Regulations (Preambles to Final Rules) - Table of Contents|
| Record Type:||Longshoring and Marine Terminals|
| Title:||Section 6 - VI. Summary of the Final Economic Analysis and Regulatory Flexibility Analysis|
VI. Summary of the Final Economic Analysis and Regulatory Flexibility Analysis
As required by Executive Order 12866, OSHA has prepared an economic analysis of the final standards for longshoring and marine terminals. Neither standard is a "significant" rule under that Executive Order nor a "major" rule under the Small Business Regulatory Enforcement Fairness Act. In addition, as required by the Regulatory Flexibility Act of 1980 (as amended in 1996), the Agency has assessed the potential impacts of these two marine cargo-handling rules on small entities and has determined that they will not have a significant economic impact on a substantial number of small entities. Because this standard does not impose annual costs of $100 million or more, will not significantly affect small governments, and is not a significant federal intergovernmental mandate, the Agency has no obligations to conduct analyses of these rules under the Unfunded Mandates Reform Act.
This section of the Preamble presents a summary of the Economic Analysis and the screening analysis for small-business impacts. The entire analysis has been placed in the rulemaking docket for the two final standards.
The purpose of this Final Economic Analysis is to:
These standards affect employers and employees in many industries. The Marine Cargo Handling industry, classified as SIC 4491 in the Standard Industrial Classification Manual, is the industry most directly affected. SIC 4491 is composed of both stevedores and marine terminal operators, both businesses that are exclusively engaged in marine cargo handling. Marine cargo handling activities in other industries are also impacted: for example, manufacturers who load or unload raw materials or finished products from vessels and electric utilities than unload coal from barges also fall within the scope of the revised final standards.
A. Evaluation of Risks and Estimation of Benefits
The transport of marine cargo has changed significantly since OSHA's Longshoring Standard was adopted in the early 1970s and even since the Marine Terminals Standard was revised in the early 1980s. Low-cost transport of cargo by standardized intermodal containers (referred to simply as containers hereafter) has become the dominant mode of shipping manufactured goods. To transport vehicles, specialized "roll on/roll off" vessels have been developed. Freighters have therefore been designed with efficient container transfer and ease of intermodal movement as the dominant criteria. Shipment by intermodal container has replaced shipment of "break bulk" cargo which came in many sizes and modes. As a result, cargo handling has become a more capital intensive and mechanized industry in the past 20 years. For example, although the weight of transported cargo (U.S. exports and imports) has remained roughly constant between 1980 and 1990, the amount shipped via intermodal containers has more than doubled. Over the same period, employment in SIC 4491 has declined from about 88,000 to 55,000.
The change in the technology of cargo transport has altered the risks that employees face on the docks and aboard ships. Although mechanization has reduced injuries due to overexertion and lifting, new risks have arisen, such as falls from containers stacked as high as 60 feet and being struck by forklifts or "fifth wheeler" tractor trailers moving containers.
Because the final standard requires longshore employers to load and unload containers secured to each other with positive container securing devices, e.g., semi-automatic twist locks, where feasible, the shipping industry is also potentially affected, since ship owners must purchase these container connectors. The standards' effect on the U.S. shipping industry and international trade (and foreign shippers) is discussed below.
The Bureau of Labor Statistics 1992 injury rate for SIC 449 (Service Incidental to Water Transportation) was 14.0 for every 100 FTE workers, based on a 2000 hour work-year, compared with 8.9 for all of private industry ("Occupational Injuries and Illnesses: Counts, Rates, and Characteristics, 1992," published May 1995). The lost workday and non-lost workday injury rates per 100 FTE workers in SIC 449 were each 7.0. The median number of lost workdays due to injury in SIC 449 was 15 per case as compared to 6 for all of the manufacturing sector. For SIC 4491, the average number of lost workdays was 38.9 lost workdays per lost workday injury. These statistics clearly indicate that marine cargo handling continues to be a highly hazardous industry.
An estimated 7,593 injuries and 18 fatalities occur annually during all marine cargo handling activities. The final Longshoring and Marine Terminals Standards are expected to result in the prevention of 1,262 injuries and 3 fatalities, annually. Many additional fatalities and injuries would be prevented if employers were in full compliance with requirements that have been in place in the Agency's Longshoring and Marine Terminals standards for years and that have been retained in these final standards. In particular, the Agency believes that an additional one to three fatalities may be avoided each year when all affected establishments comply with OSHA's requirements for engineering controls and fall protection on intermodal containers. However, because the Agency's existing Longshoring standard has been interpreted as requiring fall protection at heights over eight feet (see Preamble of the proposed rule, 59 FR 28611, June 2, 1994), the Agency did not claim the benefits or estimate the costs potentially associated with the final rules' clarified requirements for fall protection on containers in this final economic analysis. In the affected industries, confusion over OSHA's existing container top fall protection requirements and their interpretation and non-uniform enforcement have resulted in currently low compliance levels for fall protection on containers.
The deaths and injuries estimated to be prevented by this revised standard are in addition to those that would be prevented by full compliance with OSHA's existing marine-cargo handling rules. OSHA estimates that, of the injuries potentially averted by the revised standards under the revised rules, about 800 are lost workday cases. Since a lost workday injury results in almost 40 missed days of work, on average, in SIC 4491, the 800 lost workday cases amount to a savings of more than 30,000 lost workdays annually. The potential economic savings of these avoided injuries alone is approximately $7 million annually. Thus the final standards for Longshoring and Marine Terminals are clearly needed to reduce the continuing significant risk of falls and other hazards posed to marine cargo handling workers employed in these industries.
B. Affected Industries, Establishments, and Employees
The requirements of the final standards apply to all establishments that perform marine cargo handling. Affected industries include the marine cargo handling industry itself (classified in the 1987 Standard Industrial Classification manual as SIC 4491), which includes both marine terminal operators and stevedores, as well as any other industries and establishments that handle marine cargoes, such as electric utilities that unload coal from barges or grain elevators that load grain onto barges. The Agency estimates that there are 3,700 establishments affected by both the Longshoring Standard and the Marine Terminals Standard. Table 1 shows how these establishments are distributed across affected industries for both standards. Based on employment data from the Table 1 Bureau of the Census and OSHA inspection data, 93,427 workers are estimated to be affected by the Longshoring and Marine Terminals standards, about 73,000 of whom are employed in establishments classified in SIC 4491.
(1) Other SICs include SIC 13 (Oil and Gas Extraction), SIC 15 (Building
Construction sectors under SIC 44 (Water Transportation) other than
C. The Final Standards and Their Estimated Costs
The Preliminary Regulatory Impact Analysis identified 21 provisions of the proposed rules that were likely to generate costs of compliance for employers. In response to comments and public testimony by stakeholders during the rulemaking, the Agency revised several provisions in the final standards that will affect estimated costs. Better information acquired from the industry during the rulemaking has also resulted in revisions of the costs estimated for particular provisions.
The most significant change to the final rule since the proposed standard for longshoring was issued has been made in the requirement for fall protection when working on top of any intermodal container. The proposed standard would have required fall protection when the fall height was 10 feet or more (containers are usually less than 10 feet tall); the final rule, however, requires such protection when a fall hazard exists at a height of 8 feet. Because the Agency has required fall protection for workers on containers for years (see paragraph 1918.32(b) of the existing Longshoring Standard) this provision of the final rule does not impose new costs on the regulated community.
Changes to three provisions that were proposed have resulted in the elimination of the costs that were projected to be associated with these provisions. In the final standard, the Agency has substituted performance language for the specification language proposed for the selection and maintenance of first aid kits and for the provision of the proper number of sanitary facilities. Comments in the record indicated that the industry was currently providing adequate facilities in these two areas, and thus that detailed specifications were not necessary. The final standard also does not require that fall protection systems be certified by a registered professional engineer; employers may rely on the guarantee/certification generally provided by manufacturers of this personal protective equipment instead. These three provisions in the final standard are estimated to impose no new costs for employers, and the Agency believes that the changes made to the final rule have not reduced employee protections.
The proposal would have permitted containers to be lifted only by a purely vertical lift from at least four top fittings. In the final standard, non-vertical lifts are allowed as long as the lift angle is at least 80 degrees and other protective conditions are met. This change will allow employers with non-gantry container cranes to avoid the purchase of box spreader beams and maintain greater productivity with the simpler spreader bars generally in use. Again, OSHA believes, and the record supports, that this change will not diminish employee protection.
In the final standard, regulations for special stevedoring gear remain similar to those in the proposal. The Agency has revised its estimate of the cost imposed on the regulated community to test gear every four years, based on comments in the record.
Anti-two-blocking devices are required by the final rule on all cranes used to lift personnel. This provision is unchanged from the proposal; however, the Agency inadvertently overlooked the costs potentially associated with this provision at the time of the proposal. Lifting personnel by cranes other than container-handling gantry cranes is reported to be infrequent in the cargo handling industry, and the impact of these provisions is likely to be felt only by employers in the South Florida and Gulf areas. The cost estimate for anti-two-blocking devices is included in Table 2 below, which provides the estimated annual cost of provisions in the proposed and final standard.
(*)Annualized over 10 years using a 7% interest rate.
In logging operations, powered rescue boats are required by the final standard when the situation warrants it. The proposed standard only required that rescue boats be "immediately available" rather than capable of "immediate rescue." This provision of the final rule will therefore impose higher costs on the regulated community than the simpler provision proposed, and the Final Economic Analysis takes account of this new cost.
The Agency has revised its cost estimates for some provisions since the PRIA. Based on comments received from stakeholders on the estimated costs of providing high-visibility vests for employees engaged in container and roll on/roll off operations, the Agency has substantially revised the costs estimated for this provision. In addition, the Agency has increased its estimate of the amount of time necessary for establishments to analyze and adjust to the impact of the new standards on their workplaces. Finally, the proposed standard would have required six-inch sideboards for bridge plates and ramps; in the final standard, sideboards must be at least 2¾ inches when the distance spanned is 3 feet or greater. Because the final provision is consistent with current industry practice, the Agency has revised the estimated costs for this provision downward.
The final Longshoring Standard is estimated to impose costs on employers of $2.9 million annually, in 1993 dollars, to comply with all of the final rule's provisions, and the Marine Terminals Standard is estimated to cost about $0.2 million annually. Table 2 provides a comparison of the estimated costs of the proposed and the final Longshoring Standard. The estimated costs to marine terminals, which are little changed since the proposal, are presented in Table 3. The total costs of the final standards are estimated at about $3.1 million annually. Nearly all of these costs are due to the Longshoring standard and are associated with compliance efforts by establishments in SIC 4491, which includes marine terminal operators and stevedores.
(*) Annualized over 10 years using a 7% interest rate.
D. Technological Feasibility, Economic Impacts, and Economic Feasibility
All of the requirements of the final standards can be met using currently available equipment, facilities, tests, inspections, supplies, and work practices. OSHA's analysis of the technological requirements of each provision indicates that none of the final provisions will create any problem of supply or availability of equipment, facilities, or personnel. Thus the Agency concludes that the standards are technologically feasible for employers in these industries.
In the rulemaking, questions were raised about the technological feasibility of providing fall protection on top of intermodal containers.(10) However, the final standard exempts employers from providing fall protection when it is impossible to do so or when doing so would create a greater hazard. Some commenters questioned whether it was technologically feasible to install anti-two-blocking devices on shore-based cranes. However, industry experts testified that it was possible to do so and further that, when cranes are not lifting personnel, the anti-two-blocking device can be turned off or by-passed for duty cycle work. For one type of shore-based crane, those with two hoist blocks, the addition of anti-two-blocking devices were said to make the crane more difficult to operate. The Agency has concluded that the anti-two-blocking devices can be turned off when these cranes are doing duty-cycle work (the devices must only work when hoisting personnel). In any event, there are alternative means for personnel to reach elevated work areas. Other commenters noted that when positioning containers in some vessels, it was not possible to perform absolutely vertical lifts in some situations. The Agency agreed with this view, and the final rule allows non-vertical lifts of containers under certain circumstances.
The total annual revenues and profits of longshoring operations are estimated to be approximately $7.8 billion and $388.9 million, respectively. The estimated costs of compliance with the final Longshoring and Marine Terminals Standards are $3.1 million annually. Since these costs will mainly be generated by compliance efforts by stevedores and marine terminal operators, and since the compliance costs of marine terminals will be passed on to stevedores, the Agency has concluded that the best measure of the standards' economic impact is to compare costs of compliance with the revenues and profits of longshoring operations. Thus, the annual costs of compliance with the final rule represent less than 0.04 percent of the revenues and 0.8 percent of the profits of establishments in the longshoring industry. Costs of this magnitude are unlikely to threaten the viability even of marginal firms.
Current practices in the marine cargo handling industry (SIC 4491) indicate that the requirements of the final standards can be met without significant hardship. Many employers already comply with the final rule's requirements, as the record indicates.
Compliance with the requirements of the final Longshoring and Marine Terminals Standards is not expected to produce any significant adverse economic impacts. The costs of these rules are expected to impose only a minimal burden on affected establishments and will be more than offset by the economic benefits of avoided deaths and injuries. Taken alone, the estimated compliance costs would represent an average increase in the cost of shipping a loaded container in or out of U.S. ports of less than 50 cents; the current cost of shipping such a container from the U.S. to Europe now averages about $3000 (about $150 for stevedoring services). On the whole, the costs of marine cargo handling operations for society would decrease as a result of the final rules, because fewer accidents mean less lost time and wages and fewer medical and legal resources spent on cargo shipping and handling. The estimated benefits anticipated from the final standards include unquantified reductions in pain and suffering, plus estimated economic savings of more than $7 million annually from reducing lost workdays due to injuries. The Agency therefore has determined that the final Longshoring and Marine Terminal Standards are economically feasible for establishments in the affected industries.
E. Screening Analysis to Identify Small-Business Impacts and Certification of No Significant Impact
Pursuant to the Regulatory Flexibility Act of 1980, as amended in 1996, OSHA has assessed the impact of the revised standards on small entities in the marine cargo handling industry, using the Small Business Administration (SBA) size standard for SIC 4491. SBA has defined a small business in SIC 4491 as one with annual revenues of $18.5 million or less (61 FR 3291). OSHA estimates that this corresponds to 90% of all establishments in SIC 4491. As noted earlier, the costs of compliance amount to less than 0.04 percent of sales in the marine cargo handling industry. Because the magnitude of these compliance costs is so small, and because the final rules reflect practices that are currently being followed by many employers throughout the marine cargo handling industry, the Agency certifies that these final rules will not have a significant impact on a substantial number of small entities.
Several provisions in the final standards have been written or revised in order to avoid imposing unnecessary burden on small businesses while still remaining consistent with OSHA's mandate to protect employee safety. For example, when establishments do not have container gantry cranes, as is the case for many smaller establishments that service freighters with mixed cargoes, the final Longshoring standard does not require the use of positive container securing devices, although doing so was considered by the Agency. In addition, establishments that use shore-based, single wire cranes for handling containers are allowed under the final rule to lift containers with non-vertical lifts, provided that they conform to other handling conditions designed to protect marine cargo handling employees. These firms also will not have to purchase box spreader beams and can continue to use their simpler spreader beams, a change to the standard that will enhance container top safety as well as productivity. In addition, in the final standard all existing special stevedoring gear with a capacity greater than 5 short tons will only have to be tested every four years and an employer's designated person will be allowed to perform the testing (rather than an OSHA accredited agency). Finally, employers will not be required by the final rules to have a professional engineer certify the adequacy of fall protection systems but can instead rely on a qualified person. All of the above provisions provide regulatory relief to smaller as well as larger employers, and all are consistent with the mandate of the OSH Act.
F. Non-Regulatory Alternatives
The Agency considered relying on the incentives created by workers' compensation programs and the threat of private tort suits to reduce the number of fatalities and injuries to workers in the affected industries. The Agency determined, however, that government regulation is needed because of the significant risk of job-related injury or death that continues to exist in these industries. Private markets fail to provide sufficient safety and health resources due to the externalization of part of the social cost of worker injuries and deaths. The longshore workers' compensation system does not offer an adequate remedy because premiums to employers do not reflect specific workplace risk, and liability claims are restricted by statutes that prevent employees from suing their employers. The Agency is also aware that in some cases union and employer agreements include many of the provisions that are contained in the final standards. However, a large fraction of the affected employees are not subject to these agreements. Further, these agreements are neither consistent nor comprehensive, and they do not provide an enforceable framework for workplace safety. Accordingly, bargaining between employers and employees cannot be relied on to achieve an adequately protective solution.
G. Impact Upon International Trade
OSHA has determined that compliance with the final Longshoring and Marine Terminals Standards will not have a significant impact upon international trade. The compliance costs of the standards are minimal and are not expected to affect prices of exports or imports or international competitiveness. To the extent that compliance with the final rules increases cargo handling efficiency and reduces the number of injuries and fatalities associated with these operations, shipping costs may be reduced and international trade encouraged.
The requirement for engineering controls where feasible for ships to load or discharge containers (e.g. semi-automatic twist locks or cell guides) will not affect shippers' costs or, therefore, international trade. Wherever possible most shippers have already converted to the use of these engineering controls since there are clear cost advantages to doing so. Approximately 75 percent of foreign-owned vessels that call at U.S. ports use these engineering controls already. Not all ships will convert to using these engineering controls since these are only required where container lifting is done with container gantry cranes and some marine terminals and longshoring work is still performed with single-wire cranes or forklifts.
Footnote (10) For an analysis of comments received and Agency responses, see the Summary and Explanation, above.
[62 FR 40142, July 25,1997]
Regulations (Preambles to Final Rules) - Table of Contents|