Proposed Rule2026-19254
Great Lakes Pilotage Rates-2027 Annual Review and Revisions to Methodology
Primary source
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Published
September 21, 2026
Issuing agencies
Homeland Security DepartmentCoast Guard
Abstract
In accordance with the Great Lakes Pilotage Act of 1960, the Coast Guard is proposing pilotage rates for the 2027 shipping season. We are conducting a full ratemaking for 2027. We are requesting comments on the Great Lakes pilotage ratemaking methodology, including one proposed update to that methodology. We also propose the pilotage rate for the Straits of Mackinac, newly designated for pilotage requirements by the National Defense Authorization Act for Fiscal Year 2026. The Coast Guard estimates that this proposed rule would increase operating costs by approximately 10 percent compared to the 2026 season.
Full Text
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<title>Federal Register, Volume 91 Issue 181 (Monday, September 21, 2026)</title>
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[Federal Register Volume 91, Number 181 (Monday, September 21, 2026)]
[Proposed Rules]
[Pages 59712-59755]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-19254]
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DEPARTMENT OF HOMELAND SECURITY
Coast Guard
46 CFR Parts 401 and 404
[Docket No. USCG-2026-0049]
RIN 1625-AD07
Great Lakes Pilotage Rates--2027 Annual Review and Revisions to
Methodology
AGENCY: Coast Guard, DHS.
ACTION: Notice of proposed rulemaking.
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SUMMARY: In accordance with the Great Lakes Pilotage Act of 1960, the
Coast Guard is proposing pilotage rates for the 2027 shipping season.
We are conducting a full ratemaking for 2027. We are requesting
comments on the Great Lakes pilotage ratemaking methodology, including
one proposed update to that methodology. We also propose the pilotage
rate for the Straits of Mackinac, newly designated for pilotage
requirements by the National Defense Authorization Act for Fiscal Year
2026. The Coast Guard estimates that this proposed rule would increase
operating costs by approximately 10 percent compared to the 2026
season.
DATES: Comments and related material must be received by the Coast
Guard on or before October 21, 2026.
ADDRESSES: You may submit comments identified by docket number USCG-
2026-0049 at <a href="http://www.regulations.gov">www.regulations.gov</a>. See the ``Public Participation and
Request for Comments'' portion of the SUPPLEMENTARY INFORMATION section
for further instructions on submitting comments. This notice of
proposed rulemaking, with its plain-language, proposed rule summary of
100 words or less, will be available in this same docket.
FOR FURTHER INFORMATION CONTACT: For information about this document
call or email Mr. Brian Rogers, Commandant, Office of Waterways and
Ocean Policy--Great Lakes Pilotage Division (CG-WWM-2), Coast Guard;
telephone 571-608-8418, email <a href="/cdn-cgi/l/email-protection#e3a1918a828dcdb18c84869190a396908084cd8e8a8f"><span class="__cf_email__" data-cfemail="d290a0bbb3bcfc80bdb5b7a0a192a7a1b1b5fcbfbbbe">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
Table of Contents for Preamble
I. Abbreviations
II. Basis and Purpose
III. Proposed Rates, Pilot Staffing, and Other Changes
IV. Individual Target Pilot Compensation Benchmark
V. Discussion of Proposed Rate Adjustments
[[Page 59713]]
A. Step 1: Recognize Previous Operating Expenses
B. Step 2: Project Operating Expenses, Adjusting for Inflation
or Deflation
C. Step 3: Estimate Number of Registered Pilots and Apprentice
Pilots
D. Step 4: Determine Target Pilot Compensation Benchmark and
Apprentice Pilot Wage Benchmark
E. Step 5: Project Needed Revenue
F. Step 6: Calculate Initial Base Rates
G. Step 7: Calculate Average Weighting Factors by Area
H. Step 8: Calculate Revised Base Rates
I. Step 9: Review and Finalize Rates
VI. Tables Showing Calculations by District
A. District One
B. District Two
C. District Three
VII. Regulatory Analyses
A. Regulatory Planning and Review
B. Small Entities
C. Assistance for Small Entities
D. Collection of Information
E. Federalism
F. Unfunded Mandates
G. Taking of Private Property
H. Civil Justice Reform
I. Protection of Children
J. Indian Tribal Governments
K. Energy Effects
L. Technical Standards
M. Environment
VIII. Public Participation and Request for Comments
I. Abbreviations
2023 NPRM Great Lakes Pilotage Rates--2023 Annual Review and
Revisions to Methodology NPRM
2026 final rule Great Lakes Pilotage Rates--2026 Annual Review and
Revisions to Methodology
APA American Pilots' Association
Apprentice Pilot United States Registered Apprentice Pilot
BLS Bureau of Labor Statistics
CFR Code of Federal Regulations
CPI Consumer Price Index
DHS Department of Homeland Security
Director U.S. Coast Guard's Director of the Great Lakes Pilotage
ECI Employment Cost Index
FOMC Federal Open Market Committee
FR Federal Register
GLPAC Great Lakes Pilotage Advisory Committee
LPA Lakes Pilots Association
NAICS North American Industry Classification System
NDAA 2026 National Defense Authorization Act for Fiscal Year 2026
NPRM Notice of proposed rulemaking
OMB Office of Management and Budget
PCE Personal Consumption Expenditures
Pilot United States Registered Pilot
RA Regulatory Analyses
Sec. Section
SBA Small Business Administration
SLSPA Saint Lawrence Seaway Pilots Association
U.S.C. United States Code
WGLPA Western Great Lakes Pilots Association
II. Basis and Purpose
The legal basis for this proposed rule is 46 U.S.C. Chapter 93
which requires foreign merchant vessels and United States vessels
operating ``on register'' (meaning United States vessels engaged in
foreign trade) to use United States Registered Pilots (Pilots) or
Canadian Registered Pilots while transiting the United States waters of
the St. Lawrence Seaway and the Great Lakes system.\1\ Specifically, 46
U.S.C. 9303(f) requires the Secretary to prescribe by regulation rates
and charges for pilotage services, giving consideration to the public
interest and the costs of providing those services. The statute
requires the Secretary to establish new pilotage rates by March 1 of
each year.\2\ Base pilotage rates must be established by a full
ratemaking at least once every 5 years, and reviewed annually, with
adjustments made in each intervening year.\3\ The statute also
authorizes the Secretary to authorize the formation of pilotage pools
by voluntary associations of Pilots to provide for the efficient
dispatching of vessels and rendering of pilotage services.\4\ The
Secretary may limit the number of pilotage pools, prescribe regulations
governing their operation and administration, prescribe a uniform
system of accounts, perform audits and inspections, and require
reciprocal coordination with similar pool arrangements authorized by
the appropriate Canadian agency.\5\ The Secretary's authority under 46
U.S.C. Chapter 93 has been delegated to the Coast Guard, except as
otherwise provided.\6\
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\1\ 46 U.S.C. 9302(a)(1).
\2\ 46 U.S.C. 9303(f).
\3\ Id.
\4\ 46 U.S.C. 9304(a).
\5\ 46 U.S.C. 9304(b).
\6\ Department of Homeland Security (DHS) Delegation 00170.1,
Revision No. 01.4, paragraph (II)(92)(f) (delegating, in part, the
Secretary's authority under 46 U.S.C. chapter 93 to the Coast Guard,
except for the authority under 46 U.S.C. 9307 to establish and
appoint members to the Great Lakes Pilotage Advisory Committee,
which is retained by the Secretary).
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With this proposed rule, the Coast Guard initiates a full
ratemaking for the 2027 shipping season. The Coast Guard seeks public
comment on its proposed pilotage rates and, as part of this full
ratemaking, on the ratemaking methodology and staffing model. The Coast
Guard last conducted a full ratemaking in the February 17, 2026, final
rule, ``Great Lakes Pilotage Rates--2026 Annual Review and Revisions to
Methodology'' at 91 FR 7121 (2026 final rule). We are conducting
another full ratemaking for 2027 to propose the pilotage rate for the
Straits of Mackinac, newly designated for pilotage requirements by the
National Defense Authorization Act for Fiscal Year 2026 (NDAA 2026).\7\
Section III.C. of this preamble discusses this statutory change in
greater detail. Specifically, this proposed rule revises the
methodology in Step 6, specifies the pilotage rate to be charged in the
Straits of Mackinac, and updates the base compensation for Pilots and
United States Registered Apprentice Pilots (Apprentice Pilots). The
proposed rates and changes to the methodology continue to promote our
goals, as outlined in 46 CFR 404.1, by promoting safe, efficient, and
reliable pilotage service on the Great Lakes by generating sufficient
revenue for each pilotage association to reimburse its necessary and
reasonable operating expenses and fairly compensate trained and rested
Pilots. Rate setting is fundamental to achieving these goals because it
facilitates maritime commerce, protects the marine environment, and
supports National Transportation Safety Board recommendations regarding
staffing and Pilot fatigue.
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\7\ Public Law 119-60, 7314, 139 Stat. 718, 1762 (Dec. 18, 2025)
(codified as amended at 46 U.S.C. 9302(a)(1)(A)).
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III. Proposed Rates, Pilot Staffing, and Other Changes
A. Proposed Rates
The pilotage rates for the 2027 season range from a proposed $445
to $1,002 per Pilot hour, depending on which of the specific areas
pilotage service is provided. See Table 1. The rates are paid by
shippers to the pilotage associations representing each district.
BILLING CODE 9110-04-P
[[Page 59714]]
[GRAPHIC] [TIFF OMITTED] TP21SE26.000
BILLING CODE 9110-04-C
As reflected in Table 1, there are three American pilotage
districts on the Great Lakes, each represented by a pilotage
association.\8\ Each pilotage district is further divided into
``designated'' and ``undesignated'' areas. Designated areas, classified
as such by Presidential Proclamation, are waters in which Pilots must
always direct the navigation of vessels subject to the customary
authority of the vessel Master.\9\ Undesignated areas are open bodies
of water where Pilots must only ``be on board and available to direct
the navigation of the vessel'' at the discretion of and subject to the
customary authority of the vessel Master.\10\
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\8\ The Saint Lawrence Seaway Pilots Association (SLSPA)
provides pilotage services in District One, which includes all U.S.
waters of the St. Lawrence River and Lake America. The Lakes Pilots
Association (LPA) provides pilotage services in District Two, which
includes all U.S. waters of Lake Erie, the Detroit River, Lake St.
Clair, and the St. Clair River. Finally, the Western Great Lakes
Pilots Association (WGLPA) provides pilotage services in District
Three, which includes all U.S. waters of the St. Mary's River; Sault
Ste. Marie Locks; Lakes Huron, Michigan, and Superior; and the
Straits of Mackinac.
\9\ 46 U.S.C. 9302(a)(1)(A). Two Presidential proclamations
address the designation of restricted waters under the Great Lakes
Pilotage Act. Presidential Proclamation 3385 designated specified
U.S. waters of the Great Lakes as restricted waters and established
the geographical bounds of those waters within the three pilotage
districts. Presidential Proclamation 3855 subsequently amended
Proclamation 3385, including by revising the boundaries of District
3. Proclamation 3385, Designation of Restricted Waters under the
Great Lakes Pilotage Act of 1960, 25 FR 13681 (Dec. 24, 1960), as
amended by Presidential Proclamation 3855, Amending Proclamation No.
3385, Designating Restricted Waters under the Great Lakes Pilotage
Act of 1960, 33 FR 8535 (June 10, 1968).
\10\ 46 U.S.C. 9302(a)(1)(B).
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The three U.S. pilotage associations representing these districts
are the sole U.S. providers of pilotage services on the Great Lakes,
each operating as an independent business within its respective
district. Each pilotage association is self-funded, using revenue from
the shippers to cover operating expenses, maintain infrastructure,
compensate Pilots and Apprentice Pilots, acquire and implement
technological advances, train new personnel, and provide for continuing
professional development. To promote the long-term stability of the
pilotage rates and from year-to-year, the Coast Guard bases pilotage
rates on a 10-year historical average of pilotage demand. This approach
means annual revenues may be higher or lower than projected if pilotage
demand fluctuates from the average. However, this 10-year average
approach helps ensure that the associations can maintain
infrastructure, provide adequate compensation and rest for pilots, and
retain highly trained personnel. Using 3-year and 5-year averages
caused the rate to fluctuate too significantly, creating challenges for
planning for future expenses. For example, a significant decrease in
[[Page 59715]]
shipping activity in a single year would have a relatively limited
effect on rates calculated using a 10-year average. This promotes rate
stability if shipping activity returns to historical levels the
following year, when pilot associations must have sufficient trained
pilots and other resources to meet demand. Conversely, using 15- or 20-
year averages would incorporate older data that may not accurately
reflect current market conditions or pilot associations' current
resource needs.
B. Pilot and Apprentice Pilot Staffing
This proposed rule would affect 61 Pilots, 8 Apprentice Pilots, 3
pilotage associations, and the owners and operators of an average of
247 oceangoing vessels that transit the Great Lakes annually. This
proposed rule is not economically significant under Executive Order
12866 and would not affect the Coast Guard's budget or increase Federal
spending because foreign shippers, foreign cruise ships, and vessels
requesting voluntary pilotage pay these rates directly to the
respective pilotage association.
The estimated overall annual regulatory economic impact of this
rate change would be a net increase of $3,977,204 in estimated payments
made by the foreign shippers, foreign cruise ships, and vessels
requesting voluntary pilotage service, an approximately 10-percent
increase in operating costs in the 2027 shipping season. While this
increase is significantly more than the current annual inflation rate,
it is necessary to achieve the increased revenue needed to add four
Pilots and one Apprentice Pilot. An increase in the number of Pilots
will help achieve part of the Coast Guard's goal of promoting
recruitment and retention of qualified Pilots. In addition, the
increase reflects inflation, the growth of adjusted operating expenses,
changes in vessel traffic, and the need to meet Pilot compensation and
Apprentice Pilot wage benchmarks.
C. Proposal To List Straits of Mackinac in Pilotage Rates and Charges
To implement the NDAA 2026 amendment to 46 U.S.C. 9302(a)(1)(A),
the Coast Guard proposes adding the Straits of Mackinac to the annual
pilotage rate schedule in 46 CFR 401.405 and to make a corresponding
update to Step 6 of the methodology. As amended, the legislation now
requires Pilots to direct the navigation of the vessel in the Straits,
in addition to the other Presidentially designated waters.\11\ We
propose to add the Straits to the list of waters in 46 CFR
401.405(a)(5) while applying the same pilotage rate used for the
adjacent, undesignated waters of Lakes Huron, Michigan, and Superior.
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46 U.S.C. 9302(a)(1)(A).
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As noted previously, under 46 U.S.C. 9303(f), the Coast Guard
prescribes by regulation rates and charges for pilotage services,
giving consideration to the public interest and the costs of providing
the services. We propose to retain the existing Area 6 rate for the
Straits because the statutory designation does not materially change
the pilotage services historically provided there or the costs of
providing those services. Adding the Straits to the codified rate
schedule clarifies the applicable rate to this waterway for the public.
Before the statutory amendment, pilots were required under 46
U.S.C. 9302(a)(1)(B) to be on board and available to direct navigation
through the Straits at the discretion of and subject to the customary
authority of the vessel master. In practice, however, pilots
historically directed navigation through the Straits, subject to the
customary authority of the vessel master, as would be required in
designated waters under 46 U.S.C. 9302(a)(1)(A), given the relatively
limited geographic extent of the Straits. This practice is similar to
the Coast Guard's treatment of ports in undesignated waters, another
type of relatively small area. In those port waters, pilots may direct
vessel movements through short inlets or rivers necessary to enter a
port, while the rate applicable to the broader undesignated area
continues to apply. Similarly, although the Straits are now designated
waters, the Coast Guard proposes to retain the existing Area 6 rate for
the Straits because pilots historically directed navigation through
this relatively limited area, including the turn and transit under a
bridge, without a corresponding change in the rate applicable to the
broader undesignated Area 6. Accordingly, no additional Pilots, Pilot
change points, or Pilot boat services are needed. Because no additional
expenses are associated with this designation, the pilotage association
can continue to provide this service at the same cost as adjacent
undesignated waters. Any historical bridge hours in the Straits of
Mackinac have already been accounted for in Step 6 of the proposed 2027
ratemaking methodology. For these reasons, we have determined that the
current ratemaking practices are reasonable, and changes to how we
calculate the rates for transits through the Straits of Mackinac are
not necessary.
At the Great Lakes Pilotage Advisory Committee (GLPAC) meeting on
February 5, 2026, the Director presented this course of action for the
Straits of Mackinac to the committee and pilotage associations. At the
meeting, GLPAC did not provide specific feedback on the Director's
assertion that costs would not increase for providing pilotage now that
the Straits of Mackinac are designated waters. The Director welcomed
ideas from the committee and feedback when we publish this proposed
rule. A copy of the meeting transcript is available in the docket where
indicated under the ADDRESSES portion of this preamble.
For the associated calculations within this ratemaking methodology,
the Straits of Mackinac metrics would continue to be attributed to Area
6, as shown in Table 2 of this preamble. A similar table with area
numbers last appeared as table 2 in the Great Lakes Pilotage Rates--
2023 Annual Review and Revisions to Methodology NPRM (2023 NPRM) that
published August 30, 2022 (87 FR 52870, 52873). Table 2 of the 2023
NPRM illustrates that Area 6 includes Lakes Huron and Michigan, which
naturally includes transits between these lakes through the Straits of
Mackinac. Though statutorily designated, the Straits of Mackinac would
continue to be associated with Area 6, and its rates would be
equivalent to the undesignated rates for Area 6. The following table is
the proposed area division of the waterways in the Great Lakes, which
maintains the current area structure.
[[Page 59716]]
[GRAPHIC] [TIFF OMITTED] TP21SE26.001
Second, we are proposing a corresponding change to Sec. 404.106,
Step 6 of the methodology, to maintain the status quo for calculating
rates for transits in the Straits of Mackinac. Under the proposed
revision to Step 6, the bridge hours associated with the Straits of
Mackinac would continue to be included in the average bridge hours of
the undesignated waters in Area 6. We use this average in Step 6,
dividing the projected revenue needed by the district's 10-year average
of bridge hours across both designated and undesignated waters. This
additional text would promote transparency in how we average the bridge
hours in District Three and ensure consistency in the treatment of
bridge hours for the Straits of Mackinac. It would also maintain the
current methodology calculation process and would result in no
substantive change from previous ratemakings. As noted in previous
paragraphs, we propose to continue attributing the Straits of Mackinac
transits to Area 6 for ratemaking purposes.
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\12\ Area 3, the Welland Canal, is not included in this table
because it is serviced exclusively by the Canadian GLPA and is
therefore not part of the United States pilotage rate structure.
\13\ The areas are listed by name at 46 CFR 401.405.
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The operational demands for these transits are already met within
the existing resource allocation for Area 6. The proposed clarification
to Step 6 would not result in an increase in staffing or transportation
costs for District Three, nor a notable increase to other resources
relative to the 2026 final rule.
D. Executive Order Renaming Lake Ontario as Lake America
On August 27, 2026, the President issued Executive Order, Honoring
the American History of the Great Lakes and Renaming Lake Ontario as
Lake America.\14\ The Executive Order directs the Secretary of the
Interior, in coordination with the Board on Geographic Names, to take
appropriate actions to rename the body of water currently known as Lake
Ontario as Lake America.\15\ The Executive Order further directs that
Federal Government references to Lake Ontario, including in agency
documents and communications, reflect the renaming.\16\ Consistent with
this directive, as noted in Table 1 of this preamble, we have updated
references to Lake Ontario in this proposed rule to Lake America. These
changes implement the terminology directed by the Executive Order and
do not otherwise alter the substance of this proposed rule.
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\14\ See <a href="https://www.whitehouse.gov/presidential-actions/2026/08/honoring-the-american-history-of-the-great-lakes-and-renaming-lake-ontario-as-lake-america/">https://www.whitehouse.gov/presidential-actions/2026/08/honoring-the-american-history-of-the-great-lakes-and-renaming-lake-ontario-as-lake-america/</a>.
\15\ Id. at Sec. 2.
\16\ Id.
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IV. Individual Target Pilot Compensation Benchmark
According to Sec. 404.104(a), in a full ratemaking year, the
Director sets the individual target Pilot compensation benchmark and
may make necessary and reasonable adjustments based on current
information. This NPRM proposes the 2027 yearly base compensation for
Pilots on the Great Lakes to be $496,674 per Pilot (a $15,032 increase,
or 3.12 percent, over their 2026 compensation). Because the Coast Guard
must review, and adjust rates each year, we analyze rate changes as
single-year costs and do not annualize them over 10 years. Section VII.
Regulatory Analyses of this preamble provides the regulatory impact
analyses of this proposed rule.
For the 2027 ratemaking, the Coast Guard proposes setting the
target Pilot compensation benchmark at the target Pilot compensation
for the ratemaking year 2026, adjusted for inflation. This is the same
method we used for setting the target Pilot compensation benchmark in
the previous full ratemaking, in 2026.\17\ This method resembles the
interim ratemaking year requirements in Sec. 404.104(b), where the
base target Pilot compensation is adjusted annually for inflation. For
more information about how we arrived at the target Pilot benchmark in
the previous ratemaking, please see the 2026 final rule.\18\ For the
reasons discussed there,\19\ we believe the base compensation as
adjusted annually remains fair.
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\17\ 91 FR 7121, 7123.
\18\ Id. (citing 88 FR 12226, 12233 (Feb. 27, 2023)).
\19\ Id.
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Based on the information we have exchanged with the Pilots and
industry over the past several ratemakings (2025-2026), the Director
continues to believe that the level of target Pilot compensation
provides an appropriate level of compensation for Pilots. According to
Sec. 404.104(a), the Director
[[Page 59717]]
may make necessary and reasonable adjustments to the benchmark based on
current information. However, current circumstances do not indicate
that an adjustment, other than for inflation, is necessary. The
Director bases this decision on the fact that at this point there is no
indication from the Presidents of the pilotage associations that Pilots
are resigning due to their compensation or that this target Pilot
compensation benchmark is causing shortfalls in achieving reliable
pilotage service. The Director will continue to monitor the
Associations' ability to recruit and retain pilots to ensure reliable
pilotage service is not denigrated in the future. The Coast Guard finds
that the target Pilot compensation benchmark is appropriate relative to
the expertise to perform the necessary job functions. The compensation
will continue to be adjusted annually, in accordance with published
inflation rates, which will ensure the compensation remains competitive
and current for upcoming years.
Therefore, the Coast Guard does not propose alternative benchmarks
for target Pilot compensation at this time and, instead, proposes
simply adjusting the amount of target Pilot compensation for inflation
as our target Pilot compensation benchmark for 2027, as shown in Step
4. This target Pilot compensation benchmark approach has advanced and
would continue to advance the Coast Guard's goals through rate and
compensation stability while also promoting recruitment and retention
of qualified Pilots.
V. Summary of the Ratemaking Methodology
The ratemaking methodology, outlined in current 46 CFR 404.101
through 404.109, consists of 9 steps that are designed to account for
the revenues needed and total traffic expected in each district. The
first several steps of the methodology establish base pilotage rates.
Additional steps to incorporate the weighting factors are necessary to
establish the final pilotage rates. The result is an hourly rate,
determined separately for each of the six areas administered by the
Coast Guard.
In Step 1, ``Recognize previous operating expenses,'' (Sec.
404.101) the Director uses an independent third party to review each
pilot association's audited operating expenses from each of the three
pilot associations. Operating expenses include all allowable expenses,
minus Pilot and Apprentice Pilot wages and benefits. This number forms
the baseline amount that each association is budgeted. Because of the
time delay between when the association submits raw numbers and the
Coast Guard receives audited numbers, this number is 3 years behind the
projected year of expenses. Therefore, in calculating the 2027 rates in
this proposal, we begin with the audited expenses from the 2024
shipping season.
While each pilotage association operates in an entire district
(including both designated and undesignated areas), the Coast Guard
determines costs by area. We allocate certain operating expenses to
designated areas and certain operating expenses to undesignated areas.
In some cases, we can allocate the costs based on where they are
actually accrued. For example, we can allocate the costs for insurance
for Apprentice Pilots who operate in undesignated areas only. In other
situations, such as general legal expenses, expenses are distributed
between designated and undesignated waters on a pro rata basis, based
upon the proportion of income forecasted from the respective portions
of the district.
In Step 2, ``Project operating expenses, adjusting for inflation or
deflation,'' (Sec. 404.102) the Director develops the 2027 projected
operating expenses. To do this, we apply inflation adjustors for 3
years to the operating expense baseline received in Step 1. The
inflation factors are from the BLS CPI for the Midwest Region, or, if
not available, the FOMC median economic projections for PCE inflation.
This step produces the total operating expenses for each area and
district.
In Step 3, ``Estimate number of registered pilots and apprentice
pilots,'' (Sec. 404.103) the Director calculates how many Pilots and
Apprentice Pilots are needed for each district. To do this, the
Director projects, based on the number of persons applying under 46 CFR
part 401 to become United States Great Lakes Registered Pilots and on
information provided by the district's pilotage association, the number
of Pilots expected to be fully working and compensated. The director
then employs the staffing model, described in Sec. 401.220, paragraphs
(a)(1) through (a)(3), to estimate how many Pilots would be needed to
handle shipping during the opening and closing of the season. This
number provides guidance to the Director in approving an appropriate
number of Pilots.
In Step 4 of the ratemaking calculation, we determine the number of
Pilots provided by the pilot associations (see Sec. 404.103) and use
that figure to determine how many Pilots need to be compensated via the
pilotage fees collected. In Step 4, ``Determine target Pilot
compensation benchmark and apprentice pilot wage benchmark,'' (Sec.
404.104(a)(1)), the Director determines base individual target Pilot
compensation using a compensation benchmark, set after considering the
most relevant currently available non-proprietary information. For
supportable circumstances, the Director may make necessary and
reasonable adjustments to the benchmark. For this proposed rule, the
Director plans to adjust the previous year's individual target Pilot
compensation using the same process as in an interim year (Sec.
404.104(b)).
In Step 5, ``Project needed revenue,'' (Sec. 404.105) the Director
simply adds the totals produced by the preceding steps. The projected
operating expense for each area and district (from Step 2) is added to
the total Pilot compensation, including Apprentice Pilot wage
benchmarks (from Step 4). The total figure, calculated separately for
each area and district, is the ``needed revenue.''
In Step 6, ``Calculate initial base rates,'' (Sec. 404.106) the
Director calculates an hourly pilotage rate to cover the needed
revenue, as calculated in Step 5. This step consists of first
calculating the 10-year average hours of traffic for each area. Next,
we divide the revenue needed in each area (calculated in Step 6) by the
10-year average of traffic hours to produce an initial base rate.
An additional element, the ``weighting factor,'' is required under
Sec. 401.400. Pursuant to that section, ships pay a multiple of the
base rate, as calculated in Step 6, by a number ranging from 1.0 (for
the smallest ships, or ``Class I'' vessels) to 1.45 (for the largest
ships, or ``Class IV'' vessels). This significantly increases the
revenue collected, and we need to account for the added revenue
produced by the weighting factors to ensure that shippers are not
overpaying for pilotage services. We do this in Step 7.
In Step 7, ``Calculate average weighting factors by Area,'' (Sec.
404.107), the Director calculates how much extra revenue, as a
percentage of total revenue, has historically been produced by the
weighting factors in each area. We do this by using a 10-year average
of the applied weighting factors.
In Step 8, ``Calculate revised base rates,'' (Sec. 404.108) the
Director modifies the base rates by accounting for the extra revenue
generated by the weighting factors. We do this by dividing the initial
pilotage rate for each area (from Step 6) by the corresponding average
weighting factor (from Step 7), to produce a revised rate.
[[Page 59718]]
In Step 9, ``Review and finalize rates,'' (Sec. 404.109), often
referred to informally as ``Director's discretion,'' the Director
reviews the revised base rates (from Step 8) to ensure that they meet
the goals set forth in 46 U.S.C. 9303(f) and 46 CFR 404.1(a), which
include promoting efficient, safe, and reliable pilotage service on the
Great Lakes; generating sufficient revenue for each pilotage
association to reimburse necessary and reasonable operating expenses;
compensating trained and rested Pilots fairly; and providing
appropriate revenue for improvements.
VI. Discussion of Proposed Rate Adjustments
The process to calculate proposed pilotage rates begins by
calculating a baseline rate for each district, considering projected
operating expenses and the number of Pilots. This base rate is then
adjusted using specific weighting factors to determine the final hourly
pilotage rate. Detailed calculations for each district, illustrating
every step of this process, can be found in Section VI. Tables Showing
Calculations by District within this preamble.
A. Step 1: Recognize Previous Operating Expenses
The first step in our ratemaking process, as outlined by Sec.
404.101, is to establish a baseline budget for each of the three
regional pilotage associations. An independent third-party accounting
firm conducts a thorough review of each association's operating
expenses to identify the foundational costs of providing pilotage
services. This review includes all allowable expenses but specifically
excludes Pilot and Apprentice Pilot wages and benefits, which are
addressed in Step 4.
The complete reviewed financial reports, including detailed
explanations of all adjustments, are publicly available in the official
rulemaking docket, as referenced in Section IX. Public Participation
and Request for Comments.
The recognized operating expenses for Districts One, Two, and Three
are presented in tables 4, 15, and 26, respectively, in section VII.
Tables Showing Calculations by District of this preamble.
B. Step 2: Project Operating Expenses, Adjusting for Inflation or
Deflation
In Step 2, as outlined in Sec. 404.102, we project the operating
expenses for 2027. This involves taking the 2024 operating expense
baseline from Step 1 and adjusting it for 3 years of inflation.
For the 2025 inflation rate of 2.8 percent, we use the Consumer
Price Index (CPI) for the Midwest Region, as published by the Bureau of
Labor Statistics (BLS) \20\. Since the BLS does not provide inflation
forecasts, we use the median economic projections for Personal
Consumption Expenditures (PCE) inflation \21\ from the Federal Open
Market Committee (FOMC) for the 2026 and 2027 adjustments, 2.5 percent
and 2.1 percent respectively.
---------------------------------------------------------------------------
\20\ The CPI is defined as ``All Urban Consumers (CPI-U), All
Items, 1982-4=100.'' Series CUUR0200SA0. Available at <a href="https://www.bls.gov/cpi/data.htm">https://www.bls.gov/cpi/data.htm</a>., All Urban Consumers (Current Series),
multiscreen data, not seasonally adjusted, 0200 Midwest, Current,
All Items, Monthly, 12-month Percent Change and Annual Data;
accessed 04/16/2026.
\21\ The 2026 and 2027 inflation rates are available at <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250917.pdf">https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250917.pdf</a>. We used the Core PCE June Projection value
found in table 1; accessed 04/16/2026.
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This process yields the total projected operating expenses for each
district. Detailed calculations for Districts One, Two, and Three are
available in this preamble in tables 5, 16, and 27, respectively.
C. Step 3: Estimate Number of Registered Pilots and Apprentice Pilots
In this step, outlined in Sec. 404.103, the Director calculates
how many Pilots and Apprentice Pilots are needed for each district.
Setting Minimum and Maximum Levels
To provide operational flexibility, the Coast Guard establishes
minimum and maximum Pilot numbers for each district:
<bullet> The minimum number is based on the current staffing model,
with rounding methodologies amended by Great Lakes Pilotage Rates--2021
Annual Review and Revisions to Methodology (86 FR 14184, 14190).
<bullet> The maximum number is the figure from the staffing model
plus three, as recommended by the GLPAC in 2023 and as established by
the Great Lakes Pilotage Rates--2025 Annual Review (89 FR 100810,
100815).
The minimum, maximum, and proposed number of Pilots for each
District are as follows:
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More details on projected staffing levels can be found for
Districts One, Two, and Three in tables 6, 17, and 28, respectively.
Determining the Number of Apprentice Pilots
The number of authorized Apprentice Pilots is based on direct input
from the pilotage associations, who identify future staffing needs
considering anticipated retirements and other factors.
[[Page 59719]]
D. Step 4: Determine Target Pilot Compensation Benchmark and Apprentice
Pilot Wage Benchmark
In Step 4 of the ratemaking calculation, we determine the number of
Pilots provided by the pilot associations (see Sec. 404.103) and use
that figure to determine how many Pilots need to be compensated via the
pilotage fees collected.
This step establishes the target Pilot compensation for the number
of Pilots required in each district, as determined in Step 3. We
calculate an individual compensation benchmark and then use it to
determine the total compensation for all Pilots and Apprentice Pilots
in a district.
Calculating the 2027 Individual Target Pilot Compensation
In accordance with Sec. 404.104(a), the calculation for the 2027
individual target Pilot compensation benchmark starts with the 2026
benchmark of $481,642 and involves two key inflation adjustments:
1. Adjustment for 2026 Inflation: We adjust the 2026 benchmark
to account for the difference between last year's projected
inflation and the actual inflation numbers. The initial 2026 PCE
inflation projection was 2.4 percent, but the Employment Cost Index
(ECI) inflation for Q1 2026 was 3.4 percent. Applying this 1.0
percent difference to the 2026 benchmark results in an updated value
of $486,458.
2. Adjustment for 2027 Projected Inflation: Next, we apply the
projected inflation for 2027, which is 2.1 percent. This increases
the individual target Pilot compensation to $496,674 per Pilot for
2027.
Calculating Total Target Pilot Compensation and Apprentice Pilot Wages
The individual target Pilot compensation of $496,674 is used to
calculate the total target Pilot compensation for each of the three
districts by multiplying it by the number of Pilots needed in each area
and district, as shown for Districts One, Two, and Three in tables 7,
18, and 29, respectively.
From this individual target Pilot compensation, the wage benchmark
for Apprentice Pilots is set at 36 percent of a Pilot's target
compensation, amounting to $178,803 for 2027. The target Apprentice
Pilot compensation of $178,803 is used to calculate the total target
Apprentice Pilot compensation for each of the three districts by
multiplying it by the number of Apprentice Pilots needed for each
district, as shown for Districts One, Two, and Three in tables 7, 18,
and 29, respectively. The Total Target Apprentice Pilot Compensation is
apportioned to each area using the same percentage as the Step 1
operating expenses for each District. For Districts One and Two, the
allocation is 60 percent for the designated area and 40 percent for the
undesignated area. For District Three, the allocation is 22 percent for
the designated area, 78 percent for the undesignated areas (53 percent
for Area 6, and 25 percent for Area 8).
E. Step 5: Project Needed Revenue
In this step, we determine the total revenue required to cover all
projected operating expenses. For each area and pilotage district, we
sum the projected operating expenses from Step 2, the total target
Pilot compensation, and total target Apprentice Pilot wage from Step 4.
The resulting figure is the ``needed revenue'' for that district.
Specific calculations for each district are detailed for Districts One,
Two, and Three in tables 8, 19, and 30, respectively.
F. Step 6: Calculate Initial Base Rates
Next, we establish an initial hourly rate to meet the needed
revenue. First, we calculate the 10-year average of traffic using the
total time on task or Pilot bridge hours for each district. As noted
previously in this preamble, we propose to continue to include the
Straits of Mackinac bridge hours in the undesignated average bridge
hours in District Three. Then, we divide the needed revenue from Step 5
by the average bridge hours. This calculation provides an initial base
rate for pilotage services. The bridge hour data and rate calculations
for Districts One, Two, and Three are available in tables 9 and 10; 20
and 21; and 31 and 32, respectively.
G. Step 7: Calculate Average Weighting Factors by Area
In this step, we calculate the average weighting factor for each
district's designated and undesignated area. Using the weighting factor
reports from SeaPro, we calculate the average weighting factor for each
area using the data from each vessel transit in Districts One, Two, and
Three over a 10- year period (2016 through 2025), as shown in tables 11
and 12; 22 and 23; and 33 and 34, respectively.
H. Step 8: Calculate Revised Base Rates
In this step, the Director adjusts the initial base rates to
account for the revenue generated by weighting factors. The Director
divides the initial pilotage rate for each area from Step 6 by the
corresponding average weighting factor from Step 7. This calculation
produces a revised, unadjusted base rate, as shown in tables 13, 24,
and 35 for Districts One, Two, and Three, respectively.
I. Step 9: Review and Finalize Rates
Finally, per Sec. 404.109, the Director reviews the revised rates
to ensure they align with the goals of the Great Lakes Pilotage Act.
The Director considers whether the rates adequately support a
sufficient number of Pilots to handle peak traffic periods and cover
all reasonable costs. Based on these considerations, the Director makes
no alterations to the rates in this step. We propose modifying Sec.
401.405(a)(1) through (6) to reflect the final rates shown for
Districts One, Two, and Three in tables 14, 25, and 36, respectively,
of Section VII. Tables Showing Calculations by District portion of this
preamble.
VII. Tables Showing Calculations by District
A. District One
BILLING CODE 9110-04-P
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In the 2026 final rule, the Coast Guard published a figure of 6,232
hours as the total 2024 designated hours, and a figure of 8,075 as the
total 2024 undesignated hours for District One. Since that publication,
the Coast Guard received a revised figure of 6,271 designated hours and
8,099 undesignated hours through the 2024 Revenue Report for District
One provided by CohnReznick.
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B. District Two
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In the 2026 final rule, the Coast Guard published a figure of 5,809
hours as the total 2024 undesignated hours and a figure of 8,308 as the
total 2024 designated hours for District Two.\22\ Since that
publication, the Coast Guard received a revised figure of 5,820
undesignated hours and 8,437 designated hours through the 2024 Revenue
Report for District Two provided by CohnReznick.
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\22\ See p.7133, 91 FR 7121.
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C. District Three
[[Page 59735]]
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Bridge hours attributable to the designated Straits of Mackinac are
included in the undesignated waters average bridge hours. In the 2026
final rule, the Coast Guard published a figure of 26,359 hours as the
total 2024 undesignated hours and a figure of 3,437 as the total 2024
designated hours for District Three.\23\ Since that publication, the
Coast Guard received a revised figure of 27,506 undesignated hours and
3,444 designated hours through the 2024 Revenue Report for District
Three provided by CohnReznick.
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\23\ See p.7137, 91 FR 7121.
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BILLING CODE 9110-04-C
[[Page 59744]]
VIII. Regulatory Analyses
We developed this proposed rule after considering numerous statutes
and Executive orders related to rulemaking. A summary of our analyses
based on these statutes and Executive Orders follows.
A. Regulatory Planning and Review
Executive Orders 12866 (Regulatory Planning and Review) and 13563
(Improving Regulation and Regulatory Review) direct agencies to assess
the costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits. Executive Order 13563 emphasizes the importance of
quantifying costs and benefits, of reducing costs, of harmonizing
rules, and of promoting flexibility. Executive Order 14192 (Unleashing
Prosperity Through Deregulation) directs agencies to significantly
reduce the private expenditures required to comply with Federal
regulations and provides that ``any new incremental costs associated
with new regulations shall, to the extent permitted by law, be offset
by the elimination of existing costs associated with at least 10 prior
regulations.''
The Office of Management and Budget (OMB) has not designated this
proposed rule a ``significant regulatory action,'' under section 3(f)
of Executive Order 12866. Accordingly, OMB has not reviewed it.
Two additional Executive orders promote the goals of Executive
Order 13563: Executive Order 13609 (Promoting International Regulatory
Cooperation) and Executive Order 13610 (Identifying and Reducing
Regulatory Burdens). Executive Order 13609 targets international
regulatory cooperation to reduce, eliminate, or prevent unnecessary
differences in regulatory requirements. Executive Order 13610 aims to
modernize the regulatory systems and to reduce unjustified regulatory
burdens and costs on the public.
A regulatory analysis (RA) follows.
The purpose of this proposed rule is to conduct a full ratemaking
to designate the Straits of Mackinac and issue new pilotage rates for
the 2027 shipping season. For this proposed rule, the Coast Guard
estimates an increase in costs of approximately $3.98 million to
industry. This is an approximately 10-percent increase due to the
change in revenue needed in 2027 compared to the revenue needed in
2026, as shown in table 37. The biggest driver of the overall increase
is an increase of four Pilots and one Apprentice compared to the 2026
season, which drives a total of 53 percent of the increase. The rest of
the overall rate increase is driven by changes to inflation and vessel
traffic which are equally 23 percent of the overall increase.
[[Page 59745]]
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The Coast Guard is required to review and adjust pilotage rates on
the Great Lakes annually. See Section II. Basis and Purpose of this
preamble for detailed discussions of the legal basis and purpose for
this proposed rulemaking. Based on our annual review for this proposed
rulemaking, we propose adjusting the pilotage rates for the 2027
shipping season to generate sufficient revenues for each district to
reimburse its necessary and reasonable operating expenses and fairly
compensate trained and rested Pilots. The result would be an increase
in rates for all areas in Districts One, Two, and Three. These changes
would also lead to a net increase in the cost of service to shippers.
The change in per unit cost to each individual shipper would be
dependent on their area of operation.
A detailed discussion of our economic impact analysis follows.
Affected Population
This proposed rule would affect Pilots and Apprentice Pilots, the
three pilotage associations, and the owners and operators of 247
oceangoing vessels that transit the Great Lakes annually, on average,
from 2023 through 2025. We estimate that there would be 61 Pilots and 8
Apprentice Pilots during the 2027 shipping season. The shippers that
would be affected by these rate changes are those owners and operators
of domestic vessels operating ``on register''
[[Page 59746]]
(engaged in foreign trade) and owners and operators of non-Canadian
foreign vessels on routes within the Great Lakes system. These owners
and operators must have Pilots or pilotage service as required by 46
U.S.C. 9302. There is no minimum tonnage limit or exemption for these
vessels. The statute applies only to commercial vessels and not to
recreational vessels. United States-flagged vessels not operating on
register, and Canadian ``lakers,'' which account for most commercial
shipping on the Great Lakes, are not required by 46 U.S.C. 9302 to have
Pilots. However, these United States- and Canadian-flagged lakers may
voluntarily choose to engage a Pilot. Vessels that are U.S.-flagged may
opt to have a Pilot for varying reasons, such as unfamiliarity with
designated waters and ports or for insurance purposes.
The Coast Guard used billing information from the years 2023
through 2025 from SeaPro to estimate the average annual number of
vessels that would be affected by the proposed rate adjustment. SeaPro
tracks data related to managing and coordinating the dispatch of Pilots
on the Great Lakes and billing in accordance with the services. As
described in the ratemaking methodology, we use a 10-year average to
estimate the traffic for the rate. We used 3 years of the most recent
billing data to estimate the affected population. Using 3 years of
billing data is a better representation of the vessel population that
is currently using pilotage services and impacted by this proposed
rule. We found that 392 unique vessels used pilotage services during
the years 2023 through 2025. That is, these vessels had a U.S.
registered Pilot dispatched to the vessel and billing information was
recorded in SeaPro. Of these vessels, 376 were foreign-flagged vessels
and 16 were U.S.-flagged vessels. Again, U.S.-flagged vessels not
operating on register are not required to have a Pilot, per 46 U.S.C.
9302, but they can voluntarily choose to have one. Any such vessels
that voluntarily choose to have a Pilot are accounted for in the
methodology.
Numerous factors affect vessel traffic, which varies from year to
year. Therefore, rather than using the total number of vessels over the
time period, the Coast Guard took an average of the unique vessels
using pilotage services from the years 2023 through 2025 as the best
representation of vessels estimated to be affected by the rates in this
proposed rule. From 2023 through 2025, an average of 247 vessels used
pilotage services annually.\24\ On average, 240 of these vessels were
foreign-flagged, and 7 were U.S.-flagged vessels that voluntarily opted
into the pilotage service (these figures are rounded averages).
---------------------------------------------------------------------------
\24\ Some vessels entered the Great Lakes multiple times in a
single year, affecting the average number of unique vessels using
pilotage services in any given year.
---------------------------------------------------------------------------
Total Cost to Shippers
The proposed rate changes resulting from this adjustment to the
rates result in a net increase in the cost of service to shippers.
However, the change in per unit cost to each individual shipper would
be dependent on their area of operation.
The Coast Guard estimates the effect of the proposed rate changes
on shippers by comparing the total projected revenues needed to cover
costs in 2026 with the total projected revenues needed to cover costs
in 2027. We set pilotage rates, so pilotage associations receive enough
revenue to cover their necessary and reasonable expenses. Shippers pay
these rates when they engage a Pilot as required by 46 U.S.C. 9302.
Therefore, the aggregate payments of shippers to pilotage associations
are equal to the projected necessary revenues for pilotage
associations. The revenues each year represent the total costs that
shippers must pay for pilotage services. The change in revenue from the
previous year is the additional cost to shippers discussed in this
proposed rule.
The impacts of the rate changes on shippers are estimated from the
district pilotage projected revenues (shown in tables 8, 19, and 30 of
this preamble). The Coast Guard estimates that, for the 2027 shipping
season, the projected revenue needed for all three districts is
$44,428,413.
To estimate the change in cost to shippers from this proposed rule,
the Coast Guard compared the 2027 total projected revenues to the 2026
projected revenues. Because we review and prescribe rates for Great
Lakes pilotage annually, the effects are estimated as a single-year
cost rather than annualized over a 10-year period. In the 2026 final
rule, we estimated the total projected revenue needed for 2026 as
$40,451,209.\25\ This is the best approximation of 2026 revenues
because, at the time of publication of this proposed rule, the Coast
Guard does not have enough audited data available for the 2026 shipping
season to revise these projections. Table 38 shows the revenue
projections for 2026 and 2027. The cost changes to shippers are
detailed by area and district as a result of the proposed rate changes
in traffic in Districts One, Two, and Three.
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\25\ 91 FR 7121, see table 37, p.7142. <a href="https://www.govinfo.gov/content/pkg/FR-2026-02-17/pdf/2026-03054.pdf">https://www.govinfo.gov/content/pkg/FR-2026-02-17/pdf/2026-03054.pdf</a>; accessed 06/09/2026.
[GRAPHIC] [TIFF OMITTED] TP21SE26.047
[[Page 59747]]
The resulting difference between the projected revenue in 2026 and
the projected revenue in 2027 is the annual change in payments from
shippers to Pilots as a result of this proposed rule's rate changes.
The effect of the rate changes on shippers would vary by area and
district. The proposed rate changes lead to affected shippers operating
in District One experiencing an increase in payments of $1,029,896 over
2026. District Two and District Three would experience an increase in
payments of $652,734 and $2,294,574, respectively, when compared with
2026. The overall adjustment in payments would be an increase in
payments by shippers of $3,977,204 across all three districts (a 10-
percent increase when compared with 2026). Again, because the Coast
Guard reviews and sets rates for Great Lakes pilotage annually, we
estimate the impacts as single-year costs rather than annualizing them
over a 10-year period.
Table 39 shows the difference in revenue by revenue-component from
2026 to 2027 and presents each revenue-component as a percentage of the
total revenue needed. In both 2026 and 2027, the largest revenue-
component was pilotage compensation (68 percent of total revenue needed
in 2026 and 68 percent of total revenue needed in 2027), followed by
operating expenses (29 percent of total revenue needed in 2026 and 29
percent of total revenue needed in 2027).
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We estimate that there would be a total increase in revenue needed
by the pilotage associations of $3,977,204. This represents an increase
in revenue needed for total target Pilot compensation of $2,843,520, an
increase in revenue needed for total target Apprentice Pilot wage
benchmark of $216,687, and an increase in the revenue needed for
adjusted operating expenses of $916,997.
The change in revenue needed for target Pilot compensation,
$2,843,520, is due to three factors: (1) The changes to adjust 2026
pilotage compensation to account for the difference between actual ECI
inflation \26\ (3.4 percent) and predicted PCE inflation \27\ (2.4
percent) for 2026; (2) projected inflation of pilotage compensation in
Step 2 of the methodology, using predicted inflation \28\ (2.1 percent)
through 2027; and (3) an increase of 4 Pilots compared to 2026.
---------------------------------------------------------------------------
\26\ BLS, ``Table 5. Compensation (not seasonally adjusted):
Employment Cost Index for total compensation, for private industry
workers, by occupational group and industry--2026 Q1 Results,''
<a href="https://www.bls.gov/news.release/eci.t05.htm">https://www.bls.gov/news.release/eci.t05.htm</a>; accessed 06/03/2026.
\27\ 3.4 percent was the latest figure available for the 2026
final rule. FOMC, ``Summary of Economic Projections, Median Core PCE
Inflation June Projection'' September 17, 2025, <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250917.pdf">https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20250917.pdf</a>; accessed 06/09/2026.
\28\ FOMC, ``Summary of Economic Projections, Median Core PCE
Inflation December Projection'' March 18,2026, <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20260318.pdf">https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20260318.pdf</a>.; accessed 06/09/2026.
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The target Pilot compensation would be $496,674 per Pilot in 2027,
compared to $481,642 in 2026. The proposed changes to modify the 2026
target Pilot compensation to account for the difference between
predicted and actual inflation would increase the target Pilot
compensation value by 1 percent for 2027. As shown in table 40, this
inflation adjustment would increase total Pilot compensation by $4,816
per Pilot, and the total revenue needed by $293,802 when accounting for
all 61 Pilots.
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Similarly, table 41 shows the impact of the difference between
predicted and actual inflation on the target Apprentice Pilot
compensation benchmark. The inflation adjustment increases the target
Apprentice Pilot compensation benchmark by $1,734 per Apprentice Pilot,
and the total revenue needed by $13,871 when accounting for all 8
Apprentice Pilots.
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Another increase, $582,288, would be the result of increasing
compensation for the 57 Pilots predicted for the 2026 season to account
for future inflation of 2.1 percent in 2027. This would increase total
compensation by $10,216 per Pilot when accounting for all 57 Pilots in
the 2026 final rule, as shown in table 42.
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Similarly, an increase of $25,746 would be the result of increasing
compensation for the 7 Apprentice Pilots predicted for 2026 season to
account for future inflation of 2.1 percent in 2027. This would
increase total compensation by $3,678 per Apprentice Pilot when
accounting for the 7 Apprentice Pilots in the 2026 final rule, as shown
in table 43.
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As noted earlier, the Coast Guard predicts that 61 Pilots would be
needed for the 2027 season. This would be an increase of 4 Pilots
compared to the 2026 season. The difference reflects an increase of 1
Pilot in District One and 3 Pilots in District Three.
Table 44 shows the increase of $1,967,430 in revenue needed solely
for Pilot compensation. As noted previously, to avoid double counting,
this value excludes the change in revenue resulting from the change to
adjust 2026 pilotage compensation to account for the difference between
actual and predicted inflation.
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Similarly, the Coast Guard predicts that 8 Apprentice Pilots would
be needed for the 2027 season. This would be an increase of 1
Apprentice Pilot from the 2026 season. The difference reflects an
increase of 1 Apprentice Pilot for District Three.
Table 45 shows the increase of $177,069 in revenue needed solely
for Apprentice Pilot compensation. As noted previously, to avoid double
counting, this value excludes the change in revenue resulting from the
change to adjust 2026 Apprentice Pilotage compensation to account for
the difference between actual and predicted inflation.
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Table 46 presents the percentage change in revenue by area and
revenue-component, excluding surcharges, as they are applied at the
district level.\29\
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\29\ The 2026 projected revenues are from, tables 7, 18, and 29
of the 2026 final rule. The 2027 projected revenues are from tables
8, 19, and 30 of this proposed rule.
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BILLING CODE 9110-04-P
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BILLING CODE 9110-04-C
Benefits
This proposed rule allows the Coast Guard to meet the requirements
in 46 U.S.C. 9303 to review the rates for pilotage services on the
Great Lakes. The rate changes promote safe, efficient, and reliable
pilotage service on the Great Lakes by ensuring that rates cover an
association's operating expenses and by providing fair compensation,
adequate training, and sufficient rest periods for Pilots. The rate
changes also help recruit and retain Pilots, which ensures a sufficient
number of Pilots to meet peak shipping demand, helping to reduce delays
caused by Pilot shortages.
[[Page 59752]]
Maintaining safe, efficient, and reliable pilotage service also
facilitates commerce throughout the Great Lakes region.
In addition, this proposed rule provides clarity on how the
ratemaking applies to the Straits of Mackinac, as designated in the
2026 NDAA. Shippers would have a better understanding of what rates
apply and what would be expected of a Pilot when transiting the Straits
of Mackinac, which further facilitates commerce throughout the Great
Lakes region.
B. Small Entities
Under the Regulatory Flexibility Act, 5 U.S.C. 601-612, 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 people.
For the proposed rule, the Coast Guard reviewed recent company size
and ownership data for the vessels identified in SeaPro, and business
revenue and size data provided by publicly available sources, such as
Data Axle Reference Solutions and Manta.\30\ As described in Section
VI. Regulatory Planning and Review, subsection A, of this preamble, we
found that 392 unique vessels used pilotage services during the years
2023 through 2025. These vessels are owned by 59 entities, of which 44
are foreign entities that operate primarily outside the United States,
and the remaining 15 entities are U.S. entities. We compared the
revenue and employee data found in the company search to the Small
Business Administration's (SBA) small business threshold as defined in
the SBA's ``Table of Size Standards'' for small businesses to determine
how many of these companies are considered small entities.\31\
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\30\ See <a href="https://referencesolutions.data-axle.com">https://referencesolutions.data-axle.com</a>; accessed 05/
22/2026. See <a href="https://www.manta.com">https://www.manta.com</a>; accessed 06/17/2026.
\31\ See <a href="https://www.sba.gov/document/support-table-size-standards">https://www.sba.gov/document/support-table-size-standards</a>; accessed 06/22/2026. SBA has established a ``Table of
Size Standards'' for small businesses that sets small business size
standards by NAICS code. A size standard, which is usually stated in
number of employees or average annual receipts (``revenues''),
represents the largest size that a business (including its
subsidiaries and affiliates) may be in order to remain classified as
a small business for SBA and Federal contracting programs.
---------------------------------------------------------------------------
In addition to the owners and operators discussed previously, the
three pilotage associations that provide and manage pilotage services
within the Great Lakes districts would be affected by this proposed
rule. District One's SLSPA uses the North American Industry
Classification System (NAICS) code ``Inland Water Freight
Transportation,'' with a small-entity size standard of 1,050 employees.
District Two's LPA uses the NAICS code, ``Business Associations,'' with
a small-entity size standard of $15,500,000 in revenue. District
Three's WGLPA did not have a registered NAICS code through Data Axle
Reference Solutions Resources. All three associations are considered
small entities by SBA size standards.
Table 47 shows the NAICS codes of the U.S. entities and the
pilotage associations, and the respective small entity standard size
established by the SBA.
BILLING CODE 9110-04-P
[GRAPHIC] [TIFF OMITTED] TP21SE26.056
BILLING CODE 9110-04-C
Of the 15 U.S. entities, 5 exceed the SBA's small business
standards for small entities. To estimate the potential impact on the
10 small entities, the Coast Guard increased their 2025 pilotage costs
to account for the changes in pilotage rates for each district
resulting from this proposed rule and the 2026 final rule. In past
rules, we applied the average change in the rate (9.8 percent for this
year), but for this proposed rule, we applied the change in the rate
within each area to better capture the impacts where the rates may
[[Page 59753]]
increase for some areas but decrease for others. For example, for a
hypothetical trip in the designated area of District One which had a
total cost of $5,000 when the rate was $986, we estimate that the 2026
cost would be approximately $4,959 when the rate decreased to $978
($4,959 = [(((978-986) / 986) x 5,000) + $5,000]), and that the 2027
cost would be approximately $5,081, with a proposed rate of $1,002
($5,081 = [(((1,002-978) / 978) x 4,959) + $4,959]). To assign what
rate would have been charged, we took the listed area for that trip
(listed as Lake, River, DES, UNDES, Harbor Move, or Harbor Move In
River) and assumed that all but Lake and UNDES were charged at the
designated rate.
We then estimated the change in cost to these entities resulting
from this proposed rule by subtracting their estimated 2027 pilotage
costs from their estimated 2026 pilotage costs and found the average
impact to small firms would be approximately $28,194, with a range of
$528 to $86,079. We then compared the estimated change in pilotage
costs between 2026 and 2027 with each firm's annual revenue, where
revenue is known. The estimated impact on revenues ranges from 0.2
percent to 1.14 percent. One entity would experience an impact greater
than 1 percent.
Finally, the Coast Guard did not find any small not-for-profit
organizations that are independently owned and operated and are not
dominant in their fields that would be impacted by this proposed rule.
We also did not find any small governmental jurisdictions with
populations of fewer than 50,000 people that would be impacted by this
proposed rule. Based on this analysis, we conclude this proposed
rulemaking would not affect a substantial number of small entities, nor
have a significant economic impact on any of the affected entities.
Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that
this proposed rule would not have a significant economic impact on a
substantial number of small entities. If you think that your business,
organization, or governmental jurisdiction qualifies as a small entity
and that this proposed rule would have a significant economic impact on
it, please submit a comment to the docket at the address listed in the
ADDRESSES section of this preamble. In your comment, explain why you
think it qualifies and how and to what degree this proposed rule would
economically affect it.
C. Assistance for Small Entities
Under section 213(a) of the Small Business Regulatory Enforcement
Fairness Act of 1996, Public Law 104-121, we want to assist small
entities in understanding this proposed rule so that they can better
evaluate its effects on them and participate in the rulemaking. If the
proposed rule would affect your small business, organization, or
governmental jurisdiction and you have questions concerning its
provisions or options for compliance, please call or email the person
in the FOR FURTHER INFORMATION CONTACT section of this proposed rule.
The Coast Guard will not retaliate against small entities that question
or complain about this proposed rule or any policy or action of the
Coast Guard.
Small businesses may send comments on the actions of Federal
employees who enforce, or otherwise determine compliance with, Federal
regulations to the Small Business and Agriculture Regulatory
Enforcement Ombudsman and the Regional Small Business Regulatory
Fairness Boards. The Ombudsman evaluates these actions annually and
rates each agency's responsiveness to small business. If you wish to
comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR
(1-888-734-3247).
D. Collection of Information
This proposed rule would call for no new collection of information
under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501-3520, nor
would it alter an existing collection of information.
E. Federalism
A rule has implications for federalism under Executive Order 13132
(Federalism) if it has a substantial direct effect on States, on the
relationship between the National Government and the States, or on the
distribution of power and responsibilities among the various levels of
government. We have analyzed this proposed rule under Executive Order
13132 and have determined that it is consistent with the fundamental
federalism principles and preemption requirements described in
Executive Order 13132. Our analysis follows.
Congress directed the Coast Guard to establish ``rates and charges
for pilotage services'' (46 U.S.C. 9303(f)). This regulation is issued
pursuant to that statute and is preemptive of State law as specified in
46 U.S.C. 9306. Under 46 U.S.C. 9306, a ``State or political
subdivision of a State may not regulate or impose any requirement on
pilotage on the Great Lakes.'' As a result, States or local governments
are expressly prohibited from regulating within this category.
Therefore, this proposed rule is consistent with the fundamental
federalism principles and preemption requirements described in
Executive Order 13132.
While it is well settled that States may not regulate in categories
in which Congress intended the Coast Guard to be the sole source of a
vessel's obligations, the Coast Guard recognizes the key role that
State and local governments may have in making regulatory
determinations. Additionally, for rules with federalism implications
and preemptive effect, Executive Order 13132 specifically directs
agencies to consult with State and local governments during the
rulemaking process. If you believe this proposed rule would have
implications for federalism under Executive Order 13132, please call or
email the person listed in the FOR FURTHER INFORMATION CONTACT section
of this preamble.
F. Unfunded Mandates
The Unfunded Mandates Reform Act of 1995, 2 U.S.C. 1531-1538,
requires Federal agencies to assess the effects of their discretionary
regulatory actions. In particular, the Act addresses actions that may
result in the expenditure by a State, local, or tribal government, in
the aggregate, or by the private sector of $100 million (adjusted for
inflation) or more in any 1 year. Although this proposed rule would not
result in such an expenditure, we do discuss the potential effects of
this proposed rule elsewhere in this preamble.
G. Taking of Private Property
This proposed rule would not cause a taking of private property or
otherwise have taking implications under Executive Order 12630
(Governmental Actions and Interference with Constitutionally Protected
Property Rights).
H. Civil Justice Reform
This proposed rule meets applicable standards in sections 3(a) and
3(b)(2) of Executive Order 12988, (Civil Justice Reform), to minimize
litigation, eliminate ambiguity, and reduce burden.
I. Protection of Children
We have analyzed this proposed rule under Executive Order 13045
(Protection of Children from Environmental Health Risks and Safety
Risks). This proposed rule is not an economically significant rule and
would not create an environmental risk to health or risk to safety that
might disproportionately affect children.
[[Page 59754]]
J. Indian Tribal Governments
This proposed rule does not have tribal implications under
Executive Order 13175 (Consultation and Coordination with Indian Tribal
Governments) because it would not have a substantial direct effect on
one or more Indian tribes, on the relationship between the Federal
Government and Indian tribes, or on the distribution of power and
responsibilities between the Federal Government and Indian tribes.
K. Energy Effects
We have analyzed this proposed rule under Executive Order 13211
(Actions Concerning Regulations That Significantly Affect Energy
Supply, Distribution, or Use). We have determined that it is not a
``significant energy action'' under that order because it is not a
``significant regulatory action'' under Executive Order 12866 and is
not likely to have a significant adverse effect on the supply,
distribution, or use of energy.
L. Technical Standards
The National Technology Transfer and Advancement Act, codified as a
note to 15 U.S.C. 272, directs agencies to use voluntary consensus
standards in their regulatory activities unless the agency provides
Congress, through OMB, with an explanation of why using these standards
would be inconsistent with applicable law or otherwise impractical.
Voluntary consensus standards are technical standards (for example,
specifications of materials, performance, design, or operation; test
methods; sampling procedures; and related management systems practices)
that are developed or adopted by voluntary consensus standards bodies.
This proposed rule does not use technical standards. Therefore, we
did not consider the use of voluntary consensus standards.
M. Environment
We have analyzed this proposed rule under Department of Homeland
Security (DHS) Management Directive 023-01, Rev. 1, associated
implementing instructions, and Environmental Planning COMDTINST 5090.1
(series), which guide the Coast Guard in complying with the National
Environmental Policy Act of 1969 (42 U.S.C. 4321-4370f), and have made
a preliminary determination this action is not likely to have a
significant effect on the human environment. A preliminary Record of
Environmental Consideration supporting this determination is available
in the docket. For instructions on locating the docket, see the
ADDRESSES section of this preamble. This proposed rule would be
categorically excluded under paragraph A3 and L54 of Appendix A, Table
1 of DHS Instruction Manual 023-01-001-01, Rev. 1. Paragraph A3
pertains to the promulgation of rules of the following nature: (a)
those of a strictly administrative or procedural nature; (b) those that
implement, without substantive change, statutory or regulatory
requirements; (c) those that implement, without substantive change,
procedures, manuals, and other guidance documents; (d) those that
interpret or amend an existing regulation without changing its
environmental effect; (e) those that provide technical guidance on
safety and security matters; and (f) those that provide guidance for
the preparation of security plans. Paragraph L54 pertains to
regulations which are editorial or procedural. This proposed rule
involves setting or adjusting the pilotage rates for the 2027 shipping
season to account for changes in district operating expenses, changes
in the number of Pilots, and anticipated inflation. All these changes
are consistent with the Coast Guard's maritime safety missions. We seek
any comments or information that may lead to the discovery of a
significant environmental impact from this proposed rule.
IX. Public Participation and Request for Comments
The Coast Guard views public participation as essential to
effective rulemaking and will consider all comments and material
received during the comment period. Your comment can help shape the
outcome of this proposed rulemaking. If you submit a comment, please
include the docket number for this proposed rulemaking, indicate the
specific section of this document to which each comment applies, and
provide a reason for each suggestion or recommendation.
Submitting comments. We encourage you to submit comments at
<a href="http://www.regulations.gov">www.regulations.gov</a>. To do so, go to <a href="https://www.regulations.gov">https://www.regulations.gov</a>, type
USCG-2026-0049 in the search box and click ``Search.'' Next, look for
this document in the Search Results column, and click on it. Then click
on the Comment option. If you cannot submit your material by using
<a href="http://www.regulations.gov">www.regulations.gov</a>, call or email the person in the FOR FURTHER
INFORMATION CONTACT section of this proposed rule for alternate
instructions. We review all comments received.
Viewing material in docket. To view documents mentioned in this
proposed rule as being available in the docket, find the docket as
described in the previous paragraph, and then select ``Supporting &
Related Material'' in the Document Type column. Public comments will
also be placed in our online docket and can be viewed by following the
instructions on the Frequently Asked Questions web page, available at
<a href="http://www.regulations.gov/faq">www.regulations.gov/faq</a>. That page also explains how to subscribe for
email alerts that will notify you when comments are posted or if a
final rule is published.
Personal information. We accept anonymous comments. Comments we
post to <a href="http://www.regulations.gov">www.regulations.gov</a> will include any personal information you
have provided. For more about privacy and submissions to the docket in
response to this document, see DHS's eRulemaking System of Records
notice (85 FR 14226, March 11, 2020).
Public meeting. We do not plan to hold a public meeting, but we
will consider doing so if we determine from public comments that a
meeting would be helpful. We would issue a separate Federal Register
notice to announce the date, time, and location of such a meeting.
List of Subjects
46 CFR Part 401
Administrative practice and procedure, Great Lakes, Navigation
(water), Penalties, Reporting and recordkeeping requirements, Seamen.
46 CFR Part 404
Great Lakes, Navigation (water), Seamen.
For the reasons discussed in the preamble, the Coast Guard proposes
to amend 46 CFR parts 401 and 404 as follows:
PART 401--GREAT LAKES PILOTAGE REGULATIONS
0
1. The authority citation for part 401 continues to read as follows:
Authority: 46 U.S.C. 2103, 2104(a), 6101, 7701, 8105, 9303,
9304; DHS Delegation No. 00170.1, Revision No. 01.4.
0
2. Amend Sec. 401.405 by revising paragraphs (a)(1) through (6) to
read as follows:
Sec. 401.405 Pilotage rates and charges.
(a) * * *
(1) The St. Lawrence River is $1,002;
(2) Lake America is $678;
(3) Lake Erie is $585;
(4) The navigable waters from Southeast Shoal to Port Huron, MI are
$692;
(5) Lakes Huron, Michigan, and Superior; and the Straits of
Mackinac are $445; and
[[Page 59755]]
(6) The St. Marys River is $889.
* * * * *
PART 404--GREAT LAKES PILOTAGE RATEMAKING
0
3. The authority citation for part 404 continues to read as follows:
Authority: 46 U.S.C. 2103, 2104(a), 9303, 9304; DHS Delegation
No. 00170.1, Revision No. 01.4.
0
4. Amend Sec. 404.106 by adding the following text after the first
sentence: ``For District Three, the Straits of Mackinac bridge hours
are included with the undesignated waters average hours.''
Dated: September 16, 2026.
Robert C. Compher,
Rear Admiral, U.S. Coast Guard, Assistant Commandant for Prevention
Policy.
[FR Doc. 2026-19254 Filed 9-18-26; 8:45 am]
BILLING CODE 9110-04-P
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