An uninspected passenger vessel of 110 gross tons operates 4 miles seaward of the territorial sea baseline. The master argues that because the vessel carries three parachute red flares (46 CFR 160.024), no EPIRB is required. Which statement correctly evaluates this argument?

1. A. The argument is correct; three parachute red flares satisfy all distress signaling requirements including EPIRB carriage.
2. ✓ The argument is incorrect; 46 CFR §25.26-10(b) requires a float-free, automatically activated Category 1 406 MHz EPIRB for uninspected passenger vessels of at least 100 gross tons operating beyond 3 miles from shore.Correct
3. C. The argument is correct because uninspected passenger vessels are exempt from EPIRB requirements regardless of gross tonnage.
4. D. The argument is partially correct; the vessel only needs an EPIRB if it also lacks an orange distress flag.