  were approximately 1,170 U.S.-flagged vessels that maintained SMS  certifications in 2019.

An RO refers to an international classification society authorized by the  Coast Guard to conduct applicable vessel oversight and certification  services on its behalf. The Coast Guard has authorized several ROs to  conduct SMS audits and issue applicable certificates, but over 95 percent  of these vessel oversight and compliance activities are conducted by a  single RO, the American Bureau of Shipping. ROs have to meet specific  requirements for authorization, such as making information about vessel  class and inspections available to the Coast Guard. In order to be  authorized, the RO needs to have been an international classification  society for 30 years and have a history of taking appropriate corrective  actions in addressing, among other things, vessel deficiencies.

ROs are to conduct the following SMS activities on the Coast Guard’s  behalf:  review SMS documents and conduct initial company and vessel  audits to verify compliance with the ISM Code and applicable national  and international requirements;  issue a Document of Compliance to the vessel operator and a Safety  Management Certificate for the vessel, which is valid for up to 5 years;  conduct annual SMS compliance audits of the vessel operator;  conduct an intermediate SMS compliance audit for the vessel at least  once during the 5-year period; and  conduct renewal SMS compliance audits of vessel operator and  vessel(s) prior to expiration of the 5-year certificate.

The U.S. Coast Guard is ultimately responsible for guaranteeing the  effectiveness of SMS compliance activities and audits that ROs perform  on its behalf. The Coast Guard’s oversight activities of ROs are  conducted by the Office of Commercial Vessel Compliance. This office  oversees a range of different activities to help ensure SMS compliance  with the ISM Code and applicable federal regulations. Such activities  include managing the commercial vessel inspection program, developing  related guidance, and overseeing SMS audits and related activities  performed by ROs. In addition to oversight provided by officials at Coast  Guard headquarters, marine inspectors within local Coast Guard field  units are also responsible for conducting vessel inspections, which  routinely include assessing SMS effectiveness for applicable vessels.

The Coast Guard Verifies SMS Compliance through Recurrent Vessel Inspections and Has Initiated Additional Oversight of Third Parties

The Coast Guard Verifies SMS Compliance through Recurrent Inspections of Applicable U.S.-Flagged Vessels

The Coast Guard verifies SMS compliance as part of its overall vessel  compliance activities, such as conducting annual inspections of  applicable U.S.-flagged vessels. According to the Coast Guard, recurrent  vessel inspections are important opportunities for its marine inspectors to  verify the effectiveness of the vessels’ SMS, even if SMS oversight is not  the primary purpose of the vessel inspections. When conducting an  annual vessel inspection, Coast Guard marine inspectors are to look for  material deficiencies, such as poor condition of vessel structures, missing  or defective equipment, or hazardous conditions that could indicate a  potential SMS nonconformity. According to Coast Guard officials,  marine inspectors routinely review the Coast Guard’s internal database  for a record of any past deficiencies and are to inspect the vessel’s SMS  documentation to determine if the Safety Management Certificate is up- to-date and the drill logs are current, among other things. The Coast  Guard advises vessel operators to self-report or, in other words,  proactively manage their vessels and report any deficiencies identified by  the vessel’s crew and report them at the beginning of any Coast Guard  inspection.

When conducting an annual vessel inspection, Coast Guard marine  inspectors are to follow a five-step process to identify any SMS-related  deficiencies, determine if there are clear grounds for an expanded vessel  inspection, and specify any applicable compliance options. The process  requires distinguishing between normal wear and tear to the vessel and  deficiencies that could be the result of failures to implement an effective  SMS. (See appendix II for further details on this five-step process.) A  more in-depth inspection, if warranted, may include a review of  maintenance schedules and records, crew training records and  certifications, emergency procedures, and associated interviews with the  vessel master and crew. Marine inspectors are to record any identified  deficiencies on a Form 835V, which specifies the time frames and  procedures required to address the identified deficiencies. See figure 1  for a blank copy of the Form 835V.

The Coast Guard uses a range of options for addressing SMS-related  deficiencies. Some deficiencies, such as improperly secured wiring or  missing documentation, can sometimes be corrected by the vessel’s crew  during the course of a Coast Guard inspection. According to Coast Guard  guidance, if marine inspectors identify serious deficiencies that could  indicate broader SMS failures, such as an absence of required equipment  or failure by the company to notify the Coast Guard of reportable marine  casualties and hazards, the inspectors record an SMS-related  deficiency and require an internal SMS audit. An internal SMS audit is for  technical or operational deficiencies that individually or collectively do not  warrant the detention of the vessel but indicate a failure or lack of  effectiveness of the SMS. The internal SMS audit and any corrective  actions are to be completed by the vessel operator within three months  from the date of the Coast Guard vessel inspection.

If during the course of a vessel inspection Coast Guard inspectors  observe more serious deficiencies or failures, such as defective or  missing fire-fighting or life-saving equipment, the vessel is to be detained  and an external audit is to be performed by the RO prior to the vessel  being released from detention. Figure 2 shows the Coast Guard’s process  for ensuring SMS compliance during vessel inspections.

The Coast Guard Conducts Additional SMS Oversight of Vessels Designated as Higher Risk

In addition to the annual vessel inspections it conducts, the Coast Guard  also maintains a list of vessels that require additional oversight, referred  to as the “fleet risk index.” The Coast Guard Office of Commercial Vessel  Compliance evaluates vessels enrolled in the Alternate Compliance  Program and the Maritime Security Program to develop the fleet risk  index using modeling that considers and weighs multiple risk factors to  assign each vessel a risk score. This list is used internally by Coast  Guard inspectors when prioritizing vessels for additional oversight and  more frequent inspections. Assessed risk factors include vessel  detentions, marine violations/enforcement actions, vessel deficiencies,  vessel type, and vessel age, among others. According to Coast Guard  officials, the Coast Guard uses the fleet risk index to identify  approximately 50 vessels each year that are subject to inspections every  6 months rather than annually.

In 2018, the Coast Guard stipulated that traveling inspectors would  accompany the local inspection team to conduct all inspections aboard  vessels designated for additional oversight. According to Coast Guard  officials, traveling inspectors have additional training and inspection  expertise, including supplemental coursework in auditing and quality  management systems, and they routinely conduct additional background  research on these vessels prior to participating in the inspections.

Results of the Coast Guard’s Vessel SMS Compliance Activities for 2018 and 2019

Based, in part, on recommendations in the EL FARO investigative report,  in 2018 the Coast Guard took steps to improve its management of the  Alternate Compliance Program, including efforts to improve data  reporting. For example, the Coast Guard revised its form for documenting  deficiencies during annual vessel inspections. In particular, since March  2018, the Form 835V has included a checkbox to indicate if a deficiency  is related to an SMS. According to the Coast Guard, this revision will  allow for enhanced annual reporting of safety-related deficiencies  identified during compliance activities.

The Coast Guard reported it conducts approximately 1,200 inspections  each year of vessels that are either required to maintain a Safety Management Certificate, or do so voluntarily. According to the Coast  Guard,  in calendar year 2018, the Coast Guard issued between 70 and 130  SMS-related deficiencies (reporting available for April through  December only), and  for calendar year 2019, the Coast Guard issued between 183 and 212  SMS-related deficiencies.

Given the limited data and time frames available, we were not able to  identify any trends regarding SMS deficiencies. However, we noted that  the highest number of safety-related deficiencies cited in 2019 were  related to maintenance of vessels and equipment—43 of the 212 annual  deficiencies. The second-highest number of deficiencies addressed  issues related to emergency preparedness—37 of the 212 annual  deficiencies. Some specific examples in this category relate to the posting  of applicable emergency instructions and providing updated records of  emergency drills. According to Coast Guard headquarters officials, the  Coast Guard plans to review and assess the SMS deficiency data to  provide feedback to inspectors, vessel operators, and ROs. The officials  also stated that SMS deficiencies will be included in future risk-based  vessel inspection programs, including the fleet risk index discussed  earlier.

The Coast Guard Has Initiated Efforts to Enhance Its Oversight of ROs Since 2018

Following the investigative reports of the EL FARO sinking, the Coast  Guard initiated several efforts in 2018 to enhance oversight of the ROs  that perform SMS-related services and certifications on its behalf. These  efforts were largely driven by actions identified by the Commandant of the  Coast Guard in December 2017 in response to EL FARO investigative  report recommendations. In particular, the Coast Guard established a  new group to monitor ROs, developed new SMS-related guidance and  associated work instructions, increased direct observations of ROs,  developed key performance indicators, and developed guidance to  request internal investigations for certain RO deficiencies. It is too early  for us to assess the overall effectiveness of these Coast Guard efforts;  however, we believe they are positive steps toward enhancing oversight  of ROs. Further information on each of these efforts is provided in the  sections that follow.

Established a new group within the Office of Commercial Vessel  Compliance. The Coast Guard established a new group within its Office  of Commercial Vessel Compliance in 2018 to help monitor the global  performance of the U.S.-flagged fleet, provide enhanced oversight of ROs  performing vessel safety management functions, and implement any  necessary changes to related roles and responsibilities.

Developed SMS-related guidance and work instructions. The Office  of Commercial Vessel Compliance developed several new work  instructions to help inform mariners, the public, the Coast Guard, and  other federal and state regulators in applying SMS-related statutory and  regulatory requirements. The following are examples of applicable  guidance issued since 2018:

CVC-WI-003(1): USCG Oversight of Safety Management Systems on  U.S. Flag Vessels (March 23, 2018). This document contains  guidance for assessing the effectiveness of the SMS on U.S.-flagged  vessels, including directions for evaluating potential deficiencies and  compliance options during the course of a vessel inspection.

CVC-WI-004(1): U.S. Flag Interpretations on the ISM Code (April 16,  2018). This document provides guidance regarding the Coast Guard’s  interpretations on the application and implementation of the ISM  Code.

Increased the number of Coast Guard direct observations of ROs  performing vessel and company audits. The Coast Guard reported it  has increased the number of direct observations of ROs conducting  vessel and company SMS audits since 2018. According to the Coast  Guard, audit observations aboard vessels are routinely performed by  traveling inspectors. Additionally, staff from the new Commercial Vessel  Compliance group are observing an increased number of company  audits. This group has eight staff available for direct observations of ROs,  all of whom have received training in international auditing and safety  management standards. The Coast Guard reported that the number of  audit observations attended by the Commercial Vessel Compliance staff  increased from three in 2018 to 21 in 2019. According to the Coast  Guard, these additional observations serve as a mechanism to provide  increased oversight of the ROs and the companies or vessels being  audited, as well as to verify that the services provided by ROs are  effectively executed in accordance with established requirements.

Developed key performance indicators for assessing ROs. In mid- 2018, Coast Guard officials identified 10 key performance indicators to be  used to evaluate the performance of ROs. Due, in part, to challenges with  collecting and synthesizing the requested data from the different ROs, the  Coast Guard reported on limited performance information in the 2018  Domestic Annual Report. According to Coast Guard officials, the Coast  Guard is working with each of the ROs and the International Association  of Classification Societies to standardize the key performance indicator  data to better integrate the data into the Coast Guard’s data system. The  Coast Guard said that it plans to include a subset of the key performance  indicators in its 2019 annual report, which is scheduled for issuance in  April 2020. See appendix III for more information on these key  performance indicators.

Developed guidance for ROs on “quality cases.” In May 2018, the  Coast Guard also issued guidance that describes a new oversight  mechanism, referred to as a “quality case.” If a Coast Guard marine  inspector observes evidence during the course of a vessel inspection that  an RO is not adequately performing its required SMS-related functions,  the Coast Guard can request that the RO conduct a root-cause analysis  to help identify the underlying issue(s). This analysis would generally  involve the RO evaluating its quality management system and reporting  findings and corrective actions to the Coast Guard. From May 2018 to  November 2019, the Coast Guard reported it initiated 13 quality cases;  one of which was SMS-related.

Vessel SMS Plans Address Some of the Potential Shipboard Emergencies and Response Procedures Proposed by Coast Guard Guidance

Each of the 12 SMS plans (or plan excerpts) for U.S.-flagged vessels that  we reviewed identify potential shipboard emergencies and applicable  response procedures, but they do not address the full range of  emergency scenarios included in Coast Guard guidance. While the 12  SMS plans do not address all potential emergencies included in Coast  Guard guidance, the plans do address the broad, functional requirement  to identify potential shipboard emergencies and applicable response  procedures to address them, as required by the ISM Code and applicable  federal regulations. In reviewing the 12 SMS plans, we also found  variation among the specific scope and formats of the emergency  preparedness sections. Four of the 12 SMS plans are large documents  spanning hundreds of pages that incorporate various component  manuals. For example, one vessel operator provided a comprehensive  SMS plan document of nearly 600 pages that includes six different  procedural manuals covering the following issues: Management, Vessel,  Safety, Environmental, Cargo Operations, and Emergency Response. For  the other eight SMS plans we reviewed, the vessel operators provided us  with either a stand-alone manual specifically addressing shipboard  emergency preparedness and response procedures, or individual  chapters and excerpts that included this information. According to Coast  Guard and RO officials, the ISM Code does not require a specific format  or level of detail for SMS plans and, rather, allows vessel operators  flexibility to choose how they will implement and document SMS  requirements based on their specific operations and business processes.

In addition to reviewing the SMS plans for content and format, we also  reviewed each of the 12 SMS plans (or excerpts) to determine the extent  to which they address 21 different potential shipboard emergencies  identified in 2018 Coast Guard guidance related to the application and  implementation of the ISM Code (see table 1). The number of unique,  potential shipboard emergency scenarios addressed in the SMS plan  documents we reviewed generally range from five to 16. Ship routing  procedures related to heavy weather, which is an emergency scenario  highlighted in the EL FARO investigative report, is clearly identified in five  of the 12 SMS plans reviewed. However, one additional SMS plan makes  reference to a separate heavy weather plan that was not included in the  primary SMS plan documents that we reviewed. The most frequently  addressed shipboard emergency scenarios—that are addressed in at  least 10 of the 12 SMS plans we reviewed—are Fire, Collision,  Grounding, Abandon Ship, and Man Overboard. In addition, 10 of the 12  SMS plans we reviewed also identify additional potential emergency  shipboard scenarios not included in the 2018 Coast Guard guidance,  such as breakaway from dock, emergency towing, or confined space  rescue.

While none of the SMS plans that we reviewed specifically address all 21  potential shipboard emergencies identified in the 2018 Coast Guard  guidance, the guidance states that it is not a substitute for applicable legal  requirements, nor is it itself a rule. According to officials from the two ROs  with whom we discussed this program, their auditors are provided the  2018 Coast Guard guidance to use as part of their SMS audit criteria.  The officials noted, however, that their auditors may be limited to issuing  an “observation” to the vessel operator if any potential shipboard  emergency listed in Coast Guard guidance is not addressed in SMS plan  documents. Under the ISM Code, an “observation” is not the same as  an SMS “nonconformity,” which would require specific corrective action.  Officials from one RO noted that any nonconformities identified would  need to be based on specified mandatory requirements, such as ISM  Code provisions, U.S. statutes, or applicable U.S. or international  regulations, and not solely on the 2018 Coast Guard guidance.

In addition to the fact that the emergencies listed in the guidance are not  required to be included in SMS plans, there are other factors to explain  why the SMS plans we reviewed may not address all 21 potential  shipboard emergency scenarios identified in the 2018 Coast Guard  guidance. Such factors include the following:  Size and nature of vessel operations. According to RO and Coast  Guard officials, not all of the 21 potential shipboard emergency scenarios  contained in the 2018 Coast Guard guidance are applicable for each type  of vessel or for all geographical operating areas. For example, specific  emergency procedures related to piracy or terrorism, cargo-related  accidents, helicopter rescue operations, or loss of key personnel may not  be necessary for towing vessels, given the nature of their operations, their  limited size, and the reduced number of crew required to operate that  type of vessel. Similarly, icing conditions would not be expected to be  included in the SMS plans for those vessels that operate solely in  temperate waters.

Additional time may be needed to incorporate expanded potential  shipboard emergency scenarios into existing SMS plans. Although  the Coast Guard guidance identifying the 21 potential shipboard  emergency scenarios was issued in April 2018, vessel operators may still  be in the process of revising their SMS plans to include additional  potential shipboard emergency scenarios and applicable emergency  response procedures. For example, we observed that six of the 21  scenarios included in the 2018 Coast Guard guidance are not listed in  related guidance provided by the International Association of  Classification Societies. These six scenarios are among those observed  with the lowest frequency during our review of SMS plans. It is feasible  that information related to these scenarios—such as loss of key  personnel, or loss of communications with a vessel—may exist elsewhere  in vessel operators’ SMS documents or in other vessel plans, but not  incorporated as potential shipboard emergency response scenarios as  proposed in the 2018 Coast Guard guidance. Along these lines, officials  from the ROs with whom we spoke also noted that, in accordance with  the ISM Code, they routinely use a sampling approach when conducting  annual company SMS audits, and would generally not review the entire  scope of an SMS plan each year. As a result of the sampling process,  the annual audits occurring since April 2018 may not have addressed any  potential “observations” related to the expanded scope of potential  shipboard emergencies included in the Coast Guard guidance for SMS  plans.

As noted previously, the ISM Code and corresponding U.S. regulations  and Coast Guard guidance allow vessel operators flexibility in how they  address SMS functional requirements, including the documentation of  potential shipboard emergencies and applicable response procedures in  their SMS plans. Following the EL FARO incident, in 2018 the Coast  Guard developed guidance to help inform vessel operators and ROs of  potential shipboard emergency scenarios to consider. However, similar to  the SMS-compliance and oversight practices used by comparable  agencies in other developed countries, we found that the Coast Guard  does not have a direct role in reviewing or approving vessel SMS plan  documents, including response procedures for potential shipboard  emergency scenarios. Rather, as described earlier, the Coast Guard  relies on periodic vessel inspections and oversight of ROs that perform  more rigorous ISM audits on the Coast Guard’s behalf. Although the  Coast Guard has taken positive steps since 2018 to develop additional  guidance and increase the number of observations of RO audits and inspections, the extent to which these efforts will result in any specific  changes to the content of SMS plans by vessel operators in the future is  yet to be determined.

We requested comments on a draft of this report from DHS and the Coast  Guard. Officials from the Coast Guard provided technical comments,  which we incorporated into the report as appropriate.

We are sending copies of this report to the appropriate congressional  committees, the Secretary of Homeland Security, the U.S. Coast Guard,  and other interested parties. In addition, the report is available at no  charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (206) 287-4804 or AndersonN@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. Key contributors to this report are listed in  appendix IV.

Appendix I: Key Roles and Responsibilities of Recognized Organizations Related to Safety Management Systems

Federal regulations allow the Commandant of the Coast Guard to  delegate certain functions to authorized classification societies. In order  for a classification society to be recognized by the Coast Guard and  receive statutory authority to carry out delegated functions as a  Recognized Organization (RO), the classification society must meet  certain requirements, including having functioned as an international  classification society for at least 30 years and having established a history  of appropriate corrective actions in addressing vessel casualties and  deficiencies, among other things. With respect to safety management  systems (SMS), ROs—once authorized by the Coast Guard—are able to  perform SMS-related audits and issue SMS-related certifications and  documentation.

The following information summarizes the key roles and responsibilities of  ROs related to International Safety Management (ISM) Code certification  services and the key activities that ROs perform to fulfill their delegated  SMS compliance functions on behalf of the Coast Guard.

Interim verification. When a new company (i.e., vessel owner/operator)  is established, or an existing company wants to add a new vessel type to  its current Document of Compliance, the RO is to first verify that the  company has an SMS that complies with ISM Code requirements. If the  RO determines that the company is in compliance, it issues the company  an interim Document of Compliance (which applies to the entire  company) that is valid for up to 12 months.

Initial verification. After receiving an interim Document of Compliance, a  company applies for ISM Code certification, and an RO conducts an SMS  audit of the company’s shoreside management system that is to include a  visit to the company’s physical offices. Following the satisfactory  completion of the audit and verification that the company’s SMS has been  in operation for at least 3 months, the RO would issue the company a  Document of Compliance that is valid for 5 years.

After the RO issues the Document of Compliance, the RO is to verify that  the company’s SMS has been functioning effectively for at least 3 months  for each of the vessels for which the company is seeking a Safety  Management Certificate. A Safety Management Certificate is vessel- specific and may only be issued to a vessel if the company holds a valid  Document of Compliance. To perform the initial verification, the RO is to  assess each vessel to determine if the company’s SMS is being  employed effectively on that vessel.

Annual or intermediate verification. The RO is responsible for verifying  a company’s Document of Compliance every year and for verifying the  company’s Safety Management Certificates at least once during the 5- year period covered by the issued certificates. ROs generally verify  Safety Management Certificates between 2 and 3 years after their  issuance. Annual and intermediate verifications are opportunities for the  RO to verify whether the company has taken appropriate actions to  sufficiently address any deficiencies the RO may have identified during  previous audits.

Renewal verification. Up to 3 months before a company’s Document of  Compliance or a vessel’s Safety Management Certificate expires, the RO  is to conduct a renewal verification. The renewal verification is to address  all elements of the SMS, including activities required under the ISM code.

Additional Verification. The Coast Guard may also require additional  verification to ensure that an SMS is functioning effectively—for example,  to make sure that the company has sufficiently implemented appropriate  corrective actions to address any identified deficiencies.

Appendix II: Coast Guard’s Process for Evaluating Safety Management System Deficiencies and Corrective Action Options

This appendix provides summary information on the Coast Guard’s  process for evaluating safety management system (SMS) deficiencies  and corrective action options if a Coast Guard marine inspector identifies  any SMS-related deficiencies during a vessel inspection.

Appendix III: Key Performance Indicators for Assessing Recognized Organizations

In mid-2018, Coast Guard officials identified 10 key performance  indicators to be used to evaluate the performance of Recognized  Organizations (RO). Information on these 10 performance indicators is  summarized below.

1: Number of RO-issued statutory findings divided by the number of  statutory surveys conducted (e.g., 100 findings / 10 surveys = 10 Key  Performance Indicators).

2: Number of RO Safety Management Certificate audit findings  divided by the number of Safety Management Certificate audits  conducted

3: Number of RO Document of Compliance audit findings divided by  the number of Document of Compliance audits conducted (includes all  types of Document of Compliance audits).

4: Number of RO associations to Port State Control Detentions under  the Paris and Tokyo Memoranda of Understanding, and Coast Guard  Port State Control programs.

5: Number of International Association of Classification Societies  Procedural Requirement-17s (IACS PR-17) issued divided by the total  number of RO applicable surveys conducted.

6: Total number of U.S. commercial vessel casualties divided by the  total number of commercial vessels in the U.S. fleet of responsibility.

7: Total number of RO nonconformities issued by the Coast Guard  divided by the number of statutory surveys and International Safety  Management (ISM) audits conducted.

8: Total number of Coast Guard-issued deficiencies related to  statutory certificates divided by the total number of Coast Guard  inspections conducted.

9: Total number of RO-associated Flag State Detentions divided by  the total number of statutory surveys and audits performed.

10: Number of Coast Guard-issued ISM-related deficiencies divided  by the total number of Coast Guard inspections completed.

Appendix IV: GAO Contact and Staff Acknowledgments

Nathan Anderson, (206) 287-4804 or AndersonN@gao.gov  In addition to the contact named above, Christopher Conrad (Assistant  Director), Ryan Lambert (Analyst-in-Charge), Ben Nelson, Elizabeth  Dretsch, Tracey King, Kevin Reeves, and Benjamin Crossley made key  contributions to this report.

In October 2015, a cargo ship from the United States sank at sea during a hurricane, killing all 33 crew members. Concerns with the ship’s safety plan raised questions about how the Coast Guard ensures that U.S. commercial ships comply with safety regulations.

The Coast Guard relies on “recognized organizations,” third parties that the Coast Guard has authorized to perform activities such as ships’ safety plan reviews and safety audits. In 2018, the Coast Guard began improving its oversight of these organizations. For example, it developed key indicators for assessing their performance and issued new guidance and work instructions.