[Title 46 CFR ]
[Code of Federal Regulations (annual edition) - October 1, 2014 Edition]
[From the U.S. Government Publishing Office]



[[Page i]]

          

          Title 46

Shipping


________________________

Parts 200 to 499

                         Revised as of October 1, 2014

          Containing a codification of documents of general 
          applicability and future effect

          As of October 1, 2014
                    Published by the Office of the Federal Register 
                    National Archives and Records Administration as a 
                    Special Edition of the Federal Register

[[Page ii]]

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[[Page iii]]




                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 46:
          Chapter II--Maritime Administration, Department of 
          Transportation                                             3
          Chapter III--Coast Guard (Great Lakes Pilotage), 
          Department of Homeland Security                          405
  Finding Aids:
      Table of CFR Titles and Chapters........................     437
      Alphabetical List of Agencies Appearing in the CFR......     457
      List of CFR Sections Affected...........................     467

[[Page iv]]





                     ----------------------------

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 46 CFR 201.1 refers 
                       to title 46, part 201, 
                       section 1.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
together to determine the latest version of any given rule.
    To determine whether a Code volume has been amended since its 
revision date (in this case, October 1, 2014), consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

    Each volume of the Code contains amendments published in the Federal 
Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
number of the Federal Register and date of publication. Publication 
dates and effective dates are usually not the same and care must be 
exercised by the user in determining the actual effective date. In 
instances where the effective date is beyond the cut-off date for the 
Code a note has been inserted to reflect the future effective date. In 
those instances where a regulation published in the Federal Register 
states a date certain for expiration, an appropriate note will be 
inserted following the text.

OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
placed as close as possible to the applicable recordkeeping or reporting 
requirements.

PAST PROVISIONS OF THE CODE

    Provisions of the Code that are no longer in force and effect as of 
the revision date stated on the cover of each volume are not carried. 
Code users may find the text of provisions in effect on any given date 
in the past by using the appropriate List of CFR Sections Affected 
(LSA). For the convenience of the reader, a ``List of CFR Sections 
Affected'' is published at the end of each CFR volume. For changes to 
the Code prior to the LSA listings at the end of the volume, consult 
previous annual editions of the LSA. For changes to the Code prior to 
2001, consult the List of CFR Sections Affected compilations, published 
for 1949-1963, 1964-1972, 1973-1985, and 1986-2000.

``[RESERVED]'' TERMINOLOGY

    The term ``[Reserved]'' is used as a place holder within the Code of 
Federal Regulations. An agency may add regulatory information at a 
``[Reserved]'' location at any time. Occasionally ``[Reserved]'' is used 
editorially to indicate that a portion of the CFR was left vacant and 
not accidentally dropped due to a printing or computer error.

INCORPORATION BY REFERENCE

    What is incorporation by reference? Incorporation by reference was 
established by statute and allows Federal agencies to meet the 
requirement to publish regulations in the Federal Register by referring 
to materials already published elsewhere. For an incorporation to be 
valid, the Director of the Federal Register must approve it. The legal 
effect of incorporation by reference is that the material is treated as 
if it were published in full in the Federal Register (5 U.S.C. 552(a)). 
This material, like any other properly issued regulation, has the force 
of law.
    What is a proper incorporation by reference? The Director of the 
Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
approval is based are:
    (a) The incorporation will substantially reduce the volume of 
material published in the Federal Register.
    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
process.
    (c) The incorporating document is drafted and submitted for 
publication in accordance with 1 CFR part 51.
    What if the material incorporated by reference cannot be found? If 
you have any problem locating or obtaining a copy of material listed as 
an approved incorporation by reference, please contact the agency that 
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notify the Director of the Federal Register, National Archives and 
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or call 202-741-6010.

CFR INDEXES AND TABULAR GUIDES

    A subject index to the Code of Federal Regulations is contained in a 
separate volume, revised annually as of January 1, entitled CFR Index 
and Finding Aids. This volume contains the Parallel Table of Authorities 
and Rules. A list of CFR titles, chapters, subchapters, and parts and an 
alphabetical list of agencies publishing in the CFR are also included in 
this volume.

[[Page vii]]

    An index to the text of ``Title 3--The President'' is carried within 
that volume.
    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
the daily Federal Register.
    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

REPUBLICATION OF MATERIAL

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in the Code of Federal Regulations.

INQUIRIES

    For a legal interpretation or explanation of any regulation in this 
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the top of odd-numbered pages.
    For inquiries concerning CFR reference assistance, call 202-741-6000 
or write to the Director, Office of the Federal Register, National 
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CFR Sections Affected), The United States Government Manual, the Federal 
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    The e-CFR is a regularly updated, unofficial editorial compilation 
of CFR material and Federal Register amendments, produced by the Office 
of the Federal Register and the Government Printing Office. It is 
available at www.ecfr.gov.

    Charles A. Barth,
    Director,
    Office of the Federal Register.
    October 1, 2014.







[[Page ix]]



                               THIS TITLE

    Title 46--Shipping is composed of nine volumes. The parts in these 
volumes are arranged in the following order: Parts 1-40, 41-69, 70-89, 
90-139, 140-155, 156-165, 166-199, 200-499, and 500 to end. The first 
seven volumes containing parts 1-199 comprise chapter I--Coast Guard, 
DHS. The eighth volume, containing parts 200--499, includes chapter II--
Maritime Administration, DOT and chapter III--Coast Guard (Great Lakes 
Pilotage), DHS. The ninth volume, containing part 500 to end, includes 
chapter IV--Federal Maritime Commission. The contents of these volumes 
represent all current regulations codified under this title of the CFR 
as of October 1, 2014.

    For this volume, Bonnie Fritts was Chief Editor. The Code of Federal 
Regulations publication program is under the direction of John Hyrum 
Martinez, assisted by Jim Hemphill.

[[Page 1]]



                           TITLE 46--SHIPPING




                  (This book contains parts 200 to 499)

  --------------------------------------------------------------------
                                                                    Part

chapter ii--Maritime Administration, Department of 
  Transportation............................................         201

chapter iii--Coast Guard (Great Lakes Pilotage), Department 
  of Homeland Security......................................         401

[[Page 3]]



    CHAPTER II--MARITIME ADMINISTRATION, DEPARTMENT OF TRANSPORTATION




  --------------------------------------------------------------------

              SUBCHAPTER A--POLICY, PRACTICE AND PROCEDURE
Part                                                                Page
200             [Reserved]

201             Rules of practice and procedure.............           7
202             Procedures relating to review by Secretary 
                    of Transportation of actions by Maritime 
                    Subsidy Board...........................          29
203             Procedures relating to conduct of certain 
                    hearings under the Merchant Marine Act, 
                    1936, as amended........................          33
204             Claims against the Maritime Administration 
                    under the Federal Tort Claims Act.......          35
205             Audit appeals; policy and procedure.........          37
   SUBCHAPTER B--REGULATIONS AFFECTING MARITIME CARRIERS AND RELATED 
                               ACTIVITIES
221             Regulated transactions involving documented 
                    vessels and other maritime interests....          38
232             Uniform financial reporting requirements....          52
  SUBCHAPTER C--REGULATIONS AFFECTING SUBSIDIZED VESSELS AND OPERATORS
249             Approval of underwriters for marine hull 
                    insurance...............................          62
251-252         [Reserved]

272             Requirements and procedures for conducting 
                    condition surveys and administering 
                    maintenance and repair subsidy..........          65
276             [Reserved]

277             Domestic and foreign trade; interpretations.          74
280-283         [Reserved]

287             Establishment of construction reserve funds.          74
289             Insurance of construction-differential 
                    subsidy vessels, operating-differential 
                    subsidy vessels and of vessels sold or 
                    adjusted under the Merchant Ship Sales 
                    Act 1946................................          90

[[Page 4]]

295             Maritime Security Program (MSP).............          91
296             Maritime Security Program (MSP).............          99
                SUBCHAPTER D--VESSEL FINANCING ASSISTANCE
298             Obligation guarantees.......................         117
                         SUBCHAPTER E [RESERVED]
                 SUBCHAPTER F--POSITION REPORTING SYSTEM
307             Establishment of mandatory position 
                    reporting system for vessels............         151
                   SUBCHAPTER G--EMERGENCY OPERATIONS
308             War risk insurance..........................         154
309             Values for war risk insurance...............         176
                         SUBCHAPTER H--TRAINING
310             Merchant Marine training....................         185
               SUBCHAPTER I-A--NATIONAL SHIPPING AUTHORITY
315             Agency agreements and appointment of agents.         212
317             Bonding of ship's personnel.................         214
324             Procedural rules for financial transactions 
                    under Agency agreements.................         216
325             Procedure to be followed by general agents 
                    in preparation of invoices and payment 
                    of compensation pursuant to provisions 
                    of NSA Order No. 47.....................         221
326             Marine protection and indemnity insurance 
                    under agreements with agents............         222
327             Seamen's claims; administrative action and 
                    litigation..............................         224
328             Slop chests.................................         234
329             Voyage data.................................         236
330             Launch services.............................         238
332             Repatriation of seamen......................         238
335             Authority and responsibility of general 
                    agents to undertake emergency repairs in 
                    foreign ports...........................         240
336             Authority and responsibility of general 
                    agents to undertake in continental 
                    United States ports voyage repairs and 
                    service equipment of vessels operated 
                    for the account of the National Shipping 
                    Authority under general agency agreement         242
337             General agent's responsibility in connection 
                    with foreign repair custom's entries....         243

[[Page 5]]

338             Procedure for accomplishment of vessel 
                    repairs under National Shipping 
                    Authority master lump sum repair 
                    contract--NSA-LUMPSUMREP................         244
339             Procedure for accomplishment of ship repairs 
                    under National Shipping Authority 
                    individual contract for minor repairs--
                    NSA-WORKSMALREP.........................         255
340             Priority use and allocation of shipping 
                    services, containers and chassis, and 
                    port facilities and services for 
                    national security and national defense 
                    related operations......................         256
            SUBCHAPTER I-B--CONTROL AND UTILIZATION OF PORTS
345             Restrictions upon the transfer or change in 
                    use or in terms governing utilization of 
                    port facilities.........................         263
346             Federal port controllers....................         265
347             Operating contract..........................         268
349             Reemployment rights of certain merchant 
                    seamen..................................         274
                       SUBCHAPTER J--MISCELLANEOUS
350             Seamen's service awards.....................         278
351             Depositories................................         280
355             Requirements for establishing United States 
                    citizenship.............................         280
356             Requirements for vessels of 100 feet or 
                    greater in registered length to obtain a 
                    fishery endorsement to the vessel's 
                    documentation...........................         284
370             Claims......................................         310
380             Procedures..................................         311
381             Cargo preference--U.S.-flag vessels.........         315
382             Determination of fair and reasonable rates 
                    for the carriage of bulk and packaged 
                    preference cargoes on U.S.-flag 
                    commercial vessels......................         320
383             [Reserved]

385             Research and development grant and 
                    cooperative agreements regulations......         323
386             Regulations governing public buildings and 
                    grounds at the United States Merchant 
                    Marine Academy..........................         332
387             Utilization and disposal of surplus Federal 
                    real property for development or 
                    operation of a port facility............         334
388             Administrative waivers of the Coastwise 
                    Trade Laws..............................         337

[[Page 6]]

389             Determination of availability of coastwise-
                    qualified vessels for transportation of 
                    platform jackets........................         341
            SUBCHAPTER K--REGULATIONS UNDER PUBLIC LAW 91-469
390             Capital Construction Fund...................         345
391             Federal income tax aspects of the Capital 
                    Construction Fund.......................         373
392             [Reserved]

393             America's Marine Highway Program............         393
394-399         [Reserved]

[[Page 7]]



               SUBCHAPTER A_POLICY, PRACTICE AND PROCEDURE



                           PART 200 [RESERVED]



PART 201_RULES OF PRACTICE AND PROCEDURE--Table of Contents



                 Subpart A_General Information (Rule 1)

Sec.
201.1 Scope of rules.
201.2 Mailing address; hours.
201.3 Authentication of rules, orders, determinations and decisions of 
          the Administration.
201.4-201.5 [Reserved]
201.6 Documents in foreign languages.
201.7 Information; special instructions.
201.8 Use of gender and number.
201.9 Suspension, amendment, etc., of rules.

  Subpart B_Appearance and Practice Before the Administration (Rule 2)

201.15 Appearance in person or by representative.
201.16 Authority for representation.
201.17 Written appearance.
201.18 Practice before the Administration defined.
201.19 Presiding officers.
201.20 Attorneys at law.
201.21 [Reserved]
201.22 Firms and corporations.
201.23 [Reserved]
201.24 Suspension or disbarment.
201.25 Statement of interest.
201.26 Former employees.

                       Subpart C_Parties (Rule 3)

201.30 Parties; how designated.
201.31 Public counsel.
201.32 Substitution of parties.

       Subpart D_Form, Execution and Service of Documents (Rule 4)

201.41 Form and appearance of documents filed with the Administration.
201.42 Subscription, authentication of documents.
201.43 Service by parties.
201.44 Date of service.
201.45 Certificate of service.
201.46 Copies of documents for use of the Administration.

                         Subpart E_Time (Rule 5)

201.51 Computation.
201.52 Additional time after service by mail.
201.53 Extension of time to file documents.
201.54 Reduction of time to file documents.
201.55 Postponement of hearing.

                     Subpart F_Rule Making (Rule 6)

201.61 Petition for issuance, amendment, or repeal of rule or 
          regulation.
201.62 Notice of proposed rule making.
201.63 Participation in rule making.
201.64 Contents of rules.
201.65 Effective date of rules.

    Subpart G_Formal Proceedings, Notice, Pleadings, Replies (Rule 7)

201.71 Commencement of proceedings.
201.72 Notice.
201.73 Joinder of proceedings.
201.74 Declaratory orders.
201.75 Petitions--general.
201.76 Applications for Government aid.
201.77 Amendments or supplements to pleadings.
201.78 Petition for leave to intervene.
201.79 Motions.
201.80 Answers to applications, petitions, or motions.

   Subpart H_Responsibilities and Duties of Presiding Officer (Rule 8)

201.85 Commencement of functions of Department of Transportation Office 
          of Hearings.
201.86 Presiding officer.
201.87 Authority of presiding officer.
201.88 Postponement or change of place by presiding officer.
201.89 Disqualification of presiding officer.

                 Subpart I_Summary Disposition (Rule 9)

201.91 Filing of motions, answers.
201.92 Ruling on motion.
201.93 Review of ruling, appeal.

  Subpart J_Prehearing Conference; Settlements; Procedural Agreements 
                                (Rule 10)

201.101 Prehearing conference.
201.102 Prehearing rulings.
201.103 Opportunity for agreement of parties and settlement of case.

              Subpart K_Discovery and Depositions (Rule 11)

201.109 Discovery and production of documents.
201.110 Depositions: request for orders to take; time of filing.
201.111 Contents of order.
201.112 Record of examination; oath; objections.
201.113 Submission to witness, changes, signing.

[[Page 8]]

201.114 Certification and filing by officer; copies.
201.115 Waiver of objections and admissibility.
201.116 Time of filing.
201.117 Inclusion in record.
201.118 Witness fees; expenses of taking depositions.

                      Subpart L_Subpoenas (Rule 12)

201.121 Application for subpoena ad testificandum.
201.122 Application for subpoena duces tecum.
201.123 Standards for issuance of subpoena duces tecum.
201.124 Service and quashing of subpoenas.
201.125 Attendance and mileage fees.
201.126 Service of subpoenas.
201.127 Subpoena of Administration employees, documents, or things.

                 Subpart M_Hearing Procedures (Rule 13)

201.131 Presentation of evidence.
201.132 Conduct of the hearing.
201.133 Appeal from ruling of presiding officer.
201.134 Separation of functions.

                      Subpart N_Evidence (Rule 14)

201.136 Evidence admissible.
201.137 Rights of parties as to presentation of evidence.
201.138 Unsponsored written material.
201.139 Documents containing matter both material and not material.
201.140 Records in other proceedings.
201.141 Stipulations.
201.142 Further evidence required by presiding officer during hearing.
201.143 Exceptions to rulings of presiding officer unnecessary.
201.144 Offer of proof.

 Subpart O_The Record: Contents; Development; Perfection; Confidential 
                           Treatment (Rule 15)

201.146 Receipt of documents after hearing.
201.147 Official transcript.
201.148 Corrections of transcript.
201.149 Copies of data or evidence.
201.150 Record for decision.
201.151 Objections to public disclosure of information.

Subpart P_Briefs, Requests for Findings, Decisions, Exceptions (Rule 16)

201.155 Briefs; request for findings.
201.156 Requests for extension of time for filing briefs.
201.157 Reopening of a case by presiding officer prior to decision.
201.158 Decisions, authority to make and kinds.
201.159 Decisions, contents and service.
201.160 Decision based on official notice.
201.161 Exceptions to, and review by the Administration of initial or 
          recommended decisions.
201.162 Replies to exceptions.
201.163 Request for extension of time for filing exceptions and replies 
          thereto.
201.164 Certification of record by presiding officer.

     Subpart Q_Oral Argument; Submittal for Final Decision (Rule 17)

201.166 Oral argument.
201.167 Submission to Administration for final decision.

 Subpart R_Stay of Administration's Decision, Reopening of Proceedings 
                                (Rule 18)

201.171 Stay of Administration's decision.
201.172 Time for filing petition to reopen.
201.173 Reopening by Administration and modification or setting aside of 
          decision.
201.174 Petition for reopening.
201.175 Answers to petition to reopen.

           Subpart S_Judicial Standards of Practice (Rule 19)

201.181 General matters.
201.182 Improper pressures.
201.183 Ex parte communications.

                   Subpart T_Effective Date (Rule 20)

201.185 Effective date and applicability of rules.

    Authority: 46 App. U.S.C. 1114(b); 49 CFR 1.66 and 1.69.

    Source: General Order 41, 3d Rev., 29 FR 14475, Oct. 22, 1964; 29 FR 
15374, Nov. 17, 1964, unless otherwise noted.



                 Subpart A_General Information (Rule 1)



Sec. 201.1  Scope of rules.

    The regulations in this part govern practice and procedure before 
the Maritime Administration and Maritime Subsidy Board (as described in 
49 CFR 1.66 and 1.67), hereinafter referred to collectively as the 
``Administration,'' under the Merchant Marine Act, 1920, as amended, 
Merchant Marine Act, 1936, as amended, Merchant Ship Sales Act, 1946, 
Administrative Procedure Act, and related Acts. In addition, certain 
proceedings under sections 605(c)

[[Page 9]]

and 805(a) of the Merchant Marine Act, 1936, as amended, shall be 
conducted in accordance with part 203 of this chapter except as may be 
provided otherwise by the Administration.

[55 FR 12358, Apr. 3, 1990]



Sec. 201.2  Mailing address; hours.

    Documents required to be filed in, and correspondence relating to, 
proceedings governed by the regulations in this part should be addressed 
to ``Secretary, Maritime Administration, Department of Transportation, 
Washington, DC 20590.'' The Office of the Secretary, Maritime 
Administration, including the public document reading room, located in 
room 7210, 400 Seventh Street, SW., Washington, DC 20590, is open from 
8:30 a.m. to 5:00 p.m.

[55 FR 12358, Apr. 3, 1990, as amended at 63 FR 9157, Feb. 24, 1998]



Sec. 201.3  Authentication of rules, orders, determinations and decisions 

of the Administration.

    All rules, orders, determinations or decisions issued in any 
proceeding covered by the regulations in this part shall, unless 
otherwise specifically provided by the Administration, be signed and 
authenticated by seal by the Secretary of the Administration in the name 
of the Administration.



Sec. Sec. 201.4-201.5  [Reserved]



Sec. 201.6  Documents in foreign languages.

    Every document, exhibit, or other paper written in a language other 
than English and filed with the Administration or offered in evidence in 
any proceeding before the Administration under the regulations in this 
part or in response to any rule or order of the Administration pursuant 
to the regulations in this part, shall be filed or offered in the 
language in which it is written and shall be accompanied by an English 
translation thereof duly subscribed.



Sec. 201.7  Information; special instructions.

    Information as to procedure under the regulations in this part, and 
instructions supplementing the regulations in this part in special 
instances, will be furnished upon application to the Secretary of the 
Administration.



Sec. 201.8  Use of gender and number.

    Words importing the singular number may extend and be applied to 
several persons or things; words importing the plural number may include 
the singular; and words importing the masculine gender may be applied to 
females.



Sec. 201.9  Suspension, amendment, etc., of rules.

    The regulations in this part may, from time to time, be suspended, 
amended, or revoked, in whole or in part. Notice of any such action will 
be published in the Federal Register. Also, any regulation in this part 
may be waived by the Administration or the Presiding Officer to prevent 
undue hardship in any particular case.



  Subpart B_Appearance and Practice Before the Administration (Rule 2)



Sec. 201.15  Appearance in person or by representative.

    A party may appear in person or by an officer, partner, or regular 
employee of the party, or by or with counsel or other duly qualified 
representative, in any proceeding under the regulations in this part. A 
party may offer testimony, produce and examine witnesses, and be heard 
upon brief and at oral argument if oral argument is granted. Any person 
compelled to appear in a proceeding pursuant to subpoena may be 
accompanied, represented, and advised by counsel and may purchase a 
transcript of his testimony.



Sec. 201.16  Authority for representation.

    Any individual acting in a representative capacity in any proceeding 
before the Administration may be required by the Administration or the 
Presiding Officer to show his authority to act in such capacity.



Sec. 201.17  Written appearance.

    Persons who appear at any hearing shall deliver a written notation 
of appearance to the reporter, stating for whom the appearance is made. 
The

[[Page 10]]

written appearance shall be made a part of the record.



Sec. 201.18  Practice before the Administration defined.

    Practice before the Administration shall be deemed to comprehend all 
matters connected with any presentation to the Administration or its 
staff.



Sec. 201.19  Presiding officers.

    Hearings on any matter before the Administration will be held by a 
duly designated Member or Members thereof, or a Hearing Examiner 
qualified under section 11 of the Administrative Procedure Act, assigned 
by the Chief Hearing Examiner, who shall be designated as the Presiding 
Officers. Where appropriate the Administration may designate other 
members of the staff to serve as Presiding Officers in hearings not 
required by statute, as provided in Sec. 201.86.



Sec. 201.20  Attorneys at law.

    Attorneys at law who are admitted to practice before the Federal 
courts or before the courts of any State or territory of the United 
States may practice before the Administration. An attorney's own 
representation that he is such in good standing before any of the courts 
herein referred to will be sufficient proof thereof.



Sec. 201.21  [Reserved]



Sec. 201.22  Firms and corporations.

    Except as regards law firms, practice before the Administration by 
firms or corporations on behalf of others shall not be permitted.



Sec. 201.23  [Reserved]



Sec. 201.24  Suspension or disbarment.

    The Administration may, in its discretion, deny admission to, 
suspend, or disbar any person from practice before the Administration 
who it finds does not possess the requisite qualifications to represent 
others or is lacking in character, integrity, or to have engaged in 
unethical or improper professional conduct. Disrespectful, disorderly, 
or contumacious language or contemptuous conduct at any hearing before 
the Administration or a presiding officer shall constitute grounds for 
immediate exclusion from said hearing by the Presiding Officer. Any 
person who has been admitted to practice before the Administration may 
be disbarred from such practice only after he has been afforded an 
opportunity to be heard.



Sec. 201.25  Statement of interest.

    The Administration, in its discretion, may call upon any 
practitioner for a full statement of the nature and extent of his 
interest in the subject matter presented by him before the 
Administration. Attorneys retained on a contingent fee basis shall file 
with the Administration a copy of the contract of employment.

[General Order 41, 3d Rev., 29 FR 14475, Oct. 22, 1964; 29 FR 15374, 
Nov. 17, 1964, as amended at 60 FR 38735, July 28, 1995]



Sec. 201.26  Former employees.

    (a) No former officer or employee of the Administration, after his 
or her employment with the Administration has ceased, shall act as agent 
or attorney for anyone other than the United States in connection with 
any particular matter in which a specific party or parties are involved 
and in which the United States is a party or has a direct and 
substantial interest and in which the former officer or employee 
participated personally and substantially as an officer or employee of 
the Maritime Administration through decision, approval, disapproval, 
recommendation, the rendering of advice, investigation, or otherwise 
while so employed by the Maritime Administration.
    (b) No former officer or employee of the Administration shall 
practice, appear, or represent anyone, directly or indirectly, other 
than the United States, before the Administration in any matter for a 
period of 1 year subsequent to the termination of his or her employment 
with the Administration in connection with any proceeding, application, 
request for a ruling or other determination, contract, claim, 
controversy, or other particular matter involving a specific party or 
parties in which the United States is a party or directly and 
substantially interested

[[Page 11]]

and which was under his or her official responsibility as an officer or 
employee of the Administration at any time during the last year of his 
or her service.
    (c) Any person in doubt as to the applicability of paragraph (a) or 
(b) of this Sec. 201.26 to a particular case or to the postemployment 
activities of a former officer or employee of the Administration may 
address an application to the Administration for the Administration's 
consent to appear, stating his former connection with the Administration 
or predecessor agency, identifying the matter in which he or she desires 
to appear and describe in detail his or her participation in or 
responsibility for the particular matter and the specific party or 
parties involved and the extent, if any, in which the former officer or 
employee had participated while employed by the Administration. The 
applicant shall be promptly advised as to his or her privilege to appear 
in the particular matter. Separate consents to appear must be obtained 
in each particular matter.

[G.O. 41, 3d Rev., Amdt. 3, 36 FR 4377, Mar. 5, 1971]



                       Subpart C_Parties (Rule 3)



Sec. 201.30  Parties; how designated.

    The term party, whenever used in these Rules, shall include any 
natural person, corporation, association, firm, partnership, trustee, 
receiver, agency, public or private organization, or governmental 
agency. A party requesting official action subject to these Rules shall 
be designated as applicant. A party whose petition for leave to 
intervene is granted pursuant to Sec. 201.78 shall be designated as 
intervenor. Only a party as designated in this section may introduce 
evidence or examine witnesses at hearings.



Sec. 201.31  Public counsel.

    The Assistant General Counsel, Chief, Division of Operating Subsidy 
Contracts, shall be a party to all proceedings involving operating-
differential subsidy contracts. The Assistant General Counsel and his 
representatives shall be designated as Public Counsel and shall be 
served with copies of all papers, pleadings, and documents in such 
proceedings. In addition the General Counsel may designate any member of 
his staff to serve as Staff Counsel in contract appeal cases or any 
other proceeding governed by the regulations in this part. Public 
Counsel or Staff Counsel shall participate in any proceeding to which he 
is a party, to the extent he deems required in the public interest, 
subject to the separation of functions required by section 5(c) of the 
Administrative Procedure Act.



Sec. 201.32  Substitution of parties.

    Upon petition and for good cause shown, the Administration may order 
a substitution of parties; except that in case of death of a party 
substitution may be ordered upon suggestion and without the filing of a 
petition.



       Subpart D_Form, Execution and Service of Documents (Rule 4)



Sec. 201.41  Form and appearance of documents filed with the Administration.

    All papers to be filed under the regulations in this part may be 
reproduced by printing or by any other process, provided the copies are 
clear and legible; shall be dated, the original signed in ink, and shall 
show the docket description and title of the proceeding, and the title, 
if any, and address of the signatory. If typewritten, the impression 
shall be on only one side of the paper and shall be double spaced, 
except that quotations shall be single spaced and indented. Documents 
not printed, except correspondence and exhibits, should be on strong, 
durable paper and shall not be more than 8\1/2\ inches wide and 12 
inches long, with a left margin 1\1/2\ inches wide. Printed documents 
shall be printed in clear type (never smaller than pica or 11-point 
type) adequately leaded, and the paper shall be opaque and unglazed. 
Briefs, if printed, shall be printed on paper not less than 6\1/8\ 
inches wide and 9\1/4\ inches long, with inside margin not less than 1 
inch wide. All briefs over 15 pages shall contain a subject index with 
page references and a list of authorities cited.

[[Page 12]]



Sec. 201.42  Subscription, authentication of documents.

    (a) Documents filed shall be subscribed: (1) By the person or 
persons filing same, (2) by an officer thereof if it be a corporation, 
(3) by an officer or employee if it be a government instrumentality, or 
(4) by an attorney or other person having authority with respect 
thereto.
    (b) Documents submitted pursuant to stipulation of counsel where no 
sponsoring witness will be used must be verified.



Sec. 201.43  Service by parties.

    All documents, when tendered for filing should show that service has 
been made upon all parties to the proceeding. Such service shall be made 
by delivering one copy to each party in person or by mailing by first-
class mail properly addressed with postage prepaid. When a party has 
appeared by attorney or other representative, service upon such attorney 
or other representative will be deemed service upon the party. All 
documents served by mail preferably should be mailed in sufficient time 
to reach the parties on the date on which the original is due to be 
filed and should be air mailed if addressee is more than 300 miles 
distant.



Sec. 201.44  Date of service.

    The date of service of documents shall be the day when the matter 
served is deposited in the United States mail, shown by the postmark 
thereon, or is delivered in person, as the case may be.



Sec. 201.45  Certificate of service.

    The original of every document filed with the Administration and 
required to be served upon all parties to a proceeding shall be 
accompanied by a certificate of service signed by the party making 
service, stating that such service has been made upon each party to the 
proceeding. Certificates of service may be in substantially the 
following form:

    I hereby certify that I have this day served the foregoing document 
upon all parties of record in this proceeding by mailing, postage 
prepaid (or by delivering in person) a copy to each such party.
    Dated at ------------------ this ------------ day of --------------
--, 19----
(Signature)----------------
 For----------------



Sec. 201.46  Copies of documents for use of the Administration.

    Except as otherwise provided in the regulations in this part, an 
original and fifteen copies of every document shall be filed for use of 
the Administration, except written testimony and exhibits to be made a 
part of a record, which shall be filed in triplicate unless otherwise 
directed.



                         Subpart E_Time (Rule 5)



Sec. 201.51  Computation.

    In computing any period of time under these Rules, the time begins 
with the day following the act, event, or default, and includes the last 
day of the period, unless it is a Saturday, Sunday, or national legal 
holiday. When the period of time prescribed or allowed is less than 
seven (7) days, intermediate Saturdays, Sundays, and holidays shall be 
excluded from the computation.



Sec. 201.52  Additional time after service by mail.

    Whenever service of a document has been made by mail in accordance 
with Sec. 201.43 three (3) days shall be added to the prescribed period 
for answer.



Sec. 201.53  Extension of time to file documents.

    Applications for extension of time for the filing of any document 
shall set forth the reasons for the application and may be granted upon 
a showing of good cause on the part of applicant. Answers to such 
applications are permitted.



Sec. 201.54  Reduction of time to file documents.

    Except as prohibited by law, for good cause the Administration, or 
the Presiding Officer with respect to matters pending before him, may 
reduce any time limit prescribed in the regulations in this part.

[[Page 13]]



Sec. 201.55  Postponement of hearing.

    Applications for postponement of any hearing date may be granted 
upon a showing of good cause on the part of the applicant. Answers to 
such applications are permitted.



                     Subpart F_Rule Making (Rule 6)



Sec. 201.61  Petition for issuance, amendment, or repeal of rule or regulation.

    Any interested person may file with the Administration a petition 
for the issuance, amendment, or repeal of a rule designed to implement, 
interpret, or prescribe law, policy, organization, procedure, or 
practice requirements of the Administration. The petition shall set 
forth the interest of petitioner and the nature of the relief desired, 
shall include any facts, views, arguments, and data deemed relevant by 
petitioner, and shall be subscribed to. If such petition is for the 
amendment or repeal of a rule, it shall be accompanied by proof of 
service on all persons, if any, specifically named in such rule, and 
shall conform in all other aspects to subpart D of this part. Answers to 
such petition shall conform to the requirements of subpart D of this 
part.



Sec. 201.62  Notice of proposed rule making.

    After receipt of petitions and any answers thereto described in 
Sec. 201.61, or upon its own initiative, the Administration may, in its 
discretion, direct that notice thereof be published in the Federal 
Register unless all persons subject thereto are named and either are 
personally served or otherwise have actual notice thereof in accordance 
with law. Except where publication of notice of proposed rule making and 
public hearing is required by statute, this section shall not apply to 
interpretative rules, general statements of policy, organization rules, 
rules of procedure, or practice of the Administration, or amendments 
thereto, or any situation in which the Administration for good cause 
finds that notice and public procedure thereon are impracticable, 
unnecessary, or contrary to the public interest.



Sec. 201.63  Participation in rule making.

    Interested persons will be afforded an opportunity to participate in 
rule making through submission of written data, views, or arguments, 
with or without opportunity to present the same orally in any manner: 
Provided, That where the proposed rules are such as are required by 
statute to be made on the record after opportunity for a hearing, or 
where a hearing is ordered by the Administration upon petition of any 
party or upon its own initiative, such hearing shall be conducted 
pursuant to sections 7 and 8 of the Administrative Procedure Act.



Sec. 201.64  Contents of rules.

    The Administration will incorporate in any rule to be adopted a 
concise general statement of their basis and purpose.



Sec. 201.65  Effective date of rules.

    The publication or service of any substantive rule shall be made not 
less than 30 days prior to its effective date except: (a) As otherwise 
provided by the Administration for good cause found and published in the 
Federal Register or (b) in the case of rules granting or recognizing 
exemption or relieving restriction, interpretative rules, and statements 
of policy.



    Subpart G_Formal Proceedings, Notice, Pleadings, Replies (Rule 7)



Sec. 201.71  Commencement of proceedings.

    Formal proceedings may be commenced with respect to any phase of an 
application for Government aid or other relief, the processing of which 
by statute requires a public hearing. The Administration may, in its 
discretion, also direct the holding of a hearing not required by statute 
for any purpose authorized in the statutes it administers.



Sec. 201.72  Notice.

    Notice of any matter which may result in or involves the institution 
of a formal proceeding will be given by publication in the Federal 
Register in sufficient detail and in sufficient time to apprise 
interested persons of the nature of the issues to be heard and to

[[Page 14]]

allow for an opportunity to file petitions for leave to intervene.



Sec. 201.73  Joinder of proceedings.

    (a) Two or more matters which have been set for hearing by the 
Administration, and which involve similar issues, may be consolidated 
for the purpose of hearing. Such consolidation may, at the discretion of 
the Administration, or Presiding Officer after hearing has been ordered, 
be ordered upon petition of any party to said hearing or upon the 
initiative of the Administration.
    (b) A petition to consolidate shall be filed not later than the 
first prehearing conference in the proceeding with which consolidation 
is requested, and shall relate only to then pending applications. If 
made at such conference, the petition may be oral. A petition which is 
not timely filed shall be dismissed unless the petitioner shall clearly 
show good cause for the failure to file said petition on time. A 
petition which does not relate to an application pending at the time of 
or before a prehearing conference in a proceeding with which 
consolidation is requested, shall likewise be dismissed unless the 
petitioner shall clearly show good cause for a failure to file the 
application within the prescribed period.



Sec. 201.74  Declaratory orders.

    The Administration may issue a declaratory order to terminate a 
proceeding or to remove uncertainty. Petitions for the issuance thereof 
shall state clearly and concisely the nature of the controversy or 
uncertainty, shall cite the statutory authority involved, shall include 
a complete statement of the facts and grounds supporting the petition, 
together with a full disclosure of petitioner's interest.



Sec. 201.75  Petitions--general.

    All petitions shall be written and shall state the petitioner's 
grounds of interest in the subject matter, the facts relied upon, and 
the relief sought, and shall cite the authority upon which the petition 
rests. The petition shall be served upon all parties named therein or 
affected thereby. Answers to petitions may be filed.



Sec. 201.76  Applications for Government aid.

    Applications for operating-differential subsidies, charter of 
Government-owned vessels, and other types of Government aid shall 
conform to the requirements set forth in the various general orders and 
other regulations of the Administration specifically provided therefor.



Sec. 201.77  Amendments or supplements to pleadings.

    Amendments or supplements to any pleading will be allowed or refused 
in the discretion of the Administration if the case has not been 
assigned for hearing, otherwise in the discretion of the presiding 
officer designated to conduct the hearing; Provided, That after a 
prehearing conference has been held no amendment shall be allowed which 
would substantially broaden the issues, unless an opportunity is 
afforded all parties to answer such amended pleadings and to prepare for 
hearing upon the broadened issues. The presiding officer may direct a 
party to state its case more fully and in more detail by way of 
amendment. If a response to an amended pleading is necessary, it may be 
filed and served. Amendments or supplements allowed prior to hearing 
will be served in the same manner as the original pleading. Whenever by 
the regulations in this part a pleading is required to be subscribed, 
the amendment or supplement shall also be subscribed.



Sec. 201.78  Petition for leave to intervene.

    A petition for leave to intervene may be filed in any proceeding 
before the Administration. The petition will be granted by the presiding 
officer if the proposed intervenor establishes that it has a substantial 
interest in the proceeding and will not unduly broaden the issues 
therein or unduly delay the proceeding. All such petitions shall be 
filed prior to the opening of the prehearing conference, or if none is 
held, before the commencement of hearing, unless petitioner shows good 
cause for allowing the petition at a later time. Intervention petitions 
shall be served in the same manner as other petitions, and shall be 
subject to answer. Intervention petitions will be granted where

[[Page 15]]

necessary to protect substantial interests of the petitioner and where 
intervention will not materially broaden the issues. A person granted 
permission to intervene becomes a party to the proceeding.



Sec. 201.79  Motions.

    All motions and requests for rulings shall state the relief sought, 
the authority relied upon, and the facts alleged. If made before or 
after the hearing, such motions shall be in writing. If made at the 
hearing, they may be stated orally: Provided, however, That the 
presiding officer may require that such motion be reduced to writing and 
filed and served in the same manner as a formal motion. Answers to 
formal motions shall comply with the requirements of Sec. 201.80. 
Motions and answers thereto shall be addressed to the presiding officer 
if the case is pending before such officer. Oral argument upon a written 
motion in which an answer has been filed may be granted within the 
discretion of the Administration or the presiding officer, as the case 
may be. A repetitious motion will not be entertained.



Sec. 201.80  Answers to applications, petitions, or motions.

    A pleading filed in response to an application, petition, or motion 
is called an answer. An answer may be filed to any application, 
petition, motion or pleading which is required to be served on the 
answering party or noticed in the Federal Register. An answer to a 
written application, petition, or motion shall be in writing and shall 
be filed within ten days after service of the pleading which it answers. 
Any new matter raised in an answer shall be deemed to be controverted. A 
response to an answer is called a reply. A short reply restricted to 
such new matters may be filed within five days of service of the answer.



   Subpart H_Responsibilities and Duties of Presiding Officer (Rule 8)



Sec. 201.85  Commencement of functions of Department of Transportation 

Office of Hearings.

    In proceedings handled by the Department of Transportation Office of 
Hearings, its functions shall attach upon notice of the institution of a 
formal proceeding involving a prehearing conference and/or a hearing by 
the Administration.

[General Order 41, 3d Rev., 29 FR 14475, Oct. 22, 1964; 29 FR 15374, 
Nov. 17, 1964, as amended at 63 FR 9157, Feb. 24, 1998]



Sec. 201.86  Presiding officer.

    An Administrative Law Judge in the Department of Transportation 
Office of Hearings will be designated by the Department's Chief 
Administrative Law Judge to preside at hearings required by statute, or 
directed to be held under the Administration's discretionary authority 
in hearings not required by statute, in rotation so far as practicable, 
unless the Administration shall designate one or more of its officials 
to serve as presiding officer(s) in hearings required by statute, or 
member(s) of the staff in proceedings not required by statute.

[63 FR 9157, Feb. 24, 1998]



Sec. 201.87  Authority of presiding officer.

    The officer designated to hear a case shall have authority to 
arrange and issue notice of the date, time and place of hearings; under 
appropriate circumstances consolidate dockets for joint hearing; sign 
and issue subpoenas authorized by law; take or cause depositions to be 
taken; rule upon proposed amendments or supplements to pleadings; hold 
conferences for the settlement or simplification of matters embraced in 
the proceedings; regulate the course of the hearing; prescribe the order 
in which evidence shall be presented; dispose of procedural requests or 
similar matters; hear and initially rule upon all motions and petitions 
before him; administer oaths and affirmations; examine witnesses, direct 
witnesses to testify or produce available evidence and to submit 
reports, studies and analyses of data available to them which may be 
generally relevant and material to the determination of any questions of 
fact in issue; rule upon offers of proof and receive competent,

[[Page 16]]

relevant, material, reliable, and probative evidence; exclude 
irrelevant, immaterial, unreliable, repetitious or cumulative evidence; 
exclude cross-examination which is primarily intended to elicit self-
serving declarations in favor of the witness; and limit cross-
examination of any questions of fact in issue; for a full and true 
disclosure of the facts in issue; act upon petitions to intervene; act 
upon submission of facts, or argument; initially consider offers of 
settlement or other proposals of adjustment upon which recommendations 
to the Administration may be made; hear oral argument at the close of 
testimony; fix the time for filing briefs, motions and other documents 
to be filed in connection with hearings and replies thereto; and issue 
the initial or recommended decisions and dispose of any other pertinent 
matter that normally and properly arises in the course of proceedings. 
When the presiding officer is unavailable for any reason, and the 
exercise of any of his powers and functions, as described herein, is 
due, timely, and necessary, the Chief Administrative Law Judge may 
exercise such powers and functions until the presiding officer becomes 
available or until his successor is designated.

[General Order 41, 3d Rev., 29 FR 14475, Oct. 22, 1964; 29 FR 15374, 
Nov. 17, 1964, as amended at 63 FR 9157, Feb. 24, 1998]



Sec. 201.88  Postponement or change of place by presiding officer.

    If, in the judgment of the presiding officer, convenience or 
necessity so requires he may postpone the time or change the place of 
hearing.



Sec. 201.89  Disqualification of presiding officer.

    Any presiding officer may at any time withdraw if he deems himself 
disqualified, in which case another presiding officer will be 
designated. If a party to a proceeding, or his representative, files in 
good faith a timely and sufficient affidavit of personal bias or 
disqualification of a presiding officer, the Administration will 
determine the matter as a part of the record and decision in the case.



                 Subpart I_Summary Disposition (Rule 9)



Sec. 201.91  Filing of motions, answers.

    Any party or (if a petition to intervene shall have been filed but 
not have been acted upon) any prospective party may at or before the 
first prehearing conference in any proceeding, or at such later time as 
might be allowed by the presiding officer, move with supporting 
affidavits for a summary disposition in his favor of all or any part of 
the proceeding. Any adverse party may within 20 days serve opposing 
affidavits or may countermove for summary disposition. Oral argument 
thereon may be granted in the discretion of the presiding officer.



Sec. 201.92  Ruling on motion.

    The presiding officer may grant such motion if the application, 
motion, or other pleadings, affidavits or depositions, if any, and 
matters of official notice show that there is no genuine issue as to any 
material facts, that there is no necessity that further facts be 
developed in the record, and that such party is entitled to a decision 
as a matter of law.



Sec. 201.93  Review of ruling, appeal.

    The order of the presiding officer denying a motion for summary 
disposition shall be subject to interlocutory appeal under the 
provisions of Sec. 201.123. An order granting a motion for summary 
disposition is automatically reviewable by the Administration in 
accordance with the provisions of Sec. 201.133 and shall not be final 
until acted upon by the Administration.



  Subpart J_Prehearing Conference; Settlements; Procedural Agreements 

                                (Rule 10)



Sec. 201.101  Prehearing conference.

    Prior to any hearing a prehearing conference may be held before the 
presiding officer. Written notice of a prehearing conference shall be 
transmitted by the Secretary of the Administration or the Chief Hearing 
Examiner to all parties of record including persons whose petitions for 
leave to intervene in the proceeding have not

[[Page 17]]

theretofore been granted, and where practicable, by general release to 
the public press.
    (a) At the prehearing conference the following matters, among 
others, shall be considered: (1) Petitions for leave to intervene; (2) 
motions for consolidation or severance of dockets for joint or separate 
hearing to the extent that the Administration has not theretofore taken 
specific action; (3) simplification and delineation of the issues to be 
heard; (4) designation of matters in respect of which official notice 
may be taken; (5) requests for discovery and production of evidence 
considered to be generally relevant and material to the issues in the 
proceeding; (6) stipulations; (7) limitation of number of witnesses, 
particularly the avoidance of duplicate expert witnesses; (8) procedure 
applicable to the proceeding; (9) offers of settlement, as hereinafter 
to be more particularly discussed in Sec. 201.103; and (10) scheduling 
of the dates for exchange of exhibits, written testimony both 
affirmative and rebuttal and establishing the date, time and place for 
hearing.
    (b) If deemed necessary or appropriate, the presiding officer may 
also, on his own motion, or on motion of Public Counsel direct any party 
to a proceeding to prepare and submit exhibits setting forth studies, 
forecasts, or estimates on matters relevant and material to the issues 
in the proceeding to be sponsored by witnesses available for cross-
examination thereon.



Sec. 201.102  Prehearing rulings.

    The presiding officer will, where practicable, issue prehearing 
rulings, acting on petitions for leave to intervene, delineating the 
issues, summarizing the rulings made at the conference, specifying a 
schedule for the exchange of exhibits and written testimony, the date, 
time and place of hearing and specifying a time for the filing of 
exceptions to the rulings. The prehearing rulings shall be served upon 
all parties to the proceeding and any persons who participated in the 
conference. Exceptions to the prehearing rulings may be filed by any 
such party or person within the time specified therein. The presiding 
officer may serve amended rulings in the light of the exceptions 
presented. Such rulings and amendments, if any, shall constitute the 
official account of the conference and shall control the subsequent 
course of the proceeding, but they may be reconsidered and modified at 
any time to protect the public interest or to prevent injustice.



Sec. 201.103  Opportunity for agreement of parties and settlement of case.

    Where time, the nature of the proceeding, and the public interest 
permit, all interested parties shall have the opportunity for submission 
to and consideration by the presiding officer of offers of settlement, 
or proposals of adjustment together with facts and/or arguments relevant 
to such offers or proposals without prejudice to the rights of the 
parties. The presiding officer need not be present at any negotiations 
of such nature. The presiding officer shall issue an initial or 
recommended decision thereon recommending approval or disapproval of 
such offer of settlement or proposal of adjustment to the Administration 
for final action thereon. No agreement, offer, or proposal shall be 
admissible in evidence over the objection of any party in any hearing on 
the matter. When any settlement does not dispose of the whole 
proceeding, the remaining issues shall be determined in accordance with 
sections 7 and 8 of the Administrative Procedure Act.



              Subpart K_Discovery and Depositions (Rule 11)



Sec. 201.109  Discovery and production of documents.

    Upon request of any party showing good cause therefor, at the 
prehearing conference or otherwise upon notice to all other parties, the 
Administration or presiding officer may direct any party to produce and 
permit the inspection and copying or photographing, by or on behalf of 
the moving party, of any designated documents, papers, books, accounts, 
letters, photographs, objects, or tangible things, not privileged which 
constitute or contain evidence relating to any matter, not privileged, 
which is relevant to the subject matter involved in the pending 
proceeding, and which

[[Page 18]]

are in his possession, custody or control. The order shall specify the 
time, place, and manner of making the inspection and taking the copies 
and photographs and may prescribe such terms and conditions as are just. 
In lieu of such inspections the material may be produced in exhibit form 
and served upon all parties to a formal proceeding. Such exhibits may 
also, upon request of any party, be offered in evidence at a hearing.



Sec. 201.110  Depositions: request for orders to take; time of filing.

    The Administration or presiding officer may, upon proper request of 
a party to a proceeding or under circumstances deemed proper, issue an 
order to take a deposition regarding any matter, not privileged, which 
is relevant to the subject matter involved in the proceedings. A motion 
to take a deposition shall be filed not less than fifteen (15) days 
before the proposed date for taking the deposition, unless a shorter 
period is fixed under Sec. 201.54, and shall set forth the reason for 
the deposition, the place and time of taking, the officer before whom it 
is to be taken, the name and address of each witness to be examined, if 
known, and, if the name is not known, a general description sufficient 
to identify him or the particular class or group to which he belongs, 
and whether the deposition is to be based upon written interrogatories 
or upon oral examination. If the deposition is to be based upon oral 
examination, the motion shall contain a statement of the matters 
concerning which each witness will testify. If the deposition is to be 
based on written interrogatories, the motion shall be accompanied by the 
interrogatories to be propounded, serially numbered. Copies of all 
motions to take depositions, and accompanying interrogatories, if any, 
shall conform to the requirements of subpart D of this part. Objection 
to the taking of such depositions may be made in an answer to such 
motion. Without prejudice to objection, the answer may also state 
objection to any individual interrogatory, and if the deposition is 
permitted, the presiding officer will rule upon such objections to 
interrogatories. A party served with an order to take a deposition on 
written interrogatories shall have ten (10) days after date of service 
of such order unless a shorter period is fixed under Sec. 201.54, 
within which to file and serve written cross interrogatories, which 
shall be served pursuant to subpart D of this part. Answers to 
applications for cross interrogatories may be filed in accordance with 
Sec. 201.80. Upon the issuance of an order by the Administration or the 
presiding officer for the taking of a deposition, the Docket Clerk shall 
mail a copy thereof to all parties, including the party who requested 
the deposition. An application to take a deposition in a foreign country 
will be entertained when necessary or convenient, and authority to take 
such deposition will be granted upon such notice and other terms and 
directions as are lawful and appropriate.



Sec. 201.111  Contents of order.

    The order issued authorizing the taking of a deposition will state 
the name and address of each witness or a general description sufficient 
to identify him or the particular class or group to which he belongs, 
the matters concerning which the witness may be questioned, the place 
where, the time when, and the officer before whom the deposition is to 
be taken, any or all of which may or may not be the same as set forth in 
the motion filed. If the deposition is to be taken upon written 
interrogatories, a list of the interrogatories will accompany the order.



Sec. 201.112  Record of examination; oath; objections.

    The officer before whom the deposition is to be taken shall put the 
witness under oath and shall personally, or by someone acting under his 
direction and in his presence, record the testimony of the witness. The 
testimony shall be taken stenographically, shall be translated to 
English, if necessary, and shall be transcribed unless the parties agree 
otherwise. All objections made at the time of the examination to the 
qualifications of the officer taking the deposition, or to the manner of 
taking it, or to the evidence presented, or to the conduct of any party, 
and any other objections to the proceedings, shall be noted by the 
officer upon the

[[Page 19]]

deposition. Any party served with a notice to take an oral deposition 
may cross-examine a witness whose testimony is taken under such 
deposition. In lieu of cross-examination, parties served with notice of 
taking a deposition may transmit written interrogatories or cross-
interrogatories to the officer taking the deposition, who shall propound 
them to the witness and record the answers verbatim together with any 
objections interposed thereto by adverse parties.



Sec. 201.113  Submission to witness, changes, signing.

    When the testimony is fully transcribed the deposition of each 
witness shall be submitted to him for examination and shall be read to 
or by him. Any changes in form or substance which the witness desires to 
make shall be entered upon the deposition by the officer with a 
statement of the reasons given by the witness for making them. The 
deposition shall then be signed by the witness, unless the parties by 
stipulation waive the signing or the witness is ill or cannot be found 
or refuses to sign. If the deposition is not signed by the witness, the 
officer shall sign it and state on the record the fact of the waiver or 
of the illness or absence of the witness or the fact of the refusal to 
sign, together with the reason, if any, given therefor; and the 
deposition may then be used as fully as though signed, unless upon 
objection the presiding officer holds that the reasons given for the 
refusal to sign require rejection of the deposition in whole or in part.



Sec. 201.114  Certification and filing by officer; copies.

    The officer taking the deposition shall certify on the deposition 
that the witness was duly sworn by him and that the deposition is a true 
record of the testimony given by the witness, and that said officer is 
not of counsel or attorney to either of the parties and is not directly 
or indirectly interested in the outcome of the proceeding or 
investigation. He shall then securely seal the deposition in an envelope 
endorsed with the title of the proceeding and marked ``Deposition of 
(here insert name of witness)'', and shall promptly send the original 
and two copies thereof, together with the original and two copies of all 
exhibits, by registered mail to the Administration. Parties shall make 
their own arrangements with the officer taking the deposition for copies 
of the testimony and exhibits.



Sec. 201.115  Waiver of objections and admissibility.

    Objections to the form of question and answer shall be made before 
the officer taking the deposition by parties or representatives present, 
and if not so made, shall be deemed waived. Depositions shall, when 
offered at the hearing, be subject to proper legal objections.



Sec. 201.116  Time of filing.

    Any depositions to be offered in evidence shall be filed with the 
presiding officer not later than the close of the offering party's 
presentation.



Sec. 201.117  Inclusion in record.

    No deposition or part thereof shall constitute a part of the record 
in any proceeding until received in evidence.



Sec. 201.118  Witness fees; expenses of taking depositions.

    Witnesses whose depositions are taken pursuant to the regulations in 
this part, and the officer taking such deposition, shall severally be 
entitled to the same fees and mileage as are paid in the courts of the 
United States. All expenses of taking such depositions shall be paid by 
the party at whose instance the deposition is taken.



                      Subpart L_Subpoenas (Rule 12)



Sec. 201.121  Application for subpoena ad testificandum.

    An application for a subpoena requiring attendance of a witness at a 
hearing may be made without notice by any party to the presiding 
officer, or, in the event that a presiding officer has not been assigned 
to a proceeding or the presiding officer is not available, to the Chief 
Hearing Examiner, for action by him or by a member of the 
Administration. A subpoena for the attendance of a witness shall be 
issued on oral application at any time and shall be issued

[[Page 20]]

upon request of any interested party upon tender of an original and two 
copies of such subpoena. A record of the issuance of such a subpoena 
shall be entered in the docket.



Sec. 201.122  Application for subpoena duces tecum.

    An application for a subpoena duces tecum for documentary or 
tangible evidence shall be in duplicate except that for good cause shown 
it may be made during the course of a hearing on the record to the 
presiding officer. Such application need not be served upon all parties. 
All such applications, whether written or oral, shall contain a 
statement or showing of general relevance and reasonable scope of the 
evidence sought and shall be accompanied by an original and two copies 
of the subpoena sought which shall describe the documentary or tangible 
evidence to be subpoenaed with as much particularity as is feasible.



Sec. 201.123  Standards for issuance of subpoena duces tecum.

    The officer considering any application for a subpoena duces tecum 
shall issue the subpoena requested if he is satisfied the application 
complies with this section and the request is not unreasonable, 
oppressive, excessive in scope or unduly burdensome. No attempt shall be 
made to determine the admissibility of evidence in passing upon an 
application for a subpoena duces tecum and no detailed or burdensome 
showing shall be required as a condition to the issuance of any 
subpoena.



Sec. 201.124  Service and quashing of subpoenas.

    Subpoenas issued under this section may be served upon the person to 
whom directed in accordance with subpart D of this part. Any person upon 
whom a subpoena is served may within seven (7) days after service or at 
any time prior to the return date thereof, whichever is earlier, file a 
motion to quash or modify the subpoena with the officer who issued the 
subpoena for action by him, and serve a copy of such motion to quash 
upon the party requesting the subpoena. If the person to whom the motion 
to modify or quash the subpoena has been addressed or directed has not 
acted upon such a motion by the return date, such date shall be stayed 
pending his final action thereon. The Administration may at any time 
review, upon its own initiative, the ruling of the officer denying a 
motion to quash a subpoena. In such cases, the Administration may at any 
time order that the return date of a subpoena which it has elected to 
review be stayed pending Administration action thereon.



Sec. 201.125  Attendance and mileage fees.

    Persons attending hearings under requirement of subpoenas are 
entitled to the same fees and mileage as in the courts of the United 
States, to be paid by the party at whose instance the persons are 
called.



Sec. 201.126  Service of subpoenas.

    If service of subpoena is made by a United States marshal or his 
deputy, such service shall be evidenced by his return thereon. If made 
by any other person, such person shall make affidavit thereto, 
describing the manner in which service is made, and return such 
affidavit on or with the original subpoena. In case of failure to make 
service, the reasons for the failure shall be stated on the original 
subpoena. In making service the original subpoena shall be exhibited to 
the person served, shall be read to him if he is unable to read, and a 
copy thereof shall be left with him. The original subpoena, bearing or 
accompanied by required return, affidavit, or statement, shall be 
returned without delay to the Administration, or if so directed on the 
subpoena, to the presiding officer before whom the person named in the 
subpoena is required to appear.



Sec. 201.127  Subpoena of Administration employees, documents, or things.

    No subpoena for the attendance of an Administration officer or 
employee, or for the production of Administration documents or things 
shall be complied with except upon written authorization of the General 
Counsel upon written application by the party requesting the subpoena.

[[Page 21]]



                 Subpart M_Hearing Procedures (Rule 13)



Sec. 201.131  Presentation of evidence.

    (a) Testimony. Where appropriate, the Presiding officer may direct 
that the testimony of witnesses be prepared in written exhibit form and 
shall be served at designated dates in advance of the hearing. Evidence 
as to events occurring after the exhibit-exchange dates shall be 
presented by a revision of exhibits. Witnesses sponsoring exhibits shall 
be made available for cross-examination. However, unless authorized by 
the presiding officer, witnesses will not be permitted to read prepared 
testimony into the record. The evidentiary record shall be limited to 
factual and expert opinion testimony. Argument will not be received in 
evidence but rather should be presented in opening and/or closing 
statements of counsel and in briefs to the presiding officer 
subsequently filed.
    (b) Exhibits. All exhibits and responses to requests for evidence 
shall be numbered consecutively by the party submitting same and 
appropriately indexed as to number and title and shall be exchanged on 
dates prior to the hearing prescribed in the prehearing rulings. Written 
testimony should be identified alphabetically. Two copies shall be sent 
to each party and two to the presiding officer. No response to a request 
for evidence will be received into the record unless offered and 
received as an exhibit at the hearing. The exhibits, other than the 
written testimony, shall include appropriate footnotes or narrative 
material explaining the source of the information used and the methods 
employed in statistical compilations and estimates and shall contain a 
short commentary explaining the conclusions which the offeror draws from 
the data. Rebuttal exhibits should refer specifically to the exhibits 
being rebutted. Where one part of a multipage exhibit is based upon 
another part, appropriate cross-reference should be made. The principal 
title of each exhibit should state precisely what it contains and may 
also contain a statement of the purpose for which the exhibit is 
offered. However, such explanatory statement, if phrased in an 
argumentative fashion, will not be considered as a part of the 
evidentiary record. Additional exhibits pertinent to the issues may be 
submitted in a proceeding with the approval of the presiding officer.
    (c) Cooperation on basic data. Parties having like interests are 
specifically encouraged to cooperate with each other in joint 
presentations particularly in such items as basic passenger, cargo, and 
scheduling data compiled from official or semiofficial sources, and any 
other evidence susceptible to joint presentation. Duplicate presentation 
of the same evidence should be avoided wherever possible.
    (d) Authenticity. The authenticity of all documents submitted as 
proposed exhibits in advance of the hearing shall be deemed admitted 
unless written objection thereto is filed prior to the hearing, except 
that a party will be permitted to challenge such authenticity at a later 
time upon a clear showing of good cause for failure to have filed such 
written objection.
    (e) Statement of position and trial briefs. A written statement of 
position should be exchanged by all counsel with copies to all other 
parties prior to the beginning of the hearing: Provided, however, That 
Public Counsel or counsel for a public body which has intervened as its 
interests may appear, may offer his statement of position at the 
conclusion of the evidentiary hearing, unless such is impracticable. 
This statement should include a showing of the theory of the case of the 
party submitting the statement and will not be subject to cross-
examination. Trial briefs are acceptable but will not be required.



Sec. 201.132  Conduct of the hearing.

    (a) Order of presentation. Normally the order of presentation at the 
hearing will be alphabetical in each of the following categories:
    (1) MarAd statistical material.
    (2) Shipper interests, United States and foreign government 
departments.
    (3) Applicants.
    (4) Intervenors.
    (5) Public counsel.

Normally, rebuttal should be presented without any adjournment in the 
proceedings.

[[Page 22]]

    (b) Burden of proof. The burden of proof shall be (1) upon an 
applicant for any form of government aid or grant; and (2) upon a 
proponent for the issuance of any rule or order within the jurisdiction 
of the Administration. The burden of going forward with rebuttal 
evidence in proceedings involving matters under paragraphs (b) (1) and 
(2) of this section shall fall upon opposing intervenors. Whenever an 
intervenor is permitted by the presiding officer to raise or advance a 
new issue in the proceeding, the burden of proof as to such issue shall 
fall upon such intervenor. If the burden of proof is met as to such new 
issue, the other parties shall have the burden of going forward with 
rebuttal evidence in such regard.
    (c) Requirement for submission of corrected copies of exhibits. Each 
party shall present three fully corrected copies of its exhibits to be 
offered in evidence, one for the docket and two for the presiding 
officer.
    (d) Offer of exhibits in evidence. The exhibits and written 
testimony sponsored by each witness shall be offered in evidence at the 
close of his direct examination to the extent practicable. After ruling 
upon motions to strike they shall be received in evidence subject to 
cross-examination. The presiding officer, in his discretion, may defer 
such ruling until after completion of cross-examination.
    (e)(1) Cross-examination. Cross-examination shall be limited to the 
scope of the direct examination and, except for Public Counsel and 
counsel for public bodies which have intervened as their interests may 
appear, to witnesses whose testimony is adverse to the party desiring to 
cross-examine--this being intended specifically to prohibit so-called 
``friendly cross-examination''. Cross-examination, which is not 
necessary to test the truth and completeness of the direct testimony and 
exhibits, will not be permitted.
    (2) Re-cross-examination. Second rounds of cross-examination 
normally will not be permitted unless it is necessary to cover new 
matters raised by a subsequent examination. Cross-examination of any 
particular witness shall be limited to one attorney for each party and 
shall not include subjects which are not germane to the interest 
represented by the cross-examiner.
    (f) Oral motions. Oral presentation on any motion or objection shall 
be limited to the party or parties making the motion or objection and 
the party or parties against which the motion or objection is directed 
and Public Counsel. Such presentation shall also be limited to one 
attorney for each party.
    (g) Official notice; public document items. Whenever there is 
offered (in whole or in part) a public document, such as an official 
report, decision, opinion, or published scientific or economic 
statistical data issued by any of the executive departments (or their 
subdivisions), legislative agencies or committees, or administrative 
agencies of the Federal Government (including Government-owned 
corporations), or a similar document issued by a State or its agencies, 
and such document (or part thereof) has been shown by the offerer to be 
reasonably available to the public, such document need not be produced 
or marked for identification, but may be offered for official notice as 
a public document item by specifying the document or relevant part 
thereof.
    (h) Oral argument at hearings. A request for oral argument at the 
close of testimony will be granted or denied by the presiding officer in 
his discretion.



Sec. 201.133  Appeal from ruling of presiding officer.

    Rulings of presiding officers may not be appealed prior to, or 
during the course of, the hearing except where the presiding officer has 
granted a Motion for Summary Disposition under subpart I of this part, 
or in extraordinary circumstances where prompt decision by the 
Administration is necessary to prevent unusual delay, expense, or 
detriment to the public interest, in which instances the matter shall be 
referred forthwith by the presiding officer to the Administration. Any 
such appeal shall be filed within fifteen (15) days from the date of the 
ruling by the presiding officer.



Sec. 201.134  Separation of functions.

    The separation of functions as required by section 5(c) of the 
Administrative Procedure Act shall be observed

[[Page 23]]

in adversary proceedings involving controverted factual issues arising 
under the regulations in this part.



                      Subpart N_Evidence (Rule 14)



Sec. 201.136  Evidence admissible.

    In any proceeding under the regulations in this part all evidence 
which is relevant, material, reliable and probative, and not unduly 
repetitious or cumulative shall be admissible. Irrelevant and immaterial 
or unduly repetitious or cumulative evidence shall be excluded.



Sec. 201.137  Rights of parties as to presentation of evidence.

    Every party shall have the right to present his case or defense by 
oral or documentary evidence, to submit rebuttal evidence, and to 
conduct such cross-examination as may be required for a full and true 
disclosure of the facts.



Sec. 201.138  Unsponsored written material.

    (a) Material that may be deemed evidence. Where a formal hearing is 
held, a party shall be afforded an opportunity to participate through 
submission of relevant, material, reliable and probative written 
evidence including official notice matters covered in Sec. 201.132(g): 
Provided, That such evidence submitted by persons not present at the 
hearing will not be made a part of the record if opposed to by any party 
for good cause shown.
    (b) Material that may not be deemed evidence. Letters expressing 
views or urging action and other unsponsored written material in respect 
of matters embraced in, or related to, a formal hearing will be placed 
in the correspondence section of the docket of the proceeding. These 
data are not to be deemed part of the evidence or part of the record in 
the material unless sponsored at the public hearing by an authenticating 
and supporting witness.



Sec. 201.139  Documents containing matter both material and not material.

    Where written matter offered in evidence is embraced in a document 
containing other matter which is not intended to be offered in evidence, 
the party offering shall present the original document to all parties at 
the hearing for their inspection, and shall offer a true copy of the 
matter which is to be introduced unless the presiding officer determines 
that the matter is short enough to be read into the record. Opposing 
parties shall be afforded an opportunity to introduce in evidence, or by 
stipulations other portions of the original document which are material 
and relevant.



Sec. 201.140  Records in other proceedings.

    When any portion of the record before the Administration in any 
proceeding other than the one being heard is offered in evidence, a true 
copy of such portion shall be presented for the record in the form of an 
exhibit unless the parties represented at the hearing stipulate upon the 
record that such portion may be incorporated by reference.



Sec. 201.141  Stipulations.

    The parties may, by stipulation in writing filed at the prehearing 
conference, or by written or oral stipulation presented at the hearing 
or by written stipulation subsequent to the hearing, agree upon any 
facts involved in the proceeding and include them in the record with the 
consent of the presiding officer. Proposed written stipulations shall be 
subscribed by the sponsors and served upon all parties of record. Only 
upon acceptance by all parties to the proceeding may a stipulation be 
noted for the record or received as evidence.



Sec. 201.142  Further evidence required by presiding officer during 

hearing.

    At any time during the hearing the presiding officer may call for 
the production of further relevant and material evidence, reports, 
studies, and analyses upon any issue, and require such evidence, where 
available, to be presented by the party or parties concerned, either at 
the hearing or adjournment thereof in accordance with Sec. 201.132(b). 
Such material shall be received subject to appropriate motions, cross-
examination and/or rebuttal. If a witness refuses to testify or produce

[[Page 24]]

the evidence as requested, the presiding officer shall report such 
refusal to the Administration forthwith.



Sec. 201.143  Exceptions to rulings of presiding officer unnecessary.

    Formal exceptions to rulings of the presiding officer are 
unnecessary. It is sufficient that a party, at the time the ruling of 
the presiding officer is made or sought, makes known the action which he 
desires the presiding officer to take or his objection to an action 
taken, and his grounds therefor.



Sec. 201.144  Offer of proof.

    An offer of proof made in connection with an objection taken to any 
ruling of the presiding officer rejecting or excluding proffered oral 
testimony shall consist of a statement of the substance of the evidence 
which counsel contends would be adduced by such testimony; and, if the 
excluded evidence consists of evidence in documentary or written form or 
of reference to documents or records, a copy of such evidence shall be 
marked for identification and shall accompany the record as the offer of 
proof.



 Subpart O_The Record: Contents; Development; Perfection; Confidential 

                           Treatment (Rule 15)



Sec. 201.146  Receipt of documents after hearing.

    Documents to be submitted for the record after the close of the 
hearing will not be received in evidence except upon ruling of the 
presiding officer. Such documents when submitted shall be accompanied by 
proof that copies have been served upon all parties, who shall have an 
opportunity to comment thereon; and shall be received not later than ten 
(10) days after the close of the hearing except for good cause shown, 
and not less than ten (10) days prior to the date set for filing briefs. 
Exhibit numbers should be assigned by counsel or the party. In computing 
the time within which to file such documents or other writings the five 
(5) additional days provided in Sec. 201.54 shall not apply. Documents 
which are submitted but do not comply with the provisions of this rule 
will be filed in the correspondence section of the docket.



Sec. 201.147  Official transcript.

    The Administration will designate the official reporter for all 
hearings. The official transcript of testimony taken, together with any 
exhibits and any briefs or memoranda of law filed therewith shall be 
filed with the Administration. Transcripts of testimony will be 
available in any proceeding under the regulations in this section, and 
will be supplied by the official reporter to the parties and to the 
public except when required for good cause to be held confidential, at 
rates not to exceed the maximum rates fixed by the contract between the 
Administration and the reporter.



Sec. 201.148  Corrections of transcript.

    Motions made at the hearing to correct the record will be acted upon 
by the presiding officer. Motions made after the hearing to correct the 
record as to matters of substance rather than form, shall be filed with 
the presiding officer within ten (10) days after receipt of the 
transcript, unless otherwise directed by the presiding officer, and 
shall be served on all parties. Such motions may be in the form of a 
letter and shall certify the date when the transcript was received. If 
no objections are received within ten (10) days after date of service, 
the transcript will, upon approval of the presiding officer, be changed 
to reflect such corrections. If objections are received, the motion will 
be acted upon with due consideration of the stenographic record of the 
hearing.



Sec. 201.149  Copies of data or evidence.

    Every person compelled to submit data or evidence shall be entitled 
to retain or procure a copy of transcript thereof on payment of proper 
costs.



Sec. 201.150  Record for decision.

    The transcript of testimony and exhibits, together with all papers 
and requests (except the correspondence section of the docket), 
including rulings and any recommended or initial decisions filed in the 
proceeding shall constitute the exclusive record for decision. Final 
decisions will be predicated

[[Page 25]]

on the same record, including the initial decision of the presiding 
officer.



Sec. 201.151  Objections to public disclosure of information.

    Upon objection to public disclosure of any information sought to be 
elicited during a hearing, and a showing of cause satisfactory to the 
presiding officer, the witness shall disclose such information only in 
the presence of the presiding officer, official reporter and such 
attorneys or representatives of each party with demonstrated interests, 
as the presiding officer shall determine and after all present have been 
sworn to secrecy. The transcript of testimony shall be held 
confidential. Within five (5) days after such testimony is given, or 
document received, the objecting party shall file with the presiding 
officer a verified written motion to withhold such information from 
public disclosure, setting forth sufficient identification of same and 
the basis upon which public disclosure should not be made. Copies of 
said transcript and motion need not be served upon any other parties 
than those sworn to secrecy unless so ordered by the presiding officer.



Subpart P_Briefs, Requests for Findings, Decisions, Exceptions (Rule 16)



Sec. 201.155  Briefs; request for findings.

    The time for filing briefs to the presiding officer, and extensions 
thereof, shall be fixed by him. The period of time allowed shall be the 
same for all parties unless the presiding officer, for good cause shown, 
directs otherwise. Normally there shall be an opening brief by the 
moving parties, an answering brief by the proponents of a contrary 
conclusion and a short reply by the moving parties. Briefs and 
statements of position as authorized, shall be served upon all parties 
pursuant to subpart D of this part. Briefs shall include a summary of 
evidence, together with references to exhibit numbers and pages of the 
transcript, and memoranda of law with appropriate citations of the 
authorities relied upon. They shall contain proposed findings of fact 
and conclusions in serially numbered paragraphs.



Sec. 201.156  Requests for extension of time for filing briefs.

    Requests for extension of time within which to file briefs shall 
conform to the requirements of Sec. 201.53. Except for good cause 
shown, such requests shall be filed and served not later than five (5) 
days before the expiration of the time fixed for the filing of briefs.



Sec. 201.157  Reopening of a case by presiding officer prior to decision.

    At any time prior to the filing of his initial or recommended 
decision, the presiding officer, either upon petition or upon his own 
initiative may, for good cause shown and upon reasonable notice, reopen 
the case for the receipt of further evidence.



Sec. 201.158  Decisions, authority to make and kinds.

    To the presiding officer is delegated the authority to render 
initial or recommended decisions in all proceedings before him, 
including motions, petitions and other pleadings. Tentative or final 
decisions will be rendered by the Administration. The same officers who 
preside at the reception of evidence pursuant to section 7 of the 
Administrative Procedure Act shall render the initial or recommended 
decisions except where such officers become unavailable to the 
Administration, in which case another Presiding Officer will be 
designated to make such decision or certify the record to the 
Administration. Where the Administration requires the entire record in 
the case to be certified to it for initial decision, the Presiding 
Officer shall first recommend a decision, except that in rule making:
    (a) In lieu thereof the Administration may issue a tentative 
decision or any of its responsible officers may recommend a decision or 
(b) any such procedure may be omitted in any case in which the 
Administration finds upon the record that due and timely execution of 
its functions in the public interest imperatively and unavoidably so 
requires.



Sec. 201.159  Decisions; contents and service.

    All initial, recommended, tentative, and final decisions, whether 
rendered

[[Page 26]]

orally or in writing shall include a statement of findings and 
conclusions, as well as the reasons or bases therefor, upon the material 
issues presented, as well as a statement of the appropriate rule, order, 
sanction, relief to be imposed, or the denial thereof. A copy of each 
decision when issued or when transcribed if orally rendered (and all 
orally presented decisions shall be stenographically recorded) shall be 
served on the parties to the proceeding, and furnished to interested 
persons upon request.



Sec. 201.160  Decision based on official notice.

    Official notice may be taken of such matters as might be judicially 
noticed by the courts, or of technical or scientific facts within the 
general or specialized knowledge of the Administration as an expert body 
or of a document required to be filed with or published by a duly 
constituted governmental body: Provided, That where a decision or part 
thereof rests on the official notice of a material fact not appearing in 
the evidence of the record, the fact of official notice shall be so 
stated in the decision, and any party, on timely request, shall be 
afforded an opportunity to show the contrary.



Sec. 201.161  Exceptions to, and review by the Administration of initial 

or recommended decisions.

    Within twenty (20) days after the service date of the initial or 
recommended decision, whether oral or in writing, unless a shorter 
period is fixed under Sec. 201.54, any party may file exceptions to any 
conclusions, findings, or statements contained in such decision, and a 
brief in support of such exceptions. Such exceptions and brief shall 
constitute one document, shall indicate with particularity alleged 
errors, shall indicate pages of transcript and exhibit numbers when 
referring to the record, and shall be served on all parties pursuant to 
subpart D of this part. Whenever the presiding officer renders an 
initial decision, in the absence of the filing of exceptions thereto, or 
notice of review thereof by the Administration, such decision, shall 
upon the issuance of an appropriate order by the Administration, become 
the decision of the Administration. Upon the filing of exceptions to, or 
notice of review of, an initial or recommended decision, such decision 
shall become inoperative until the Administration determines the matter. 
Where exceptions are filed to, or the Administration reviews, an initial 
or recommended decision, the Administration, except as it may limit the 
issues upon notice or by rule, will have all the powers which it would 
have in making the initial decision. Whenever the Administration shall 
determine to review an initial or recommended decision on its own 
initiative, notice of such intention shall be served upon the parties 
within thirty (30) days after the date when the initial or recommended 
decision is orally rendered and, if in writing, served.



Sec. 201.162  Replies to exceptions.

    Any party may file and serve a reply to exceptions within twenty 
(20) days after date of service thereof, unless a shorter period is 
fixed pursuant to Sec. 201.54. Such reply shall indicate pages of the 
transcript and exhibit numbers when referring to the record.



Sec. 201.163  Request for extension of time for filing exceptions and 

replies thereto.

    Requests for extension of time within which to file exceptions, and 
briefs in support thereof, or replies to exceptions shall conform to the 
applicable provisions of subpart E of this part. Except for good cause 
shown, such requests shall be filed and served not later than five (5) 
days before the expiration of the time fixed for the filing of such 
documents.



Sec. 201.164  Certification of record by presiding officer.

    The presiding officer shall certify and transmit the entire record 
to the Administration when: (a) Exceptions are filed or the time 
therefor has expired, (b) notice is given by the Administration that the 
initial or recommended decision will be reviewed on its own initiative, 
or (c) the Administration requires the case to be certified to it for 
initial decision.

[[Page 27]]



     Subpart Q_Oral Argument; Submittal for Final Decision (Rule 17)



Sec. 201.166  Oral argument.

    If oral argument before the Administration is desired on exceptions 
or replies to exceptions to an initial, recommended, or tentative 
decision, or on a motion, petition, or application, a request therefor 
shall be made in writing properly addressed to the Administration. Any 
party may make such request irrespective of his filing exceptions or 
replies. If a brief on exceptions or replies thereto are filed, the 
request for oral argument shall be incorporated therein. Requests for 
oral argument on any motion, petition, or application shall be made in 
the motion, petition, or application or in the reply thereto. Requests 
for oral argument will be granted or denied in the discretion of the 
Administration, and, if granted, the notice of oral argument will set 
forth the order of presentation and the amount of time to be allotted. 
Those who appear before the Administration for oral argument should 
confine their argument to points of controlling importance and shall 
limit their argument to points upon which exceptions have been filed. 
Where the facts of a case are adequately and accurately dealt with in 
the initial, recommended, or tentative decision, parties should, as far 
as possible, address themselves in argument to the conclusions. Effort 
should be made by parties taking the same position to agree in advance 
of the argument upon those who are to present their side of the case. 
The names of persons who will argue and the amount of time requested by 
each should be received by the Administration not later than ten (10) 
days before the date set for the argument. Ordinarily, consolidation of 
appearances at oral argument will permit the parties' interests to be 
presented more effectively in the time allotted.



Sec. 201.167  Submission to Administration for final decision.

    A proceeding will be deemed submitted to the Administration for its 
determination as follows: (a) If oral argument is had, on the date of 
completion thereof, or if memoranda on points of law are permitted to be 
filed after argument, the last date of such filing; (b) if oral argument 
is not had, the last date when exceptions or replies thereto are filed, 
or if exceptions are not filed, the expiration date for such exceptions 
or the date when all parties have stated that no exceptions will be 
filed; (c) in the case of an initial decision, the date of notice of the 
Administration to review the decision, if such notice is given.



 Subpart R_Stay of Administration's Decision, Reopening of Proceedings 

                                (Rule 18)



Sec. 201.171  Stay of Administration's decision.

    The Administration's decision or order shall be stayed pending 
resolution by the Administration of a petition for reopening, duly 
filed, and for so long as such Administration's action has not been 
finally disposed of in accordance with the provisions of section 7 of 
Department of Commerce Order 117 (Revised).



Sec. 201.172  Time for filing petition to reopen.

    Except for good cause shown, and upon leave granted, petition to 
reopen under Sec. 201.174, shall be filed with the Administration 
within twenty (20) days after the date of service of the 
Administration's decision or order in the proceeding, unless a different 
period is fixed under Sec. 201.54.



Sec. 201.173  Reopening by Administration and modification or setting aside 

of decision.

    Upon petition and a showing of compelling cause, filed in accordance 
with Sec. 201.174, or on its own motion, the Administration may at any 
time reopen any proceeding under the regulation in this part for 
rehearing, reargument, or reconsideration in whole or in part. After 
reasonable notice and opportunity for hearing or such other procedure as 
the Administration may direct, the Administration may alter, modify or 
set aside in whole or in part its decision therein if it finds such 
action is required by changed conditions in fact or law or by the public 
interest.

[[Page 28]]



Sec. 201.174  Petition for reopening.

    A petition for reopening for the purpose of rehearing, reargument, 
or reconsideration, shall be made in writing, shall state the grounds 
relied upon, and conform to the requirements of subpart D of this part. 
If the petition is for the purpose of rehearing, said petition shall 
state the nature and purpose of the new evidence to be adduced and that 
such evidence was not available at the time of the prior hearing. If the 
petition be for reargument or reconsideration, the matter claimed to 
have been erroneously decided shall be specified and the alleged errors 
briefly stated. In case of exceptional circumstances, satisfactorily 
shown by the petitioner, a request for modification of rules or orders 
may be made by telegram or otherwise, upon notice to all parties or 
attorneys of record, but such request shall be followed by a petition 
filed and served in accordance with subpart D of this part.



Sec. 201.175  Answers to petition to reopen.

    Answers to petitions to reopen shall conform to the requirements of 
subpart D of this part.



           Subpart S_Judicial Standards of Practice (Rule 19)



Sec. 201.181  General matters.

    (a) In general, the functions of the Administration involve hearing 
procedures comparable to those of a court and accordingly parties to 
proceedings before the Administration and persons representing these 
parties are expected to conduct themselves with honor and dignity. For 
the same reasons, the members of the Administration and those of its 
employees who participate with the Administration in the determination 
of formal proceedings are expected to conduct themselves with the same 
fidelity to standards of propriety that characterizes a court and its 
staff. The standing and the effectiveness of the Administration are in 
direct relation to the observance by it, its staff and the parties and 
attorneys appearing before it of the highest of judicial and 
professional ethics.
    (b) It is essential in cases to be determined after notice and 
hearing and upon a record, or in any other cases which the 
Administration by order may designate, that the judicial character of 
the Administration be recognized and protected. As a consequence, from 
the time of the filing of an application or a petition which can be 
granted by the Administration only after notice and opportunity for 
hearing, or in the case of other matters from the time of notice by the 
Administration that such matters shall be determined after notice and 
opportunity for hearing, no ex parte communications, as hereinafter 
defined, are to constitute or be considered part of the record on which 
the final decision is to be predicated.



Sec. 201.182  Improper pressures.

    It is determined to be improper that there be any effort by any 
person interested in a case before the Administration to attempt to sway 
the judgment of the Administration by undertaking to bring pressure or 
influence to bear upon the Administration, its staff, or the presiding 
officer assigned to the proceeding. It is further determined to be 
improper that such interested persons or any member of the 
Administration's staff or the presiding officer directly or indirectly 
give statements to the press or radio, by paid advertisements or 
otherwise, designed to influence the Administration's judgment in the 
matter. In addition, it is further determined to be improper that any 
person solicit communications to the Administration or any of its 
members, its staff or the presiding officer in the case other than by 
counsel of record who shall serve copies thereof on all other parties to 
the proceeding.



Sec. 201.183  Ex parte communications.

    (a) Requests for expeditious treatment of matters pending with the 
Administration are deemed communications on the merits and as such are 
improper except when forwarded from parties to a proceeding and served 
upon all other parties thereto. Such communications from parties to a 
proceeding should be in the form of a motion and are to be dealt with as 
such by the Administration, the presiding officer, and

[[Page 29]]

the parties to the proceeding. Any such request which is not made as a 
motion shall be placed in the public correspondence file and will not be 
considered by the Administration or any of its staff members or the 
presiding officer in connection with the disposition of the case.
    (b) Written or oral communications involving any substantive or 
procedural issue in a matter subject to public hearing directed to a 
Member of the Administration, its staff, or the presiding officer in the 
case, from any individual in private or public life shall be deemed a 
private communication in respect of the merits of the case. These 
communications, unless otherwise provided for by law or a published rule 
of the Administration are deemed ex parte communications and are not to 
be considered part of any record or the basis for any official action by 
the Administration, members of its staff or the presiding officer: 
Provided, however, That this prohibition shall not be determined to 
apply to informal petitions or applications filed with the 
Administration; the usual informal communications between counsel 
including discussions directed toward the development of a stipulation 
or settlement between parties; communications of a nature deemed proper 
in proceedings in U.S. Federal courts; and communications which merely 
inquire as to the status of a proceeding without discussing issues or 
expressing points of view. Any prohibited communications in writing 
received by a Member of the Administration, its staff or the presiding 
officer shall be made public by placing it in the correspondence file of 
the docket which is available for public inspection and will not be 
considered by the Administration or the presiding officer as part of the 
record for decision. If the ex parte communication is received orally, a 
memorandum setting forth the substance of the conversation shall be made 
and filed in the correspondence section of the appropriate public 
docket.



                   Subpart T_Effective Date (Rule 20)



Sec. 201.185  Effective date and applicability of rules.

    The regulations in this part shall become effective October 23, 
1964, and shall apply only to cases which are designated for hearing on 
or after October 23, 1964: Provided, however, That the regulations in 
this part shall be applicable to cases designated for hearing prior to 
October 23, 1964, if consolidated with a case designated for hearing on 
or after that date. All other cases designated for hearing prior to 
October 23, 1964, shall be governed by the rules in effect immediately 
prior to such date.



PART 202_PROCEDURES RELATING TO REVIEW BY SECRETARY OF TRANSPORTATION 

OF ACTIONS BY MARITIME SUBSIDY BOARD--Table of Contents



Sec.
202.1 Purpose.
202.2 Time and place for filings.
202.3 Form of petitions, requests and replies.
202.4 Petitions and requests for review--content.
202.5 Replies and requests that review not be exercised--content.
202.6 Grant or denial of review.
202.7 Supplemental briefs.
202.8 Oral argument.
202.9 Decisions by the Secretary of Transportation.
202.10 Petitions for reconsideration.
202.11 Ex parte communications.

    Authority: Sec. 204, 49 Stat. 1987, as amended; sec. 204(b), as 
amended, 46 U.S.C. 1114(b); Reorganization Plan No. 7 of 1961 (26 FR 
7315).

    Source: 32 FR 2705, Feb. 9, 1967, unless otherwise noted.



Sec. 202.1  Purpose.

    The rules of this part prescribe procedures relating to Secretarial 
review of any decision, report, order or action of the Maritime Subsidy 
Board (Board) pursuant to Department Order 117-A (31 FR 8087, 15331). 
Section 6 of Department Order 117-A is reprinted here for the 
convenience of the public.

    Sec. 6. Review and finality of actions by Maritime Subsidy Board. 
.01 The Secretary of Transportation (hereinafter referred to as 
``Secretary'') may, on his own motion or on the basis of a petition 
filed as hereinafter

[[Page 30]]

provided, review any decision, report and/or order of the Maritime 
Subsidy Board based on a hearing held pursuant to (a) statutory 
requirements or (b) Board order, by entering a written order stating 
that he elects to review the action of the Board. Copies of all orders 
for review shall be served on all parties of record (which phrase 
includes the Board). Petitions for review under this paragraph may be 
filed by parties of record, shall be in writing, and shall state the 
grounds upon which petitioner relies. Ten (10) copies of such petitions 
for review, together with proof of service thereof on all parties of 
record, shall be filed with the Secretary within fifteen (15) days after 
the date of the service of the Board's decision, report or order. 
Parties of record may file replies in writing thereto. Ten (10) copies 
of such replies, together with proof of service thereof on the 
petitioner and all other parties of record, shall be filed with the 
Secretary within ten (10) days after the date the petition for review is 
timely filed. Petitions for review and replies thereto shall be limited 
to the record before the Board. If a petition for review is filed within 
the time prescribed, a decision, report or order of the Board shall be 
final fifteen (15) days after expiration of the time prescribed for 
filing a reply thereto unless the Secretary, prior to expiration of the 
fifteen (15) days, enters a written order granting the petition for 
review. If no petition for review is filed within the time prescribed, a 
decision, report or order of the Board shall be final twenty (20) days 
after the date of service of the decision unless the Secretary, prior to 
expiration of the twenty (20) days, enters a written order stating that 
he elects to review the action of the Board. If upon any review the 
decision of the Secretary rests on official notice of a material fact 
not appearing in the evidence in the record, any party of record shall, 
if request is made within ten (10) days after the date of service of the 
Secretary's decision on said party, be afforded an opportunity to show 
the contrary. The said ten (10) days shall constitute the period for a 
``timely request'' within the meaning of section 7(d) of the 
Administrative Procedure Act.
    .02 The Secretary may on his own motion review all actions of the 
Maritime Subsidy Board other than those referred to in paragraph .01 of 
this section by entering a written order stating that he elects to 
review the action of the Board. Any person having an interest in any 
action of the Board under this paragraph shall have the privilege of 
submitting to the Secretary within ten (10) days after the date of such 
Board action, a request that the Secretary undertake such review. Such 
request shall be in writing and shall state the grounds upon which the 
person submitting the same relies and his interest in the action for 
which review is requested. Ten (10) copies of such requests shall be 
submitted to the Secretary. Any other person having an interest in such 
matter shall have the privilege of submitting within fifteen (15) days 
after the date of the Board's action, a written request that the 
Secretary not exercise such review. Copies of request that the Secretary 
undertake or not exercise review will be open for public inspection at 
the office of the Secretary of the Board. If either a request that the 
Secretary undertake review or a request that he not exercise review is 
submitted within the time prescribed, an action of the Board shall be 
final in ten (10) days after expiration of the time prescribed for 
submission of a request that review not be exercised unless the 
Secretary, prior to the expiration of the ten (10) days, enters a 
written order stating that he elects to review the action of the Board. 
If neither a request that the Secretary undertake review nor a request 
that he not exercise review is submitted within the time prescribed, an 
action of the Board shall be final in twenty (20) days after the date of 
such action unless the Secretary, prior to expiration of the twenty (20) 
days, enters a written order stating that he elects to review the action 
of the Board. Copies of all orders for review shall be served upon the 
Board, and upon all persons filing requests as herein described.
    .03 If a timely petition for reconsideration is filed under the 
rules prescribed by the Board, the time for filing a petition or request 
for review by the Secretary under paragraph .01 or .02 of this section, 
respectively, or the entry of an order by the Secretary on his own 
motion electing to review an action of the Board under paragraph .01 or 
.02 of this section, shall, in the case of actions under paragraph .01 
of this section run from the date of service of the Board's action and, 
in the case of actions under paragraph .02 of this section, run from the 
date of the Board's action, finally disposing of the issues presented by 
the petition for reconsideration.
    .04 In computing any period of time under this section, the time 
begins with the day following the act, event, or default, and includes 
the last day of the period unless it is Saturday, Sunday, or national 
legal holiday, in which event the period runs until the end of the next 
day which is not a Saturday, Sunday, or such holiday. The prescribed 
time for action by the Secretary in a proceeding in which additional 
days have been added pursuant to the provisions of this paragraph shall 
be extended by the total of such additional days.
    .05 Petitions and requests for review by the Secretary shall not be 
filed:
    a. Unless the petitioner shall have first exhausted his 
administrative remedies (other than a petition for reconsideration) 
before the Maritime Subsidy Board; nor

[[Page 31]]

    b. With respect to interlocutory decisions of the Maritime Subsidy 
Board in actions or proceedings referred to in paragraphs .01 and .02 of 
this section.
    .06 The Secretary may, for good cause and/or in order to prevent 
undue hardship in any particular case, waive or modify any procedural 
provision of this section by written order.



Sec. 202.2  Time and place for filings.

    All petitions, requests and replies relating to Secretarial review 
of Maritime Subsidy Board actions shall be filed with the Office of the 
Secretary of Transportation, Department of Transportation. Such papers 
shall be filed in accordance with the provisions of and within the time 
periods prescribed by Department Order 117-A.



Sec. 202.3  Form of petitions, requests and replies.

    (a) All papers presented to the Secretary, other than records, shall 
bear on the cover the name and post office address of the party, and the 
name and address of the principal attorney or authorized representative 
(if any) for the party concerned. Certification shall be made that 
service of the paper has been made upon all parties of record (if any) 
and upon the Secretary of the Maritime Subsidy Board. One copy of every 
paper filed with the Secretary must in addition bear at its close the 
hand written signature of the party or attorney.
    (b) All papers presented to the Secretary, other than records, 
shall, unless they are fewer than 10 pages in length, be preceded by a 
subject index of the matter contained therein, with page references, and 
a table of the cases (alphabetically arranged), textbooks, statutes and 
other material cited, with references to the pages where they are cited.
    (c) Whenever a reference is made to a transcript, exhibit or other 
part of the record, such reference must be accompanied by a specific 
citation identifying the document and indicating the relevant page 
number of the document concerned.
    (d) Papers filed with the Secretary should be logically arranged, 
with proper headings, concise, and free from irrelevant and unduly 
repetitious matter.
    (e) It will not be necessary to reproduce the opinion of the Board.



Sec. 202.4  Petitions and requests for review--content.

    Petitions and requests for review shall contain in the order here 
indicated--
    (a) A reference to the decision, report, order or action of the 
Board;
    (b) A concise statement of the interest of the party submitting the 
paper;
    (c) A concise summary statement of the case containing that which is 
material to the consideration of the questions presented;
    (d) A listing of each of the grounds upon which the party seeking 
review relies, expressed in the terms and circumstances of the case, 
each ground set forth in a separate, numbered paragraph;
    (e) The argument, generally amplifying the material in paragraph (d) 
of this section and exhibiting clearly the points of law, policy and 
fact being presented, citing the authorities, statutes and other 
material relied upon. The argument should separately identify and treat 
each of the grounds upon which review is sought. In cases where 
reversible legal error is contended, a full legal argument on the points 
concerned should be presented. In cases where policy error is contended, 
it should be pointed out what policy of the Board is alleged to be 
wrong, what is wrong with it and what policy the submitting party 
advocates as the correct one. In cases where reversible factual error is 
contended, the findings of fact alleged to be erroneous should be 
pointed out along with citations to the record where appropriate. The 
party should further indicate precisely what it contends to be the 
correct findings of fact, with supporting references;
    (f) A conclusion, specifying with particularity the action which the 
submitting party believes the Secretary should take.



Sec. 202.5  Replies and requests that review not be exercised--content.

    Replies and requests that review not be exercised shall contain in 
the order here indicated--
    (a) A reference to the decision, report, order, or action of the 
Board;

[[Page 32]]

    (b) A concise statement of the interests of the party submitting the 
paper;
    (c) Where deemed necessary by the submitting party, a concise 
summary statement of the case explicitly pointing out any inaccuracy or 
omission in the statement of the other side, with references to the 
record where appropriate;
    (d) A listing of the reasons why review should not be exercised, 
each reason set forth in a separate, numbered paragraph;
    (e) The argument generally amplifying the material in paragraph (d) 
of this section and, in addition, specifically replying to the points of 
law, policy and fact presented by the other side (each stated 
separately) citing the authorities, statutes, and other material relied 
upon by the submitting party;
    (f) A conclusion, specifying with particularity the action which the 
submitting party believes the Secretary should take.



Sec. 202.6  Grant or denial of review.

    (a) A petition or request for review by the Secretary of any 
decision, report, order or action of the Board will not be granted 
unless significant and important questions of over-all policy requiring 
the Secretary's attention are involved or there appears to be 
significant legal, policy, or factual error in the Board's action.
    (b) The parties and the Secretary of the Board will be notified, by 
Order, of the Secretary's decision to review a case on his own motion, 
and of his decision to review or to deny review of a case where a 
petition or request concerning review has been filed.
    (c) Promptly upon notice of a decision by the Secretary to review a 
case subject to review under section 6.01 of Department Order 117-A, the 
Secretary of the Board shall certify to the Secretary the complete 
record of the proceeding before the Board and shall serve upon all 
parties a copy of such certification which shall adequately identify the 
matter so certified. The Secretary of the Board shall further serve upon 
all parties a copy of any further communication from the Board or 
Maritime Administration on such a case.



Sec. 202.7  Supplemental briefs.

    If an order taking review is entered by the Secretary, further 
briefs supplementing the arguments set forth in the petitions and 
replies may be requested in cases where the Secretary deems such to be 
appropriate and desirable.



Sec. 202.8  Oral argument.

    Generally, oral argument will not be necessary. However, the 
Secretary reserves the right to schedule such when he deems it 
desirable.



Sec. 202.9  Decisions by the Secretary of Transportation.

    Decisions of the Secretary will be reached in accordance with 
applicable law and the evidence. Upon the determination of a case taken 
under review by the Secretary, a written decision and opinion which 
states the Secretary's conclusions and an explanation thereof will be 
issued.



Sec. 202.10  Petitions for reconsideration.

    Petitions for reconsideration of decisions by the Secretary in any 
case taken under review will be considered, upon a showing of good 
cause, if filed within ten (10) days of service of the Secretary's 
decision.



Sec. 202.11  Ex parte communications.

    Oral or written communications with the Department concerning a 
matter subject to Secretarial review under section 6.01 of Department 
Order 117-A, unless otherwise provided by law or by order, rule, or 
regulation of the Department, shall be deemed ex parte communications 
and shall not be part of the record and shall not be considered in 
making any recommendation, decision or action; Provided, however, That 
this rule shall not apply to customary informal communications with 
Department counsel, including discussions directed toward the 
development of a stipulation or settlement between parties; 
communications of a nature deemed proper in proceedings in U.S. Federal 
courts; and communications with Department counsel which merely inquire 
as to procedures or the status of a proceeding without discussing issues 
or expressing points of view. Any

[[Page 33]]

written communication subject to the above stated rule received by the 
Department shall be placed in the correspondence file of the case, which 
is available for public inspection. If an oral communication subject to 
the above stated rule is received, a memorandum setting for the 
substance of the conversation shall be made and placed in the 
correspondence file.



PART 203_PROCEDURES RELATING TO CONDUCT OF CERTAIN HEARINGS UNDER THE 

MERCHANT MARINE ACT, 1936, AS AMENDED--Table of Contents



Sec.
203.1 Scope of rules.
203.2 Applications.
203.3 Opposition to applications.
203.4 Replies.
203.5 Types of hearings.
203.6 Oral evidentiary hearing before one or more members.

    Authority: Secs. 204(b), 605(c) and 805(a), Merchant Marine Act, 
1936, as amended (46 U.S.C. app. 1114(b), 1175(c) and 1223(a)).

    Source: 55 FR 12358, Apr. 3, 1990, unless otherwise noted.



Sec. 203.1  Scope of rules.

    (a) The provisions of this part apply to applications which involve 
statutorily mandated hearings under sections 605(c) and 805(a) of the 
Merchant Marine Act, 1936, as amended (46 U.S.C. app. 1175(c), 1223(a)), 
hereinafter referred to as the ``Act'', conducted by the Maritime 
Administrator or Maritime Subsidy Board of the Maritime Administration, 
hereinafter referred to collectively as the ``Administration''.
    (b) The provisions of this part are to be construed consistently 
with the Administration Rules of Practice and Procedure in 46 CFR part 
201. If this part and 46 CFR part 201 conflict, this part shall govern.



Sec. 203.2  Applications.

    (a) Notice of all applications subject to this part shall be 
published in the Federal Register, in accordance with the provisions of 
46 CFR 201.72.
    (b) All applications under section 605(c) of the Act shall specify, 
at a minimum, full details of the existing or proposed new or amended 
service, to include itineraries and the number and type of vessels 
currently operated in the trade or trade route, the number and type of 
vessels proposed to be operated in the trade or trade route, the 
frequency of sailings and port calls and the nature and extent of U.S.-
flag and any foreign-flag competition. As a matter of discretion, the 
Administration may request additional information, which may be 
protected by a confidentiality ruling, if justified. If the application 
is one for additional service on a route in which the applicant has an 
established service, or for an existing service, then the applicant must 
include information on its previous three years of operation. Applicants 
for permission under section 805(a) of the Act must describe clearly the 
scope of permission sought, including details of proposed domestic 
service and existing or proposed foreign service, as well as the 
applicant's operating structure.
    (c) Applications under section 605(c) of the Act shall be filed on 
Form MA-964, in accordance with the instructions annexed thereto. Copies 
of Form MA-964 may be obtained on request from the Secretary of the 
Administration.
    (d) Applications for permission under section 805(a) of the Act 
shall be submitted in accordance with the procedures set forth in 46 CFR 
part 380, and shall comply with all of the requirements of that part.



Sec. 203.3  Opposition to applications.

    (a) Required documents. A person seeking to oppose an application 
shall file with the Secretary of the Administration, and concurrently 
serve upon the applicant, a petition for leave to intervene, together 
with an answer, within the time period specified in the Federal Register 
notice of the application. Normally, twenty days will be provided.
    (b) Petition for leave to intervene. The petition for leave to 
intervene shall specify the basis upon which such person asserts a right 
to intervene and shall set forth with particularity:
    (1) The number and type of U.S.-flag vessels currently operated by 
the person seeking intervention in the trade or trade route to which the 
application pertains.

[[Page 34]]

    (2) The frequency of sailings of vessels operated by such person in 
the trade or trade route to which the application pertains in the 36 
calendar months immediately preceding the date of the application.
    (3) The specific ports of call conducted by such person in the trade 
or trade route to which the application pertains in the 36 calendar 
months immediately preceding the date of the application.
    (4) The average annual carriage by such person for the past 36 
months on the trade route to which the application pertains.
    (5) If applicable, specific information detailing firm and definite 
plans for the inauguration of a new service, including, as appropriate, 
but not limited to, approval by the board of directors or general 
partners, membership in applicable conference agreements, office 
openings or the retention of agents in the proposed service area, 
acquisition of vessels and related equipment, subsidy applications, 
applications for any needed Government approvals or advertisement for 
the proposed service.
    (6) Such other information as the person believes should be 
considered in a determination of such person's right to intervene.
    (c) Answer. (1) The answer shall be simultaneously filed with the 
petition for leave to intervene and shall specify the basis upon which 
such person asserts the application should be denied or granted subject 
to modifications.
    (2) The answer shall set forth with particularity:
    (i) The ground upon which opposition is based;
    (ii) The factual matters which such person believes must be 
determined by the Administration;
    (iii) The legal matters which such person believes must be 
determined by the Administration;
    (iv) For each factual and legal matter raised such person's position 
and basis therefor; and
    (v) The precise nexus between each factual and legal matter raised 
and the decision of the Administration.
    (d) Right to intervene in Opposition to applications. (1) Leave to 
intervene in opposition to applications under section 605(c) of the Act 
will only be granted to operators of U.S.-flag vessels, and only to the 
extent, as demonstrated by the petition for leave to intervene, that 
such person provides an existing service, or that such person has firm 
and definite plans to provide a service, by a showing that its vessels 
operate in the same trade or on the same trade route as that proposed by 
the applicant and so operate in a manner competitive with the specific 
service proposed by the applicant. Although persons seeking intervention 
need not call at the same specific ports proposed by the applicant by 
direct vessel calls, any filing based on intermodal service in 
opposition to an application shall demonstrate that such person 
regularly competes by intermodal service for cargo moving to or from 
ports in the service proposed by the applicant. The burden of 
demonstrating competition between the vessels of the person seeking 
intervention and those of the applicant will be with the person seeking 
such intervention. Leave to intervene will not be granted to those 
conducting a competing service on an intermittent or de minimis basis.
    (2) Leave to intervene in opposition to applications under section 
805(a) of the Act will be granted, as provided in the statute, to every 
person, firm, or corporation ``having any interest'' in such 
application.



Sec. 203.4  Replies.

    Within ten (10) days after the date for filing answers, the 
applicant may file a reply specifically addressed to the issues raised 
in the answers and to oppose the grant to any petitioner of leave to 
intervene.



Sec. 203.5  Types of hearings.

    (a) Oral Evidentiary Hearing: If, upon review of the application, 
answers, petitions to intervene and replies, the Administration 
determines that the proceeding involves a disputed issue of material 
fact which cannot be resolved on the basis of available information of 
record, and that the case is anticipated to involve the submission of 
extensive evidence, or the Administration determines that it is 
otherwise appropriate, the Administration may issue an order referring 
the case to an Administrative

[[Page 35]]

Law Judge for oral evidentiary hearing. Such hearing shall be conducted 
in accordance with the procedures set out in 46 CFR part 201. The 
Administration may resolve issues of intervention in such order or refer 
such issues to the Administrative Law Judge. The burden of establishing 
that there is a disputed issue of material fact is upon the party 
seeking the oral evidentiary hearing.
    (b) Hearing on Submission of Written Evidence and Argument: If, upon 
review of the application, answers, petitions to intervene and replies, 
the Administration determines that the proceeding involves a disputed 
issue of material fact which cannot be resolved on the basis of 
available information of record, but which is not anticipated to involve 
the submission of extensive evidence, the Administration may fulfill the 
hearing requirement in sections 605(c) and 805(a) of the Act by 
rendering a decision solely on the merits of papers submitted, provided 
that a full and true disclosure of the facts is made and such procedure 
is fair to all parties. The Administration may, in its discretion, 
direct the submission of briefs on legal issues together with evidence 
in written form, and/or the holding of oral argument before the 
Administration prior to issuing its final decision on the proceeding.
    (c) Show Cause Proceeding: If, upon review of the application, 
answers, petitions to intervene and replies, the Administration 
determines that the proceeding does not or is not likely to involve a 
disputed issue of material fact or that if such facts exist they can be 
resolved on the basis of available information subject to official 
notice, and if the case is not anticipated to involve the submission of 
extensive evidence, the Administration may determine to handle the 
matter by show-cause proceeding. In that event, it will issue a decision 
setting out its tentative conclusions on all of the matters of fact and 
law at issue in the proceeding. A Notice summarizing such decision shall 
be published in the Federal Register in accordance with 46 CFR 201.72. 
Interested persons may file comments, including support or rebuttal for 
any matter officially noticed, within 30 days of the date of service of 
the tentative decision and responses to such comments shall be filed 
within ten days thereafter unless a shorter or longer period is provided 
by the Administration for such comments and answers.



Sec. 203.6  Oral evidentiary hearing before one or more members.

    If an oral evidentiary hearing is to be conducted, the Maritime 
Administration, or the Maritime Subsidy Board or one or more of its 
members, may conduct such hearing. A member who is not present at the 
hearing may participate in the consideration and the decision of the 
case where the oral evidentiary hearing, if held, has been 
stenographically recorded in full and transcribed for the member's 
review.



PART 204_CLAIMS AGAINST THE MARITIME ADMINISTRATION UNDER THE FEDERAL 

TORT CLAIMS ACT--Table of Contents



Sec.
204.1 Scope and procedure for filing claims.
204.2 Claims payable.
204.3 Claims not payable.
204.4 Time limitations on claims.
204.5 Notification to claimant of action on claim.
204.6 Payment of claims.
204.7 Delegation of authority.
204.8 Where to file claims.
204.9 Indemnity or contribution.
204.10 Attorney's fees.

    Authority: 28 U.S.C. 2672; 28 CFR 14.11; 49 CFR 1.45(a)(2), (3), and 
(16).

    Source: 50 FR 25711, June 21, 1985, unless otherwise noted.



Sec. 204.1  Scope and procedure for filing claims.

    This part prescribes the requirements and procedure for 
administrative settlement of claims against the United States, involving 
the Maritime Administration, under the Federal Tort Claims Act, based on 
death, personal injury, or damage to or loss of property. The 
controlling regulations are promulgated by the Department of Justice at 
28 CFR Part 14--Administrative Claims Under Federal Tort Claims Act. 
These regulations supplement those of the Department of Justice and 
provide specific guidance regarding claims processing in the Maritime 
Administration.

[[Page 36]]



Sec. 204.2  Claims payable.

    Claims for death, personal injury, or damage to or loss of real or 
personal property are payable when the death, injury or damage is caused 
by a negligent or wrongful act or omission of an employee of the 
Maritime Administration, while acting within the scope of employment and 
under circumstances in which the United States, if a private person, 
would be liable to the claimant under the law of the place where the act 
or omission occurred.



Sec. 204.3  Claims not payable.

    A claim is not payable under the regulations in this part 204, if 
such tort claim is excluded from the scope of the Federal Tort Claims 
Act, as amended, pursuant to 28 U.S.C. 2680.



Sec. 204.4  Time limitations on claims.

    (a) A claim can be settled only if presented in writing within two 
years after it accrues.
    (b) The two year statute of limitations is not tolled until the 
Office of the Chief Counsel of the Maritime Administration receives from 
a claimant, or the claimant's duly authorized agent or legal 
representative, an executed Standard Form 95, ``Claims for Damage, 
Injury, or Death,'' or written notification of an incident, together 
with a claim for money damages in a sum certain, for death, personal 
injury, or damage to or loss of real or personal property. When a claim 
is received in any office, mail unit, or other Maritime Administration 
activity other than the Office of the Chief Counsel, such office, unit 
or activity shall transmit it to the Office of the Chief Counsel without 
delay.

[50 FR 25711, June 21, 1985, as amended at 64 FR 54782, Oct. 8, 1999]



Sec. 204.5  Notification to claimant of action on claim.

    (a) If a claim is approved (either for the amount claimed or less 
than such full amount), the claimant, prior to the disbursement of an 
award, shall sign a document releasing the United States, its agents and 
employees from all further claims relating to the incident giving rise 
to the approved claim.
    (b) If the claim is finally denied, the official vested with such 
authority shall inform the claimant by certified or registered mail of 
the final denial of the claim. Notification of final denial shall 
include a statement that a claimant who does not accept or is 
dissatisfied with the action may institute suit against the United 
States not later than six months after the date of mailing of the notice 
of final denial.
    (c) A claimant may regard the failure of the Maritime Administration 
to make a final disposition of a claim within six months after the date 
of receipt of the claim by the Maritime Administration as a final denial 
for the purpose of filing suit.



Sec. 204.6  Payment of claims.

    (a) Once the amount to be paid has been agreed upon, the agency 
shall attempt to forward a check for such amount to the claimant within 
thirty days.
    (b) If a claimant is represented by an attorney, both the claimant 
and the claimant's attorney shall be designated as payees on any check 
delivered to the claimant's attorney.



Sec. 204.7  Delegation of authority.

    (a) Subject to written approval of the Attorney General of the 
United States of any payment in excess of $100,000, the Chief Counsel of 
the Maritime Administration is authorized to approve the award, 
compromise, or settlement of any tort claim and to authorize payment of 
the claim.
    (b) The Chief Counsel is authorized to deny any claim and to settle 
and authorize payment of any tort claim involving the Maritime 
Administration in an amount not exceeding $100,000.

[64 FR 54783, Oct. 8, 1999]



Sec. 204.8  Where to file claims.

    Claimants must file claims with the Chief Counsel (MAR-220), 
Maritime Administration, Department of Transportation, Room 7232, SW, 
Washington, DC 20590 at the Nassif Building, 7th and D Streets.

[64 FR 54783, Oct. 8, 1999]

[[Page 37]]



Sec. 204.9  Indemnity or contribution.

    (a) Sought by the United States. If a claim arises under 
circumstances in which the United States is entitled to indemnity or 
contribution under a contract or the applicable law governing joint 
tort-feasors, the Chief Counsel of the Maritime Administration shall 
notify the third party of the claim and request the third party to honor 
its obligation to the United States or to accept its share of joint 
liability. If the issue of third party indemnity or contribution is not 
satisfactorily adjusted, the underlying claim shall be settled only 
after consultation with the Department of Justice as provided in 28 CFR 
14.7
    (b) Sought from the United States. Claims for indemnity or 
contribution from the United States shall be settled under this part 
only if the incident giving rise to liability and the claim is otherwise 
cognizable under this part.



Sec. 204.10  Attorney's fees.

    Attorney's fees for any claim settled under this part are limited to 
not more than twenty percent of the amount paid in settlement.



PART 205_AUDIT APPEALS; POLICY AND PROCEDURE--Table of Contents



Sec.
205.1 Purpose.
205.2 Policy.
205.3 Procedure.
205.4 Finality of decisions.
205.5 Contracts containing disputes article.

    Authority: Sec. 204, 49 Stat. 1987, 1998, 2004, 2011; 46 U.S.C. 
1114, 1155, 1176, 1212.

    Source: 66 FR 23861, May 10, 2001, unless otherwise noted.



Sec. 205.1  Purpose.

    This part establishes the policy and procedure for parties to use 
when seeking redress and appeals of audit decisions involving contracts 
with the Maritime Subsidy Board or the Maritime Administration (MARAD, 
we, our, or us). A party to a contract (you or your) may appeal MARAD's 
findings, interpretations, or decisions of annual or special audits.



Sec. 205.2  Policy.

    If you disagree with audit findings and fail to settle any 
differences with the appropriate Office Director, you may ask the 
appropriate office Associate Administrator to review the audit findings. 
If you disagree with the Associate Administrator, you may appeal to the 
Maritime Administrator (Administrator).



Sec. 205.3  Procedure.

    (a) You have 90 days from the date you receive the initial audit 
findings to file a written request for review of the audit findings with 
the appropriate Associate Administrator. Your written request must state 
the legal or factual bases for your disagreement. The appropriate 
Associate Administrator will issue a written determination.
    (b) You have 30 days following the Associate Administrator's final 
audit determination to submit your appeal in writing to the 
Administrator. Your written appeal must set forth the legal and factual 
bases for your appeal. The Administrator may, at his or her discretion, 
extend the time limitation in the case of extenuating circumstances.
    (c) We will notify you, in writing, if you must submit additional 
facts for our consideration of the appeal. We will notify you, in 
writing, once the Administrator has made a decision regarding your 
appeal.



Sec. 205.4  Finality of decisions.

    The Administrator's decision will be the final administrative action 
on all audit appeals.



Sec. 205.5  Contracts containing disputes article.

    When a contract contains a disputes article, the disputes article 
will govern the bases for negotiating disputes regarding audit findings, 
interpretations, or decisions made by MARAD and any appeals.

[[Page 38]]



    SUBCHAPTER B_REGULATIONS AFFECTING MARITIME CARRIERS AND RELATED 

                               ACTIVITIES


PART 221_REGULATED TRANSACTIONS INVOLVING DOCUMENTED VESSELS AND OTHER MARITIME 

INTERESTS--Table of Contents



                         Subpart A_Introduction

Sec.
221.1 Purpose.
221.3 Definitions.
221.5 Citizenship declarations.
221.7 Applications and fees.

  Subpart B_Transfers to Noncitizens or to Registry or Operation Under 
                     Authority of a Foreign Country

221.11 Required approvals.
221.13 General approval.
221.15 Approval for transfer of registry or operation under authority of 
          a foreign country or for scrapping in a foreign country.
221.17 Sale of a documented vessel by order of a district court.
221.19 Possession or sale of vessels by mortgagees or trustees other 
          than pursuant to court order.

Subpart C [Reserved]

Subpart D--Transactions Involving Maritime Interests in Time of War or 
National Emergency Under 46 App. U.S.C. 835 [Reserved]

                        Subpart E_Civil Penalties

221.61 Purpose.
221.63 Investigation.
221.65 Criteria for determining penalty.
221.67 Stipulation procedure.
221.69 Hearing Officer.
221.71 Hearing Officer referral.
221.73 Initial Hearing Officer consideration.
221.75 Response by party.
221.77 Disclosure of evidence.
221.79 Request for confidential treatment.
221.81 Counsel.
221.83 Witnesses.
221.85 Hearing procedures.
221.87 Records.
221.89 Hearing Officer's decision.
221.91 Appeals.
221.93 Collection of civil penalties.

Subpart F--Other Transfers Involving Documented Vessels [Reserved]

                      Subpart G_Savings Provisions

221.111 Status of prior transactions--controlling dates.

    Authority: 46 U.S.C. chs. 301, 313, and 561; 49 CFR 1.93.

    Source: 57 FR 23478, June 3, 1992, unless otherwise noted.



                         Subpart A_Introduction



Sec. 221.1  Purpose.

    (a) This part implements statutory responsibilities of the Secretary 
of Transportation (the Secretary) with respect to:
    (1) The regulation pursuant to 46 U.S.C. 56101 and 56103of 
transactions involving transfers of:
    (i) An interest in or control of Documented Vessels owned by 
Citizens of the United States (including the Transfer of a Controlling 
Interest in such owners) to Noncitizens or;
    (ii) A Documented Vessel to registry or Operation under Authority of 
a Foreign Country or for scrapping in a foreign country; and
    (2) Transactions involving maritime interests in time of war or 
national emergency under 46 U.S.C. 56102.
    (b) The responsibilities in paragraph (a) (1) and (2) of this 
section have been delegated by the Secretary to the Maritime 
Administrator.

[57 FR 23478, June 3, 1992, as amended at 63 FR 6880, Feb. 11, 1998; 78 
FR 35771, June 14, 2013]



Sec. 221.3  Definitions.

    For the purpose of this part, when used in capitalized form:
    (a) Bowaters Corporation means a Noncitizen corporation organized 
under the laws of the United States or of a State that has satisfied the 
requirements of 46 U.S.C. 12118 and holds a valid Certificate of 
Compliance issued by the Coast Guard.
    (b) Charter means any agreement or commitment by which the 
possession or services of a vessel are secured for a

[[Page 39]]

period of time, or for one or more voyages, whether or not a demise of 
the vessel.
    (c) Citizen of the United States means a Person (including 
receivers, trustees and successors or assignees of such Persons as 
provided in 46 U.S.C. 50502), including any Person (stockholder, partner 
or other entity) who has a Controlling Interest in such Person, any 
Person whose stock or equity is being relied upon to establish the 
requisite U.S. citizen ownership, and any parent corporation, 
partnership or other entity of such Person at all tiers of ownership, 
who, in both form and substance at each tier of ownership, satisfies the 
following requirements--
    (1) An individual who is a Citizen of the United States, by birth, 
naturalization or as otherwise authorized by law;
    (2) A corporation organized under the laws of the United States or 
of a State, the Controlling Interest of which is owned by and vested in 
Citizens of the United States and whose chief executive officer, by 
whatever title, chairman of the board of directors and all officers 
authorized to act in the absence or disability of such persons are 
Citizens of the United States, and no more of its directors than a 
minority of the number necessary to constitute a quorum are Noncitizens;
    (3) A partnership organized under the laws of the United States or 
of a State, if all general partners are Citizens of the United States 
and a Controlling Interest in the partnership is owned by Citizens of 
the United States;
    (4) An association organized under the laws of the United States or 
of a State, whose chief executive officer, by whatever title, chairman 
of the board of directors (or equivalent committee or body) and all 
officers authorized to act in their absence or disability are Citizens 
of the United States, no more than a minority of the number of its 
directors, or equivalent, necessary to constitute a quorum are 
Noncitizens, and a Controlling Interest in which is vested in Citizens 
of the United States;
    (5) A joint venture, if it is not determined by the Maritime 
Administrator to be in effect an association or a partnership, which is 
organized under the laws of the United States or of a State, if each 
coventurer is a Citizen of the United States. If a joint venture is in 
effect an association, it will be treated as is an association under 
paragraph (c)(4) of this section, or, if it is in effect a partnership, 
will be treated as is a partnership under paragraph (c)(3) of this 
section; or
    (6) A Trust described in paragraph (t)(1) of this section.
    (d) Controlling interest owned by and vested in Citizens of the 
United States means that--
    (1) In the case of a corporation:
    (i) Title to a majority of the stock thereof is owned by and vested 
in Citizens of the United States, free from any trust or fiduciary 
obligation in favor of any Noncitizen;
    (ii) The majority of the voting power in such corporation is vested 
in Citizens of the United States;
    (iii) Through no contract or understanding is it so arranged that 
the majority of the voting power may be exercised, directly or 
indirectly, in behalf of any Noncitizen; and
    (iv) By no other means whatsoever control of the corporation is 
conferred upon or permitted to be exercised by any Noncitizen;
    (2) In the case of a partnership, all general partners are Citizens 
of the United States and ownership and control of a majority of the 
partnership interest, free and clear of any trust or fiduciary 
obligation in favor of any Noncitizen, is vested in a partner or 
partners each of whom is a Citizen of the United States;
    (3) In the case of an association, a majority of the voting power is 
vested in Citizens of the United States, free and clear of any trust or 
fiduciary obligation in favor of any Noncitizen; and
    (4) In the case of a joint venture, a majority of the equity is 
owned by and vested in Citizens of the United States free and clear of 
any trust or fiduciary obligation in favor of any Noncitizen; but
    (5) In the case of a corporation, partnership, association or joint 
venture owning a vessel which is operated in the coastwise trade, the 
amount of interest and voting power required to be owned by and vested 
in Citizens of the United States shall be not less than 75 percent as 
required by 46 U.S.C. 50501.

[[Page 40]]

    (e) Documented vessel means a vessel documented under chapter 121, 
title 46, United States Code or a vessel for which an application for 
such documentation is pending.
    (f) Fishing vessel means a vessel that commercially engages in the 
planting, cultivating, catching, taking, or harvesting of fish, 
shellfish, marine animals, pearls, shells, or marine vegetation or an 
activity that can reasonably be expected to result in the planting, 
cultivating, catching, taking, or harvesting of fish, shellfish, marine 
animals, pearls, shells, or marine vegetation.
    (g) Fish processing vessel means a vessel that commercially prepares 
fish or fish products other than by gutting, decapitating, gilling, 
skinning, shucking, icing, freezing, or brine chilling.
    (h) Fish tender vessel means a vessel that commercially supplies, 
stores, refrigerates, or transports (except in foreign commerce) fish, 
fish products, or materials directly related to fishing or the 
preparation of fish to or from a Fishing Vessel, Fish Processing Vessel, 
or another Fish Tender Vessel or a fish processing facility.
    (i) Hearing Officer means an individual designated by the Maritime 
Administrator to conduct hearings under Subpart E of this part and 
assess civil penalties.
    (j) Noncitizen means a Person who is not a Citizen of the United 
States.
    (k) Operation under the authority of a foreign country means any 
agreement, undertaking or device by which a Documented Vessel is 
voluntarily subjected to any restriction or requirement, actual or 
contingent, under the laws or regulations of a foreign country or 
instrumentality thereof concerning use or operation of the vessel that 
is or may be in derogation of the rights and obligations of the owner, 
operator or master of the vessel under the laws of the United States, 
unless such restriction or requirement is of general applicability and 
uniformly imposed by such country or instrumentality in exercise of its 
sovereign prerogatives with respect to public health, safety or welfare, 
or in implementation of accepted principles of international law 
regarding cabotage or safety of navigation.
    (l) Party means the Person alleged to have violated the statute or 
regulations for which a civil penalty may be assessed.
    (m) Person includes individuals and corporations, partnerships, 
joint ventures, associations and Trusts existing under or authorized by 
the laws of the United States or of a State or, unless the context 
indicates otherwise, or any foreign country.
    (n) Pleasure vessel means a vessel that has been issued a 
Certificate of Documentation with a recreational endorsement and is 
operated only for pleasure pursuant to 46 U.S.C. 12109.
    (o) Settlement means the process whereby a civil penalty or other 
disposition of the alleged violation is agreed to by the Hearing Officer 
and the Party in accordance with Sec. 221.73 of this part.
    (p) State means a State of the United States, Guam, Puerto Rico, the 
Virgin Islands, American Samoa, the District of Columbia, the 
Commonwealth of the Northern Mariana Islands, and any other territory or 
possession of the United States.
    (q) Transfer means the passing of control of or an interest in a 
Documented Vessel and includes the involuntary conveyance by a foreign 
judicial or administrative tribunal of any interest in or control of a 
Documented Vessel owned by a Citizen of the United States to a 
Noncitizen that is not eligible to own a Documented Vessel.
    (r) Trust means:
    (1) In the case of ownership of a Documented Vessel, a Trust that is 
domiciled in and existing under the laws of the United States, or of a 
State, of which the trustee is a Citizen of the United States and a 
Controlling Interest in the Trust is held for the benefit of Citizens of 
the United States; or
    (s) United States, when used in the geographic sense, means the 
States of the United States, Guam, Puerto Rico, the Virgin Islands, 
American Samoa, the District of Columbia, the Commonwealth of the 
Northern Mariana Islands, and any other territory or possession of the 
United States; when used in other than the geographic sense, it means 
the United States Government.
    (t) United States Government means the Federal Government acting by 
or

[[Page 41]]

through any of its departments or agencies.
    (u) Vessel Transfer Officer means the Maritime Administration's 
Vessel Transfer and Disposal Officer, whose address is MAR-630, Maritime 
Administration, United States Department of Transportation, 1200 New 
Jersey Ave. SE., Washington, DC 20590, or that person's delegate.

[57 FR 23478, June 3, 1992, as amended at 63 FR 6880, Feb. 11, 1998; 69 
FR 34310, June 21, 2004; 78 FR 35771, June 14, 2013]



Sec. 221.5  Citizenship declarations.

    (a) Pursuant to 46 U.S.C. 31306(a), when an instrument transferring 
an interest in a Documented Vessel owned by a Citizen of the United 
States is presented to the United States Government for filing or 
recording, the Person filing shall submit therewith Maritime 
Administration Form No. MA-899 so it may be determined if 46 U.S.C. 
56101 and 56103 apply to the transaction. Form No. MA-899 is available 
from the Coast Guard Documentation Office at the port of record of the 
vessel or from the Vessel Transfer Officer.
    (b) The filing required by paragraph (a) of this section is not 
required for transactions involving vessel types described in Sec. 
221.11(b)(1)(i) through (iv) of this part.
    (c) The filing required by paragraph (a) of this section is waived 
for transactions which are given general approval in this part.
    (d) If the transfer of interest is one which requires written 
approval of the Maritime Administrator, the Person filing shall submit 
therewith evidence of that approval.
    (e) A declaration filed by any Person other than an individual shall 
be signed by an official authorized by that Person to execute the 
declaration.

[57 FR 23478, June 3, 1992, as amended at 78 FR 35771, June 14, 2013]



Sec. 221.7  Applications and fees.

    (a) Applications. Whenever written approval of the Maritime 
Administrator is required for transfers to Noncitizens or to foreign 
registry or Operation Under Authority of a Foreign Country, or pursuant 
to a Maritime Administration contract or Order, an application on 
Maritime Administration Form MA-29 or MA-29B giving full particulars of 
the proposed transaction shall be filed with the Vessel Transfer 
Officer.
    (b) Fees. Applications for written approval of any of the following 
transactions shall be accompanied by the specified fee:
    (1) Transactions requiring approval for:

(i) Sale and delivery by a Citizen of the United States to a
 Noncitizen, or Transfer to foreign registry or Operation Under
 Authority of a Foreign Country, of a Documented Vessel, per
 vessel--
  (A) Of 1,000 gross tons and over...............................   $325
  (B) Of less than 1,000 gross tons..............................    170
(ii) Transfer of any interest in, or control of, a Documented        250
 Vessel owned by a Citizen of the United States to a Noncitizen,
 per vessel......................................................
(iii) Charter of a Documented Vessel owned by a Citizen of the       250
 United States to a Noncitizen, per vessel.......................
(iv) Sale or Transfer of an interest in or the control of an         325
 interest in an entity that is a Citizen of the United States and
 owns, or is the direct or indirect parent of an entity that
 owns, any Documented Vessel, if by such sale or Transfer the
 Controlling Interest in such entity is vested in, or held for
 the benefit of, any Noncitizen..................................
 

    (2) Transactions requiring written approval pursuant to a Maritime 
Administration contract or Order:

(i) Transfer of ownership or registry, or, both, of the vessel,     $260
 per vessel......................................................
(ii) Sale or Transfer of any interest in the owner of the vessel,    235
 if by such sale or Transfer the Controlling Interest in the
 owner is vested in, or held for the benefit of, a Noncitizen,
 per vessel......................................................
(iii) Charter of the vessel to a Noncitizen, per vessel..........    240
 

    (c) Modification of applications or approvals. An application for 
modification of any pending application or prior approval, or of an 
outstanding Maritime Administration contract or Order, shall be 
accompanied by the fee established for the original application.
    (d) Reduction or waiver of fees. The Maritime Administrator, in 
appropriate circumstances, and upon a written finding, may reduce any 
fee imposed by paragraph (b) or (c) of this section, or may waive the 
fee entirely in extenuating circumstances where the interest of the 
United States Government would be served.

[57 FR 23478, June 3, 1992, as amended at 63 FR 6880, Feb. 11, 1998]

[[Page 42]]



  Subpart B_Transfers to Noncitizens or to Registry or Operation Under 

                     Authority of a Foreign Country



Sec. 221.11  Required approvals.

    (a) Except as provided in section 12119 of title 46, United States 
Code, a Person may not, without the approval of the Maritime 
Administrator:
    (1) Sell, lease, charter, deliver, or in any manner Transfer to a 
Noncitizen, or agree (unless such agreement by its terms requires 
approval of the Maritime Administrator in order to effect such 
transfer), to sell, lease, charter, deliver, or in any manner Transfer 
to a Noncitizen, any interest in or control of a Documented Vessel owned 
by a Citizen of the United States or a vessel the last documentation of 
which was under the laws of the United States except as provided in this 
part; or
    (2) Place any Documented Vessel, or any vessel the last 
documentation of which was under the laws of the United States, under 
foreign registry or operate that vessel under the authority of a foreign 
country, except as provided in this part.
    (b)(1) The approvals required by paragraph (a)(1) of this section 
are not required for the following Documented Vessel types if the vessel 
has been operated exclusively and with bona fides for one or more of the 
following uses, under a Certificate of Documentation with an appropriate 
endorsement and no other, since initial documentation or renewal of its 
documentation following construction, conversion, or transfer from 
foreign registry, or, if it has not yet so operated, if the vessel has 
been designed and built and will be operated for one or more of the 
following uses:
    (i) A Fishing vessel;
    (ii) A Fish processing vessel;
    (iii) A Fish tender vessel; and
    (iv) A Pleasure vessel.
    (2) A vessel of a type specified in paragraphs (b)(1)(i) through 
(iii) of this section will not be ineligible for the approval granted by 
this paragraph by reason of also holding or having held a Certificate of 
Documentation with a coastwise or registry endorsement, so long as any 
trading under that authority has been only incidental to the vessel's 
principal employment in the fisheries and directly related thereto.

[57 FR 23478, June 3, 1992, as amended at 63 FR 6880, Feb. 11, 1998; 78 
FR 35771, June 14, 2013]



Sec. 221.13  General approval.

    (a) Transactions other than transfer of registry or operation under 
authority of a foreign country. (1) The Maritime Administrator hereby 
grants the approval required by 46 U.S.C. 56101 for the sale, lease, 
Charter, delivery, or any other manner of Transfer to a Noncitizen of an 
interest in or control of a Documented Vessel owned by a Citizen of the 
United States or a vessel the last documentation of which was under the 
laws of the United States except:
    (i) As limited by paragraph (b) of this section for transfers to 
Bowaters Corporations;
    (ii) As limited by Sec. 221.15(d) of this part for sales for 
scrapping;
    (iii) Bareboat or demise Charters of vessels operating in the 
coastwise trade.

A Documented Vessel shall remain documented following any transaction 
approved by this paragraph (a)(1). Other approvals may be required by 
statutes other than 46 App. U.S.C. 808(c)(1) and/or by contract for 
certain vessels.
    (2) The approvals granted by paragraph (a)(1) of this section shall 
not apply to any such Transfer proposed to be made during any period 
when the United States is at war or during any national emergency, the 
existence of which has invoked the provisions of section 37 of the 
Shipping Act, 1916, as amended (46 App. U.S.C. 835), or to any such 
Transfer proposed to be made to a citizen of any country when such 
transfer would be contrary to the foreign policy of the United States as 
declared by an executive department of the United States.
    (3) An information copy of any sales agreement, bareboat or demise 
Charter entered into pursuant to this approval shall be submitted to the 
Vessel Transfer Officer not later than thirty days following a request 
by that official.
    (4) Except for Charters to Noncitizens of documented bulk cargo 
vessels engaged in carrying bulk raw and processed agricultural 
commodities from

[[Page 43]]

the United States to ports in the geographic area formerly known as the 
Union of Soviet Socialist Republics, or to other permissible ports of 
discharge for transshipment to the geographic area formerly known as the 
Union of Soviet Socialist Republics, pursuant to an operating- 
differential subsidy agreement that is consistent with the requirements 
of 46 CFR parts 252 and 294, this approval excludes and does not apply 
to Transfers to a Person who is subject, directly or indirectly, to 
control of an entity within any country listed by the Department of 
Commerce in 15 CFR part 740, Supplement 1, Country Group E, unless such 
transferee is an individual who has been lawfully admitted into, and 
resides in, the United States, or to Charters for the carriage of 
cargoes of any kind to or from, or for commercial operation while within 
the waters of (as distinct from passage through), any of these 
countries. This list of countries is subject to change from time to 
time. Information concerning current restrictions may be obtained from 
the Vessel Transfer Officer.
    (b) Bowaters corporations. (1) For documented Vessels other than 
those operating in the coastwise trade, the approvals granted in 
paragraph (a) of this section shall apply to Bowaters Corporations.
    (2) The Maritime Administrator hereby grants approval for the time 
charter of a Documented Vessel of any tonnage by a Citizen of the United 
States to a Bowaters Corporation for operation in the coastwise trade, 
subject to the following conditions:
    (i) If non-self-propelled or, if self-propelled and less than 500 
gross tons, no such vessel shall engage in the fisheries or in the 
transportation of merchandise or passengers for hire between points in 
the United States embraced within the coastwise laws except as a service 
for a parent or subsidiary corporation; and
    (ii) If non-self-propelled or, if self-propelled and less than 500 
gross tons, no such vessel may be subchartered or subleased from any 
such Bowaters Corporation except:
    (A) At prevailing rates;
    (B) For use otherwise than in the domestic noncontiguous trades;
    (C) To a common or contract carrier subject to part 3 of the 
Interstate Commerce Act, as amended, which otherwise qualifies as a 
Citizen of the United States and which is not connected, directly or 
indirectly, by way of ownership or control with such corporation.

[57 FR 23478, June 3, 1992, as amended at 63 FR 6880, Feb. 11, 1998; 69 
FR 54248, Sept. 8, 2004; 78 FR 35771, June 14, 2013]



Sec. 221.15  Approval for transfer of registry or operation under authority 

of a foreign country or for scrapping in a foreign country.

    In no case will approval be granted to place under foreign registry 
or to operate under the authority of a foreign country a Fishing Vessel, 
Fish Processing Vessel, or Fish Tender Vessel that has had its fishery 
endorsement revoked pursuant to Appendix D of Public Law 106-554, 114 
Stat 2763. Subject to this exclusion, approval requests will be 
considered as set forth in this section.
    (a) Vessels of under 1,000 gross tons. (1) The Maritime 
Administrator hereby grants approval for the Transfer to foreign 
registry and flag or Operation Under the Authority of a Foreign Country 
or for scrapping in a foreign country of Documented Vessels or vessels 
the last documentation of which was under the laws of the United States 
and which are of under 1,000 gross tons if at the time of such Transfer 
there are no liens or encumbrances recorded against the vessel in the 
U.S. Coast Guard Documentation Office at its last U.S. port of record.
    (2) This approval shall not apply if the vessel is to be placed 
under the registry, or operated under the authority of, or scrapped in 
any country listed in Sec. 221.13(a)(4) of this part.
    (3) This approval shall not apply to any such Transfer proposed to 
be made during any period when the United States is at war or during any 
national emergency, the existence of which has invoked the provisions of 
46 U.S.C. 56102, or to any such Transfer proposed to be made to a 
citizen of any country when such transfer would be contrary to the 
foreign policy of the United States as declared by an executive 
department of the United States.

[[Page 44]]

    (b) Vessels of 1,000 gross tons or more. (1) Applications for 
approval of Transfer to foreign registry and flag or Operation Under the 
Authority of a Foreign Country or for scrapping in a foreign country of 
Documented Vessels or vessels the last documentation of which was under 
the laws of the United States and which are of 1,000 gross tons or more 
will be evaluated in light of--
    (i) The type, size speed, general condition, and age of the vessel;
    (ii) The acceptability of the owner, proposed transferee and the 
country of registry or the country under the authority of which the 
vessel is to be operated; and
    (iii) The need to retain the vessel under U.S. documentation, 
ownership or control for purposes of national defense, maintenance of an 
adequate merchant marine, foreign policy considerations or the national 
interest.
    (2) If the application is found to be acceptable under the criteria 
of this paragraph, approval will be granted. For vessels of under 3,000 
gross tons, in the absence of unusual circumstances, no conditions will 
be imposed on the transfer. For vessels of 3,000 gross tons and above, 
approval will be granted upon acceptance by the owner of the terms and 
conditions referred to in paragraph (c) or (d) of this section, as 
applicable. Additional terms deemed appropriate by the Maritime 
Administrator may be imposed. The terms and conditions shall be 
contained in an Approval Notice and Agreement (``Contract'') executed 
prior to issuance of the Transfer Order. Unless otherwise specified, the 
terms and conditions shall remain in effect for the period of the 
remaining economic life of the vessel or for the duration of a national 
emergency proclaimed by the President prior or subsequent to such 
Transfer, whichever period is longer. The economic life of a vessel for 
purposes of this regulation is deemed to be twenty (20) years for 
tankers and other liquid bulk carriers and twenty-five (25) years for 
other vessel types. This period is to be calculated from the date the 
vessel was originally accepted for delivery from the shipbuilder, but 
may be extended for such additional period of time as may be determined 
by the Maritime Administrator if the vessel has been substantially 
rebuilt or modified in a manner that warrants such extension.
    (c) Foreign transfer other than for scrapping. If the foreign 
Transfer of a vessel referred to in paragraph (b) of this section is 
other than for the purpose of scrapping the vessel and other than a 
Transfer to the government of an acceptable foreign country, and in the 
absence of unusual circumstances as determined by the Maritime 
Administrator (for example a Transfer to an entity controlled by the 
government of an acceptable foreign country), the following conditions 
will be imposed on the transferee:
    (1) Ownership. (i) Without the prior written approval of the 
Maritime Administrator, there shall be no further Transfer of ownership, 
change in the registry or Operation of such vessel Under the Authority 
of a Foreign Country; provided, however, that, if the Transfer of 
ownership is to a Citizen of the United States or other entity qualified 
under 46 U.S.C. 12102(a) to document a vessel and the vessel is 
thereafter documented under U.S. law, no prior written approval shall be 
required but the transferee shall notify the Vessel Transfer Officer in 
writing of such change in the ownership and the U.S. documentation 
within thirty (30) days after such change in ownership and 
documentation.
    (ii) The restrictions contained in paragraph (c)(1)(i) of this 
section shall not be applicable to a change in ownership resulting from 
the death of the vessel owner, so long as notification of any such 
Transfer of ownership occurring by reason of death shall be filed with 
the Vessel Transfer Officer within 60 days from the date of such 
Transfer identifying with particularity the name, legal capacity, 
citizenship, current domicile or address of, or other method of direct 
communication with, the transferee(s).
    (2) Requisition. The vessel shall, if requested by the United 
States, be sold or Chartered to the United States on the same terms and 
conditions upon which a vessel owned by a Citizen of the United States 
or documented under U.S. law could be requisitioned for purchase or 
Charter pursuant to 46 U.S.C. chapters 563 and 565. If the vessel is

[[Page 45]]

under the flag of a country that is a member of the North Atlantic 
Treaty Organization (NATO), the Maritime Administrator will consider 
this condition satisfied if the owner furnishes satisfactory evidence 
that the vessel is already in noncommercial service under the direction 
of the government of a NATO country.
    (3) Trade. Without the prior written approval of the Maritime 
Administrator, the vessel shall not carry cargoes of any kind to or 
from, or be operated commercially while within the waters of (as 
distinct from passage through), a country referred to in Sec. 
221.13(a)(4) of this part, nor shall there be any Charter or other 
Transfer of an interest in the vessel, other than to a Citizen of the 
United States, for carriage of cargoes of any kind to or from, or for 
commercial operation while within the waters of (as distinct from 
passage through), any such country.
    (4) Default. In the event of default under any or all of the 
conditions set forth in paragraphs (c) (1), (2) or (3) of this section, 
the owner shall pay to the Maritime Administration, without prejudice to 
any other rights that the United States may have, as liquidated damages 
and not as a penalty, the sum of not less than $25,000 or more than 
$1,000,000, as specified in the contract, and the vessel shall be 
subject to the penalties imposed by 46 App. U.S.C. 808 and 839. Pursuant 
to 46 U.S.C. 56105, the Maritime Administrator may remit forfeiture of 
the vessel upon such conditions as may be required under the 
circumstances of the particular case, including the payment of a sum in 
lieu of forfeiture, and execution of a new agreement containing 
substantially the same conditions set forth above and such others as the 
Maritime Administrator may deem appropriate and which will be applicable 
to the vessel for the remaining period of the original agreement. In 
order to secure the payment of any such sums of money as may be required 
as a result of default, the transferee shall contractually agree, in 
form and substance approved by the Chief Counsel of the Maritime 
Administration, to comply with the above conditions and to provide a 
United States commercial surety bond or other surety acceptable to the 
Maritime Administrator for an amount not less than $25,000 and not more 
than $1,000,000, depending upon the type, size and condition of the 
vessel. ``Other surety'' may be any one of the following:
    (i) An irrevocable letter of credit, which is acceptable to the 
Maritime Administrator, issued or guaranteed by a Citizen of the United 
States or by a federally insured depository institution;
    (ii) A pledge of United States Government securities;
    (iii) The written guarantee of a friendly government of which the 
transferee is a national;
    (iv) A written guarantee or bond by a United States corporation 
found by the Maritime Administrator to be financially qualified to 
service the undertaking to pay the stipulated amount;
    (v) If the transferee is controlled in any manner by one or more 
Citizens of the United States, a contractual agreement in form and 
substance acceptable to the Chief Counsel of the Maritime Administration 
by the transferee and the Citizens of the United States with authority 
to exercise such control, if found by the Maritime Administrator to be 
financially qualified, jointly and severally to pay the stipulated 
amount, such agreement to be secured by the written guarantee of the 
transferee and each of the Citizens of the United States or other form 
of guarantee as may be required by the Maritime Administrator; or
    (vi) Any other surety acceptable to the Maritime Administrator and 
approved as to form and substance by the Chief Counsel of the Maritime 
Administration.
    (d) Foreign transfer for scrapping. If the transfer of control, 
whether or not there is a transfer of registry, of a vessel referred to 
in paragraph (b) of this section is for the purpose of scrapping the 
vessel abroad, the following conditions will be imposed on the 
transferee:
    (1) The vessel or any interest therein shall not be subsequently 
sold to any Person without the prior written approval of the Maritime 
Administrator, nor shall it be used for the carriage of cargo or 
passengers of any kind whatsoever.
    (2) Within a period of 18 months from the date of approval of the 
sale, the

[[Page 46]]

hull of the vessel shall be completely scrapped, dismantled, 
dismembered, or destroyed in such manner and to such extent as to 
prevent the further use thereof, or any part thereof, as a ship, barge, 
or any other means of transportation.
    (3) The scrap resulting from the demolition of the hull of the 
vessel, the engines, machinery, and major items of equipment shall not 
be sold to, or utilized by, any citizen or instrumentality of a country 
referred to in Sec. 221.13(a)(4) of the part, nor may such scrap be 
exported to these countries. The engines, machinery and major items of 
equipment shall not be exported to destinations within the United 
States.
    (4) In the event of default under any or all of the conditions set 
forth in paragraphs (d) (1), (2) or (3) of this section, the transferee 
shall pay to the Maritime Administration, without prejudice to any other 
rights that the United States may have, as liquidated damages and not as 
a penalty, the sum of not less than $25,000 or more than $1,000,000, as 
specified in the contract, depending upon the size, type and condition 
of the vessel. This payment shall be secured by a surety company bond or 
other surety satisfactory to the Maritime Administrator. ``Other 
surety'' may be one of those set out in paragraph (c)(4) (i) through 
(vi) of this section.
    (5) There shall be filed with the Vessel Transfer Officer a 
certificate or other evidence satisfactory to the Chief Counsel of the 
Maritime Administration, duly attested and authenticated by a United 
States Consul, that the scrapping of the vessel (hull only) and disposal 
or utilization of the resultant scrap and the engines, machinery and 
major items of equipment have been accomplished in accord with 
paragraphs (d) (2) and (3) of this section.
    (e) Resident agent for service. (1) Any proposed foreign transferee 
shall, prior to the issuance and delivery of the Transfer Order covering 
the vessel or vessels to be transferred, designate and appoint a 
resident agent in the United States to receive and accept service of 
process or other notice in any action or proceeding instituted by the 
United States relating to any claim arising out of the approved 
transaction.
    (2) The resident agent designated and appointed by the foreign 
transferee shall be subject to approval by the Maritime Administrator. 
To be acceptable, the resident agent must maintain a permanent place of 
business in the United States and shall be a banking or lending 
institution, a ship-owner or ship-operating corporation or other 
business entity that is satisfactory to the Maritime Administrator.
    (3) Appointment and designation of the resident agent shall not be 
terminated, revoked, amended or altered without the prior written 
approval of the Maritime Administrator.
    (4) The foreign transferee shall file with the Vessel Transfer 
Officer a written copy of the appointment of the resident agent, which 
copy shall be fully endorsed by the resident agent stating that it 
accepts the appointment, that it will act thereunder and that it will 
notify the Vessel Transfer Officer in writing in the event it becomes 
disqualified from so acting by reason of any legal restrictions. Service 
of process or notice upon any officer, agent or employee of the resident 
agent at its permanent place of business shall constitute effective 
service on, or notice to, the foreign transferee.
    (f) Administrative provisions. (1) The subsequent Transfer of 
ownership or registry of vessels that have been Transferred to foreign 
ownership or registry or both, or to Operation Under the Authority of a 
Foreign Country, that remain subject to Maritime Administration 
contractual control as set forth above, will be subject to substantially 
the same Maritime Administration policy considerations that governed the 
original Transfer, including such changes or modifications that have 
subsequently been made and continued in effect. Approval of these 
subsequent Transfers will be subject to the same terms and conditions 
governing the foreign Transfer at the time of the previous Transfer, as 
modified (if applicable).
    (2) The authorization for all approved transactions, either by 
virtue of U.S.C. chapter 561 or the Maritime Administration's Contract 
with the vessel owner, will be by notification in the form of a Transfer 
Order upon receipt of the executed Contract, the required

[[Page 47]]

bond or other surety, and other supporting documentation required by the 
Contract.
    (3) In order that the Maritime Administration's records may be 
maintained on a current basis, the transferor and transferee of the 
vessel are required to notify the Vessel Transfer Officer of the date 
and place where the approved transaction was completed, and the name of 
the vessel, if changed. This information relating to the completion of 
the transaction and any change in name shall be furnished as soon as 
possible, but not later than 10 days after the same has occurred.

[57 FR 23478, June 3, 1992, as amended at 63 FR 6881, Feb. 11, 1998; 66 
FR 55596, Nov. 2, 2001; 78 FR 35771, June 14, 2013]



Sec. 221.17  Sale of a documented vessel by order of a district court.

    (a) A Documented Vessel may be sold by order of a district court 
only to a Person eligible to own a Documented Vessel or to a mortgagee 
of the vessel. Unless waived by the Maritime Administrator, a Person 
purchasing the vessel pursuant to court order or from a mortgagee not 
eligible to document a vessel who purchased the vessel pursuant to a 
court order must document the vessel under chapter 121 of title 46, 
United States Code.
    (b) A Person purchasing the vessel, pursuant to court order or from 
a mortgagee not eligible to document a vessel who purchased the vessel 
pursuant to a court order, and wishing to obtain waiver of the 
documentation requirement must submit a request including the reason 
therefor to the Vessel Transfer Officer.
    (c)(1) A mortgagee not eligible to own a Documented Vessel shall not 
operate, or cause operation of, the vessel in commerce. Except as 
provided in paragraph (c)(2) of this section, the vessel may not be 
operated for any purpose without the prior written approval of the 
Maritime Administrator.
    (2) The Maritime Administrator hereby grants approval for a 
mortgagee not eligible to own a Documented Vessel to operate the vessel 
to the extent necessary for the immediate safety of the vessel or for 
repairs, drydocking or berthing changes, but only under the command of a 
Citizen of the United States.

[57 FR 23478, June 3, 1992, as amended at 63 FR 6881, Feb. 11, 1998]



Sec. 221.19  Possession or sale of vessels by mortgagees or trustees 

other than pursuant to court order.

    (a) A mortgagee or a trustee of a preferred mortgage on a Documented 
Vessel that is not eligible to own a Documented Vessel does not require 
the express approval of the Maritime Administrator to take possession of 
the vessel in the event of default by the mortgagor other than by 
foreclosure pursuant to 46 U.S.C. 31329, if provided for in the mortgage 
or a related financing document, but in such event the vessel may not be 
operated, or caused to be operated, in commerce. The vessel may not, 
except as provided in paragraph (b) of this section, be operated for any 
other purpose unless approved in writing by the Maritime Administrator, 
nor may the vessel be sold to a Noncitizen without the approval of the 
Maritime Administrator.
    (b) The Maritime Administrator hereby grants approval for such 
mortgagee or trustee to operate the vessel to the extent necessary for 
the immediate safety of the vessel, for its direct return to the United 
States or for its movement within the United States, or for repairs, 
drydocking or berthing changes, but only under the command of a Citizen 
of the United States.
    (c) A Noncitizen mortgagee that has brought a civil action in rem 
for enforcement of a preferred mortgage lien on a citizen-owned 
Documented Vessel pursuant to 46 U.S.C. 31325(b)(1) may petition the 
court pursuant to 46 U.S.C. 31325(e)(1) for appointment of a receiver 
and, if the receiver is Person eligible to own a Documented Vessel, to 
authorize the receiver to operate the mortgaged vessel on such terms and 
conditions as the court deems appropriate. If the receiver is not a 
Citizen of the United States, the vessel may not be operated in 
coastwise trade without prior written approval of the Maritime 
Administrator.

[57 FR 23478, June 3, 1992, as amended at 63 FR 6881, Feb. 11, 1998]

[[Page 48]]

Subpart C [Reserved]

Subpart D--Transactions Involving Maritime Interests in Time of War or 
National Emergency Under 46 App. U.S.C. 835 [Reserved]



                        Subpart E_Civil Penalties



Sec. 221.61  Purpose.

    This subpart describes procedures for the administration of civil 
penalties that the Maritime Administration may assess under 46 U.S.C. 
31309 and 31330, and 46 U.S.C. 56101, pursuant to 49 U.S.C. 336.
    Note: Pursuant to 46 U.S.C. 31309, a general penalty of not more 
than $12,000 may be assessed for each violation of chapter 313 or 46 
U.S.C. subtitle III administered by the Maritime Administration, and the 
regulations in this part that are promulgated thereunder, except that a 
person violating 46 U.S.C. 31328 or 31329 and the regulations 
promulgated thereunder is liable for a civil penalty of not more than 
$30,000 for each violation. A person that charters, sells, transfers or 
mortgages a vessel, or an interest therein, in violation of 46 App. 
U.S.C. 808 is liable for a civil penalty of not more than $12,000 for 
each violation. These penalty amounts are in accordance with Pub. L. 
101-410, amended by Pub. L. 104-134. Criminal penalties may also apply 
to violations of these statutes.

[68 FR 33406, June 4, 2003, as amended at 78 FR 35771, June 14, 2013]



Sec. 221.63  Investigation.

    (a) When the Vessel Transfer Office obtains information that a 
Person may have violated a statute or regulation for which a civil 
penalty may be assessed under this subpart, that Officer may investigate 
the matter and decide whether there is sufficient evidence to establish 
a prima facie case that a violation occurred.
    (b) If that Officer decides there is a prima facie case, then that 
Officer may enter into a stipulation with the Party in accordance with 
Sec. 221.67 of this subpart, or may refer the matter directly to a 
Hearing Officer for procedures in accordance with Sec. 221.73 to 221.89 
of this subpart.



Sec. 221.65  Criteria for determining penalty.

    In determining any penalties assessed, the Vessel Transfer Officer 
under Sec. 221.67 and the Hearing Officer under Sec. Sec. 221.73 to 
221.89 of this part shall take into account the nature, circumstances, 
extent and gravity of the violation committed and, with respect to the 
Party, the degree of culpability, any history of prior offenses, ability 
to pay and other matters that justice requires.



Sec. 221.67  Stipulation procedure.

    (a) When the Vessel Transfer Office decides to proceed under this 
section, that Office shall notify the Party in writing by registered or 
certified mail--
    (1) Of the alleged violation and the applicable statute and 
regulations;
    (2) Of the maximum penalty that may be assessed for each violation;
    (3) Of a summary of the evidence supporting the violation;
    (4) Of the penalty that the Vessel Transfer Officer will accept in 
settlement of the violation;
    (5) Of the right to examine all the material in the case file and 
have a copy of all written documents provided upon request;
    (6) That by accepting the penalty, the Party waives the right to 
have the matter considered by a Hearing Officer in accordance with 
Sec. Sec. 221.73 to 221.89 of this subpart, and that if the Party 
elects to have the matter considered by a Hearing Officer, the Hearing 
Officer may assess a penalty less than, equal to, or greater than that 
stipulated in settlement if the Hearing Officer finds that a violation 
occurred; and
    (7) That a violation will be kept on record and may be used by the 
Maritime Administration in aggravation of an assessment of a penalty for 
a subsequent violation by that Party.
    (b) Upon receipt of the notification specified in paragraph (a) of 
this section, a Party may within 30 days--
    (1) Agree to the stipulated penalty in the manner specified in the 
notification; or
    (2) Notify in writing the Vessel Transfer Officer that the Party 
elects to have the matter considered by a Hearing Officer in accordance 
with the

[[Page 49]]

procedure specified in Sec. Sec. 221.73 through 221.89 of this subpart.
    (c) If, within 30 days of receipt of the notification specified in 
paragraph (a) of this section, the Party neither agrees to the penalty 
nor elects the informal hearing procedure, the Party will be deemed to 
have waived its right to the informal hearing procedure and the penalty 
will be considered accepted. If a monetary penalty is assessed, it is 
due and payable to the United States, and the Maritime Administration 
may initiate appropriate action to collect the penalty.



Sec. 221.69  Hearing Officer.

    (a) The Hearing Officer shall have no responsibility, direct or 
supervisory, for the investigation of cases referred for the assessment 
of civil penalties.
    (b) The Hearing Officer shall decide each case on the basis of the 
evidence before him or her, and must have no prior connection with the 
case. The Hearing Officer is solely responsible for the decision in each 
case referred to him or her.
    (c) The Hearing Officer is authorized to administer oaths and issue 
subpoenas necessary to the conduct of a hearing, to the extent provided 
by law.



Sec. 221.71  Hearing Officer referral.

    If, pursuant to Sec. 221.67(b)(2) of this subpart, a Party elects 
to have the matter referred to a Hearing Officer, the Vessel Transfer 
Officer may--
    (a) Decide not to proceed with penalty action, close the case, and 
notify the Party in writing that the case has been closed; or
    (b) Refer the matter to a Hearing Officer with the case file and a 
record of any prior violations by the Party.



Sec. 221.73  Initial Hearing Officer consideration.

    (a) When a case is received for action, the Hearing Officer shall 
examine the material submitted. If the Hearing Officer determines that 
there is insufficient evidence to proceed, or that there is any other 
reason which would make penalty action inappropriate, the Hearing 
Officer shall return the case to the Vessel Transfer Officer with a 
written statement of the reason. The Vessel Transfer Officer may close 
the case or investigate the matter further. If additional evidence 
supporting a violation is discovered, the Vessel Transfer Officer may 
resubmit the matter to the Hearing Officer.
    (b) If the Hearing Officer determines that there is reason to 
believe that a violation has been committed, the Hearing Officer 
notifies the Party in writing by registered or certified mail of--
    (1) The alleged violation and the applicable statute and 
regulations;
    (2) The maximum penalty that may be assessed for each violation;
    (3) The general nature of the procedure for assessing and collecting 
the penalty;
    (4) The amount of the penalty that appears to be appropriate, based 
on the material then available to the Hearing Officer;
    (5) The right to examine all the material in the case file and have 
a copy of all written documents provided upon requests; and
    (6) The right to request a hearing.
    (c) If at any time it appears that the addition of another Party to 
the proceedings is necessary or desirable, the Hearing Officer will 
provide the additional Party and the Party alleged to be in violation 
with notice as described above.
    (d) At any time during a proceeding, before the Hearing Officer 
issues a decision under Sec. 221.89, the Hearing Officer and the Party 
may agree to a Settlement of the case.



Sec. 221.75  Response by party.

    (a) Within 30 days after receipt of notice from the Hearing Officer, 
the Party, or counsel for the Party, may--
    (1) Pay the amount specified in the notice as being appropriate;
    (2) In writing request a hearing, specifying the issues in dispute; 
or
    (3) Submit written evidence or arguments in lieu of a hearing.
    (b) The right to a hearing is waived if the Party does not submit a 
request to the Hearing Officer within 30 days after receipt of notice 
from the Hearing Officer, unless additional time has been granted by the 
Hearing Officer.
    (c) The Hearing Officer has discretion as to the venue and 
scheduling of a hearing. The hearing will normally be

[[Page 50]]

held at the office of the Hearing Officer. A request for a change of 
location of a hearing or transfer to another Hearing Officer must be in 
writing and state the reasons why the requested action is necessary or 
desirable. Action on the request is at the discretion of the Hearing 
Officer.
    (d) A Party who has requested a hearing may amend the specification 
of the issues in dispute at any time up to 10 days before the scheduled 
date of the hearing. Issues raised later than 10 days before the 
schedule hearing may be presented only at the discretion of the Hearing 
Officer.



Sec. 221.77  Disclosure of evidence.

    The Party shall, upon request, be provided a free copy of all the 
evidence in the case file, except material that would disclose or lead 
to the disclosure of the identity of a confidential informant and any 
other information properly exempt from disclosure.



Sec. 221.79  Request for confidential treatment.

    (a) In addition to information treated as confidential under Sec. 
221.77 of this subpart, a request for confidential treatment of a 
document or portion thereof may be made by the Person supplying the 
information on the basis that the information is--
    (1) Confidential financial information, trade secrets, or other 
material exempt from disclosure by the Freedom of Information Act (5 
U.S.C. 552);
    (2) Required to be held in confidence by 18 U.S.C. 1905; or
    (3) Otherwise exempt by law from disclosure.
    (b) The Person desiring confidential treatment must submit the 
request to the Hearing Officer in writing and the reasons justifying 
nondisclosure. The Hearing Officer shall forward any request for 
confidential treatment to the appropriate official of the Maritime 
Administration for a determination hereon. Failure to make a timely 
request may result in a document being considered as nonconfidential and 
subject to release.
    (c) Confidential material shall not be considered by the Hearing 
Officer in reaching a decision unless--
    (1) It has been furnished by a Party; or
    (2) It has been furnished pursuant to a subpoena.



Sec. 221.81  Counsel.

    A Party has the right to be represented at all stages of the 
proceeding by counsel. After receiving notification that a Party is 
represented by counsel, the Hearing Officer will direct all further 
communications to that counsel.



Sec. 221.83  Witnesses.

    A Party may present the testimony of any witness either through a 
personal appearance or through a written statement. The Party may 
request the assistance of the Hearing Officer in obtaining the personal 
appearance of a witness. The request must be in writing and state the 
reasons why a written statement would be inadequate, the issue or issues 
to which the testimony would be relevant, and the substance of the 
expected testimony. If the Hearing Officer determines that the personal 
appearance of the witness may materially aid in the decision on the 
case, the Hearing Officer will seek to obtain the witness' appearance. 
The Hearing Officer may move the hearing to the witness' location, 
accept a written statement, or accept a stipulation in lieu of 
testimony.



Sec. 221.85  Hearing procedures.

    (a) The Hearing Officer shall conduct a fair and impartial 
proceeding in which the Party is given a full opportunity to be heard. 
At the opening of a hearing, the Hearing Officer shall advise the Party 
of the nature of the proceedings and of the alleged violation.
    (b) The material in the case file pertinent to the issues to be 
determined by the Hearing Officer shall first be presented. The Party 
may examine, respond to and rebut this material. The Party may offer any 
facts, statements, explanations, documents, sworn or unsworn testimony, 
or other exculpatory items that bear on the issues, or which may be 
relevant to the size of an appropriate penalty. The Hearing Officer may 
require the authentication of any written exhibit or statement.
    (c) At the close of the Party's presentation of evidence, the 
Hearing Officer

[[Page 51]]

may allow the introduction of rebuttal evidence. The Hearing Officer may 
allow the Party to respond to rebuttal evidence submitted.
    (d) In receiving evidence, the Hearing Officer shall not be bound by 
the strict rules of evidence. In evaluating the evidence presented, the 
Hearing Officer shall give due consideration to the reliability and 
relevance of each item of evidence.
    (e) After the evidence in the case has been presented, the Party may 
present argument on the issues in the case. The party may also request 
an opportunity to submit a written statement for consideration by the 
Hearing Officer. The Hearing Officer shall allow a reasonable time for 
submission of the statement and shall specify the date by which it must 
be received. If the statement is not received within the specified time, 
the Hearing Officer may render a decision in the case without 
consideration of the statement.



Sec. 221.87  Records.

    (a) A verbatim transcript of a hearing will not normally be 
prepared. The Hearing Officer will prepare notes on material and points 
raised by the Party in sufficient detail to permit a full and fair 
review of the case.
    (b) A Party may, at its own expense, cause a verbatim transcript to 
be made, in which event the Party shall submit, without charge, two 
copies to the Hearing Officer within 30 days of the close of the 
hearing.



Sec. 221.89  Hearing Officer's decision.

    (a) The Hearing Officer shall issue a written decision. Any decision 
to assess a penalty shall be based on substantial evidence in the 
record, and shall state the basis for the decision.
    (b) If the Hearing Officer finds that there is not substantial 
evidence in the record establishing the alleged violation, the Hearing 
Officer shall dismiss the case. A dismissal is without prejudice to the 
Vessel Transfer Officer's right to refile the case if additional 
evidence is obtained. A dismissal following a rehearing is final and 
with prejudice.
    (c) The Hearing Officer shall notify the Party in writing, by 
certified or registered mail, of the decision and, if adverse, shall 
advise the Party of the right to an administrative appeal to the 
Maritime Administrator or an individual designated by the Administrator 
from that decision.
    (d) If an appeal is not filed within the prescribed time, the 
decision of the Hearing Officer constitutes final agency action in the 
case.



Sec. 221.91  Appeals.

    (a) Any appeal from the decision of the Hearing Officer must be 
submitted in writing by the Party to the Hearing Officer within 30 days 
from the date of receipt of the Hearing Officer's decision.
    (b) The only issues that will be considered on appeal are those 
issues specified in the appeal which were raised before the Hearing 
Officer and jurisdictional questions.
    (c) There is no right to oral argument on an appeal.
    (d) The Maritime Administrator or an individual designated by the 
Administrator will issue a written decision on the appeal, and may 
affirm, reverse, or modify the decision, or remand the case for new or 
additional proceedings. In the absence of a remand, the decision on 
appeal is final agency action.
    (e) The Maritime Administrator or an individual designated by the 
Administrator shall notify the Party in writing, by certified or 
registered mail, of the decision on appeal and, if adverse, shall advise 
the Party of the right of appeal to the courts.



Sec. 221.93  Collection of civil penalties.

    Within 30 days after receipt of the Hearing Officer's decision, or a 
decision on appeal, the Party must submit payment of any assessed 
penalty in the manner specified in the decision letter. Failure to make 
timely payment will result in the institution of appropriate action to 
collect the penalty.

Subpart F--Other Transfers Involving Documented Vessels [Reserved]

[[Page 52]]



                      Subpart G_Savings Provisions



Sec. 221.111  Status of prior transactions--controlling dates.

    (a) The Maritime Administrator hereby grants approval for any 
transaction occurring on or after January 1, 1989 and prior to July 3, 
1991 that was lawful under 46 CFR part 221, revised as of October 1, 
1989.
    (b) The Maritime Administrator hereby grants approval for any 
transaction occurring on or after July 3, 1991 and prior to June 3, 1992 
that was lawful under 46 CFR part 221, revised as of October 1, 1991.
    (c) Any transaction approved by the Maritime Administrator prior to 
January 1, 1989, or any transaction that did not require such approval 
prior to that date, shall continue to be lawful.



PART 232_UNIFORM FINANCIAL REPORTING REQUIREMENTS--Table of Contents



Sec.
232.1 Purpose and applicability.
232.2 General instructions.
232.3 Chart of accounts.

                              Balance Sheet

232.4 Balance sheet accounts.

                            Income Statement

232.5 Income statement accounts.
232.6 Financial report filing requirement.

    Authority: Section 204(b), Merchant Marine Act, 1936, as amended (46 
App. U.S.C. 1114(b)); 49 CFR 1.66.

    Source: 48 FR 30122, June 30, 1983, unless otherwise noted.



Sec. 232.1  Purpose and applicability.

    (a) Purpose. The purpose of this regulation is to establish uniform 
reporting requirements for the preparation of financial reports and 
submissions of information to the Maritime Administration. The Maritime 
Administration will, as necessary, issue clarifying instructions to 
those subject to these reporting requirements to assist in their 
interpretation and application. The uniform reporting requirements 
consist of:
    (1) A chart of accounts defined in this regulation.
    (2) Standard financial report formats, set forth in Form MA-172 
(Revised).
    (b) Applicability. This regulation is application to all 
participants in financial assistant programs administered by the 
Maritime Administration, U.S. Department of Transportation, that are 
required to file periodic financial reports with that agency.

[48 FR 30122, June 30, 1983, as amended at 58 FR 62043, Nov. 24, 1993]



Sec. 232.2  General instructions.

    (a) Use of generally accepted accounting principles. All contractors 
shall conform their accounting policies to generally accepted accounting 
principles (promulgated by the Financial Accounting Standards Board of 
the American Institute of Certified Public Accountants).
    (b) Need to conform accounting information. All contractors may 
continue to use their current accounting system, if the system provides 
a basis for the preparation of reports in the prescribed formats and is 
consistent with generally accepted accounting principles.
    (c) Reconciliation of financial reports. When a program participant 
issues certified financial statements following accounting policies 
different from those followed for the financial statement filed with the 
Maritime Administration (such as reports filed with the Securities and 
Exchange Commission, public service commissions or other regulatory 
agencies, or reports using other acceptable accounting methods differing 
from methods used for this regulation's purposes), the program 
participant shall clearly set forth the nature and amount of each 
adjustment necessary to reconcile the published statements with those 
filed with the Maritime Administration.
    (d) Submission of questions. (1) A contractor may submit in writing, 
or by electronic options (such as facsimile and Internet), if 
practicable, any question involving the interpretation of any provision 
of this part for consideration and decision to the Director, Office of 
Financial and Rate Approvals, for the Maritime Security Program, or 
Director, Office of Ship Financing, for the Maritime Loan Guarantee 
Program (Title XI), Maritime Administration, Department of 
Transportation, 400 Seventh Street, SW., Washington, DC

[[Page 53]]

20590. Appeals from such interpretation will be in accordance with the 
interpretation letter.
    (2) A contractor who has a question of financial accounting or 
reporting procedure pending before the Maritime Administration at the 
time a financial report is due shall file the report in accordance with 
established scheduled dates. The contractor shall include in the report 
a footnote disclosure that adequately describes the question pending, 
the manner of presentation in the report, and the relative impact on the 
balance sheet and income statement, respectively.
    (e) Effective Date. This regulation is effective as of December 27, 
1993 and its requirements are mandatory for financial reports for 
accounting periods ending on or after December 31, 1993.

[48 FR 30122, June 30, 1983, as amended at 58 FR 62043, Nov. 24, 1993; 
68 FR 62537, Nov. 5, 2003; 69 FR 61449, Oct. 19, 2004]



Sec. 232.3  Chart of accounts.

    (a) Purpose of accounts. A contractor shall use this chart of 
accounts as a guide for preparing the financial statements and for other 
required financial reports required to be submitted to the Maritime 
Administration. However, whenever there is a conflict between the 
meaning of any term used in the Chart of Accounts in this part 232 and 
that stated in any revision to generally accepted accounting principles, 
the meaning of the latter shall control and shall be followed.
    (b) Account numbers. Contractors are not required to use these 
account numbers or titles for their internal accounting.

(Approved by the Office of Management and Budget under control number 
2133-0005)

[48 FR 30122, June 30, 1983, as amended at 58 FR 62044, Nov. 24, 1993]

                              Balance Sheet



Sec. 232.4  Balance sheet accounts.

    (a) Accounts defined. Each account is identified by an account 
number and an account title, followed by a text describing the 
accounting information to be included in that account. Where considered 
necessary, accounting procedures are also included to explain how the 
contractor shall disclose information for reporting purposes.
    (b) Purpose of balance sheet accounts. The balance sheet accounts 
are intended to disclose the financial condition of the contractor as of 
a given date.
    (A) Asset Accounts.
    (1) 100 Cash.
    (i) This account shall include the amount of current funds available 
on demand in the hands of financial officers or deposited in banks or 
trust companies, including cash in transit for which agents or others 
have received credit. Cash appropriated or otherwise restricted for any 
purpose shall be included in Account 300, ``Restricted Funds.''
    (ii) Compensating balances included in this account shall be 
disclosed by appropriate footnote.
    (2) 120 Marketable Securities.
    (i) This account shall include securities and other temporary 
investments which are available for general purposes of the business. In 
no case shall securities of the reporting contractor or of a related 
party be included in this account. Separate subaccounts may be used to 
account for discounts and premiums on marketable securities.
    (ii) For financial reporting, the lower of aggregate cost or market 
value at the balance sheet date shall be used to value securities 
included in this account.
    (3) 140 Notes Receivable.
    (i) This account shall include the amount of all obligations in the 
form of short-term notes receivable or other evidences (except interest 
coupons) of money receivable and due on demand or within one year from 
date of issue.
    (ii) Separate subaccounts shall be used to segregate notes 
receivable from related parties.
    (4) 150 Accounts Receivable.
    (i) This account shall include trade or traffic receivables and 
claims receivable from insurance underwriters and other miscellaneous 
receivables not otherwise provided for in other accounts. Accrued 
accounts receivable for interest, dividends, rents, royalties,

[[Page 54]]

charters and other unmatured receivables of a current nature shall be 
reported in this account, except those accrued amounts which are 
required to be deposited to a restricted fund.
    (ii) Separate subaccounts shall be used to segregate trade or 
traffic receivables, claims receivables and miscellaneous receivables. 
Receivables arising from transactions with related parties shall also be 
segregated.
    (iii) This account shall also be used to report construction-
differential subsidy (CDS) and operating-differential subsidy (ODS) 
estimated to have accrued to the contractor and which remain unpaid as 
of the balance sheet date.
    (iv) Separate subaccounts shall be maintained by contract number 
and, under each contract, identified by year of termination and by 
category of subsidy as applicable, e.g., for CDS categories may include 
design and inspection costs; and for ODS categories may include wages, 
maintenance and repair, and any other category for which the contractor 
receives an operating subsidy.
    (5) 160 Allowance for Bad Debts.
    This account shall be credited at the close of each accounting 
period for estimated uncollectable notes and accounts.
    (6) 170 Other Current Assets.
    (i) Inventories, prepaid expenses and other items that are expected 
to be used or consumed within 12 months of purchase or acquisition shall 
be reported in this account.
    (ii) Acquisition of similar items that will not be used or consumed 
within one year should be reported as part of account 360, Other Assets.
    (iii) For Financial Report purposes, this account shall be used to 
record the contra entries of accrued deposits in account 300 Restricted 
Funds.
    (7) 300 Restricted Funds.
    (i) This account shall include the amount of cash and securities (at 
cost) deposited to any restricted fund, including but not limited to 
Title XI Reserve or Restricted Fund, Capital Construction Fund, 
Construction Reserve Fund, Title XI Escrow Fund, Title XI Construction 
Fund, Drilling Rig Reserve Fund, Insurance Fund, Debt Retirement Fund, 
special and guarantee deposits.
    (ii) For each fund established, subsidiary accounts shall be used to 
separately account for cash or securities deposited to the fund. At the 
close of each accounting period accrual entries shall be made to account 
for earned but undeposited investment income.
    (iii) Compensating balances under an agreement which legally 
restricts the use of such funds and constitutes support for borrowing 
arrangements shall be included in this account.
    (iv) Deposits required to be made into any Restricted Fund are to be 
included in the column ``Accrued for Deposit''--appearing in Schedule 
211. The contra entry for the accrual shall be credited to account 170 
Other Current Assets.
    (8) 310 Investments.
    (i) This account shall include amounts of investment instruments 
intended to be held more than one year and includes securities of 
related parties, noncurrent notes receivable and noncurrent accounts 
receivable, both from related parties and others, cash value of life 
insurance policies and other investments. Noncurrent marketable 
securities shall be carried at the lower of aggregate cost or market 
value at the balance sheet date.
    (ii) Separate subaccounts shall be maintained for the various 
investments, including those resulting from related party transactions.
    (iii) For financial reporting purposes, the lower of cost or market 
value at the close of business on the balance sheet date will be used to 
value the securities included in the account except as noted below.
    (iv) Investments in related parties must be reported using the 
equity or consolidated basis of accounting as adopted by the Financial 
Accounting Standards Board.
    (9) 330 Property and Equipment.
    (i) This account shall include the cost of acquisition or 
construction and related capitalizable cost, including additions and 
betterments and all other associated cost necessary to place the 
respective property and equipment in acceptable condition for its 
intended use. This account shall also include the capitalized amount of 
financing leases, computed in accordance with generally

[[Page 55]]

accepted accounting principles, as prescribed by the Securities and 
Exchange Commission and the Financial Accounting Standard Board.
    (ii) Subaccounts shall be maintained by type and category of 
property and equipment such as, but not limited to, the following: (A) 
Floating equipment, including self-propelled vessels for transporting 
cargo or passengers in U.S. foreign or worldwide foreign commerce, tugs 
and barges, drilling platforms used in offshore operations, fishing and 
associated service vessels, service vessels used in conjunction with 
off-shore drilling platforms and deep-water mining operations, lighters 
primarily used to transport cargo within port areas and river systems or 
carried aboard mother vessels--i.e., LASH and SEABEE lighters and 
barges, other floating equipment ancillary to the operator's primary 
vessel operations; (B) containers and flat racks; (C) chassis and 
trailer equipment; (D) terminal property and cargo handling equipment; 
(E) other property and equipment; (F) leaseholds, leasehold improvements 
and Capital Leases; and (G) construction work-in-progress (to provide 
information by project or by type of capitalized asset cost category). 
For each asset account within account 330 a separate depreciation or 
amortization accumulation account must be established except for work-
in-progress accounts.
    (10) 360 Deferred Charges.
    (i) This account shall be used to report expenses, the payment for 
which the contractor has become liable currently, but which will not be 
charged to income within one year of the balance sheet date.
    (ii) Separate subaccounts shall be maintained to identify the 
different categories of expense included in this account. These 
subaccounts may include such items as prepaid insurance; the expense of 
issuing long-term debt and for absorption of discounts on the stated 
value of the debt instruments; organization expenses; deferred 
prepayments and other deferred charges.
    (iii) Separate subaccounts shall be maintained for amortization of 
the various deferred charges included in this account.
    (11) 380 Other Assets.
    All assets, not otherwise provided for above, shall be reported in 
this account. Separate subaccounts shall be maintained for the various 
types of assets, including notes and accounts receivable which are not 
due in the normal course of business within one year of the balance 
sheet date. Each type of asset shall be further segregated to disclose 
amounts due from officers and employees of the reporting contractor or 
operator, officers and employees of related parties, related parties 
themselves, allowance for the trade in of vessels to the Maritime 
Administration (where the allowance is to be applied by the agency on 
behalf of the contractor toward progress payments on new construction) 
and other assets not otherwise accounted for as miscellaneous assets.
    (12) 390 Intangible Assets.
    (i) This account shall be used to report the amount of goodwill 
attributed to the cost of acquiring a business or segment of a business 
from an unrelated party, as well as the cost of acquiring by purchase, 
development or other means such intangible assets as patents, 
copyrights, trade names, operating rights, and similar assets.
    (ii) The contractor shall maintain separate subaccounts for the 
identified intangible assets, including subaccounts to identify their 
respective amortization.
    (B) Liability Accounts.
    (1) 400 Notes Payable and Current Portion of Long-Term Debt.
    (i) The amount reported for this account shall include the face 
value of notes, drafts and other evidences of indebtedness issued by the 
contractor which are payable on demand or within one year of the balance 
sheet date.
    (ii) Separate subaccounts shall be used to identify different groups 
of creditors, e.g., banks, insurance companies, officers and employees, 
related parties and all other creditors.
    (iii) The amount of capitalized lease liability maturing during the 
twelve months following the balance sheet date shall also be reported in 
this account. A record shall be maintained for each lease agreement, 
with a description of the type of equipment under lease.

[[Page 56]]

    (iv) This account shall not include obligations due within one year 
which the contractor intends to refinance on a long-term basis or which 
are payable from restricted funds. Long-term refinancing of short-term 
obligations means replacement with long-term obligations or equity 
securities or renewal, extension, or replacement with short-term 
obligations for an uninterrupted period extending beyond one year from 
the balance sheet date. Such short-term obligations are to be recorded 
in account 510, Long-term Debt.
    (2) 420 Accounts Payable.
    (i) The amount reported for this account shall include accounts 
payable--trade; accounts payable--traffic; pension and welfare funds; 
accounts payable--Maritime Administration; and other accounts payable.
    (ii) Sufficient information shall be maintained to identify 
individual creditors and the general categories or classification of the 
liabilities.
    (iii) Debts of individual creditors not incurred in the normal 
course of business shall be identified by group, e.g., officers and 
employees, affiliated companies, officers and employees of an affiliated 
company, and other appropriate groupings of creditors not otherwise 
affiliated in any way with the contractor.
    (3) 440 Accrued Liabilities.
    (i) This account shall be used to report the amount of accrued 
taxes, accrued operating expenses and other accrued liabilities arising 
in the regular course of business.
    (ii) Subaccounts shall be maintained for each category of liability.
    (4) 450 Other Current Liabilities.
    (i) This account shall include all current liabilities for which no 
other account has been provided.
    (ii) Subaccounts shall be maintained to account separately for each 
class of current liabilities that arise from transactions with officers 
or employees, affiliated companies and officers or employees of 
affiliated companies, and must be readily identifiable to facilitate 
financial reporting requirements.
    (5) 470 Advance Payments and Deposits.
    (i) This account shall be used to report the balance of collections 
from customers for services not yet provided by the contractor.
    (ii) Sufficient accounting information shall be maintained to 
readily disclose collections from related parties.
    (6) 510 Long-Term Debt.
    (i) This account shall be used to report the noncurrent portion of 
long-term debt, including mortgage notes payable to the Maritime 
Administration, U.S. Government insured or guaranteed debt obligations 
issued under Title XI of the Act, and the face amount of bonds, 
debentures and other long-term debt not provided for in other accounts.
    (ii) Subaccounts shall be maintained to disclose unsecured and 
secured debt by creditor and by secured asset.
    (iii) This account shall also include the balance of the long-term 
portion of capitalized lease liabilities. Reporting shall be by lease 
agreement and type of asset leased.
    (iv) This account shall also include obligations due within one year 
which are expected to be refinanced on a long-term basis in accordance 
with the discussion of Account 400.
    (v) Separate subaccounts shall be maintained to record the premiums 
for each class of funded debt (which shall be amortized over the 
respective lives of the securities by credit to Account 670, Other 
Revenue).
    (7) 530 Other Liabilities.
    (i) This account shall be used to report the balance of all other 
liabilities maturing after one year from the balance sheet date and for 
which no other account has been specifically provided.
    (ii) Subsidiary accounts shall be maintained for each category or 
type of liability and accounted for by debtor.
    (iii) Reporting of balances outstanding shall show separately 
amounts due to officers and employees, affiliated companies and officers 
and employees of affiliated companies.
    (8) 560 Deferred Credits.
    This account shall be used to report the amount of accumulated 
deferred income taxes, income or credits for which no other account is 
specifically provided.
    (C) Equity Accounts.
    (1) 570 Invested Capital.

[[Page 57]]

    This account shall be used to report the amount of capital 
contribution by an individual in a proprietary company, by partners of a 
partnership, and by stockholders of a corporation for the par or stated 
value of the capital stock outstanding and additional paid-in capital.
    (2) 580 Treasury Stock.
    This account shall be used to report the cost to the contractor of 
its stock that has been reacquired.
    (3) 590 Retained Earnings.
    (i) This account shall be used to report the balance of restricted 
and unrestricted retained earnings for an incorporated business entity. 
Subsidiary accounts shall be used for each class of restricted earnings.
    (ii) Partnerships should make appropriate changes of titles to 
account for partners accounts.
    (iii) For purposes of meeting the Maritime Administration's Dividend 
Policy for Operators Receiving ODS (46 CFR part 283), accounting 
information for unrestricted retained earnings shall be made available 
to show the income or loss taken into retained earnings, dividends and 
other distributions paid, and the current balance of unrestricted 
retained earnings available for distribution.

[48 FR 30122, June 30, 1983, as amended at 58 FR 62044, Nov. 24, 1993; 
58 FR 64798, Dec. 9, 1993]

                            Income Statement



Sec. 232.5  Income Statement Accounts.

    (a) Accounts Defined. Each account shall be identified by an account 
number and an account title followed by a text describing the accounting 
information to be included in that account.
    (b) Purpose of Income and Expense Accounts. The income and expense 
accounts shall show for each reporting period the amount of money the 
contractor is entitled to receive for services rendered; the income 
accrued from investments in securities and property; accrued expenses; 
and income and expense attributable to extraordinary items.
    (D) Revenue Accounts.
    (1) 600 Vessel Revenue.
    (i) This account shall be used to report revenue (including 
surcharges) from operations. As used here, vessel refers to any asset 
that qualifies for obligation guarantees pursuant to regulations issued 
under Title XI of the Act (46 CFR part 298).
    (ii) For contractors who operate vessels in the U.S. foreign 
commerce with a construction or operating-differential subsidy agreement 
(CDSA or ODSA), operating revenue attributed to such vessels shall be 
separately accounted for to report the following: Freight-foreign, 
freight-coastwise and intercoastal; passenger-foreign, passenger-
coastwide and intercoastal; charter revenue; and other voyage revenue. 
Contractors with an ODSA shall further describe freight and passenger 
revenue--foreign (including surcharges), U.S. foreign commerce revenue 
outbound and foreign commerce revenue (transportation between foreign 
ports). Revenue shall be accounted for to facilitate reporting the 
source of revenue by trade route or service area.
    (iii) All other contractors shall report vessel revenue by category 
or class, or by operating segment or division if different business 
segments or operating divisions produce vessel revenue.
    (iv) Except as otherwise provided in paragraph (D)(1)(i) of this 
section, vessel revenue shall be accounted for following generally 
accepted accounting principles for the segment of the maritime industry 
of which the contractor is a part and shall be applied consistently 
between reporting periods.
    (2) 640 Operating-Differential Subsidy.
    (i) This account shall be used to report the revenue accrued under 
provisions of the ODSA.
    (ii) Subsidiary accounts shall be used to account for the amount of 
subsidy accrued by expense classifications to include: Wages of officers 
and crew; subsistence of officers and crew; maintenance, repairs and 
upkeep not compensated by insurance; hull and machinery insurance 
premiums; protection and indemnity insurance premiums; protection and 
indemnity insurance; deductible expense attributed to illness or injury 
of crew members; and other expense categories as may be specified in the 
ODSA.
    (iii) Records shall be maintained by vessel for each trade route or 
service

[[Page 58]]

area in which a vessel subject to an ODSA operates.
    (iv) If ODS is accrued at substantially different rates developed by 
the contractor applicable to any year in which final rates have not been 
agreed to, the difference between the ODS accruals based on billing 
rates established by MARAD and the ODS accruals based on the 
contractor's rates shall be disclosed in appropriate footnotes to the 
balance sheet and to the income statement.
    (3) 650 Other Shipping Operations Revenue.
    This account shall be used to report revenue earned from shipping 
activities other than vessel operations. Examples are revenue from 
pooling agreements, terminal services provided to others, and cargo 
handling services performed for others; cargo equipment rentals, and 
repairs to cargo equipment belonging to others; agency fees, commissions 
and brokerage fees earned.
    (4) 670 Other Revenue.
    This account shall be used to report revenue from the following 
sources: Interest bearing securities, dividends from capital stock, 
gains from the sale of assets not accounted for under the provisions 
prescribed for account 995, amortization of premium on funded debt, 
income or loss from subsidiaries, and other revenue not otherwise 
provided for, including nonshipping operations revenue.
    (E) Expense Accounts.
    (1) 700 Vessel Operating Expense.
    (i) This account shall be used to report expenses of vessel 
operations of any kind. As used here, vessel has the same meaning as in 
paragraph (D)(1)(i) of this section.
    (ii) For contractors with an ODSA who operate vessels subject to 
such an agreement in the U.S.-foreign commerce or worldwide foreign 
commerce, vessel expense shall be recorded by category as follows: 
Salaries and wages of officers and unlicensed crew, including relief 
crews and others regularly employed aboard the vessel; fringe benefits, 
such as pension and welfare, vacation payments to unions on behalf of 
the officers, crew and others, accrued payroll taxes; consumable stores, 
supplies and equipment, sales taxes, delivery and inspection charges; 
vessel maintenance and repair expense, including laundry service, 
inspection services, cost of maintaining expendable equipment and other 
costs not recoverable from insurance which are integral parts of vessels 
(including the purchase of permanent equipment and spares required by 
the classification societies in the United States and its territories 
and possessions); hull and machinery insurance costs, including premium 
expense, deductibles which have been incurred or paid, protection and 
indemnity insurance, including premium expense, personal injury and 
illness deductibles which have been incurred or paid, and second 
seaman's insurance premiums; premiums for other marine risk insurance 
involving the vessel and not properly chargeable to hull and machinery 
insurance or to protection and indemnity insurance accounts; vessel fuel 
and incidental costs; charter hire expenses, including time, trip, 
short-term and long-term bareboat charter hire; and other vessel 
expenses not properly chargeable to other accounts described herein 
which are incidental to the operation of vessels.
    (iii) For contractors who own or operate vessels not subject to an 
ODSA, vessel expense shall include all expenses directly attributable to 
the operation of vessels. Such expense shall include such expense 
classifications as generally in use by the segment of the industry with 
which the contractor is identified. To the extent applicable, the 
expense classifications mentioned in the preceding paragraph (ii) shall 
be used.
    (iv) Contractors operating vessels to transport cargo or passengers 
shall maintain appropriate vessel expense records for the purpose of 
filing vessel operating reports with the Maritime Administration.
    (2) 750 Vessel Port Call Expense.
    (i) This account shall be used to report the expenses of a vessel at 
each port of call. Port call expenses may include: Charges for wharfage 
and dockage of the vessel, pilotage, entry dues and fees, port dues and 
taxes; anchor dues; canal tolls; launch hire, and tug hire; dispatch and 
husbanding fees of agents; and other port and terminal expenses.

[[Page 59]]

    (ii) Port charges attributable to the vessel's cargo or passengers 
are not to be reported in this account. Such expenses shall be reported 
in Account 760, Cargo Handling Expense.
    (3) 760 Cargo Handling Expense.
    This account shall be used to report all expenses directly 
attributable to the handling of cargo or passengers for a fee. This 
account shall include: Cost of preparing a vessel to receive cargo; cost 
of loading and discharging of the vessel's cargo, including stevedoring 
and equipment and service charges of stevedoring contractors; cost of 
transporting cargo from the point of delivery into the possession of the 
contractor to the loading port and from the discharge port to the point 
of delivery stipulated by the freight agreement if different from the 
port of discharge; brokerage expense, including commissions paid 
brokers' agencies for the procurement of passengers or freight; cargo 
loading plans, demurrage, costs incidental to receiving, delivering and 
warehousing at freight station facilities; and other charges for cargo 
services performed by others.
    (4) 800 Inactive Vessel Expense.
    (i) This account shall be used to report all expenses incurred 
during and directly incident to inactive periods of vessels.
    (ii) Expenses in this account include: Wages of officers and crew; 
contributions to crew fringe benefit plans; accrued payroll taxes; 
subsistence cost of personnel assigned to inactive vessels; consumables 
other than subsistence items; vessel maintenance expense; vessel 
repairs; insurance expense; charter hire cost; wharfage and dockage; 
port expense; and miscellaneous expenses.
    (5) 860 Other Shipping Operations Expense.
    This account shall be used to report cost of container leasing, 
maintenance and repair cost and costs of shipping related activities in 
which the contractor engages to support vessels, such as terminal 
operations, cargo equipment, fleet operations, cargo pooling agreements, 
container loading and other activities that are not accounted for 
elsewhere and that are ancillary to the contractor's vessel operations.
    (6) 900 General and Administrative Expenses.
    (i) This account shall be used to report the administrative and 
general expenses incurred in the operation of the business.
    (ii) This account shall include: Compensation of corporate officers, 
directors, administrative and service employees; fringe benefits of 
general and administrative personnel; legal fees; accounting and 
auditing fees; other professional fees; office and storage expense; 
utilities; communications expense; data processing expense; dues; 
subscriptions; entertainment; travel expense; insurance expense; 
maintenance and repair expense for office facilities; fixtures and 
equipment; fees and commissions paid to managing agents; advertising 
expense; foreign currency conversion; and other expenses to enhance the 
operation of the business.
    (7) 940 Depreciation and Amortization Expense.
    (i) This account shall be maintained by class of assets as accounted 
for in the property and equipment accounts.
    (ii) Subaccounts shall be grouped by classifications such as: 
Vessels; terminals; cargo equipment; office furniture and fixtures; and 
nonshipping assets.
    (8) 950 Other Expense.
    This account is to be used to report expenses not chargeable to any 
other expense account. Such charges may include: Amortization of 
deferred charges; taxes other than income; debt discount and expense; 
nonshipping operations expense; organization and preoperating expense 
and other miscellaneous deferred charges; as well as doubtful notes and 
accounts receivable.
    (9) 960 Interest Expense.
    (i) This account shall be used to report all interest expense 
accrued and charged to income during the period.
    (ii) Subaccounts shall be maintained by debt source/contract to 
provide information needed to fulfill reporting disclosure requirements.
    (10) 970 Income Taxes.
    (i) This account shall be used to report accrued income tax 
liability for the current year's operation exclusive of extraordinary 
items, discontinued operations and the cumulative effect of a change in 
accounting policy.

[[Page 60]]

    (ii) Sufficient accounting records shall be maintained to meet 
income and expense allocation requirements that may exist as a result of 
a Capital Construction Fund Agreement entered into under 46 CFR parts 
390 and 391, pursuant to provisions of Title VI of the Act.
    (11) 990 Cumulative Effect of Change in Accounting Policy.
    (i) This account shall be used to report the cumulative effect of a 
change in accounting policy or a change required under generally 
accepted accounting principles.
    (ii) A footnote shall be added to the income statement explaining 
the substance of the old and new accounting methods and the reason 
supporting the change in accounting policy.
    (iii) The amount reported in this account shall be net of all taxes.
    (12) 995 Income or Loss from Extraordinary Items Net of Taxes.
    (i) Amounts representing gain or loss from extraordinary items, as 
defined by generally accepted accounting principles customarily applied 
in the industry of which the contractor is a part, shall be reported in 
this account. Generally, these transactions would be attributed to 
insurance proceeds from the total loss of a vessel or catastrophic 
losses to shore-based facilities, as well as from sales of damaged 
assets scrapped because of a natural catastrophe, and disposal of assets 
used primarily in a business segment which is being discontinued.
    (ii) Sufficient records shall be maintained to fully describe and 
account for all aspects of each item reported in this account, and when 
a firm commitment is made to dispose of an operating business segment, a 
provision for anticipated gain or loss to be realized in the subsequent 
period from disposal of assets and winding down of operations of the 
discontinued segment shall be taken into income in the year the 
contractor makes the decision.
    (iii) Amounts in this account must be net of all taxes including 
Federal income taxes.

[48 FR 30122, June 30, 1983, as amended at 58 FR 62044, Nov. 24, 1993]



Sec. 232.6  Financial report filing requirement.

    (a) Reporting Frequency and Due Dates. The contractor shall file a 
semiannual financial report and an annual financial report, in the 
format referred to in Sec. 232.1(a)(2), which MARAD shall make 
available to the contractor. This Form MA-172 (Revised) shall be 
prepared in accordance with generally accepted accounting principles and 
modified to the extent necessary to comply with this regulation. The 
annual financial report shall be reconciled to the financial statements 
audited by independent certified public accountants (CPAs) licensed to 
practice by a state or other political subdivision of the United States, 
or licensed public accountants licensed to practice by regulatory 
authority or other political subdivision of the United States on or 
before December 31, 1970. Both the annual and semiannual financial 
reports shall be due within 120 days after the close of the contractor's 
annual or semiannual accounting period. If certified (CPA) statements 
are not available when required, company certified statements are to be 
submitted within the due dates, and the CPA statements shall be 
submitted as soon as available. The respondent may, in place of any 
Schedule(s) contained in the Form MA-172, submit a schedule or schedules 
from its audited financial statements, or a computer print-out or 
schedule, consistent with the instructions provided in the MARAD 
formats. MARAD will accept electronic options (such as facsimile and 
Internet) for transmission of required information to MARAD, if 
practicable.
    (b) Certification. Annual and semiannual reports shall be approved 
by the Respondent and Official of Respondent whom MARAD may contact 
regarding the report in the reporting formats prescribed as the MA-172 
submission.
    (c) Presumption of confidentiality. MARAD will initially presume 
that each part of the financial reports or data submitted as prescribed 
by this Regulation, other than Schedule 101--Identity of Respondent and 
Schedules 102 and 103, only with respect to the

[[Page 61]]

names and titles of directors and principal officers and employees, is 
privileged or confidential within the meaning of 5 U.S.C. 552(b)(4). In 
the event of a subsequent request for any portion of the reports or data 
under 5 U.S.C. 552, the submitter will be notified of such request and 
given the opportunity to comment. The contractor shall claim 
confidentiality at that time by memorandum or letter stating the basis, 
in detail, for such assertion of exemption, including but not limited to 
statutory and decisional authorities. Those parts not so claimed by the 
submitter to be confidential will be disclosed, and those parts so 
claimed will be subject to initial determination by the Freedom of 
Information Act Officer.

(Approved by the Office of Management and Budget under control number 
2133-0005)

[48 FR 30122, June 30, 1983, as amended at 68 FR 62537, Nov. 5, 2003; 69 
FR 61449, Oct. 19, 2004]

[[Page 62]]



   SUBCHAPTER C_REGULATIONS AFFECTING SUBSIDIZED VESSELS AND OPERATORS





PART 249_APPROVAL OF UNDERWRITERS FOR MARINE HULL INSURANCE--Table of 

Contents



Sec.
249.1 Purpose.
249.2 Policy.
249.3 Amounts of insurance.
249.4 Eligibility.
249.5 Eligibility criteria.
249.6 Application procedures.
249.7 Approval.
249.8 Limitation on risk.
249.9 American market participation.
249.10 Non-discrimination policy.
249.11 Confidentiality.
249.12 Waivers.

    Authority: Sec. 204(b), 1109, Merchant Marine Act, 1936, as amended 
(46 App. U.S.C. 1114(b), 1279b); 49 CFR 1.66.

    Source: 53 FR 23119, June 20, 1988, unless otherwise noted.



Sec. 249.1  Purpose.

    This part prescribes certain regulations governing the placement of 
marine hull insurance on vessels built or operated with subsidy or 
covered by vessel obligation guarantees issued pursuant to Title XI of 
the Merchant Marine Act, 1936, as amended (Act). (46 U.S.C. 1271-1279)



Sec. 249.2  Policy.

    (a) It is the policy of the Maritime Administration (MARAD) that 
companies subject to requirements for the placement of marine hull 
insurance shall be afforded the widest possible opportunity to obtain 
the necessary coverage, with minimal regulatory constraints, with 
financially sound underwriters, and that such placement should not 
create any unnecessary impediments to competitive maritime operations.
    (b) It is also the policy of MARAD to require owners of vessels with 
ODS or Title XI obligation guarantees to allow the American marine 
insurance market the opportunity to compete for the marine hull 
insurance on their vessels before such insurance is placed. Consistent 
with sound business judgment, owners will be expected to place their 
insurance with the American market to the maximum extent possible when 
the rates, terms and conditions offered by American underwriters are 
competitive with those offered by foreign underwriters.



Sec. 249.3  Amounts of insurance.

    MARAD will inform the owner of each vessel that is subsidized or 
covered by vessel obligation guarantees, prior to initial placement and 
at least annually thereafter, of the minimum amount of insurance 
required to be placed on the vessel.



Sec. 249.4  Eligibility.

    In General. All required marine hull insurance must be placed with:
    (a) Underwriters licensed to do business in one or more of the 
United States;
    (b) Underwriters at Lloyds;
    (c) Member companies of the Institute of London Underwriters; or
    (d) Other underwriters specifically approved in advance by the 
Maritime Administration.



Sec. 249.5  Eligibility criteria.

    (a) U.S. Underwriters. Underwriters licensed to do business in a 
state are eligible to participate without further consideration, 
provided they have at least a B security rating, as published in the 
latest edition of A.M. Best's Insurance Reports, and the amount of 
insurance does not exceed the limitation on risk prescribed in Sec. 
249.8.
    (b) Foreign Underwriters. (1) Underwriters at Lloyds are eligible to 
participate without further consideration.
    (2) Underwriters which are members of the Institute of London 
Underwriters (ILU) (i.e., member companies, not parents or affiliates of 
the member companies) are eligible to participate without further 
consideration, provided that the ILU member company actually 
underwriting the risk maintains a trust fund in the United States for 
the benefit of its U.S. policyholders in an amount at least equal to the 
minimum provided in Sec. 249.7(d), and the

[[Page 63]]

amount insured does not exceed the limitation on risk prescribed in 
Sec. 249.8. Parent companies or affiliates of the ILU member companies 
are treated as other foreign underwriters under subsection (c) of this 
section.
    MARAD reserves the right to review this eligibility at any time.
    (c) Other Foreign Underwriters. Foreign underwriters, other than 
those specified in paragraphs (b) (1) and (2) of this section, may also 
be eligible to participate in the writing of marine hull insurance on 
MARAD program vessels, if approved to do so in accordance with the 
procedures contained in Sec. Sec. 249.6 and 249.7.
    (d) Documentation of eligibility. It shall be the responsibility of 
the vessel owner and its broker to ensure that the requirements of this 
section are met, and they should be able to provide MARAD, upon request, 
with documentation to that effect.



Sec. 249.6  Application procedures.

    (a) MARAD may grant specific approval for underwriters described in 
Sec. 249.5(c) to participate in the writing of marine hull insurance on 
MARAD program vessels, only in advance of any actual placement.
    (b) Only those foreign underwriters who have obtained a high rating 
(A or comparable) from an accepted international rating service may 
apply, and if approved, such approval will be contingent upon continued 
maintenance of such rating. MARAD will make available to interested 
parties the names of any accepted international rating service.
    (c) To seek approval, an applicant shall submit to MARAD:
    (1) Certified financial data for the five previous years in 
sufficient detail to enable MARAD to assess the financial strength and 
solvency of the applicant. Normally, this would be the same data which 
the underwriter must submit to the regulatory agency in its country of 
domicile. However, MARAD may request additional data if the applicant's 
submissions are considered inadequate;
    (2) A comprehensive description and English language version of the 
insurance regulatory regime that is in place in the insurer's country of 
domicile. (After review, MARAD may contact the foreign national 
regulatory authorities, as appropriate);
    (3) An affidavit in writing, executed by an agent of the applicant 
who is a domiciliary of the United States, and supported by appropriate 
documentation, to demonstrate that there is nothing in either law or 
practice to preclude a U.S. insurer from obtaining the same access to 
the applicant's home market as the applicant is seeking to the U.S. 
market, and
    (4) The details of its reinsurance program, if it wishes to write 
any risks in excess of five percent of its policyholders' surplus. These 
details shall be accompanied by a statement that clearly demonstrates 
the special circumstances and good cause by which MARAD should be 
persuaded to modify its general policy on limitation of risk described 
in Sec. 249.8.



Sec. 249.7  Approval.

    (a) Approval of the applicant will be based upon an assessment of 
the applicant's financial condition and solvency, its rating by an 
accepted international rating service, suitability of the regulatory 
regime under which the applicant must operate in its home country, and 
on the principle of reciprocal non-discrimination. MARAD will not 
approve access to the U.S. hull insurance market, if U.S. insurers are 
denied similar access to the hull insurance market in the applicant's 
home country.
    (b) MARAD will publish in the Federal Register each Notice of 
Application received from foreign underwriters described in Sec. 
249.5(c), affording interested persons an opportunity to bring to 
MARAD's attention any discriminatory laws or practices relating to the 
placement of marine hull insurance which might exist in the applicant's 
country of domicile.
    (c) In granting approval, MARAD will consider all materials 
available to it, and may impose reasonable terms and conditions upon any 
such approvals granted.
    (d) Upon approval, applicant will be required to establish and 
maintain for the benefit of its U.S. policyholders a U.S. trust fund in 
the amount of at least $1.5 million, such amount to be

[[Page 64]]

reviewed periodically (but not more frequently than annually), and 
adjusted as appropriate. This requirement may be satisfied by means of 
an appropriate irrevocable letter of credit.
    (e) All policies, at the time of issuance, shall contain the latest 
American Institute of Marine Underwriters' forms, or equivalent, as 
approved by MARAD.
    (f) All policies issued by foreign underwriters shall include New 
York Suable Clause or Service of Suit (USA) Clause.
    (g)(1) To maintain approval, foreign underwriters, other than those 
specified in Sec. 249.5(b), shall, in addition to retaining the high 
rating from an accepted international rating service, file annual 
financial statements in the same level of detail as required for 
original approval. Such statements shall be due within 120 days after 
the close of the underwriter's annual accounting period.
    (2) In addition, a new affidavit concerning the lack of 
discriminatory laws or practices related to hull insurance in the 
underwriter's home market, as described in Sec. 249.6(c)(3), shall be 
filed annually at the same time as the financial statements.
    (h) Since there is no annual reapproval required, foreign 
underwriters which are approved shall agree to submit additional 
information, as requested by MARAD, if it has reason to believe there 
has been a change in the underwriter's financial status or business 
practices which could affect the quality of its security. Failure to 
provide such information on a timely basis could result in immediate 
withdrawal of the authorization to write hull insurance on MARAD program 
vessels.



Sec. 249.8  Limitation on risk.

    (a) Underwriters may take a line on any single risk in excess of 
five percent of its Policyholders' Surplus only with the prior approval 
of MARAD. MARAD will grant such approval to certain underwriters only in 
special circumstances, and for good cause shown. The standard to be 
applied in such cases shall be that the underwriter's net retention on 
any single risk may not exceed five percent of its Policyholders' 
Surplus, the gross amount of the risk may not exceed its surplus, and 
the reinsurers must have a high (A or comparable) rating from an 
accepted international rating service.
    (b) The vessel owner shall also provide MARAD with a mortgagee's 
interest policy in an amount equal to the difference between the net 
retention and the amount of the line taken by such underwriter.



Sec. 249.9  American market participation.

    (a) Owners of vessels receiving ODS or Title XI vessel obligation 
guarantees, or their brokers, shall offer to the American marine 
insurance market the opportunity to compete for the placement of marine 
hull insurance on each vessel. Consistent with sound business judgment, 
owners will be expected to place their insurance with the American 
market to the maximum extent possible when the rates, terms and 
conditions offered by American underwriters are competitive with those 
offered by foreign underwriters. MARAD will make available a list of 
approved American underwriters and their capacities.
    (b) In the event that less than 50 percent of the placement is made 
with the American marine insurance market, the owners, or their brokers, 
shall file an affidavit confirming that the risk has been offered to a 
substantial portion of the American market. The affidavit shall list the 
American underwriters to which the risk was offered, and such 
underwriters shall account for at least 50 percent of the approved 
American market capacity, or 75 percent in the event that more than 75 
percent of the risk was placed in foreign markets.
    (c) Failure to comply with (a) or (b), above, may result in MARAD 
requiring that the risk be reoffered and that the existing placement be 
modified, as deemed appropriate.



Sec. 249.10  Non-discrimination policy.

    To administer effectively the policy regarding non-discrimination 
against U.S. insurers in other countries, as described in Sec. Sec. 
249.6(b)(3) and 249.7(a), MARAD seeks the assistance of the American 
marine insurance industry to

[[Page 65]]

provide information at the time of publication of Notice of Application 
described in Sec. 249.7(b) concerning the existence of any 
discriminatory laws or practices in the marine hull insurance market 
abroad. Upon receipt of such information, MARAD will take whatever 
action it deems appropriate.



Sec. 249.11  Confidentiality.

    (a) If the data submitted under this rule contain information that 
the submitter considers to be commercial or financial information and 
privileged or confidential, or otherwise exempt from disclosure under 
the Freedom of Information Act (FOIA) (5 U.S.C. 552), the submitter 
shall assert a claim of exemption at the time the data are submitted. 
The claim shall be made in a letter contained in a sealed enveloped 
marked ``Confidential Information,'' addressed to the Secretary, 
Maritime Administration. The submitter shall stamp or mark 
``confidential'' on the top of each page containing information claimed 
to be confidential.
    (b) In claiming an exemption under FOIA, the submitter must state 
the basis for such action, including supporting information showing: (1) 
That the information claimed to be confidential is a trade secret or 
commercial or financial information in accordance with statutory and 
decisional authority; and (2) that measures have been taken by the 
submitter of the information to ensure that the information has not been 
disclosed or otherwise made available to the public, or, if the 
information has been disclosed or otherwise becomes available to the 
public, why such disclosure or availability does not compromise the 
confidential nature of the information.
    (c) In the event of a subsequent request for any portion of the data 
under the FOIA, those submissions not so claimed by the submitter will 
be disclosed, and those so claimed will be subject to the initial 
determination by the Secretary, Maritime Administration.
    (d) If the Secretary makes a determination unfavorable to the 
submitter, the submitter will be advised that MARAD will not honor the 
request for confidentiality at the time of any request for production of 
information under the FOIA by third parties.



Sec. 249.12  Waivers.

    The provision of this part may be waived in writing, for special 
circumstances and good cause shown, provided the procedures adopted are 
consistent with the Act and with the intent of these regulations.

                        PARTS 251-252 [RESERVED]



PART 272_REQUIREMENTS AND PROCEDURES FOR CONDUCTING CONDITION SURVEYS AND 

ADMINISTERING MAINTENANCE AND REPAIR SUBSIDY--Table of Contents



                            Subpart A_General

Sec.
272.1 Purpose.
272.2 Scope.
272.3 Definitions.
272.4 Effective date.
272.5 Prior instructions superseded.

 Subpart B_Requirements and Procedures for Determining the Condition of 
                            Eligible Vessels

272.11 Scope.
272.12 Determining the condition of eligible vessels.
272.13 Operator's responsibilities.
272.14 Survey procedures.
272.15 Execution of condition survey reports.
272.16 Non-compliance with survey requirements.

 Subpart C_Eligibility Criteria for M&R Subsidy; Substantiation of M&R 
                                Expenses

272.21 General eligibility criteria.
272.22 Improvements and other similar work.
272.23 Examples of ineligible expenses.
272.24 Subsidy repair summaries.
272.25 Requirements for subsidy repayment.

                           Subpart D_Penalties

272.31 Determination of penalty.
272.32 Mitigation of penalty.
272.33 Appeals.

       Subpart E_Examination, Audit, Review and Appeal Procedures

272.41 Requirements for examination and allocation of M&R expenses.
272.42 Audit requirements and procedures.

[[Page 66]]

272.43 Review and appeal procedures.
272.44 Dates.

    Authority: 46 App. U.S.C. 1114(b), 1173, 1176; 49 CFR 1.66.

    Source: 55 FR 34919, Aug. 27, 1990, unless otherwise noted.



                            Subpart A_General



Sec. 272.1  Purpose.

    The purpose of this part is to prescribe the requirements and 
procedures for determining the condition of vessels receiving operating-
differential subsidy, to prescribe the requirements for reporting and 
substantiating maintenance and repair (M&R) expenses, and to establish 
the criteria and procedures for determining whether a M&R expense is 
subsidizable.



Sec. 272.2  Scope.

    Except as otherwise provided in subpart B, the provisions of this 
part apply only to vessels operating under an operating-differential 
subsidy agreement which provides for the payment of M&R subsidy, except 
that this part does not apply to any vessel operating under an 
operating-differential subsidy agreement for the carriage of bulk raw 
and processed agricultural commodities from the United States to the 
Union of Soviet Socialist Republics, pursuant to part 294 of this 
chapter.



Sec. 272.3  Definitions.

    For the purposes of this part:
    (a) Act means the Merchant Marine Act, 1936, as amended, 46 App. 
U.S.C. 1101 et seq.
    (b) MARAD means the Maritime Administration, a unit of the United 
States Department of Transportation, as distinguished from the Board 
(which is a unit of MARAD).
    (c) Board means the Maritime Subsidy Board of the Maritime 
Administration.
    (d) Domestic Origin:
    (1) Labor. With respect to labor, Domestic Origin means that the 
work shall be performed by a U.S. ship repair facility, a U.S. 
independent contractor, or by the Operator's own shore gang.
    (2) Materials. With respect to materials, Domestic Origin means that 
all articles, materials, and supplies shall be of the growth, production 
or manufacture of the United States.
    (e) Eligible Vessel means a vessel operated under an ODSA, other 
than an ODSA subject to part 294 of this chapter, which provides for the 
payment of M&R subsidy with respect to the operation of that vessel.
    (f) Equipment means that part of an Eligible Vessel that is not part 
of the vessel's hull or machinery.
    (g) Expendable equipment means those articles, outfittings and 
furnishings that are portable, semi-portable or detachable, that are 
used in equipping a ship for service and in its normal day-to-day 
maintenance and operation, and that are subject to casual or gradual 
deterioration and replacement. It does not include items classified as 
stores and supplies or Spare Parts.
    (h) Improvement means work to be performed on an Eligible Vessel 
which is a modification, alteration, addition or betterment, which may 
be accomplished separately from M&R, but may be eligible for M&R subsidy 
pursuant to Sec. 272.22 of this part.
    (i) M&R and M&R Subsidy mean, respectively, maintenance and repairs 
and maintenance and repair subsidy payable pursuant to section 603 of 
the Act.
    (j) ODS and ODSA refer, respectively, to operating-differential 
subsidy provided under an operating-differential subsidy agreement 
entered into pursuant to title VI of the Act.
    (k) Operator means any individual, partnership, corporation, or 
association that enters into an ODSA with the Board pursuant to title VI 
of the Act.
    (l) Permanent equipment means Equipment that is, or is intended to 
become when installed, an integral, permanent, built-in part of the 
vessel.
    (m) Region Office means any one of the four Maritime Administration 
Region Offices in New York, NY; New Orleans, LA; San Francisco, CA; and 
Chicago, IL; established pursuant to section 809 of the Act.
    (n) Spare parts means such items as spare propellers and tailshafts 
and self-contained operable units of machinery or equipment, as well as 
those items generally recognized within the maritime industry as Spare 
Parts.

[[Page 67]]

    (o) United States means the states of the United States, the 
District of Columbia and Puerto Rico.



Sec. 272.4  Effective date.

    The provisions of this part apply to voyages of every Eligible 
Vessel which terminate on or after September 26, 1990.



Sec. 272.5  Prior instructions superseded.

    The provisions of this part supersede any provisions of MARAD 
Circular Letters and Accounting Instructions applicable to M&R and dated 
prior to the effective date of these regulations to the extent that the 
provisions of this part may be inconsistent with the provisions of such 
prior instructions.



 Subpart B_Requirements and Procedures for Determining the Condition of 

                            Eligible Vessels



Sec. 272.11  Scope.

    This subpart applies to any Eligible Vessel, other than one 
operating under an ODSA subject to part 294 of this chapter.



Sec. 272.12  Determining the condition of eligible vessels.

    The Operator of an Eligible Vessel shall make the vessel available 
whenever MARAD may require, in any of the following instances:
    (a) At the commencement of the first subsidized voyage, except for a 
newly constructed vessel which enters subsidized service immediately 
upon delivery by the shipyard, and for which there is a prior condition 
survey report. If that subsidized service commences outside the 
continental limits of the United States, the vessel may be surveyed at 
the first United States port of call;
    (b) At the commencement of the first voyage following the effective 
date for M&R subsidy established by MARAD, if such M&R rate was not 
established at the commencement of the vessel's first voyage;
    (c) Upon the discontinuance of a M&R subsidy rate;
    (d) Upon resumption of subsidized voyages after temporary withdrawal 
from subsidized operation. The vessel shall not be considered as having 
been temporarily withdrawn from subsidized service if it performed 
unsubsidized voyages in a subsidized service of the Operator;
    (e) Upon withdrawal from subsidized service, either temporarily 
(subject to the provisions of paragraph (d) of Sec. 272.14), or 
permanently;
    (f) During the dry docking period incident to the vessel's American 
Bureau of Shipping Special Surveys;
    (g) Upon termination of the last voyage under the ODSA, or at the 
end of the contract period, with respect to subsidized vessels in idle 
status at that time; or
    (h) At any other time that MARAD considers to be appropriate.



Sec. 272.13  Operator's responsibilities.

    Whenever MARAD notifies an Operator that a survey of an Eligible 
Vessel is required under this section, the Operator shall:
    (a) Make the vessel immediately available for survey if the vessel 
is in a port of the United States at the time of notification, or make 
the vessel available for survey immediately upon arrival at the first 
port of call in the United States if the vessel is not in a port of the 
United States at the time of notification; and
    (b) Furnish to the Secretary of the Board the following:
    (1) A copy of each American Bureau of Shipping report and every 
other salvage association or damage survey report; and
    (2) Copies of certificates or other evidence of compliance with 
applicable laws, rules, and regulations as to vessel condition and 
operation, including, but not limited to, those administered by the 
United States Coast Guard, Environmental Protection Agency, Federal 
Communications Commission, Public Health Service, or their respective 
successors, and compliance with all applicable treaties and conventions 
to which the United States is a signatory.

(Approved by the Office of Management and Budget under control number 
2133-0007)



Sec. 272.14  Survey procedures.

    (a) Prior to survey. Unless otherwise directed by MARAD, the 
Operator of a vessel which is required to be surveyed

[[Page 68]]

under this subpart shall contact the ship operations unit of the Region 
Office in which the survey is to be conducted.
    (b) Operator's assistance to surveyor. The Operator shall assist the 
marine surveyor performing the survey for MARAD and shall permit access 
by that surveyor to all parts of the vessel, its log books, and other 
official records. The Operator may designate a representative to 
accompany the marine surveyor during the survey, but no Operator's 
representative is required to be present during the survey.
    (c) On-subsidy surveys. An on-subsidy survey consists of the 
following:
    (1) Vessel survey. This includes an inspection and the completion of 
reports by the surveyor, in sufficient detail to reveal a comprehensive 
picture of the conditions noted.
    (2) On-subsidy survey report. The on-subsidy survey report consists 
of:
    (i) Ship Survey Report, Form MA-58; and
    (ii) As appropriate for the circumstances of the survey and the 
respective vessel, Forms MA-55 (Turbines and Gears Report); MA-56 (Tooth 
Contact Report); MA-57 (Drydock Report); and MA-59 (Measurements of 
Piston Rings and Grooves).
    (d) Off-subsidy surveys. An off-subsidy survey consists of the 
following:
    (1) Repair specifications. The Operator shall prepare and furnish to 
the appropriate Region Office detailed repair specifications covering 
all repair work attributable to completed subsidized service.
    (2) Off-subsidy survey report. The survey report for an off-subsidy 
survey consists of the repair specifications required by paragraph 
(c)(1) of this section, and the findings of the Region Office on these 
specifications after the survey required by paragraph (c)(2) of this 
section.



Sec. 272.15  Execution of condition survey reports.

    Every survey report shall be signed by:
    (a) The Operator's representative, when designated pursuant to Sec. 
272.13(a), but only if that representative was in attendance during the 
survey;
    (b) The Operator's superintendent engineer or equivalent;
    (c) The marine surveyor who conducted the survey; and
    (d) The appropriate representative of the Region Office for the 
Region in which the survey was conducted.



Sec. 272.16  Non-compliance with survey requirements.

    MARAD may disallow any one or more M&R claims otherwise eligible for 
subsidy if an Operator fails to:
    (a) Contact the appropriate Region Office as required by Sec. 
272.14(a);
    (b) Comply with provisions of Sec. 272.14(c)(1) with respect to 
repair specifications, or to make the vessel reasonably available for 
inspection before its next sailing; or
    (c) Comply with any other requirement specified in this subpart B.



 Subpart C_Eligibility Criteria for M&R Subsidy; Substantiation of M&R 

                                Expenses



Sec. 272.21  General eligibility criteria.

    (a) Eligible maintenance and repairs. Costs of maintenance and 
repair are eligible for M&R subsidy participation if they are:
    (1) Performed on an Eligible Vessel;
    (2) Necessary, because of subsidized operation, for the M&R or 
replacement of damaged or worn parts of the vessel's hull, machinery, or 
Permanent Equipment;
    (3) Uncompensated by insurance;
    (4) Considered fair and reasonable by the Board;
    (5) Of Domestic Origin; and
    (6) Otherwise eligible in accordance with provisions of this part.
    (b) Off-subsidy survey items. Any M&R contained in an executed off-
subsidy survey report is eligible maintenance and repair if:
    (1) Paragraphs (a) (1) through (6) of this section are met;
    (2) The work is accomplished by the Operator before or during the 
next drydocking period (periodic or otherwise); and
    (3) The vessel is either owned by the same Operator who owned it at 
the time of the off-subsidy survey, or ownership was transferred to the 
Federal

[[Page 69]]

Government pursuant to section 510 of the Act (46 App. U.S.C. 1160).
    (c) Operator furnished items. In addition to the general 
requirements of paragraph (a) of this section, the cost of the 
Operator's materials, supplies, or both, furnished by the Operator which 
are necessary to the performance of eligible M&R, is eligible for M&R 
subsidy if:
    (1) The items for which the cost was incurred are issued by the 
Operator from ship's inventory or the Operator's shoreside inventory, or 
are issued by direct purchase to the ship repair yard, other independent 
contractor, or shore gang labor; and
    (2) No subsidy, whether M&R or otherwise, has previously been paid 
for such material, supplies, or both; and
    (3) The items are of Domestic Origin.
    (d) Costs associated with shore gang labor. In addition to the 
general requirements of paragraph (a) of this section, the costs 
incurred with respect to the Operator's employment of U.S. shore gang 
labor necessary for the performance of eligible M&R are eligible for M&R 
subsidy participation only if such costs are:
    (1) For direct labor charges;
    (2) For eligible Spare Parts, as described in paragraph (e) of this 
section; or
    (3) Incidental to the payment of wages for the direct labor, to the 
extent that such costs are required by State or Federal law or by 
collective bargaining agreements.
    (e) Spare parts. Spare parts are eligible for M&R subsidy if they 
are:
    (1) Necessary for eligible M&R
    (2) Issued by the Operator from the Operator's shoreside inventory 
or issued by direct purchase to a U.S. ship repair yard, U.S. 
independent contractor, or U.S. shore gang labor; and
    (3) Placed aboard an Eligible Vessel, and
    (4) Of Domestic Origin.



Sec. 272.22  Improvements and other similar work.

    (a) Eligible expenditures. Any expenditure not in excess of $200,000 
for work effected during any one or a series of repair periods, which 
the Operator and MARAD consider to be an Improvement, is eligible for 
M&R subsidy if otherwise eligible for such subsidy pursuant to 
provisions of this Part.
    (b) Capital expenditures. An expenditure in excess of $200,000 for 
work effected during any one or a series of repair periods, which is not 
necessary for maintenance or repair shall be considered to be a capital 
expenditure, ineligible for M&R subsidy, except that work on an Eligible 
Vessel which the operator considers to be an Improvement is eligible for 
M&R subsidy if, before awarding this work:
    (1) The Operator submits a written request to the Director, Office 
of Ship Operations, for consideration of the expenditures;
    (2) The Director determines that the work is an Improvement and is 
technically acceptable; and
    (3) The Associate Administrator for Maritime Aids approves M&R 
subsidy for the work, as appropriate, pursuant to the provisions of 
title VI of the Act.
    (c) Improvements performed in more than one repair period. Whenever 
an Operator desires to spread the work incident to any Improvement over 
more than one repair period, the operator shall give written notice to 
the Director, Office of Ship Operations, prior to commencement of the 
work, as to the scope of work involved, expected benefits, the number of 
voyages over which the work will be spread and the estimated total cost. 
The operator shall report in the Subsidy Repair Summary (Form MA-140) 
the actual total cost of such work, covering the repair period in which 
it is finally completed, and shall attach a copy of the acknowledgement 
of such notification to the Form MA-140.



Sec. 272.23  Examples of ineligible expenses.

    Expenses ineligible for M&R subsidy participation include, but are 
not limited to, the following examples:
    (a) Specialized improvements. Any expenditure or Improvement 
required to alter, outfit or otherwise equip a vessel for its intended 
subsidized service which MARAD determines should have been performed 
before the initial entry of the vessel into subsidized service;
    (b) Convenience items. Any expenditure for items that the Region 
Director determines to be aboard a ship only for

[[Page 70]]

the convenience of the Operator or crew members, and which are not 
considered integral parts of the vessel and are not required for 
seaworthiness, navigation or the health or well-being of the crew or 
passengers.
    (c) Unsupported expenses. Any expense item which the Operator fails 
to substantiate adequately with documentation, as required by Sec. 
272.24.
    (d) Untimely requests for review. Any disallowed expense item for 
which the Operator fails to make a timely request for review, as 
required by Sec. 272.43.
    (e) Untimely appeals. Any expense item disallowed in the final 
determination by the Director, Office of Ship Operations, for which the 
Operator fails to make a timely appeal to the Board, pursuant to Sec. 
272.43.
    (f) Absence of notice of multi-repair period Improvements. Any 
expenses for an Improvement extending over more than one repair period 
in which the Operator did not notify the Director, Office of Ship 
Operations, as required by Sec. 272.22(c).
    (g) Cargo expenses. Any expense of special cargo fittings of a 
temporary nature, dunnage, ceiling, battens, the cleaning of cargo holds 
and tanks for cargo, the reading and certification of temperatures for 
refrigerated cargoes, and similar expenses.
    (h) Stevedore damage. Any expense or any damage to the vessels or 
cargo gear directly attributable to a stevedore.
    (i) Rented equipment. Any expense for the rental of Permanent or 
Expendable Equipment, such as compressors, paint floats, and other 
similar items for use by shore gangs or ship's crew on repair or other 
work, radar, radio telephones, and other similar items for use by ship's 
crew in ship operations.
    (j) Special requirements for trade routes. Any expense for the 
initial installation of equipment necessary for the vessel's particular 
trade route, such as Suez Canal davits, which should have been installed 
before the entry of the vessel into the particular subsidized service.
    (k) General operating expenses. Any expense for the loading of 
stores, the landing and sorting of laundry, pilot service, tug charges, 
removing surplus equipment to warehouses, and other similar expenses 
which do not involve actual maintenance and repair.
    (l) Items attributable to unsubsidized operations. Any item of 
maintenance or repair that is clearly attributable to unsubsidized 
operation, including expenses noted in on-subsidy surveys for repairs 
which clearly should have been made before departure from the last 
United States port on the first voyage:
    (1) In subsidized service, or
    (2) Upon resumption of subsidized operation following temporary 
withdrawal.
    (m) Overdue classification and inspection requirements. Any expenses 
for work required by a classification society or an agency of the 
Federal Government, which was due (irrespective of any grace period 
granted) and not completed before the first voyage:
    (1) In subsidized service, or
    (2) Upon resumption of subsidized operation following temporary 
withdrawal, except when such work is attributable to prior subsidized 
service.
    (n) Foreign maintenance and repairs. Any expense for any item of 
M&R, including insurance repairs, that is not of Domestic Origin.
    (o) Marine or other loss. Any part of an expense or a repair which 
is recovered or recoverable from an insurer or another party.
    (p) Consumables, expendables. Any procurement expense for 
consumables, expendables, and Expendable Equipment, when used or 
installed by ship's crew or furnished for inclusion in ship's inventory, 
and any expense for maintenance, repair, or replacement of Expendable 
Equipment.
    (q) Excessive costs. Costs for M&R which MARAD considers excessive, 
after allowing the Operator an opportunity to present all relevant facts 
pertinent to such costs.
    (r) Overhead costs. Any expense included in shore gang labor charges 
which is an overhead item, as prescribed by 46 CFR part 232--Uniform 
Financial Reporting Requirements.
    (s) Guarantee items. Any expense for an item adjudged or noted as 
being a guarantee item of a construction or repair contractor.

[55 FR 34919, Aug. 27, 1990, as amended at 57 FR 34690, Aug. 6, 1992]

[[Page 71]]



Sec. 272.24  Subsidy repair summaries.

    (a) Filing requirements. The Operator of an Eligible Vessel shall 
submit to the appropriate MARAD regional Ship Operations Office a 
Subsidy Repair Summary (Form MA-140) for each quarter of a calendar year 
in which one or more of the Operator's Eligible Vessels (including any 
vessel which has been temporarily withdrawn from subsidized service) 
terminates a voyage. This quarterly report shall include supporting 
documents and information, as described in paragraph (c) of this 
section. This summary may be for either a single voyage or multiple 
voyages, and shall be filed not later than 120 days after:
    (1) The close of the calendar quarter in which a voyage is 
terminated, or
    (2) The date the reported vessel is temporarily or permanently 
withdrawn from subsidized service.
    (b) Form requirements. MARAD will make available one copy of Form 
MA-140 upon request. Each Operator shall furnish its own supply of the 
form and prepare each form for submission. Information on any Form MA-
140 shall pertain to only one vessel. The Operator's superintendent 
engineer or other responsible official shall certify every summary 
submitted by an Operator in the following manner:

This is to certify that, to the best of my knowledge and belief, and 
based on recorded entries through (Date), this is a true and correct 
statement of repair and maintenance expenditures for the period stated, 
and that the repair and maintenance items indicated as eligible for 
subsidy participation are reasonably attributable to service subsequent 
to commencement of the first voyage under the Operating-Differential 
Subsidy Agreement and were necessary, satisfactorily completed, and the 
price is fair and reasonable (exceptions are listed on separate page).

    (c) Categorization. The Operator shall exercise due diligence in 
identifying each item in the Form MA-140 within the following three 
separate categories:
    (1) Claimed for subsidy. This includes the following:
    (i) M&R
    (ii) Spare Parts
    (iii) Improvements
    (2) Marine loss. If any M&R expense is incurred because of marine 
loss, the Operator shall list such an M&R expense under this separate 
category, and shall exclude such expense from the totals for the 
``Claimed for Subsidy'' and ``Non-Subsidized Items'' categories provided 
for in this section.
    (3) Non-subsidized items. This category shall include builders' 
guarantee items, foreign repairs, and other items of M&R expense not 
claimed for subsidy.
    (d) Required supporting documents and information--(1) General. The 
Operator shall support every item in the Form MA-140 with documents or 
other information, in sufficient detail to permit MARAD to determine the 
fairness and reasonableness of the prices for the submitted work. With 
respect to any claims for M&R performed outside the United States, the 
Operator shall submit with the claim a certificate, signed either by the 
Operator (if it uses its own shore gang labor or materials from its own 
inventory) or by an official of the ship repair yard or the independent 
contractor performing the work, stating that the M&R were performed with 
materials, labor, or both, of Domestic Origin.
    (2) U.S. Independent contractors. If a U.S. independent contractor 
performed M&R work, the Operator shall support each such expense with 
one copy of the contractor's invoices covering the work performed. If an 
invoice is not itemized and fully descriptive of the work performed with 
item prices then the Operator shall attach to the contractor's invoice 
other supporting documentation, such as specifications, prepared in 
sufficient detail to permit a determination of the fairness and 
reasonableness of the prices for each segment of the work performed.
    (3) Operator's shore gang. If an Operator's own U.S. shore gang has 
performed any M&R work, the Operator shall submit with the Form MA-140 
specifications covering that work, prepared in sufficient detail 
(including the material and labor cost of each item) to permit a 
determination of the specific cost of each segment of work performed.
    (4) Operator furnished material. Whenever an Operator furnishes to a 
contractor material obtained either from the Operator's own ship stores 
or

[[Page 72]]

shoreside inventory, or by direct purchase for a specific job, the 
Operator shall include on the invoice, requisition form or other form of 
transfer memorandum the item number for which the material was used and 
the contract number covering the work performed.
    (5) Spare parts. The Operator shall ensure that the invoice covering 
any Spare Part for an Eligible Vessel which is to be used or installed 
as an integral, permanent part of the vessel, indicates the specific 
piece or part of the vessel's hull, machinery, or Equipment for which 
the Spare Part was obtained.
    (6) Foreign repairs. Operators receiving M&R subsidy shall submit 
copies of all U.S. Customs entry forms detailing foreign expenditures on 
behalf of Eligible Vessels. The copies shall include all expenditures 
made during the quarter.

(Approved by the Office of Management and Budget under control number 
2133-0007)



Sec. 272.25  Requirements for subsidy repayment.

    (a) Repayment of M&R subsidy for compensated marine or other loss. 
If an Operator eventually receives compensation from an insurer or any 
other person for a marine loss or any other loss for which M&R subsidy 
has been paid, the Operator shall repay to MARAD an amount equal to the 
amount of subsidy paid with respect to that loss.
    (b) Repayment of M&R subsidy for Improvements--three year service 
requirement. If, within three years after the completion of an 
Improvement for which M&R subsidy was paid, the Operator permanently 
withdraws the Eligible Vessel from the ODSA, the Operator shall repay to 
MARAD an amount equal to the amount of M&R subsidy paid with respect to 
that Improvement unless MARAD shall have determined that such action was 
beyond the control of the Operator.
    (c) Repayment of M&R subsidy due to allocation of costs. If the 
allocation of total M&R costs required by Sec. 272.41(e) of this part 
results in the allocation of a lesser amount of subsidizable M&R costs 
than were actually paid for during the calendar year, the Operator shall 
repay to MARAD the amount of ODS which was paid in excess of the 
allocated subsidizable costs.
    (d) Administrative action. If an Operator fails to repay an M&R 
subsidy required to be repaid by this section, MARAD may either reduce 
any ODS payable by the amount of M&R subsidy required to be repaid by 
this section, or take any other action necessary to secure repayment.



                           Subpart D_Penalties



Sec. 272.31  Determination of penalty.

    Operators whose Eligible Vessels have undergone foreign repairs, 
which MARAD determines are non-emergency in nature, may be subject to a 
penalty in an amount equal to the total cost (exclusive of applicable 
U.S. Customs duties) of such foreign repairs and purchases, such penalty 
to be effected by a deduction from the Operator's total ODS otherwise 
accrued. The Director, Office of Ship Operating Assistance, shall notify 
the Operator by letter with respect to:
    (a) MARAD's determination of a penalty and the reasons therefore; 
and
    (b) Whether the determination is final or subject to the submission 
of additional information.



Sec. 272.32  Mitigation of penalty.

    The Director, Office of Ship Operating Assistance, may decide, after 
a non-emergency foreign repair occurs, to mitigate the penalty. Any 
mitigation of penalty shall be based on a determination that special 
circumstances existed at the time of repair. The Director shall not 
consider the difference in the price of foreign and domestic repair work 
in making this determination, and shall not grant prior approval of 
foreign repairs. In determining whether special circumstances existed, 
the Director shall consider, among others, the following factors:
    (a) The trading area of the vessel both before and after the repair 
was performed;
    (b) Loss of revenue and effect on vessel utilization if the vessel 
had returned to the United States for repairs;
    (c) The additional operating expense which would have resulted from 
a return to the United States to repair the vessel; and
    (d) Whether the repairs could have been deferred until return to the

[[Page 73]]

United States, taking into consideration the Coast Guard requirements 
for dry docking and special surveys.



Sec. 272.33  Appeals.

    The Operator may appeal final penalty determinations of the 
Director, Office of Ship Operating Assistance, to the Board, as provided 
in Sec. 272.43(c) of this part.



       Subpart E_Examination, Audit, Review and Appeal Procedures



Sec. 272.41  Requirements for examination and allocation of M&R expenses.

    (a) Examination requirement. Pursuant to the specific limitations on 
M&R subsidy in section 603 of the Act, the Region Office shall examine 
the expenses submitted by an operator on Form MA-140 in order to 
determine eligibility to receive M&R subsidy and the reasonableness of 
such expenses.
    (b) Operator's responsibility. During the examination, the operator 
shall provide, at the request of the Director or other official of the 
Region Office, any further documentation or information necessary to 
support an M&R expense. If such documentation or information, including 
information required under paragraph (e) of this section, is not 
received at the Region Office on a timely basis, the Director or other 
official of the Region Office may disallow the M&R expense.
    (c) Notification of examination results. At the completion of the 
examination the Director or other appropriate official of the applicable 
Region Office shall notify the Operator by letter of the results of the 
examination, and shall state the reason for each disallowance of an item 
claimed for subsidy and/or each nonapproval of a marine loss item.
    (d) Record retention requirements. To facilitate an audit 
examination of M&R made pursuant to Sec. 272.42 of this part, the 
Operator shall maintain files arranged by vessel and voyage, which shall 
include, at a minimum, a copy of the Region Office notice letter, a copy 
of the Form MA-140 with all supporting documents submitted therewith, 
and the condition survey report. The Operator shall retain all the 
required materials in files for not less than 3 years after completion 
of the audit.
    (1) Limitation on approval. Any approval for payment of M&R subsidy 
for a marine loss item shall be subject to rescission or modification if 
the Operator subsequently receives insurance or other compensation for 
the item. The Region Finance Officer may at any time request 
verification that the Operator has not received such compensation.
    (2) Status report on approved marine loss items. The Operator shall 
advise the Region Finance Office by letter as to whether insurance or 
other compensation will be recovered for the marine loss item. The 
Operator is responsible for ensuring that the letter reaches the 
applicable Region Office within 120 days after:
    (i) The date on which all repairs for damage attributed to the 
``Policy Voyage'' (as defined in the Operator's insurance policy) are 
completed, when the amount for such repairs does not exceed the 
franchise or deductible of the policy, or
    (ii) The date of the underwriter's rejection of the Operator's 
marine loss insurance claim or claims.

(Reporting and recordkeeping requirements contained in paragraph (d) 
introductory text were approved by the Office of Management and Budget 
under control number 2133-0007)

[55 FR 34919, Aug. 27, 1990, as amended at 61 FR 32706, June 25, 1996]



Sec. 272.42  Audit requirements and procedures.

    (a) Required audit. In connection with the audit of the Operator's 
subsidizable expenses, the Office of the Inspector General, Department 
of Transportation, shall audit for MARAD the Operator's M&R costs, as 
necessary, for the determination of final subsidy rates. The Operator 
shall substantiate those costs recorded on the books of account which 
have been approved by the Administration.
    (b) Notification of audit results. Upon completion of the audit by 
the Office of Inspector General, the MARAD Office of Financial Approvals 
shall notify the Operator of the audit results, including

[[Page 74]]

any items disallowed and the reasons for such disallowance.

[57 FR 34690, Aug. 6, 1992]



Sec. 272.43  Review and appeal procedures.

    (a) Exclusive procedures. Notwithstanding the audit appeal 
procedures of part 205 of this chapter, the provisions of this section 
shall be the exclusive remedy available to an Operator for the review 
and appeal of any disallowance of subsidy for a M&R expense claimed or 
any penalty assessed pursuant to Sec. 272.31.
    (b) Request for review. An Operator may request review by:
    (1) The Director, Office of Ship Operations, with respect to any 
disallowance by the Region office of a claimed M&R expense, after 
receiving the notification required by Sec. 272.41(c); or
    (2) The Director, Office of Financial Approvals, with respect to any 
disallowance of a claimed M&R expense, after receiving the notification 
required by Sec. 272.42(b).
    (c) Timeliness of request. The Operator shall file all requests for 
review pursuant to paragraph (b) of this section within 60 days after 
the date of the audit notification. Any disallowance with respect to 
which the Operator fails to file a timely request for review shall be 
final and shall not be subject to appeal to the Board pursuant to 
paragraph (e) of this section.
    (d) Notification of review determination. The appropriate MARAD 
Office Director shall notify the Operator by letter, with respect to 
each timely filed review request, of the Director's determination and 
the reasons for each disallowance and whether the determination is final 
or subject to the submission of additional information.
    (e) Appeal to the Maritime Subsidy Board--(1) Right to appeal. An 
Operator may appeal a MARAD Office Director's final determination issued 
pursuant to Sec. 272.32 (penalties) or Sec. 272.43 (review of claims 
disallowance or of audit results) of this section to the Board in 
writing.
    (2) Contents and timeliness. The Operator shall set forth in any 
appeal the reasons for the Operator's objection to a penalty or 
disallowance of M&R subsidy and shall file such appeal with the 
Secretary of the Board within 60 days after the date of the notification 
sent to the operator by the appropriate Director pursuant to paragraph 
(d) of this section or Sec. 272.33.



Sec. 272.44  Dates.

    The dates noted on the letters or notifications sent to the Operator 
by officials of the Region Office, any Director or any other official or 
MARAD, pursuant to the provisions of this part, shall be conclusive for 
the purposes of determining the timeliness of any requests for review 
made under the provisions of this part.

                           PART 276 [RESERVED]



PART 277_DOMESTIC AND FOREIGN TRADE; INTERPRETATIONS--Table of Contents





Sec. 277.1  Guam, Midway and Wake.

    Steamship service between ports of the United States mainland and 
ports in the islands of Guam, Midway and Wake is not ``domestic 
intercoastal or coastwise service'' within the meaning of section 805(a) 
of the Merchant Marine Act, 1936. This interpretation is limited to 
Guam, Midway and Wake and does not signify that a similar interpretation 
is or would be applicable to Hawaii, Puerto Rico or Alaska.

(Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114. Interprets or 
applies sec. 805, 49 Stat. 2012, as amended; 46 U.S.C. 1223)

[G.O. 73, 15 FR 9065, Dec. 19, 1950]

                        PARTS 280-283 [RESERVED]



PART 287_ESTABLISHMENT OF CONSTRUCTION RESERVE FUNDS--Table of Contents



Sec.
287.1 Definitions.
287.2 Scope of section 511 of the Act and the regulations in this part.
287.3 Requirements as to vessel operations.
287.4 Application to establish fund.
287.5 Tentative authorization to establish fund.
287.6 Establishment of fund.
287.7 Circumstances permitting reimbursement from a construction reserve 
          fund.
287.8 Investment of funds in securities.
287.9 Valuation of securities in fund.
287.10 Withdrawals from fund.
287.11 Time deposits.
287.12 Election as to nonrecognition of gain.

[[Page 75]]

287.13 Deposit of proceeds of sales or indemnities.
287.14 Deposit of earnings and receipts.
287.15 Time for making deposits.
287.16 Tax liability as to earnings deposited.
287.17 Basis of new vessel.
287.18 Allocation of gain for tax purposes.
287.19 Requirements as to new vessels.
287.20 Obligation of deposits.
287.21 Period for construction of certain vessels.
287.22 Time extensions for expenditure or obligation.
287.23 Noncompliance with requirements.
287.24 Extent of tax liability.
287.25 Assessment and collection of deficiencies.
287.26 Reports by taxpayers.
287.27 Controlled corporation.
287.28 Administrative jurisdiction.

    Authority: Secs. 204, 511, 49 Stat. 1987, as amended, 54 Stat. 1106, 
as amended; 46 U.S.C. 1114, 1161.

    Source: General Order 38 (2d Rev.), 30 FR 7215, May 29, 1965; 30 FR 
8162, June 25, 1965, unless otherwise noted.

    Editorial Note: The regulations contained in this part were codified 
by the Internal Revenue Service in Treasury Decision 6820, 30 FR 6030, 
Apr. 29, 1965. For text see also 26 CFR part 2.



Sec. 287.1  Definitions.

    (a) As used in the regulations in this part, except as otherwise 
expressly provided--
    (1) Act means the Merchant Marine Act, 1936, as amended (46 U.S.C., 
ch. 27).
    (2) Section means one of the sections of the regulations in this 
part.
    (3) Administration means the Maritime Administration of the 
Department of Transportation.
    (4) Citizen means a person who, if an individual, was born or 
naturalized as a citizen of the United States or, if other than an 
individual, meets the requirements of section 905(c) of the Act and 
section 2 of the Shipping Act, 1916, as amended (46 U.S.C. 802).
    (5) Taxpayer means a citizen who has established or seeks to 
establish a construction reserve fund under the provisions of section 
511 of the Act and the regulations in this part, and may include a 
partnership.
    (6) Corporation includes associations, joint-stock companies and 
insurance companies.
    (7) Stock includes the shares in an association, joint-stock 
company, or insurance company.
    (8) Affiliate or associate means a person directly or indirectly 
controlling, controlled by, or under common control with, another 
person.
    (9) Control, as used in paragraph (a)(8) of this section, means the 
possession of the power to direct in any manner the management and 
policies of a person, and the terms controlling and controlled shall 
have the meanings correlative to the foregoing.
    (10) Person means an individual, a corporation, a partnership, an 
association, an estate, a trust, or a company.
    (11) Partnership includes a syndicate, group, pool, joint venture, 
or other unincorporated organization.
    (12) Construction, if so determined by the Administration, shall 
include reconstruction and reconditioning.
    (13) Reconstruction and reconditioning shall include the 
reconstruction, reconditioning, or modernization of a vessel for 
exclusive use on the Great Lakes, including the Saint Lawrence River and 
Gulf, if the Administration determines that the objectives of the Act 
will be promoted by such reconstruction, reconditioning, or 
modernization, and, notwithstanding any other provisions of law, such 
vessel shall be deemed to be a new vessel within the meaning of section 
511 of the Act for such reconstruction, reconditioning, or 
modernization.
    (14) Purchase-money indebtedness means any indebtedness, or evidence 
thereof, created as the result of the purchase of a vessel by the 
taxpayer.
    (15) Contract, contract for the construction, and construction 
contract shall include, if so determined by the Administration, a 
contract for reconstruction or reconditioning and shall include, in the 
case of a taxpayer who constructs a new vessel in a shipyard owned by 
such taxpayer, an agreement, between such taxpayer and the 
Administration with respect to such construction, and containing 
provisions deemed necessary or advisable by the Administration to carry 
out the purposes and policy of section 511 of the Act.
    (b) Insofar as the computation and collection of taxes are 
concerned, other terms used in the regulations in this

[[Page 76]]

part, except as otherwise provided, have the same meaning as in the 
Internal Revenue Code and the regulations thereunder.



Sec. 287.2  Scope of section 511 of the Act and the regulations in this part.

    (a) Applicability of regulations. The regulations prescribed in this 
part--
    (1) Apply to gain realized from the sale or loss of vessels, 
earnings from the operation of vessels, and interest (or otherwise) with 
respect to amounts previously deposited in the construction reserve 
fund, for a taxable year beginning after December 31, 1964, and
    (2) Apply to the expenditure, obligation, or withdrawal, during a 
taxable year beginning after December 31, 1964, of any deposits of gain, 
earnings, and interest (or otherwise) of the character referred to in 
paragraph (a)(1) of this section without regard to the taxable year in 
which the deposits were made.
    (b) Nonrecognition and accumulation. Section 511 of the Act 
provides, under conditions specified, for the nonrecognition, for income 
and excess-profits tax purposes, of the gain realized from the sale or 
indemnification for loss of certain vessels including certain vessels in 
the course of construction, or shares therein. It also permits the 
accumulation of the proceeds of such sales or indemnification and of 
certain earnings without liability under part I (section 531 and 
following), subchapter G, chapter 1 of the Internal Revenue Code of 
1954, and the regulations thereunder (26 CFR 1.531 through 1.537-1 
(Income Tax Regulations)).
    (c) Availability of benefits. The benefits of section 511 of the Act 
are available to any citizen as defined in paragraph (a)(4) of Sec. 
287.1, who, during any taxable year owns, in whole or in part, a vessel 
or vessels within the scope of Sec. 287.3. A citizen operating such a 
vessel or vessels owned by any other person or persons can derive no 
benefit from the provisions relating to the nonrecognition of gain from 
the sale or loss of such vessel or vessels so owned, but may establish a 
construction reserve fund in which he may deposit earnings from the 
operation of such vessel or vessels.
    (d) Applicability of section 511. Section 511 of the Act applies 
only with respect to sales or losses of vessels within the scope of 
Sec. 287.3 or in respect of earnings derived from the operation of such 
vessels. A loss to be within section 511 of the Act must be an actual or 
constructive total loss. Whether there is a total loss, actual or 
constructive, will be determined by the Administration.



Sec. 287.3  Requirements as to vessel operations.

    Section 511 of the Act applies with respect to vessels operated in 
the foreign or domestic commerce of the United States or in the 
fisheries of the United States and vessels acquired or being constructed 
for the purpose of such operation. The foreign commerce of the United 
States includes commerce or trade between the United States (including 
the District of Columbia), the territories and possessions which are 
embraced within the coastwise laws, and a foreign country or other 
territories and possessions of the United States. The domestic commerce 
of the United States includes commerce or trade between ports of the 
United States and its territories and possessions, embraced within the 
coastwise laws and on inland rivers. The fisheries include the fisheries 
of the United States and its territories and possessions. Section 511 of 
the Act does not apply to vessels operated in the foreign commerce or 
fisheries of any country other than the United States.



Sec. 287.4  Application to establish fund.

    (a) Any person claiming to be entitled to the benefits of section 
511 of the Act may make application, in writing, to the Administration 
for permission to establish a construction reserve fund. The original 
application shall be executed and verified by the taxpayer, or if the 
taxpayer is a corporation, by one of its principal officers, in 
triplicate, and shall be accompanied by eight conformed copies when 
filed with the Administration. MARAD will accept electronic options 
(such as facsimile and Internet) for transmission of required 
information to MARAD, if practicable.
    (b) Form of application:

[[Page 77]]

  Application for Permission To Establish a Construction Reserve Fund 
          Under Sec. 511, Merchant Marine Act, 1936, as Amended

    The undersigned applicant, ------, hereby applies, under section 
511, Merchant Marine Act, 1936, as amended, and the regulations 
prescribed by the Secretary of Transportation acting by and through the 
Maritime Administrator (hereinafter referred to as ``Administrator'') 
(46 CFR Part 287) and the Secretary of the Treasury, Internal Revenue 
Service (26 CFR Part 2) for permission to establish a construction 
reserve fund to be used for the construction or acquisition of a new 
vessel or vessels as defined by subsection (a) of said section 511, and 
submits in support of its application the following information:
    A. Identity and nationality of applicant.
    1. Exact name.
    2. Status (individual, partnership, corporation, etc.).
    3. Give the place of incorporation--whether under the laws of the 
United States, or of a State, Territory, District, or possession 
thereof.
    4. Address of principal executive offices.
    5. A statement, if applicant is an individual or a partnership, 
should be attached in the application in affidavit form, containing 
information that applicant is a citizen of the United States by virtue 
of birth in the United States, naturalization, etc.; give place and date 
of birth and/or naturalization; if derivative U.S. citizenship is 
alleged through naturalization of parent while a minor, the number, date 
and place of issue of the certificate of derivative citizenship of 
applicant should be cited together with any other pertinent details 
relative thereto.
    6. (a) The name, office, and nationality of each officer and 
director of the applicant owning shares of stock in the corporation 
should be submitted together with the number and class of capital shares 
owned.
    (b) In order that the U.S. citizenship status of a corporation 
applicant may be determined by the Administration, an affidavit as in 
accordance with Part 355 of this Chapter shall be furnished together 
with a current copy of the Articles or Certificate of Incorporation 
certified by the Secretary of the State where incorporated (or 
appropriate officer, if other than a State, as provided in ``A.3'' 
above), and a copy of the current By-Laws certified by the Secretary of 
the Corporation.
    7. The name, address and nationality of, and number and class of 
capital shares owned by, each person not named in answer to Item 6, 
owning of record, or beneficially if known, 5 percent or more of the 
outstanding capital shares of any class of the applicant. (The applicant 
shall be required, upon request, to furnish such additional data as may 
be deemed necessary to establish the U.S. citizenship of the applicant 
pursuant to section 2, Shipping Act, 1916, or section 905(c), Merchant 
Marine Act, 1936, as amended.)
    8. A brief statement of the general effect of each voting agreement, 
voting trust, or other arrangement whereby the voting rights in any 
shares of the applicant are owned, controlled or exercised, or whereby 
the control of the applicant is in any way held or exercised by any 
person not the holder of legal title to such shares. Give the name, 
address, nationality, and business of any such person, and, if not an 
individual, the form of organization.
    B. Business of the applicant and proposed use of the new vessel.
    9. A brief description of (a) the shipping business, or (b) the 
fishing business, and (c) any other business activities of the 
applicant.
    10. If engaged in the domestic or foreign commerce of the United 
States, full details concerning the services, routes, or lines on which 
vessels owned or chartered by the applicant are or have been operated.
    11. If applicant is engaged in the fisheries of the United States, 
full details concerning the location of the fishing operations and the 
method employed.
    C. Proceeds to be deposited.
    12. If applicant proposes to deposit the proceeds from the sale of a 
vessel, a description of the transaction from which the funds were 
obtained, including the name of the vessel sold, name of purchaser, 
selling price, date and terms of sale, consideration received by the 
applicant, amount and description of any mortgage or other lien on the 
vessel at the time of sale, whether such mortgage or lien was satisfied 
from the proceeds of sale, brief description of vessel as to size, 
speed, tonnage, etc., age of vessel at the time of sale, and value and 
accrued depreciation for income tax purposes at time of sale.
    13. If applicant proposes to deposit proceeds of indemnity from loss 
of a vessel, the name of the vessel, date and description of the loss, 
amount of indemnity and date received, name of underwriter, amount and 
description of any mortgage or other lien on the vessel at time of loss, 
whether such mortgage or lien was satisfied from the proceeds of the 
indemnity, age of vessel at time of loss, brief description of vessel as 
to size, speed, tonnage, etc., and value and accrued depreciation for 
income tax purposes at time of loss.
    14. If applicant proposes to deposit earnings from the operation of 
vessels, a statement of the amount of such earnings to be deposited, the 
period during which earned, and their source, including the vessels, 
services, routes, or lines involved.
    D. The new vessel.

[[Page 78]]

    15. Statement whether applicant proposes: (a) To have a new vessel 
built to specifications, or (b) to acquire a vessel already constructed 
or under construction. If the former, and a contract for construction 
has been entered into at the time of the making of this application, 
state the date said contract was entered into, the parties thereto, the 
terms thereof, and date of delivery thereunder. If the latter, give name 
of vessel, builder, from whom purchased, or to be purchased, date when 
construction commenced, and date when delivered, or if vessel is still 
under construction, anticipated date of delivery.
    16. The general characteristics of the proposed new vessel, 
including (a) principal dimensions; (b) gross, net and deadweight 
tonnage; (c) bale and grain capacities of all cargo holds; (d) 
capacities of all tanks, storage spaces, refrigerator cargo spaces and 
separately chilled cargo spaces; (e) number and classes of passenger 
accommodations; (f) type and power, and in case of steam machinery, the 
gauge pressure, total temperature, and vacuum expected of propulsive 
machinery; (g) kind of fuel to be burned; and (h) sustained sea speed at 
designed load draft.
    17. If the proposed new vessel is to operate in the domestic or 
foreign commerce of the United States, a statement of how it will meet 
the needs of the service, route or line for which it is intended, with 
emphasis on the following factors: (a) Cargo accommodations--cargo space 
and fittings and appliances for handling and stowing cargo; (b) 
passenger accommodations; (c) construction and design; and (d) 
accommodations for officers and crews.
    18. If the proposed new vessel is to be operated in the fisheries of 
the United States, a description of the vessel, and a statement of how 
the vessel will meet the needs of such operations.
    19. If the proposed new vessel is intended to replace a vessel or 
vessels requisitioned or purchased by the United States, a statement of 
how the proposed replacement vessel will meet the needs of the service, 
route, line, or use for which it is intended.
    20. If the proposed new vessel is less than 2,000 gross tons or of 
less speed than 12 knots, a description of the features which would make 
it desirable for use by the United States in case of war or national 
emergency.
    E. The construction reserve fund.
    21. A description of the deposit or deposits which the applicant 
proposes to make in the construction reserve fund, including the amounts 
to be deposited in cash, notes, mortgages or other evidences of 
indebtedness, irrevocable commitments, or securities, giving reference 
to the source as described in items C-12, C-13, or C-14.
    22. Name and address of proposed depository or depositories for the 
construction reserve fund.
    F. Taxable year of applicant.
    23. Whether applicant files its Federal income tax return on a 
calendar year or fiscal year basis and if on the latter, the beginning 
of its fiscal year.
    G. Exhibits to be furnished.
    24. The following documents shall be filed as exhibits attached to 
the application:
    Exhibit I--If available at the time this application is filed, an 
authenticated copy of any irrevocable commitment to finance the 
construction or acquisition of the new vessel proposed to be deposited 
in the construction reserve fund pursuant to the provisions of 46 CFR 
287.13(d).
    Exhibit II--If the applicant is a corporation, a copy of each 
contract or agreement presently in effect, referred to in answer to Item 
8.
    H. Covenants of the applicant.
    25. The applicant hereby agrees as follows:
    (a) That the construction reserve fund shall be subject to the 
provisions of section 511, Merchant Marine Act, 1936, as amended, to the 
regulations prescribed by the Administrator, and the Secretary of the 
Treasury with respect to the establishment, maintenance, expenditure, 
and use of such fund, and to such resolutions as may be adopted by the 
Administrator with respect to such fund;
    (b) That it will furnish copies of any contracts entered into for 
the construction or acquisition of new vessels which the Administrator 
may require;
    (c) That it will furnish hull plans and specifications, machinery 
plans and specifications, and data with respect to communication 
facilities if and to the extent required by the Administrator; and
    (d) If no contract for the construction of a new vessel as set forth 
in paragraph D, sub-division 15(a) hereof, has been entered into at the 
time of making of this application, it will, upon entering into said 
contract, furnish to the Administrator the date thereof, the parties 
thereto, the terms thereof and date of delivery thereunder. Name of 
applicant:

(Date)__________________________________________________________________
 By_____________________________________________________________________
                                                           (Name, typed)
________________________________________________________________________
                                                                 (Title)
________________________________________________________________________
                                                             (Signature)

I, ------, certify that I am the ------ (Title of office) of ------ 
(Exact name of applicant) the applicant on whose behalf I am authorized 
to execute the foregoing application and agreements; that the applicant 
is a citizen of the United States, in accordance with the requirements 
of the Merchant Marine Act,

[[Page 79]]

1936, as amended; that this application is made for the purpose of 
inducing the Secretary of Transportation, represented by the Maritime 
Administrator to grant to the applicant, pursuant to the provisions of 
section 511 of the Merchant Marine Act, 1936, as amended, and the 
regulations promulgated by the Secretary of the Treasury and the 
Maritime Administrator thereunder, with all of which I am familiar, 
permission to establish a construction reserve fund; that I have 
carefully examined the application and all documents submitted in 
connection therewith and, to the best of my knowledge, information and 
belief, the statements and representations contained in said application 
and related documents are full, complete, accurate, and true.

    Date:
________________________________________________________________________
                                                                  (Name)
________________________________________________________________________
                                                                 (Title)
________________________________________________________________________
                                                             (Signature)

    Attention: A false statement in this application is punishable by 
law (18 U.S.C. 1001).

              instructions as to preparation of application

    1. Applications shall be prepared in the form provided according to 
the lettered items and serially numbered paragraphs. They must be signed 
and sworn to as provided. Eleven copies of the applications shall be 
filed with the Maritime Administrator, at least one copy of which shall 
be signed.
    2. Each application shall be complete. Items or part of items which 
are inapplicable may, however, be omitted. The information required by 
Article 25 need be furnished only as stated in that item. The applicant 
may incorporate by specific reference information previously furnished 
the Maritime Administrator provided that such information so 
incorporated shall have been furnished at least in triplicate.
    3. If any information called for by an applicable item is not 
furnished, and explanation of the omission shall be given. The applicant 
may furnish such relevant information as it may desire, in addition to 
that specified in the form.
    4. Any additional information called for by the Maritime 
Administrator from time to time shall be furnished as an amendment or 
amendments to the application. The original and 11 copies of each 
amendment shall be filed, shall refer to the application, and shall be 
identified as an amendment and dated. Without any specific request from 
the Maritime Administrator the applicant shall file from time to time as 
amendments any information necessary to keep the information contained 
therein or furnished in connection therewith current and correct while 
the application is pending.

    (c) Fee. Each such application shall be accompanied by the sum of 
$225, which sum will be retained to recover the cost of processing the 
application.

(Approved by the Office of Management and Budget under control number 
2133-0032)

[G.O. 38, 2d Rev., 30 FR 7215, May 29, 1965, as amended by Amdt. 1, 31 
FR 3397, Mar. 4, 1966; 47 FR 25530, June 14, 1982; 68 FR 62537, Nov. 5, 
2003; 69 FR 61451, Oct. 19, 2004]



Sec. 287.5  Tentative authorization to establish fund.

    Where the time between the receipt by the Administration of the 
application for permission to establish a construction reserve fund and 
the date prior to which an amount received from the sale or loss of a 
vessel must be deposited to come within the scope of section 511 of the 
Act is insufficient to permit a determination of the eligibility of the 
applicant, the Administration may tentatively authorize the 
establishment of a construction reserve fund and the deposit of such 
amount therein. Such tentative authorization shall be subject to 
rescission by the Administration if subsequently it is determined that 
the applicant is not entitled to the benefits of section 511 of the Act, 
or has not complied with the statutory requirements. For example, a 
tentative authorization will be rescinded if the Administration 
ascertains that the applicant is not a citizen. Upon such determination, 
the fund shall be closed and all amounts on deposit therein shall be 
withdrawn.



Sec. 287.6  Establishment of fund.

    (a) Authorization by the Administration. If the application is 
approved by the Administration, the Administration will adopt Orders 
authorizing the establishment of a construction reserve fund with the 
depository or depositories designated by the taxpayer and approved by 
the Administration. The Orders will provide for joint control by the 
Administration and the taxpayer over such fund, will set forth the 
conditions governing the establishment and maintenance of the fund and 
the making of deposits therein and withdrawals

[[Page 80]]

therefrom, and will designate the representatives authorized to execute 
instruments of withdrawal on behalf of the Administration.
    (b) Resolution or agreement of the taxpayer. A certified copy of the 
Orders of the Administration will be furnished the taxpayer. If the 
taxpayer is a corporation, it shall promptly adopt, through its board of 
directors, a resolution satisfactory in form and substance to the 
Administration, authorizing the establishment and maintenance of the 
fund in conformity with the action of the Administration. If the 
taxpayer is not a corporation, it shall promptly execute an agreement 
with the depository satisfactory in form and substance to the 
Administration to conform to the action of the Administration as set 
forth in the Orders. Certified copies of the Orders of the 
Administration and of the resolution of the taxpayer (if it is a 
corporation) will be furnished to the depository by the Administration 
and the taxpayer, respectively, for its guidance in maintaining the fund 
and honoring instruments of withdrawal. The taxpayer, if a corporation, 
shall also furnish the Administration with a certified copy of its 
resolution, or if not a corporation a duplicate original of its 
agreement with the depository.

    Note: The resolutions referred to in this section shall be retained 
2 years after a final release or settlement agreement is completed 
between the Maritime Administration/Maritime Subsidy Board and the 
taxpayer.

    (c) Constructive action not recognized. Constructive deposits, 
substitutions or withdrawals will not be recognized by the 
Administration in the establishment and maintenance of the fund.
    (d) Failure to make deposits as basis for termination of fund. In 
the event no deposit is made into the fund for more than five years, any 
amounts remaining in the fund shall be removed from the fund at the 
discretion of the Administration and, if so removed, the fund shall be 
terminated. In the event of such termination, see Sec. 287.23 for 
recognition of gain.



Sec. 287.7  Circumstances permitting reimbursement from a construction reserve fund.

    (a) Payments prior to establishment of fund. If, prior to the 
establishment of a construction reserve fund under the regulations in 
this part, a taxpayer has made necessary payments under a contract which 
satisfies the provisions of the regulations in this part and section 511 
of the Act for the construction or acquisition of a new vessel, such 
taxpayer may, if subsequently authorized to establish a construction 
reserve fund under the regulations in this part, draw against such fund 
as reimbursement for the amount, if any, of other funds which, with the 
approval or ratification of the Administration, the taxpayer used for 
making such necessary payments prior to the establishment of the fund.
    (b) Payments subsequent to establishment of fund. If, subsequent to 
the establishment of a construction reserve fund under the regulations 
in this part, the taxpayer has made necessary payments under a contract 
which satisfies the provisions of the regulations in this part and 
section 511 of the Act for the construction or acquisition of a new 
vessel, such taxpayer may draw against such fund as reimbursement for 
the amount, if any, of other funds which, with the approval or 
ratification of the Administration, the taxpayer had used for the 
purpose of making such necessary payments.



Sec. 287.8  Investment of funds in securities.

    (a) Obligations of or guaranteed by the United States. Interest-
bearing direct obligations of the United States, or obligations fully 
guaranteed as to principal and interest by the United States may be 
deposited in the construction reserve fund in lieu of cash, may be 
purchased with cash on deposit in the fund, or may be substituted for 
securities or commitment to finance in the fund, subject to the 
provisions of paragraph (b) of this section.
    (b) Other securities. In cases where the taxpayer desires to deposit 
any securities in the fund in lieu of cash other than those of or 
guaranteed by the United States or to purchase such other securities 
with cash on deposit in

[[Page 81]]

the fund, or to substitute such other securities for securities or 
commitment to finance in the fund, the taxpayer shall make written 
application to the Administration and shall not consummate the 
transaction until the written consent of the Administration shall have 
been received. The application shall describe the securities fully. 
Every approval by the Administration of such application shall be 
conditioned upon agreement by the taxpayer forthwith to dispose of such 
securities upon subsequent request by the Administration. Immediately 
upon the purchase of any securities for deposit in the fund, the 
taxpayer shall advise the Administration, giving the date of purchase, a 
description of the securities, and the price paid therefor (net, 
brokerage and other charges, and gross). Ordinarily, the Administration 
will not approve the deposit in the fund in lieu of cash, or the 
purchase with cash on deposit in the fund or the substitution for 
securities in the fund of securities not actively traded in on exchanges 
registered under the Securities Exchange Act of 1934 (15 U.S.C. Chapter 
2B), or securities which are not legal for investment of trust funds. 
Whenever the Administration approves the substitution of other 
securities for securities in the fund, such substitution shall be 
effected only upon or after the deposit of the substituted securities 
into the fund.
    (c) Cash. Cash may be substituted for amounts which are on deposit 
in the fund in any other form.
    (d) Devalued securities. In the event the Administration determines 
that the market value at any date of any securities in the fund has 
decreased to a figure which is less than 90 percent of the market value 
at the time of deposit into the fund, then within 60 days after the 
taxpayer receives notice of such determination the taxpayer shall 
(except as otherwise provided in this paragraph) deposit into the fund 
cash or securities in an amount equal to the difference between the 
current market value of the devalued securities and the market value of 
such securities at the time of their original deposit. However, if any 
securities in the fund are valued at the time of their deposit at less 
than the market value of such securities at the time of their deposit 
the taxpayer shall be required to deposit only an amount equal to that 
portion of the difference between the current market value of the 
devalued securities and the market value of such securities at the time 
of their original deposit which bears the same ratio to such total 
difference as the amount at which the securities were valued at the time 
of their deposit bears to the market value at the time of such deposit.



Sec. 287.9  Valuation of securities in fund.

    (a) Equipment values. In cases where securities are deposited in the 
fund in lieu of cash, or are purchased with cash on deposit in the fund, 
or are substituted for securities in the fund, the value of such 
securities must not be less than the amount of cash in lieu of which 
they are so deposited or with which they are so purchased, or the value 
at the time of deposit of the securities for which they were so 
substituted. If the securities on deposit in the fund are replaced by 
cash from the general funds of the taxpayer, the amount of cash to be 
deposited in the fund in lieu thereof shall be not less than the amount 
at which such securities were valued at the time of their deposit in the 
fund.
    (b) Determination of value. (1) For the purpose of determining the 
amount in the fund, the value of securities shall be their ``market 
value'' (which shall be the basis for determining value, unless 
otherwise agreed to by the administration) and shall be determined in 
the following manner:
    (i) In instances where no actual purchase is involved, such as the 
initial deposit of securities in the fund in lieu of cash, the last 
sales price thereof on the principal exchange on the day the deposit was 
made shall be deemed to be the ``market value'' thereof, or, if no such 
sales were made, the ``market value'' thereof will be determined by the 
Administration on such basis as it may deem to be fair and reasonable in 
each case.
    (ii) In instances where the purchase of securities with cash on 
deposit in the fund is involved, ``market value'' shall be the gross 
price paid (adjusted for accrued interest); Provided, That if such 
securities are purchased otherwise

[[Page 82]]

than upon a registered exchange the price shall be within the range of 
transactions on the exchange on the date of such purchase, or, if there 
were no such transactions, then the ``market value'' thereof will be 
determined by the Administration on such basis as it may deem to be fair 
and reasonable in each case.
    (2) Purchase-money obligations secured by mortgages on vessels sold 
or irrevocable commitments to finance the construction or acquisition of 
new vessels which are deposited in the construction reserve fund as 
provided in Sec. 287.13 ordinarily will be considered as equivalent to 
their face value.



Sec. 287.10  Withdrawals from fund.

    (a) Withdrawals for obligations or liquidation. (1) Checks, drafts, 
or other instruments of withdrawal to meet obligations under a contract 
for the construction or acquisition of new vessel or vessels or for the 
liquidation of existing or subsequently incurred purchase-money 
indebtedness, after having been executed by the taxpayer, shall be 
forwarded to the Administration in Washington, DC, with appropriate 
explanation of the purpose of the proposed withdrawal, including 
properly certified invoices or other supporting papers. Such instruments 
of withdrawal, if payable to the Administration, will be deposited by 
the Administration for collection, and the proceeds thereof, upon 
collection, will be credited to the appropriate contract with the 
Administration; but if drawn to the order of payees other than the 
Administration, after countersignature on behalf of the Administration, 
will ordinarily be forwarded to the payees.
    (2) An amount obligated under a contract for the construction or 
acquisition of a new vessel or vessels or for the liquidation of 
existing or subsequently incurred purchase-money indebtedness, whether 
the obligor has the entire or a partial interest therein within the 
scope of section 511 of the Act, may not, so long as the contract or 
indebtedness continues in full force and effect, be withdrawn except to 
meet payments due or to become due under such contract or for such 
liquidation.
    (b) Other withdrawals. Checks, drafts, or other instruments of 
withdrawal executed by the taxpayer for purposes other than to meet 
obligations under a contract for the construction or acquisition of a 
new vessel or vessels or for the liquidation of existing or subsequently 
incurred purchase-money indebtedness, whether the taxpayer has the 
entire or a partial interest therein, shall be drawn by the taxpayer to 
its own order and forwarded to the Administration in Washington, DC, 
with appropriate explanation of the purpose of the proposed withdrawal. 
Such withdrawals may occur by reason of a determination by the 
Administration that the taxpayer is not entitled to the benefits of 
section 511 of the Act (see Sec. 287.5), or that a particular deposit 
has been improperly made (see Sec. 287.13), or by reason of the 
election of the taxpayer to make such withdrawals. Upon receipt of such 
checks, drafts, or other instruments of withdrawal, the Administration 
will give notice thereof to the Commissioner of Internal Revenue. The 
Commissioner will advise the Administration of the receipt of the notice 
and the date it was received. The Administration shall not countersign 
such checks, drafts, or other instruments of withdrawal or transmit them 
to the taxpayer until the expiration of 30 days from the date of receipt 
of the notice by the Commissioner, unless the Commissioner or such 
official of the Internal Revenue Service as he may designate for the 
purpose consents in writing to earlier countersignature by the 
Administration and transmittal to the taxpayer. Upon the expiration of 
such 30-day period, or prior thereto if the aforesaid consent of the 
Commissioner has been obtained, the Administration will countersign the 
check, draft, or other instrument of withdrawal and forward it to the 
taxpayer.
    (c) Inapplicability to certain transactions. The provisions of this 
section shall not be applicable to transactions deemed to be withdrawals 
by reason of the sale of securities held in the fund for an amount less 
than the market value thereof at the time of their deposit (see Sec. 
287.23), nor to the cancellation of an irrevocable commitment deposited 
in the fund, upon proof satisfactory to the Administration that the

[[Page 83]]

terms of such commitment have been fully satisfied.



Sec. 287.11  Time deposits.

    Deposits in the construction reserve fund not invested in securities 
may be placed in time deposits when, in the judgment of the taxpayer, it 
is desirable and feasible so to do. The taxpayer shall promptly advise 
the Administration of any time deposit arrangements made with the 
depository. The Administration reserves the right at any time to require 
the termination or modification of any such arrangements. With prior 
approval of the Administration a time deposit may be made in a 
depository other than the one with which the construction reserve fund 
is established.



Sec. 287.12  Election as to nonrecognition of gain.

    (a) Election requirements. As a prerequisite to the nonrecognition 
of gain on the sale or loss of a vessel (or of a part interest therein) 
for Federal income tax purposes, the taxpayer, after establishing a 
construction reserve fund, must make an election with respect to such 
vessel or interest in the manner set forth in this paragraph.
    (1) In general. Except as provided in paragraph (a)(2) of this 
section, the election must be made in the taxpayer's Federal income tax 
return (or, in the case of a partnership, in the partnership return of 
income) for the taxable year in which the gain with respect to the sale 
or loss of the vessel is realized. The election as to the nonrecognition 
of gain shall be shown by a statement to that effect, submitted as a 
part of, and attached to, the return. The statement, which need not be 
on any prescribed form, shall set forth a computation of the amount of 
the realized gain, the identity of the vessel, the nature and extent of 
the taxpayer's interest therein, whether such vessel was sold or lost 
and the date of sale or loss, the full sale price or full amount of 
indemnity, and the amount and date of each payment thereof, the basis of 
tax purposes and any other data affecting the determination of the 
realized gain.
    (2) Certain Government payments. In case a vessel is purchased or 
requisitioned by the United States, or is lost, in any taxable year and 
the taxpayer receives payment for the vessel so purchased or 
requisitioned, or receives from the United States indemnity on account 
of such loss, subsequent to the end of such taxable year, the taxpayer 
shall make his election by filing notice thereof with the Commissioner 
of Internal Revenue, Washington, DC, 20224, prior to the expiration of 
60 days after receipt of the payment or indemnity. The taxpayer shall 
file a copy of the notice with the Secretary, Maritime Administration, 
Washington, DC, 20590. The form of the notice of election shall be 
prepared by the taxpayer and shall be substantially as follows:

  Election Relative to Nonrecognition of Gain Under Section 511(c)(2), 
                        Merchant Marine Act, 1936

    Pursuant to the provisions of section 511(c)(2) of the Merchant 
Marine Act, 1936, as amended, notice is hereby given that the 
undersigned taxpayer elects that gain in respect of the sale to the 
United States, or indemnification received from the United States on 
account of the loss, of the vessel named below or share therein shall 
not be recognized. The circumstances involved in the computation of such 
gain are as follows:

Name and other identification of vessel_________________________________

Nature and extent of the taxpayer's interest in the vessel______________

Nature of disposition, i.e., sale or loss_______________________________

Date of disposition_____________________________________________________

Full sale price or full amount of indemnity received by taxpayer________

Amount and date of each payment of sale price or indemnity received by 
taxpayer________________________________________________________________

Amount and date of each previous deposit of such payments in 
construction reserve fund_______________________________________________

Identification of each check or other instrument by which payment made 
to taxpayer_____________________________________________________________

Tax basis of taxpayer's interest in vessel______________________________

Any other data affecting the determination of the realized gain_________

Amount of gain (submit computation)_____________________________________

________________________________________________________________________
                                                      (Name of taxpayer)
 By_____________________________________________________________________

[[Page 84]]

(Date of execution)_____________________________________________________



Sec. 287.13  Deposit of proceeds of sales or indemnities.

    (a) Manner of deposit. The deposit required by section 511 of the 
Act must be made in a construction reserve fund established with a 
depository or depositories approved by the Administration and subject to 
the joint control of the Administration and the taxpayer. It is not 
necessary to establish a separate fund with respect to each vessel or 
share in a vessel sold or lost.
    (b) Amount of deposit. With respect to any vessel sold or lost, or a 
share therein, the deposit must be in an amount equal to the ``net 
proceeds'' of the sale, or the ``net indemnity'' for the loss. By ``net 
proceeds'' and ``net indemnity'' is meant (1) the depositor's interest 
in the adjusted basis of the vessel plus (2) the amount of gain which 
would be recognized for tax purposes in the absence of section 511 of 
the Act. In determining ``net proceeds'', the amount necessarily paid or 
incurred for brokers' commissions is to be deducted from the gross 
amount of the sales price. In the event the taxpayer is an affiliate or 
associate of the buyer, the amount of the sales price shall not exceed 
the fair market value of the vessel or vessels sold as determined by the 
Administration. In such case the taxpayer shall furnish evidence 
sufficient, in the opinion of the Administration, to establish that the 
sales price is not in excess of the fair market value. In determining 
``net indemnity'', the amount necessarily paid or incurred purely for 
collection, or rate of exchange discounts on the payment, of the 
indemnity is to be deducted from the gross amount of collectible 
indemnity. In case of the sale or loss of several vessels or share 
therein, a deposit of the ``net proceeds'' or ``net indemnity'' with 
respect to one or more of the vessels or shares is permissible. Where 
several vessels or shares are sold for a lump sum, the ``net proceeds'' 
allocated to each vessel or share shall be determined in accordance with 
any reasonable rule satisfactory to the Commissioner of Internal 
Revenue. The taxpayer must deposit the full amount of each payment 
(including cash, notes, or other evidences of indebtedness) as a single 
deposit in the construction reserve fund. A payment divided between two 
or more depositories will be regarded as a single deposit. Amounts 
received by the taxpayer prior to the date of consummation of the sale 
of the vessel shall be considered as having been received by the 
taxpayer at the time the sale is consummated.
    (c) Purchase-money obligations. Where the proceeds from the sale of 
a vessel include purchase-money obligations, such obligations together 
with the entire collateral therefor, or, in the case of deposit of the 
proceeds of a share in the vessel, a proportionate part of the 
obligations and collateral as determined by the Administration, shall be 
deposited, with the remainder of the proceeds, in the construction 
reserve fund as a part of the ``net proceeds''. The depository shall 
receive payment of all amounts due on such purchase-money obligations 
and such amounts shall be placed in the fund in substitution for the 
portion of the obligations paid. All installments of purchase-money 
obligations shall be paid directly into the fund by the obligor. In the 
event any such installment is not so deposited, the Administration, at 
any time after the due date, may require the taxpayer to deposit an 
amount equal to such installment. If the taxpayer so desires, he may 
deposit in the construction reserve fund cash or approved securities in 
an amount equal to the face value of any purchase-money obligations in 
lieu of depositing such obligations.
    (d) Vessel subject to mortgage at time of sale or loss. Where a 
vessel is subject to a mortgage or other encumbrance at the time of its 
sale or loss and the taxpayer actually receives only an amount 
representing the equity therein or a share in such equity corresponding 
to his share in the vessel, he shall deposit in the construction reserve 
fund such amount and concurrently therewith other funds in an amount 
equal to the difference between the amount received and the ``net 
proceeds'' or ``net indemnity''. Such other funds may be in the form of 
cash, or, subject to the

[[Page 85]]

approval of the Administration, (1) interest-bearing securities, or (2) 
an irrevocable and unconditional commitment to finance the construction 
or acquisition of a new vessel in whole or in part by an obligor 
approved by the Administration in an amount equal to the amount by which 
the ``net proceeds'' exceed the cash or securities deposited in the 
fund.
    (e) Unauthorized deposits. A deposit which is not provided for by 
section 511 of the Act shall, without unreasonable delay, be withdrawn 
from the fund and tax liability will be determined as though such 
deposit had not been made. (See Sec. Sec. 287.10 and 287.24.)



Sec. 287.14  Deposit of earnings and receipts.

    (a) Earnings. A citizen may deposit all or any part of earnings 
derived from the operation, within the scope of Sec. 287.3, of a vessel 
or vessels owned either by himself or any other person, if such earnings 
are intended for construction or acquisition of new vessels. Such 
earnings may include payments received by an owner, as compensation for 
use of his vessel, from other persons by whom it is so operated. 
Earnings from other sources may not be deposited. The earnings from 
operation of vessels which are eligible for deposit are the net earnings 
determined without regard to any deduction for depreciation, 
obsolescence, or amortization with respect to such vessels.
    (b) Receipts. Receipts from deposited funds, in the form of interest 
or otherwise, may be deposited.



Sec. 287.15  Time for making deposits.

    (a) Proceeds of sale or indemnification. Deposits of amounts 
representing proceeds of the sale or indemnification for loss of a 
vessel or share therein must be made within 60 days after receipt by the 
taxpayer.
    (b) Earnings and receipts. Earnings and receipts for the taxable 
year may be deposited at any time. (See Sec. 287.14.)



Sec. 287.16  Tax liability as to earnings deposited.

    Deposit in the construction reserve fund of earnings from the 
operation of a vessel or vessels, or receipts, in the form of interest 
or otherwise, with respect to amounts previously deposited does not 
exempt the taxpayer from tax liability with respect thereto nor postpone 
the time such earnings or receipts are includible in gross income. 
Earnings and receipts deposited in a construction reserve fund 
established in accordance with the provisions of section 511 of the Act 
and the regulations in this part will be deemed to have been accumulated 
for the reasonable needs of the business within the meaning of part 1 
(section 531 and following), subchapter G, chapter 1 of the Internal 
Revenue Code of 1954, so long as the requirements of section 511 of the 
Act and the regulations in this part are satisfied relative to the use 
of the fund in the construction, reconstruction, reconditioning, or 
acquisition of new vessels, or for the liquidation of purchase-money 
indebtedness on such vessels. For incurrence of tax liability due to 
noncompliance with the requirements of section 511 of the Act and the 
regulations in this part with respect to deposits in the construction 
reserve fund, see the provisions of Sec. 287.23.



Sec. 287.17  Basis of new vessel.

    The basis for determining gain or loss and for depreciation for the 
purpose of the Federal income tax with respect to a new vessel 
constructed, reconstructed, reconditioned, or acquired by the taxpayer, 
or with respect to which purchase-money indebtedness is liquidated as 
provided in section 511(g) of the Act, with funds deposited in the 
construction reserve fund, is reduced by the amount of the unrecognized 
gain represented in the funds allocated under the provisions of the 
regulations in this part to the cost of such vessel. (See Sec. 287.18.)



Sec. 287.18  Allocation of gain for tax purposes.

    (a) General rules of allocation. As provided in Sec. 287.17, if 
amounts on deposit in a construction reserve fund are expended, 
obligated, or withdrawn for construction, reconstruction, 
reconditioning, or acquisition of new vessels, or for the liquidation of 
purchase-money indebtedness of such vessels, the portion thereof which 
represents gain shall be applied in reduction of the basis of such new 
vessels. The rules

[[Page 86]]

set forth below in this paragraph shall apply in allocating the 
unrecognized gain to the amounts so expended, obligated, or withdrawn:
    (1) If the ``net proceeds'' of a sale or ``net indemnity'' in 
respect of a loss are deposited in more than one deposit, the portion 
thereof representing unrecognized gain shall be considered as having 
been deposited first.
    (2) Amounts expended, obligated, or withdrawn from the construction 
reserve fund shall be applied against amounts deposited in the order of 
deposit.
    (3) If any deposit consists in part of gain not recognized under 
section 511(c) of the Act, then any expenditure, obligation, or 
withdrawal applied against such deposit shall be considered to consist 
of gain in the same proportion that the part of the deposit which 
constitutes gain bears to the total amount of the deposit.
    (b) Date of obligation. The date funds are obligated under a 
contract for the construction, reconstruction, reconditioning, or 
acquisition of new vessels, or for the liquidation of purchase-money 
indebtedness on such vessels, rather than the date of payment from the 
fund, will determine the order of application against the deposits in 
the fund. When a contract for the construction, reconstruction, 
reconditioning, or acquisition of new vessels, or for the liquidation of 
purchase-money indebtedness on such vessels is entered into, amounts on 
deposit in the construction reserve fund will be deemed to be obligated 
to the extent of the amount of the taxpayer's liability under the 
contract. Deposits will be deemed to be so obligated in the order of 
deposit, each new contract obligating the earliest deposit not 
previously expended, obligated, or withdrawn. If the liability under the 
contract exceeds the amount in the construction reserve fund, the 
contract will be deemed to obligate, to the extent of that part of such 
excess not otherwise satisfied, the earliest deposit or deposits 
thereafter made.
    (c) Illustration. The foregoing rules are illustrated in the 
following example:

    Example. (1) A taxpayer who makes his returns on the calendar year 
basis sells a vessel in 1963 for $1,000,000, realizing a gain of 
$400,000. Payment of $100,000 is received in March 1963 when the 
contract is signed, and the balance of $900,000 is received in June 1963 
on delivery of the vessel. The $1,000,000 is deposited in a construction 
reserve fund in July 1963. In December 1963, the taxpayer also deposits 
$150,000, representing earnings of that year. In 1964, he sells another 
vessel for $1,000,000, realizing a gain of $250,000. The sale price of 
$1,000,000 is received on delivery of the vessel in February 1964, and 
deposited in the construction reserve fund in March 1964. In September 
1964, the taxpayer purchases for cash out of the construction reserve 
fund a new vessel for $1,750,000. To the cost of this vessel must be 
allocated the 1963 deposits of $1,150,000 and $600,000 of the March 1964 
deposit. This leaves in the fund $400,000 of the March 1964 deposit. The 
amount of the unrecognized gain to be applied against the basis of the 
new vessel is $550,000, computed as follows: Gain of $400,000 
represented in the 1963 deposits, plus the same proportion of the 
$250,000 gain represented in the March 1964 deposit ($1,000,000) which 
the amount ($600,000) allocated to the vessel is of the amount of the 
deposit, i.e., $400,000 plus 600,000/1,000,000 of $250,000 or $150,000, 
a total of $550,000. This reduces the basis of the new vessel to 
$1,200,000 ($1,750,000 less $550,000).
    (2) In 1965, the taxpayer sells a third vessel for $3,000,000, 
realizing a gain of $900,000. The $3,000,000 is received and deposited 
in the construction reserve fund in June 1965, making a total in the 
fund of $3,400,000. In December 1965, the taxpayer contracts for the 
construction of a second new vessel to cost a maximum of $3,200,000, 
thereby obligating that amount of the fund, and in June 1966, receives 
permission to withdraw the unobligated balance amounting to $200,000. To 
the cost of the second new vessel must be allocated the $400,000 balance 
of the March 1964 deposit and $2,800,000 of the June 1965 deposit. The 
unrecognized gain to be applied against the basis of such new vessel is 
that proportion of the gain represented in each deposit which the 
portion of the deposit allocated to the vessel bears to the amount of 
such deposit, i.e., 400,000/1,000,000 of $250,000, or $100,000 plus 
2,800,000/3,000,000 of $900,000, or $840,000 making a total of $940,000. 
The $200,000 withdrawal is applied against the June 1965 deposit and the 
portion thereof which represents gain will be recognized as income for 
1965, the year in which realized. The computation of the recognized gain 
is as follows: 200,000/3,000,000 of $900,000, or $60,000.



Sec. 287.19  Requirements as to new vessels.

    (a) Requirements. For the purposes of section 511 of the Act and the 
regulations in this part, the new vessel must be--

[[Page 87]]

    (1) Documented under the laws of the United States when it is 
acquired by the taxpayer, or the taxpayer must agree that when acquired 
it will be documented under the laws of the United States;
    (2)(i) Constructed in the United States after December 31, 1939, or 
(ii) its construction has been financed under Title V or Title VII of 
the Act, or (iii) its construction has been aided by a mortgage insured 
under Title XI of the Act; and
    (3) Either (i) of such type, size, and speed as the Administration 
determines to be suitable for use on the high seas or Great Lakes in 
carrying out the purposes of the Act, but of not less than 2,000 gross 
tons or of less speed than 12 knots, except that a particular vessel may 
be of lesser tonnage or speed if the Administration determines and 
certifies that the particular vessel is desirable for use by the United 
States in case of war or national emergency, or (ii) constructed to 
replace a vessel or vessels requisitioned or purchased by the United 
States, in which event it must be of such type, size, and speed as to 
constitute a suitable replacement for the vessel requisitioned or 
purchased, but if a vessel already built is acquired to replace a vessel 
or vessels requisitioned or purchased by the United States, such vessel 
must meet the requirements set forth in paragraph (a)(3)(i) of this 
section. Ordinarily, under paragraph (a)(3)(i) of this section, a vessel 
constructed more than five years before the date on which deposits in a 
construction reserve fund are to be expended or obligated for 
acquisition of such vessel will not be considered suitable for use in 
carrying out the purpose of the Act, except that the five-year age 
limitation provided above in this sentence shall not apply to a vessel 
to be reconstructed before being placed in operation by the taxpayer.
    (b) Time of construction. A vessel will be deemed to be constructed 
after December 31, 1939, only if construction was commenced after that 
date. Subject to the provisions of this section, a new vessel may be 
newly built for the taxpayer, or may be acquired after it is built.
    (c) Replacement of vessels. It is not necessary that vessels shall 
be replaced vessels for vessel. The new vessels may be more or less in 
number than the replaced vessels, provided the other requirements of 
this section are met.



Sec. 287.20  Obligation of deposits.

    (a) Time for obligation. Within three years from the date of any 
deposit in a construction reserve fund, unless extension is granted as 
provided in Sec. 287.22, such deposit must be obligated under a 
contract for the construction or acquisition of a new vessel or vessels 
(or in the discretion of the Administration for a share therein), with 
not less than 12\1/2\ percent of the construction or contract price of 
the entire vessel or vessels actually paid or irrevocably committed on 
account thereof or must be expended or obligated for the liquidation of 
existing or subsequently incurred purchase-money indebtedness to persons 
other than a parent company of, or a company affiliated or associated 
with, the mortgagor on a new vessel or vessels. Amounts on deposit in a 
construction reserve fund will be deemed to be obligated for expenditure 
when a binding contract of construction or acquisition has been entered 
into or when purchase-money indebtedness has been incurred and, if 
obligated under a contract of construction or acquisition, will be 
deemed to be irrevocably committed when due and payable in accordance 
with the terms of the contract of construction or acquisition.
    (b) Requirements for obligation. Unless otherwise authorized by the 
Administration, contracts for the construction of new vessels must be 
for a fixed price, or provide for a base price that may be adjusted for 
changes in labor and material costs not exceeding 15 percent of the base 
price. The fixed or base price, as the case may be, shall be fair and 
reasonable as determined by the Maritime Administration. Any financial 
or other interests between the taxpayer and the contractor shall be 
disclosed to the Administration by the taxpayer. Plans and 
specifications for the new vessel or vessels must be approved by the 
Administration to the extent it deems necessary. A deposit in a 
construction reserve fund may be expended

[[Page 88]]

or obligated for expenditure for procurement under an acquisition or 
construction contract of a part interest in a new vessel or vessels only 
after obtaining the written consent of the Administration. The granting 
of such consent shall be entirely in the discretion of the 
Administration and it may impose such conditions with respect thereto as 
it may deem necessary or advisable for the purpose of carrying out the 
provisions of section 511 of the Act. Applications for such consent 
shall be executed in triplicate, and, together with eight conformed 
copies thereof, filed with the Administration.



Sec. 287.21  Period for construction of certain vessels.

    A new vessel constructed otherwise than under the provisions of 
Title V of the Act, and not purchased from the Administration must, 
within six months from the date of the construction contract, or within 
the period of any extension, be completed to the extent of not less than 
5 percent as estimated by the Administration and certified by it to the 
Secretary of the Treasury. In case of a contract covering more than one 
vessel it will be sufficient if one of the vessels is 5 percent 
completed within the six months' period from the date of the contract or 
within the period of any extension, and so certified. All construction 
must be completed with reasonable dispatch as determined by the 
Administration. If, for causes within the control of the taxpayer, the 
entire construction is not completed with reasonable dispatch, the 
Administration will so certify to the Secretary of the Treasury. For the 
effect of such certification, see Sec. 287.23.



Sec. 287.22  Time extensions for expenditure or obligation.

    (a) Extensions. The Administration, upon application and a showing 
of proper circumstances, (1) may allow an extension of time within which 
deposits shall be expended or obligated, not to exceed one year, and 
upon a second application received before the expiration of the first 
extension, may allow an additional extension not to exceed one year, and 
(2) may allow an extension or extensions of time within which five 
percent of the construction shall have been completed as provided in 
Sec. 287.21 not to exceed one year in the aggregate, and (3) may allow 
any other extensions that may be provided by amendment to the Act.
    (b) Application required. A taxpayer seeking an extension of time 
shall make application therefor, and transmit it with an appropriate 
statement of the circumstances, including the reasons justifying the 
requested extension or extensions, and appropriate documents in 
substantiation of the statement, to the Administration. The 
Administration will notify the Commissioner of Internal Revenue of any 
extension granted. In case an application for extension is denied, the 
taxpayer will be liable for delay as though no application had been 
made.



Sec. 287.23  Noncompliance with requirements.

    (a) Noncompliance. The amount of the gain which is that portion of 
the construction reserve fund otherwise constituting taxable income 
under the law applicable to the taxable year in which such gain was 
realized shall be included in the taxpayer's gross income for such 
taxable year for income or excess-profits tax purposes, if:
    (1) A portion of such fund is withdrawn for purposes other than--
    (i) The construction, reconstruction, reconditioning, or acquisition 
of a new vessel; or
    (ii) The liquidation of existing or subsequently incurred purchase-
money indebtedness to persons other than a parent company of, or a 
company affiliated or associated with, the mortgagor on a new vessel or 
vessels; or
    (2) The taxpayer fails to comply with the requirements of section 
511 of the Act or the regulations in this part relating to the 
utilization of construction reserve funds in the construction, 
reconstruction, reconditioning, or acquisition of a new vessel, or the 
liquidation of purchase-money indebtedness on such a vessel.

If securities on deposit in a construction reserve fund are sold and the 
amount placed in the fund in lieu thereof is less than the value of the 
securities at the time of their deposit, the difference between such 
market

[[Page 89]]

value and the amount placed in the fund in lieu of the securities will 
be deemed to have been withdrawn. With respect to the substitution of 
new financing in the case of an irrevocable commitment, see paragraph 
(d) of Sec. 287.13.
    (b) Amount recognized. In the event of noncompliance with the 
prescribed conditions relative to any contract for construction, 
reconstruction, reconditioning, or acquisition of new vessels, or for 
the liquidation of purchase-money indebtedness on such vessels, 
recognition will extend to the entire amount of the gain represented in 
that portion of the construction reserve fund obligated under such 
contract. Thus, if the Administration determines and certifies to the 
Secretary of the Treasury that for causes within the control of the 
taxpayer construction under a contract is not completed with reasonable 
dispatch, the entire amount of the gain represented in the portion of 
the construction reserve fund obligated under the contract will be 
recognized even though all other conditions have been satisfied. In case 
of noncompliance with the requirements of section 511 of the Act or the 
regulations in this part, see the provisions of Sec. 287.18 as to the 
allocation of gain.
    (c) Unreasonable accumulation. Noncompliance with the provisions of 
section 511 of the Act or the regulations in this part relative to the 
utilization of the deposited amounts may also, inasmuch as the provision 
of section 511(f) of the Act is then inapplicable, warrant an 
examination to ascertain whether such amounts constitute an unreasonable 
accumulation of earnings and profits within the meaning of part I 
(section 531 and following), subchapter G, chapter 1 of the Internal 
Revenue Code of 1954, or corresponding provisions of prior law. If 
amounts are deposited and the fund maintained in good faith for the 
purpose of construction, reconstruction, reconditioning, and acquisition 
of new vessels, or for the liquidation of purchase-money indebtedness on 
such vessels, such amounts will be deemed to have been accumulated for 
the reasonable needs of the business.



Sec. 287.24  Extent of tax liability.

    (a) Declared value excess-profits tax. Gain which is includible in 
gross income under Sec. 287.23 shall be included in gross income for 
all income and excess-profits tax purposes, but not for the purposes of 
the declared value excess-profits tax and the capital stock tax as 
provided in section 511(i) of the Act. In lieu of any adjustment with 
respect to such declared value excess-profits tax, there is imposed for 
any taxable year ending on or before June 30, 1945, in which the gain is 
realized an additional tax of 1.1 percent of the amount of the gain. No 
additional capital stock tax liability is incurred.
    (b) Improper deposits. In the case of deposits in the construction 
reserve fund of amounts derived from sources other than those specified 
in section 511 of the Act, or in the case of failure to deposit an 
amount equal to the ``net proceeds'' or ``net indemnity'' within the 
period prescribed in section 511(c) of the Act and Sec. 287.15, the 
taxpayer obtains no suspension or postponement of any tax liability and 
the tax is collectible without regard to the provisions of section 
511(c) of the Act.
    (c) Time for filing claim subsequent to election under section 
511(c)(2). If an election is made under section 511(c)(2) of the Act, 
and paragraph (a)(2) of Sec. 287.12, and if computation or 
recomputation in accordance therewith is otherwise allowable but is 
prevented, on the date of filing of notice of such election, or within 
six months thereafter, by any statute of limitation, such computation or 
recomputation nevertheless shall be made notwithstanding such statute if 
a claim therefor is filed within six months after the date of making 
such election. If as the result of such computation or recomputation an 
overpayment is disclosed, a claim for refund on Form 843 should also be 
filed within such six months' period.



Sec. 287.25  Assessment and collection of deficiencies.

    Any additional tax, including the 1.1 percent amount imposed by 
section 511(i) of the Act, due on account of withdrawal from a 
construction reserve fund, or failure to comply with section 511 of the 
Act or the regulations in this

[[Page 90]]

part, is collectible as a deficiency. Interest upon such deficiency will 
run from the date the withdrawal or noncompliance occurs. The amount of 
any deficiency, including interest and additions to the tax, determined 
as a result of such withdrawal or noncompliance, may be assessed, or a 
proceeding in court for the collection thereof may be begun without 
assessment, at any time and without regard to any period of limitations 
or any other provisions of law or rule of law, including the doctrine of 
res judicata.



Sec. 287.26  Reports by taxpayers.

    (a) Information required. With each income tax return filed for a 
taxable year during any part of which a construction reserve fund is in 
existence the taxpayer shall submit a statement setting forth a detailed 
analysis of such fund. The statement, which need not be on any 
prescribed form, shall include the following information with respect to 
the construction reserve fund:
    (1) The actual balance in the fund at the beginning and end of the 
taxable year;
    (2) The date, amount, and source of each deposit during the taxable 
year;
    (3) If any deposit referred to in paragraph (a)(2) of this section 
consists of proceeds from the sale, or indemnification of loss, of a 
vessel or share thereof, the amounts of the unrecognized gain;
    (4) The date, amount, and purpose of each expenditure or withdrawal 
from the fund; and
    (5) The date and amount of each contract, under which deposited 
funds are deemed to be obligated during the taxable year, for the 
construction, reconstruction, reconditioning, or acquisition of new 
vessels, or for the liquidation of purchase-money indebtedness on such 
vessels, and the identification of such vessels.
    (b) Records required. Taxpayers shall keep such records and make 
such additional reports as the Commissioner of Internal Revenue or the 
Administration may require.

    Note: The records referred to in this section shall be retained for 
a period of six months beyond the termination or closing out of the 
reserve fund.



Sec. 287.27  Controlled corporation.

    For the purpose of section 511 of the Act and the regulations in 
this part a new vessel is considered as constructed, reconstructed, 
reconditioned, or acquired by the taxpayer if constructed, 
reconstructed, reconditioned, or acquired by a corporation at a time 
when the taxpayer owns not less than 95 percent of the total number of 
shares of each class of stock of the corporation.



Sec. 287.28  Administrative jurisdiction.

    Sections 287.3 to 287.11, inclusive, Sec. Sec. 287.13 to 187.15, 
inclusive, and Sec. Sec. 287.19 to 287.22, inclusive, deal primarily 
with matters under the jurisdiction of the Administration. Sections 
287.12, 287.16 to 287.18, inclusive, and Sec. Sec. 287.23 to 287.27, 
inclusive, deal primarily with matters under the jurisdiction of the 
Commissioner of Internal Revenue. Generally, matters relating to the 
establishment, maintenance, expenditure, and use of construction reserve 
funds and the construction, reconstruction, reconditioning, or 
acquisition of new vessels are under the jurisdiction of the 
Administration; and matters relating to the determination, assessment, 
and collection of taxes are under the jurisdiction of the Commissioner 
of Internal Revenue. Correspondence should be addressed to the 
particular authority having jurisdiction in the matter.



PART 289_INSURANCE OF CONSTRUCTION-DIFFERENTIAL SUBSIDY VESSELS, 

OPERATING-DIFFERENTIAL SUBSIDY VESSELS AND OF VESSELS SOLD OR 

ADJUSTED UNDER THE MERCHANT SHIP SALES ACT 1946--Table of Contents



Sec.
289.1 Definition.
289.2 Vessels included.
289.3 Provision in subsidy agreements and mortgages.
289.4 Insurance by owners.
289.5 Insurance by the United States.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114. 
Interpret or apply sec. 12, 60 Stat. 49, as amended; 50 U.S.C. App. 
1745.

[[Page 91]]


    Source: General Order 67 Rev., 18 FR 230, Jan. 10, 1953, unless 
otherwise noted.



Sec. 289.1  Definition.

    For the purpose of this part, when reference is made to the phrase 
interest of the United States, it shall mean:
    (a) As to vessels constructed or sold with construction-differential 
subsidy and/or national defense feature allowance under Title V or VII 
of the Merchant Marine Act, 1936, as amended, the value of the 
construction-differential subsidy allowance, plus the allowance for 
national defense features;
    (b) As to vessels constructed or sold under Title V or VII of the 
Merchant Marine Act of 1936, as amended, and adjusted in price pursuant 
to section 9 of the Merchant Ship Sales Act of 1946, the difference 
between the pre-war domestic cost and the statutory sales price as 
defined in the Merchant Ship Sales Act of 1946.



Sec. 289.2  Vessels included.

    Vessels subject to the provisions of this part are:
    (a) All vessels which may in the future be constructed or sold with 
construction-differential subsidy allowances and/or national defense 
features allowance under Title V or VII of the Merchant Marine Act 1936, 
as amended.
    (b) All vessels which have previously been constructed or sold with 
construction-differential subsidy allowances and national defense 
features allowances under Title V or VII of the Merchant Marine Act, 
1936, as amended;
    (c) All vessels which have previously been constructed with 
construction-differential subsidy allowances or national defense 
features allowance under Title V or VII of the Merchant Marine Act of 
1936, as amended, and later adjusted in price pursuant to section 9 of 
the Merchant Ship Sales Act of 1946;
    (d) All vessels which are subsidized under operating-differential 
subsidy agreements.



Sec. 289.3  Provision in subsidy agreements and mortgages.

    (a) All construction-differential subsidy agreements and mortgages 
relative to vessels covered in Sec. 289.2(a) shall provide, wherever 
possible, that the Maritime Administrator may, in his discretion, 
require the owner to insure, with commercial underwriters, the interest 
of the United States.
    (b) All future construction-differential subsidy agreements and 
future operating subsidy agreements shall require that owners insure 
vessels covered in Sec. 289.2 (a) and (d) in amounts acceptable to the 
Maritime Administration.



Sec. 289.4  Insurance by owners.

    Owners of vessels covered in Sec. 289.2 will not be required to 
arrange commercial insurance to cover the interest of the United States, 
exclusive of its mortgage interest, but the United States reserves the 
right to require, whenever the contracts so provide, that this be done 
at some future date, should it deem it necessary.



Sec. 289.5  Insurance by the United States.

    The United States will self-insure its interest, exclusive of 
mortgage interest, as defined in Sec. 289.1.



PART 295_MARITIME SECURITY PROGRAM (MSP)--Table of Contents



                         Subpart A_Introduction

Sec.
295.1 Purpose.
295.2 Definitions.
295.3 Waivers.

          Subpart B_Establishment of MSP Fleet and Eligibility

295.10 Eligibility requirements.
295.11 Applications.
295.12 Priority for awarding agreements.

        Subpart C_Maritime Security Program Operating Agreements

295.20 General conditions.
295.21 MSP assistance conditions.
295.22 Commencement and termination of operations.
295.23 Reporting requirements.

                Subpart D_Payment and Billing Procedures

295.30 Payment.
295.31 Criteria for payment.

                      Subpart E_Appeals Procedures

295.40 Administrative determinations.


[[Page 92]]


    Authority: 46 App. U.S.C. 1171 et seq.; 46 App. U.S.C. 1114 (b), 49 
CFR 1.66.

    Source: 62 FR 37737, July 15, 1997, unless otherwise noted.



                         Subpart A_Introduction



Sec. 295.1  Purpose.

    This part prescribes regulations implementing the provisions of 
subtitle B (Maritime Security Fleet Program) of title VI of the Merchant 
Marine Act, 1936, as amended, governing Maritime Security Program 
payments for vessels operating in the foreign trade or mixed foreign and 
domestic commerce of the United States allowed under a registry 
endorsement issued under 46 U.S.C. 12105.



Sec. 295.2  Definitions.

    For the purposes of this part:
    (a) Act, means the Merchant Marine Act, 1936, as amended by the 
Maritime Security Act of 1996 (MSA)(46 App. U.S.C. 1101 et seq.).
    (b) Administrator, means the Maritime Administrator, U.S. Maritime 
Administration (MARAD), U.S. Department of Transportation, who is 
authorized to administer the MSA.
    (c) Agreement Vessel, means a vessel covered by a MSP Operating 
Agreement.
    (d) Applicant, means an applicant for a MSP Operating Agreement.
    (e) Bulk Cargo, means cargo that is loaded and carried in bulk 
without mark or count.
    (f) Chapter 121, means the vessel documentation provisions of 
chapter 121 of title 46, United States Code.
    (g) Citizen of the United States, means an individual or a 
corporation, partnership or association as determined under section 2 of 
the Shipping Act, 1916, as amended (46 App. U.S.C. 802).
    (h) Contracting Officer, means the Associate Administrator for 
National Security, MARAD.
    (i) Contractor, means the owner or operator of a vessel that enters 
into a MSP Operating Agreement for the vessel with MARAD pursuant to 
Sec. 295.20 of this part.
    (j) DOD, means the U.S. Department of Defense.
    (k) Domestic Trade, means trade between two or more ports and/or 
points in the United States.
    (l) Eligible Vessel, means a vessel that meets the requirements of 
Sec. 295.10(b) of this part.
    (m) Emergency Preparedness Program Agreement, means the agreement, 
required by section 653 of the act, between a Contractor and the 
Secretary of Transportation (acting through MARAD) to make certain 
commercial transportation resources available during time of war or 
national emergency.
    (n) Enrollment, means the entry into a MSP Operating Agreement with 
the MARAD to operate a vessel(s) in the MSP Fleet in accordance with 
Sec. 295.20 of this part.
    (o) Fiscal Year, means any annual period beginning on October 1 and 
ending on September 30.
    (p) LASH Vessel, means a lighter aboard ship vessel.
    (q) Militarily Useful, is defined according to DOD Joint Strategic 
Planning Capabilities Plan (JSCAP) guidance as follows:
    (1) U.S. Sources--All active and inactive ocean-going ships (and 
certain other specially selected vessels) within the following types and 
criteria from United States sources with a minimum speed of 12 knots.
    (2) Dry Cargo--All dry cargo ships, including integrated tug/barges 
(ITBs) with a minimum capacity of 6,000 tons (DWT) capable of carrying, 
without significant modification, any of the following cargoes: unit 
equipment, ammunition, or sustaining supplies.
    (r) MSP Fleet, means the fleet of vessels operating under MSP 
Operating Agreements.
    (s) MSP Operating Agreement, means the MSP Operating Agreement, 
providing for MSP payments entered into by a Contractor and MARAD.
    (t) MSP Payments, means the payments made for the operation of U.S.-
flag vessels in the foreign trade or mixed foreign and domestic trade of 
the United States allowed under a registry endorsement issued under 46 
U.S.C. 12105, to maintain intermodal shipping capability and to meet 
national defense and security requirements in accordance with the terms

[[Page 93]]

and conditions of the MSP Operating Agreement.
    (u) Ocean Common Carrier, means a carrier that meets the 
requirements of the MSA, section 654(3).
    (v) ODS, means Operating-Differential Subsidy provided by Subtitle 
A, Title VI, of the Act.
    (w) Operating Day, means any day during which a vessel is operated 
in accordance with the terms and conditions of the MSP Operating 
Agreement.
    (x) Related party, means:
    (1) a holding company, subsidiary, affiliate, or associate of a 
contractor who is a party to an operating agreement under Subtitle B, 
Title VI, of the Act; and
    (2) an officer, director, agent, or other executive of a contractor 
or of a person referred to in paragraph (x)(1) of this section.
    (y) Roll-on/Roll-off Vessel, means a vessel that has ramps allowing 
cargo to be loaded and discharged by means of wheeled vehicles so that 
cranes are not required.
    (z) Secretary, means the Secretary of Transportation.
    (aa) United States Documented Vessel, means a vessel documented 
under Chapter 121 of Title 46, United States Code.



Sec. 295.3  Waivers.

    In special circumstances, and for good cause shown, the procedures 
prescribed in this part may be waived in writing by the Maritime 
Administration, by mutual agreement of the Maritime Administration and 
the Contractor, so long as the procedures adopted are consistent with 
the Act and with the objectives of these regulations.



          Subpart B_Establishment of MSP Fleet and Eligibility



Sec. 295.10  Eligibility requirements.

    (a) Applicant. Any person may apply to MARAD for Enrollment of 
Eligible Vessels in MSP Operating Agreements for inclusion in the MSP 
Fleet pursuant to the provisions of subtitle B, title VI, of the act. 
Applications shall be addressed to the Secretary, Maritime 
Administration, 400 Seventh Street, S.W., Washington, D.C. 20590.
    (b) Eligible Vessel. A vessel eligible for enrollment in a MSP 
Operating Agreement shall be self-propelled and meet the following 
requirements:
    (1) Vessel Type--(i) Liner Vessel. The vessel shall be operated by a 
person as an Ocean Common Carrier.
    (ii) Specialty vessel. Whether in commercial service, on charter to 
the DOD, or in other employment, the vessel shall be either:
    (A) a Roll-on/Roll-off vessel with a carrying capacity of at least 
80,000 square feet or 500 twenty-foot equivalent units; or
    (B) a LASH vessel with a barge capacity of at least 75 barges; or
    (iii) Other vessel. Any other type of vessel that is determined by 
the MARAD to be suitable for use by the United States for national 
defense or military purposes in time of war or national emergency; and
    (2) Vessel Requirements--(i) U.S. Documentation. Except as provided 
in paragraph (b)(2)(iv) of this section, the vessel is a U.S.-documented 
vessel; and
    (ii) Age. Except as provided in paragraph (b)(2)(iii), on the date a 
MSP Operating Agreement covering the vessel is first entered into is:
    (A) a LASH Vessel that is 25 years of age or less; or
    (B) any other type of vessel that is 15 years of age or less.
    (iii) Waiver Authority. In accordance with section 651(b)(2) of the 
act, MARAD is authorized to waive the application of paragraph 
(b)(2)(ii) of this section if MARAD, in consultation with the Secretary 
of Defense, determines that the waiver is in the national interest.
    (iv) Intent to document U.S. Although the vessel may not be a U.S.-
documented vessel, it shall be considered an Eligible Vessel if the 
vessel meets the criteria for documentation under 46 U.S.C. chapter 121, 
the vessel owner has demonstrated an intent to have the vessel 
documented under 46 U.S.C. chapter 121, and the vessel will be less than 
10 years of age on the date of that documentation; and
    (3) MARAD's determination. MARAD determines that the vessel is 
necessary to maintain a United States presence in international 
commercial shipping and the applicant possesses the ability,

[[Page 94]]

experience, resources and other qualifications necessary to execute the 
obligations of the MSP Operating Agreement, or MARAD, after consultation 
with the Secretary of Defense, determines that the vessel is militarily 
useful for meeting the sealift needs of the United States.



Sec. 295.11  Applications.

    (a) Action by MARAD--(1) Time Deadlines. Not later than 30 days 
after the enactment of the Maritime Security Act of 1996, Pub. L. 104-
239, MARAD shall accept applications for Enrollment of vessels in the 
MSP Fleet. Within 90 days after receipt of a completed application, 
MARAD shall enter into a MSP Operating Agreement with the applicant or 
provide in writing the reason for denial of that application.
    (2) Closure of Applications. Applications for MSP Operating 
Agreements shall be made only at such time as, and in response to, 
publication of invitations to apply by MARAD in the Federal Register. 
After the Administrator has fully allocated authorized contracting 
authority through the award of the maximum number of vessels allowed 
under Sec. 295.30(a), MARAD will not accept any applications for award 
of new Operating Agreements until additional contracting authority 
becomes available, or existing contracting authority reverts back to 
MARAD.
    (3) Reflagging for Eligible vessels. Except as provided in paragraph 
(a)(4) of this section, an applicant may remove a vessel from U.S. 
registry without MARAD approval if an application for a MSP Operating 
Agreement has been filed for that vessel, the applicant is qualified, 
and it has been determined by MARAD to be eligible under MSA section 
651(b)(1) under a priority for which sufficient funds are available and 
the Administrator has not awarded an Operating Agreement for the vessel 
within 90 days of that application.
    (4) Reflagging ODS and MSC chartered vessels. Vessels eligible under 
MSA section 651(b)(1) which are also subject to ODS contracts or on 
charter to MSC, and for which applications have been denied pursuant to 
Sec. 295.11(a)(1) of this part, may be removed from U.S. registry only 
after those agreements have expired and only after the age requirement 
in section 9(e)(3) of the Shipping Act, 1916 (46 App. U.S.C. 808) has 
been met.
    (b) Action by the Applicant. Applicants for MSP Payments shall 
submit information on the following (Note: MARAD will accept electronic 
options (such as facsimile and Internet) for transmission of required 
information to MARAD, if practicable):
    (1) Intermodal network. A statement describing its operating and 
transportation assets, including vessels, container stocks, trucks, 
railcars, terminal facilities, and systems used to link such assets 
together;
    (2) Diversity of trading patterns. A list of countries and trade 
routes serviced along with the types and volumes of cargo carried;
    (3) Vessel construction date;
    (4) Vessel type and size; and
    (5) Military Utility. An assessment of the value of the vessel to 
DOD sealift requirements.

(Approved by the Office of Management and Budget under Control Number 
2133-0525)

[62 FR 37737, July 15, 1997, as amended at 68 FR 62537, Nov. 5, 2003; 69 
FR 61451, Oct. 19, 2004]



Sec. 295.12  Priority for awarding agreements.

    Subject to the availability of appropriations, MARAD shall enter 
into individual MSP Operating Agreements for Eligible Vessels according 
to the following priorities:
    (a) First priority requirements. First priority shall be accorded to 
any Eligible Vessel meeting the following requirements:
    (1) U.S. citizen ownership. Vessels owned and operated by persons 
who are Citizens of the United States as defined in Sec. 295.2; or
    (2) Other corporations. Vessels less than 10 years of age and owned 
and operated by a corporation that is:
    (i) eligible to document a vessel under 46 U.S.C. chapter 121; and
    (ii) affiliated with a corporation operating or managing for the 
Secretary of Defense other vessels documented under 46 U.S.C. chapter 
121, or chartering other vessels to the Secretary of Defense.

[[Page 95]]

    (3) Limitation on number of vessels. Limitation on the total number 
of Eligible Vessels awarded under paragraph (a) of this section shall 
be:
    (i) For any U.S. citizen under paragraph (a)(1), the number of 
vessels may not exceed the sum of:
    (A) the number of U.S.-flag documented vessels that the Contractor 
or a related party operated in the foreign commerce of the United States 
on May 17, 1995, except mixed coastwise and foreign commerce; and
    (B) the number of U.S.-flag documented vessels the person chartered 
to the Secretary of Defense on that date; and
    (ii) For any corporation under paragraph (a)(2) of this section, not 
more than five Eligible Vessels.
    (4) Related party. For the purpose of this section a related party 
with respect to a person shall be treated as the person.
    (b) Second priority requirements. To the extent that appropriated 
funds are available after applying the first priority in paragraph (a) 
of this section, the MARAD shall enter into individual MSP Operating 
Agreements for Eligible Vessels owned and operated by a person who is:
    (1) U.S. citizen. A Citizen of the United States, as defined in 
Sec. 295.2(g), that has not been awarded a MSP Operating Agreement 
under the priority in paragraph (a) of this section, or
    (2) Other. A person (individual or entity) eligible to document a 
vessel under 46 U.S.C. chapter 121, and affiliated with a person or 
corporation operating or managing other U.S.-documented vessels for the 
Secretary of Defense or chartering other vessels to the Secretary of 
Defense.
    (c) Third priority. To the extent that appropriated funds are 
available after applying the first and second priority, any other 
Eligible Vessel.
    (d) Number of MSP Operating Agreements Awarded. If appropriated 
funds are not sufficient to award agreements to all vessels within a 
priority set forth herein, MARAD shall award to each eligible applicant 
in that priority a number of Operating Agreements that bears 
approximately the same ratio to the total number of Operating Agreements 
requested under that priority, and for which timely applications have 
been made, as the amount of appropriations available for MSP Operating 
Agreements for Eligible Vessels in the priority bears to the amount of 
appropriations necessary for MSP Operating Agreements for all Eligible 
Vessels in the priority.



        Subpart C_Maritime Security Program Operating Agreements



Sec. 295.20  General conditions.

    (a) Approval. MARAD may approve applications to enter into a MSP 
Operating Agreement and make MSP Payments with respect to vessels that 
are determined to be necessary to maintain a United States presence in 
international commercial shipping or those that are deemed, after 
consultation with the Secretary of Defense, to be militarily useful for 
meeting the sealift needs of the United States in national emergencies.
    (b) Effective date--(1) General Rule. Unless otherwise provided in 
the contract, the effective date of a MSP Operating Agreement is the 
date when executed by the Contractor and MARAD.
    (2) Exceptions. In the case of an Eligible Vessel to be included in 
a MSP Operating Agreement that is subject to an ODS contract under 
subtitle A, title VI, of the act or on charter to the U.S. Government, 
other than a charter under the provisions of an Emergency Preparedness 
Program Agreement provided by section 653 of the act, unless an earlier 
date is requested by the applicant, the effective date for a MSP 
Operating Agreement shall be:
    (i) The expiration or termination date of the ODS contract or 
Government charter covering the vessel, respectively, or
    (ii) Any earlier date on which the vessel is withdrawn from that 
contract or charter.
    (c) Replacement Vessels. MARAD may approve the replacement of an 
Eligible Vessel in a MSP Operating Agreement provided the replacement 
vessel is eligible under Sec. 295.10.
    (d) Notice to shipbuilders. The Contractor agrees that no later than 
30 days after soliciting any offer or bid for the construction of any 
vessel in a foreign shipyard, and before entering into

[[Page 96]]

any contract for construction of a vessel in a foreign shipyard, the 
Contractor shall provide notice of its intent to enter into such a 
contract (for vessels being considered for U.S.-flag registry) to MARAD. 
Within 10 business days after the receipt of such notification, MARAD 
shall issue a notice in the Federal Register of the Contractor's intent. 
The Contractor is prohibited from entering into any such contract until 
10 business days after the date of publication of such notice.
    (e) Early termination. A MSP Operating Agreement shall terminate on 
a date specified by the Contractor if the Contractor notifies MARAD not 
later than 60 days before the effective date of the proposed 
termination, that the Contractor intends to terminate the Agreement. The 
Contractor shall be bound by the provisions relating to vessel 
documentation and national security commitments to the extent and for 
the period contained in section 652(m) of the Act.
    (f) Non-renewal for lack of funds. If, by the first day of a fiscal 
year, insufficient funds have been appropriated under section 655 of the 
act for that fiscal year, MARAD shall notify the Congress that MSP 
Operating Agreements for which insufficient funds are available will be 
terminated on the 60th day of that fiscal year if sufficient funds are 
not appropriated or otherwise made available by that date. If only 
partial funding is appropriated by the 60th day of such fiscal year, 
then MSP Operating Agreements for which funds are not available shall be 
terminated using the pro rata distribution method used to award MSP 
Operating Agreements set forth in Sec. 295.12(d). With respect to each 
terminated agreement the Contractor shall be released from any further 
obligation under the agreement, and the Contractor may transfer and 
register the applicable vessel under a foreign registry deemed 
acceptable by MARAD. In the event that no funds are appropriated, then 
all MSP Operating Agreements shall be terminated and each Contractor 
shall be released from its obligations under the agreement. Final 
payments under the terminated agreements shall be made in accordance 
with Sec. 295.30. To the extent that funds are appropriated in a 
subsequent fiscal year, existing operating agreements may be renewed if 
mutually acceptable to the Administrator and the Contractor and the MSP 
vessel remains eligible.
    (g) Operation under a Continuing Resolution. In the event a 
Continuing Resolution (CR) is in place that does not provide sufficient 
appropriations to fully meet obligations under MSP Operating Agreements, 
a Contractor may request termination of the agreement in accordance with 
paragraph (f), herein, and Sec. 295.30.
    (h) Requisition authority. To the extent section 902 of the act is 
applicable to any vessel transferred foreign under this section, the 
vessel shall remain available to be requisitioned by the Maritime 
Administration under that provision of law.
    (i) Transfer of Operating Agreements. A Contractor subject to an 
Agreement may transfer that Agreement (including all rights and 
obligations thereunder) to any person eligible to enter into an 
Agreement under the same priority established in section 652(i)(1)(A) of 
the act as the Contractor, provided that:
    (1) The Contractor gives notice of any such transfer to the Maritime 
Administrator by filing a completed application;
    (2) The transfer is not disapproved in writing by the Maritime 
Administrator within 90 days of the notification; and
    (3) the vessel to be covered by the Agreement after transfer is the 
same vessel originally covered by the Agreement or is an eligible vessel 
under section 651(b) of the act and is the same type, and comparable to, 
the vessel originally covered by the Agreement.



Sec. 295.21  MSP assistance conditions.

    (a) Term of MSP Operating Agreement. MSP Operating Agreements shall 
be effective for a period of not more than one fiscal year, and unless 
otherwise specified in the Agreement, shall be renewable, subject to the 
availability of appropriations or amounts otherwise made available, for 
each subsequent fiscal year through the end of FY 2005. In the event 
appropriations are enacted after October 1 with respect to any 
subsequent fiscal year, October 1 shall be

[[Page 97]]

considered the effective date of the renewed agreement, provided 
sufficient funds are made available and subject to the Contractor's 
rights for early termination pursuant to section 652(m) of the act.
    (b) Terms under a Continuing Resolution (CR). In the event funds are 
available under a CR, the terms and conditions of the MSP Operating 
Agreements shall be in force provided sufficient funds are available to 
fully meet obligations under MSP Operating Agreements, and only for the 
period stipulated in the applicable CR. If funds are not appropriated at 
sufficient levels for any portion of a fiscal year, the terms and 
conditions of any applicable MSP Operating Agreement may be voided and 
the Contractor may request termination of the MSP Operating Agreement in 
accordance with Sec. 295.20(f).
    (c) National security requirements. Each MSP Operating Agreement 
shall require the owner or operator of an Eligible Vessel included in 
that agreement to enter into an Emergency Preparedness Program Agreement 
pursuant to section 653 of the act.
    (d) Vessel operating requirements. The MSP Operating Agreement shall 
require that during the period an Eligible Vessel is included in that 
Agreement, the Eligible Vessel shall:
    (1) Documentation. Be documented as a U.S.-flag vessel under 46 
U.S.C. chapter 121; and
    (2) Operation. Be operated exclusively in the U.S.-foreign trade or 
in mixed foreign and domestic trade allowed under a registry endorsement 
issued under 46 U.S.C. 12105, and shall not otherwise be operated in the 
coastwise trade of the United States.
    (e) Limitations. Limitations on Contractors with respect to the 
operation of foreign-flag vessels shall be in accordance with section 
804 of the act, as amended. The operation of vessels, other than 
Agreement Vessels, in the noncontiguous trades shall be limited in 
accordance with service levels and conditions permitted in section 656 
of the act.
    (f) Non-Contiguous Domestic Trade. [Reserved]
    (g) Obligation of the U.S. Government. The amounts payable as MSP 
Payments under a MSP Operating Agreement shall constitute a contractual 
obligation of the United States Government to the extent of available 
appropriations.



Sec. 295.22  Commencement and termination of operations.

    (a) Time frames. A Contractor that has been awarded a MSP Operating 
Agreement shall commence operations of the Eligible Vessel, under the 
applicable agreement or a subsequently renewed agreement, within the 
time frame specified as follows:
    (1) Existing vessel. Within one year after the initial effective 
date of the MSP Operating Agreement in the case of a vessel in existence 
on that date and after notification to MARAD within 30 days of the 
Contractor's intent; or
    (2) New building. Within 30 months after the initial effective date 
of the MSP Operating Agreement in the case of a vessel to be constructed 
after that date.
    (b) Unused authority. In the event of a termination of unused 
authority pursuant to paragraph (a) of this section, such authority 
shall revert to MARAD.



Sec. 295.23  Reporting requirements.

    The Contractor shall submit to the Director, Office of Financial and 
Rate Approvals, Maritime Administration, 400 Seventh St., SW., 
Washington, DC 20590, one of the following reports, including management 
footnotes where necessary to make a fair financial presentation [Note: 
MARAD will accept electronic options (such as facsimile and Internet) 
for transmission of required information to MARAD, if practicable.]:
    (a) Form MA-172. Not later than 120 days after the close of the 
Contractor's semiannual accounting period, a Form MA-172 on a semiannual 
basis, in accordance with 46 CFR 232.6; or
    (b) Financial Statement. Not later than 120 days after the close of 
the Contractor's annual accounting period, an audited annual financial 
statement in accordance with 46 CFR 232.6 and the most recent vessel 
operating cost data

[[Page 98]]

submitted as part of its Emergency Preparedness Agreement.

(Approved by the Office of Management and Budget under Control Number 
2133-0525)

[62 FR 37737, July 15, 1997, as amended at 68 FR 62538, Nov. 5, 2003; 69 
FR 61451, Oct. 19, 2004]



                Subpart D_Payment and Billing Procedures



Sec. 295.30  Payment.

    (a) Amount payable. A MSP Operating Agreement shall provide, subject 
to the availability of appropriations and to the extent the agreement is 
in effect, for each Agreement Vessel, an annual payment of $2,100,000 
for each fiscal year. This amount shall be paid in equal monthly 
installments at the end of each month. The annual amount payable shall 
not be reduced except as provided in paragraph (b) of this section and 
Sec. 295.31(a)(3).
    (b) Reductions in amount payable. (1) The annual amount otherwise 
payable under a MSP Operating Agreement shall be reduced on a pro rata 
basis for each day less than 320 in a fiscal year that an Agreement 
Vessel is not operated exclusively in the U.S.-foreign trade or in mixed 
foreign and domestic trade allowed under a registry endorsement issued 
under 46 U.S.C. 12105. Days during which the vessel is drydocked or 
undergoing survey, inspection, or repair shall be considered to be days 
during which the vessel is operated, provided the total of such days 
within a fiscal year does not exceed 30 days, unless prior to the 
expiration of a vessel's 30 day period, approval is obtained from MARAD 
for an extension of the 30 day provision.
    (2) There shall be no payment for any day that a MSP Agreement 
Vessel is engaged in transporting more than 7,500 tons (using the U.S. 
English standard of short tons, which converts to 6,696.75 long tons, or 
6,803.85 metric tons) of civilian bulk preference cargoes pursuant to 
section 901(a), 901(b), or 901b of the act, provided that it is bulk 
cargo.



Sec. 295.31  Criteria for payment

    (a) Submission of voucher. For contractors operating under more than 
one MSP Operating Agreement, the contractor may submit a single monthly 
voucher applicable to all its agreements. Each voucher submission shall 
include a certification that the vessel(s) for which payment is 
requested were operated in accordance with Sec. 295.21(d) and 
applicable MSP Operating Agreements with MARAD, and consideration shall 
be given to reductions in amounts payable as set forth in Sec. 295.30. 
All submissions shall be forwarded to the Director, Office of 
Accounting, MAR-330 Room 7325, Maritime Administration, 400 Seventh 
Street, SW., Washington, DC 20590. Payments shall be paid and processed 
under the terms and conditions of the Prompt Payment Act, 31 U.S.C. 
3901.
    (1) Payments shall be made per vessel, in equal monthly 
installments, of $175,000.
    (2) To the extent that reductions under Sec. 295.30(b) are known, 
such reductions shall be applied at the time of the current billing. The 
daily reduction amounts shall be based on the annual amounts in 
295.30(a) of this part divided by 365 days (366 days in leap years) and 
rounded to the nearest cent. Daily reduction amounts shall be applied as 
follows:

FY 1997--$5,753.42
FY 1998--$5,753.42
FY 1999--$5,753.42
FY 2000--$5,737.70
FY 2001--$5,753.42
FY 2002--$5,753.42
FY 2003--$5,753.42
FY 2004--$5,737.70
FY 2005--$5,753.42

    (3) In the event a monthly payment is for a period less than a 
complete month, that month's payment shall be calculated by multiplying 
the appropriate daily rate in Sec. 295.31(a)(2) by the actual number of 
days the Eligible Vessel operated in accordance with Sec. 295.21.
    (4) MARAD may require, for good cause, that a portion of the funds 
payable under this section be withheld if the provisions of Sec. 
295.21(d) have not been met.
    (5) Amounts owed to MARAD for reductions applicable to a prior 
billing period shall be electronically transferred using MARAD's 
prescribed format, or a check may be forwarded to the Maritime 
Administration, P.O. Box

[[Page 99]]

845133, Dallas, Texas 75284-5133, or the amount owed can be credited to 
MARAD by offsetting amounts payable in future billing periods.
    (b) [Reserved]



                      Subpart E_Appeals Procedures



Sec. 295.40  Administrative determinations.

    (a) Policy. A Contractor who disagrees with the findings, 
interpretations or decisions of the Contracting Officer with respect to 
the administration of this part may submit an appeal to the Maritime 
Administrator. Such appeals shall be made in writing to the Maritime 
Administrator, within 60 days following the date of the document 
notifying the Contractor of the administrative determination of the 
Contracting Officer. Such an appeal should be addressed to the Maritime 
Administrator, Att.: MSP Contract Appeals, Maritime Administration, 400 
Seventh St., S.W. Washington, D.C. 20590.
    (b) Process. The Maritime Administrator may require the person 
making the request to furnish additional information, or proof of 
factual allegations, and may order any proceeding appropriate in the 
circumstances. The decision of the Maritime Administrator shall be 
final.



PART 296_MARITIME SECURITY PROGRAM (MSP)--Table of Contents



                         Subpart A_Introduction

Sec.
296.1 Purpose.
296.2 Definitions.
296.3 Applications.
296.4 Waivers.

                          Subpart B_Eligibility

296.10 Citizenship requirements of owners, charterers and operators.
296.11 Vessel requirements.
296.12 Applicants.

              Subpart C_Priority for Granting Applications

296.20 Tank vessels.
296.21 Participating Fleet Vessels.
296.22 Other vessels.
296.23 Discretion within priority.
296.24 Subsequent awards of MSP Operating Agreements.

        Subpart D_Maritime Security Program Operating Agreements

296.30 General conditions.
296.31 MSP assistance conditions.
296.32 Reporting requirements.

                Subpart E_Billing and Payment Procedures

296.40 Billing procedures.
296.41 Payment procedures.

                      Subpart F_Appeals Procedures

296.50 Administrative determinations.

      Subpart G_Maintenance and Repair Reimbursement Pilot Program

296.60 Applications.

    Authority: Pub. L. 108-136, Pub. L. 109-163; 49 U.S.C. 322(a), 49 
CFR 1.66.

    Source: 70 FR 55588, Sept. 22, 2005, unless otherwise noted.



                         Subpart A_Introduction



Sec. 296.1  Purpose.

    This part prescribes regulations implementing the provisions of 
Subtitle C, Maritime Security Fleet Program, Title XXXV of the National 
Defense Authorization Act for Fiscal Year 2004, the Maritime Security 
Act of 2003 (MSA 2003), governing Maritime Security Program (MSP) 
payments for vessels operating in the foreign trade or mixed foreign and 
domestic commerce of the United States allowed under a registry 
endorsement issued under 46 U.S.C. 12105. The MSA 2003 provides for 
joint responsibility between the Department of Defense (DOD) and the 
Department of Transportation (DOT) for administering the law. These 
regulations provide the framework for the coordination between DOD and 
DOT in implementing the MSA 2003. Implementation of the MSA 2003 has 
been delegated by the Secretary of Transportation to the Maritime 
Administrator, U.S. Maritime Administration and by the Secretary of 
Defense to the Commander, U.S. Transportation Command, respectively.



Sec. 296.2  Definitions.

    For the purposes of this part:

[[Page 100]]

    Act means the Merchant Marine Act, 1936, as amended (46 App. U.S.C. 
1101 et seq.).
    Administrator means the Maritime Administrator, U.S. Maritime 
Administration (MARAD), U.S. DOT, who is authorized by the Secretary of 
Transportation to administer the MSA 2003, in consultation with the 
Commander, U.S. Transportation Command (USTRANSCOM).
    Agreement Vessel means a vessel covered by an MSP Operating 
Agreement.
    Applicant means an applicant for an MSP Operating Agreement. The 
term, ``applicant'' excludes a trust.
    Bulk Cargo means cargo that is loaded and carried in bulk without 
mark or count.
    Chapter 121 means the vessel documentation provisions of chapter 121 
of title 46, United States Code.
    Coastwise Trade means trade between points in the United States.
    Commander means Commander, USTRANSCOM, who is authorized by the 
Secretary of Defense to administer the MSA 2003, in consultation with 
the Administrator.
    Contracting Officer means the Associate Administrator for National 
Security, MARAD.
    Contractor means the owner or operator of a vessel that enters into 
an MSP Operating Agreement for the vessel with the Secretary of 
Transportation (acting through MARAD) pursuant to Sec. 53103 of the MSA 
2003. The term, ``Contractor'' excludes a trust.
    Defense Contractor means a person that operates or manages United 
States documented vessels for the Secretary of Defense or charters 
vessels to the Secretary of Defense and has entered into a special 
security agreement with the Secretary of Defense.
    Documentation Citizen means an entity able to document a vessel 
under 46 U.S.C. chapter 121. This definition includes a trust.
    DOD means the U.S. Department of Defense.
    Domestic Trade means trade between points in the United States.
    Eligible Vessel means a vessel that meets the requirements of Sec. 
53102(b) of the MSA 2003.
    Emergency Preparedness Agreement means an agreement, required by 
Sec. 53107 of the MSA 2003, between a Contractor and the Secretary of 
Transportation (acting through MARAD) to make certain commercial 
transportation resources available during time of war or national 
emergency or whenever determined by the Secretary of Defense to be 
necessary for national security or contingency operation.
    Enrollment means the entry into an MSP Operating Agreement with 
MARAD to operate a vessel(s) in the MSP Fleet in accordance with Sec. 
296.30.
    Fiscal Year means any annual period beginning on October 1 and 
ending on September 30.
    Foreign Commerce means:
    (1) For any vessel other than a liquid or a dry bulk carrier, a 
cargo freight service, including direct and relay service, operated 
exclusively in the foreign trade or in mixed foreign and domestic trade 
allowed under a registry endorsement under section 12105 of title 46, 
United States Code, where the origination point or the destination point 
of any cargo carried is the United States, regardless of whether the 
vessel provides direct service between the United States and a foreign 
country, or commerce or trade between foreign countries; and
    (2) For liquid and dry bulk cargo carrying services, includes 
trading between ports in the United States and foreign ports or trading 
between foreign ports in accordance with normal commercial bulk shipping 
practices in such manner as will permit United States-documented vessels 
to freely compete with foreign-flag bulk carrying vessels in their 
operation or in competing for charters.
    LASH Vessel means a lighter aboard ship vessel.
    Militarily Useful is defined, in terms of minimum military 
capabilities, according to DOD Joint Strategic Planning Capabilities 
Plan (JSCAP) guidance.
    MSA 2003 means the Maritime Security Act of 2003.
    MSP Fleet means the fleet of vessels established under section 
53102(a) of the MSA 2003 and operated under MSP Operating Agreements.
    MSP Operating Agreement means the assistance agreement between a 
Contractor and MARAD that provides for

[[Page 101]]

MSP payments, but is not a ``procurement contract.''
    MSP Payments means the payments made for the operation of U.S.-flag 
vessels in the foreign commerce.
    Noncontiguous Domestic Trade means transportation of cargo between a 
point in the contiguous 48 states and a point in Alaska, Hawaii, or 
Puerto Rico, other than a point in Alaska north of the Arctic Circle.
    Operating Day means any calendar day during which a vessel is 
operated in accordance with the terms and conditions of the MSP 
Operating Agreement.
    Operator is a person that either owns a vessel and operates that 
vessel directly or charters in a vessel at a financial risk through a 
demise charter that transfers virtually all the rights and obligations 
of the vessel owner to the vessel operator, such as that of crewing, 
supplying, maintaining, insuring and navigating the vessel.
    Owner means an entity that has title and/or beneficial ownership of 
a vessel. Only an owner that is a person is eligible to enter into an 
MSP Operating Agreement.
    Participating Fleet Vessel means any vessel that:
    (1) On October 1, 2005--
    (i) Meets the citizenship requirements of paragraph (1), (2), (3), 
or (4) of section 53102(c) of the MSA 2003;
    (ii) Is less than 25 years of age, or is less than 30 years of age 
in the case of a LASH vessel; and
    (2) On December 31, 2004, is covered by an MSP Operating Agreement.
    Person includes corporations, limited liability companies, 
partnerships, and associations existing under or authorized by the laws 
of the United States, or any State, Territory, District, or possession 
thereof, or of any foreign country. For purposes of holding an MSP 
Operating Agreement, the term ``person'' excludes a trust.
    Roll-on/Roll-off Vessel means a vessel that has ramps allowing cargo 
to be loaded and discharged by means of wheeled vehicles so that cranes 
are not required.
    SecDef means Secretary of Defense acting through the Commander 
USTRANSCOM.
    Section 2 Citizen means a United States citizen within the meaning 
of section 2 of the Shipping Act, 1916, 46 U.S.C. 802, without regard to 
any statute that ``deems'' a vessel to be owned and operated by a 
Section 2 Citizen.
    Secretary means the Secretary of Transportation acting through the 
Maritime Administrator.
    Tank Vessel means, as stated in 46 U.S.C. 2101(38), a self-propelled 
tank vessel that is constructed or adapted to carry, or that carries, 
oil or hazardous material in bulk as cargo or cargo residue. In 
addition, the vessel must be double hulled and capable of carrying 
simultaneously more than two separated grades of refined petroleum 
products.
    Transfer of an MSP Operating Agreement includes any sale, assignment 
or transfer of the MSP Operating Agreement, either directly or 
indirectly, or through any sale, reorganization, merger, or 
consolidation of the MSP Contractor.
    United States includes the 50 U.S. States, the District of Columbia, 
the Commonwealth of Puerto Rico, the Northern Mariana Islands, Guam, 
American Samoa, and the Virgin Islands.
    United States Citizen Trust means:
    (1) Subject to paragraph (3) of this definition, a trust that is 
qualified under this definition.
    (2) A trust is qualified only if:
    (i) Each of the trustees is a Section 2 Citizen; and
    (ii) The application for documentation of the vessel under 46 U.S.C. 
chapter 121, includes the affidavit of each trustee stating that the 
trustee is not aware of any reason involving a beneficiary of the trust 
that is not a Section 2 Citizen, or involving any other person that is 
not a Section 2 Citizen, as a result of which the beneficiary or other 
person would hold more than 25 percent of the aggregate power to 
influence or limit the exercise of the authority of the trustee with 
respect to matters involving any ownership or operation of the vessel 
that may adversely affect the interests of the United States.
    (3) If any person that is not a Section 2 Citizen has authority to 
direct or participate in directing a trustee for a

[[Page 102]]

trust in matters involving any ownership or operation of the vessel that 
may adversely affect the interests of the United States or in removing a 
trustee for a trust without cause, either directly or indirectly through 
the control of another person, the trust instrument provides that 
persons who are not Section 2 Citizens may not hold more than 25 percent 
of the aggregate authority to so direct or remove a trustee.
    (4) This definition shall not be considered to prohibit a person who 
is not a Section 2 Citizen from holding more than 25 percent of the 
beneficial interest in a trust.
    United States Documented Vessel means a vessel documented under 46 
U.S.C. chapter 121.



Sec. 296.3  Applications.

    (a) Action by MARAD--Time Deadlines. Applications for enrollment of 
vessels in the MSP were due by October 15, 2004 to the Secretary, 
Maritime Administration, Room 7218, Maritime Administration, U.S. 
Department of Transportation, 400 Seventh Street, SW., Washington, DC 
20590. Any applications received before October 15, 2004 were deemed to 
have been submitted on October 15, 2004. Within 90 days after receipt of 
a completed application, the Secretary was obligated to approve the 
application, in conjunction with the SecDef, or provide in writing the 
reason for denial of that application. Execution of a standard MSP 
Operating Agreement took place reasonably soon after approval of the 
application. Contractors of MSP Operating Agreements were required to 
submit ownership information and signed charters to MARAD for approval 
by July 1, 2005.
    (b) Action by the Applicant. Each applicant for an MSP Operating 
Agreement was required to submit an application under OMB control number 
2133-0525 to the Secretary, Maritime Administration in the manner 
prescribed on that form. Application forms were made available from 
MARAD's Office of Sealift Support, or the application form could be 
downloaded from the MARAD Web site, http://www.marad.dot.gov, 
Information required included:
    (1) An Affidavit of Section 2 Citizenship that comports with the 
requirements of 46 CFR part 355, if applying as a Section 2 Citizen. 
Otherwise, an affidavit which demonstrates that the applicant is 
qualified to document a vessel under 46 U.S.C. chapter 121 is required. 
If the applicant is a vessel operator and proposes to employ a vessel 
manager, then the applicant must supply an affidavit for the vessel 
manager that meets the same citizenship requirements applicable to the 
applicant;
    (2) Certificate of Incorporation;
    (3) Copies of by-laws or other governing instruments;
    (4) Maritime related affiliations;
    (5) Financial data:
    (i) Provide an audited financial statement or a completed MARAD Form 
MA-172 dated within 120 days after the close of the most recent fiscal 
period; and
    (ii) Provide estimated annual forecast of maritime operations for 
the next five years showing revenue and expense, including explanations 
of any significant increase or decrease of these items;
    (6) Intermodal network:
    (i) If applicable, a statement describing the applicant's operating 
and transportation assets, including vessels, container stocks, trucks, 
railcars, terminal facilities, and systems used to link such assets 
together;
    (ii) The number of containers and their twenty-foot equivalent units 
(TEUs) by size and type owned and/or long-term leased by the applicant 
distinguishing those that are owned from those that are leased; and
    (iii) The number of chassis by size and type owned and/or long-term 
leased by the applicant distinguishing those that are owned from those 
that are leased;
    (7) Diversity of trading patterns: A list of countries and trade 
routes serviced along with the types and volumes of cargo carried;
    (8) Applicant's record of owning and/or operating vessels: Provide 
number of ships owned and/or operated, specifying flag, in the last ten 
years, trades involved, number of employees in your ship operations 
department, vessel or ship managers utilized in the operation

[[Page 103]]

of your vessels, and any other information relevant to your record of 
owning or operating vessels;
    (9) Bareboat charter arrangements, if applicable;
    (10) Vessel data including vessel type, size, and construction date;
    (11) Military Utility: Provide an assessment of the value of the 
vessel to DOD sealift requirements. Provide characteristics which 
indicate the value of the vessels to DOD including items of specific 
value, e.g., ramp strengths, national defense sealift features;
    (12) Special Security Agreements: If applicable, provide a copy of 
any Special Security Agreement;
    (13) If applicable, Certification from documentation citizen who is 
the demise charterer of the MSP vessel: In a letter submitted at the 
time of the application addressed to the Administrator and the Commander 
from the Chief Executive Officer, or equivalent, of a documentation 
citizen that is the proposed Contractor of an MSP Operating Agreement, 
provide a statement that there are no treaties, statutes, regulations, 
or other laws of the foreign country(ies) of the parent, that would 
prohibit the proposed Contractor from performing its obligations under 
an MSP Operating Agreement. The statement should be substantially in the 
following format:

    ``I, --------, Chief Executive Officer of --------, certify to you 
that there are no treaties, statutes, regulations, or other laws of the 
foreign country(ies) of ----'s ultimate foreign parent or intermediate 
parents that would prohibit ---- from performing its obligations under 
an Operating Agreement with the Maritime Administration pursuant to the 
Maritime Security Act of 2003.'';

    (14) Agreement from the ultimate foreign parent of the documentation 
citizen: An agreement to be signed and submitted at the time of 
application from the equivalent of the Chief Executive Officer of the 
ultimate foreign parent of a documentation citizen not to influence the 
operation of the MSP vessel in a manner that will adversely affect the 
interests of the United States. The Agreement should be substantially in 
the following format:

    ``I, --------, am the Chief Executive Officer [or equivalent] of --
----, the ultimate foreign parent of --------, a documentation citizen 
of the United States that is applying for an MSP Operating Agreement. I 
agree on behalf of the ``foreign parent'' that neither -------- (the 
ultimate foreign parent) nor any representative of -------- (the 
ultimate foreign parent) will in any way influence the operation of the 
MSP vessel in a manner that will adversely affect the interests of the 
United States.'';

    (15) Replacement Vessel Plan and Age Waiver: If applicable, an 
applicant must submit a replacement vessel plan along with an age waiver 
request if the applicant seeks an age waiver for an existing vessel(s). 
The vessel replacement plan shall include the vessel's characteristics, 
a letter of intent or other document indicating agreement for purchase 
of vessel, and a forecast of operations for five years for the 
replacement vessel. The age restriction for over-age vessels shall not 
apply to a Participating Fleet Vessel during the 30-month period 
beginning on the date the vessel begins operating under an MSP Operating 
Agreement under the MSA 2003 provided that the Secretary has determined 
that the Contractor has entered into an arrangement for a replacement 
vessel that will be eligible to be included in an MSP Operating 
Agreement, and;
    (16) Anti-Lobbying Certificate: A certificate as required by 49 CFR 
part 20 stating that no funds provided under MSP have been used for 
lobbying to obtain an Operating Agreement.

(Approved by the Office of Management and Budget under Control Number 
2133-0525)



Sec. 296.4  Waivers.

    In General--In special circumstances, and for good cause shown, the 
procedures prescribed in this part may be waived in writing by the 
Secretary, by mutual agreement of the Secretary in consultation with the 
SecDef, and the Contractor, so long as the procedures adopted are 
consistent with the MSA 2003 and with the objectives of these 
regulations.



                          Subpart B_Eligibility



Sec. 296.10  Citizenship requirements of owners, charterers and operators.

    Citizenship requirements are deemed to have been met if during the 
entire

[[Page 104]]

period of an MSP Operating Agreement under this chapter that applies to 
the vessel, all of the conditions of any of the paragraphs (a), (b), 
(c), or (d) of this section are met, and subject to conditions in 
paragraph (e):
    (a) A vessel to be included in an MSP Operating Agreement is owned 
and operated by one or more persons that are Section 2 Citizens.
    (b) A vessel to be included in an MSP Operating Agreement is owned 
by either a person that is a Section 2 Citizen or a United States 
Citizen Trust, and the vessel is demise chartered to a non-Section 2 
Citizen--
    (1) That is eligible to document the vessel under 46 U.S.C. chapter 
121;
    (2) Whose chairman of the board of directors, chief executive 
officer, and a majority of the members of the board of directors are 
Section 2 Citizens, and are appointed and subject to removal only upon 
approval by the Secretary as follows:
    (i) Proposed changes to the chairman of the board, chief executive 
officer, and membership of the board of directors must be submitted to 
the Administrator 60 days before scheduled to take effect; and
    (ii) MARAD must approve or disapprove changes within 30 days of 
receiving the proposed changes;
    (3) That certifies to the Secretary in a format substantially 
similar to the format at Sec. 296.3(b)(13) that there are no treaties, 
statutes, regulations, or other laws that would prohibit the Contractor 
from performing its obligations under an MSP Operating Agreement at the 
time of application for an MSP Operating Agreement; and
    (4) The ultimate foreign parent of that person proffers, at the time 
of application for an MSP Operating Agreement, an agreement in a format 
substantially similar to the format at Sec. 296.3(b)(14) not to 
influence the vessel's operation in a way that is detrimental to the 
United States.
    (c) A vessel to be included in an MSP Operating Agreement is owned 
and operated by a defense contractor or a related person to include 
affiliated or related companies within the same corporate group that:
    (1) Is eligible to document the vessel under 46 U.S.C. chapter 121;
    (2) Operates or manages other United States-documented vessels for 
the SecDef, or charters other vessels to the SecDef;
    (3) Has entered into a special security agreement with the SecDef;
    (4) Certifies to the Secretary, at the time of application, in a 
format substantially similar to the format of Sec. 296.3(b)(13), that 
there are no treaties, statutes, regulations, or other laws that would 
prohibit the Contractor from performing its obligations under an MSP 
Operating Agreement; and
    (5) Has its ultimate foreign parent proffer, at the time of 
application for an MSP Operating Agreement, an agreement in a format 
substantially similar to the format of Sec. 296.3(b)(14) not to 
influence the vessel's operation in a way that is detrimental to the 
United States.
    (d) The vessel is owned by a documentation citizen and demise 
chartered to a Section 2 Citizen.
    (e) Where applicable, the Secretary and the SecDef shall notify the 
Senate Committees on Armed Services, and Commerce, Science, and 
Transportation and the House of Representatives Committee on Armed 
Services that they concur with the certifications by the documentation 
citizens under Sec. 296.3(b)(13) and that they have reviewed the 
agreements proffered by the ultimate foreign parent under Sec. 
296.3(b)(14), and agree that there are no other legal, operational, or 
other impediments that would prohibit the contractors for the vessels 
from performing their obligations under MSP Operating Agreements.



Sec. 296.11  Vessel requirements.

    (a) Eligible Vessel. A vessel is eligible to be included in an MSP 
Operating Agreement if:
    (1) The vessel is:
    (i) Determined by the SecDef to be suitable for use by the United 
States for national defense or military purposes in time of war or 
national emergency; and
    (ii) Determined by the Secretary to be commercially viable;
    (2) The vessel is operated or, in the case of a vessel to be 
purchased or constructed, will be operated to provide

[[Page 105]]

transportation in the foreign commerce;
    (3) The vessel is self-propelled and is:
    (i) A Roll-on/Roll-off vessel with a carrying capacity of at least 
80,000 square feet or 500 twenty-foot equivalent units and is 15 years 
of age or less on the date the vessel is included in the MSP;
    (ii) A tank vessel that is constructed in the United States after 
November 24, 2003;
    (iii) A tank vessel that is 10 years of age or less on the date the 
vessel is included in the MSP Fleet;
    (iv) A LASH vessel that is 25 years of age or less on the date the 
vessel is included in the MSP fleet; or
    (v) Any other type of vessel that is 15 years of age or less on the 
date the vessel is included in the MSP fleet;
    (4) The vessel is:
    (i) A United States documented vessel under 46 U.S.C. chapter 121; 
or
    (ii) Not a United States-documented vessel under 46 U.S.C. chapter 
121, but the owner of the vessel has demonstrated an intent to have the 
vessel documented under 46 U.S.C. chapter 121 at the time the vessel is 
to be included in the MSP fleet; and
    (A) The vessel is eligible for a certificate of inspection if the 
Secretary of the Department in which the United States Coast Guard is 
operating determines that:
    (1) The vessel is classed and designed in accordance with the rules 
of the American Bureau of Shipping (ABS) or another classification 
society accepted by such Secretary;
    (2) The vessel complies with applicable international agreements and 
associated guidelines as determined by the country in which the vessel 
was documented immediately before becoming a U.S.-flag vessel; and
    (3) The flag country has not been identified by such Secretary as 
inadequately enforcing international vessel regulations.
    (B) [Reserved]
    (b) Waiver of Age Restriction of Vessels. The SecDef, in conjunction 
with the Secretary, may waive the age restriction in paragraph (a) of 
this section if the Secretaries jointly determine that the waiver:
    (1) Is in the national interest;
    (2) Is appropriate to allow the maintenance of the economic 
viability of the vessel and any associated operating network; and
    (3) Is necessary due to the lack of availability of other vessels 
and operators that comply with the requirements of the MSA 2003.
    (c) Telecommunications and Other Electronic Equipment. The 
telecommunications and other electronic equipment on an existing vessel 
that is redocumented under the laws of the United States for operation 
under an MSP Operating Agreement shall be deemed to satisfy all Federal 
Communications Commission equipment certification requirements, if
    (1) Such equipment complies with all applicable international 
agreements and associated guidelines as determined by the country in 
which the vessel was documented immediately before becoming documented 
under the laws of the United States;
    (2) That country has not been identified by the Secretary as 
inadequately enforcing international regulations as to that vessel; and
    (3) At the end of its useful life, such equipment will be replaced 
with equipment that meets Federal Communications Commission equipment 
certification standards (see 47 CFR Chapter I).

[70 FR 55588, Sept. 22, 2005; 70 FR 59400, Oct. 12, 2005]



Sec. 296.12  Applicants.

    Applicant. Owners or operators of an eligible vessel may apply to 
MARAD for inclusion of that vessel in the MSP Fleet pursuant to the 
provisions of the MSA 2003. Applications shall be addressed to the 
Secretary, Maritime Administration, Room 7218, Maritime Administration, 
U.S. Department of Transportation, 400 Seventh Street, SW., Washington, 
DC 20590.



              Subpart C_Priority for Granting Applications



Sec. 296.20  Tank vessels.

    (a) First priority for the award of MSP Operating Agreements under 
MSA 2003 shall be granted to a tank vessel

[[Page 106]]

that is constructed in the United States after October 1, 2004.
    (b) First priority for the award of MSP Operating Agreements under 
the MSA 2003 may be granted to a tank vessel that is less than ten years 
of age on the date it enters an MSP Operating Agreement:
    (1) Provided: (i) That the Contractor agrees to execute a binding 
agreement approved by the Secretary for a replacement vessel to be 
operated under the MSP Operating Agreement and to be built in the United 
States not later than nine months after the first date appropriated 
funds are available for construction and operating assistance for a 
minimum of three tank vessels;
    (ii) A tank vessel under this section is eligible to be included in 
the MSP under Sec. 296.11(a); and
    (iii) A tank vessel under this section is owned and operated during 
the period of the MSP Operating Agreement by one or more persons that 
are Section 2 Citizens;
    (2) No payment can be made for an existing tank vessel granted 
priority one status after the earlier of:
    (i) Four years following the date this MSP Operating Agreement is 
effective, except if amounts are available for construction of a minimum 
of three tank vessels under the National Defense Tank Vessel 
Construction Assistance Program (NDTVCP) by October 1, 2007, then no 
payments shall be made for the existing ``tank vessel'' after four years 
following the date such amounts are available; or
    (ii) The date of delivery of the replacement tank vessel constructed 
in the United States after October 1, 2004.
    (3) The Secretary will not enter into more than five MSP Operating 
Agreements for tank vessels under this priority. If the five tank vessel 
MSP Operating Agreement slots are not fully subscribed, the Secretary, 
in consultation with the SecDef, may award the non-subscribed slots to 
lower priority vessels, if deemed appropriate. If the Secretary 
determines that no funds are, or are likely to be, allocated for any 
tank vessel construction in the United States, the five slots may 
nevertheless be awarded to existing tank vessels or the slots may be 
awarded permanently to any eligible vessels. The Secretary may 
temporarily award a slot reserved for a tank vessel under construction 
to a lower priority vessel during the construction period of that vessel 
if an existing tank vessel offered by the tank vessel Contractor is not 
eligible for priority for that slot. If no existing tank vessel is 
offered by the tank vessel Contractor, the Secretary may temporarily 
award an MSP Operating Agreement to any eligible vessel of another 
Contractor until a new tank vessel's construction is completed in the 
United States. Such temporary MSP Operating Agreements may be terminated 
under terms set forth in the temporary MSP Operating Agreement.



Sec. 296.21  Participating Fleet Vessels.

    (a) Priority. To the extent that appropriated funds are available 
after applying the first priority, tank vessels, in Sec. 296.20, the 
second priority is applicable to Participating Fleet Vessels.
    (b) Number of MSP Operating Agreements. MARAD will not enter into 
more than 47 MSP Operating Agreements for Participating Fleet Vessels.
    (c) Reduction of Participating Fleet Vessel MSP Operating 
Agreements. The number of MSP Operating Agreements available to 
Participating Fleet Vessels shall be reduced by one for:
    (1) Each Participating Fleet Vessel for which an application for 
enrollment in the MSP is not received by the Secretary, Maritime 
Administration on October 15, 2004; or
    (2) Each Participating Fleet Vessel for which an application for 
enrollment in the MSP is received by the Secretary, Maritime 
Administration on October 15, 2004, but the application is not approved 
by the Secretary of Transportation and the SecDef by January 12, 2005.
    (d) Authority to Enter into an MSP Operating Agreement. (1) 
Applications for inclusion of a Participating Fleet Vessel under the 
priority in paragraph (a) of this section will be accepted only from a 
person that has authority to enter into an MSP Operating Agreement for 
the vessel with respect to the full term of the MSP Operating Agreement. 
Applicants must certify that they have the requisite authority as of 
October 1, 2005 and for the full period of

[[Page 107]]

the MSP Operating Agreement thereafter and provide the basis on which 
they rely for such certification, such as a copy of a vessel title of 
ownership or a demise charter that remains in effect until September 30, 
2015.
    (2) The full term of the MSP Operating Agreement is the period from 
October 1, 2005 through September 30, 2015. If a vessel proposed to be 
included in the MSP will become ineligible for the program prior to 
September 30, 2015, due to vessel age restrictions, then the full term 
of the MSP Operating Agreement for that vessel for purposes of paragraph 
(d)(1) of this section is the period the vessel meets the applicable age 
restrictions. MARAD may still award an MSP Operating Agreement through 
September 30, 2015, to an applicant having authority to enter into an 
MSP Operating Agreement for a vessel whose age eligibility expires 
before that date. For companies requesting an age waiver, the Applicant 
must submit an appropriate replacement vessel at least 120 days prior to 
the date of expiration of age eligibility.
    (3) For the purposes of paragraph (d)(1) of this section, in the 
case of a vessel that is subject to a demise charter that terminates by 
its terms on September 30, 2005 (without giving effect to any extension 
provided therein for completion of a voyage or to effect the actual 
redelivery of the vessel), or that is terminable at will by the owner of 
the vessel after such date, only the owner of the vessel (provided the 
owner of the vessel is a ``person'' as defined in Sec. 296.2) shall be 
treated as having the authority referred to in paragraph (d)(1) of this 
section.
    (4) If two or more applicants claim authority for the same vessel, 
the Secretary may request additional information bearing on the issue of 
which party has authority to enter into an MSP Operating Agreement, and 
the Secretary shall, in his/her sole discretion, decide the matter as 
he/she deems appropriate.
    (e) During the 30-month period commencing October 1, 2005, the age 
restrictions set forth under Sec. 296.11(a) and Sec. 296.41(c) do not 
apply to a Participating Fleet Vessel operating under an MSP Operating 
Agreement, provided:
    (1) The Contractor has entered into an arrangement to obtain and 
operate under that MSP Operating Agreement a replacement vessel for that 
Participating Fleet Vessel; and
    (2) The Secretary determines that the replacement vessel will be 
eligible to be included in the MSP Fleet under Sec. 296.11(a).
    (f) In the event that a Participating Fleet Vessel will be 
unavailable to participate in the MSP on October 1, 2005, due to an 
unforeseen casualty to the vessel, a Contractor may offer an eligible 
replacement vessel. The replacement vessel must subsequently be approved 
by MARAD and DOD. The replacement vessel must operate under an MSP 
Operating Agreement in sufficient time to meet the 180 minimum operation 
days required during the fiscal year to avoid being in default of the 
MSP Operating Agreement.



Sec. 296.22  Other vessels.

    (a) Third Priority. To the extent that appropriated funds are 
available after applying the first priority, tank vessels, in Sec. 
296.20, and the second priority, Participating Fleet Vessels, in Sec. 
296.21, the third priority is for any other vessel that is eligible to 
be included in an MSP Operating Agreement under Sec. 296.11(a), and 
that, during the period of that MSP Operating Agreement, will be:
    (1) Owned and operated by one or more persons that are Section 2 
Citizens; or
    (2) Owned by a person that is eligible to document the vessel under 
46 U.S.C. chapter 121 and operated by a person that is a Section 2 
Citizen.
    (b) Fourth Priority. To the extent that appropriations are available 
after applying the first priority in Sec. 296.20, the second priority 
in Sec. 296.21, and the third priority in paragraph (a) of this 
section, the fourth priority is for any other vessel that is eligible to 
be included in an MSP Operating Agreement under Sec. 296.11(a).



Sec. 296.23  Discretion within priority.

    The Secretary--
    (a) Subject to paragraph (b) of this section, may award MSP 
Operating Agreements within each priority as the Secretary considers 
appropriate; and

[[Page 108]]

    (b) Shall award MSP Operating Agreements within a priority--
    (1) In accordance with operational requirements specified by the 
SecDef;
    (2) In the cases of the Priorities III and IV, according to the 
applicants' records of owning and operating vessels; and
    (3) Subject to the approval of the SecDef.
    (c) The Secretary does not have discretion to override the priority 
requirements with respect to the initial award of MSP Operating 
Agreements.



Sec. 296.24  Subsequent awards of MSP Operating Agreements.

    (a) Until October 1, 2005, if, for any reason, after the award of an 
MSP Operating Agreement, the Applicant is unwilling or unable to 
commence operations pursuant to the terms of the MSP Operating 
Agreement, MARAD may, pursuant to the priority criteria, award that MSP 
Operating Agreement to an Applicant having an eligible vessel that 
applied but was not awarded an MSP Operating Agreement.
    (b) After October 1, 2005, MARAD intends to ensure that all 
available MSP Operating Agreements are fully utilized at all times, in 
order to maximize the benefit of the MSP. Accordingly, when an MSP 
Operating Agreement becomes available through termination by the 
Secretary, expiration of a temporary MSP Operating Agreement or early 
termination by the MSP contractor, and no transfer under 46 U.S.C. 
53105(e) is involved, MARAD will reissue the MSP Operating Agreement 
pursuant to the following criteria.
    (1) The proposed vessel must meet the requirements for vessel 
eligibility in 46 U.S.C. 53102(b);
    (2) The applicant must meet the vessel ownership and operating 
requirements for priority in 46 U.S.C. 53103(c); and
    (3) Priority will be assigned in accordance with operational 
requirements specified by the SecDef.
    (c) MARAD will use the following procedures in reissuing an MSP 
Operating Agreement. MARAD and USTRANSCOM will determine if the 
applications received on October 15, 2004 form an adequate pool for 
award of a reissued MSP Operating Agreement. If so, MARAD will award a 
reissued MSP Operating Agreement from that pool of qualified applicants 
in its discretion, subject to approval of the SecDef. MARAD and 
USTRANSCOM may decide to open a new round of applications. Applicants 
for reissued MSP Operating Agreements must meet the citizenship 
requirements of Priority III. Inasmuch as MSP furthers a public purpose 
and MARAD does not acquire goods or services through MSP, the selection 
process for award of MSP Operating Agreements does not constitute an 
acquisition process subject to any procurement law or the Federal 
Acquisition Regulations.



        Subpart D_Maritime Security Program Operating Agreements



Sec. 296.30  General conditions.

    (a) Approval. (1) The Secretary, in conjunction with the SecDef, may 
approve applications to enter into an MSP Operating Agreement and make 
MSP Payments with respect to vessels that are determined by the 
Secretary to be commercially viable and those that are deemed by the 
SecDef to be militarily useful for meeting the sealift needs of the 
United States in time of war or national emergencies. The Secretary 
announced an initial award of 60 MSP Operating Agreements on January 12, 
2005. In addition, the Secretary advised those applicants found to be 
eligible but not included in the initial award that those applicants 
will be wait-listed for an award of an MSP Operating Agreement if 
additional slots become available.
    (2) The Commander established general evaluation criteria for 
operational requirements for considering replacement vessels described 
in Sec. 296.21(e), and for vessels eligible under the third and fourth 
priorities described in Sec. 296.22. These general evaluation criteria 
were made available by the Commander in sufficient time for preparing 
applications.
    (b) Effective date--(1) General Rule. Unless otherwise provided, the 
effective date of an MSP Operating Agreement is October 1, 2005.
    (2) Exceptions. In the case of an Eligible Vessel to be included in 
an MSP Operating Agreement that is on charter

[[Page 109]]

to the U.S. Government, other than a charter under the provisions of an 
Emergency Preparedness Agreement (EPA) provided by Sec. 53107 of the 
MSA 2003, unless an earlier date is requested by the applicant, the 
effective date for an MSP Operating Agreement shall be:
    (i) The expiration or termination date of the Government charter 
covering the vessel; or
    (ii) Any earlier date on which the vessel is withdrawn from that 
charter, but not before October 1, 2005.
    (c) Replacement Vessels. A Contractor may replace an MSP vessel 
under an MSP Operating Agreement with another vessel that is eligible to 
be included in the MSP under Sec. 296.11(a), if the Secretary, in 
conjunction with the SecDef, approves the replacement vessel. The 
replacement vessel must qualify with the same or with more militarily 
useful capability as the MSP vessel to be replaced for operational 
requirements as determined by the Commander.
    (d) Termination by the Secretary. If the Contractor materially fails 
to comply with the terms of the MSP Operating Agreement:
    (1) The Secretary shall notify the Contractor and provide a 
reasonable opportunity for the Contractor to comply with the MSP 
Operating Agreement;
    (2) The Secretary shall terminate the MSP Operating Agreement if the 
Contractor fails to achieve such compliance; and
    (3) Upon such termination, any funds obligated by the relevant MSP 
Operating Agreement shall be available to the Secretary to carry out the 
MSP.
    (e) Early termination by Contractor, generally. An MSP Operating 
Agreement shall terminate on a date specified by the Contractor if the 
Contractor notifies the Secretary not later than 60 days before the 
effective date of the proposed termination that the Contractor intends 
to terminate the MSP Operating Agreement. The Contractor shall be bound 
by the provisions relating to vessel documentation and national security 
commitments, and by its EPA for the full term, from October 1, 2005 
through September 30, 2015, of the MSP Operating Agreement.
    (f) Early termination by Contractor, with available replacement. An 
MSP Operating Agreement shall terminate without further obligation on 
the part of the Contractor upon the expiration date of the three-year 
period beginning on the date a vessel begins operating under the MSP, 
if:
    (1) The Contractor notifies the Secretary, by not later than two 
years after the date the vessel begins operation under an MSP Operating 
Agreement, that the Contractor intends to terminate the MSP Operating 
Agreement; and
    (2) The Secretary, in conjunction with the SecDef, determines that:
    (i) An application for an MSP Operating Agreement has been received 
for a replacement vessel that is acceptable to the Secretaries; and
    (ii) During the period of an MSP Operating Agreement that applies to 
the replacement vessel, the replacement vessel will be:
    (A) Owned and operated by one or more persons that are Section 2 
Citizens; or
    (B) Owned by a person that is a Documentation Citizen and operated 
by a person that is a Section 2 Citizen.
    (g) Non-renewal for lack of funds. If, by the first day of a fiscal 
year, sufficient funds have not been appropriated under the authority of 
MSA 2003 for that fiscal year, the Secretary will notify the Senate's 
Committees on Armed Services and Commerce, Science, and Transportation, 
and the House of Representatives' Committee on Armed Services, that MSP 
Operating Agreements for which sufficient funds are not available, will 
not be renewed for that fiscal year if sufficient funds are not 
appropriated by the 60th day of that fiscal year. If only partial 
funding is appropriated by the 60th day of such fiscal year, then the 
Secretary, in consultation with the SecDef, shall select the vessels to 
retain under MSP Operating Agreements, based on the Secretaries' 
determinations of the most militarily useful and commercially viable 
vessels. In the event that no funds are appropriated, then all MSP 
Operating Agreements shall be terminated and, each Contractor shall be 
released from its obligations under the MSP Operating Agreement. Final 
payments

[[Page 110]]

under the terminated MSP Operating Agreements shall be made in 
accordance with Sec. 296.41. To the extent that funds are appropriated 
in a subsequent fiscal year, former MSP Operating Agreements may be 
reinstated if mutually acceptable to the Administrator and the 
Contractor provided the MSP vessel remains eligible.
    (h) Release of Vessels from Obligations: If an MSP Operating 
Agreement is terminated by the Contractor, with available replacement 
under paragraph (f) of this section, or if sufficient funds are not 
appropriated for payments under an MSP Operating Agreement for any 
fiscal year by the 60th day of that fiscal year, then--
    (1) Each vessel covered by the terminated MSP Operating Agreement is 
released from any further obligation under the MSP Operating Agreement;
    (2) The owner and operator of a non-tank vessel or a tank vessel not 
built under the NDTVCP may transfer and register the applicable vessel 
under a foreign registry deemed acceptable by the Secretary and the 
SecDef, notwithstanding section 9 of the Shipping Act, 1916 (46 App. 
U.S.C. 808) and 46 CFR part 221;
    (3) The owner and operator of a tank vessel built under the NDTVCP 
must formally apply to MARAD pursuant to section 9 of the Shipping Act, 
1916 to transfer and register the vessel under a foreign registry; and
    (4) If section 902 of the Act is applicable to a vessel that has 
been transferred to a foreign registry due to a terminated MSP Operating 
Agreement, then that vessel is available to be requisitioned by the 
Secretary pursuant to section 902 of the Act.
    (5) Paragraph (h) of this section is not applicable to vessels under 
MSP Operating Agreements that have been terminated for any other reason.
    (i) Foreign Transfer of Vessel. A Contractor may transfer a non-tank 
vessel to a foreign registry, without approval of the Secretary, if the 
Secretary, in conjunction with the SecDef, determines that the 
contractor will provide a replacement vessel:
    (1) Of equal or greater military capability or of a capacity that is 
equivalent or greater as measured in deadweight tons, gross tons, or 
container equivalent units, as appropriate;
    (2) That is a documented vessel under 46 U.S.C. chapter 121 by the 
owner of the vessel to be placed under a foreign registry; and
    (3) That is not more than 10 years of age on the date of that 
documentation.
    (j) Transfer of MSP Operating Agreements. A Contractor subject to an 
MSP Operating Agreement may transfer that MSP Operating Agreement 
(including all rights and obligations under that MSP Operating 
Agreement) to any person eligible to enter into an MSP Operating 
Agreement under Sec. 296.10 and of the same or more restrictive U.S. 
citizen priority, provided that prior approval to transfer the MSP 
Operating Agreement is granted by the Secretary and the SecDef. The 
Contractor should allow at least 90 days for processing of a transfer 
request.



Sec. 296.31  MSP assistance conditions.

    (a) Term of MSP Operating Agreement. MSP Operating Agreements are 
authorized for 10 years, starting on October 1, 2005, and ending on 
September 30, 2015, but payments to Contractors are subject to annual 
appropriations each fiscal year. MARAD may enter into MSP Operating 
Agreements for a period less than the full term authorized under the MSA 
2003.
    (b) Terms under a Continuing Resolution (CR). In the event funds are 
available under a CR, the terms and conditions of the MSP Operating 
Agreements shall be in force provided sufficient funds are available to 
fully meet obligations under MSP Operating Agreements, and only for the 
period stipulated in the applicable CR. If funds are not appropriated 
under a CR at sufficient levels for any portion of a fiscal year, the 
Secretary will select the vessels to retain within the funding level of 
the previous fiscal year, in consultation with the SecDef, based on the 
Secretaries' determination of the most militarily useful and 
commercially viable vessels. With regard to an MSP Operating Agreement 
that does not receive funds, the terms and conditions of any applicable 
MSP Operating Agreement may be voided and the Contractor may request 
termination of the MSP Operating Agreement.

[[Page 111]]

    (c) National security requirements. Each MSP Operating Agreement 
shall require the owner or operator of an Eligible Vessel included in 
that MSP Operating Agreement to enter into an EPA pursuant to section 
53107 of the MSA 2003. The EPA shall be a document incorporating the 
terms of the Voluntary Intermodal Sealift Agreement (VISA), as approved 
by the Secretary and the SecDef, or other agreement approved by the 
Secretaries.
    (d) Vessel operating agreements. The MSP Operating Agreement shall 
require that during the period an Eligible Vessel is included in that 
MSP Operating Agreement, the Eligible Vessel shall:
    (1) Documentation: Be documented as a U.S.-flag vessel under 46 
U.S.C. chapter 121;
    (2) Operation: Be operated exclusively in the foreign commerce, 
except for tankers, which may be operated in foreign-to-foreign 
commerce, and shall not otherwise be operated in the coastwise trade of 
the United States; and
    (3) Noncontiguous Domestic Trade: Not receive MSP payments during a 
period in which the Contractor participates, i.e., directly or 
indirectly owns, charters, or operates, a vessel engaged in 
noncontiguous domestic trade unless the Contractor is a Section 2 
Citizen.
    (e) Obligation of the U.S. Government. The amounts payable as MSP 
payments under an MSP Operating Agreement shall constitute a contractual 
obligation of the United States Government to the extent of available 
appropriations.
    (f) U.S. Merchant Marine Academy cadets. The MSP Operator shall 
agree to carry on the MSP vessel two U.S. Merchant Marine Academy 
cadets, if available, on each voyage.



Sec. 296.32  Reporting requirements.

    The Contractor shall submit to the Director, Office of Financial and 
Rate Approvals, Maritime Administration, 400 Seventh St., SW., 
Washington, DC 20590, one of the following reports, including management 
footnotes where necessary to make a fair financial presentation:
    (a) Form MA-172: Not later than 120 days after the close of the 
Contractor's semiannual accounting period, a Form MA-172 on a semiannual 
basis, in accordance with 46 CFR 232.6; or
    (b) Financial Statement: Not later than 120 days after the close of 
the Contractor's annual accounting period, an audited financial 
statement in accordance with 46 CFR 232.6 and the most recent vessel 
operating cost data submitted as part of its EPA, or if not current year 
data, a Schedule 310 of the MA-172.


(Approved by the Office of Management and Budget under Control Number 
2133-0005)



                Subpart E_Billing and Payment Procedures



Sec. 296.40  Billing procedures.

    Submission of voucher. For contractors operating under more than one 
MSP Operating Agreement, the contractor may submit a single monthly 
voucher applicable to all its MSP Operating Agreements. Each voucher 
submission shall include a certification that the vessel(s) for which 
payment is requested were operated in accordance with Sec. 296.31(d) 
and applicable MSP Operating Agreements with MARAD, and consideration 
shall be given to reductions in amounts payable as set forth in Sec. 
296.41(b) and (c). All submissions shall be forwarded to the Director, 
Office of Accounting, MAR-330, Room 7325, Maritime Administration, 400 
Seventh Street, SW., Washington, DC 20590. Payments shall be paid and 
processed under the terms and conditions of the Prompt Payment Act, 31 
U.S.C. 3901.



Sec. 296.41  Payment procedures.

    (a) Amount payable. An MSP Operating Agreement shall provide, 
subject to the availability of appropriations and to the extent the MSP 
Operating Agreement is in effect, for each Agreement Vessel, an annual 
payment equal to $2,600,000 for FY 2006, FY 2007, FY 2008; $2,900,000 
for FY 2009, FY 2010, FY 2011; and $3,100,000 for FY 2012, FY 2013, FY 
2014, FY 2015. This amount shall be paid in equal monthly installments 
at the end of each month. The annual amount payable shall not be reduced 
except as provided in paragraphs (b) and (c) of this section.

[[Page 112]]

    (b) Reductions in amount payable. (1) The annual amount otherwise 
payable under an MSP Operating Agreement shall be reduced on a pro rata 
basis for each day less than 320 in a fiscal year that an Agreement 
Vessel:
    (i) Is not operated exclusively in the foreign commerce, except for 
tank vessels, which may be operated in foreign-to-foreign commerce;
    (ii) Is operated in the coastwise trade; or
    (iii) Is not documented under 46 U.S.C. chapter 121.
    (2) To the extent that a Contractor operates MSP vessels less than 
320 days under the provisions of Sec. 296.31(d), payments will be 
reduced for each day less than 320 days.
    (c) No payment. (1) Regardless of whether the Contractor has or will 
operate for 320 days in a fiscal year, a Contractor shall not be paid:
    (i) For any day that an Agreement Vessel is engaged in transporting 
more than 7,500 tons (using the U.S. English standard of short tons, 
which converts to 6,696.75 long tons, or 6,803.85 metric tons) of 
civilian bulk preference cargoes pursuant to section 901(a), 901(b), or 
901b of the Act, provided that it is bulk cargo;
    (ii) During a period in which the Contractor participates in 
noncontiguous domestic trade, unless that Contractor is a Section 2 
Citizen;
    (iii) While under charter to the United States Government other than 
a charter pursuant to an EPA under Sec. 53107 of the MSA 2003. A voyage 
charter that is essentially a contract of affreightment will not be 
considered to be a charter;
    (iv) For a vessel in excess of 25 years of age, except for a LASH 
vessel in excess of 30 years of age or a tank vessel which is limited to 
20 years of age, unless the vessel is a Participating Fleet Vessel 
meeting the requirements of Sec. 296.21(e);
    (v) For days in excess of 30 days in a fiscal year in which a vessel 
is drydocked or undergoing survey, inspection, or repair unless prior to 
the expiration of the vessel's 30-day period, approval is obtained from 
MARAD for an extension beyond 30 days. Drydocking, survey, inspection, 
or repair periods of 30 days or less are considered operating days; and
    (vi) If the contracted vessel is not operated or maintained in 
accordance with the terms of the MSP Operating Agreement.
    (2) To the extent that non-payment days under paragraph (c) of this 
section are known, Contractor payments shall be reduced at the time of 
the current billing. The daily reduction amounts shall be based on the 
annual amounts in paragraph (a) of this section divided by 365 days (366 
days in leap years) and rounded to the nearest cent. Daily reduction 
amounts shall be applied.
    (3) MARAD may require, for good cause, that a portion of the funds 
payable under this section be withheld if the provisions of Sec. 
296.31(d) have not been met.
    (4) Amounts owed to MARAD for reductions applicable to a prior 
billing period shall be electronically transferred using MARAD's 
prescribed format, or a check may be forwarded to the Maritime 
Administration, P.O. Box 845133, Dallas, Texas 75284-5133, or the amount 
owed can be credited to MARAD by offsetting amounts payable in future 
billing periods.



                      Subpart F_Appeals Procedures



Sec. 296.50  Administrative determinations.

    (a) Policy. A Contractor who disagrees with the findings, 
interpretations or decisions of the Maritime Administration or the 
Contracting Officer with respect to the administration of this part or 
any other dispute or complaint concerning MSP Operating Agreements may 
submit an appeal to the Administrator. Such appeals shall be made in 
writing to the Secretary, within 60 days following the date of the 
document notifying the Contractor of the administrative determination of 
the Contracting Officer. Such an appeal should be addressed to the 
Maritime Administrator, Attn.: MSP Operating Agreement Appeals, Maritime 
Administration, 400 Seventh St., SW., Washington, DC 20590. Such an 
appeal is a prerequisite to exhausting administrative remedies.

[[Page 113]]

    (b) DOD determinations. The MSA 2003 assigns joint and separate 
roles and responsibilities to the Secretary and to the SecDef. The 
Administrator and the Commander will make joint and separate findings, 
interpretations, and decisions necessary to implement the MSA 2003. A 
Contractor who disagrees with the initial findings, interpretations or 
decisions regarding the implementation of the MSA 2003--whether joint or 
separate in nature--shall communicate such disagreement to the 
Contracting Officer. Any disagreement or dispute of a Contractor may, 
where appropriate, be transferred to the Director, Policy and Plans, 
U.S. Transportation Command (Director), for resolution. A Contractor who 
disagrees with the findings, interpretations, or decisions of the 
Director, with respect to the administration of this part, may submit an 
appeal to the Commander. Such an appeal shall be made in writing to the 
Commander within 60 days following the date of the document notifying 
the Contractor of the administrative determination of the Director. Such 
an appeal should be addressed to the Commander, U.S. Transportation 
Command, 508 Scott Drive, Scott Air Force Base, IL 62225-5357.
    (c) Process. The Administrator, or the Commander in the case of a 
DOD determination, may require the person making the request to furnish 
additional information, or proof of factual allegations, and may order 
any proceeding appropriate in the circumstances. The decision of the 
Administrator, or the Commander in the case of a DOD determination, 
shall be final.



      Subpart G_Maintenance and Repair Reimbursement Pilot Program



Sec. 296.60  Applications.

    (a) Introduction. This section sets forth MARAD's regulations 
governing its Maintenance and Repair (M&R) Reimbursement Pilot Program. 
The M&R program is presently a 5-year program, authorized at $19.5 
million per year for FY 2006-2011.
    (b) M&R participants. Every existing Contractor in MSP may enter 
into an agreement under 46 U.S.C. 3517, to perform qualified M&R of one 
or more MSP vessels in United States shipyards, subject to the terms of 
this section. Every MSP Contractor entering into an MSP operating 
agreement, including those agreements transferred from an existing MSP 
Contractor, or newly issued or reissued from MARAD, after March 8, 2007, 
must agree to enter into an agreement under 46 U.S.C. 3517, to perform 
qualified M&R of one or more MSP vessels in United States shipyards, 
subject to the terms of this section. Each vessel that is subject to an 
M&R agreement will receive a priority in the allocation of MSP payments 
if the amount available for a fiscal year for making payments under MSP 
operating agreements is not sufficient to pay the full amount authorized 
under each agreement for such fiscal year.
    (c) Terms of Agreement. An agreement under this section:
    (1) Will require that except as provided in paragraph (d) of this 
section, all qualified M&R on the vessel will be performed in the United 
States;
    (2) Will require the Administrator to reimburse the Contractor in 
accordance with paragraph (j) of this section for the costs of qualified 
M&R performed in the United States; and
    (3) Will apply to qualified M&R performed during the 5-year period 
beginning on the date the vessel begins operating under the operating 
agreement under chapter 531 of title 46, United States Code.
    (d) Exception to Requirement to Perform Work in the United States. A 
Contractor will not be required to have qualified M&R work performed in 
the United States under this section if:
    (1) The Administrator determines that there is no facility capable 
of meeting all technical requirements of the qualified M&R in the United 
States located in the geographic area in which the vessel normally 
operates available to perform the work in the time required by the 
Contractor to maintain its regularly scheduled service;
    (2) The Administrator determines that there are insufficient funds 
to pay reimbursement under paragraph (j) of this section with respect to 
the work; or

[[Page 114]]

    (3) The Administrator fails to make the certification described in 
paragraph (h)(2) of this section.
    (e) Qualified M&R. In this section the term ``qualified M&R'' means:
    (1) Except as provided in paragraph (e)(2) of this section:
    (i) Any inspection of a vessel that is--
    (A) Required under chapter 33 of title 46, United States Code; and
    (B) Performed in the period in which the vessel is subject to an 
agreement under this section;
    (ii) Any M&R of a vessel that is determined, in the course of an 
inspection referred to in paragraph (e)(1)(i) of this section, to be 
necessary; and
    (iii) Any additional M&R the Contractor intends to undertake at the 
same time as the work described in paragraph (e)(1)(ii) of this section; 
but (2) does not include:
    (i) M&R not agreed to by the Contractor to be undertaken at the same 
time as the work described in paragraph (e)(1) of this section;
    (ii) Work carried out as part of continuous machinery surveys and 
other similar requirements not associated with a drydocking of the 
vessel; or
    (iii) Any emergency work that is necessary to enable a vessel to 
return to a port in the United States.
    (f) Qualification of Shipyard. MARAD will assess the following 
factors in determining whether a proposed shipyard is capable of 
undertaking the proposed M&R:
    (1) The dimension of the facility relative to the size of the 
vessel;
    (2) The capacity and the reach of the lifting cranes necessary for 
performing the specified work; and
    (3) The skills and experience of sufficient numbers of workers to 
complete the job in time to maintain the vessel's schedule.
    (g) Required information. Under each M&R agreement, the participant 
must provide within 30 days of enrollment a schedule for regular and 
special surveys for each vessel in the agreement. At the same time, and 
on an annual basis by January 1 of each calendar year, each M&R 
participant must submit a schedule of anticipated M&R for each vessel 
under an M&R agreement for the coming year. In addition, the M&R 
participant must provide for each such vessel the anticipated itinerary 
for the coming year.
    (h) Notification Requirements. (1) NOTIFICATION BY CONTRACTOR.--The 
Administrator is not required to pay reimbursement to a Contractor under 
this section for qualified M&R, unless the Contractor--
    (i) Notifies the Administrator of the intent of the Contractor to 
obtain the qualified M&R, by not later than 90 days before the date of 
the performance of the qualified M&R and
    (ii) Includes in such notification:
    (A) A description of all qualified M&R that the Contractor should 
reasonably expect may be performed;
    (B) A description of the vessel's normal route and port calls in the 
United States;
    (C) An estimate of the cost, with supporting documentation, of 
obtaining the qualified M&R described under paragraph (h)(1)(ii)(A) of 
this section in the United States; and
    (D) An estimate of the cost, with supporting documentation, of 
obtaining the qualified M&R described under paragraph (h)(1)(ii)(A) of 
this section outside the United States, in the country in which the 
Contractor otherwise would undertake the qualified M&R.
    (2) CERTIFICATION BY ADMINISTRATOR.--
    (i) Not later than 30 days after the date of receipt of notification 
under paragraph (h)(1) of this section, the Administrator will certify 
to the Contractor--
    (A) Whether the cost estimates provided by the Contractor are fair 
and reasonable;
    (B) If the Administrator determines that such cost estimates are not 
fair and reasonable, the Administrator's estimate of fair and reasonable 
costs for such work;
    (C) Whether there are available to the Administrator sufficient 
funds to pay reimbursement under paragraph (j) of this section with 
respect to such work; and
    (D) That the Administrator commits such funds to the Contractor for 
such reimbursement, if such funds are available for that purpose.

[[Page 115]]

    (ii) If the Contractor notification described in paragraph (h)(1) of 
this section does not include an estimate of the cost of obtaining 
qualified M&R in the United States, then not later than 30 days after 
the date of receipt of such notification, the Administrator will:
    (A) Certify to the Contractor whether there is a facility capable of 
meeting all technical requirements of the qualified M&R in the United 
States located in the geographic area in which the vessel normally 
operates available to perform the qualified M&R described in the 
notification by the Contractor under paragraph (h)(1) of this section in 
the time period required by the Contractor to maintain its regularly 
scheduled service; and
    (B) If there is such a facility, require the Contractor to resubmit 
such notification with the required cost estimate for such facility.
    (i) Allocation of available funds. If the funds available to MARAD 
are insufficient to accommodate every M&R project required to be 
performed in U.S. shipyards, MARAD will select those work projects 
suitable for accomplishment in United States shipyards, for which MARAD 
will reimburse the differential costs of the M&R. MARAD will base such 
determinations on the amount of funds available, the projected cost of 
each repair, the number of vessels operated by the vessel operator and 
the proximity of the vessels' itineraries to suitable U.S. shipyard 
locations.
    (j) Reimbursement. (1) IN GENERAL.--The Administrator will, subject 
to the availability of appropriations, reimburse a Contractor for costs 
incurred by the Contractor for qualified M&R performed in the United 
States under this section.
    (2) AMOUNT.--The amount of reimbursement will be equal to the 
difference between--
    (i) The fair and reasonable cost of obtaining the qualified M&R in 
the United States; and
    (ii) The fair and reasonable cost of obtaining the qualified M&R 
outside the United States, in the country in which the Contractor would 
otherwise undertake the qualified M&R.
    (3) DETERMINATION OF FAIR AND REASONABLE COSTS.--
    (i) The Administrator will determine fair and reasonable costs for 
purposes of paragraph (j)(2) of this section after considering the 
supporting documentation submitted by the Contractor. If it is too 
difficult to accurately ascertain the foreign costs of anticipated M&R, 
the Maritime Administrator may decide to compute the foreign cost of M&R 
by reference to a percentage of the domestic cost of the M&R, based on 
available general information.
    (ii) MARAD will also pay for other costs borne by the M&R 
participant reasonably associated with the qualified M&R performed in a 
U.S. shipyard that would not be incurred if the vessel was repaired in a 
foreign shipyard. Such costs include:
    (A) Any additional vessel maintenance and repair preparation costs, 
including costs for additional engineering, design and contract bid 
proposal costs;
    (B) Costs (including capital and operating costs) for ``lost time'' 
for transit to a U.S. shipyard in excess of the transit period to a 
foreign shipyard on the same trade route to which the vessel is assigned 
and for the time spent in a U.S. shipyard which exceeds the estimated 
time required by a foreign shipyard for the same work.
    (C) Costs for additional labor, supervision, overhead and other work 
involving shore-side personnel.
    (iii) Upon approval of each specific M&R project, the Administrator 
will establish with the Contractor a set level of funding to be provided 
by MARAD. If, during the course of performing M&R in a U.S. shipyard, it 
is discovered that the repairs will entail additional unanticipated 
costs, the Administrator shall provide MARAD's share of funding 
corresponding to the percentage of the domestic M&R costs originally 
agreed to by MARAD, but not in excess of 20 percent of the original 
funding level agreed to by MARAD. Cost overruns will be the obligation 
of the M&R participant unless MARAD determines that it is fair to 
reimburse the M&R participant and sufficient funds are available to do 
so.
    (iv) Payment of MARAD's share of the shipyard contract price may be 
made as work progresses or upon completion of the M&R and finalization 
of

[[Page 116]]

costs, as MARAD may determine. Vouchers for payment may be submitted to 
the Associate Administer for Marine Asset Development. Payments shall be 
paid and processed under the terms and conditions of the Prompt Payment 
Act, 31 U.S.C. 3901. However, pursuant to 31 U.S.C. 3902(f), interest on 
late payments will be paid only if appropriated funds for paying 
reimbursement under the M&R Pilot Program are available.

[72 FR 5344, Feb. 6, 2007]

[[Page 117]]



                SUBCHAPTER D_VESSEL FINANCING ASSISTANCE




PART 298_OBLIGATION GUARANTEES--Table of Contents



                         Subpart A_Introduction

Sec.
298.1 Purpose.
298.2 Definitions.
298.3 Applications.

                          Subpart B_Eligibility

298.10 Citizenship.
298.11 Vessel requirements.
298.12 Applicant and operator's qualifications.
298.13 Financial requirements.
298.14 Economic soundness.
298.15 Investigation fee.
298.16 Substitution of participants.
298.17 Evaluation of applications.
298.18 Financing Shipyard Projects.
298.19 Financing Eligible Export Vessels.

                          Subpart C_Guarantees

298.20 Term, redemptions, and interest rate.
298.21 Limits.
298.22 Amortization of Obligations.
298.23 Refinancing.
298.24 Financing a Vessel more than a year after delivery.
298.25 Excess interest or other consideration.
298.26 Lease payments.
298.27 Advances.

                         Subpart D_Documentation

298.30 Nature and content of Obligations.
298.31 Mortgage.
298.32 Required provisions in documentation.
298.33 Escrow fund.
298.34 [Reserved]
298.35 Title XI Reserve Fund and Financial Agreement.
298.36 Guarantee Fee.
298.37 Examination and audit.
298.38 Partnership agreements and limited liability company agreements.
298.39 Exemptions.

 Subpart E_Defaults and Remedies, Reporting Requirements, Applicability 
                             of Regulations.

298.40 Defaults.
298.41 Remedies after default.
298.42 Reporting requirements--financial statements.
298.43 Applicability of the regulations.

Subpart F--Administration [Reserved]

    Authority: 46 App. U.S.C. 1114(b), 1271 et seq.; 49 CFR 1.66.

    Source: 65 FR 45152, July 20, 2000, unless otherwise noted.



                         Subpart A_Introduction



Sec. 298.1  Purpose.

    This part prescribes regulations implementing Title XI of the 
Merchant Marine Act, 1936, as amended, governing Federal ship financing 
assistance (46 App. U.S.C. 1271 et seq.). This part uses ``you'' and 
``we'' throughout. You and your refer to the applicant for Title XI 
financing assistance unless we note or imply otherwise. We, us, and our 
refer to the Maritime Administration, the Secretary of the Maritime 
Administration, or the Secretary of Transportation, as applicable.



Sec. 298.2  Definitions.

    For the purpose of this part:

    Act means the Merchant Marine Act, 1936, as amended (46 App. U.S.C. 
1101 through 1294).

    Actual Cost of a Vessel or Shipyard Project means, as of any 
specified date, the aggregate, as determined by us, of all amounts paid 
by or for the account of the Obligor on or before that date and all 
amounts which the Obligor is then obligated to pay from time to time 
thereafter, for the construction, reconstruction or reconditioning of 
such Vessel or Shipyard Project.

    Advanced Shipbuilding Technology means:

    (1) Numerically controlled machine tools, robots, automated process 
control equipment, computerized flexible manufacturing systems, 
associated computer software, and other technology for improving 
shipbuilding and related industrial production which advance the state-
of-the-art; and

    (2) Novel techniques and processes designed to improve shipbuilding 
quality, productivity, and practice, and to

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promote sustainable development, including engineering design, quality 
assurance, concurrent engineering, continuous process production 
technology, energy efficiency, waste minimization, design for 
recyclability or parts reuse, inventory management, upgraded worker 
skills, and communications with customers and suppliers; and
    (3) Other elements contributing to a shipyard's efficiency or 
productivity assisting it to more effectively operate in the 
shipbuilding industry.
    Citizen of the United States means a person who, if an individual, 
is a Citizen of the United States by birth, naturalization or as 
otherwise authorized by law or, if other than an individual, meets the 
requirements of Section 2 of the Shipping Act, 1916, as amended (46 App. 
U.S.C. 802), as further described at 46 CFR 221.3(c).
    Closing means a meeting of various participants or their 
representatives in a Title XI financing, at which a commitment to issue 
Guarantees is executed, or at which all or part of the Obligations are 
authenticated and issued and the proceeds are made available for a 
purpose set forth in section 1104(a) of the Act, or at which a Vessel is 
delivered and a Mortgage is executed as security to us or a Shipyard 
Project is completed and a Mortgage or other security is executed to us.
    Commitment Closing means a meeting of various participants or their 
representatives in a Title XI financing at which a commitment to issue 
Guarantees is executed and the forms of the Obligations and the related 
Title XI documents are also either agreed upon or executed.
    Depository means the U.S. Department of Treasury, acting in its 
capacity under Section 1109 of the Act.
    Depreciated Actual Cost of a Vessel or Shipyard Project means the 
Actual Cost of the Vessel or Shipyard Project, as defined in this 
section (less a residual value of 2\1/2\ percent of United States 
shipyard construction cost or, in the case of Shipyard Project, a 
residual value as appropriate), depreciated on a straightline basis over 
the useful life of the Vessel or Shipyard Project as determined by us, 
not to exceed twenty-five years from the date the Vessel or Shipyard 
Project was delivered by the shipbuilder or manufacturer or, if the 
Vessel or Shipyard Project has been reconstructed or reconditioned, the 
Actual Cost of the Vessel or Shipyard Project depreciated on a 
straightline basis from the date the Vessel or Shipyard Project was 
delivered by the shipbuilder or manufacturer to the date of such 
reconstruction or reconditioning, on the basis of the original useful 
life of the Vessel or Shipyard Project, and from the date of said 
reconstruction or reconditioning on a straightline basis and on the 
basis of a useful life of the Vessel or Shipyard Project determined by 
us, plus all amounts paid or obligated to be paid for the reconstruction 
or reconditioning, depreciated on a straightline basis and on the basis 
of a useful life of the Vessel or Shipyard Project determined by us.
    Documentation means all or part of the agreements relating to an 
entire Title XI financing which must be furnished to us, irrespective of 
whether we are a party to each agreement.
    Eligible Export Vessel means a Vessel constructed, reconstructed, or 
reconditioned in the United States for use in world-wide trade which 
will, upon delivery or redelivery, be placed under or continued to be 
documented under the laws of a country other than the United States.
    Eligible Shipyard means a private shipyard located in the United 
States.
    General Shipyard Facility means:
    (1) For operations on land, any structure or appurtenance thereto 
designed for the construction, repair, rehabilitation, refurbishment, or 
rebuilding of any Vessel, including graving docks, building ways, ship 
lifts, wharves and pier cranes; the land necessary for any structures or 
appurtenances; and equipment necessary for the performance of any 
function referred to in this definition; and
    (2) For operations other than on land, any Vessel, floating drydock, 
or barge constructed in the United States, within the meaning of Sec. 
298.11(a), and used for, or a type that is usually used for, activities 
referred to in paragraph (1) of this definition.
    Guarantee means the contractual commitment of the United States of 
America, represented by us, endorsed on each Obligation, to make payment

[[Page 119]]

to the Obligee or an agent, upon demand, of the unpaid interest on, and 
the unpaid balance of the principal of such Obligation, including 
interest accruing between the date of default and the date of payment.
    Guarantee Fee means the fee payable to us in consideration for the 
issuance of the Guarantees.
    Indenture Trustee means a bank with corporate trust powers, or a 
trust company, with a capital and surplus of at least $25,000,000, which 
is located in and organized and doing business under the laws of the 
United States, any State or territory thereof, the District of Columbia 
or the Commonwealth of Puerto Rico, which has duties under the terms of 
a Trust Indenture, entered into with the Obligor, providing for the 
issuance and registration of the ownership and transfer of Obligations, 
the disbursement of funds held in trust by the Indenture Trustee for the 
redemption and payment of interest and principal with respect to 
Obligations, demands by the Indenture Trustee for payment under the 
Guarantees in the event of default and the remittance of payments 
received to the Obligees. Pursuant to our specific authorization, the 
Indenture Trustee may also authenticate the Guarantees.
    Letter Commitment means a letter from us to you, setting forth 
specific determinations made by us with respect to your proposed 
project, as required by the Act and regulations of this part, and 
stating our commitment to execute Guarantees, subject to compliance by 
you with any conditions specified therein.
    Maritime Administration means the agency created within the 
Department of Transportation by Reorganization Plan No. 21 of 1950 (64 
Stat. 1273), amended by Reorganization Plan No. 7 of 1961 (75 Stat. 
840), as amended by Public Law 91-469 (84 Stat. 1036).
    Modern Shipbuilding Technology means a technology to be introduced 
into the shipyard that is comprised of the best available proven 
technology, techniques, and processes appropriate to advancing the 
state-of-the-art of the applicant shipyard, or exceeds the best 
available processes of American shipbuilding, and that will enhance its 
productivity and make it more competitive internationally.
    Mortgage means a first Preferred Mortgage on any Vessel or a first 
mortgage with respect to a Shipyard Project.
    Obligation means any note, bond, debenture, or other evidence of 
indebtedness, as defined in section 1101(c) of the Act, issued for one 
of the purposes specified in section 1104(a) of the Act.
    Obligee means the holder of an Obligation.
    Obligor means any party primarily liable for payment of principal of 
or interest on any Obligation.
    Paying Agent means any Person appointed by the Obligor to pay the 
principal of or interest on the Obligations on behalf of the Obligor.
    Person means any individual, estate, foundation, corporation, 
partnership, limited partnership, joint venture, association, joint-
stock company, trust, unincorporated organization or other acceptable 
legal business entity, government, or any agency or political 
subdivision thereof.
    Preferred Mortgage means:
    (1) In the case of a mortgage on a Vessel documented under United 
States law, whenever made, a mortgage that--
    (i) Includes the whole of a Vessel;
    (ii) Is filed in substantial compliance with 46 U.S.C. 31321;
    (iii) Covers a documented Vessel or a Vessel for which an 
application for documentation has been filed that is in substantial 
compliance with the requirements of 46 U.S.C. Ch. 121 and the 
regulations prescribed under that Chapter by the United States Coast 
Guard; and
    (iv) Is otherwise in compliance with the provisions of Chapter 313 
of Title 46 of the U.S. Code.; and
    (2) In the case of a mortgage on an Eligible Export Vessel, whenever 
made, a mortgage that--
    (i) Constitutes a mortgage that is established as security on an 
Eligible Export Vessel under the laws of a foreign country;
    (ii) Was executed under the laws of that foreign country and under 
which laws the ownership of the Vessel is documented;

[[Page 120]]

    (iii) Is registered under the laws of that foreign country in a 
public register at the port of registry of the Vessel or at a central 
office;
    (iv) Otherwise satisfies the requirements of 46 U.S.C. 31301(6)(B) 
to constitute a Preferred Mortgage; and
    (v) Has us as the mortgagee, or such other mortgagee as is permitted 
by the applicable foreign law and approved by us.
    Related Party means as that term is defined by generally accepted 
accounting principles outlined in paragraph 24 of Statement of Financial 
Accounting Standards No. 57, Related Party Disclosures.
    Secretary means the Secretary of Transportation, acting by and 
through the Maritime Administrator, Department of Transportation, the 
Maritime Administrator or any official of the Maritime Administration to 
whom is duly delegated the authority, from time to time, to perform the 
functions of the Secretary of Transportation or the Maritime 
Administrator, Department of Transportation.
    Secretary's Note means a promissory note from the Obligor to the 
Secretary in an amount equal to the aggregate amount of the Obligations, 
which is issued simultaneously with the Guarantees.
    Security Agreement means the primary contract between the Obligor 
and the Secretary, providing for the transfer to the Secretary by the 
Obligor of all right, title and interest of the Obligor in certain 
described property (including rights under contracts in existence or to 
be entered into), and containing other provisions relating to 
representations and responsibilities of the Obligor to the Secretary as 
security for the issuance of Guarantees.
    Shipyard Project means Advanced Shipbuilding Technology and Modern 
Shipbuilding Technology or both unless otherwise specified.
    Vessel means all types of vessels, whether in existence or under 
construction, including passenger, cargo and combination passenger-cargo 
carrying vessels, tankers, towboats, barges and dredges which are or 
will be documented under the laws of the United States, floating 
drydocks which have a capacity of at least thirty-five thousand or more 
lifting tons and a beam of one hundred and twenty-five feet or more 
between the wing walls and oceanographic research or instruction or 
pollution treatment, abatement or control vessels, which are owned by 
citizens of the United States; except that an Eligible Export Vessel 
will not be documented under the laws of the United States.

[65 FR 45152, July 20, 2000, as amended at 67 FR 61282, Sept. 30, 2002]



Sec. 298.3  Applications.

    (a) Process and certification. When you apply for a commitment to 
execute Guarantees, you must:
    (1) Complete Form MA-163 and send it to the Secretary, Maritime 
Administration, U.S. Department of Transportation, 400 Seventh Street, 
SW., Washington, DC 20590. [Note: MARAD will accept electronic options 
(such as facsimile and Internet) for transmission of required 
information (excluding closing documents and documents submitted in 
connection with defaults) to MARAD, if practicable.]
    (2) Certify the application in the manner that Form MA 163 
prescribes.
    (b) Required information. You must include all required information 
on Form MA 163 or in attached exhibits and schedules submitted with the 
application. You must also include the following regarding the Vessel or 
Vessels, if applicable:
    (1) Any demise charters,
    (2) Time charters in excess of six months,
    (3) Contracts of affreightment,
    (4) Drilling contracts, and/or
    (5) Other contractual arrangements.
    (c) Declaration of Lobbying form. You must also file the Declaration 
of Lobbying form as required by 31 U.S.C. 1352 with the initial 
application as part of the formal submission.
    (d) Attachments. Each exhibit, schedule, and attachment must contain 
a statement, on the first page clearly identifying the document as an 
attachment to the application. You must state on each attachment the:
    (1) Name of the applicant; and
    (2) Date of the application.
    (e) Amendment. You must mark ``Amendment,'' on any amendment of data 
contained in the application. Each

[[Page 121]]

first page must contain a statement clearly identifying the document as 
an amendment to your application and must include the:
    (1) Name of the applicant;
    (2) Date of application; and
    (3) Certification required on Form MA 163.
    (f) Application time schedule. You must submit each application to 
us at least four (4) months prior to the anticipated date by which you 
require a Letter Commitment.
    (1) We may consider applications with less than four (4) months 
notice, prior to the anticipated date by which you require a Letter 
Commitment, if you submit written documentation to us that extenuating 
circumstances exist.
    (2) During the first fifteen (15) calendar days after you submit 
your application, we will preliminarily review your application for 
adequacy and completeness.
    (i) If we find that your application is incomplete, or if we require 
additional data, we will notify you promptly in writing, and you will 
have fifteen (15) calendar days, from the date of each request for 
additional information, to correct deficiencies.
    (ii) If you have not corrected the deficiencies or have not made 
substantial progress toward correcting them, within the 15 calendar 
days, then we may terminate the processing of your application without 
prejudice.
    (3) Once we consider your Title XI application complete, we will act 
on the application within a period of 60 calendar days, unless for good 
cause, we find it necessary to extend the 60 day period.
    (4) If you do not complete your application and we do not act upon 
your application within four (4) months from the submission date, unless 
we extend the time period, we will notify you in writing that processing 
of the application is terminated and that you may reapply at a later 
date.
    (i) If we terminate your application without prejudice, we will not 
require you to pay a new filing fee for a later application for a 
similar project that you file within one year of the termination date.
    (ii) If you submit an application for a substantially different 
project, you must pay a new filing fee. We will determine whether the 
application is substantially different on a case-by-case basis.
    (5) If we issue you a Letter Commitment, you must submit two (2) 
sets of the Closing documentation to us for review at least six (6) 
weeks prior to the anticipated Closing. The six weeks time period will 
give us time to complete an adequate review of the documentation. You 
must use our standard form of documentation.
    (g) Degrees of risk. When processing applications, we will consider 
the different degrees of risk involved with different applications.
    (h) Additional assurances. Before we approve your application, we 
may require additional assurances if you are not a well established firm 
with strong financial qualifications and strong market shares seeking 
financing guarantees for replacement vessels in an established market in 
which projected demand exceeds supply. The additional assurances may 
include:
    (1) Firm charter commitments;
    (2) Parent company guarantees;
    (3) Greater equity participation;
    (4) Private financing participation;
    (5) Security interest on other property; and
    (6) Similar arrangements to any of these additional assurances.
    (i) Filing Fee. When you submit your application, you must include a 
$5,000 filing fee, which will be non-refundable, irrespective of whether 
we issue a Letter Commitment. However, the $5,000 filing fee is credited 
toward the investigation fee described in Sec. 298.15(b).
    (j) Confidential Information. (1) If we receive a request for 
release of your information, we will notify you. If you believe that 
your application, including attachments, contains information you 
consider to be trade secrets or commercial or financial information and 
privileged or confidential, or otherwise exempt from disclosure under 
the Freedom of Information Act (FOIA) (5 U.S.C. 552), you may assert a 
claim of confidentiality. When submitting your application, you should 
mark ``Confidential'' on the pages that you

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consider confidential. The same requirement applies to any amendment to 
the application.
    (2) FOIA requests. We will apply the procedures contained in the 
Department of Transportation's regulations at 49 CFR 7.17 regarding FOIA 
requests for information that the submitter has designated as 
confidential. We will consider your claim of confidentiality at the time 
someone requests the information under FOIA.
    (3) Statement of objections. If we receive a request for release of 
your information, we will notify you. We will give you a reasonable 
period of time to give us a written, detailed statement explaining your 
objections to our release of the information. We will not give you 
notice if:
    (i) We determine that we should not disclose the information;
    (ii) The information has been lawfully published or made available 
to the public; or
    (iii) Law (other than 5 U.S.C. 552) requires us to disclose the 
information.
    (4) Our notification of intent to disclose. If your objections to 
release of the information do not persuade us, we will notify you of our 
intent to disclose in a reasonable number of days before we intend to 
disclose the information. The written notice will include:
    (i) A statement explaining our reasons for not accepting the 
submitter's disclosure objections;
    (ii) A description of the business information that we will 
disclose; and
    (iii) A specific disclosure date.
    (k) Priority. We will give priority for processing applications to:
    (1) Vessels capable of serving as a United States naval and military 
auxiliary in time of war or national emergency,
    (2) Requests for financing construction of equipment or vessels less 
than one year old as opposed to the refinancing of existing equipment or 
vessels that are one year old or older,
    (3) Any applications involving the purchase of vessels currently 
financed under Title XI if the purpose is to process the assumption of 
the obligations,
    (4) Applications from those willing to take guarantees for less than 
the normal term for that class of vessel.
    (5) Eligible Export Vessels. We may issue a commitment to guarantee 
Obligations for an Eligible Export Vessel if we determine, in our sole 
discretion, that the issuance of a commitment to guarantee Obligations 
for an Eligible Export Vessel will not cause us to deny an economically 
sound application to issue a commitment to guarantee Obligations for 
vessels documented under the laws of the United States operating in the 
domestic or foreign commerce of the United States, after considering:
    (i) The status of pending applications for commitments to guarantee 
obligations for vessels documented under the laws of the United States 
and operating or to be operated in the domestic or foreign commerce of 
the United States;
    (ii) The economic soundness of the applications referred to in 
paragraph (k)(5)(i) of this section; and
    (iii) The amount of guarantee authority available.

(Unless indicated otherwise in this part 298, information collection 
requirements have been approved by the Office of Management and Budget 
under control number 2133-0018.)

[65 FR 45152, July 20, 2000, as amended at 68 FR 62538, Nov. 5, 2003; 69 
FR 61451, Oct. 19, 2004]



                          Subpart B_Eligibility



Sec. 298.10  Citizenship.

    (a) Applicability. Before you receive a legal or beneficial interest 
in a Vessel financed under Title XI of the Act which is operating in or 
will be operated in the U.S. coastwise trade, you and any other Person, 
(including the shipowner and any bareboat charterer), must establish 
your United States citizenship, within the definition of ``Citizen of 
the United States'' in Sec. 298.2.
    (b) Prior to Letter Commitment. Before we issue the Letter 
Commitment, you and any Person identified in paragraph (a) of this 
section, who is required to establish United States citizenship must 
establish United States citizenship in the form and manner stated in 46 
CFR part 355.
    (c) Commitment Closing. (1) Within 10 days before every Commitment 
Closing, unless we waive this requirement for good cause, you and all 
Persons identified with the project who have

[[Page 123]]

previously established United States citizenship in accordance with 
paragraphs (a) and (b) of this section, must submit pro forma 
Supplemental Affidavits of Citizenship which we have approved for 
Closing as to form and substance, and
    (2) On the date of the Closing, three (3) executed copies of 
Supplemental Affidavits of Citizenship that:
    (i) Show evidence of the continuing United States citizenship of the 
Persons in paragraph (a) of this section; and
    (ii) Bear the date of the Closing.
    (d) Additional information. If we request additional material 
essential to clarify or support evidence of U.S. citizenship, you, the 
Obligor, or any Person identified in paragraph (a) of this section must 
submit the additional information.

(Approved by the Office of Management and Budget under control number 
2133-0012)



Sec. 298.11  Vessel requirements.

    When you apply for a Guarantee, the Vessel for which you intend to 
receive financing for construction, reconstruction, or reconditioning 
must meet the following criteria:
    (a) United States Construction. A Vessel, including an Eligible 
Export Vessel, financed by an Obligation Guarantee must be constructed 
in the United States. United States construction means that the Vessel 
is assembled in a shipyard geographically located within the United 
States.
    (1) A U.S.-flag Vessel must meet the applicable United States Coast 
Guard requirements.
    (2) An Eligible Export Vessel must be constructed in accordance with 
the requirements of the International Maritime Organization and must 
meet the applicable:
    (i) Laws, rules, and regulations of its country of documentation,
    (ii) Treaties, conventions on international agreements to which that 
country is a signatory, and
    (iii) Laws of the ports it serves.
    (b) Actual Cost. We must approve your estimated Actual Cost for the 
construction, reconstruction, or reconditioning of a Vessel as a 
condition for issuance of the Letter Commitment. The estimated cost of 
the Vessel may include escalation for the anticipated construction 
period of the Vessel. We may contact the shipyard directly and may 
require you to have the shipyard that has contracted to build the Vessel 
to submit additional technical data, backup cost details, and other 
evidence if we have insufficient data.
    (c) Class, condition, and operation. The Vessel must be constructed, 
maintained, and operated so as to meet the highest classification, 
certification, rating, and inspection standards for vessels of the same 
age and type imposed by:
    (1) The American Bureau of Shipping (ABS), or
    (2) Another classification society that also meets the inspection 
standards of the United States Coast Guard with respect to the 
documentation of U.S.-flag vessels, or
    (3) In the case of an Eligible Export Vessel, such standards as may 
be imposed by a member of the International Association of 
Classification Societies (IACS), classification societies to be ISO 9000 
series registered or Quality Systems Certificate Scheme qualified IACS 
members who have been recognized by the United States Coast Guard as 
meeting acceptable standards with such recognition including, at a 
minimum, that the society meets the requirements of IMO Resolution 
A.739(18) with appropriate certificates required at delivery, so long as 
the home country of the IACS member accords equal reciprocity, as 
determined by us, to United States classification societies.
    (4) Except in the case of an Eligible Export Vessel, the Vessel must 
be in compliance with all applicable laws, rules, and regulations as to 
condition and operation, including, but not limited to, those 
administered by the:
    (i) United States Coast Guard,
    (ii) Environmental Protection Agency,
    (iii) Federal Communications Commission,
    (iv) Public Health Service, or
    (v) Their respective successor agencies, and
    (vi) All applicable treaties and conventions to which the United 
States is a signatory, including, but not limited to, the International 
Convention for Safety of Life at Sea.

[[Page 124]]

    (d) Documentation. (1) An Eligible Export Vessel must be documented 
in a country that is party to the International Convention for Safety of 
Life at Sea, or other treaty, convention, or international agreement 
governing vessel inspection to which the United States is a signatory, 
and must comply with the applicable laws, rules, and regulations of its 
country of documentation, all applicable treaties, conventions on 
international agreements to which that country is a signatory, and the 
laws of the ports it serves.
    (2) All other Eligible Vessels must be documented under U.S. 
registry.
    (e) Reconstruction or reconditioning. Repairs necessary for the 
Vessel to meet the classification standards approved by us, or any 
regulatory body, or for previous inadequate maintenance and repair, will 
not constitute reconstruction or reconditioning within the meaning of 
this paragraph.
    (f) Condition survey. If your application involves a reconstructed 
or reconditioned Vessel, you must make the Vessel available at a time 
and place acceptable to us so that we may conduct a condition survey. 
You must:
    (1) Pay the cost of the condition survey.
    (2) Ensure that the scope and extent of the condition survey will 
not be less effective than that required by the last ABS special survey 
completed (if the Vessel is classified), next due or overdue, whichever 
date is nearest in accordance with the Vessel's age.
    (3) Ensure that the Vessel meets the standard of the survey 
necessary for retention of class (if the Vessel is classified), and
    (4) Ensure that the operating records of the Vessel reflect normal 
operation of the Vessel's main propulsion and other machinery and 
equipment, consistent with accepted commercial experience and practice.
    (g) Metric Usage. Our preferred system of measurement and weights 
for Vessels and Shipyard Projects is the metric system.



Sec. 298.12  Applicant and operator's qualifications.

    (a) Operator's qualifications. We will not issue a Letter Commitment 
without a prior determination that you, the bareboat charterer, or other 
Person identified in the application as the operator of the Vessel(s) or 
Shipyard Project, possesses the necessary experience, ability and other 
qualifications to properly operate and maintain the Vessel(s) or 
Shipyard Project which serve as security for the Guarantees. You must 
also comply with all requirements of this part.
    (b) Identity and ownership of applicant. In order for us to assess 
the likelihood that the project will be successful, we need information 
about you and the proposed project. To permit this assessment, you must 
provide the following information in your application for Title XI 
guarantees:
    (1) Incorporated companies. If you or any bareboat charterer is an 
incorporated company, you must submit the following identifying 
information:
    (i) Name of company, place and date of incorporation, and tax 
identification number, or if appropriate, international identification 
number of the company;
    (ii) Address of principal place of business; and
    (iii) Certified copy of certificate of incorporation and bylaws.
    (2) Partnerships, limited partnerships, limited liability companies, 
joint ventures, associations, unincorporated companies. If you or any 
bareboat charterer is a partnership, limited partnership, limited 
liability company, joint venture, association, or unincorporated 
company, you must submit the following identifying information:
    (i) Name of entity, place and date of formation, and tax 
identification number, or if appropriate, international identification 
number of entity;
    (ii) Address of principal place of business; and
    (iii) Certified copy of certificate of formation, partnership 
agreement or other documentation forming the entity.
    (3) Other entities. For any entity that does not fit the 
descriptions in paragraphs (b)(1) and (b)(2) of this section, we will 
specify the information that the entity must submit regarding its 
identity and ownership.
    (4) You and any bareboat charterer must provide a brief statement of 
the

[[Page 125]]

general effect of each voting agreement, voting trust or other 
arrangement whereby the voting rights of any interest in you or the 
bareboat charterer are controlled or exercised by any person who is not 
the holder of legal title to such interest.
    (5) You and any bareboat charterer must provide the following 
information regarding the entity's officers, directors, partners or 
members:
    (i) Name and address;
    (ii) Office or position; and
    (iii) Nationality and interest owned (for example, shares owned and 
whether voting or non-voting).
    (c) Business and affiliations of applicants. You must include:
    (1) A brief description of your principal business activities during 
the past five years.
    (2) A list of all business entities that directly or indirectly, 
through one or more intermediaries, control, are controlled by, or are 
under common control with you.
    (3) The nature of the business transacted by each listed entity and 
the relationship between these entities. This information may be 
presented in the form of a chart.
    (4) Whether any of the affiliated entities have previously applied 
for or received Title XI assistance.
    (5) A statement indicating whether the applicant, any predecessor or 
affiliated entity has been in bankruptcy or reorganization under any 
insolvency or reorganization proceeding and if so, give details.
    (6) A statement indicating whether the applicant or any predecessor 
or affiliated entity is now, or during the past five years has been, in 
default under any agreement or undertaking with others or with the 
United States of America, or is currently delinquent on any Federal 
debt, and if so, provide explanatory information.
    (7) A list of your banking references:
    (i) Principal bank(s) or lending institutions(s)--name and address;
    (ii) Nature of relationship; and
    (iii) Individual references--name(s), telephone and fax number of 
banking officer(s).
    (d) Management of applicant. You must include:
    (1) A brief description of the principal business activities during 
the past five years of each officer, director, partner or member you 
listed in paragraph (b)(5) of this section and if these persons (have) 
act(ed) as executive officers in other entities, indicate the names of 
these entities and whether such entities have defaulted on any U.S. 
Government debt, and
    (2) The name and address of each organization engaged in business 
activities which have a direct financial relationship to those carried 
on or to be carried on by you with which any person listed in paragraph 
(d)(1) of this section has any present business connection, the name of 
each such person and, briefly, the nature of such connection.
    (e) Applicant's property and activity. You must provide:
    (1) A brief description of the general character and location of the 
principal assets employed in your business and those of your affiliate, 
other than vessels. Describe financial encumbrances, if any;
    (2) A general description of the vessels currently owned and/or 
operated by you or your affiliates and a description of the areas of 
operation; and,
    (3) In the case of an Eligible Shipyard which is an applicant for a 
guarantee for a Shipyard Project, a brief description of the general 
character (that is, the number of building ways, launch method, drydocks 
and size) and location (that is, water depth, length of riverfront) of 
the principal properties of the applicant employed in its business. You 
must also describe any financial encumbrances.
    (f) Operating ability. (1) You must submit a detailed statement 
showing your ability to successfully operate the financed Vessel(s).
    (2) If a company other than you will operate the Vessel(s), then the 
information in paragraph (f)(1) of this section must be provided for the 
operating company together with a copy of the operating agreement.
    (3) You must submit a copy of any management agreement(s) between 
you and any related or unrelated organization(s) which will affect the 
management of the Title XI Vessel or shipyard.

[[Page 126]]

    (4) In the case of an Eligible Shipyard, which is an applicant for a 
guarantee for a Shipyard Project, a detailed statement must be submitted 
showing your ability to successfully operate the Shipyard Project and 
construct/reconstruct Vessels, including name, education, background of, 
and licenses held by, all senior supervisory personnel concerned with 
the physical operation of the Shipyard Project.
    (5) Where an operator has an historical performance record, we will 
consider this record in evaluating your operating ability. For newly 
formed entities, we will evaluate the performance of affiliates and/or 
companies associated with the principals (where the principals have a 
significant degree of control) in determining your operating ability. 
However, unless the affiliates or principals have an obligation with 
respect to the debt, we will not consider historical performance in 
evaluating your creditworthiness.



Sec. 298.13  Financial requirements.

    (a) In general. To be eligible for guarantees, you and/or your 
parent organization (when applicable), and any other participants in the 
project having a significant financial or contractual relationship with 
you must submit information, respectively, on their financial condition. 
You must submit this information at the time of the application. You 
must supplement this information if we require it in subsequent 
requests. You must submit information satisfactory to us to show that 
financial resources are available to support the Title XI project.
    (b) Cost of the project. You must submit the following cost 
information with respect to the project:
    (1) Vessel financing Guarantees. A detailed statement of the 
estimated Actual Cost of construction, reconstruction, or reconditioning 
of the Vessel(s) including those items which would normally be 
capitalized as Vessel construction costs. Net interest during 
construction is the total estimated construction period interest on non-
equity funds less estimated earnings from the escrow fund, if such fund 
is to be established prior to Vessel(s) delivery.
    (2) Foreign components. (i) You must exclude each item of foreign 
components and services from Actual Cost, unless we specifically grant a 
waiver for the item. We will not grant a waiver for major foreign 
components of the hull and superstructure.
    (ii) In deciding whether to grant a waiver for foreign components 
and services, we will consider your certification, to be reviewed by us, 
stating that:
    (A) A foreign item or service is not available in the United States 
on a timely or price-competitive basis, or
    (B) The domestic item or service is not of sufficient quality.
    (iii) Although excluded from Actual Cost, foreign components of the 
hull and superstructure can be regarded as owner-furnished equipment 
that may be used in satisfying your equity requirements imposed by 
paragraph (f) of this section.
    (3) Costs incurred by written contracts. If any of the costs have 
been incurred by written contracts such as shipyard contract, management 
or operating agreement, you should forward signed copies with the 
application. We may require you to have the contracting shipyard submit 
back-up cost details and technical data. You must submit this 
information in the format given in the Title XI application procedures.
    (4) Shipyard Project. In the case of Shipyard Project, a detailed 
statement of the actual cost of such technology, including those items 
which would normally be capitalizable. If you incurred any of the costs 
through written contracts, you should forward signed copies of the 
contract with the application. We may require you to have manufacturers 
submit back-up cost details and technical data. You must submit this 
information in the format given in the Title XI application procedures.
    (5) Shore facilities, cargo containers, etc. A detailed statement 
showing the actual cost of any shore facilities, cargo containers, etc., 
required to be purchased in conjunction with the project.
    (6) Additional project costs. A detailed statement showing any other 
costs associated with the project which were not included in paragraphs 
(b)(1) through (5) of this section, such as:
    (i) Legal and accounting fees;
    (ii) Printing costs;

[[Page 127]]

    (iii) Vessel insurance;
    (iv) Underwriting fees;
    (v) Fee to a Related Party; and
    (vi) Other fees.
    (7) Request for Actual Cost Approval and Reimbursement. If the 
project involves refinancing, you must also submit the exhibit entitled 
Request for Actual Cost Approval and Reimbursement, its summary sheet 
and supplemental schedules at the time of filing the application.
    (c) Financing. (1) You must:
    (i) Describe, in detail, how the costs of the project (sums referred 
to in paragraph (b) of this section) will be funded and the timing of 
such funding.
    (ii) Include any vessel trade-ins, related or third party 
financings, etc.
    (iii) Provide the proposed terms and conditions of all private 
funding, from both equity and debt sources and clearly identify all 
parties involved.
    (iv) Obtain our approval of the terms and conditions for co-
financing (involving a blend of Title XI and private financing for the 
debt portion), including the ability of the co-financiers to exercise 
their rights against collateral shared with us for any transaction.
    (v) Demonstrate with financial statements that at least 12\1/2\ 
percent, or 25 percent as applicable, of the construction or 
reconstruction costs of the Vessel(s) or the cost of the Shipyard 
Project will be in the form of equity and not additional debt, except to 
the extent allowed by paragraph (h) of this section.
    (vi) Disclose all of the Vessel(s), Shipyard Project financing in 
the format given in the Title XI application procedures.
    (2) Financial Information. You must provide us with financial 
statements, prepared in accordance with U.S. generally accepted 
accounting principles (GAAP), and include notes that explain the basis 
for arriving at the figures except that for Eligible Export Vessels, 
your financial statements must be in accordance with GAAP if formed in 
the U.S., or reconciled to GAAP if formed in a foreign country unless a 
satisfactory justification is provided explaining the inability to 
reconcile. The financial statements must include the following [Note: 
MARAD will accept electronic options (such as facsimile and Internet) 
for transmission of required information to MARAD, if practicable.]:
    (i) The most recent financial statements for you, your parent 
company and other significant participants, as applicable (year end or 
intermediate), and the three most recent audited statements with details 
of all existing debt. If you are a new entity and are to be funded from 
or guaranteed by external source(s), you must provide such statements 
for such source(s);
    (ii) Your pro forma balance sheet and that of any guarantor (if 
applicable) as of the estimated date of execution of the Guarantees 
reflecting the assumption of the Title XI Obligations, including the 
current liability; and
    (iii) Your pro forma balance sheets and that of the guarantor (if 
applicable) for five years after the Closing.

(Approved by the Office of Management and Budget under control number 
2133-0005)

    (d) Financial definitions. For the purpose of this section and 
Sec. Sec. 298.35 and 298.42 of this part:
    (1) ``Company'' means any Person subject to financial requirements 
imposed under paragraph (f) of this section and in Sec. 298.35, as well 
as the reporting requirements imposed by Sec. 298.42.
    (2) ``Working Capital'' means the excess, if any, of current assets 
over current liabilities, both determined in accordance with GAAP and 
adjusted as follows:
    (i) In determining current assets you must exclude:
    (A) Any securities, obligations or evidence of indebtedness of a 
Related Party or of any stockholder, director, officer or employee (or 
any member of his family) of the Company or of such Related Party, 
except advances to agents required for the normal current operation of 
the Company's vessels and current receivables arising out of the 
ordinary course of business and not outstanding for more than 60 days; 
and
    (B) An amount equal to any excess of unterminated voyage revenue 
over unterminated voyage expenses.
    (ii) In determining current liabilities, you must deduct any excess 
of unterminated voyage expenses over unterminated voyage revenue and add

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one half of all annual charter hire and other lease obligations (having 
a term of more than six months) due and payable within the succeeding 
fiscal year, other than charter hire and such other lease obligations 
already included and reported as a current liability on the Company's 
balance sheet.
    (3) ``Equity'' or ``net worth'' means, as of any date, (the total of 
paid-in-capital stock, paid-in surplus, earned surplus and appropriated 
surplus,) and all other amounts that would be included in net worth in 
accordance with GAAP, but does not include:
    (i) Any receivables from any stockholder, director, Officer or 
employee (or their family) of the Company or from any Related Party 
(other than current receivables arising out of the ordinary course of 
business and not outstanding for more than 60 days), and
    (ii) Any increment resulting from the reappraisal of assets.
    (4) ``Long-Term Debt'' means, as of any date, the total notes, 
bonds, debentures, equipment obligations and other evidence of 
indebtedness that would be included in long term debt in accordance with 
GAAP. You must include any guarantee or other liability for the debt of 
any other Person not otherwise included on the balance sheet.
    (5) ``Capitalizable Cost'' means the aggregate of the Actual Cost of 
the Vessel or Shipyard Project and those other items which customarily 
would be capitalized as Vessel costs or Shipyard Project costs under 
GAAP.
    (6) ``Depreciated Capitalizable Cost'' means the Capitalizable Cost 
of a Vessel or Shipyard Project, depreciated on a straightline basis 
over the same useful life as determined by us for Actual Cost, and 
depreciated as required by Sec. 298.21(g).
    (e) Applicability. The financial resources must be adequate to meet 
the Equity requirements in the project and Working Capital requirements, 
as set forth in paragraph (f) of this section.
    (1) The various financial requirements shall be met by the owner of 
the Vessel or Vessels or Shipyard Project to be security to us for the 
Guarantees, except that if the owner is not the operator, the overall 
financial requirements will be allocated among the owner, the operator 
and other parties as determined by us.
    (2) The Company must satisfy the applicable financial requirements, 
in addition to any other financial requirements already imposed or which 
may be imposed upon it in connection with other Vessels financed under 
the Title XI program or in connection with other Shipyard Project 
financed under the Title XI program.
    (3) A determination as to whether the Company has satisfied all 
financial requirements shall be based on the assumption that the 
projected financing has been completed. Accordingly, you must submit:
    (i) A pro forma balance sheet at the time of the application, 
reflecting any adjustment made pursuant to paragraph (f)(1)(i) of this 
section, and
    (ii) A revised pro forma balance sheet, reflecting the completion of 
the projected financing, at least five business days before the first 
Closing at which the Obligations are issued.
    (f) Financial requirements at Closing. Financial requirements can 
apply to one or more Companies, and are determined as follows:
    (1) Owner as operator. Where the owner is to be the Vessel operator, 
minimum requirements at Closing usually are as follows:
    (i) Working Capital. The Company's Working Capital shall not be less 
than one dollar. This Working Capital requirement is based on the 
premise that the Company engages in a service-type activity with only 
normal vessel inventory. If Working Capital includes other inventory, in 
addition to such normal Vessel inventory, we may adjust the requirement 
as appropriate. Also, if we determine that the Company's Working Capital 
includes amounts receivable that it reasonably could not expect to 
collect within one year, we may make adjustments to the Working Capital 
requirements.
    (ii) Long-Term Debt. The Company's Long-Term Debt must not be 
greater than twice its Equity.
    (iii) Equity (net worth). The Company's Equity must be:
    (A) The greater of:
    (1) 50 percent of its Long-Term Debt; or

[[Page 129]]

    (2) 90 percent of its Equity as shown on the last audited balance 
sheet, dated not earlier than six months before the date of issuance of 
the Letter Commitment; or
    (B) Such other amount as may be specified by us.
    (2) Lessee or charterer as operator. Where a lessee or charterer is 
to be the Vessel operator, minimum requirements at Closing usually are 
as follows:
    (i) Working Capital. The operator's Working Capital requirement will 
be the same as that which would have otherwise been imposed on the owner 
as operator under paragraph (f)(1)(i) of this section and based on the 
same premise stated in that paragraph.
    (ii) Long-Term Debt. The operator's Long-Term Debt will be the same 
as that which would have otherwise been imposed on the owner as operator 
under paragraph (f)(1)(ii) of this section.
    (iii) Equity (net worth). The operator's equity requirement will be 
the same as that which would have otherwise been imposed on the owner as 
operator under paragraph (f)(1)(iii) of this section.
    (iv) The owner's Equity shall at least be equal to the difference 
between the Capitalizable Cost or Depreciated Capitalizable Cost of the 
Vessel (whichever is applicable) and the total amount of the Guarantees.
    (3) Owner as General Shipyard Facility. Where the owner of Shipyard 
Project is a General Shipyard Facility, minimum requirements at Closing 
will be the same as those set forth in paragraph (f)(1) of this section 
for an owner as operator.
    (g) Adjustments to financial requirements at Closing. If the owner, 
although not operating a Vessel, assumes any of the operating 
responsibilities, we may adjust the respective Working Capital and 
Equity requirements of the owner and operator, otherwise applicable 
under paragraph (f) of this section, by increasing the requirements of 
the owner and decreasing those of the operator by the same amount.
    (h) Subordinated debt considered to be Equity. With our consent, 
part of the Equity requirements applicable under paragraphs (c) and (f) 
of this section may be satisfied by debt, fully subordinated as to the 
payment of principal and interest on the Secretary's Note and any claims 
secured as provided for in the Security Agreement or the Mortgage. 
Repayment of subordinated debt may be made only from funds available for 
payment of dividends or for other distributions, in accordance with 
requirements of the Title XI Reserve Fund and Financial Agreement 
(described in Sec. 298.35). Such subordinated debt shall not be secured 
by any interest in property that is security for Guarantees under Title 
XI, unless the Obligor and the lender enter into a written agreement, 
satisfactory to us, providing, among other things, that if any Title XI 
financing or advance by us to the Obligor shall occur in the future, 
such security interest of the lender shall become subordinated to any 
indebtedness to us incurred by the Obligor and to any security interest 
obtained by us in that property or other property, with respect to the 
subsequent indebtedness.
    (i) Modified requirements. We may waive or modify the financial 
terms or requirements otherwise applicable under this section and 
Sec. Sec. 298.35 and 298.42, upon determining that there is adequate 
security for the Guarantees. We may impose similar financial 
requirements on any Person providing other security for the Guarantees.

[65 FR 45152, July 20, 2000, as amended at 68 FR 62538, Nov. 5, 2003; 69 
FR 61451, Oct. 19, 2004]



Sec. 298.14  Economic soundness.

    (a) Economic Evaluation. We shall not issue a Letter Commitment for 
guarantees unless we find that the proposed project, regarding the 
Vessel(s) or Shipyard Project for which you seek Title XI financing or 
refinancing, will be economically sound. The economic soundness and your 
ability to repay the Obligations will be the primary basis for our 
approval of a Letter Commitment. We will consider the value of the 
collateral for which we will issue the Obligations as only a secondary 
consideration in determining your ability to repay the Obligations.
    (b) Basic feasibility factors. In making the economic soundness 
findings, we

[[Page 130]]

shall consider all relevant factors, including, but not limited to:
    (1) The need in the particular segment of the maritime industry for 
new or additional capacity, including any impact on existing equipment 
for which a guarantee under this title is in effect;
    (2) The market potential for the employment of the Vessel or 
utilization of the Shipyard Project of a General Shipyard Facility over 
the life of the guarantee;
    (3) Projected revenues and expenses associated with employment of 
the Vessel or utilization of the Shipyard Project of a General Shipyard 
Facility;
    (4) Any charters, contracts of affreightment, transportation 
agreements, or similar agreements or undertakings relevant to the 
employment of the Vessel or utilization of the Shipyard Project of a 
General Shipyard Facility;
    (5) For inland waterways, the need for technical improvements 
including but not limited to increased fuel efficiency, or improved 
safety; and
    (6) Other relevant criteria.
    (c) Project Feasibility. To demonstrate the economic feasibility of 
the project over the Guarantee period, you must submit the following 
information:
    (1) Purpose. A detailed purpose for the obligations to be 
guaranteed.
    (2) Necessary exhibits. Necessary exhibits to support your project 
feasibility as supplements to the application.
    (3) Relevant market information. Information regarding the relevant 
market including a written narrative of the market (or potential market) 
for the project including full details on the following, as applicable:
    (i) Nature and amount of cargo/passengers available for carriage and 
your projected share (provide also the number of units; that is 
containers, trailers, etc.);
    (ii) Services or routes in which the Vessel(s) will be employed, 
including an itinerary of ports served, with the arrival and departure 
times, sea time, port time, hours working or idle in port, off hire days 
and reserve or contingency time, proposed number of annual sailings and 
number of annual working days for the Vessel(s) or, with respect to 
Shipyard Project, how the equipment will be employed;
    (iii) Suitability of the Vessel(s) or Shipyard Project for their 
anticipated use;
    (iv) Significant factors influencing your expectations for the 
future market for the Vessel(s) or Shipyard Project, for example, 
competition, government regulations, alternative uses, and charter 
rates; and
    (v) Particulars of any charters, contracts of affreightment, 
transportation agreements, etc. You should supplement the narrative by 
providing copies of any marketing studies and/or supporting information 
(for instance, existing or proposed charters, contracts of 
affreightment, transportation agreements, and letters of intent from 
prospective customers).
    (vi) The potential for purchasing existing equipment of a reasonable 
condition and age from another source, including information regarding:
    (A) Market assessment concerning the availability and cost of 
existing equipment that may be an alternative to new construction or the 
new Shipyard Project;
    (B) The cost of modification, reconditioning, or reconstruction of 
existing equipment to make it suitable for intended use; and
    (C) Descriptions of any bids or offers which you had made to 
purchase existing equipment, especially Vessels which currently are 
financed with Title XI Obligations including date of offer, Vessels, and 
amount of offer.
    (4) Revenues. A detailed statement of the revenues expected to be 
earned from the project based upon the information in paragraph (c) of 
this section. Vessel revenue projections shall include shipping/hire 
rates for current market conditions or market conditions expected to 
exist at the time of Vessel delivery taking into account seasonal or 
temporary fluctuations. The revenues shall be based on a realistic 
estimate of the Vessel(s) or the new Shipyard Project utilization rate 
and at a breakeven rate for the project. A justification for the 
utilization rate shall be supplied and should indicate the number of 
days per year allowed for maintenance, drydocking, inspection, etc.

[[Page 131]]

    (5) Expenses for Vessel financing. For applications for Vessel 
financing, a detailed statement of estimated Vessel expenses including 
the following (where applicable):
    (i) Estimated Vessel daily operating expenses, including wages, 
insurance, maintenance and repair, fuel, etc. and a detailed projection 
of anticipated costs associated with long term maintenance of the 
Vessel(s) such as drydocking and major mid-life overhauls, with a time 
frame for these events over the period of the Guarantee;
    (ii) If applicable, a detailed breakdown of those expenses 
associated with the Vessel(s) voyage, such as port fees, agency fees and 
canal fees that are assessed as a result of the voyage; and
    (iii) A detailed breakdown of annual capital costs and 
administrative expenses, segregated as to:
    (A) Interest on debt;
    (B) Principal amortization; and
    (C) Salaries and other administrative expenses (indicate basis of 
allocation).
    (6) Expenses for a Shipyard Project. For applications for a Shipyard 
Project, a statement of estimated expenses related to the Shipyard 
Project, including the following (where applicable):
    (i) A detailed breakdown of estimated daily operating expenses for 
the shipyard, such as wages, including staffing, and segregated as to 
straight-time, overtime and fringe benefits; utility costs; costs of 
stores, supplies, and equipment; maintenance and repair cost; insurance 
costs; and, other expenses (indicate items included); and
    (ii) A detailed breakdown of annual capital costs and administrative 
expenses, segregated as to:
    (A) Interest on debt;
    (B) Principal amortization; and
    (C) Salaries and other administrative expenses (indicate basis of 
allocation).
    (7) Forecast of Operations. Utilizing the revenues and expenses 
provided in paragraphs (c)(4),(5) and (6) of this section, you shall 
provide a forecast of operating cash flow, as defined in paragraph 
(d)(4) of this section, for the Title XI project for the first full year 
of operations and the next four years. The cash flow statements should 
be footnoted to explain the assumptions used.
    (d) Objective Criteria. We must make a finding of economic soundness 
as to each project based on an assessment of the entire project. In 
order for the project to receive approval, we must determine that a 
project meets the following criteria:
    (1) The projected long-term demand (equal to length of time that you 
request financing) for the particular Vessel(s) or new Shipyard Project 
to be financed must exceed the supply of similar vessels or new shipyard 
project in the applicable markets. We will determine the supply of 
similar vessels and similar shipyard projects based on:
    (i) Existing equipment,
    (ii) Similar vessels or new shipyard project under construction, and
    (iii) The projected need for new equipment in that particular 
segment of the maritime industry.
    (2) We will base our determination of the project's economic 
soundness on the following:
    (i) Conformity of your projections with our supply and demand 
analyses;
    (ii) Availability of charters, letters of intent, outstanding 
contractual commitments, contracts of affreightment, transportation 
agreements or similar agreements or undertakings; and
    (iii) Your existing market share compared with the market share 
necessary to meet projected revenues.
    (3) In cases where market conditions are temporarily inadequate for 
you to service the Obligation indebtedness at the time of Vessel 
delivery, or completion of the Shipyard Project, we may approve your 
application only if you have sufficient outside sources of cash flow to 
service your indebtedness during this temporary period.
    (4) With respect to the asset for which Obligations are to be 
issued, the operating cash flow to Obligation debt service ratio over 
the term of the Guarantee must be in excess of 1:1. Operating cash flow 
means revenues less operating and capital expenses including taxes paid 
but exclusive of interest, accrued taxes, depreciation and amortization 
for the Title XI asset. Debt service means interest plus principal.



Sec. 298.15  Investigation fee.

    (a) In general. Before we issue a Letter Commitment, you shall pay 
us an

[[Page 132]]

investigation fee. The Letter Commitment will state the fee which is 
based on the formula in paragraph (b) of this section.
    (1) The investigation fee covers the cost of the investigation of 
the project described in the application and the participants in the 
project, the appraisal of properties offered as security, Vessel 
inspection during construction, reconstruction, or reconditioning (where 
applicable) and other administrative expenses.
    (2) If, for any reason, we disapprove the application, you shall pay 
one-half of the investigation fees.
    (b) Base Fee. (1) The investigation fee shall be one-half (\1/2\) of 
one percent on Obligations to be issued up to and including $10,000,000, 
plus
    (2) One-eighth (\1/8\) of one percent on all Obligations to be 
issued in excess of $10,000,000.
    (c) Credit for filing fee. You will receive credit for the $5,000 
filing fee that you paid upon filing the original application (described 
in Sec. 298.3) towards the investigation fee.



Sec. 298.16  Substitution of participants.

    (a) You may request our permission to substitute participants to a 
Mortgage and/or Security Agreement in a financing that is receiving 
assistance authorized by Title XI of the Act.
    (b) A non-refundable fee of $3,000 is due, payable at the time of 
the request. The fee defrays all costs of processing and reviewing a 
joint application by a mortgagor and/or Obligor and a proposed 
transferee of a Vessel or Shipyard Project, which is security for Title 
XI debt, if the proposed transferee is to assume the Mortgage and/or the 
Security Agreement.



Sec. 298.17  Evaluation of applications.

    (a) In evaluating project applications, we shall also consider 
whether the application provides for:
    (1) The capability of the Vessel(s) serving as a naval and military 
auxiliary in time of war or national emergency.
    (2) The financing of the Vessel(s) within one year after delivery.
    (3) The acquisition of Vessel(s) currently financed under Title XI 
by assumption of the total obligation(s).
    (4) The Guarantees extend for less than the normal term for that 
class of vessel.
    (5) In the case of an Eligible Shipyard, the capability of the 
shipyard to engage in naval vessel construction in time of war or 
national emergency.
    (6) In the case of Shipyard Project, the Guarantees extend for less 
than the technological life of the asset.
    (b) In determining the amount of equity which you must provide, we 
will consider, among other things, the following:
    (1) Your financial strength;
    (2) Adequacy of collateral; and
    (3) The term of the Guarantees.



Sec. 298.18  Financing Shipyard Projects.

    (a) Initial criteria. We may issue Guarantees to finance a Shipyard 
Project at a General Shipyard Facility. We may approve such Guarantees 
after we consider whether the Guarantees will result in shipyard 
modernization and support increased productivity.
    (b) Detailed statement. You must provide a detailed statement, with 
the Guarantee application, which will provide the basis for our 
consideration.
    (c) Required conditions. We shall approve your application for loan 
guarantees under this section if we determine the following:
    (1) The term for such Guarantees will not exceed the reasonable 
economic useful life of the collective assets which comprise this 
Shipyard Project;
    (2) There is sufficient collateral to secure the Guarantee; and
    (3) Your application will not prevent us from guaranteeing debt for 
a Shipyard Project that, in our sole opinion, will serve a more 
desirable use of appropriated funds. In making this determination, we 
will consider:
    (i) The types of vessels which will be built by the shipyard,
    (ii) The productivity increases which will be achieved,
    (iii) The geographic location of the shipyard,
    (iv) The long-term viability of the shipyard,
    (v) The soundness of the financial transaction,
    (vi) Any financial impact on other Title XI transactions, and

[[Page 133]]

    (vii) The furtherance of the goals of the Shipbuilding Act.



Sec. 298.19  Financing Eligible Export Vessels.

    (a) Notification to Secretary of Defense. (1) We will provide prompt 
notice of our receipt of an application for a loan Guarantee for an 
Eligible Export Vessel to the Secretary of Defense.
    (2) During the 30-day period, beginning on the date on which the 
Secretary of Defense receives such notice, the Secretary of Defense may 
disapprove the loan guarantee if the Secretary of Defense makes an 
assessment that the Vessel's potential use may cause harm to United 
States national security interests.
    (3) The Secretary of Defense may not disapprove a loan Guarantee 
under this section solely on the basis of the type of vessel to be 
constructed with the loan Guarantee. The authority of the Secretary of 
Defense to disapprove a loan Guarantee under this section may not be 
delegated to any official other than a civilian officer of the 
Department of Defense appointed by the President, by and with the advice 
and consent of the Senate. We will not approve a loan guarantee 
disapproved by the Secretary of Defense.
    (b) Vessel eligibility. We may not approve a Guarantee for an 
Eligible Export Vessel unless:
    (1) We find that the construction, reconstruction, or reconditioning 
of the Vessel will aid in the transition of United States shipyards to 
commercial activities or will preserve shipbuilding assets that would be 
essential in time of war or national emergency;
    (2) The owner of the Vessel agrees with us that the Vessel shall not 
be transferred to any country designated by the Secretary of Defense as 
a country whose interests are hostile to the interests of the United 
States; and
    (3) We determine that the countries in which the shipowner, its 
charterers, guarantors, or other financial interests supporting the 
transaction, if any, have their chief executive offices or have located 
a substantial portion of their assets, present an acceptable financial 
or legal risk to our collateral interests. Our determination will be 
based on confidential risk assessments provided by the Inter-Agency 
Country Risk Assessment System and will take into account any other 
factors related to the loan guarantee transaction that we deem 
pertinent.



                          Subpart C_Guarantees



Sec. 298.20  Term, redemptions, and interest rate.

    (a) In general. The maturity date of the Obligations must be 
satisfactory to us and must not exceed the anticipated physical and 
economic life of the Vessel or Vessels or Shipyard Project, and may be 
less than but no more than:
    (1) Twenty-five years from the date of delivery from the shipbuilder 
of a single new Vessel which is to be security for Guarantees;
    (2) Twenty-five years from the date of delivery from the shipyard of 
the last of multiple Vessels which are to be security for the Guarantees 
but that the amount of the Guarantees will relate to the amount of the 
depreciated actual cost of the multiple Vessels as of the Closing;
    (3) The later of twenty-five years from the date of original 
delivery of a reconstructed, or reconditioned Vessel which is to be 
security for the Guarantees, or at the expiration of the remaining 
useful life of the Vessel, as we determine; or
    (4) The technological life of the Shipyard Project.
    (b) Required redemptions. Where multiple Vessels or multiple 
Shipyard Project assets are to be used as security for the Guarantees, 
as set forth in paragraph (a) of this section, we may require payments 
of principal prior to maturity (redemptions) regarding all related 
Obligations, as we may deem necessary to maintain adequate security for 
the Guarantees.
    (c) Interest rate. We will make a determination as to the 
reasonableness of the interest rate of each Obligation, taking into 
account the range of interest rates prevailing in the private market for 
similar loans and the risks that we assume.



Sec. 298.21  Limits.

    (a) Actual Cost basis. We will issue a guarantee on an amount of the 
Obligation satisfactory to us based on the

[[Page 134]]

economic soundness of the transaction. The Obligation amount may be less 
than but not more than 75 percent or 87\1/2\ percent, whichever is 
applicable, under the provisions of section 1104A(b)(2) or section 
1104B(b)(2) of the Act of the Actual Cost of the Vessel or Vessels or 
Shipyard Project asset(s).
    (1) If minimum horsepower of the main engine is a requirement for 
Guarantees up to 87\1/2\ percent of the Actual Cost, the standard for 
the horsepower will be continuous rated horsepower.
    (2) Where we refinance existing debt, the amount of new Obligations 
we issue for the existing debt may not exceed the lesser of:
    (i) The amount of outstanding debt being refinanced (whether or not 
receiving assistance under Title XI); or
    (ii) Seventy-five or 87\1/2\ percent, whichever is applicable, of 
the Depreciated Actual Cost of the Vessel or Shipyard Project with 
respect to which the new Obligations are being issued.
    (b) Actual Cost items. Actual Cost is comprised essentially of those 
items which would customarily be capitalized as Vessel or Shipyard 
Project construction costs such as designing, engineering, constructing 
(including performance bond premiums that we approve), inspecting, 
outfitting and equipping.
    (1) Cost items include those items usually specified in Vessel or 
Shipyard Project construction contracts, e.g., changes and extras, cost 
of owner furnished equipment, shoreside spare parts and commitment fees 
and interest on the Obligations or other borrowings incurred during the 
construction period (excluding interest paid on subordinated debt 
considered to be Equity), and less income realized from investment of 
Escrow Fund deposits during the construction period.
    (2) Commissions (which represent a portion of the total shipyard 
contract price) may be included in the foreign equipment and services 
amount of the Actual Cost of an export project, provided:
    (i) A majority of the work done by the parties receiving the 
commissions is in the form of design and engineering work, and
    (ii) The commissions represent a small amount of the total contract 
price.
    (3) You may include Guarantee Fees determined in accordance with the 
provisions of section 1104(e) of the Act as an item of Actual Cost.
    (4) In approving an item of Actual Cost, we will consider all 
pertinent factors.
    (c) Items excludible from Actual Cost. Actual Cost shall not include 
any other costs such as the following:
    (1) Legal fees or expenses;
    (2) Accounting fees or expenses;
    (3) Commitment fees or interest other than those specifically 
allowed;
    (4) Fees, commissions or charges for granting or arranging for 
financing;
    (5) Fees or charges for preparing, printing and filing an 
application for Title XI Guarantees and supporting documents, for 
services rendered to obtain approval of the application and for 
preparing, printing and processing documents relating to the application 
for Guarantees;
    (6) Underwriting or trustee's fees;
    (7) Foreign, federal, state or local taxes, user fees, or other 
governmental charges;
    (8) Investigation fee determined in accordance with section 1104(f) 
of the Act and Sec. 298.15;
    (9) Predelivery Vessel operating expenses, Vessel insurance premiums 
and other items which may not be properly capitalized by the owner as 
costs of the Vessel under GAAP;
    (10) The cost of the condition survey required by Sec. 298.11(f) 
and all work necessary to meet the standards set forth in that 
paragraph;
    (11) The cost to the Shipowner of a Vessel which is to be 
reconstructed, or reconditioned, e.g., cost of acquisition or repair 
work;
    (12) Generally, any amount payable to the shipyard for early 
delivery of the Vessel;
    (13) Generally, any amount payable to the manufacturer of the 
Shipyard Project for early delivery of the equipment to the General 
Shipyard Facility;
    (14) Predelivery Shipyard Project expenses which may not be properly 
capitalized by the General Shipyard Facility as costs of the Shipyard 
Project under GAAP; and
    (15) The cost of major foreign components and other foreign 
components for

[[Page 135]]

which there is no waiver and their assembly when comprising any part of 
the hull and superstructure of a Vessel.
    (d) Substantiation of Actual Cost. (1) Before we make distribution 
from the Escrow Fund or Construction Fund (described in Sec. Sec. 
298.33 and 298.34), and prior to our final Actual Cost determination for 
each Vessel or Shipyard Project, you must submit to us documents 
substantiating all claimed costs eligible under paragraph (b) of this 
section or, alternatively, appropriate certification of such costs by an 
agent who has received our approval.
    (2) These documents may include, but need not be limited to, copies 
of invoices, change orders, subcontracts, and where we require, 
statements from independent certified or independent licensed public 
accountants that the costs for which you seek payment or reimbursement 
were actually paid or are payable for the construction of a Vessel or 
Shipyard Project.
    (3) You must summarize, index and arrange these documents according 
to cost categories by following the directions contained in our forms.
    (e) Escalation as part of Actual Cost. Escalation clauses in 
construction contracts shall be subject to our approval. After a review 
of the base contract price and the escalation clauses, we shall, in 
order to estimate the Actual Cost amount to be stated in the Letter 
Commitment, add to the approved base contract price the amount of 
estimated escalation as approved by us. We must subsequently approve the 
amount of escalation cost you claimed as a component of Actual Cost.
    (f) Monies received in respect of construction. (1) If you or any 
Person acting on your behalf, from time to time receives moneys due for 
construction of a Vessel or Shipyard Project (described in the Security 
Agreement) from the shipbuilder, guarantors, sureties or other Persons, 
you shall give us written notice of such fact.
    (2) As long as we have not paid the Guarantees, you or other 
recipient shall promptly deposit these moneys with us to be held by the 
Depository in accordance with the Depository Agreement.
    (3) We will determine the extent to which Actual Cost is to be 
reduced by these moneys.
    (4) In no event shall Actual Cost be reduced with respect to 
payments by the shipyard to a Vessel or Shipyard Project owner of 
liquidated damages for late delivery of the Vessel or Shipyard Project .
    (5) If we have paid the Guarantees, you or other recipient must 
promptly pay these moneys, including any liquidated damages, to us for 
deposit into the Maritime Guaranteed Loans account.
    (g) Depreciated Actual Cost. After a Vessel or Shipyard Project has 
been delivered or redelivered (in the case of reconstruction or 
reconditioning), the limitation on the amount of Guarantees will be 75 
or 87\1/2\ percent, whichever is applicable, of the Depreciated Actual 
Cost of the Vessel or Shipyard Project.

[65 FR 45152, July 20, 2000, as amended at 67 FR 61282, Sept. 30, 2002]



Sec. 298.22  Amortization of Obligations.

    (a) Generally, after delivery or completion of Shipyard Project, and 
until maturity of the Obligations, provisions of the Trust Indenture or 
other part of the Documentation require you to make periodic payment of 
principal and interest on the Obligations.
    (b) Usually, the payment of principal (amortization) shall be made 
semi-annually, but in no event, less frequently than on an annual basis, 
and in either case the amortization shall be in equal payments of 
principal (level principal), unless we consent to the periodic payment 
of a constant aggregate amount, comprised of both interest and principal 
components which are variable in amount (level payment). No other 
proposed method of amortization will be allowed which would reduce the 
amount of periodic amortization below that determined under the level 
principal or level payment basis at any time prior to maturity of the 
Obligations, except where:
    (1) You can demonstrate to our satisfaction that there will be 
adequate funds to discharge the Obligations at maturity;
    (2) You establish a fund with the Depository in which you deposit an 
equal

[[Page 136]]

annual amount necessary to redeem the outstanding Obligations at 
maturity; or
    (3) With regard to Eligible Export Vessels, in accordance with such 
other terms as we determine to be more favorable and to be compatible 
with export credit terms offered by foreign governments for the sale of 
vessels built in foreign shipyards.

[65 FR 45152, July 20, 2000, as amended at 67 FR 61282, Sept. 30, 2002]



Sec. 298.23  Refinancing.

    (a) We may approve guarantees of Obligations to be secured by one or 
more Vessels or a Shipyard Project issued to refinance existing Title XI 
debt for either Vessels or for Shipyard Project and existing non-Title 
XI debt, so long as the existing debt has been previously issued for one 
of the purposes set forth in sections 1104(a)(1) through (4) of the Act. 
Section 1104 (a) (1) of the Act requires that, if the existing 
indebtedness was incurred more than one year after the delivery or 
redelivery of the related Vessel or Shipyard Project, the proceeds of 
such Obligations will be applied to the construction, reconstruction or 
reconditioning of other Vessels or Shipyard Project or as provided in 
Sec. 298.24.
    (b) We shall require any security lien on the Vessel(s) or Shipyard 
Project to be discharged immediately before we place a Mortgage or other 
security interest on any of the above assets. You must satisfy all 
necessary eligibility requirements as set forth in subpart B of this 
part, including economic soundness.



Sec. 298.24  Financing a Vessel more than a year after delivery.

    (a) We may approve Guarantees for a Vessel which has been delivered 
(or redelivered in the case of reconstruction or reconditioning of a 
Vessel) more than one year prior to the issuance of the Guarantees only 
if:
    (1) The issuance of the Guarantees would otherwise satisfy the 
requirements of the Act and the regulations in this part, and
    (2) The proceeds of the Obligation financing such existing Vessel 
are used to finance:
    (i) The construction, reconstruction, or reconditioning of a 
different Vessel within one year of that Vessel's delivery or 
redelivery, as the case may be, or
    (ii) Facilities or equipment pertaining to marine operations. Such 
facilities or equipment must be of a specialized nature, used 
principally for servicing vessels and in handling waterborne cargo in 
the close proximity of the berthing area, excluding over-the-road 
equipment (other than chassis and containers), permanent or 
semipermanent structures and real estate, as well as new or less than 
one year old.
    (b) At the Closing of Guarantees covered by this section, you must 
deposit the proceeds of the Obligation into an Escrow Fund established 
to pay for the cost unless you demonstrate to our satisfaction that all 
such costs have been paid.



Sec. 298.25  Excess interest or other consideration.

    We shall not execute Guarantees if any agreement in the 
Documentation directly or indirectly provides for:
    (a) The payment to an Obligee of interest, or other compensation for 
services which have not been performed, in a manner that such 
compensation or payment is being provided as interest in excess of the 
rate approved by us; or
    (b) Grants of security to an Obligee in addition to the Guarantees.



Sec. 298.26  Lease payments.

    You must obtain our approval of the amount and conditions of lease 
or charter hire payments if the payment of principal and interest on 
Obligations would be dependent, in any way, upon the lease or charter 
hire payments for a Vessel or Shipyard Project.



Sec. 298.27  Advances.

    (a) In general. (1) In accordance with section 207 and Title XI of 
the Act, we have the discretion to make or commit to make an advance or 
payment of funds to, or on behalf of the owner, or operator or directly 
to any other person or entity for items, including, but not limited to:
    (i) Principal,
    (ii) Interest,

[[Page 137]]

    (iii) Insurance, and
    (iv) Other vessel-related expenses or fees.
    (2) We will make advances or payments only to protect, preserve or 
improve the collateral held as our security for Title XI debt.
    (3) When requesting an advance, you must demonstrate that:
    (i) Your problems are short term (less than two years) by using 
market and cash flow analysis and other projections.
    (ii) An advance(s), would assist you over temporary difficulties; 
and
    (iii) There is adequate collateral for the advance.
    (b) Filing requirements. (1) You shall apply for an advance or other 
payment as early as is reasonably possible.
    (2) Principal and interest payments. We must receive a request for 
an advance for principal and interest payments at least 30 days before 
the initial payment date.
    (3) Insurance payments. We must receive a request for an advance of 
insurance payments at least 30 days before a renewal or termination 
date.
    (4) Extenuating circumstances. We may consider requests for 
assistance with less notice, upon written documentation of extenuating 
circumstances.
    (5) Supporting data. Any requests for assistance must be accompanied 
by supporting data regarding:
    (i) Need for the advance,
    (ii) Financial assistance you sought from other sources,
    (iii) The measures that you are taking and have taken to alleviate 
the situation,
    (iv) Financial projections,
    (v) Proposed term of the repayment,
    (vi) Current and projected market conditions,
    (vii) Information on other available collateral,
    (viii) Liens and other creditor information, and
    (ix) Any other information which we may request.



                         Subpart D_Documentation



Sec. 298.30  Nature and content of Obligations.

    (a) Single page. An Obligation, in the form of a note, bond of any 
type, or other debt instrument, when engraved, printed or lithographed 
on a single sheet of paper must include on its face the:
    (1) Name of the Obligor,
    (2) Principal sum,
    (3) Rate of interest,
    (4) Date of maturity, and
    (5) Guarantee of the United States, authenticated by the Indenture 
Trustee, if any.
    (b) Several pages. If the Obligation is typewritten, printed or 
reproduced by other means on several pages of paper, the Guarantee of 
the United States and the authentication certificate of the Indenture 
Trustee, if any, may appear at the end of the typewritten Obligation.
    (c) Rights and responsibilities. The instrument which is evidence of 
indebtedness shall also contain all information necessary to apprise the 
Obligees of their rights and responsibilities including, but not limited 
to:
    (1) Time and manner for payment of principal and interest,
    (2) Redemptions,
    (3) Default procedure, and
    (4) Notification (in case of registered Obligations) of sale or 
other transfer of the instruments.



Sec. 298.31  Mortgage.

    (a) In general. Under normal circumstances, a Guarantee shall not be 
endorsed on any Obligation until we receive satisfactory evidence that 
we hold a Mortgage in one or more Vessels or a Mortgage or other 
security interest in the Shipyard Project. During construction of a new 
Vessel or any Shipyard Project, a security interest may be perfected by 
a filing under the Uniform Commercial Code.
    (b) Ensuring validity of security interest. In order to ensure that 
our Mortgages or other security interests are valid and enforceable, we 
shall require that the Obligor obtain legal opinions, in form and 
substance satisfactory to us, from independent, outside legal counsel 
satisfactory to us, including foreign independent outside legal Counsel 
for Eligible Export Vessels, which opinions shall state, among other 
things, that the Mortgage or other security interest(s) are valid and 
enforceable:

[[Page 138]]

    (1) In the country in which the Vessel is documented (or, in the 
case of a security interest, in jurisdictions acceptable to us);
    (2) In the United States; and
    (3) For vessels operating on specified trade routes, in the country 
or countries involved in this service, unless we determine that those 
destinations are too numerous, in which case, we will instead require an 
opinion of foreign validity and enforceability in the Vessel's primary 
port of operation.
    (c) Alternative forms of security. In the case where a Mortgage or 
security interest on the financed assets may not be available or 
enforceable, we will require alternative forms of security.
    (d) Mortgage in our favor. The Security Agreement shall provide that 
upon delivery of a new Vessel or upon final completion of the Shipyard 
Project, or at the time Guarantees are issued with respect to an 
existing Vessel or the Shipyard Project, a Mortgage on the Vessel and a 
Mortgage or other security interest on the Shipyard Project will be 
executed in our favor, unless we determine that a Mortgage or a security 
interest is not available or enforceable in accordance with paragraph 
(c) of this section.
    (e) Filing. You must file the Mortgage with the United States Coast 
Guard's National Vessel Documentation Center. You must file the Mortgage 
for an Eligible Export Vessel with the proper foreign authorities. For 
assets of a General Shipyard Facility, you must file a Mortgage and 
security interest with the proper authorities within the appropriate 
state for recording. After you have recorded the Mortgage, you must 
deliver to us the Mortgage and evidence of the filing of the security 
interest.
    (f) Mortgage secured by multiple Vessels. (1) When two or more 
Vessels are to be security for Guarantees, the Security Agreement may 
provide that one Mortgage relating to all the Vessels (Fleet Mortgage) 
shall be executed, perfected and delivered to us by the Obligor.
    (2) If the Fleet Mortgage relates to undelivered Vessels, the Fleet 
Mortgage will be executed upon delivery of the first vessel. At the time 
of each subsequent Vessel delivery, the Obligor shall execute a 
supplement to the Fleet Mortgage which makes that Vessel subject to our 
Mortgage lien.
    (3) The Fleet Mortgage shall provide that payment by the Obligor of 
the entire amount of Obligations covered or to be covered by Guarantees 
shall be required to discharge the Fleet Mortgage, regardless of the 
amount of the Secretary's Note or Notes issued and outstanding at the 
time of execution and delivery of the Fleet Mortgage or the number of 
Vessels covered by the Fleet Mortgage.
    (4) The discharge date of the Fleet Mortgage shall be the maturity 
date of the Secretary's Note. We may require, as authorized by section 
1104(c)(2) of the Act, such payments of principal prior to maturity 
(redemptions), regarding all related Obligations, as deemed necessary to 
maintain adequate security for the Guarantees.
    (5) Each Fleet Mortgage shall provide that in the event of 
constructive total loss, requisition of title or sale of any Vessel 
covered by the Fleet Mortgage, indebtedness represented by the 
Obligations shall be paid, unless we otherwise determine that there 
remains adequate security for the Guarantees, and the Vessel shall be 
discharged from the Mortgage lien.
    (g) Adequacy of collateral. (1) Under normal circumstances, a First 
Preferred Mortgage on the Vessel(s) or Shipyard Project will be adequate 
security for the Guarantees.
    (2) If, however, we determine that the Mortgage on the Vessel(s) or 
Shipyard Project is not sufficient to provide adequate security, as a 
condition to approving the Letter Commitment or processing the 
application, we may require additional collateral, such as a mortgage(s) 
on other vessel(s) or Shipyard Project or on other assets, special 
escrow funds, pledges of stock, charters, contracts, notes, letters of 
credit, accounts receivable assignments, and guarantees.



Sec. 298.32  Required provisions in documentation.

    (a) Performance under shipyard and related contracts. Generally, 
shipyard and related contracts must contain provisions for:

[[Page 139]]

    (1) Furnishing by the shipyard or contractor of the Shipyard Project 
of satisfactory insurance and a satisfactory performance bond where 
Obligations are issued during the construction period, except that if 
the shipyard or contractor of the Shipyard Project demonstrates to our 
satisfaction that it has sufficient financial resources and operational 
capacity to complete the project, posting of a bond will not be 
required;
    (2) Allowing access to the Vessel or Shipyard Project, as well as 
all related work projects being performed by the contractor and 
subcontractors, to our representative, at all reasonable times, to 
inspect performance of the work and to observe trials and other tests 
for the purpose of determining that the Vessel or Shipyard Project is 
being constructed, reconstructed, or reconditioned in accordance with 
contract plans and specifications approved by us;
    (3) Submitting to us, upon request, one set of shipyard plans, in 
form and substance satisfactory to us, for the Vessel or Shipyard 
Project as built;
    (4) Making periodic payments for the work in accordance with an 
agreed schedule, submitted by the shipyard or contractor, as 
appropriate, in a form acceptable to us, based on percentage of 
completion, after such percentage and satisfactory performance are 
certified by the Obligor, shipyard or contractor, as appropriate, and 
our representative as to each payment;
    (5) Prohibiting the use of proceeds from the sale of Obligations for 
the payment of work performed outside the shipyard, unless we consent in 
writing to such use; and
    (6) Requiring that all components of the hull and superstructure of 
a U.S.-documented Vessel and an Eligible Export Vessel shall be 
assembled in the United States.
    (7) If Obligation will not be issued during the construction period 
of the Vessel and Shipyard Project, requiring that shipyard-related 
contracts shall generally include the provisions specified in paragraphs 
(a)(2), (a)(3) and (a)(6) of this section.
    (b) Assignments and general covenants from Obligor to us. The 
Obligor shall assign rights and shall covenant with us, as we require, 
including, but not limited to, the following:
    (1) Assignment of all or part of the right, title and interest under 
the construction contract and related contracts, except those rights 
expressly reserved therein by the Obligor relating to such things as 
patent infringement and liquidated damages;
    (2) Assignment of rights to receive all moneys which from time to 
time become due regarding Vessel or Shipyard Project construction;
    (3) Assignment, where applicable, of all or a part of the bareboat 
charter, time charter, contracts of affreightment or other agreements 
relating to the use of the Vessel or Shipyard Project and all hire 
payable to the Obligor, and delivery to us of required consents by 
appropriate parties to any such assignments;
    (4) Covenants relating to the filing of satisfactory evidence of 
continuing United States citizenship, in accordance with 46 CFR part 
355, with the exception of Eligible Export Vessels and shipyards with 
Shipyard Projects; warranty of Vessel or Shipyard Project title free 
from all liens other than those specifically excepted; maintaining 
United States documentation of the Vessel or documentation under the 
laws of a country other than the United States with regard to an 
Eligible Export Vessel; compliance with the provisions of 46 U.S.C. 
31301-31343, except that Eligible Export Vessels shall comply with the 
definition of a ``preferred mortgage'' in 46 U.S.C. 31301(6)(B), 
requiring, among other things, that the Mortgage shall comply with the 
mortgage laws of the foreign country where the Vessel is documented and 
shall have been registered under those laws in a public register; Notice 
of Mortgage, payment of all taxes (except if being contested in good 
faith); annual financial statements audited by independent certified or 
independent licensed public accountant.
    (5) Covenants to keep records of construction costs paid by or for 
the Obligor's account and to furnish us with a detailed statement of 
those costs, distinguishing between:
    (i) Items paid or obligated to be paid, attested to by independent 
certified

[[Page 140]]

public accountants unless otherwise verified by us; and
    (ii) Costs of American and foreign materials (including services) in 
the hull and superstructure.
    (6) Covenants to maintain Marine and War Risk Hull and Machinery 
insurance on the Vessel or Eligible Export Vessel in an amount equal to 
110% of the outstanding Obligations or up to the full commercial value 
of the Vessel or Eligible Export Vessel, whichever is greater; Marine 
and War Risk Protection and Indemnity insurance; Interim War Risk 
Binders for Hull and Machinery, and Protection and Indemnity coverages 
underwritten by us as authorized by Title XII of the Act; and such 
additional insurance as may be required by us. All insurance required to 
be maintained shall be placed with the United States Government and 
American and/or British (and/or other foreign, if permitted by us by 
prior written notice) insurance companies, underwriters' associations or 
underwriting funds approved by us through marine insurance brokers and/
or underwriting agents approved by us. All insurance required to be 
maintained shall be placed under the latest (at the time of issue) forms 
of American Institute of Marine Underwriters policies approved by us 
and/or under such other forms of policies which we may approve in 
writing and/or policies issued by or for us insuring the Vessel or 
Eligible Export Vessel against the usual risks provided for under such 
forms, including such amounts of increase value or other forms of ``that 
total loss only'' insurance permitted by the Hull and Machinery 
insurance policies;
    (7) Collateralize other debt due to us under other Title XI 
financings;
    (8) Covenants to maintain shipyard insurance on the Shipyard Project 
in an amount equal to 110% of the outstanding Obligations or up to the 
full commercial value of the Shipyard Project, whichever is greater, and 
such additional insurance as may be required by us; and
    (9) Covenants to maintain additional types of insurance as may be 
required by us with respect to Eligible Export Vessels, i.e. political 
risk insurance, to cover such items as the political, financial, and/or 
economic risk in a foreign country.



Sec. 298.33  Escrow fund.

    (a) Escrow Fund Deposits. At the time of the sale of the 
Obligations, the Obligor shall deposit with the Depository in an escrow 
fund (the ``Escrow Fund'') all of the proceeds of that sale unless the 
Obligor is entitled to withdraw funds under paragraph (b) of this 
section. The Obligor must also deposit into the Escrow Fund on the 
Closing date an amount equal to six months interest at the rate borne by 
the Obligations, unless we find the existence of adequate consideration 
or accept other consideration in lieu of the interest deposit.
    (b) Escrow Fund Withdrawals. You, as Obligor, may make a written 
request for us to disburse funds from the Escrow Fund. Within a 
reasonable time thereafter, we shall disburse directly to the Indenture 
Trustee, any Paying Agent for such Obligations, or any other Person 
entitled to payment any amount which you are obligated to pay or have 
paid, on account of the items and amounts or any other item approved by 
us, provided that we are satisfied with the accuracy and completeness of 
the information contained in the following submissions:
    (1) A responsible officer of the Obligor shall deliver an officer's 
certificate, in form and substance satisfactory to us, stating that:
    (i) There is no default under the construction contract or the 
Security Agreement;
    (ii) There have been no occurrences which have or would adversely 
and materially affect the condition of the Vessel, its hull or any of 
its component parts, or the Shipyard Project;
    (iii) The amounts of the request are in accordance with the 
construction contract including the approved disbursement schedule and 
each item in these amounts is properly included in our approved estimate 
of Actual Cost;
    (iv) With respect to the request, once the contractor is paid there 
will be no liens or encumbrances on the applicable Vessel, its hull or 
component parts, or the Shipyard Project for which the withdrawal is 
being requested except for those already approved by us; and

[[Page 141]]

    (v) If the Vessel or Shipyard Project has already been delivered or 
completed, it is in class, if required, and is being maintained in the 
highest and best condition. The Obligor must also attach an officer's 
certificate of the shipyard and other general contractors, in form and 
substance satisfactory to us, stating that there are no liens or 
encumbrances as provided in paragraph (b)(1)(iv) of this section and 
attaching the invoices and receipts supporting each proposed withdrawal 
to our satisfaction.
    (2) No payment or reimbursement under this section shall be made:
    (i) To any Person until the total amount paid by or for the account 
of the Obligor from sources other than the proceeds of such Obligations 
equals at least 12\1/2\ percent or 25 percent as applicable, of the 
Actual Cost of the Vessel or Shipyard Project is made;
    (ii) To the Obligor which would have the effect of reducing the 
total amounts paid by the Obligor pursuant to paragraph (b)(2)(ii) of 
this section; or
    (iii) To any Person on account of items, amounts or increases 
representing changes and extras or owner furnished equipment, if any, 
unless such items, amounts and increases shall have been previously 
approved by us; provided, however, that when the amount guaranteed by us 
equals 75 percent or less of the Actual Cost and the Obligor 
demonstrates to our satisfaction the ability to pay in the remaining 25 
percent, or more, then after the initial 12\1/2\ percent of Actual Cost 
has been paid by or on behalf of the Obligor for such Vessel or 
completed Shipyard Project and up to 37\1/2\ percent of Actual Cost has 
been withdrawn from the Escrow Fund for such Vessel or Shipyard Project, 
the Obligor must pay the remaining Obligor's equity of at least 12\1/2\ 
percent (as determined by us) before additional monies can be withdrawn 
from the Escrow Fund relating to such Vessel or Shipyard Project.
    (3) We will not be required to make any disbursement except out of 
the cash available in the Escrow Fund. If any sale or payment on 
maturity results in a loss in the principal amount of the Escrow Fund 
invested in securities so sold or matured, the requested disbursement 
from the Escrow Fund shall be reduced by an amount equal to such loss, 
and the Obligor must pay to any Person entitled thereto, the balance of 
the requested disbursement from the Obligor's funds other than the 
proceeds of such Obligations.
    (4) If we assume the Obligor's rights and duties under the 
Obligations or we pay the Guarantees, all amounts in the Escrow Fund 
(including realized income which has not yet been paid to the Obligor), 
shall be paid to us and be credited against any amounts due or to become 
due to us under the Security Agreement and the Secretary's Note.
    (5) Other rights and duties with respect to withdrawals from the 
Escrow Fund shall be set out in the closing documentation in form and 
substance satisfactory to us.
    (c) Investment and liquidation of the Escrow Fund. We may invest the 
Escrow Fund in obligations of the United States. We will deposit amounts 
in the Escrow Fund into an account with the U.S. Treasury Department and 
upon agreement with the Obligor, shall deliver to the U.S. Treasury 
Department instructions for the investment, reinvestment and liquidation 
of the Escrow Fund. We will have no liability to the Obligor for acting 
in accordance with such instructions.
    (d) Income on the Escrow Fund. Unless there is an existing default, 
any income realized on the Escrow Fund shall be paid to the Obligor upon 
our receipt of such income.
    (e) Termination date of the Escrow Fund. The Escrow Fund shall 
terminate 90 days after the delivery date of the last Vessel or Shipyard 
Project covered by the Security Agreement (the ``Termination Date''). In 
the event that on such date the payment of the full amount of the 
aggregate Actual Cost of all of the Vessels or Shipyard Project has not 
been made or the amounts with respect to such Actual Cost are not then 
due and payable, then we and the Obligor by written agreement shall 
extend the Termination Date for such period as we and the Obligor shall 
determine is sufficient to allow for such contingencies. Any amounts 
remaining in the Escrow Fund on the Termination Date which

[[Page 142]]

are in excess of 87\1/2\ percent or 75 percent of Actual Cost, as the 
case may be, shall be applied to retire a pro rata portion of the 
Obligations.

[65 FR 45152, July 20, 2000, as amended at 67 FR 61282, Sept. 30, 2002]



Sec. 298.34  [Reserved]



Sec. 298.35  Title XI Reserve Fund and Financial Agreement.

    (a) Purpose. In order to provide us with further security and to 
ensure payment of the interest and principal due on the Obligations, we 
will require the Company to enter into a Title XI Reserve Fund and 
Financial Agreement (Agreement) at the first Closing at which the 
Company issues Obligations. We may waive or modify provisions of the 
Agreement based on our evaluation of the aggregate security for the 
Guarantees.
    (b) Financial covenants. There will be two sets of covenants. One 
set of covenants will be imposed regardless of the Company's financial 
condition (primary covenants). The other set of covenants will be 
imposed only if the Company does not meet specific financial conditions 
(supplemental covenants). The primary and supplemental covenants are to 
be set forth in the Agreement. Covenants shall be imposed on the Company 
as follows:
    (1) Primary covenants. So long as Guarantees are in effect the 
Company shall not, without our prior written consent:
    (i) Make any distribution of earnings, except as may be permitted as 
follows:
    (A) From retained earnings in an amount specified in paragraph 
(b)(1)(i)(C) of this section, provided that, in the fiscal year in which 
the distribution of earnings is made there is no operating loss to the 
date of such payment of such distribution of earnings, and there was no 
operating loss in the immediately preceding three fiscal years, or there 
was a one-year operating loss during the immediately preceding three 
fiscal years, but such loss was not in the immediately preceding fiscal 
year, and there was positive net income for the three year period;
    (B) If distributions of earnings may not be made under paragraph 
(b)(1)(i)(A) of this section, a distribution can be made in an amount 
equal to the total operating net income for the immediately preceding 
three fiscal year period, provided that:
    (1) There were no two successive years of operating losses;
    (2) There is no operating loss to the date of such distribution in 
the fiscal year in which such distribution is made; and
    (3) The distribution of earnings made would not exceed an amount 
specified in paragraph (b)(1)(i)(C) of this section;
    (C) Distributions of earnings may be made from earnings of prior 
years in an aggregate amount equal to 40 percent of the Company's total 
net income after tax for each of the prior years, less any distributions 
that were made in such years; or the aggregate of the Company's total 
net income after tax for such prior years, provided that, after making 
such distribution, the Company's Long-Term Debt does not exceed its Net 
Worth. In computing net income for purposes of this paragraph 
(b)(1)(i)(C), extraordinary gains, such as gains from the sale of 
assets, will be excluded;
    (ii) Enter into any service, management or operating agreement for 
the operation of the Vessel or the Shipyard Project (excluding 
husbanding type agreements), or appoint or designate a managing or 
operating agent for the operation of the Vessel or the Shipyard Project 
(excluding husbanding agents) unless approved by us;
    (iii) Sell, mortgage, transfer, or demise charter the Vessel or the 
Shipyard Project or any assets to any non-Related Party except as 
permitted in paragraph (b)(1)(vii) of this section or sell, mortgage, 
transfer, or demise charter the Vessel or any assets to a Related Party, 
unless such transaction is at a fair market value as determined by an 
independent appraiser acceptable to us, and is a total cash transaction;
    (iv) Enter into any agreement for both sale and leaseback of the 
same assets so sold unless the proceeds from such sale are at least 
equal to the fair market value of the property sold;
    (v) Guarantee, or otherwise become liable for the obligations of any 
other Person, except with respect to any undertakings as to the fees and 
expenses

[[Page 143]]

of the Indenture Trustee, except endorsement for deposit of checks and 
other negotiable instruments acquired in the ordinary course of business 
and except as otherwise permitted in this section;
    (vi) Directly or indirectly embark on any new enterprise or business 
activity not directly connected with the business of shipping or other 
activity in which the Company is actively engaged;
    (vii) Enter into any merger or consolidation or convey, sell, demise 
charter, or otherwise transfer, or dispose of any portion of its 
properties or assets (any and all of which acts are encompassed within 
the words ``sale'' or ``sold'' as used in this section), provided that, 
the Company will not be deemed to have sold such properties or assets if 
the net book value of the aggregate of all the assets sold by the 
Company during any period of 12 consecutive calendar months does not 
exceed ten percent of the total net book value of all of the Company's 
assets; the Company retains the proceeds of the sale of assets for use 
in accordance with the Company's regular business activities; and the 
sale is not otherwise prohibited by paragraph (b)(1)(iii) of this 
section. The Company may not consummate such sale without our prior 
written consent if the Company has not, prior to the time of such sale, 
submitted to us, as required, its most recently audited financial 
statements referred to in Sec. 298.42(a) and any attempt to consummate 
a sale absent such approval will be null and void ab initio.
    (2) Supplemental Covenants which may become applicable. Unless, 
after giving effect to such transaction or transactions, during any 
fiscal year of the Company, the Company's Working Capital is equal to at 
least one dollar, the Company's Long-Term Debt does not exceed two times 
the Company's Net Worth and the Company's Net Worth is at least the 
amount specified by us, the Company shall not, without our prior written 
consent:
    (i) Withdraw any capital;
    (ii) Redeem any share capital or convert any of the same into debt;
    (iii) Pay any dividend (except dividends payable in capital stock of 
the Company);
    (iv) Make any loan or advance (except advances to cover current 
expenses of the Company), either directly or indirectly, to any 
stockholder, director, officer, or employee of the Company, or to any 
other Related Party;
    (v) Make any investments in the securities of any Related Party;
    (vi) Prepay in whole or in part any indebtedness to any stockholder, 
director, officer, or employee of the Company, or to any Related Party, 
which has a stated maturity of more than one year from such date;
    (vii) Increase any direct employee compensation (as defined in this 
paragraph) paid to any employee in excess of $100,000 per annum; nor 
increase any direct employee compensation which is already in excess of 
$100,000 per annum; nor initially employ or re-employ any person at a 
direct employee compensation rate in excess of $100,000 per annum; 
provided, however, that beginning with January 1, 2000 the $100,000 
limit may be increased annually based on the previous years' closing 
Consumer Price Index for All Urban Consumers published by the Bureau of 
Labor Statistics. For the purpose of this paragraph, the term ``direct 
employee compensation'' is the total amount of any wage, salary, bonus 
commission, or other form of direct payment to any employee from all 
companies with guarantees under the Act as reported to the Internal 
Revenue Service for any fiscal year.
    (viii) Acquire any fixed assets other than those required for the 
maintenance of the Company's existing assets, including normal 
maintenance and operation of any vessel or vessels owned or chartered by 
the Company;
    (ix) Either enter into or become liable (directly or indirectly) 
under charters and leases (having a term of six months or more) for the 
payment of charter hire and rent on all such charters and leases which 
have annual payments aggregating in excess of an amount specified by us;
    (x) Pay any indebtedness subordinated to the Obligations or to any 
other Title XI obligations;

[[Page 144]]

    (xi) Create, assume, incur, or in any manner become liable for any 
indebtedness, except current liabilities, or short term loans, incurred 
or assumed in the ordinary course of business as such business presently 
exists;
    (xii) Make any investment whether by acquisition of stock or 
indebtedness, or by loan, advance, transfer of property, capital 
contribution, guarantee of indebtedness or otherwise, in any Person, 
other than obligations of the United States, bank deposits or 
investments in securities of the character permitted for monies in the 
Title XI Reserve Fund; and,
    (xiii) Create, assume, permit or suffer to exist or continue any 
mortgage, lien, charge or encumbrance upon, or pledge of, or subject to 
the prior payment of any indebtedness, any of its property or assets, 
real or personal, tangible or intangible, whether now owned or 
thereafter acquired, or own or acquire, or agree to acquire, title to 
any property of any kind subject to or upon a chattel mortgage or 
conditional sales agreement or other title retention agreement, except 
loans, mortgages and indebtedness guaranteed by us under Title XI of the 
Act or related to the construction of a vessel approved for Title XI by 
us, and liens incurred in the ordinary course of business as such 
business presently exists.
    (c) Title XI Reserve Fund Net Income. The Agreement shall provide 
that within 105 days after the end of its accounting year, the Company 
will compute its net income attributable to the operation of the 
Vessel(s) that were constructed, reconstructed, reconditioned or 
refinanced with Title XI financing assistance (Title XI Reserve Fund Net 
Income). The computation utilizes a ratio expressed as a percentage, and 
applies this percentage to the Company's total net income after taxes. 
The numerator of the ratio is be the total original capitalized cost of 
all Company Vessels (whether leased or owned) which were constructed, 
reconstructed, reconditioned or refinanced with the assistance of 
Guarantees. The denominator shall be the total original capitalized cost 
of all the Company's fixed assets. In the case of Shipyard Project, the 
Agreement shall provide that within 105 days after the end of its 
accounting year, the Company shall submit its audited financial 
statements showing its net cash flow in a manner acceptable to us, in 
lieu of any other computation of Reserve Fund Net Income specified in 
this section for Vessels. The net income after taxes, computed in 
accordance with GAAP, will be adjusted as follows:
    (1) The depreciation expense applicable to the accounting year shall 
be added back.
    (2) There shall be subtracted:
    (i) An amount equal to the principal amount of debt required to be 
paid or redeemed, and actually paid or redeemed by the Company (other 
than from the Title XI Reserve Fund) during the year; and
    (ii) The principal amount of Obligations retired or paid (as defined 
in the Security Agreement), prepaid or redeemed, in excess of the 
required redemptions or payments which may be used by the Company as a 
credit against future required redemptions or other required payments 
with respect to the Obligations.
    (d) Deposits. Unless the Company, as of the close of its accounting 
year, was subject to and in compliance with the financial requirements 
set forth in paragraph (b)(2) of this section, the Company shall make 
one or more deposits to us to be held by the Depository (the Title XI 
Reserve Fund), as further provided for in the Depository Agreement. The 
amount of deposit as to any year, or period less than a full year, where 
applicable, will be determined as follows:
    (1) Fifty percent of the Title XI Reserve Fund Net Income, less an 
amount equal to 10% of the Company's total original equity investment in 
the Vessel or Vessels, (if the Company is the owner of the assets), will 
be deposited into the Title XI Reserve Fund.
    (2) In the case of Shipyard Project, the shipyard shall make a 
deposit at two percent of its net cash flow, as defined by GAAP, and as 
shown on its audited financial statements.
    (3) Any additional amounts that may be required pursuant to the 
Security Agreement or any other agreement in the documentation to which 
the Company is a party.

[[Page 145]]

    (4) Any additional amounts that may be required, pursuant to 
provisions of the Security Agreement or any other agreement in the 
documentation to which the Company is a party.
    (5) Irrespective of the Company's deposit requirement, as stated in 
paragraphs (d) (1) through (4) of this section, the Company will not be 
required to make any deposits into the Title XI Reserve Fund if any of 
the following events will have occurred:
    (i) The Company will have discharged the Obligations and related 
Secretary's Note and will have paid other sums secured under the 
Security Agreement and Preferred Mortgage;
    (ii) All Guarantees with respect to outstanding Obligations will 
have terminated pursuant to the provisions of the Security Agreements, 
other than by reason of payment of the Guarantees; or
    (iii) The amount in the Title XI Reserve Fund, (including any 
securities at market value), is equal to, or in excess of 50 percent of 
the principal amount of outstanding Obligations.
    (e) Fund in lieu of Title XI Reserve Fund. If the Company has 
established a Capital Construction Fund (CCF), pursuant to section 607 
of the Act, whether interim or permanent, at any time when a deposit 
would otherwise be required to be made into the Title XI Reserve Fund, 
and the Company elects to make such deposits to the CCF, the Company 
must enter into an agreement, satisfactory to us, providing that all 
such deposits of assets therein will be security (CCF Security Amount) 
to the United States in lieu of the Title XI Reserve Fund. The deposit 
requirements of the Title XI Reserve Fund and Financial Agreement will 
be deemed satisfied by deposits of equal amounts in the CCF, and 
withdrawal of the CCF Security Amount will be subject to our prior 
written consent. If, for any reason, the CCF terminates prior to the 
payment of the Obligations, the Secretary's Note and all other amounts 
due under or secured by the Security Agreement or Mortgage, the CCF 
Security Amount will be deposited or redeposited in the Title XI Reserve 
Fund.

[65 FR 45152, July 20, 2000, as amended at 67 FR 61282, Sept. 30, 2002]



Sec. 298.36  Guarantee Fee.

    (a) Rates in general. (1) For annual periods, beginning with the 
date of the Security Agreement and prior to the delivery date of a 
Vessel or Shipyard Project, we shall charge a Guarantee Fee set at a 
rate of not less than \1/4\ of 1 percent and not more than \1/2\ of 1 
percent of the excess of the average principal amount of the Obligations 
estimated to be outstanding during the annual periods covered by said 
Guarantee Fee over the average principal amount, if any, on deposit in 
the Escrow Fund during said annual period (Average Principal Amount of 
Obligations Outstanding).
    (2) For annual periods beginning with the delivery date of a Vessel 
or Shipyard Project, the Guarantee Fee shall be set at an annual rate of 
not less than \1/2\ of 1 percent and not more than 1 percent of the 
Average Principal Amount of Obligations Outstanding during the annual 
periods covered by the Guarantee Fee. You will be responsible for 
payment of the Guarantee Fee.
    (b) Rate calculation. (1) The Guarantee Fee rate generally shall 
vary inversely with the ratio of Equity to Long-Term Debt (Variable 
Rate) of the Person who we consider to be the primary source of credit 
in the transaction (Credit Source), for example,
    (i) The long term time charterer (where the charter hire represents 
the source of payment of interest and principal with respect to the 
Obligations),
    (ii) The guarantor of the Obligations,
    (iii) The Obligor, or
    (iv) The bareboat charterer.
    (2) Where the Variable Rate is used, we may make such adjustments to 
the computation of Equity and Long-Term Debt considered necessary to 
reflect more accurately the financial condition of the Credit Source.
    (3) We shall base our determination of Equity and Long-Term Debt on 
information contained in forms or statements on file with us prior to 
the date on which the Guarantee Fee is to be paid.
    (4) With our consent, you may include in Equity and exclude from 
Long-Term Debt, any subordinated indebtedness representing loans from 
any credit source.

[[Page 146]]

    (5) We may establish a fixed rate or other method of calculation of 
the Guarantee Fee, upon an evaluation of the aggregate security for the 
Guarantees.
    (c) Variable Rate prior to Vessel or Shipyard Project. For annual 
periods beginning prior to the delivery date of a Vessel or Shipyard 
Project being constructed, reconstructed, or reconditioned, the 
Guarantee Fee shall be determined as follows:
    (1) If the Equity is less than 15 percent of the Long-Term Debt, the 
Guarantee Fee rate shall be \1/2\ of 1 percent of the Average Principal 
Amount of Obligations Outstanding during the annual period covered by 
the Guarantee Fee.
    (2) If the Equity is at least 15 percent of the Long-Term Debt, but 
less than the Long-Term Debt, the Guarantee Fee rate shall be \3/8\ of 1 
percent of the Average Principal Amount of Obligations Outstanding 
during the annual period covered by the Guarantee Fee.
    (3) If the Equity is equal to or exceeds the Long-Term Debt, the 
Guarantee Fee rate shall be \1/4\ of 1 percent of the Average Principal 
Amount of Obligations Outstanding during the annual period covered by 
the Guarantee Fee.
    (d) Variable Rate after Vessel or Shipyard Project delivery or 
completion. For annual periods beginning on or after the Vessel or 
Shipyard Project delivery date, the Guarantee Fee shall be determined as 
follows:
    (1) If the Equity is less than 15 percent of the Long-Term Debt, the 
Guarantee Fee rate shall be 1 percent of the Average Principal Amount of 
Obligations Outstanding during the annual period covered by the 
Guarantee Fee.
    (2) If the Equity is at least 15 percent of the Long-Term Debt but 
less than 60 percent of the Long-Term Debt, the Guarantee Fee rate shall 
be \3/4\ of 1 percent of the Average Principal Amount of Obligations 
Outstanding during the annual period covered by the Guarantee Fee.
    (3) If the Equity is at least 60 percent of the Long-Term Debt, but 
less than the Long-Term Debt, the Guarantee Fee rate shall be \5/8\ of 1 
percent of the Average Principal Amount of Obligations outstanding 
during the annual period covered by the Guarantee Fee.
    (4) If the Equity is equal to or exceeds the Long-Term Debt, the 
Guarantee Fee rate shall be \1/2\ of 1 percent of the Average Principal 
Amount of Obligations outstanding during the annual period covered by 
the Guarantee Fee.
    (e) Payment of Guarantee Fee. (1) The Guarantee Fee covering the 
full period of the stated maturity of the Obligations commencing with 
the date of the Security Agreement shall be paid to us concurrently with 
the execution and delivery of said Agreement. The project's entire 
Guarantee Fee payment shall be made by you to us in an amount equal to 
the sum of the present value of the separate products obtained by 
applying the pertinent pre or post delivery Guarantee Fee rate or rates 
to the projected amount of the Average Principal Amount of Obligations 
Outstanding for each year of the stated maturity of the Obligations. In 
calculating the present value used in determining the amount of the 
Guarantee Fee to be paid, we shall use a discount rate based on 
information contained in the President's most recently submitted budget.
    (2) The Guarantee Fee may be included in Actual Cost, is eligible to 
be financed, and is non-refundable.
    (f) Proration of Guarantee Fee. The Guarantee Fee shall be prorated 
where a Vessel delivery is scheduled to occur during the annual period 
with respect to which payment of said Guarantee Fee is being made, as 
follows:
    (1) Undelivered Vessel. If the Guarantee Fee relates to an 
undelivered Vessel, the predelivery rate is applicable to the Average 
Principal Amount of Obligations Outstanding for the period from the date 
of the Security Agreement to the delivery date, and the delivered Vessel 
rate is applicable for the balance of the annual period in which the 
delivery occurs.
    (2) Multiple Vessels. If the Guarantee Fee relates to more than one 
Vessel, the amount of outstanding Obligations will be allocated to each 
Vessel in the manner prescribed in Sec. 298.33(d), and an amount shall 
be determined for each Vessel by using the rate that is applicable under 
paragraph (c) or (d) of this

[[Page 147]]

section. The Guarantee Fee shall be the aggregate of the amounts 
calculated for each Vessel.



Sec. 298.37  Examination and audit.

    (a)(1) We shall have the right to examine and audit the books, 
records (including original logs, cargo manifests and similar records) 
and books of account, which pertain directly to the project, of the 
Obligor, bareboat charterer, time charterer or any other Person who has 
an agreement with respect to control of, or a financial interest in, a 
Vessel or Shipyard Project, as well as records of a Related Party and 
domestic agents connected with such Persons, and shall have full, free 
and complete access to these items at all reasonable times.
    (2) We shall have the right to full, free and complete access, at 
all reasonable times, to each Vessel or Shipyard Project for which 
Guarantees are in force.
    (3) When a Vessel is in port or undergoing repairs, we may make 
photostatic or other copies of any books, records and other relevant 
documents or papers being examined or audited.
    (b) The Person in control of the premises where we conduct the 
examination or audit must furnish, without charge, adequate office space 
and other facilities that we reasonably require in performing the 
examination, audit or inspection.



Sec. 298.38  Partnership agreements and limited liability company agreements.

    Partnership and limited liability company agreements must be in form 
and substance satisfactory to us prior to any Guarantee Closing, 
especially relating, but not limited to:
    (a) Duration of the entity;
    (b) Adequate partnership or limited liability company funding 
requirements and mechanisms;
    (c) Dissolution of the entity and withdrawal of a general partner or 
member;
    (d) The termination, amendment, or other modification of the entity 
without our prior written consent; and
    (e) Distribution of funds or ownership interest.



Sec. 298.39  Exemptions.

    We may exempt an applicant from any requirement of this part, unless 
required by statute or other regulations, in exceptional cases, on 
written findings that:
    (a) The case materially involves factors not considered in the 
promulgation of this part;
    (b)(1) A national emergency makes it necessary to approve the 
exemption, or
    (2) The exemption will substantially relieve the financial liability 
of the United States;
    (c) The exemption will not substantially impact effective regulation 
of the Title XI program, consistent with the objectives of this part;
    (d) The exemption will not be unjustly discriminatory; and
    (e) For Eligible Export Vessels, such exemption would assist in 
creating financing terms that would be compatible with export credit 
terms for the sale of vessels built in shipyards other than those in the 
United States.



 Subpart E_Defaults and Remedies, Reporting Requirements, Applicability 

                             of Regulations



Sec. 298.40  Defaults.

    (a) In General. Provisions concerning the existence and declaration 
of a default and demand for payment of the Obligations (described in 
paragraphs (b) and (c) of this section) shall be included in the 
Security Agreement and in other parts of the Documentation.
    (b) Principal and interest Payment Default. Unless we have assumed 
the Obligor's rights and duties under the Obligation and agreements and 
have made any payments in default under terms in the Obligation or 
related agreements, the following procedures regarding principal and 
interest payment default shall apply:
    (1) No demand shall be made for payment under the Guarantees unless 
the default shall have continued for 30 days (Payment Default).
    (2) After the expiration of said 30-day period, demand for payment 
of all amounts due under the Guarantees must be made no later than 60 
days afterward.

[[Page 148]]

    (3) After demand for payment is made by or on behalf of the 
Obligees, we shall make payment under the Guarantees, except if we 
determine that a Payment Default has not occurred or that such Payment 
Default has been remedied prior to demand being made.
    (c) Security Default. If a default occurs under the Security 
Agreement which is other than a Payment Default (Security Default), 
section 1105(b) of the Act allows us, in our sole discretion, to declare 
such default a Security Default, and we may notify the Obligee or agent 
of the Obligee of such Security Default, stating that demand for payment 
under the Guarantees must be made no later than 60 days after the date 
of such notification.
    (d) Payment of Guarantees. If we receive notice of demand for 
payment of the Guarantees, we shall, no later than 30 days after the 
date of such demand (provided that we shall not have, upon such terms as 
may be provided in the Obligations or related agreements, prior to that 
demand, assumed the Obligor's rights and duties under the Obligation and 
agreements and shall have made any payments in default), make payment to 
the Obligees, Indenture Trustee or any other agent of the unpaid 
principal amount of Obligations and unpaid interest accrued and accruing 
thereon up to, but not including, the date of payment.



Sec. 298.41  Remedies after default.

    (a) In general. The Security Agreement or other parts of the 
Documentation shall include provisions governing remedies after a 
default, which relate to our rights and duties, the rights and duties of 
the Obligor, and other appropriate Persons.
    (b) Action by the Secretary. (1) We may take the Vessel or Shipyard 
Project and hold, lease, charter, operate or use the Vessel or Shipyard 
Project, accounting only for the net profits to the Obligor after a 
default has occurred and is continuing and before making payment 
required under the Guarantees.
    (2) After making payment required under the Guarantees, we may 
initiate or otherwise participate in legal proceedings of every type, or 
take any other action considered appropriate, to protect rights and 
interests granted to us under:
    (i) Sections 1105(c), 1105(e) and 1108(b) of the Act,
    (ii) The Security Agreement,
    (iii) Other applicable provisions of law, and
    (iv) The Documentation.
    (c) Security proceeds to Secretary. Our interest in proceeds 
realized from the disposition of or collection regarding the security 
granted to us in consideration for the Guarantees (except all proceeds 
from the sale, requisition, charter or other disposition of property 
purchased by us at a foreclosure or other public sale, which proceeds 
shall belong to and vest exclusively in us), shall be an amount equal 
to, but not in excess of, the sum of (in order of priority of 
application of the proceeds):
    (1) All moneys due and unpaid and secured by the Mortgage or 
Security Agreement;
    (2) All advances, including interest thereon, by us, under the 
Security Agreement and all our reasonable charges and expenses;
    (3) The accrued and unpaid interest on the Secretary's Note;
    (4) The accrued and unpaid balance of the principal of the 
Secretary's Note; and
    (5) To the extent of any collaterization by the Obligor of other 
debt due to us from the Obligor under other Title XI financings, such 
other Title XI debt.
    (d) Security proceeds to Obligor. You shall be entitled to the 
proceeds from the sale or other disposition of security, described in 
paragraph (c) of this section, if and to the extent that the proceeds 
realized are in excess of the amounts described in paragraphs (c)(1) 
through (5) of this section.



Sec. 298.42  Reporting requirements--financial statements.

    (a) In general. The financial statements of the Company shall be 
audited at least annually, in accordance with generally accepted 
auditing standards, by independent certified public accountants licensed 
to practice by the regulatory authority of a State or other political 
subdivision of the United States or, licensed public accountants 
licensed to practice by the

[[Page 149]]

regulatory authority or other political subdivision of the United States 
on or before December 31, 1970.
    (b) Eligible Export Vessels. In the case of Eligible Export Vessels, 
the accounts of the Company shall be audited at least annually, and 
unless otherwise agreed to by us, we shall require that the financial 
statements be in accordance with generally accepted accounting 
principles, by accountants as described in paragraph (a) of this section 
or by independent public accountants licensed to practice by the 
regulatory authority or other political subdivision of a foreign 
country, provided such accountants are satisfactory to us. The 
accountants performing such audits may be the regular auditors of the 
Company.
    (c) Reports of Company and other Persons. Except as we require 
otherwise, the Company must file a semiannual financial report and an 
annual financial report, prepared in accordance with generally accepted 
accounting principles, with us as specified in the Documentation. You 
must include:
    (1) The balance sheet and a statement of paid-in-capital and 
retained earnings at the close of the required reporting period,
    (2) A statement of income for the period, and
    (3) Any other statement that we consider necessary to accurately 
reflect the Company's financial condition and the results of its 
operations.
    (d) Required form. We will specify in a letter to the Company the 
form required for reporting and the number of copies that you must 
submit
    (e) Other Persons. We may after providing the Company notice, also 
require the Company to submit financial statements of any other Person, 
directly or indirectly participating in the project, if the financial 
condition of that Person affects our security for the Guarantees.
    (f) Timeliness. The required financial report for the annual period 
will be due within 105 days after the close of each fiscal year of the 
Company, commencing with the first fiscal year ending after the date of 
the Security Agreement. The required semiannual report will be due 
within 105 days after each semiannual period, commencing with the first 
semiannual period ending after the date of the Security Agreement.
    (g) Public accountant's report. The annual report will be 
accompanied by the public accountant's report based on an audit of the 
company's financial statements. We may require an audit by the public 
accountants of the financial statements contained in the company's 
semiannual report. We also may require certification of the semiannual 
report by the accountants. Where independent certification is not 
required, a responsible corporate officer will attach a certification 
that such report is based on the accounting records and, to the best of 
that officer's knowledge and belief, is accurate and complete.
    (h) Leveraged lease financing. If the method of financing involved 
is a leveraged lease financing, or a trust is the owner of the Vessels, 
we may modify the requirements for annual and semiannual accounting 
reports of the Obligor accordingly.
    (i) Letter of confirmation. The Company must furnish, along with its 
financial report, a letter of confirmation issued by its insurance 
underwriter(s) or broker(s) that the Company has paid premiums on 
insurance applicable to the preservation, protection and operation of 
the asset, which information must state the term for which the insurance 
is in force.



Sec. 298.43  Applicability of the regulations.

    (a) The regulations in this part are effective August 21, 2000, and 
apply to all applications made, Letter Commitments, Commitments to 
Guarantee Obligations or Guarantees issued or entered into on or after 
August 21, 2000, under section 1104(a) of the Merchant Marine Act, 1936, 
as amended.
    (b) The regulations in this part do not apply to any applications 
made, Letter Commitments, Commitments to Guarantee Obligations, or 
Guarantees issued under those regulations in effect before August 21, 
2000. See 46 CFR, parts 200 to 499, edition revised as of October 1, 
1996 and 46 CFR, parts 200 to 499, edition revised as of October 1, 1999 
for regulations that apply to applications made, Letter Commitments,

[[Page 150]]

Commitments to Guarantee Obligations, or Guarantees issued before August 
21, 2000.

Subpart F--Administration [Reserved]



                         SUBCHAPTER E [RESERVED]

[[Page 151]]



                 SUBCHAPTER F_POSITION REPORTING SYSTEM





PART 307_ESTABLISHMENT OF MANDATORY POSITION REPORTING SYSTEM FOR 

VESSELS--Table of Contents



Sec.
307.1 Purpose.
307.3 Definitions.
307.5 Provisions of general applicability.
307.7 Information required in report.
307.9 When to report.
307.11 Report changes.
307.13 Where to report.
307.15 Release of information from reports.
307.17 Distress messages and hostile action reports.
307.19 Penalties.

    Authority: Secs. 204(b), 212(A), 1203(a), Merchant Marine Act, 1936, 
as amended (46 U.S.C. 1114(b), 1122(a), 1283)); Pub. L. 97-31; 46 CFR 
1.66.

    Source: 51 FR 18329, May 19, 1986, unless otherwise noted.



Sec. 307.1  Purpose.

    This part establishes that operators of U.S.-flag oceangoing vessels 
in U.S. foreign trade and certain foreign-flag vessels as described in 
46 U.S.C. 1283 must report on their locations according to the 
provisions of this regulation to enhance the safety of vessel operations 
at sea and provide a contingency for events of national emergency.



Sec. 307.3  Definitions.

    As used in this part:
    (a) Administrator means the Maritime Administrator of the Department 
of Transportation.
    (b) MARAD means the Maritime Administration, Department of 
Transportation.
    (c) Coast Guard means the United States Coast Guard, Department of 
Transportation.
    (d) AMVER means the Automated Mutual-Assistance Vessel Rescue System 
operated by the U.S. Coast Guard as it applies to U.S.-flag ships and 
certain non-U.S.-flag ships in U.S. foreign commerce under this 
regulation.



Sec. 307.5  Provisions of general applicability.

    (a) The following operators must comply with the reporting 
requirements contained in this part:
    (1) Operators of United States-flag vessels of one thousand gross 
tons or more, operating in the foreign commerce of the United States.
    (2) Operators of foreign-flag vessels of one thousand gross tons, or 
more, for which an Interim War Risk Insurance Binder has been issued 
under the provisions of Title XII, Merchant Marine Act, 1936, as amended 
(46 U.S.C. 1281 et seq.).
    (b) Operators of other merchant vessels may choose to submit reports 
and have voyage information forwarded to MARAD, when approved by the 
Coast Guard and MARAD. Information voluntarily provided by them will be 
released by Coast Guard only for safety purposes or to satisfy certain 
advance notification requirements of 33 CFR part 160. Requests should be 
addressed to the Maritime Administration, 400 Seventh Street, SW., 
Washington, DC 20590, Attn: MAR-742.



Sec. 307.7  Information required in report.

    (a) Types of Reports. Reports on vessel departure, arrival, position 
and deviation are required under this part. Sailing plans are optional, 
and may be sent prior to departure, or may be combined with departure 
reports.
    (b) Report Content. Content of each type of required report are 
specified below. Note that the word ``MAREP'' must be included in the 
text of each message if MARAD is to receive the information.
    (1) Sailing Plan Report. Sailing plan reports, though optional, must 
contain the following:
    (i) Vessel name,
    (ii) International Radio Call Sign,
    (iii) Intended time of departure,
    (iv) Port of departure and latitude/longitude,
    (v) Port of destination and latitude/longitude,
    (vi) Estimated time of arrival,
    (vii) Route information, and
    (viii) The keyword ``MAREP''.

[[Page 152]]


If optional remarks are included, they must follow at the end of the 
text.
    (2) Departure Report. Departure reports must contain the following:
    (i) Vessel name,
    (ii) International Radio Call Sign,
    (iii) Time of departure,
    (iv) Port of departure,
    (v) Latitude and longitude, and
    (vi) The keyword ``MAREP''.

If optional remarks are included, they must follow at the end of the 
text.
    (3) Position Report. Position reports must contain the following:
    (i) Vessel name,
    (ii) International Radio Call Sign,
    (iii) Time at reported position,
    (iv) Latitude and longitude, and
    (v) The keyword ``MAREP''.

If optional remarks are included, they must follow at the end of the 
text.
    (4) Deviation Report. Deviation reports are necessary to report 
sailing plan changes or other changes and must contain the following:
    (i) Vessel name,
    (ii) International Radio Call Sign,
    (iii) The changes to prior reports, and
    (iv) The keyword ``MAREP''.

If optional remarks are included, they must follow at the end of the 
text.
    (5) Arrival Report. Arrival reports must contain the following:
    (i) Vessel name,
    (ii) International Radio Call Sign,
    (iii) Port name,
    (iv) Latitude and longitude,
    (v) Time of arrival, and
    (vi) The keyword ``MAREP''.

If optional remarks are included, they must follow at the end of the 
text.



Sec. 307.9  When to report.

    (a) Operators required to report under this regulation shall send 
reports during the Radio Officer's normal duty hours.
    (b) Operators shall send reports as follows:
    (1) Departure Reports must be sent as soon as practicable upon 
leaving the Port of Departure.
    (2) Position Reports must be sent within twenty-four hours of 
departure, and subsequently, no less frequently that every forty-eight 
hours until arrival.
    (3) Arrival Reports must be sent immediately prior to or upon 
arrival at the Port of Destination.
    (4) Deviation Reports may be sent at the discretion of the vessel 
operator. Reports may be sent more frequently than the above schedule, 
as, for example, in heavy weather or under other adverse conditions.



Sec. 307.11  Report changes.

    The Administrator, through MARAD advisory or special warning, may 
direct changes in reporting frequency and specify particular information 
to be included in the comments section of AMVER messages.



Sec. 307.13  Where to report.

    To ensure that no charge is applied, all AMVER reports must be 
passed through specified radio stations. Those stations which currently 
accept AMVER reports and apply no coastal station, ship station, or 
landline charge are listed in each issue of the ``AMVER Bulletin'' 
publication, together with respective International Radio Call Sign, 
location, frequency bands, and hours of operation. The ``AMVER 
Bulletin'' is available from AMVER Maritime Relations Office, U.S. Coast 
Guard, Battery Park Building, New York, NY 10004. Although AMVER reports 
may be sent through other stations, the Coast Guard cannot reimburse the 
sender for any charges applied.

[51 FR 18329, May 19, 1986, as amended at 65 FR 47678, Aug. 3, 2000]



Sec. 307.15  Release of information from reports.

    (a) The information collected under these instructions will be 
released to recognized search-and-rescue authorities, to make advance 
notice to the U.S. Coast Guard of arrival in U.S. ports as required by 
certain sections of 33 CFR. The information collected will also be 
forwarded to the MARAD.
    (b) AMVER reports will remain voluntary for foreign ships unless 
otherwise directed by their governments, and will be kept strictly 
confidential by the U.S. Coast Guard. Information collected from such 
foreign ships will not be forwarded to MARAD.

[[Page 153]]

    (c) any information provided in the remarks line will be stored in 
AMVER's automatic data processing system for later review. However, no 
immediate action will be taken, nor will the information be routinely 
passed to other organizations. The remarks line cannot be used as a 
substitute for sending information to other search-and-rescue 
authorities or organizations. However, AMVER will, at the request of 
other SAR authorities, forward remarks line information to the 
requesting agencies.



Sec. 307.17  Distress messages and hostile action reports.

    (a) AWVER reports shall not replace distress messages and hostile 
action reports prescribed by Chapter 5, Defense Mapping Agency (DMA) 
Publication 117.
    (b) Vessel owners or operators subject to this part shall summarize 
distress messages or hostile action reports in the comments sections of 
AMVER reports.



Sec. 307.19  Penalties.

    The owner or operator of a vessel in the waterborne foreign commerce 
of the United States is subject to a penalty of $50 for each day of 
failure to file an AMVER report required by this part. Such penalty 
shall constitute a lien upon the vessel, and such vessel may be libeled 
in the district court of the United States in which the vessel may be 
found.

[[Page 154]]



                    SUBCHAPTER G_EMERGENCY OPERATIONS





PART 308_WAR RISK INSURANCE--Table of Contents



                            Subpart A_General

Sec.
308.1 Eligibility for vessel insurance.
308.2 Requirements for eligible vessels.
308.3 Applications for insurance; warranties; supporting documents; 
          payment of binder fees.
308.4 [Reserved]
308.5 Voluntary contract of commitment.
308.6 Period of interim binders, updating application information and 
          new applications.
308.7 Premiums and payment thereof.
308.8 War risk insurance underwriting agency agreement.

           Subpart B_War Risk Hull and Disbursements Insurance

308.100 Insured amount.
308.101 [Reserved]
308.102 Issuance of interim binder; terms and conditions; fees.
308.103 Insured amounts under interim binder.
308.104 Additional war risk insurance.
308.105 Reporting casualties and filing claims.
308.106 [Reserved]
308.107 War risk hull insurance policy.

          Subpart C_War Risk Protection and Indemnity Insurance

308.200 Insured amount--application.
308.201 [Reserved]
308.202 Issuance of interim binder; terms and conditions.
308.203 Amount insured under interim binder.
308.204 Additional war risk protection and indemnity insurance.
308.205 Reporting casualties and filing claims.
308.206 [Reserved]
308.207 War risk protection and indemnity insurance policy.

              Subpart D_Second Seamen's War Risk Insurance

308.300 Insured amount--application.
308.301 [Reserved]
308.302 Issuance of interim binder; terms and conditions.
308.303 Amounts insured under interim binder.
308.304 Reporting casualties and filing claims.
308.305 [Reserved]
308.306 Second Seamen's War Risk Policy, Form MA-242.

               Subpart E_War Risk Builder's Risk Insurance

308.400 Authority.
308.401 Eligibility for insurance.
308.402 Insurance during vessel construction period.
308.403 Insured amounts.
308.404 Application for insurance.
308.405 Form of application.
308.406 Issuance of policies; terms and conditions.
308.407 Premiums and payment.
308.408 Right of Maritime Administrator to change rate of premium.
308.409 Standard form of War Risk Builder's Risk Insurance Policy, Form 
          MA-283.
308.410 Reporting casualties and filing claims.

                   Subpart F_War Risk Cargo Insurance

                              Introduction

308.500 Authority.
308.501 Cargoes on which coverage is available.
308.502 Additional insurance.
308.503 Rate schedules.
308.504 Definition of territories and possessions.

                  Open Policy War Risk Cargo Insurance

308.505 General.
308.506 Application for an Open Cargo Policy.
308.507 Security for payment of premiums.
308.508 Issuance of an Open Cargo Policy.
308.509 Collateral deposit fund.
308.510 Surety bond.
308.511 Cancellation of Open Cargo Policy.
308.512 Declaration of shipments under Open Cargo Policy.
308.513 Payment of premiums and fees.
308.514 Return premium.
308.515 Payment in event of loss.
308.516 Failure to comply with Clause 21.
308.517 Open Cargo Policy, Form MA-300.
308.518 Standard optional endorsement No. 1, Form MA-300-A.
308.519 Standard optional endorsement No. 2, Form MA-300-B.
308.520 Standard optional endorsement No. 3, Form MA-300-C.
308.521 Application for Open Cargo Policy, Form MA-301.
308.522 Collateral deposit fund, letter of transmittal, Form MA-302.
308.523 Application for revision of Open Cargo Policy, Form MA-303.

[[Page 155]]

308.524 Application for cancellation of Open Cargo Policy, Form MA-304.
308.525 Application for decrease in amount of cash collateral fund, Form 
          MA-305.
308.526 Certificate for repayment of decrease of collateral deposit 
          fund, Form MA-306.
308.527 Application for return premium, Form MA-307.
308.528 Surety Bond A, Form MA-308.
308.529 Surety Bond B, Form MA-309.
308.530 Letter requesting increase or decrease in amount of surety bond, 
          Form MA-310.
308.531 Endorsement of surety bond increasing or decreasing amount of 
          coverage, Form MA-311.
308.532 Release of surety bond, Form MA-312.
308.533 Closing report, Form MA-313.
308.534 Certificate to be attached to closing report, Form MA-313-A.
308.535 Certificate to be attached to final closing report, Form MA-313-
          B.
308.536 Declaration where failure to comply with Clause 21 was 
          inadvertent, Form MA-314.

                  Facultative War Risk Cargo Insurance

308.538 General.
308.539 Application.
308.540 Premiums.
308.541 Issuance.
308.542 Warranty re thirty-day shipments.
308.543 Cancellation.
308.544 Facultative binder, Form MA-315.
308.545 Facultative cargo policy, Form MA-316.
308.546 Standard optional endorsement No. 1-A, Form MA-316-A.
308.547 Application for return premium, Form MA-317.

                                 General

308.548 Standard form of underwriting agency agreement for cargo, Form 
          MA-318.
308.549 Application for appointment of Cargo Underwriting Agent, Form 
          MA-319.
308.550 Certificate, Form MA-320.
308.551 War risk insurance clearing agency agreement for cargo, Form MA-
          321.
308.552 Effective date.

                       Subpart G_Records Retention

308.600 Records retention requirement.

    Source: 79 FR 17898, Mar. 31, 2014, unless otherwise noted.



                            Subpart A_General



Sec. 308.1  Eligibility for vessel insurance.

    Any vessel within one of the following categories shall be eligible 
for insurance, but shall remain eligible only while meeting the 
qualifications criteria in one of said categories. An eligible vessel is 
not insured unless and until an application is submitted as required in 
subpart B, C, or D of this part 308 and the Maritime Administrator, 
Department of Transportation, (Maritime Administrator) Maritime 
Administration (MARAD), approves said application.

    (a) A vessel registered, enrolled, or licensed under the laws of the 
United States of America (United States); any undocumented vessel owned 
or chartered by or made available to the United States or any department 
or agency thereof; any tug or barge or other watercraft (documented 
under the laws of the United States, or undocumented) owned by a citizen 
of the United States and used in essential water transportation; and 
United States citizen-owned watercraft used in the fishing trade or 
industry, except when used exclusively in or for sport fishing.

    (b) Any vessel, other than a vessel described in paragraph (a) of 
this section determined by the Maritime Administrator to be engaged in 
the national defense or the national economy of the United States and 
subject to an unqualified Contract of Commitment with the United States 
in a form required by the Maritime Administrator, and which is:

    (1) Owned by a United States corporation, or a foreign corporation 
in which a majority of the stock is owned and controlled by a citizen or 
citizens of the United States, whether direct or through intervening 
corporations, foreign or domestic. Where such intervening corporations 
are foreign, the ultimate majority ownership and control of the stock of 
such corporations must be vested in a citizen or citizens of the United 
States as defined 46 U.S.C. 50501(a);

    (2) Owned by a foreign corporation which is not directly or 
beneficially owned by a citizen or citizens of the United States, but 
which vessel is under a long-term charter or other long-term contract 
covering the use of the vessel on terms deemed by the Maritime 
Administrator to subject the vessel to United States control in the

[[Page 156]]

event of an emergency. The charterer of such vessel must be either a 
citizen or citizens of the United States or a foreign corporation in 
which a majority of the stock is owned and controlled by a citizen or 
citizens of the United States, whether direct or indirect through 
intervening corporations, foreign or domestic. Where such intervening 
corporations are foreign, ultimate majority ownership and control of the 
stock of such corporations must be vested in a citizen or citizens of 
the United States, as defined in 46 U.S.C. 50501(a).
    (c) Any other vessel, at the sole discretion of the Maritime 
Administrator, but only while engaged in a service which has been 
determined by the Maritime Administrator to be in the interest of the 
national defense or the national economy of the United States. Vessels 
in this category are not eligible for war risk insurance interim 
binders.



Sec. 308.2  Requirements for eligible vessels.

    (a) Restrictions--foreign-flag vessels. Interim insurance is 
available on any vessel described in Sec. 308.1(a) and (b), provided 
application for interim insurance is submitted as required in subparts 
B, C, or D of this part 308, and the Maritime Administrator approves 
said application: Provided, that only vessels of Panamanian, Honduran, 
Bahamian, Republic of the Marshall Islands or Liberian registry not more 
than 20 years old will be considered eligible under Sec. 308.1 (b) for 
interim insurance, subject at all times to the determination specified 
in paragraph (b) of this section.
    (b) Special rules--foreign-flag vessels. For the purpose of 
providing interim insurance on vessels described in Sec. 308.1(b), the 
Maritime Administrator shall consider the characteristics, employment, 
and general management of the vessel. The Maritime Administrator 
formally determines that the following vessels are engaged in a service 
in the interest of the national defense or the national economy of the 
United States and qualify for an interim binder:
    (1) Vessels substantially engaged in the foreign commerce of the 
United States or which would be required in the event of war or national 
emergency;
    (2) Tankers of not less than 2,000 deadweight tons;
    (3) Dry cargo vessels, including containerships, break-bulk, and dry 
bulk vessels;
    (4) Heavy lift vessels;
    (5) Refrigerated vessels and other classes of ships in short supply 
in the United States-flag fleet;
    (6) Passenger vessels; and
    (7) Other vessels with special capabilities, as determined by the 
Maritime Administrator.
    (c) Vessel Position Reports. All vessels for which war risk 
insurance interim binders have been issued shall file a Vessel Position 
Report. The purpose of this report is to inform U.S. agencies of vessel 
arrivals, departures, and at-sea locations. Failure to make required 
regular reports will cause MARAD to issue a one-time notice of default. 
If failure to report continues, MARAD shall cancel the interim binder 
for the subject vessel and any insurance attaching thereunder. MARAD 
will issue reporting instructions and formats with the binders.
    (d) Notice of change in status of vessel after binder issued. Any 
breach of the warranty prescribed hereunder as to vessels in all 
categories with respect to Department of Commerce Transportation Order 
T-1 (44 CFR Parts 401 and 402), as well as the additional warranties as 
to vessels in categories (b)(1) and (b)(2) of this section, with respect 
to maintenance of eligibility for insurance and availability of the 
insured vessels to the U.S. Government in time of emergency, shall 
terminate the binders and any insurance attaching thereunder. In the 
event of the sale, demise charter, requisition, confiscation, change of 
flag, total loss, or any other change in status which, by the terms of 
the binder causes the binder to terminate, prompt notice shall be given 
in writing to MARAD's underwriting agent and to MARAD at: Division of 
Marine Insurance, Maritime Administration, Department of Transportation, 
1200 New Jersey Avenue SE., MAR-712, Washington, DC 20950.
    (e) Nature of change in status of other vessels. It is the intention 
of the parties that any breach of the warranty as to

[[Page 157]]

operation in the approved service of vessels described in Sec. 308.1(c) 
shall terminate the insurance. In the event of the sale, demise charter, 
requisition, confiscation, change of flag, total loss, any other change 
in status or change in operation of the vessel in the approved service 
prompt notice shall be given to MARAD's underwriting agent MARAD's 
underwriting agent and to MARAD at the address in paragraph (d) of this 
section.



Sec. 308.3  Applications for insurance; warranties; supporting documents; 

payment of binder fees.

    (a) Application, binder forms. A single application for War Risk 
Insurance shall be filed on Form MA-528, specifying the types of 
insurance coverages for which the applicant is applying. A single 
application may be submitted for several vessels, if the application 
identifies each vessel to be insured and the coverage(s) required, by 
completing appendices A and B to that form. An interim binder for war 
risk insurance coverage, of the types described in subparts B, C and D 
of this part, shall be on Form MA-942, which may be obtained from the 
MARAD's underwriting agent or from MARAD.
    (b) Warranties--
    (1) In general. Applications for war risk hull and protection and 
indemnity insurance in any eligible category of this Part 308 shall 
include a warranty that, at all times during the effective period of the 
binder and any insurance attaching thereunder, the insured vessel, 
regardless of its nation of registry, will comply with Department of 
Commerce Transportation Order T-1 (44 CFR Parts 401 and 402), or any 
modifications thereof so long as it remains in force and that the vessel 
will not be chartered, unless in accordance with the provisions of 
Sec. Sec. 221.11 and 221.13 of this chapter, which requirement is 
applicable to any charter in existence at the time the applicant applies 
for insurance.
    (2) Vessels described in Sec. 308.1(a). Applications for war risk 
insurance on a vessel described in Sec. 308.1(a) shall contain the 
warranty that at, and from the date of issuance of the interim binder, 
and for and during the term of any insurance attaching thereunder, such 
vessel will remain eligible within its category.
    (3) Vessels described in Sec. 308.1(b). Applications for war risk 
insurance on a vessel described in Sec. 308.1(b) shall contain the 
warranties that at all times the vessel will remain eligible within its 
applicable category; that the vessel will be made available for use by 
the United States pursuant to the signed Contract of Commitment 
submitted with the insurance applications, as required by MARAD; that 
the vessel will remain in the approved service; and that no controlling 
interest in the vessel shall be transferred by a subsequent sale or 
long-term charter, except on the condition that the successor in 
interest agrees to be bound by the terms of the applicant's Contract of 
Commitment. All instruments transferring any controlling interest in the 
vessel, including long-term charter or merger agreements, shall be 
submitted to MARAD for prior approval.
    (4) Vessels described in Sec. 308.1(c). Applications for war risk 
insurance on a vessel described in Sec. 308.1(c) shall contain 
warranties that the vessel will remain in the approved service and that 
any change in flag or service will be reported in advance to MARAD for a 
new determination as to whether the vessel's service is in the interest 
of the national defense or the national economy of the United States. 
Vessels in this category are not eligible for war risk insurance interim 
binders.
    (5) Vessel locator filing requirements. Applications for insurance 
on vessels in all categories, except tugs and barges and vessels used 
exclusively in the fishing trade or industry, described in Sec. 
308.1(a), shall contain a warranty that at all times the vessel will 
file reports as required under the U.S. Coast Guard's Automated Mutual-
Assistance Vessel Rescue System (AMVER) as prescribed in Sec. 308.2(c) 
of this section.
    (c) Filing applications for insurance. All applications for 
insurance on a vessel shall be made to MARAD's underwriting agent and to 
MARAD at the address in Sec. 308.2(d).
    (d) Required submissions with--
    (1) In general. An application for insurance on a vessel described 
in Sec. 308.1(b) shall be accompanied by:

[[Page 158]]

    (i) A contract of commitment, in the form prescribed in Sec. 308.5. 
In the event the vessel is determined to be ineligible under the terms 
of this part 308, the applicant will be so advised and the executed 
contract of commitment and any official foreign government action or 
approval will be returned to the applicant by MARAD.
    (ii) An executed agreement contained in the application for 
insurance that any charter or other contract covering the use of the 
vessel during the period of the binder or any insurance attaching 
thereunder shall be subject to termination or suspension without notice 
in the event the United States requires the use of the vessel under the 
voluntary contract of commitment submitted by the applicant.
    (2) Certification of citizenship. An application for insurance on 
such a vessel shall be supported by execution of the citizenship 
certification, in the format set out in appendix C to Form MA-528, as 
described in paragraph (a) of this section. That certification shall be 
required to establish the U.S. citizenship of the majority ownership and 
control of the vessel-owning corporation, whether that ownership is 
direct or through intervening corporations.
    (3) Existing long-term charters. An application for a vessel in this 
category which is at the time of application under long-term charter or 
other long-term contract, either to the applicant or from the applicant 
to a third party, shall be jointly submitted by the owner and the 
charterer, and in addition to the other materials required under this 
paragraph, shall be accompanied by a copy of the long-term contract 
covering the use of the vessel and all addenda thereto, certified to be 
full and complete copies (except as to rate of hire or freight) and a 
completed appendix C to Form MA-528, establishing the U.S. citizenship 
of the majority of the shareholders and control of the charterer. The 
charterer shall also furnish to MARAD a certified copy of any amendment 
to such charter which may be issued subsequent to the issuance of any 
binder of insurance under this part 308.
    (4) Foreign government action or approval. An application for a 
vessel in this category also shall be accompanied by a certified copy of 
the evidence of any official action or approval required by the 
government of the country of registry as a prerequisite to the execution 
of a contract of commitment with the United States.
    (5) Additional materials. With respect to a vessel in this category, 
the applicant shall submit the following additional materials:
    (i) A statement describing the service in which the vessel is 
engaged, including a listing of the vessel's voyages and ports of call 
during the immediately preceding six (6) month period, indicating the 
tonnage and type of cargo carried on such voyages and the reasons why 
such service should be deemed to be in the interest of the national 
defense or the national economy of the United States;
    (ii) Material demonstrating the management and financial 
capabilities of the applicant; and
    (iii) In the case of a new vessel or a vessel which has not for the 
six (6) months immediately prior to the date of the application been 
engaged in the foreign commerce of the United States, a statement, 
signed by a responsible company official, certifying the extent to which 
the vessel will be engaged in the foreign commerce of the United States 
for the six (6) months immediately following the issuance of any interim 
binder of insurance under this part 308.
    (e) Requests for changes in binders. All requests for changes in 
binders and inquiries relative to the insurance after the interim 
binders have been issued shall be directed to MARAD's underwriting agent 
or MARAD at the address in Sec. 308.2(d).
    (f) Fees. A check payable in U.S. funds to the ``Maritime 
Administration, Department of Transportation'' for the total amount of 
all binder fees payable by such applicant shall accompany each 
application. Binder fees are not returnable.
    (g) Availability of Application Forms. Form MA-528 may be obtained 
from either MARAD's underwriting agent or MARAD at the address in Sec. 
308.2 (d).

[[Page 159]]



Sec. 308.4  [Reserved]



Sec. 308.5  Voluntary contract of commitment.

    Applications for insurance on vessels described in Sec. 308.1(b) 
shall be accompanied by a contract of commitment, in triplicate 
originals, executed by the owner (or by the owner and the charterer 
where required by Sec. 308.3). Contracts of commitment to make the 
vessel available to the United States during any period in which vessels 
may be requisitioned under 46 U.S.C. Chapter 563 shall be submitted on 
standard contract form which may be obtained from MARAD's underwriting 
agent or MARAD. The effective date of the contract of commitment will be 
the effective date of the binder and will be inserted in the contract of 
commitment by MARAD.



Sec. 308.6  Period of interim binders, updating application information 

and new applications.

    (a) All existing interim binders remain in full force and effect 
without the necessity of re-application or the payment of additional 
fees so long as the Secretary of Transportation's authority to provide 
such insurance has been extended and is continuous.
    (b) Assureds under interim binders are required to notify MARAD's 
underwriting agent annually, by June 30th, of any change in the 
information provided in their original binder applications including, 
but not limited to, change of address, vessel name or vessel 
characteristics.
    (c) New applications for interim binders on American vessels, with 
necessary attachments (as specified in Sec. 308.3), as well as checks 
for the binder fees prescribed made payable to ``Maritime 
Administration, Department of Transportation,'' shall be filed with the 
MARAD's underwriting agent. All interim binders on American vessels 
shall become effective as of the date of determination of eligibility by 
MARAD.
    (d) New applications for interim binders on U.S. citizen-owned or 
controlled foreign-flag vessels, with necessary attachments (as 
specified in Sec. 308.3), as well as checks for the binder fees 
prescribed made payable to ``Maritime Administration, Department of 
Transportation,'' shall be filed for review in accordance with 
eligibility requirements specified in Sec. 308.2, and mailed to MARAD's 
underwriting agent. All interim binders on foreign-flag vessels will 
become effective on the date the owner's contract of commitment is 
executed by MARAD.



Sec. 308.7  Premiums and payment thereof.

    Rate to be fixed promptly upon the happening of the event causing 
the American Institute Hull War Risks and Strikes Clauses dated December 
1, 1977 (including Automatic Termination and Cancellation Provisions) 
for attachment to American Institute Hull Clauses dated June 2, 1977 of 
any war risk policies to become operative and premium shall be payable 
within ten (10) days after receipt of notice of the amount thereof by 
the assured. Premiums shall be paid to the Underwriting Agent that 
issued the binders by check payable to the order of ``Maritime 
Administration, Department of Transportation.'' In the event that it is 
subsequently determined that insurance under interim binders did not 
attach, premiums paid will be refunded by the Maritime Administrator.



Sec. 308.8  War risk insurance underwriting agency agreement.

    Standard form MA-355, Underwriting Agency Agreement, shall be 
executed by the Maritime Administrator and domestic insurance companies 
or groups of domestic insurance companies authorized to do a marine 
insurance business in any States of the United States, appointing such 
companies or groups of companies as Underwriting Agents to issue binders 
and policies covering hull, protection and indemnity, and Second 
Seamen's war risk insurance under subparts B, C, and D of this part. It 
shall contain provisions including, but not limited to the appointment 
of the agent, duties of the agent, books and records, compensation, 
standard of performance, indemnification effective date, amendment and 
termination, and nondiscrimination.

[[Page 160]]



           Subpart B_War Risk Hull and Disbursements Insurance



Sec. 308.100  Insured amount.

    An applicant for war risk hull insurance shall state the amount of 
insurance desired but any payment of claim for damage to or actual or 
constructive total loss of the vessel insured shall be made as provided 
in Sec. 308.103(a). An applicant desiring disbursements insurance may 
at his option obtain such additional insurance but any claim for loss of 
disbursements as a consequence of the actual or constructive total loss 
of the vessel insured shall be made as provided in Sec. 308.103(c).



Sec. 308.101  [Reserved]



Sec. 308.102  Issuance of interim binder; terms and conditions; fees.

    Upon acceptance of an application, an interim binder in the form set 
forth in Sec. 308.106, will be issued and there shall be deemed to be 
incorporated therein by references all the terms, conditions, and 
warranties contained in the application for war risk hull and 
disbursements insurance and the standard war risk hull insurance policy 
(set forth in Sec. 308.107), to the same extent as if such application 
and policy were made a part of the binder. The binder fee (not 
refundable) for American vessels shall be $25 per application for 
vessels under 500 gross tons; $100 per application for vessels 500 gross 
tons or over; and $100 per barge application. The binder fee (not 
refundable) for foreign-flag vessels shall be $50 per application for 
vessels under 500 gross tons; $200 per application for vessels 500 tons 
or over; and $200 per barge application. All fees are payable in U.S. 
funds by check to order of ``Maritime Administration, Department of 
Transportation.''



Sec. 308.103  Insured amounts under interim binder.

    (a) Valuation. The valuation in the policy for damage to, or actual 
or constructive total loss of the vessel insured shall be a stated 
valuation (exclusive of National Defense features paid for by the 
Government) determined by the Maritime Administrator which shall not 
exceed the amount that would be payable if the vessel had been 
requisitioned for title under 46 U.S.C. Chapter 563 at the time of the 
attachment of the insurance under said policy: Provided, however, that 
in the case of a construction subsidized vessel, for the period of 
insurance prior to requisition for title or use, the valuation so 
determined shall be reduced by such proportion as the amount of 
construction subsidy paid with respect to the vessel bears to the entire 
construction cost and capital improvements thereof (excluding the cost 
of national defense features), and for the period of insurance after 
requisition for use the valuation so determined shall not exceed the 
amount which would be payable under 46 U.S.C. 56303 in the case of 
requisition for title or use: Provided, further, that the insured shall 
have the right within sixty (60) days after the attachment of the 
insurance under said policy, or within sixty (60) days after 
determination of such valuation by the Maritime Administrator, whichever 
is later, to reject such valuation, and shall pay, at the rate provided 
for in said policy, premiums upon such asserted valuation as the insured 
shall specify at the time of rejection, but such asserted valuation 
shall not operate to the prejudice of the Government in any subsequent 
action on the policy. In the event of the actual or constructive total 
loss of the vessel, if the insured has not rejected such valuation the 
amount of any claim therefor which is adjusted, compromised, settled, 
adjudged, or paid shall not exceed such stated amount, but if the 
insured has so rejected such valuation, the insured shall be paid as a 
tentative advance only, 75 per centum of such valuation so determined by 
the Maritime Administrator and shall be entitled to sue the United 
States in a court having jurisdiction of such claims to recover such 
valuation as would be equal to the just compensation which such court 
determines would have been payable if the vessel had been requisitioned 
for title under 46 U.S.C. Chapter 563 at the time of the attachment of 
the insurance under said policy: Provided, however, that in the case of 
a construction-subsidized vessel, the valuation determined by the court 
as such just compensation for any period of insurance

[[Page 161]]

prior to actual requisition for title or use of the vessel shall be 
reduced by such proportion as the amount of construction subsidy paid 
with respect to the vessel bears to the entire construction cost and 
capital improvements thereof (excluding the cost of national defense 
features), and for any period of insurance after actual requisition for 
use, the valuation determined by the court shall be the amount which 
would have been payable under 46 U.S.C. 56303 in the case of requisition 
for title: And provided further, that in the event of an election by the 
insured to reject the stated valuation fixed by the Maritime 
Administrator and to sue in the courts, the amount of the judgment will 
be payable without regard to any limitations provided by statute, 
although the excess of any amounts advanced on account of just 
compensation that is over the amount of the court judgment shall be 
required to be refunded by the insured. In the event of such court 
determination, premiums under the policy shall be adjusted on the basis 
of the valuation as finally determined and of the rate provided for in 
said policy. The ``stated valuation'' of the vessel insured refers to 
the vessel as described in Sec. 309.5 of this chapter.
    (b) Insurance risks. Insurance risks covered by the terms of the 
standard form of war risk hull insurance policy (Sec. 308.107), except 
damage to or actual or constructive total loss of the vessel insured as 
set forth in paragraph (a) of this section and loss of disbursements 
(limited to consumable and subsistence stores, slop chests, bar stock 
and bunker fuel lost as a consequence of the actual or constructive 
total loss of the vessel insured) as set forth in paragraph (c) of this 
section and identified as disbursements, shall be insured for an amount 
not in excess of the ``sum insured'' as referred to in said policy.
    (c) Disbursements. Disbursements shall be insured as authorized 
under 46 U.S.C. 53903(a)(4) and shall be limited to consumable and 
subsistence stores, slop chests, bar stock and bunker fuel. 
Disbursements insurance shall be optional and is insurance additional to 
the war risk hull insurance provided under this subpart, and payment of 
claim shall be limited to the actual value of the disbursements lost as 
a consequence of the actual or constructive total loss of the vessel 
insured.



Sec. 308.104  Additional war risk insurance.

    Owners or charterers may obtain, on an excess basis, additional war 
risk insurance in such amounts as desired and such insurance shall not 
inure to the benefit of the Maritime Administrator as underwriter.



Sec. 308.105  Reporting casualties and filing claims.

    All casualties occurring after insurance under a binder has attached 
shall be reported promptly to the underwriting agent that issued the 
binder and all claim documents shall likewise be filed with such 
underwriting agent, but payment of the amounts due in settlement of 
claims will be made by the Maritime Administrator.



Sec. 308.106  [Reserved]



Sec. 308.107  War risk hull insurance policy.

    Standard Form MA-240, issued by the Maritime Administrator, acting 
for the United States, through authority delegated by the Secretary of 
Transportation, may be obtained from MARAD's underwriting agent or 
MARAD.



          Subpart C_War Risk Protection and Indemnity Insurance



Sec. 308.200  Insured amount--application.

    An applicant for war risk protection and indemnity insurance shall 
state the amount of insurance desired but such amount shall not exceed 
$750 per gross ton of the Vessel.



Sec. 308.201  [Reserved]



Sec. 308.202  Issuance of interim binder; terms and conditions.

    Upon acceptance of an application, an interim binder in form as set 
forth in Sec. 308.3 will be issued and there shall be deemed to be 
incorporated therein by reference all the terms, conditions, and 
warranties contained in the application for war risk protection and 
indemnity insurance (set forth in Sec. 308.3) and the standard war risk 
protection

[[Page 162]]

and indemnity insurance policy (set forth in Sec. 308.207) to the same 
extent as if such application and policy were made a part of the binder. 
The binder fee (not refundable) shall be $100 per application for 
American barges; $25 per application for all other American vessels; 
$200 per application for foreign-flag barges; and $50 per application 
for all other foreign-flag vessels. All fees are payable in U.S. funds 
by check to the order of ``Maritime Administration, Department of 
Transportation.''



Sec. 308.203  Amount insured under interim binder.

    The amount insured shall be the amount stated in the application, 
but not in excess of $750 per gross ton of the vessel.



Sec. 308.204  Additional war risk protection and indemnity insurance.

    Owners or charterers may obtain, on an excess basis, additional war 
risk protection and indemnity insurance in such amounts as desired and 
such insurance shall not inure to the benefit of the Maritime 
Administrator, as underwriter.



Sec. 308.205  Reporting casualties and filing claims.

    All casualties occurring after insurance under a binder has attached 
shall be reported promptly to, and all claim documents filed with 
``Office of Marine Insurance, Maritime Administration, Department of 
Transportation.''



Sec. 308.206  [Reserved]



Sec. 308.207  War risk protection and indemnity insurance policy.

    The standard form of war risk protection and indemnity insurance 
policy, Form MA-241, may be obtained from MARAD's underwriting agent or 
MARAD.



              Subpart D_Second Seamen's War Risk Insurance



Sec. 308.300  Insured amount--application.

    An applicant for Second Seamen's war risk insurance shall not state 
the amount of insurance desired, which shall be as provided in Sec. 
308.303.



Sec. 308.301  [Reserved]



Sec. 308.302  Issuance of interim binder; terms and conditions.

    Upon acceptance of an application, an interim binder in form as set 
forth in Sec. 308.3 will be issued and there shall be deemed to be 
incorporated therein by reference all the terms, conditions, and 
warranties contained in the application for Second Seamen's war risk 
insurance (set forth in Sec. 308.3) and the Second Seamen's War Risk 
Policy (1955) (set forth in Sec. 308.306) to the same extent as if such 
application and policy were made a part of the binder. The binder fee 
(not refundable) shall be $75 per application for American vessels and 
$150 per application for foreign-flag vessels. All fees are payable in 
U.S. funds by check to the order of ``Maritime Administration, 
Department of Transportation.''



Sec. 308.303  Amounts insured under interim binder.

    The amounts insured are the amounts specified in the Second Seamen's 
War Risk Policy (1955) or as modified by shipping articles, collective 
bargaining agreements or other applicable employment agreements which 
are in effect as of the date of a casualty involving the subject vessel. 
Upon the attachment of this binder, the number of crew members and 
modified benefits payable as of that date shall be declared immediately 
to the Underwriting Agent that issued the binder. Any subsequent changes 
shall be likewise declared.



Sec. 308.304  Reporting casualties and filing claims.

    All casualties occurring after insurance under a binder has attached 
shall be reported promptly to, and all claim documents filed with, 
``Maritime Administration, Attention: Chief, Office of Marine 
Insurance.''



Sec. 308.305  [Reserved]



Sec. 308.306  Second Seamen's War Risk Policy, Form MA-242.

    The standard form of Second Seamen's War Risk Policy Form MA-242, 
may be obtained from MARAD's underwriting agent or MARAD.

[[Page 163]]



               Subpart E_War Risk Builder's Risk Insurance



Sec. 308.400  Authority.

    The Secretary of Transportation has delegated authority to the 
Maritime Administrator to perform the functions vested in the Secretary 
of Transportation by 46 U.S.C. Chapter 539. The Maritime Administrator, 
pursuant to a finding by the Secretary under 46 U.S.C. 53902(a) has 
authorized the issuance of war risk insurance on American vessels under 
construction in shipyards in the United States.



Sec. 308.401  Eligibility for insurance.

    A vessel is eligible for insurance if it is an American vessel, as 
defined in 46 U.S.C. 53901, being constructed in a shipyard within the 
United States.



Sec. 308.402  Insurance during vessel construction period.

    (a) Prelaunching period. This period is from the date and time the 
first material destined for inclusion as part of the vessel becomes at 
risk at the shipyard of the builder to the date and time the vessel 
first becomes water-borne after launching.
    (b) Postlaunching period. This period is from the date and time the 
vessel first becomes water-borne after launching to the date and time of 
delivery of the vessel by the builder.
    (c) Portions of periods. A vessel may be insured for a portion of 
either period as cited in paragraph (a) or (b) of this section at the 
sole discretion of the Maritime Administrator.



Sec. 308.403  Insured amounts.

    (a) Prelaunching period. The amount insured during this period will 
be the cost of material destined for inclusion as a part of the vessel 
at risk at the shipyard of the builder, plus the cost of labor, other 
direct charges, overhead, and profit not exceeding 10 percent, all as 
determined from the builder's records.
    (b) Postlaunching period. The amount insured during this period will 
be:
    (1) An amount not in excess of the difference in amount between the 
total amount of war risk insurance obtainable from companies authorized 
to do an insurance business in a State of the United States and the 
contract price of the vessel plus the cost of the materials and 
equipment furnished by the owner and not included in such contract 
price, or
    (2) An amount not in excess of the contract price of the vessel plus 
the cost of materials and equipment furnished by the owner and not 
included in the contract price: Provided, that no war risk insurance is 
obtainable from companies authorized to do an insurance business in a 
State of the United States.
    (c) Maximum liability. The amount of any claim for damage to or the 
total or constructive total loss of the vessel adjusted, compromised, 
settled, adjudged or paid shall not exceed the amount insured: Provided, 
that the amount payable hereunder shall not exceed the maximum sum which 
the Maritime Administrator, as Underwriter, is authorized to pay under 
any applicable Acts of Congress: Provided, further, that where MARAD is 
an Excess Underwriter, the amount payable under this insurance for 
damage to or the total or constructive total loss of the vessel, after 
all sums due and payable under primary and excess insurance written by 
commercial Underwriters have been exhausted, shall be the balance, if 
any, of said claims.



Sec. 308.404  Application for insurance.

    Application for insurance shall be made to ``Maritime 
Administration, Attention: Chief, Division of Marine Insurance'' at the 
address in Sec. 308.2(d). The applications shall be signed by all 
parties to be named as assureds, unless they have filed with the Chief, 
Division of Marine Insurance, written designations of a broker or 
brokers to act for them, in which case the applications may be signed by 
such broker or brokers.



Sec. 308.405  Form of application.

    Applications shall be submitted in duplicate and may be obtained 
from MARAD's underwriting agent or MARAD.



Sec. 308.406  Issuance of policies; terms and conditions.

    Upon acceptance of an application, a policy in the form specified in 
Sec. 308.409

[[Page 164]]

will be issued with endorsements MA-283(A) and MA-283(D), or MA-283(B) 
and MA-283(D), or MA-283(C), and MA-283(D), as appropriate.



Sec. 308.407  Premiums and payment.

    For the prelaunching period premium will be charged on the average 
value at risk during each calendar month or the daily pro rata part 
thereof for periods of less than one calendar month. For the 
postlaunching period premium will be charged on the amount insured for 
the full period. Premiums shall be due and payable within thirty days 
after receipt by the Assured of notice of the amount thereof and if not 
paid within that period the insurance shall become null and void and of 
no effect from the beginning of the period for which the premium charge 
is made unless the Maritime Administrator agrees otherwise. Payment 
shall be made to MARAD at the address in Sec. 308.2(d), by check 
payable to the order of ``Maritime Administration, Department of 
Transportation.''



Sec. 308.408  Right of Maritime Administrator to change rate of premium.

    The Maritime Administrator, acting for the Secretary of 
Transportation, shall have the right to change the rate of premium at 
any time, and unless the revised rate of premium is accepted in writing 
by the Assured within fifteen (15) days after receipt by the Assured of 
notice of the revised rate, the policy shall become null and void and of 
no effect as of midnight, Standard Time, at the location of the shipyard 
on the fifteenth (15th) day after receipt of said notice. Premium at the 
revised rate shall be payable for the fifteen (15) day period during 
which the insurance remained in force unless the Assured, within such 
period, dispatches notice to MARAD by fax, certified mail or courier of 
his refusal to accept such revised rate of premium, in which event 
premium at the revised rate shall be payable for that portion of the 
fifteen (15) day period prior to dispatch of such notice. Upon the 
dispatch of such notice of non-acceptance the insurance shall terminate.



Sec. 308.409  Standard form of War Risk Builder's Risk Insurance Policy, 

Form MA-283.

    The standard form of War Risk Builder's Risk Insurance Policy, Form 
MA-283 may be obtained from MARAD's underwriting agent or MARAD.



Sec. 308.410  Reporting casualties and filing claims.

    Casualties shall be reported promptly to, and all claims documents 
filed with MARAD, Attention: Chief, Division of Marine Insurance, at the 
address in Sec. 308.2(d).



                   Subpart F_War Risk Cargo Insurance

                              Introduction



Sec. 308.500  Authority.

    The Secretary of Transportation has delegated authority to the 
Maritime Administrator to perform the functions vested in the Secretary 
by 46 U.S.C. Chapter 539, which authority includes the insurance set 
forth in this Subpart, as provided under 46 U.S.C. 53903(a)(3). For the 
purposes of this Subpart F--War Risk Cargo Insurance, the terms 
``cargo'' and ``cargoes'' as used herein shall include loaded or empty 
containers located aboard American and foreign-flag vessels insured 
under 46 U.S.C. Chapter 539. Cargo war risk insurance will be written 
under either an open policy or a facultative policy in accordance with 
the provisions of this subpart.



Sec. 308.501  Cargoes on which coverage is available.

    The Maritime Administrator will be prepared to provide marine 
insurance against loss or damage by the risks of war under approved 
clauses on shipments of cargoes coming within one or more of the 
following categories:
    (a) Shipped or to be shipped on any American vessel, as defined in 
46 U.S.C. 53901;
    (b) Shipped or to be shipped on any foreign flag vessels owned by 
citizens of the United States;
    (c) Owned by citizens or residents of the United States, its 
Territories or possessions;

[[Page 165]]

    (d) Imported to, or exported from, the United States, its 
Territories or possessions, under contracts of sale or purchase by the 
terms of which the risk of loss by war risks or the obligation to 
provide insurance against such risks is assumed by or falls upon a 
citizen or resident of the United States, its Territories or 
possessions;
    (e) Sold or purchased by citizens or residents of the United States, 
its Territories or possessions, under contracts of sale or purchase by 
the terms of which the risk of loss by war risks or the obligation to 
provide insurance against such risks is assumed by or falls upon a 
citizen or resident of the United States, its Territories or 
possessions;
    (f) Shipped between ports in the United States, or between ports in 
the United States and its Territories and possessions, or between ports 
in such Territories or possessions; and
    (g) Shipped or to be shipped on any foreign flag vessels, whether or 
not owned by citizens of the United States, if such vessels are engaged 
in transportation in the water-borne commerce of the United States or in 
such other transportation by water or such other services as may be 
deemed by the Maritime Administrator to be in the interest of the 
national defense or the national economy of the United States, when so 
engaged.



Sec. 308.502  Additional insurance.

    The assured may place increased value or additional insurance in 
other markets beyond the amount of insurance provided by the Maritime 
Administrator, but such insurance must be non-participating with the 
Maritime Administrator's coverage, and without benefit of salvage or 
right of contribution.



Sec. 308.503  Rate schedules.

    Rate schedules published by the Maritime Administrator may be 
obtained from an underwriting agent. All rate schedules are subject to 
change by the Maritime Administrator at any time without notice. If no 
rate is published for a voyage on which war risk coverage is available, 
the Maritime Administrator will name a rate through an underwriting 
agent upon application.



Sec. 308.504  Definition of territories and possessions.

    Whenever reference is made to the territories and possessions of the 
United States in this subpart or in any supplement thereto or any policy 
of insurance issued pursuant to the provisions thereof, said territories 
and possessions shall be deemed to include only the Virgin Islands of 
the United States, the Commonwealth of Puerto Rico, American Samoa, 
Commonwealth of the Northern Mariana Islands, Guam, Wake Island, Midway 
Islands, Baker Island, Howland Island, Jarvis Island, Johnston Atoll, 
Kingman Reef, Navassa Island, and Wake Island.

                  Open Policy War Risk Cargo Insurance



Sec. 308.505  General.

    The Maritime Administrator is prepared to provide an open cargo war 
risk insurance policy covering any cargoes described in Sec. 308.501. 
The policy will be in the standard form of War Risk Open Cargo Policy, 
Form MA-300, prescribed in Sec. 308.517. All policies will be issued by 
underwriting agents appointed by the Maritime Administrator. All 
underwriting agents will be domestic insurance companies authorized to 
do a marine insurance business in a State of the United States.



Sec. 308.506  Application for an Open Cargo Policy.

    Application for an Open Cargo Policy shall be made by filing Form 
MA-301, prescribed in Sec. 308.521, with the underwriting agent of 
MARAD. The application shall state the applicant's name and address; the 
person or persons to whom loss shall be payable; the nature and 
geographic scope of the shipments to be covered under the policy which 
shall not be broader than the coverage authorized in Sec. 308.501; the 
requested effective date, which shall not be earlier than the date of 
the completion of the requirements for the issuance of the policy; and 
the basis of valuation to be incorporated in the policy. An applicant 
may specify one basis of valuation for imports and another for exports,

[[Page 166]]

and he may specify different bases of valuation for different 
commodities or voyages, provided that each basis of valuation specified 
by the applicant shall define the value by the use of facts which 
existed prior to the date of the shipment and which are readily 
ascertainable by either party after the safe arrival or loss of the 
shipment.



Sec. 308.507  Security for payment of premiums.

    Clause 21 of the policy requires the assured to maintain with the 
Maritime Administrator a collateral deposit fund or a surety bond, to 
secure the payment of the premiums, in an amount which shall at all 
times exceed the unpaid premiums on all risks which have attached under 
the policy. The minimum amount of the fund or of the surety bond shall 
be $1,000. Clause 21 also provides that, within seven (7) days from the 
time knowledge comes to the assured that the amount of the deposit or 
the surety bond is insufficient to meet the requirements of Clause 21, 
the assured shall deposit additional collateral or increase the surety 
bond in an amount not less than double the amount of such insufficiency, 
and for a sum which shall be a multiple of $500. If the assured fails to 
increase the deposit or the surety bond within the seven (7) day period, 
the policy automatically becomes void at the end of the seven (7) day 
period except as to risks which have attached prior to that date. The 
procedure for establishing a collateral deposit fund is prescribed in 
Sec. 308.509, and the procedure for posting and maintaining a surety 
bond is prescribed in Sec. 308.510. An application for the issuance of 
an open cargo policy shall be ineffective unless a collateral deposit 
fund is established and maintained, or a surety bond is posted and 
maintained, in accordance with the provisions of this section and Sec. 
308.510.



Sec. 308.508  Issuance of an Open Cargo Policy.

    (a) Time. The underwriting agent will issue an Open Cargo Policy 
within fifteen (15) days after the completion by the applicant of the 
requirements set forth in Sec. Sec. 308.506 and 308.507 unless the time 
for issuance is extended by the Maritime Administrator in writing. The 
underwriting agent may not make any Open Cargo Policy effective with 
respect to shipments attaching on a date earlier than the date when the 
application was completed, but he may make it effective on the date of 
the completion of the application or any date thereafter requested by 
the applicant.
    (b) Numbering. Each Open Cargo Policy supplied to the underwriting 
agent by the Maritime Administrator shall be numbered by MARAD before it 
is supplied to the underwriting agent. No two numbers shall be the same. 
The underwriting agent when issuing the policy shall add at the end of 
the policy number the agency number assigned to that underwriting agent, 
and where policies are issued by more than one office of an underwriting 
agent, the issuing office shall also be identified in the policy number. 
For example, policies issued by an office in New York will be designated 
by ``NY'' and policies issued in San Francisco will be designated by 
``SF'' prefixed to the underwriting agent's agency number.



Sec. 308.509  Collateral deposit fund.

    (a) Requirements. An assured electing to use a cash collateral 
deposit fund pursuant to Sec. 308.507 shall comply with the provisions 
of this section and Clause 21 of the Open Cargo Policy, Form MA-300, 
prescribed in Sec. 308.517.
    (b) Cash or Government bonds. To establish a collateral deposit fund 
the applicant shall deposit with the underwriting agent a check payable 
to the order of the ``Maritime Administration, Department of 
Transportation'' for the amount of the fund, or United States Government 
bonds having a par value at the time of deposit of the amount of the 
fund, which shall be a multiple of $500 but not less than $1,000, 
together with a letter of transmittal executed by the applicant on Form 
MA-302, prescribed in Sec. 308.522. Upon receipt of the deposit, the 
underwriting agent shall assign it a serial number and transmit it to 
``Maritime Administration, Attention: Chief Financial Officer, Maritime 
Administration''. It is the responsibility of the assured to make sure 
that this deposit fund is sufficient at all times to cover the premiums 
payable on all risks which have

[[Page 167]]

attached under the policy, so as to prevent the termination of the 
insurance under the provisions of Clause 21.
    (c) Overdue premiums. Pursuant to Clause 20, if the assured fails to 
pay any premium when it becomes due and payable, he thereby breaches the 
policy and it automatically ceases to insure any shipments which would 
otherwise have attached after the expiration of fifteen (15) days 
following the due date of the premium, unless within the fifteen (15) 
day period the premium has been paid and the assured has otherwise 
complied with the requirements of the policy, including the filing of 
the closing report required by Clause 19 and the payment of the 
reinstatement fee of $25 required by Clause 20. If the assured fails to 
pay the premium within the fifteen (15) day period, the Maritime 
Administrator may deduct from the assured's collateral deposit fund all 
amounts due.
    (d) Increase in amount of collateral as required by Clause 21. If 
the assured fails to deposit additional collateral in the fund within 
seven (7) days from the time knowledge comes to the assured that the 
amount of collateral is insufficient to meet the requirements of Clause 
21, the policy shall be void except as to risks which have attached 
prior to the expiration of the seven (7) day period.
    (e) Changes in amount of collateral. The assured may increase or 
decrease the amount of the collateral deposit fund by amounts of not 
less than $500 or multiples thereof, provided that the amount of the 
fund shall not be less than the amount required by Clause 21, or the 
required minimum of $1,000, whichever is greater. The effect of any 
change in the amount of the collateral deposit shall be the sole 
responsibility of the assured, and the permission granted by this 
paragraph to change the amount of collateral in the fund shall in no 
manner relieve the assured of the responsibility imposed by Clause 21.
    (f) Increase of collateral. To increase the amount of the collateral 
on deposit in the fund, the assured shall transmit to the underwriting 
agent on Form MA-302, prescribed in Sec. 308.522, a check payable to 
the order of ``Maritime Administration, Department of Transportation'' 
or United States Government bonds having a par value at the time of 
deposit of not less than the amount of the requested increase. The 
increase shall become effective upon the date of the receipt of the 
application and check or bonds by the underwriting agent, as shown on 
Form MA-302.
    (g) Decrease of collateral. To decrease the collateral deposit fund, 
the assured shall file with the underwriting agent an application on 
Form MA-305, prescribed in Sec. 308.525. The decrease shall become 
effective upon the date of the receipt of the application by the 
underwriting agent as shown on Form MA-305.
    (h) Refund of collateral. Whenever the assured becomes entitled to a 
refund of the collateral deposit, in whole or in part, by reason of a 
request for a partial return of such collateral, or the cancellation of 
the policy and the payment in full of all premiums then or thereafter 
due, or the waiver by the Maritime Administrator of the requirements of 
maintaining the collateral deposit fund because the assured is a 
department or agency of the United States or is acting on behalf of such 
a department or agency, or the substitution of a surety bond in the 
place and stead of the collateral deposit fund, as provided in Sec. 
308.510(j), the Maritime Administrator will refund to the assured the 
amount of the collateral deposit to which the assured is entitled; 
provided, however, that the repayment of such collateral shall not be 
made by the Maritime Administrator until the assured has filed a closing 
report and paid in full all premiums with respect to all shipments which 
had attached at the time of the receipt by the underwriting agent of the 
application for the refund, Form MA-305, and a certificate executed in 
duplicate on Form MA-306, prescribed in Sec. 308.526, and, in the event 
of the substitution of a surety bond for the collateral deposit fund, 
the receipt by the underwriting agent of the surety bond properly 
executed, in accordance with Sec. 308.510.



Sec. 308.510  Surety bond.

    (a) Requirements. An assured electing to post a surety bond pursuant 
to Sec. 308.507 shall comply with the provisions of this section and 
Clause 21 of

[[Page 168]]

the Open Cargo Policy, Form MA-300, prescribed in Sec. 308.517.
    (b) Amount of bond. An applicant who wishes to post a surety bond 
shall deliver to the underwriting agent a surety bond on Form MA-308, 
prescribed in Sec. 308.528, executed by the assured as principal, and 
by the surety, in such amount as the assured determines to be necessary 
to comply with Clause 21. Such amount shall be a multiple of $500 but 
shall not be less than $1,000. Upon receipt of the surety bond, the 
underwriting agent shall assign a serial number to it and transmit it to 
``Maritime Administration, Attention: Chief, Division of Marine 
Insurance.'' It shall be the responsibility of the assured to provide 
that the amount of the bond is sufficient at all times to cover the 
premium payable on all risks which have attached under the policy, so as 
to prevent the termination of the insurance under the provisions of 
Clause 21.
    (c) Surety. The sufficiency of the surety executing the bond shall 
be subject to approval by the Maritime Administrator. The underwriting 
agent may accept on behalf of the Maritime Administrator a surety bond 
executed by a surety named on the United States Treasury Department's 
approved list of sureties whose bonds are acceptable to the United 
States Treasury Department to secure obligations due the United States, 
provided the bond is within the maximum amount for which the surety is 
so authorized to write bonds as shown by the approved list.
    (d) Overdue premiums. Pursuant to Clause 20, if the assured fails to 
pay any premium when it becomes due and payable, he thereby breaches the 
policy and it automatically ceases to insure any shipments which would 
otherwise have attached after the expiration of fifteen (15) days 
following the due date of the premium, unless within the fifteen (15) 
day period the premium has been paid and the assured has otherwise 
complied with the requirements of the policy, including the filing of 
the closing report required by Clause 19 and the payment of the 
reinstatement fee of $25 required by Clause 20. If the assured fails to 
pay the premium within the fifteen (15) day period, all amounts due 
shall become a liability collectible under the surety bond and from the 
assured.
    (e) Increase in amount of bond as required by Clause 21. If the 
assured fails to increase the amount of the surety bond within seven (7) 
days from the time knowledge comes to the assured that the amount of the 
bond is insufficient to meet the requirements of Clause 21, the policy 
shall be void except as to risks which have attached prior to the 
expiration of the seven (7) day period.
    (f) Changes in amount of bond. The assured may increase or decrease 
the amount of the surety bond by amounts of not less than $500 or 
multiples thereof, provided that the amount of the bond shall not be 
less than the amount required by Clause 21, or the required minimum of 
$1,000, whichever is greater. The effect of any change in the amount of 
the bond shall be the sole responsibility of the assured, and the 
permission granted by this paragraph to change the amount of the bond 
shall in no manner relieve the assured of the responsibility imposed by 
Clause 21.
    (g) Increase in amount of bond. To increase the surety bond the 
assured shall transmit to the underwriting agent, on Form MA-310, 
prescribed in Sec. 308.530, an endorsement duly executed by the assured 
and the surety company on Form MA-311, prescribed in Sec. 308.531. The 
increase shall become effective upon the date of the receipt of the 
endorsement by the underwriting agent as shown on Form MA-311.
    (h) Decrease in amount of bond. To decrease the amount of the bond, 
the assured shall transmit to the underwriting agent, on Form MA-310, 
prescribed in Sec. 308.530, an endorsement duly executed by the assured 
and the surety on Form MA-311, prescribed in Sec. 308.531. The decrease 
shall become effective upon the date of the receipt of the endorsement 
by the underwriting agent as shown on Form MA-311, except as to 
shipments which on that date are known or reported to the assured to be 
in transit and which have attached under the policy and upon which 
premium has not been paid in full.
    (i) Termination of bond. Whenever the assured becomes entitled to a 
termination of a surety bond by reason of

[[Page 169]]

the cancellation of the policy and the payment in full of all premiums 
then or thereafter due, or the waiver by the Maritime Administrator of 
the requirements of maintaining the surety bond by an assured which is a 
department or agency of the United States or is acting on behalf of such 
a department or agency, or the substitution of a collateral deposit fund 
in the place or stead of the surety bond, the underwriting agent shall 
execute a release on Form MA-312, prescribed in Sec. 308.532. The 
release shall be made effective as of:
    (1) The effective date of the cancellation of the policy when the 
bond is terminated for that reason, or
    (2) The date of the Maritime Administrator's directive waiving the 
requirement of a surety bond when the bond is terminated for that 
reason, or
    (3) The effective date of the establishment of a collateral deposit 
fund when the bond is terminated for that reason.
    (j) Substitution of bond for collateral deposit. An assured may 
substitute a surety bond for a collateral deposit fund by delivering to 
the underwriting agent a surety bond on Form MA-309, prescribed in Sec. 
308.529, executed by the assured as principal, and by the surety, in 
such amount as the assured determines to be necessary to comply with 
Clause 21. Such amount shall be a multiple of $500, but shall not be 
less than $1,000. The collateral deposit fund will be refunded to the 
assured after the bond has been posted, in accordance with the 
provisions of Sec. 308.509(h).



Sec. 308.511  Cancellation of Open Cargo Policy.

    An assured may cancel an Open Cargo Policy by delivering to the 
underwriting agent, at least fifteen (15) days prior to the requested 
date of cancellation, an application for cancellation executed by the 
assured on Form MA-304, prescribed in Sec. 308.524, together with the 
original policy. The policy shall be cancelled as of the effective date 
requested in the application, which, unless otherwise agreed by the 
Maritime Administrator in writing, shall not be a date earlier than 
fifteen (15) days following the date of the receipt of the application 
as acknowledged by the underwriting agent on Form MA-304, with respect 
to all risks that have not attached prior to said effective date. Such 
cancellation shall not relieve the assured of the obligation to file 
closing reports with respect to all risks which attached prior to the 
effective date of the cancellation and to pay all unpaid premiums. 
Within four (4) months of the effective date of cancellation, unless 
otherwise agreed by the Maritime Administrator in writing, the assured 
must file a closing report in duplicate on Form MA-313, prescribed in 
Sec. 308.533, of all shipments covered by the policy for which closing 
reports have not been previously filed. The assured shall mark this 
closing report ''Final Closing Report on Cancellation of Policy'', and 
file a certificate on Form MA-313-B, prescribed in Sec. 308.535, 
executed by the assured in duplicate. Thereafter, when all unpaid 
premiums have been paid, the assured will become entitled to a refund of 
the collateral deposit, or cancellation of the surety bond in accordance 
with Sec. Sec. 308.509 and 308.510. If the assured has lost or mislaid 
the original policy and is unable to produce it for cancellation, the 
assured shall execute a letter of indemnity and such other documents as 
may be required by the Maritime Administrator.



Sec. 308.512  Declaration of shipments under Open Cargo Policy.

    (a) Closing report. (1) The assured shall file with the underwriting 
agent, not later than the twenty-fifth (25th) day of each month, a 
closing report for all inward shipments and a closing report for all 
outward shipments, and pay the premium and fees, for all shipments 
covered during the preceding calendar month, as required by Clause 19. 
Each closing report shall be filed in duplicate on Form MA-313, 
prescribed in Sec. 308.533, supported by a certificate executed by the 
assured on Form MA-313-A, prescribed in Sec. 308.534. If the assured 
has no shipments to report during any calendar month, the closing 
report, Form MA-313, shall, nevertheless, be filed with one or both of 
the following statements, depending upon their applicability, noted 
thereon certifying that:
    (i) No inward shipment coming within the scope of this policy 
arrived at

[[Page 170]]

destination during the preceding calendar month, and that during the 
preceding calendar month no knowledge has come to the assured of an 
inward shipment covered under the terms of the policy which will not 
arrive by reason of loss, frustration or other similar cause,
    (ii) No outward shipment coming within the scope of this policy was 
made during the preceding calendar month, and
    (iii) Whenever a sea passage is made with respect to cargo covered 
under the policy by a barge or sailing vessel the assured shall note 
that fact upon the closing report, unless the Maritime Administrator 
otherwise agrees.
    (2) An assured reporting for one calendar month shall not include 
therein a report of a shipment due to be reported in the report for the 
next succeeding calendar month. Thus, the report of January closing 
shipments filed in February does not include February closings.
    (b) Inward shipments. The closing report covering inward shipments 
shall include:
    (1) All such shipments which have arrived at the port of destination 
during the preceding calendar month, and
    (2) All such shipments with respect to which inability to so arrive 
by reason of loss, frustration, or other similar causes has come to the 
knowledge of the assured during the preceding calendar month.
    (c) Outward shipments. The closing report covering outward shipments 
shall include all such shipments which attached under the policy during 
the preceding calendar month.
    (d) Definition of inward and outward shipments. A shipment will be 
classified as an inward shipment or as an outward shipment by reference 
to the geographical location of the assured with respect to the movement 
of the shipment. The address of the assured as stated in the application 
filed by him for the policy shall be deemed to be the assured's 
geographical location for the purpose of determining whether the 
shipment is inward or outward. To illustrate, if an assured has stated 
in his application that his address is in Hawaii, the assured's 
shipments of goods from the United States to Hawaii would be classified 
as inward, and his shipments from Hawaii to the United States would be 
classified as outward. Any shipments that cannot be classified as inward 
or outward under this definition shall be treated as inward shipments 
for the purposes of the declaration.
    (e) Supplemental closing report. If an assured files a closing 
report and thereafter discovers that one or more additional shipments 
should have been included in the report, then, even though the assured 
has executed the certificate on Form MA-313-A, prescribed in Sec. 
308.534, or Form MA-313-B, prescribed in Sec. 308.535, in connection 
with the closing report, the assured must nevertheless amend the closing 
report by filing a supplemental closing report supported by an 
appropriate certificate. The supplemental closing report must be 
accompanied by a statement in writing signed by the assured giving the 
reasons for the omission of such shipments from the original closing 
report. If the Maritime Administrator finds that the failure to file the 
complete closing report was either inadvertent or unintentional or arose 
by reason of causes beyond the control of the assured, the otherwise 
automatic termination of the policy by reason of a breach of the 
warranty embodied in Clause 20 shall be avoided pursuant to the 
provisions of Clause 23.



Sec. 308.513  Payment of premiums and fees.

    The assured shall pay the premium, when his closing report is filed, 
for all shipments shown on his closing report for the preceding month, 
at the rates prescribed by the Maritime Administrator and in effect on 
the date of the ocean bill of lading, or if an ocean bill of lading was 
not issued, on the date of the equivalent shipping document, or if no 
ocean bill of lading or equivalent shipping document was issued, or if 
such documents were undated, on the date the goods were laden on the 
overseas vessel, as required by Clause 19. All payments of premium or 
fees must be made by check or money order payable to the order of 
''Maritime Administration, Department of Transportation.''

[[Page 171]]



Sec. 308.514  Return premium.

    No premium will be returned to the assured with respect to a 
shipment of goods that attached under the policy except where there was 
a declaration of value at variance with Clause 8, or an error in the 
application of a rate or in the computation of a premium, or the insured 
goods were short-shipped. An application for the return of a premium 
shall be made on Form MA-307, prescribed in Sec. 308.527, filed in 
duplicate with the Underwriting Agent who will transmit it to the 
Maritime Administrator for payment.



Sec. 308.515  Payment in event of loss.

    All claims for losses shall be filed by the assured with the 
Underwriting Agent who issued the policy. Such claims must be supported 
by the customary documents required in connection with war risk 
insurance claims, together with appropriate declarations as required by 
Clause 9, and such further data as may now or hereafter be required by 
the Maritime Administrator.



Sec. 308.516  Failure to comply with Clause 21.

    (a) If the assured willfully fails to maintain a collateral deposit 
fund or a surety bond in an amount sufficient to meet the requirements 
of Clause 21, the policy becomes void from the date the fund or bond was 
first insufficient, but, if the assured's failure was inadvertent, the 
policy may be reinstated when the assured complies with Clause 21, and 
shows to the satisfaction of the Maritime Administrator that his failure 
was inadvertent and not willful. If the failure was in fact inadvertent, 
the assured shall file a declaration on Form MA-314, prescribed in Sec. 
308.536, executed in duplicate, with the Underwriting Agent within seven 
(7) days from the time knowledge comes to the assured of the 
insufficiency of the collateral deposit fund or surety bond unless the 
time for filing such declaration is extended by permission of the 
Maritime Administrator. If the space provided in the declaration, Form 
MA-314, for an explanation of the circumstances whereby the assured 
first had knowledge that the collateral was not sufficient, the assured 
shall attach to the declaration a detailed statement and include the 
same by reference in the declaration.
    (b) If any policy becomes void by reason of the failure of the 
assured to deposit additional collateral or increase the amount of its 
surety bond under the provisions of Clause 21, the Maritime 
Administrator reserves the right to refuse to issue another policy to 
such assured for a period of ninety (90) days.



Sec. 308.517  Open Cargo Policy, Form MA-300.

    The standard form of War Risk Open Cargo, Form MA-300, may be 
obtained from MARAD's underwriting agent or MARAD.



Sec. 308.518  Standard optional endorsement No. 1, Form MA-300-A.

    Standard Optional Endorsement No. 1, which may be obtained from 
MARAD's underwriting agent or MARAD, limits the amount payable for the 
loss of goods to the actual bona fide pecuniary loss to the Assured, 
exclusive of any allowance for anticipated or accrued profit arising out 
of the insured venture. An Assured may elect to have his Open Cargo 
Policy endorsed with Standard Optional Endorsement No. 1 applicable on 
all shipments, or on all outward shipments, or on all inward shipments, 
or on named commodities except goods sold by the Assured prior to 
loading on board the overseas vessel and shipped for the account and at 
the risk of third persons other than a branch subsidiary or affiliate of 
the Assured. When an Assured has elected to have Standard Optional 
Endorsement No. 1 made applicable to certain named commodities he may 
not change to a different basis of valuation for those commodities until 
after he has given ninety (90) days written notice to the Maritime 
Administrator through the Underwriting Agent of his election to make the 
change. Application for Standard Optional Endorsement No. 1 may be made 
to the Underwriting Agent which is authorized to issue the endorsement 
without prior approval of the Maritime Administrator.

[[Page 172]]



Sec. 308.519  Standard optional endorsement No. 2, Form MA-300-B.

    Standard Optional Endorsement No. 2, which may be obtained from 
MARAD's underwriting agent or MARAD, amends the policy to cover 
shipments made to the Assured or shipped by the Assured as agent for the 
account and risk of a principal. Application for Standard Optional 
Endorsement No. 2 may be made to the Underwriting Agent, which is 
authorized to issue the endorsement without prior approval of the 
Maritime Administrator.



Sec. 308.520  Standard optional endorsement No. 3, Form MA-300-C.

    Standard Optional Endorsement No. 3, which may be obtained from 
MARAD's underwriting agent or MARAD, amends the policy to include 
shipments of diamonds for industrial purposes, or rubies or sapphires, 
natural or synthetic, used for instruments or watch jewels imported to 
the Continental United States (excluding Alaska). Application for 
Standard Optional Endorsement No. 3 may be made to the Underwriting 
Agent, which shall transmit it to the Maritime Administrator for 
approval or disapproval of the issuance of the endorsement.



Sec. 308.521  Application for Open Cargo Policy, Form MA-301.

    The standard form of application for a War Risk Open Cargo Policy 
may be obtained from MARAD's underwriting agent or MARAD.



Sec. 308.522  Collateral deposit fund, letter of transmittal, Form MA-302.

    The standard form of letter of transmittal for use in establishing a 
collateral deposit fund may be obtained from MARAD's underwriting agent 
or MARAD.



Sec. 308.523  Application for revision of Open Cargo Policy, Form MA-303.

    An application for the revision of an Open Cargo Policy shall be 
filed in duplicate with the Underwriting Agent on a form which may be 
obtained from MARAD's underwriting agent or MARAD.



Sec. 308.524  Application for cancellation of Open Cargo Policy, Form 

MA-304.

    The standard form of application for cancellation of an Open Cargo 
Policy Form MA-304 may be obtained from MARAD's underwriting agent or 
MARAD.



Sec. 308.525  Application for decrease in amount of cash collateral fund, 

Form MA-305.

    Application for decrease in the amount of the cash collateral 
deposit fund shall be made on Form MA-305, which may be obtained from 
MARAD's underwriting agent or MARAD.



Sec. 308.526  Certificate for repayment of decrease of collateral deposit 

fund, Form MA-306.

    The standard form of certificate for repayment of the amount of the 
decrease of the collateral deposit fund, Form MA-306, may be obtained 
from MARAD's underwriting agent or MARAD.



Sec. 308.527  Application for return premium, Form MA-307.

    An application for the return of premium, which may be obtained from 
MARAD's underwriting agent or MARAD, shall be filed in duplicate with 
the Underwriting Agent on Form MA-307.



Sec. 308.528  Surety Bond A, Form MA-308.

    The Standard Form of Surety Bond A, Form MA-308, which may be 
obtained from MARAD's underwriting agent or MARAD, shall be used by an 
Assured who elects to post a surety bond as security for payment of the 
premiums pursuant to Clause 21 of the policy:



Sec. 308.529  Surety Bond B, Form MA-309.

    An Assured who elects to substitute a surety bond for a collateral 
deposit fund shall submit Form MA-309, which may be obtained from 
MARAD's underwriting agent or MARAD.

[[Page 173]]



Sec. 308.530  Letter requesting increase or decrease in amount of surety 

bond, Form MA-310.

    An endorsement increasing or decreasing the amount of the surety 
bond, Form MA-310, shall be transmitted to the underwriting agent and 
may be obtained from MARAD's underwriting agent or MARAD.



Sec. 308.531  Endorsement of surety bond increasing or decreasing amount of 

coverage, Form MA-311.

    The Standard Form of Endorsement which shall be used in increasing 
or decreasing the amount of a surety bond, Form MA-311, may be obtained 
from MARAD's underwriting agent or MARAD.



Sec. 308.532  Release of surety bond, Form MA-312.

    The Standard Form of Release of Surety bond, Form MA-312, may be 
obtained from MARAD's underwriting agent or MARAD.



Sec. 308.533  Closing report, Form MA-313.

    This form, which may be obtained from MARAD's underwriting agent or 
MARAD, shall be filed in duplicate with the Underwriting Agent not later 
than the 25th day of each month.



Sec. 308.534  Certificate to be attached to closing report, Form MA-313-A.

    The standard form of Certificate to be attached to the closing 
report, Form MA-313-A, may be obtained from MARAD's underwriting agent 
or MARAD and shall be filed each month.



Sec. 308.535  Certificate to be attached to final closing report, Form 

MA-313-B.

    The Standard Form of Certificate, Form MA-313-B, shall be attached 
to the final closing report after cancellation of the policy, and may be 
obtained from MARAD's underwriting agent or MARAD.



Sec. 308.536  Declaration where failure to comply with Clause 21 was 

inadvertent, 

Form MA-314.

    An Assured that fails inadvertently to maintain a collateral deposit 
fund or surety bond in an amount sufficient to meet the requirements of 
Clause 21 of the Policy shall file this Declaration, Form MA-314, which 
may be obtained from MARAD's underwriting agent or MARAD.

                  Facultative War Risk Cargo Insurance



Sec. 308.538  General.

    The Maritime Administrator is prepared to provide facultative war 
risk insurance policies covering any cargoes described in Sec. 308.501 
which are designated by an applicant prior to the attachment of risks, 
if the applicant does not have an Open Cargo Policy issued by the 
Maritime Administrator, or if he has a shipment which is not covered by 
his Open Cargo Policy. However, a person with regular shipments is urged 
to avail himself of the advantages of the automatic coverage of an Open 
Cargo Policy. The Maritime Administrator reserves the right to decline 
to quote rates or bind insurance on shipments of cargo that could be 
covered by an Open Cargo Policy unless the applicant can show to the 
satisfaction of the Maritime Administrator that the risk is not one of a 
series of similar risks forming part of a continual flow of business for 
the applicant. The policy will be in the standard form of War Risk 
Facultative Cargo Policy, Form MA-316, prescribed in Sec. 308.545. All 
policies shall be issued by Underwriting Agents appointed by the 
Maritime Administrator. All Underwriting Agents shall be domestic 
insurance companies authorized to do a marine insurance business in a 
State of the United States.



Sec. 308.539  Application.

    (a) Preliminary request. Application for a Facultative Cargo Policy 
shall be made by filing a preliminary request in writing (including 
telegram) with an Underwriting Agent of MARAD, setting forth the 
following information:
    (1) The name and address of the applicant;
    (2) The amount of insurance requested;
    (3) The commodity and quantity to be insured;
    (4) The voyage to be covered;
    (5) The name of the vessel upon which the cargo will be shipped, if

[[Page 174]]

known, the name of the steamship line, if known, and the date of 
shipment, if the applicant is submitting the request to bind war risk in 
writing; for security reasons, if the applicant is submitting the order 
to bind war risk insurance by telefax, neither the name of the vessel 
nor the name of the steamship line nor the anticipated date of sailing, 
should be mentioned. Mentioning such information in a telefax may result 
in a denial of insurance to the applicant. Any envelope transmitting a 
letter containing such information shall be marked ``confidential.''
    (b) Binder. Before the insurance can be bound, the applicant shall 
provide the Underwriting Agent with a properly prepared binder on Form 
MA-315 prescribed in Sec. 308.544. The binder must be submitted in 
duplicate, accompanied by check or Money Order payable to the order of 
''Maritime Administration, Department of Transportation'' for the full 
amount of the premium computed on the amount to be insured at the rate 
set by the Maritime Administrator. Any application for facultative cargo 
war risk insurance received by an Underwriting Agent later than 4 p.m. 
(Local Time) shall be considered the next day's business.
    (c) Optional loss limits clause. Clause 9 of the standard form of 
facultative cargo policy, Form MA-316, prescribed in Sec. 308.545, 
limits the amount payable for loss to the fair market value at the place 
and approximate time of the attachment of risk, plus the cost of marine 
insurance, transportation and expenses incident thereto, and war risk 
insurance with respect to the lost or damaged goods, or if it is 
impossible to determine the fair market value at place and time of 
attachment of risk, the fair market value at the designated port of 
arrival on the date of the attachment of the risk, plus the cost of 
marine insurance, transportation and expenses incidental thereto, and 
war risk insurance with respect to the lost or damaged goods, or if the 
goods had been purchased prior to loading, the actual amount paid or 
payable to the seller for the goods less all discounts, plus the cost of 
marine insurance, transportation and expenses incidental thereto, and 
war risk insurance with respect to the lost or damaged goods. In lieu of 
these loss limits, the Assured by so specifying in his application, and 
the binder may have attached to the policy when issued Standard Optional 
Endorsement No. 1-A, Form MA-316, prescribed in Sec. 308.546, which 
limits the amount payable for loss to the actual bona fide pecuniary 
loss to the Assured, exclusive of any allowance for anticipated or 
accrued profits arising out of the insured venture.



Sec. 308.540  Premiums.

    (a) Rates. Rate Schedules for war risk facultative cargo insurance 
will be published by the Maritime Administrator from time to time, and 
may be obtained from an Underwriting Agent. All Rate Schedules are 
subject to change by the Maritime Administrator without notice. If no 
rate is published for a voyage on which war risk facultative cargo 
insurance is available, the Maritime Administrator will name a rate 
through an Underwriting Agent upon application. Whenever an applicant 
for war risk facultative cargo insurance receives a definite rate 
quotation and desires to bind insurance at the quoted rate, an order to 
bind the insurance in accordance with the procedure set forth in this 
subpart should be submitted within two business days following the day 
of quotation accompanied by check or Money Order payable to the order of 
``Maritime Administration, Department of Transportation'' for the full 
amount of the premium thereon computed on the amount to be insured at 
the rate set by the Maritime Administrator, or the quotation will 
expire.
    (b) Return premium. Where goods are short-shipped, the amount of 
insurance may be reduced by an amount computed by applying to the 
original amount of insurance the proportion which the quantity of 
merchandise short-shipped (i.e., bales, barrels, tons, and other 
designations of quantity) bears to the total quantity of merchandise 
originally declared for insurance. Where more than one class of 
merchandise is insured under one policy (e.g., fuel, oil and gasoline) 
the reduced amount of insurance must be computed separately on each 
item. Where the amount of insurance is reduced, the

[[Page 175]]

Maritime Administrator will give consideration to requests for 
proportionate returns of premium. An application for the return of a 
premium must be submitted to the Underwriting Agent in quadruplicate on 
Form MA-317, prescribed in Sec. 308.547.



Sec. 308.541  Issuance.

    (a) Binder. The Underwriting Agent is authorized to issue a 
facultative policy in Form MA-316, prescribed in Sec. 308.545, when 
there has been presented to him a properly prepared binder on Form MA-
315, prescribed in Sec. 308.544, together with the payment of the 
premium as required, and such policy shall be issued as soon as possible 
after the binder form has been presented to the Underwriting Agent. 
Prior to the issuance of the policy, the Underwriting Agent is 
authorized to accept the risk on behalf of the Maritime Administrator by 
signing the binder. The Maritime Administrator will provide each 
Underwriting Agent with a supply of facultative policies which shall not 
be valid until countersigned by the Underwriting Agent. The Underwriting 
Agent shall keep a permanent record of all such policies and the Assured 
to whom the policy is issued.
    (b) Numbering. Each Facultative Cargo Policy supplied to the 
Underwriting Agent by the Maritime Administrator shall be numbered by 
MARAD before it is supplied to the Underwriting Agent. No two numbers 
shall be the same. The Underwriting Agent when issuing the policy shall 
add at the end of the Policy number the agency number assigned to that 
Underwriting Agent, and where policies are issued by more than one 
office of an Underwriting Agent the issuing office shall also be 
identified in the policy number. For example, the policies issued by an 
office in New York will be designated ``NY'' and policies issued in San 
Francisco will be designated by ``SF'' prefixed to the Underwriting 
Agent's agency number.



Sec. 308.542  Warranty regarding thirty-day shipments.

    If, after an effective binding of war risk insurance on a shipment 
of cargo, the assured believes that it will be impossible to comply with 
the warranty requiring the goods to be shipped and in transit within 
thirty days from the effective date of binding, such an assured may 
apply to the Maritime Administrator, through the Underwriting Agent, to 
modify the warranty. If the Maritime Administrator is satisfied that an 
extension of time within which the goods are warranted to be shipped and 
in transit should be granted, he will do so, but additional premium may 
be charged in the discretion of the Maritime Administrator.



Sec. 308.543  Cancellation.

    Facultative war risk insurance is not subject to cancellation by the 
Assured unless the goods are not shipped within thirty (30) days 
following the effective date of binding, and then only if the policy is 
returned for cancellation.



Sec. 308.544  Facultative binder, Form MA-315.

    The standard form of War Risk Facultative Cargo Binder, which may be 
obtained from MARAD's underwriting agent of MARAD, shall be completed by 
the applicant and submitted, in duplicate, to an Underwriting Agent 
before the insurance can be bound.



Sec. 308.545  Facultative cargo policy, Form MA-316.

    The standard form of War Risk Facultative Cargo Policy, Form MA-316, 
may be obtained from MARAD's underwriting agent or MARAD.



Sec. 308.546  Standard optional endorsement No. 1-A, Form MA-316-A.

    Standard Optional Endorsement No. 1-A limits the amount payable for 
the loss of goods to the actual bona fide pecuniary loss to the Assured, 
exclusive of any allowance for anticipated or accrued profit arising out 
of the insured venture. (Similar provisions for Open Cargo Policies are 
contained in Standard Optional Endorsement No. 1, Form MA-300-A, 
prescribed in Sec. 308.518.) Application for Standard Optional 
Endorsement No. 1-A shall be made to the Underwriting Agent at the time 
application is made for the policy. The Underwriting Agent is authorized 
to issue the endorsement without prior approval of the Maritime 
Administrator. This form may be obtained from

[[Page 176]]

MARAD's underwriting agent or MARAD.



Sec. 308.547  Application for return premium, Form MA-317.

    An application for the return of premium must be filed in duplicate 
with the Underwriting Agent on Form MA-317, which may be obtained from 
MARAD's underwriting agent or MARAD.

                                 General



Sec. 308.548  Standard form of underwriting agency agreement for cargo, 

Form MA-318.

    This form, which may be obtained from MARAD's underwriting agent or 
MARAD, is the standard form of underwriting agency agreement applicable 
with respect to agreements executed by the Maritime Administrator and 
domestic insurance companies authorized to do a marine insurance 
business in any State of the United States, appointing such companies as 
Underwriting Agents to issue war risk cargo policies in accordance with 
the provision of the agreement and this subpart.



Sec. 308.549  Application for appointment of Cargo Underwriting Agent, 

Form MA-319.

    Any domestic insurance company authorized to do a marine insurance 
business in any State of the United States may apply for appointment as 
a Cargo Underwriting Agent by submitting to the Maritime Administrator a 
letter and Form MA-399, which may be obtained from MARAD's underwriting 
agent or MARAD.



Sec. 308.550  Certificate, Form MA-320.

    Wherever any provision of this subpart, or any amendment thereto, 
requires the Assured to make a declaration or certification under the 
penalties of perjury, and the form of the declaration or certificate is 
not prescribed, the Assured may execute a certificate on Form MA-320-A 
for an individual, on Form MA-320-B for a partnership, or on Form MA-
320-C for a corporation, which forms may be obtained from MARAD's 
underwriting agent or MARAD.



Sec. 308.551  War risk insurance clearing agency agreement for cargo, 

Form MA-321.

    The standard form of clearing agency agreement, Form MA-321, shall 
be executed by the Maritime Administrator and domestic insurance 
companies, or groups of domestic insurance companies authorized to do a 
marine insurance business in any State of the United States, appointing 
such companies or groups of companies as clearing agents, which form may 
be obtained from MARAD's underwriting agent or MARAD.



Sec. 308.552  Effective date.

    This subpart shall be effective as and when the Maritime 
Administrator finds that war risk cargo insurance adequate for the needs 
of the waterborne commerce of the United States cannot be obtained on 
reasonable terms and conditions from companies authorized to do an 
insurance business in a State of the United States.



                       Subpart G_Records Retention



Sec. 308.600  Records retention requirement.

    The records specified in Sec. Sec. 308.8, 308.517, and 308.548 of 
this part shall be retained until a release is granted by MARAD, at 
which time MARAD will take custody of the records.

(Authority: 46 U.S.C. sections 53902, 53910; 49 CFR 1.93)



PART 309_VALUES FOR WAR RISK INSURANCE--Table of Contents



Sec.
309.1 Procedure.
309.2 Definitions.
309.3 Stated valuation.
309.4 Maximum amount insured.
309.5 Condition of vessel.
309.6 Adjustments for condition, equipment, and other considerations.
309.7 Modifications.
309.8 Vessel data forms.
309.101 Amendment of interim binders.

                           Stores and Supplies

309.201 Purpose.
309.202 Definitions.
309.203 Value at time of loss.
309.204 Proof of loss.


[[Page 177]]


    Authority: Secs. 204, 1209, Merchant Marine Act, 1936, as amended 
(46 U.S.C. 1114, 1289); Reorganization Plans No. 21 of 1950 (64 Stat. 
1273), No. 7 of 1961 (75 Stat. 840) as amended by Pub. L. 91-469 (84 
Stat. 1036); Department of Commerce Organization Order 10-8 (38 FR 
19707, July 23, 1973); Maritime Administrative Order 440-3 (December 6, 
1973).

    Source: 39 FR 30487, Aug. 23, 1974, unless otherwise noted.



Sec. 309.1  Procedure.

    The Ship Valuation Committee, Maritime Administration, shall publish 
bianually in the notice section of the Federal Register a general notice 
which shall set forth the stated valuations of individual vessels upon 
which interim binders for war risk hull insurance have been issued. Such 
values shall be effective with respect to a six-month period commencing 
on January 1 and ending on June 30, or a six-month period commencing on 
July 1 and ending on December 31 of each calendar year; Provided, 
however, That if there is a substantial change in market values during 
the effective period of a state valuation, the Maritime Administration 
reserves the right to revise such valuations at any time during such 
period.



Sec. 309.2  Definitions.

    (a) Ship Valuation Committee means the Ship Valuation Committee 
referred to in Maritime Administrative Order 440-3.
    (b) The date a vessel is built is the date the vessel is delivered 
by the shipbuilder.
    (c) The deadweight tonnage of a vessel means her deadweight capacity 
established in accordance with normal Summer Freeboard as assigned 
pursuant to the International Load Line Convention, 1966, and shall be 
her capacity (in tons of 2,240 pounds) for cargo, fuel, fresh water, 
spare parts, and stores, but exclusive of permanent ballast.
    (d) The speed of a vessel means the speed determined in accordance 
with the formulae provided in part 246 of this chapter.
    (e) A passenger vessel is a vessel which carries more than twelve 
passengers.



Sec. 309.3  Stated valuation.

    A stated valuation represents just compensation for the vessel to 
which it applies computed by the Ship Valuation Committee in accordance 
with sections 902(a) and 1209(a)(2) of the Merchant Marine Act, 1936, as 
amended (46 U.S.C. 1242(a), 1289(a)(2)). The stated valuation of a 
vessel does not include vessel stores and supplies, which consist of (a) 
consumable stores, (b) subsistence stores, (c) slop chest, (d) bar 
stock, and (e) fuel, as defined in Maritime Administration Inventory 
Book Forms MA-4736, A through K, which will be valued separately.



Sec. 309.4  Maximum amount insured.

    A stated valuation is the maximum amount for which the Maritime 
Administration will provide war risk hull insurance for damage to or 
actual or constructive total loss of the vessel to which such valuation 
applies and for which claims for damage to or actual or constructive 
total loss of such insured vessel may be adjusted, compromised, settled, 
adjudged, or paid by the Maritime Administration with respect to 
insurance attaching during the effective period of such valuation under 
the standard forms of war risk hull insurance interim binder or policy 
prescribed by Sec. Sec. 308.106 and 308.107 of this chapter.



Sec. 309.5  Condition of vessel.

    If the true condition of a vessel is not known, the Ship Valuation 
Committee, in determining the stated valuation of the vessel, may assume 
that it is in a condition that would entitle it to the highest 
classification of the American Bureau of Shipping, or the equivalent if 
the vessel is a foreign-flag vessel, with all required certificates, 
including but not limited to, marine inspection certificates of the 
United States Coast Guard, the United States Public Health Service, and 
the Federal Communications Commission, with all outstanding requirements 
and recommendations necessary for retention of class accomplished, 
without regard to any grace period; and, so far as due diligence can 
make her so, the vessel is tight, staunch, strong, and well and 
sufficiently tacked, appareled, furnished, and equipped, and in every 
respect seaworthy and in good running condition and repair, with clean 
swept holds and

[[Page 178]]

in all respects fit for service. The stated valuation of a vessel in 
substandard condition is subject to downward adjustment as provided in 
Sec. 309.6(a).



Sec. 309.6  Adjustments for condition, equipment, and other considerations.

    (a) Adjustment for a vessel in substandard condition. If the 
Maritime Administration determines that a vessel is in substandard 
condition from that assumed by the Committee as provided in Sec. 309.5, 
there shall be subtracted from the stated valuation of such vessel an 
amount estimated by the Maritime Administration as the cost of putting 
the vessel in the condition assumed by the Committee when determining 
its stated valuation.
    (b) Special equipment. If the depreciated reproduction cost less 
construction subsidy, if any, of any special equipment of material 
utility in the handling of cargo or utilization of a vessel, not 
otherwise taken into account in determining the stated valuation of such 
vessel, is in excess of $50,000, an amount estimated by the Maritime 
Administration as the fair and reasonable value of such equipment shall 
be added to the stated valuation of such vessel.
    (c) Government installations. A stated valuation determined pursuant 
to this part shall not include any allowance for any special 
installations or equipment to the extent that their cost was borne by 
the United States.



Sec. 309.7  Modifications.

    The Maritime Administration reserves the right to exempt any vessel 
from the scope of this part, or to amend, modify, or terminate the 
provisions hereof.



Sec. 309.8  Vessel data forms.

    (a) To accompany application for insurance. Each application for war 
risk insurance, submitted in accordance with Sec. 308.3 of this 
chapter, shall be accompanied by a completed Form MA-828, Vessel Data. 
Copies of this form may be obtained from either the American War Risk 
Agency, 14 Wall Street, New York, N.Y. 10005, or the Director, Office of 
Marine Insurance (MAR-540) Maritime Administration 400 Seventh Street 
SW., Washington, DC 20590.
    (b) Modification to vessels. Revised vessel data shall be submitted 
on the appropriate form prescribed in paragraph (a) of this section 
whenever a vessel undergoes a physical change which increases or 
decreases its value by five percent or more.

(Approved by the Office of Management and Budget under control number 
2133-0011)

[39 FR 30487, Aug. 23, 1974, as amended at 47 FR 25330, June 14, 1982; 
50 FR 50167, Dec. 9, 1985]



Sec. 309.101  Amendment of interim binders.

    The interim binder for a vessel whose stated valuation is 
established pursuant to this part shall be deemed to have been amended 
on the first day of the effective period of such valuation, as provided 
in the notice publishing such valuation, by inserting in the space 
provided therefor, or in substitution for any value appearing in such 
space, the stated valuation of the vessel set forth in such notice. A 
stated valuation shall apply with respect to insurance attaching during 
the effective period of such valuation; Provided, however, That if there 
is a substantial change in market values during such period, the 
Maritime Administration reserves the right to revise the valuations 
provided for therein at any time during said period; And provided 
further, That the assured shall have the right within 60 days after the 
date of publication of a stated valuation or within 60 days after the 
attachment of the insurance under the interim binder to which such 
valuation applies, whichever is later, to reject such valuation and 
proceed as authorized by section 1209(a)(2), Merchant Marine Act, 1936, 
as amended (46 U.S.C. 1289(a)(2)).

                           Stores and Supplies

    Authority: Sec. 204, 49 Stat. 1987, as amended, sec. 1209, 64 Stat. 
775, as amended, 70 Stat. 984; 46 U.S.C. 1114, 1289.

    Source: Sections 309.201 through 309.204 contained in G.O. 100, 29 
FR 2944, Mar. 4, 1964; 29 FR 3706, Mar. 25, 1964, unless otherwise 
noted.

[[Page 179]]



Sec. 309.201  Purpose.

    It is the purpose of Sec. Sec. 309.201 through 309.204 to prescribe 
the method for determining the values of stores and supplies on board a 
vessel when lost, for which claims for loss will be paid, and to 
prescribe the procedure for payment of claims for such loss, when stores 
and supplies are covered under a disbursements clause of a War Risk Hull 
Insurance Binder or a War Risk Hull Insurance Policy issued by the 
United States on forms prescribed by Sec. Sec. 308.106 and 308.107 of 
this chapter, or when stores and supplies are covered by a War Risk 
Disbursements Policy issued by the United States pursuant to section 
1203(c) of the Merchant Marine Act, 1936, as amended (46 U.S.C. 
1283(c)). The vessel values established by Sec. Sec. 309.1 through 
309.8 (General Order 82) do not include any allowance for the loss of 
stores and supplies, as distinguished from equipment and spare parts 
which are included in such vessel values.



Sec. 309.202  Definitions.

    Stores and supplies are those articles and commodities used and 
consumed in the day-to-day operation of a vessel by the operation and 
maintenance of machinery and equipment; the maintenance of clean and 
sanitary conditions; the feeding of passengers, officers, and crew; and 
stocked for the use and convenience of passengers, officers, and crew. 
Vessel stores and supplies include (a) consumable stores, (b) 
subsistence stores, (c) slop chest, (d) bar stock, and (e) fuel, as 
defined in Maritime Administration Inventory Books, Forms MA-4736, A 
through K.



Sec. 309.203  Value at time of loss.

    The value of unused stores and supplies on board a vessel at the 
time of loss, and for which claims for loss will be paid equals:
    (a) The value of such stores and supplies on board at the completion 
of the previous voyage, plus
    (b) The value of stores and supplies purchased and placed on board 
the vessel before the commencement of the voyage during which the loss 
occurred, plus
    (c) The value of stores and supplies purchased and placed on board 
the vessel after the commencement of such voyage, less
    (d) That portion of the sum of paragraphs (a), (b), and (c) of this 
section which was sold, transferred, used or consumed to, but not 
including, the date of the loss.



Sec. 309.204  Proof of loss.

    Claims for reimbursement for total loss of stores and supplies may 
be submitted by the owner to the Chief, Division of Insurance, Maritime 
Administration, Washington, DC 20590, based on one of two alternative 
methods of proof, as provided in paragraphs (a) and (b) of this section. 
Owners may use either method for each category of stores and supplies.
    (a) Formula. In cases where the owner and the Chief, Division of 
Insurance, Maritime Administration, have agreed, in advance of the loss, 
upon amounts representing, or the method for determining, the average 
daily consumption costs of stores and supplies for the owner's vessel, 
claims for total loss of such stores and supplies may be submitted by 
the owner on Affidavit in Proof of Claim for the loss of stores and 
supplies, Exhibit A. In such cases, the value of the consumable stores 
at time of loss is determined as follows:
    (1) The value of consumable stores on board at the time the vessel 
was ready to sail, determined by multiplying the number of days for 
which the vessel is stored by the average daily consumption cost in 
dollars, plus
    (2) The cost of consumable stores, if any, purchased in foreign 
ports for the homeward voyage, less
    (3) The average daily consumption cost times the number of days from 
the date the vessel was ready to sail to, but not including, the date of 
loss, plus the actual amount of consumable stores transferred or sold. 
The values of slop chest stores, bar stock and fuel, at the time of loss 
are determined in the same manner by using the applicable daily 
consumption costs for such stores. The value of subsistence stores at 
the time of loss is determined as follows:
    (i) The value of subsistence stores on board at the time the vessel 
was ready to sail, determined by multiplying the agreed cost for one man 
per day by the

[[Page 180]]

number of crew signed on and the number of passengers, if any, and 
multiplying that product by the number of days for which the vessel is 
stored, plus
    (ii) The cost of subsistence stores, if any, purchased in foreign 
ports for the homeward voyage, less
    (iii) The number of crew signed on and the average number of 
passengers, if any, times the agreed cost of one man per day times the 
number of days from the date the vessel was ready to sail to, but not 
including, the date of loss, plus the actual amount of subsistence 
stores transferred or sold.
    (b) Verified costs. In cases where the owner and the Chief, Division 
of Insurance, Maritime Administration, have not agreed in advance of the 
loss upon amounts representing, or the method for determining, the 
average daily consumption costs of Stores and Supplies for the owner's 
vessel, claims for total loss of such Stores and Supplies must be 
submitted by the owner on Affidavit in Proof of Claims for the Loss of 
Stores and Supplies, Exhibit B. In such cases, the value of the 
consumable stores will be determined as follows:
    (1) The value of consumable stores on board the vessel at the time 
the vessel was ready to sail, determined by certified inventories of the 
owner of amounts on board the vessel at the termination of the preceding 
voyage or date of last inventory, less actual consumption to date of 
sailing, plus a certified statement by the owner of actual additional 
purchases made from date of termination of the preceding voyage or date 
or last inventory to date vessel was lost, subject to audit by the 
Maritime Administration, less
    (2) The average daily consumption cost determined by dividing the 
amount determined as in paragraph (b)(1) of this section by the number 
of days for which the vessel was stored, times the number of days from 
the date the vessel was ready to sail to, but not including, the date of 
loss, plus actual amount of consumable stores transferred or sold.
    The values of subsistence stores, slop chest, bar stock, and fuel, 
at the time of loss are determined in the same manner, supported by 
certified inventories of the owner and invoices.

                                Exhibit A

affidavit in proof of claim for the loss of unused stores and supplies 
on board the ss--------------

State of

 ss:

County of

    I am the ------ of ------, the Owner of the SS ------, which was 
lost as a result of enemy action on or about the ------ day of ------, 
------. I make this affidavit in support of the above-named Owner's 
claim for the loss of the actual value of the said vessel's unused 
Stores and Supplies. The statements herein contained are based upon the 
personal knowledge of deponent or upon the books of records of the Owner 
or its agent which deponent believes are true and accurate.
    (A) ``Stores and Supplies'', for loss of which claim is being made, 
are limited to consumable and subsistence stores as defined in Maritime 
Administration Inventory Manual, Vessel Inventories, Part I, and do not 
include radio supplies, expendable equipment, scrap, junk and spare 
parts. \1\
---------------------------------------------------------------------------

    \1\ Strike out either paragraph (A) or (B).
---------------------------------------------------------------------------

    (B) It has been the consistent accounting practice of the Owner to 
group together Consumable Stores as defined in the Maritime 
Administration Inventory Manual, Vessel Inventories, Part I, and 
Expendable Equipment, but the amount herein stated to be the value of 
consumable stores for the purpose of making this claim does not exceed 
------ \2\ percent of the aggregate of such consumable stores and 
expendable equipment. \1\ I am familiar with the insurance carried on 
the Stores and Supplies on the SS ------; and, from the effective date 
of War Risk Insurance Binder No------ Policy No------ issued by the 
United States of America, which covers the total loss of Stores and 
Supplies in the amount of $------, to the date of such vessel's loss on 
------, there was no war risk insurance on such Stores and Supplies 
other than that provided by said Binder or Policy.
---------------------------------------------------------------------------

    \2\ Insert percentage agreed upon with Chief, Division of Insurance, 
Maritime Administration.
---------------------------------------------------------------------------

    The period for which the vessel was stored with Stores and Supplies 
for use on the voyage on which she was lost, beginning with the last day 
of storing, was ------ days for Consumable Stores, ------ days for 
Subsistence Stores, ------ days for Slop Chest, ------ days for Bar 
Stock and ------ days for Fuel. The number of days from the last day of 
storing to, but not including, the date on which the vessel was lost, 
was ------ days for

[[Page 181]]

Consumable Stores, ------ days for Subsistence Stores, ------ days for 
Slop Chest, ------ days for Bar Stock and ------ days for Fuel.
    I. Consumable (Excluding Subsistence) Stores: \3\
---------------------------------------------------------------------------

    \3\ If the figure needed to fill the blank in paragraph (A) or (B) 
is not available, the formula cannot be used; the Owner must submit 
actual inventories and a record of purchases on Affidavit Exhibit B.
---------------------------------------------------------------------------

    (A) The average daily consumption cost of Consumable Stores for this 
vessel for the year prior to the voyage on which she was lost was \4\ 
$------.
---------------------------------------------------------------------------

    \4\ Strike out paragraph (A) or (B).
---------------------------------------------------------------------------

    (B) The figure required for (A) is not readily available, and the 
average daily cost of Consumable Stores for this vessel for the last 
calendar year set up on the Owner's books was \4\ $------.
    The amount of Consumable Stores on board at the time this vessel was 
ready to sail (the number of days for which the vessel was stored times 
the average daily consumption cost, as above) was $------.
    To this amount is added the actual cost of Consumable Stores 
purchased in Foreign Ports for the homeward voyage (as per statement 
attached) \5\ $------, making the total amount on board at date of 
sailing $------.
---------------------------------------------------------------------------

    \5\ Strike out this sentence if vessel was lost on outward leg of 
voyage.
---------------------------------------------------------------------------

    The average daily consumption cost, as above, times the number of 
days from the date the vessel was ready to sail to, but not including, 
the date of loss, as above, is $------.
    To this amount is added the actual amount of Consumable Stores 
transferred or sold (as per statement attached) $------, making $------, 
which, subtracted from the amount of Consumable Stores on board at date 
of sailing, as above, is $------, which sum is claimed to be the actual 
value of the vessel's unused Consumable Stores at the time of the loss, 
according to the best of deponent's knowledge, information and belief.
    II. Subsistence Stores:
    The amount of Subsistence Stores on board, that is the number of the 
crew signed on ( ) and the average number of passengers, if any ( ), 
times the number of days for which the vessel was stored as above ( ), 
times the applicable factor \6\ of cost for one man per day ( ) was $--
----.
---------------------------------------------------------------------------

    \6\ The factor of cost per man per day, as prescribed by the 
Maritime Administration for voyages beginning in 19 , is $------.
---------------------------------------------------------------------------

    To this amount is added the actual cost of Subsistence Stores 
purchased in Foreign Ports for the homeward voyage (as per statement 
attached) \5\ $------, making the amount on board on date of sailing $--
----.
    The amount of Subsistence Stores consumed, that is the number of 
crew signed on ( ) and the average number of passengers, if any ( ) 
times the number of days between the last day of storing the vessel and 
the date on which the vessel was lost ( ) times the applicable factor 
\6\ of cost for one man per day was $------.
    To this amount is added the actual amount of Subsistence Stores 
transferred or sold (as per statement attached), $------, making $------
, which, subtracted from the amount of Subsistence Stores on board at 
date of sailing, as above, is $------, which sum is claimed to be the 
actual value of the unused Subsistence Stores at the time of the loss, 
according to the best of deponent's knowledge, information and belief.
    III. Slop Chest: \7\
---------------------------------------------------------------------------

    \7\ If the figure needed to fill the blank in paragraph (A) or (B) 
is not available, the formula cannot be used; the Owner must submit 
actual inventories and a record of purchases on Affidavit Exhibit B.
---------------------------------------------------------------------------

    (A) The average daily consumption cost of Slop Chest Stores for this 
vessel for the year prior to the voyage on which she was lost was \8\ 
$------.
---------------------------------------------------------------------------

    \8\ Strike out paragraph (A) or (B).
---------------------------------------------------------------------------

    (B) The figure required for (A) is not readily available, and the 
average daily cost of Slop Chest Stores for this vessel for the last 
calendar year set up on the Owner's books was \8\ $------.
    The amount of Slop Chest Stores on board at the time this vessel was 
ready to sail (the number of days for which the vessel was stored times 
the average daily consumption cost, as above) was $------.
    To this amount is added the actual cost of Slop Chest Stores 
purchased in Foreign Ports for the homeward voyage (as per statement 
attached) \5\ $------, making the total amount on hand at date of 
sailing $------.
    The average daily consumption cost, as above times the number of 
days from the date the vessel was ready to sail to, but not including, 
the date of loss, as above, is $------.
    To this is added the actual amount of Slop Chest Stores transferred 
or sold (as per statement attached) $------, making $------, which, 
subtracted from the amount of Slop Chest Stores on board at date of 
sailing, as above, is $------, which sum is claimed to be the actual 
value of the vessel's unsold Slop Chest Stores at the time of the loss 
according to the best of deponent's knowledge, information and belief.
    IV. Bar Stock: \9\
---------------------------------------------------------------------------

    \9\ If the figure needed to fill the blank in paragraph (A) or (B) 
is not available, the formula cannot be used; the Owner must submit 
actual inventories and a record of purchases on Affidavit Exhibit B.
---------------------------------------------------------------------------

    (A) The average daily consumption cost of Bar Stock for this vessel 
for the year prior

[[Page 182]]

to the voyage on which she was lost was \10\ $------.
---------------------------------------------------------------------------

    \10\ Strike out paragraph (A) or (B).
---------------------------------------------------------------------------

    (B) The figure required for (A) is not readily available, and the 
average daily cost of Bar Stock for this vessel for the last calendar 
year set up on the Owner's books was \10\ $------.
    The amount of Bar Stock on board at the time this vessel was ready 
to sail (the number of days for which the vessel was stored times the 
average daily consumption cost, as above) was $------.
    To this amount is added the actual cost of Bar Stock purchased in 
Foreign Ports for the homeward voyage (as per statement attached) \5\ 
$------, making the total amount on hand at date of sailing $------.
    The average daily consumption cost, as above, times the number of 
days from the date the vessel was ready to sail to, but not including, 
the date of loss, as above, is $------.
    To this amount is added the actual amount of Bar Stock transferred 
or sold (as per statement attached) $------, making $------, which, 
subtracted from the amount of Bar Stock on board at the time of sailing, 
as above, is $------, which sum is claimed to be the actual value of the 
vessel's unused Bar Stock at the time of the loss according to the best 
of deponent's knowledge, information and belief.
    V. Fuel: \11\
---------------------------------------------------------------------------

    \11\ If the figure needed to fill the blank in paragraph (A) or (B) 
is not available, the formula cannot be used; the Owner must submit 
actual inventories and a record of purchases on Affidavit Exhibit B.
---------------------------------------------------------------------------

    (A) The average daily consumption cost of Fuel for this vessel for 
the year prior to the voyage on which she was lost was \11\ $------.
    (B) The figure required for (A) is not readily available, and the 
average daily cost of Fuel for this vessel for the last calendar year 
set up on the Owner's books was \12\ $------.
---------------------------------------------------------------------------

    \12\ Strike out paragraph (A) or (B).
---------------------------------------------------------------------------

    The amount of Fuel on board at the time this vessel was ready to 
sail (the number of days for which the vessel was stored times the 
average daily consumption cost, as above) was $------.
    To this amount is added the actual cost of Fuel purchased in Foreign 
Ports for homeward voyage (as per statement attached) \5\ $------, 
making the total amount on hand at date of sailing $------.
    The average daily consumption cost, as above, times the number of 
days from the date the vessel was ready to sail to, but not including, 
the date of loss, as above, is $------.
    To this amount is added the actual amount of Fuel transferred or 
sold (as per statement attached) $------, making $------, which, 
subtracted from the amount of Fuel on board at the time of sailing, as 
above, is $------, which sum is claimed to be the actual value of the 
vessel's unused Fuel at the time of the loss according to the best of 
deponent's knowledge, information and belief.

Unused Consumable Stores, other than--
  Subsistence Stores.......................  $------
  Subsistence Stores.......................  ------
  Slop Chest...............................  ------
  Bar Stock................................  ------
  Fuel.....................................  ------
                                            ----------------------------
    Total..................................  $------
 

                                              By: ----------------------
    Sworn to before me this ------------ day of ----------------, 19--
--.

                                                           Notary Public

                                Exhibit B

affidavit in proof of claim for the loss of unused stores and supplies 
on board the ss--------------

State of

 ss:

County of

    I am the ------ of ------, the Owner of the SS ------, which was 
lost as a result of enemy action on or about the -------------- day of 
--------------, --------. I make this affidavit in support of the above-
named Owner's claim for the loss of the actual value of the said 
vessel's unused Stores and Supplies. The statements herein contained are 
based upon the personal knowledge of deponent or upon the books of 
records of the Owner or its agent which deponent believes are true and 
accurate.
    ``Stores and Supplies'', for loss of which claim is being made, are 
limited to consumable and subsistence stores as defined in Maritime 
Administration Inventory Manual, Vessel Inventories, Part I, and do not 
include radio supplies, expendable equipment, scrap, junk and spare 
parts.
    I am familiar with the insurance carried on the Stores and Supplies, 
on the SS ------; and, from the effective date of War Risk Insurance 
Binder No. ------ Policy No. ------ issued by the United States of 
America, which covers the total loss of Stores and Supplies in the 
amount of $------, to the date of such vessel's loss on ------, there 
was no war risk insurance on such Stores and Supplies other than that 
provided by said Binder or Policy.
    The period for which the vessel was stored with Stores and Supplies 
for use on the voyage on which she was lost, beginning with the last day 
of storing, was ------ days for Consumable Stores, ------ days for 
Subsistence Stores, ------ days for Slop Chest, ------ days for Bar 
Stock and ------ days for Fuel. The number of days from the last day of

[[Page 183]]

storing to, but not including, the date on which the vessel was lost, 
was ------ days for Consumable Stores, ------ days for Subsistence 
Stores, ------ days for Slop Chest, ------ days for Bar Stock and ------ 
days for Fuel.
    I. Consumable (excluding Subsistence) Stores:
    (1) The value of Consumable Stores on board the vessel at the time 
the vessel was ready to sail, as shown by the attached certified 
inventory of amounts on board the vessel at the termination of the 
preceding voyage or date of last inventory on ------, less actual 
consumption to date of sailing, amounting to $------, plus the actual 
additional purchases made for the voyage on which the vessel was lost, 
as shown by the attached invoices, amounting to $------, was $------.
    (2) The average daily consumption factor of $------ (determined by 
dividing the amount determined as in (1) by the number of days for which 
the vessel was stored) times the number of days from the date the vessel 
was ready to sail to, but not including, the date of loss ( ) is $----
--.
    To this amount is added the actual amount of Consumable Stores 
transferred or sold (as per statement attached) $------, making $------, 
which, subtracted from the amount of Consumable Stores on board at the 
time the vessel was ready to sail, as shown in (1) above, is $------, 
which sum is claimed to be the actual value of the vessel's unused 
Consumable Stores at the time of the loss according to the best of 
deponent's knowledge, information and belief.
    II. Subsistence Stores:
    (1) The value of Subsistence Stores on board the vessel at the time 
the vessel was ready to sail, as shown by the attached certified 
inventory of amounts on board the vessel at the termination of the 
preceding voyage or date of last inventory on ------ less actual 
consumption to date of sailing, amounting to $------, plus the actual 
additional purchases made for the voyage on which the vessel was lost, 
as shown by the attached invoices, amounting to $------, was $------.
    (2) The average daily consumption factor of $------ (as determined 
by dividing the amount determined as in (1) by the number of days for 
which the vessel was stored) times the number of days from the date the 
vessel was ready to sail to, but not including, the date of loss ( ) is 
$------.
    To this amount is added to the actual amount of Subsistence Stores 
transferred or sold (as per statement attached) $------, making $------, 
which, subtracted from the amount of Subsistence Stores on board at the 
time the vessel was ready to sail, as shown in (1) above, is $------, 
which sum is claimed to be the actual value of the vessel's unused 
Subsistence Stores at the time of the loss according to the best of 
deponent's knowledge, information and belief.
    III. Slop Chest Stores:
    (1) The value of Slop Chest Stores on board the vessel at the time 
the vessel was ready to sail, as shown by the attached certified 
inventory of amounts on board the vessel at the termination of the 
preceding voyage or date of last inventory on ------ less actual 
consumption to date of sailing, amounting to $------, plus the actual 
additional purchases made for the voyage on which the vessel was lost, 
as shown by the attached invoices, amounting to $------, was $------.
    (2) The average daily consumption factor of $------ (determined by 
dividing the amount determined as in (1) by the number of days for which 
the vessel was stored) times the number of days from the date the vessel 
was ready to sail to, but not including, the date of loss ( ) is $----
--.
    To this amount is added the actual amount of Slop Chest Stores 
transferred or sold (as per statement attached) $------, making $------, 
which, subtracted from the amount of Slop Chest Stores on board at the 
time the vessel was ready to sail, as shown in (1) above, is $------, 
which sum is claimed to be the actual value of the vessel's unused Slop 
Chest Stores at the time of the loss according to the best of deponent's 
knowledge, information and belief.
    IV. Bar Stock:
    (1) The value of Bar Stock on board the vessel at the time the 
vessel was ready to sail, as shown by the attached certified inventory 
of amounts on board the vessel at the termination of the preceding 
voyage or date of last inventory on ------ less actual consumption to 
date of sailing, amounting to $------, plus the actual additional 
purchases made for the voyage on which the vessel was lost, as shown by 
the attached invoices, amounting to $------, was $------.
    (2) The average daily consumption factor of $------ (determined by 
dividing the amount determined as in (1) by the number of days for which 
the vessel was stored) times the number of days from the date the vessel 
was ready to sail to, but not including, the date of loss ( ) is $----
--.
    To this amount is added the actual amount of Bar Stock transferred 
or sold (as per statement attached) $------, making $------, which, 
subtracted from the amount of Bar Stock on board at the time the vessel 
was ready to sail, as shown in (1) above, is $------, which sum is 
claimed to be the actual value of the vessel's unused Bar Stock at the 
time of the loss according to the best of deponent's knowledge, 
information and belief.
    V. Fuel:
    (1) The value of Fuel on board the vessel at the time the vessel was 
ready to sail, as shown by the attached certified inventory of

[[Page 184]]

amounts on board the vessel at the termination of the preceding voyage 
or date of last inventory on ------ less actual consumption to date of 
sailing, amounting to $------, plus the actual additional purchase made 
for the voyage on which the vessel was lost, as shown by the attached 
invoices, amounting to $------, was $------.
    (2) The average daily consumptions factor of $------ (determined by 
dividing the amount determined as in (1) by the number of days for which 
the vessel was stored) times the number of days from the date the vessel 
was ready to sail to, but not including, the date of loss ( ) is $----
--.
    To this amount is added the actual amount of Fuel transferred or 
sold (as per statement attached) $------, making $------, which, 
subtracted from the amount of Fuel on board at the time the vessel was 
ready to sail, as shown in (1) above, is $------, which sum is claimed 
to be the actual value of the vessel's unused Fuel at the time of the 
loss according to the best of deponent's knowledge, information and 
belief.

Claim is hereby made for:
  Unused Consumable Stores, other than--
    Subsistence Stores........................................   $------
    Subsistence Stores........................................   $------
    Slop Chest................................................   $------
    Bar Stock.................................................   $------
    Fuel......................................................   $------
                                                               ---------
        Total.................................................   $------
 

 By:--------------

    Sworn to before me this ------------ day of ----------------, 19--
--.

                                                           Notary Public

[[Page 185]]



                          SUBCHAPTER H_TRAINING





PART 310_MERCHANT MARINE TRAINING--Table of Contents



 Subpart A_Regulations and Minimum Standards for State, Territorial or 
                Regional Maritime Academies and Colleges

Sec.
310.1 Definitions.
310.2 Federal assistance.
310.3 Schools and courses.
310.4 Training Ship.
310.5 Personnel.
310.6 Entrance requirements.
310.7 Federal student subsistence allowances and student incentive 
          payments.
310.8 Leave.
310.9 Medical attention and injury claims.
310.10 Discipline and dismissal.
310.11 Cadet uniforms.
310.12 Scope and effect.
310.12-1 Form of agreement.

Subpart B [Reserved]

  Subpart C_Admission and Training of Midshipmen at the United States 
                         Merchant Marine Academy

310.50 Purpose.
310.51 Definitions.
310.52 General.
310.53 Nominations and vacancies.
310.54 General requirements for eligibility.
310.55 Scholastic requirements.
310.56 Physical requirements.
310.57 Application and selection of midshipmen.
310.58 Service obligation for students executing or reexecuting 
          contracts.
310.59 Courses of instruction.
310.60 Training on subsidized vessels.
310.61 Training on other vessels and by other facilities or agencies.
310.62 Allowances and expenses; required deposit.
310.63 Uniforms and textbooks.
310.64 Privileges.
310.65 Graduation.
310.66 Foreign students.
310.67 Academy regulations.

    Authority: 46 App. U.S.C. 1295; 49 CFR 1.66.

    Source: 46 FR 37694, July 22, 1981, unless otherwise noted.



 Subpart A_Regulations and Minimum Standards for State, Territorial or 

                Regional Maritime Academies and Colleges



Sec. 310.1  Definitions.

    For purposes of this subpart A:
    (a) The 1958 Act means the Maritime Academy Act of 1958, Pub. L. 85-
672.
    (b) Act means the Maritime Education and Training Act of 1980, Pub. 
L. 96-453, as amended.
    (c) Administration means the Maritime Administration, United States 
Department of Transportation.
    (d) Agreement means an agreement between a State, or Territorial or 
Regional maritime academy or college and the Maritime Administrator, 
Department of Transportation as authorized by the 1958 Act or the Act 
and set forth in Sec. 310.13 of this part.
    (e) Secretary means Secretary of Transportation.
    (f) Maritime Administrator means the Maritime Administrator, 
Department of Transportation.
    (g) Cadet means cadet enrolled in the United States Maritime Service 
and in good standing at a State or Territorial or Regional maritime 
academy or college meeting the requirements of the 1958 Act.
    (h) Commanding Officer means the Commanding Officer of a training 
ship furnished by the Administration.
    (i) Cost of Education Provided means the financial costs incurred by 
the Federal Government in providing student incentive payments for 
students at the State maritime academies.
    (j) Deputy means the Deputy Maritime Administrator, Department of 
Transportation.
    (k) Maritime Service means the United States Maritime Service.
    (l) Midshipman means a student in good standing at a State maritime 
academy or college who has accepted midshipman status in the United 
States Naval Reserve (including the Merchant Marine Reserve, United 
States Naval Reserve) under the Act.

[[Page 186]]

    (m) Officers means all officers and faculty employed by a State 
maritime academy or college.
    (n) Region Director means the Director of the Administration's 
region office in which a School is located or in which a training ship 
is located.
    (o) School means State or Territorial or regional maritime academy 
or college meeting the requirements of the Act.
    (p) Superintendent means the superintendent or president of a 
School.
    (q) Supervisor means the employee of the Administration designated 
to supervise the Federal Government's interest in a School under the 
provisions of the Act, an agreement, and this subpart.
    (r) Training Ship means a vessel used for training by a school and 
furnished by the Administration to a State or Territory, and includes 
the ship itself and all its equipment, apparel, appliances, machinery 
boilers, spare and replacement parts and other property contained in it.

[46 FR 37694, July 22, 1981, as amended at 69 FR 31901, June 8, 2004]



Sec. 310.2  Federal assistance.

    (a) The Maritime Administrator may enter into agreements with the 
present or later established schools (not more than one such school in 
each State or Territory) meeting the requirements of the Act to make 
annual payments, for not in excess of four (4) years in the case of each 
such agreement, to be used for the maintenance and support of such 
Schools. The amount of each such annual payment shall be not less than 
the amount furnished to such School for its maintenance and support by 
the State or Territory in which such academy is located or, in the case 
of a Regional maritime academy an amount equal to the amount furnished 
to such academy for its maintenance and support by all States or 
Territories, r both, cooperating to support such School, but shall not 
exceed $100,000. However, the amount shall not exceed $25,000, if such 
academy does not meet the requirements of subsection 1304(f)(2) of the 
Act.
    (b) Pursuant to the provisions of section 1304(c) of the Act, The 
Maritime Administrator, may furnish to any State or Territory of the 
United States for use as a Training Ship by a school any suitable vessel 
that is under his or her jurisdiction, obtain such vessel from any 
department or agency of the United States, or may construct and furnish 
a suitable vessel, if such vessel is not available.
    (c) The Maritime Administrator may pay to any School the amount of 
the costs of all fuel consumed by a Training Ship furnished under the 
provisions of section 1304(c)(1) of the Act while such vessel is being 
used for training purposes by such a School, if such funds have been 
appropriated and are available for that purpose.
    (d) As a condition to receiving any payments or the use of any 
Training Ship under the provisions of the Act, the school shall comply 
with the requirements of the Act and this subpart and shall agree in 
writing to conform to such requirements.
    (e) As a further condition to receiving any payments or the use of 
any Training Ship, a School shall agree that, with respect to the 
training program for merchant marine officers, consistent with 
provisions of the Act, the 1958 Act, and the Agreement, it will comply 
with the following provisions of law and implementing regulations duly 
promulgated thereunder, to the extent applicable, including, but not 
limited to: Title VI, Civil Rights Act, 1964 (42 U.S.C. 2000d); the Age 
Discrimination Act of 1975 (42 U.S.C. 6101); the Vocational 
Rehabilitation Act--section 504 (29 U.S.C. 794); and 15 CFR Part 8. Each 
school shall give assurances that it will take any and all measures 
necessary to effectuate compliance.



Sec. 310.3  Schools and courses.

    (a) Schools with Federal aid. The following schools are presently 
operating with Federal aid under the 1958 Act or the Act:

California Maritime Academy
Maine Maritime Academy
Massachusetts Maritime Academy
State University of New York Maritime College
Texas Maritime College of the Texas A&M University at Galveston
The Great Lakes Maritime Academy

    (b) General rules for operation of a School. (1) The Schools shall 
maintain

[[Page 187]]

adequate berthing, messing and classroom instruction facilities ashore, 
or have plans to establish same at the earliest possible time, unless 
prevented from doing so by conditions beyond the control of the School. 
During a period a school is implementing an approved plan, Cadets may be 
housed and instructed on a Training Ship. However, the approved plan may 
include the ongoing use of the Training Ship as an instructional and 
laboratory facility and for the berthing of entering class cadets for a 
period not to exceed six months for purposes of shipboard 
indoctrination.
    (2) The School shall arrange for the Cadet or Midshipman to take the 
United States Coast Guard original licensing examination prior to the 
date of graduation.
    (3) As a condition to receiving payments of any amount allowable by 
the 1958 Act and the Act in excess of $25,000 for any year, a School 
shall agree to admit student residents of other States to the extent of 
at least ten percent (10%) of each entering class, if such out-of-State 
students apply for admission and are otherwise qualified for such 
admission. The calculation of residents of other States shall exclude 
residents of foreign countries, but shall include residents of 
Territories and possessions of the United States (including the 
Commonwealth of Puerto Rico).
    (4) Upon the request of the Administration a school shall furnish 
such reports and estimates as may be required in the preparation of 
Federal Budget estimates.
    (5) State authorities shall prescribe and administer rules and 
regulations for the internal organization and administration of each 
School.
    (6) The Administration shall have the right to inspect shore base 
facilities at all reasonable times.
    (7) Records pertaining to a School, its officers, crew, Cadets, the 
Training Ship, and shore base, shall be maintained by each School and 
shall be available to the Supervisor upon request. A detailed record of 
applications for admissions, enrollments, reenrollments, absences with 
or without leave, hospitalizations, determinations of students not in 
good standing, disenrollments, graduations, and other data concerning 
cadets and Midshipmen shall be kept by each school for the period of 
enrollment plus one year. Copies of these records shall be furnished to 
the Supervisor upon request.
    (8) The Administration may include in any pamphlets, brochures or 
other public information materials an adequate description of each 
School giving the reader knowledge of the existence of the School, its 
purposes and where to obtain application forms and further information.
    (c) Curriculum. (1) The minimum period of training shall be three 
(3) years. For the Cadets and Midshipmen at the schools located in 
California, Maine, Massachusetts, New York and Texas at least six (6) 
months of the total time must be aboard a Training Ship in cruise 
status. A maximum of two (2) months of training time aboard commercial 
vessels of not less than 2,500 horsepower may be substituted for two (2) 
months of the specified cruise time. For the cadets at the Great Lakes 
Maritime Academy, six (6) months of the time shall be aboard Great Lakes 
commercial vessels and an additional three (3) months shall be aboard 
either a Training Ship in a cruise status or Great Lakes commercial 
vessels while underway. Cadets in training status aboard commercial 
vessels shall sign on board as cadets and shall pursue their training 
within the framework of formal sea projects prepared and monitored by 
their respective Schools.
    (2) State authorities shall prescribe and be responsible for the 
courses of instruction and general system of training and the addition 
of such reasonable maritime courses as may be prescribed by Federal 
authorities, subject to approval by the Maritime Administrator. The 
curriculum as a composite shall, as a minimum, meet the requirements set 
out in the Federal Curriculum Standards for Merchant Marine Officers 
Training Program.
    (3) Copies of the Federal Curriculum Standards for Merchant Marine 
Officers Training Program at the State maritime academies may be 
obtained

[[Page 188]]

from the Maritime Administration, Office of Policy and Plans, 400 
Seventh Street, SW, Washington, DC 20590.

(Sec. 204(b), Merchant Marine Act, 1936, as amended (46 U.S.C. 1114(b)); 
Pub. L. 97-31 (August 6, 1981); 49 CFR 1.66 (46 FR 47458, Sept. 28, 
1981))

[46 FR 37694, July 22, 1981, as amended at 49 FR 13365, Apr. 4, 1984; 69 
FR 31901, June 8, 2004]



Sec. 310.4  Training Ship.

    The Administration may furnish a Training Ship, if such is 
available, to any School. Training Ships which may be designated for use 
by a School will be delivered to the School at a location determined by 
the Administration, in condition found to be in class by the American 
Bureau of Shipping and certificated by the U.S. Coast Guard. If a 
Training Ship is not available, adequate cruising facilities shall be 
the responsibility of the State and its School. The furnishing of a 
Training Ship shall be subject to the following terms and conditions:
    (a) General provisions. (1) The State, acting through the School 
shall exercise reasonable care to safeguard the interests of the 
Administration and avoid (i) injury to any person aboard the Training 
Ship, and (ii) loss and damage of every nature with respect to the 
Training Ship. Also, the school shall have reasonable layup procedures 
during noncruise status of the Training Ship.
    (2) Excerpts from log books and reports shall be submitted as 
directed by the Supervisor.
    (3) Initial telegraphic or telephonic reports shall be made promptly 
to the Supervisor and the appropriate Region Director in the event of an 
accident causing (i) serious injury to any person, or to the Training 
Ship, or (ii) damage inflicted by the Training Ship upon any other ship 
or other property. Such reports shall be followed by complete written 
details of the occurrence.
    (4) The Supervisor shall determine whether or not the berth of the 
Training Ship at the base in its home port is suitable from the 
standpoint of safe mooring. When the Training Ship is not on cruise, the 
Commanding Officer or Superintendent shall keep the Supervisor informed 
of the location of the Training Ship and any contemplated change of 
berth.
    (5) The following notice shall be posted conspicuously aboard each 
Training Ship furnished to a State for use by a School:
    This training ship is the property of the United States of America. 
It is furnished to the State of -------- by the Department of 
Transportation, Maritime Administration, for the purpose of training 
young men and women to become officers in the merchant marine of the 
United States. Neither the State, the Commanding Officer, nor any other 
person has any right, power or authority to create, incur or permit to 
be imposed upon this vessel, any lien whatever.
    (6) No changes requiring U.S. Coast Guard approval shall be made to 
the Training Ship without the written approval of the Administration.
    (7) In the event of the termination of the use of a Training Ship by 
the State or by the Maritime Administrator, the State shall return to 
the State base port, the Training Ship and all property whatsoever owned 
by the Administration. Title to all additions, replacements, and 
renewals made by the State shall vest in the Administration without 
charge.
    (b) Termination of use. The Maritime Administrator may terminate the 
use of a Training Ship upon such reasonable notice to the State as the 
circumstances may permit in the judgment of the Maritime Administrator. 
If use of the Training Ship is terminated by the Maritime Administrator, 
the Maritime Administrator may:
    (1) Substitute another Training Ship;
    (2) Require the sharing of a Training Ship by two or more Schools; 
or
    (3) Cooperate with the School in arranging for training time aboard 
commercial vessels for its Cadets and Midshipmen.
    (c) Property aboard the Training Ship. The State shall have the 
complete use of a Training Ship as defined, subject to the following 
terms and conditions:
    (1) All property, or its equivalent furnished by the Administration, 
shall be returned to the Administration when use of the Training Ship is 
terminated. The only exceptions are: spare and replacement parts 
consumed; and losses

[[Page 189]]

due to ordinary wear and tear, unavoidable accident and perils of the 
sea. All other property otherwise lost or destroyed shall be replaced at 
the expense of the State.
    (2) Administration property shall not be permanently removed from 
the Training Ship to the shore base without the prior written approval 
of the Supervisor.
    (3) The administration shall take inventories of State and Federal 
property aboard the Training Ship at such times as it deems necessary. 
The school, at its expense, shall furnish such assistance as may be 
necessary in taking such inventories.
    (d) Condition Surveys. Before a Training Ship is released to a 
School and manned by officers under State control, a condition survey 
shall be made by duly authorized representatives of the School and the 
Administration. If the Training Ship is found in order, the School 
representative shall sign a receipt for the Training Ship. Subsequently, 
after due notice to the State authorities, a condition survey may be 
made of the Training Ship whenever deemed advisable by the 
Administration, and, in any event, upon redelivery of the Training Ship 
by the State to the Administration.
    (e) Maintenance and repairs--(1) Administration payment. A Training 
Ship shall be maintained in good repair by the Secretary as provided by 
the 1958 Act and the Act. Expenses for repairs, changes and alterations, 
repairs to equipage and replacements of equipage in accordance with the 
Administration's approved allowance lists for the Training Ship (i.e. 
authorized under the Act and to the extent that funds are available), 
shall be borne by the Administration under the following terms and 
conditions:
    (i) When it is necessary to repair or drydock the Training Ship 
because of damage (except in an emergency, when on foreign cruise), the 
Commanding Officer or Superintendent shall notify the Supervisor and 
appropriate Region Director by telephone or telegraph in order to enable 
a representative of the Region Director, if available, to be present, 
when the survey of the damage is made.
    (ii) Repairs which need not be carried out during the annual 
overhaul period shall be made by the Cadets or Midshipmen, if possible, 
under the supervision of the officers. When repair material is required 
for this purpose, the Commanding Officer or Superintendent shall forward 
to the Supervisor a list of such material and estimated costs, and a 
description of the repairs to be carried out by the Cadets or 
Midshipmen. The Supervisor shall promptly advise the Commanding Officer 
or Superintendent whether or not such work comes under the heading of 
repairs, and if procurement of the material is authorized.
    (iii) Requisitions covering repairs, renewals, and betterments shall 
be prepared in quintuplicate by the heads of departments of the Training 
Ship and submitted by the Commanding Officer or Superintendent to the 
Supervisor at least forty-five (45) days before the date of the annual 
overhaul, with one copy to the Region Director.
    (iv) The State is authorized to expend not to exceed $5,000 for 
emergency repairs which become necessary while the Training Ship is on 
foreign cruise. The Administration shall reimburse the State upon 
submission of vouchers to, and approval by, the Maritime Administrator. 
To obtain reimbursement for emergency repairs estimated to cost in 
excess of $5,000, authorization must be obtained by the State from the 
Supervisor prior to undertaking such repairs. The Commanding Officer 
shall be responsible for all necessary filings with the United States 
Customs Service to avoid duties upon all emergency repairs performed 
outside the United States. If penalties are imposed, for non-filing or 
improper filing, they shall be solely the responsibility of the State.
    (2) State payment. Except as otherwise provided in this section, the 
State shall, at its own expense, accomplish the following:
    (i) Undertake usual preventive maintenance of the Training Ship, 
adhere to minimum levels of preventive maintenance as prescribed by the 
Administration, and keep the Training Ship clean and painted, above the 
waterline according to good maritime practices.

[[Page 190]]

    (ii) Cause the Training Ship to be fumigated if required by the 
Administration and forward to the Supervisor a copy of the fumigation 
certificate.
    (iii) Pay for all consumable stores, freshwater and costs incidental 
to the operation of the Training Ship.
    (iv) Pay for fuel of the training ship except that the 
Administration may assist in paying the cost of fuel consumed on the 
Training Ship while being used for training purposes if funds are 
appropriated and available for such purposes.
    (f) Cruises. The school shall submit the cruise itinerary of the 
Training Ship including a listing of foreign ports to be visited, for 
approval of the Supervisor at least sixty (60) days in advance of the 
date such cruise is scheduled to begin. The Supervisor shall arrange 
with the Department of State for clearance of the Training Ship to visit 
foreign ports.
    (g) Hospitalization. The School shall be responsible for all medical 
treatment and hospitalization of all persons aboard the Training Ship at 
all times, including officers and Cadets and Midshipmen. If available, 
facilities of the United States Public Health Service should be 
utilized.
    (h) Repatriation and return to home port. The School shall be 
responsible for the return to the home port of the Training Ship of all 
persons, including officers and Cadets and Midshipmen, who originally 
embarked on a training cruise from a Continental United States port and 
who are left behind, after the departure of the Training Ship from any 
port, foreign or domestic, or are to be brought home from the ship at 
any time or for any reason. The School shall be solely responsible for 
all expenses of repatriation and return to home port.



Sec. 310.5  Personnel.

    (a) Selection and appointment of Superintendent and faculty by State 
authorities. (1) The State shall select and appoint the Superintendent 
of a School in accordance with qualifications established by appropriate 
State authorities. The State shall notify the Maritime Administrator 
whenever a new Superintendent is appointed and furnished with 
appropriate background information on the appointee for informational 
purposes.
    (2) The State shall appoint faculty members in disciplines other 
than engineering and navigation on the basis of the same criteria used 
in the employment of such personnel in State-supported colleges and 
universities throughout the State. Faculty members in navigation and 
engineering courses, including steam and diesel, shall meet appropriate 
academic and practical experience standards adopted by the school and 
approved by the Administration.
    (b) Personnel for Training Ships--(1) Commanding Officer. The 
Commanding Officer shall hold a valid Master's Ocean, Unlimited Tonnage 
license including Radar Observer endorsement issued by the United States 
Coast Guard and shall have served at least two (2) years as Master, 
Chief Officer, Commanding Officer, or Executive Officer either (i) on 
oceangoing vessels under the authority of said Master's Ocean, Unlimited 
Tonnage license, or (ii) in the case of sea service as a member of the 
Uniformed Services of the United States, on ships accepted by the United 
States Coast Guard as equivalent for qualifying service for issue of a 
Master's Ocean, Unlimited Tonnage license.
    (2) Chief Engineer. The Chief Engineer must hold a valid Chief 
Engineer's (Steam) Ocean, Unlimited Horsepower license, issued by the 
United States Coast Guard and have served as Chief Engineer of an 
oceangoing steamship of comparable horsepower to that of the particular 
Training Ship.
    (3) Watch Officers. Both Deck and Engineer Watch Officers in charge 
of a watch, underway, shall hold valid Ocean, Unlimited Tonnage 
licenses, issued by the United States Coast Guard, in their particular 
field.
    (4) Radio Officers. During each training cruise the Training Ship 
shall have assigned one or more radio officers holding a valid license 
issued by the United States Coast Guard, in accordance with its 
regulations.
    (5) Licensed Engineer. When a Training Ship boiler is in operation, 
there shall be a Licensed Engineer qualified to stand the watch aboard 
at all times.

[[Page 191]]

    (c) Insignia for officers and other School personnel. The State may 
furnish insignia for officers and other school personnel, other than 
officers of the United States Navy, United States Naval Reserve, United 
States Maritime Service and United States Coast Guard.

(Approved by the Office of Management and Budget under control number 
2133-0010)

(Sec. 204(b), Merchant Marine Act, 1936, as amended (46 U.S.C. 1114(b)); 
Pub. L. 97-31 (August 6, 1981); 49 CFR 1.66 (46 FR 47458, Sept. 28, 
1981))

[46 FR 37694 July 22, 1981, as amended at 47 FR 25530, June 14, 1982; 49 
FR 13365, Apr. 4, 1984]



Sec. 310.6  Entrance requirements.

    (a) Enrollment prior to April 1, 1982. A candidate for admission to 
a school who wishes to be considered for Federal student subsistence 
payments shall:
    (1) Be a citizen of the United States.
    (2) Be obligated to (i) complete the Naval Science curriculum (ii) 
take all necessary and positive steps to obtain a commission as ensign 
in the United States Naval Reserve, (iii) apply before graduation for 
such commission, and (iv) accept such commission if offered. A breach of 
this agreement will result in termination of cadet status and of Federal 
student subsistence payments, and may lead to legal action for recovery 
of all past such payments. The requirements of this paragraph shall not 
apply at The Great Lakes Maritime Academy.
    (3) Be obligated to sit for the appropriate licensing examination of 
the United States Coast Guard. A breach of this agreement will result in 
termination of cadet status and of Federal student subsistence payments, 
and may lead to legal action for recovery of all past such payments.
    (4) Meet the physical standards specified by the United States Coast 
Guard for original licensing as a merchant marine officer. The written 
certification of the Superintendent of the school, based on a physical 
examination by a doctor, the results of which are on record at the 
school, that a candidate meets these requirements, will be acceptable to 
the Administration.
    (5) Possess a secondary school education or equivalent, satisfactory 
for admission as an undergraduate, to colleges or universities under 
control of the State in which the school is located.
    (6) Meet requirements established by the school in regard to such 
criteria as the individual's secondary school grades, rank in graduating 
class, aptitude, achievement, and qualities of leadership.
    (b) Enrollment on or after April 1, 1982. A candidate for admission 
to a school who wishes to be considered for the Federal student 
incentive payments shall:
    (1) Meet the requirements of paragraphs (a) (1), (4), (5), and (6) 
of this section.
    (2) Be at least seventeen (17) years of age and not have passed the 
twenty-fifth (25th) birthday on the day of enrollment at a School.
    (3) Apply for, be offered, and have accepted midshipman status in 
the United States Naval Reserve (including the Merchant Marine Reserve, 
United States Naval Reserve) and simultaneously have applied and been 
accepted for Enlisted Reserve status.
    (4) Be obligated to complete the naval science curriculum.

[46 FR 37694, July 22, 1981, as amended at 48 FR 24080, May 31, 1983]



Sec. 310.7  Federal student subsistence allowances and student incentive 

payments.

    (a) Subsistence allowances--(1) Selection and allocation. In 
accordance with the Administration's established freshmen subsidy 
allocation for each School, the school shall select the individuals in 
its new entering class who will be enrolled in the United States 
Maritime Service as cadets and start to receive Federal student 
subsistence payments for uniforms, textbooks and subsistence as provided 
in the 1958 Act. The freshman subsidy allocations for each school are as 
follows: California Maritime Academy 99; Maine Maritime Academy 135; 
Massachusetts Maritime Academy 69; State University of New York Maritime 
College 200; Great Lakes Maritime Academy 45; and the

[[Page 192]]

Texas Maritime College 32. Each student who meets the entrance 
requirements in Sec. 310.6(a) and applies for enrollment in the United 
States Maritime Service shall be entitled to consideration for a student 
subsistence payment at a rate and under the conditions in the 1958 Act. 
The list identifying the selected students shall be forwarded to the 
Administration on or before October 31, 1981. The Federal student 
subsistence payments will be paid to the School while a cadet is in 
attendance but not in excess of four (4) academic years for any one 
student.
    (2) Resignation or disenrollment. There will be no substitution for 
students removed or dropped from the list of those originally receiving 
Federal student subsistence payments. Subsidized students who resign or 
are disenrolled from a school shall not, on subsequent reenrollment, be 
in a position to reclaim their subsidy status.
    (3) Selection criteria; rate of payment. The selection of the 
students to receive such payments shall be made by the School in 
accordance with criteria established by the School, with the prior 
approval of the Administration. The rate of Federal student subsistence 
payments will be determined by the Administration according to the 1958 
Act or the Act.
    (4) ROTC enrollment. Subsidized cadets who make a commitment to an 
Armed Force Reserve Officer Training Corps will be removed from the 
Administration subsidy rolls effective on the date they receive funds 
from a U.S. military service. Should they leave the program for any 
reason they may not reclaim the Administration subsidy as a cadet.
    (5) Payment procedure. The Administration shall make the Federal 
student subsistence payments no more frequently than monthly, directly 
to the School upon the presentation of a statement containing the names 
of each Cadet selected by the Academy (within the quotas furnished 
pursuant to paragraph (a) of this section) to be enrolled in the 
Maritime Service and to receive the Federal student subsistence 
payments. For newly selected Cadets in a new entering class, the 
statement supporting the first voucher for payment shall certify that 
the cadets have met the entrance requirements in Sec. 310.6.
    (6) Certification procedure. All vouchers submitted for payment 
shall contain a certification by the Superintendent that the payment 
will be used to assist in defraying the cost of the uniforms, textbooks, 
and subsistence of each Cadet on the basis of the amount to which the 
cadet is entitled, as reflected by the attached Daily Attendance Report. 
No cadet shall receive a federal student subsistence payment for any 
time during which he or she is absent without leave or for absence due 
to a condition not in line of duty, or when determined by the School to 
be not in good standing.
    (7) Insufficient appropriations. If it appears that the amount 
appropriated by Congress under the Act shall not be sufficient to make 
payments at the maximum rate, not in excess of $1,200 per academic year 
per cadet, the Maritime Administrator, after consultation with the 
Schools, may determine the exact rate to be paid at each School for the 
remainder of the fiscal year.
    (b) Federal student incentive payments--(1) General provisions. In 
accordance with the Administration's established subsidy quotas for 
classes entering after April 1982, each school shall identify to the 
Administration, no later than February 1 annually, those students who 
have been selected to receive the student incentive payment authorized 
by the Act. The students so identified must meet the requirements of 
Sec. 310.6(b). The Administration shall provide the school with the 
necessary service obligation contracts. The contracts will be signed by 
the designated students and returned by the School to the Supervisor and 
shall become effective when signed by the Supervisor or his or her 
designee. A copy shall be returned to the School for transmittal to the 
student. Payments will be issued to midshipmen in amounts equaling $4000 
for each academic year of attendance whom execute the service obligation 
contracts providing for such payment amount. Payments shall commence to 
accrue on the day each such midshipman begins his or her first term of 
work at the School. Such payments shall be made quarterly to the 
midshipman until the completion of his or

[[Page 193]]

her course of instruction but in no event for more than four (4) 
academic years. The School shall submit a quarterly certified Daily 
Attendance Report listing the names of all designated midshipmen who are 
entitled to student incentive payments. Midshipmen who do not take all 
necessary steps to maintain their midshipman status, who lose their 
midshipman status due to action by the U.S. Navy, or who make the 
commitment identified in paragraph (a)(4) of this section will have 
their student incentive payment terminated.
    (2) Temporary reallocation of Federal student incentive payments. If 
a School does not have a sufficient number of eligible freshmen to 
utilize all of its alloted payments, then the unused subsidies may be 
reallocated on a need basis to academies with eligible students. In the 
next academic year, each School's subsidy quota for entering students 
will revert to its original level.
    (3) Form of the service obligation contract. The service obligation 
contract shall obligate the midshipman to--
    (i) Use the student incentive payment to defray the cost of 
uniforms, books and subsistence;
    (ii) Complete the course of instruction at the School;
    (iii) Take the examination for a license as an officer in the 
merchant marine of the United States on or before the date of graduation 
from a School and fulfill the requirements for such license not later 
than three (3) months after such graduation;
    (iv) Maintain a valid license as an officer in the merchant marine 
of the United States for at least six (6) years following the date of 
graduation from a School, accompanied by the appropriate national and 
international endorsements and certification required by the United 
States Coast Guard for service aboard vessels on domestic and 
international voyages (``appropriate'' means the same endorsements and 
certifications held at the date of graduation, or the equivalent);
    (v) Apply for an appointment as, and accept if tendered, and serve 
as a commissioned officer in the United States Naval Reserve (including 
the Merchant Marine Reserve, United States Naval Reserve), the United 
States Coast Guard Reserve, or any other Reserve unit of an armed force 
of the United States for at least six (6) years following the date of 
graduation from a school; and
    (vi) Serve in the foreign or domestic commerce or both, and the 
national defense of the United States for at least three (3) years 
following graduation from a School--
    (A) As a merchant marine officer serving on vessels documented under 
the laws of the United States or on vessels owned and operated by the 
United States or by any State or Territory of the United States;
    (B) As an employee in a United States maritime-related industry, 
profession, or marine science (as determined by the Maritime 
Administrator), if the Maritime Administrator determines that service 
under paragraph (b)(3)(vi)(A) of this section is not available to such 
individual;
    (C) As a commissioned officer on active duty in an armed force of 
the United States or in the National Oceanic and Atmospheric 
Administration or in other maritime-related employment with the Federal 
Government which serves the national security interests of the United 
States, as determined to be satisfactory by the Maritime Administrator; 
or
    (D) By combining the services specified in paragraphs (b)(3)(vi)(A), 
(b)(3)(vi)(B) and (b)(3)(vi)(C) of this section; and
    (E) Such employment in the Federal Government must be both 
significantly maritime-related and serve the national security interests 
of the United States. ``Significantly'' is equated to a material or 
essential portion of an individual's responsibilities. It does not mean 
a ``majority'' of such individual's responsibilities, but means more 
than just an incidental part.
    (4) Marine-related employment. (i) graduates who intend to claim 
employment in a United States maritime-related industry, profession of 
marine science as meeting all or part of the service obligation under 
paragraph (b)(3)(vi) of this section, shall submit evidence to the 
Supervisor that they have conscientiously sought employment as a 
merchant marine officer, and

[[Page 194]]

that such employment is not available. Such evidence and other 
information available, shall be considered in any finding. In view of 
current and projected employment opportunities, afloat, the Maritime 
Administrator will grant the shoreside employment option infrequently 
and only on the basis of comprehensive evidence.
    (ii) The Maritime Administrator may consider the positions of 
operational, management and administrative responsibility in the 
following marine-related categories under the provisions of paragraph 
(b)(3)(vi) of this section: Civilian employment in Federal and State 
agencies related to maritime affairs, steamship companies, stevedoring 
companies, vessel chartering and operations, cargo terminal operations, 
naval architecture, shipbuilding and repair, municipal and state port 
authorities, port development, marine engineering, and tug and barge 
companies. The above list is not all inclusive and is only intended to 
serve as a general guide.
    (5) Afloat employment year. For purposes of the service obligation, 
a satisfactory year of afloat employment shall be the lesser of--
    (i) 150 days; or
    (ii) The number of days employed afloat that is at least equal to 
the median number of days of seafaring employment under articles 
achieved by deck or engine officers in the most recent calendar year for 
which statistics are available.
    (6) Reporting requirement. (i) The schools must promptly submit 
copies of all resignation forms (containing the name, reason, address 
and telephone number) of juniors and seniors to the Supervisor, to be 
used for monitoring and enforcement purposes. Each graduate must submit 
an annual Service Obligation Compliance Report form (MA-930) to the 
Maritime Administration (Supervisor) between January 1 and March 1 
following his or her graduation. After the initial report is submitted, 
each graduate must continue to submit annual reports during the same 
time frame between January 1 and March 1 for six (6) consecutive years 
thereafter, or until all components of the service obligation are 
fulfilled, whichever is latest. Each graduate will file a minimum of 
seven (7) reports in order to give information on all six (6) years of 
the armed forces reserve and merchant marine officer license service 
obligations. Graduates are encouraged to submit their Service Obligation 
Compliance Report forms (MA-930) to MARAD using the web-based Internet 
system at https://mscs.marad.dot.gov. Reports may also be mailed to: 
Compliance Specialist, Office of Policy and Plans, Maritime 
Administration, Department of Transportation, 400 7th St., SW., Room 
7123, Washington, DC 20590. In case a deferment has been granted to 
engage in a maritime-related graduate course of study, annual reports 
must be submitted during the extension period resulting from such 
deferments. Examples of the reporting requirements are as follows.

    Example 1: Midshipman graduates on June 30, 2004. His or her first 
reporting date is between January 1, 2005 and March 1, 2005 and each 
following period between January 1 and March 1 for six (6) consecutive 
years thereafter (or until all components of the service obligation are 
fulfilled, whichever is latest) for a minimum of seven (7) reports.
    Example 2: Midshipman has a deferred graduation on November 30, 
2004. His or her first reporting date is between January 1, 2005 and 
March 1, 2005 and each following period between January 1 and March 1 
for six (6) consecutive years thereafter (or until all components of the 
service obligation are fulfilled, whichever is latest) for a minimum of 
seven (7) reports.
    Example 3: Midshipman has a deferment following graduation on June 
30, 2004, to attend graduate school for two (2) years. His or her first 
reporting date is between January 1, 2005 and March 1, 2005 and during 
the same time frame between January 1 and March 1 for two (2) years 
during graduate school, and then during the same January 1 to March 1 
time frame for six (6) consecutive years thereafter (or until all 
components of the service obligation are fulfilled, whichever is latest) 
for a total of nine (9) reports.

    (ii) The Maritime Administration will provide reporting forms. 
However, non-receipt of such forms will not exempt a graduate from 
submitting information as required by this paragraph. The reporting form 
has been approved by the Office of Management and Budget (2133-0509).

[[Page 195]]

    (7) Breach of contract--(i) Breach before graduation. (A) If the 
Maritime Administrator determines that any individual who has accepted 
Federal student incentive payments for a minimum of two (2) academic 
years has failed to fulfill any part of the contract set forth in Sec. 
310.7(b)(3), such individual may be ordered by the Secretary of Defense 
to active duty in one of the Armed Forces of the United States to serve 
a period of time not to exceed two (2) years. In cases of hardship as 
determined by the Maritime Administrator, the Maritime Administrator may 
waive this provision in whole or in part.
    (B) If the Secretary of Defense is unable or unwilling to order an 
individual to active duty under paragraph (b)(7)(i)(A) of this section, 
or if the Maritime Administrator determines that reimbursement of the 
cost of education provided would better serve the interests of the 
United States, the Maritime Administrator may recover from the 
individual the amount of student incentive payments, plus interest and 
attorney's fees.
    (C) The Maritime Administrator is authorized to reduce the amount to 
be recovered under paragraph (b)(7)(i)(B) of this section from such 
individual to reflect partial performance of service obligations and 
such other factors as the Maritime Administrator determines merit such 
reduction.
    (D) For purposes of paragraph (b)(7)(i)(A) of this section, an 
``academic year'' is defined as the completion by a student of the 
required number of semesters, trimesters, or quarters, as applicable, 
whether at school or at sea, which comprise a complete course of study 
for an academic year. Thus, liability under paragraph (b)(7)(i)(A) of 
this section begins for students at the beginning of their third (3rd) 
academic year, whether at school or at sea.
    (ii) Breach after graduation. (A) If the Maritime Administrator 
determines that an individual has failed to fulfill any part of the 
service obligations (described in Sec. 310.7(b)(3)), such individual 
may be ordered to active duty to serve a period of time not less than 
two (2) years and not more than the unexpired portion of the service 
obligation contract relating to service in the foreign or domestic 
commerce or the national defense, as determined by the Maritime 
Administrator. The Maritime Administrator, in consultation with the 
Secretary of Defense, shall determine in which service the individual 
shall be ordered to active duty to serve such period of time. In cases 
of hardship, as determined by the Maritime Administrator, the Maritime 
Administrator may waive this provision in whole or in part.
    (B) If the Secretary of Defense is unable or unwilling to order an 
individual to active duty under paragraph (b)(7)(ii)(A) of this section 
or if the Maritime Administrator determines that reimbursement of the 
Cost of Education Provided would better serve the interests of the 
United States, the Maritime Administrator may recover from the 
individual the Cost of Education Provided, plus interest and attorney's 
fees.
    (C) The Maritime Administrator may reduce the amount to be recovered 
under paragraph (b)(7)(ii)(B) of this section from such individual to 
reflect partial performance of service obligations and such other 
factors as the Maritime Administrator determines merit such reduction.
    (8) Waivers. Waivers may be granted in cases where there would be 
undue hardship or impossibility of performance of the provisions of the 
contract due to accident, illness or other justifiable reason. 
Applications for waiver will be submitted to the Supervisor.
    (9) Deferments. In exceptional cases the Administration may grant a 
deferment of all or part of the service commitment under paragraphs 
(b)(3)(ii) through (vi) of this section for a period not to exceed two 
years, only for graduates considered to have superior academic and 
conduct records while at the school, for the purpose of their entry 
after graduation into a marine-or maritime-related graduate course of 
study at an accredited graduate school. However, the Secretary of the 
department in which the United States Coast Guard is operating and the 
Secretary of Commerce, with respect to the National Oceanic and 
Atmospheric Administration, which has jurisdiction over such service 
shall approve any

[[Page 196]]

deferment of service as a commissioned officer. Applications for such 
deferment shall be made through the Superintendent of Midshipman's 
school, who shall forward each application together with the 
Superintendent's recommendation for approval or disapproval and an 
evaluation of the applicant's academic and conduct records, to the 
Supervisor for appropriate action.
    (10) Determination of compliance with service obligation contract; 
deferment; waiver; and appeal procedures. (i) An official of the 
Administration designated by the Supervisor shall:
    (A) Render determinations of whether a student or graduate has 
breached his or her service agreement;
    (B) Grant or deny a deferment of the service obligation under 
paragraph (b)(9) of this section, except obligations otherwise a part of 
the graduate Reserve officer status;
    (C) Grant or deny a waiver of the requirements of the service 
agreement in hardship cases.
    (ii)(A) If a student or graduate disagrees with the decision of the 
designated official, the student or graduate may appeal that decision to 
the Maritime Administrator. The appeal must set forth all the legal and 
factual grounds on which the student or graduate bases the appeal. Any 
grounds not set forth in the appeal are waived.
    (B) Appeals must be filed with the Maritime Administrator within 30 
calendar days of the date of receipt by such student or graduate of the 
written decision of the designated official. Appeals must be filed at 
the Office of the Secretary, Maritime Administration, Room 7210, 400 7th 
St., SW., Washington, DC 20590. Each decision will include a notice of 
appeal rights.
    (C) A decision is deemed to be received by a student or graduate 
five (5) working days after the date it is mailed by first class mail, 
postage prepaid, to the address for such student or graduate listed with 
the Office of Policy and Plans. It is the responsibility of such student 
or graduate to ensure that their current mailing address is on file with 
the Office of Policy and Plans, 400 7th St., SW., Washington, DC 20590.
    (D) If the appeal is sent by conventional mail (through the United 
States Postal Service), the date of filing is determined by the postmark 
date. If no legible postmark date appears on the mailing, the appeal is 
deemed to be filed five (5) working days before the date of its receipt 
in the Office of the Secretary. If delivered by other than the United 
States Postal Service, an appeal is filed with the Maritime 
Administrator on the date it is physically delivered to the Office of 
the Secretary at the address referenced in paragraph (b)(10)(ii)(B) of 
this section. The date of filing by commercial delivery (not United 
States Postal Service) is the date it is received at the address for the 
Office of the Secretary set forth in paragraph (b)(10)(ii)(B) of this 
section. Appeals may not be submitted by facsimile or by electronic 
mail. Requests for extension of the time to file an appeal may be 
submitted by facsimile or electronic mail to the Office of the 
Secretary. Requests for extension of time do not stop or toll the 
running of the time for filing an appeal. Appeals may only be filed 
after the deadline if the Maritime Administrator or his designee, in 
their sole discretion, grants an extension.
    (E) In computing the number of days, the first day counted is the 
day after the event from which the time period begins to run. If the 
date that ordinarily would be the last day for filing falls on a 
Saturday, Sunday, or Federal holiday, the filing period will include the 
first workday after that date.

    Example to paragraph (b)(10)(ii)(E): If a graduate receives a 
decision on July 1, the 30-day period for filing an appeal starts to run 
on July 2. The appeal would ordinarily be timely only if postmarked on 
or physically delivered by July 31. If July 31 is a Saturday, however, 
the last day for obtaining a postmark by mailing or physical delivery 
would be Monday, August 2.

    (iii) The Maritime Administrator will issue a written decision for 
each timely appeal. This decision constitutes final agency action.
    (iv) If a student or graduate fails to appeal within the time set 
forth in paragraph (b)(10)(ii) of this section, the decision of the 
designated official will be final and constitute final agency action.

[[Page 197]]

    (11) Remedies. To aid in the recovery of the cost of education under 
this section, the Maritime Administrator may request the Attorney 
General to begin court proceedings, and the Maritime Administrator may 
make use of the Federal debt collection procedure in chapter 176 of 
title 28, United States Code, or other applicable administrative 
remedies.

[46 FR 37694, July 22, 1981, as amended at 48 FR 24080, May 31, 1983; 49 
FR 13365, Apr. 4, 1984; 65 FR 39558, June 27, 2000; 66 FR 36176, July 
11, 2001; 69 FR 31901, June 8, 2004; 69 FR 61606, Oct. 20, 2004; 70 FR 
28833, May 19, 2005]



Sec. 310.8  Leave.

    (a) Enrolled before April 1, 1982. Limitations on cadet leave, 
without loss of Federal student subsistence, with the specific limits to 
be set at the discretion of the Superintendent on an academic year 
basis, are:
    (1) If hospitalized, sick at home, or confined in the sick bay, 
leave shall not exceed four (4) months.
    (2) For an emergency due to the serious illness, injury or death of 
a very near relative, leave shall not exceed seven (7) days.
    (3) Annual leave shall not exceed thirty (30) days.
    (4) Christmas and Easter leave shall not exceed a total of twelve 
(12) days, and leave may be granted for all legal holidays--Federal and 
state. This leave is in addition to that granted in paragraph (a)(3) of 
this section.
    (5) Leave in addition to that provided in paragraphs (a) (3) and (4) 
of this section may be granted only if approved in advance by the 
Supervisor, upon direct request by the Superintendent.
    (b) Enrolled on or after April 1, 1982. Midshipmen will be granted 
leave without loss of incentive payments as follows:
    (1) Medical leave, as authorized by the school, not to exceed four 
(4) months.
    (2) Christmas and Easter leave and all legal holidays--Federal and 
state--as authorized by the school. This leave is in addition to that 
granted in paragraph (b)(3) of this section.
    (3) Excused absences, as authorized by the school, not to exceed 
thirty (30) days per academic year. All unauthorized leave and all 
excused absences in excess of thirty (30) days will result in loss of 
incentive payments. Midshipmen receiving student incentive payments may 
be granted leaves of absence without pay, as approved by the 
Superintendent, for periods not to exceed one (1) academic year at a 
time. Midshipmen in a pay status will only be granted a leave of absence 
if they continue to meet all requirements for graduation in this part, 
including age requirements.

[48 FR 24081, May 31, 1983]



Sec. 310.9  Medical attention and injury claims.

    (a) Medical attention and hospitalization. The school shall be 
responsible for arranging that a medical officer shall be attached or on 
call to the school. During the cruise, the School shall assign a medical 
officer to the Training Ship.
    (b) Compensation claims of Cadets or Midshipmen. Compensation claims 
for personal injuries or death sustained by a federally-assisted cadet 
or midshipman in the performance of official duty shall be forwarded to 
the Supervisor for transmission to the Office of Workers' Compensation 
Programs. The Supervisor shall furnish necessary forms.
    (c) Medical care and compensation for Officers and other personnel. 
Officers and other personnel of the School, and of the Training Ship may 
avail themselves of any medical facilities furnished by the State or 
Federal Government for which they qualify. See, for example, 42 CFR part 
32. Such persons who are not Federal employees shall look to the State 
alone for pay, allowances, compensation and other benefits during injury 
or illness.

[46 FR 37694, July 22, 1981, as amended at 48 FR 24081, May 31, 1983]



Sec. 310.10  Discipline and dismissal.

    (a) Each School shall establish and publish rules and regulations 
governing Cadet and Midshipman discipline and providing for a demerit 
system for infractions of these rules and regulations. Serious or 
excessive violations of the rules and regulations by a Cadet or 
Midshipman may be considered as evidence of inaptitude for the demanding

[[Page 198]]

career of a merchant marine officer and warrant dismissal by the school.
    (b) Each Cadet or Midshipman shall, upon admission to the School, be 
furnished a copy of the School's rules and regulations.
    (c) Any Cadet or Midshipman placed on probation for failure to meet 
the conduct requirements of the school may, at the discretion of the 
Superintendent, be listed as not in good standing for any period not to 
exceed six (6) months for the purpose of Sec. 310.7(a)(5).



Sec. 310.11  Cadet uniforms.

    Cadet uniforms shall be supplied at the school in accordance with 
the uniform regulations of the School. Those regulations shall prescribe 
a distinctive insignia or device approved by the Maritime Administrator.



Sec. 310.12  Scope and effect.

    (a) If any provisions of this subpart conflict with laws and 
regulations of the State, the appropriate State authorities shall notify 
the Maritime Administrator in writing of such conflict and pertinent 
circumstances. The Maritime Administrator, as a matter of discretion, 
shall take, or not take, any action determined appropriate under the 
1958 Act or the Act.
    (b) The Maritime Administrator may, after consultation with the 
Superintendents of the schools issue binding executive instructions 
supplementing this subpart.



Sec. 310.12-1  Form of Agreement.

    The form of agreement between the Maritime Administrator and schools 
for annual maintenance and support payments, Federal student subsistence 
and incentive payments and fuel assistance under the 1958 Act and the 
Act may be obtained from the Office of Policy and Plans, Maritime 
Administration, 400 7th St., SW., Washington, DC 20590.

[70 FR 28833, May 19, 2005]

Subpart B [Reserved]



  Subpart C_Admission and Training of Midshipmen at the United States 

                         Merchant Marine Academy

    Authority: Secs. 204(b) and 1301-1308, Merchant Marine Act, 1936, as 
amended, (46 U.S.C. 1114(b) and 1295-1295g); 49 CFR 1.66 (46 FR 47458, 
September 28, 1981).

    Source: 47 FR 21812, May 20, 1982, unless otherwise noted.



Sec. 310.50  Purpose.

    The regulations in this subpart govern the nomination, admission and 
appointment of midshipmen to the United States Merchant Marine Academy,



Sec. 310.51  Definitions.

    (a) Academy means the United States Merchant Marine Academy.
    (b) Act means the Maritime Education and Training Act of 1980, Pub. 
L. 96-453, 94 Stat. 1997, as subsequently amended, 46 App. U.S.C. 1295-
1295g.
    (c) Administration means the Maritime Administration, Department of 
Transportation.
    (d) Administrator means the Administrator of the Maritime 
Administration.
    (e) Citizen means an individual who, by birth or naturalization, 
owes national allegiance to the United States, but the term excludes 
United States nationals.
    (f) Cost of Education Provided means the financial costs incurred by 
the Federal Government for providing training or financial assistance to 
students at the United States Merchant Marine Academy, including direct 
financial assistance, room, board, classroom academics, and other 
training activities.
    (g) Foreign student means an individual who owes national allegiance 
to a country or political entity other than the United States, and the 
term includes United States nationals.
    (h) NOAA means the National Oceanic and Atmospheric Administration.
    (i) USNR means the United States Naval Reserve.

[47 FR 21812, May 20, 1982, as amended at 69 FR 31902, June 8, 2004]

[[Page 199]]



Sec. 310.52  General.

    (a) Midshipmen are appointed to the Academy for training to prepare 
them to become officers in the U.S. merchant marine. The Academy, 
located at Kings Point, New York, is maintained by the Government as a 
part of the Administration. After successful completion of the 4-year 
course of study, a graduate of the Academy shall receive a Bachelor of 
Science degree and a merchant marine license as either a third officer 
or third assistant engineer (or both licenses upon completion of a 
special curriculum and passing the respective license examinations) 
issued by the U.S. Coast Guard. If qualified, a graduate may be 
commissioned as an officer in a reserve component of an armed force of 
the United States.
    (b) Midshipmen entering the Academy after April 1, 1982, are 
required by the Act to sign an agreement committing them to service 
obligations following the date of graduation. The terms of the service 
obligation contract are set forth in Sec. 310.58 of this subpart.



Sec. 310.53  Nominations and vacancies.

    (a) Nominating officials. (1) Each Senator and Member of the House 
of Representatives (including delegates from Guam, the Virgin Islands 
and the District of Columbia and the Resident Commissioner from Puerto 
Rico), the Panama Canal Commission, the Governor of the Northern Mariana 
Islands, and the Delegate to the House of Representatives from American 
Samoa may nominate ten (1) candidates to compete for admission to the 
Academy.
    (2) In accordance with the Act (46 U.S.C. 1295b (b)(1)), nominating 
officials may only nominate candidates who are residents of the State or 
other geographic area which the particular nominating official 
represents, as follows:

------------------------------------------------------------------------
   The candidate must be a resident of--        To be nominated by--
------------------------------------------------------------------------
The State.................................  A Member of the U.S. Senate
                                             representing that State.
The State.................................  A Member of the U.S. House
                                             of Representatives whose
                                             Congressional District is
                                             located in that State.
Guam......................................  The Delegate to the U.S.
                                             House of Representatives
                                             representing Guam.
Virgin Islands............................  The Delegate to the U.S.
                                             House of Representatives
                                             representing the Virgin
                                             Islands.
District of Columbia......................  The Delegate to the U.S.
                                             House of Representatives
                                             representing the District
                                             of Columbia.
Commonwealth of Puerto Rico...............  The Resident Commissioner to
                                             the United States from
                                             Puerto Rico.
American Samoa............................  The Delegate to the House of
                                             Representatives
                                             representing American
                                             Samoa.
Any area or installation located in the     Panama Canal Commission.
 Republic of Panama which is made
 available to the United States pursuant
 to the (i) the Panama Canal Treaty of
 1977, (ii) the agreements relating to and
 implementing the Treaty signed September
 7, 1977, and (iii) the Agreement between
 the United States of America and the
 Republic of Panama Concerning Air Traffic
 Control and Related Services, concluded
 January 8, 1979; Provided, That no
 residence in the Republic of Panama is
 required if nomination is due to his or
 her parent's employment in the Panama
 Canal or in the Republic of Panama by the
 United States Government or the Panama
 Canal Commission.
Northern Mariana Islands..................  Governor of the Northern
                                             Mariana Islands.
Trust Territory of the Pacific Islands....  Secretary of the Interior.
------------------------------------------------------------------------

    (3) Individuals must be residents of the Trust Territory of the 
Pacific Islands to qualify for designation by the Secretary of the 
Interior.
    (4) Nominating officials may select nominees, and the Secretary of 
the Interior may select designees, by any method they wish, including a 
screening examination.
    (5) Candidates from nations other the United States must be 
nominated by an official of their home government and have their 
applications approved by the United States Government official specified 
in Sec. 310.66 (a), or (c) or (d).
    (b) Vacancies. (1) The number of vacancies in each entering class 
allocated to each State is in proportion to the representation in 
Congress from that State.

[[Page 200]]

    (2) In each entering class, two vacancies shall be allocated each 
year for individuals nominated by the Panama Canal Commission; one 
vacancy each to nominees from Puerto Rico, Guam, Virgin Islands, 
Northern Marian Islands and American Samoa; and four vacancies to 
nominees from the District of Columbia.
    (3) Not to exceed four (4) individuals at any one time may be 
admitted from the Trust Territory of the Pacific Islands and twelve (12) 
individuals from nations located in the Western Hemisphere, other than 
the United States, but not more than two (2) individuals from any one of 
such nations shall receive training at the same time.
    (4) The Administrator may permit, upon approval of the Secretary of 
State, not more than thirty (30) individuals at one time from nations 
other than the United States to receive instruction at the Academy, 
subject to the condition that the foreign nations reimburse the 
Administrator for the cost of such training.
    (5) The distribution of each entering class by State is:

Alabama................................................................4
Alaska.................................................................1
Arizona................................................................3
Arkansas...............................................................2
California............................................................19
Colorado...............................................................4
Connecticut............................................................4
Delaware...............................................................1
Florida...............................................................10
Georgia................................................................5
Hawaii.................................................................2
Idaho..................................................................2
Illinois...............................................................9
Indiana................................................................3
Iowa...................................................................4
Kansas.................................................................3
Kentucky...............................................................2
Louisiana..............................................................4
Maine..................................................................2
Maryland...............................................................5
Massachusetts..........................................................5
Michigan...............................................................7
Minnesota..............................................................3
Mississippi............................................................3
Missouri...............................................................3
Montana................................................................2
Nebraska...............................................................2
Nevada.................................................................2
New Hampshire..........................................................2
New Jersey.............................................................6
New Mexico.............................................................2
New York..............................................................15
North Carolina.........................................................6
North Dakota...........................................................1
Ohio...................................................................8
Oklahoma...............................................................2
Oregon.................................................................3
Pennsylvania..........................................................10
Rhode Island...........................................................2
South Carolina.........................................................4
South Dakota...........................................................1
Tennessee..............................................................4
Texas.................................................................13
Utah...................................................................2
Vermont................................................................1
Virginia...............................................................5
Washington.............................................................5
West Virginia..........................................................2
Wisconsin..............................................................4
Wyoming................................................................1

    (6) The distribution of each entering class otherwise provided under 
the Act is:

Northern Mariana Islands..............................................1.
Puerto Rico...........................................................1.
District of Columbia..................................................4.
Republic of Panama....................................................2.
Guam..................................................................1.
American Samoa........................................................1.
Virgin Islands........................................................1.
Administrator..........................................Not to exceed 40.

    (7) The distribution of students provided for under the Act without 
reference to entering class is:

------------------------------------------------------------------------
                                                                 Not to
                                                               exceed at
                                                                any one
                                                                  time
------------------------------------------------------------------------
Trust Territory of the Pacific Islands.......................          4
Western Hemisphere nations (other than U.S.).................         12
Foreign nations..............................................         30
------------------------------------------------------------------------

    (c) Request for nomination. A person interested in admission to the 
Academy who feels that he or she meets the requirements in this subpart 
should request a nomination from his or her Senator or Representative or 
other appropriate nominating official listed in paragraph (a) of this 
section.
    (d) Date for nominations. The nominating official will send a 
nomination form for each nominee to the Admissions Office, U.S. Merchant 
Marine Academy, Kings Point, Long Island, New York 11024, normally 
between August 1 and December 31 of the school year preceding that in 
which admission to the Academy is desired.
    (e) Appointments. (1) The Administrator shall make appointments to 
fill the vacancies allocated pursuant to paragraph (b) of this section 
from among qualified nominees, in order of merit, from each geographical 
area.

[[Page 201]]

The order of merit shall be established according to the procedure as 
specified in Sec. 310.57(b). Such appointments first shall be made from 
among residents of each geographic area listed in paragraph (b) of this 
section. Thereafter, appointments shall be made from among residents of 
each geographic area listed in paragraph (b) of this section. Thereafter 
appointments shall be made from among remaining qualified nominees 
(national alternates) in order of merit regardless of the area of 
residence.
    (2) The Administrator may appoint, without competition, not more 
than forty (40) qualified citizens who possess qualities deemed to be of 
special value to the Academy. In making these appointments, the 
Administrator shall give special consideration to achieving a national 
demographic balance and to recognizing individuals with qualities deemed 
to be of special value to the Academy.

[47 FR 21812, May 20, 1982, as amended at 51 FR 17741, May 15, 1986; 60 
FR 44438, Aug. 28, 1995]



Sec. 310.54  General requirements for eligibility.

    (a) Citizenship. All candidates shall be citizens of the United 
States except: (1) Nominees from foreign nations; (2) nominees from the 
Northern Mariana Islands; (3) designees from the Trust Territory of the 
Pacific Islands; and (4) nominees from American Samoa, who may be 
American nationals. No person who is not a citizen shall be entitled to 
any office or position in the U.S. merchant marine by reason of his or 
her graduation from the Academy, until such person shall have become a 
citizen.
    (b) Age. On July 1 of the year of admission to the Academy, a 
candidate shall be not less than seventeen (17) years of age and shall 
not have passed his or her twenty-fifth (25) birthday.
    (c) Character. A candidate shall be of good moral character. The 
Administrator may reject the nomination of any candidate whose character 
is incompatible with the Academy's standards. No person who has been 
dismissed or compelled to resign from the U.S. Military Academy, the 
U.S. Naval Academy, the U.S. Air Force Academy, the U.S. Coast Guard 
Academy, the Academy or a State maritime academy for improper conduct 
shall be eligible for appointment as a midshipman at the Academy. No 
person whose last discharge from any armed force was under conditions 
other than honorable or who has had a merchant mariner document removed 
or suspended for cause shall be eligible for appointment as a 
midshipman.
    (d) Investigation. To be eligible for appointment, all candidates 
who are United States citizens shall be completely loyal to the United 
States and shall meet the requirements established by the Department of 
the Navy for designation as Midshipman, USNR (including the Merchant 
Marine Reserve, USNR). Candidates for appointment shall execute 
documents approved by the Administrator for the purpose of a security 
and suitability investigation. Appointment as a Midshipman, USNR 
(including the Merchant Marine Reserve, USNR) shall be a condition of 
admission for an individual who is a citizen. A candidate who is 
conditionally appointed to the Academy pending completion of a Navy 
security and suitability investigation shall be subject to immediate 
separation should the candidate, as a result of the investigation, fail 
to meet the requirements established for appointment as Midshipman, 
USNR.
    (e) Waivers. There shall be no waivers of general eligibility 
requirements.

(Sec. 204(b), Merchant Marine Act, 1936, as amended (46 U.S.C. 1114(b)); 
Pub. L. 97-31 (August 6, 1981); 49 CFR 1.66)

[47 FR 21812, May 20, 1982, as amended at 49 FR 45858, Nov. 21, 1984]



Sec. 310.55  Scholastic requirements.

    (a) Academic requirements--(1) Credits. Applicants shall have 
satisfactorily completed their high school education at an accredited 
secondary school, or equivalent, and shall present at least 15 units of 
credit for subjects acceptable to the Academy, comprised of:
    (i) 7 required units, as follows:
    (A) 3 units of Mathematics (from algebra, geometry and 
trigonometry);
    (B) 3 units of English; and
    (C) 1 unit of Physics or Chemistry.
    (ii) 8 other units, preferably chosen from the following fields:

[[Page 202]]

    (A) Additional mathematics and science;
    (B) Foreign language;
    (C) Economics; and,
    (D) Social science.
    (2) Evidence of academic work. Before approval of an application, 
each applicant shall submit evidence showing completion of high school 
education, or showing that such education will be completed no later 
than June 30 of the year in which admission is sought.
    (b) Scholastic examinations--(1) Required entrance examinations. 
Applicants shall qualify in either the College Board's Scholastic 
Aptitude Tests (SAT) or the American College Testing Program (ACT) 
examinations, administered nationally on scheduled dates at convenient 
testing centers. A candidate electing to use the College Board shall 
take both the mathematics and the verbal section of the SAT. A candidate 
electing to use the ACT, shall take all the tests, namely, English, 
Mathematics, Social Sciences and Natural Sciences. Minimum qualifying 
scores on the entrance examinations will be determined by the 
Superintendent of the Academy for each entering class prior to any 
offers of appointment for the particular class. Any score below the 
minimum on any one section of an examination shall make the nominee 
ineligible for admission. All examination costs shall be borne by the 
applicant. Nominees shall take all the required examinations by the 
February testing date in the year for which they seek appointment, 
unless the Academy's Admissions Office grants special authorization to 
take later examinations.
    (2) Forwarding test results. Candidates shall be responsible for 
requesting the testing services to submit their scores directly to the 
Academy.
    (3) Test information. Information on the entrance examinations may 
be obtained from--

The candidate's high school guidance office; or,
College Board, P.O. Box 592, Princeton, N.J. 08540; or,
College Board, P.O. Box 1025, Berkeley, CA. 94701; or,
American College Testing Program, P.O. Box 168, Iowa City, IA 52240.

    (c) Prior Scholastic Record. Applicants shall demonstrate scholastic 
achievement by having attained a relatively high standing in relation to 
their fellow students and by having shown proficiency in mathematics and 
science courses. With respect to applicants who completed high school at 
least one year before applying for admission to the Academy, 
consideration will be given to satisfactory college level study or any 
special study undertaken to strengthen their academic backgrounds, 
particularly in respect to determining whether such supplementary 
academic activity offsets any deficiency in high school scholastic 
records.
    (d) Waivers. No waivers of scholastic requirements will be granted.



Sec. 310.56  Physical requirements.

    (a) Physical standards. (1) A candidate shall meet the physical 
requirements prescribed by the Department of the Navy for appointment as 
Midshipman, USNR (including the Merchant Marine Reserve, USNR) and the 
requirements prescribed by the U.S. Coast Guard for original licensing 
as a third mate and third assistant engineer. All candidates shall have 
color perception and refractive error within the limits prescribed by 
the Department of the Navy or by the U.S. Coast Guard, whichever are 
higher.
    (2) The requirement to meet these standards is a continuing one and 
shall apply through graduation from the Academy. Failure to meet the 
standards while attending the Academy is grounds for, and may lead to 
disenrollment. Individuals who have completed at least two years of 
study and, as a result of an accident, illness or other cause (during 
official duty), fail to meet this requirement may be permitted to remain 
at the Academy at the discretion of, and under conditions set by, the 
Administrator. Those individuals permitted to remain through graduation 
will agree to fulfill aspects of the service obligation which they are 
capable of, as deemed appropriate by the Administrator.
    (b) Qualifying physical examinations. All candidates for the Academy 
shall have a physical and dental examination conducted by a service 
academy

[[Page 203]]

examining facility designated by the Service Academies Central Medical 
Review Board. The required physical examination shall occur within 1 
year preceding the date of admission to the Academy. Although there is 
no charge for such examination, all expenses (including travel, meals 
and hotel accommodations) incurred in obtaining such examination shall 
be borne by the applicant. Candidates may be subject to reexamination 
upon reporting to the Academy and at any time while attending the 
Academy.
    (c) Physical reexamination. A candidate who is rejected for failure 
to meet the physical requirements may request either a reevaluation of 
the examination results or a reexamination. A midshipman failing to meet 
the physical requirements while attending the Academy is entitled to 
make the same request.
    (d) Waivers. Some medical requirements may be waived for enrolled 
students and applicants to the USMMA who require such a medical waiver 
to qualify for admission and/or retention. Since commissioning in the 
United States Navy, or any other branch of the Armed Forces, is a 
requirement for graduation, no waivers will be granted for medical 
conditions which would prevent commissioning in at least a restricted 
status in the U.S. Navy Reserve. Individuals interested in waiver 
consideration may request a waiver by writing to the Superintendent, 
USMMA. The granting of medical waivers will be based on U.S. Navy 
guidelines and regulations for waiver consideration for admission to the 
U.S. Naval Academy and the physical requirements consistent with 
commissioning as a reserve officer in the U.S. Navy in a restricted line 
program. Individuals requesting medical waivers must be able to meet all 
other admission requirements, including the physical examination 
requirement for an original U.S. Coast Guard merchant marine license as 
a third mate and/or third assistant engineer. The decision of the 
Superintendent on any requested waiver is administratively final.

[47 FR 21812, May 20, 1982, as amended at 55 FR 46952, Nov. 8, 1990]



Sec. 310.57  Application and selection of midshipmen.

    (a) Application. All candidates shall submit an application for 
admission to the Academy's Admissions Office. Prospective candidates 
also should submit an application, but are not considered official 
candidates until their nominations are received. Candidates shall submit 
with their applications an official transcript and personality record 
from the candidate's high school and, if applicable, such records from 
any school attended after high school graduation. Application forms are 
available upon request by writing to the Admissions Office at the 
Academy. MARAD will accept electronic options (such as facsimile and 
Internet) for transmission of only Part I of required information to 
MARAD, if practicable.
    (b) Selection of Midshipmen. Selection of midshipmen for appointment 
to fill vacancies allotted to the various States and other locations, as 
specified in Sec. 310.53(b) (1) and (2) of this subpart, shall be in 
order of merit. The order of merit shall be determined on the scores of 
the required entrance examinations, on assessment of the academic 
background of the individual and on such other factors as are considered 
by the Academy to be effective indicators of motivation and the 
probability of successful completion of training at the Academy. No 
preference shall be granted in selecting individuals for appointment 
because one or more members of their immediate families are alumni of 
the Academy.
    (c) Notification of selection. Results of the selection process will 
be made known about May 1 each year. The Academy shall advise each 
candidate and his or her nominating official of his or her status as a 
principal candidate, as an alternate candidate or as an unqualified 
candidate. Alternates will replace principal candidates who decline 
appointment or fail to meet the physical requirements or the security 
and suitability investigation.
    (d) Service obligation agreement. Each candidate selected for 
appointment to the Academy after April 1, 1982, who is a citizen of the 
United States, shall sign a service obligation contract as a condition 
of admission. The contract is prescribed in Sec. 310.58 of this 
subpart.

[[Page 204]]

    (e) Reporting to the Academy. Candidates who accept offers of 
appointment shall, pursuant to instructions issued by the Academy, 
report to the Academy on a specified date in mid-July for orientation 
and induction.
    (f) Oath. Each midshipman who is a citizen of the United States 
shall take the following oath of office at the Academy:

    ``I, ------, having been appointed a midshipman to the U.S. Merchant 
Marine Academy, accept appointment and do solemnly swear (or affirm) 
that I will support and defend the Constitution of the United States 
against all enemies, foreign and domestic; that I will bear true faith 
and allegiance to the same; that I will comply with all the regulations 
of the U.S. Merchant Marine Academy; that I take this obligation freely, 
without any mental reservation or purpose of evasion; and that I will 
well and faithfully discharge the duties of the office on which I am 
about to enter, so help me God.''

    (g) Birth Certificate. Each candidate shall present a certificate of 
birth authenticated by an authorized official.

[47 FR 21812, May 20, 1982, as amended at 68 FR 62538, Nov. 5, 2003; 69 
FR 61451, Oct. 19, 2004]



Sec. 310.58  Service obligation for students executing or reexecuting contracts.

    (a) The service obligation contract shall obligate each midshipman 
who is a citizen and who executes or reexecutes a service obligation 
contract to:
    (1) Complete the course of instruction at the Academy;
    (2) Fulfill the requirements for a license as an officer in the 
merchant marine of the United States on or before the date of graduation 
from the Academy;
    (3) Maintain a license as an officer in the merchant marine of the 
United States for at least six (6) years following the date of 
graduation from the Academy accompanied by the appropriate national and 
international endorsements and certifications as required by the United 
States Coast Guard for service aboard vessels on both domestic and 
international voyages (``appropriate'' means the same endorsements and 
certifications held at the date of graduation, or the equivalent);
    (4) Apply for an appointment as, accept any tendered appointment as 
and serve as a commissioned officer in the USNR (including the Merchant 
Marine Reserve, USNR), the United States Coast Guard Reserve, or any 
other Reserve component of an armed force of the United States for at 
least six (6) years following the date of graduation from the Academy;
    (5) Serve in the foreign or domestic commerce and the national 
defense of the United States for at least five (5) years following the 
date of graduation from the Academy:
    (i) As a merchant marine officer serving on vessels documented under 
the laws of the United States or on vessels owned and operated by the 
United States or by any State or territory of the United States;
    (ii) As an employee in a United States maritime-related industry, 
profession or marine science (as determined by the Maritime 
Administrator), if the Maritime Administrator determines that service 
under paragraph (a)(5)(i) of this section is not available;
    (iii) As a commissioned officer on active duty in an armed force of 
the United States or in the National Oceanic and Atmospheric 
Administration; or
    (iv) Other maritime-related employment with the Federal Government 
which serves the national security interests of the United States, as 
determined by the Maritime Administrator; or
    (v) By combining the services specified in paragraphs (a)(5)(i), 
(ii), (iii) and (iv) of this section; and,
    (vi) Such employment in the Federal Government that satisfies 
paragraph (a)(5)(iv) of this section must be both significantly 
maritime-related and serve the national security interests of the United 
States. ``Significantly'' is equated to a material or essential portion 
of an individual's responsibilities. It does not mean a ``majority'' of 
such individual's responsibilities, but means more than just an 
incidental part; and
    (6) Submit periodic reports to the Administration to establish 
compliance with all the terms of the contract.
    (b) Service as a merchant marine officer. For purposes of the 
service obligation set forth in paragraph (a)(5)(i) of this section, a 
satisfactory year of service on vessels in the United States

[[Page 205]]

merchant marine as a merchant marine officer shall be the lesser of--
    (1) 150 days; or
    (2) The number of days that is at least equal to the median number 
of days of seafaring employment under articles achieved by deck or 
engine officers in the most recent calendar year for which statistics 
are available.
    (c) Marine-related employment. (1) Graduates who do not meet the sea 
service requirement in paragraph (b) of this section and who claim 
employment in a United States maritime-related industry, profession or 
marine science as meeting all or part of the service obligation under 
paragraph (a)(5) of this section and the serve obligation contract shall 
submit evidence to the Administration that they have conscientiously 
sought employment as a merchant marine officer, and that such employment 
is not available. Such evidence submitted, and other information 
available to the Administration, shall be considered in any finding. In 
view of current and projected employment opportunities afloat, the 
Administrator will grant the shoreside employment option infrequently 
and only on the basis of comprehensive evidence.
    (2) The Administrator may consider positions of operational, 
management or administrative responsibility, including, but not limited 
to, the following marine-related categories, to be under the provisions 
of Sec. 310.58(a)(5)(ii) of this subpart and the service obligation 
contract: Civilian employment in Federal and State agencies related to 
maritime affairs; steamship companies; stevedoring companies; vessel 
chartering and operations; cargo terminal operations; naval 
architecture; shipbuilding and repair; municipal and State port 
authorities; and port development, marine engineering, and tug and barge 
companies.
    (d) Reporting requirements. (1) Each graduate must submit an annual 
Service Obligation Compliance Report form (MA-930) to the Maritime 
Administration between January 1 and March 1 following his or her 
graduation. After the initial report is submitted, each graduate must 
continue to submit annual reports during the same time frame between 
January 1 and March 1 for six (6) consecutive years thereafter, or until 
all components of the service obligation are fulfilled, whichever is 
latest. Each graduate will file a minimum of seven (7) reports in order 
to give information on all six (6) years of the service obligation. 
Graduates are encouraged to submit their Service Obligation Compliance 
Report forms (MA-930) to MARAD using the web-based Internet system at 
https://mscs.marad.dot.gov. Reports may also be mailed to: Compliance 
Specialist, Office of Policy and Plans, Maritime Administration, 
Department of Transportation, 400 7th St., SW., Room 7123, Washington, 
DC 20590.
    (i) Example 1: Midshipman graduates on June 30, 2004. His or her 
first reporting date is between January 1, 2005 and March 1, 2005 and 
thereafter between January 1 and March 1 for six (6) consecutive years 
(or until all components of the service obligation are fulfilled, 
whichever is latest) for a minimum of seven (7) reports.
    (ii) Example 2: Midshipman has a deferred graduation on November 30, 
2004. His or her first reporting period is between January 1, 2005 and 
March 1, 2005 and thereafter between January 1 and March 1 for six (6) 
consecutive years (or until all components of the service obligation are 
fulfilled, whichever is latest) for a minimum of seven (7) reports.
    (iii) Example 3: Midshipman graduated in June 2003 and has already 
begun his or her service obligation reporting. His or her reports are 
now due between January 1 and March 1 of each reporting year.
    (2) The Maritime Administration will provide reporting forms upon 
request. However, non-receipt of such forms will not exempt a graduate 
from submitting service obligation information as required by this 
paragraph. Graduates are encouraged to submit their Service Obligation 
Compliance Report forms (MA-930) electronically at https://
mscs.marad.dot.gov. The reporting form has been approved by the Office 
of Management and Budget (2133-0509).
    (e) Breach of contract. (1) Breach before graduation: (i) If the 
Maritime Administrator determines that an individual who has attended 
the Academy for not less than two (2) academic

[[Page 206]]

years has failed to complete the course of instruction at the Academy, 
such individual may be ordered by the Secretary of Defense to active 
duty in one of the Armed Forces of the United States to serve for a 
period of time not to exceed two (2) years. In cases of hardship, as 
determined by the Maritime Administrator, the Maritime Administrator may 
waive this provision in whole or in part.
    (ii) If the Secretary of Defense is unable or unwilling to order an 
individual to active duty under the previous paragraph, or if the 
Maritime Administrator determines that reimbursement of the Cost of 
Education Provided by the Federal Government would better serve the 
interests of the United States, the Maritime Administrator may recover 
from the individual the Cost of Education Provided by the Federal 
Government.
    (iii) For purposes of paragraph (e)(1)(i) of this section, an 
``academic year'' is defined as the completion by a student of a total 
of three (3) trimesters, whether at the Academy or at sea. Thus, 
liability under paragraph (e)(1)(i) of this section begins for students 
when they begin their seventh (7th) trimester, whether at the Academy or 
at sea.
    (2) Breach after graduation: (i) If the Maritime Administrator 
determines that an individual has failed to fulfill any part of the 
service obligation contract (described in Sec. 310.58(a)), such 
individual may be ordered to active duty to serve a period of time not 
less than three (3) years and not more than the unexpired portion of the 
service obligation contract relating to service in the foreign or 
domestic commerce or the national defense, as determined by the Maritime 
Administrator. The Maritime Administrator, in consultation with the 
Secretary of Defense, shall determine in which service the individual 
shall be ordered to active duty to serve such period of time. In cases 
of hardship, as determined by the Maritime Administrator, the Maritime 
Administrator may waive this provision in whole or in part.
    (ii) If the Secretary of Defense is unable or unwilling to order an 
individual to active duty under paragraph (e)(2)(i) of this section or 
if the Maritime Administrator determines that reimbursement of the Cost 
of Education Provided would better serve the interests of the United 
States, the Maritime Administrator may recover from the individual the 
Cost of Education Provided.
    (iii) The Maritime Administrator may reduce the amount to be 
recovered from such individual to reflect partial performance of service 
obligations and such other factors as the Maritime Administrator 
determines merit such reduction.
    (f) Waivers. The Maritime Administrator shall have the discretion to 
grant waivers of all or a portion of the service obligation contract in 
cases where there would be undue hardship or impossibility of 
performance due to accident, illness or other justifiable reason. 
Applications for waivers shall be submitted in writing to the Academies 
Program Officer, Office of Policy and Plans, Maritime Administration, 
400 7th St., SW., Washington, DC 20590.
    (g) Deferments. In exceptional cases, the Administration may grant a 
deferment of all or part of the agreement under paragraph (a)(5) of this 
section and the service obligation contract, for a period not to exceed 
2 years, only for graduates considered to have superior academic and 
conduct records while at the Academy and only for the purpose of 
entering a marine or maritime-related graduate course of study approved 
by the Administrator or for the purpose of pursuing studies as 
recipients of scholarships or fellowships of national significance; 
Provided, that any deferment of service as a commissioned officer under 
paragraph (a)(5)(iii) of this section and the service obligation 
contract shall be subject to the sole approval of the Secretary of the 
department which has jurisdiction over such service (including the 
Secretary of the department in which the U.S. Coast Guard is operating 
and the Secretary of Commerce with respect to NOAA). A graduate shall 
make application for such deferment through the Superintendent of the 
Academy, who shall forward each application, together with the 
Superintendent's recommendation for approval or disapproval and an 
evaluation of the applicant's academic and conduct

[[Page 207]]

records, to the Academies Program Officer, Maritime Administration, 
Office of Policy and Plans, NASSIF Building, 400 7th St., SW., 
Washington, DC 20590 for appropriate action.
    (h) Determination of compliance with service obligation contract; 
deferment; waiver; and appeal procedures. (1) A designated official of 
the Administration shall:
    (i) Determine whether a student or graduate has breached his or her 
service obligation contract;
    (ii) Grant or deny a deferment of the service obligation, except for 
obligations otherwise a part of the graduate's commissioned officer 
status; and,
    (iii) Grant or deny a waiver of the requirements of the service 
obligation contract in cases of undue hardship or impossibility of 
performance due to accident, illness or other justifiable reason.
    (2)(i) If a student or graduate disagrees with the decision of the 
designated official, the student or graduate may appeal that decision to 
the Maritime Administrator. The appeal will set forth all the legal and 
factual grounds on which the student or graduate bases the appeal. Any 
grounds not set forth in the appeal are waived.
    (ii) Appeals must be filed with the Maritime Administrator within 
thirty (30) calendar days of the date of receipt by such student or 
graduate of the written decision of the designated official. Appeals 
must be filed at the Office of the Maritime Administrator, Maritime 
Administration, Room 7210, 400 7th St., SW., Washington, DC 20590. Each 
decision will include a notice of appeal rights.
    (iii) A decision is deemed to be received by a student or graduate 
five (5) working days after the date it is mailed by first class mail, 
postage prepaid, to the address for such student or graduate listed with 
the Office of Policy and Plans. It is the responsibility of such student 
or graduate to ensure that their current mailing address is on file with 
the Office of Policy and Plans, Maritime Administration, 400 7th St., 
SW., Washington, DC 20590. Students and graduates can determine the 
current address on file with the Office of Policy and Plans by logging 
into the service obligation contract compliance Web site at http://
mscs.marad.dot.gov. Changes in the address listed can be made through 
the Internet.
    (3) The Maritime Administrator will issue a written decision for 
each timely appeal. This decision constitutes final agency action.
    (4) If a student or graduate fails to appeal within the time set 
forth in paragraph (h)(2) of this section, the decision of the 
designated official will be final and constitute final agency action.
    (i) Remedies. To aid in the recovery of the Cost of Education 
Provided the Maritime Administrator may request the Attorney General to 
begin court proceedings, and the Maritime Administrator also may make 
use of the Federal debt collection procedures in chapter 176 of title 
28, United States Code, and other applicable administrative remedies.

[47 FR 21812, May 20, 1982, as amended at 60 FR 44438, Aug. 28, 1995; 65 
FR 39558, June 27, 2000; 66 FR 36177, July 11, 2001; 69 FR 9759, Mar. 2, 
2004; 69 FR 29081, May 20, 2004; 69 FR 31903, June 8, 2004; 69 FR 61454, 
Oct. 19, 2004; 70 FR 28833, May 19, 2005]



Sec. 310.59  Courses of instruction.

    (a) At Academy. Three major curriculums are offered: Nautical 
Science, for the preparation of deck officers; Marine Engineering, for 
the preparation of engineering officers; and the Dual License Program, a 
combined course which leads to licenses in both specialties. All 
midshipmen who are citizens shall take naval science courses prescribed 
by the Department of the Navy. All curriculums include general education 
courses and electives.
    (b) Sea year. Midshipmen spend one-half of their sophomore (third 
class) year and one-half of their junior (second class) year training at 
sea aboard one or more merchant vessels. In addition to practical 
shipboard assignments, midshipmen are required to complete written study 
assignments incorporating material from the major segments of the 
Academy curriculums.



Sec. 310.60  Training on subsidized vessels.

    All operators of subsidized merchant vessels, in accordance with 
contractual

[[Page 208]]

arrangements, are required to employ for training at least two 
midshipmen, as assigned by the Superintendent of the Academy, which 
employment shall be in accordance with the following provisions.
    (a) Work assignments. All practical work assignments for midshipmen 
shall be in accordance with courses prescribed by the Superintendent of 
the Academy.
    (b) Working hours. In order to permit midshipmen to complete their 
academic assignments, vessel employers shall not require midshipmen to 
work more than 8 hours each day. Midshipmen shall devote at least 3 
hours of their own time each day to study.
    (c) Pay. Midshipmen shall receive pay while employed aboard merchant 
vessels directly from the steamship company employers at the same rate 
received by cadets and midshipmen at the other Federal academies. A 
change in the rate of pay for midshipmen at the Academy shall occur 
after a change in the rate of pay for cadets/midshipmen at the other 
Federal academies and shall be effective either on June 15th or on 
December 15th of the same calendar year, whichever occurs first. While 
aboard ship, they shall be berthed in single-occupancy rooms or in rooms 
with other midshipmen in that part of the vessel designated for licensed 
officers (or in first-class passenger quarters) and shall mess with the 
licensed officers. The steamship company employers shall also pay the 
midshipmen such subsistence and room allowance in port, transportation 
allowances, and other bonuses or allowances as are paid to the licensed 
officers of the vessel in which the midshipmen are employed.
    (d) Berthing and messing. While aboard ship, midshipmen shall be 
berthed in single-occupancy rooms or in rooms with other midshipmen in 
that part of the vessel designated for licensed officers (or in first-
class passenger quarters) and shall mess with the licensed officers.

(Secs. 204(b) and 1301-1308, Merchant Marine Act, 1936, as amended, (46 
U.S.C. 1114(b); and 1295 through 1295g); Pub. L. 96-453; Pub. L. 97-31; 
49 CFR 1.66 (46 FR 47458, Sept. 28, 1981); EO 12387 (47 FR 44981, Oct. 
13, 1982)

[47 FR 21812, May 20, 1982, as amended at 52 FR 21534, June 8, 1987]



Sec. 310.61  Training on other vessels and by other facilities or agencies.

    The Administrator may arrange for training of midshipmen on 
Government-owned vessels, in cooperation with other governmental and 
private agencies, and on other vessels documented under the laws of the 
United States if the owner of such vessel cooperates in such use. 
Midshipmen may be assigned for training in shipyards, plants, and 
industrial and educational organizations for instructional purposes 
only.



Sec. 310.62  Allowances and expenses; required deposit.

    (a) Items furnished. Each midshipman shall receive: Free tuition, 
quarters and subsistence; limited medical and dental care; and certain 
travel expenses, in accordance with chapter 5, part A, of the Joint 
Travel Regulations For Members Of Uniform Services, Vol. 1 (U.S. 
Department of Defense publication, Serial No. 0516-LP-255-0265), while 
traveling under official Academy orders.
    (b) Required Deposit. Prior to admission to the Academy, each 
midshipman shall make a specified deposit, as established by Academy 
regulations, to help defray the cost of items and services generally of 
a personal nature which are not provided by the Academy. Additional 
deposits, as prescribed in Academy regulations, are required to be made 
in subsequent years. Failure to make any required deposit will result in 
denial of admission, suspension or disenrollment.



Sec. 310.63  Uniforms and textbooks.

    The Academy shall supply midshipmen uniforms and textbooks in 
accordance with Academy regulations.

[[Page 209]]



Sec. 310.64  Privileges.

    (a) Midshipmen may be granted a leave of absence of approximately 
four (4) weeks after completing each of the first, second and third 
years of training.
    (b) Classes and exercises are suspended on New Year's Day, 
Washington's Birthday, Memorial Day, Independence Day, Labor Day, 
Columbus Day, Veterans' Day, Thanksgiving Day, Christmas Day and such 
other days as may be designated by the President as holidays for Federal 
employees.
    (c) Midshipmen may be granted approximately 2 weeks leave during the 
period which includes Christmas Day and New Year's Day.
    (d) Liberty and other privileges are granted to midshipmen meriting 
them under Academy regulations.
    (e) Relatives and friends of midshipmen may visit at the Academy 
during such ours as the Superintendent may prescribe.
    (f) There shall be a Ship's Service Store maintained as a non-
appropriated fund activity at the Academy primarily to serve the needs 
of the midshipmen.



Sec. 310.65  Graduation.

    (a) Classes enrolled prior to April 1, 1982. (1) A midshipman will 
be graduated from the Academy upon the successful attainment of the 
following requirements:
    (i) Completion of the required course of study;
    (ii) Fulfillment of the requirements for a license as an officer in 
the merchant marine of the United States;
    (iii) Filing for a commission in the USNR (including the Merchant 
Marine Reserve, USNR); and
    (iv) Compliance with the prescribed midshipman disciplinary and 
honor systems.
    (2) Graduates receive the degree of Bachelor of Science and a U.S. 
Coast Guard license either as third officer or third assistant engineer 
or both. They also may be granted commissions as Ensign, USNR (including 
the Merchant Marine Reserve, USNR) by the Department of the Navy.
    (3) In return for the education received at Government expense, each 
applicant shall sign an agreement to serve in one of the following 
categories immediately after graduation:
    (i) Sail on his or her license at sea for not less than six (6) 
months each year for three (3) consecutive years; or
    (ii) Sail on his or her license at sea for not less than four (4) 
months each year for four (4) consecutive years; or
    (iii) Apply for and serve on active duty for training on board a 
U.S. Navy ship for a minimum period of thirty (30) consecutive days each 
year for a period of three (3) consecutive years, and be either employed 
ashore for the balance of each year in some phase of the maritime 
industry or engaged in full-time graduate studies related to the 
maritime field; or
    (iv) Apply for and serve on full-time active duty as a commissioned 
officer in a uniformed service of the United States for a period of 3 
consecutive years.
    (b) Classes enrolled after April 1, 1982. (1) A midshipman will be 
graduated from the Academy upon the successful attainment of the 
following requirements:
    (i) Completion of the required course of study;
    (ii) Fulfillment of the requirements for a license as an officer in 
the merchant marine of the United States;
    (iii) Application for an appointment, and acceptance if tendered of 
an appointment, as a commissioned officer in the USNR (including the 
Merchant Marine Reserve, USNR), the U.S. Coast Guard Reserve, or any 
other Reserve component of an armed force of the United States; and,
    (iv) Compliance with the prescribed midshipman disciplinary and 
honor systems.
    (2) Graduates receive the degree of Bachelor of Science and a U.S. 
Coast Guard license either as third officer or third assistant engineer 
or both. They also may be commissioned as a reserve officer in an armed 
force as described in paragraph (b)(1) of this section.
    (3) The service obligation incurred by graduates is prescribed in 
Sec. 310.58 of this subpart.



Sec. 310.66  Foreign students.

    (a) Appointments from the Trust Territory of the Pacific Islands. 
The Administrator may permit, upon designation

[[Page 210]]

by the Secretary of the Interior, individuals from the Trust Territory 
of the Pacific Islands to receive instruction at the Academy. Not more 
than 4 such individuals may receive instruction at any one time. 
Residents of the Trust Territory of the Pacific Islands are neither 
citizens nor nationals of the United States.
    (b) Appointments from the Northern Mariana Islands. The Governor of 
the Northern Mariana Islands may nominate individuals for one position 
each year allocated to residents of the Northern Mariana Islands. Such 
residents are neither citizens nor nationals of the United States.
    (c) Appointments from nations located in the Western Hemisphere. The 
President may designate individuals from nations located in the Western 
Hemisphere, other than the United States, to receive instruction at the 
Academy. Not more than 12 individuals may receive instruction under this 
paragraph at any one time, and not more than 2 individuals receiving 
instruction under this paragraph at any one time may be from the same 
nation. The Secretary may allow, upon approval of the Secretary of 
State, additional individuals from the Republic of Panama to receive 
instruction at the Academy on a reimbursable basis.
    (d) Appointments from nations other than the United States. In 
addition to the appointments under paragraphs (a), (b) and (c) of this 
section, the Administrator, with the approval of the Secretary of State, 
may permit individuals from any nations other than the United States to 
receive instruction at the Academy. Not more than 30 such individuals 
may receive instruction at any one time.
    (e) Candidate Sponsors. A representative of the Administration or a 
diplomatic representative of the United States in the candidate's 
country of residence will be designated as the Candidate's Sponsor. It 
will be the responsibility of the Candidate's Sponsor to act as liaison 
with the appropriate officials of the candidate's country of residence 
and to coordinate all activities, including funding arrangements, 
entrance examinations, medical examinations, country clearances, travel 
papers, transportation to the Academy, obtaining the necessary 
designation by the Department of the Interior in the case of candidates 
from the Trust Territory of Pacific Islands under paragraph (a) of this 
section, the nomination of the Governor of the Northern Mariana Islands 
under paragraph (b) of this section, the nomination of a designee of the 
President in the case of candidates from nations located in the Western 
Hemisphere under paragraph (c) of this section, and the approval of the 
Department of State in the case of candidates from nations other than 
the United States under paragraph (d) of this section. In addition, the 
Candidate's Sponsor shall furnish to the Admissions Office of the 
Academy a report as to the candidate's proficiency in the use of 
idiomatic English.
    (f) Admissions Procedure--(1) Applications. Applications for 
enrollment of foreign students shall be processed through the 
appropriate diplomatic channels of the applicant's country and the 
appropriate offices in the United States Departments of State or of the 
Interior, whichever is applicable. Applications shall reach the 
appropriate office of the United States Government by January 1 of the 
year in which admission is sought. After endorsement by the authorized 
official of the United States Government, the application will be 
forwarded promptly to the Academy's Admissions Office.
    (2) Qualifications. Each candidate shall:
    (i) Be a bona fide citizen of the country transmitting the 
application and meet the requirements as to age and character set forth 
in Sec. 310.54 of this subpart;
    (ii) Possess the physical qualifications, specified in Sec. 310.56 
of this subpart, and undergo a physical examination as arranged by the 
Academy's Admissions Office;
    (iii) Be proficient in reading, writing and speaking idiomatic 
English; and,
    (iv) Satisfy the following scholastic requirements:
    (A) Meet the minimum qualifying scores on the entrance examinations 
as specified in Sec. 310.55 of this subpart. When available, special 
foreign language College Board examinations may be substituted for the 
College Board or

[[Page 211]]

American College Testing Program examinations. Detailed certificates 
covering schoolwork of foreign students are required. Transcripts shall 
be submitted in the English language.
    (B) Submit a certificate from his or her Government that he or she 
is conversant with the literature of his or her native country and that 
he or she has completed a course in the literature of his or her native 
language generally equivalent to two (2) years of secondary schoolwork 
in literature in the United States. In lieu of this certificate, a 
candidate may produce evidence of having acquired the units for 
literature from accredited United States schools.
    (g) Cost of instruction. Students admitted to the Academy pursuant 
to paragraphs (a), (b) and (c) of this section shall be subject only to 
the same fees as are paid by citizen midshipmen. The cost of instruction 
(including the same allowances as received by midshipmen at the Academy 
appointed from the United States) for students admitted to the Academy 
under paragraph (d) of this section must be reimbursed to the 
Administrator by the nation from which the student comes. Such 
reimbursement shall be the incremental cost of providing the instruction 
to each of such foreign students (including the cost of allowances). The 
amount of reimbursement shall be established by the Academy separately 
for each entering class and each upper class prior to January 1 of the 
year in which the academic year begins and will be payable annually in 
advance of commencement of the academic year. Instructions as to payment 
procedures will be provided with the statement of the amount to be 
reimbursed. Students admitted to the Academy pursuant to paragraph (d) 
of this section shall pay the same fees paid by citizen midshipmen.
    (h) Uniforms, textbooks and allowances. The Academy shall provide to 
foreign students receiving instruction at the Academy all required 
uniforms and textbooks and allowances for transportation as are provided 
to citizen midshipmen.
    (i) Rules and regulations. Subject to such exceptions as shall be 
jointly agreed to by the Administrator and the Secretary of the Interior 
with respect to individuals from the Trust Territory of the Pacific 
Islands, foreign students, including students from the Northern Mariana 
Islands, receiving instruction at the Academy shall be subject to the 
same rules and regulations governing admission, attendance, discipline, 
resignation, discharge, dismissal and graduation as citizen midshipmen; 
but such persons shall not be entitled to hold any license authorizing 
service on any merchant vessel of the United States solely by reason of 
graduation from the Academy.
    (j) Oath. In lieu of the oath of allegiance to the United States, a 
substitute oath shall be required of students who are not citizens of 
the United States, as follows:

    ``I, ------, a citizen of ------, aged -- years and -- months, 
having been appointed to receive instruction at the U.S. Merchant Marine 
Academy, do solemnly swear (or affirm) to comply with all regulations of 
the U.S. Merchant Marine Academy and to give my utmost efforts to 
accomplish satisfactorily the required curriculum with the full 
knowledge that I shall be disenrolled from the U.S. Merchant Marine 
Academy if deficient in conduct, health or studies.''

[47 FR 21812, May 20, 1982, as amended at 60 FR 44439, Aug. 28, 1995]



Sec. 310.67  Academy regulations.

    The Superintendent of the Academy is delegated authority to issue 
all regulations necessary for the accomplishment of the Academy's 
mission.

[[Page 212]]



               SUBCHAPTER I-A_NATIONAL SHIPPING AUTHORITY




PART 315_AGENCY AGREEMENTS AND APPPOINTMENT OF AGENTS--Table of Contents



Sec.
315.1 Purpose.
315.3 Definitions.
315.5 Appointment of agents.
315.6 Transferred vessels and contracts.
315.7 Administration of agency agreements.
315.9 Duties of agents.
315.11 Vessel deactivation procedures.

    Authority: 50 U.S. C. App. 1744; 49 CFR 1.66.

    Source: 58 FR 44285, Aug. 20, 1993, unless otherwise noted.



Sec. 315.1  Purpose.

    This part summarizes the procedures governing the award and 
administration of Agency Agreements in the form of Service Agreements 
and Ship Manager Contracts entered into between the United States of 
America, acting by and through the Director, National Shipping Authority 
(NSA) of the Maritime Administration (MARAD), Department of 
Transportation, and Agents which will manage or otherwise conduct the 
business of one or more vessels owned, controlled or time-chartered by 
the United States, which vessel(s) may be assigned to Agents from time 
to time pursuant to the specific provisions of a Service Agreement or 
Ship Manager Contract.



Sec. 315.3  Definitions.

    (a) Agent includes a General Agent, Berth Agent and Ship Manager, 
designated as such under a standard form of Service Agreement or Ship 
Manager Contract to manage and conduct the business of vessels of which 
the United States is owner, owner pro hac vice or time charterer.
    (b) Citizen of the United States means a person (including 
receivers, trustees and successors or assignees of such Persons as 
provided in 46 App. U.S.C. 803), including any Person (stockholder, 
partner or other entity) who has a controlling interest in such person, 
any person whose stock or equity is being relied upon to establish the 
requisite U. S. citizen ownership, and any parent corporation, 
partnership or other entity of such Person at all tiers of ownership, 
who, in both form and substance at each tier of ownership, satisfies the 
following requirements--
    (1) An individual who is a Citizen of the United States, by birth, 
naturalization or as otherwise authorized by law;
    (2) A corporation organized under the laws of the United States or 
of a State, the controlling interest of which is owned by and vested in 
Citizens of the United States and whose chief executive officer, by 
whatever title, chairman of the board of directors and all officers 
authorized to act in the absence or disability of such persons are 
Citizens of the United States, and no more of its directors than a 
minority of the number necessary to constitute a quorum are noncitizens;
    (3) A partnership organized under the laws of the United States or 
of a State, if all general partners are Citizens of the United States 
and a controlling interest in the partnership is owned by Citizens of 
the United States;
    (4) An association organized under the laws of the United States or 
of a State, whose chief executive officer, by whatever title, chairman 
of the board of directors (or equivalent committee or body) and all 
officers authorized to act in their absence or disability are Citizens 
of the United States, no more than a minority of the number of its 
directors, or equivalent, necessary to constitute a quorum are 
noncitizens, and a controlling interest in which is vested in Citizens 
of the United States;
    (5) A joint venture, if it is not determined by the Maritime 
Administrator to be in effect an association or partnership, which is 
organized under the laws of the United States or of a State, if each 
conventurer is a Citizen of the United States. If a joint venture is in 
effect an association, it will be treated as is an association under 
paragraph (b)(4) of this section, or, if it is in effect a partnership, 
will be treated as is a partnership under paragraph (b)(3) of this 
section.
    (c) Director, National Shipping Authority, or Director means the 
Maritime Administrator. It also means the Associate Administrator for 
Shipbuilding

[[Page 213]]

and Ship Operations, or the Associate Administrator for Marketing, 
respectively, when the NSA is operating under authority delegated by the 
Maritime Administrator.
    (d) NDRF means a National Defense Reserve Fleet site.
    (e) United States means the States of the United States, Guam, 
Puerto Rico, the Virgin Islands, American Samoa, the District of 
Columbia, the Commonwealth of the northern Mariana Islands and any other 
territory or possession of the United States.

[58 FR 44285, Aug. 20, 1993, as amended at 69 FR 34310, June 21, 2004]



Sec. 315.5  Appointment of agents.

    (a) Eligibility. The Director shall restrict the appointment as 
Agent to qualified applicants. Each applicant shall establish that 
eligibility according to procedures that may be obtained from MARAD and 
shall:
    (1) Be a Citizen of the United States, as defined in Sec. 315.3(b) 
of this part;
    (2) Demonstrate the necessary ability, experience and resources as 
an operator of vessels or ports, or shoreside husbander of vessels; and
    (3) Continue to meet all such requirements throughout the term of 
the appointment.
    (b) Procedures. Information about procedures for appointment as 
General Agent, Berth Agent or Ship Manager may be obtained from, and 
inquiries and other written communications shall be submitted to, the 
Maritime Administration, Attn: Office of Acquisition, MAR-383, 
Department of Transportation, 400 Seventh Street SW., Washington, DC 
20590, tel. (202)366-1943. Inquiries should be made during normal 
business hours.
    (c) Approval. After final approval of an Agent by MARAD, the 
contracting office shall transmit the Service Agreement or Ship Manager 
contract to the Agent for execution and return to MARAD.
    (d) Agreements. The standard text of the Service Agreement and Ship 
Manager Contract may be obtained from the Office of Acquisition at the 
address appearing in paragraph (b) of this section, by mail or in person 
during normal business hours.



Sec. 315.6  Transferred vessels and contracts.

    The requirements of Sec. 315.5(a)(1) shall not apply to a 
contractor managing vessels owned by the United States under a contract 
or contracts previously awarded by another Federal agency if the 
contract, and the vessels managed under such contract, are subsequently 
transferred to the Maritime Administration, provided the period of 
performance of the transferred contract does not exceed the period of 
performance of the original contract, including options.

[73 FR 49358, Aug. 21, 2008]



Sec. 315.7  Administration of agency agreements.

    (a) Amendments. The MARAD contracting office shall prepare 
modifications to all Service Agreements and Ship Manager Contracts that 
are required due to changes in the Federal Acquisition Regulation or 
Transportation Acquisition Regulation, or changes in MARAD policy or 
procedure.
    (b) Annual review of General Agent representations and 
certifications. The contracting office shall require that each General 
Agent certify annually that all representations and certifications 
incorporated in a Service Agreement are current, complete and accurate, 
or provide new representations and certifications.



Sec. 315.9  Duties of agents.

    The Agent shall perform all duties prescribed in the Service 
Agreement or Ship Manager Contract and shall be guided by such 
directions, orders or regulations as may be issued by MARAD.



Sec. 315.11  Vessel deactivation procedures.

    When an Agent is responsible as vessel operator to decommission and 
deliver a vessel to the NDRF, that Agent shall observe all the 
procedures and requirements prescribed by MARAD contained in 
instructions which may be obtained from the MARAD Division of Reserve 
Fleet (MAR-743) at the address specified in Sec. 315.5(b) of this part. 
Tel. (202) 366-5752.

[[Page 214]]



PART 317_BONDING OF SHIP'S PERSONNEL--Table of Contents



Sec.
1. What this order does.
2. Amount of bond.
3. Premiums.
4. Posting of bond.
5. Measures to protect ship's payrolls.
6. Surety and form of bond.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114.

    Source: AGE-3, 16 FR 6751, July 12, 1951, unless otherwise noted. 
Redesignated at 45 FR 44587, July 1, 1980.



Section 1  What this order does.

    This order requires that General Agents, appointed under Service 
Agreement ``G.A.A., 3/19/51'' shall not advance or entrust any monies or 
slop chest property of the United States to a master, purser or any 
other member of the ship's personnel unless such person is under a bond 
indemnifying the United States against loss of such monies or property 
caused solely or in part by the dishonesty or lack of care of any such 
person in the performance of the duties of any petition covered by the 
bond.



Sec. 2  Amount of bond.

    The amount of the bond must be governed by the amount of monies 
advanced or value of slop chest property entrusted, and shall, at all 
times, not be less than the value of slop chest property entrusted plus 
advances of monies for which a satisfactory accounting has not been 
made.



Sec. 3  Premiums.

    The bonds provided for shall be furnished without cost to the 
National Shipping Authority, but the cost of the premiums of such bonds 
shall be included in the overhead expense of the General Agent.



Sec. 4  Posting of bond.

    The General Agent shall retain an executed copy of each such bond in 
its principal office for examination by the National Shipping Authority 
at any time.

[Amdt. 1, 16 FR 9527, Sept. 19, 1951. Redesignated at 45 FR 44587, July 
1, 1980]



Sec. 5  Measures to protect ship's payrolls.

    (a) General Agents are not required to consider the amount of the 
payroll delivered to the Master at the conclusion of a voyage in 
determining the amount of bond required for any one person filling a 
bonded position hereunder. However, the person paying off the crew 
should be either the Master, or purser, or some other member of the 
ship's personnel acting for the Master who has been bonded pursuant to 
this order. If, however, the person paying off is a shoreside employee 
of the General Agent, such employee shall be bonded under the General 
Agents' general fidelity bond.
    (b) The principal risk involved where payrolls are delivered to a 
vessel at the conclusion of a voyage is loss through hold-up. Therefore, 
reasonable protection shall be taken by all General Agents where 
payrolls are delivered to a vessel or elsewhere. Because the 
circumstances of each case will vary, the General Agents shall use their 
best judgment in determining whether armored car service, armed guards 
or similar types of protection should be employed (in other words, the 
General Agents should follow their usual practices). The cost of these 
services may be included in vessel operating expenses.
    (c) General Agents are not required to purchase hold-up insurance, 
since subject to the terms, conditions and limitations of Service 
Agreement ``G.A.A., 3/19/51'' losses resulting from this exposure are 
assumed by the National Shipping Authority.



Sec. 6  Surety and form of bond.

    Each bond provided for by this order shall be duly executed by an 
authorized surety appearing on the current approved list of companies 
acceptable as sureties on Federal bonds published by the U.S. Treasury 
Department. The form of bond required by the National Shipping Authority 
to be used by the General Agents shall be as follows:

[[Page 215]]

                      Department of Transportation

          maritime administration, national shipping authority

                     Position Fidelity Schedule Bond

    In consideration of the annual premium ------ (hereafter called the 
``Surety'') hereby agrees to pay to ------ or its successors (hereafter 
called the ``Agent'') or the United States of America, (hereafter called 
the ``United States''), represented by the Director, National Shipping 
Authority of the Maritime Administration, Department of Transportation 
(hereafter called the ``Director''), as their interests may appear, the 
amount of any pecuniary loss of money or slop chest property caused, 
solely or in part, by reason of the dishonesty or lack of care of any 
person in the performance of the duties of any position, now or 
hereafter listed in the Schedule of Positions and Amounts forming part 
hereof (hereafter called the ``Schedule''), on any and all vessels from 
time to time allocated to the Agent by the Director.
    This bond is executed and accepted subject to the following 
agreements, limitations and conditions:
    First. Liability under this bond begins with the ---------- day of 
----------------, 19---- in respect of each person then filling any 
position named in the Schedule on any and all vessels then allocated to 
the Agent by the Director. As to any position or positions bearing the 
same designation as that of any position or positions named in the 
Schedule on any vessel or vessels thereafter allocated to the Agent by 
the Director, liability under this bond shall automatically begin as 
soon as such position or positions are filled, provided the Director or 
the Agent shall within ninety (90) days of the date such position or 
positions are filled notify the Surety in writing of the date such 
position or positions are filled. As between the Agent and the Director, 
it shall be the responsibility of the Agent to give the notice to the 
Surety as provided herein. Without affecting its liability hereunder, 
the Surety agrees that neither the Agent nor the Director need furnish 
the names of vessels on which positions are bonded hereunder at any time 
during the effective period of this bond.
    Second. If the Agent or the Director shall request the Surety to 
increase or decrease the amount of coverage applicable to any position 
named in the Schedule, the Surety shall make such change by written 
acceptance showing the increase or decrease in the amount of coverage 
and the effective date thereof, which effective date shall not be prior 
to the date of such request; provided, however, that if the Director 
shall within ninety (90) days after receipt of notice of a decrease 
resulting from a request by the Agent, advise the Surety that it does 
not consent to such decrease, such decrease shall become inoperative and 
coverage shall continue in the amount applicable prior to such decrease 
as if such decrease had never been made.
    Third. If the Surety knows or has reason to believe that any person 
filling any position named in the Schedule has caused any loss of money 
or property entrusted to him by reason of his dishonesty or lack of care 
in the performance of the duties of such position, the Surety may 
terminate the coverage of this bond as to such person by giving notice 
in writing to the Agent and the Director at least thirty (30) days prior 
to the completion, in a continental United States port, of the then 
current voyage of the vessel on which such person is filling a position, 
in which case the coverage of this bond as to such person shall 
terminate when the crew is paid off upon such completion of the voyage. 
The Agent may cancel the coverage of this bond (a) as an entirety or (b) 
as to any position named in the Schedule by giving the Surety fifteen 
(15) days' written notice accompanied by written approval of the 
Director to such cancellation. The Director may cancel the coverage of 
this bond (a) as an entirety or (b) as to any position named in the 
Schedule upon fifteen (15) days' written notice to the Surety. In the 
event of any such cancellation the Surety shall refund to the Agent any 
unearned premiums computed pro rata.
    Fourth. After discovery and report to the Agent or the Director of 
any loss hereunder, the Agent or the Director shall give the Surety 
written notice thereof, and within ninety (90) days after such written 
notice to the Surety shall file with the Surety affirmative proof of 
loss itemized and sworn to on forms furnished by the Surety. Prior 
discovery and report to the Agent of such loss shall not affect the 
right of the Director to notify the Surety of such loss and to file 
proof of loss. As between the Agent and the Director, it shall be the 
responsibility of the Agent to give the notice and to file the proof of 
loss with the Surety as provided herein. ``Discovery and report'' as 
used herein is defined in paragraph Tenth hereof.
    Fifth. Any suit to recover on account of any loss hereunder shall be 
brought before the expiration of five years from the report to the Agent 
or the Director of the act causing such loss.
    Sixth. The Agent will declare at the original effective date of this 
bond, and at each subsequent premium anniversary date, the total number 
of persons then filling each position named in the Schedule, and the 
annual premium will be computed for the ensuing year on the basis of the 
aggregate coverage represented by such declaration. Upon such premium 
anniversary date there will be a computation of additional premium or 
refund of premium in proportion to the change in the coverage each year.

[[Page 216]]

    Seventh. Settlement of any claim hereunder shall be made by check 
payable to the Agent unless otherwise instructed by the Director, but no 
settlement of any claim hereunder may be made for an amount less than 
the full amount of the loss for which the claim is made without the 
written consent of the Director thereto.
    Eighth. The Surety shall not be entitled to any reimbursement, 
salvage or recovery,--except from insurance, reinsurance, collateral or 
indemnity taken by the Surety for its own benefit,--on account of any 
loss hereunder until the Agent or the Director, as their interests may 
appear, is reimbursed in full.
    Ninth. No modification or change of any nature of the provisions of 
this bond shall take effect unless the Director shall have given his 
written consent thereto, except that the Agent may increase the coverage 
hereunder in accordance with the provisions of paragraph First hereof 
without such consent of the Director.
    Tenth. (a) Any action, approval or consent which by the provisions 
of this bond is required to be taken or signed by the Director shall be 
effective if taken or signed by the Director or by his authorized 
representative, and wherever and whenever herein any right, power, or 
authority is granted or given to the Director, such right, power, or 
authority may be exercised in all cases by his authorized 
representative, and the act or acts of such authorized representative, 
when taken shall constitute the act of the Director hereunder.
    (b) ``Discovery and report'' by the Agent as used herein shall be 
deemed to mean discovery by any person and the report of such discovery 
to an executive officer or head of a department or division concerned 
with such discovery and report of the Agent at the Agent's principal 
place of business within the continental United States. ``Discovery and 
report'' by the Director shall be deemed to mean discovery by any person 
and the report of such discovery to an executive officer or head of a 
division or section concerned with such discovery and report at the 
Director's headquarters.
    (c) Notices, approvals and requests required by the provisions 
hereof shall be sent to the Surety addressed to it at its home office 
at.
    (d) Notices, acceptances and requests required to be sent to the 
Agent shall be sent to The Agent, ---------------- (Name and head office 
address).
    (e) Notices and requests to be sent to the Director shall be 
addressed to the Director, National Shipping Authority of the Maritime 
Administration, Department of Transportation, at the Director's 
headquarters.
    Signed, sealed and dated this ------------ day of --------------, 
19----.

 [corporate seal]_______________________________________________________
                                                                (Surety)

Attest or witness:

                                                        ------ By ------
                                                        ------ By ------

                                                            Schedule of Positions and Amounts
 The positions set forth hereinafter in this Schedule are all located on board the vessel or vessels allocated by the Director from time to time to the
                                                                   Agent named herein
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Number persons filling    Amount coverage on
              Item No.                Description position          position                  each            Aggregate coverage          Premium
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
 
 
 
--------------------------------------------------------------------------------------------------------------------------------------------------------


[AGE-3, 16 FR 6751, July 12, 1951, as amended by Amdt. 1, 16 FR 9527, 
Sept. 19, 1951. Redesignated at 45 FR 44587, July 1, 1980]



PART 324_PROCEDURAL RULES FOR FINANCIAL TRANSACTIONS UNDER AGENCY AGREEMENTS--

Table of Contents



                                Accounts

Sec.
1. Books of account.
2. Bank account.

                         Accounting for Revenues

3. Accounting for revenues.

                          Funding of Operations

4. Funding of operations.

                              Disbursements

5. Disbursements at principal office of agent.
6. Disbursements at other domestic ports.
7. Disbursements at foreign ports.

                                Documents

8. Disbursement documents.
9. Maintenance of documents.

[[Page 217]]

10. Lost documents.

                            Reports and Audit

11. Reports to the owner.
12. Audit.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114.

    Source: FIS-1, 16 FR 2885, Apr. 3, 1951, unless otherwise noted. 
Redesignated at 45 FR 44587, July 1, 1980.

                                Accounts



Section 1  Books of account.

    A separate set of books of account shall be opened for the purpose 
of recording the various transactions in connection with the said agency 
agreement. The books of original entry and ledgers may be similar in 
design to those heretofore employed by the agent unless it develops that 
they are inadequate, in which event the deficiency shall be remedied 
promptly. The accounts required in operations under this agency 
agreement, however, shall conform to the chart in the uniform system 
prescribed by the Maritime Administration in General Order No. 22, 
Revised (46 CFR part 282) and recordings in the accounts shall be in 
accordance with the descriptions thereof contained in the said uniform 
system.



Sec. 2  Bank account.

    A separate joint bank account will be maintained in a depository or 
depositories designated by the agent and approved by the National 
Shipping Authority (referred to in this order as the owner), into which 
all collections under the agency agreement will be deposited and from 
which disbursements in connection with the activities, maintenance and 
business of the vessels thereunder will be made. Upon designation by the 
agent and approval by the owner of the depository or depositories, the 
owner will issue an order for the establishment of the joint bank 
account. The order will set forth the conditions governing the 
establishment and maintenance of the account and the making of deposits 
therein and withdrawals therefrom. A signed copy of the order of the 
owner will be furnished the agent and the agent promptly shall adopt, 
through its Board of Directors, a resolution satisfactory in form and 
substance to the owner, authorizing the establishment and maintenance of 
the account in conformity with the action of the owner. A signed copy of 
the order of the owner and a certified copy of the resolution of the 
agent will be furnished by the owner to the depository for its guidance 
in maintaining the fund and honoring instruments of withdrawal. The 
order will provide, among other things, that:

    (a) Withdrawals from this bank account may be made by the agent 
without the countersignature of the owner for disbursements in 
connection with the activities, maintenance and business of the vessels 
assigned under agency agreements, except disbursements involving 
payments to the agent directly, or to any other persons specifically 
designated by the Director, National Shipping Authority, in which 
instances the countersignature of a designated representative of the 
owner will be required, (b) withdrawals may be made from the account by 
the owner without the countersignature of the agent whenever and to the 
extent the owner shall determine that the balance in the account in 
excess of current operating requirements warrants such action, (c) the 
bank shall have no rights against the joint account on account of 
indebtedness of the agent either by way of set-off or otherwise, (d) the 
bank may receive for deposit in the joint account any funds tendered to 
it by any person with instructions that the same be deposited in the 
said account, and the bank shall have no responsibility to inquire as to 
the source of such funds, and (e) the bank shall disburse funds from the 
joint account in accordance with checks, drafts, or other orders for the 
payment of money, drawn as provided in the order, without making any 
inquiry as to the purpose or use to which such withdrawals are to be 
put.

                         Accounting for Revenues



Sec. 3  Accounting for revenues.

    (a) General. (1) The Agent shall be responsible for the prompt 
collection of all vessel operating revenue, shall issue such 
instructions as may be necessary to its branch houses or sub-agents, and 
shall take such other steps as may be

[[Page 218]]

necessary to insure prompt remittance to it of vessel operating revenue 
collected outside its principal office.
    (2) Freight revenue collected, less refunds made therefrom, shall be 
remitted to the owner promptly subsequent to the close of each month. 
Disbursements except for refunds shall not be made from freight revenue 
collections unless specifically authorized by the owner.
    (3) Passenger revenue collections shall be accounted for in 
accordance with procedures to be described.
    (4) The agent shall in all cases perform his audit and review 
functions promptly and shall be in a position to supply complete 
documentation for a current audit by representatives of the owner.
    (b) Revenue documents--(1) Freight revenue. The agent shall require 
its domestic and foreign branch houses, sub-agents, or other 
representatives, to prepare and submit revenue documents (manifests, 
bills of lading, out turn weight certificates, correction notices, etc.) 
to it. The manifest, in addition to showing the name of shipper, 
consignee, weight or measurement, freight rate and basis (whether the 
freight rate applies on measurement or weight basis), and amount of 
freight, shall show also advance charges, prepaid beyond charges, etc. A 
recapitulation sheet shall be made of the totals shown on the individual 
manifest sheets for each port. The aggregate totals of weight and 
measurement freight shall be converted to freight payable tons of bulk, 
general, heavy lifts, and commodities subject to special stevedoring 
rates if freight carried is subject to an over-all stevedoring 
agreement.
    (2) Passenger revenue. Agents to whom combination passenger and 
freight vessels have been assigned under agency agreements and who 
heretofore have established a passenger accounting procedure, may 
continue to follow such procedure under the agency operations, unless 
such procedure is found to be inadequate by the owner.
    (3) Certifications of revenue documents. The following 
certifications will be signed by branch houses or sub-agents:

    (i) Freight manifests. Certified to be a true and correct reflection 
of cargo loaded and rates charged.

                                               Branch house or sub-agent
 By:____________________________________________________________________
                                                              Name Title

    (ii) Passenger manifests. Certified to be a true and correct 
reflection of passengers carried and rates charged.

                                               Branch house or sub-agent
 By:____________________________________________________________________
                                                              Name Title
    (4) Definition of manifest. The term manifest as used in this order, 
shall be interpreted to include appropriate equivalent documents as 
customarily used.

                          Funding of Operations



Sec. 4  Funding of operations.

    Cash advances will be made by the owner in such amounts and at such 
times as are required to adequately fund the activities, maintenance and 
business of the vessels assigned under agency agreements.

                              Disbursements



Sec. 5  Disbursements at principal office of agent.

    All expenses directly applicable to the activities, maintenance and 
business of the vessels assigned under agency agreements shall be paid 
from funds advanced by the owner unless otherwise specifically provided. 
When paid by check, invoices shall reflect the numbers of the checks by 
which the invoices were paid; when paid other than by check of the agent 
at his principal office, invoices must bear evidence of payment.



Sec. 6  Disbursements at other domestic ports.

    Disbursements at domestic ports other than the principal office of 
the agent for expenses as referred to in section 5 shall be made by one 
of the three following methods:
    (a) After proper certification by the branch house or subagent, 
invoices shall be forwarded to the agent for payment, or
    (b) The branch house or subagent shall pay invoices and thereafter 
apply

[[Page 219]]

to the agent for reimbursement, supporting its voucher with invoices 
bearing evidence of payment covering individual disbursement, or
    (c) The agent may advance from time to time from the joint bank 
account the funds necessary to meet the requirements of such branch 
houses or subagents in connection with the activities, maintenance and 
business of the vessels assigned under the agency agreement. In such 
cases the branch house or subagent shall pay invoices from such advances 
and make proper accounting to the agent for each advance supported by 
invoices bearing evidence of payment and accompanied by remittance 
covering any unexpended balance of the advance, promptly after the 
departure of each vessel for which such advance was made.



Sec. 7  Disbursements at foreign ports.

    Disbursement procedures at foreign ports may differ in the case of 
individual agents and in view of existing conditions. Disbursements at 
foreign ports shall be made by one of the following methods or by any 
other method outlined to and approved by the owner in advance of its 
use:
    (a) The agent may advance from time to time from the joint bank 
account the funds necessary to meet the requirements of the business of 
the vessels assigned under the agency agreement. In such cases the 
foreign branch house or sub-agent shall pay invoices from such advances 
and shall make proper accounting to the agent for all advances supported 
by invoices bearing satisfactory evidence of payment. Any gains or 
losses in exchange on such advances or disbursements shall be for the 
account of the owner.
    (b) The foreign branch house or sub-agent may pay all invoices from 
his own funds and thereafter draw on the agent for reimbursement, at the 
same time forwarding the disbursements account by air mail.
    (c) The agent may establish Letters of Credit making funds available 
to the foreign branch house or sub-agent against which funds may be 
drawn by the sub-agent for branch house for payment of properly approved 
documents.

                                Documents



Sec. 8  Disbursement documents.

    (a) Preparation of invoices by contractors and/or vendors. (1) 
Invoices from contractors or vendors shall be supported by evidence of 
delivery of supplies (delivery receipts), performance of services, or 
use in facilities furnished the vessels, and shall include the 
following:
    (i) Name of vessel.
    (ii) Name of port at which the services, supplies, or facilities 
were furnished.
    (iii) Date of delivery or service.
    (iv) Necessary details as to the nature of services, supplies, or 
facilities furnished including quantity, rate, price and total amount.
    (2)(i) In addition to the foregoing, contractors or vendors shall 
certify each invoice or voucher (original only) in the following manner:

    I certify that the above bill is correct and just and that payment 
therefor has not been received.

 Name of contractor or vendor___________________________________________
 By:____________________________________________________________________
                                                              Name Title
    (ii) The agent shall advise its domestic and foreign branch houses, 
sub-agents, or other representatives to the effect that the foregoing 
information and certifications must be shown on all invoices or vouchers 
when received from contractors or vendors.
    (iii) In instances where the foregoing certification is unobtainable 
for foreign purchases only, it may be waived: Provided, That, in lieu of 
such certification the agent certifies the invoice as follows:

    We certify that the prescribed certification of the payee was 
unobtainable.

                                            General agent or berth agent
 By:____________________________________________________________________
                                                              Name Title
    (3) In instances where it is not possible or practicable to obtain 
invoices bearing evidence of payment covering disbursements at foreign 
ports, that requirement will be waived, provided the agent certifies as 
follows:


[[Page 220]]


    We certify that, to the best of our knowledge and belief, this 
invoice has been paid.

                                            General agent or berth agent
 By:____________________________________________________________________
                                                              Name Title
    (4) Invoices rendered to the agent by its branch houses or sub-
agents shall be only those of the contractors or vendors who actually 
rendered the services or furnished the supplies or facilities.
    (5) If the laws of any country require the foreign sub-agent or 
branch house to retain the original invoice with stamps affixed, or if 
such laws require the original receipt as prima facie evidence of 
payment, the corresponding duplicate copy of the invoice, in proper 
form, must be forwarded to the agent with notation to that effect made 
thereon by the foreign sub-agent or branch house.
    (b) Certification of master, ship's officers, branch houses, sub-
agents, or duly authorized representatives. (1) Evidence of delivery of 
supplies, performance of services, or use of facilities, as normally 
provided by delivery receipts, or an equivalent form, comprises an 
essential part of proper documentation for disbursing purposes.
    (i) Where supplies are delivered or services or facilities are 
furnished directly to a vessel, evidence of delivery or performance 
normally should be signed by a ship's officer.
    (ii) Where such evidence is not signed by a ship's officer, any duly 
authorized representative of the agent may sign as ``Duly Authorized 
Representative,'' provided the agent shall be responsible for the 
designation of proper and qualified representatives and provided the 
agent shall furnish, when so required by the owner, adequate evidence 
that the signing representative was duly authorized by him. In instances 
in which the agent may not be able to identify in advance the 
representative who may sign, the agent shall have the responsibility for 
determining that the person signing was qualified to execute evidence of 
delivery of supplies, performance of services, or use of facilities 
involved.
    (2) For charges for watching cargo, stevedoring, wharfage, receiving 
and delivering cargo, clerking and checking, or other services or 
facilities not rendered directly to the vessel, for which normally 
delivery receipts or any equivalent form are not furnished, the 
following certification on the face of the original invoice by a duly 
authorized representative of the agent is required.

    I certify that the services or facilities as specified have been 
furnished.

                                                                    Name

                                          Duly authorized representative
    (3) Ships' payrolls shall be certified by the master (or his 
authorized representative) as follows:

    I certify that this payroll is true and correct, and that the 
persons named hereon have performed the services for the period stated.


                                               Master (or his authorized
                                                         representative)
    (4) In instances where vessels are under foreign articles the 
payroll shall bear proper evidence of having been paid off before a 
United States Shipping Commissioner or an American Consul.
    (5) The slop chest account shall be certified by the master as 
follows:

    I hereby certify that the above is a true statement of all Slop 
Chest transactions on this vessel and voyage.

                                               Master (or his authorized
                                                         representative)
    (6) A similar certification shall be made by the Chief Steward (or 
his authorized representative) covering bar transactions (if any).
    (c) Certification by branch house or sub-agent where agent does not 
handle transactions directly. The certification of the branch house or 
sub-agent must be shown on the original invoice (if rendered singly) or 
on the summary disbursement statement (if rendered in groups) in the 
following manner:
    (1) On single invoices.

    I certify that the prices charged are reasonable and correct.

                                               Branch house or sub-agent
 By:____________________________________________________________________
                                                              Name Title
    (2) On the summary statement.


[[Page 221]]


    I certify that the prices charged per invoices detailed above are 
reasonable and correct.

                                               Branch house or sub-agent
 By:____________________________________________________________________
                                                              Name Title



Sec. 9  Maintenance of documents.

    The agent shall maintain the originals of all documents at his 
principal office. All documents originating at other domestic ports and 
at foreign ports shall be transmitted as currently as possible to the 
principal office of the agent. The agent shall in all cases perform his 
audit and review functions promptly and shall be in a position to supply 
complete documentation for a current audit by representatives of the 
owner. The agent shall maintain to the maximum extent possible a 
complete and orderly file of all authorizations for facilities, services 
and supplies, and complete tariffs and port schedules covering charges 
at domestic and foreign ports incident to the operation of the vessels 
assigned under the agency agreement.



Sec. 10  Lost documents.

    In the event of the loss of documents, photostat, carbon, or other 
suitable copies may be substituted therefor, in which event the 
following certification shall be placed on such copies:

    I certify that, to the best of my knowledge and belief, this is a 
true copy of an original that has been lost.

                                               Branch house or sub-agent
 By:____________________________________________________________________
                                                              Name Title

                            Reports and Audit



Sec. 11  Reports to the owner.

    The agent shall submit to the local District Finance Officer of the 
owner, in triplicate, not later than 20 days after the end of each 
month, its general ledger trial balance and such schedules and support 
thereof as may be required. The agent shall also submit to the owner, in 
original and four copies, not later than 10 days after the end of each 
month a statement in the form and content to be prescribed reflecting 
cash receipts and cash disbursements for the preceding month and 
cumulative totals for the year to date; the original and one copy will 
be transmitted to the local District Finance Officer and three copies 
will be transmitted to the Chief, Office of Finance, Maritime 
Administration, Washington.

[FIS-1, 16 FR 2885, Apr. 3, 1951, as amended at 33 FR 5952, Apr. 18, 
1968. Redesignated at 45 FR 44587, July 1, 1980]



Sec. 12  Audit.

    (a) The owner will audit as currently as possible subsequent to 
audit by the agent, all documents relating to the activities, 
maintenance and business of the vessels assigned under agency 
agreements.
    (b) The agent shall maintain all documents in his principal office, 
for the time being in accordance with his customary practice of filing.
    (c) Subsequent to audit by the owner, at such intervals as may be 
determined, the owner will authorize entries to be made to revenue and 
expense accounts and to accounts reflecting relations between the owner 
and the agent.

    Note: Books of accounts and documents referred to in the above 
order, shall be retained until the completion of the audit by the 
General Accounting Office, at which time the Maritime Administration 
will take custody of the records.

[16 FR 2885, Apr. 3, 1951, as amended at 21 FR 8105, Oct. 23, 1956. 
Redesignated at 45 FR 44587, July 1, 1980]



PART 325_PROCEDURE TO BE FOLLOWED BY GENERAL AGENTS IN PREPARATION OF 

INVOICES AND PAYMENT OF COMPENSATION PURSUANT TO PROVISIONS OF NSA 

ORDER NO. 47--Table of Contents



Sec.
1. What this order does.
2. Terms.
3. Preparation of invoices.
4. Method of payment.
5. Accounting.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114.

    Source: FIS-2, 16 FR 10026, Oct. 2, 1951, unless otherwise noted. 
Redesignated at 45 FR 44587, July 1, 1980.

[[Page 222]]



Section 1  What this order does.

    This order prescribes procedures for the preparation of invoices 
for, and payment and the accounting for, compensation payable to General 
Agents of the National Shipping Authority for services rendered in 
connection with the husbanding and conduct of the business of dry cargo 
vessels assigned to General Agents under the standard form of Service 
Agreement GAA, March 19, 1951, as prescribed in NSA Order No. 47. (AGE-4 
of this chapter).



Sec. 2  Terms.

    The terms employed in this order shall have the same meaning as 
those contained in NSA Order No. 47.



Sec. 3  Preparation of invoices.

    (a) Pursuant to Article 4 of the Service Agreement, the General 
Agent shall prepare monthly invoices for compensation earned during the 
preceding month under the applicable provisions of NSA Order No. 47.
    (1) Invoices shall be prepared so as to show separately husbanding 
services and other services in conducting the business of the vessels.
    (2) Husbanding services shall be stated to indicate the names of all 
vessels delivered to the General Agent during the month involved, the 
number of days each vessel was serviced or operated by the General Agent 
during the month, rate of compensation per day, and the amount produced 
by the calculation.
    (3) Services in conducting the business of the vessels shall be 
stated to indicate the name of the vessel, the voyage number, the amount 
of revenue, the rate of compensation, and the amount produced by the 
calculation; and, in the instance of vessels employed in MSTS service, 
the number of days the vessels were so employed, the rate of 
compensation per day, and the amount produced by the calculation.
    (b) Invoices shall be certified by a duly authorized officer of the 
General Agent as follows:

    I certify that this invoice is correct and just, that it is a 
correct statement of the compensation calculated in accordance with the 
provisions of NSA Order No. 47 due the undersigned General Agent for the 
month of ---------- under Service Agreement No. ------ made as of ------ 
with the National Shipping Authority, and that payment thereof has not 
been received.

________________________________________________________________________
                                                   Name of General Agent
________________________________________________________________________
                                                               Signature
________________________________________________________________________
                                                                   Title



Sec. 4  Method of payment.

    The General Agent shall prepare check drawn on the NSA Special bank 
account for countersignature by an authorized representative of the 
Owner. All such payments to the General Agent shall be considered as 
payments on account and are subject to post-audit by the Owner.



Sec. 5  Accounting.

    The General Agent shall record the amounts of compensation paid from 
the NSA Special bank account in its agency books, in the following 
designated accounts:

    Account 887--Husbanding Compensation.
    Account 888--All Other Compensation.
    This account shall be maintained to show separately compensation 
paid under sections 3(a), 3(b), 3(c), and 3(d) of NSA Order No. 47.

    Note: Invoices and account books referred to in the above order, 
shall be retained until the completion of the audit by the General 
Accounting Office, at which time the Maritime Administration will take 
custody of the records.

[16 FR 2885, Apr. 3, 1951, as amended at 21 FR 8105, Oct. 23, 1956. 
Redesignated at 45 FR 44587, July 1, 1980]



PART 326_MARINE PROTECTION AND INDEMNITY INSURANCE UNDER AGREEMENTS WITH 

AGENTS--Table of Contents



Sec.
326.1 Purpose.
326.2 Insurer.
326.3 Insured.
326.4 Reports of accidents and occurrences.
326.5 Report of claims.
326.6 Settlement of claims.
326.7 Litigation.

    Authority: 50 U.S.C. App. 1744; 46 U.S.C. 121a; 1114(b); 49 CFR 
1.66.

    Source: 53 FR 37572, Sept. 27, 1988, unless otherwise noted.

[[Page 223]]



Sec. 326.1  Purpose.

    This part states that the Maritime Administration (MARAD) shall be 
responsible for providing or obtaining marine protection and indemnity 
(P&I) insurance for any vessel that has been placed in the National 
Defense Reserve Fleet (NDRF), which includes the Ready Reserve Force 
component, which vessel is assigned under a General Agency Agreement. 
These various forms of Agreements are entered into by the United States, 
acting by and through the National Shipping Authority, MARAD, and a 
private company (Agent). An agreement also contains procedures for the 
Agent to report accidents and occurrences of a P&I nature to MARAD and 
to report and settle P&I claims.



Sec. 326.2  Insurer.

    MARAD shall be responsible for providing or obtaining P&I insurance 
for all vessels assigned to Agents under an Agreement. At its election, 
MARAD may be a self-insurer of any one or more vessels covered by the 
Agreement, or may obtain P&I insurance coverage under one or more 
policies written by underwriters of marine insurance. MARAD shall 
determine the amount of coverage to be provided or obtained.



Sec. 326.3  Insured.

    The insureds are: The United States of America, acting by and 
through the Director, National Shipping Authority, Maritime 
Administration, Department of Transportation, and its Agents (including 
Agents' employees). Sub-agents shall be insureds only as expressly 
provided in the Agreement. Independent contractors of the Agents are not 
insureds.



Sec. 326.4  Reports of accidents and occurrences.

    The Agent shall report every accident or occurrence of a P&I nature 
promptly to both the Director, Office of Trade Analysis and Insurance, 
Maritime Administration, 500 Seventh Street, SW., Room 8121, Washington, 
DC 20590, Tel. (202) 366-1461, and the contracting officer named in the 
Agreement. If MARAD has obtained P&I insurance through a marine 
insurance underwriter, the Agent also shall concurrently file a report 
of such accident or occurrence with the underwriter. MARAD shall 
disclose full details as the identity of such underwriter to the Agent.



Sec. 326.5  Report of claims.

    The Agent also shall submit a quarterly report of all claims of a 
P&I insurance nature to the Director, Office of Trade Analysis and 
Insurance. The report shall contain all relevant information, e.g., the 
names of the vessels and of the claimant, the date of the injury or 
occurrence, the amount claimed, the basis for any payments already 
disbursed in behalf of the United States, estimated future costs and an 
evaluation of the claim of the merits.



Sec. 326.6  Settlement of claims.

    (a) After ascertaining from MARAD the availability of funds, the 
Agent is authorized to settle individual claims of a P&I insurance 
nature that do not exceed $5,000. For a settlement in excess of $5,000, 
the Agent shall obtain MARAD's prior approval through the Director, 
Office of Trade Analysis and Insurance. If MARAD has placed the P&I 
insurance with an insurance underwriter, the Agent also shall obtain the 
prior approval of the underwriter to settle claims.
    (b) The amount of individual claims that do not exceed the Agent's 
limit for settlement shall be chargeable by the Agent to the vessel 
expense and shall be accounted for in accordance with current accounting 
instructions of MARAD.
    (c) When settling any such claim, the Agent shall advise the 
claimant that such settlement shall be accounted for in accordance with 
current accounting instructions, and shall also advise the claimant that 
such settlement is not to be construed as an admission of liability by 
or on behalf of the United States, the Agent or any other person.
    (d) The Agent shall apply sound judgment and follow standard 
practices of vessel operators in the settlement or other disposition of 
such P&I insurance claims, and shall settle such claims only when the 
settlement is adequately

[[Page 224]]

supported by all the facts and circumstances and is in the best interest 
of the United States.



Sec. 326.7  Litigation.

    (a) If a court suit of a P&I nature is filed which arises out of the 
activities of the Agent under its Agreement, wherein the Agent is named 
as the party defendant or one of the parties' defendant irrespective of 
whether the risk is covered by P&I insurance, the Agent shall 
immediately forward copies of the pleading and all other related legal 
documents, by first class mail, to the Chief Counsel, Maritime 
Administration, Department of Transportation, Washington, DC 20590, and 
to the Attorney General, Attn: Civil Division, Torts Branch, Department 
of Justice, Washington, DC 20530. No agent or authorized subagent shall 
incur any legal expenses in connection with any claim of a P&I nature, 
unless approved in advance by MARAD, and by the underwriter, where 
applicable. However, the Agent may incur legal expenses if the mission 
of the vessel will be frustrated or impeded and/or time will not permit 
such prior approval.
    (b) In the event of any attachment or seizure of a vessel, whether 
or not the risk is of a P&I nature, the Agent shall immediately notify 
the Chief Counsel, Maritime Administration, Washington, DC 20590, Tel. 
(202) 366-05711, by telegram, radio, or cable.



PART 327_SEAMEN'S CLAIMS; ADMINISTRATIVE ACTION AND LITIGATION--Table of Contents



  Subpart A_Clarification Act Claims: Seamen's Claims; Administrative 
                          Action and Litigation

Sec.
327.1 Purpose.
327.2 Statutory provisions.
327.3 Required claims submission.
327.4 Claim requirements.
327.5 Filing claims.
327.6 Notice of allowance or disallowance.
327.7 Administrative disallowance presumption.
327.8 Court action.

  Subpart B_Admiralty Extension Act Claims; Administrative Action and 
                               Litigation

327.20 Admiralty Jurisdiction Extension Claims: Required claims.
327.21 Definitions.
327.22 Who may present claims.
327.23 Insurance and other subrogated claims.
327.24 Actions by claimant.
327.25 Contents of a claim.
327.26 Evidence supporting a claim.
327.27 Proof of amount claimed for personal injury.
327. 28 Proof of amount claimed for loss of, or damage to, property.
327.29 Effect of other payments to claimant.
327.30 Statute of limitations for AEA and claim requirements.
327.31 Statute of limitations not tolled by administrative consideration 
          of claims.
327.32 Notice of claim acceptance or denial.
327.33 Claim denial presumption.
327.34 Court action.

                    Subpart C_Other Admiralty Claims

327.40 Other Admiralty claims.
327.41 Definitions.
327.42 Who may present claims.
327.43 Insurance and other subrogated claims.
327.44 Actions by claimant.
327.45 Contents of a claim.
327.46 Evidence supporting a claim.
327.47 Proof of amount claimed for personal injury.
327. 48 Proof of amount claimed for loss of, or damage to, property.
327.49 Effect of other payments to claimant.
327.50 Statute of limitations for other admiralty claims and claim 
          requirements.
327.51 Statute of limitations not tolled by administrative consideration 
          of claims.
327.52 Notice of claim acceptance or denial.

    Authority: 46 U.S.C. Chapters 301-309.

    Source: 77 FR 65633, Oct. 30, 2012, unless otherwise noted.



  Subpart A_Clarification Act Claims: Seamen's Claims; Administrative 

                         Action and Litigation.



Sec. 327.1  Purpose.

    This part prescribes rules and regulations pertaining to the filing 
of claims designated in Sec. 327.3 and the administrative allowance, or 
disallowance (actual and presumed), of such claims, in whole or in part, 
filed by officers and

[[Page 225]]

members of crews (hereafter referred to as ``seamen'') employed on 
vessels as employees of the United States through the National Shipping 
Authority (NSA), Maritime Administration (MarAd), or successor.



Sec. 327.2  Statutory provisions.

    These regulations are enacted to implement the administrative claims 
procedures set forth in 50 U.S.C. App. 1291(a).



Sec. 327.3  Required claims submission.

    All claims specified in 50 U.S.C. App. 1291(a) shall be submitted 
for administrative consideration, as provided in Sec. Sec. 327.4 and 
327.5, prior to institution of court action thereon.



Sec. 327.4  Claim requirements.

    (a) Form. The claim may be in any form and shall be
    (1) In writing,
    (2) Designated as a claim,
    (3) Disclose that the object sought is the administrative allowance 
of the claim,
    (4) Comply with the requirements of this part, and
    (5) Filed as provided in Sec. 327.5.
    (6) The claim must be signed or attested to by the claimant. The 
statements made in the claim should be made to the best of the knowledge 
of the claimant and are subject to the provision of 18 U.S.C. 287 and 
1001 and all other penalty provisions for making false, fictitious, or 
fraudulent claims, statements or entries, or falsifying, concealing, or 
covering up a material fact in any matter within the jurisdiction of any 
department or agency of the United States. Any lawsuits filed contrary 
to the provisions of section 5 of the Suits in Admiralty Act, as amended 
by Public Law 877, 81st Congress (64 Stat. 1112; 46 U.S.C. 30901 et 
seq.), shall not be in compliance with the requirements of this part.
    (b) Contents. Each claim shall include the following information:
    (1) With respect to the seaman:
    (i) Name;
    (ii) Mailing address;
    (iii) Date of birth;
    (iv) Legal residence address;
    (v) Place of birth; and
    (vi) Merchant mariner license or document number and social security 
number.
    (2) With respect to the basis for the claim:
    (i) Name of vessel on which the seaman was serving when the incident 
occurred that is the basis for the claim;
    (ii) Place where the incident occurred;
    (iii) Time of incident--year, month and day, and the precise time of 
day, to the minute, where possible;
    (iv) Narrative of the facts and circumstances surrounding the 
incident, including a statement explaining why the United States is 
liable for this claim;
    (v) Pictures, video recordings and other physical evidence related 
to the case and
    (vi) The names, addresses, and telephone numbers, if available, of 
others who can supply factual information about the incident and its 
consequences.
    (3) A sum certain dollar amount of claim, which includes a total for 
all amounts sought. The claim shall explain the amounts sought for:
    (i) Past loss of earnings or earning capacity;
    (ii) Future loss of earnings or earning capacity;
    (iii) Medical expenses paid out of pocket;
    (iv) Pain and suffering; and
    (v) Any other loss arising out of the incident (describe).
    (4) All medical and clinical records of physicians and hospitals 
related to a seaman's claim for injury, illness, or death shall be 
attached. If the claimant does not have a copy of each record, the 
claimant shall identify every physician and hospital having records 
relating to the seaman and shall provide written authorization for MarAd 
to obtain all such records. The claim shall also include the number of 
days the seaman worked as a merchant mariner and the earnings received 
for the current calendar year, as well as for the two preceding calendar 
years.
    (5) If the claim does not involve a seaman's death, the following 
information shall be submitted with the claim:

[[Page 226]]

    (i) Date the seaman signed a reemployment register as a merchant 
mariner;
    (ii) Copy of the medical fit-for-duty certificate issued to the 
seaman;
    (iii) Date and details of next employment as a seaman; and
    (iv) Date and details of next employment as other than a seaman.
    (6) If the claim is for other than personal injury, illness or 
death, the claim shall provide all supporting information concerning the 
nature and dollar amount of the loss.



Sec. 327.5  Filing claims.

    (a) Claims may be filed by or on behalf of seamen or their surviving 
dependents or beneficiaries, or by their legal representatives. Claims 
shall be filed either by personal delivery or by registered mail.
    (b) The claimant shall send the claim directly to the Chief, 
Division of Marine Insurance, Maritime Administration, Department of 
Transportation, 1200 New Jersey Ave. SE., Washington, DC 20590. A copy 
of each claim shall be filed with the Ship Manager or General Agent of 
the vessel with respect to which such claim arose.



Sec. 327.6  Notice of allowance or disallowance.

    MarAd shall give prompt notice in writing of the allowance or 
disallowance of each claim, in whole or in part, by mail to the last 
known address of, or by personal delivery to, the claimant or the 
claimant's legal representative. In the case of administrative 
disallowance, in whole or in part, such notice shall contain a brief 
statement of the reason for such disallowance.



Sec. 327.7  Administrative disallowance presumption.

    If MarAd fails to give written notice of allowance or disallowance 
of a claim in accordance with Sec. 327.6 within sixty (60) calendar 
days following the date of the receipt of such claim by the proper 
person designated in Sec. 327.5, such claim shall be presumed to have 
been ``administratively disallowed,'' within the meaning in section 1(a) 
of 50 U.S.C. App. 1291(a).



Sec. 327.8  Court action.

    (a) No seamen, having a claim specified in subsections (2) and (3) 
of section 1(a) of 50 U.S.C. App. 1291(a), their surviving dependents 
and beneficiaries, or their legal representatives shall institute a 
court action for the enforcement of such claim unless such claim shall 
have been prepared and filed in accordance with Sec. Sec. 327.4 and 
327.5 and shall have been administratively disallowed in accordance with 
Sec. 327.6 or 327.7.
    (b) This part prescribes rules and regulations pertaining to the 
filing of claims designated in Sec. 327.3 and the administrative 
allowance, or disallowance (actual and presumed), of such claims, in 
whole or in part, filed by officers and members of crews (hereafter 
referred to as ``seamen'') employed on vessels through the National 
Shipping Authority (NSA), Maritime Administration (MarAd), or successor 
organization.



  Subpart B_Admiralty Extension Act Claims; Administrative Action and 

                               Litigation



Sec. 327.20  Admiralty Jurisdiction Extension Claims: Required claims.

    (a) Pursuant to 46 U.S.C. 30101(c) of the Admiralty Extension Act 
(AEA), administrative claims involving the extension of admiralty 
jurisdiction to cases of damage or injury on land caused by a Maritime 
Administration vessel on navigable waters must be presented in writing 
to the Maritime Administration in accordance with Sec. Sec. 327.20 
through 327.34 prior to institution of a court action thereon.
    (b) A civil action against the United States for injury or damage 
done or consummated on land by a vessel on navigable waters may not be 
brought until the earlier occurrence of either the denial of the claim 
by the Maritime Administration or the presumptive denial of the claim 
which arises 6 months after the claim has been presented in writing to 
the Maritime Administration. 46 U.S.C. 30101(c)(2). Note that the 6 
month period of review will not begin until a valid claim is filed 
pursuant to Sec. 327.25.
    (c) Proceedings against the United States pursuant to the 
requirements of

[[Page 227]]

the AEA and these regulations is the exclusive remedy available against 
the United States of America, acting by and through the Maritime 
Administration, with respect to such injuries and damages.



Sec. 327.21  Definitions.

    The following definitions apply to this subpart:
    (a) Accrual date. The day on which the alleged wrongful act or 
omission results in injury or damage for which a claim is made.
    (b) Claim. A written notification of an incident, signed by the 
claimant, describing the incident and explaining why the United States 
is liable. The claim shall be accompanied by a demand for the payment of 
a sum certain of money, with a statement as to how that sum certain was 
calculated and all documents supporting the amount claimed. Where 
damages for medical injuries are made, the doctor's statement relating 
the injuries to the accident should be attached as well as medical 
release forms for each treating physician, hospital, and medical care 
provider.



Sec. 327.22  Who may present claims.

    (a) General rules. (1) A claim for property loss or damage may be 
presented by anyone having an interest in the property, including an 
insurer or other subrogee.
    (2) A claim for personal injury may be presented by the person 
injured.
    (3) A claim based on death may be presented by the executor or 
administrator of the decedent's estate, or any other person legally 
entitled to assert such a claim under local law. The claimant's status 
must be stated in the claim.
    (4) A claim for medical, hospital, or burial expenses may be 
presented by any person who by reason of family relationship has, in 
fact, incurred the expenses.
    (b) A joint claim must be presented in the names of and signed by, 
the joint claimants, and the settlement will be made payable to the 
joint claimants.
    (c) A claim may be presented by a duly authorized agent, legal 
representative or survivor, if it is presented in the name of the 
claimant. If the claim is not signed by the claimant, the agent, legal 
representative, or survivor shall indicate their title or legal capacity 
and provide evidence of their authority to present the claim.
    (d) Where the same claimant has a claim for damage to or loss of 
property and a claim for personal injury or a claim based on death 
arising out of the same incident, they must be combined in one claim.



Sec. 327.23  Insurance and other subrogated claims.

    (a) The claims of an insured (subrogor) and an insurer (subrogee) 
for damages arising out of the same incident constitute a single claim.
    (b) An insured (subrogor) and an insurer (subrogee) may file a claim 
jointly or separately. If the insurer has fully reimbursed the insured, 
payment will only be made to the insurer. If separate claims are filed, 
the settlement will be made payable to each claimant to the extent of 
that claimant's undisputed interest. If joint claims are filed, the 
settlement will be sent to the insurer.
    (c) Each claimant shall include with a claim, a written disclosure 
concerning insurance coverage including:
    (1) The names and addresses of all insurers;
    (2) The kind and amount of insurance;
    (3) The policy number;
    (4) Whether a claim has been or will be presented to an insurer, 
and, if so, the amount of that claim; and whether the insurer has paid 
the claim in whole or in part, or has indicated payment will be made.
    (d) Each subrogee shall substantiate an interest or right to file a 
claim by appropriate documentary evidence and shall support the claim as 
to liability and measure of damages in the same manner as required of 
any other claimant. Documentary evidence of payment to a subrogor does 
not constitute evidence of liability of the United States or conclusive 
evidence of the amount of damages. The Maritime Administration makes an 
independent determination on the issues of fact and law based upon the 
evidence of record.

[[Page 228]]



Sec. 327.24  Actions by claimant.

    (a) Form of claim. The claim must meet the requirements of this 
section.
    (b) Presentation. The claim must be presented in writing to the 
Office of Chief Counsel, Attn. Chief Counsel, Maritime Administration, 
Department of Transportation, 1200 New Jersey Ave. SE., Washington, DC 
20590-0001.



Sec. 327.25  Contents of a claim.

    (a) A valid claim will contain the following:
    (1) Identification of the Maritime Administration as the agency 
whose act or omission gave rise to the claim;
    (2) The full name and mailing address of the claimant. If this 
mailing address is not claimant's residence, the claimant shall also 
include residence address;
    (3) The date, time, and place of the incident giving rise to the 
claim;
    (4) The amount claimed, in a sum certain, supported by independent 
evidence of property damage or loss, personal injury, or death, as 
applicable together with supporting medical records and a HIPPA 
compliant medical waiver for each treating physician or hospital;
    (5) A detailed description of the incident giving rise to the claim 
and the factual basis upon which it is claimed the Maritime 
Administration is liable for the claim;
    (6) A description of any property damage or loss, including the 
identity of the owner, if other than the claimant, as applicable;
    (7) The nature and extent of the injury, as applicable;
    (8) The full name, title, if any, and address of any witness to the 
incident and a brief statement of the witness' knowledge of the 
incident;
    (9) A description of any insurance carried by the claimant or owner 
of the property and the status of any insurance claim arising from the 
incident; and
    (10) An agreement by the claimant to accept the total amount claimed 
in full satisfaction and final settlement of the claim, lien or 
subrogation claim on the claimed amount, or any assignment of the claim.
    (b) A claimant or duly authorized agent or legal representative must 
sign in ink a claim and any amendment to that claim. The claim shall 
include a statement that the information provided is true and correct to 
the best of the claimant's knowledge, information, and belief. If the 
person's signature does not include the first name, middle initial, if 
any, and surname, that information must be included in the claim. A 
married woman must sign her claim in her given name, e.g., ``Mary A. 
Doe,'' rather than ``Mrs. John Doe.''



Sec. 327.26  Evidence supporting a claim.

    (a) The claimant shall present any evidence in the claimant's 
possession that supports the claim. This evidence shall include, if 
available, statements of witnesses, accident or casualty reports, 
photographs and drawings.
    (b) Notwithstanding anything in the regulations in this subpart, the 
claimant shall provide such additional reasonable documents and evidence 
as requested by the Maritime Administration with respect to the claim. 
Failure to respond to reasonable requests for additional information and 
documentation can result in a determination that a valid claim has not 
been submitted.



Sec. 327.27  Proof of amount claimed for personal injury.

    The following evidence must be presented when appropriate in claims:
    (a) Itemized medical, hospital, and burial bills.
    (b) A written report by the attending physician including:
    (1) The nature and extent of the injury and the treatment;
    (2) The necessity and reasonableness of the various medical expenses 
incurred;
    (3) Duration of time injuries prevented or limited employment;
    (4) Past, present, and future limitations on employment;
    (5) Duration and extent of pain and suffering and of any disability 
or physical disfigurement;
    (6) A current prognosis;
    (7) Any anticipated medical expenses;
    (8) Any past medical history of the claimant relevant to the 
particular injury alleged; and
    (9) If required by the Maritime Administration, an examination by an 
independent medical facility or physician to provide independent medical

[[Page 229]]

evidence against which to evaluate the written report of the claimant's 
physician. The Maritime Administration determines the need for this 
examination, makes mutually convenient arrangements for such an 
examination, and bears the costs thereof.
    (c) All hospital records or other medical documents from either this 
injury or any relevant past injury.
    (d) If the claimant is employed, a written statement by the 
claimant's employer certifying the claimant's:
    (1) Age;
    (2) Occupation;
    (3) Hours of employment;
    (4) Hourly rate of pay or weekly salary;
    (5) Time lost from work as a result of the incident; and
    (6) Claimant's actual period of employment, full-time or part-time, 
and any effect of the injury upon such employment to support claims for 
lost earnings.
    (e) If the claimant is self-employed, written statements, or other 
evidence showing:
    (1) The amount of earnings actually lost; and
    (2) The Federal tax return if filed for the three previous years.
    (f) If the claim arises out of injuries to a person providing 
services to the claimant, statement of the cost necessarily incurred to 
replace the services to which claimant is entitled under law.



Sec. 327.28  Proof of amount claimed for loss of, or damage to, property.

    The following evidence must be presented when appropriate:
    (a) For each particular lost item, evidence of its value such as a 
bill of sale and a written appraisal, or two written appraisals, from 
separate disinterested dealers or brokers, market quotations, commercial 
catalogs, or other evidence of the price at which like property can be 
obtained in the community. The Maritime Administration may waive these 
requirements when circumstances warrant. The reasonable cost of any 
appraisal may be included as an element of damage if not deductible from 
any bill submitted to claimant.
    (b) For each particular damaged item which can be economically 
repaired, evidence of cost of repairs such as a receipted bill and one 
estimate, or two estimates, from separate disinterested repairmen. The 
Maritime Administration may waive these requirements when circumstances 
warrant. The reasonable cost of any estimate may be included as an 
element of damage if not deductible from any repair bill submitted to 
claimant.
    (c) For any claim for property damage which may result in payment in 
excess of $20,000.00, a survey or appraisal shall be performed as soon 
as practicable after the damage accrues, and, unless waived in writing, 
shall be performed jointly with a government representative.
    (d) If the item is so severely damaged that it cannot be 
economically repaired or used, it shall be treated as a lost item.
    (e) If a claim includes loss of earnings or use during repairs to 
the damaged property, the following must also be furnished and supported 
by competent evidence:
    (1) The date the property was damaged;
    (2) The name and location of the repair facility;
    (3) The beginning and ending dates of repairs and an explanation of 
any delay between the date of damage and the beginning date;
    (4) A complete description of all repairs performed, segregating any 
work performed for the owner's account and not attributable to the 
incident involved, and the costs thereof;
    (5) The date and place the property was returned to service after 
completion of repairs, and an explanation, if applicable, of any delay;
    (6) Whether or not a substitute for the damaged property was 
available. If a substitute was used by the claimant during the time of 
repair, an explanation of the necessity of using the substitute, how it 
was used, and for how long, and the costs involved. Any costs incurred 
that would have been similarly incurred by the claimant in using the 
damaged property must be identified;
    (7) Whether or not during the course of undergoing repairs the 
property

[[Page 230]]

would have been used, and an explanation submitted showing the identity 
of the person who offered that use, the terms of the offer, time of 
prospective service, and rate of compensation; and
    (8) If at the time of damage the property was under charter or hire, 
or was otherwise employed, or would have been employed, the claimant 
shall submit a statement of operating expenses that were, or would have 
been, incurred. This statement shall include wages and all bonuses which 
would have been paid, the value of fuel and the value of consumable 
stores, separately stated, which would have been consumed, and all other 
costs of operation which would have been incurred including, but not 
limited to, license and parking fees, personnel expenses, harbor fees, 
wharfage, dockage, shedding, stevedoring, towage, pilotage, inspection, 
tolls, lockage, anchorage and moorage, grain elevation, storage, and 
customs fees.
    (f) For each item which is lost, actual or constructive, proof of 
ownership.



Sec. 327.29  Effect of other payments to claimant.

    The total amount to which the claimant may be entitled is normally 
computed as follows:
    (a) The total amount of the loss, damage, or personal injury 
suffered for which the United States is liable, less any payment the 
claimant has received from the following sources:
    (1) The military member or civilian employee who caused the 
incident;
    (2) The military member's or civilian employee's insurer; and
    (3) Any joint tort-feasor or insurer.
    (b) No deduction is generally made for any payment the claimant has 
received by way of voluntary contributions, such as donations of 
charitable organizations.



Sec. 327.30  Statute of limitations for AEA and claim requirements.

    A civil suit must be filed within two years of the Accrual Date. No 
civil suit may be brought until the earlier occurrence of either the 
denial of a claim or the presumptive denial of the claim after 6 months 
from the date the claim was properly presented in writing to the 
Maritime Administration.



Sec. 327.31  Statute of limitations not tolled by administrative 

consideration of claims.

    The statute of limitations for filing a civil action under 46 U.S.C. 
30101(b) is not tolled by MarAd's administrative consideration of a 
claim.



Sec. 327.32  Notice of claim acceptance or denial.

    The Maritime Administration shall give prompt notice in writing of 
the acceptance or denial of each claim in whole or in part, by mail to 
the last known address of, or by personal delivery to, the claimant or 
the claimant's legal representative. In the case of denial, such notice 
shall contain a brief statement of the reason for such a denial.



Sec. 327.33  Claim denial presumption.

    If the Maritime Administration fails to give written notice of 
acceptance or denial of a claim in accordance with Sec. 327.30 within 6 
months following the date of receipt of such a claim by the proper 
person designated in Sec. 327.24(b), such claim shall be presumed to 
have been denied by the Maritime Administration.



Sec. 327.34  Court action.

    No person, surviving dependent or beneficiary, or legal 
representative, having a claim specified under 46 U.S.C. 30101(a) 
against the Maritime Administration, shall institute a court action 
against the Maritime Administration unless an administrative claim has 
previously been properly presented and filed in accordance with Sec. 
327.22, Sec. 327.23, and Sec. 327.24, and such administrative claim 
has been subsequently denied in accordance with Sec. 327.32 or Sec. 
327.33.



                    Subpart C_Other Admiralty Claims



Sec. 327.40  Other Admiralty claims.

    (a) Admiralty claims caused by United States owned and operated 
vessels on navigable waters or otherwise that are not covered under the 
Clarification Act (50 U.S.C. app. 1291(a)), the Admiralty Extension Act 
(46 U.S.C. 30101) or the Contracts Disputes Act (41

[[Page 231]]

U.S.C. 601 et. seq.) may be filed with the Maritime Administration in 
accordance with Sec. Sec. 327.40 through 327.52.
    (b) A civil action against the United States for admiralty claims 
caused by United States owned and operated vessels on navigable waters 
or otherwise that are not covered under the Clarification Act (50 U.S.C. 
App. 1291(a)), the Admiralty Extension Act (46 U.S.C. 30101) or the 
Contracts Disputes Act (41 U.S.C. 601 et. seq.) may be brought without 
the filing of an administrative claim. This Part III sets forth the 
optional procedure for filing such claims with the Maritime 
Administration in advance of litigation. Once litigation is filed, the 
authority to handle such claims is vested with the Justice Department, 
not the agency.
    (c) Proceeding against the United States pursuant to the 
requirements this Part III is not a requirement for filing suit against 
the United States of America, acting by and through the Maritime 
Administration, with respect to such admiralty claims.



Sec. 327.41  Definitions.

    The following definitions apply to this subpart:
    (a) Accrual date. The day on which the alleged wrongful act or 
omission results in injury or damage for which a claim is made.
    (b) Claim. A written notification of an incident, signed by the 
claimant, describing the incident and explaining why the United States 
is liable. The claim shall be accompanied by a demand for the payment of 
a sum certain of money, with a statement as to how that sum certain was 
calculated and all documents supporting the amount claimed. Where 
damages for medical injuries are made, the doctor's statement relating 
the injuries to the accident should be attached as well as medical 
release forms for each treating physician, hospital, and medical care 
provider.



Sec. 327.42  Who may present claims.

    (a) General rules. (1) A claim for property loss or damage may be 
presented by anyone having an interest in the property, including an 
insurer or other subrogee.
    (2) A claim for personal injury may be presented by the person 
injured.
    (3) A claim based on death may be presented by the executor or 
administrator of the decedent's estate, or any other person legally 
entitled to assert such a claim under local law. The claimant's status 
must be stated in the claim.
    (4) A claim for medical, hospital, or burial expenses may be 
presented by any person who by reason of family relationship has, in 
fact, incurred the expenses.
    (5) A joint claim must be presented in the names of and signed by, 
the joint claimants, and the settlement must be made payable to the 
joint claimants.
    (b) A claim may be presented by a duly authorized agent, legal 
representative or survivor, if it is presented in the name of the 
claimant. If the claim is not signed by the claimant, the agent, legal 
representative, or survivor shall indicate their title or legal capacity 
and provide evidence of their authority to present the claim.
    (c) Where the same claimant has a claim for damage to or loss of 
property and a claim for personal injury or a claim based on death 
arising out of the same incident, they must be combined in one claim.



Sec. 327.43  Insurance and other subrogated claims.

    (a) The claims of an insured (subrogor) and an insurer (subrogee) 
for damages arising out of the same incident constitute a single claim.
    (b) An insured (subrogor) and an insurer (subrogee) may file a claim 
jointly or separately. If the insurer has fully reimbursed the insured, 
payment will only be made to the insurer. If separate claims are filed, 
the settlement will be made payable to each claimant to the extent of 
that claimant's undisputed interest. If joint claims are filed, the 
settlement will be sent to the insurer.
    (c) Each claimant shall include with a claim, a written disclosure 
concerning insurance coverage including:
    (1) The names and addresses of all insurers;
    (2) The kind and amount of insurance;
    (3) The policy number; and

[[Page 232]]

    (4) Whether a claim has been or will be presented to an insurer, 
and, if so, the amount of that claim; and whether the insurer has paid 
the claim in whole or in part, or has indicated payment will be made.
    (d) Each subrogee shall substantiate an interest or right to file a 
claim by appropriate documentary evidence and shall support the claim as 
to liability and measure of damages in the same manner as required of 
any other claimant. Documentary evidence of payment to a subrogor does 
not constitute evidence of liability of the United States or conclusive 
evidence of the amount of damages. The Maritime Administration makes an 
independent determination on the issues of fact and law based upon the 
evidence of record.



Sec. 327.44  Actions by claimant.

    (a) Form of claim. The claim should meet the requirements of Sec. 
327.44.
    (b) Presentation. The claim must be presented in writing to the 
Office of Chief Counsel, Attn: Chief Counsel, Maritime Administration, 
Department of Transportation, 1200 New Jersey Ave. SE., Washington, DC 
20590-0001.



Sec. 327.45  Contents of a claim.

    (a) A properly filed claim shall include the following, however, any 
of the following requirements may be waived by the Maritime 
Administration:
    (1) Identification of the Maritime Administration as the agency 
whose act or omission gave rise to the claim;
    (2) The full name and mailing address of the claimant. If this 
mailing address is not claimant's residence, the claimant shall also 
include residence address;
    (3) The date, time, and place of the incident giving rise to the 
claim;
    (4) The amount claimed, in a sum certain, supported by independent 
evidence of property damage or loss, personal injury, or death, as 
applicable together with supporting medical records and a HIPPA 
compliant medical waiver for each treating physician, hospital, or 
medical provider;
    (5) A detailed description of the incident giving rise to the claim 
and the factual basis upon which it is claimed the United States is 
liable for the claim;
    (6) A description of any property damage or loss, including the 
identity of the owner, if other than the claimant, as applicable;
    (7) The nature and extent of the injury, as applicable;
    (8) The full name, title, if any, and address of any witness to the 
incident and a brief statement of the witness' knowledge of the 
incident;
    (9) A description of any insurance carried by the claimant or owner 
of the property and the status of any insurance claim arising from the 
incident; and
    (10) An agreement by the claimant to accept the total amount claimed 
in full satisfaction and final settlement of the claim, lien, or 
subrogation claim on the claimed amount, or any assignment of the claim.
    (b) A claimant or duly authorized agent or legal representative must 
sign in ink a claim and any amendment to that claim. The claim shall 
include a statement that the information provided is true and correct to 
the best of the claimant's knowledge, information, and belief. If the 
person's signature does not include the first name, middle initial, if 
any, and surname, that information must be included in the claim. A 
married woman must sign her claim in her given name, e.g., ``Mary A. 
Doe,'' rather than ``Mrs. John Doe.''



Sec. 327.46  Evidence supporting a claim.

    (a) The claimant should present any evidence in the claimant's 
possession that supports the claim. This evidence shall include, if 
available, statements of witnesses, accident or casualty reports, 
photographs and drawings.
    (b) Notwithstanding anything in the regulations in this subpart, the 
claimant shall provide such additional documents and evidence as 
requested by the Maritime Administration with respect to the claim. 
Failure to respond to reasonable requests for additional information and 
documentation can result in a determination that a proper claim has not 
been submitted.

[[Page 233]]



Sec. 327.47  Proof of amount claimed for personal injury.

    The following evidence must be presented when appropriate in claims:
    (a) Itemized medical, hospital, and burial bills.
    (b) A written report by the attending physician including:
    (1) The nature and extent of the injury and the treatment;
    (2) The necessity and reasonableness of the various medical expenses 
incurred;
    (3) Duration of time injuries prevented or limited employment;
    (4) Past, present, and future limitations on employment;
    (5) Duration and extent of pain and suffering and of any disability 
or physical disfigurement;
    (6) A current prognosis;
    (7) Any anticipated medical expenses;
    (8) Any past medical history of the claimant relevant to the 
particular injury alleged; and
    (9) At the request of the Maritime Administration, an examination by 
an independent medical facility or physician may be required to provide 
independent medical evidence against which to evaluate the written 
report of the claimant's physician. The Maritime Administration 
determines the need for this examination, makes mutually convenient 
arrangements for such an examination, and bears the costs thereof.
    (c) All hospital records or other medical documents from either this 
injury or any relevant past injury.
    (d) If the claimant is employed, a written statement by the 
claimant's employer certifying the claimant's:
    (1) Age;
    (2) Occupation;
    (3) Hours of employment;
    (4) Hourly rate of pay or weekly salary;
    (5) Time lost from work as a result of the incident; and
    (6) Claimant's actual period of employment, full-time or part-time, 
and any effect of the injury upon such employment to support claims for 
lost earnings.
    (e) If the claimant is self-employed, written statements, or other 
evidence showing:
    (1) The amount of earnings actually lost, and
    (2) The Federal tax return, if filed, for the three previous years.
    (f) If the claim arises out of injuries to a person providing 
services to the claimant, statement of the cost necessarily incurred to 
replace the services to which claimant is entitled under law.



Sec. 327.48  Proof of amount claimed for loss of, or damage to, property.

    The following evidence should be presented when appropriate:
    (a) For each particular lost item, evidence of its value such as a 
bill of sale and a written appraisal, or two written appraisals, from 
separate disinterested dealers or brokers, market quotations, commercial 
catalogs, or other evidence of the price at which like property can be 
obtained in the community. The Maritime Administration may waive these 
requirements when circumstances warrant. The reasonable cost of any 
appraisal may be included as an element of damage if not deductible from 
any bill submitted to claimant.
    (b) For each particular damaged item which can be economically 
repaired, evidence of cost of repairs such as a receipted bill and one 
estimate, or two estimates, from separate disinterested repairmen. The 
Maritime Administration may waive these requirements when circumstances 
warrant. The reasonable cost of any estimate may be included as an 
element of damage if not deductible from any repair bill submitted to 
claimant.
    (c) For any claim which may result in payment in excess of 
$20,000.00, a survey or appraisal shall be performed as soon as 
practicable after the damage accrues, and, unless waived in writing, 
shall be performed jointly with a government representative.
    (d) If the item is so severely damaged that it cannot be 
economically repaired or used, it shall be treated as a lost item.
    (e) If a claim includes loss of earnings or use during repairs to 
the damaged property, the following must also be furnished and supported 
by competent evidence:

[[Page 234]]

    (1) The date the property was damaged;
    (2) The name and location of the repair facility;
    (3) The beginning and ending dates of repairs and an explanation of 
any delay between the date of damage and the beginning date;
    (4) A complete description of all repairs performed, segregating any 
work performed for the owner's account and not attributable to the 
incident involved, and the costs thereof;
    (5) The date and place the property was returned to service after 
completion of repairs, and an explanation, if applicable, of any delay;
    (6) Whether or not a substitute for the damaged property was 
available. If a substitute was used by the claimant during the time of 
repair, an explanation of the necessity of using the substitute, how it 
was used, and for how long, and the costs involved. Any costs incurred 
that would have been similarly incurred by the claimant in using the 
damaged property must be identified;
    (7) Whether or not during the course of undergoing repairs the 
property would have been used, and an explanation submitted showing the 
identity of the person who offered that use, the terms of the offer, 
time of prospective service, and rate of compensation; and
    (8) If at the time of damage the property was under charter or hire, 
or was otherwise employed, or would have been employed, the claimant 
shall submit a statement of operating expenses that were, or would have 
been, incurred. This statement shall include wages and all bonuses which 
would have been paid, the value of fuel and the value of consumable 
stores, separately stated, which would have been consumed, and all other 
costs of operation which would have been incurred including, but not 
limited to, license and parking fees, personnel expenses, harbor fees, 
wharfage, dockage, shedding, stevedoring, towage, pilotage, inspection, 
tolls, lockage, anchorage and moorage, grain elevation, storage, and 
customs fees.
    (f) For each item which is lost, actual or constructive, proof of 
ownership.



Sec. 327.49  Effect of other payments to claimant.

    The total amount to which the claimant may be entitled is normally 
computed as follows:
    (a) The total amount of the loss, damage, or personal injury 
suffered for which the United States is liable, less any payment the 
claimant has received from the following sources:
    (1) The military member or civilian employee who caused the 
incident;
    (2) The military member's or civilian employee's insurer; and
    (3) Any joint tort-feasor or insurer.
    (b) No deduction is generally made for any payment the claimant has 
received by way of voluntary contributions, such as donations of 
charitable organizations.



Sec. 327.50  Statute of limitations for other admiralty claims and claim 

requirements.

    A civil suit must be filed within the statute of limitations of the 
specific admiralty claim. The start date for such statute of limitations 
determinations shall be the Accrual Date.



Sec. 327.51  Statute of limitations not tolled by administrative 

consideration of claims.

    The statute of limitations for filing a civil action under 46 U.S.C. 
30101(b) is not tolled by the Maritime Administration's administrative 
consideration of a claim.



Sec. 327.52  Notice of claim acceptance or denial.

    The Maritime Administration shall give prompt notice in writing of 
the acceptance or denial of each claim in whole or in part, by mail to 
the last known address of, or by personal delivery to, the claimant or 
the claimant's legal representative. In the case of denial, such notice 
shall contain a brief statement of the reason for such a denial.



PART 328_SLOP CHESTS--Table of Contents



Sec.
1. What this order does.
2. General Agent's requirements.
3. Master's requirements.
4. General provisions.


[[Page 235]]


    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114. 
Interpret or apply sec. 11, 23 Stat. 56; 46 U.S.C. 670.



Section 1  What this order does.

    In accordance with the provisions of section 11 f the act of 
Congress approved June 26, 1884, 23 Stat. 56; 46 U.S.C. 670, this order 
requires all vessels operated by the National Shipping Authority under 
General Agency Agreement 3-19-51, Amendment 8-65, to be provided with a 
slop chest subject to all limitations contained in said act.

[OPR-1, 16 FR 4137, May 5, 1951, as amended at 33 FR 5952, Apr. 18, 
1968. Redesignated at 45 FR 44587, July 1, 1980]



Sec. 2  General Agent's requirements.

    The General Agent shall:
    (a) Obtain from the Master, a requisition for slop chest items 
required for the intended voyage. Purchase for the account of the NSA, 
from recognized bona fide slop chest suppliers, at prices not in excess 
of the fair and reasonable level prevailing at the respective domestic 
ports, only such items and quantities reflecting past experience of 
actual requirements.
    (b) Arrange for delivery on board to the custody of the Master all 
slop chest items purchased, together with a copy of the vendor's invoice 
showing items, units, unit cost and totals.
    (c) Furnish the Master with a Slop Chest Statement showing on hand 
at the beginning of each voyage the items, units, unit cost, totals and 
selling price per unit of each item. The selling price shall approximate 
but not exceed 110 percent of the reasonable wholesale value of the same 
at the port at which the voyage commenced. The Slop Chest Statement 
shall also provide spaces for:
    (1) Quantities and total value sold.
    (2) Quantities and total cost value on hand, end of voyage.
    (3) Quantities of each item required for next voyage.
    (d) Submit to the Coast Director in the district in which the 
General Agent is located, upon termination of each voyage a copy of the 
Slop Chest Statement obtained from the Master as provided for in section 
3(b) of this order and a copy of all invoices for slop chest purchases 
showing items by brand or trade name, unit cost and total.
    (e) Account to the cognizant Coast Director for the purchase, 
delivery to the Master, receipts from sales, condemnations, transfers 
and all other transactions in connection with slop chests.

[OPR-1, 16 FR 4137, May 5, 1951, as amended by Amdt. 1, 33 FR 6475, Apr. 
27, 1968. Redesignated at 45 FR 44587, July 1, 1980]



Sec. 3  Master's requirements.

    The Master shall:
    (a) Receive and receipt for the quantities of slop chest items 
delivered on board.
    (b) Upon the termination of each voyage complete the Slop Chest 
Statement referred to in section 2(c) of this order, as to quantities 
and total value sold, quantities and total cost value on hand at end of 
voyage and quantities of each item required for the next voyage.
    (c) Sell, from time to time as specified by him, any of the contents 
of the slop chest to any or every seaman applying therefor, at the unit 
price, specified by the Slop Chest Statement furnished the Master by the 
General Agent as provided in section 2(c) of this order.
    (d) Account to the General Agent for all slop chest items received 
on board, for all receipts and for all other slop chest transactions 
engaged in during the voyage.
    (e) Cause entry to be made in the ship's log authenticated by the 
person designated by the Master to be in charge of the slop chest, 
together with signatures of two other witnesses, for all losses 
sustained due to fire, water or other damage which renders articles 
unsaleable. Such log entries shall itemize the quantities damaged and 
the cost thereof.
    (f) Submit a detailed written report to the General Agent covering 
losses incurred due to damage, theft or pilferage of slop chest items. 
The report shall be submitted at the termination of the voyage during 
which the damage, theft or pilferage occurred.
    (g) Retain on board, all damaged slop chest items, for survey, 
removal and

[[Page 236]]

disposition by the General Agent at a domestic port.

[OPR-1, 16 FR 4137, May 5, 1951. Redesignated at 45 FR 44587, July 1, 
1980]



Sec. 4  General provisions.

    (a) All slop chest items, damaged or otherwise, shall be removed or 
transferred only in compliance with applicable regulations dealing with 
Property Removals.
    (b) In the transfer of a vessel from one General Agent to another 
General Agent the physical transfer of the complete slop chest shall 
also be accomplished between the respective General Agents. The General 
Agents participating in such transfer shall complete and have their 
respective representatives sign, a joint inventory containing the unit 
cost price and extensions of all slop chest items, a copy of which shall 
be submitted to the Division of Operations, NSA, Washington, DC 20590, 
together with a copy of the Slop Chest Statement for the voyage 
terminated prior to transfer of the vessel. An additional copy of the 
Slop Chest Statement shall be submitted to the Comptroller's Office, 
Division of Accounts, Maritime Administration, Washington, DC 20590.
    (c) In pricing the contents of the slop chest, the General Agent 
shall comply with all applicable regulations of the Office of Price 
Stabilization, Economic Stabilization Agency.
    (d) It shall be the responsibility of each General Agent and Master 
to exercise reasonable care and diligence in the compliance with the 
Owner's obligations hereunder and in the protection and disposition of 
slop chest items.
    (e) Neither the General Agent nor the Master shall place insurance 
on the contents of the slop chest purchased for the account of the NSA.

All slop chests purchased on or after the effective date of this 
regulation shall conform to the instructions contained in this order.

    Note: Records and logs referred to in the above order, shall be 
retained until the completion of the audit by the General Accounting 
Office, at which time the Maritime Administration will take custody of 
the records.

[OPR-1, 16 FR 4137, May 5, 1951, as amended at 21 FR 8105, Oct. 23, 
1956; 33 FR 5952, Apr. 18, 1968. Redesignated at 45 FR 44587, July 1, 
1980]



PART 329_VOYAGE DATA--Table of Contents



Sec.
1. What this order does.
2. Voyage numbers.
3. Voyage commencements.
4. Voyage terminations.
5. Idle status period.
6. General provisions.
7. Operation under current GAA/MSTS Southeast Asia Program.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114.

    Source: OPR-2, 16 FR 5950, June 22, 1951, unless otherwise noted. 
Redesignated at 45 FR 44587, July 1, 1980.



Section 1  What this order does.

    The General Agents, as appointed by the National Shipping Authority, 
promulgated under GAA, 3/19/51, shall be instructed in the manner of 
recording voyage activities of dry cargo vessels operated for the 
account of the National Shipping Authority.



Sec. 2  Voyage numbers.

    (a) The voyages of National Shipping Authority vessels shall be 
numbered consecutively commencing with voyage No. 1 having the prefixed 
designation NSA and followed by the General Agents' abbreviated 
designation and voyage number, as NSA-1/ABC-1.
    (b) The continuity of NSA voyage numbers shall not change with berth 
agency operations or in the transfer of vessels to other General Agents.
    (c) The General Agents' designated abbreviation and voyage numbers 
shall terminate upon transfer of the vessel and the succeeding General 
Agent shall affix his abbreviated designation and initial voyage 
numbers, as NSA-13/XYZ-1.



Sec. 3  Voyage commencements.

    (a) All voyages shall commence at 0001 hours of the date on which 
any of the following activities occur first:
    (1) Vessel goes on loading berth, or
    (2) Vessel sails outward on a new voyage, or

[[Page 237]]

    (3) Following termination of the previous voyage as prescribed in 
section 4(a) of this order.
    (4) Following termination of an idle status period as prescribed in 
section 5 (a) and (b) of this order.



Sec. 4  Voyage terminations.

    (a) All voyages shall terminate at a continental United States port 
at 2400 hours of the date on which any of the following activities were 
completed, whichever occurs last:
    (1) Final discharge of cargo or ballast.
    (2) Paying off of crew from sea articles.
    (3) Completion of voyage repairs.
    (b) [Reserved]



Sec. 5  Idle status period.

    (a) The General Agent shall place a vessel in idle status during the 
period of reactivation or deactivation or upon redelivery from Military 
Sea Transportation Service notwithstanding the fifteen (15) days minimum 
period as provided for in paragraph (b) of this section.
    (b) The General Agent shall place a vessel in idle status, although 
the voyage may have commenced, whenever and as soon as it is anticipated 
that the minimum period of inactivity will exceed fifteen (15) days, 
due, but not limited to: (1) Repairs, (2) labor, (3) awaiting 
allocation, (4) awaiting cargo.
    (c) Should the anticipated period of inactivity terminate prior to 
the expiration of the 15 day minimum idle status period, except as 
provided in paragraph (a) of this section, the General Agent shall 
cancel the idle status and antedate the succeeding voyage commencement 
to the termination of the previous voyage as prescribed in section 4(a) 
of this order.
    (d) Should an idle status period be established after a voyage has 
commenced, the voyage shall be suspended for the duration of the idle 
status period and resumed when the idle status period is terminated.
    (e) Idle status periods as defined in this order, shall be 
established only in continental United States ports.
    (f) Idle status periods shall be treated as separate accounting 
periods.

[OPR-2, 16 FR 5950, June 22, 1951, as amended by Amdt. 1, 17 FR 3830, 
Apr. 30, 1952; Amdt. 2, 22 FR 165, Jan. 8, 1957. Redesignated at 45 FR 
44587, July 1, 1980]



Sec. 6  General provisions.

    (a) In cases of overlapping activities and all other questions 
arising in respect to voyage commencements, terminations and idle status 
periods as defined in sections 4 and 5 of this order, the General Agent 
shall immediately inform the nearest Coast Director, or his local 
representative of the circumstances and submit recommendations for 
terminating a voyage. The resulting recommendations, decisions and 
instructions shall be confirmed in writing to the General Agent, with a 
copy of such correspondence being sent to the Division of Operations, 
N.S.A., Washington 25, DC.
    (b) In the event a vessel is employed in intermediate voyage or 
voyages, or in cross trading outside the continental United States, the 
voyage shall continue until terminated at a continental United States 
port.
    (c) There shall be no voyage terminations outside continental United 
States ports except in cases of,
    (1) Total loss or constructive total loss of the vessel.
    (2) Transfer of operations.



Sec. 7  Operation under current GAA/MSTS Southeast Asia Program.

    In order to adapt the provisions of NSA Order 35 (OPR-2) to the 
particular circumstances of the present GAA/MSTS Southeast Asia Program, 
the following material partially modifying certain sections of that 
order is published.

For General Agency operations not related to the current GAA/MSTS 
Southeast Asia Program, NSA Order 35 (OPR-2) remains unchanged and 
wholly applicable. Except where specifically altered by the material 
which follows, it also remains applicable to the present situation.

For voyages made under the current GAA/MSTS program only, the following 
provisions concerning voyage commencements and terminations shall apply 
in lieu of those appearing in

[[Page 238]]

sections 3 and 4 of NSA Order 35 (OPR-2). Continental United States 
ports do not include ports in the states of Alaska or Hawaii.
    (a) The commencement of the initial voyage shall occur in a 
continental U.S. port at 0001 hours of the day the vessel is tendered 
and accepted for use by MSTS. Subsequent voyages shall commence in a 
continental U.S. port at 0001 hours of the day after either of the 
following activities occurs:
    (1) The previous voyage terminates.
    (2) Reduced operational status period terminates and vessel returns 
to full operational status.
    (b) Voyages shall terminate in a continental U.S. port at 2400 hours 
of the day that the following action is completed:
    (1) Paying off of the crew from sea articles.
    (c) Since, in all instances, the voyage termination procedure takes 
precedence over the voyage commencement procedure and since it is 
mandatory that voyages terminate in a continental U.S. port, the 
following exception to the requirement of paragraph (b) of this section 
shall be effective when warranted:
    (1) If the vessel completes payoff as in paragraph (b) of this 
section and takes departure within the same calendar day, the General 
Agent shall immediately inform the nearest Coast Director of Area 
Representative of the circumstances and submit recommendations regarding 
voyage termination. The resulting recommendations, decisions, and 
instructions shall be confirmed in writing to the General Agent, copy to 
Division of Operations, Washington, DC 20590.
    (d) Where a vessel is employed in intermediate voyages or in cross 
trading outside the continental United States, the original voyage shall 
continue until terminated under conditions in paragraph (b) of this 
section.

[OPR-2, Amdt. 3, 33 FR 6710, May 2, 1968. Redesignated at 45 FR 44587, 
July 1, 1980]



PART 330_LAUNCH SERVICES--Table of Contents



Sec.
1. What this order does.
2. Authority for launch hire.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114.

    Source: OPR-3, 16 FR 12791, Dec. 20, 1951, unless otherwise noted. 
Redesignated at 45 FR 44587, July 1, 1980.



Section 1  What this order does.

    This order prescribes the circumstances under which launch hire will 
be accepted by National Shipping Authority as vessel operating expense.



Sec. 2  Authority for launch hire.

    Launch hire in foreign and domestic ports will be accepted by 
National Shipping Authority as vessel operating expense, subject to the 
provisions of Article 5 of GAA 3-19-51 and BAA 9-19-51, only under the 
following circumstances:
    (a) When incurred by the Master of an NSA vessel, or by an agent of 
NSA or by his sub-agent, for the purpose of properly conducting the 
owners' activities and business of NSA vessels;
    (b) When incurred in transporting liberty parties to or from an NSA 
vessel with the approval of the Master or the General Agent as properly 
for account of the vessel owner; and
    (c) When incurred for the transportation of workmen required aboard 
the vessel, if the contract for the work provides that such service 
shall be for account of NSA, and the launch service is authorized by the 
representative of NSA or the agent who ordered the work to be performed 
for account of NSA.



PART 332_REPATRIATION OF SEAMEN--Table of Contents



Sec.
1. What this order does.
2. Definitions.
3. Classification of repatriates.
4. Manner of repatriation.
5. Repatriation charges.
6. General provisions.

    Authority: Sec. 204, 49 Stat. 1937, as amended; 46 U.S.C. 1114.

    Source: OPR-5, 18 FR 1446, Mar. 13, 1953, unless otherwise noted. 
Redesignated at 45 FR 44587, July 1, 1980.



Section 1  What this order does.

    This order prescribes the manner in which seamen separated from 
vessels

[[Page 239]]

operated for the account of the National Shipping Authority shall be 
repatriated and explains how charges in connection with such 
repatriation shall be handled.



Sec. 2  Definitions.

    (a) For the purpose of this order, the term seaman shall include 
every person, irrespective of capacity or rating, whose last service has 
been on a vessel operated for the account of the National Shipping 
Authority, upon which vessel he had signed shipping articles and whether 
or not he had signed off such articles before a consular or other 
authorized official, but shall not include the master of such a vessel.
    (b) The term General Agent shall include any designated 
representative of such General Agent.



Sec. 3  Classification of repatriates.

    Seamen in need of repatriation, whether being repatriated to or from 
the United States, shall be classified as follows:
    (a) Seamen separated from their vessels because of the destruction 
of, abandonment of, or damage to their vessels, or because of 
termination of shipping articles at a port outside the continental 
limits of the United States.
    (b) Seamen separated from their vessels as the result of illness or 
injury received in the service of their vessels or otherwise through no 
fault of their own.
    (c) Seamen separated from their vessels for any cause whatsoever not 
described in paragraph (a) or (b) of this section.



Sec. 4  Manner of repatriation.

    (a) A seaman described in paragraph (a) of section 3 of this order 
shall be repatriated in accordance with the provisions of the shipping 
articles, or the applicable collective bargaining agreement, employment 
contract, or statute. If a seaman in this class is repatriated as a 
passenger, the General Agent of the vessel of which he was last a crew 
member shall arrange for his passage and pay the amount of expense 
involved.
    (b) A seaman described in paragraph (b) of section 3 of this order 
may be repatriated as a passenger where space is available and 
circumstances permit. If applicable collective bargaining agreements, 
employment contracts, or statutes do not conflict, he may return as a 
workaway or, at the discretion of the master of the repatriating vessel, 
he may sign on articles either as a replacement of to complete a 
vessel's complement or, when deemed advisable by the official 
authorizing the repatriation and with the approval of the master of the 
repatriating vessel, he may be signed on the articles as a repatriated 
seaman (non-working). If a seaman in this class is repatriated as a 
passenger, or repatriate seaman (non-working), the General Agent of the 
vessel of which he was last a crew member shall arrange for his passage 
and pay the amount of expense involved.
    (c) A seaman described in paragraph (c) of section 3 of this order 
shall be returned as a workaway or, at the discretion of the master of 
the repatriating vessel, he may sign on as a replacement or to complete 
a vessel's complement. Only in unusual cases, and only with the prior 
approval of the Chief, Division of Operations, shall a seaman in this 
class be repatriated as a passenger or as a repatriate seaman (non-
working). If a seaman in this class is repatriated as a passenger, or as 
a repatriate seaman (non-working), the General Agent of the vessel of 
which he was last a crew member shall arrange for his passage and pay 
the amount of expense involved.
    (d) A master shall be repatriated in accordance with applicable 
collective bargaining agreement, employment contract, statute, or 
established commercial practice.



Sec. 5  Repatriation charges.

    (a) If it is deemed necessary to repatriate a seaman as a passenger 
aboard a privately operated vessel, plane, train, or other conveyance, 
the full amount of the reasonably incurred expense in connection 
therewith shall be billed against the General Agent of the vessel of 
which he was last a crew member.
    (b) If a seaman is repatriated as a passenger, or as a repatriate 
seaman (non-working), aboard a vessel operated for the account of the 
National

[[Page 240]]

Shipping Authority under a General Agency Agreement, a flat 
transportation charge of $5.00 per day shall be made for every day spent 
aboard the repatriating vessel, including day of embarkation and day of 
debarkation, which charge shall be in addition to necessary train or 
other conveyance expense, United States and foreign government taxes, 
port dues, landing fees or other charges of every nature levied in 
connection with such repatriation. In such a case, the General Agent of 
the vessel of which the repatriate was last a crew member shall be 
billed for the amount of expense involved, and appropriate entries 
covering the receipts and disbursements resulting from the repatriation 
shall be made in the proper books of account by the General Agent 
concerned. In the event the General Agent repatriating a seaman is also 
the General Agent of the vessel on which the seaman last served, it will 
not be necessary to issue a formal billing, but it is required that 
appropriate entries be made on the agency books of account to reflect a 
revenue of $5.00 per day in the account of the vessel rendering the 
transportation service and that a charge covering the cost of 
repatriation be recorded against the vessel on which the seaman last 
served. In all cases, the General Agent charged with the repatriation 
expense shall take necessary steps to secure reimbursement of such 
expense from the P & I underwriters insuring the vessel against which 
the expense is charged. No charge is to be made in the case of a seaman 
repatriate who signs on vessel articles as a workaway or in any other 
capacity except as a repatriate seaman (non-working). When repatriation 
is required, it shall be effected by the first available means 
considered appropriate by the official authorizing such repatriation.



Sec. 6  General provisions.

    (a) In case of repatriation of any seaman as a passenger aboard a 
vessel operated for account of the National Shipping Authority, the 
requirements of the applicable collective bargaining agreement or 
employment contract shall be met. In any event, a seaman repatriate 
shall receive at least as good accommodations as would be his due while 
sailing in his capacity.
    (b) Unless otherwise directed, a seaman when repatriated as a 
passenger aboard a vessel operated for the account of the National 
Shipping Authority, shall be issued a ticket in the form prescribed by 
the General Agent of the vessel for its own vessels. Such ticket shall 
be surrendered to the master of the repatriating vessel. When 
repatriated as a repatriate seaman (non-working), the master of the 
repatriating vessel shall be furnished with a certificate from the 
official authorizing the repatriation setting forth that the 
circumstances require that the seaman be signed on as a repatriate 
seaman (non-working). The master shall ascertain the seaman's full name 
and rating, cause of repatriation, and the names of the vessels and the 
General Agent to be charged with the cost of the repatriation.
    (c) It is recognized that the procedure set forth in this order will 
not cover all situations arising out of obligations to repatriate seamen 
nor fix ultimate responsibility for repatriation expenses which may 
sometimes depend upon determinations of fact which cannot be made prior 
to repatriation. In cases of emergency or in situations not covered in 
this order, the General Agent shall proceed in accordance with 
established commercial practice.
    (d) Nothing in this order shall be construed to interfere with the 
proper exercise of authority by United States consular officials 
relative to repatriation of seamen in accordance with applicable 
statutes.



PART 335_AUTHORITY AND RESPONSIBILITY OF GENERAL AGENTS TO UNDERTAKE 

EMERGENCY REPAIRS IN FOREIGN PORTS--Table of Contents



Sec.
1. What this order does.
2. General Agents' authority.
3. General Agents' responsibilities.
4. General provisions.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114.

    Source: SRM-2, 16 FR 5321, June 6, 1951, unless otherwise noted. 
Redesignated at 45 FR 44587, July 1, 1980.

[[Page 241]]



Section 1  What this order does.

    This order outlines General Agents' responsibilities and limited 
authority in connection with repairs in foreign ports to vessels 
operated for the account of the National Shipping Authority under 
General Agency Agreement.



Sec. 2  General Agents' authority.

    The General Agents are hereby delegated authority to undertake for 
the account of the National Shipping Authority only such emergency 
repairs outside the Continental United States as may be necessary to 
enable vessels to complete their voyages, provided the repair costs are 
not in excess of $5,000 per vessel.



Sec. 3  General Agents' responsibilities.

    In the event the cost of emergency repairs to a vessel in a foreign 
port is estimated to exceed $5,000, requests for approval shall be 
transmitted by General Agents by cable or wire addressed to Chief, 
Division of Ship Repair and Maintenance, National Shipping Authority, 
Washington, DC 20590, and shall include the following information:
    (a) The cost and time to effect permanent repairs on a straight time 
and overtime basis;
    (b) The cost and time to effect such temporary repairs on a straight 
time and overtime basis as will enable the vessel to return to the 
United States under its own power or under tow;
    (c) Whether required repairs can be effected by the use of 
facilities under the direct control of the Army, Navy, or other agencies 
of the United States Government, and if so, at what cost and time; and
    (d) Where major repairs are involved, a recommendation regarding the 
advisability of repairing the vessel or abandoning it.

[SRM-2, 16 FR 5321, June 6, 1951, as amended at 33 FR 5952, Apr. 18, 
1968. Redesignated at 45 FR 44587, July 1, 1980]



Sec. 4  General provisions.

    The General Agents shall keep the Division of Ship Repair and 
Maintenance in Washington fully posted in detail as to the nature, 
extent, cost, and estimated time for completion of all foreign repairs 
where such repairs are for the account of the National Shipping 
Authority.

As soon as practicable after completion of either temporary or permanent 
repairs, the General Agent shall forward to the Division of Ship Repair 
and Maintenance, Washington, DC the following:
    (a) A copy of the repair specifications;
    (b) An itemized statement of the costs of the repairs supported by 
copies of invoices;
    (c) A copy of the completion certificate showing the repair period, 
signature of a National Shipping Authority representative (if 
available), the Agent's technical representative, the Chief Engineer, 
and the Master of the vessel;
    (d) A report indicating the causes and circumstances leading to the 
repairs.

General Agents shall forthwith instruct their subagents and other 
representatives in foreign areas and their Masters and Chief Engineers 
with respect to their operations, pursuant to this directive.

This directive is intended strictly to limit repairs in foreign waters 
on vessels under National Shipping Authority control to those absolutely 
necessary to enable the vessels to complete their respective voyages at 
a port in the United States.

This directive shall not be construed to affect outstanding directives 
of the Office of the Comptroller.

    Note: Records and supporting documents referred to in the above 
order, shall be retained until the completion of the audit by the 
General Accounting Office, at which time the Maritime Administration 
will take custody of the records.

[16 FR 5321, June 6, 1951, as amended at 21 FR 8105, Oct. 23, 1956. 
Redesignated at 45 FR 44587, July 1, 1980]

[[Page 242]]



PART 336_AUTHORITY AND RESPONSIBILITY OF GENERAL AGENTS TO UNDERTAKE IN

CONTINENTAL UNITED STATES PORTS VOYAGE REPAIRS AND SERVICE EQUIPMENT 

OF VESSELS OPERATED FOR THE ACCOUNT OF THE NATIONAL SHIPPING AUTHORITY 

UNDER GENERAL AGENCY AGREEMENT--Table of Contents



Sec.
1. What this order does.
2. General Agents' authority.
3. General provisions.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114.



Section 1  What this order does.

    This order outlines General Agents' limited authority to arrange for 
and award contracts for voyage repairs and servicing equipment of 
vessels operated for the account of the National Shipping Authority 
under General Agency Agreement.

[SRM-3, Rev., 18 FR 5035, Aug. 22, 1953. Redesignated at 45 FR 44587, 
July 1, 1980]



Sec. 2  General Agents' authority.

    The General Agents are:
    (a) Hereby delegated authority to arrange for and award contracts 
for voyage repairs on vessels operated under the General Agency 
Agreement for the account of the National Shipping Authority when the 
aggregate cost of all such repairs in any one Continental United States 
port is not in excess of $25,000.
    (b) Also delegated authority to arrange for and order the 
performance of minor repairs to or servicing of pantry and galley 
equipment, radios, gyro compasses, fathometers, radio direction finders, 
fire extinguisher systems, ships clocks, binoculars, barometers, 
typewriters, adding machines, and any other vessel equipment of a 
similar nature where the aggregate amount does not exceed $2,500 in any 
one continental United States port.

[SRM-3, Rev., 18 FR 5035, Aug. 22, 1953, as amended by Amdt. 2, 31 FR 
16713, Dec. 30, 1966. Redesignated at 45 FR 44587, July 1, 1980]



Sec. 3  General provisions.

    (a) The voyage repairs, as covered by section 2(a), may be awarded 
by the General Agents within the limitation specified under the Master 
Repair Contract if the contractor is a holder thereof or if the 
contractor does not hold a Master Repair Contract under NSA-WORKSMALREP 
if the contract price does not exceed $2,000 and said contract is made 
in accordance with NSA Order 46 (SRM-5, Revised) and NSA Order 51 (SRM-
6, Revised).
    (b) The repairs to or servicing of ships equipment, as covered by 
section 2(b), may be awarded by the General Agents, within the 
limitation specified, by letter or purchase order.
    (c) It is to be understood by all General Agents that the authority 
delegated by this order is not to be construed to cover alterations, 
additions, changes or betterments.
    (d) The prime General Agents shall submit, in duplicate, to the 
Atlantic, Gulf or Pacific Coast Director, Maritime Administration, 
within whose District the Agents home offices are situated a monthly 
listing of all awards made by the General Agents and their Sub-Agents. 
This listing shall reflect individually the contractor, complete 
contract number, vessel, type of award, e.g., negotiated or bid, cost 
and repair period. This listing is to be submitted substantially in the 
following form:

--------------------------------------------------------------------------------------------------------------------------------------------------------
            Contractor                   Contract No.              Vessel                 Award          Amount           Start             Completed
--------------------------------------------------------------------------------------------------------------------------------------------------------
Steamboat Repairs, Inc............  MA-600-USL-1.........  John Doe.............  Bid.................    $8,000  Jan. 1, 1953........      Jan. 9, 1953
Steamboat Repairs, Inc............  MA-600-USL-1A........  John Doe.............  Negotiated..........     1,000  ....................     Jan. 10, 1953
--------------------------------------------------------------------------------------------------------------------------------------------------------


A copy of the monthly listing shall be forwarded by each prime General 
Agent to each Coast Director of the District in which any of the work 
involved was awarded. If no work was awarded by a General Agent under 
his delegated authority, a report to that effect shall be

[[Page 243]]

submitted to the pertinent Coast Director as prescribed in this section. 
The required reports shall be submitted to the Coast Directors within 
five (5) days after the last day of the month being reported upon. This 
reporting requirement has been approved by the Bureau of the Budget in 
accordance with the Federal Reports Act of 1942.

    Note: Records and supporting documents referred to in the above 
order, shall be retained until the completion of the audit by the 
General Accounting Office, at which time the Maritime Administration 
will take custody of the records.

[SRM-3, Rev., 18 FR 5035, Aug. 22, 1953, as amended at 21 FR 8106, Oct. 
23, 1956. Redesignated at 45 FR 44587, July 1, 1980]



PART 337_GENERAL AGENT'S RESPONSIBILITY IN CONNECTION WITH FOREIGN REPAIR 

CUSTOM'S ENTRIES--Table of Contents



Sec.
1. What this order does.
2. Submission of repair entries.
3. Application for remission of duties.
4. Evidence required.
5. General Agent's authority to effect payment of duties.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114.

    Source: 16 FR 9658, Sept. 21, 1951, unless otherwise noted. 
Redesignated at 45 FR 44587, July 1, 1980.



Section 1  What this order does.

    This order outlines the procedure to be followed by General Agents 
in filing foreign repair entries and obtaining relief from Custom's 
duties on equipment purchased for or repairs made to ships owned by or 
Bareboat Chartered to the U.S. Maritime Administration and operated 
under General Agency Agreement.



Sec. 2  Submission of repair entries.

    At the first United States port of arrival upon termination of a 
foreign voyage, the ship's Master must file with the District Director 
of Customs as defined in 19 CFR 1.1(d) an affidavit on Custom's Form 
3417 certifying that no equipment was purchased for or repairs made to 
the ship at a foreign port or if this is not the case, an affidavit on 
Custom's Form 3415 describing the equipment purchased and/or repairs 
made. If equipment was purchased and/or repairs were made in a foreign 
port, the Master simultaneously with or shortly after filing of Custom's 
Form 3415, must file a repair entry on Custom's Form 7535 together with 
invoices and required supporting documents.

[16 FR 9658, Sept. 21, 1951, as amended at 33 FR 5952, Apr. 18, 1968. 
Redesignated at 45 FR 44587, July 1, 1980]



Sec. 3  Application for remission of duties.

    An application for relief from the payment of duties imposed is to 
be filed with the District Director of Customs as defined in 19 CFR 
1.1(d) if the following circumstances prevail:
    (a) When an item covered by the entry is not within the class of 
items liable to duty (i.e., that the item does not constitute equipment, 
repair parts or materials within the meaning of section 466 of the 
Tariff Act of 1930);
    (b) When the purchase of the equipment, repair parts or materials or 
the making of the repairs was necessitated by stress of weather and/or 
other casualty encountered during the regular course of the particular 
voyage and was necessary to secure the safety and seaworthiness of the 
vessel; or
    (c) When the equipment, repair parts or materials were manufactured 
or produced in the United States and the labor involved was performed by 
residents of the United States or by members of the regular crew of the 
vessel.

To insure consideration in the liquidation (i.e., the assessment of 
duty) of the entry, the application for relief must be filed within 90 
days from the date of the entry, except in meritorious cases, the 
District Director may grant an extension of 90 more days upon written 
request therefor.

[16 FR 9658, Sept. 21, 1961, as amended at 33 FR 5952, Apr. 18, 1968. 
Redesignated at 45 FR 44587, July 1, 1980]



Sec. 4  Evidence required.

    When relief is claimed on the grounds of stress of weather or other 
casualty, there must be submitted to the Collector the following:
    (a) An affidavit of the Master which shall set out fully the nature 
of the

[[Page 244]]

casualty and/or stress of weather encountered; when and where the 
casualty and/or stress of weather occurred; nature of the damage 
sustained; the port where the repairs were made or the equipment 
purchased and a statement of the Master as to whether the repairs or 
equipment purchased were required to secure the safety or seaworthiness 
of the vessel to enable her to reach a port of destination in the United 
States;
    (b) Itemized invoices covering the cost of repairs made or equipment 
purchased;
    (c) Abstracts of the vessel's log;
    (d) Classification surveyor's report confirming vessel's 
classification when the repairs were made in order to insure 
seaworthiness.

The Master shall certify as true copies or originals, as the case may 
be, one copy of each repair bill, abstract of vessel's log, survey 
report and other documents used in support of the application for 
relief. If a document is written in a foreign language, it should be 
accompanied by a translation certified to be accurate.



Sec. 5  General Agent's authority to effect payment of duties.

    (a) In those cases where the conditions outlined in section 3 of 
SRM-4 do not prevail, the General Agent shall effect payment of duties 
imposed by Customs and shall include the expenditure in the voyage 
accounts of the vessel. In those cases where the conditions as outlined 
in section 3 of SRM-4 do prevail, the General Agent shall exhaust every 
means toward obtaining remission of duty imposed.
    (b) Should the General Agent fail to obtain remission of duties in 
such cases, he shall refer the matter to the appropriate Coast Director 
for his (The Director) determination as to whether further appeal to the 
Bureau of Customs is warranted or that payment of duty should be made by 
the General Agent.

    Note: Records and supporting documents referred to in the above 
order, shall be retained until the completion of the audit by the 
General Accounting Office, at which time the Maritime Administration 
will take custody of the records.

[SRM-4, 16 FR 9658, Sept. 21, 1951, as amended by Amdt. 1, 18 FR 5035, 
Aug. 22, 1953; 21 FR 8106, Oct. 23, 1956. Redesignated at 45 FR 44587, 
July 1, 1980]



PART 338_PROCEDURE FOR ACCOMPLISHMENT OF VESSEL REPAIRS UNDER NATIONAL 

SHIPPING AUTHORITY MASTER LUMP SUM REPAIR CONTRACT_NSA-LUMPSUMREP--Table of 

Contents



Sec.
1. What this order does.
2. Use of contract for competitive bid and negotiated price awards.
3. Specifications.
4. Procedure for securing competitive bids.
5. Procedure for negotiated price awards.
6. Awarding of work.
7. Job order numbering.
8. Extra work and changes.
9. Payment.
10. Bonds.
11. Guarantee obligations.
12. Disposition of removed equipment and scrap.
13. Insurance.
14. Anti-Kickback and Davis-Bacon Acts.
15. Subcontracts.
16. Liquidated damages.
17. Performance of work resulting from damage sustained while undergoing 
          repairs.
18. Group classification.
19. Ship Repair Summaries.
20. Reports of awards.
21. Delegations of authority.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114. 
Interpret or apply R.S. 3709, as amended; 41 U.S.C. 5.

    Source: SRM-5, Revised, 18 FR 5035, Aug. 22, 1953, unless otherwise 
noted. Redesignated at 45 FR 44587, July 1, 1980.



Section 1  What this order does.

    This order cancels NSA Order No. 32 (SRM-1); and outlines the 
procedure to be followed by the several Coast Directors, their field 
Ship Repair and Maintenance Staffs, the General Agents of the Authority, 
and the ship repair contractors in the award and performance of vessel 
repairs under the National Shipping Authority Master Repair Contract, 
NSA-LUMPSUMREP. The Coast Directors, field Ship Repair and Maintenance 
Staffs and the General Agents shall be referred to hereafter in this

[[Page 245]]

order as representatives of the Authority.



Sec. 2  Use of contract for competitive bid and negotiated price awards.

    (a) The NSA-LUMPSUMREP Contract is a Master form of fixed price 
contract and is applicable to ship repair work awarded as a result of 
competitive bidding or negotiation. As a general rule all work awarded 
under the NSA-LUMPSUMREP Contract must be awarded upon the basis of 
competitive bids. Revised Statute section 3709 (41 U.S.C. 5), which 
requires the award of contracts on the basis of competitive bids, 
however, permits award upon a negotiated basis in certain situations, 
that is, ``where immediate delivery or performance is required by the 
public exigency.''
    (b) There are set forth in paragraphs (b)(1) to (3) of this section 
three (3) examples of situations where the negotiation of fixed price 
awards for the accomplishment of work under the NSA-LUMPSUMREP Contract 
will be permitted in lieu of competitive bidding:
    (1) Where the desired results from competitive bidding cannot be 
obtained. For example, where there is doubt as to the reality of 
competition or the fairness or reasonableness of a low bid, all bids 
shall be rejected. If the ship's availability permits a new Invitation 
for Bids for the work in question shall be issued. If the bids received 
as a result of the second invitation are not considered satisfactory the 
bids are to be again rejected and prices of all specification items are 
to be negotiated with and the job awarded to the lowest bidder. If the 
low bidder refuses to accept the award upon the condition referred to 
the offer of award subject to price negotiation may be made to the next 
lowest bidder, etc. Negotiated awards in such cases shall be made in 
accordance with the conditions set forth on the invitation form, e.g., 
time specified, liquidated damages, etc. If a satisfactory price cannot 
be secured by negotiation with the bidders as herein proved an award may 
be made upon a negotiated basis approved in section 5 of this order.
    (2) Where the element of time is paramount. There will be instances 
where expeditious ship turnarounds will necessitate the award of work 
without the delay involved in awarding on the basis of competitive bids. 
In such cases immediate negotiation for a fixed price with one 
contractor will be permissible. However, full consideration must be 
given to the factors involved in order to determine whether, under the 
circumstances, the time requirements make necessary the negotiation of 
price rather than using the competitive bid procedure. Such relevant 
factors are the individual ship's commitments with respect to loading 
berths, sailing dates, and the charter hire, etc., that might accrue in 
the event additional ship lay-time is required because of competitive 
bidding. Definite dollar and time values cannot be established as 
specific guides for determining when to negotiate. The individual ship 
and circumstances involved are the governing elements. The practice of 
consistently favoring one contractor where this type of repair is 
required will not be permitted but instead, to the maximum extent 
possible, all qualified contractors in the particular port shall be 
given the opportunity to perform work for the National Shipping 
Authority.
    (3) Extra items of work found subsequent to the awarding of the work 
covered by the original specifications. Where extra items of work are 
required after the commencement of the awarded work, it is permissible 
to negotiate with the contractor who is performing the awarded work, for 
the accomplishment of such extra work under the provisions of Article 6 
of the NSA-LUMPSUMREP Contract. A discussion of this procedure is set 
out in section 8 of this order. However, where items of extra work are 
found after examinations have been made as called for by the original 
specifications, negotiation with the contractor to perform such items of 
extra work shall be permitted only if the aggregate estimated cost of 
such items of extra work would not amount to a substantial part of the 
entire job. If the items of extra work amount to a substantial part of 
the entire job, they shall be awarded in the same manner and after 
consideration of the same factors as are set forth above for awarding 
original work.

[[Page 246]]



Sec. 3  Specifications.

    (a) It shall be incumbent upon the representatives of the Authority 
on each and every vessel requiring repairs for the account of the 
National Shipping Authority to prepare complete, detailed and fully 
descriptive specifications of the particulars of each repair item, 
identified in each particular case by the appropriate voyage number. 
Decisions of the Coast Directors' Ship Repair and Maintenance Staffs 
with respect to the need for any particular item in repair 
specifications shall be final. The specifications for voyage repairs 
shall itemize the work involved and shall be numbered consecutively and 
shall be arranged in accordance with the group classification set forth 
in section 18 of this order with the segregation by the three 
departments, namely, deck, engine and steward.
    (b) The specifications shall in their final written form be explicit 
in every respect and shall include drydocking, if required, as well as 
all other items of work known to be required or discernible through 
visual inspection and examination regardless of the fact that later 
decision may be made to eliminate or defer some of the items of work. In 
no case shall an item of work, the accomplishment of which is 
problematical, be so identified or segregated in the specifications. 
Resorting to such general phraseology as ``overhaul as necessary,'' 
``open up for examination and repair or renew as necessary,'' ``repair 
or renew,'' etc., shall not be permitted in preparing and writing the 
specifications.
    (c) Where an exact and final determination of the extent of the work 
cannot be ascertained until an examination has been made, the particular 
items involved shall so specify and the specifications with respect to 
said items shall be limited to such examinations as are necessary.
    (d) If it is desired by the representatives of the Authority to 
change any item in the specifications after the specifications have been 
issued to bid such changes shall be reduced to writing and shall be 
distributed to the invited bidders at least by such time prior to the 
time originally specified for the opening of bids as shall reasonably 
permit the bidders to revise their estimates. If determined to be 
necessary or desirable under the circumstances, the representative of 
the Authority may extend the time for opening of bids.
    (e) Any exceptions taken to the specifications by a prospective 
bidder shall be made known to the represent- ative of the Authority 
prior to the time specified for opening the bids. If it is finally 
determined by the representative of the Authority that the exceptions 
are justified, then the procedure set forth in the preceding sub-
paragraph shall be followed. Exceptions accompanying bids not processed 
as herein prescribed, but made known at the time the bids are opened 
will not be acceptable, and will be a cause for rejecting such bids.
    (f) When it is anticipated that the cost of a job will be in excess 
of a Coast Director's delegated authority, one (1) copy of 
specifications, and in case of bids a copy of Invitation for Bids, 
Instructions to Bidders and listing of contractors invited to bid shall 
be forwarded to the Chief, Division of Ship Repair and Maintenance, 
Washington, DC, simultaneously with the specifications being issued to 
the contractors.
    (g) In all cases where materials, parts or equipment are required in 
connection with the performance of any particular repair item the 
representatives of the Authority shall utilize to the fullest possible 
extent spares and replacement parts stocked in Maritime Administration 
warehouses. Prior to arranging for the purchase or furnishing of repair 
parts by repair contractors, it shall be the responsibility of the 
representatives of the Authority awarding work to determine that the 
required parts are not available in the Maritime Administration 
warehouse in the area involved, contingent upon the urgency of the 
particular situation, ship's sailing schedule, etc.



Sec. 4  Procedure for securing competitive bids.

    (a) The geographical area within which bids will be invited involves 
the exercise of sound administrative judgment. All the relevant factors 
should be considered in deciding over what areas competitive bids should 
be invited. Such factors will include the

[[Page 247]]

scope and nature of the work, the location of the vessel, and the time 
and expense involved in shifting and returning the vessel to its loading 
berth consistent with the operating requirements.
    (b) Invitations for Bids shall be sent to all contractors, within 
the area as determined in paragraph (a) of this section, who are 
considered to be financially qualified and to be capable of performing 
all of the work set forth in the specifications either by the 
utilization of their own or subcontractors' facilities. In this regard 
attention is invited to section 15 of this order.
    (c) When inviting Bids the NSA form entitled ``Invitation for Bids, 
Instruction for Bidders, and Specifications for Repairs, Renewals, 
Alterations and Additions to the Vessel ----------'' shall be used.
    (d) Attention is called to the fact that the Invitation for Bids 
form includes a statement of the completion date for the work. In the 
event bids are invited the individual vessel's period of availability 
and the extent of the proposed work shall be considered in fixing a 
completion date that is consistent with the scope of the work involved. 
Consideration must be given to the fact that it will not be possible in 
every case to get lower bids by extending a completion date beyond the 
normal time required to do the work merely because the vessel's 
availability is exceptionally long. At the same time, care is to be 
exercised to insure that the repair period is not shortened, when there 
is no urgent need for the use of the vessel, to such an extent that it 
is impossible for the contractor to accomplish the work under normal 
working conditions. A completion date can only be fixed so as to be 
financially and otherwise to the best interests of the Government after 
due consideration has been given to all of the factors involved.
    (e) The Invitations for Bids shall provide that the contractors 
shall submit, simultaneously with their responses to Invitations for 
Bids, unit prices for each item of specification work in a separate 
sealed envelope. Only the envelope containing the separate item prices 
of the contractor determined to be the low bidder shall be retained by 
the representative of the Authority and shall not be opened until after 
the award is made. All other envelopes containing separate item prices 
shall be returned un- opened to each contractor by the representative of 
the Authority. In the event the low bid is rejected, the itemized prices 
of the low bidder shall be returned to him in the unopened envelope. 
Item prices submitted by contractors will not be subject to public 
perusal.
    (f) Vessel repair work contracted for by representatives of the 
National Shipping Authority is subject to the provisions of the Davis-
Bacon Act, except in those cases where at the time of the issuance of 
the Invitations for Bids the site of the work is not known. Where bids 
are being invited from bidders in more than one port area, the port area 
in which the award will be made will not be known, and the Invitations 
for Bids, accordingly, must state that the work in question is not 
subject to the Davis-Bacon Act.
    (g) The Invitations for Bids shall also include a statement of the 
per day liquidated damages, for the particular type vessel on which the 
work is to be performed.
    (h) The Invitation for Bids shall state where the bids are to be 
opened.
    (i) When Invitations for Bids are issued by a General Agent, the 
General Agent, at the time the invitations are issued shall make 
available to the local Ship Repair and Maintenance office, three (3) 
copies of the specifications, three (3) copies of a list of contractors 
to whom invitations have been sent, and three (3) copies of the 
Invitation for Bids.
    (j) Where the scope and probable cost of the work and the time 
required for effecting such work are secondary as compared to the ship's 
time, and where the preparation of formal specifications and the 
issuance of formal Invitations for Bids are not practicable, the 
representative of the Authority may orally contact as many qualified 
contractors as is feasible, in order to obtain written ``Spot Bids.'' 
Each contractor who indicates its intention to bid shall be fully 
advised as to the specific work involved and given an opportunity to 
inspect the vessel to enable it to prepare a bid. The contractor shall

[[Page 248]]

be verbally advised of a time and place for the submission of the ``Spot 
Bids.'' If such bids are invited by the General Agent, the General Agent 
shall also advise the Coast Director or his duly appointed 
representative of the time and place of opening the ``Spot Bids,'' and 
if practicable, the NSA representative shall attend such opening. If 
submission of such spot bids is not in writing the contractors shall 
immediately confirm their respective Spot Bids by written tenders. The 
representative of the Authority shall, if requested by responsive 
contractors, furnish invitations for bids and supporting specifications 
to the contractors.



Sec. 5  Procedure for negotiated price awards.

    (a) In the award of vessel repair work upon the basis of negotiation 
or request for quotation, other than work covered by a supplemental job 
order, the contractor shall be furnished with the information provided 
for in Article 1(a) of the NSA-LUMPSUMREP Contract.
    (b) The contractor, within the time specified in a request for a 
quotation, may quote a price and shall submit itemized prices and the 
price breakdown provided for in Article 1(c) of the NSA-LUMPSUMREP 
Contract. In the event a mutually satisfactory price cannot be agreed 
to, a price shall be determined by the representative of the Authority 
making the award which shall be set out in the job order or the 
supplemental job order issued to the contractor. Within thirty (30) days 
from the receipt of such job order or supplemental job order the 
contractor may appeal such price to the Director of the Authority as a 
dispute under Article 27 of the NSA-LUMPSUMREP Contract.



Sec. 6  Awarding of work.

    (a) Those portions of all bids reflecting the total aggregate cost 
of the work involved shall be opened publicly. The work shall be awarded 
to the contractor submitting the lowest qualified bid. The term lowest 
shall mean the bid most advantageous to the Government after evaluation 
of all bids by the application of differentials and any other relevant 
factors set forth in the Invitation for Bids. All pertinent costs of 
moving the vessel from the port where said vessel is located at the time 
bids are invited to the port of the responsive bidders' work sites and/
or plants are to be stated on the Invitation for Bids. If the vessel is 
scheduled to return to the same port where located at the time bids were 
invited, all costs of returning the vessel to that port shall also be 
included on the Invitation for Bids and considered in the bid 
evaluation.
    (b) Immediately after an award of a job order or a supplemental job 
order on a negotiated basis a written report shall be submitted by the 
representative of the Authority, making the award, to the appropriate 
Coast Director's office stating the pertinent reasons for awarding the 
job on a negotiated rather than bid basis. A copy of this report must be 
attached to the Ship Repair Summary.
    (c) When an award is made, a job order in the form attached to the 
NSA-LUMPSUMREP Contract shall be issued to the contractor and when 
awards are made in excess of the Coast Directors' Authority one copy 
each of all job orders and supplemental job orders and supporting 
specifications are to be forwarded to the Chief, Division of Ship Repair 
and Maintenance, Washington, DC, simultaneously with the issuance of 
said orders to the contractors.



Sec. 7  Job order numbering.

    (a) The NSA-LUMPSUMREP Contract number shall be inserted in every 
job order and supplemental job order thereto awarded to a Contractor. 
The Chiefs of local Ship Repair and Maintenance offices shall give 
consecutive numbers starting with No. 1 to job orders awarded by them to 
each contractor. The General Agents shall give consecutive numbers 
starting with No. 1 to job orders awarded by each General Agent. Job 
orders and supplemental job orders covering work awarded by a General 
Agent shall bear the initials of the prime General Agent, as a prefix to 
the numeral for example, ``Job Order No. USL-1.'' Thus, the first award 
made by a local Ship Repair and Maintenance office to each respective 
master repair contractor

[[Page 249]]

shall bear ``Job Order No. 1''. The first award made by each General 
Agent to each respective master repair contractor shall also bear ``Job 
Order No. 1'' and in addition the Prime General Agents initials. Sub-
agents shall use the initials of the Prime General Agent in identifying 
the job order number. Any additional means of numbering other than the 
numeral and Prime Agent's initials are not to be used. Supplemental job 
orders shall contain the original job order number suffixed by the 
letter ``A'' on the first supplemental job order, the letter ``B'' on 
the second supplemental job order, and so forth.



Sec. 8  Extra work and changes.

    (a) At any time after the award of an original job order and during 
the time the work thereunder is being performed, additional or extra 
work or changes in the work covered by the job order may be directed by 
the representative of the Authority.
    (b) Such additional or changed work shall be directed by a written 
Change Order as provided in Article 6 of the NSA-LUMPSUMREP Contract.
    (c) A supplemental job order shall be issued to the Contractor 
covering such Change Order(s), which supplemental order shall include 
the agreed amount of contract price increase or decrease and any 
revision in the completion date of the job order work, as modified by 
the Change Order(s).
    (d) In the event a change in the contract price or revision in the 
completion date cannot be agreed upon the representative of the 
Authority shall determine the contract price or revised completion date 
and issue a supplemental job order to the contractor who shall proceed 
with the work covered by the Change Order(s) and the Contractor may 
appeal such contract price or revised completion date as provided in 
Article 27 of the NSA-LUMPSUMREP Contract.



Sec. 9  Payment.

    (a) Repair contractors invoices covering work awarded by the field 
staff of the National Shipping Authority:
    (1) Repair Contractors will submit invoices for repair costs covered 
by job orders under Master Repair Contract or work orders under 
WORKSMALREP Contracts, directly to the local office of the National 
Shipping Authority awarding the work.
    (2) The local office of the National Shipping Authority will:
    (i) Review repair contractors' invoices to determine that the 
charges have been billed in accordance with the prices provided in the 
job order and repair contract.
    (ii) Attach to each repair contractor's invoice, a copy of the 
WORKSMALREP work order or job order and supplemental job order(s), if 
any; a signed completion certificate; and, in the case of competitive 
bids, abstract of bids listing the contractors who submitted bids, the 
bid prices and completion time specified by each contractor, the name of 
the contractor to whom the work was awarded, and an explanation of the 
basis for the award when the contract is not awarded to the lowest 
bidder.
    (iii) Review each repair contractor's invoice and attachments to 
ascertain completeness of supports and whether repair items included 
therein have been placed under the appropriate repair group numbers as 
set out in section 18 and make corrections as necessary.
    (iv) Forward the invoices and supports to the District Ship Repair 
and Maintenance office for final review.
    (3) The District office shall make a final review and if in order 
forward the contractor's invoices and other supports relating to (i) 
voyage and idle status repairs to the principal office of the General 
Agent, and (ii) reactivation repairs and all others which do not involve 
General Agency operated ships to the appropriate District Finance 
Officer.
    (4) The General Agent, upon receiving repair contractors' invoices 
and attachments thereto from the District Ship Repair and Maintenance 
office will:
    (i) Review each invoice and attachments to assure that the payment 
authorized by the District office appears to be proper on the basis of 
the attachments.

[[Page 250]]

    (ii) Upon determination that all necessary supporting documents are 
attached, make payment directly to the contractor.
    (5) The District Finance Officer, upon receiving repair contractors' 
invoices pursuant to paragraph (a)(3)(ii) of this section will process 
them in accordance with prescribed procedures.
    (b) Repair contractors invoices covering work awarded by General 
Agents:
    (1) Repair contractors will submit invoices for repair costs covered 
by job orders under Master Repair Contracts or work orders and 
WORKSMALREP contracts directly to the principal office of the General 
Agent or author- ized Sub-Agent contracting for the ship repair work.
    (2) The General Agent or authorized Sub-Agent, upon receipt of an 
invoice from a contractor, will follow the procedure outlined in 
paragraph (a) (2)(i thru iii) and (4)(ii) of this section.

[SRM-5, Rev., 18 FR 5035, Aug. 22, 1953, as amended at 33 FR 5952, Apr. 
18, 1968. Redesignated at 45 FR 44587, July 1, 1980]



Sec. 10  Bonds.

    (a) All bids in response to an Invitation for Bids and all 
quotations in response to a request for a quotation in excess of $2,000, 
shall be accompanied by a guaranty or a bid bond in a sum equal to 
twenty-five (25) percent of such bid or quotation to insure the 
acceptance of the job order covering the awarded work and the furnishing 
of the performance and payment bonds required by Article 14 of the NSA-
LUMPSUMREP Contract. The stand- ard Government form of bid bond 
(Standard Form 24 Revised November 1950) shall be used.
    (b) In compliance with the perform- ance bond and payment bond 
requirements of Article 14 of the NSA-LUMPSUMREP Contract, the standard 
form of individual performance bond (Standard Form 25 Revised November 
1950) and the standard form of individual payment bond (Standard Form 
25A Revised November 1950) respectively, shall be used. Such bonds (in 
the respective penal sums of 50 percent of the respective job order 
contract prices but if the job order contract price is in excess of 
$1,000,000 in the penal sum of 40 percent of such job order contract 
price) shall guarantee the Contractor's performance and payment 
obligations in connection with the work covered by an original job order 
awarded on either competitive bid or negotiated basis, as that work may 
be modified by supplemental job orders to such original job orders.
    (c) The individual bid, performance and payment bonds shall be 
submitted by the contractors to the awarding offices (General Agents or 
local offices of NSA) to verify the correctness of the penalty amount, 
contract and job order numbers, etc. The individual bonds shall then be 
forwarded by the awarding office to the office of the appropriate Coast 
Director for final action and approval pursuant to existing regulations.
    (d) For the convenience of contractors, in lieu of submitting 
individual bid, performance and payment bonds they may file with the 
Authority approved annual or blanket bid, performance and payment bonds 
covering the Contractor's bond obligations under job orders (as such job 
orders may be modified by supplemental job orders) awarded under said 
contracts in such annual period. Annual bonds shall be submitted by the 
Contractors or their surety representative to the appropriate Coast 
Director's office for clearance pursuant to existing regulations. In 
this regard all annual bonds must be of the open penalty type.
    (e) No repair voucher (progress or final) where bond coverage is 
required shall be passed for payment until such time as the required 
bid, performance and payment bonds have been given final clearance.



Sec. 11  Guarantee obligations.

    (a) Under the provisions of Article 10 of the NSA-LUMPSUMREP 
Contract the Contractor's guarantee liability extends to defects and 
deficiencies in the Contractor's work developing within sixty (60) days 
from the date of the acceptance of all the work and the accepted 
redelivery of the vessel to the Authority.
    (b) Notice of such defects and deficiencies must be given to the 
Contractor not later than ninety (90) days after the acceptance of the 
work.

[[Page 251]]

    (c) As soon as practicable, after the acceptance of work performed 
under a job order, and the supplemental job orders thereto, the office 
awarding the job order shall furnish to the General Agent two copies of 
the specifications, job order and supplemental job orders, together with 
a statement of the date of the expiration of the Contractor's guarantee 
responsibility with respect to some work.
    (d) The General Agent shall during the period of the Contractor's 
guarantee responsibility screen all deficiencies and defects and repair 
items and list separately against the respective specifications, all 
items which represent defects or deficiencies in the Contractor's work.
    (e) In order that the Contractor may be notified of such defects and 
deficiencies prior to the expiration of the 90-day notice period, the 
General Agent, particularly with respect to vessels in foreign ports or 
vessels which may be at sea, shall instruct the Master of the respective 
vessel to forward the information with respect to defects and 
deficiencies in the Contractor's work to the General Agent's home office 
by the most expeditious manner of communication.
    (f) In connection with all deficiencies and defects, referred to in 
paragraph (d) of this section, the General Agent shall immediately 
notify the Contractor and the local Ship Repair and Maintenance Office 
Head in the vessel's port of call with copies of such notification to 
the Chief, Division of Ship Repair and Maintenance in Washington, DC, in 
all cases and to the Chairman, Trial and Guarantee Survey Boards, if the 
total contract price is equal to or in excess of $100,000. If 
practicable, the local Ship Repair and Maintenance Office Head shall 
arrange to view the defective or deficient work in question and, if 
possible, shall secure the correction of such defects or deficiencies by 
the Contractor in question.
    (g) The General Agent, and the representative of the local Ship 
Repair and Maintenance staff, who acted under the provisions of 
paragraph (e) of this section promptly shall file with the Chief, 
Division of Ship Repair and Maintenance in Washington, DC, and also with 
the Chairman, Trial and Guarantee Survey Boards, if the total contract 
price equals or exceeds $100,000, separate or concurring reports setting 
out the defects and deficiencies, describing the actual conditions 
found, causes of failure, and the disposition of each defect or 
deficiency item.



Sec. 12  Disposition of removed equipment and scrap.

    (a) Article 8 of the NSA-LUMPSUMREP Contract provides that any ship 
equipment, fuel, lube oil, supplies, stores, furniture, fixtures, 
salvage and other movable property removed from the vessel is the 
property of the United States and shall be disposed of in such manner as 
the Authority may direct within sixty (60) days from the date of the 
completion of the work. The representative of the Authority, by 
appropriate item in the specifications, shall cause the Contractor to 
segregate all equipment, salvageable material and scrap, removed from a 
vessel in the performance of repairs, in such a manner as to be readily 
identifiable, and shall submit a list thereof to the local Property and 
Supply office which is responsible for arranging for retention, 
disposal, etc., of said equipment, material, and scrap. A copy of the 
listing is to be attached as a support to the Ship Repair Summary (MA-
159).
    (b) After the 60-day period, if no direction for disposal is given 
the Contractor, the Contractor shall store and protect, in the shipyard 
or outside of the shipyard at its election, such property of the United 
States, for the additional period directed by said local Property and 
Supply office who shall furnish a copy of such written direction to the 
representative of the Authority. The increased contract price for the 
cost of the storage for such additional period shall be covered by 
purchase order prepared by the local Property and Supply office.
    (c) All scrap removed from the vessel shall be the property of the 
United States and shall be handled as provided in paragraph (b) of this 
section: Provided, however, That any scrap or salvage may, upon the 
written approval of the local Property and Supply office,

[[Page 252]]

be purchased or disposed of by the Contractor at the prevailing market 
price, or at not less than the fair value thereof in the absence of an 
established market therefor. The net sales price of the scrap or salvage 
disposed of by the Contractor shall be promptly paid to the office of 
the District Finance Officer, or at the option of the office of the 
District Finance Officer, shall be credited against the moneys due or to 
become due the Contractors.

[SRM-5, Rev., 18 FR 5035, Aug. 22, 1953, as amended at 33 FR 5952, Apr. 
18, 1968. Redesignated at 45 FR 44587, July 1, 1980]



Sec. 13  Insurance.

    Article 9 of the NSA-LUMPSUMREP Contract sets forth the Contractor's 
liabilities and obligations with respect to awarded work. Said Article 9 
requires that the Contractor shall maintain insurance to cover such 
liabilities and obligations. Evidence of such insurance shall be 
submitted to the Chief, Division of Insurance, Washington, DC, by the 
contractors for approval.



Sec. 14  Anti-Kickback and Davis-Bacon Acts.

    (a) All work awarded under the NSA-LUMPSUMREP Contract is subject to 
the provisions of the Anti-Kickback Act, and is also subject to the 
provisions of the Davis-Bacon Act (except in those cases where the 
Invitations for Bids or job order state that the work covered thereby is 
not subject to the Davis-Bacon Act). Article 24 of the NSA-LUMPSUMREP 
Contract requires the compliance of Contractor and its subcontractors 
with the applicable provisions of said acts. In this respect the 
Contractor agrees in the NSA-LUMPSUMREP Contract to comply with the 
regulations of the Secretary of Labor made pursuant to the Anti-Kickback 
Act.
    (b) The Contractor shall, as provided in Article 24(a) of the NSA-
LUMPSUMREP Contract, post at the site of the work the wage determination 
decision of the Secretary of Labor as provided in said Article 24(a).
    (c) It shall be the responsibility of the representative of the 
Authority awarding the work to determine that the Contractor has made 
the postings required by Article 24(a) of the NSA-LUMPSUMREP Contract.
    (d) In lieu of submitting weekly certified copies of all payrolls to 
the Authority, as provided in Article 24(d) of the Master LUMPSUMREP 
Contract the Contractor shall maintain his weekly payrolls for a period 
of three years and submit weekly an affidavit that the payrolls of the 
Contractor for the preceding week are correct and complete, that the 
wage rates contained therein are not less than those determined by the 
Secretary of Labor and that the classifications set forth for each labor 
mechanic conforms with the work he performed. The Contractor shall also 
submit, and shall be responsible for the submission by its 
subcontractors of the Anti-Kickback Act affidavits as provided in 
Article 24(f) of the Master LUMPSUMREP Contract. The Contractor shall 
submit one copy of each of the weekly payroll and Anti-Kickback Act 
affidavits to the Records Administration Section, Maritime 
Administration, Washington 25, DC.
    (e) The representative of the Authority shall require Contractors, 
pursuant to the provisions of Article 24(d) of the NSA-LUMPSUMREP 
Contract, to classify or reclassify any class of laborers or mechanics 
employed on National Shipping Authority contract work and not listed in 
the Secretary of Labor's decision (schedule of wages). A report of such 
cases shall be forwarded to the District Ship Repair and Maintenance 
office for transmittal to the Office of Maritime Labor Policy.
    (f) The representatives of the Authority shall be responsible for 
establishing procedures insuring that Contractors are complying with the 
Davis-Bacon Act and in cases of non-compliance withhold payment of 
contractors' invoices.
    (g) The following certification shall be inserted by all contractors 
on all invoices rendered covering work awarded under the Master Repair 
Contract subject to the Anti-Kickback and Davis-Bacon Acts.

I hereby certify that in performing the work for which the invoice was 
rendered that all applicable terms and conditions of the Anti-Kickback 
and Davis-Bacon Acts as provided

[[Page 253]]

in the Master Repair Contract and regulations of the Department of Labor 
have been complied with.



Sec. 15  Subcontracts.

    Under Article 29 of the NSA-LUMPSUMREP Contract, the Contractor is 
authorized to subcontract portions of the work. However, the Contractor 
must obtain prior approval from the representative of the Authority, 
awarding the work, for each subcontract in an amount exceeding 10 
percent of the contract price for the work covered by a job order or 
supplemental job order.



Sec. 16  Liquidated damages.

    (a) The liquidated damages payable for each calendar day of delay 
shall be placed on each job order and supplemental job order whether 
awarded on a competitive bid or negotiated basis.
    (b) The completion certificates are to contain the date on which 
work is actually completed, whereas the job order and supplemental job 
orders are to contain a completion date based on a fair and reasonable 
estimate of time to be allowed the contractor to perform the work. Thus, 
the difference between the completion date specified on the job order or 
supplemental job orders and on the completion certificates will be the 
period for which liquidated damages are assessed. If an extension of an 
original completion date is considered justifiable, the completion 
certificates are to bear in detail in the space provided for 
``exceptions'' the reasons why the completion dates were extended beyond 
that specified in the original job orders. The face of the Ship Repair 
Summaries (MA-159) shall reflect the amounts of liquidated damages. The 
penalty amount shall be deducted from the invoice prior to payment for 
the work involved.

[18 FR 5035, Aug. 22, 1953; 18 FR 5294, Sept. 2, 1953. Redesignated at 
45 FR 44587, July 1, 1980]



Sec. 17  Performance of work resulting from damage sustained while 

undergoing repairs.

    (a) When damage is sustained by a vessel during performance of 
repairs under the NSA Master Contract, negotiations for accomplishment 
of work necessary to correct such damage are to be made with the repair 
contractor involved, if practicable, and a job order issued to the 
contractor for the repair of damage. Such job orders are to be assigned 
a new number and are not to be supplemental to the original award. The 
following ``without prejudice'' clause is to be made a part of and place 
on each job order issued for the performance of work discussed in this 
section.

It is understood and agreed that the work covered by this job order is 
awarded and accepted without prejudice to, or waiver of, any rights of 
the United States or the Contractor.

    (b) If it is determined that the contractor is at fault and the 
contractor refuses to accept the responsibility, the procedure outlined 
in Article 27 of the master repair contract shall be followed. It is to 
be understood that the payment of this type of account is to be withheld 
pending establishment that the contractor involved is relieved of all 
responsibility for the damage.
    (c) In the event other than the original contractor effects the 
damage repairs immediate arrangements are to be made by and through the 
General Agent to collect from the contractor considered responsible for 
the damages.
    (d) A damage survey is to be conducted in all such cases and a 
report thereon submitted to the Chief, Division of Ship Repair and 
Maintenance, Washington, DC.



Sec. 18  Group classification.

    In the preparation of specifications, Job Orders, Supplemental Job 
Orders and WORKSMALREP Contracts costs by Group Numbers as set forth and 
described below are to be inserted thereon:

------------------------------------------------------------------------
 Number                           Classification
------------------------------------------------------------------------
     41  Maintenance Repairs (deck, engine and stewards department
          repairs resulting from wear and tear).
     42  Original installation of, repairs to, and removal of national
          defense features.
     44  Conversions (conversion of vessels to troop carriers, hospital
          ships, and for other special purposes).
     51  Alterations, Additions and Betterments (additional equipment,
          such as, spar decks, heavy lift equipment, change of cargo or
          passenger space, increasing speed of vessel, and structural
          changes).

[[Page 254]]

 
     52  Strengthening of Newly Constructed Vessels (strengthening of
          vessels according to program).
     54  Damage Repairs (claimed as a result of enemy action, heavy
          weather, stranding, collision, fire, stevedore damage, ice
          damage, and other damages).
          Note: All items chargeable to each separate casualty to be
          properly identified and segregated both with respect to
          casualty and cost.
     63  Builders' and Vendors' Guaranty Work (repairs and replacements
          chargeable to builders and vendors of equipment--separate cost
          to be furnished for each item).
     64  Repair Contractors' Guarantee Items (repairs to correct
          deficiencies due to faulty workmanship and/or materials
          incident to prior repairs performed under provisions of Master
          Repair Contract where responsible contractor did not effect
          the necessary corrections).
     65  Other Costs (temporary lights, garbage disposal, tugs to shift
          vessel while in contractors' yard, and other miscellaneous
          work requiring distribution of costs over more than one
          group).
     66  Miscellaneous Expenses Applicable to Voyage Operating Expense
          (removal of cargo debris, fresh water when not required for
          testing purposes, cleaning cargo and other tanks where no
          repairs or alterations are involved, and other similar
          expenses).
     67  Preparation of Vessels for Lay-up (stripping, draining and
          preservation. No repairs to be included in this grouping).
------------------------------------------------------------------------



Sec. 19  Ship Repair Summaries.

    (a) Ship Repair Summaries shall be prepared on Form MA-159 by the 
General Agents and local offices of the Authority covering all work 
performed under their respective jurisdiction and submitted to the 
District Ship Repair and Maintenance office involved. The summaries must 
be properly identified and contain the correct cost breakdown as set 
forth in this order. If the summary covers work other than repairs 
related to a voyage, the summary must so state, e.g., reactivation, lay-
up, idle status, etc. The District Ship Repair and Maintenance office 
shall review the summaries and supports to ascertain that they have been 
properly prepared in all respects. The originals of all summaries 
unsupported shall be forwarded by the District offices to the Chief, 
Operating Cost Control Branch, Office of Ship Operations, National 
Shipping Authority, Washington, DC, and two copies each of all summaries 
one of which is to be supported by one copy each of job orders, 
supplemental job orders, invitation for bids, specifications, invoices, 
itemized prices, completion certificates, ABS invoices and reports, 
purchase orders, price warehouse delivery tickets, property removal 
notices, WORKSMALREP Contracts, a statement that bid, performance and 
payment bonds were received and approved, abstract of bids containing 
the list of contractors invited to bid and response of each, an 
explanation of the basis for an award when the contract is not awarded 
to lowest bidder, listing of scrap, salvageable material and equipment 
removed from a vessel, etc., shall be forwarded to the Chief, Division 
of Ship Repair and Maintenance, Washington, DC.
    (1) Within 60 days after termination of the respective voyages for 
work awarded by General Agents.
    (2) Within 30 days after completion of all work awarded by the Local 
Offices within a port area.
    (b) In the event invoices for particular services are not available 
such as, American Bureau of Venders Inspectors fees, the summary is 
nevertheless to be prepared as outlined in this order and estimated 
costs for the missing billings set forth on the summary. Upon receipt of 
said invoices a supplementary summary shall promptly be prepared and 
distributed as outlined in this section.
    (c) If no work is performed under a General Agent's jurisdiction for 
a particular voyage, the General Agent must submit for distribution as 
stated herein a repair summary stating across the face that no repairs, 
either foreign or domestic, were performed for the particular voyage 
involved.



Sec. 20  Reports of awards.

    (a) The Coast Directors shall submit to the Chief, Division of Ship 
Repair and Maintenance, Washington, D.C., a monthly listing of all 
awards made under their jurisdiction. This listing shall reflect 
individually the complete contract number, contractor, vessel, type of 
award, e.g., negotiated or bid, costs and repair period. This listing 
shall be submitted substantially in the following form:

--------------------------------------------------------------------------------------------------------------------------------------------------------
            Contractor                   Contract No.              Vessel                 Award           Amount           Start            Completed
--------------------------------------------------------------------------------------------------------------------------------------------------------
Steamboat Repairs, Inc............  MA-600 J.O.1.........  John Doe.............  Bid..................   $15,000  Jan. 1, 1953........    Jan. 10, 1953

[[Page 255]]

 
Steamboat Repairs, Inc............  MA-600 J.O.1A........  John Doe.............  Negotiated...........     1,000  ....................    Jan. 11, 1953
--------------------------------------------------------------------------------------------------------------------------------------------------------

    (b) If no work was awarded during a reporting period, a report to 
that effect is to be made.
    (c) The Coast Directors are to attach to their monthly reports, the 
originals of the monthly reports submitted by the General Agents 
pursuant to section 3(d) of NSA Order 34 (SRM-3, Revised).



Sec. 21  Delegations of authority.

    (a) The term authorized representative of the Authority appears in 
several of the contract provisions of the NSA-LUMPSUMREP Contract. The 
respective representatives of the authority are the ``authorized 
representative of the Authority'' for the respective contract provisions 
as set out in this section:
    (b) Articles 1 and 2--Chief, Division of Ship Repair and 
Maintenance, Coast Directors, Chiefs of District Ship Repair and 
Maintenance offices, Chiefs of Local Ship Repair and Maintenance 
offices, and General Agents (within the General Agents' contract 
limitations); Article 3--Maritime Administration Marine Surveyors, 
Chief, Division of Ship Repair and Maintenance, Coast Directors, Chiefs 
of District Ship Repair and Maintenance offices, Chiefs of Local Ship 
Repair and Maintenance offices; and General Agents (within the General 
Agents' contract limitations); Article 4--Coast Directors, Chief, 
Division of Ship Repair and Maintenance, Chiefs of District Ship Repair 
and Maintenance offices, Chiefs of Local Ship Repair and Maintenance 
offices, and General Agents; Article 5--Maritime Administration Marine 
Surveyors and General Agents; Article 6--Coast Directors, Chief, 
Division of Ship Repair and Maintenance, Chiefs of District Ship Repair 
and Maintenance offices, Chiefs of Local Ship Repair and Maintenance 
offices, and General Agents (within the General Agent's contract 
limitations); Article 7--Chiefs of District Ship Repair and Maintenance 
Offices, Chiefs of Local Ship Repair and Maintenance Offices, and 
Maritime Administration Marine Surveyors; Article 18 (d)--Coast 
Directors; Chief, Division of Ship Repair and Maintenance, Chiefs of 
District Ship Repair and Maintenance offices, Chiefs of Local Ship 
Repair and Maintenance offices, and General Agents in connection with 
work awarded by General Agents; Article 27--Coast Directors, Chiefs of 
District Ship Repair and Maintenance offices and Chiefs of Local Ship 
Repair and Maintenance offices.

    Note: Records and supporting documents referred to in the above 
order, shall be retained until the completion of the audit by the 
General Accounting Office, at which time the Maritime Administration 
will take custody of the records.

[SRM-5, Rev., 18 FR 5035, Aug. 22, 1953, as amended at 21 FR 8106, Oct. 
23, 1956. Redesignated at 45 FR 44587, July 1, 1980]



PART 339_PROCEDURE FOR ACCOMPLISHMENT OF SHIP REPAIRS UNDER NATIONAL 

SHIPPING AUTHORITY INDIVIDUAL CONTRACT FOR MINOR REPAIRS_NSA-WORKSMALREP--

Table of Contents



Sec.
1. What this order does.
2. Description of NSA-WORKSMALREP Contract.
3. When the NSA-WORKSMALREP Contract may be used.
4. Persons authorized to make awards under NSA-WORKSMALREP Contract.
5. Responsibility for duplicating copies of NSA-WORKSMALREP Contract.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114. 
Interpret or apply R.S. 3709, as amended; 41 U.S.C. 5.

    Source: SRM-6, Revised, 18 FR 5040, Aug. 22, 1953, unless otherwise 
noted. Redesignated at 45 FR 44587, July 1, 1980.



Section 1  What this order does.

    This order authorizes the use of NSA-WORKSMALREP individual contract 
for minor repairs to Maritime Administration owned or controlled 
vessels. The procedure to be followed by the field personnel of the 
Authority, the

[[Page 256]]

General Agents of the Authority, and the ship repair contractors is set 
forth in the ``General Provisions for Small Repairs'' and, therefore, no 
further reference is made to said procedure herein.



Sec. 2  Description of NSA-WORKSMALREP Contract.

    This is an individual fixed price contract which may be awarded to 
any firm not holding an NSA-LUMPSUMREP Contract, as a result of formal 
competitive bids, spot bids, or by negotiation for the performance of 
ship repair work. NSA Order No. 46 (SRM-5, Revised) sets forth the 
conditions when work may be awarded on the basis of formal competitive 
bids, spot bids or negotiation, therefore, further reference thereto 
will not be made herein.



Sec. 3  When the NSA-WORKSMALREP Contract may be used.

    This contract may be used for awards to firms performing specialized 
work such as repairs to and adjustment of compasses, direction finders, 
radios, refrigerators, etc., as well as minor voyage repairs of a 
general nature and fees of the American Bureau of Shipping. The use of 
this contract is limited to awards not to exceed a total aggregate cost 
of $2,000.



Sec. 4  Persons authorized to make awards under the NSA-WORKSMALREP Contract.

    Authority is hereby delegated to the Atlantic, Gulf and Pacific 
Coast Directors, Chiefs of Local and District Ship Repair and 
Maintenance Offices and the General Agents to make awards under this 
form of contract, provided the aggregate cost of the work does not 
exceed $2,000, and is within their expenditure limitations.



Sec. 5  Responsibility for duplicating copies of NSA-WORKSMALREP Contract.

    It will be the responsibility of the several Coast Directors, Local 
and District Ship Repair and Maintenance Offices and the General Agents 
to duplicate copies of the work order form and general provisions to 
suit their respective needs.



 PART 340_PRIORITY USE AND ALLOCATION OF SHIPPING SERVICES, CONTAINERS 
 
 AND CHASSIS, AND PORT FACILITIES AND SERVICES FOR NATIONAL SECURITY AND 
 
 NATIONAL DEFENSE RELATED OPERATIONS--Table of Contents



Sec.
340.1 Scope.
340.2 Definitions.
340.3 General provisions.
340.4 Shipping services.
340.5 Containers and chassis.
340.6 Port facilities and services.
340.7 Application to contractors and subcontractors.
340.8 Priorities for materials and production.
340.9 Compliance.

    Authority: Defense Production Act of 1950, as amended (50 U.S.C. 
App. 2061 et seq.;) Executive Order 10480, as amended (18 FR 4939); 
Executive Order 12656 (53 FR 47491); 44 CFR Part 322; 49 CFR 1.45; 
Department of Transportation Orders 1100.60, as amended: 1900.8 and 
1900.7D.

    Source: 58 FR 29352, May 20, 1993, unless otherwise noted.



Sec. 340.1  Scope.

    This part establishes procedures for assigning priority for use by 
defense agencies, on commercial terms, of commercial shipping services, 
containers and chassis, and port facilities and services and for 
allocating vessels employed in commercial shipping services, containers 
and chassis, and port facilities and services for exclusive use by 
defense agencies (as defined in 340.2), at any time where appropriate 
under provision of title I of the Defense Production Act of 1950 (50 
U.S.C. App. 2061 et seq.) as determined by the Secretary of 
Transportation. The procedures will provide the means to require vessel 
and port operators to provide defense agencies with existing commercial 
services and facilities not obtainable through established 
transportation procurement procedures. Thus the procedures will minimize 
interference with commercial operations and ensure rapid response to 
defense needs in times of crisis or war.



Sec. 340.2  Definitions.

    As used in this regulation:

[[Page 257]]

    (a) Administrator means the Maritime Administrator, Department of 
Transportation, who is, ex officio, the Director, National Shipping 
Authority, within the Maritime Administration (MARAD). Pursuant to 49 
CFR 1.45(a)(5), the Maritime Administrator is authorized to carry out 
emergency preparedness functions assigned to the Secretary by Executive 
Order 12656 (53 FR 47490, November 18, 1988).
    (b) Container means any type of container for intermodal surface 
movement that is 20 feet in length or longer, 8 feet wide, and of any 
height, including specialized containers, with International Standards 
Organization standard fittings.
    (c) Container service means the intermodal movement, which includes 
an ocean movement leg, of goods in containers.
    (d) Container service operator means a vessel operator (defined in 
Sec. 340.2(v)) that provides containerized ocean shipping service.
    (e) Container supplier means a U.S.-citizen controlled (pursuant to 
46 App. U.S.C. 802) company which manufactures containers, is a 
container service operator, or is in the business of leasing containers.
    (f) Chassis means a vehicle built specifically for the purpose of 
transporting a container so that when the chassis and container are 
assembled the unit produced serves the same function as a road trailer.
    (g) Chassis supplier means a U.S.-citizen controlled (pursuant to 46 
App. U.S.C. 802) company which is a container service operator or is in 
the business of leasing chassis.
    (h) Defense agency means the Department of Defense, or any other 
department or agency of the Federal Government as determined by the 
Secretary of Transportation, for the purposes of this regulation.
    (i) FEMA means the Federal Emergency Management Agency.
    (j) NAO means the NSA Allocation Order, which is an order allocating 
the exclusive use of a vessel employed in commercial shipping service, a 
container, a chassis, or a port facility for the purposes of providing 
its services to a defense agency for a specified period.
    (k) NSA means the National Shipping Authority, which is the 
emergency shipping operations activity of the Department of 
Transportation (MARAD).
    (l) NSPO means an NSA Service Priority Order, which is an order 
directing that priority of service be given to the movement of cargoes 
of a defense agency.
    (m) Planning order means a notification of tentative arrangements to 
meet anticipated defense agency requirements, issued by NAO or NSPO 
format, for planning purposes only.
    (n) Port authority means any state, municipal, or private agency, or 
firm that (1) owns port facilities (2) manages such facilities for 
common-user commercial shipping services under lease from an owner; (3) 
owns or operates a proprietary port facility or terminal; and (4) 
otherwise leases or licenses and manages a port facility.
    (o) Port facilities and services means (1) all port facilities, for 
coastwise, intercoastal, inland waterways, and Great Lakes shipping and 
overseas shipping, including, but not limited to wharves, piers, sheds, 
warehouses, terminals, yards, docks, control towers, container 
equipment, maintenance buildings, container freight stations and port 
equipment, including harbor craft, cranes and straddle carriers; and (2) 
port services normally used in accomplishing the transfer or interchange 
of cargo and passengers between vessels and other modes of 
transportation, or in connection therewith.
    (p) Secretary means the Secretary of Transportation or his or her 
designees to whom emergency authorities under the Defense Production Act 
of 1950 have been delegated, i.e., the Director of Office of Emergency 
Transportation or the Departmental Crisis Coordinator.
    (q) Secretarial Review means the process by which the Secretary or 
his or her designee(s) exercises review, coordination, and control over 
departmental emergency preparedness programs and/or matters.
    (r) Shipper means a civilian or Government agency that owns (or is 
responsible to the owner for) goods transported in waterborne service.
    (s) Shipping service means a commercial service which provides for 
the

[[Page 258]]

movement of passengers or cargo by one or more modes of transportation 
and includes a waterborne movement leg in the overseas, coastwise, 
intercoastal, inland waterways, or Great Lakes shipping trades.
    (t) Vessel means a vessel employed in commercial service for 
waterborne movement of passengers or cargo in the overseas, coastwise, 
intercoastal, inland waterways or Great Lakes shipping trades, or any 
portion of the cargo-carrying capacity of such vessel.
    (u) Vessel operator means a company owning and/or operating, to and 
from any U.S. port, an ocean-going overseas, coastwise, intercoastal, 
inland waterways or Great Lakes vessel that is U.S.-flag, or foreign-
flag and U.S.-citizen controlled (pursuant to 46 App. U.S.C. 802), or 
foreign-flag and non-citizen controlled that is made available to the 
United States (as described in Sec. 340.3(j)).



Sec. 340.3  General provisions.

    (a) The provisions of this rule apply pursuant to authority granted 
to the President by title I, Defense Production Act of 1950, as amended 
(50 U.S.C. App. 2061 et seq.) that authority having been delegated to 
the Secretary of Transportation, with respect to civil transportation 
services, by Sec. 322.3(b) of title 44, Code of Federal Regulations. In 
order to give priority to performance under contracts deemed necessary 
or appropriate to promote the national defense and to allocate materials 
and facilities in such manner, upon such conditions and to such extent 
as necessary or appropriate to promote the national defense, the 
following procedures shall be applicable:
    (1) In connection with deployment of the Armed Forces of the United 
States, or other requirements of the nation's defense, a defense agency 
(as defined in Sec. 340.2(h) of this part) may request priority use or 
allocation of vessels employed in commercial shipping services, 
containers, chassis, or port facilities and services.
    (2) The Secretary may authorize initiation of priority and 
allocation authority in accordance with administrative and statutory 
authorities.
    (3) The Administrator, on approval by the Secretary to initiate the 
use of priority and allocation authority under this regulation and in 
conformance with national program priorities, may direct owners and/or 
operators of vessels, containers, chassis, or port facilities to give 
priority usage to the defense agency or may allocate vessels, 
containers, chassis, or facilities for the defense agency's use during 
specified periods.
    (b) A defense agency may transmit requests for assignment of 
priority for use or for allocation of vessels, containers, chassis, and 
port facilities and services to the Secretary by letter, memorandum, or 
electrical message.
    (c) Justification for requested priorities or allocations may 
include references to military operations plans. When classified, 
justifications may be provided separately by correspondence or staff 
coordination. NSPOs and NAOs will not include classified information.
    (d) The Administrator shall determine, before issuing an NSPO or 
NAO, that the action is necessary to meet the requirements of the 
national defense (as determined by the defense agency) and conforms to 
Secretarial guidance for coordinating the Department's crisis response, 
and that the proposed approach is the most effective way to do so. The 
Administrator, in conjunction with the defense agency, shall coordinate 
with vessel operators, container suppliers, chassis suppliers, port 
authorities and the Coast Guard to identify vessels, equipment and 
facilities to meet requirements covered by NSPOs and NAOs. The 
Administrator shall ensure that arrangements to provide defense support 
under NSPOs and NAOs satisfy the defense agency's requirements with 
minimum disruption to commercial activities.
    (e) When resources are required for movement of hazardous or other 
special cargo, the Administrator shall ensure that the Commandant of the 
Coast Guard and the Captain of the Port and other concerned hazardous 
materials officials of the U.S. Department of Transportation, as 
required, are notified and that the views of all concerned agencies and 
interests are obtained and reflected in actions taken pursuant to this 
regulation. Any action taken pursuant to this regulation shall conform 
with existing regulations for the safe

[[Page 259]]

transportation of hazardous materials and or cargoes, subject to 
Department of Transportation exemptions.
    (f) The Secretary shall notify FEMA of the intention to issue any 
directive granting priority for use or allocation of vessels, 
containers, chassis, or port facilities and services, and shall provide 
information copies of NSPOs and NAOs as required to the defense agency 
concerned, FEMA, the Interstate Commerce Commission and the Coast Guard.
    (g) Defense agencies which foresee difficulty in meeting their needs 
for vessels employed in commercial shipping services, containers, 
chassis, or port facilities and services shall coordinate with MARAD, 
the Coast Guard, vessel operators, container suppliers, chassis 
suppliers, and port authorities concerned before the need arises. The 
Administrator, after Secretarial review, may issue planning orders for 
information and guidance of affected agencies confirming tentative 
arrangements to meet the defense agencies' needs. No action will be 
taken to give effect to those arrangements until NSPOs and NAOs are 
issued at the time the services, equipment, or facilities are required.
    (h) Defense agencies shall pay for services covered by NSPOs and 
NAOs on the basis of commercial tariffs, or on the basis of contracts 
concluded between the operator interests and the defense agencies 
concerned, or on the basis of existing contracts where both parties so 
agree.
    (i) Defense agencies shall be responsible for payment of costs 
arising from:
    (1) Shifting ships to unoccupied berths for defense use;
    (2) Discharging commercial cargo to free ships for defense use; and
    (3) Such other costs as may be agreed between the defense agency and 
the provider of service.
    (j) The provisions of this regulation shall apply to foreign 
vessels, containers, and chassis only when and to the extent that such 
vessels, containers, and chassis are available to the United States 
because of control by U.S. citizens (46 App. U.S.C. 802) or by provision 
of international agreements for use of shipping services and related 
resources for the common defense.
    (k) Recipients of NSPOs and NAOs shall notify the Administrator, 
without undue delay, when they cannot comply or are experiencing 
difficulty in complying with the provisions of the Orders.



Sec. 340.4  Shipping services.

    (a) When a defense agency requires shipping services not obtainable 
through established transportation procurement practices, the following 
procedures shall apply:
    (1) Except during periods of Presidentially-declared national 
defense emergencies, when requests shall be transmitted to the 
Administrator, the agency shall transmit a request to the Secretary 
specifying:
    (i) The type of service required;
    (ii) The route over which priority of service is required;
    (iii) The period during which priority of service is required; and
    (iv) Justification for priority use of the requested service.
    (2) The Administrator, pursuant to the circumstances specified in 
Sec. 340.4(a)(l), shall identify vessel operators that can provide the 
necessary service and issue NSPOs in coordination with the Secretary to 
those operators directing that priority be given to the movement and 
delivery of the defense agency's cargo and/or passengers by the type of 
service specified in the NSPO during the specified period.
    (3) Each vessel operator in receipt of an NSPO shall:
    (i) Give precedence to the cargoes of the defense agency in 
provision of equipment, loading, ocean transport and delivery; and
    (ii) Coordinate with other operators in receipt of NSPOs applicable 
to the same priority movement program to ensure movement of the defense 
agency's cargoes on first available sailings.
    (b) When a defense agency has need for vessels employed in 
commercial service on a continuing basis for national defense operations 
for a specified period or for the duration of a defense emergency which 
they cannot obtain through established transportation procurement 
practices, the following procedures shall apply:

[[Page 260]]

    (1) The agency shall transmit to the Secretary, with a copy to the 
Administrator, a request specifying the kinds of services required, the 
arrangements under which the agency proposes that the services be 
acquired, managed and compensated, and justification for allocation of 
the required vessels.
    (2) The Administrator, upon receiving guidance from the Secretary, 
shall identify vessel operators that can supply the requested services 
and issue NAOs to operators directing that specified vessels be made 
available for use of the defense agency for specified periods. As far as 
practicable, the economic impact will be balanced among operators.
    (3) Each vessel operator in receipt of an NAO shall provide vessels 
in coordination with the defense agency as specified in the NAO.



Sec. 340.5  Containers and chassis.

    (a) When a defense agency requires priority use of containers and/or 
chassis not obtainable through established transportation procurement 
practices, the following procedures shall apply:
    (1) Except during periods of Presidentially-declared national 
defense emergencies, when requests shall be transmitted to the 
Administrator, the agency shall transmit a request to the Secretary 
specifying:
    (i) The route over which or the area in which priority use of 
containers and/or chassis is required;
    (ii) The period during which priority use is required;
    (iii) the approximate time-phased movement requirement in containers 
and/or chassis of specified sizes and types or in 20-foot equivalent 
units (TEU); and
    (iv) Justification for priority use of containers and/or chassis.
    (2) The Administrator pursuant to the circumstances in Sec. 
340.5(a)(l) shall):
    (i) Identify container service operators capable of meeting the 
requirement; and
    (ii) Issue NSPOs or NAOs in coordination with the Secretary to those 
container service operators, directing that priority be given to supply 
of containers and/or chassis against the defense requirement.
    (3) Each container service operator in receipt of an NSPO shall:
    (i) Coordinate with the defense agency on schedules for spotting 
empty containers and/or chassis and for movement of containerized 
cargoes; and
    (ii) Supply containers and/or chassis to the defense agency in 
accordance with the defense agency's scheduling needs or supply the 
first available containers and/or chassis if those needs cannot be met.
    (b) When a defense agency requires the allocation of containers and/
or chassis on a continuing basis for national defense operations, the 
following procedures shall apply:
    (1) They agency shall transmit to the Secretary, with a copy to the 
Administrator, request specifying:
    (i) The number of containers and/or chassis required by type;
    (ii) The general terms and conditions under which the agency 
proposes to acquire the needed containers and/or chassis and compensate 
the owners or operators;
    (iii) The expected duration of the lease, if the containers and/or 
chassis are to be leased;
    (iv) The locations at which the agency will take possession of the 
containers and/or chassis and the required delivery schedule; and
    (v) Justification for allocation of containers and/or chassis.
    (2) The Administrator in coordination with the Secretary shall 
identify container and chassis suppliers that can supply the required 
containers and/or chassis, and shall provide, so far as practicable, for 
balancing the defense agency's requirement against other requirements 
for containers and/or chassis so as to minimize disruption of inventory 
distribution, and shall issue NAOs to suppliers, directing the 
allocation of specified numbers of containers and/or chassis by type for 
exclusive use of the defense agency for a specified period.
    (3) Each container and chassis supplier in receipt of an NAO shall 
deliver the containers and/or chassis specified in the NAO to the 
defense agency at the places and times specified in the NAO or 
separately agreed upon with the defense agency, under terms and

[[Page 261]]

conditions agreed upon with the defense agency.



Sec. 340.6  Port facilities and services.

    (a) When a defense agency requires priority use of port facilities 
and services not obtainable through established transportation 
procurement practices, the following procedures shall apply:
    (1) Except during periods of Presidentially-declared national 
defense emergencies, when requests shall be transmitted to the 
Administrator, the agency shall transmit a request to the Secretary 
specifying:
    (i) The ports at which priority use of port facilities and services 
are required and the kinds of facilities and services required at each 
port;
    (ii) The approximate scale and duration of the operation for which 
priority support is required; and
    (iii) Justification for priority use of port facilities and 
services.
    (2) The Administrator in coordination with the Secretary shall issue 
NSPOs to the port authorities concerned, directing that priority be 
given to the receipt, in transit handling, and outloading of the defense 
agency's cargo during a specified period and specifying the facilities 
and services required.
    (3) Each port authority in receipt of an NSPO shall:
    (i) Make such dispositions of commercial cargoes and ships loading 
or discharging commercial cargoes as may be necessary to accommodate 
priority movement of the defense agency's cargoes; and
    (ii) Ensure receipt, in transit handling and outloading of the 
defense agency's cargoes as rapidly as possible.
    (b) When a defense agency requires the allocation of port facilities 
for exclusive use of the agency on a continuing basis, the following 
procedures shall apply:
    (1) The agency shall transmit a request to the Secretary, with a 
copy to the Administrator specifying:
    (i) The ports at which the allocation of facilities is required and 
the kinds of facilities needed at each port;
    (ii) The general terms and conditions under which the agency 
proposes to acquire the needed facilities and compensate the owners or 
leaseholders;
    (iii) The periods during which the facilities will be required; and
    (iv) Justification for allocation of facilities.
    (2) The Administrator in coordination with the Secretary shall 
identify facilities that meet the defense agency's needs, and shall 
issue to each concerned port authority and NAO directing the allocation 
of specified facilities for exclusive use of the defense agency during a 
specified period.
    (3) Each port authority in receipt of an NAO shall make the 
specified facilities available to the defense agency for the specified 
period under terms and conditions agreed upon with the defense agency.



Sec. 340.7  Application to contractors and subcontractors.

    (a) Vessel operators, port authorities and container and chassis 
suppliers requiring priorities for production services in order to 
comply with NSPOs and NAOs must submit their priority requirements for 
such services to the Maritime Administrator for action in accordance 
with Departmental policies governing supporting resource support.
    (b) Vessel operators, port authorities and container and chassis 
suppliers requiring priorities for fuel in order to comply with NSPOs 
and NAOs must submit their priority requirements for fuel in accordance 
with Departmental policies governing supporting resources.



Sec. 340.8  Priorities for materials and production.

    (a) Vessel operators, port authorities and container and chassis 
suppliers may request priority ratings to obtain production materials 
and services necessary to comply with orders issued under this 
regulation. Requests for priority rating authority must be made through 
and sponsored by the Maritime Administrator, in accordance with the 
Defense Priorities and Allocation System (15 CFR part 330 et seq. (49 FR 
30412, July 30, 1984)) and Departmental policies governing supporting 
resources support.
    (b) Vessel operators, port authorities and container and chassis 
suppliers may request priority ratings to obtain fuels necessary to 
comply with orders

[[Page 262]]

issued under this regulation. Requests for priority ratings will be made 
in accordance with regulations issued by the Department.



Sec. 340.9  Compliance.

    Pursuant to section 103 of the Defense Production Act, 1950 (50 
U.S.C. App. 2073), any person who willfully performs any act prohibited, 
or willfully fails to perform any act required, by the provisions of 
this regulation shall, upon conviction, be fined not more than $10,000 
or imprisoned for not more than one year, or both.

[[Page 263]]



             SUBCHAPTER I-B_CONTROL AND UTILIZATION OF PORTS





PART 345_RESTRICTIONS UPON THE TRANSFER OR CHANGE IN USE OR IN TERMS 

GOVERNING UTILIZATION OF PORT FACILITIES--Table of Contents



Sec.
1. Definitions.
2. Effective date.
3. Federal control of port facilities.
4. Port facilities predesignated for emergency use.
5. Restrictions on the transfer or change in use or in terms governing 
          utilization of port facilities.
6. Application for approval; place of filing; investigation; disposition 
          by Federal Port Controller; request for review; disposition by 
          the NSA.
7. Exemptions.
8. Applicability.
9. Communications.

    Authority: The Defense Production Act of 1950, as amended (50 App. 
U.S.C. 2061, et seq.;) E.O. 12656, sec. 1401(7) (53 FR 47491, 3 CFR 1988 
Comp.); E.O. 12919, section 201(a), June 3, 1994, 59 FR 29525; 49 CFR 
1.45(5).

    Source: 44 FR 9381, Feb. 13, 1979, unless otherwise noted. 
Redesignated at 45 FR 44587, July 1, 1980.



Section 1  Definitions.

    As used in this part or any other part of this chapter XIX the term:
    (a) National Shipping Authority (NSA), means the emergency shipping 
operations activity of the Maritime Administration established by the 
Secretary of Transportation, when specifically activated during an 
emergency affecting national security in accordance with existing 
statutory authority.
    (b) Person means any individual, partnership, corporation, 
association, joint stock company, business trust, or other organized 
group of persons, or any trustee, receiver, assignee, or personal 
representative, and includes any department, agency, or corporation of 
the United States, any State, or any political, governmental, or legal 
entity.
    (c) Federal Port Controller means a person designated as such in 
accordance with part 1902 of this chapter XIX, under a standard form of 
service agreement to exercise delegated authorities of the Director, 
NSA, in the control of operations of a designated port or group of ports 
upon deployment of the Armed Forces of the United States, or other 
requirements of the nation's defense.
    (d) Port or port area includes any zone contiguous to or a part of 
the traffic network of an ocean or Great Lakes port, or outport 
location, including beach loading sites, within which facilities exist 
for transshipment of persons and property between domestic carriers and 
carriers engaged in coastal, intercoastal and overseas transportation.
    (e) Port facility means a specific location in a port where 
passengers or commodities are transferred between land and water 
carriers or between two water carriers, specifically including: wharves, 
piers, sheds, warehouses, yards, and docks.
    (f) Port equipment means mechanical and other devices used for 
loading and unloading passengers and commodities, including fork lifts, 
towmotors, jitneys, straddle carriers, floating cranes, etc.
    (g) Transfer means to sell, lease, trade, lend, give, relinquish 
title or possession to, or to physically transfer in any other way.

[44 FR 9381, Feb. 13, 1979. Redesignated at 45 FR 44587, July 1, 1980, 
and amended at 60 FR 38736, July 28, 1995]



Sec. 2  Effective date.

    The provisions of this part are effective during the existence of a 
state of war or national emergency proclaimed by the President of the 
United States in accordance with existing statutory authority or by 
concurrent resolution of the Congress.

[44 FR 9381, Feb. 13, 1979. Redesignated at 45 FR 44587, July 1, 1980, 
and amended at 46 FR 36709, July 15, 1981]



Sec. 3  Federal control of port facilities.

    During any period when the provisions of this part are in effect the 
NSA shall exercise such control of ports in the United States and its 
territories or possessions as may be necessary to

[[Page 264]]

meet the requirements of the national security. Control shall be 
consistent with the orders of the Coast Guard Captain of the Port 
relating to the safety and security of the port.



Sec. 4  Port facilities predesignated for emergency use.

    (a) Certain port facilities selected for standby contracts or 
agreements for use by Government agencies shall be controlled directly 
by the NSA.
    (b) Facilities which are not required by the United States 
immediately on the effective date of this part will be released. The 
Director, NSA shall have the discretion to approve contracts for 
subsequent exclusive use by the United States of port facilities in lieu 
of formal requisitioning of such properties.



Sec. 5  Restrictions on the transfer or change in use or in terms governing 

utilization of port facilities.

    Except as otherwise provided in this part, and irrespective of the 
terms of any contract or other commitment, whether or not the facility 
has been designated for emergency use in accordance with section 3 of 
this part:
    (a) No person shall transfer, and no person shall accept transfer of 
any port facility unless such transfer has been approved by the NSA.
    (b) No person shall use any port facility for any purpose or use 
other than that for which it was being used on the day preceding the 
effective date of this part, unless such change in purpose or use has 
been approved by the NSA.
    (c) No person shall change or alter the terms or conditions under 
which any port facility was being operated or used on the day preceding 
the effective date of this part, unless such change has been approved by 
the NSA: Provided, That this restriction shall not relate to the filing 
of tariffs with the Federal Maritime Commission as required by 
applicable law.



Sec. 6  Application for approval; place of filing; investigation; disposition 

by Federal Port Controller; request for review; disposition by the NSA.

    (a) Application for approval of a transfer of, or change in use of, 
or change in terms governing utilization of any port facility shall be 
in writing, and shall contain the following information:
    (1) Name, address, and principal place of business of applicant;
    (2) Specific description and location of port facility involved;
    (3) Name, address, and principal place of business of owner and/or 
operator of such port facility;
    (4) Present use of such port facility;
    (5) Proposed use of such port facility; and
    (6) A statement of the reasons why such transfer, change in use, or 
change in terms, is in the interests of the war effort, national 
defense, or the maintenance of the essential civilian economy.
    (b) The application shall be signed by the applicant or by any 
lawfully authorized agent or representative of the applicant who is 
familiar with the facts stated therein.
    (c) The application and two clear copies thereof shall be filed in 
the office of the Federal Port Controller of the port in which the port 
facility is located, when a Federal Port Controller has been designated 
for the port. For all other ports, the application and copies shall be 
filed in the office of the Maritime Administration Region Director for 
the area where the port is located.
    (d) The Federal Port Controller or Region Director may require the 
applicant to submit reasonable proof of statements made in support of 
the application, and may make such investigation as may be necessary for 
proper disposition of the application. The Federal Port Controller or 
Region Director shall not be required to make any disposition of the 
application unless and until such reasonable proof has been submitted: 
Provided, That the disposition of any such application by the Federal 
Port Controller or Region Director shall not be delayed for more than 60 
days from the date of the filing thereof for the purpose of completing 
any such investigation.
    (e) The Federal Port Controller, or Maritime Administration's Region 
Director or Area Officer may approve the application in whole or in part 
when the action covered by the application to the extent approved, is in 
the interests of the war effort, national defense,

[[Page 265]]

or the maintenance of the essential civilian economy.
    (f) Any applicant aggrieved by the action of the Federal Port 
Controller or Region Director in disapproving in whole or in part his 
application may request, in writing, that such action be reviewed by the 
Director, NSA. The written request shall contain a statement of reasons 
why the decision of the Federal Port Controller should be reversed or 
modified. The Director, NSA, or a designee, will review the application 
on the record made before the Federal Port Controller and will dispose 
of the application on its merits in accordance with the standards set 
forth above.



Sec. 7  Exemptions.

    The provisions of this part shall not apply to any port facility 
owned by, or organic to, any agency or department of the United States 
as of the effective date of this order.



Sec. 8  Applicability.

    This part shall apply to the States of the United States, Puerto 
Rico, and the Virgin Islands.



Sec. 9  Communications.

    Communications concerning this part should refer to 32A CFR part 
1901 and should be addressed to the Maritime Administrator, Department 
of Transportation, Department of Transportation, Washington, DC 20590.



PART 346_FEDERAL PORT CONTROLLERS--Table of Contents



Sec.
1. Purpose.
2. Definitions.
3. Standby agreements.
4. Service agreements.

    Authority: The Defense Production Act of 1950, as amended (50 App. 
U.S.C. 2061, et seq.;) E.O.12656, sec. 1401(7) (53 FR 47491, 3 CFR 1988 
Comp.); E.O. 12919, section 201(a), June 3, 1994, 59 FR 29525; 49 CFR 
1.45(5).



Section 1  Purpose.

    This part prescribes the standard form of the service agreement to 
be entered into by the United States of America, acting by and through 
the Director, National Shipping Authority (NSA) of the Maritime 
Administration, U.S. Department of Transportation, with State or 
municipal port authorities or, private corporations, covering the 
appointment of individuals within their organizations as Federal Port 
Controllers, and providing the required supporting staff and resources.

[44 FR 9382, Feb. 13, 1979. Redesignated at 45 FR 44587, July 1, 1980]



Sec. 2  Definitions.

    (a) Federal control of use of port facilities and services means the 
exercise of jurisdiction over the use of port facilities, as defined in 
section 340.2(o) of 46 CFR Part 340, equipment and services (other than 
port facilities, equipment and services owned by, or organic to any 
agency or department of the United States) in time of emergency to meet 
the needs of the national defense and maintain the essential civilian 
economy.
    (b) Federal Port Controller means a person designated as such under 
a standard form of service agreement to exercise delegated authorities 
of the Director, NSA, in the use of port facilities of a designated port 
or group of ports in connection with the deployment of the Armed Forces 
of the United States, or other requirements of the nation's defense.

[44 FR 9382, Feb. 13, 1979. Redesignated at 45 FR 44587, July 1, 1980, 
and amended at 46 FR 36709, July 15, 1981; 60 FR 38736, July 28, 1995]



Sec. 3  Standby agreements.

    The Director, NSA, may negotiate the standard form of service 
agreement, specified in section 4, with port authorities on a standby 
basis, prior to the deployment of the Armed Forces of the United States, 
or other requirements of the nation's defense. In such cases, the 
contractor accepts the obligation to maintain a qualified incumbent in 
the position specified in Article 1 of the service agreement and to be 
prepared to furnish the resources specified in Articles 4 and 5. An 
agreement executed on a standby basis may become operational in 
connection with the deployment of the Armed Forces of the United States, 
or other requirements of the nation's defense. An

[[Page 266]]

agreement executed after the deployment of the Armed Forces of the 
United States, or other requirements of the nation's defense may be 
operational upon execution.

[60 FR 38737, July 28, 1995]



Sec. 4  Service agreements.

                                                      Contract MA ------

               Service Agreement, Federal Port Controller

    This agreement, made as of ----------------------, 19----, between 
the United States of America (herein called the ``United States''), 
acting by and through the Director, National Shipping Authority of the 
Maritime Administration, Department of Transportation, and ------------
--, a ------------, organized and existing under the laws of ----------
-------- (herein called the ``Contractor'').

                               Witnesseth

    It is this day mutually agreed between the parties as follows:
    Article 1. Appointment of Federal Port Controller. The United States 
appoints the incumbent of the position of --------------------, an 
employee of the Contractor, as Federal Port Controller, to serve as the 
agent of the United States and not as an independent contractor, to 
exercise delegated authority of the Director, NSA, in the control of 
port operations in time of national emergency.
    Art. 2. Acceptance of appointment. (a) The contractor agrees to the 
appointment and undertakes and promises to maintain a qualified 
incumbent in the position specified in articles 4 and 5 and otherwise 
required by the Federal Port Controller and agreed to by the United 
States. Maintaining the equivalent of such specified positions under any 
subsequent reorganization of port staff is deemed to be in compliance 
with this article.
    (b) The contractor undertakes and promises to ensure that the 
Federal Port Controller and agreed supporting staff will be relieved of 
other staff duties and responsibilities during any period in which the 
arrangements provided for in this agreement are in effect, to the extent 
necessary to enable them to exercise diligently the authority delegated 
by the Director, NSA, in accordance with such directions, orders, or 
regulations not inconsistent with this agreement as the United States 
(NSA) has by that time prescribed or may from time to time subsequently 
prescribe to the satisfaction of the director, NSA.
    Art. 3. Scope of Control. The Federal Port Controller shall exercise 
the authorities delegated with respect to port operations in the 
prescribed area of ------.
    Art. 4. Responsibilities and functions of the Federal Port 
Controller--(a) Responsibilities. The Federal Port Controller, acting as 
an agent of the United States (NSA), is charged with exercising due 
diligence to protect the interests of the United States in support of 
any deployment of the Armed Forces of the United States, or other 
requirements of the nation's defense including maintenance of the 
essential civilian economy and be responsible for insuring the efficient 
and effective utilization of the port in accordance with such 
directions, orders, regulations, supervision, and inspections as the 
United States (NSA) may prescribe (or in the absence of such directions, 
orders, forms, and methods of supervision and inspection, in accordance 
with customary commercial practice). Responsibilities generally include:
    (1) Formulation of port coordination and support policy and 
assurance of adherence thereto:
    (2) Expediting of ship turnaround and prevention of congestion of 
ships and cargo in port;
    (3) Correlation of arrangements for rapid clearance and rapid 
transit of commodities through the port;
    (4) Correlation of arrangements for berthing ships and their loading 
and discharging;
    (5) Provision through port control agency channels, of advice on 
daily port capacities and workload; and
    (6) Disposition of frustrated cargo to prevent reduction of port 
capacity.
    (b) Functions. Subject to the direction and control of the NSA, in 
accordance with such policies, programs, allocations, and priorities as 
may be adopted or established, the Federal Port Controller will:
    (1) Furnish the NSA necessary information based upon the local 
situation and conditions, for establishment by the NSA, of periodic 
maximum quotas of cargo ocean lift for the port. As appropriate such 
information shall include but not be limited to estimates of port 
capacity; the port work load; and availability of berths, vessels, 
cargoes, labor, and equipment.
    (2) Recommend changes of destination of ships or cargo to 
appropriate representatives of the NSA.
    (3) Coordinate port operations to accommodate ships diverted in 
emergencies by naval authorities.
    (4) Coordinate through the Federal agency responsible for land 
transportation, movement of traffic to and from port areas and, as 
necessary, exercise controls in coordination with said agency, over the 
movement of traffic into, within, and out of port areas in accordance 
with requirements and available port capacity for transshipment.
    (5) Administer priorities for the movement of traffic through port 
areas.

[[Page 267]]

    (6) Provide guidance for the coordination of port terminal and 
forwarding operations; exercise control over the utilization of port 
facilities, port equipment, and port services, public and private, 
except those owned by, or organic to any agency or department of the 
United States and promote maximum efficiency.
    (7) Coordinate and make recommendations with respect to the 
development of port facilities and rehabilitation of substandard port 
facilities; recommend restoration or replacement of damaged or destroyed 
port facilities and direct, coordinate and control the activities of 
Federal, State, local and private agencies in carrying out such 
restoration or replacement work as may be authorized by proper 
authority.
    (8) Furnish the NSA with pertinent information and data with respect 
to local port operations in order to assist the NSA in performing its 
responsibilities at the national level.
    (9) Handle ``claimant'' requests and problems arising at the local 
level within authorities delegated by the NSA.
    (10) As directed, furnish current information to the Federal agency 
responsible for land transportation in order that it may approve and 
issue block releases for port bound traffic to the Department of Defense 
with respect to military traffic and to the NSA with respect to all 
other oceangoing traffic, in accordance with firm cargo ocean lift 
schedules for the port. Shipper agencies may provide individual permits 
to shippers and depots for specific movements to the port areas. Advise 
the Federal agency responsible for land transportation where 
circumstances warrant institution of control by the latter agency over 
traffic-bound inland from the port area in order to minimize congestion 
in the port.
    Art. 5. Federal Port Controller staff. The contractor shall provide, 
in support of the Federal Port Controller, the staff personnel necessary 
to coordinate actions to overcome any constraints on the effective and 
efficient conduct of port operations as well as clerical staff to meet 
the administrative requirements of the Federal Port Controller. The 
numbers of staff will be determined and agreed to from time to time by 
the United States (NSA) and the contractor and entered in schedule A 
attached to this service agreement.
    Art. 6. Office Facilities. The contractor shall provide or arrange 
for necessary office facilities for the Federal Port Controller 
activity, including office space, furniture, communications equipment, 
supplies, utilities, transportation, and other normal administrative 
support and support services, as necessary and agreed to from time to 
time by the United States (NSA) and the contractor and recorded in 
schedule B attached to this service agreement.
    Art. 7. Compensation. (a) At least once a month, the United States 
(NSA) shall pay to the contractor compensation for the Federal Port 
Controller's services, the costs of his organization, and the costs of 
office facilities, administrative support services, as follows:
    (1) Compensation for services of the Federal Port Controller and his 
staff shall be in accordance with salary levels plus monetary items 
directly related thereto (employee service expenses) in force at the 
time this agreement comes into force: Provided, That subsequent cost of 
living increases authorized under labor agreements and in accordance 
with Federal or State regulations will apply: And provided, That part-
time services will be compensated for on a prorated basis. Any 
adjustments in compensation after the contract comes into force will be 
negotiated, if appropriate. Employee service expenses will include the 
employer contributions for social security and pensions, as well as 
life/health and workmen's compensation insurance.
    (2) Compensation for support other than salaries and related 
expenses (see art. 6) shall be in accordance with published schedules of 
charges of the contractor; and if schedules of charges have not been 
published by the contractor, in such fair and reasonable amount as the 
United States shall from time to time determine and publish in addendums 
to this service agreement: Provided, That, when facilities and support 
services are shared by the Federal Port Controller and other agencies 
and activities compensation shall be prorated on a schedule acceptable 
to the United States and the contractor.
    (b) The contractor shall also be entitled to payment or credit for 
any service, loss, cost, or expense, whether or not specifically 
provided for or excepted herein, if, and to the extent that such payment 
or credit is determined within the sole discretion of the Director, NSA, 
to be fair and equitable and in accordance with the basic principles or 
intent of this agreement.
    Art. 8. Warranty against contingent fees. The contractor warrants 
that it has not employed any person to solicit or secure this agreement 
upon any agreement for a commission, percentage, brokerage, or 
contingent fee. Breach of this warranty shall give the United States the 
right to annul this agreement or in its discretion to deduct from any 
amount payable hereunder the amount of such commission, percentage, 
brokerage, or contingent fee.
    Art. 9. Equal opportunity. During the performance of this agreement, 
the contractor agrees that the contractor will not discriminate against 
any employee or applicant for employment because of race, color, 
religion, sex, age or national origin. The contractor will take 
affirmative action to insure that

[[Page 268]]

all action related to employment is taken without regard to race, color, 
religion, sex, age, or national origin. Such action shall include, but 
not be limited to, employment, promotion, layoff or termination, direct 
or indirect compensation and selection for training, except where such 
provisions are governed by State civil service commissions or comparable 
government agencies. The contractor agrees to post in conspicuous 
places, available to employees and applicants for employment, notices to 
be provided by the NSA setting forth the provisions of this 
nondiscrimination clause.
    Art. 10. Officials not to benefit. No persons elected or appointed 
as members of or delegates to Congress, themselves or by any other 
persons in trust for them, or for their use or account shall hold or 
enjoy this agreement in whole or in part, except as provided in Section 
433, Title 18, United States Code. The operator shall not employ any 
member of Congress, either with or without compensation as an attorney, 
agent, officer, or director.
    Art. 11. Right of Comptroller General to Examine Books and Records. 
The Comptroller General of the United States or any of his duly 
authorized representatives shall have access to and the right to examine 
any pertinent books, documents, papers, and records of the contractor 
related to this agreement.
    Art. 12. Effective Date, Implementation, Duration and Termination. 
(a) This agreement is effective as of the day and year set forth above.
    (b)(1) if entered into on a standby basis, this agreement shall be 
operational as of the day and year when the United States notifies the 
contractor that the services specified in this agreement are required 
during a deployment of the Armed Forces of the United States, or other 
requirements of the nation's defense, Provided that during the standby 
period, the contractor will carry out the obligation specified in 
paragraph (a) of Article 2. No compensation will accrue to the 
contractor during the standby period.
    (2) if entered into during a deployment of the Armed Forces of the 
United States, or other requirements of the nation's defense, this 
agreement shall be operational when executed.
    (c) Unless sooner terminated, the agreement shall extend until 6 
months after termination of the emergency.
    (d) This agreement may be terminated upon thirty (30) days' written 
notice by either party to the other party hereto: Provided, however, 
That, notwithstanding any such termination, the contractor shall, at the 
option of the United States, continue to be responsible for the 
completion of any work which the contractor is performing on the 
effective date of termination. Termination or expiration of this 
agreement shall neither affect nor relieve any liability or obligation 
that may have accrued prior thereto.
    (e) This agreement may be amended, modified or supplemented in 
writing at any time by mutual consent of the parties hereto. This 
agreement may not be amended, modified or supplemented otherwise than in 
writing.
    Art. 13. Renegotiation. This contract shall be deemed to contain all 
the provisions required by section 104 of the Renegotiation Act of 1951.
    Art. 14. Headnotes. The use of headnotes at the beginning of the 
articles of this agreement is for the purpose of description only and 
shall not be construed as limiting or in any other manner affecting the 
substance of the articles themselves.
    In witness whereof, the parties hereto have executed this agreement 
in triplicate as of this ------------ day of ----------------, 19----.

       united states of america, department of commerce, maritime 
                             administration

(Seal)
Attest:

Secretary ------
Director, National Shipping Authority ------
(Corporate Seal)
Attest:
Secretary ------

By:_____________________________________________________________________

    Approved as to Form:
General Counsel ------, Maritime Administration.

                   Part 1902. Federal Port Controller

Schedule A
    Agreed positions.
Schedule B
    Agreed office facilities, furniture and support resources.

[44 FR 9382, Feb. 13, 1979. Redesignated at 45 FR 44587, July 1, 1980, 
and amended at 46 FR 36710, July 15, 1981; 60 FR 38737, July 28, 1995]



PART 347_OPERATING CONTRACT--Table of Contents



Sec.
1. Purpose.
2. Stand-by agreements.
3. Terminal operating contract.

    Authority: The Defense Production Act of 1950, as amended (50 App. 
U.S.C. 2061, et seq.); E.O. 12656, sec. 1401(7) (53 FR 47491, 3 CFR 1988 
Comp.); E.O. 12919, section 201(a), June 3, 1994, 59 FR 29525; 49 CFR 
1.45(5).

    Source: 44 FR 9384, Feb. 13, 1979, unless otherwise noted. 
Redesignated at 45 FR 44587, July 1, 1980.

[[Page 269]]



Sec. 1  Purpose.

    This part prescribes the standard form of marine terminal contract 
to be entered into by the United States of America, acting by and 
through the Director, National Shipping Authority (NSA) of the Maritime 
Administration, U.S. Department of Transportation, with State or 
municipal authorities or private terminal operators for the provision of 
terminal operating services during civil defense emergencies or national 
emergencies declared by the President of the United States in accordance 
with existing statutory authority or by concurrent resolution of the 
Congress.



Sec. 2  Stand-by agreements.

    The Director NSA, Maritime Administration, in advance of an 
emergency, may negotiate the standard form of terminal operating 
contract specified in Section 3, with terminal operators on a stand-by 
basis. Stand-by arrangements establish the framework of rapid initiation 
of government shipping operations at the outset of an emergency.

At port facilities, (as defined in section 1(e) of 32A CFR part 1901) 
under the control of the Maritime Administration and allocated for long 
term exclusive use by the Department of Defense (DOD), provisions will 
ordinarily be made for the use of contractors under DOD contracts to 
move DOD cargo through selected ports, to perform such services as pre-
stowing, receipt, intransit storage and loading of cargo under DOD 
procedures for the Defense Transportation System. When it becomes 
necessary to move DOD cargo through marine terminals under the control 
of the Maritime Administration, but not allocated for long term 
exclusive use by DOD, contractors will be required to perform such 
services as DOD requires for handling cargo and documenting shipments 
under the Defense Transportation System, with corresponding contractual 
obligations.



Sec. 3  Terminal operating contract.

Contract MA_____________________________________________________________

                       Terminal Operating Contract

    This agreement, made as of ------------------, 19----, between the 
United States of America (herein called the ``United States''), acting 
by and through the Director, National Shipping Authority (NSA) of the 
Maritime Administration, Department of Transportation, and ------------
----, a ------------ organized and existing under the laws of ----------
---- (herein called the ``operator'').

                               Witnesseth

    That in consideration of the covenants and agreements of the parties 
hereinafter contained and set forth, the parties here to do mutually 
covenant and agree as follows: Part. 1.
    Article 1. Relationship of parties. (a) The United States engages 
the operator as an independent contractor to do and perform or arrange 
for the performance of all the customary duties and functions of a 
terminal operator, subject to the terms, covenants and conditions of 
this agreement and to such rules, regulations and orders as may be 
issued by the United States from time to time, with respect to such 
cargo and vessels as the United States may from time to time direct or 
designate, and at the following terminals: ------, more specifically 
described in Schedule A hereto attached and made a part hereof by 
reference, and at such other terminals as the United States may from 
time to time designate, which the operator may use under temporary 
assignment in order to expedite the loading and discharging of vessels 
under jurisdiction of the NSA.
    (b) The operator hereby accepts such engagement and agrees to do and 
perform all the work required by it to be performed under this agreement 
in an economical and efficient manner and in accordance with the best 
operating practices, to exercise due diligence to protect and safeguard 
the interests of the United States in all respects and seek to avoid any 
delay, loss or damage whatsoever to United States shipping. The operator 
represents and warrants that it is the ------ of the herein before 
specified terminals.
    Art. 2. Compensation. (a) As full and complete compensation for the 
work done and performed by the operator, the United States agrees to pay 
to the operator, as soon as practicable after the completion of each 
calendar month's work under the provisions of this agreement the 
following:
    (1) For terminal services, an amount calculated on the basis of 
rates and charges contained in tariffs on file with the Federal Maritime 
Commission during the time this agreement is in effect: Provided, 
however, That the operator will be compensated, as a minimum, the amount 
per month set forth for each terminal in schedule A attached: And 
provided further, That, when the operator, with the approval of the 
Director, NSA, utilizes the terminal for cargo not controlled by the 
Director, NSA (that is, for commercial cargo), the compensation received 
by the operator for handling such cargo shall

[[Page 270]]

apply against the minimum compensation; and
    (2) For stevedoring services provided or arranged for by the 
operator and any related contractual services not specified in the 
terminal tariff such as handling lines or additional lashing or 
carpentry required for proper stowage or discharge activities, 
reimbursement for all direct costs of labor as well as those directly 
related or allocable to the provision of such labor and employee service 
expenses and costs of materials and equipment, an allowance of 15 
percent for GAE is authorized except for those items which are 
ordinarily provided by the contractor and the basis for charges for 
which already includes GAE.
    (3) An additional amount in payment or credit for any service, loss, 
cost of expense, whether or not specifically provided for or excepted 
herein; if, and to the extent that, such payment or credit is found by 
the Director, NSA, or his designated agent, in his sole discretion, to 
be fair and equitable and in accordance with the basic principles or 
intent of this agreement.
    (b) Monies due and owing to the operator shall be paid to it only 
upon the submission of vouchers properly and duly supported and 
certified. All such vouchers under this agreement shall refer to the 
date and number of this agreement.
    (c) In the event a voucher submitted for payment for the work, or 
any portion thereof, is not properly supported or certified, the United 
States may nevertheless make partial payment thereof or payments on 
account of such voucher as has been properly supported or certified. 
Such partial payment or payments on account shall not be deemed or held 
to be a waiver of the right of the United States to revise or adjust 
such partial payment or payments on account upon the basis of any data 
or information later received or submitted by the operator.
    (d) No payment will be made for handling ship stores or providing 
services properly billed under vessel contracts or agency agreements 
related to vessel operations and repairs.
    Art. 3. Effective Date, Implementation, Duration and Termination
    (a) This agreement is effective as of the day and year set forth 
above.
    (b)(1) if entered into on a standby basis, this agreement shall be 
operational as of the day and year when the United States notifies the 
contractor that the services specified in this agreement are required 
during a period of war or national emergency: Provided, That during the 
standby period, the contractor will carry out the obligation specified 
in paragraph (a) of Article 2. No compensation will accrue to the 
contractor during the standby period.
    (2) if entered into during a period of war or national emergency, 
this agreement shall be operational when executed.
    (c) Unless sooner terminated, this agreement shall extend until 6 
months after the termination of the emergency.
    (d) This agreement may be terminated upon thirty (30) days' written 
notice by either party to the other party hereto: Provided, however, 
That, notwithstanding any such termination, the operator shall, at the 
option of the United States, continue to be responsible for the 
completion of any work which the operator is performing on the effective 
date of termination. Termination or expiration of this agreement shall 
neither affect nor relieve any party of any liability or obligation that 
may have accrued prior thereto.
    (e) This agreement may be amended, modified or supplemented in 
writing at any time by mutual consent of the parties hereto. This 
agreement may not be amended, modified or supplemented otherwise than in 
writing.
    Art. 4. Contract documents. This agreement consists of part I, part 
II, and schedule A (the latter being hereto attached and made a part 
hereof by reference) and such other schedules or writing as may be made 
by the parties in accordance with the provisions of this agreement. Each 
and every one of the provisions of said part II, schedules and writings 
are part of this agreement as though hereinbefore set out at length.
    In witness whereof, the parties hereto have duly executed this 
agreement in triplicate as of the day and year first above written.

(Seal)
Attest:

    united states of america, department of transportation, maritime 
                             administration

Secretary ------, Maritime Administration.

By:_____________________________________________________________________
Director, National Shipping Authority___________________________________

(Corporate Seal)
Attest:

Secretary ------
    Approved as to Form:

By:_____________________________________________________________________

General Counsel ------, Maritime Administration.

                       Terminal Operating Contract

                                Part II.

    Article 1. Definitions, (a) Cargo as used in this agreement means 
all general freight and commodities in bulk (including those damaged or 
solidified), merchandise, material, mail, baggage, express, ship's and 
subsistence stores, explosives, petroleum products, petroleum and other 
similar liquid cargo.

[[Page 271]]

    (b) Terminal Work as used in this agreement means the operation of 
the terminals specified in schedule A, as terminals and not for any 
other purpose, including the handling, receiving, delivering, 
assembling, checking, sorting, storing, coopering, protecting, and 
shifting of cargo at the said terminals; stowing and snugging cargo in 
the space on the terminal; issuing and receiving proper receipts for 
cargo; loading and discharging boxcars, lighters, scows, barges, 
carfloats, containers, trailers, and chasis; handling vessel's lines on 
docking and undocking; doing maintenance, and repair in accordance with 
the terms of this agreement; any and all other services, operations and 
functions usually or customarily done or performed by a terminal 
operator; and any and all other duties, services, operations or 
functions required by the terms of this agreement to be done or 
performed by the operator.
    (c) Port Terminal Facilities as used in this agreement means piers, 
wharves, warehouses, covered and/or open storage space, cold storage 
plants, grain elevators and/or bulk loading and/or unloading structures, 
landings and receiving stations, used for the transmission, care and 
convenience of cargo and/or passengers in the interchange of same 
between land and water carriers or between two water carriers.
    Art. 2. Duties of the operator. The operator shall:
    (a) If lessee or licensee of the terminals, perform, comply with and 
abide by all applicable terms, covenants and conditions of the lease or 
license under which it occupies and uses said terminals;
    (b) Make available and operate for the requirements of the United 
States (which requirements include all cargo and vessels designated by 
the NSA, whether or not owned by the United States all terminals 
hereinabove described;
    (c) Perform the terminal work as defined and furnish all labor of 
every nature and description and furnish and use all gear and mechanical 
devices or other equipment necessary for the most efficient performance;
    (d) When requested to do so by the NSA or when incident to its 
terminal operations, perform or arrange for the shifting of lighters, 
barges, scows, rail cars and/or carfloats and load and discharge the 
same;
    (e) Insure that the terminals are maintained and kept in proper 
condition and all berths suitably dredged;
    (f) Supply all telephone service, clerical work, light, heat, power, 
fuel, water and other supplies and services connected with or incidental 
to the work, within the limits imposed by national resource allocation 
and priorities systems in effect at the time.
    (g) Insure that sub-contractors engaged are experienced and 
competent to perform adequately in their respective functional field, 
e.g., handling lines; directing tug operations for docking vessels; 
planning and conducting cargo stowage with ship or quayside gear and 
fully complying with all documentation requirements and safety, health 
and sanitation regulations.
    Art. 3. General labor and other provisions. (a) The operator shall 
comply with the Social Security Act, the unemployment insurance laws of 
any State in which work is done, and the provisions of applicable 
collective bargaining agreements.
    (b) The operator recognizes the relation of trust and confidence 
established between it and the United States by this agreement, and 
agrees to furnish its best skill and judgment in planning, supervising 
and performing the work, to make every effort to complete the work in 
the shortest time practicable, and to cooperate fully with the United 
States in furthering the interests of the United States. The operator 
agrees to furnish efficient business administration and superintendence 
in performing the work.
    (c) Upon the execution of this agreement the operator shall 
immediately furnish to the Regional Office, NSA, written schedules of 
the wages and contractual working conditions, (including overtime, pay, 
insurance benefits and other compensation and employment benefits) 
payable by the operator in performing the work, and whenever requested 
from time to time thereafter, the operator shall furnish similar written 
schedules to the Regional Office, NSA, covering the then existing 
conditions. The operator shall notify the NSA concerning any proposed or 
actual change, modifications or alteration in such schedules as soon as 
knowledge thereof is available to the operator.
    (d) The operator shall, if required by the NSA, employ 
identification cards with individual photograph affixed, or other 
methods of identification, as issued by the United States Coast Guard or 
other responsible Government authorities.
    (e) Overtime work under this agreement shall be incurred or 
performed by the operator only when required. However, the operator 
whenever requested by the NSA, shall work overtime.
    Art. 4. Notice of labor disputes. Whenever any actual potential 
labor dispute is delaying or threatens to delay the timely and efficient 
performance of the work, the operator will immediately give written 
notice thereof to the NSA.
    Art. 5. Liability of the operator. (a) While performing the work, 
the operator shall, except as provided in paragraph 6(c) of part II 
hereof, be responsible for any and all loss, damage or injury, including 
death to persons, cargo, vessels, their stores, apparel or equipment, 
wharves, docks, piers, lighters, elevators, cars, carfloats or other 
property or thing, arising through the negligence or

[[Page 272]]

fault of the operator, its employees or terminals: Provided, That, to 
the extent not covered by insurance, the operator shall not be 
responsible to the NSA, for any loss, damage or injury resulting from 
the negligence or wrongful acts of the NSA; or from acts of the operator 
and its employees performed only because specifically so directed by the 
NSA; or from defects or other gear supplied by the United States.
    (b) The operator shall be under no liability to the United States in 
the event that the operator should fail to perform any work hereunder by 
reason of any labor shortage, dispute or difficulty, or any strike or 
lockout or any shortage of material or any act of God or peril of the 
sea or any other cause beyond the control of the operator, whether or 
not of the same or similar nature; or shall do or fail to do any act in 
reliance upon instructions of military or naval authorities.
    Art. 6. Insurance requirements and indemnification. (a) The operator 
shall procure, and maintain during the term of this agreement, pay for 
one or more policies of insurance insuring it as follows, as the basis 
for calculating compensation payable under paragraph 5(a) above:
    (1) Coverage of all piers, wharves, buildings, structures, 
facilities and equipment, as owner or in accordance with terms of lease.
    (2) Standard workman's compensation insurance and employer's 
liability insurance, including longshoremen and harbor worker's 
compensation insurance, or such of these as may be proper under 
applicable State or Federal statutes. Such insurance shall, unless 
otherwise required by applicable State or Federal statutes, be subject 
to $50,000/100,000 limits and shall be full coverage with occupational 
disease endorsement. The operator may, however, be a self-insurer 
against the risks in this subparagraph, if it has obtained the prior 
approval of the Director, NSA, such approval to be given upon the 
submission of satisfactory evidence that the operator has duly qualified 
as a self-insurer under applicable provisions of law.
    (3) Public liability insurance with limits of at least $1,000,000 
for the death or bodily injuries to one person and at least $5,000,000 
for the death or bodily injuries to more than one person in any one 
accident or occurrence.
    (4) Property damage liability insurance covering damage to or loss 
of property resulting from the negligence of the operator with a limit 
of $1,000,000 for each occurrence.
    (b) All liability insurance obtained by the operator as provided in 
paragraph (a)(3) of this section above shall name the United States as 
additional insured or provided for a waiver or subrogation.
    (c) The operator's work is incident to war activities of the United 
States and will involve risks and hazards far in excess of those 
normally incident to peacetime commercial operations. To induce the 
operator to undertake the performance of the work for the compensation 
herein provided, and thus obtain for the United States the resulting 
benefit of such reduced compensation, the United States undertakes to 
and does indemnify the operator and hold it harmless against any loss or 
damage to the terminals (whether owned, leased or occupied under 
license) and against expense (including expense of litigation), 
liability to and claims of third persons because of loss, damage or 
injury to persons, cargo, vessels, their stores, apparel or equipment, 
wharves, piers, docks, lighters, barges, scows, elevators, rail cars, 
carfloats, or other property or thing, arising through the negligence or 
fault of the operator, its employees, gear or equipment, or otherwise, 
all subject, however, to the following conditions and limitations:
    (1) The undertaking of the United States shall be applicable only 
and limited to:
    (a) For public liability the amount such loss, expense, or liability 
arising from any single catastrophe, accident or occurrence exceeds the 
sum of $1,000,000 each person and $5,000,000 per accident or the sum of 
insurance approved or required to be carried in excess of these limits, 
whichever sum is greater and
    (b) For property damage liability the amount such loss, expense or 
liability arising from any single catastrophe, accident or occurrence 
exceeds the sum of $1,000,000 per accident or the sum of insurance 
approved or required to be carried in excess of these limits whichever 
sum is greater.
    (2) The undertaking of the United States shall not be applicable and 
the United States shall have no obligation or liability in respect of 
such undertaking or otherwise, in situations in which such loss, expense 
or liability is due in whole or in part to willful and deliberate 
disregard of instructions of the Administrator or the personal failure 
to exercise good faith or insofar as the character of the work permits 
under wartime operations that degree of care normally exercised under 
like conditions in the performance of the operator's peacetime 
commercial operations, by the elected corporate officers of the operator 
or by the representative of the operator having supervision and 
direction of all operations at any terminal where the operator may 
perform services hereunder.
    (3) As soon as practicable after occurrence of any event from which 
the obligation of the United States to hold the operator harmless 
against loss, expense and liability might arise, written notice of such 
event shall be given by the operator to the United States, which notice 
shall contain full particulars of the event. If claim is made or suit is 
brought thereafter against the operator as a result or because of such 
event, the operator shall immediately deliver to the United States every 
demand, notice, summons or other process

[[Page 273]]

received by it or its representatives, and the United States shall 
provide appropriate attachment or appeal bonds or undertakings where 
required in the course of such litigation.
    (4) The operator shall cooperate with the United States and, upon 
the request of the United States, shall assist in effecting settlements, 
securing and giving evidence, obtaining the attendance of witnesses and 
in the conduct (including defense) of suits; and the United States shall 
reimburse the operator for reasonable out-of-pocket expenses, other than 
loss of earnings, incurred in so doing. The operator shall not 
voluntarily, except at its own cost, make any payment, assume any 
obligation or incur any expense, other than for such immediate medical 
and surgical relief to others as shall be imperative at the time of said 
occurrence of such event.
    (5) This undertaking of the United States to hold the operator 
harmless against loss, expense and liability as herein provided, shall 
not create or give rise to any right, privilege or power in any person 
or organization, except the operator, nor shall any person or 
organization be or become entitled to join the United States as a co-
defendent in any action against the operator brought to determine the 
operator's liability or for any other purpose; Provided, however, That 
as to any risk borne or assumed by the United States through the 
undertaking set above, the United States shall be and hereby is 
subrogated by the operator to any claim, demand or cause of action 
against third persons or organizations which exists or may arise in 
favor of the operator, and the operator shall, if so required, forthwith 
execute a formal assignment or transfer of such claim, demand or cause 
of action.
    (6) This undertaking of the United States shall not apply against 
any loss or expense resulting from enemy attack upon the United States.
    Art. 7. Covenant against assignment or sublease of terminals. The 
operator shall not assign or sublet the terminals or any portion thereof 
nor grant any license with respect thereto, except in the ordinary 
course of terminal operations and subject to the approval of the NSA.
    Art. 8. Custom of the port. No rule or custom of the port in 
conflict with any provision or term of this agreement will be binding 
upon the United States, unless the operator is legally obligated to 
comply with the same pursuant to the laws of the United States or laws 
of any State thereof or pursuant to the terms, provisions, covenants and 
conditions of any lease covering the terminals and entered into between 
the operator and its lessor or licensor thereof.
    Art. 9. Extra work. The United States will neither compensate nor 
make any payments to the operator for any extra work in connection with 
the operation of terminals which it may render in addition to the work 
specifically required by this agreement, except as provided in paragraph 
3(e) of part II hereof.
    Art. 10. Status of employees. All employees of the operator or of 
any other person or organization employed in performance of the work 
shall at all times be the employees of the operator or of such other 
person or organization, as the case may be, and are not employees of the 
United States.
    Art. 11. Delegation of authority. Wherever and whenever any right, 
power or authority herein is granted or given to the United States, such 
right, power or authority may be exercised by the NSA or such agent or 
agents as the United States may appoint, and the act or acts of such 
agent or agents when taken shall constitute the act of the United States 
hereunder. In performing the work, the operator may rely upon the 
instructions and directions of the Director, NSA, his officers and 
responsible employees, or any person or agency authorized by him. 
Whenever practicable, instructions and directions to the operator shall 
be in writing and oral instructions or directions given shall be 
confirmed promptly in writing. No Director's orders or regulations shall 
have retroactive effect without the written consent of the General 
Counsel, Maritime Administration.
    Art. 12. Warranty against contingent fees. The operator warrants 
that it has not employed any person to solicit or secure this agreement 
upon any agreement for a commission, percentage, brokerage or contingent 
fee. Breach of this warranty shall give the United States the right to 
annul this agreement or in its discretion to deduct from any amount 
payable hereunder the amount of such commission, percentage, brokerage, 
or contingent fee.
    Art. 13. Equal opportunity. During the performance of this 
agreement, the operator agrees as follows:
    (a) The operator will not discriminate against any employee or 
applicant for employment because of race, color, religion, sex, age or 
national origin. The contractor will take affirmative action to insure 
that all action related to employment is taken without regard to race, 
color, religion, sex, age or national origin. Such action shall include, 
but not be limited to, employment, promotion, layoff or termination, 
direct or indirect compensation and selection for training, except where 
such provisions are governed by State civil service commissions or 
comparable government agencies. The contractor agrees to post in 
conspicuous places, available to employees and applicants, notices to be 
provided by the NSA setting forth the provisions of this 
nondiscrimination clause.
    (b) The operator will, in all solicitations or advertisements for 
employees placed by or

[[Page 274]]

on behalf of the operator, state that all qualified applicants will 
receive consideration for employment without regard to race, color, 
religion, sex, age, or national origin.
    (c) The operator will send to each labor union or representative of 
workers with which it has a collective bargaining agreement or other 
contract or understanding, a notice, to be provided by the NSA, advising 
the labor union or worker's representative of the operator's commitments 
under section 202 of Executive Order No. 11246 of September 24, 1965, as 
amended, and shall post copies of the notice in conspicuous places 
available to employees and applicants for employment.
    (d) The operator will comply with all provisions of Executive Order 
No. 11246, as amended, and by the rules, regulations and orders of the 
Secretary of Labor.
    (e) The operator will furnish all information and reports required 
by Executive Order No. 11246, as amended, and by the rules, regulations 
and orders of the Secretary of Labor, or pursuant thereto, and will 
permit access to its books, records, and accounts by the NSA and the 
Secretary of Labor for purposes of investigation to ascertain compliance 
with such rules, regulations and orders.
    (f) In the event of the operator's noncompliance with the 
nondiscrimination clauses of this agreement or with any of such rules, 
regulations or orders, this agreement may be cancelled, terminated or 
suspended in whole or in part, and the operator may be declared 
ineligible for further Government contracts in accordance with 
procedures authorized in Executive Order No. 11246, as amended, and such 
other sanctions may be imposed and remedies invoked as provided in 
Executive Order No. 11246, as amended, or by rule, regulation or order 
of the Secretary of Labor, or as otherwise provided by law.
    (g) The operator will include the provisions of this paragraph in 
every subcontract or purchase order unless exempted by rules, 
regulations or orders of the Secretary of Labor issued pursuant to 
section 204 of Executive Order No. 11246, as amended, so that such 
provisions will be binding upon each subcontractor or vendor. The 
operator will take such action with respect to any subcontract or 
purchase order as the NSA may direct as a means of enforcing such 
provisions, including sanctions for noncompliance: Provided, however, 
That in the event the operator becomes involved in or is threatened with 
litigation with a subcontractor or vendor as a result of such direction 
by the NSA, the operator may request the United States to enter into 
such litigation to protect the interests of the United States.
    Art. 14. Officials not to benefit. No persons elected or appointed 
as members of or delegates to Congress, themselves or by any other 
persons in trust for them, or for their use or account shall hold or 
enjoy this agreement in whole or in part, except as provided in Section 
433, Title 18, United States Code. The operator shall not employ any 
member of Congress, either with or without compensation, as an attorney, 
agent, officer or director.
    Art. 15. Right of Controller General to examine books and records. 
The Controller General of the United States or any of his duly 
authorized representatives shall have access to and the right to examine 
any pertinent books, documents, papers and records of the operator or 
any of its subcontractors engaged in the performance of the work under 
this agreement.
    Art. 16. Renegotiation. This agreement shall be deemed to contain 
all the provisions required by section 104 of the Renegotiation Act of 
1951. The operator shall, in compliance with said section 104, insert 
the provisions of this paragraph in each subcontract and purchase order 
made or issued in carrying out this agreement.
    Art. 17. Headnotes. The use of headnotes at the beginning of the 
articles of this agreement is for the purpose of description only and 
shall not be construed as limiting or in any other manner affecting the 
substance of the articles themselves.

                 Schedule A--Terminal Operating Contract

    Description of Terminal(s) and the agreed minimum dollars per month 
for each.

[44 FR 9384, Feb. 13, 1979. Redesignated at 45 FR 44587, July 1, 1980, 
and amended at 46 FR 36710, July 15, 1981]



PART 349_REEMPLOYMENT RIGHTS OF CERTAIN MERCHANT SEAMEN--Table of Contents



Sec.
349.1 Purpose.
349.2 Application for certification.
349.3 Certification criteria.
349.4 Decision on application.
349.5 Reemployment rights and benefits.
349.6 Enforcement.

    Authority: Secs. 204(b), 302, Merchant Marine Act, 1936, as amended 
(46 App. U.S.C. 1114(b), 1132); 38 U.S.C. 4301 et seq.; 49 CFR 1.66

    Source: 62 FR 5159, Feb. 4, 1997, unless otherwise noted.



Sec. 349.1  Purpose.

    This part prescribes regulations implementing section 302, Merchant 
Marine Act, 1936 (Act), as amended (46 App. U.S.C. 1132), added by 
section 10 of Pub. L. 104-239, the Maritime Security Act of 1996. These 
regulations provide the procedures by which the Maritime

[[Page 275]]

Administration (MARAD), under authority delegated by the Secretary of 
Transportation to the Maritime Administrator, certifies, upon 
application, that certain merchant seamen are entitled to reemployment 
rights and other benefits after completion of their service on vessels 
used by the United States for a war, armed conflict, national emergency 
or maritime mobilization need. It also describes the form of 
administrative assistance MARAD will provide to the seamen certified.



Sec. 349.2  Application for certification.

    Pursuant to 46 App. U.S.C. 1132, an individual may submit an 
application to MARAD not later than 45 days after the date the 
individual completes the period of employment described in Sec. 349.3 
of this part.



Sec. 349.3  Certification criteria.

    The Administrator shall apply the following criteria for certifying 
that an individual merchant seaman is entitled to reemployment rights 
and other benefits substantially equivalent to the rights and benefits 
provided by chapter 43 of title 38, United States Code, for any member 
of a Reserve Component of the Armed Forces of the United States who is 
ordered to active duty. It shall be the responsibility of each applicant 
for certification to submit relevant documentation to MARAD, Office of 
Maritime Labor, Training, and Safety, MAR-250, 400 Seventh St., S.W., 
Room 7302, Washington, D.C. 20590, establishing that--
    (a) Employment as merchant seaman. The applicant was employed after 
October 8, 1996, in the activation or operation of a vessel--
    (1) in the National Defense Reserve Fleet maintained by MARAD under 
authority of section 11 of the Merchant Ship Sales Act of 1946 (50 
U.S.C. App. 1744) in a period in which that vessel was in use or being 
activated for use under 50 U.S.C. App. 1744(b);
    (2) that is requisitioned under section 902 of the Act (46 App. 
U.S.C. 1242); or
    (3) that is owned, chartered, or controlled by the United States and 
used by the United States for a war, armed conflict, national emergency, 
or maritime mobilization need (including for training purposes or 
testing for readiness and suitability for mission performance).
    (b) Seaman credentials. During the period of employment described in 
paragraph (a) of this section, the seaman possessed a valid license, 
certificate of registry, or merchant mariner's document issued under 
chapter 73 (as applicable) of title 46, United States Code, as required 
by 46 App. U.S.C. 1132(c).
    (c) Additional information. If applicable, periods of 
hospitalization, convalescence, illness, injury, shipwreck or detention 
beyond the mariner's control were incurred in, or aggravated during, the 
performance of employment described in Sec. 349.3(a).



Sec. 349.4  Decision on application.

    MARAD will issue or deny certification (accompanied by an 
explanation in writing) to each applicant not later than 20 days after 
receipt of an application for certification.



Sec. 349.5  Reemployment rights and benefits.

    (a) General. An individual who is absent from a position of 
employment, in the private or public (federal, state or local 
government) sector, because of temporary employment of any duration 
described in Sec. 349.3(a), shall be entitled to reemployment rights 
and benefits upon completion of the temporary employment as a merchant 
seaman.
    (b) Superior claims. Pursuant to 38 U.S.C. 4312(g), the right of a 
person to reemployment shall not entitle such person to retention 
preference or displacement rights over any person with a superior claim 
under the provisions of title 5, United States Code, relating to 
veterans and other preference eligibles.
    (c) Notification of employer. Any person who is absent from a 
position of employment by reason of service as described in Sec. 
349.3(a) shall be entitled to reemployment rights and benefits provided 
in Sec. 349.3(e) if--
    (1) The person has given advance written or verbal notice of such 
service to such person's employer, unless giving notice is precluded by 
military necessity, under regulations prescribed by the Secretary of 
Defense, or, under

[[Page 276]]

all relevant circumstances, is impossible or unreasonable, pursuant to 
the provisions of 38 U.S.C. 4312(b); and
    (2) The person submits an application for reemployment with the 
employer not later than 14 days after completion of a period of service 
of less than 181 days, or not later than 90 days after the completion of 
a period of service greater than 180 days, or if submitting such 
application within such period is impossible or unreasonable through no 
fault of the person, the next first full calendar day when submission of 
such application becomes possible.
    (d) Waiver of notice requirements. A person who has not given 
notice, or who fails to report or apply for employment or re-employment 
within the appropriate period specified in paragraph (c) of this section 
shall not automatically forfeit such person's entitlement to the rights 
and benefits referred to in Sec. 349.5(e), but shall be subject to the 
rules of conduct, established by policy, and the general practices of 
the employer pertaining to explanations and discipline with respect to 
absence from scheduled work. MARAD will make a determination on the 
issue of whether notice of service was required in acting on the 
application for certification.
    (e) Exception to reemployment rights. An employer is not required to 
reemploy an individual if the employer satisfies the burden of proving 
that, pursuant to 38 U.S.C. 4312(d)--
    (1) The employer's circumstances have so changed as to make such 
reemployment impossible or unreasonable, or such reemployment, if 
required, would impose an undue hardship on the employer, as defined in 
38 U.S.C. 4303(15); or
    (2) The employment which the individual left for employment as a 
merchant seaman was for a brief, nonrecurrent period and there was not 
at the time of leaving such employment any reasonable expectation that 
such employment would continue indefinitely or for a significant period.
    (f) Reemployment benefits. An individual certified by MARAD to be 
entitled to reemployment shall also be entitled to other ``benefits of 
employment'' (other than wages or salary for work performed), as defined 
in 38 U.S.C. 4303(2), that would have accrued to that individual by 
reason of an employment contract or agreement or an employer policy, 
plan or practice and includes rights and benefits under a pension plan, 
a health plan, an employee stock ownership plan, insurance coverage and 
awards, bonuses, severance pay, supplemental unemployment and benefits, 
vacations and the opportunity to select work hours or location of 
employment.
    (g) Reemployment position. (1) An individual certified by MARAD as 
being entitled to reemployment shall be promptly reemployed by the 
former employer, according to the order of priority specified in 38 
U.S.C. 4313(a), after submitting an application for reemployment. The 
three categories of priority, in ascending order, are for a merchant 
seaman who:
    (i) Served for 90 days or less;
    (ii) Served for more than 90 days; or
    (iii) Has a disability incurred in, or aggravated during, the 
performance of such merchant service.
    (2) For a person with such service related disability, the employer 
shall make ``reasonable efforts'', as defined in 38 U.S.C. 4303(10), 
``to accommodate the disability'' to allow that person to be employed in 
the position that would have been occupied had the employment with the 
employer been continuous, or in the position in which employed on the 
date service began as a merchant seaman, and if that person is ``not 
qualified'' for either position, in a substantially equivalent position, 
as specified in 38 U.S.C. 4313 (a)(3) and (a)(4).



Sec. 349.6  Enforcement.

    MARAD shall provide administrative assistance to any individual 
certified to be entitled to reemployment rights and benefits pursuant to 
chapter 43 of title 38, United States Code, made applicable by 46 App. 
U.S.C. 1132(a) and these regulations, who alleges in writing to MARAD 
the failure, refusal, or imminent failure or refusal of an employer to 
grant such rights or other benefits. The complaint must be sent to MARAD 
at the address in Sec. 349.3. Such complaint may be in any format and 
shall include the name and address

[[Page 277]]

of the employer against whom the complaint is filed and a summary of the 
allegations that form the basis for the complaint. MARAD will review, 
investigate and attempt to resolve the complaint by taking one or more 
of the following actions:
    (a) Consultation with claimant. MARAD will communicate with the 
individual filing the complaint, in writing and/or by telephone or other 
means, to provide assistance in pursuing reemployment rights and 
benefits with the employer.
    (b) Employer contact. MARAD may contact the employer and attempt to 
resolve the complaint to the mutual satisfaction of the complainant and 
the employer.
    (c) Consultation with Department of Labor. If attempts by MARAD to 
resolve the complaint are unsuccessful, MARAD may seek advice on the 
matter from the U.S. Department of Labor.
    (d) Referral to Attorney General or Merit Systems Protection Board. 
MARAD will notify the complainant of an unsuccessful effort to resolve a 
complaint. Pursuant to 38 U.S.C. 4323 and 4324, if the complainant so 
requests, MARAD will refer to the Attorney General a complaint relating 
to a private or State employer, or to the Merit Systems Protection 
Board, for litigation, a complaint relating to a Federal executive 
agency employer.

[[Page 278]]



                       SUBCHAPTER J_MISCELLANEOUS




PART 350_SEAMEN'S SERVICE AWARDS--Table of Contents



Sec.
350.1 Purpose.
350.2 Special medals and awards.
350.3 Other original recognition of service.
350.4 Eligibility for awards.
350.5 Replacement decorations.
350.6 Unauthorized sale, manufacture, possession or display.
350.7 Special certificate of recognition.

    Authority: 46 App. U.S.C. 2001, et seq.; 49 CFR 1.66.

    Source: 60 FR 49804, Sept. 27, 1995, unless otherwise noted.



Sec. 350.1  Purpose.

    The purpose of this part is to prescribe regulations to implement 
the Merchant Marine Decorations and Medals Act of 1988, 46 App. USC 
2001, et seq., to authorize the issue of decorations, medals, and other 
recognition for service in the U.S. merchant marine, and for other 
purposes, and to provide for the replacement of awards previously issued 
for service in the United States Merchant Marine under prior law.



Sec. 350.2  Special medals and awards.

    The Secretary of Transportation, acting through the Maritime 
Administrator, may award decorations and medals of appropriate design 
for individual acts or service in the U.S. Merchant Marine.
    (a) Medals, awards. The Secretary may award the Distinguished 
Service Medal, Meritorious Service Medal and Gallant Ship Unit Citation 
Award, as prescribed under sections 3 and 4 of Pub. L. 100-324.
    (b) Nominations. Nominations for these awards shall be reviewed and 
submitted by the MARAD Merchant Marine Awards Committee to the Maritime 
Administrator for approval.
    (c) Inquiries. Direct all inquiries concerning eligibility and 
procedures for the issuance of these medals to Chairperson, Merchant 
Marine Awards Committee, Office of Maritime Labor, Training and Safety, 
Maritime Administration, U.S. Department of Transportation, Washington, 
DC 20590.



Sec. 350.3  Other original recognition of service.

    Under the provision of Pub. L. 100-324, the Administrator has the 
authority to review original applications for the following decorations:
    (a) World War II Service. (1) Merchant Marine Emblem, awarded to 
merchant seamen for service during World War II from the period December 
7, 1941 to July 25, 1947;
    (2) Victory Medal, awarded to merchant seamen who served as members 
of the crews of ships for 30 days or more during the period December 7, 
1941 to September 3, 1945;
    (3) Honorable Service Button, awarded to merchant seamen who served 
as members of the crews of ships for 30 days or more during the period 
December 7, 1941 to September 3, 1945;
    (4) Mariner's Medal, awarded to merchant seamen who, while serving 
on a ship from December 7, 1941 to July 25, 1947, were wounded or 
suffered physical injury as a result of an act of an enemy of the United 
States;
    (5) Merchant Marine Combat Bar, awarded to merchant seamen who 
served on a ship which, at the time of such service, was attacked or 
damaged by an instrumentality of war, from December 7, 1941 to July 25, 
1947. A star is attached if the seaman was forced to abandon ship. For 
each additional abandonment, a star is added;
    (6) Merchant Marine Defense Bar and Medal, awarded to merchant 
seamen who served on merchant vessels between September 8, 1939 to 
December 7, 1941;
    (7) Atlantic War Zone Bar and Medal, awarded to merchant seamen who 
served in the Atlantic War Zone, including the North Atlantic, South 
Atlantic, Gulf of Mexico, Caribbean, Barents Sea, and the Greenland Sea, 
between December 7, 1941 and November 8, 1945;
    (8) Mediterranean-Middle East War Zone Bar and Medal, awarded to 
merchant seamen who served in the zone including the Mediterranean Sea, 
Red Sea, Arabian Sea, and Indian Ocean

[[Page 279]]

west of 80 degrees east longitude, between December 7, 1941 and November 
8, 1945;
    (9) Pacific War Zone Bar and Medal, awarded to merchant seamen who 
served in the Pacific War Zone, including the North Pacific, South 
Pacific, and the Indian Ocean east of 80 degrees east longitude, during 
the period December 7, 1941 to March 2, 1946;
    (10) Presidential Testimonial Letter, signed by President Harry S 
Truman, to all active merchant seamen who sailed during World War II;
    (11) Philippine Defense Ribbon, awarded to merchant seamen who 
served as members of crews of ships in Philippine waters, for not less 
than 30 days, from December 8, 1941 to June 15, 1942;
    (12) Philippine Liberation Ribbon, awarded to merchant seamen who 
served as members of crews of ships in Philippine Waters for not less 
than 30 days from October 17, 1944 to September 3, 1945;
    (b) Korean Conflict Service. Korean Service bar and medal for 
merchant seamen who served in waters adjacent to Korea during the Korean 
Conflict, between June 30, 1950 and September 30, 1953.
    (c) Service in the Vietnam Conflict. Vietnam Service bar and medal 
awarded to merchant seamen who served in waters adjacent to Vietnam 
between July 4, 1965 and August 15, 1973.
    (d) Operations DESERT SHIELD AND DESERT STORM. The Merchant Marine 
Expeditionary Award, authorized on May 22, 1991, to those American 
merchant seamen who directly participated from August 2, 1990 to 
December 31, 1991 in the war zone designated by Executive Order 12744 as 
``the Persian Gulf, Red Sea, Gulf of Oman, Gulf of Aden, and that 
portion of the Arabian Sea that lies north of 10 degrees north latitude 
and west of 68 degrees east longitude.''



Sec. 350.4  Eligibility for awards.

    (a) World War II awards. Submission of the original applications for 
World War II merchant marine service awards to the Maritime 
Administration shall include:
    (1) A copy of seaman's DD Form 214, ``Certificate of Release or 
Discharge from Active Duty'' with continuation sheet, if provided. The 
DD Form 214 is required to verify merchant marine service on vessels 
during World War II. The application and instructions for applying for 
this document may be obtained from the Maritime Administration, Office 
of Maritime Labor, Training and Safety. If a seaman was not eligible for 
this discharge, the Maritime Administration will accept official 
documents, including ships' discharges;
    (2) A summary of World War II sailing history to include--theater(s) 
of operation and ports of discharge; and
    (3) Book number or United States Maritime Service (USMS) number and 
World War II home address.
    (b) Korean and Vietnam Awards. Applicants for the Korean Service bar 
and medal, Vietnam Service bar and medal and the Merchant Marine 
Expeditionary Award shall provide copies of the ship(s) discharge(s) for 
the appropriate voyages. All awardees will be given an appropriate 
certification card or certificate for their awards.
    (c) The information establishing eligibility, along with a written 
request, shall be directed to Office of Maritime Labor, Training & 
Safety, Maritime Administration, Washington, DC 20590, Attention: 
Merchant Marine Awards.
    (d) MARAD has entered into agreements with vendors to supply the 
medals and decorations to eligible mariners at cost. After reviewing 
applications, MARAD will instruct eligible mariners to submit their 
orders for the medals and decorations to the following vendors.

OWNCO Marketing, 1705 SW. Taylor Street, Portland, OR 97205, (503) 226-
3841
PIECES OF HISTORY, P.O. Box 4470, Cave Creek, AZ 85331, (602) 488-1377, 
(602) 488-1316 (FAX)
THE QUARTERMASTER UNIFORM COMPANY, P.O. Box 829, 750 Long Beach Blvd., 
Long Beach, CA 90801-0829, 800-444-8643 Toll Free 7:00 AM--7:00 PM
SHIP'S SERVICE STORE, United States Merchant Marine Academy, Kings 
Point, NY 11024, (516) 773-5000 ext. 5229
VANGUARD MILITARY EQUIPMENT CORP., 41-45 39th Street, Sunnyside, NY 
11104, Toll Free 1-800-221-1264
VANGUARD INDUSTRIES WEST, 6155 Conte Del Cedro, Carlsbad, CA 92009, Toll 
Free 1-800-433-1334
PAST GLORY COMPANY, P.O. Box 4470, Alexandria, VA 22302, (703) 491-7544


[[Page 280]]


    (e) Compliance with the procedure set forth in paragraph (a) of this 
section is required when purchasing a replacement. Certification cards 
need not be presented to the authorized vendors in order to purchase the 
bars. The possession or display, including the wearing of any Merchant 
Marine decoration by other than authorized personnel is prohibited by 
law and subject to fine and imprisonment.



Sec. 350.5  Replacement decorations.

    The following decorations that have been previously issued may be 
replaced at cost upon written request made to the Office of Maritime 
Labor, Training and Safety:
    (a) Distinguished Service Medal.
    (b) Meritorious Service Medal.
    (c) Mariner's Medal.
    (d) Gallant Ship Unit Citation Bar.
    (e) Presidential Testimonial Letter (no cost for replacement).



Sec. 350.6  Unauthorized sale, manufacture, possession or display.

    The sale, manufacture, possession or display of any Merchant Marine 
decoration, or colorable imitations thereof, by anyone other than an 
authorized vendor is prohibited by law and subject to fine and 
imprisonment.



Sec. 350.7  Special certificate of recognition.

    The Maritime Administration is authorized to issue a special 
certificate of recognition of service to an individual, or the personal 
representative of an individual, whose service in the U.S. Merchant 
Marine has been determined to be active duty under an earlier Act of 
Congress (Pub. L. 95-202). The issuance of this certificate to any 
individual does not entitle that individual to any rights, privileges or 
benefits under any law of the United States.



PART 351_DEPOSITORIES--Table of Contents



Sec.
351.1 Purpose.
351.2 Qualification of depository.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114.



Sec. 351.1  Purpose.

    The purpose of this part is to set forth the criteria necessary for 
depositories of funds under all programs authorized by the Merchant 
Marine Act, 1936, as amended (46 U.S.C. 1101 et seq.) (Act).

[38 FR 8061, Mar. 28, 1973]



Sec. 351.2  Qualification of depository.

    (a) General qualification. Any depository which is a member of the 
Federal Deposit Insurance Corporation will be approved for deposit of 
funds under the maritime programs authorized by the Act. With respect to 
the Capital Construction Fund program, any depository which is a member 
of the Securities Investor Protection Corporation, and is organized as a 
corporation under the laws of the United States, any State, territory, 
or possession thereof or the District of Columbia, will also be approved 
for the deposit of funds.
    (b) Limitation on amount of deposits. No person making deposits 
under the programs authorized by the Act shall make or maintain deposits 
which exceed 5 percent of the depository's total deposits.

[38 FR 8061, Mar. 28, 1973, as amended at 63 FR 55039, Oct. 14, 1998]



PART 355_REQUIREMENTS FOR ESTABLISHING UNITED STATES CITIZENSHIP--Table of 

Contents



Sec.
355.1 General.
355.2 Requirements regarding evidence of U.S. citizenship; affidavit 
          guide.
355.3 Criteria to be applied in support of stock data in affidavit.
355.4 Changes in citizenship data.
355.5 Additional material.

    Authority: Secs. 2, 204, 39 Stat. 729, as amended, 49 Stat. 1987, as 
amended, 73 Stat. 597; 46 U.S.C. 802, 803, 1114, 11.

    Source: General Order 89, Rev., 35 FR 11558, July 18, 1970, unless 
otherwise noted.



Sec. 355.1  General.

    (a) Under section 2, Shipping Act, 1916, as amended and section 
905(c), Merchant Marine Act, 1936, as amended, no corporation is deemed 
to be a citizen of the United States unless:

[[Page 281]]

    (1) It is organized under the laws of the United States or of a 
State, Territory, District, or possession thereof;
    (2) Its chief executive officer, by whatever title, and the chairman 
of its board of directors are citizens of the United States, and no more 
of its directors than a minority of the number necessary to constitute a 
quorum are non-citizens (except that in the case of corporations under 
title VI, Merchant Marine Act, 1936, as amended, all directors must be 
citizens of the United States) and
    (3) The controlling interest therein is owned by citizens of the 
United States or, in the case of a corporation operating any vessel in 
the coastwise trade, on the Great Lakes, or inland lakes of the United 
States, 75 per centum of the interest in such corporation is owned by 
citizens of the United States.
    (b) As used in this part, the term ``primary corporation'' includes, 
but not exclusively, an applicant, for, or one already receiving, 
benefits under the Merchant Marine Act, 1936, as amended, as well as 
participants in certain transactions, such as banking institutions 
designated as lenders, mortgagees, and trustees pursuant to Public Law 
89-346 (73 Stat. 597), as amended.
    (c) To satisfy the statutory requirements, an Affidavit of U.S. 
Citizenship of a primary corporation by one of its officers duly 
authorized to execute such Affidavit, should be submitted. This 
affidavit should contain facts from which the corporation's citizenship 
can be determined. MARAD will accept electronic options (such as 
facsimile and Internet) for transmission of required information to 
MARAD, if practicable.

[General Order 89, Rev., 35 FR 11558, July 18, 1970, as amended at 68 FR 
62538, Nov. 5, 2003; 69 FR 34311, June 21, 2004; 69 FR 61451, Oct. 19, 
2004]



Sec. 355.2  Requirements regarding evidence of U.S. citizenship; affidavit 

guide.

    (a) In order to establish that a corporation is a citizen of the 
United States within the meaning of section 2, Shipping Act, 1916, as 
amended, the form of affidavit to be used as a guide is hereby 
prescribed for execution in behalf of the primary corporation and filing 
with an application or, if required, subsequent filing within 30 days 
after the annual meeting of the stockholders (if the primary corporation 
is a wholly owned subsidiary and contrary to the bylaw provision does 
not hold the annual meeting of stockholders, the subsequent filing 
should be annually and related to the date of the original filing) as 
evidence of the continuing U.S. citizenship of a ``person'' as defined 
in section 1, Shipping Act, 1916, as amended, which shall read as 
follows:

                      Affidavit of U.S. Citizenship

State of ------ County of ------ SS:

    I, ----------, (Name) of ----------, (Residence address) being duly 
sworn, depose and say:
    1. That I am the ------(Title of office(s) held) of ------, (Name of 
corporation) a corporation organized and existing under the laws of the 
State of ------ (hereinafter called the ``Corporation''), with offices 
at ----------, (Business address) in evidence of which incorporation a 
certified copy of the Articles or Certificate of Incorporation (or 
Association) is filed herewith (or has been filed) together with a 
certified copy of the corporate Bylaws. [Evidence of continuing U.S. 
citizenship status, including amendments to said Articles or Certificate 
and Bylaws, should be filed within 30 days after the annual meeting of 
the stockholders or annually, within 30 days after the original 
affidavit if there has been no meeting of the stockholders prior to that 
time.];
    2. That I am authorized by and in behalf of the Corporation to 
execute and deliver this Affidavit of U.S. Citizenship;
    3. That the names of the Chief Executive Officer, by whatever title, 
Vice Presidents or other individuals who are authorized to act in the 
absence or disability of the Chief Executive Officer, by whatever title, 
the Chairman of the Board of Directors, and the Directors of the 
Corporation are as follows:

------------------------------------------------------------------------
                                                       Date and place of
              Name                       Title               birth
------------------------------------------------------------------------
 
 
 
------------------------------------------------------------------------

(The foregoing list should include the officers, whether or not they are 
also directors, and all directors, whether or not they are also 
officers.)

and that each of said individuals is a citizen of the United States by 
virtue of birth in the United States, birth abroad of U.S. citizen 
parents, by naturalization, by naturalization during minority through 
the naturalization of a parent, by marriage (if a woman) to a

[[Page 282]]

U.S. citizen prior to September 22, 1922, or as otherwise authorized by 
law, except (give name and nationality of alien directors, if any); 
however, the Bylaws of the Corporation provide that ------(Number) of 
the directors are necessary to constitute a quorum; therefore, the alien 
directors named represent no more than a minority of the number 
necessary to constitute a quorum. [In the case of corporations under 
title VI, Merchant Marine Act, 1936, as amended, all directors must be 
citizens of the United States. Further, obtaining evidence necessary to 
support this Affidavit of U.S. Citizenship is the responsibility of the 
affiant.];
    4. Information as to stock, where Corporation has 30 or more 
stockholders: \1\
---------------------------------------------------------------------------

    \1\ Strike inapplicable paragraph 4.
---------------------------------------------------------------------------

    That I have access to the stock books and records of the 
Corporation; that said stock books and records have been examined and 
disclose (a) that, as of ------, (Date) the Corporation had issued and 
outstanding ------ (Number) shares of ------, (Class or series) the only 
class or series of stock of the Corporation issued and outstanding [if 
such is the case], owned of record by ------(Number) stockholders, said 
number of stockholders representing the ownership of the entire issued 
and outstanding stock of the Corporation, and (b) that no stockholder 
owned of record as of said date five per centum (5%) or more of the 
issued and outstanding stock of the Corporation of any class or series. 
[If different classes or series of stock exist, give the same data for 
each class or series issued and outstanding, showing the monetary value 
and voting rights per share in each class or series. If there is an 
exception to the statement in clause (b), the name, address, and 
citizenship of the stockholder and the amount and class or series of 
stock owned should be stated.]
    That the registered addresses of ------ owners of record of ------ 
shares of the issued and outstanding ----------(Class or series) stock 
of the Corporation are shown on the stock books and records of the 
Corporation as being within the United States, said ------ shares being 
------ per centum (------%) of the total number of shares of said stock 
(each class or series). [The exact figure as disclosed by the stock 
books of the corporation must be given and the per centum figure must 
not be less than 65 per centum, except that for a corporation operating 
a vessel in the coastwise trade, the per centum figure must be not less 
than 95 per centum. These per centum figures apply to corporate 
stockholders as well as to the primary corporation.]
    (The same statement should be made with reference to each class or 
series of stock, if there is more than one class or series.)
    4. Information as to stock, where Corporation has less than 30 
stockholders: \1\
    That the information as to stock ownership, upon which the 
Corporation relies to establish that the required percentage \2\ of 
stock ownership is vested in citizens of the United States, is as 
follows:
---------------------------------------------------------------------------

    \2\ 75% if Corporation is operating in the coastwise trade, on the 
Great Lakes, or on bays, sounds, rivers, harbors, or inland lakes of the 
United States; and controlling interest if Corporation is operating 
solely in the foreign trade, both terms as defined in section 2, 
Shipping Act, 1916, as amended.

------------------------------------------------------------------------
                                   Number of shares      Percentage of
       Name of stockholder         owned (each class  shares owned (each
                                      or series)       class or series)
------------------------------------------------------------------------
 
 
 
 
------------------------------------------------------------------------

and that each of said individual stockholders is a citizen of the United 
States by virtue of birth in the United States, birth abroad of U.S. 
citizen parents, by naturalization during minority through the 
naturalization of a parent, by marriage (if a woman) to a U.S. citizen 
prior to September 22, 1922, or as otherwise authorized by law.

    Note: If a corporate stockholder, give information with respect to 
State of incorporation, the names of the officers, directors, and 
stockholders in the appropriate percentage of shares held, with 
statement that they are all U.S. citizens. Nominee holders of record of 
5 percent or more of any class or series of stock and the beneficial 
owners thereof should be named and their U.S. citizenship affirmed.

    5. That the controlling interest (or 75% of the interest) \3\ in 
(each) said Corporation, as established by the data hereinbefore set 
forth, is owned by citizens of the United States; that the title to a 
majority (or 75%) \3\ of the stock of (each) said Corporation is vested 
in citizens of the United States free from any trust or fiduciary 
obligation in favor of any person not a citizen of the United States; 
that such proportion of the voting power of (each) said Corporation is 
vested in citizens of the United States; that through no contract or 
understanding is it so arranged that the majority (or more than 25%) \3\ 
of the voting power of (each) said Corporation may be exercised, 
directly or indirectly, in behalf of any person who is not a citizen of 
the United States; and that by no means whatsoever, is control of (each) 
said

[[Page 283]]

Corporation (or any interest in said Corporation in excess of 25%) \3\ 
conferred upon or permitted to be exercised by any person who is not a 
citizen of the United States; and
---------------------------------------------------------------------------

    \3\ Strike inappropriate language.
---------------------------------------------------------------------------

    6. That affiant has carefully examined this affidavit and asserts 
that all of the statements and representations contained therein are 
true to the best of his knowledge, information, and belief.
    Dated: ------

                                                       (Name of affiant)

    Subscribed and sworn to before me, a Notary Public in and for the 
State and County aforesaid, this ---------- day of --------------19----.

                                                         (Notary Public)

My Commission expires:
    --------------------------

    Penalty for False Statement: A fine or imprisonment, or both, are 
provided for violation of the proscriptions contained in 18 U.S.C. 1001 
(see also 18 U.S.C. 286, 287).

(Approved by the Office of Management and Budget under control number 
2133-0012)

[G.O. 89, Rev., 35 FR 11558, July 18, 1970, as amended at 35 FR 11686, 
July 22, 1970; 47 FR 25530, June 14, 1982; 69 FR 34311, June 21, 2004]



Sec. 355.3  Criteria to be applied in support of stock data in affidavit.

    (a) The same criteria should be observed in obtaining information to 
be furnished for stockholders named (direct ownership of required 
percentage of shares of stock of each class or series) in the Affidavit 
as those observed for the primary corporation. If, on the other hand, 
the ``fair inference rule'' is applied with respect to stock ownership 
(see Collier Advertising Service, Inc. v. Hudson River Day Line, 14 Fed. 
Supp. 335), the extent of U.S. citizen ownership of stock should be 
ascertained in the requisite percentage (65 percent for foreign 
operation and 95 percent for coastwise operation) in order that the 
veracity of the statutory statements made in the Affidavit (paragraph 5) 
may be relied upon by the Maritime Administration.
    (b) When applying the fair inference rule (where there are more than 
30 stockholders, except where one or more of such number actually owns 
the controlling or 75 percent interest) in order to prove U.S. citizen 
ownership in the required percentages (1) for foreign operation, 65 
percent of the shares of stock of each class or series must be shown to 
be held by persons with registered addresses within the United States to 
prove that 51 percent or controlling interest is vested in citizens of 
the United States and (2) for coastwise operation, 95 percent of the 
shares of stock of each class or series must be shown to be held by 
persons having registered addresses within the United States to prove 
that 75 percent of the interest in the corporation is vested in citizens 
of the United States.
    (c) If the primary corporation is consecutively owned by several 
``parent'' corporations (holders of 100 percent of the stock of each or 
all classes or series of stock issued and outstanding), the facts should 
be given in proper sequence either by chart or in narrative form, 
revealing the facts of stock ownership. The information with respect to 
the ultimate parent should include data relative to the basis upon which 
controlling or 75 percent (depending upon whether the primary 
corporation operates in the domestic or foreign commerce) is 
established, together with the names of the owners of record or 
beneficial owners of 5 percent or more of each class or series of stock, 
if more than one class or series, and statement that such owners are 
citizens of the United States. In any case where different classes or 
series of stock exist, each class or series shall be treated depending 
upon whether ``closely held'' or ``publicly held,'' individually in 
applying the fair inference rule, if applicable, or giving the relevant 
information with respect to United States citizens owning of record 51 
percent or 75 percent of the interest.



Sec. 355.4  Changes in citizenship data.

    It shall be incumbent upon the parties filing affidavits under this 
part to apprise the Maritime Administration promptly in writing relative 
to changes in data last furnished with respect to officers, directors, 
and stockholders holding 5 percent or more of the issued and outstanding 
stock of each class or series, together with statements concerning the 
citizenship status thereof.



Sec. 355.5  Additional material.

    If additional material is determined to be essential to clarify or 
support the

[[Page 284]]

evidence of U.S. citizenship, such material shall be furnished by the 
aforementioned primary corporation upon request by the Maritime 
Administration.



PART 356_REQUIREMENTS FOR VESSELS OF 100 FEET OR GREATER IN REGISTERED LENGTH 

TO OBTAIN A FISHERY ENDORSEMENT TO THE VESSEL'S DOCUMENTATION--Table of Contents



                      Subpart A_General Provisions

Sec.
356.1 Purpose.
356.2 Waivers.
356.3 Definitions.

                     Subpart B_Ownership and Control

356.5 Affidavit of U.S. Citizenship.
356.7 Methods of establishing ownership by United States Citizens.
356.9 Tiered ownership structures.
356.11 Impermissible control by a Non-Citizen.

                Subpart C_Requirements for Vessel Owners

356.13 Information required to be submitted by vessel owners.
356.15 Filing of affidavit of U.S. Citizenship.
356.17 Annual requirements for vessel owners.

                           Subpart D_Mortgages

356.19 Requirements to hold a Preferred Mortgage.
356.21 General approval of standard loan or mortgage agreements.
356.23 Restrictive loan covenants approved for use by lenders.
356.25 Operation of Fishing Industry Vessel by Mortgagees.

                       Subpart E_Mortgage Trustees

356.27 Mortgage Trustee requirements.
356.31 Maintenance of Mortgage Trustee approval.
356.37 Operation of a Fishing Industry Vessel by a Mortgage Trustee.

  Subpart F_Charters, Management Agreements and Exclusive or Long-Term 
                                Contracts

356.39 Charters.
356.41 Management agreements.
356.43 Long-term or exclusive sales contracts.
356.45 Advance of funds.

           Subpart G_Special Requirements for Certain Vessels

356.47 Special requirements for large vessels.
356.49 Penalties.
356.51 Exemptions for specific vessels.

                   Subpart H_International Agreements

356.53 Conflicts with international agreements.

        Subpart I_Review of Harvesting and Processing Compliance

356.55 Review of compliance with harvesting and processing quotas.

    Authority: 46 U.S.C. 12102; 46 U.S.C. 31322; Pub. L. 105-277, 
division C, title II, subtitle I, section 203 (46 U.S.C. 12102 note), 
section 210(e), and section 213(g), 112 Stat. 2681; Pub. L. 107-20, 
section 2202, 115 Stat. 168-170; 49 CFR 1.66.

    Source: 65 FR 44877, July 19, 2000, unless otherwise noted.

    Editorial Note: Nomenclature changes to part 356 appear at 68 FR 
5576, Feb. 4, 2003.



                      Subpart A_General Provisions



Sec. 356.1  Purpose.

    (a) Part 356 implements the U.S. Citizenship requirements of the 
American Fisheries Act of 1998, as amended, Title II, Division C, Public 
Law 105-277, for owners, Mortgage Trustees, and Mortgagees of vessels of 
100 feet or greater in registered length that have a fishery endorsement 
to the vessel's documentation or where a fishery endorsement to the 
vessel's documentation is being sought. This part also addresses 
ancillary matters of charters, management agreements, exclusive sales or 
marketing contracts, conflicts with international agreements, 
determinations regarding violations of harvesting or processing limits, 
and exceptions for certain vessels, vessel owners and Mortgagees from 
the general requirements of the rule.
    (b) An agency may not conduct or sponsor and a person is not 
required to respond to a collection of information unless it displays a 
currently valid

[[Page 285]]

OMB control number. Part 356 establishes a new requirement for the 
collection of information. The Office of Management and Budget (``OMB'') 
has reviewed and approved the information collection requirements under 
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501, et seq.) and 
assigned OMB control number 2133-0530 to the information collection 
requirements of this part 356.



Sec. 356.2  Waivers.

    In special circumstances and for good cause shown, we may waive the 
procedures prescribed in this part, provided the waiver is consistent 
with the requirements of the AFA and with the intent of this part.

[66 FR 45947, Aug. 31, 2001]



Sec. 356.3  Definitions.

    For the purpose of this part, when used in capitalized form:
    (a) 1916 Act refers to section 2 of the Shipping Act, 1916, as 
amended, 46 App. U.S.C. 802. The Controlling Interest requirements of 
the Shipping Act are found in section 2(b), 46 App. U.S.C. section 
802(b). The citizenship requirements for eligibility to own a vessel 
with a fisheries endorsement are found in section 2(c), 46 App. U.S.C. 
802(c), and 46 U.S.C. 12102(c).
    (b) AFA means the American Fisheries Act of 1998, as amended, Title 
II, Division C, of Public Law 105-277;
    (c) Affiliate or Affiliated refers to a Person that directly or 
indirectly through one or more intermediaries, controls, or is 
controlled by, or is under common control with, the first Person. For 
the purposes of this definition the term ``control'' (including the 
terms ``controlled by'' and ``under common control with'') means the 
possession, directly or indirectly, of the power to direct or cause the 
direction of the management policies of a Person, whether through the 
ownership of voting securities, by contract, as trustee or executor, or 
otherwise.
    (d) Charter means any agreement or commitment by which the 
possession or services of a Fishing Industry Vessel are secured for a 
period of time, or for one or more voyages, whether or not a bareboat 
charter of the vessel. A long-term or exclusive contract for the sale of 
all or a portion of a Fishing Vessel's catch is not considered a 
Charter.
    (e) Citizen of the United States, Citizen or U.S. Citizen:
    (1) Means an individual who is a Citizen of the United States, by 
birth, naturalization or as otherwise authorized by law, or an entity 
that in both form and substance, at each tier of ownership and in the 
aggregate, satisfies the requirements of 46 U.S.C. 12102(c) and section 
2(c) of the 1916 Act, 46 App. U.S.C. 802(c). In order to satisfy the 
statutory requirements an entity other than an individual must meet the 
requirements of paragraph (e)(2) of this section and the following 
criteria:
    (i) The entity must be organized under the laws of the United States 
or of a State;
    (ii) Seventy five percent (75%) of the ownership and control in the 
entity must be owned by and vested in Citizens of the United States free 
from any trust or fiduciary obligation in favor of any Non-Citizen;
    (iii) No arrangement may exist, whether through contract or any 
understanding, that would allow more than 25% of the voting power of the 
entity to be exercised, directly or indirectly, in behalf of any Non-
Citizen; and
    (iv) Control of the entity, by any other means whatsoever, may not 
be conferred upon or permitted to be exercised by a Non-Citizen.
    (2) Other criteria that must be met by entities other than 
individuals include:
    (i) In the case of a corporation:
    (A) The chief executive officer, by whatever title, and chairman of 
the board of directors and all officers authorized to act in the absence 
or disability of such persons must be Citizens of the United States; and
    (B) No more of its directors than a minority of the number necessary 
to constitute a quorum are Non-Citizens;
    (ii) In the case of a partnership all general partners are Citizens 
of the United States;
    (iii) In the case of an association:
    (A) All of the members are Citizens of the United States;
    (B) The chief executive officer, by whatever title, and the chairman 
of the

[[Page 286]]

board of directors (or equivalent committee or body) and all officers 
authorized to act in their absence or disability are Citizens of the 
United States; and,
    (C) No more than a minority of the number of its directors, or 
equivalent, necessary to constitute a quorum are Non-Citizens;
    (iv) In the case of a joint venture:
    (A) It is not determined by the Citizenship Approval Officer to be 
in effect an association or a partnership; and,
    (B) Each co-venturer is a Citizen of the United States;
    (v) In the case of a Trust that owns a Fishing Industry Vessel:
    (A) The Trust is domiciled in the United States or a State;
    (B) The Trustee is a Citizen of the United States; and
    (C) All beneficiaries of the trust are persons eligible to document 
vessels pursuant to the requirements of 46 U.S.C. 12102(c);
    (vi) In the case of a Limited Liability Company (LLC) that is not 
found to be in effect a general partnership requiring all of the general 
partners to be Citizens of the United States:
    (A) Any Person elected to manage the LLC or who is authorized to 
bind the LLC, and any Person who holds a position equivalent to a Chief 
Executive Officer, by whatever title, and the Chairman of the Board of 
Directors in a corporation are Citizens of the United States; and,
    (B) Non-Citizens do not have authority within a management group, 
whether through veto power, combined voting, or otherwise, to exercise 
control over the LLC.
    (f) Citizenship Approval Officer means MARAD's Citizenship Approval 
Officer within the Office of Chief Counsel. The Citizenship Approval 
Officer's address is: Maritime Administration, United States Department 
of Transportation, Citizenship Approval Officer, MAR-220, Room 7232, 400 
7th Street, SW., Washington, DC 20590.
    (g) Commercial Lender means an entity that is primarily engaged in 
the business of lending and other financing transactions and that has a 
loan portfolio in excess of $100,000,000, of which not more than 50 per 
centum in dollar amount consists of loans to borrowers in the commercial 
fishing industry, as certified by the Commercial Lender to the 
Citizenship Approval Officer.
    (h) Controlling Interest:
    (1) Means, in the context of an entity, that in both form and 
substance, at each tier of ownership and in the aggregate, the entity 
satisfies the controlling interest requirements of section 2(b) of the 
1916 Act, 46 App. U.S.C. 802(b). In order to satisfy the statutory 
requirements, an entity other than an individual must meet the 
requirements of paragraph (g)(2) of this section and the following 
criteria:
    (i) The entity must be organized under the laws of the United States 
or of a State;
    (ii) A majority of the ownership and control in the entity must be 
owned by and vested in Citizens of the United States free from any trust 
or fiduciary obligation in favor of any Non-Citizen;
    (iii) No arrangement may exist, whether through contract or any 
understanding, that would allow a majority of the voting power of the 
entity to be exercised, directly or indirectly, in behalf of any Non-
Citizen; and
    (iv) Control of the entity, by any other means whatsoever, may not 
be conferred upon or permitted to be exercised by a Non-Citizen.
    (2) Other criteria that must be met by entities other than an 
individual include:
    (i) In the case of a corporation:
    (A) The Chief Executive Officer, by whatever title, and the Chairman 
of the Board of Directors (or equivalent committee or body) and all 
officers authorized to act in their absence or disability are Citizens 
of the United States; and,
    (B) No more than a minority of the number of its directors, or 
equivalent, necessary to constitute a quorum are Non-Citizens;
    (ii) In the case of a partnership all general partners are Citizens 
of the United States;
    (iii) In the case of an association:
    (A) The Chief Executive Officer, by whatever title, and the Chairman 
of the Board of Directors (or equivalent committee or body) and all 
officers authorized to act in their absence or disability are Citizens 
of the United States; and,

[[Page 287]]

    (B) No more than a minority of the number of its directors, or 
equivalent, necessary to constitute a quorum are Non-Citizens;
    (iv) In the case of a joint venture:
    (A) It is not determined by the Citizenship Approval Officer to be 
in effect an association or partnership; and
    (B) A majority of the equity is owned by and vested in Citizens of 
the United States free and clear of any trust or fiduciary obligation in 
favor of any Non-Citizen;
    (v) In the case of a Limited Liability Company (LLC) that is not 
found to be in effect a general partnership requiring all of the general 
partners to be Citizens of the United States:
    (A) Any Person elected to manage the LLC or who is authorized to 
bind the LLC, and any Person who holds a position equivalent to the 
Chief Executive Officer, by whatever title, and the Chairman of the 
Board of Directors in a corporation and any Persons authorized to act in 
their absence are Citizens of the United States; and,
    (B) Non-Citizens do not have authority within a management group, 
whether through veto power, combined voting, or otherwise, to exercise 
control over the LLC;
    (3) A state or federally chartered financial institution that meets 
the Controlling Interest requirements of paragraphs (g)(1) and (2) of 
this section is deemed to be a Citizen of the United States for all 
purposes under subpart D of this part other than operation of the vessel 
pursuant to Sec. 356.25.
    (i) Fishing Vessel means a vessel of 100 feet or greater in 
registered length that has or for which the owner is seeking a fishery 
endorsement to the vessel's documentation and that commercially engages 
in the planting, cultivating, catching, taking, or harvesting of fish, 
shellfish, marine animals, pearls, shells, or marine vegetation or an 
activity that can reasonably be expected to result in the planting, 
cultivating, catching, taking, or harvesting of fish, shellfish, marine 
animals, pearls, shells, or marine vegetation;
    (j) Fishing Industry Vessel means a Fishing Vessel, Fish Processing 
Vessel, or Fish Tender Vessel;
    (k) Fish Processing Vessel means a vessel of 100 feet or greater in 
registered length that has or for which the owner is seeking a fishery 
endorsement to the vessel's documentation and that commercially prepares 
fish or fish products other than by gutting, decapitating, gilling, 
skinning, shucking, icing, freezing, or brine chilling;
    (l) Fish Tender Vessel means a vessel of 100 feet or greater in 
registered length that has or for which the owner is seeking a fishery 
endorsement to the vessel's documentation and that commercially 
supplies, stores, refrigerates, or transports (except in foreign 
commerce) fish, fish products, or materials directly related to fishing 
or the preparation of fish to or from a Fishing Industry Vessel or a 
fish processing facility;
    (m) Harvest means to commercially engage in the catching, taking, or 
harvesting of fish or fishery resources or any activity that can 
reasonably be expected to result in the catching, taking or harvesting 
of fish or fishery resources;
    (n) Lender Syndicate means an arrangement established for the 
combined extension of credit of not less than $20,000,000 made up of 
four or more entities that each have a beneficial interest, held through 
an agent, under a trust arrangement established pursuant to 46 U.S.C. 
31322(f). Other than the exercise by the agent of powers related to 
routine administrative matters, none of the entities in a Lender 
Syndicate may exercise powers related to the Lender Syndicate's 
extension of credit without the concurrence of at least one other 
unaffiliated beneficiary. Powers related to routine administrative 
matters include those concerning the day-to-day management of the 
extension of credit such as monitoring compliance with loan covenants, 
collateral inspections and similar matters; however, more substantive 
powers such as amending loan and mortgage documents, releasing 
guarantors or collateral, or administering the loan in the event of a 
default are not considered routine.
    (o) MARAD means the Maritime Administration within the United States 
Department of Transportation. The terms ``we, our, and us'' may also be

[[Page 288]]

used to refer to the Maritime Administration;
    (p) Mortgagee means a Person to whom a Fishing Industry Vessel or 
other property is mortgaged. (See the definition of Non-Citizen Lender 
and Preferred Mortgage in this section)
    (q) Mortgage Trustee, for purposes of holding a Preferred Mortgage 
on a Fishing Industry Vessel, means a corporation that:
    (1) Is organized and doing business under the laws of the United 
States or of a State;
    (2) Is authorized under those laws to exercise corporate trust 
powers;
    (3) Is eligible to hold a Preferred Mortgage under 46 U.S.C. 
31322(a)(4)(A)-(E);
    (4) Is subject to supervision or examination by an official of the 
United States Government, or of a State;
    (5) Has a combined capital and surplus (as stated in its most recent 
published report of condition) of at least $3,000,000; and
    (6) Meets any other requirements prescribed by the Citizenship 
Approval Officer.
    (r) Non-Citizen means a Person who is not a Citizen of the United 
States within the meaning of paragraph (d) of this section, 46 U.S.C. 
12102(c) and section 2(c) of the 1916 Act, 46 App. U.S.C. 802(c).
    (s) Non-Citizen Lender means a lender that does not qualify as a 
Citizen of the United States.
    (t) Person includes an individual, corporation, partnership, joint 
venture, association, limited liability company, Trust, and other 
entities existing under or authorized by the laws of the United States 
or of a State or, unless the context indicates otherwise, of any foreign 
country.
    (u) Preferred Mortgage means a mortgage on a Fishing Industry Vessel 
that has as the Mortgagee:
    (1) A person eligible to own a vessel with a fishery endorsement 
under 46 U.S.C. 12102(c);
    (2) A state or federally chartered financial institution that is 
insured by the Federal Deposit Insurance Corporation;
    (3) A farm credit lender established under title 12, chapter 23, of 
the United States Code [12 U.S.C. 2001 et seq.];
    (4) A commercial fishing and agriculture bank established pursuant 
to State law;
    (5) A commercial lender organized under the laws of the United 
States or of a State and eligible to own a vessel under 46 U.S.C. 
12102(a); or
    (6) A Mortgage Trustee that complies with the requirements of 46 
U.S.C. 31322(f) and 46 CFR 356.27 through 356.31.
    (v) Related Party means a holding company, subsidiary, affiliate, or 
associate of a Non-Citizen or an officer, director, agent, or other 
executive of the Non-Citizen or of a holding company, subsidiary, 
affiliate or associate thereof.
    (w) State means a State of the United States, Guam, Puerto Rico, the 
Virgin Islands, American Samoa, the District of Columbia, the 
Commonwealth of the Northern Mariana Islands, and any other territory or 
possession of the United States.
    (x) Submitted means sent by mail and postmarked on that date, or 
sent by another delivery service or by electronic means, including E-
mail and facsimile, and marked with an indication of the date equivalent 
to a postmark;
    (y) Trust means:
    (1) In the case of ownership of a Fishing Industry Vessel, a trust 
that is domiciled in and existing under the laws of the United States or 
of a State, of which the Trustee is a Citizen of the United States, and 
100% of the interest in the Trust is held for the benefit of a Citizen 
of the United States; or
    (2) In the case of a mortgage trust, a trust that is domiciled in 
and existing under the laws of the United States, or of a State, that 
has as its trustee a Mortgage Trustee as defined in this section, and 
that is authorized to act on behalf of a beneficiary in accordance with 
the requirements of Sec. Sec. 356.27 through 356.31.
    (z) United States, when used in the geographic sense, means the 
States of the United States, Guam, Puerto Rico, the Virgin Islands, 
American Samoa, the District of Columbia, and any other territory or 
possession of the United States; when used in other than the geographic 
sense, it means the United States Government.

[[Page 289]]

    (aa) United States Government means the Federal Government acting by 
or through any of its departments or agencies.

[65 FR 44877, July 19, 2000, as amended at 68 FR 5576, Feb. 4, 2003]



                     Subpart B_Ownership and Control



Sec. 356.5  Affidavit of U.S. Citizenship.

    (a) In order to establish that a corporation or other entity is a 
Citizen of the United States within the meaning of section 2(c) of the 
1916 Act, or where applicable, section 2(b) of the 1916 Act, the form of 
Affidavit is hereby prescribed for execution in behalf of the owner, 
charterer, Mortgagee, or Mortgage Trustee of a Fishing Industry Vessel. 
Such Affidavit must include information required of parent corporations 
and other stockholders whose stock ownership is being relied upon to 
establish that the requisite ownership in the entity is owned by and 
vested in Citizens of the United States. A certified copy of the 
Articles of Incorporation and Bylaws, or comparable corporate documents, 
must be submitted along with the executed Affidavit.
    (b) This Affidavit form set forth in paragraph (d) of this section 
may be modified to conform to the requirements of vessel owners, 
Mortgagees, or Mortgage Trustees in various forms such as partnerships, 
limited liability companies, etc. A copy of an Affidavit of U.S. 
Citizenship modified appropriately, for limited liability companies, 
partnerships (limited and general), and other entities is available on 
MARAD's internet home page at http://www.marad.dot.gov.
    (c) As indicated in Sec. 356.17, in order to renew annually the 
fishery endorsement on a Fishing Industry Vessel, the owner must submit 
annually to the Citizenship Approval Officer evidence of U.S. 
Citizenship within the meaning of section 2(c) of the 1916 Act and 46 
App. U.S.C. 12102(c).
    (d) The prescribed form of the Affidavit of U.S. Citizenship is as 
follows:

State of -------- County of -------- Social Security Number: ----------
--
I, ------------, (Name) of ------------, (Residence address) being duly 
sworn, depose and say:

    1. That I am the -------- (Title of office(s) held) of --------, 
(Name of corporation) a corporation organized and existing under the 
laws of the State of-------- (hereinafter called the ``Corporation''), 
with offices at ------------, (Business address) in evidence of which 
incorporation a certified copy of the Articles or Certificate of 
Incorporation (or Association) is filed herewith (or has been filed) 
together with a certified copy of the corporate Bylaws. [Evidence of 
continuing U.S. citizenship status, including amendments to said 
Articles or Certificate and Bylaws, should be filed within 45 days of 
the annual documentation renewal date for vessel owners. Other parties 
required to provide evidence of U.S. citizenship status must file within 
30 days after the annual meeting of the stockholders or annually, within 
30 days after the original affidavit if there has been no meeting of the 
stockholders prior to that time.];
    2. That I am authorized by and in behalf of the Corporation to 
execute and deliver this Affidavit of U.S. Citizenship;
    3. That the names of the Chief Executive Officer, by whatever title, 
the Chairman of the Board of Directors, all Vice Presidents or other 
individuals who are authorized to act in the absence or disability of 
the Chief Executive Officer or Chairman of the Board of Directors, and 
the Directors of the Corporation are as follows: \1\
---------------------------------------------------------------------------

    \1\ Offices that are currently vacant should be noted when listing 
Ofifcers and Directors in the Affidavit.

---------------------------------------------------------------------------
 _______________________________________________________________________

Name          Title

 _______________________________________________________________________

Date and Place of Birth

 _______________________________________________________________________

 _______________________________________________________________________

(The foregoing list should include the officers, whether or not they are 
also directors, and all directors, whether or not they are also 
officers.) Each of said individuals is a Citizen of the United States by 
virtue of birth in the United States, birth abroad of U.S. citizen 
parents, by naturalization, by naturalization during minority through 
the naturalization of a parent, by marriage (if a woman) to a U.S. 
citizen prior to September 22, 1922, or as otherwise authorized by law, 
except (give name and nationality of all Non-Citizen officers and 
directors, if any). The By-laws of the Corporation provide that ---- 
(Number) of the directors are necessary to constitute a quorum; 
therefore, the Non-Citizen directors named represent no more than a 
minority of the number necessary to constitute a quorum.

[[Page 290]]

    4. Information as to stock, where Corporation has 30 or more 
stockholders:

________________________________________________________________________
    That I have access to the stock books and records of the 
Corporation; that said stock books and records have been examined and 
disclose (a) that, as of ----, (Date) the Corporation had issued and 
outstanding -------- (Number) shares of --------, (Class) the only class 
of stock of the Corporation issued and outstanding [if such is the 
case], owned of record by -------- (Number) stockholders, said number of 
stockholders representing the ownership of the entire issued and 
outstanding stock of the Corporation, and (b) that no stockholder owned 
of record as of said date five per centum (5%) or more of the issued and 
outstanding stock of the Corporation of any class. [If different classes 
of stock exist, give the same information for each class issued and 
outstanding, showing the monetary value and voting rights per share in 
each class. If there is an exception to the statement in clause (b), the 
name, address, and citizenship of the stockholder and the amount and 
class of stock owned should be stated and the required citizenship 
information on such stockholder must be submitted.] That the registered 
addresses of -------- owners of record of -------- shares of the issued 
and outstanding -------- (Class) stock of the Corporation are shown on 
the stock books and records of the Corporation as being within the 
United States, said -------- shares being -------- per centum ----(%) of 
the total number of shares of said stock (each class). [The exact figure 
as disclosed by the stock books of the corporation must be given and the 
per centum figure must not be less than 65 per centum for a corporation 
that must satisfy the controlling interest requirements of section 2(b) 
of the Shipping Act, 1916, 46 App. U.S.C. Sec. 802(b), or not less than 
95 per centum for an entity that is demonstrating ownership in a vessel 
for which a fishery endorsement is sought. These per centum figures 
apply to corporate stockholders as well as to the primary corporation.] 
(The same statement should be made with reference to each class of 
stock, if there is more than one class.)

or

[Note: An entity that has less than 30 stockholders should use the 
following alternate paragraph (4) and strike the inapplicable paragraph 
(4).]

    4. Information as to stock, where Corporation has less than 30 
stockholders: That the information as to stock ownership, upon which the 
Corporation relies to establish that 75% of the stock ownership is 
vested in Citizens of the United States, is as follows:

----------------------------------------------------------------------------------------------------------------
                                                                 Number of shares owned    Percentage of shares
         Name of stockholder           Date and place of birth        (each class)          owned (each class)
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------

and that each of said individual stockholders is a Citizen of the United 
States by virtue of birth in the United States, birth abroad of U.S. 
citizen parents, by naturalization during minority through the 
naturalization of a parent, by marriage (if a woman) to a U.S. citizen 
prior to September 22, 1922, or as otherwise authorized by law.

    Note: If a corporate stockholder, give information with respect to 
State of incorporation, the names of the officers, directors, and 
stockholders and the appropriate percentage of shares held, with 
statement that they are all U.S. citizens. Nominee holders of record of 
5% or more of any class of stock and the beneficial owners thereof 
should be named and their U.S. citizenship information submitted to 
MARAD.

    5. That 75% of the interest in (each) said Corporation, as 
established by the information hereinbefore set forth, is owned by 
Citizens of the United States; that the title to 75% of the stock of 
(each) class of the stock of (each) said Corporation is vested in 
Citizens of the United States free from any trust or fiduciary 
obligation in favor of any person not a Citizen of the United States; 
that such proportion of the voting power of (each) said Corporation is 
vested in Citizens of the United States; that through no contract or 
understanding is it so arranged that more than 25% the voting power of 
(each) said Corporation may be exercised, directly or indirectly, in 
behalf of any person who is not a Citizen of the United States; and that 
by no means whatsoever, is any interest in said Corporation in excess of 
25% conferred upon or permitted to be exercised by any person who is not 
a Citizen of the United States; and
 or
[Note: An entity that is required to comply with the controlling 
interest requirements of section 2(b) of the Shipping Act, 1916, 46 App. 
U.S.C. Sec. 802(b), should use the following alternate paragraph (5) 
and strike the inapplicable paragraph (5).]
    5. That the Controlling Interest in (each) said Corporation, as 
established by the information hereinbefore set forth, is owned by 
Citizens of the United States; that the title to a majority of the stock 
of (each) said Corporation is vested in Citizens of the United

[[Page 291]]

States free from any trust or fiduciary obligation in favor of any 
person not a Citizen of the United States; that such proportion of the 
voting power of (each) said Corporation is vested in Citizens of the 
United States; that through no contract or understanding is it so 
arranged that the majority of the voting power of (each) said 
Corporation may be exercised, directly or indirectly, in behalf of any 
person who is not a Citizen of the United States; and that by no means 
whatsoever, is control of (each) said Corporation conferred upon or 
permitted to be exercised by any person who is not a Citizen of the 
United States; and
    6. That the affiant has submitted all of the necessary documentation 
required under 46 CFR Sec. 356.13 in connection with this Affidavit of 
U.S. Citizenship for the vessels herein identified.

------------------------------------------------------------------------
                Vessel Name                        Official Number
------------------------------------------------------------------------
1.........................................
2.........................................  ............................
------------------------------------------------------------------------

[Note: Paragraph 6 should be included in the Affidavit of U.S. 
Citizenship submitted by an entity that owns a Fishing Industry Vessel.]

    7. That affiant has carefully examined this affidavit and asserts 
that all of the statements and representations contained therein are 
true to the best of his knowledge, information, and belief.
________________________________________________________________________

________________________________________________________________________
(Name and title of affiant)

________________________________________________________________________
(Signature of affiant)

________________________________________________________________________
Date

    Penalty for False Statement: A fine or imprisonment, or both, are 
provided for violation of the proscriptions contained in 18 U.S.C. Sec. 
1001 (see also, 18 U.S.C. Sec. Sec. 286, 287).
    (e) The format for an Affidavit of United States Citizenship, 
modified appropriately for limited liability companies, partnerships, 
etc., will be available from the Citizenship Approval Officer and on 
MARAD's internet web site at http://www.marad.dot.gov.
    (f) The same criteria should be observed in obtaining information to 
be furnished for stockholders named (direct ownership of required 
percentage of shares of stock of each class) in the Affidavit as those 
observed for the owner of the Fishing Industry Vessel. If, on the other 
hand, the ``fair inference rule'' is applied with respect to stock 
ownership as outlined in Sec. 356.7(c), the extent of U.S. Citizen 
ownership of stock should be ascertained in the requisite percentage (65 
% for state or federally chartered financial institutions and 95 % for 
Fishing Industry Vessel owners, bareboat charterers, trustees, as well 
as entities owning 5% or more of the stock of such entities). Any entity 
that must establish its U.S. citizenship has to submit proof of U.S. 
citizenship of any five percent stockholder of each class of stock in 
order that the veracity of the statutory statements made in the 
Affidavit (paragraph 5) may be relied upon by MARAD.
    (g) It shall be incumbent upon the parties filing affidavits under 
this part to notify the Citizenship Approval Officer in writing within 
30 calendar days of any changes in information last furnished with 
respect to the officers, directors, and stockholders, including 5 
percent or more stockholders of the issued and outstanding stock of each 
class, together with information concerning their citizenship status. If 
other than a corporation, comparable information must be filed by other 
entities owning Fishing Industry Vessel, including any entity whose 
ownership interest is being relied upon to establish 75% ownership by 
Citizens of the United States.
    (h) If additional material is determined to be essential to clarify 
or support the evidence of U.S. citizenship, such material shall be 
furnished by the owner of the Fishing Industry Vessel upon request by 
the Citizenship Approval Officer.

[65 FR 44877, July 19, 2000, as amended at 68 FR 5577, Feb. 4, 2003]



Sec. 356.7  Methods of establishing ownership by United States Citizens.

    (a) An entity may demonstrate that the interest in the entity (75% 
for Citizens of the United States or 51% for entities meeting the 
Controlling Interest requirements) is owned by Citizens of the United 
States either by direct proof or through the fair inference method 
depending on the size of the entity.
    (b) The ``direct proof'' method is used for closely held companies 
that have 30 or fewer stockholders. Under the direct proof method, the 
following information must be set forth in paragraph

[[Page 292]]

four of the Affidavit of U.S. Citizenship:
    (1) The identity of the holders of stock or other equitable 
interests;
    (2) The amount of stock or interest that each stockholder owns;
    (3) A representation as to the citizenship of the stockholder; and
    (4) If the stockholder is a corporation or other entity, the names 
and citizenship of officers, directors, stockholders, etc. must be set 
out in the Affidavit of U.S. Citizenship.
    (c) The ``fair inference method'' is used by corporations whose 
stock is publicly traded (more than 30 stockholders). Use of the fair 
inference method requires that:
    (1)(i) At least 95% of the stock (each class) of the corporation be 
held by Persons having a registered U.S. address in order to infer at 
least 75% ownership by U.S. Citizens, or
    (ii) At least 65% of the stock (each class) of the corporation be 
held by Persons having a registered U.S. address in order to infer at 
least 51% ownership by U.S. Citizens; and
    (2) Disclosure be made in the Affidavit of U.S. Citizenship of the 
names and citizenship of any stockholders who holds five percent or more 
of the corporation's stock (including all classes of stock, voting and 
non-voting), officers, and directors.
    (d) If the owner of a Fishing Industry Vessel is consecutively owned 
by several ``parent'' corporations, the facts revealing the stock 
ownership of each entity must be set forth in the Affidavit of U.S. 
Citizenship.

[65 FR 44877, July 19, 2000, as amended at 68 FR 5579, Feb. 4, 2003]



Sec. 356.9  Tiered ownership structures.

    Non-Citizens may not own or control, either directly through the 
first tier of ownership or in the aggregate through an interest in other 
entities at various tiers, more than 25% of the interest in an entity 
which owns a Fishing Industry Vessel. The prohibition against Non-
Citizens owning or controlling more than 25%, in the aggregate, of the 
interest in an entity that owns a Fishing Industry Vessel means, for 
example, that:
    (a) Non-Citizens that own or control a 25% stake in the ownership 
entity of a Fishing Industry Vessel at the first tier may not have any 
interest whatsoever in any entity that is being relied upon to establish 
the required 75% U.S. Citizen ownership; and
    (b) Non-Citizens that own or control less than a 25% stake at the 
first tier may participate in the ownership and control of other 
entities that are being relied upon to establish the required 75% U.S. 
Citizen ownership and control at the first tier. However, the total 
ownership and control by Non-Citizens of the entity owning a Fishing 
Industry Vessel may not exceed 25% in the aggregate as computed by 
MARAD.



Sec. 356.11  Impermissible control by a Non-Citizen.

    (a) An impermissible transfer of control will be deemed to exist 
where a Non-Citizen, whether by agreement, contract, influence, or any 
other means whatsoever:
    (1) Has the right to direct the business of the entity which owns 
the Fishing Industry Vessel. The right to ``direct the business of the 
entity'' does not include the right to simply participate in the 
direction of the business activities of an entity which owns a Fishing 
Industry Vessel;
    (2) Has the right in the ordinary course of business to limit the 
actions of or replace the chief executive officer, a majority of the 
board of directors, any general partner or any person serving in a 
management capacity of the entity which owns the Fishing Industry 
Vessel. Standard rights of minority shareholders to restrict the actions 
of the entity are permitted provided they are unrelated to day-to-day 
business activities. These rights include provisions to require the 
consent of the minority shareholder to sell all or substantially all of 
the assets, to enter into a different business, to contract with the 
majority investors or their affiliates or to guarantee the obligations 
of majority investors or their affiliates;
    (3) Has the right to direct the transfer, operation, or manning of a 
Fishing Industry Vessel. The right to ``direct the transfer, operation, 
or manning'' of such vessels does not include the right to simply 
participate in the direction

[[Page 293]]

of the transfer, operation, and manning of such vessels;
    (4) Has the right to restrict unduly the day-to-day business 
activities and management policies of the entity owning a Fishing 
Industry Vessel through loan covenants other than those approved for use 
by the Citizenship Approval Officer or other means;
    (5) Has the right to derive, through a minority shareholder and in 
favor of a Non-Citizen, a significantly disproportionate amount of the 
economic benefit from the ownership and operation of the Fishing 
Industry Vessel;
    (6) Has the right to control the management of or to be a 
controlling factor in the entity owning a Fishing Industry Vessel ;
    (7) Has the right to cause the sale of a Fishing Industry Vessel 
other than:
    (i) By an entity that is eligible to hold a Preferred Mortgage on 
the vessel pursuant to Sec. 356.19(a)(2) through (a)(5);
    (ii) By an approved Mortgage Trustee that is exercising loan and 
mortgage covenants on behalf of a beneficiary that qualifies as a 
Commercial Lender, a Lender Syndicate or an entity eligible to hold a 
Preferred Mortgage under Sec. 356.19(a)(2) through (a)(5);
    (iii) By an approved Mortgage Trustee that is exercising loan or 
mortgage covenants for a beneficiary that is not qualified to hold a 
Preferred Mortgage, provided that the loan or mortgage covenants have 
been approved by the Citizenship Approval Officer; or
    (iv) Where it is necessary in order to allow a Non-Citizen to 
dissolve its interest in the entity;
    (8) Absorbs all of the costs and normal business risks associated 
with ownership and operation of the Fishing Industry Vessel;
    (9) Has the responsibility for the procurement of insurance on the 
Fishing Industry Vessel, or assumes any liability in excess of insurance 
coverage; or,
    (10) Has the ability through any other means whatsoever to control 
the entity that owns a Fishing Industry Vessel.
    (b) In addition to the actions in paragraph (a) of this section that 
are considered absolute indicia of control, we will consider other 
factors which, in combination with other elements of Non-Citizen 
involvement, may be deemed impermissible control. The following factors 
may be considered indicia of control:
    (1) If a Non-Citizen minority stockholder takes the leading role in 
establishing an entity that will own a Fishing Industry Vessel;
    (2) If a Non-Citizen has the right to preclude the owner of a 
Fishing Industry Vessel from engaging in other business activities;
    (3) If a Non-Citizen and owner use the same law firm, accounting 
firm, etc.;
    (4) If a Non-Citizen and owner share the same office space, phones, 
administrative support, etc.;
    (5) If a Non-Citizen absorbs considerable costs and normal business 
risks associated with ownership and operation of the Fishing Industry 
Vessel;
    (6) If a Non-Citizen provides the start up capital for the owner or 
bareboat charterer on less than an arm's-length basis;
    (7) If a Non-Citizen time charterer has the general right to inspect 
the books and records of the owner, bareboat charterer, or time 
charterer of a Fish Processing Vessel or Fish Tender Vessel;
    (8) If the owner or bareboat charterer uses the same insurance 
agent, law firm, accounting firm, or broker of any Non-Citizen with whom 
the owner or a bareboat charterer has entered into a mortgage, long-term 
or exclusive sales or marketing agreement, unsecured loan agreement, or 
management agreement; or
    (9) If a Non-Citizen has the right to control, whether through sale, 
lease or other method, the fishing quota, fishing rights or processing 
rights allocated to a vessel or vessel-owning entity.
    (c) In most cases, any single factor listed in paragraph (b) of this 
section will not be sufficient to deem an entity a Non-Citizen. However, 
a combination of several factors listed in paragraph (b) of this section 
may increase our concern as to whether the entity complies with the U.S. 
Citizen ownership and control provisions of the AFA and any single 
factor listed in paragraph (b) of this section may be the basis for a 
request from us for further information.

[[Page 294]]

    (d) If we have a concern regarding a Non-Citizen, we will notify the 
entity of the concern and work with the entity toward a satisfactory 
resolution, provided there is no verifiable evidence of fraud. 
Resolution of any control issues may result in a request by us for 
additional information to clarify the intent of the provision or to 
amend or delete the provision in question.
    (e) Information that is specifically required to be submitted for 
our consideration is set out in Sec. 356.13. However, in determining 
whether an entity has control over a Fishing Industry Vessel, we may 
review any contract or agreement that may, by any means whatsoever, 
result in a transfer of control to a Non-Citizen.

[65 FR 44877, July 19, 2000, as amended at 68 FR 5579, Feb. 4, 2003]



                Subpart C_Requirements for Vessel Owners



Sec. 356.13  Information required to be submitted by vessel owners.

    (a) In order to be eligible to document a Fishing Industry Vessel 
with a fishery endorsement, the entity that owns the vessel must submit 
documentation to demonstrate that 75 percent (75%) of the interest in 
such entity is owned and controlled by Citizens of the United States. 
Unless otherwise exempted, the following documents must be submitted to 
the Citizenship Approval Officer in support of a request for a 
determination of U.S. Citizenship:
    (1) An Affidavit of U.S. Citizenship. This affidavit, set out in 
Sec. 356.15, must contain all required facts, at all tiers of 
ownership, needed for determining the citizenship of the owner of the 
Fishing Industry Vessel.
    (2) A certified copy of the Articles of Incorporation and Bylaws of 
the owner of the Fishing Industry Vessel, and any parent corporation, 
must be submitted. The certification must be by the Secretary of State 
in which the corporation is incorporated or by the Secretary of the 
corporation. For entities other than corporations, comparable certified 
documents must be submitted. For example, for a limited liability 
company, a copy of the Certificate of Formation filed with a State must 
be submitted, along with a certified copy of the Limited Liability 
Company Operating Agreement;
    (3) An Affidavit of U.S. Citizenship for each charterer of a Fishing 
Industry Vessel, with the exception of time or voyage charterers of Fish 
Processing Vessels and Fish Tender Vessels permitted under Sec. 
356.39(b)(2);
    (4) A copy of any time charter or voyage charter to a Non-Citizen of 
a Fish Tender Vessel or Fish Processing Vessel;
    (5) Any loan agreements or other financing documents applicable to a 
Fishing Industry Vessel where the lender has not been approved by MARAD 
to hold a Preferred Mortgage on Fishing Industry Vessels, excepting 
financing documents that are exempted from review pursuant to Sec. 
356.19(d) and loan documents that have received general approval from 
the Citizenship Approval Officer pursuant to Sec. 356.21 for use with 
an approved Mortgage Trustee.
    (6) A description of any operating and/or management agreements 
entered into between the owner or bareboat charterer of a Fishing 
Industry Vessel and an entity that has not been determined by MARAD to 
be a U.S. Citizen, accompanied by a representation and warranty that the 
agreement does not contain any provisions that convey control over the 
vessel or vessel-owning entity to a Non-Citizen;
    (7) Copies of any sales or purchase agreements that relate to the 
sale or purchase of all or a significant portion of a vessel's catch 
where the agreement is with an entity that has not been determined by 
MARAD to be a U.S. Citizen and the agreement contains provisions that 
could convey control to a Non-Citizen other than those expressly 
authorized in Sec. 356.43. Agreements that only contain provisions 
expressly authorized in Sec. 356.43 do not have to be submitted; 
however, the agreements and the parties to the agreements must be 
identified;
    (8) Any stockholder's agreement, voting trust agreements, or any 
other pooling agreements, including any proxy appointment, relating to 
the ownership of all classes of stock, whether voting or non-voting of 
the owner of the Fishing Industry Vessel,

[[Page 295]]

including any parent corporation or other stockholder whose stock is 
being relied upon to establish 75 percent U.S. Citizen ownership;
    (9) Any agreements relating to an option to buy or sell stock or 
other comparable equity interest in the owner of the Fishing Industry 
Vessel, or Fish Tender Vessel, or any agreement that restricts the sale 
of such stock or equity interests in the owner of the Fishing Industry 
Vessel, including any parent corporation or other stockholder whose 
stock is being relied upon to establish 75 percent U.S. Citizen 
ownership;
    (10) Any documents relating to a merger, consolidation, liquidation 
or dissolution of the owner of the Fishing Industry Vessel, including 
any parent corporation where all of the parties have not been determined 
by the Citizenship Approval Officer to be U.S. Citizens;
    (11) Disclosure of any interlocking directors or other officials by 
and between the owner of a Fishing Industry Vessel (including any parent 
corporation) and any Non-Citizen minority stockholder of the owner and 
any parent corporation. This requirement is also applicable to any 
lender, purchaser of fish catch, or other entity that is a Non-Citizen;
    (12) Any contract or agreement that purports to sell, lease or 
otherwise transfer to a Non-Citizen the fishing rights, a fishing quota, 
a processing quota or any other right allocated to a vessel owner, 
bareboat charterer, or a particular Fishing Industry Vessel; and
    (13) A copy of the Large Vessel Certification required by Sec. 
356.47.
    (b) In the event the owner or bareboat charterer of a Fishing 
Industry Vessel enters into any agreement reflected in any of the 
documents set forth in paragraph (a) of this section after the 
submission of the Affidavit of U.S. Citizenship, the owner or bareboat 
charterer must notify the Citizenship Approval Officer within 30 
calendar days. Failure to notify the Citizenship Approval Officer of 
such agreements within the prescribed time may result in the vessel 
owner being deemed ineligible to document the vessel with a fishery 
endorsement.

[65 FR 44877, July 19, 2000, as amended at 68 FR 5579, Feb. 4, 2003]



Sec. 356.15  Filing of affidavit of U.S. Citizenship.

    (a) New owners of Fishing Industry Vessel after October 1, 2001, 
must file the Affidavit of U.S. Citizenship and other required 
documentation with the Citizenship Approval Officer in order for the 
Citizenship Approval Officer to make a determination whether the owner 
is eligible to own a vessel with a fishery endorsement to the vessel's 
documentation. A vessel may not receive a fishery endorsement to its 
documentation or operate in the fisheries of the United States before 
this determination has been made.
    (b) If the Citizenship Approval Officer believes that there is a 
defect in the Affidavit of U.S. Citizenship or the supporting 
documentation, the applicant will be notified and will be given an 
opportunity to work with the Citizenship Approval Officer to resolve the 
matter before a determination is made whether the applicant qualifies as 
a U.S. Citizen.
    (c) A vessel owner that has a valid fishery endorsement prior to 
October 1, 2001, must obtain a citizenship determination from the 
Citizenship Approval Officer no later than October 1, 2001, which states 
that the owner is a U.S. Citizen eligible to own a vessel with a fishery 
endorsement. If the owner obtains the required determination from the 
Citizenship Approval Officer, the fishery endorsement will remain valid 
and will be subject to renewal at the time of its next regularly 
scheduled annual filing to document the vessel with the Coast Guard, at 
which point the owner will be required to obtain an annual ruling from 
the MARAD's Citizenship Approval Officer that it is still a U.S. 
Citizen. If a vessel owner that owns a vessel with a valid fishery 
endorsement prior to October 1, 2001, does not obtain the required 
determination from the Citizenship Approval Officer by October 1, 2001, 
the vessel's fishery endorsement may be deemed invalid. In order to 
obtain a new fishery endorsement, the vessel

[[Page 296]]

owner will be required to obtain a citizenship determination from the 
Citizenship Approval Officer and to apply to the U.S. Coast Guard for a 
new fishery endorsement.
    (d) The owner of a Fishing Industry Vessel or a prospective owner of 
such a vessel may request a letter ruling from the Citizenship Approval 
Officer in order to determine whether the owner under a proposed 
ownership structure will qualify as a U.S. Citizen that is eligible to 
document the vessel with a fishery endorsement. A complete request for a 
letter ruling must be accompanied by an Affidavit of U.S. Citizenship 
and all other documentation required by `` 356.13. The Citizenship 
Approval Officer will issue a letter ruling based on the ownership 
structure that is proposed; however, the Citizenship Approval Officer 
reserves the right to reverse the determination if any of the elements 
of the ownership structure, contractual arrangements, or other material 
relationships are altered when the vessel owner submits the executed 
Affidavits and supporting documentation.

[65 FR 44877, July 19, 2000, as amended at 68 FR 5579, Feb. 4, 2003]



Sec. 356.17  Annual requirements for vessel owners.

    (a) An owner of a Fishing Industry Vessel must submit a 
certification in the form of an Affidavit of United States Citizenship 
to the Citizenship Approval Officer on an annual basis as provided in 
paragraph (b) of this section. The vessel owner does not have to submit 
duplicate copies of documents that have already been submitted and that 
have not changed, provided a copy is still retained by us. This annual 
certification requirement does not excuse the owner from the 
requirements of Sec. 356.5 to notify the Citizenship Approval Officer 
throughout the year when changes in the citizenship information occur.
    (b) The annual certification required by paragraph (a) of this 
section must be filed at least 45 days prior to the renewal date for the 
vessel's documentation and fishery endorsement. Where multiple Fishing 
Industry Vessels are owned by the same entity or by entities that 
ultimately have common ownership, an Affidavit of U.S. Citizenship and 
supporting documentation may be filed for all of the vessels in 
conjunction with the first vessel documentation renewal during each 
calendar year. Any information or supporting documentation unique to a 
particular vessel that would normally be required to be submitted under 
Sec. 356.13 or any other provision of this part 356 such as charters, 
management agreements, loans or financing agreements, sales, purchase or 
marketing agreements, or exemptions claimed under this part must be 
submitted with the annual filing for that vessel if the documents are 
not already on file with the Citizenship Approval Officer.
    (c) Failure to file the annual certification in a timely manner may 
result in the expiration of the vessel's fishery endorsement, which will 
prohibit the vessel from operating in the fisheries of the United 
States.

[65 FR 44877, July 19, 2000, as amended at 68 FR 5579, Feb. 4, 2003]



                           Subpart D_Mortgages



Sec. 356.19  Requirements to hold a Preferred Mortgage.

    (a) In order for a Mortgagee to be eligible to obtain a Preferred 
Mortgage on a Fishing Industry Vessel, it must be:
    (1) A Citizen of the United States;
    (2) A state or federally chartered financial institution that is 
insured by the Federal Deposit Insurance Corporation;
    (3) A farm credit lender established under title 12, chapter 23, of 
the United States Code (12 U.S.C. 2001 et seq.);
    (4) A commercial fishing and agriculture bank established pursuant 
to State law;
    (5) A Commercial Lender organized under the laws of the United 
States or of a State and eligible to own a vessel under 46 U.S.C. 
12102(a); or
    (6) A Mortgage Trustee that complies with the requirements of 46 
U.S.C. 31322(f) and 46 CFR 356.27 through 356.37.
    (b) A Mortgagee must demonstrate to the Citizenship Approval Officer 
that it satisfies one of the requirements set forth in paragraph (a) of 
this section before it will be qualified to obtain a

[[Page 297]]

Preferred Mortgage on a Fishing Industry Vessel after April 1, 2003. A 
Mortgagee that has an existing Preferred Mortgage on a Fishing Industry 
Vessel prior to April 1, 2003, will be required to demonstrate that it 
satisfies one of the requirements set forth in paragraph (a) of this 
section before the vessel's next certificate of documentation renewal 
date after April 1, 2003. Failure to submit the required information may 
result in the loss of the preferred status for the mortgage. A sample 
format that may be used to submit the required information for 
Mortgagees, Commercial Lenders and Lender Syndicates is available on the 
MARAD website at http://www.marad.dot.gov/afa.html. The required 
information that must be submitted in order to make such a demonstration 
for each category in paragraph (a) is as follows:
    (1) If a Mortgagee plans to qualify as a United States Citizen under 
paragraph (a)(1) of this section, the Mortgagee must file an Affidavit 
of United States Citizenship demonstrating that it complies with the 
citizenship requirements of 46 U.S.C. 12102(c) and section 2(c) of the 
1916 Act, which require that 75% of the ownership and control in the 
Mortgagee be vested in U.S. Citizens at each tier and in the aggregate. 
In addition to the Affidavit of U.S. Citizenship, a certified copy of 
the Articles of Incorporation and Bylaws, or other comparable corporate 
documents must be submitted to the Citizenship Approval Officer.
    (2) A state or federally chartered financial institution must 
provide a certification that indicates whether it is a state chartered 
or federally chartered financial institution and that certifies that it 
is insured by the Federal Deposit Insurance Corporation (``FDIC''). The 
certification must include the FDIC Certification Number assigned to the 
institution.
    (3) A farm credit lender must provide a certification indicating 
that it qualifies as a farm credit lender established under title 12, 
chapter 23, of the United States Code (12 U.S.C. 2001 et seq.);
    (4) A commercial fishing and agriculture bank must provide a 
certification indicating that it has been lawfully established as a 
commercial fishing and agriculture bank pursuant to State law and that 
it is in good standing;
    (5) A Commercial Lender that seeks to be qualified to hold a 
Preferred Mortgage directly or through a Mortgage Trustee must provide 
evidence that it is engaged primarily in the business of lending and 
other financing transactions and a certification that it has a loan 
portfolio in excess of $100 million, of which no more than 50 percent of 
the dollar amount of the loan portfolio consists of loans to borrowers 
in the commercial fishing industry. The certification must include 
information regarding the approximate size of the loan portfolio and the 
percentage of the portfolio that consists of loans to borrowers in the 
commercial fishing industry. A Commercial Lender that seeks to be 
qualified to hold a Preferred Mortgage directly must also submit an 
Affidavit of U.S. Citizenship to the Citizenship Approval Officer to 
demonstrate that it qualifies as one of the following:
    (i) An individual who is a citizen of the United States;
    (ii) An association, trust, joint venture, or other entity--
    (A) All of whose members are citizens of the United States; and
    (B) That is capable of holding title to a vessel under the laws of 
the United States or of a State;
    (iii) A partnership whose general partners are citizens of the 
United States, and the controlling interest in the partnership is owned 
by citizens of the United States;
    (iv) A corporation established under the laws of the United States 
or of a State, whose chief executive officer, by whatever title, and 
chairman of its board of directors are citizens of the United States and 
no more of its directors are Non-citizens than a minority of the number 
necessary to constitute a quorum;
    (v) The United States Government; or
    (vi) The government of a State.
    (6) A Mortgage Trustee must submit the Mortgage Trustee Application 
and other documents required in Sec. 356.27. If the beneficiary under 
the trust arrangement has not demonstrated to the Citizenship Approval 
Officer that it qualifies as a Commercial Lender, a

[[Page 298]]

Lender Syndicate or an entity eligible to hold a preferred mortgage 
under paragraphs (a)(1) through (5) of this section, the Mortgage 
Trustee must submit to the Citizenship Approval Officer copies of the 
trust agreement, security agreement, loan documents, preferred mortgage, 
and any issuance, assignment or transfer of interest so that a 
determination can be made as to whether any of the arrangements results 
in an impermissible transfer of control of the vessel to a person not 
eligible to own a vessel with a fishery endorsement under 46 U.S.C. 
12102(c).
    (c) A Mortgagee is required to provide the certification required by 
paragraph (b) of this section to the Citizenship Approval Officer on an 
annual basis during the time in which it holds a preferred mortgage on a 
Fishing Industry Vessel. The annual certification must be submitted at 
least 30 calendar days prior to the annual anniversary date of the 
original approval. The Citizenship Approval Officer will notify a 
Mortgagee if the Mortgagee fails to submit the required annual 
certification. If the Mortgagee does not provide the certification 
within 30 calendar days of the mailing date of the delinquency notice, 
the mortgage will no longer qualify as a Preferred Mortgage.
    (d) The following entities may exercise rights under loan or 
mortgage covenants with respect to a Fishing Industry Vessel without 
obtaining MARAD approval:
    (1) An entity that is deemed qualified to hold a Preferred Mortgage 
under paragraphs (a)(1) through (5) of this section and that has 
submitted the appropriate certification to the Citizenship Approval 
Officer under paragraph (b) of this section; and
    (2) An approved Mortgage Trustee that is holding a Preferred 
Mortgage for a beneficiary that is qualified to hold a Preferred 
Mortgage under paragraphs (a)(1) through (a)(5) of this section or for a 
beneficiary that qualifies as a Commercial Lender or a Lender Syndicate 
and that has made an appropriate certification to the Citizenship 
Approval Officer that it meets the requirements of either Sec. 356.3(g) 
or Sec. 356.3(n).
    (e) An entity that holds a Preferred Mortgage on a Fishing Industry 
Vessel or that is using a Mortgage Trustee to hold a Preferred Mortgage 
for its benefit may request a letter ruling from the Citizenship 
Approval Officer in order to determine whether a mortgage or mortgage 
trust arrangement is in compliance with the regulations in this part. 
The Citizenship Approval Officer reserves the right to reverse any 
advice given under a letter ruling if any of the elements of the 
proposed loan or mortgage are materially altered or if the entity 
requesting the letter ruling has failed to fully disclose all relevant 
information.

[68 FR 5579, Feb. 4, 2003]



Sec. 356.21  General approval of standard loan or mortgage agreements.

    (a) A lender that is engaged in the business of financing Fishing 
Industry Vessels and that is not a Commercial Lender or Lender Syndicate 
using a Mortgage Trustee to hold a Preferred Mortgage for its benefit or 
an entity that is otherwise qualified to hold a Preferred Mortgage on 
Fishing Industry Vessels pursuant to Sec. 356.19(a)(2) through (a)(5), 
may apply to the Citizenship Approval Officer for general approval of 
its standard loan and mortgage agreements for such vessels. In order to 
obtain general approval for its standard loan and mortgage agreements, a 
lender using an approved Mortgage Trustee must submit to the Citizenship 
Approval Officer:
    (1) A copy of its standard loan or mortgage agreement for Fishing 
Industry Vessel, including all covenants that may be included in the 
loan or mortgage agreement; and,
    (2) A certification that it will not use covenants or restrictions 
in the loan or mortgage agreement outside of those approved by the 
Citizenship Approval Officer without obtaining the prior approval of the 
Citizenship Approval Officer.
    (b) A lender that receives general approval may enter into loans and 
mortgages on Fishing Industry Vessel without prior approval from us of 
each individual loan or mortgage; provided, that the loan or mortgage 
conforms to the standard agreement approved by the Citizenship Approval 
Officer and does

[[Page 299]]

not include any other covenants that have not been approved by the 
Citizenship Approval Officer.
    (c) The lender must provide an annual certification to the 
Citizenship Approval Officer certifying that all loans and mortgages on 
Fishing Industry Vessel entered into under this general approval conform 
to the standard agreement approved by us and do not contain deviations 
from the standard agreement or covenants that were not reviewed and 
approved by the Citizenship Approval Officer. The certification must be 
submitted at least 30 calendar days prior to the annual anniversary date 
of the previous approval.
    (d) If the lender wishes to use covenants that were not approved 
pursuant to this section, it must submit the new covenants to the 
Citizenship Approval Officer for approval.
    (e) A lender that has received general approval for its lending 
program and that uses covenants in a loan or mortgage on a Fishing 
Industry Vessel that have not been approved by the Citizenship Approval 
Officer will be subject to loss of its general approval and the 
Citizenship Approval Officer may review and approve all of the lender's 
mortgage and loan covenants on a case-by-case basis. The Citizenship 
Approval Officer may also determine that the arrangement results in an 
impermissible transfer of control to a Non-Citizen and therefore does 
not meet the requirements to qualify as a Preferred Mortgage. If the 
lender knowingly files a false certification with the Citizenship 
Approval Officer or has used covenants in a loan or mortgage on a 
Fishing Industry Vessel that are materially different from the approved 
covenants, it may also be subject to civil and criminal penalties 
pursuant to 18 U.S.C. 1001.

[65 FR 44877, July 19, 2000, as amended at 68 FR 5581, Feb. 4, 2003]



Sec. 356.23  Restrictive loan covenants approved for use by lenders.

    (a) We approve the following standard loan covenants, which may 
restrict the activities of the borrower without the lender's consent and 
which may be included in loan agreements or other documents between an 
owner of a Fishing Industry Vessel and an unrelated lender that is using 
an approved Mortgage Trustee to hold the mortgage and debt instrument 
for the benefit of the lender and that is not exempted under Sec. 
356.19(d) from MARAD review of its loan and mortgage covenants, so long 
as the lender's consent is not unreasonably withheld:
    (1) Borrower cannot sell part or all of its assets;
    (2) Borrower cannot merge, consolidate, reorganize, dissolve, or 
liquidate;
    (3) Borrower cannot undertake new borrowing or contingent 
liabilities;
    (4) Borrower cannot insure, guaranty or become otherwise liable for 
debt obligations of any other entity, Person, etc.;
    (5) Borrower cannot Charter or lease a vessel that is collateral for 
the loan;
    (6) Borrower cannot incur liens, except any permitted liens that may 
be set forth in the loan or other financing documents;
    (7) Borrower must limit its investments to marketable investments 
guaranteed by the United States or a State, or commercial paper with the 
highest rating of a generally recognized rating service;
    (8) Borrower cannot make structural alterations or any other major 
alteration to the vessel;
    (9) Borrower, if in arrears in its debt obligations to the lender, 
cannot make dividend payments on its capital stock; and,
    (10) Borrower, if in arrears in its debt obligations to the lender, 
cannot make excessive contributions to pension plans, make payment of 
employee bonuses, or make excessive contributions to stock option plans, 
or provide other major fringe benefits in terms of dollar amount to its 
employees, officers, and directors, such as loans, etc.
    (b) The mortgage may not include covenants that allow the Mortgagee 
to operate the vessel except as provided for in Sec. 356.25.

[65 FR 44877, July 19, 2000, as amended at 68 FR 5581, Feb. 4, 2003]



Sec. 356.25  Operation of Fishing Industry Vessel Mortgagees.

    (a) A Mortgagee that has demonstrated to MARAD that it qualifies as 
a Citizen of the United States and is eligible to own a vessel with a 
fishery

[[Page 300]]

endorsement may operate a Fishing Industry Vessel.
    (b) A Mortgagee not eligible to own a Fishing Industry Vessel cannot 
operate or cause operation of, the vessel in the fisheries of the United 
States. Except as provided in paragraph (c) of this section, the vessel 
may not be operated for any purpose without the prior written approval 
of the Citizenship Approval Officer.
    (c) A Mortgagee not eligible to own a Fishing Industry Vessel may 
operate the vessel for a non-commercial purpose to the extent necessary 
for the immediate safety of the vessel or for repairs, drydocking or 
berthing changes; provided, that the vessel is operated under the 
command of a Citizen of the United States and for no longer than 15 
calendar days.
    (d) A Mortgagee that is holding a Preferred Mortgage on a Fishing 
Industry Vessel but that is not eligible to own a Fishing Industry 
Vessel may take possession of the vessel in the event of default by the 
mortgagor other than by foreclosure pursuant to 46 U.S.C. 31329, if 
provided for in the mortgage or a related financing document. However, 
the vessel may not be operated, or caused to be operated in commerce, 
except as provided in paragraph (c) of this section or with the approval 
of the Citizenship Approval Officer.
    (e) A Non-Citizen Lender that has brought a civil action in rem for 
enforcement of a Preferred Mortgage lien on a Citizen-owned Fishing 
Industry Vessel pursuant to 46 U.S.C. 31325(b)(1) may petition the court 
pursuant to 46 U.S.C. 31325(e)(1) for appointment of a receiver, and, if 
the receiver is a Person eligible to own a Fishing Industry Vessel , to 
authorize the receiver to operate the mortgaged vessel pursuant to terms 
and conditions consistent with this part 356. If the receiver is not a 
Citizen of the United States that meets the requirements of section 2(c) 
of the 1916 Act, 46 App. U.S.C. 802(c), and 46 U.S.C. 12102(c), the 
vessel may not be operated in the fisheries of the United States.



                       Subpart E_Mortgage Trustees



Sec. 356.27  Mortgage Trustee requirements.

    (a) A lender who is not qualified under Sec. 356.19(a)(1) through 
(5) to hold a Preferred Mortgage directly on a Fishing Industry Vessel 
may use a qualified Mortgage Trustee to hold, for the benefit of the 
lender, the Preferred Mortgage and the debt instrument for which the 
Preferred Mortgage is providing security.
    (b) In order to qualify as an approved Mortgage Trustee, the 
Mortgage Trustee must:
    (1) Be eligible to hold a Preferred Mortgage on a Fishing Industry 
Vessel under Sec. 356.19(a)(1) through (a)(5);
    (2) Be organized as a corporation and doing business under the laws 
of the United States or of a State;
    (3) Be authorized under the laws of the United States or of the 
State under which it is organized to exercise corporate trust powers;
    (4) Be subject to supervision or examination by an official of the 
United States Government, or of a State;
    (5) Have a combined capital and surplus (as stated in its most 
recent published report of condition) of at least $3,000,000; and
    (6) Meet any other requirements prescribed by the Citizenship 
Approval Officer.
    (c) The Mortgage Trustee must submit to the Citizenship Approval 
Officer the following documentation in order to be an approved Mortgage 
Trustee:
    (1) An application for approval as a Mortgage Trustee as set out in 
paragraph (g) of this section;
    (2) The appropriate certification and documentation required under 
Sec. 356.19(b)(1) through (5) to demonstrate that it is qualified to 
hold a Preferred Mortgage on Fishing Industry Vessels;
    (3) A copy of the most recent published report of condition of the 
Mortgage Trustee; and,
    (4) A certification that the Mortgage Trustee is authorized under 
the laws of the United States or of a State to exercise corporate trust 
powers and is subject to supervision or examination by an official of 
the United States or of a State;

[[Page 301]]

    (5) A certification that the Mortgage Trustee is authorized under 
the laws of the United States or of a State to exercise corporate trust 
powers and is subject to supervision or examination by an official of 
the United States or of a State;
    (d) Any right set forth in a mortgage on a Fishing Industry Vessel 
cannot be issued, assigned, or transferred to a person who is not 
eligible to be a Mortgagee without the approval of the Citizenship 
Approval Officer.
    (e) Mortgage Trustees approved by the Citizenship Approval Officer 
must not assume any fiduciary obligations in favor of Non-Citizen 
Lenders that are in conflict with the U.S. Citizen ownership and control 
requirements set forth in the AFA, without the approval of the 
Citizenship Approval Officer. An approved Mortgage Trustee may request 
that the Citizenship Approval Officer pre-approve a trust agreement form 
to ensure that the fiduciary duties assumed by the Mortgage Trustee in 
favor of a Non-Citizen Lender are consistent with the ownership and 
control requirements of this part and the AFA.
    (f) We will periodically publish a list of Approved Mortgage 
Trustees in the Federal Register, but current information as to the 
status of any particular Mortgage Trustee must be obtained from the 
Citizenship Approval Officer.
    (g) An application to be approved as a Mortgage Trustee should 
include the following:

The undersigned (the ``Mortgage Trustee'') hereby applies for approval 
as Mortgage Trustee pursuant to 46 U.S.C. 31322(f) and the Regulation 
(46 CFR part 356), prescribed by the Maritime Administration 
(``MARAD''). All terms used in this application have the meaning given 
in the Regulation. In support of this application, the Mortgage Trustee 
certifies to and agrees with MARAD as hereinafter set forth:
    The Mortgage Trustee certifies:
    (a) That it is acting or proposing to act as Mortgage Trustee on a 
Fishing Industry Vessel documented, or to be documented under the U.S. 
registry;
    (b) That it--
    (1) Is organized as a corporation under the laws of the United 
States or of a State and is doing business in the United States;
    (2) Is authorized under those laws to exercise corporate trust 
powers;
    (3) Is qualified to hold a Preferred Mortgage on Fishing Industry 
Vessels pursuant to 46 CFR 356.19(a);
    (4) Is subject to supervision or examination by an official of the 
United States Government or a State; and
    (5) Has a combined capital and surplus of at least $3,000,000 as set 
forth in its most recent published report of condition, a copy of which, 
dated --------, is attached.
    The Mortgage Trustee agrees:
    (a) That it will, so long as it shall continue to be on the List of 
Approved Mortgage Trustees referred to in the Regulation:
    (1) Notify the Citizenship Approval Officer in writing, within 20 
days, if it shall cease to be a corporation which:
    (i) Is organized under the laws of the United States or of a State, 
and is doing business under the laws of the United States or of a State;
    (ii) Is authorized under those laws to exercise corporate trust 
powers;
    (iii) Is qualified under 46 CFR. 356.19(a) to hold a Preferred 
Mortgage on Fishing Industry Vessels;
    (iv) Is subject to supervision or examination by an authority of the 
U.S. Government or of a State; and
    (v) Has a combined capital and surplus (as set forth in its most 
recent published report of condition) of at least $3,000,000.
    (2) Furnish to the Citizenship Approval Officer on an annual basis:
    (i) The appropriate certification and documentation required under 
Sec. 356.19(b)(1)-(5) to demonstrate that it is qualified to hold a 
Preferred Mortgage on Fishing Industry Vessels;
    (ii) A copy of the most recent published report of condition of the 
Mortgage Trustee;
    (iii) A list of the Fishing Industry Vessels for which it is acting 
as Mortgage Trustee; and,
    (iv) The identity and address of all beneficiaries for which it is 
acting as a Mortgage Trustee.
    (3) Furnish to the Citizenship Approval Officer copies of each Trust 
Agreement as well as any other issuance, assignment or transfer of an 
interest related to each transaction where the beneficiary under a trust 
arrangement is not a Commercial Lender, a Lender Syndicate or an entity 
that is eligible to hold a Preferred Mortgage under 46 CFR 356.19(a)(1)-
(5);
    (4) Furnish to the Citizenship Approval Officer any further relevant 
and material information concerning its qualifications as Mortgage 
Trustee under which it is acting or proposing to act as Mortgage 
Trustee, as the Citizenship Approval Officer may from time to time 
request; and,
    (5) Permit representatives of the Maritime Administration, upon 
request, to examine its books and records relating to the matters 
referred to herein;

[[Page 302]]

    (b) That it will not issue, assign, or in any manner transfer to a 
person not eligible to own a documented vessel, any right under a 
mortgage of a Fishing Industry Vessel, or operate such vessel without 
the approval of the Citizenship Approval Officer; except that it may 
operate the vessel to the extent necessary for the immediate safety of 
the vessel, for its direct return to the United States or for its 
movement within the United States for repairs, drydocking or berthing 
changes, but only under the command of a Citizen of the United States 
for a period not to exceed 15 calendar days;
    (c) That after a responsible official of such Mortgage Trustee 
obtains knowledge of a foreclosure proceeding, including a proceeding in 
a foreign jurisdiction, that involves a documented Fishing Industry 
Vessel on which it holds a mortgage pursuant to approval under the 
Regulation and to which 46 App. U.S.C. 802(c), 46 U.S.C. 31322(a)(4) or 
46 U.S.C. 12102(c) is applicable, it shall promptly notify the 
Citizenship Approval Officer with respect thereto, and shall ensure that 
the court or other tribunal has proper notice of those provisions; and
    (d) That it shall not assume any fiduciary obligation in favor of 
Non-Citizen beneficiaries that is in conflict with any restrictions or 
requirements of the Regulation.
    This application is made in order to induce the Maritime 
Administration to grant approval of the undersigned as Mortgage Trustee 
pursuant to 46 U.S.C. 31322 and the Regulation, and may be relied on by 
the Citizenship Approval Officer for such purposes. False statements in 
this application may subject the applicant to fine or imprisonment, or 
both, as provided for violation of the proscriptions contained in 18 
U.S.C. 286, 287, and 1001.
    Dated this -------- day of --------, 20----.
ATTEST:

________________________________________________________________________
(Print or type name below)

(SEAL)

MORTGAGE TRUSTEE'S NAME & ADDRESS

________________________________________________________________________
By:
(Print or type name below)
TITLE

[65 FR 44877, July 19, 2000, as amended at 68 FR 5581, Feb. 4, 2003]



Sec. 356.31  Maintenance of Mortgage Trustee approval.

    (a) A Mortgage Trustee that holds a Preferred Mortgage on a Fishing 
Industry Vessel must submit the following information to the Citizenship 
Approval Officer during each calendar year that it is acting as a 
Mortgage Trustee:
    (1) The appropriate certification and documentation required under 
Sec. 356.19(b)(1) through (b)(5) to demonstrate that it is qualified to 
hold a Preferred Mortgage on Fishing Industry Vessels;
    (2) A copy of the most recent published report of condition of the 
Mortgage Trustee;
    (3) A list of the Fishing Industry Vessels for which it is acting as 
Mortgage Trustee; and
    (4) The identity and address of all beneficiaries for which it is 
acting as a Mortgage Trustee.
    (b) The Mortgage Trustee must file the documents required in 
paragraph (a) of this section within 30 calendar days prior to the 
anniversary date of the original approval from the Citizenship Approval 
Officer.
    (c) If at any time the Mortgage Trustee fails to meet the statutory 
requirements set forth in the AFA, the Mortgage Trustee must notify the 
Citizenship Approval Officer of such failure to qualify as a Mortgage 
Trustee not later than 20 calendar days after the event causing such 
failure. Upon learning that a Mortgage Trustee fails to meet the 
statutory or regulatory requirements to qualify as a Mortgage Trustee, 
we will publish a disapproval notice in the Federal Register and will 
notify the U.S. Coast Guard, the Mortgage Trustee, and the beneficiary 
of each Preferred Mortgage of such disapproval by providing them a copy 
of the disapproval notice. The notice to beneficiaries will be provided 
by standard U.S. mail to the address supplied to the Citizenship 
Approval Officer by the Mortgage Trustee. Within 30 calendar days of 
publication in the Federal Register of the disapproval notice, the 
disapproved Mortgage Trustee must either transfer its fiduciary 
responsibilities to a successor Mortgage Trustee that has been approved 
by the Citizenship Approval Officer or cure the defect in its approval. 
The preferred status of

[[Page 303]]

the mortgage will be maintained during the 30 day period following 
publication of the notice in the Federal Register and pending transfer 
of the Mortgage Trustee's fiduciary responsibilities to a successor 
Mortgage Trustee or cure of the defect.

[68 FR 5582, Feb. 4, 2003]



Sec. 356.37  Operation of a Fishing Industry Vessel by a Mortgage Trustee.

    An approved Mortgage Trustee cannot operate a Fishing Industry 
Vessel without the approval of the Citizenship Approval Officer, except 
where non-commercial operation is necessary for the immediate safety of 
the vessel, or for repairs, drydocking or berthing changes; provided, 
that the vessel is operated under the command of a Citizen of the United 
States for a period of no more than 15 calendar days.

[68 FR 5582, Feb. 4, 2003]



  Subpart F_Charters, Management Agreements and Exclusive or Long-Term 

                                Contracts



Sec. 356.39  Charters.

    (a) Charters to Citizens of the United States:
    (1) Bareboat charters may be entered into with Citizens of the 
United States subject to approval by the Citizenship Approval Officer 
that the charterer is a Citizen of the United States. The bareboat 
charterer of Fishing Industry Vessel must submit an Affidavit of U.S. 
Citizenship to the Citizenship Approval Officer for review and approval 
prior to entering into such charter.
    (2) Time charters, voyage charters and other charter arrangements 
that do not constitute a bareboat charter of the Fishing Industry Vessel 
may be entered into with Citizens of the United States. The charterer 
must submit an Affidavit of U.S. Citizenship to the Citizenship Approval 
Officer within 30 calendar days of execution of the charter.
    (b) Charters to Non-Citizens:
    (1) Bareboat or demise charters to Non-Citizens of Fishing Industry 
Vessel for use in the United States are prohibited. Bareboat charters to 
Non-Citizens of Fish Processing Vessels and Fish Tender Vessels for use 
solely outside of the United States are permitted.
    (2) Time charters, voyage charters and other charters that are not a 
demise of the vessel may be entered into with Non-Citizens for the 
charter of dedicated Fish Tender Vessels and Fish Processing Vessels 
that are not engaged in the Harvesting of fish or fishery resources. A 
copy of the charter must be submitted to the Citizenship Approval 
Officer prior to being executed in order for the Citizenship Approval 
officer to verify that the charter is not in fact a demise of the 
vessel.
    (3) Time charters, voyage charters and other charters of Fishing 
Industry Vessels to Non-Citizens are prohibited if the Fishing Industry 
Vessel will be used to Harvest fish or fishery resources.
    (c) We reserve the right to request a copy of any time charter, 
voyage charter, contract of affreightment or other Charter of a Fishing 
Industry Vessel in order to confirm that the Charter is not a bareboat 
charter of the Fishing Industry Vessel.
    (d) Any violation of this section will render the vessel's fishery 
endorsement immediately invalid upon notification from the Citizenship 
Approval Officer.



Sec. 356.41  Management agreements.

    (a) An owner or bareboat charterer of a Fishing Industry Vessel may 
enter into a management agreement with a Non-Citizen in which the 
management company provides marketing services, consulting services or 
other services that are ministerial in nature and do not convey control 
of the vessel to the Non-Citizen.
    (b) An owner or bareboat charterer of a Fishing Industry Vessel may 
not enter into a management agreement that allows the Non-Citizen to 
appoint, discipline or replace the crew or the master, direct the 
operations of the vessel or to otherwise effectively gain control over 
the management and operation of the vessel or vessel-owning entity.
    (c) The owner or bareboat charterer must file with the Citizenship 
Approval Officer a description of any management agreement entered into 
with a Non-Citizen. The description must be

[[Page 304]]

submitted within 30 days of the execution and must include:
    (1) A description of the agreement with a summary of the terms and 
conditions, and,
    (2) A representation and warranty that the agreement does not 
contain any provisions that convey control over the vessel or vessel-
owning entity to a Non-Citizen.
    (d) The Citizenship Approval Officer may request a copy of any 
management agreement to determine if it contains provisions that convey 
control over the vessel or vessel-owning entity to a Non-Citizen.



Sec. 356.43  Long-term or exclusive sales contracts.

    (a) An owner or bareboat charterer of a Fishing Industry Vessel may 
enter into an agreement or contract with a Non-Citizen for the sale of 
all or a significant portion of its catch where the contract or 
agreement is solely for the purpose of employment of certain vessels on 
an exclusive basis for a specified period of time. Such contracts or 
agreements will not require our prior approval; provided, that the 
contract or agreement does not convey control over the owner or bareboat 
charterer of the vessel or the vessel's operation, management and 
harvesting activities.
    (b) Provisions of a long-term or exclusive contract or agreement for 
the sale of all or a significant portion of a vessel's catch entered 
into pursuant to paragraph (a) of this section that are not considered 
to convey impermissible control to a Non-Citizen and do not require our 
approval include provisions that:
    (1) Specify that the owner or bareboat charterer agrees to sell and 
purchaser agrees to procure, on a preferential basis, a certain quantity 
of fish caught by a vessel owner or bareboat charterer on a specific 
vessel;
    (2) Specify that the vessel owner or charterer is responsible for 
supplying a specific type of fish to off-loading points designated by 
the purchaser;
    (3) Provide for the replacement by the vessel owner of vessels 
covered by the contract or agreement in the event of loss or damage;
    (4) Specify refrigeration criteria;
    (5) Provide that the owner or bareboat charterer has to comply with 
fishing schedules that specify the maximum age of fish to be delivered 
and a method to coordinate delivery to the purchaser;
    (6) Provide for methods of calculating price per pound or other 
price schedules and a schedule for payment for delivered fish;
    (7) Provide for an arbitration mechanism in the event of dispute; 
and
    (8) Provide for the purchaser to furnish off-loading crew and/or 
processing or quality control technicians but no other vessel crew 
members.
    (c) An owner or bareboat charterer of a Fishing Industry Vessel must 
obtain the approval of the Citizenship Approval Officer prior to 
entering into any agreement or contract with a Non-Citizen for the sale 
of all or a significant portion of a vessel's catch if the agreement or 
contract contains provisions that in any way convey to the purchaser of 
the vessel's catch control over the operation, management or harvesting 
activities of the vessel, vessel owner, or bareboat charterer other than 
as provided for in paragraph (b) of this section.
    (d) An owner or bareboat charterer must submit, with its Affidavit 
of United States Citizenship and annually thereafter, a list of any 
long-term or exclusive sales agreements to which it is a party and the 
principal parties to those agreements. If requested, a copy of such 
agreements must be provided to the Citizenship Approval Officer.



Sec. 356.45  Advance of funds.

    (a) A Non-Citizen may advance funds to the owner or bareboat 
charterer of a Fishing Industry Vessel:
    (1) As provisional payment for products delivered for consignment 
sales, but not yet sold; or
    (2) Where the basis of the advancement is an agreement between the 
Non-Citizen and the vessel owner or bareboat charterer to sell all or a 
portion of the vessel's catch to the Non-Citizen and the agreement meets 
the following conditions:
    (i) The amount of the advancement does not exceed the annual value 
of the sales contract, measured as the value

[[Page 305]]

of the product to be supplied to the processor;
    (ii) The Non-Citizen is not granted any rights whatsoever to control 
the operation, management and harvesting activities of the Fishing 
Industry Vessel other than as provided for in Sec. 356.43;
    (iii) The owner or bareboat charterer submits to the Citizenship 
Approval Officer within 30 days of execution a description of the 
arrangement and a certification and warranty that the agreement or 
contract with the Non-Citizen does not convey control over the vessel, 
the vessel owner or bareboat charterer in any manner whatsoever other 
than as provided for in Sec. 356.43; and,
    (iv) No security interest in the vessel is conveyed as collateral 
for the advance of funds, unless a qualified Mortgage Trustee is used to 
hold the debt instrument for the benefit of the Non-Citizen.
    (b) An owner or bareboat charterer may enter into an unsecured 
letter of credit or promissory note with a U.S. branch of a Non-Citizen 
Lender if:
    (1) The Non-Citizen Lender is not affiliated with any party with 
whom the owner or bareboat charter has entered into a mortgage, long-
term or exclusive sales or purchase agreement, or other similar 
contract;
    (2) The Non-Citizen Lender is not granted any rights whatsoever to 
control the owner or the operation, management and harvesting activities 
of the Fishing Industry Vessel; and,
    (3) The owner or bareboat charterer submits to the Citizenship 
Approval Officer within 30 days of execution a description of the 
arrangement and a certification and warranty that the agreement or 
contract with the Non-Citizen Lender does not convey control over the 
vessel, the vessel owner or bareboat charter in any manner whatsoever.
    (c) The Citizenship Approval Officer may request a copy of any 
agreement for an advance of funds or letter of credit in order to 
determine if it contains an impermissible conveyance of control to a 
Non-Citizen.

[65 FR 44877, July 19, 2000, as amended at 68 FR 5582, Feb. 4, 2003]



           Subpart G_Special Requirements for Certain Vessels



Sec. 356.47  Special requirements for large vessels.

    (a) Unless exempted in paragraph (b), (c) or (d) of this section, a 
vessel is not eligible for a fishery endorsement under 46 U.S.C. 12108 
if:
    (1) It is greater than 165 feet in registered length;
    (2) It is more than 750 gross registered tons (as measured pursuant 
to 46 U.S.C. Chapter 145) or 1900 gross registered tons (as measured 
pursuant to 46 U.S.C. Chapter 143); or
    (3) It possesses a main propulsion engine or engines rated to 
produce a total of more than 3,000 shaft horsepower; such limitation 
shall not include auxiliary engines for hydraulic power, electrical 
generation, bow or stern thrusters, or similar purposes.
    (b) A vessel that meets one or more of the conditions in paragraph 
(a) of this section may still be eligible for a fishery endorsement if:
    (1) A certificate of documentation was issued for the vessel and 
endorsed with a fishery endorsement that was effective on September 25, 
1997;
    (2) The vessel is not placed under foreign registry after October 
21, 1998; and,
    (3) In the event of the invalidation of the fishery endorsement 
after October 21, 1998, application is made for a new fishery 
endorsement within 15 business days of the receipt of written 
notification from MARAD or the Coast Guard identifying the reason for 
such invalidation. The fishery endorsement of a Fishing Industry Vessel 
that meets the criteria of paragraph (a) of this section is not deemed 
to be invalid for purposes of complying with this paragraph (a)(3), if 
the vessel is purchased pursuant to 46 U.S.C. 31329 by a Mortgagee that 
is not eligible to own a vessel with a fishery endorsement, provided 
that the Mortgagee is eligible to hold a preferred mortgage on such 
vessel at the time of the purchase;
    (c) A vessel that is prohibited from receiving a fishery endorsement 
under paragraph (a) of this section will be eligible if the owner of 
such vessel demonstrates to MARAD that the regional

[[Page 306]]

fishery management council of jurisdiction established under section 
302(a)(1) of the Magnuson-Stevens Fishery Conservation and Management 
Act (16 U.S.C. 1852(a)(1)) has recommended after October 21, 1998, and 
the Secretary of Commerce has approved, conservation and management 
measures in accordance with the American Fisheries Act of 1998, Title 
II, Division C, Public Law 105-277, to allow such vessel to be used in 
fisheries under such council's authority.
    (d) A vessel that meets one or more of the conditions in paragraph 
(a) of this section may still be eligible for a fishery endorsement if 
the vessel is engaged exclusively in the menhaden fishery in the 
geographic region governed by the South Atlantic Fisheries Council or 
the Gulf of Mexico Fisheries Council.
    (e) The owner of a vessel that meets any of the criteria in 
paragraph (a) of this section is required to submit a certification each 
year in conjunction with its Affidavit of U.S. Citizenship in order to 
document that the vessel is eligible for documentation with a fishery 
endorsement. The certification should indicate that the vessel meets the 
criteria of paragraph (a) of this section; however, it is eligible to be 
documented with a fishery endorsement because it complies with the 
requirements of either paragraph (b), (c), or (d) of this section. A 
sample form for the certification is available on the MARAD Web site at 
http://www.marad.dot.gov/afa.html or may be obtained by contacting the 
Citizenship Approval Officer.

[65 FR 44877, July 19, 2000, as amended at 68 FR 5582, Feb. 4, 2003]



Sec. 356.49  Penalties.

    If the owner or the representative or agent of the owner has 
knowingly falsified or concealed a material fact or knowingly made a 
false statement or representation with respect to the eligibility of the 
vessel under 46 U.S.C. 12102(c), in applying for or applying to renew 
the vessel's fishery endorsement, the following penalties may apply:
    (a) The vessel's fishery endorsement may be revoked;
    (b) A fine of up to $100,000 may be assessed against the vessel 
owner for each day in which such vessel has engaged in fishing (as such 
term is defined in section 3 of the Magnuson-Stevens Fishery 
Conservation and Management Act (16 U.S.C. 1802)) within the exclusive 
economic zone of the United States; and
    (c) The owner, representative or agent may be subject to additional 
fines, penalties or both for violation of the proscriptions of 18 U.S.C. 
286, 287, and 1001.



Sec. 356.51  Exemptions for specific vessels.

    (a) The following vessels are exempt from the requirements of 46 
U.S.C. 12102(c) as amended by the AFA until such time after October 1, 
2001, as 50% of the interest owned and controlled in the vessel changes; 
provided, the vessel maintains eligibility for a fishery endorsement 
under the federal law that was in effect prior to the enactment of the 
AFA:
    (1) EXCELLENCE (United States official number 967502);
    (2) GOLDEN ALASKA (United States official number 651041);
    (3) OCEAN PHOENIX (United States official number 296779);
    (4) NORTHERN TRAVELER (United States official number 635986); and
    (5) NORTHERN VOYAGER (United States official number 637398) or a 
replacement for the NORTHERN VOYAGER that complies with paragraphs 2, 5, 
and 6 of section 208(g) of the AFA.
    (b) The NORTHERN VOYAGER (United States official number 637398) and 
NORTHERN TRAVELER (United States official number 635986) will forfeit 
the exemption under paragraph (a) of this section if the vessel is used 
in a fishery under the authority of a regional fishery management 
council other than the New England Fishery Management Council or Mid-
Atlantic Fishery Management Council established, respectively, under 
subparagraphs (A) and (B) of section 302(a)(1) of the Magnuson-Stevens 
Fishery Conservation and Management Act (16 U.S.C. 1852(a)(1)(A) and 
(B)).
    (c) The EXCELLENCE (United States official number 967502), GOLDEN 
ALASKA (United States official number 651041), and OCEAN PHOENIX (United 
States official number 296779)

[[Page 307]]

will forfeit their exemption under paragraph (a) of this section if the 
vessel is used to Harvest fish.
    (d) Owners of vessels that are exempt from the new ownership and 
control requirements of the AFA and this part 356 pursuant to paragraph 
(a) of this section must still comply with the requirements for a 
fishery endorsement under the federal law that was in effect on October 
21, 1998. The owners must submit to the Citizenship Approval Officer on 
an annual basis:
    (1) An Affidavit of United States Citizenship in accordance with 
Sec. 356.15 demonstrating that they comply with the Controlling 
Interest requirements of section 2(b) of the 1916 Act. The Affidavit 
must note that the owner is claiming an exemption from the requirements 
of this part 356 pursuant to paragraph (e) of this section; and
    (2) A description of the current ownership structure, a list of any 
changes in the ownership structure that have occurred since the filing 
of the last Affidavit, and a chronology of all changes in the ownership 
structure that have occurred since October 21, 1998.
    (e) The following Fishing Industry Vessels are exempt from the new 
ownership and control standards under the AFA and this part 356 for 
vessel owners and Mortgagees:
    (1) Fishing Industry Vessels engaged in fisheries in the exclusive 
economic zone under the authority of the Western Pacific Fishery 
Management Council established under section 302(a)(1)(H) of the 
Magnuson-Stevens Fishery Conservation and Management Act (16 U.S.C. 
1852(a)(1)(H)); and
    (2) Purse seine vessels when they are engaged in tuna fishing in the 
Pacific Ocean outside the exclusive economic zone of the United States 
or pursuant to the South Pacific Regional Fisheries Treaty.
    (f) Fishing Industry Vessels that are claiming the exemption 
provided for in paragraph (e) of this section must certify to the 
Citizenship Approval Officer that the vessel is exempt from the 
ownership and control requirements of this part 356 pursuant to the 
exemption in paragraph (e) of this section. The vessel owner will be 
required to follow the U.S. Coast Guard's procedures for documenting a 
vessel with a fishery endorsement, as in effect prior to the passage of 
the AFA. The vessel owner must also notify the Coast Guard's National 
Vessel Documentation Center that it is claiming an exemption from the 
ownership and control requirements of this part 356 pursuant to 
paragraph (e) of this section.

[65 FR 44877, July 19, 2000, as amended at 68 FR 5583, Feb. 4, 2003]



                   Subpart H_International Agreements



Sec. 356.53  Conflicts with international agreements.

    (a) If the owner or Mortgagee of a Fishing Industry Vessel believes 
that there is a conflict between the AFA or 46 CFR part 356 and any 
international treaty or agreement to which the United States is a party 
on July 24, 2001, and to which the United States is currently a party, 
the owner or Mortgagee may petition the Chief Counsel of the Maritime 
Administration at any time after July 19, 2000 to request a ruling that 
all or part of the requirements of this part 356 do not apply to that 
particular owner or particular Mortgagee with respect to a specific 
vessel; provided, the petitioner had an ownership interest in the 
Fishing Industry Vessel, or a mortgage on the vessel in the case of a 
Mortgagee, on July 24, 2001, and is covered by the international 
agreement.
    (b) A petition for exemption from the requirements of this part 356 
must include:
    (1) Evidence of the ownership structure, or mortgage structure in 
the case of a Mortgagee, of the Fishing Industry Vessel as of July 24, 
2001 (or on the date of the petition, for petitions filed prior to July 
24, 2001), and any subsequent changes to the ownership structure, or 
mortgage structure in the case of a Mortgagee, of the vessel;
    (2) A copy of the provisions of the international agreement or 
treaty which the owner or mortgagee believes are in conflict with the 
regulations in this part 356;
    (3) A detailed description of how the provisions of the 
international agreement or treaty and the regulations in this part 356 
are in conflict; and

[[Page 308]]

    (4) A certification in all petitions filed on or after July 24, 
2001, that no interest in the vessel-owning entity has been transferred 
to a Non-Citizen after July 24, 2001.
    (c) A separate petition must be filed for each Fishing Industry 
Vessel for which the vessel owner or a Mortgagee is requesting an 
exemption unless the Chief Counsel authorizes consolidated filing. 
Petitions should include two copies of all materials and should be sent 
to the following address: Maritime Administration, Chief Counsel, Room 
7228, 400 7th Street, SW., Washington, DC 20590.
    (d) Upon receipt of a complete petition, the Chief Counsel may 
publish a notice in the Federal Register requesting public comment if 
the petition presents unique issues that have not been addressed in 
previous determinations. The Federal Register notice will include the 
petitioner's descriptions regarding how the AFA and this part 356 are in 
conflict with a particular investment treaty or agreement, but it will 
not include proprietary or confidential information about the 
petitioner. The Chief Counsel, in consultation with other departments 
and agencies within the Federal Government that have responsibility or 
expertise related to the interpretation or application of international 
investment agreements (e.g., the Department of State, United States 
Trade Representative, Department of Treasury, etc.), will review the 
petition and the public comments, if any, to determine whether the 
international agreement and the requirements of the AFA and this part 
356 are in conflict and, absent any extenuating circumstances, will 
render a decision within 120 days of the receipt of a fully completed 
petition. If MARAD's Chief Counsel determines after the receipt of a 
fully completed petition that there are extenuating circumstances that 
will preclude a decision from being rendered on the petition within 120 
days, the petitioner will be notified around the 90th day and provided 
with an estimated date on which a decision will be rendered.
    (e) To the extent that it is determined that an international 
agreement covering the petitioner is in conflict with the requirements 
of this part 356, the AFA, 46 U.S.C. 31322(a), 46 U.S.C. 12102(c), and 
this part 356 will not be applied to the petitioner with respect to the 
specific vessel. If the petitioner is a vessel owner, it will be 
required to comply with the documentation requirements as in effect 
prior to passage of the AFA on October 21, 1998. If the petitioner is a 
Mortgagee, it will be subject to requirements of 46 U.S.C. 31322(a) as 
in effect prior to passage of the AFA with regard to the mortgage on the 
particular vessel covered by the petition. Decisions of the Chief 
Counsel may be appealed to the Maritime Administrator within 15 business 
days of issuance.
    (f) The owner of a Fishing Industry Vessel that is determined 
through the petition process to be exempt from all or part of the 
requirements of this part 356 must submit evidence of its ownership 
structure to the Chief Counsel on an annual basis. The owner must 
specifically set forth:
    (1) The Vessel's current ownership structure;
    (2) The identity of all Non-Citizen owners and the percentage owned;
    (3) Any changes in the ownership structure that have occurred since 
the filing of the last Affidavit; and,
    (4) A certification that no interest in the vessel was transferred 
to a Non-Citizen after July 24, 2001.
    (g) The provisions of this part 356 shall apply:
    (1) To all owners and Mortgagees of a Fishing Industry Vessel who 
acquired an interest in the vessel after July 24, 2001; and
    (2) To the owner of a Fishing Industry Vessel on July 24, 2001, if 
any ownership interest in that owner is transferred to or otherwise 
acquired by a Non-Citizen or if the percentage of foreign ownership in 
the vessel is increased after such date.
    (3) An ownership interest is deemed to be transferred under this 
paragraph (g) if:
    (i) There is a transfer of direct ownership interest in the primary 
vessel owning entity. If the primary vessel owning entity is wholly 
owned by another entity, the parent entity will be considered the 
primary vessel owning entity; or

[[Page 309]]

    (ii) There is a transfer of indirect ownership at any tier.
    (4) A transfer of interest in a vessel owner does not include:
    (i) Transfers of disparately held shares of a vessel-owning entity 
if it is a publicly traded company and the total of the shares 
transferred in a particular transaction equals less than 5% of the 
shares in that class. An interest in a vessel owning entity that exceeds 
5% of the shares in a class can not be sold to the same Non-Citizen 
through multiple transactions involving less than 5% of the shares of 
that class of stock in order to maintain the exemption for the vessel 
owner; or
    (ii) Transfers pursuant to a divorce or death.

[65 FR 44877, July 19, 2000, as amended at 68 FR 5583, Feb. 4, 2003]



        Subpart I_Review of Harvesting and Processing Compliance



Sec. 356.55  Review of compliance with harvesting and processing quotas.

    (a) Upon the request of either the North Pacific Fishery Management 
Council (``NPFMC'') or the Secretary of Commerce, the Chief Counsel will 
review any allegation that an individual or entity has exceeded the 
allowable percentage for harvesting or processing pollock as provided 
for in section 210(e)(1) or (2) of the AFA.
    (b) Following a request for MARAD review under paragraph (a) of this 
section, the NPFMC and the Secretary of Commerce (through the National 
Oceanic and Atmospheric Administration and the National Marine Fisheries 
Service) will transmit to MARAD any relevant information in their 
possession including, but not limited to:
    (1) The identity of the parties alleged to have exceeded the 
excessive share caps;
    (2) The relevant harvesting or processing data (the amount harvested 
or processed by particular parties);
    (3) Any information that would be helpful in determining if the 
parties are related;
    (4) Any information regarding the ownership structure of the 
parties, including:
    (i) Articles of incorporation;
    (ii) Bylaws;
    (iii) Identity of shareholders and the percentage owned;
    (iv) Any contracts or agreements that would demonstrate ownership or 
control of one party by another allegedly related party; and
    (v) Any other evidence that would demonstrate ownership or control 
of one party by another allegedly related party.
    (c) If MARAD determines during the course of its review that 
additional information is required from the parties alleged to have 
exceeded the excessive share cap, the Chief Counsel will advise the 
Secretary of Commerce and/or the NPFMC what information is required. The 
Secretary and/or the NPFMC will request that specific parties submit the 
required information to MARAD.
    (d) The Chief Counsel will make a finding as soon as practicable and 
will submit it to the Secretary of Commerce and the NPFMC.
    (e) For purposes of this section, if 10% or more of the interest in 
an entity is owned or controlled either directly or indirectly by 
another individual or entity, the two entities will be considered the 
same entity for purposes of applying the harvesting and processing caps.
    (1) For purposes of this section, an entity will be deemed to have 
an ownership interest in a pollock harvesting or processing entity if it 
either owns a percentage of the pollock harvesting or processing entity 
directly or if ownership can be traced through intermediate entities to 
the pollock harvesting or processing entity. To determine the percentage 
of ownership interest that an entity has in a pollock harvesting or 
processing entity where the ownership interest passes through one or 
more intermediate entities, the entity's percentage of direct interest 
in an intermediate entity is multiplied by the intermediate entity's 
percentage of direct or indirect interest in the pollock harvesting or 
processing entity.
    (2) For purposes of this section, an entity will be deemed to 
exercise 10% or greater control over a pollock harvesting or processing 
entity if:
    (i) It has the right to direct the business of the pollock 
harvesting or processing entity;

[[Page 310]]

    (ii) It has the right to appoint members to the management team of 
the pollock harvesting or processing entity such as the directors of a 
corporation or is a general partner or joint venturer in a harvesting or 
processing entity;
    (iii) It has the right to direct the business of an entity that 
directly or indirectly owns or controls 10% of a harvesting or 
processing entity; or
    (iv) It owns 50% or more of an entity that owns or controls 10 
percent of a pollock harvesting or processing entity.
    (f) If the Secretary of Commerce determines that there is enough 
evidence to pursue an enforcement action for violation of the harvesting 
or processing caps contained in section 210(e) of the AFA, the Person 
against whom an enforcement action is taken is entitled to notice and an 
opportunity for a hearing before the Secretary of Commerce in accordance 
with 5 U.S.C. 554.



PART 370_CLAIMS--Table of Contents



               Subpart A_Processing of Time-Barred Claims

Sec.
370.1 Definitions.
370.2 General policy.



               Subpart A_Processing of Time-Barred Claims



Sec. 370.1  Definitions.

    (a) Time-barred claim means a claim against the Government, for 
which the statutory period for filing suit has expired.
    (b) Contract includes every agreement or contract entered into by 
the Maritime Administrator and/or Maritime Subsidy Board, the Director 
National Shipping Authority or their delegatee.

(Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114)

[G.O. 102, 34 FR 6928, Apr. 25, 1969]



Sec. 370.2  General policy.

    (a) Time-barred claims shall be rejected, except as follows:
    (1) A time-barred claim which could be asserted in court by way of 
set-off against a claim in favor of the United States arising out of the 
same contract may be considered in an overall settlement where 
settlement will result in a net payment to the United States, provided 
claimant releases the United States from all claims arising from or in 
any way connected with said contract.
    (2) Time-barred claims in favor of friendly foreign governments 
shall not be rejected solely because they are time-barred. However, 
should any such government adopt the practice of asserting the statute 
of limitations as a defense against claims of the United States, the 
time-barred claims of that government shall be rejected.
    (3) Time-barred claims arising under Second Seamen's War Risk 
insurance (or similar earlier types of crew insurance) where the policy 
was issued or the risks were assumed by the Maritime Administration (or 
its predecessors), shall not be rejected where the beneficiaries were 
precluded from receiving the proceeds of the policy by reason of 
regulations or orders of the U.S. Government (i) by reason of the 
beneficiary being physically or mentally unable to present the claim, 
(ii) by the beneficiaries being unaware of their entitlement to the 
proceeds in question, or (iii) where the claim is not ``stale'' under 
general principles of equity.
    (b) For the purpose of a claim by a General Agent under General 
Agency Agreements set forth in 32A CFR AGE-1 for reimbursement by the 
Maritime Administration on account of a timely payment made to a third 
party within a period of limitations running from the date the claim of 
the third party accrued, the period of limitations applicable to the 
General Agent shall run from the date of such payment. In all other 
cases involving claims arising under General Agency Agreements, 
including third-party claims, the policy provided in paragraph (a) of 
this section shall apply.
    (c) Consideration of any claim governed by applicable regulations in 
this chapter II, including without limitation parts 272, 292, and 205 of 
this chapter, shall be controlled by the time limitations expressly 
provided for with

[[Page 311]]

respect to the submission of such claims.

(Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114)

[G.O. 102, 34 FR 6928, Apr. 25, 1969]



PART 380_PROCEDURES--Table of Contents



     Subpart A_Filing of Applications Under Section 805(a), 1936 Act

Sec.
380.1 Purpose.
380.2 Filing applications.
380.3 Processing of application.
380.4 Notices; statements from interested parties and arrangements for 
          hearing.
380.5 Exception to procedure.

Subpart B_Application for Designation of Vessels as American Great Lakes 
                                 Vessels

380.10 Purpose.
380.11 Designation of American Great Lakes vessels.
380.12 Application requirements.

                  Subpart C_Records Retention Schedule

380.20 Purpose.
380.21 Reproduction.
380.22 Responsibility.
380.23 Supervision of records.
380.24 Schedule of retention periods and description of records.

Subpart D [Reserved]

                     Subpart E_Compulsory Disclosure

380.40 Subpoenas, other compulsory processes and requests.



     Subpart A_Filing of Applications Under Section 805(a), 1936 Act

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114.

    Source: General Order 86, Rev., 33 FR 810, Jan. 23, 1968, unless 
otherwise noted.



Sec. 380.1  Purpose.

    To prescribe procedure to be followed for filing applications 
submitted to the Maritime Subsidy Board/Maritime Administration pursuant 
to the provisions of section 805(a), Merchant Marine Act, 1936, as 
amended.



Sec. 380.2  Filing applications.

    (a) An applicant under section 805(a) shall file his application (16 
copies, including three originals) with the Secretary, Maritime Subsidy 
Board/Maritime Administration at least 15 days in advance of the 
effective date of the action proposed in the application.
    (b) The application shall concisely and clearly reflect:
    (1) Whether the applicant holds an operating-differential subsidy 
contract under title VI of the Act, or has applied for such type 
contract, or
    (2) Whether the applicant has a Government-owned vessel on charter 
under title VII of the Act or has applied for the charter of a 
Government-owned vessel thereunder;
    (3) The action for which approval of the Maritime Subsidy Board/
Maritime Administration is sought, stated in terms of a request for 
permission to, directly or indirectly, own, operate, or charter a 
vessel(s) in the domestic intercoastal or coastwise service, or to own a 
pecuniary interest, directly or indirectly, in any person or concern 
that owns, charters, or operates any vessel(s) in the domestic 
intercoastal or coastwise service; and
    (4) Whether the operator of the vessel to be engaged in the domestic 
trade is a citizen of the United States as required by and within the 
meaning of section 2 of the Shipping Act, 1916.



Sec. 380.3  Processing of application.

    All applications under section 805(a) shall be referred to the 
Chief, Office of Government Aid, Maritime Administration, for 
consideration and such further action as may be appropriate.



Sec. 380.4  Notices; statements from interested parties and arrangements 

for hearing.

    (a) A notice shall be published in the Federal Register which shall:
    (1) Identify and abstract the subject of the application.
    (2) Provide that interested parties may inspect the proposed 
application in the Office of Government Aid, Maritime Administration.
    (3) Provide for a specific date by which parties having any interest 
(within the meaning of section 805(a)) in such application and desiring 
to be heard on issues pertinent to section 805(a) shall petition to 
intervene, or

[[Page 312]]

submit a written statement with reference to the application addressed 
to the Secretary, Maritime Subsidy Board/Maritime Administration.
    (4) Provide that if no petitions for leave to intervene are received 
within the specified time, the Maritime Subsidy Board/Maritime 
Administration will take such action as may be deemed appropriate.
    (5) Provide that in the event petitions are received from parties 
with standing to be heard on the application, a hearing will be held on 
a date specified in the notice.
    (6) Indicate that the purpose of the hearing will be to receive 
evidence under section 805(a) relative to whether the proposed operation 
(i) could result in unfair competition to any person, firm, or 
corporation operating exclusively in the coastwise or intercoastal 
service or (ii) would be prejudicial to the objects and policy of the 
Act relative to domestic trade operations.



Sec. 380.5  Exception to procedure.

    The Maritime Subsidy Board or the Maritime Administrator may 
dispense with the publication of notice when not inconsistent with 
applicable laws.



Subpart B_Application for Designation of Vessels as American Great Lakes 

                                 Vessels

    Authority: Sec. 204(b), Merchant Marine Act, 1936, as amended, (46 
app. U.S.C. 1114(b)); Subtitle B, Pub. L. 101-624; 49 CFR 1.66.

    Source: 56 FR 3980, Feb. 1, 1991, unless otherwise noted.



Sec. 380.10  Purpose.

    The purpose of this subpart is to prescribe the requirements for the 
submission of applications for designation of vessels as American Great 
Lakes vessels, subject to the conditions imposed by section 1522 of Pub. 
L. 101-624 (November 28, 1990).



Sec. 380.11  Designation of American Great Lakes Vessels.

    The Secretary shall designate a vessel as an American Great Lakes 
vessel if--
    (a) The vessel is documented under the laws of the United States;
    (b)(1) The vessel is not more than 6 years old, and not less than 1 
year old, on the effective date of the designation; or
    (2) The vessel is not more than 11 years old, and not less than 1 
year old, on the effective date of the designation, and the Secretary 
determines that suitable vessels are not available for providing the 
type of service for which the vessel will be used after designation;
    (c) The vessel has not been previously designated as an American 
Great Lakes vessel; and
    (d) The person who will be the owner of the vessel at the time of 
such designation agrees to enter into an agreement with the Secretary 
which provides that if the Secretary determines that the vessel is 
necessary to the defense of the United States, the United States 
Government shall have, during the 120-day period following the date of 
any revocation of such designation an exclusive right to purchase the 
vessel for a price equal to--
    (1) The approximate world market value of the vessel; or
    (2) The cost of the vessel to the owner less an amount representing 
reasonable depreciation of the vessel, whichever is greater.



Sec. 380.12  Application requirements.

    (a) Submission. An application for designation of one or more 
vessels as an American Great Lakes vessel shall be filed with the 
Secretary, Maritime Administration, Department of Transportation, 400 
Seventh St. SW., Room 7300, Washington, DC 20590, at least 60 days prior 
to the date when the owner wishes to commence operation of one or more 
vessels with such designation. The application shall state with 
specificity that the vessel complies with the requirements of Sec. 
380.11.
    (b) Fee. Each application shall be accompanied by a fee of $50 per 
vessel. Payment shall be made by cashier's check, certified check, or 
money order, payable to ``Maritime Administration.''
    (c) Unavailability of suitable vessels. Where the owner requests 
that the Secretary make a determination that would allow the designation 
of one or more vessels that would be over 6 years

[[Page 313]]

of age, but less than 11 years of age, on the effective date of 
designation, the owner shall include with the application all relevant 
and material information from which the Secretary may determine that 
suitable vessels will not be available for the type of service in which 
the vessel(s) will be used after designation.



                  Subpart C_Records Retention Schedule

    Authority: Secs. 204, 207, 49 Stat. 1987, as amended, 1988, as 
amended; 46 U.S.C. 1114, 1117; sec. 801, 49 Stat. 2011, 46 U.S.C. 1211.



Sec. 380.20  Purpose.

    The purpose of this subpart is to prescribe the procedure to be 
followed by contractors for the retention and disposal of books, 
records, and accounts created and maintained by them under construction 
or operating-differential subsidy contracts with the Maritime 
Administration/Maritime Subsidy Board (hereinafter referred to as the 
``Administration''). The minimum retention periods prescribed herein 
govern only the Administration's requirements for the preservation of 
the hereinafter specified books, records, and accounts. The failure to 
describe a particular book, record, or account shall not exempt a 
contractor from retaining the particular book, record, or account, 
unless expressly so authorized by the Administration.

(Sec. 204(b), Merchant Marine Act, 1936, as amended (46 U.S.C. 1114(b)); 
Pub. L. 97-31 (August 6, 1981); 49 CFR 1.66 (46 FR 47458, Sept. 28, 
1981))

[48 FR 45560, Oct. 6, 1983]



Sec. 380.21  Reproduction.

    (a) The records described in Sec. 380.24 may be microfilmed or 
otherwise reproduced in lieu of their retention in original form: 
Provided, That such reproductions shall not be made prior to completion 
of the audit of such records by the Administration.
    (b) The following standards are established for reproduction 
processes:
    (1) Microfilm. The film stock used in making photographic or 
microphotographic copies shall comply with Interim Federal Standard No. 
125 covering photographic film and processed photographic film. The 
microfilm shall be regularly inspected for aging in accordance with 
Handbook 96, entitled, ``Inspection of Processed Photographic Record 
Films for Aging Blemishes'', published by the U.S. Department of 
Commerce, National Bureau of Standards. If blemishes are detected, a 
duplicate copy of the roll or print shall be made immediately.
    (2) Photocopy. Electrostatic or wet processes only.

(Sec. 204(b), Merchant Marine Act, 1936, as amended (46 U.S.C. 1114(b)); 
Pub. L. 97-31 (August 6, 1981); 49 CFR 1.66 (46 FR 47458, Sept. 28, 
1981))

[G.O. 101, 30 FR 12356, Sept. 28, 1965, as amended at 48 FR 45560, Oct. 
6, 1983]



Sec. 380.22  Responsibility.

    (a) Notwithstanding the minimum retention periods hereinafter set 
forth, it shall be the sole responsibility of any party subject to the 
provisions of this subpart to retain such books, records, and accounts:
    (1) For the periods specifically provided by any statutory, 
regulatory, and contractual requirements of the Administration, or
    (2) Pertaining to or related to matters in litigation, to matters 
which knowingly may become involved in litigation, to unsettled claims 
of whatsoever nature, and to all unsettled matters specifically reserved 
by the parties at the time of any final accounting as may be required 
under statute, contract and/or agreement.
    (b) With respect to books, records, and accounts which, subject to 
the provision of paragraph (a) of this section, are to be disposed of 
upon the expiration of the minimum retention period prescribed herein, 
there shall be filed with the Records Officer, Maritime Administration, 
Washington, DC, 20590, a written notification, at least thirty (30) days 
prior to the contemplated, disposal requesting permission to dispose of 
records. MARAD will accept electronic options (such as facsimile and 
Internet) for transmission of required information to MARAD, if 
practicable. The request shall be in such form that the books, records, 
and accounts can be readily identified. Within thirty (30) days after 
receipt of such notification

[[Page 314]]

the Records Officer shall grant approval for disposal, or advise the 
necessity for continued retention of all or any specified portion 
thereof. Failure of the Record Officer to reply within the thirty (30) 
days period following receipt by the Administration of such request 
shall constitute approval.
    (c) Applications for special authority to dispose of certain books, 
records, and accounts prior to the expiration of prescribed minimum 
retention periods, and any inquiries as to the interpretation or 
applicability of this subpart to specific items shall be submitted to 
the Records Officer, Maritime Administration. MARAD will accept written 
or electronic options (such as facsimile and Internet) for transmission 
of required information to MARAD, if practicable. The applicant shall 
describe in detail the items to be disposed of and explain why continued 
retention is unnecessary.

[G.O. 101, 30 FR 12356, Sept. 28, 1965, as amended at 68 FR 62538, Nov. 
5, 2003; 69 FR 61452, Oct. 19, 2004]



Sec. 380.23  Supervision of records.

    (a) Contractors and others subject to the provisions of this subpart 
shall designate, through formal action, the official company position by 
title, the incumbent of which shall be responsible for supervision of 
its document retention and disposal program. Immediately upon 
designation of the position, a copy of the formal action and name of the 
incumbent shall be filed with the Records Officer, Maritime 
Administration. MARAD will accept written or electronic options (such as 
facsimile and Internet) for transmission of required information, if 
practicable.
    (b) The person in charge of the retention and disposal program shall 
maintain a record of all books, records, and accounts held in storage, 
and in such form that the items and their location are readily 
identifiable. A copy of the written, or by electronic options (such as 
facsimile and Internet), if practicable, notification requesting 
permission to dispose of any books, records, and accounts, and the 
original approval from the Administration, as required in Sec. 
380.22(b), together with a statement showing date, place and method of 
disposal will suffice as a record of such disposed items. These 
retention and disposal records shall be available at all times for 
inspection by Administration officials and auditors.

[69 FR 61452, Oct. 19, 2004]



Sec. 380.24  Schedule of retention periods and description of records.

    (a) The following records shall be retained for not less than two 
(2) years after final release agreement or settlement agreement is 
completed between the Administration and contractors under operating-
differential subsidy contracts:
    (1) Official company or corporate records such as certificates or 
articles of incorporation, minute books, stock ledgers, bond registers, 
merger or acquisition records, patents and copyrights;
    (2) Financial statements and reports such as annual reports to 
stockholders and audit reports by independent public accountants;
    (3) Insurance records such as policies, underwriters' audit reports, 
indemnity bonds, salvage data, and claim files;
    (4) Contracts, agreements, franchises, licenses, etc., such as 
subsidy, charter, ship construction, and pooling agreements;
    (5) Vessel operating records such as log books, surveys, position 
reports, and vessel itineraries;
    (6) Voyage account items such as manifests, bills of lading, 
master's accounts, ship's payrolls;
    (7) Underlying traffic records pertaining to tariffs, dray tickets, 
pooling agreements, passenger reports, freight and passenger conference 
records.
    (b) The following records shall be retained for three (3) years 
after final audit and/or approval by the Administration:
    (1) Ship construction or reconversion records such as bids, plans, 
progress payments, and construction-differential subsidy data;
    (2) Canceled checks;
    (3) Miscellaneous documents and work papers such as correspondence, 
operating and construction-differential subsidy rate data, subsidy 
adjustments pursuant to 46 CFR part 276 and approvals pursuant to 
Article II-10(c) of operating-differential subsidy contracts;

[[Page 315]]

    (4) Any document generated under the provisions of the Shipping Act, 
1916;
    (5) Books of account such as general and subsidiary ledgers, 
journals, cash books, and check registers;
    (6) Personnel records and supplementary records such as union 
agreements.
    (c) Reports prepared by Federal, State, Local, or foreign 
governments pertaining to any documents referred to in this Sec. 
380.24, shall be retained for the same period as prescribed herein for 
the retention of the documents to which they apply.
    (d) If identical copies of the same document serve more than one 
purpose, only the original copy is required to be retained.

(Approved by the Office of Management and Budget under control number 
2133-0501)

(Sec. 204(b), Merchant Marine Act, 1936, as amended (46 U.S.C. 1114(b)); 
Pub. L. 97-31 (August 6, 1981); 49 CFR 1.66 (46 FR 47458, Sept. 28, 
1981))

[48 FR 45560, Oct. 6, 1983]

Subpart D [Reserved]



                     Subpart E_Compulsory Disclosure



Sec. 380.40  Subpoenas, other compulsory processes and requests.

    In any case where it is sought by subpoena, order, or other 
compulsory process or other demand of a court or other authority to 
require the production or disclosure of any record in the files of the 
Maritime Administration or other information acquired by an officer or 
employee of the Maritime Administration as a part of the performance of 
his official duties or because of his official status, the matter shall 
be immediately referred for determination, through the Secretary of the 
Maritime Administration and Maritime Subsidy Board, to the Maritime 
Administrator, Department of Transportation.

[G.O. 112, 36 FR 21816, Nov. 16, 1971]



PART 381_CARGO PREFERENCE_U.S.-FLAG VESSELS--Table of Contents



Sec.
381.1 Purpose.
381.2 Definitions.
381.3 Reporting information and procedure.
381.4 Fair and reasonable participation.
381.5 Fix American-flag tonnage first.
381.6 Informal grievance procedure.
381.7 Federal Grant, Guaranty, Loan and Advance of Funds Agreements.
381.8 Subsidized vessel participation.
381.9 Available U.S.-flag service.

    Authority: 46 App. U.S.C. 1101, 1114(b), 1122(d) and 1241; 49 CFR 
1.66.

    Source: General Order 103, 36 FR 6894, Apr. 10, 1971, unless 
otherwise noted.



Sec. 381.1  Purpose.

    The purpose of this part 381 is to prescribe regulations to be 
followed by all departments and agencies having responsibility under the 
Cargo Preference Act of 1954, section 901(b) of the Merchant Marine Act, 
1936, as amended (46 U.S.C. 1241(b)), in the administration of their 
programs with respect to that Act, and to provide a uniform system for 
the collection of data on the administration of such programs for use in 
preparing the annual reports to Congress required by that Act.



Sec. 381.2  Definitions.

    (a) Cargo Preference Act of 1954 means section 901(b) of the 
Merchant Marine Act, 1936, as amended (46 U.S.C. 1241(b)).
    (b) Cargoes subject to the Cargo Preference Act of 1954, include 
equipment, material or commodities:
    (1) Procured, contracted for or otherwise obtained within or outside 
the United States for the account of the United States;
    (2) Furnished within or outside the United States to or for the 
account of any foreign nation without provision for reimbursement;
    (3) Furnished within or outside the United States for the account of 
any foreign nation in connection with which the United States advances 
funds or credits or guarantees the convertability of foreign currencies.
    (4) Procured, contracted for, or otherwise obtained within or 
outside of the United States with advance of funds, loans or guaranties 
made by or on behalf of the United States.
    (c) Department or agency having responsibility under the Cargo 
Preference Act of 1954 means any department or agency of the Federal 
Government, administering a program that involves

[[Page 316]]

the transportation on ocean vessels of cargoes subject to the Cargo 
Preference Act of 1954. At present, these agencies include:
    (1) Department of State.
    (2) Department of Agriculture.
    (3) Department of Defense.
    (4) Post Office Department.
    (5) General Services Administration.
    (6) Export-Import Bank of the United States.
    (7) National Aeronautics and Space Administration.
    (8) Inter-American Development Bank.
    (9) U.S. Information Agency.
    (10) Department of Interior.
    (11) Department of Commerce.
    (12) Department of Treasury.
    (13) Department of Health, Education, and Welfare.
    (14) Department of Housing and Urban Development.
    (15) Department of Transportation.
    (16) Atomic Energy Commission.
    (17) Tennessee Valley Authority.
    (18) Veterans Administration.
    (19) Smithsonian Institution.
    (20) Library of Congress.
    (d) Liner parcel means any cargo, dry or liquid, normally carried 
under berth terms by common carriers in ocean trades.

(Reorganization Plans No. 21 of 1950 (64 Stat. 1273) and No. 7 of 1961 
(75 Stat. 840) as amended by Pub. L. 91-469 (84 Stat. 1036) and 
Department of Commerce Organization Order 10-8 (38 FR 19707, July 23, 
1973))

[G.O. 103, 36 FR 6894, Apr. 10, 1971, as amended by Amdt. 1, 36 FR 
10739, June 2, 1971; 36 FR 19367, Oct. 5, 1971; 42 FR 57126; Nov. 1, 
1977]



Sec. 381.3  Reporting information and procedure.

    (a) Reports of cargo preference shipments. Each department or agency 
subject to the Cargo Preference Act of 1954, except the Department of 
Defense for which separate regulations will be issued, shall furnish to 
the Office of National Cargo and Compliance, Maritime Administration, 
U.S. Department of Transportation, Washington, DC 20590, within 20 
working days of the date of loading for shipments originating in the 
United States or within 30 working days for shipments originating 
outside the United States, the following information concerning each 
shipment of preference cargo:
    (1) Identification of the sponsoring U.S. Government agency or 
department;
    (2) Name of vessel;
    (3) Vessel flag of registry;
    (4) Date of loading;
    (5) Port of loading;
    (6) Port of final discharge;
    (7) Commodity description;
    (8) Gross weight in pounds;
    (9) Total ocean freight revenue in U.S. dollars.
    (b) Format of reports. The information listed in paragraph (a) of 
this section shall be furnished to the Maritime Administration in a 
format prepared by the reporting department or agency and approved by 
the Maritime Administrator, Department of Transportation as suitable for 
the purpose of carrying out his responsibility under section 901(b)(2) 
of the Merchant Marine Act, 1936, as amended, pursuant to the authority 
delegated to him thereunder by the Secretary of Transportation under 
section 3 of Department Organization Order 10-8, 36 FR 1223. Where 
obtainable, a properly notated and legible copy of the ocean bill of 
lading in English will suffice. Reporting formats shall be submitted for 
approval by April 30, 1971.
    (c) Shipments made subject to the Act. In those instances where a 
shipment has been made that was not known to be subject to the Cargo 
Preference Act of 1954 when it was made, but subsequent events cause it 
to be subject to that Act, the agency taking the action that caused the 
shipment to be subject to the Act shall furnish to the Office of 
National Cargo and Compliance the information listed in paragraph (a) of 
this section in the approved reporting form.

[General Order 103, 36 FR 6894, Apr. 10, 1971, as amended at 57 FR 
13047, Apr. 15, 1992]



Sec. 381.4  Fair and reasonable participation.

    In order to insure a fair and reasonable participation by U.S.-flag 
commercial vessels in liner parcel cargoes subject to the Cargo 
Preference Act of 1954, as required by that Act, the head of each 
department or agency having

[[Page 317]]

responsibility under that Act shall prescribe regulations or formal 
staff instructions providing for the cargo mix of liner parcel cargoes 
transported on ocean vessels to be divided between privately owned U.S.-
flag vessels and foreign-flag vessels in such a manner as to yield to 
the U.S.-flag vessels freight revenue per long ton at least equal to the 
freight revenue per long ton afforded the foreign-flag vessels 
participating in the same grant, loan, or purchase transaction. A copy 
of the regulations or staff instructions prescribed by each department 
or agency shall be furnished to the Secretary, Maritime Administration, 
no later than June 30, 1971, for approval.

[G.O. 103, Amdt. 1, 36 FR 10739, June 2, 1971]



Sec. 381.5  Fix American-flag tonnage first.

    Each department or agency having responsibility under the Cargo 
Preference Act of 1954 shall cause each full shipload of cargo subject 
to said act to be fixed on U.S.-flag vessels prior to any fixture on 
foreign-flag vessels for at least that portion of all preference cargoes 
required by that Act and the Food Security Act of 1985 to be shipped on 
U.S.-flag vessels, computed by purchase authorization or other 
quantitative unit satisfactory to the agency involved and the Maritime 
Administration, except where such department or agency determines, with 
the concurrence of the Maritime Administration, that (a) U.S.-flag 
vessels are not available at fair and reasonable rates for U.S.-flag 
commercial vessels, or (b) that there is a substantially valid reason 
for fixing foreign-flag vessels first.

[G.O. 103, Amdt. 2, 36 FR 19254, Oct. 1, 1971, as amended at 57 FR 
13047, Apr. 15, 1992]



Sec. 381.6  Informal grievance procedure.

    (a) Whenever any person has a question, problem, complaint, 
grievance, or controversy pertaining to the terms and conditions of any 
tenders, charter party terms, or other matter involving the 
administration of the Cargo Preference Act of 1954, such person may 
request the Maritime Administration to afford him an opportunity to 
discuss the matter informally with representatives of the Maritime 
Administration and, if other U.S. Government agencies or foreign 
missions, embassies, or agencies acting on behalf of a foreign 
government are involved with them or persons authorized to speak for 
them.
    (b) In such cases, a request may be made by telephone or letter to 
the Chief, Office of Market Development, Maritime Administration, 
Washington, DC 20590, (202) 366-4610. When such a request has been 
received, the Maritime Administrator, Department of Transportation or 
his designated representative will promptly consider the matter on its 
merits and provide assistance if possible. If the matter cannot be 
resolved satisfactorily by the Maritime Administration, the Maritime 
Administrator, Department of Transportation or his designated 
representative will then arrange for a meeting at a time and place 
satisfactory to all interested parties so that the matter may be freely 
discussed and resolved.
    (c) At such meetings, the Maritime Administrator, Department of 
Transportation or his designated representative may request any U.S. 
Government agency, foreign mission, embassy, or agency acting on behalf 
of a foreign government, or others having an interest in the matter to 
attend such a conference, or to send representatives authorized to speak 
for them. All such meetings and conferences will be conducted in an 
informal manner.

[G.O. 103, Amdt. 3, 37 FR 3641, Feb. 18, 1972, as amended at 57 FR 
13047, Apr. 15, 1992]



Sec. 381.7  Federal Grant, Guaranty, Loan and Advance of Funds Agreements.

    In order to insure a fair and reasonable participation by privately 
owned United States-flag commercial vessels in transporting cargoes 
which are subject to the Cargo Preference Act of 1954 and which are 
generated by U.S. Government Grant, Guaranty, Loan and/or Advance of 
Funds Programs, the head of each affected department or agency shall 
require appropriate clauses to be inserted in those Grant, Guaranty, 
Loan and/or Advance of Funds Agreements and all third party contracts 
executed between the borrower/grantee and other parties, where the 
possibility exists for ocean transportation of items procurred, 
contracted for or otherwise obtained by or on behalf of the

[[Page 318]]

grantee, borrower, or any of their contractors or subcontractors. The 
clauses required by this part shall provide that at least 50 percent of 
the freight revenue and tonnage of cargo generated by the U.S. 
Government Grant, Guaranty, Loan or Advance of Funds be transported on 
privately owned United States-flag commercial vessels. These clauses 
shall also require that all parties provide to the Maritime 
Administration the necessary shipment information as set forth in Sec. 
381.3. A copy of the appropriate clauses required by this part shall be 
submitted by each affected agency or department to the Secretary, 
Maritime Administration, for approval no later than 30 days after the 
effective date of this part. The following are suggested acceptable 
clauses with respect to the use of United States-flag vessels to be 
incorporated in the Grant, Guaranty, Loan and/or Advance of Funds 
Agreements as well as contracts and subcontracts resulting therefrom:
    (a) Agreement Clauses. ``Use of United States-flag vessels:
    ``(1) Pursuant to Pub. L. 664 (43 U.S.C. 1241(b)) at least 50 
percent of any equipment, materials or commodities procured, contracted 
for or otherwise obtained with funds granted, guaranteed, loaned, or 
advanced by the U.S. Government under this agreement, and which may be 
transported by ocean vessel, shall be transported on privately owned 
United States-flag commercial vessels, if available.
    ``(2) Within 20 days following the date of loading for shipments 
originating within the United States or within 30 working days following 
the date of loading for shipments originating outside the United States, 
a legible copy of a rated, `on-board' commercial ocean bill-of-lading in 
English for each shipment of cargo described in paragraph (a)(1) of this 
section shall be furnished to both the Contracting Officer (through the 
prime contractor in the case of subcontractor bills-of-lading) and to 
the Division of National Cargo, Office of Market Development, Maritime 
Administration, Washington, DC 20590.''
    (b) Contractor and Subcontractor Clauses. ``Use of United States-
flag vessels: The contractor agrees--
    ``(1) To utilize privately owned United States-flag commercial 
vessels to ship at least 50 percent of the gross tonnage (computed 
separately for dry bulk carriers, dry cargo liners, and tankers) 
involved, whenever shipping any equipment, material, or commodities 
pursuant to this contract, to the extent such vessels are available at 
fair and reasonable rates for United States-flag commercial vessels.
    ``(2) To furnish within 20 days following the date of loading for 
shipments originating within the United States or within 30 working days 
following the date of loading for shipments originating outside the 
United States, a legible copy of a rated, `on-board' commercial ocean 
bill-of-lading in English for each shipment of cargo described in 
paragraph (b) (1) of this section to both the Contracting Officer 
(through the prime contractor in the case of subcontractor bills-of-
lading) and to the Division of National Cargo, Office of Market 
Development, Maritime Administration, Washington, DC 20590.
    ``(3) To insert the substance of the provisions of this clause in 
all subcontracts issued pursuant to this contract.''
(Reorganization Plans No. 21 of 1950 (64 Stat. 1273) and No. 7 of 1961 
(75 Stat. 840) as amended by Pub. L. 91-469 (84 Stat. 1036) and 
Department of Commerce Organization Order 10-8 (38 FR 19707, July 23, 
1973))
[42 FR 57126, Nov. 1, 1977]



Sec. 381.8  Subsidized vessel participation.

    (a) For the purpose of approving subsidized U.S.-flag liner and bulk 
vessels competing for the carriage of dry bulk preference cargoes, each 
department or agency having responsibility under the Cargo Preference 
Act of 1954 (46 U.S.C. 1214(b)), shall evaluate bids received from the 
operators of such vessels in the manner described in this section.
    (b) When a subsidized vessel operator is the apparent low U.S.-flag 
responsive bidder for a dry bulk preference cargo, the responsible 
department or agency shall evaluate the subsidized operator's bid by:
    (1) Requesting from MARAD an amount for the operating-differential 
subsidy (ODS) likely to be paid for the carriage of such cargo expressed 
as a

[[Page 319]]

cost per ton for performing the voyage by the apparent low responsive 
subsidized bidders;
    (2) Deriving ``augmented bids'' for the subsidized operators by 
adding the ODS amount to each subsidized operator's bid;
    (3) Comparing the augmented bids of the subsidized operators and the 
bids of unsubsidized operators to determine the apparent low responsive 
bidder;
    (4) Requesting from MARAD a fair and reasonable guideline rate for 
the apparent low responsive bidder which shall be based on MARAD's 
calculation of anticipated costs (less ODS in the case of a subsidized 
vessel) for the voyage plus a reasonable amount for profit for the 
voyage; and
    (5) Determining whether the subsidized operator's unaugmented bid or 
the unsubsidized operator's bid, whichever was determined to be the 
lowest responsive bid pursuant to paragraph (b)(3) of this section, is 
at or below the fair and reasonable guideline rate.
    (c) If the amount of dry bulk cargo to be shipped is changed at any 
time prior to award, the department or agency shall request that MARAD 
provide new ODS amounts applicable to the carriage. The department or 
agency shall redetermine the augmented bids before determining the 
lowest responsive bid and requesting from MARAD a revised fair and 
reasonable guideline rate in accordance with the provisions of paragraph 
(b) of this section.
    (d) Whenever a bid is submitted for a U.S.-flag vessel for the 
transportation of dry bulk preference cargo, the responsible department 
or agency shall only approve bids that apply to an individual vessel, 
and may not accept combined bids submitted for more than one vessel. If 
two or more vessels are offered, separate bids shall be submitted for 
each vessel. A bidder may submit a conditional lower bid for each vessel 
to be effective only if more than one vessel is contracted to carry the 
cargo.
    (e) The requirements of this section shall apply only to those 
departments or agencies that directly pay or finance all or part of 
U.S.-flag ocean freight transportation costs for the carriage of dry 
bulk preference cargoes, in accordance with this part.
    (f) The requirements of this section shall not apply to foreign aid 
consisting of direct cash transfer payments under specific agreements 
between departments or agencies and the recipient country with respect 
to the utilization of U.S.-flag vessels for transportation of 
commodities purchased with such funds.

[53 FR 24272, June 28, 1988]



Sec. 381.9  Available U.S.-flag service.

    For purposes of shipping bulk agricultural commodities under 
programs administered by sponsoring Federal agencies from U.S. Great 
Lakes ports during the 1996-2000 Great Lakes shipping seasons, if direct 
all-U.S.-flag service, at fair and reasonable rates, is not available at 
U.S. Great Lakes ports, a joint service involving a foreign-flag 
vessel(s) carrying cargo no farther than a Canadian port(s) or other 
point(s) on the Gulf of St. Lawrence, with transshipment via a U.S.-flag 
privately-owned commercial vessel to the ultimate foreign destination, 
will be deemed to comply with the requirement of ``available'' 
commercial U.S.-flag service under the Cargo Preference Act of 1954. 
Shipper agencies considering bids resulting in the lowest landed cost of 
transportation based on U.S.-flag rates and service shall include within 
the comparison of U.S.-flag rates and service, for shipments originating 
in U.S. Great Lakes ports, through rates (if offered) to a Canadian port 
or other point on the Gulf of St. Lawrence and a U.S.-flag leg for the 
remainder of the voyage. The ``fair and reasonable'' rate for this mixed 
service will be determined by considering the U.S.-flag component under 
the existing regulations at 46 CFR Part 382 or 383, as appropriate, and 
incorporating the cost for the foreign-flag component into the U.S.-flag 
``fair and reasonable'' rate in the same way as the cost of foreign-flag 
vessels used to lighten U.S.-flag vessels in the recipient country's 
territorial waters. Alternatively, the supplier of the commodity may 
offer the Cargo FOB Canadian transshipment point, and MARAD will 
determine fair and reasonable rates accordingly.

[61 FR 24897, May 17, 1996]

[[Page 320]]



PART 382_DETERMINATION OF FAIR AND REASONABLE RATES FOR THE CARRIAGE OF BULK 

AND PACKAGED PREFERENCE CARGOES ON U.S.-FLAG COMMERCIAL VESSELS--Table of 

Contents



Sec.
382.1 Scope.
382.2 Data submission.
382.3 Determination of fair and reasonable rates.
382.4 Waivers.

    Authority: 46 App. U.S.C. 1114, 1241(b); 49 CFR 1.66.

    Source: 63 FR 3828, Jan. 27, 1998, unless otherwise noted.



Sec. 382.1  Scope.

    The regulations in this part prescribe the type of information that 
shall be submitted to the Maritime Administration (MARAD) by operators 
interested in carrying bulk and packaged preference cargoes, and the 
method for calculating fair and reasonable rates for the carriage of dry 
(including packaged) and liquid bulk preference cargoes on U.S.-flag 
commercial vessels, except vessels engaged in liner trades, which is 
defined as service provided on an advertised schedule, giving relatively 
frequent sailings between specific U.S. ports or ranges and designated 
foreign ports or ranges.



Sec. 382.2  Data submission.

    (a) General. The operators shall submit information, described in 
paragraphs (b) and (c) of this section, to the Director, Office of Costs 
and Rates, Maritime Administration, Washington, DC 20590. To the extent 
a vessel is time chartered, the operator shall also submit operating 
expenses for that vessel. All submissions shall be certified by the 
operators. A further review based on the independent CPA performing an 
engagement consistent with professional standards, i.e., an attestation 
engagement, is recommended. Submissions are subject to verification, at 
MARAD's discretion, by the Office of the Inspector General, Department 
of Transportation. MARAD's calculations of the fair and reasonable rates 
for U.S.-flag vessels shall be performed on the basis of cost data 
provided by the U.S.-flag vessel operator, as specified herein. If a 
vessel operator fails to submit the required cost data, MARAD will not 
construct the guideline rate for the affected vessel, which may result 
in such vessel not being approved by the sponsoring Federal agency.
    (b) Required vessel information. The following information shall be 
submitted not later than April 30, 1998, for calendar year 1997 and 
shall be updated not later than April 30 for each subsequent calendar 
year. In instances where a vessel has not previously participated in the 
carriage of cargoes described in Sec. 382.1, the information shall be 
submitted not later than the same date as the offer for carriage of such 
cargoes is submitted to the sponsoring Federal agency, and/or its 
program participant, and/or its agent and/or program's agent, or freight 
forwarder.
    (1) Vessel name and official number.
    (2) Vessel DWT (summer) in metric tons.
    (3) Date built, rebuilt and/or purchased.
    (4) Normal operating speed.
    (5) Daily fuel consumption at normal operating speed, in metric tons 
(U.S. gallons for tugs) and by type of fuel.
    (6) Daily fuel consumption in port while pumping and standing, in 
metric tons (U.S. gallons for tugs) and by type of fuel.
    (7) Total capitalized vessel costs (list and date capitalized 
improvements separately), and applicable interest rates for indebtedness 
(where capital leases are involved, the operator shall report the 
imputed capitalized cost and imputed interest rate).
    (8) Operating cost information, to be submitted in the format 
stipulated in 46 CFR 232.1, on Form MA-172, Schedule 310. Operators are 
encouraged to provide operating cost information for similar vessels 
that the operator considers substitutable within a category, as defined 
in Sec. 382.3(a)(1), in the aggregate on a single schedule. Information 
shall be applicable to the most recently completed calendar year.
    (9) Number of vessel operating days pertaining to data reported in 
paragraph (b)(8) of this section for the year ending December 31. For 
purposes of this part, an operating day means any day on which a vessel 
or tug/barge unit

[[Page 321]]

is in a seaworthy condition, fully manned, and either in operation or 
standing ready to begin pending operations.
    (c) Required port and cargo handling information. The port and cargo 
handling costs listed in this paragraph shall be provided semiannually 
for each cargo preference voyage terminated during the period. The 
report shall identify the vessel, cargo and tonnage, and round-trip 
voyage itinerary including dates of arrival and departure at port or 
ports of loading and discharge. The semiannual periods and the 
information to be submitted are as follows:

------------------------------------------------------------------------
                  Period                              Due date
------------------------------------------------------------------------
April 1-September 30......................  January 1.
October 1-March 31........................  July 1.
------------------------------------------------------------------------

    (1) Port expenses. Total expenses or fees, by port, for pilots, 
tugs, line handlers, wharfage, port charges, fresh water, lighthouse 
dues, quarantine service, customs charges, shifting expenses, and any 
other appropriate port expense.
    (2) Cargo expense. Separately list expenses or fees for stevedores, 
elevators, equipment, and any other appropriate expenses.
    (3) Extra cargo expenses. Separately list expenses or fees for 
vacuvators and/or cranes, lightering (indicate tons moved and cost per 
ton), grain-to-grain cleaning of holds or tanks, and any other 
appropriate expenses.
    (4) Canal expenses. Total expenses or fees for agents, tolls (light 
or loaded), tugs, pilots, lock tenders and boats, and any other 
appropriate expenses. Indicate waiting time and time of passage.
    (d) Other requirements. Unless otherwise provided, operators shall 
use generally accepted accounting principles and MARAD's regulations at 
46 CFR part 232, Uniform Financial Reporting Requirements, for guidance 
in submitting cost data. Notwithstanding the general provisions in 46 
CFR 232.2(c) for MARAD program participants, each operator shall submit 
cost data in the format that conforms with the accounting practices 
reflected in the operator's trial balance and, if audited statements are 
prepared, the audited financial statements. Data requirements stipulated 
in paragraph (b) of this section that are not included under those 
reporting instructions shall be submitted in a similar format. If the 
operator has already submitted to MARAD, for other purposes, any data 
required under paragraph (b) of this section, its submission need not be 
duplicated to satisfy the requirements of this part.
    (e) Presumption of confidentiality. MARAD will initially presume 
that the material submitted in accordance with the requirements of this 
part is privileged or confidential within the meaning of the Freedom of 
Information Act (FOIA), 5 U.S.C. 552(b)(4). In the event of a subsequent 
request for any portion of that data under the FOIA, MARAD will inform 
the submitter of such request and allow the submitter the opportunity to 
comment. The submitter shall claim or reiterate its claim of 
confidentiality at that time by memorandum or letter, stating the basis 
for such assertions of exemption from disclosure. The Freedom of 
Information Act Officer, or the Chief Counsel of MARAD, will inform the 
submitter of the intention to disclose any information claimed to be 
confidential, after the initial FOIA request, or after any appeal of 
MARAD's initial decision, respectively.

(Approved by the Office of Management and Budget under control number 
2133-0514)



Sec. 382.3  Determination of fair and reasonable rate.

    Fair and reasonable rates for the carriage of preference cargoes on 
U.S.-flag commercial vessels shall be determined as follows:
    (a) Operating cost component--(1) General. An operating cost 
component for each category, based on average operating costs of 
participating vessels within a vessel size category, shall be 
determined, at least twice yearly, on the basis of operating cost data 
for the calendar year immediately preceding the current year that has 
been submitted in accordance with Sec. 382.2. The operating cost 
component shall include all operating cost categories, as specified in 
46 CFR 232.5, Form MA-172, Schedule 310, Operating Expenses. For 
purposes of these regulations, charter

[[Page 322]]

hire expenses are not considered operating costs. MARAD shall index such 
data yearly to the current period, utilizing the escalation factors for 
wage and non-wage costs used in escalating operating subsidy costs for 
the same period.
    (2) Fuel. Fuel costs within each category shall be determined based 
on the average actual fuel consumptions, at sea and in port, and current 
fuel prices in effect at the time of the preference cargo voyage(s).
    (3) Vessel categories. Vessels shall be placed in categories by 
deadweight capacities (DWT), as follows:

Group I--under 10,000 DWT
Group II--10,000--19,999 DWT
Group III--20,000--34,999 DWT
Group IV--35,000 DWT and over.

    (b) Capital Component--(1) General. An average capital cost 
component for each category shall be constructed, at least twice yearly, 
consisting of vessel depreciation, interest, and return on equity.
    (2) Items included. The capital cost component shall include:
    (i) Depreciation. The owners' capitalized vessel costs, including 
capitalized improvements, shall be depreciated on a straight-line basis 
over a 20-year economic life, except vessels purchased or reconstructed 
when their age was greater than 10 years old. To the extent vessels are 
chartered or leased, the operator shall submit the capitalized cost of 
the vessel owner and imputed interest rate. If these items are not 
furnished, MARAD will construct these amounts. When vessels more than 10 
years old are acquired, a depreciation period of 10 years shall be used. 
Capitalized improvements made to vessels more than 10 years old shall be 
depreciated over a 10-year period. When vessels more than 10 years old 
are reconstructed, MARAD will determine the depreciation period.
    (ii) Interest. The cost of debt shall be determined by applying each 
vessel owner's actual interest rates to the outstanding vessel 
indebtedness. MARAD shall assume that original vessel indebtedness is 75 
percent of the owners' capitalized vessel costs, including capitalized 
improvements, and that annual principal payments are made in equal 
installments over the economic life of the vessels as determined in 
accordance with paragraph (b)(2)(i) of this section. Where an operator 
uses a variable interest rate, the operator's actual interest rate at 
the time of calculation of the average capital cost component shall be 
used. The ten-year Treasury bill (T-bill) rate plus one percent on the 
first business day of the year or the first business day on or after 
July 1 shall be used for operators without vessel debt and when the 
actual rate is unavailable.
    (iii) Return on equity. The rate of return on equity shall be 
computed in the same manner as described in paragraph (b)(3) of this 
section. For the purpose of determining equity, it shall be assumed that 
the vessel's constructed net book value, less outstanding constructed 
principal, is equity. The constructed net book values shall equal the 
owners' capitalized cost minus accumulated straight-line depreciation.
    (3) Return on working capital. For each voyage a return on working 
capital shall be included as a voyage related capital cost element, and 
thus not part of the averaged costs. Working capital shall equal the 
dollar amount necessary to cover 100 percent of the averaged operating 
costs and estimated voyage costs for the voyage. The rate of return 
shall be based on an average of the most recent return of stockholders' 
equity for a cross section of transportation companies, including 
maritime companies.
    (4) New vessel allowance. Newly constructed vessels and vessels 
acquired during or before their fifth year of age will receive an 
additional allowance for acquisition capital as part of the capital cost 
element. For the first year following construction or acquisition by the 
operator, a daily amount equal to ten percent of capitalized acquisition 
costs, divided by 300 operating days, shall be included. This amount 
shall be reduced by one percent of capitalized acquisition costs each 
subsequent year. No allowance shall be included after the tenth year 
following construction.
    (5) Voyage component. The annual average depreciation, interest, and 
return on equity for vessels in each category shall be divided by 300 
vessel operating

[[Page 323]]

days to yield the daily cost factors. Total voyage days shall be applied 
to the daily cost factors and totaled with the return on working capital 
and new vessel allowance for the voyage to determine the daily capital 
cost component.
    (c) Port and cargo handling cost component. MARAD shall calculate an 
estimate of all port and cargo handling costs on the basis of the 
reported cargo tender terms. The port and cargo handling cost component 
shall be based on vessels in the category and the most current 
information available verified by information submitted in accordance 
with Sec. 382.2(c), or as otherwise determined by MARAD, such as by 
analysis of independent data obtained from chartering agencies.
    (d) Brokerage and overhead component. An allowance for broker's 
commission and overhead expenses of 8.5 percent shall be added to the 
sum of the operating cost component, the capital cost component, and the 
port and cargo handling cost component.
    (e) Determination of voyage days. The following assumptions shall be 
made in determining the number of preference cargo voyage days:
    (1) The voyage shall be round-trip with the return in ballast to a 
port or port range selected by MARAD as the most appropriate, unless the 
vessel is scrapped or sold after discharge of the preference cargo and 
does not return to the United States as a U.S.-flag vessel. In this 
event, only voyage days from the load port to the discharge port, 
including time allowed to discharge, shall be included.
    (2) Cargo is loaded and discharged as per cargo tender terms 
interpreted in accordance with the ``International Rules For the 
Interpretation of Trade Terms'' (INCOTERMS) published by the 
International Chamber of Commerce.
    (3) Total loading and discharge time includes the addition of a 
factor to account for delays and days not worked.
    (4) One extra port day is included at each anticipated bunkering 
port.
    (5) An allowance shall be included for canal transits, when 
appropriate.
    (6) Transit time shall be based on the average speed of vessels in 
the category. When calculating the vessels' average speed, individual 
vessel speeds will be reduced by five percent for self-propelled vessels 
and ten percent for tugs/barges to account for weather conditions.
    (f) Determination of cargo carried. The amount of cargo tonnage used 
to calculate the rate shall be based on the tender offer or charter 
party terms. In instances when separate parcels of preference cargo are 
booked or considered for booking on the same vessel, whether under a 
single program or different programs, a guideline rate shall be provided 
based on the combined voyage.
    (g) Total rate. The guideline rate shall be the total of the 
operating cost component, the capital cost component, the port and cargo 
handling cost component, and the broker's commission and overhead 
component. The fair and reasonable rate can be expressed as total voyage 
revenue or be divided by the amount of cargo to be carried, as 
prescribed in paragraph (f) of this section, and expressed as cost per 
ton, whichever MARAD deems most appropriate.



Sec. 382.4  Waivers.

    In special circumstances and for good cause shown, the procedures 
prescribed in this part may be waived in keeping with the circumstances 
of the present, so long as the procedures adopted are consistent with 
the Act and with the intent of this part.

                           PART 383 [RESERVED]



PART 385_RESEARCH AND DEVELOPMENT GRANT AND COOPERATIVE AGREEMENTS REGULATIONS

--Table of Contents



                                 General

Sec.
385.1 Scope.

                            Regulation System

385.2 Scope.
385.3 Purpose.
385.4 Authority.
385.5 Applicability.
385.6 Exclusions.
385.7 Issuance.
385.8 Arrangement.
385.9 Exceptions, deviations, or waivers.

[[Page 324]]

                           Definition of Terms

385.20 Scope.
385.21 Definitions.

                            General Policies

385.31 Scope.
385.32 Selection of award instrument.
385.33 Unsolicited applications and proposals for financial assistance 
          awards.
385.34 Responsibility for issuing solicitations for proposals or 
          applications.
385.35 Program opportunity notices.
385.36 Public notice of availability of assistance awards.
385.37 Requirement for unrestricted solicitations for discretionary 
          assistance awards.
385.38 Joint funding.
385.39 Socio-economic and environmental policies.
385.40 Disputes.

                           Criteria for Award

385.50 Scope.
385.51 Criteria: Projects.
385.52 Criteria: Applicant.

                           Forms of Agreement

385.60 Scope.
385.61 Grant and cooperative agreements: Special provisions.
385.62 Grant and cooperative agreements: Standard general provisions.

    Authority: Sec. 204(b), Merchant Marine Act, 1936, as amended (46 
U.S.C. 1114(b)); Reorganization Plans No. 21 of 1950 (64 Stat. 1273), 
and No. 7 of 1961 (75 Stat. 840), as amended by Pub. L. 91-469 (84 Stat. 
1036); Department of Commerce Organization Order 10-8 (36 FR 19707, July 
23, 1973); and Secretary's Circular 30 (Nov. 5, 1979).

    Source: 45 FR 66168, Oct. 6, 1980, unless otherwise noted.

                                 General



Sec. 385.1  Scope.

    This part sets forth information about the Maritime Administration 
(MarAd) assistance regulations: Their purpose, authority, applicability, 
issuance, arrangement, implementation, and exception procedure; 
definitions of terms; and general MarAd assistance policies.

                            Regulation System



Sec. 385.2  Scope.

    Sections 385.2 through 385.9 set forth introductory information 
pertaining to the MarAd assistance regulations: Their purpose, 
authority, applicability, exclusions, issuance, arrangement, 
publication, and exceptions.



Sec. 385.3  Purpose.

    Sections 385.2 through 385.9 establish the MarAd assistance 
regulations which codify, implement, and publish uniform assistance 
policies and selected procedures applicable to MarAd and recipients of 
MarAd assistance awards. The MarAd assistance regulations do not, in and 
of themselves, provide authority for the use of assistance instruments 
nor the making of assistance awards where statutory authority has not 
been otherwise provided. Generic authority to award grants and 
cooperative agreements is provided in Pub. L. 95-224, the Federal Grant 
and Cooperative Agreement Act of 1977. The assistance regulations are 
distinct from the Federal and MarAd and Department of Transportation 
procurement regulations.



Sec. 385.4  Authority.

    The MarAd assistance regulations are issued pursuant to section 
204(b) of the Merchant Marine Act, 1936, as amended (46 U.S.C. 1114(b)), 
and pursuant to delegation of authority by the Secretary of 
Transportation to the Maritime Administrator, Department of 
Transportation.



Sec. 385.5  Applicability.

    The MarAd assistance regulations apply to all MarAd research and 
development programs which will result in assistance awards, and to all 
recipients eligible for MarAd assistance awards such as state and local 
governments, institutions of higher education, hospitals, other 
nonprofit organizations, individuals, profitmaking organizations, and 
foreign organizations. The provisions of this part govern the award and 
administration of all such financial assistance matters, including 
resolutions and guidelines issued by MarAd except:
    (a) As otherwise required by statute; and,
    (b) As otherwise provided by specific program regulations.

[[Page 325]]



Sec. 385.6  Exclusions.

    Excluded from this part are requirements pertaining to procurement 
contracts subject to the Federal Property and Administrative Services 
Act of 1949 and the Federal and MarAd procurement regulations, 
interagency agreements, memorandums of understanding and programs or 
projects which directly disseminate technical information, or provide 
consultation, technical service, information, and data counseling to 
recipients without the use of an assistance instrument. Also excluded is 
the sale, lease, license, or other authorization to use Federal 
property, when such use is not incidental to the purpose of stimulation 
or support.



Sec. 385.7  Issuance.

    The MarAd assistance regulations are issued in the Code of Federal 
Regulations as Part 385, Chapter II, of Title 46, Shipping, after 
publication in the Federal Register. Copies of the MarAd assistance 
regulations in the Federal Register and Code of Federal Regulations may 
be purchased from the Superintendent of Documents, Government Printing 
Office, Washington, DC 20402.



Sec. 385.8  Arrangement.

    (a) General Plan. The general format, numbering system, and 
nomenclature used in this part conform with Federal Register standards.
    (b) Citation. The MarAd assistance regulations will be cited in 
accordance with Federal Register standards. Thus, this paragraph, when 
referred to within divisions of the MarAd assistance regulations, should 
be cited as ``Sec. 385.8(b).'' When this section is referred to 
formally in other documents outside of this part, it should be cited as 
``46 CFR 385.8(b).''
    (c) Implementation. Instructions and procedures needed by MarAd to 
internally implement this part will be contained in a separate MarAd 
Financial Assistance Manual, which will be available to the public upon 
request.



Sec. 385.9  Exceptions, deviations, or waivers.

    Requests for exceptions, deviations, or waivers from the 
requirements of this part, unless exceptions are required by program 
legislation or program regulations, shall be submitted to the Grants 
Officer. Exceptions may be approved by the Grants Officer on matters 
within the scope of his authority, or obtained by said Grants Officer 
from higher authority within the Department of Transportation or from 
the Office of Management and Budget when required by law or other 
applicable Federal requirement.

                           Definition of Terms



Sec. 385.20  Scope.

    Only those definitions needed to understand this part will be 
defined. Generally, terms defined elsewhere in statutes, OMB circulars, 
and other Federal requirements will not be restated. Special attention 
is directed to the definitions in the Standard General Provisions of 
MarAd's grant and cooperative agreements (See Sec. 385.62).



Sec. 385.21  Definitions.

    (a) Assistance is where the principal purpose of the relationship is 
the transfer of money, property, services or anything of value to a 
recipient in order to accomplish a public purpose of support or 
stimulation authorized by Federal statute rather than of acquisition, by 
purchase, lease, or barter, of property or services for the direct 
benefit or use of the Federal Government.
    (b) Assistance instrument is a general term which identifies a class 
of instruments used to award assistance. These instruments include grant 
and cooperative agreements, as defined in Sec. 385.32 (c) and (d) of 
this part.
    (c) Act means the Federal Grant and Cooperative Agreement Act of 
1977 (Pub. L. 95-224).
    (d) MarAd means the Maritime Administration within the Department of 
Transportation.
    (e) Secretary means the Secretary of Transportation.
    (f) Maritime Administrator means the Maritime Administrator, 
Department of Transportation to whom the Secretary has delegated 
authority to administer within MarAd the provisions of the Act.

[[Page 326]]

    (g) Grants Officer means the primary delegate of the Maritime 
Administrator responsible for administration of grants and cooperative 
agreements for research and development within MarAd.
    (h) Awards Officer means the principal executive subordinate to the 
Grants Officer responsible for the day-to-day administration of grants 
and cooperative agreements for research and development.

                            General Policies



Sec. 385.31  Scope.

    Sections 385.31 through 385.62 set forth the regulations applicable 
to all assistance instruments as defined herein.



Sec. 385.32  Selection of award instrument.

    (a) General. This section provides guidance on the appropriate use 
of award instruments consistent with the Act and the supplementary 
interpretative guidelines required by section 9 of the Act, which were 
published by the OMB in the Federal Register of August 18, 1978 (41 FR 
36860), and are incorporated by reference herein. This section applies 
to all program and individual transactions where the choice of award 
instruments is within the administrative discretion of MarAd and is not 
otherwise prescribed or limited by law. A variety of award instruments 
is available as the means for defining the terms and conditions and the 
nature of the relationship between MarAd and eligible recipients. The 
award instruments are intended to be different in purpose, application, 
content, and nature. When properly employed, they create different 
relationships between the parties. Because of these differences, the 
decision to use a particular instrument must be made deliberately. The 
determination of whether a program, to be implemented through individual 
transactions, is principally one of acquisition or assistance will be 
made by the Grants Officer. MarAd generally will employ the cooperative 
agreement form of assistance instrument but will employ the grant form 
where deemed appropriate.
    (b) Procurement contract. A procurement contract shall be used as 
the legal instrument to reflect a relationship between the Federal 
Government and a state or local government or other recipient whenever 
(1) the principal purpose of the instrument is the acquisition by 
purchase, lease, or barter, of property or services for the direct 
benefit or use of the Federal Government; or (2) whenever MarAd 
determines in a specific instance that the use of a type of procurement 
contract is appropriate.
    (c) Grant agreement. A type of grant agreement shall be used as the 
legal instrument to reflect a relationship between the Federal 
Government and a state or local government or other recipient whenever 
the principal purpose of the relationship is the transfer of money, 
property, services, or anything of value to the state or local 
government or other recipient in order to accomplish a public purpose of 
support or stimulation authorized by Federal statute, rather than 
acquisition, by purchase, lease, or barter, of property or services for 
the direct benefit or use of the Federal Government; and no substantial 
involvement is anticipated between MarAd, acting for the Federal 
Government, and the state or local government or other recipient during 
performance of the contemplated activity.
    (d) Cooperative agreement. A type of cooperative agreement shall be 
used as the legal instrument to reflect a relationship between the 
Federal Government and a state or local government or other recipient 
whenever the principal purpose of the relationship is the transfer of 
money, property, services, or anything of value to the state or local 
government or other recipient in order to accomplish a public purpose of 
support or stimulation authorized by Federal statute, rather than 
acquisition by purchase, lease, or barter, of property or services for 
the direct benefit or use of the Federal Government; and substantial 
involvement is anticipated between MarAd, acting for the Federal 
Government, and the state or local government or other recipient during 
performance of the contemplated activity.

[[Page 327]]



Sec. 385.33  Unsolicited applications and proposals for financial 

assistance awards.

    (a) Policy. Although it is MarAd policy to solicit applications and 
proposals for assistance awards where possible, MarAd also values 
obtaining innovative ideas, methods, and approaches in maritime 
transportation areas offered by the public through unsolicited 
applications and proposals. It is the policy of the Government to foster 
and encourage the submission of unsolicited proposals. This Sec. 385.33 
is designed to encourage the submisson of unsolicited proposals relating 
to MarAd's mission and to eliminate restraints which discourage the 
generation and acceptance of innovative ideas through unsolicited 
proposals.
    (b) Scope. This section applies to unsolicited proposals being 
considered for support through an assistance instrument. This section 
does not apply when a procurement contract is the appropriate award 
instrument in accordance with Sec. 385.32(b).
    (c) Definition of unsolicited proposal. The term unsolicited 
proposal means a written offer to perform a proposed task or effort, 
initiated and submitted to MarAd by a prospective recipient (offeror) 
without solicitation by MarAd, and with the objective of obtaining an 
award. The term may include both requests for support of a new project 
and requests for additional support of a previously funded project 
(renewals).
    (d) Advance consultation. Organizations or individuals who are 
interested in submitting an unsolicited proposal are encouraged, before 
expending extensive effort in preparing a detailed unsolicited proposal 
or submitting any proprietary information to the Government, to make 
preliminary inquiries of MarAd program staff as to the general interest 
in the type of project contemplated. Prior contact with agency technical 
personnel is permissible and is encouraged, with the limited objectives 
of conveying to the prospective recipient an understanding of the agency 
mission and interest relative to the type of project contemplated. The 
project officer shall not indicate or imply in discussions with the 
potential proposer that a proposal will result in an award. Nothing is 
to be suggested to encourage or authorize the potential proposer to 
perform any work at MarAd expense in anticipation of support or an 
award. If there have been prior discussions with a particular MarAd 
program office, a statement of this fact should be stated on the face of 
the proposal.
    (e) Guides. Guides for preparing the content of unsolicited 
proposals are available from the Awards Officer (M-900), Maritime 
Administration, U.S. Department of Transportation, Washington, DC 20590. 
Notwithstanding these guides, state and local governments may submit 
unsolicited applications or proposals using the application forms 
authorized by OMB Circular No. A-102, Attachment M.
    (f) Submission point. All unsolicited proposals for new or renewals 
of financial assistance awards shall be submitted to Awards Officer (M-
900), Maritime Administration, U.S. Department of Transportation, 
Washington, DC 20590.
    (g) Receipt and review. (1) Receipt of unsolicited proposals will be 
acknowledged promptly by the Awards Officer and then forwarded 
expeditiously to potentially interested program offices for comment. 
Each unsolicited proposal that is circulated for a comprehensive 
evaluation shall have a legend attached or imprinted on it by the Awards 
Officer, identifying it as an unsolicited proposal and stating that it 
shall be used only for purposes of evaluation.
    (2) The responsible program officials shall evaluate the proposal 
fairly and objectively using the criteria in Sec. Sec. 385.50 through 
385.52.
    (3) An unsolicited proposal may include data which the proposer does 
not want disclosed for purposes other than the evaluation of the 
proposal. In such case, the proposer should mark each page containing 
such data with the words ``Proprietory Data--Restricted Use'' at the top 
of the page. In the event that an unsolicited proposal, in whole or in 
part, indicates that the proposer wishes to impose restrictions on the 
use or disclosure of the data contained in the proposal, MarAd personnel 
handling the proposal will take care to ensure that the information in

[[Page 328]]

the proposal is not disclosed outside of MarAd. The Awards Officer has 
responsibility for ensuring that proposal reviewers are free of any 
direct affiliation with the individual(s) or institution submitting the 
proposal. MarAd policy on the use of information contained in proposals 
is to use such information only for evaluation purposes, except to the 
extent such information is generally available to the public, is already 
the property of the Government, or is available to the Government 
without restriction. Accordingly, if a proposal contains information the 
proposer wishes to protect, the proposer shall mark the cover page of 
the proposal with the following Notice:

    Notice: The data contained in pages ---- of this proposal have been 
submitted in confidence and contain trade secrets and/or privileged or 
confidential commercial or financial information, and such data shall be 
used or disclosed only for evaluation purposes: Provided, That if this 
proposer receives an award as a result of or in connection with the 
submission of this proposal the Government shall have the right to use 
or disclose the data herein to the extent provided in the award. This 
restriction does not limit the Government's right to use or disclose 
data obtained without restriction from any source, including the 
proposer.


MarAd shall ensure that all copies of the proposal carry the above 
Notice, and that it is not disclosed outside MarAd, except with the 
consent of the proposer.
    (h) Criteria for acceptance of an unsolicited proposal are those 
listed in Sec. Sec. 385.50 through 385.52. If an unsolicited proposal 
fails to meet any of the criteria, the proposer will be notified by the 
Awards Officer in accordance with paragraph (j) of this section.
    (i) Funding determination. The responsibility for deciding funding 
availability rests solely with the Grants Officer and will not be 
considered by the proposal reviewers.
    (j) Nonsupport of proposal. If the proposal does not offer 
sufficient technical merit or program value; is not relevant to the 
accomplishment of a public purpose authorized by MarAd program 
legislation; or if funds are not available; the proposal will be 
returned to the proposer, if the proposer so requests. The Awards 
Officer shall prepare a letter to the proposer which sets forth the 
basis for rejection of the unsolicited proposal or application.
    (k) Support of proposal. There is no prescribed format for the 
program documentation necessary to justify providing assistance. The 
minimum requirements are that: there be a reasonable basis for 
acceptance based on the criteria set forth in Sec. Sec. 385.50 through 
385.52; the rationale for providing support be written, and approvals be 
obtained as required by MarAd; and, that a copy of the documentation be 
included in the assistance instrument award file. The rationale for 
providing assistance may be included in documents required for project 
approval.



Sec. 385.34  Responsibility for issuing solicitations for proposals or 

applications.

    (a) It is MarAd policy to favor solicitation of proposals or 
applications, where discretionary assistance awards are available, in 
preference to relying on unsolicited proposals, in order to maximize 
opportunities for open participation by the public in MarAd assistance 
awards.
    (b) The Awards Officer shall be responsible for issuing 
solicitations, announcements, or the like, which call for the submission 
of proposals and applications by a certain due date which, if favorably 
acted upon by MarAd, may result in assistance awards.



Sec. 385.35  Program opportunity notices.

    (a) A program opportunity notice can be used to stimulate the flow 
of unsolicited proposals or applications when the program objectives 
cannot be defined sufficiently to prepare a program solicitation.
    (b) The program opportunity notice will contain the following, at a 
minimum:
    (1) A number assigned for control and reference purposes;
    (2) A brief description of the broad, general technical program or 
areas needing investigation (generally 50 words or less);
    (3) A statement of the principal program objective in possibly 
funding unsolicited proposals as either:
    (i) The acquisition of concepts, property, or services for the 
direct benefit or use of the Federal Government; or

[[Page 329]]

    (ii) The transfer of money, property, or services to a recipient for 
support or stimulation authorized by Federal statute;
    (4) A statement about how unsolicited proposals will be evaluated 
and accepted:
    (i) If the principal program objective is to accomplish a public 
purpose of support or stimulation, the criteria in Sec. Sec. 385.50 
through 385.52 shall be applied;
    (ii) If the principal program objective is the acquisition of 
concepts, property, or services for the direct benefit or use of the 
Federal Government (i.e., procurement), the policy regarding evaluation 
and acceptance of unsolicited proposals in 41 CFR 9-4.9 shall apply;
    (5) Restrictions, if any, as to who may submit proposals;
    (6) A contact where additional information may be obtained;
    (7) An expiration date which identifies when the program opportunity 
notice will no longer be current. This date shall not be used as a 
required common due date for submission of proposals;
    (8) A statement that MarAd reserves the right to support or not 
support, in whole or in part, any or all proposals received;
    (9) A statement that MarAd assumes no responsibility for any costs 
associated with specific proposal preparation if no award is made; but 
that if an award is made, MarAd will pay its allocable share of bid and 
proposal expenses as provided for in applicable Federal cost principles;
    (10) A statement that proposals submitted pursuant to the notice 
shall be mailed to the Awards Officer (M-900), Maritime Administration, 
Room 4885, U.S. Department of Transportation, Washington, DC 20590.
    (11) A reference that detailed information concerning assistance 
policy and procedures is contained in these assistance regulations, 46 
CFR part 385;
    (12) As much information as possible as to how proposals and 
applications will be evaluated;
    (13) Policies and procedures for patents, data, and copyrights. 
Proposers have the right to request in advance of or within thirty (30) 
days after the effective date of award a waiver of all or any part of 
the United States rights in subject inventions.
    (c) The program opportunity notice shall be in a format that best 
reflects the needs of the specific program, for example, letter, 
booklet, bulletin, or other documents.
    (d) The program opportunity notice shall be distributed widely. It 
may be distributed to industry associations, including small business 
associations; schools, colleges, and universities; appropriate 
professional and scientific journals; state, local, and regional 
governmental organizations; the Commerce Business Daily; other MarAd 
offices; and individuals and organizations who request copies on a one-
time basis.
    (e) The submission of innovative methods, approaches or ideas will 
not be restricted to those problems or technical areas published in the 
program opportunity notice. Alternatives will be eligible for 
consideration.



Sec. 385.36  Public notice of availability of assistance awards.

    (a) In order to maximize involvement of prospective recipients in 
MarAd assistance programs, it is MarAd's policy, wherever possible, to 
provide timely notice to the public as to the availability of assistance 
awards.
    (b) Early notice regarding legislated grant or other assistance 
programs will br provided by MarAd to the Office of Management and 
Budget for publication in the Catalog of Federal Domestic Assistance 
pursuant to Office of Management and Budget Circular No. A-89. When 
legislated assistance programs or program objectives which are to be 
implemented through assistance instruments reach the point where 
applications or proposals need to be obtained, timely notice of such 
solicitations will be published in the Federal Register, Commerce 
Business Daily, trade and professional journals which are widely 
circulated to state and local governments, and news media, as 
appropriate to communicate with potentially interested applicants.
    (c) When a MarAd assistance project involves making assistance 
available through prime recipients to subrecipients, such as through 
states to local governments, prime recipients should

[[Page 330]]

provide timely advance notice to subrecipients as to the availability of 
such assistance, and provide a reasonable time period for subrecipients 
to prepare applications and secure prerequisite local approvals.



Sec. 385.37  Requirement for unrestricted solicitations for discretionary 

assistance awards.

    (a) Policy. It is MarAd policy to maximize the opportunity for 
prospective recipients to be considered for assistance awards where 
eligibility is not prescribed by law. Therefore, when eligibility is not 
prescribed by law or a final program regulation, and when discretionary 
assistance awards are selected to accomplish a program objective, 
applications or proposals will be obtained, wherever practicable, by 
issuance of a written solicitation. When MarAd initiates the 
solicitation of applications or proposals, eligibility to be considered 
for discretionary awards will not be restricted by MarAd to one category 
of recipients or to a single recipient without adequate basis.
    (b) Justification of restricted eligibility. Where program 
legislation explicitly restricts eligibility, e.g., to state 
governments, no justification is required. When program regulations 
restrict eligibility beyond the restrictions required by the program 
legislation, the basis for the restriction shall be set forth in the 
program rulemaking.

41 CFR 9-3.805-51 shall be used as a guide in preparing the 
``justification for restricting eligibility.'' The reasons offered will 
be evaluated for consistency with the policy in paragraph (a) of this 
section, MarAd's overall mission, and the objective of maintaining an 
open and fair system of making assistance awards.
    (c) Approvals. Justifications of restricted eligibility will be 
signed by the Grants Officer and will be reviewed by Office of General 
Counsel for legal sufficiency prior to issuance of the restricted 
solicitation. The signed justification will be filed in official award 
file.



Sec. 385.38  Joint funding.

    (a) Pursuant to section 10(c) of the Act, MarAd is authorized to 
participate in joint funded projects with other Federal agencies in any 
funding relationship which will serve the best interest of all of the 
participating agencies' program. Such joint funding project may include 
more than one type of assistance relationship, e.g., some components of 
project may be funded by grants and other components of the project may 
be funded by cooperative agreements.
    (b) It is MarAd's positive policy, further, to encourage cost-
sharing on the part of applicants for financial assistance. The 
willingness of applicants to cost-share is a primary factor in making, 
or not making, an assistance award.



Sec. 385.39  Socio-economic and environmental policies.

    A number of socio-economic and environmental policies of the Federal 
Government are incorporated into the standard general provisions of the 
grant agreement and cooperative agreements, and are identified as 
explicit criteria in Sec. Sec. 385.51 and 385.52.



Sec. 385.40  Disputes.

    Procedures for resolution of disputes between a recipient and MarAd 
appear in the standard general provisions of the grant and cooperative 
agreements referenced in Sec. 385.62, of this part.

                           Criteria for Award



Sec. 385.50  Scope.

    Sections 385.51 and 385.52 set forth the criteria to be used by 
MarAd in evaluating all projects and all potential recipients prior to 
award of a grant or cooperative agreement.



Sec. 385.51  Criteria: Projects.

    The criteria to be used by MarAd in evaluating all projects prior to 
award of a grant or cooperative agreement are as follows:
    (a) In terms of the accomplishment of a public purpose--
    (1) The potential contribution which the proposed work is expected 
to make to the MarAd assistance mission;
    (2) The economic, environmental, and societal significance which a 
successful demonstration or project may have for

[[Page 331]]

the nation, and in particular the national merchant marine program;
    (3) The relationship of the proposal to:
    (i) The public need for the potential results of the research, 
development, or demonstration effort, and whether it is unlikely that 
similar results would be achieved in a timely manner in the absence of 
Federal assistance;
    (ii) Whether the potential opportunities for non-Federal interests 
to recapture the investment in the undertaking through the normal 
commercial utilization of proprietary knowledge appear inadequate to 
encourage timely results;
    (iii) The extent of the problems treated and whether the objectives 
sought by the undertaking are national, widespread, or regional in their 
significance;
    (iv) The extent of opportunities to induce non-Federal support of 
the undertaking;
    (v) The degree of risk of loss of the investment inherent in the 
research, and the availability of risk capital to the non-Federal 
entities which might otherwise engage in the field of the research so as 
to further timely development of the technology; and,
    (vi) The availability of appropriations to MarAd.
    (b) In terms of the particular objectives of the project, whether 
the project has:
    (1) High technical merit which promises or represents an innovative 
idea, method, or approach;
    (2) Program value not previously recognized or pursued by MarAd; 
and,
    (3) A reasonable degree of probability of achieving the stated 
objectives.



Sec. 385.52  Criteria: Applicant.

    The criteria to be used by MarAd in evaluating all applicants prior 
to award of a grant or cooperative agreement are as follows:
    (a) The qualifications, capabilities, resources (both financial and 
technical) and experience of the applicant;
    (b) The facilities or techniques which the proposer possesses and 
offers which are considered to be integral factors for achieving the 
objectives of the proposal;
    (c) The qualifications, capabilities, and experiences of the 
proposed investigator, team leader, or key personnel, who are considered 
to be critical in achieving the objectives of the proposal;
    (d) The precision and detail with which the applicant states its 
plan to further the formally adopted socioeconomic and environmental 
policies of the United States e.g., the encouragement of minority 
business enterprises); and,
    (e) The extent to which the applicant will share the total estimated 
cost of the project.

                           Forms of Agreements



Sec. 385.60  Scope.

    Sections 385.61 through 385.62 describe the form and content of the 
two parts which comprise a grant agreement or a cooperative agreement 
which will be executed by MarAd and a recipient of financial assistance.



Sec. 385.61  Grant and cooperative agreements: Special provisions.

    (a) MarAd has adopted two format matrices, one for grant agreements 
and one for cooperative agreements, to accommodate the variables 
inherent in undertaking a project with a particular recipient. These 
variables include, for example, identity of the recipient, scope of 
work, schedule of performance and obligations assumed by both parties.
    (b) The format matrices are available on request from the Awards 
Officer, and a copy of each is included in the information kit provided 
to all potential recipients of financial assistance. \1\
---------------------------------------------------------------------------

    \1\ An informational copy of both format matrices accompany this 
regulation as filed in the Office of the Federal Register.
---------------------------------------------------------------------------

    (c) MarAd will adapt the appropriate format matrix to the extent 
deemed necessary when drafting the particular agreement to be executed 
by MarAd and a recipient of financial assistance for a specific project.



Sec. 385.62  Grant and cooperative agreements: Standard general provisions.

    (a) MarAd has adopted two standard general provisions which apply to

[[Page 332]]

grant and cooperative agreements, respectively, and said provisions are 
hereby incorporated by reference into these regulations. \2\
---------------------------------------------------------------------------

    \2\ A copy of both such incorporated provisions accompany this 
regulation and are on file in the Office of the Federal Register.
---------------------------------------------------------------------------

    (b) MarAd reserves the right to amend or to render inapplicable any 
portion of the particular standard general provisions required for any 
particular grant or cooperative agreement: Provided, That such 
modification shall be accomplished only by means of an explicit 
statement in the special provisions executed by MarAd and a particular 
recipient.



PART 386_REGULATIONS GOVERNING PUBLIC BUILDINGS AND GROUNDS AT THE UNITED 

STATES MERCHANT MARINE ACADEMY--Table of Contents



Sec.
386.1 Hours of admission to property.
386.3 Preservation of property.
386.5 Conformity with signs and posted regulations.
386.7 Disturbances.
386.9 Gambling.
386.11 Alcoholic beverages and controlled substances.
386.13 Soliciting, vending, and debt collection.
386.15 Distribution of handbills.
386.17 Photographs for news, advertising, or commercial purposes.
386.19 Dogs and other animals.
386.21 Vehicular and pedestrian traffic.
386.23 Weapons and explosives.
386.25 Enforcement, penalties and other laws.

    Authority: 40 U.S.C. 318; 32 FR 11969 (August 18, 1967), Pub. L. 97-
31 (95 Stat. 151, August 6, 1981); 49 CFR 1.66.

    Source: 52 FR 21534, June 8, 1987, unless otherwise noted.



Sec. 386.1  Hours of admission to property.

    Academy property shall be closed to the public during other than 
normal working hours, as well as during Regimental leave periods and 
indoctrination training for the fourth class year. The closing of 
property shall not apply where the Superintendent has approved the after 
normal working hours use of buildings or athletic facilities for 
authorized activities. During normal working hours, property shall be 
closed to the public only when situations require this action to ensure 
the orderly conduct of Academy business. The Superintendent, or a 
designated representative of the Superintendent, shall make the decision 
to close all or any areas of Academy property. This action shall be 
coordinated with the Head, Department of Public Safety and Security 
(Security), of the Academy. When property, or a portion thereof, is 
closed to the public, admission to the property, or to any area thereof, 
shall be restricted to authorized persons, who shall register with 
Security personnel upon entry to the property. When requested, any 
person shall display Government or other identifying credentials to 
Security personnel when entering, leaving, or while on Academy property.



Sec. 386.3  Preservation of property.

    Prohibited actions against property on the Academy grounds are 
improper disposal of rubbish; theft of or damage to property; throwing 
articles from an Academy building; and climbing on statues, fountains or 
any part of a building.



Sec. 386.5  Conformity with signs and posted regulations.

    Persons in and on Academy property shall, at all times, comply with 
official signs and posted regulations of a prohibitional, instructional 
or directional nature, and shall also comply with the directions of 
Academy special police and other authorized officials. These regulations 
shall be enforced by uniformed special police and other designated 
security personnel.



Sec. 386.7  Disturbances.

    Any loitering, disorderly conduct or other conduct on Academy 
property which creates loud or unusual noise or a nuisance which 
unreasonably obstructs the use of any area, including entrances, foyers, 
lobbies, corridors, offices, elevators, stairways, or parking lots; or 
impedes or disrupts the performance of official duties by Government 
employees or Midshipmen activities is prohibited.

[[Page 333]]



Sec. 386.9  Gambling.

    Unless permitted by Executive or Department of Transportation Order, 
participating in games of chance for money or other consideration, or in 
the operation of gambling devices, or the conduct of a lottery or a 
pool, or the selling or purchasing of numbers tickets, is prohibited on 
Academy property.



Sec. 386.11  Alcoholic beverages and controlled substances.

    Operation of a motor vehicle on Academy property while intoxicated, 
under criteria set forth in the statutes of the State of New York, is 
prohibited. The consumption or possession by any person on Academy 
property of alcoholic beverages, narcotic drugs, hallucinogens, 
marijuana, barbiturates, amphetamines or any other substances controlled 
under the laws of the State of New York or the United States is 
prohibited. These prohibitions shall not apply in cases where drugs are 
being used as prescribed for a patient by a licensed physician. The 
prohibition against possession and consumption of alcoholic beverages 
shall not apply when possessed or consumed by staff or resident officers 
in private residences, or when the Superintendent, or a designee of the 
Superintendent, has granted an exemption in writing for an appropriate 
reason.



Sec. 386.13  Soliciting, vending, and debt collection.

    Soliciting aims, or commercial soliciting and vending of all kinds, 
displaying or distributing commercial advertising, or collecting private 
debts is prohibited on Academy property. This prohibition does not apply 
to national or local drives for funds for charitable purposes, welfare, 
health, or other purposes as authorized by the ``Manual on Fund Raising 
Within the Federal Service,'' issued by the U.S. Office of Personnel 
Management under Executive Order 10927 of March 18, 1961, and sponsored 
or approved by the Superintendent; and to commercial lessees and 
contractors authorized to sell goods or services.



Sec. 386.15  Distribution of handbills.

    The distribution of materials such as pamphlets, handbills and 
flyers, and the displaying of placards or posting of materials on 
bulletin boards or elsewhere in or on Academy property shall be 
coordinated with the Head, Department of Public Safety and Security, of 
the Academy so as not to impede Academy employees in the performance of 
their duties or Midshipmen activities.



Sec. 386.17  Photographs for news, advertising, or commercial purposes.

    Such photographs for news, advertising or commercial purposes may be 
taken on Academy premises only with the written consent of the Office of 
External Affairs at the Academy. Except where national security 
regulations apply or a Federal Court Order or rule prohibits, 
photographs for news purposes may be taken in entrances, lobbies, foyers 
or corridors, or in auditoriums in which public meetings are being held. 
Photographs for advertising and commercial purposes may be taken only 
with the written permission of and in locations specified by the Office 
of External Affairs.



Sec. 386.19  Dogs and other animals.

    Persons are prohibited from bringing dogs and other animals on to 
the Academy premises, except for authorized purposes and except for 
seeing eye or other guide dogs, or pets approved in writing by the 
Superintendent or a designee of the Superintendent.



Sec. 386.21  Vehicular and pedestrian traffic.

    Operators of all vehicles on Academy property shall drive in a 
careful and safe manner at all times and shall comply with the signals 
and directions of Academy special police, Security personnel or other 
authorized individuals, and all posted traffic signs and with 
restrictions indicated by marked traffic areas. The following acts are 
prohibited on Academy property: the blocking with vehicles of entrances, 
driveways, walks, loading platforms or fire hydrants; parking without a 
permit, except in emergencies; parking in unauthorized locations or in 
locations reserved for other persons, or parking contrary to the 
direction of posted signs or marked traffic areas, including yellow 
curbs. Vehicles parked in violation of the foregoing shall be subject to

[[Page 334]]

the issuance of a Traffic Violation Notice and/or removal of the vehicle 
at the owner's risk and expense. The Superintendent may issue and post 
other specific traffic directives as may be required, applicable to 
drivers and pedestrians. When so issued and posted, such directives 
shall have the same force and effect as if made a part hereof. Proof 
that a motor vehicle was in violation of these regulations or such 
directives shall be evidence that the registered owner was responsible 
for the violation.



Sec. 386.23  Weapons and explosives.

    No person shall carry or possess firearms, other dangerous or deadly 
weapons or parts thereof, explosives or items intended to be used to 
fabricate an explosive or incendiary device, or parts thereof, either 
openly or concealed, while on Academy property, except for official 
purposes specifically authorized in writing by the Superintendent or a 
designee of the Superintendent.



Sec. 386.25  Enforcement, penalties and other laws.

    Whoever shall be found guilty of violating any regulations in this 
part while in or on Academy property is subject to a fine of not more 
than $50 or imprisonment of not more than 30 days, or both (40 U.S.C. 
318c). Nothing in these regulations shall be construed to abrogate any 
other Federal laws or regulations or any State and local laws and 
regulations applicable to any area in which the property is situated. 
These regulations shall be posted prominently throughout the Academy. 
Penalties for their violation shall be incorporated in the Schedule of 
Fines for Petty Offenses established by order of the United States 
District Court for the Eastern District of New York.



PART 387_UTILIZATION AND DISPOSAL OF SURPLUS FEDERAL REAL PROPERTY FOR 

DEVELOPMENT OR OPERATION OF A PORT FACILITY--Table of Contents



Sec.
387.1 Scope.
387.2 Definitions.
387.3 Notice of availability of surplus property.
387.4 Applications.
387.5 Surplus property assignment recommendation.
387.6 Terms, reservations, restrictions, and conditions of conveyance.

    Authority: Pub. L. 103-160, 107 stat. 1933 (40 U.S.C. 484 (q)).

    Source: 60 FR 42467, Aug. 16, 1995; 60 FR 43720, Aug. 23, 1995, 
unless otherwise noted.



Sec. 387.1  Scope.

    This part is applicable to Surplus Property that is recommended by 
the Secretary as being needed for the development or operation of a Port 
Facility and is appropriate for being assigned to, or that has been 
assigned to the Secretary for conveyance as provided for in Public Law 
103-160 and 40 U.S.C. 471 et seq.



Sec. 387.2  Definitions.

    (a) Act means the Federal Property and Administrative Services Act 
of 1949 as amended, 40 U.S.C. 471 et seq., and 41 CFR 101-47. Terms 
defined in the Act and not defined in this section have the meanings 
given to them in the Act.
    (b) Applicant means any State, the District of Columbia, the 
Commonwealth of Puerto Rico, Guam, American Samoa, the Virgin Islands, 
the Trust Territory of the Pacific Islands, the Commonwealth of the 
Northern Mariana Islands, or any political subdivision, municipality, or 
instrumentality thereof, that has submitted an application to the 
Secretary to obtain surplus Federal property.
    (c) Disposal Agency means the executive agency of the Government 
which has authority to assign property to the Secretary for conveyance 
for development or operation of a port facility.
    (d) Grantee means the Applicant to which surplus Federal property is 
conveyed.
    (e) Grantor means the Secretary.
    (f) Port Facility means any structure and improved property, 
including services connected therewith, whether located on the 
waterfront or inland, which is used or intended for use in developing, 
transferring, or assisting maritime commerce and water dependent 
industries, including, but not limited to, piers, wharves, yards, docks,

[[Page 335]]

berths, aprons, equipment used to load and discharge cargo and 
passengers from vessels, dry and cold storage spaces, terminal and 
warehouse buildings, bulk and liquid storage terminals, tank farms, 
multimodal transfer terminals, transshipment and receiving stations, 
marinas, foreign trade zones, shipyards, industrial property, fishing 
and aquaculture structures, mixed use waterfront complexes, connecting 
channels and port landside transportation access routes.
    (g) Secretary means the Secretary of Transportation acting by and 
through the Maritime Administrator, Maritime Administration by 
delegation of authority.
    (h) Surplus Property means Federal real and related personal 
property duly determined to be unneeded by a Federal agency which may be 
conveyed to an Applicant for use in the development or operation of a 
port facility.



Sec. 387.3  Notice of availability of surplus property.

    The Disposal Agency shall publish notices of availability of excess 
and surplus Federal real and personal property. The Secretary will 
advise eligible public port agencies, in an appropriate manner, of the 
availability of Surplus Property that is deemed to have port facility 
potential. Potential Applicants shall notify the Secretary, in writing, 
of a desire to acquire surplus Federal property before the expiration of 
the notice period specified in the Notice of Surplus Property--
Government Property.



Sec. 387.4  Applications.

    Application forms for conveyance of Surplus Property can be obtained 
from the Maritime Administration, Division of Ports, 400 Seventh Street, 
SW, Washington, DC 20590. The applicant shall identify on the 
application form the requested property, agree to the terms/conditions 
of the conveyance and shall also submit a Port Facility Redevelopment 
Plan (PFRP) which details the plan of use for the property and the 
associated economic development plan.



Sec. 387.5  Surplus property assignment recommendation.

    Before any assignment recommendation is submitted to the Disposal 
Agency by the Secretary the following conditions shall be met:
    (a) The Secretary has received and approved an application for the 
property.
    (b) The Applicant is able, willing, and authorized to assume 
immediate possession of the property and pay administrative expenses 
incidental to the conveyance (application preparation, documentation, 
legal and land transfer costs).
    (c) The Secretary, after consultation with the Secretary of Labor, 
has determined that the property to be conveyed is located in an area of 
serious economic disruption.
    (d) The Secretary, after consultation with the Secretary of 
Commerce, approves the PFRP as part of a necessary economic development 
program.
    (e) The Secretary determines that the application complies with the 
provisions of the National Environmental Policy Act of 1969 as prepared 
by the Disposal Agency.



Sec. 387.6  Terms, reservations, restrictions, and conditions of conveyance.

    (a) Conveyances of property shall be on forms approved by, and 
available from the Secretary, and shall include such terms, 
reservations, restrictions and conditions set forth in this part and 
such other terms, reservations, restrictions and conditions as the 
Secretary may deem appropriate or necessary.
    (b) Property shall be conveyed by a quitclaim deed or deeds on an 
``as is, where is'' basis without any warranty, expressed or implied.
    (c) Property shall be used and maintained in perpetuity for the 
purpose for which it was conveyed, and that if the property ceases to be 
used or maintained for that purpose, all or any portion of the property 
shall, in its then existing condition, at the option of the Government, 
revert to the Government.
    (d) The entire Port Facility, including all structures, 
improvements, facilities and equipment in which the deed conveys any 
interest shall be

[[Page 336]]

maintained at all times in safe and serviceable condition, to assure its 
efficient operation and use, provided, however, that such maintenance 
shall be required as to structures, improvements, facilities and 
equipment only during the useful life thereof, as determined by the 
Grantor.
    (e) No property conveyed shall be mortgaged or otherwise disposed 
of, or rights or interest granted by the Grantee without the prior 
written consent of the Grantor. However, the Grantor will only review 
leases of five years or more to determine the interest granted therein.
    (f) Property conveyed for a Port Facility shall be used and 
maintained for the use and benefit of the public on fair and reasonable 
terms, without discrimination.
    (g) The Grantee shall, insofar as it is within its powers and to the 
extent reasonable, adequately protect the water and land access to the 
Port Facility.
    (h) The Grantee shall operate and maintain in a safe and serviceable 
condition, as deemed reasonably necessary by Grantor, the port and all 
facilities thereon and connected therewith which are necessary to 
service the maritime users of the Port Facility and will not permit any 
activity thereon which would interfere with its use as a Port Facility.
    (i) The Port Facility is subject to the provisions of Title 46 Code 
of Federal Regulations (CFR) Part 340.
    (j) The Grantee shall furnish the Grantor such financial, 
operational and annual utilization reports as may be required.
    (k) Where construction or major renovation is not required or 
proposed, the Port Facility shall be placed into use within twelve (12) 
months from the date of this conveyance. Where construction or major 
renovation is contemplated at the time of conveyance, the property shall 
be placed in service according to the redevelopment time table approved 
by the Grantor in the PFRP.
    (l) The Grantee shall not enter into any transaction which would 
operate to deprive it of any of the rights and powers necessary to 
perform or comply with any or all of the terms, reservations, 
restrictions and conditions set forth in the application and the deed.
    (m) The Grantee shall keep up to date at all times a Port Facility 
layout map of the property described herein showing:
    (1) the boundaries of the Port Facility and all proposed additions 
thereto, and
    (2) the location of all existing and proposed port facilities and 
structures, including all proposed extensions and reductions of existing 
port facilities.
    (n) In the event that any of the terms, reservations, restrictions 
and conditions are not met, observed, or complied with by the Grantee, 
the title, right of possession and all other rights conveyed by the deed 
to the Grantee, or any portion thereof, shall, at the option of the 
Grantor revert to the Government, in its then existing condition sixty 
(60) days following the date upon which demand to this effect is made in 
writing by Grantor or its successor in function, unless within said 
sixty (60) days such default or violation shall have been cured and all 
such terms, reservations, restrictions and conditions shall have been 
met, observed, or complied with, in which event said reversion shall not 
occur.
    (o) The deed will contain a severability clause dealing with the 
terms, reservations, restrictions and conditions of conveyance.
    (p) The Grantee shall remain at all times a State, the District of 
Columbia, the Commonwealth of Puerto Rico, Guam, American Samoa, the 
Virgin Islands, the Trust Territory of the Pacific Islands, the 
Commonwealth of the Northern Mariana Islands, or any political 
subdivision, municipality, or instrumentality thereof.
    (q) The Grantee shall comply at all times with all applicable 
provisions of law, including, the Water Resources Development Act of 
1990.
    (r) The Grantee shall not modify, amend or otherwise change its 
approved PFRP without the prior written consent of Grantor and shall 
implement the PFRP as approved by the Grantor.
    (s) The Government under Section 120 (h)(3) of the Comprehensive, 
Environmental Response, Compensation

[[Page 337]]

and Liability Act of 1980, as amended, warrants that:
    (1) all remedial action necessary to protect human health and the 
environment with respect to any hazardous substance on the property has 
been taken before the date of the conveyance, and
    (2) any additional remedial action found to be necessary after the 
date of the conveyance shall be conducted by the Government.
    (t) The Government reserves the right of access to any and all 
portions of the property for purposes of environmental investigation, 
remediation or other corrective action and compliance inspection 
purposes.
    (u) The Grantee shall agree that in the event, the Grantor exercises 
its option to revert all right, title, and interest in and to any 
portion of the property to the Government, or Grantee voluntarily 
returns title to the property in lieu of a reverter, the Grantee shall 
provide protection to, and maintenance of the property at all times 
until such time as the title is actually reverted or returned to and 
accepted by the Government. Such protection and maintenance shall, at a 
minimum, conform to the standards prescribed in regulations implementing 
the Act.
    (v) The Grantor expressly reserves from the conveyance:
    (1) oil, gas and mineral rights,
    (2) improvements without land,
    (3) military chapels, and
    (4) property disposed of pursuant to 204 (c) of the Act.
    (w) The Government reserves all right, title, and interest in and to 
all property of whatsoever nature not specifically conveyed, together 
with right of removal thereof from the Port Facility within one (1) year 
from the date of the deed.
    (x) The Grantee shall agree to maintain any portion of the property 
identified as ``historical'' in accordance with recommended approaches 
in the Secretary of Interior Standards for Historic Property at 16 
U.S.C. 461-470w-6.
    (y) Prior to the use of any property by children under seven (7) 
years of age, the Grantee shall remove all lead-based paint hazards and 
all potential lead-based paint hazards in accordance with applicable 
lead-based paint laws and regulations.
    (z) The Grantee agrees that any construction or alteration is 
prohibited unless a determination of no hazard to air navigation is 
issued by the Federal Aviation Administration.
    (aa) The Grantee shall agree that in its use and occupancy of the 
Port Facility it shall comply with all laws relating to asbestos.
    (bb) All construction on any portion of the property identified as 
``wetlands'' as determined by the appropriate District of the Army Corps 
of Engineers shall comply with Department of the Army Wetland 
Construction Restrictions contained in Title 33 CFR, Parts 320 through 
330.
    (cc) The Grantee shall agree to maintain, indemnify and hold 
harmless the Grantor and the Government from any and all claims, 
demands, costs or judgments for damages to persons or property that may 
arise from the use of the property by the Grantee, guests, employees and 
lessees.
    (dd) The Grantor, on written request from the Grantee, may grant 
release from any of the terms, reservations, restrictions and conditions 
contained in the deed, or the Grantor may release the Grantee from any 
terms, restrictions, reservations or conditions if the Grantor 
determines that the property so conveyed no longer serves the purpose 
for which it was conveyed.
    (ee) The Grantor shall make reforms, corrections or amendments to 
the deed if necessary to correct such deed or to conform such deed to 
the requirements of applicable law.



PART 388_ADMINISTRATIVE WAIVERS OF THE COASTWISE TRADE LAWS--Table of Contents



Sec.
388.1 Purpose.
388.2 Definitions.
388.3 Application and fee.
388.4 Criteria for grant of a waiver.
388.5 Criteria for revocation of a waiver.
388.6 Process.

    Authority: 46 App. U.S.C. 1114(b); Pub. L. 105-383, 112 Stat. 3445 
(46 U.S.C. 12106 note): 49 CFR 1.66.

    Source: 69 FR 51772, Aug. 23, 2004, unless otherwise noted.

[[Page 338]]



Sec. 388.1  Purpose.

    This part prescribes regulations implementing the provisions of 
Title V of Public Law 105-383 (112 Stat. 3445), which grants the 
Secretary authority to review and approve applications for waiver of the 
coastwise trade laws to allow the carriage of no more than twelve 
passengers for hire on vessels, which are three years old or more, built 
or rebuilt outside the United States, and grants authority for 
revocation of those waivers.



Sec. 388.2  Definitions.

    For the purposes of this part:
    (a) Administrator means the Maritime Administrator.
    (b) Coastwise Trade Laws include:
    (1) The Coastwise Endorsement Provision of the Vessel Documentation 
Laws, (46 U.S.C. 12106);
    (2) The Passenger Services Act, section 8 of the Act of June 19, 
1886 (46 App. U.S.C. 289); and
    (3) The Jones Act, section 27 of the Merchant Marine Act, 1920 (46 
App. U.S.C. 883).
    (c) Eligible Vessel means a vessel that--is either a small passenger 
vessel or an uninspected passenger vessel that--
    (1) Was not built in the United States and is at least 3 years of 
age; or
    (2) If rebuilt, was rebuilt outside the United States at least 3 
years before the certificate of documentation with appropriate 
endorsement if granted, would become effective.
    (d) MARAD means the Maritime Administration, U.S. Department of 
Transportation.
    (e) Secretary means the Secretary of Transportation.
    (f) The terms small passenger vessel, uninspected passenger vessel 
and passenger for hire have the meaning given such terms by 46 U.S.C. 
2101.
    (g) Fraud means the intentional misrepresentation of a material fact 
or facts.

[69 FR 51772, Aug. 23, 2004, as amended at 75 FR 28206, May 20, 2010]



Sec. 388.3  Application and fee.

    (a) An owner of a vessel may choose either of two methods to apply 
for an administrative waiver of the coastwise trade laws of the United 
States for an eligible vessel to carry no more than twelve passengers 
for hire.
    (1) The application form contained on MARAD's Web site at http://
www.marad.dot.gov may be submitted electronically with credit card or 
Automated Clearinghouse (ACH) payment of the $500 application fee.
    (2) Alternatively, applicants may send written applications to Small 
Passenger Vessel Waiver Applications, Office of Cargo Preference, MAR-
730, 1200 New Jersey Ave., SE., Washington, DC 20590. Written 
applications need not be in any particular format, but must be signed, 
be accompanied by a check made out to the order of ``Maritime 
Administration,'' and contain the following information:
    (i) Name of vessel and owner for which waiver is requested and the 
vessel's official number.
    (ii) Size, capacity and tonnage of vessel (state whether tonnage is 
measured pursuant to 46 U.S.C. 14502, or otherwise, and if otherwise, 
how measured).
    (iii) Intended use for vessel, including geographic region of 
intended operation and trade.
    (iv) Date and place of construction and (if applicable) rebuilding. 
(If applicant is unable to document the origin of the vessel, foreign 
construction will be assumed).
    (v) Name, address, and telephone number of the vessel owner.
    (vi) A statement on the impact this waiver will have on other 
commercial passenger vessel operators, including a statement describing 
the operations of existing operators.
    (vii) A statement on the impact this waiver will have on U.S. 
shipyards.
    (viii) A statement that the applicant represents that the foregoing 
information is true to the best of the applicant's knowledge.
    (b) MARAD may ask additional questions of the applicant as part of 
the application review.

[69 FR 51772, Aug. 23, 2004, as amended at 70 FR 66797, Nov. 3, 2005; 75 
FR 28206, May 20, 2010]



Sec. 388.4  Criteria for grant of a waiver.

    (a) General Criteria. (1) A waiver of the foreign build and/or 
foreign rebuild prohibition in the coastwise trade laws

[[Page 339]]

will be granted for an eligible vessel only if we determine that the 
employment of the vessel in the coastwise trade will not unduly 
adversely affect--
    (i) United States vessel builders; or
    (ii) The coastwise trade business of any person who employs vessels 
built in the United States in that business.
    (2) The determination of ``unduly adverse affect'' on a coastwise 
operator or a U.S. vessel builder may not be limited to operators or 
builders of vessels carrying 12 or fewer passengers.
    (3) We may evaluate the expected impact of the proposed waiver on 
the basis of the information received from all sources, including public 
comment, internal investigation and analysis, and any other sources of 
information deemed appropriate.
    (b) Impact on U.S. vessel builders. We may use the following 
criteria to determine the effect on U.S. vessel builders: Whether a 
potentially affected U.S. vessel builder has a history of construction 
of similar vessels, or can demonstrate the capability and capacity and 
the fact it has taken definite steps to offer to build a similar vessel, 
for use in the same geographic region of the United States, as the 
proposed vessel of the applicant.
    (c) Impact on coastwise trade business. We may use the following 
criteria to determine the effect on existing operators of U.S.-built 
vessels in coastwise trade:
    (1) Whether the proposed vessel of the applicant and a vessel of an 
existing operator (or the vessel of an operator that can demonstrate it 
has taken definite steps to begin operation) would provide similar 
commercial service and would operate in the same geographic area.
    (2) The number of similar vessels operating or proposed to operate 
in the same market with the same or similar itinerary, relative to the 
size of the market. For example, a single vessel may have a small impact 
on a large market.
    (d) Advance notice and approval needed for changes. When we approve 
a waiver application, we will notify the applicant that no substantial 
change in the employment of the vessel in the coastwise trade may be 
made without prior notice to MARAD. In general, a substantial change in 
operating area will require a new waiver application.



Sec. 388.5  Criteria for revocation of a waiver.

    We shall revoke a waiver previously granted under this part if we 
determine, after notice and opportunity for a hearing, that fraud was 
involved in any part of the waiver application.



Sec. 388.6  Process.

    (a) Initial process. (1) We will review each application for 
completeness as received. We will notify the applicant if additional 
information is necessary or if the application does not meet the initial 
eligibility requirements for waiver. All applications will be available 
for public inspection electronically in the Department of Transportation 
Docket at http://dot.dms.gov.
    (2) Applications being processed on the merits will be noticed in 
the Federal Register. Interested parties will be given an opportunity to 
comment on whether introduction of any proposed vessel would adversely 
affect them. In the absence of duly filed objections to an application, 
and in the absence of unduly adverse impact on vessel builders or 
businesses employing U.S.-built vessels otherwise discovered by us, we 
will conclude that there will be no adverse effect. If an objection to 
an application is received, additional information may be sought from 
the objector. The applicant will be given a sufficient amount of time to 
respond. The Director, Office of Ports and Domestic Shipping, will then 
either make a decision based on the written submissions and all 
available information or, on MARAD's motion or at the applicant's 
request, hold a hearing on the application and make a decision based on 
the hearing record. The decision will be communicated to the applicant, 
commenters and the United States Coast Guard in writing and placed in 
the docket. If MARAD grants a waiver, the applicant must thereafter 
contact the Coast Guard to obtain the necessary documentation for 
domestic operation. MARAD's waiver does not satisfy other requirements 
of the Coast Guard for documentation. The waiver, if approved, will be 
assigned to the vessel.

[[Page 340]]

    (b) Revocation. We may, upon the request of a U.S. builder or a 
coastwise trade business of a person who employs U.S.-built vessels or 
upon our own initiative propose to revoke a waiver granted under this 
part, on the basis that the waiver was obtained through fraud. The 
grantee of the waiver in question will be notified directly by mail, and 
a notice will be published in the Federal Register. The original docket 
of the application will be reopened. We may request additional 
information from the applicant granted the waiver or from any respondent 
to the notice. The Director, Office of Ports and Domestic Shipping, will 
then either make a decision based on the written submissions and all 
available information or, on MARAD's motion or at the applicant's 
request, hold a hearing on the proposed revocation and make a decision 
based on the hearing record. The decision will be communicated in 
writing to: the applicant granted the waiver, the requestor (if any), 
each respondent to the proposed revocation notice, the Coast Guard; and 
placed in the docket. If MARAD revokes a waiver, the Coast Guard, 
automatically and without further proceedings, shall revoke the vessel's 
coastwise endorsement.
    (c) Review of determinations. (1) The decisions by the Director, 
Office of Ports and Domestic Shipping, to grant a waiver, deny a waiver, 
or revoke a waiver will not be final until time for discretionary review 
by the Administrator has expired. Each decision to grant, deny, or 
revoke a waiver will be made in writing and a copy of the written 
decision will be provided to each applicant and other parties to the 
decision. Applicants, persons who requested revocation of a waiver, and 
persons who submitted comments in response to a Federal Register notice 
may petition the Administrator to review a decision by the Director, 
Office of Ports and Domestic Shipping, to grant a waiver, deny a waiver, 
or revoke a waiver within five (5) business days after such decision is 
filed in the docket. Each petition for review should state the 
petitioner's standing and the reasons review is being sought, clearly 
pointing out alleged errors of fact or misapplied points of law. Within 
five (5) business days of submission of a petition for review, the 
applicant, and other persons with standing, may request that the 
Administrator not review a decision by the Director, Office of Ports and 
Domestic Shipping, to grant, deny, or revoke a waiver. Such petitions 
and responses must either be sent by facsimile to the Secretary, 
Maritime Administration, at (202) 366-9206 or filed electronically in 
the appropriate DOT docket at http://dms.dot.gov. The Administrator will 
decide whether to review within five (5) business days following the 
last day for submission of a request that the Administrator not take 
review. If the Administrator undertakes review, the decision by the 
Director, Office of Ports and Domestic Shipping, is stayed until final 
disposition. In the event the Administrator decides to undertake review, 
a decision will be made based on the written submissions and all 
available information. As a matter of discretion, the Administrator or 
designated representative may hold a hearing on the proposed action and 
make a decision based on the hearing record. The decision will be 
communicated in writing to the interested parties and the Coast Guard. 
In the review process, the decision of the Maritime Administrator is the 
final disposition. In the absence of any petition for review, the 
determination by the Director, Office of Ports and Domestic Shipping, 
becomes final on the sixth business day after the decision. The 
Secretary, MARAD, may extend any of the time limits, but only for good 
cause shown.
    (2) Such petitions and responses must either be sent by facsimile to 
the Secretary, Maritime Administration, at (202) 366-9206 or filed 
electronically in the appropriate DOT docket at http://dms.dot.gov. The 
Administrator will decide whether to review within five (5) business 
days following the last day for submission of a request that the 
Administrator not take review. If the Administrator takes review, the 
decision by the Director, Office of Ports and Domestic Shipping, is 
stayed until final disposition. In the event the Administrator decides 
to take review, a decision will be made based on the written

[[Page 341]]

submissions and all available information. As a matter of discretion, 
the Administrator or designated representative may hold a hearing on the 
proposed action and make a decision based on the hearing record. The 
decision will be communicated in writing to the interested parties and 
the Coast Guard. In the review process, the decision of the Maritime 
Administrator is the final disposition. In the absence of any petition 
for review, the determination by the Director, Office of Ports and 
Domestic Shipping, becomes final on the sixth business day after the 
decision. The Secretary, MARAD, may extend any of the time limits, but 
only for good cause shown.



PART 389_DETERMINATION OF AVAILABILITY OF COASTWISE-QUALIFIED VESSELS 

FOR TRANSPORTATION OF PLATFORM JACKETS--Table of Contents



Sec.
389.1 Purpose.
389.2 Definitions.
389.3 Registration.
389.4 Application and fee.
389.5 Review; issuance of determinations.

    Authority: 49 U.S.C. 322(a); 46 U.S.C. 55102; 46 U.S.C. 55108; 
Public Law 108-293, 118 Stat 1028; and 49 CFR 1.66.

    Source: 75 FR 62474, Oct. 12, 2010, unless otherwise noted.



Sec. 389.1  Purpose.

    This part prescribes regulations implementing the provisions of 
section 417 of Public Law 108-293, which grants the Secretary of 
Transportation, acting through the Maritime Administrator, the authority 
to review and approve applications for determination of availability of 
coastwise-qualified vessels. Owners or operators of proposed platform 
jackets may submit information regarding a specific platform jacket 
transport, placement and/or launch project, following the procedures set 
forth in this regulation, in order for the Maritime Administration to 
determine whether a suitable coastwise-qualified vessel is available for 
the project. If the agency determines that a project owner has 
registered as required herein and sought in good faith to meet its 
transportation needs using U.S. flag vessels in compliance with the 
Jones Act, and that a suitable coastwise qualified vessel is not 
available, then a foreign launch barge may be used.



Sec. 389.2  Definitions.

    For the purposes of this part:
    Administrator means the Maritime Administrator.
    Applicant means the offshore development person, entity, or company 
as identified to the Bureau of Ocean Energy Management, Regulation and 
Enforcement in its Development Production Plan (DPP) or Development 
Operations Coordination Document (DOCD), which has applied to the 
Maritime Administration for a waiver.
    Classed as a launch barge by a recognized classification Society 
means that the vessel holds a current classification document to be used 
as a launch barge by at least one of the following classification 
societies: American Bureau of Shipping (ABS), Bureau Veritas (BV), 
Lloyd's Register (LR), Germanischer Lloyd (GL), Det Norske Veritas (DNV) 
or Registro Italiano Navale (RINA).
    Coastwise-qualified vessel means a vessel that has been issued a 
certificate of documentation with a coastwise endorsement under 46 
U.S.C. 12112.
    Coastwise Trade Laws include:
    (1) The Coastwise Endorsement Provision of the Vessel Documentation 
Laws (46 U.S.C. 12112);
    (2) The Passenger Vessel Services Act, section 8 of the Act of June 
19, 1886 (46 U.S.C. 55103);
    (3) The Jones Act, section 27 of the Merchant Marine Act, 1920 (46 
U.S.C. 55102); and
    (4) Section 2(c) of the Shipping Act of 1916 (46 U.S.C. 50501).
    Foreign launch barge, for the purpose of this part, means a non-
coastwise-qualified launch barge that was built before December 31, 
2000, and has a launch capacity of 12,000 long tons or more.
    Launch barge means a vessel that is technically capable of 
transporting and, if needed, launching or installing an offshore 
drilling or production platform jacket, provided that a coastwise-
qualified vessel may meet this definition even if it is not capable of 
launching such a platform jacket, and even if

[[Page 342]]

it requires the involvement of one or more other vessels in connection 
with the installation of such a platform jacket.
    A long ton equals 2,240 pounds.
    Platform jacket refers to a single physical component and includes 
any type of offshore exploration, development, or production structure 
or component thereof, including platform jackets, tension leg, or SPAR 
platform superstructures (including the deck, drilling rig and support 
utilities, and supporting structure), hull (including vertical legs and 
connecting pontoons or vertical cylinder), tower and base sections of a 
platform jacket, jacket structures, and deck modules (known as 
``topsides'').
    Secretary means the Secretary of the Maritime Administration.



Sec. 389.3  Registration.

    In order to provide timely notification and to identify potential 
participants to each other so they may examine how they can best work 
together to maximize use of coastwise-qualified vessels, the Maritime 
Administration will require early notification as outlined in this 
section.
    (a) Registration of coastwise-qualified vessel for platform jacket 
transportation. In January of each calendar year, the Maritime 
Administration will publish a notice in the Federal Register requesting 
that owners or operators or potential owners or operators of coastwise-
qualified launch barges, or other interested parties notify the agency 
of:
    (1) Their interest in participating in the transportation and, if 
needed, the launching or installation of offshore platform jackets;
    (2) Provide the agency with their contact information; and,
    (3) Provide specifications of any currently owned or operated 
coastwise-qualified launch barges or plans to construct same.
    (b) Registration requirement for transportation of platform jackets 
when non-coastwise-qualified vessels may be required. When a current or 
potential owner or operator of any type of offshore exploration, 
development, or production structure expects to require the use of a 
non-coastwise-qualified vessel in the transportation of a platform 
jacket it must notify the Maritime Administration. Such notification 
must be on the earlier of either:
    (1) The date of filing of the Development and Production Plan (DPP) 
or Development Operations Coordination Document (DOCD) with the Bureau 
of Ocean Energy Management, Regulation and Enforcement as required by 30 
CFR 250.201; or
    (2) A date not later than twenty-one (21) months before the proposed 
date of using a non-coastwise qualified vessel for transportation of a 
platform jacket.
    (c) The early notification information to be provided to the 
Maritime Administration by a platform owner or operator shall include:
    (1) A summary of technical details of the platform jacket to be 
transported and, if needed, launched or installed;
    (2) The projected physical specification of a suitable vessel to be 
used in the project;
    (3) The projected time period, and load and destination sites, for 
the platform jacket transportation; and
    (4) Full contact information for the applicant and its 
representatives having decision-making authority with respect to the 
utilization of vessels for transportation and, if needed, the launching 
or installation of a platform jacket.
    (d) The information in paragraphs (a), (b), and (c) of this section 
must be submitted either electronically to [email protected] or 
delivered to the Secretary, Maritime Administration, 1200 New Jersey 
Avenue, SE., Washington, DC 20590. Any information that is business 
confidential must be so identified and accompanied by a justification 
for that characterization.
    (e) The Maritime Administration will publish a list of potential 
coastwise-qualified launch barge owners/operators on the agency's Web 
site at http://MARAD.dot.gov. The Maritime Administration will publish a 
summary of early notification information delineated by paragraph (c) of 
this section on its Web site and also disseminate it to registered 
potential coastwise-qualified launch barge owners/operators and other 
interested parties.

[[Page 343]]



Sec. 389.4  Application and fee.

    (a) When, after surveying the market and discussing the platform 
project with potential coastwise-qualified vessel owners/operators, it 
appears that coastwise-qualified vessels will not be available for a 
project, the platform jacket owner/operator may apply to the Maritime 
Administration for a determination of non-availability and request 
authority to use a foreign launch barge.
    (b) A complete application must be submitted to the Secretary, 
Maritime Administration, 1200 New Jersey Avenue, SE., Washington, DC 
20590 at least 120 days prior to the proposed platform jacket 
transportation date.
    (1) The Maritime Administration reserves the right to waive, reduce, 
or extend the time requirements based upon its evaluation of any 
national emergency or other relevant consideration.
    (c) Applications must contain the information set forth in 
paragraphs (c) and (d) of this section and be accompanied by a statement 
signed by an officer of the applicant containing the following language:
    ``This application is made for the purpose of inducing the United 
States of America to grant a determination of non-availability of a 
coastwise-qualified vessel as set forth in 46 U.S.C. 55108. I have 
carefully examined the application and all documents submitted and, to 
the best of my knowledge, information and belief, the statements and 
representations contained in said application and related documents are 
full, complete, accurate and true. Further, I agree to pay any fees that 
result from the work required by this application.

 Signature:_____________________________________________________________

 Name (typed):__________________________________________________________

 Title:_________________________________________________________________

 Date:__________________________________________________________________

    (d) The applicant must submit a non-refundable check in the amount 
of $500 (Five Hundred Dollars) made payable to the Maritime 
Administration, which is a minimum fee and represents a deposit against 
any cost to the Government for processing the application. The applicant 
must also submit a signed statement (see paragraph (c) of this section) 
that it agrees to pay all such additional costs that will be invoiced by 
the Government. Government costs will be billed for actual staff hours 
spent at applicable hourly rates plus overhead, administrative and other 
associated costs.
    (e) Required platform jacket transportation project information.
    (1) Applications must include a general description of the 
transport, placement and/or launch project, including:
    (i) A description of the platform jacket structure with launching 
weight, center of gravity, major dimensions, and a general arrangement 
plan,
    (ii) The projected loading date and site,
    (iii) The projected transportation date and destination site,
    (iv) The names of potential coastwise-qualified vessel owners/
operators contacted and their responses regarding suitability and 
availability of transportation vessels, and
    (v) The technical merits and availability studies of coastwise-
qualified vessels considered.
    (2) Characteristics of the applicant's desired foreign launch barge, 
including, at a minimum, the following information:
    (i) Name of the vessel,
    (ii) Registered owner of the vessel,
    (iii) Physical dimensions, deadweight capacity in long tons, 
ballasting capacities and arrangements, and launch capacity in long tons 
and arrangements,
    (iv) Documentation showing classification as a launch barge by one 
of the following classification societies: American Bureau of Shipping 
(ABS), Bureau Veritas (BV), Lloyd's Register (LR), Germanischer Lloyd 
(GL), Det Norske Veritas (DNV) or Registro Italiano Navale (RINA).
    (v) Date and place of construction of the foreign launch barge and 
(if applicable) rebuilding. If the applicant is unable to document the 
origin of the vessel, foreign construction will be assumed.
    (vi) Name, address, e-mail address and telephone number of the 
foreign launch vessel owner.
    (3) A signed statement that the applicant represents that the 
foregoing information is true to the best of the applicant's knowledge 
and belief, as required by paragraph (b) of this section.

[[Page 344]]

    (f) The Maritime Administration may require additional information 
from an applicant as part of the review process. The application will 
not be considered complete until the agency has received all required 
information.



Sec. 389.5  Review; issuance of determinations.

    (a) The Maritime Administration will review each application for 
completeness, including evidence of prior notification and payment of 
the application fee. Applications will not be processed until deemed 
complete. The Maritime Administration will notify an applicant if 
additional information is necessary. The agency encourages submission of 
applications well in advance of project dates in order to allow 
sufficient time for review under this part.
    (b) The Maritime Administration will review the information required 
by Section 389.4. When the application is deemed complete, the agency 
will publish a notice in the Federal Register describing the project and 
platform jacket involved, advising that all relevant information 
reasonably necessary to assess the transportation requirements will be 
made available to interested parties upon request. The notice will 
request that information on the availability of coastwise-qualified 
vessels be submitted within thirty (30) days after the publication date. 
The Maritime Administration will also notify coastwise-qualified owners/
operators who have registered with per Sec. 389.3.
    (c) The Maritime Administration will review any submissions whereby 
an offeror owner or operator of a coastwise-qualified vessel asserts it 
is available and will facilitate discussions between the offeror and a 
platform jacket owner/operator who requires transportation services. If 
the parties are unable to reach agreement, the Maritime Administration 
will make a determination regarding vessel availability.
    (d) If needed, the Maritime Administration's technical personnel 
will review data required by Sec. 389.4. The data must be complete and 
current. Any data submitted will not be returned to an applicant and 
will be retained by the agency on file further to applicable record 
retention directives. Maritime Administration review will not substitute 
for the review or approval by a major classification society (ABS, BV, 
LR, GL, DNV, RINA). Maritime Administration review will not verify the 
accuracy or correctness of an applicant's engineering proposal; rather, 
it will only pertain to the general reasonableness and soundness of the 
technical approach.
    (e) The Maritime Administration will disapprove the application if:
    (1) The agency finds the applicant does not comply with requirements 
set forth by Sec. 389.3 or Sec. 389.4; or
    (2) The agency finds that the applicant refused to attempt to obtain 
transportation services that comply with the Jones Act; or
    (3) The agency determines a suitable coastwise-qualified vessel is 
reasonably available.
    (f) The Maritime Administration will issue a determination of non-
availability if it is determined that no suitable coastwise-qualified 
vessel is reasonably available.
    (g) A determination will be issued within ninety (90) days from the 
date the application notice was published in the Federal Register.
    (h) A determination of non-availability will expire one-hundred and 
twenty (120) days after the date of issuance, unless the agency provides 
an extension for good cause shown.
    (i) Maritime Administration determinations in this regard should not 
be interpreted as a change setting new Federal maritime precedents. The 
Maritime Administration fully supports the Jones Act, the Passenger 
Vessel Services Act, and other Federal U.S.-flag requirements.

[[Page 345]]



            SUBCHAPTER K_REGULATIONS UNDER PUBLIC LAW 91-469





PART 390_CAPITAL CONSTRUCTION FUND--Table of Contents



Sec.
390.1 Scope of the regulations.
390.2 Application for an agreement.
390.3 Policy considerations.
390.4 Description of the agreement.
390.5 Agreement vessels.
390.6 Administration of the agreement.
390.7 Deposits into the fund.
390.8 Investment of the fund.
390.9 Qualified withdrawals.
390.10 Nonqualified withdrawals.
390.11 Sale or other disposition of agreement vessels.
390.12 Liquidated damages.
390.13 Failure to fulfill a substantial obligation under the agreement.
390.14 Departmental reports and certification.

Appendix I to Part 390--U.S. Department of Transportation, Maritime 
          Administration--Application Instructions
Appendix II to Part 390--Sample Capital Construction Fund Agreement
Appendix III to Part 390--U.S. Department of Transportation, Maritime 
          Administration--Sample Semiannual Report
Appendix IV to Part 390--Sample Addendum to Maritime Administration 
          Capital Construction Fund Agreement
Appendix V to Part 390--Sample Qualified Trade Affidavit

    Authority: Secs. 53501, et seq., of Title 46, United States Code, 
formerly, sec. 607, Merchant Marine Act, 1936, as amended (46 App. 
U.S.C. 1177); 49 CFR 1.66.

    Source: 41 FR 4265, Jan. 29, 1976, unless otherwise noted.



Sec. 390.1  Scope of the regulations.

    (a) In general--(1) Scope. The regulations prescribed in this part 
govern the capital construction fund (``fund'') authorized by 46 U.S.C. 
53501 et seq.
    (2) Establishment of a fund. A fund is established by an agreement 
(``agreement''), which is a contract between the party (``party'') and 
the United States.
    (3) Purpose of the fund. Chapter 535 provides that any agreement 
entered into with the Secretary of Transportation must be for the 
purpose of providing replacement vessels, additional vessels or 
reconstructed vessels to be built and documented in the United States 
and operated in the United States foreign, Great Lakes or noncontiguous 
domestic trade.
    (4) Benefits of a fund. Chapter 535 provides for the nontaxability 
of certain deposits of money or other property placed into a fund 
established pursuant to an agreement within certain ceilings. These 
ceilings are equal to:
    (i) Earnings or gains realized from the operation of an agreement 
vessel;
    (ii) Net proceeds realized from the sale or other disposition of an 
agreement vessel or from insurance or indemnification from the loss of 
an agreement vessel; and
    (iii) Earnings from the investment or reinvestment of amounts on 
deposit in the fund.
    (5) Delegation. The Secretary of Transportation has delegated the 
authority for matters relating to the United States Merchant Marine to 
the Maritime Administrator, Department of Transportation (``Maritime 
Administrator'').
    (b) Act. For purposes of this part, the term Act shall mean Chapter 
535 of Title 46, United States Code.
    (c) Joint regulations. For purposes of this part, the term joint 
regulations shall mean the regulations prescribed by the Secretary of 
Transportation and the Secretary of the Treasury under Chapter 535 and 
published in title 26, part 3 of the Code of Federal Regulations 
(reprinted in part 391 of this chapter).
    (d) Cross references. For rules relating to the Federal Income Tax 
aspects of a fund, see the joint regulations. For rules governing 
agreements relating to the fisheries of the United States, see the 
separate Secretary of Commerce regulations published in title 50, part 
259 of the Code of Federal Regulations.

[41 FR 4265, Jan. 29, 1976, as amended at 73 FR 56740, Sept. 30, 2008]



Sec. 390.2  Application for an agreement.

    (a) In general--(1) Application instructions. The Maritime 
Administrator has adopted instructions for making application for an 
agreement. These instructions are contained in appendix I to

[[Page 346]]

this part. MARAD will accept electronic options (such as facsimile and 
Internet) for transmission of required information to MARAD, if 
practicable.
    (2) General eligibility requirements. Chapter 535 specifies who is 
eligible for a fund and the application instructions specify what 
information is required to establish such eligibility. An applicant 
must:
    (i) Be a citizen of the United States within the meaning of 46 
U.S.C. 50501, as amended (46 U.S.C. 802, 803). See part 355 of this 
title for requirements for establishing United States citizenship;
    (ii) Own or be the lessee of one or more eligible vessels or share 
thereof as defined in 46 U.S.C. 53501, or be party to a contract for the 
construction of one or more eligible vessels, or share thereof, as 
defined in paragraph (b) of Sec. 390.5;
    (iii) Have a program which furthers the purposes of the Act (see 
Sec. 390.3 relating to policy considerations) and provides for the 
acquisition, construction or reconstruction of a qualified vessel, as 
defined in 46 U.S.C. 53501(5). Such provisions state that the vessel 
will be operated in the United States foreign, Great Lakes, 
noncontiguous domestic, or short sea transportation trade as defined in 
46 U.S.C. 53501 and 46 U.S.C. 109(b); and
    (iv) Demonstrate the financial capabilities to accomplish the 
program.
    (b) Information which may be required in conjunction with the 
application. An applicant must provide such facts, documents and 
materials as the Maritime Administrator may require in considering 
whether to enter into an agreement. An applicant should be ready to make 
available such applicable materials, including, but not limited to: 
Design plans, data concerning the reasonableness of the cost of the 
program, construction contracts, financial statements, certificates of 
incorporation, bylaws, articles of partnership, stock ownership data and 
other information including judgments and pending litigation which would 
affect the proposed program. The specific information required is set 
forth in the instructions.

(Approved by the Office of Management and Budget under control number 
2133-0027)

[41 FR 4265, Jan. 29, 1976, as amended at 47 FR 25530, June 14, 1982; 68 
FR 62539, Nov. 5, 2003; 69 FR 61452, Oct. 19, 2004; 73 FR 56740, Sept. 
30, 2008]



Sec. 390.3  Policy considerations.

    (a) In general. It is the policy of the United States, as set forth 
in 46 U.S.C. 50501, that for the national defense and the development of 
its foreign and domestic commerce, the United States shall have a 
merchant marine: sufficient to carry a substantial portion of its water-
borne export and import foreign commerce and to provide shipping service 
essential for maintaining the flow of such commerce at all times; 
capable of serving as auxiliaries in time of war or national emergency; 
owned and operated by United States citizens insofar as practicable and 
composed of the best equipped, safest and most suitable types of 
vessels, constructed and documented in the United States and manned with 
United States citizens.
    (b) Unacceptable programs--(1) In general. The Maritime 
Administrator will not enter into an agreement where the proposed 
program is not, in his opinion, in consonance with the policies of the 
Act.
    (2) Specific unacceptable programs. The Maritime Administrator will 
not enter into an agreement where the proposed program is merely to 
accomplish the following:
    (i) Reconstruction of an existing vessel, unless such reconstruction 
will exceed $1,000,000 in cost, will be capitalized under the Internal 
Revenue Code of 1986, as amended, and the regulations thereunder and 
will result in a vessel which is significantly more competitive;
    (ii) Acquisition of an existing vessel; or
    (iii) Payment of the principal on existing indebtedness.
    (3) Waiver. The Maritime Administrator may, for good cause shown, 
waive the provisions of paragraph (b)(2) of this section. For example, 
the Maritime Administrator may waive the monetary limit in paragraph 
(b)(2)(i) of

[[Page 347]]

this section where the applicant proposes to reconstruct a small vessel.

[41 FR 4265, Jan. 29, 1976, as amended at 73 FR 56740, Sept. 30, 2008]



Sec. 390.4  Description of the agreement.

    (a) In general. The agreement consists of a standard part and 
appended schedules. The standard part of the agreement contains 
recitals, covenants and warranties which apply to all parties. The 
appended schedules set forth the particular program of the party and 
contain other information unique to each agreement. See Sec. 390.6 
(relating to administration of the agreement) for procedures and 
criteria for the modification of schedules.
    (b) Schedule A--Eligible agreement vessels. Schedule A lists the 
names of eligible agreement vessels (as defined in Sec. 390.5), whether 
owned or leased, and the allowable percentage of the depreciation 
ceiling, if any, available for deposit purposes by the party. See Sec. 
390.7 (relating to deposits) for allowable depreciation in the case of 
leased vessels.
    (c) Schedule B--Program--(1) In general. Schedule B sets forth the 
program of the party including the cost of the program and the time in 
which the program shall be accomplished.
    (2) Items in Schedule B. Schedule B shall contain:
    (i) A statement describing each qualified agreement vessel (as 
defined in Sec. 390.5) to be acquired, constructed or reconstructed. In 
the case of reconstruction, the statement will include a general 
description of the work to be performed;
    (ii) The anticipated date on which the acquisition, construction or 
reconstruction of each qualified agreement vessel will commence;
    (iii) The anticipated total cost, including any costs which will not 
be paid from the fund, of the acquisition, construction or 
reconstruction of each qualified agreement vessel; and
    (iv) The amount to be withdrawn from the fund with respect to the 
acquisition, construction or reconstruction of each qualified agreement 
vessel.
    (3) Submission of contracts. When a contract is executed for any 
acquisition, construction or reconstruction relating to the agreement, 
such contract shall be submitted within 30 days after execution to the 
Maritime Administrator who shall then determine whether such undertaking 
is in accordance with the program set forth in Schedule B.
    (d) Schedule C--Depositories. Schedule C lists, by name and address, 
the depositories of the fund. See Sec. 390.7 (relating to deposits).
    (e) Schedule D--Minimum deposits. Schedule D sets forth the minimum 
deposits which must be made into the fund. See Sec. 390.7 (relating to 
deposits) for the procedure in setting minimum deposits.
    (f) Submission of proposed schedules. An applicant shall submit 
proposed schedules with his application. The specific information 
required in such schedules is set forth in the application instructions 
referred to in paragraph (a)(1) of Sec. 390.2. A sample agreement 
(standard part and appended schedules) is contained in appendix II to 
this part.



Sec. 390.5  Agreement vessels.

    (a) In general. 46 U.S.C. 53501 states the requirements for 
eligible, qualified and agreement vessels. The rules in this section 
further define such terms and state how vessels must be listed on 
Schedules A and B in the agreement.
    (b) Eligible agreement vessels--(1) Definition. An eligible 
agreement vessel, which may be used to establish ceilings for deposit 
purposes, is any vessel:
    (i) Constructed in the United States, and if reconstructed, 
reconstructed in the United States; the term constructed or 
reconstructed in the United States includes any vessel which was 
constructed or reconstructed outside of the United States but documented 
under the laws of the United States on April 15, 1970, or constructed or 
reconstructed outside of the United States for use in the United States 
foreign commerce pursuant to a contract entered into before April 15, 
1970;
    (ii) Documented under the laws of the United States;
    (iii) Operated in the foreign or domestic commerce of the United 
States;
    (iv) Engaged primarily in the waterborne carriage of men, materials, 
goods or wares; and
    (v) Designated in the agreement as an ``eligible agreement vessel.''

[[Page 348]]

    (2) Scope of the term ``eligible agreement vessel.'' For purposes of 
generating ceilings for deposits under 46 U.S.C. 53505 and the joint 
regulations the term eligible agreement vessel includes any:
    (i) Tug or barge;
    (ii) Vessels which have been contracted for or are in the process of 
construction; and
    (iii) Share interest in a vessel; the party is considered to have a 
share interest in an eligible agreement vessel if the party has the 
right to use the vessel to generate income or a right to the proceeds or 
a portion of the proceeds from its use even if the party does not have a 
proprietary interest in the vessel for purposes of State or Federal law.
    (3) Foreign or domestic commerce. For the purpose of paragraph 
(b)(1)(iii) of this section the term foreign or domestic commerce means 
the water-borne carriage of men, materials, goods or wares between:
    (i) Two points in the United States;
    (ii) A point in the United States and a point in a foreign country; 
or
    (iii) Two points in the same foreign country or points in two 
different foreign countries.
    (c) Qualified agreement vessels--(1) Definition. A qualified 
agreement vessel which may be acquired, constructed or reconstructed 
with the aid of qualified withdrawals, is any vessel:
    (i) Constructed in the United States, and if reconstructed, 
reconstructed in the United States; the term constructed or 
reconstructed in the United States includes any vessel which was 
constructed or reconstructed outside of the United States but documented 
under the laws of the United States on April 15, 1970, or constructed or 
reconstructed outside of the United States for use in the United States 
foreign commerce pursuant to a contract entered into before April 15, 
1970;
    (ii) Documented under the laws of the United States;
    (iii) Operated in the United States foreign, Great Lakes, 
noncontiguous domestic, or short sea transportation trade.
    (iv) Engaged primarily in the water-borne carriage of men, 
materials, goods or wares; and
    (v) Designated in the agreement as a ``qualified agreement vessel.''
    (2) Scope of the term ``qualified agreement vessel.'' For purposes 
of making qualified withdrawals under 46 U.S.C. 53509 and the joint 
regulations the term qualified agreement vessel includes any:
    (i) Cargo handling equipment which the Maritime Administrator 
determines will be used primarily on a qualified agreement vessel. 
Normally any auxiliary equipment which is ordinarily carried from port 
to port, excluding equipment that needs frequent replacement due to 
normal wear and tear, and is used in conjunction with the loading or 
unloading of the vessel is deemed to be cargo handling equipment;
    (ii) Ocean-going towing vessel or barge which the Maritime 
Administrator determines is suitable for the trade in which the party 
intends to operate such vessel or barge, or any comparable vessel or 
barge operated on the Great Lakes which is suitable for its intended 
trade; and
    (iii) Proprietary interest in a qualified agreement vessel as, for 
example, that which may result from a joint venture or partnership.
    (3) Foreign trade. Foreign trade shall mean the water-borne carriage 
of men, materials, goods or wares between:
    (i) A point in the United States and a point in a foreign country;
    (ii) Two points in the domestic trade permitted under the first 
sentence of 46 U.S.C. 53101 note; or
    (iii) Two points in the same foreign country or points in two 
different foreign countries in the case of liquid and dry bulk cargo 
carrying services provided the party demonstrates that such operating 
flexibility is needed to compete with foreign flag vessels in its 
operations or in competing for charters.
    (4) Great Lakes trade. Great Lakes trade shall mean the waterborne 
carriage of men, materials, goods or wares between points on the Great 
Lakes and their connecting and tributary waterways in the immediate 
environs of the Great Lakes.
    (5) Noncontiguous domestic trade. Noncontinguous domestic trade 
shall mean the water-borne carriage of men, materials, goods or wares 
between:

[[Page 349]]

    (i) The contiguous 48 States on the one hand and Alaska, Hawaii, 
Puerto Rico and the insular territories and possessions of the United 
States on the other hand; and
    (ii) Any point in Alaska, Hawaii, Puerto Rico and the insular 
territories and possessions of the United States, and any other point in 
Alaska, Hawaii, Puerto Rico and such territories and possessions.
    (6) Short Sea Transportation Trade. The term short sea 
transportation trade means the carriage by vessel of cargo--
    (i) That is:
    (A) Contained in intermodal cargo containers and loaded by crane on 
the vessel; or
    (B) Loaded on the vessel by means of wheeled technology; and
    (ii) That is:
    (A) Loaded at a port in the United States and unloaded either at 
another port in the United States or at a port in Canada located in the 
Great Lakes Saint Lawrence Seaway System; or
    (B) Loaded at a port in Canada located in the Great Lakes Saint 
Lawrence Seaway System and unloaded at a port in the United States.''
    (7) Nonqualified operations. Nonqualified operations for qualified 
agreement vessels include:
    (i) Positioning vessels in support of domestic operations prohibited 
by Chapter 535;
    (ii) Use of barges as docks and ramps;
    (iii) Except as provided in (c)(8) (i) and (ii) of this section:
    (A) Foreign-to-foreign trade, consisting of voyages originating and 
ending in foreign ports, with no intermediate domestic cargo operation, 
and
    (B) Trade from foreign ports to and form U.S. oil rigs in 
international waters; and
    (iv) Bunkering in support of non-qualified trade operations.
    (8) Permissible operations. Permissible operations for qualified 
agreement vessels include:
    (i) Foreign-to-foreign trade in the case of vessels operating as 
part of U.S.-flag service and carrying cargo originating in or destined 
for U.S. ports, i.e., U.S.-flag feeder vessels;
    (ii) Foreign-to-foreign trade, including the lightering of foreign-
flag vessels, in the case of vessels carrying liquid or dry bulk cargoes 
when the carrier has demonstrated to the Administrator:
    (A) The need for such foreign-to-foreign shipments (as required by 
46 U.S.C. 109 and paragraph (c)(iii) of this section), and
    (B) That the proposed cargo would qualify as liquid or dry bulk 
cargo;
    (iii) Ship assist work, including lightering or shifting of a vessel 
at the end or beginning of a noncontiguous domestic, short sea 
transportation trade, Great Lakes or U.S. foreign trade voyage. In 
addition, the lightering of foreign-flag vessels in U.S. ports is 
permitted.
    (9) United States construction. An agreement vessel is considered to 
be of United States construction if:
    (i) It is built entirely in a shipyard or shipyards within any of 
the United States and the Commonwealth of Puerto Rico;
    (ii) All components of the hull and superstructure are fabricated in 
the United States; and
    (iii) The vessel is assembled entirely in the United States.
    (d) Agreement vessels--(1) Definition. The term agreement vessel 
means any eligible or qualified vessel which is subject to an agreement.
    (2) Scope of the term ``agreement vessel.'' For purposes of 
generating ceilings and making qualified withdrawals the term agreement 
vessel includes containers, trailers or barges which are part of the 
complement of an agreement vessel. The complement is limited to three 
times the container, trailer or barge capacity of the vessel, unless the 
Maritime Administrator shall agree to a different complement.

[41 FR 4265, Jan. 29, 1976, as amended at 55 FR 34928, Aug. 27, 1990; 73 
FR 56740, Sept. 30, 2008; 74 FR 17097, Apr. 14, 2009]



Sec. 390.6  Administration of the agreement.

    (a) In general. The Maritime Administrator will administer and 
enforce the agreement in a manner which will insure that the fund is 
properly established, that the assets in the fund are used to accomplish 
the program and that the party fully complies with all obligations and 
responsibilities. This

[[Page 350]]

section specifies the reports which must be submitted to the Maritime 
Administrator and sets forth the procedures for administering the 
agreement.
    (b) Reporting requirements--(1) In general. This paragraph describes 
the reports required to be submitted to the Maritime Administrator by 
the party.
    (2) Submission dates. Reports must be submitted annually, in 
triplicate, for the party's taxable year not later than 90 days after 
the close of each reporting period. An affidavit regarding the operation 
of qualified agreement vessels as required by paragraph (b)(7) of this 
section shall be submitted concurrently with each annual report.
    (3) Cumulation. The annual report submitted following the close of 
the party's taxable year shall be cumulative for the party's entire 
taxable year.
    (4) Certification. The annual report shall be accompanied by an 
opinion of an independent certified public accountant to the effect that 
exhibits (see paragraph (b)(5) of this section) composing the accounting 
have been prepared in accordance with all published orders, rules, 
regulations and instructions issued or adopted by the Maritime 
Administrator.
    (5) Format. The reports shall consist of the following exhibits:
    (i) ``Exhibit A''--a summary of cash, securities and stock on 
deposit (showing the adjusted basis for securities and stock), including 
a subtotal of cash, securities and stock on deposit, net amount of 
accrued deposits to and accrued withdrawals from the fund and the fund 
total at the end of the period, and if applicable, a summary of the 
portion of the fund which represents a ``CCF: Security Amount'' pursuant 
to an Agreement Covering the Dual Use of a Capital Construction Fund;
    (ii) ``Exhibit A-1''--a summary of balances in all cash accounts 
within the fund at the end of the period;
    (iii) ``Exhibit A-2''--a summary of the securities and stock within 
the fund at the end of the period (showing both the adjusted basis and 
fair market value of each item);
    (iv) ``Exhibit A-3''--a summary of the accrued deposits to and 
accrued withdrawals from the fund at the end of the period;
    (v) ``Exhibit B''--a transcript of transactions occurring within the 
fund during the period by date;
    (vi) ``Exhibit C''--a summary showing the opening balance, additions 
thereto due to deposits to the fund, subtractions therefrom due to 
withdrawals from the fund, and the closing balance for the period for 
each of the three separate accounts: ordinary income account, capital 
gains account and capital account; and
    (vii) ``Exhibit D''--a summary, by vessel, of the qualified 
withdrawals made from the fund during the period.
    (6) Sample report. A sample report is contained in appendix III of 
this part.
    (7) Affidavit. An official of the party who is knowledgeable about 
the operation of the party's qualified agreement vessels shall submit an 
affidavit for each taxable year indicating that the party's qualified 
agreement vessels operated only in qualified trades during such taxable 
year, or if any such vessel operated in a trade other than a qualified 
trade, the details of such operation. See Sec. 390.5(c) of this part 
for a description of what constitutes a qualified trade. A sample 
affidavit is contained in appendix V of this part.
    (8) Failure to submit reports. The failure by a party to make the 
timely submission of any report or affidavit required by this section 
shall constitute a material breach of the agreement unless the Maritime 
Administrator shall determine that such failure was excusable. See Sec. 
390.13 (relating to the failure to fulfill a substantial obligation 
under the agreement).
    (c) Review in the event of changed circumstances. Each agreement 
provides that the party shall promptly inform the Maritime Administrator 
of any change in circumstances which affects its agreement. Such changes 
may be mere form, such as a change of the party's name, or substantive 
such as the sale of an eligible agreement vessel. The Maritime 
Administrator may require a full review of the agreement if in his 
opinion the changed circumstances materially affect the agreement.
    (d) Modification of agreement--(1) In general. The agreement is 
subject to

[[Page 351]]

modification and amendment by mutual consent. However, except in special 
circumstances, the Maritime Administrator will not consent to 
modification or amendment of the standard part of the agreement unless 
such modification or amendment is of uniform application to similarly 
situated parties. The Maritime Administrator will normally agree to 
modification or amendment of the schedules subject to the restriction in 
paragraph (d)(2) of this section.
    (2) Limitations on modification of schedules. The Maritime 
Administrator will not agree to modification or amendment of the 
schedules (as described in Sec. 390.4) when, in his opinion, such 
modification or amendment delays imposition of Federal Income Tax in a 
manner not contemplated or authorized by the Act, or if the proposed 
modification or amendment would not be in consonance with the policies 
of the Act, these rules and regulations or the joint regulations.
    (e) Fund adjustment upon modification. Upon application by a party 
for modification or amendment of the agreement, the Maritime 
Administrator will determine whether the requested modification or 
amendment would result in an amount held in the fund in excess of an 
amount determined to be necessary or appropriate to carry out the 
program. If such an excess is created in the fund by such modification 
or amendment, the Maritime Administrator will require a nonqualified 
withdrawal (as defined in Sec. 390.10) of such excess as a condition to 
the modification or amendment.

[41 FR 4265, Jan. 29, 1976, as amended at 41 FR 39751, Sept. 16, 1976; 
55 FR 34928, Aug. 27, 1990]



Sec. 390.7  Deposits into the fund.

    (a) In general--(1) Source of deposits. 46 U.S.C. 53505 provides 
ceilings within which fund deposits may be made. This section provides 
rules for the qualification of depositories, timing of deposits, the 
type of property which may be deposited and the level of deposits.
    (2) Tax aspects of deposits. For the Federal Income Tax aspects of 
deposits into a fund, see 46 U.S.C. 53507 and Sec. 3.3 of the joint 
regulations (Sec. 391.3 of this chapter).
    (b) Depositories--(1) In general. 46 U.S.C. 53506 provides that 
amounts in a fund must be kept in the depository or depositories 
specified in the agreement and be subject to such trustee or other 
fiduciary requirements as the Maritime Administrator may specify.
    (2) Qualifications. The Maritime Administrator has established 
general qualifications for depositories for all maritime programs 
authorized under the Act, including the capital construction fund 
program. The general qualifications are published in Part 351 of this 
title.
    (3) Fiduciary requirements. Except in unusual circumstances, the 
Maritime Administrator will not impose special trustee or other 
fiduciary requirements upon depositories of a fund. For rules relating 
to a fund held in trust for investment purposes, see paragraph (h) of 
this section.
    (4) Type and name of accounts. Unless otherwise specified in the 
agreement, the party may select the type or types of accounts in which 
assets of the fund may be deposited. For example, the party may select a 
savings account for cash and a trust account for intangible property 
which is held in the fund. Each account shall be in the name of the 
party and identified as a capital construction fund account.
    (5) Compensating balances. The obligation of the assets in the fund 
as a compensating balance shall constitute a material breach of the 
agreement.
    (c) Timing of deposits--(1) In general. 46 U.S.C. 53507(b) provides 
that deposits shall not be taxable only when they are made in accordance 
with the agreement and not later than the time provided in the joint 
regulations.
    (2) Deposits prior to the time provided in joint regulations. The 
party may make deposits for any taxable year prior to the time provided 
in joint regulations in accordance with the following rules:
    (i) Amounts representing taxable income attributable to the 
operation of agreement vessels for a taxable year may be deposited at 
any time during such taxable year, and thereafter within the time 
provided for in the joint regulations, based upon the party's estimated 
Federal taxable income for such vessels for the entire taxable year;

[[Page 352]]

    (ii) Amounts representing net proceeds from the sale or other 
disposition (including mortgaging) with respect to agreement vessels may 
be deposited when accrued and thereafter within the time provided for in 
the joint regulations;
    (iii) Amounts representing receipts from the investment or 
reinvestment of amounts held in a fund may be deposited when accrued and 
thereafter within the time provided for in the joint regulations; and
    (iv) Amounts representing depreciation with respect to agreement 
vessels for a taxable year may be deposited at any time during such 
taxable year, and thereafter within the time provided for in the joint 
regulations.
    (3) Deposits required prior to the time provided in joint 
regulations. The Maritime Administrator may require that deposits be 
made earlier than the latest time provided for in the joint regulations. 
Generally, the Maritime Administrator will require early deposits only 
when necessary for the party to meet its agreed upon obligations.
    (d) Types of property which may be deposited into a fund--(1) Form 
of deposits. Deposits may be made into a fund only in the form of money 
or intangible property of the type in which assets of the fund may be 
invested pursuant to 46 U.S.C. 53506, the Agreement, and these 
regulations, other than the securities or common and preferred stock of 
the party or a company related to the party within the meaning of 
paragraph (d)(2) of this section, except that in the case of deposits 
representing net proceeds from the sale or other disposition of any 
agreement vessel to other than a purchaser or transferee related to the 
party (within the meaning of paragraph (d)(2) of this section) or 
deposits representing receipts from the investment or reinvestment of 
amounts held in a fund, any intangible property received may be 
deposited.
    (2) Related purchaser. For purposes of this paragraph a purchaser or 
transferee is a related person to the party if--
    (i) The relationship between purchaser or transferee and the party 
would result in disallowance of losses under section 267 or 707 of the 
Code, or
    (ii) The purchaser or transferee and the party are members of the 
same controlled group of corporations (as defined in section 1563(a) of 
the Code, except that ``more than 50 percent'' shall be substituted for 
``at least 80 percent'' each place it appears therein).
    (e) Level of deposits--(1) In general. 46 U.S.C. 53504 states that 
the agreement must provide for the deposit in the fund of amounts agreed 
upon but only to the extent necessary or appropriate to provide for 
qualified withdrawals to accomplish the program set forth in the 
agreement.
    (2) Maximum level of deposits. The party shall not be permitted to 
deposit more than is necessary to complete its program. See Sec. 390.4 
(relating to description of the agreement).
    (3) Minimum level of deposits. Each agreement shall contain an 
agreed upon minimum deposit schedule applicable to each three-year 
period under the agreement. The minimum deposit shall be calculated 
taking into consideration the scheduling of the anticipated qualified 
withdrawals. The purpose of the minimum deposit is to insure that the 
party has made a sufficient commitment to accomplish its program. See 
Sec. 390.13 (relating to failure to fulfill a substantial obligation 
under the agreement).
    (4) Determination of minimum deposits. The minimum deposit shall be 
set by the Maritime Administrator. In determining the minimum deposit, 
the Maritime Administrator shall give consideration to the anticipated 
ceilings, financial history, current conditions and future business 
expectations of the party.
    (5) Waiver of minimum deposit. The Maritime Administrator shall 
waive a failure to meet the minimum deposit schedule when the party has 
deposited all allowable taxable income as specified in Article 5(c) of 
this agreement attributable to the operation of agreement vessels, net 
proceeds from all sales or other dispositions of agreement vessels, all 
receipts from the investment or reinvestment of amounts held in the fund 
and all earned depreciation on agreement vessels. The Maritime 
Administrator may also waive the minimum deposit schedule in any case 
where the party can demonstrate

[[Page 353]]

that such deposits will adversely affect its ability to operate its 
agreement vessels. In the event of a waiver, the Maritime Administrator 
may require modification of the schedules. See Sec. 390.6 (relating to 
administration of the agreement).
    (6) Selection of ceiling. Except as may be otherwise provided in the 
agreement or these rules and regulations, the party may choose the 
ceilings with respect to which deposits are made.
    (f) Allocation of depreciation deposits--(1) In general. 46 U.S.C. 
53505(b) provides that in the case of a lessee of an eligible agreement 
vessel the maximum amount which may be deposited with respect to such 
vessel, under the depreciation ceiling, shall be reduced by any amount 
which the owner is required or permitted to deposit with respect to such 
vessel under its depreciation ceiling.
    (2) Method of allocation. When an agreement vessel is leased, the 
party's agreement shall fix a percentage of the annual depreciation 
which the party may deposit. The percentage shall be that agreed upon 
between the lessors and the lessees unless the Maritime Administrator 
determines that the agreed upon percentage will result in an 
accumulation of assets in the fund or funds which is greater than or 
less than an amount necessary or appropriate to carry out the party's 
program. See paragraph (e) of this section (relating to level of 
deposits).
    (g) [Reserved]
    (h) Funds held in trust for investment purposes. A fund may be 
transferred in whole or in part to the control of an unrelated trustee 
for investment purposes with the prior written permission of the 
Maritime Administrator. The Maritime Administrator shall approve such a 
transfer when:
    (1) The trustee meets the requirements for a depository under 
paragraph (b) of this section;
    (2) The trust instrument provides that all investment restrictions 
stated in 46 U.S.C. 53506 and Sec. 390.8 of these regulations will be 
observed;
    (3) The trust instrument provides that the trustee will give 
consideration to the party's withdrawal requirements under the agreement 
when investing the fund;
    (4) The trustee agrees to be bound by all rules and regulations 
which have been or will be promulgated governing the investment or 
management of the fund.
    (i) Federal ship mortgage guarantee or insurance. A fund may serve 
in lieu of a Restricted Fund required in connection with Federal Ship 
Mortgage Guarantee or Insurance under 46 U.S.C. Chapter 537 and the 
regulations thereunder upon approval by the Maritime Administrator. 
Approval by the Maritime Administrator shall be conditioned upon the 
execution by the party of an agreement, satisfactory in form and 
substance to the Maritime Administrator, governing the dual use of the 
fund. Applications for permission to use the fund in this dual capacity 
should be made in writing to the Secretary, Maritime Administration.

[41 FR 4265, Jan. 29, 1976, as amended at 73 FR 56740, Sept. 30, 2008]



Sec. 390.8  Investment of the fund.

    (a) In general. 46 U.S.C. 53506 provides that assets in the fund 
must be invested in accordance with certain restrictions. The rules in 
this section provide for the quality of securities, restrictions on the 
type of stock in which a fund may invest, related company investments 
and miscellaneous prohibited activities.
    (b) Permissible investments--(1) In general. The party, at its 
discretion, or the party's trustee, if established pursuant to paragraph 
(h) of Sec. 390.7, may invest in the types of securities specified in 
this paragraph.
    (2) Interest bearing securities. The party or the party's trustee 
may invest in any obligation of the United States Government, including 
any agency or instrumentality thereof, and in the interest bearing 
securities listed below:
    (i) Any obligation of a state or local government, including any 
agency or instrumentality thereof, or any domestic obligation, which is 
rated by Moody's Investors Service, Inc., as ``Baa'' or better or by 
Standard and Poor's Corporations as ``BBB'' or better;
    (ii) Bankers' acceptances, certificates of deposit, repurchase 
agreements, and short-term commercial obligations,

[[Page 354]]

provided that the latter must be readily marketable and rated not lower 
than ``Prime'' by Moody's Investors Services, Inc. or ``B'' by Standard 
& Poor's Corp.; and
    (iii) Any unsubordinated obligation of an issuer that has any 
unsecured securities with a credit rating of ``Baa'' or better if rated 
by Moddy's Investors Services, Inc., or ``BBB'' or better if rated by 
Standard and Poor's Corporation, or by an issuer that has a commercial 
paper rating not lower than ``Prime'' by Moody's Investors Service, Inc. 
or ``B'' by Standard and Poor's Corporation.
    (3) Guaranteed interest bearing securities. The party or the party's 
trustee may invest in interest bearing securities which do not meet the 
investment criteria set forth in this paragraph (b) Provided, That:
    (i) The types of interest bearing securities and their terms and 
conditions are acceptable to the Maritime Administration;
    (ii) All principal and interest of the interest bearing securities 
are unconditionally guaranteed in a form satisfactory to the Maritime 
Administration and neither the securities nor the obligation to pay 
interest on the securities is that of a party or a company related to 
the party within the meaning of section 482 of the Internal Revenue Code 
of 1986, as amended, and the regulations thereunder; and
    (iii) The guarantor, which may be an affiliate of the party, must be 
either a person that has any unsecured securities with a credit rating 
of ``Baa'' or better if rated by Moody's Investors Services, Inc., or 
``BBB'' or better if rated by Standard & Poor's Corporations, or a 
person whose commercial paper rated not lower than ``Prime'' by Moody's 
Investors Services, Inc. or ``B'' junior securities are rated in the 
highest grade by Moody's Commercial Paper Service or in one of the two 
highest grades by Standard & Poor's Corporations, and is otherwise 
acceptable to the Maritime Administration.
    (4) Common and preferred stocks. The party or the party's trustee 
may invest in the following common and preferred stocks:
    (i) Stock of domestic corporations which is fully listed and 
registered at the time of purchase on an exchange registered with the 
Securities and Exchange Commission as a national securities exchange and 
which would be acquired by prudent men of discretion and intelligence in 
such matters who are seeking a reasonable income and the preservation of 
their capital; and
    (ii) Preferred stock of a corporation if the common stock of that 
corporation meets the requirements of this paragraph and if the 
preferred stock of such corporation would meet such requirements but for 
the fact that such preferred stock cannot be listed and registered as 
required because it is nonvoting stock.
    (c) Limitations on investments--(1) Interest bearing securities. The 
value of securities of any one issuer held in the Fund compared to the 
value of the total assets of the fund shall not exceed 10 percent in the 
case of nongovernmental securities referred to in paragraph (b)(2)(i) of 
this section.
    (2) Common and preferred stock. The value of common and preferred 
stock of any one issuer held in the fund shall not exceed 25 percent of 
the value of the total assets of the fund. In no case may more than 60 
percent of the value of the total assets of the fund be invested in 
common or preferred stock.
    (3) Margin or short sale. No interest bearing securities or common 
and preferred stock shall be purchased on margin or be sold short for 
the account of a fund.
    (4) Related company investments. Funds shall not be invested in the 
interest bearing securities or common and preferred stock of the party 
or of a company related to the party within the meaning of section 482 
of the Internal Revenue Code of 1986, as amended, and the regulations 
thereunder.
    (5) Subsequent investments. If at any time the fair market value of 
the interest bearing securities or common and preferred stock in the 
fund is more than the limitations stated in this paragraph (c), any 
subsequent deposit to or withdrawal from the fund or investment made 
within the fund shall be made in such a way as tends to restore the fund 
to a posture in which the fair market values of such securities or stock 
do not exceed such limitations. Values of such securities and stocks

[[Page 355]]

shall be the fair market values as determined by the party on the last 
day of each semi-annual and annual reporting period.

[41 FR 4265, Jan. 29, 1976, as amended at 42 FR 34882, July 7, 1977; 43 
FR 51636, Nov. 6, 1978; 55 FR 34928, Aug. 27, 1990; 73 FR 56740, Sept. 
30, 2008]



Sec. 390.9  Qualified withdrawals.

    (a) In general--(1) Defined. In accordance with 46 U.S.C. 53509, 
qualified withdrawals are those made from a fund in accordance with the 
agreement, but only if they are for:
    (i) The acquisition, construction or reconstruction of a qualified 
agreement vessel;
    (ii) The acquisition, construction or reconstruction of barges or 
containers which are part of the complement of a qualified agreement 
vessel; or
    (iii) The payment of the principal on indebtedness incurred in 
connection with the acquisition, construction or reconstruction of a 
qualified agreement vessel or a barge or container which is part of the 
complement of a qualified agreement vessel.
    (2) Tax aspects of a qualified withdrawal. For the tax aspects of a 
qualified withdrawal, see 46 U.S.C. 50510 and Sec. 3.6 of the joint 
regulations (Sec. 391.6 of this chapter).
    (b) Purpose of qualified withdrawals--(1) Acquisition of qualified 
agreement vessels. (i) The term acquisition of a qualified agreement 
vessel shall mean any transaction, including a corporate merger, where 
the party obtains a proprietary interest in an existing vessel and such 
a proprietary interest will, in the opinion of the Maritime 
Administrator, further the purposes and policies of the Act. See Sec. 
390.3 (relating to policy considerations).
    (ii) Qualified withdrawals for the acquisition of a qualified 
agreement vessel shall only be allowed for amounts determined by 
independent appraisal to be the fair market value of the vessel, at the 
time of the acquisition, or the actual cost directly allocable to 
acquiring only the vessel, whichever is less.
    (2) Construction of qualified agreement vessels. The term 
construction of a qualified agreement vessel shall mean the construction 
of a vessel with the aid of qualified withdrawals.
    (3) Reconstruction of qualified agreement vessels. Once an agreement 
has been entered into, the term reconstruction of a qualified agreement 
vessel shall mean any improvement to an existing vessel which increases 
the vessel's competitiveness and involves an aggregate sum in excess of 
$100,000. The Maritime Administrator may waive the monetary limit in 
this subparagraph in the case of small vessels.
    (4) Payment of principal on indebtedness. 46 U.S.C. 53509(a)(2) 
provides that any indebtedness which the party proposes to pay through 
qualified withdrawals must be shown to the satisfaction of the Maritime 
Administrator to have been incurred in direct connection with the 
acquisition, construction or reconstruction of a qualified agreement 
vessel. The fact that indebtedness is secured by an interest in a 
qualified agreement vessel is insufficient by itself to demonstrate the 
direct connection. It is not necessary that the lien or mortgage 
securing the indebtedness be on the vessel. For example, if the party 
mortgages an office building in order to finance the construction of a 
vessel, payments of principal on the mortgage may be made with qualified 
withdrawals.
    (c) Limitations on qualified withdrawals--(1) Capitalized costs 
requirement. All qualified withdrawals must be for costs which are 
capitalized under the Internal Revenue Code of 1986, as amended, and the 
regulations thereunder and so reported on the party's Federal Income Tax 
return.
    (2) Executed contract requirement and reimbursement of general 
funds. Qualified withdrawals may be made for the purpose of reimbursing 
general funds subject to the following limitations:
    (i) Qualified withdrawals may not be made until a construction, 
reconstruction or acquisition contract is executed. However, the party 
may reimburse its general funds for expenditures applicable to the 
construction, reconstruction or acquisition contract which occurred 
prior to the date of contracting if such reimbursements are made within 
120 days from the date of such contracting.

[[Page 356]]

    (ii) The party may also reimburse its general funds for expenditures 
which could have been paid initially by a qualified withdrawal, if such 
reimbursements are made within 120 days of such expenditure.
    (iii) The party may reimburse its general funds for expenditures 
made prior to the time an agreement or amendment is entered into, but 
after the party has made application therefor, if such expenditures 
would otherwise qualify for reimbursement pursuant to paragraphs (c)(3) 
(i) and (ii) of this section but for the fact that an agreement or 
amendment has not been executed, and if such reimbursement is effected 
within 120 days of the execution of an agreement or amendment.
    (3) Prepayment of indebtedness. The party shall not prepay principal 
on indebtedness with qualified withdrawals without the prior written 
consent of the Maritime Administrator.
    (4) Qualified withdrawals paid to related persons. A withdrawal, 
including payments for indebtedness, paid to a related person, within 
the meaning of section 482 of the Internal Revenue Code of 1986, as 
amended, and the regulations thereunder, shall not constitute a 
qualified withdrawal unless the Maritime Administrator determines that 
no portion of such payment constitutes a dividend, a return of capital 
or a contribution of capital under the Internal Revenue Code. 
Transactions which include payments to a related person, will be 
approved if the cost of the item to be acquired, constructed or 
reconstructed through qualified withdrawals is or was at the time of the 
acquisition, construction or reconstruction its fair market value. The 
party must obtain the prior written permission of the Maritime 
Administrator before any qualified withdrawals may be paid to a related 
person. Any such withdrawal prior to approval shall be a nonqualified 
withdrawal.
    (d) Permission to make qualified withdrawals. Once a program has 
been approved, prior approval of the Maritime Administrator is not 
required for specific qualified withdrawals except as provided in 
paragraphs (c)(4) and (c)(5) of this section. However, the Maritime 
Administrator will give prior approval to qualified withdrawals upon 
written request.

[41 FR 4265, Jan. 29, 1976, as amended at 55 FR 34929, Aug. 27, 1990; 73 
FR 56740, Sept. 30, 2008]



Sec. 390.10  Nonqualified withdrawals.

    (a) In general--(1) Defined. Any withdrawal from a fund which is not 
a qualified withdrawal is a nonqualified withdrawal.
    (2) Tax aspects of a nonqualified withdrawal. For the tax aspects of 
a nonqualified withdrawal, see 46 U.S.C. 53511 and Sec. 3.7 of the 
joint regulations (Sec. 391.7 of this chapter).
    (b) Permission required--(1) In general. The prior written 
permission of the Maritime Administrator is required before a 
nonqualified withdrawal may be made.
    (2) Failure to secure permission. A nonqualified withdrawal made 
without the prior written permission of the Maritime Administrator shall 
constitute a material breach of the agreement unless the Maritime 
Administrator shall determine that failure to obtain prior written 
consent was excusable. See Sec. 390.13 (relating to failure to fulfill 
a substantial obligation under the agreement).
    (3) Types of nonqualified withdrawals which will be permitted. 
Generally, the Maritime Administrator will give permission to make 
nonqualified withdrawals when:
    (i) The party has incurred operating losses from the operations of 
agreement vessels which have impaired his working capital and it becomes 
necessary to reimburse its general funds to the extent of such losses;
    (ii) The party desires to make an expenditure for research, 
development or design and such an expenditure is incident to new and 
advanced ship design, machinery and equipment;
    (iii) The withdrawal would be a qualified withdrawal except for the 
fact that there is no tax basis left that can be reduced; or
    (iv) The party demonstrates, to the satisfaction of the Maritime 
Administrator, that it cannot fulfill its program due to circumstances 
beyond its

[[Page 357]]

control or due to a change in circumstances which makes the completion 
of its program economically unfeasible.
[41 FR 4265, Jan. 29, 1976, as amended at 73 FR 56740, Sept. 30, 2008]



Sec. 390.11  Sale or other disposition of agreement vessels.

    (a) Eligible agreement vessels. The sale or other disposition 
(including mortgages) of eligible agreement vessels shall not require 
prior approval of the Maritime Administrator, but shall require written 
notification within 10 days after the sale or other disposition. Such 
notification shall include a description of the transaction, the 
identity of the transferee, the proceeds to be realized, the date of the 
transaction and whether the proceeds will be deposited into the fund.
    (b) Qualified agreement vessels--(1) In general. If a qualified 
agreement vessel whose basis has been reduced through the application of 
qualified withdrawals is sold or disposed of (including mortgaged) 
within one year, interest on the amount of gain attributable to the 
basis reduction shall attach if the Maritime Administrator determines 
that the disposition was contrary to the policies of the Act, the joint 
regulations or these regulations. See Sec. 390.13 (relating to failure 
to fulfill a substantial obligation under the agreement).
    (2) Period of one year defined. The one-year period shall mean 365 
days from the date of final delivery from the shipyard in the case of 
construction or reconstruction and 365 days from the date of first 
loading of the vessel in the case of an acquisition.
    (3) Prior approval. The party shall obtain the written approval of 
the Maritime Administrator prior to the sale or other disposition 
(including mortgage) of a qualified agreement vessel.
    (4) Deposit requirement. The Maritime Administrator will not 
normally require the deposit of the net proceeds from the sale of a 
qualified agreement vessel but shall require the deposit of the net 
proceeds from the mortgage of a qualified agreement vessel for which 
qualified withdrawals from the fund have been made.
    (c) Sale or other disposition of agreement vessels to related 
persons--(1) In general. Section 3.2(c)(4) of the joint regulations 
(Sec. 391.2(c)(4) of this chapter) requires that the net proceeds from 
the sale or other disposition of an agreement vessel shall be the fair 
market value of the vessel when the party and the purchaser are owned or 
controlled directly or indirectly by the same interests within the 
meaning of section 482 of the Internal Revenue Code of 1986, as amended, 
and the regulations thereunder. In such case, the party shall furnish 
data to establish that the amount realized or to be realized is the fair 
market value.
    (2) Data to be submitted. Sufficient data must be submitted to 
support a determination by the Maritime Administrator of the fair market 
value including the original cost of the vessel, dates of original 
delivery, acquisition and reconstruction, as applicable, cost of 
improvements, sales price, costs of sale and any other information which 
would assist in making such determination.
[41 FR 4265, Jan. 29, 1976, as amended at 73 FR 56740, Sept. 30, 2008]



Sec. 390.12  Liquidated damages.

    (a) Liquidated damages--(1) In general. Each agreement entered into 
under Chapter 535 shall contain a liquidated damages provision for the 
purpose of placing the party into its prefund position for each day a 
qualified agreement vessel is operated in violation of the geographic 
trading restrictions contained in the Act and Sec. 390.5. The 
liquidated damages provision requires that the party repay the time 
value of the deferral of Federal Income Tax which the party has 
received.
    (2) Calculation of liquidated damages. The liquidated damages 
specified in this paragraph shall be calculated as follows:
    (i) With respect to each vessel operated in violation of the 
applicable trading restrictions, add (A) the sum of qualified 
withdrawals for the vessel which have been made from the ordinary income 
and capital gain accounts to the date of breach, and (B) the amount of 
any unpaid principal on indebtedness for the vessel which may be paid 
from the fund less any portion of such amount which by operation of law

[[Page 358]]

must be withdrawn from the capital account balance on deposit in the 
fund on the date of the breach.
    (ii) Multiply the total derived in paragraph (a)(2)(i) of this 
section by an assumed effective Federal Income Tax rate of 30 percent;
    (iii) Compound the product derived in paragraph (a)(2)(ii) of this 
section at 8 percent annually (A) for 20 years, if the duration of the 
trading restrictions applicable to the vessel is 20 years in accordance 
with paragraph (b)(1)(i) of this section; (B) for 10 years, if the 
duration of the trading restrictions applicable to the vessel is 10 
years in accordance with paragraphs (b)(1) (ii), (iii) or (iv) of this 
section; or (C) for 5 years, if the duration of the trading restrictions 
applicable to the vessel is 5 years in accordance with paragraph 
(b)(1)(iv) of this section.
    (iv) Subtract the amount calculated in paragraph (a)(2)(ii) of this 
section from the product derived in paragraph (a)(2)(iii) of this 
section;
    (v) Divide the result derived in paragraph (a)(2)(iv) of this 
section by 2; and
    (vi) Divide the result derived in paragraph (a)(2)(v) of this 
section (A) by 7300 (days) if the duration of the trading restrictions 
applicable to the vessel is 20 years; (B) by 3650 (days) if the duration 
of the trading restrictions applicable to the vessel is 10 years; or (C) 
by 1825 (days) if the duration of the trading restrictions applicable to 
the vessel is 5 years.
    (3) Formula. The calculation of the daily rate of liquidated damages 
may be reduced to the following formula:

X = [I(QT)-S]/2D

Where:

X = Daily rate in dollars.
Q = Summation of qualified withdrawals, other than withdrawals from the 
          capital account, permitted from the fund.
T = Assumed effective tax rate of 30 pct.
S = Tax savings=(Q)(T).
I = Discount factor to be applied for vessels subject to 20-yr trading 
          restriction = 4.660957; for vessels subject to 10-yr trading 
          restriction = 2.158925; for vessels subject to 5-yr trading 
          restriction = 1.469328 (value of $1 compounded at 8 pct for 
          20, 10, and 5 yr respectively).
D = 7,300 d for vessels subject to 20-yr trading restriction; 3,650 d 
          for vessels subject to 10-yr trading restriction; 1,825 d for 
          vessel subject to 5-yr trading restriction.

    The formula may be further reduced to:

X = 0.5491436Q/7,300


for vessels subject to 20 year trading restriction,

X = 0.1738388Q/3,650


for vessels subject to 10 year trading restriction,

X = 0.0703992Q/1,825


for vessels subject to 5 year trading restriction.
    (4) Example. The provisions of paragraphs (c)(2) and (c)(3) of this 
section may be illustrated by the following example:

    Assume that a qualified agreement vessel has been constructed with 
qualified withdrawals from a fund. The total cost was $20 million of 
which $6 million was withdrawn from the fund for a downpayment. Pursuant 
to the agreement, an additional $4 million may be withdrawn from the 
fund to pay principal on indebtedness. Thus, $10 million has been or may 
be withdrawn from the fund with respect to this vessel. The daily rate 
of liquidated damages would be:

X = 0.5491436 (10,000,000)/7300 or X = $752.25

    (5) Payment of liquidated damages. The amount derived in paragraph 
(a)(2) of this section shall be the daily rate of liquidated damages and 
shall be paid to the Maritime Administrator, for deposit in the Treasury 
of the United States, within 30 days from the date the qualified 
agreement vessel first entered the prohibited geographic trade and shall 
be for all amounts owing from such date thereafter until the date 
payment is due. Payments, for continuing breaches, shall be made at 30 
day intervals.
    (6) Other remedies. Nothing in this paragraph shall diminish the 
Maritime Administrator's other remedies for breach under the Act, the 
rules and regulations or the agreement.
    (b) Duration of restrictions--(1) In general. The geographic trading 
restrictions in the Act and Sec. 390.5 and the liquidated damages 
provision shall apply for:
    (i) 20 years from the date of final delivery on qualified agreement 
vessels constructed or acquired within one year of final delivery from 
the shipyard with the aid of qualified withdrawals;

[[Page 359]]

    (ii) 10 years from the date of completion of reconstruction for 
qualified agreement vessels reconstructed with the aid of qualified 
withdrawals;
    (iii) 10 years from the date of acquisition of qualified agreement 
vessels acquired with the aid of qualified withdrawals more than one 
year after final delivery of the vessel from the shipyard;
    (iv) 10 years from the date of the first qualified withdrawal from 
the fund to pay the existing indebtedness on a qualified agreement 
vessel which was included in Schedule B for that purpose unless the 
qualified vessel was more than fifteen years old on the date of the 
first qualified withdrawal in which case the period shall be five years.
    (2) Transfer of qualified agreement vessel. In the event a qualified 
agreement vessel is sold or transferred to another person (see paragraph 
(b)(3) of Sec. 390.11 requiring prior permission), the transferor shall 
require in the bill of sale that the transferee agree with the Maritime 
Administrator to comply with the geographic trading restrictions and to 
pay liquidated damages for any breach of such agreement that occurs 
after the transfer. The transferor shall remain liable for any 
violations that occurred prior to the approved transfer. However, in the 
case of a like kind exchange which is governed by section 1031 of the 
Internal Revenue Code of 1986, as amended, if the vessel acquired by the 
party has an economic life equal to or greater than the length of the 
geographic trading restrictions that remain applicable to the 
transferred vessel, the acquired vessel shall be deemed to be a 
qualified agreement vessel and the geographic trading restrictions of 
the transferred vessel shall attach to the acquired vessel.

[41 FR 4265, Jan. 29, 1976 as amended at 42 FR 34283, July 5, 1977; 73 
FR 56740, Sept. 30, 2008]



Sec. 390.13  Failure to fulfill a substantial obligation under the agreement.

    (a) In general. 46 U.S.C. 53509(c) requires the Maritime 
Administrator to determine whether there has been a failure to fulfill a 
substantial obligation under an agreement.
    (b) Contracting Officer's tentative conclusion--(1) Notice. If the 
Contracting Officer tentatively concludes that any substantial 
obligation under the agreement, the joint regulations or these 
regulations is not being fulfilled by the party he shall serve written 
notice of his tentative conclusion upon the party by certified mail with 
return receipt requested. The notice shall contain the following 
information:
    (i) A statement of the grounds upon which the tentative conclusion 
is based;
    (ii) The amount the Contracting Officer tentatively concludes should 
be withdrawn as a nonqualified withdrawal; and
    (iii) A statement that the tentative conclusion shall become a final 
decision unless the party requests, within 30 days, an opportunity 
either to cure its breach or to be heard and offer evidence in 
opposition to the tentative conclusion.
    (2) Effect of notice. The notice of the tentative conclusion shall 
become a final decision as described in paragraph (d)(1) of this 
section, unless within 30 days of receipt of such a written notice the 
party by personal delivery or by certified mail, requests the 
opportunity either to cure its breach or to be heard and offer evidence 
in opposition to the tentative conclusion, in which case no further 
withdrawals from the fund, without the written prior approval of the 
Contracting Officer, shall be made by the party until a binding final 
decision is reached by the Maritime Administration.
    (c) Basis for Contracting Officer's tentative conclusion. In 
determining whether a party has not fulfilled a substantial obligation 
under its agreement, the Contracting Officer shall consider among other 
things:
    (1) The effect of the party's action or omission upon its ability to 
either carry out the purpose of the fund, accomplish its Schedule B 
program (see Sec. 390.4(c)) or satisfy its minimum level of deposits in 
Schedule D (see Sec. 390.4(e)).
    (2) Whether the party has made material misrepresentations in 
connection with its application, agreement or any modification or 
amendment thereto or has failed to disclose material information that 
may affect its agreement or the purpose of the fund.

[[Page 360]]

    (d) Contracting Officer's decision and appeals to the Maritime 
Administrator--(1) Where there has not been a request to cure or to be 
heard. If the Contracting Officer issues a written notice under 
paragraph (b) of this section and the party does not request within 30 
days an opportunity either to cure its breach or to be heard and offer 
evidence in opposition to the tentative conclusion, the Contracting 
Officer's tentative conclusion shall become the final decision, which 
decision shall be final, conclusive and binding upon the party, and no 
appeal therefrom shall be taken to the Maritime Administrator.
    (2) Where there has been a request to cure or to be heard. If the 
Contracting Officer issues a written notice under paragraph (b) of this 
section and the party requests within 30 days an opportunity either to 
cure its breach or to be heard and offer evidence in opposition to the 
tentative conclusion, the party shall be offered such an opportunity. 
Request to cure must include a proposal to cure the breach. If the 
Contracting Officer accepts the party's proposal to cure its breach, 
then such determination shall be final. A party requesting to be heard 
and offer evidence in opposition to the Contracting Officer's tentative 
conclusion shall be permitted to submit, in writing, any information, 
evidence or argument within a period set by the Contracting Officer 
after considering the wishes of the party. The Contracting Officer shall 
reduce his final decision to writing and furnish the party a copy, by 
certified mail--return receipt requested, which decision shall be final 
and conclusive and shall bind the party unless within 30 days of receipt 
of the decision the party appeals from said decision by personal 
delivery or by certified mail to the Maritime Administrator with notice 
to the Contracting Officer.
    (e) Appeals to the Maritime Administrator. Appeals with a request 
for a hearing on the record, if desired, are to be transmitted pursuant 
to paragraph (d) of this section and are to be addressed to the Maritime 
Administrator. Upon the filing of an appeal, the Contracting Officer 
shall transmit the entire record and a copy of his final decision to the 
Maritime Administrator. If a request for a hearing on the record is 
granted, the Maritime Administrator shall proceed pursuant to the Rules 
of Practice and Procedure in Part 201 of this title. The decision of the 
Maritime Administrator on any question of fact shall be final, 
conclusive and binding upon the party unless determined by a court of 
competent jurisdiction to be fraudulent, capricious, or arbitrary, or so 
grossly erroneous as necessarily to imply bad faith or is not supported 
by substantial evidence.

[41 FR 4265, Jan. 29, 1976, as amended at 73 FR 56740, Sept. 30, 2008]



Sec. 390.14  Departmental reports and certification.

    (a) In general. For each calendar year, the Secretary of 
Transportation shall provide the Secretary of the Treasury, within 120 
days after the close of such calendar year, a written report with 
respect to those capital construction funds under the Secretary of 
Transportation's jurisdiction.
    (b) Content of reports. Each report shall set forth the name and 
taxpayer identification number of each person:
    (1) Establishing a capital construction fund during such calendar 
year;
    (2) Maintaining a capital construction fund as of the last day of 
such calendar year;
    (3) Terminating a capital construction fund during such calendar 
year;
    (4) Making any withdrawal from or deposit into (and the amounts 
thereof) a capital construction fund during such calendar year; or
    (5) With respect to which a determination has been made during such 
calendar year that such person has failed to fulfill a substantial 
obligation under any capital construction fund agreement to which such 
person is a party.

[55 FR 34929, Aug. 27, 1990]



Sec. Appendix I to Part 390--U.S. Department of Transportation, Maritime 
                Administration--Application Instructions

    instruction regarding application for a capital construction fund

    An application for a capital construction fund under 46 U.S.C. 53501 
et seq., the Rules and Regulations prescribed jointly by the

[[Page 361]]

Secretary of the Treasury and the Secretary of Transportation (26 CFR 
Part 3 and reprinted in 46 CFR Part 391, the ``Joint Regulations'') and 
individually by the Secretary of Transportation (46 CFR Part 390, the 
``SOC Regulations'') shall be prepared and submitted in the form 
specified by these instructions.
    The application must be legible and shall be submitted in six (6) 
complete sets, including the required Schedules and Exhibits. The 
application shall be filed with the Secretary, Maritime Administration, 
Washington, DC 20590. Three of these sets must be duly executed and 
certified by the Applicant. The name of the Applicant shall be shown on 
all accompanying papers for identification.
    All questions contained in the application must be responded to; if 
a question is not applicable the respondent should so state. Additional 
information may be requested if such information is necessary to aid the 
Contracting Officer in making a determination to enter into a Capital 
Construction Fund Agreement.

       U.S. Department of Transportation, Maritime Administration

   application for establishment of a capital construction fund under 
           section 607, merchant marine act, 1936, as amended

    The undersigned ------ (``Applicant''), a citizen of the United 
States within the meaning of 46 U.S.C. 50501, as amended, hereby applies 
under section 607 of the Merchant Marine Act, 1936, as amended 
(``Act''), the Rules and Regulations jointly prescribed by the Secretary 
of the Treasury and the Secretary of Transportation (``Joint 
Regulations'') and individually by the Secretary of Transportation 
(``SOC Regulations'') to establish a Capital Construction Fund to aid in 
the acquisition, construction or reconstruction of a qualified vessel, 
the acquisition, construction or reconstruction of barges, containers or 
trailers which are part of the complement of a qualified vessel and the 
payment of the principal on indebtedness incurred in connection with the 
acquisition, construction or reconstruction of a qualified vessel or a 
barge, container or trailer which is part of the complement of a 
qualified vessel. The fund hereby applied for will be effective for 
deposits relating to the taxable year beginning ------------------, 20--
-- and ending ----------------, 20----, and for subsequent taxable 
years. In support of this application, the Applicant submits the 
following information:
    I. As to the identity of and other General Information of the 
Applicant (the following data is required to prove the Applicant's 
citizenship to the satisfaction of the Secretary; also see 46 CFR Part 
355):
    A. Natural Persons. If the Applicant is a natural person, the 
following identifying information should be submitted:
    1. Name.
    2. Address.
    3. Date of birth.
    4. Place of birth.
    5. Citizenship.
    6. Principal place of business.
    7. Trade name under which business is conducted.
    B. Partnerships, Associations, Unincorporated Companies. If the 
Applicant is a partnership, association, or unincorporated company, the 
following identifying information should be submitted:
    1. Name of partnership, association, or unincorporated company.
    2. Business address.
    3. Date and place of organization.
    4. Name of all partners (general, limited and special) of the 
partnership or trustees and holders of beneficial interests in the 
association or company.
    5. Share owned by each partner, trustee, or beneficial owner.
    6. Date of birth of each.
    7. Place of birth of each.
    8. Citizenship of each.
    C. Incorporated Companies. If the Applicant is an incorporated 
company, the following identifying information should be submitted:
    1. Exact name of Applicant.
    2. State in which incorporated and date of incorporation.
    3. Address of principal executive offices, and of important branch 
offices, if any.
    4. The following information with respect to each officer and 
director of the corporation:
    a. Name and address.
    b. Office.
    c. Citizenship.
    d. Capital shares owned (specify type, whether voting or non-voting 
and percentage of total of each type issued if five percent (5%) or 
more).
    5. The name, address and citizenship of and number of capital shares 
owned by each person not named in answer to item 4, owning of record, or 
beneficially if known, five percent (5%) or more of the issued capital 
shares of any class stock of the Applicant.
    6. A brief statement of the general effect of each voting agreement, 
voting trust, or other arrangement whereby the voting rights in any 
shares of the Applicant are owned, controlled, or exercised, or whereby 
the control of the Applicant is in any way held or exercised by any 
person not the holder of legal title to such shares. (Give the name, 
address, citizenship, and business of any such person, and, if not an 
individual, include the form of organization.)
    II. As to the Business and Affiliations of the Applicant. A. A brief 
description of the principal business activities during the past five

[[Page 362]]

years of the Applicant and of any predecessor or predecessors of the 
Applicant; if any change is presently contemplated, a brief statement of 
the nature and circumstances thereof.
    B. A list of all companies or persons that are related within the 
meaning of section 482 of the Internal Revenue Code of 1954, as amended, 
and the regulations thereunder (``related companies'') or that directly 
or indirectly through one or more intermediaries, control, are 
controlled by, or are under common control with the Applicant, together 
with an indication of the nature of the business transacted by each, the 
relationships between the companies named, and the nature and extent of 
the control. This information may be furnished in the form of a chart.
    C. A statement whether during the past 5 years the Applicant or any 
predecessor or related company has been in bankruptcy or in 
reorganization under II-B of the Bankruptcy Act or in any other 
insolvency or reorganization proceedings, and whether any substantial 
property of the Applicant or any predecessor or related company has been 
acquired in any such proceeding or has been subject to foreclosure or 
receivership during such period. If so, give details.
    D. A statement of whether the Applicant or any predecessor or 
related company is now or during the past 5 years was involved in any 
litigation or subject to any outstanding judgments. If so, give details.
    E. Describe any contemplated plan of reorganization or 
recapitalization involving new capital, the consolidation or mergers of 
the Applicant with related or other companies, debt elimination, or 
other changes or modifications in the corporate or individual structure, 
and indicate by appropriate financial statements the anticipated results 
thereof.
    III. As to the Management of the Applicant. A. A brief description 
of the principal business activities during the past 5 years of each 
director and each principal executive officer of the Applicant.
    B. The name and address of each other organization engaged in 
business activities related to those carried on or to be carried on by 
the Applicant with which any person named in the answer to the preceding 
item has any present business connection; the name of each such person, 
and briefly the nature of such connection.
    IV. Description of Vessels, Barges, Containers or Trailers which 
Applicant Proposes to be Incorporated in Capital Construction Fund 
Agreement for the Purpose of Making Deposits. Vessels must be eligible 
vessels as that term is defined in 46 U.S.C. 53501 and Sec. 390.5(b) of 
the SOC Regulations. Undocumented barges, containers or trailers must be 
part of the complement of an eligible vessel as that term is defined in 
section 607(b) of the Act and Sec. 390.5(d) of the SOC Regulations:
    A. Vessels. Provide in a tabular form headed ``Schedule A'' (see 
prescribed format in appendix II) the vessels owned or leased by the 
Applicant which the Applicant proposes to be designated as ``Eligible 
Agreement Vessels'' for the purposes of making deposits into a Capital 
Construction Fund pursuant to the provisions of 46 U.S.C. 53501 et seq, 
giving:
    a. Name and official number.
    b. Specific type.
    c. Capacity (tons of cargo, number of containers, barges, etc.).
    d. Whether owned or leased, and if leased the owner and the owner's 
address.
    e. Date and place of construction.
    f. If reconstructed, date of redelivery and place of reconstruction.
    g. Date documented under laws of the United States.
    h. Area of operation.
    i. Full details concerning the service in which the Applicant 
operates or will operate each vessel; if the vessel is used for multiple 
purposes indicate the percentage of time in which the vessel is engaged 
in each service.
    B. Barges, Containers, and Trailers. Provide in a tabular form 
headed ``Schedule A'' (see prescribed format in appendix II) the barges, 
containers, and trailers owned or leased by the Applicant which the 
Applicant proposes to be incorporated in an Agreement for purposes of 
making deposits into a Capital Construction Fund pursuant to the 
provisions of 46 U.S.C. 53501 et seq, giving:
    a. Number of barges, containers or trailers which are part of the 
complement of an eligible vessel; name and official number of barges 
which are not a part of the complement of an eligible vessel.
    b. Specific type.
    c. Size or capacity.
    d. Whether owned or leased, and if leased the owner and the owner's 
address.
    e. Date and place of construction.
    f. If reconstructed, date of redelivery and place of reconstruction.
    g. Date documented under the laws of the United States.
    h. Area of operation.
    i. The vessel or vessels for which the barges, containers and 
trailers are part of the complement; full details concerning the service 
in which the Applicant operates or will operate each barge which is not 
a part of a complement.
    V. Purposes for which Qualified Withdrawals are Proposed. Applicant 
is advised that information furnished in response to sections A, B, C 
and D of this item is for the purpose of inducing the United States to 
enter into an agreement to establish a Capital Construction Fund 
pursuant to 46 U.S.C. 53501 et seq. In connection therewith attention is 
directed to 46 U.S.C. 53509(c) which states, ``Under joint regulations, 
if the Secretary of Transportation determines that any substantial

[[Page 363]]

obligation under any agreement is not being fulfilled, he may, after 
notice and opportunity for hearing to the person maintaining the fund, 
treat the entire fund or any portion thereof as an amount withdrawn from 
the fund in a nonqualified withdrawal.'' Also see Sec. 390.13 of the 
SOC Regulations.
    A. Acquisition or Construction of Vessels. Provide in form headed 
``Schedule B'' (see prescribed format in appendix II) the proposed 
program for the acquisition or construction of vessels, giving:
    a. Number, type and commercial characteristics of vessels to be 
acquired or constructed.
    b. Whether vessels will be replacements or additions, and if 
replacements identify vessels to be replaced.
    c. Projected date of acquisition or award of construction contract.
    d. Projected date of commencing operations.
    e. Estimated total cost.
    f. Method by which estimated total cost of project was determined.
    g. Estimated amount of Capital Construction Fund monies to be used 
as down payment by the Applicant.
    h. Estimated amount of borrowings and the amount of such borrowings 
to be retired by qualified withdrawals from the Capital Construction 
Fund, including anticipated terms of such financing.
    i. Intended area of operation.
    j. Full details concerning the use of the proposed vessel; if the 
vessel is to be used for multiple purposes indicate the approximate 
percentage of time in which the vessel will be engaged in each service.
    B. Acquisition or Construction of Barges, Containers and Trailers. 
Provide in a form headed ``SCHEDULE B'' (see prescribed format in 
appendix II) the proposed program for acquisition or construction of 
barges, containers and trailers giving:
    a. Number, type and size of barges, containers and trailers.
    b. Whether barges, containers and trailers will be replacements or 
additions, if replacements, identify barges, containers or trailers to 
be replaced.
    c. Projected date of acquisition or award of construction contract.
    d. Projected date of introduction into service.
    e. Estimated total cost.
    f. Method by which estimated total cost of project was determined.
    g. Estimated amount of Capital Construction Fund monies to be used 
as down payment by the Applicant.
    h. Estimated amount of borrowings and the amount of such borrowings 
to be retired by qualified withdrawals from the Capital Construction 
Fund including anticipated terms of such financing.
    i. Identification of vessels for which the barges, containers and 
trailers will be part of the complement, and the vessel's area of 
operation. In the case of barges which are not a part of the complement 
of a vessel provide the barges' intended area of operation.
    j. Full details concerning the use of the proposed barge; if the 
barge is to be used for multiple purposes indicate the approximate 
percentage of time in which the barge will be engaged in each service.
    C. Reconstruction of Vessels. Provide in a form headed ``SCHEDULE 
B'' (see prescribed format in appendix II) the proposed program for 
reconstruction of vessels, giving:
    a. Identification of vessels to be reconstructed.
    b. Nature and extent of proposed reconstruction.
    c. Projected date of award of reconstruction contract.
    d. Projected date of commencing operations with reconstructed 
vessels.
    e. Estimated total cost.
    f. Method by which estimated total cost of project was determined.
    g. Estimated amount of Capital Construction Fund monies to be used 
as down payment by the Applicant.
    h. Estimated amount of borrowings and amount of such borrowings to 
be retired by qualified withdrawals from the Capital Construction Fund, 
including anticipated terms of such financing.
    i. Intended area of operation.
    j. Full details concerning the use of the proposed vessel; if the 
vessel is to be used for multiple purposes indicate the approximate 
percentage of time in which the vessel will be engaged in each service.
    D. Reconstruction of Barges, Containers and Trailers. Provide in a 
form headed ``SCHEDULE B'' (see prescribed format in appendix II) the 
proposed program for reconstruction of barges, containers and trailers, 
giving:
    a. Number, type and size of barges, containers and trailers.
    b. Nature and extent of proposed reconstruction work.
    c. Projected date of award of reconstruction contract.
    d. Projected date of completion of reconstruction work.
    e. Estimated total cost.
    f. Method by which estimated total cost of project was determined.
    g. Estimated amount of Capital Construction Fund monies to be used 
as down payment by the Applicant.
    h. Estimated amount of borrowings and amount of such borrowings to 
be retired by qualified withdrawal from the Capital Construction Fund 
including anticipated terms of such financing.
    i. Identification of vessels for which the barges, containers, and 
trailers will be part of the complement, and the vessel's area of

[[Page 364]]

operations. In the case of barges which are not a part of the complement 
of a vessel provide the barges' area of operation.
    j. Full details concerning the use of the proposed barge; if the 
barge is to be used for multiple purposes indicate approximate 
percentage of time in which the barge will be engaged in each service.
    E. Payment of Principal on Existing Indebtedness Incurred in 
Connection with the Acquisition, Construction or Reconstruction of a 
Qualified Vessel or a Barge, Container or Trailer which is Part of the 
Complement of a Qualified Vessel. Provide in a form headed ``Schedule 
B'' (see prescribed format in appendix II) the proposed program for 
payments of principal on existing indebtedness incurred in connection 
with the acquisition, construction, or reconstruction of qualified 
vessels, barges, containers, or trailers, giving:
    a. Name, official number or other identifying information for the 
vessel, barge, container, or trailer.
    b. Whether the debt was incurred for acquisition, construction or 
reconstruction, demonstrating evidence of a direct connection between 
the qualified vessel and the debt which was incurred.
    c. The aggregate principal balance of such indebtedness as of the 
date of this application.
    d. The dates and amounts of payments of principal to liquidate the 
outstanding debt in accordance with the applicable loan agreements or 
other documents.
    VI. As to the Depository to be Used for the Capital Construction 
Fund. Provide in a tabular form headed ``Schedule C'' (see prescribed 
format in appendix II) the full name and complete address of the 
financial institution which will act as depository. Indicate the type of 
account, i.e., checking, savings, trust, in which the fund will be held.
    VII. Proposed Schedule of Minimum Amounts Available for Deposit into 
the Capital Construction Fund. Provide in a tabular form headed 
``Schedule D'' (see prescribed format in appendix II) a proposed program 
for deposits into the Capital Construction Fund commencing with the 
beginning of the first taxable year for which the Agreement applies. The 
applicant is advised that the purpose of Schedule D is to insure that a 
sufficient commitment has been made to accomplish the objectives 
contained in Schedule B. Minimum annual deposits are not required, but a 
minimum amount must be deposited for each 3 year period under the 
Agreement. For each such 3 year period of the proposed Schedule D the 
Applicant will indicate not only the minimum amount to be deposited, but 
also the source of such deposit, giving amounts expected to be derived 
from:
    a. Ordinary income attributable to the operation of agreement 
vessels.
    b. Net proceeds from the sale or other disposition of agreement 
vessels.
    c. Receipts from the investment or reinvestment of amounts held in 
the fund.
    d. Earned depreciation on agreement vessels.
    VIII. Financial Statements and Reports of the Applicant Including 
Predecessors. A. Financial Statements. For each of the past three fiscal 
years provide:
    1. Statements of Financial Conditions.
    2. Statements of Operations.
    3. Statements of Retained Earnings.
    B. Reports. If the books of the Applicant were audited by an 
independent certified public accountant copies of the public 
accountant's reports shall be submitted for each of the past three 
fiscal years.
    IX. As to Exhibits Furnished. At the time of original filing, the 
following exhibits, properly identified, shall be furnished:
    Exhibit I--A copy of the Certificate of Incorporation of the 
Applicant or other organization papers including all amendments thereto 
presently in effect.
    Exhibit II--A copy of the By-Laws or other governing instruments of 
the Applicant, including all amendments thereto presently in effect.
    Exhibit III--Such other financial statements, copies of contracts, 
schedules and other required data which the Applicant desires to 
incorporate by reference.
    X. A statement of any additional information which, in the opinion 
of the Applicant, is necessary to make the application and attached 
exhibits true and complete.
    XI. A specific written request, pursuant to 5 U.S.C. 552(b)(4), must 
accompany the application if the Applicant wishes certain trade secrets, 
financial and commercial information contained in this application to be 
withheld from disclosure. The Maritime Administrator, Department of 
Transportation will endeavor to respect such a request, acting within 
the limits of the applicable provisions of the Freedom of Information 
Act.

State of ------------------ County of ------------------ ss.:
Dated ------------------------, 20----
Name of Applicant ----------------------------------
By ------ Name and Title

    I, ------, do certify that I am the (Title of Office) of (Exact Name 
of Applicant), the Applicant on whose behalf I have executed the 
foregoing application; that the Applicant is a citizen of the United 
States within the meaning of 46 U.S.C. 50501; that this application is 
made for the purpose of inducing the United States of America to permit 
the Applicant, pursuant to section 607 of the Merchant Marine Act, 1936, 
as amended, the Joint Regulations and the SOC Regulations to establish a 
Capital Construction Fund for the purposes set forth in 46 U.S.C. 53501; 
that I have carefully examined the application and all documents 
submitted in connection

[[Page 365]]

therewith and, to the best of my knowledge, information and belief, the 
statements and representations contained in said application and related 
documents are full, complete, accurate, and true.

    Subscribed and sworn to before me, a -------------- in and for the 
State and County above named, this ------------ day of ----------------, 
20----.

    My Commission expires ----------------------.

    Note: The United States Criminal Code makes it a criminal offense to 
knowingly and willfully falsify, conceal or cover up by any trick, 
scheme, or device, a material fact from, or make any false, fictitious 
or fraudulent statements or representations or make or use any false 
writing or document knowing the same to contain any false, fictitious or 
fraudulent statement to, any department or government agency of the 
United States as to any matter within its jurisdiction (18 U.S.C. 1001).

[41 FR 4265, Jan. 29, 1976, as amended at 73 FR 56740, Sept. 30, 2008; 
74 FR 17097, Apr. 14, 2009]



Sec. Appendix II to Part 390--Sample Capital Construction Fund Agreement

                         [Contract No. MA/CCF--]

                capital construction fund agreement with

    This Capital Construction Fund Agreement (``Agreement''), made on 
the date hereinafter set forth, by and between the United States of 
America, represented by the Maritime Administrator, Department of 
Transportation (``Maritime Administrator''), and ------, a corporation 
organized and existing under the laws of the State of ------ 
(``Party''), a citizen of the United States of America.
    Whereas: 1. The Party has applied for the establishment of a Capital 
Construction Fund (``Fund'') under section 607 of the Merchant Marine 
Act, 1936, as amended (``Act'');
    2. The Party is the owner or lessee or has contracted for the 
construction of one or more eligible vessels as defined in 46 U.S.C. 
53501, which vessels are listed in Schedule A hereof;
    3. The Party has a program for the construction or acquisition of 
qualified agreement vessels as defined in 46 U.S.C. 53501, which program 
is described in Schedule B hereof;
    4. The Maritime Administrator and the Party desire to enter into an 
Agreement for the purpose of providing replacement vessels, additional 
vessels, or reconstruction vessels, built in the United States and 
documented under the laws of the United States for operation in the 
United States foreign, Great Lakes, or noncontiguous domestic trade;
    5. The Maritime Administrator has determined that the Party 
qualifies for an Agreement under the Act; and
    6. The Maritime Administrator has authorized the award of an 
Agreement upon the terms and conditions set forth herein subject to the 
Act, as it may be amended from time to time, and such rules and 
regulations as shall be prescribed by the Secretary of Transportation or 
his delegate, either alone or jointly with the Secretary of the 
Treasury, as necessary to carry out the powers, duties, and functions 
vested in them by the Act (``rules and regulations'').
    Now, therefore in consideration of the premises the Maritime 
Administrator and the Party hereby agree as follows:
    1. Establishment of a Fund: (A) A Fund is hereby established for the 
purposes set forth in Article 2 hereof, pursuant to such terms and 
conditions as shall be prescribed in this Agreement, the Act, or the 
rules and regulations.
    (B) The Fund shall be established in the depositories listed in 
Schedule C hereof.
    2. Purpose of the Fund: The Fund established hereunder shall be 
utilized to provide for replacement vessels, additional vessels, or 
reconstructed vessels, built in the United States and documented under 
the laws of the United States for operation in the United States 
foreign, Great Lakes, or noncontiguous domestic trade, and to provide 
for qualified withdrawals to achieve the program set forth in Schedule B 
hereof.
    3. Term of the Agreement: This Agreement shall be effective on the 
date of execution by the Maritime Administrator and shall continue until 
terminated under Article 4.
    4. Termination of Agreement: (A) This Agreement may be terminated at 
any time under any of the following circumstances:
    (1) Upon written mutual agreement by the parties;
    (2) Upon written notice by the Party that a change has been made in 
the rules and regulations which would have a substantial effect upon the 
rights or obligations of the Party.
    (B) This Agreement shall terminate upon completion of the program as 
set forth in Schedule B hereof.
    (C) Upon termination of this Agreement pursuant to paragraphs (A) 
and/or (B) hereof all amounts remaining in the Fund shall be treated as 
if withdrawn in a nonqualified withdrawal (as that term is defined in 
the Act and the rules and regulations) on the date of termination of 
this Agreement.
    5. Deposits to be made into the Fund: (A) Subject to any 
restrictions contained in the Act, the rules and regulations, or this 
Agreement, the Party may deposit, for each taxable year to which this 
Agreement applies, amounts representing:

[[Page 366]]

    (1) Taxable income attributable to the operation of the vessels 
listed in Schedule A or B hereof;
    (2) The depreciation allowable under section 167 of the Internal 
Revenue Code of 1986, on the vessels listed in Schedule A or B hereof;
    (3) The net proceeds from the sale or other disposition of any of 
the vessels listed in Schedule A or B hereof; and
    (4) The net proceeds from insurance or indemnity attributable to the 
vessels listed in Schedule A or B hereof.
    (B) The Party shall deposit for each taxable year to which this 
Agreement applies:
    (1) All receipts from the investment or reinvestment of amounts held 
in the Fund, except that the Party shall not be permitted to deposit 
more than is necessary to complete its program set out in Schedule B 
hereof; and
    (2) The net proceeds from the mortgage of any vessel listed in 
Schedule B hereof for which qualified withdrawals from the Fund have 
been made.
    (C) Notwithstanding anything in paragraph (A) or (B) hereof to the 
contrary, the Party shall make the minimum deposits set forth in 
Schedule D hereof at the time and in such amounts as may be set forth 
therein. The Party specifically agrees to deposit up to one hundred 
percent of allowable taxable income attributable to the operation of 
agreement vessels in order to meet its obligations under this paragraph.
    (D) In the event that any leased vessel listed in Schedule A hereof 
is included in another capital construction fund agreement, the maximum 
amount of depreciation which the Party may deposit in respect to that 
vessel shall be calculated by using the allowable percentage of the 
depreciation ceiling listed for that vessel in Schedule A hereof.
    6. Withdrawals from the Fund: (A) The Party may make such qualified 
withdrawals (as that term is defined in the Act and the rules and 
regulations) as shall be necessary to fulfill the obligations set forth 
in Schedule B hereof. Any such qualified withdrawal may be made without 
the consent of the Maritime Administrator, except as required by the 
rules and regulations.
    (B) Any other withdrawal from the Fund shall be made only upon the 
prior written consent of the Maritime Administrator, as required by the 
rules and regulations.
    7. Investment of the Fund: (A) The Party, at its discretion, may 
invest assets held in the Fund in accordance with the Act and the rules 
and regulations.
    (B) The Party agrees that when investing assets held in the Fund to 
make such investments as will insure that sufficient cash is available 
at the time qualified withdrawals are required in accordance with the 
program described in Schedule B hereof.
    8. Pledges, Assignments and Transfers: (A) The Party agrees not to 
assign, pledge or otherwise encumber, either directly or indirectly or 
through any reorganization, merger, or consolidation, all or any part of 
this Agreement, the Fund, or any assets in the Fund without the prior 
written consent of the Maritime Administrator; Provided, however, The 
Party may transfer the assets of the Fund, in whole or in part, to an 
investment trustee, as provided in the rules and regulations.
    (B) The Party shall not obligate any assets in the Fund as a 
compensating balance.
    (C) The Party may not sell, transfer or otherwise dispose of any 
vessel, or part thereof, described in Schedule B hereof without the 
prior written consent of the Maritime Administrator.
    9. Records and Reports: (A) The Party and each affiliate, domestic 
agent, subsidiary or holding company connected with, or directly or 
indirectly controlling or controlled by the Party shall keep its books, 
records, and accounts relating to the maintenance, operation, servicing 
of the vessel(s) and/or service(s) covered by this Agreement in such 
form as may be prescribed by the Maritime Administrator under the rules 
and regulations.
    (B) The Maritime Administrator agrees not to require the duplication 
of books, records and accounts required to be kept in some other form by 
the Interstate Commerce Commission or the Secretary of the Treasury, so 
long as the information required in paragraph (A) hereof is made 
available to the Maritime Administrator.
    (C) The Party agrees to file, upon notice from the Maritime 
Administrator, balance sheets, profit and loss statements, and such 
other statements of financial operations, special reports, charters, 
ships' logs, memoranda of facts and transactions, as in the opinion of 
the Maritime Administrator may affect the Party's performance under this 
Agreement.
    (D) The Maritime Administrator may require by regulation that any of 
such statements, reports and memoranda shall be certified by independent 
certified public accountants acceptable to the Maritime Administrator.
    (E) The Maritime Administrator may require the Party to establish 
and maintain systems of control of expenses and revenues in connection 
with the operation of the agreement vessel(s).
    (F) The Party agrees to submit promptly to the Maritime 
Administrator any contract executed in connection with the program 
described in Schedule B hereof.
    (G) The Maritime Administrator is hereby authorized to examine and 
audit the books, records, and accounts of all persons referred to in 
this Article whenever he may deem it necessary or desirable.

[[Page 367]]

    10. Modification and Amendment: This Agreement may be modified or 
amended at any time by mutual written consent.
    11. Incorporation of Schedules: The attached Schedules A, B, C, and 
D are incorporated into and made a part of this Agreement.
    12. Liquidated Damages: (A) In the event that the Party operates any 
qualified agreement vessel described in Schedule B hereof in geographic 
trades other than those permitted by 46 U.S.C. 53501 et seq, this 
Agreement, and/or the rules and regulations, the Party shall pay to the 
United States an amount of liquidated damages for each day of such 
impermissible geographic trading which shall constitute the time value 
of the deferral of Federal income tax which the Party has received. The 
amount shall be calculated in accordance with the rules and regulations.
    (B) The Party agrees to pay the daily rate of liquidated damages to 
the Maritime Administrator, for deposit in the Treasury of the United 
States, within the time limits provided for in the rules and 
regulations.
    (C) Nothing in this Article shall in any way be construed to 
diminish or waive any of the Maritime Administrator's other remedies for 
breach under the Act, the Agreement, or the rules and regulations.
    (D) Notwithstanding the fact that the Agreement may be terminated 
pursuant to the provisions of Article 4 hereof, or otherwise, the 
provisions of this Article 12 shall continue in effect as follows:
    (1) In the case of a vessel constructed or acquired within one year 
of final delivery from the shipyard after construction with the aid of 
qualified withdrawals, for a period of twenty (20) years from the date 
of such vessel's final delivery;
    (2) In the case of a vessel reconstructed or acquired more than one 
year after final delivery from the shipyard after construction with the 
aid of qualified withdrawals, for a period of ten (10) years from the 
date of such vessel's final delivery from the shipyard after 
reconstruction or the date of such vessel's acquisition; and
    (3) In the case of a vessel included in Schedule B hereof as a 
qualified agreement vessel in regard to which qualified withdrawals from 
the Fund have been made to pay existing indebtedness, for a period of 
ten (10) years from the date of the first qualified withdrawal in regard 
to such vessel, Provided, however, That if such vessel was more than 
fifteen (15) years old on the date of the first qualified withdrawal in 
regard thereto, such conditions shall continue for a period of five (5) 
years in regard to such vessel.
    13. Warranties and Representations by the Party: The Party hereby 
warrants and represents that:
    (A) The Party is a citizen of the United States within the meaning 
of section 2 of the Shipping Act, 1916, as amended, and will continue to 
be so for the term of this Agreement. The Party agrees that, each year, 
within thirty (30) days after the annual meeting of its stockholders, it 
shall file a supplemental affidavit as evidence of its continuing United 
States citizenship, provided that any changes in data last furnished 
with respect to officers, directors, and stockholders holding five 
percent or more of the issued and outstanding stock of each class or 
series which would result in a loss of the Party's status as a United 
States citizen shall be promptly reported to the Maritime Administrator.
    (B) The Party owns, is the lessee, or has contracted for the 
construction of one or more eligible vessels (within the meaning of 46 
U.S.C. 53501) as listed in Schedule A hereof.
    (C) The qualified vessels described in Schedule B hereof: (1) Were 
or will be constructed or reconstructed in the United States, except as 
provided in the Act and the rules and regulations;
    (2) Are or will be documented under the laws of the United States 
and will continue to remain so documented; and
    (3) Will be operated in the foreign, Great Lakes or noncontiguous 
domestic trade of the United States within the meaning of the Act and 
the rules and regulations
    (D) The Party will meet its deposit obligations as agreed upon in 
Article 5 of this Agreement.
    (E) The Party will promptly inform the Maritime Administrator, in 
writing, of any change in circumstances which would tend to adversely 
affect the ability of the Party to carry out its obligations under the 
Agreement.
    (F) The Party will faithfully conform to all rules and regulations 
governing the Agreement and the Fund.
    (G) Nothing of monetary value has been improperly given, promised, 
or implied for entering into this Agreement. The Party further warrants 
that no improper personal, political or other activities have been used 
or attempted in an effort to influence the outcome of the discussions or 
negotiations leading to the award of this Agreement. Breach of this 
warranty shall constitute an event of default for which the Maritime 
Administrator shall have the right, notwithstanding Article 4, to 
terminate this Agreement without liability to the United States.
    14. Default in Obligations: (A) If the Maritime Administrator 
determines that any substantial obligation under this Agreement is not 
being fulfilled by the Party, he may, under the rules and regulations 
and after the Party has been given notice and an opportunity to be 
heard, declare a breach and treat the entire Fund, or any portion 
thereof, as an amount withdrawn in a nonqualified withdrawal.

[[Page 368]]

    (B) The Maritime Administrator shall provide an opportunity for the 
Party to cure a breach declared pursuant to Paragraph (A) of this 
Article 14.
    (C) Events of breach by the Party shall include, but shall not be 
limited to: (1) Failure in any respect to use due diligence in 
performing the program set forth in Schedule B hereof;
    (2) Obligating the assets in the Fund as a compensating balance;
    (3) Failure to make deposits required in Schedule D hereof;
    (4) Failure to secure written permission from the Maritime 
Administrator when such permission is required by the rules and 
regulations;
    (5) Failure to submit reports and/or records on a timely basis as 
provided in Article 9 hereof;
    (6) Any material misrepresentation made by the Party or any failure 
by the Party to disclose material information in connection with this 
Agreement whether before or after execution hereof and whether made in 
an application, report, affidavit, or otherwise; or
    (7) Failure by the Party to comply with any provisions of 46 U.S.C. 
53501 et seq, the rules and regulations, or this Agreement.
    15. Extension of Federal Income Tax Benefits: The Maritime 
Administrator agrees that the Federal income tax benefits provided in 
the Act and the rules and regulations shall be available to the Party if 
the Party shall carry out its obligations under this Agreement.

    United States of America, Maritime Administrator, Department of 
                             Transportation

(Seal)
Attest:
By ----------

(Secretary)

(Seal)
By ----------
(Secretary)
Attest:

By______________________________________________________________________
                                                   (Contracting Officer)
________________________________________________________________________
                                                             (Secretary)

Approved as to form: (Date of Execution)
------ By ------
(Assistant General (President)
Counsel, Maritime
 Administration)

                                 XYZ Co--Schedule A--Eligible Agreement Vessels
----------------------------------------------------------------------------------------------------------------
               (a)                        (b)                 (c)                 (d)                 (e)
----------------------------------------------------------------------------------------------------------------
                                                                            Owned or leased
         Name of vessel              Specific type         Capacity          and owner is       Date and place
                                                                                leased            constructed
----------------------------------------------------------------------------------------------------------------
SS Smith, official No. 236425...  Tanker............  56,000 dwt........  Leased: ABC Ships,  1962, American
                                                                           Inc., San Diego,    Steel, San
                                                                           Calif., 50          Francisco, Calif.
                                                                           percent of
                                                                           depreciation
                                                                           ceiling.
SS Brown, official No. 325111...  ......do..........  265,000 dwt.......  Owned.............  1974, Southern
                                                                                               Shipyards,
                                                                                               Mobile, Ala.
SS Jones, official No. 190528...  Container ship....  30,000 dwt, 500     ......do..........  1954, Bond
                                                       400-ft containers.                      Shipyard, New
                                                                                               York, N.Y.
Hercules, official No. 256,125..  Oceangoing tugboat  105 ft 2,000 hp...  ......do..........  1968, Washington
                                                                                               Iron Works,
                                                                                               Seattle, Wash.
XYZ-1, official No. 257,164.....  Roll-on, roll-off   1,200 gr ton, 45    ......do..........  1968, Washington
                                   barge.              40-ft containers.                       Iron Works,
                                                                                               Seattle, Wash.
XYZ-2, official No. 260,138.....  ......do..........  ......do..........  ......do..........  1969, Washington
                                                                                               Iron Works,
                                                                                               Seattle, Wash.
OTC-35, official No. 262,170....  ......do..........  1,500 gr ton, 60    Leased; Oregon      1969, J. & J.
                                                       40-ft containers.   Towing Co.,         Shipyard,
                                                                           Portland, Oreg.,    Portland, Oreg.
                                                                           100 percent of
                                                                           depreciation
                                                                           ceiling.
200 trailers, Nos. 111032-A-      Dry cargo.........  40 ft.............  Leased;             1968, Acme
 10677B-1M through 11032-A-                                                International       Container Corp.,
 10877B-1M.                                                                Leasing Co., New    New York, N.Y.
                                                                           York, N.Y. 0
                                                                           percent of
                                                                           depreciation
                                                                           ceiling.
1,500 containers, Nos. 312 A      Refrigerated dry    ......do..........  Owned.............  1969, Aluminum
 through 1312 A..                  cargo..                                                     Products, Inc.,
                                                                                               Dallas, Tex.
----------------------------------------------------------------------------------------------------------------


[[Page 369]]


                           XYZ Co--Schedule A--Eligible Agreement Vessels (Continued)
----------------------------------------------------------------------------------------------------------------
                                             (f)              (g)              (h)                   (i)
----------------------------------------------------------------------------------------------------------------
                                       Date and place        Date
                                        reconstructed     documented    Area of operation    Details of service
----------------------------------------------------------------------------------------------------------------
SS Smith, official No. 236425.....  Not available.......        1962  Noncontiguous         Carriage of crude
                                                                       domestic trade.       oil from Valdez,
                                                                                             Alaska, to west
                                                                                             coast of the
                                                                                             continental United
                                                                                             States.
SS Brown, official No. 325111.....  ......do............        1974  U.S. foreign trade..  Worldwide carriage
                                                                                             of crude oil.
SS Jones, official No. 190528.....  1970, Litton                1954  U.S. foreign and      Container service
                                     Systems,                          noncontiguous trade.  between Japan and
                                     Mississippi.                                            California via
                                                                                             Hawaii.
Hercules, official No. 256,125....  Not available.......        1968  Domestic............  Towing roll-on, roll-
                                                                                             off barges from
                                                                                             Puget Sound to San
                                                                                             Francisco.
XYZ-1, official No. 257,164.......  ......do............        1968  ......do............  Carriage of trailer
                                                                                             type containers
                                                                                             between Puget Sound
                                                                                             and San Francisco.
XYZ-2, official No. 260,138.......  ......do............        1969  ......do............   Do.
OTC-35, official No. 262,170......  ......do............        1969  ......do............   Do.
200 trailers, Nos. 111032-A-10677B- ......do............          NA  ......do............  For use on Barges
 1M through 11032-A-10877B-1M.                                                               XYZ-1, XYZ-2, and
                                                                                             OTC-35.
1,500 containers, Nos. 312 A        ......do............          NA  U.S. foreign          For use as
 through 1312 A..                                                      noncontiguous         complement of SS
                                                                       domestic trade.       Jones.
----------------------------------------------------------------------------------------------------------------


                                         XYZ Co., Program Objectives--I. Acquisition or Construction of Vessels
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Amount to be              Approximate date of--
Vessel name, and official number        General        Approximate cost     withdrawn from   ----------------------------------------  Anticipated area
                                    characteristics                              fund              Contract            Delivery          of operation
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
 
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                               XYZ Co., Program Objectives--II. Reconstruction of Vessels
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                             Amount to be              Approximate date of--
Vessel name, and official number        General        Approximate cost     withdrawn from   ----------------------------------------  Anticipated area
                                    characteristics                              fund              Contract            Delivery          of operation
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
 
--------------------------------------------------------------------------------------------------------------------------------------------------------


   XYZ Co., Program Objectives--III. Payment of Principal on Existing
                              Indebtedness
------------------------------------------------------------------------
                                      Purpose of       Amount to be paid
 Vessel name and official number     indebtedness          from fund
------------------------------------------------------------------------
 
 
------------------------------------------------------------------------


     XYZ Co., Schedule C--Depositories for Capital Construction Fund
 
                  Name                                Address
 
1. First American Bank checking account.  2001 Park Ave., San Francisco,
                                           Calif. 94109.
2. Southern California National Bank      1 Waterfront Place, San
 investment trustee established pursuant   Francisco, Calif. 94101.
 to sec. 390.7 of the SOC regulations.
 


                                      XYZ Co. Schedule D--Minimum Deposits
                                                 [In thousands]
----------------------------------------------------------------------------------------------------------------
                                     Ordinary
          Taxable year                income       Net proceeds    Fund interest   Depreciation        Total
----------------------------------------------------------------------------------------------------------------
1973 to 1975....................          $3,150      \1\ $2,400            $250  ..............          $5,800
1976 to 1978....................           2,900       \2\ 1,500             325  ..............           4,725
1979 to 1981....................           3,000  ..............             350              85           3,435

[[Page 370]]

 
1982 to 1984....................           2,800  ..............              74             125           3,000
1985 to 1987....................           2,850  ..............              90              60           3,000
1988 to 1990....................           2,900  ..............             100  ..............           3,000
1991 to 1993....................           3,000  ..............             100  ..............           3,100
1994 to 1996....................           3,100  ..............             110  ..............           3,210
1997 to 1999....................           3,250  ..............             120  ..............           3,370
2000............................           3,200  ..............             120  ..............           3,320
                                 -------------------------------------------------------------------------------
 Total..........................  ..............  ..............  ..............  ..............          35,960
----------------------------------------------------------------------------------------------------------------
\1\ Net proceeds from sale of barges XYZ-1 and XYZ-2 for $1,200,000 each.
\2\ Net proceeds from sale of tug Hercules.

[41 FR 4265, Jan. 29, 1976, as amended at 42 FR 43632, Aug. 30, 1977; 74 
FR 17097, Apr. 14, 2009]
    Editorial Note: At 73 FR 56741, Sept. 30, 2008, appendix II to part 
390 was amended; however, the amendment could not be incorporated due to 
inaccurate amendatory instruction.

 Appendix III to Part 390--U.S. Department of Transportation, Maritime 
                Administration--Sample Semiannual Report

[Illustrative sample of the report required by the Maritime 
Administration pursuant to 46 CFR part 390 prescribing the capital 
construction fund reporting requirements to be followed by those 
companies which are party to a capital construction fund agreement]

  Exhibit A--XYZ Co., Summary of cash, securities, and stock on deposit
  and net accrued deposits to and accrued withdrawals from the capital
                 construction fund as of june 30, 19----
 
                                                             Thousands
 
Cash (exhibit A-1 and B)................................          $1,025
Securities and stock--adjusted basis (exhibit A-2 and B)           2,560
                                                         ---------------
Fund total for tax purposes on deposit (exhibit C)......           3,585
Net accrued deposits and withdrawals (exhibit A-3)......             450
                                                         ---------------
Fund total (agrees with balance sheet submitted at this            4,035
 date) on deposit for book purposes--June 30, 19----....
Portion of fund total for tax purposes as of June 30,          Thousands
 19----, which represents a ``CCF: Security amount''
 pursuant to an agreement covering the dual use of a
 capital construction fund
Balance brought forward.................................            $403
Deposits................................................              82
                                                         ---------------
 Total ``CCF: Security Amount''.........................             485
 


                        Exhibit A-1--XYZ Company
 summary of cash on deposit in capital construction fund as of june 30,
                                 19----
 
                                                             Thousands
 
First American Bank, San Francisco, Calif., checking              $1,025
 account No. 654-0876-211...............................
Total cash in capital construction fund at June 30,                1,025
 19----.................................................
 


  Exhibit A-2--XYZ Co., Summary of Securities and Stock (Adjusted Basis
and Fair Market Value) in Capital Construction Fund as of June 30, 19----
                             (in Thousands)
------------------------------------------------------------------------
                                              Adjusted      Fair market
                                               basis           value
------------------------------------------------------------------------
Treasury notes--due July 4, 19----,                 $760            $760
 $800,000 face value, 1st American Bank,
 San Francisco, Calif., trust account
 No. 610-2135...........................
Negotiable certificate of deposit--due               500             500
 July 31, 19----, $500,000 at 8 percent,
 1st American Bank, San Francisco,
 Calif., CD No. 186007..................
U.S.A. Motors, Inc.--class A common                  625             725
 stock, 5,000 shares, Southern
 California National Bank, trust account
 No. 358-21.............................
Energy Co., Inc.--1st preferred, 4,100               205             255
 shares, Southern California National
 Bank, trust account No. 358-21.........

[[Page 371]]

 
Boon Corp.--class A common stock, 10,000             470             520
 shares, Southern California National
 Bank, San Francisco, Calif., trust
 account No. 358-21.....................
                                         -------------------------------
 Total securities and stock in capital             2,560           2,760
 construction fund at June 30, 19----...
------------------------------------------------------------------------


Exhibit A-3--XYZ Co., Summary of Net Accrued Deposits and Withdrawals in
               Capital Construction Fund as of June 19----
 
                                                             Thousands
 
Accrued deposits:
  19---- income (6 mos. ended June 30, 19----)..........            $500
  Depreciation..........................................             200
                                                         ---------------
   Total................................................             700
Accrued withdrawals: Progress payment made from general              250
 fund--hull 210.........................................
                                                         ---------------
 Net accrued deposits and withdrawals in capital                     450
 construction fund at June 30, 19----...................
 


  Exhibit B--XYZ Co., Transcript of Transactions in the Capital Construction Fund for the 6 Mos. Ended June 30,
                                                     19----
----------------------------------------------------------------------------------------------------------------
                                                   Cash           Securities and stock
                      Description of     -----------------------   (at adjusted basis)
      Date             transaction                              ------------------------          Detail
                                             Debit      Credit      Debit       Credit
----------------------------------------------------------------------------------------------------------------
Jan. 1, 19----   Balances brought         $1,500,000  .........   $2,000,000
                  forward.
Jan. 1, 19----   Bond debt payment--SS    ..........   $250,000
                  Smith..
Jan. 3, 19----   Deposit 19----              300,000
                  depreciation.
Jan. 4, 19----   Purchased Treasury       ..........    752,000      752,000  .........  $800,000 at 6-percent
                  notes--90 days at 6-                                                    discount.
                  percent discount..
Feb. 29, 19----  Dividends earned.......       4,500  .........  ...........  .........  $0.45 per share on
                                                                                          10,000 shares Boon
                                                                                          Corp.
Mar. 15, 19----  Progress payment No. 3   ..........    172,500
                  hull 210..
Apr. 4, 19----   Sale of Treasury notes--    752,000  .........  ...........    752,000
                  cost.
                 Income from sale.......      48,000
Apr. 4, 19----   Purchased Treasury       ..........    760,000      760,000  .........  $800,000 at 5-percent
                  notes 90 days at 5-                                                     discount.
                  percent discount.
Apr. 15, 19----  Deposit from 19----         310,000
                  earnings.
May 15, 19----   Progress payment No. 4-- ..........    180,000
                  hull 210..
June 15, 19----  Sale of stock--cost....     200,000  .........  ...........    200,000  4,000 shares at $56.25
                                                                                          per share.
                 Gain on sale of stock..  ..........  .........  ...........  .........  Energy Co., Inc.
                                              25,000
                ------------------------------------------------------------------------------------------------
                 Balances carried          1,025,000  .........    2,560,000
                  forward.
----------------------------------------------------------------------------------------------------------------


 Exhibit C--XYZ Co., Summary of Total Transaction Affecting the Tax Account Balances in the Capital Construction
                                    Fund for the 6 Mos. Ended June 30, 19----
----------------------------------------------------------------------------------------------------------------
                                                                Ordinary     Capital
                                                                 income        gain       Capital       Total
----------------------------------------------------------------------------------------------------------------
Opening balance, Jan. 1, 19----.............................   $1,000,000   $1,000,000   $1,500,000   $3,500,000
Deposits, income, transfers in, etc.........................      362,500       25,000      300,000      687,500
                                                             ---------------------------------------------------
 Total......................................................    1,362,500    1,025,000    1,800,000    4,187,500
Withdrawals, losses, transfers out, etc.....................  ...........  ...........      602,500
                                                             ---------------------------------------------------
Balance at June 30, 19----..................................    1,362,500    1,025,000    1,197,500    3,585,000
----------------------------------------------------------------------------------------------------------------


[[Page 372]]

                         Exhibit D--XYZ Company

  summary by vessel of qualified withdrawals from the fund for the six 
                      months ending june 30, 19----

                A. Acquisition or Construction of Vessels

(1) 80,000 dwt tanker: No qualified withdrawals have been made to date; 
          construction is presently scheduled to commence in mid-1977.
(2) 130-foot ocean tug hull No. 210:

Balance brought forward....................................     $700,000
Qualified withdrawals during period........................      352,500
                                                            ------------
    Total qualified withdrawals to date....................    1,052,500
 


130-foot ocean tug hull No. 211: No withdrawals have been made to date; 
construction is presently scheduled to commence in November 1975

    B. Acquisition or Construction of Barges, Containers and Trailers

250-foot tank barge: No qualified withdrawals have been made to date; 
construction presently scheduled to commence in November 1975.

                      C. Reconstruction of Vessels

None.

          D. Reconstruction of Barges, Containers, and Trailers

None.

            E. Payment of Principal on Existing Indebtedness

SS Smith--Official No. 236425:

Balance brought forward....................................     $500,000
  Qualified withdrawals during period......................      250,000
                                                            ------------
    Total qualified withdrawals to date....................      750,000
 



Sec. Appendix IV to Part 390--Sample Addendum to Maritime Administration 
                   Capital Construction Fund Agreement

    This Agreement, made by the Maritime Administrator, Department of 
Transportation (``Maritime Administrator'') and ------ (``Party''), a 
citizen of the United States of America, as an Addendum to that certain 
agreement, Contract No. MA/CCF--
    Whereas: 1. On ------, the parties hereto entered into a Capital 
Construction Fund Agreement (``Agreement'') under 46 U.S.C. 53501 et 
seq;
    2. The parties hereto desire to modify that Agreement in the manner 
hereinafter set forth;
    3. The parties hereto have agreed to said amendment and desire to 
incorporate the same into the Agreement.
    Now, therefore, in consideration of the premises the Maritime 
Administrator and the Party agree as follows:
    Notwithstanding the provisions of Article 4(A)(2) of the Agreement, 
the Party may, within sixty (60) days after notice appears in the 
Federal Register that the Regulations jointly prescribed by the 
Secretary of the Treasury and the Secretary of Transportation have been 
finalized, terminate the Agreement, if such Regulations have a 
substantial effect on the rights or obligations of the Party. Upon 
termination of the Agreement pursuant to this Addendum No. ---- the 
provisions of the Internal Revenue Code of 1986, the Act, and the rules 
and regulations shall apply to all funds remaining in the Fund as if 
such funds were withdrawn in a non-qualified, withdrawal, as that term 
is defined in the Act and the rules and regulations.
    In witness whereof, the Secretary and the Party have executed this 
addendum, in quadruplicate, effective as of the date indicated below.

United States of America,
    Secretary of Transportation,
    Maritime Administrator,

Department of Transportation

By........................................  By.................
           (Contracting Officer)
Date......................................  Title.................
Attest:                                     Attest:
By........................................  By....................
                (Secretary)
                                            Title................
(Seal)                                      (Seal)
 Approved as to form:
                                            ............................
 (Assistant Chief Counsel
 Maritime Administration)
 


[G.O. 109, Rev., Amdt. 6, 42 FR 43634, Aug. 30, 1977, as amended at 73 
FR 56741, Sept. 30, 2008; 74 FR 17097, Apr. 14, 2009]

    Editorial Note: At 73 FR 56741, Sept. 30, 2008, appendix IV to part 
390 was amended; however, a portion of the amendment could not be 
incorporated due to inaccurate amendatory instruction.



      Sec. Appendix V to Part 390--Sample Qualified Trade Affidavit

                                affidavit

State of________________________________________________________________
County of_______________________________________________________________
I, ------, (Name) being duly sworn, depose and say:
    1. That I am the ------ (Title) of ------. (Name of party)
    2. That I am fully acquainted with and have knowledge of the 
operations of all qualified agreement vessels owned or operated by my 
company and identified in Capital Construction Fund Agreement, MA/CCF --
----.

[[Page 373]]

    3. That I have full knowledge of the trading restrictions and 
liquidated damages provisions pertaining to qualified agreement vessels, 
as stipulated in46 U.S.C. 53501 et seq, and in the rules and regulations 
of 46 CFR Part 390.
    4. That based on my inspection of Company records and to the best of 
my knowledge and belief, except as noted below in statement 5 of this 
affidavit, during the period ---------- (Beginning of taxable year) 
through ---------- (End of taxable year) my company operated its 
qualified agreement vessels only in the United States, foreign, Great 
Lakes, and noncontiguous domestic trade in accordance with Capital 
Construction Fund Agreement, MA/CCF ------.
    5. Exceptions to statement 4 of this Affidavit are as follows 
(indicate exceptions below or attach a supplemental statement if 
additional space is needed; if there are no exceptions, write ``none''):

                                                               (Affiant)

    Subscribed and sworn to before me, a Notary Public in and for the 
State, City and County above named, this ------------ day of ----------
------, 19----.

                                                         (Notary Public)

My commission expires ------------------------, 19----

[41 FR 39751, Sept. 16, 1976; 74 FR 17097, Apr. 14, 2009]



PART 391_FEDERAL INCOME TAX ASPECTS OF THE CAPITAL CONSTRUCTION FUND--

Table of Contents



Sec.
391.0 Statutory provisions; section 607, Merchant Marine Act, 1936, as 
          amended.
391.1 Scope of section 607 of the Act and the regulations in this part.
391.2 Ceiling on deposits.
391.3 Nontaxability of deposits.
391.4 Establishment of accounts.
391.5 Qualified withdrawals.
391.6 Tax treatment of qualified withdrawals.
391.7 Tax treatment of nonqualified withdrawals.
391.8 Certain corporate reorganizations and changes in partnerships, and 
          certain transfers on death. [Reserved]
391.9 Consolidated returns. [Reserved]
391.10 Transitional rules for existing funds.
391.11 Definitions.

    Authority: Secs. 204(b) and 607(l), Merchant Marine Act, 1936, as 
amended (46 U.S.C. 1114, 1177), Reorganization Plans No. 21 of 1950 (64 
Stat. 1273) and No. 7 of 1961 (75 Stat. 840) as amended by Pub. L. 91-
469 (84 Stat. 1036), Dept. of Commerce Organization Order 10-8 (38 FR 
19707), July 23, 1973.

    Source: 41 FR 23960, June 14, 1976, unless otherwise noted.



Sec. 391.0  Statutory provisions; section 607, Merchant Marine Act, 1936, 

as amended.

    Sec. 607 (a) Agreement Rules.
    Any citizen of the United States owning or leasing one or more 
eligible vessels (as defined in subsection (k)(1)) may enter into an 
agreement with the Secretary of Transportation under, and as provided 
in, this section to establish a capital construction fund (hereinafter 
in this section referred to as the ``fund'') with respect to any or all 
of such vessels. Any agreement entered into under this section shall be 
for the purpose of providing replacement vessels, additional vessels, or 
reconstructed vessels, built in the United States and documented under 
the laws of the United States for operation in the United States 
foreign, Great Lakes, or noncontiguous domestic trade or in the 
fisheries of the United States and shall provide for the deposit in the 
fund of the amounts agreed upon as necessary or appropriate to provide 
for qualified withdrawals under subsection (f). The deposits in the 
fund, and all withdrawals from the fund, whether qualified or 
nonqualified, shall be subject to such conditions and requirements as 
the Secretary of Transportation may by regulations prescribe or are set 
forth in such agreement; except that the Secretary of Transportation may 
not require any person to deposit in the fund for any taxable year more 
than 50 percent of that portion of such person's taxable income for such 
year (computed in the manner provided in subsection (b)(1)(A)) which is 
attributable to the operation of the agreement vessels.
    (b) Ceiling on Deposits.
    (1) The amount deposited under subsection (a) in the fund for any 
taxable year shall not exceed the sum of:
    (A) That portion of the taxable income of the owner or lessee for 
such year (computed as provided in chapter 1 of the Internal Revenue 
Code of 1954 but without regard to the carryback of any net operating 
loss or net capital loss and without regard to this section) which is 
attributable to the operation of the agreement vessels in the foreign or 
domestic commerce of the United States or in the fisheries of the United 
States.
    (B) The amount allowable as a deduction under section 167 of the 
Internal Revenue Code of 1954 for such year with respect to the 
agreement vessels.
    (C) If the transaction is not taken into account for purposes of 
subparagraph (A), the net proceeds (as defined in joint regulations) 
from (i) the sale or other disposition of any

[[Page 374]]

agreement vessel, or (ii) insurance or indemnity attributable to any 
agreement vessel, and
    (D) The receipts from the investment or reinvestment of amounts held 
in such fund.
    (2) In the case of a lessee, the maximum amount which may be 
deposited with respect to an agreement vessel by reason of paragraph 
(1)(B) for any period shall be reduced by any amount which, under an 
agreement entered into under this section, the owner is required or 
permitted to deposit for such period with respect to such vessel by 
reason of paragraph (1)(B).
    (3) For purposes of paragraph (1), the term agreement vessel 
includes barges and containers which are part of the complement of such 
vessel and which are provided for in the agreement.
    (c) Requirements as to Investments.
    Amounts in any fund established under this section shall be kept in 
the depository or depositories specified in the agreement and shall be 
subject to such trustee and other fiduciary requirements as may be 
specified by the Secretary of Transportation. They may be invested only 
in interest-bearing securities approved by the Secretary of 
Transportation; except that, if the Secretary of Transportation consents 
thereto, an agreed percentage (not in excess of 60 percent) of the 
assets of the fund may be invested in the stock of domestic 
corporations. Such stock must be currently fully listed and registered 
on an exchange registered with the Securities and Exchange Commission as 
a national securities exchange, and must be stock which would be 
acquired by prudent men of discretion and intelligence in such matters 
who are seeking a reasonable income and the preservation of their 
capital. If at any time the fair market value of the stock in the fund 
is more than the agreed percentage of the assets in the fund, any 
subsequent investment of amounts deposited in the fund, and any 
subsequent withdrawal from the fund, shall be made in such a way as to 
tend to restore the fund to a situation in which the fair market value 
of the stock does not exceed such agreed percentage. For purposes of 
this subsection, if the common stock of a corporation meets the 
requirements of this subsection, and if the preferred stock of such 
corporation would meet such requirements but for the fact that it cannot 
be listed and registered as required because it is nonvoting stock, such 
preferred stock shall be treated as meeting the requirements of this 
subsection.
    (d) Nontaxability for Deposits.
    (1) For purposes of the Internal Revenue Code of 1954--
    (A) Taxable income (determined without regard to this section) for 
the taxable year shall be reduced by an amount equal to the amount 
deposited for the taxable year out of amounts referred to in subsection 
(b)(1)(A).
    (B) Gain from a transaction referred to in subsection (b)(1)(C) 
shall not be taken into account if an amount equal to the net proceeds 
(as defined in joint regulations) from such transaction is deposited in 
the fund.
    (C) The earnings (including gains and losses) from the investment 
and reinvestment of amounts held in the fund shall not be taken into 
account,
    (D) The earnings and profits of any corporation (within the meaning 
of section 316 of such Code) shall be determined without regard to this 
section, and
    (E) In applying the tax imposed by section 531 of such Code 
(relating to the accumulated earnings tax), amounts while held in the 
fund shall not be taken into account.
    (2) Paragraph (1) shall apply with respect to any amount only if 
such amount is deposited in the fund pursuant to the agreement and not 
later than the time provided in joint regulations.
    (e) Establishment of Accounts.
    For purposes of this section--
    (1) Within the fund established pursuant to this section three 
accounts shall be maintained:
    (A) The capital account,
    (B) The capital gain account, and
    (C) The ordinary income account.
    (2) The capital account shall consist of--
    (A) Amounts referred to in subsection (b)(1)(B),
    (B) Amounts referred to in subsection (b)(1)(C) other than that 
portion thereof which represents gain not taken into account by reason 
of subsection (d)(1)(B),
    (C) 85 percent of any dividend received by the fund with respect to 
which the person maintaining the fund would (but for subsection 
(d)(1)(C)) be allowed a deduction under section 243 of the Internal 
Revenue Code of 1954, and
    (D) Interest income exempt from taxation under section 103 of such 
Code.
    (3) The capital gain account shall consist of--
    (A) Amounts representing capital gains on assets held for more than 
6 months and referred to in subsection (b)(1)(C) or (b)(1)(D), reduced 
by--
    (B) Amounts representing capital losses on assets held in the fund 
for more than 6 months.
    (4) The ordinary income account shall consist of--
    (A) Amounts referred to in subsection (b)(1)(A),
    (B)(i) Amounts representing capital gains on assets held for 6 
months or less and referred to in subsection (b)(1)(C) or (b)(1)(D), 
reduced by--
    (ii) Amounts representing capital losses on assets held in the fund 
for 6 months or less,
    (C) Interest (not including any tax-exempt interest referred to in 
paragraph (2)(D)) and other ordinary income (not including any

[[Page 375]]

dividend referred to in subparagraph (E)) received on assets held in the 
fund,
    (D) Ordinary income from a transaction described in subsection 
(b)(1)(C), and
    (E) 15 percent of any dividend referred to in paragraph (2)(C).
    (5) Except on termination of a fund, capital losses referred to in 
paragraph (3)(B) or in paragraph (4)(B)(ii) shall be allowed only as an 
offset to gains referred to in paragraph (3)(A) or (4)(B)(i), 
respectively.
    (f) Purposes of Qualified Withdrawals.
    (1) A qualified withdrawal from the fund is one made in accordance 
with the terms of the agreement but only if it is for:
    (A) The acquisition, construction, or reconstruction of a qualified 
vessel,
    (B) The acquisition, construction, or reconstruction of barges and 
containers which are part of the complement of a qualified vessel, or
    (C) The payment of the principal on indebtedness incurred in 
connection with the acquisition, construction or reconstruction of a 
qualified vessel or a barge or container which is part of the complement 
of a qualified vessel.

Except to the extent provided in regulations prescribed by the Secretary 
of Transportation, subparagraph (B), and so much of subparagraph (C) as 
relates only to barges and containers, shall apply only with respect to 
barges and containers constructed in the United States.
    (2) Under joint regulations, if the Secretary of Transportation 
determines that any substantial obligation under any agreement is not 
being fulfilled, he may, after notice and opportunity for hearing to the 
person maintaining the fund, treat the entire fund or any portion 
thereof as an amount withdrawn from the fund in a nonqualified 
withdrawal.
    (g) Tax Treatment of Qualified Withdrawals.
    (1) Any qualified withdrawal from a fund shall be treated--
    (A) First as made out of the capital account.
    (B) Second as made out of the capital gain account, and
    (C) Third as made out of the ordinary income account.
    (2) If any portion of a qualified withdrawal for a vessel, barge, or 
container is made out of the ordinary income account, the basis of such 
vessel, barge, or container shall be reduced by an amount equal to such 
portion.
    (3) If any portion of a qualified withdrawal for a vessel, barge, or 
container is made out of the capital gain account, the basis of such 
vessel, barge, or container shall be reduced by an amount equal to--
    (A) Five-eighths of such portion, in the case of a corporation 
(other than an electing small business corporation, as defined in 
section 1371 of the Internal Revenue Code of 1954), or
    (B) One-half of such portion, in the case of any other person.
    (4) If any portion of a qualified withdrawal to pay the principal on 
any indebtedness is made out of the ordinary income account or the 
capital gain account, then an amount equal to the aggregate reduction 
which would be required by paragraphs (2) and (3) if this were a 
qualified withdrawal for a purpose described in such paragraphs shall be 
applied, in the order provided in joint regulations, to reduce the basis 
of vessels, barges, and containers owned by the person maintaining the 
fund. Any amount of a withdrawal remaining after the application of the 
preceding sentence shall be treated as a nonqualified withdrawal.
    (5) If any property the basis of which was reduced under paragraph 
(2), (3), or (4) is disposed of, any gain realized on such disposition, 
to the extent it does not exceed the aggregate reduction in the basis of 
such property under such paragraphs, shall be treated as an amount 
referred to in subsection (h)(3)(A) which was withdrawn on the date of 
such disposition. Subject to such conditions and requirements as may be 
provided in joint regulations, the preceding sentence shall not apply to 
a disposition where there is a redeposit in an amount determined under 
joint regulations which will insofar as practicable, restore the fund to 
the position it was in before the withdrawal.
    (h) Tax Treatment of Nonqualified Withdrawals.
    (1) Except as provided in subsection (i), any withdrawal from a fund 
which is not a qualified withdrawal shall be treated as a nonqualified 
withdrawal.
    (2) Any nonqualified withdrawal from a fund shall be treated--
    (A) First as be made out of the ordinary income account,
    (B) Second as made out of the capital gain account, and
    (C) Third as made out of the capital account.

For purposes of this section, items withdrawn from any account shall be 
treated as withdrawn on a first-in-first-out basis; except that (i) any 
nonqualified withdrawal for research, development, and design expenses 
incident to new and advanced ship design, machinery and equipment, and 
(ii) any amount treated as a nonqualified withdrawal under the second 
sentence of subsection (g)(4), shall be treated as withdrawn on a last-
in-first-out basis.
    (3) For purposes of the Internal Revenue Code of 1954--
    (A) Any amount referred to in paragraph (2)(A) shall be included in 
income as an item of ordinary income for the taxable year in which the 
withdrawal is made.

[[Page 376]]

    (B) Any amount referred to in paragraph (2)(B) shall be included in 
income for the taxable year in which the withdrawal is made as an item 
of gain realized during such year from the disposition of an asset held 
for more than 6 months, and
    (C) For the period on or before the last date prescribed for payment 
of tax for the taxable year in which this withdrawal is made--
    (i) No interest shall be payable under section 6601 f such Code and 
no addition to the tax shall be payable under section 6651 of such Code.
    (ii) Interest on the amount of the additional tax attributable to 
any item referred to in subparagraph (A) or (B) shall be paid at the 
applicable rate (as defined in paragraph (4)) from the last date 
prescribed for payment of the tax for the taxable year for which such 
item was deposited in the fund, and
    (iii) No interest shall be payable on amounts referred to in clauses 
(i) and (ii) of paragraph (2) or in the case of any nonqualified 
withdrawal arising from the application of the recapture provision of 
section 606(5) of the Merchant Marine Act of 1936 as in effect on 
December 31, 1969.
    (4) For purposes of paragraph (3)(C)(ii), the applicable rate of 
interest for any nonqualified withdrawal--
    (A) Made in a taxable year beginning in 1970 or 1971 is 8 percent, 
or
    (B) Made in a taxable year beginning after 1971, shall be determined 
and published jointly by the Secretary of the Treasury and the Secretary 
of Transportation and shall bear a relationship to 8 percent which the 
Secretaries determine under joint regulations to be comparable to the 
relationship which the money rates and investment yields for the 
calendar year immediately preceding the beginning of the taxable year 
bear to the money rates and investment yields for the calendar year 
1970.
    (i) Certain Corporate Reorganizations and Changes in Partnerships.
    Under joint regulations--
    (1) A transfer of a fund from one person to another person in a 
transaction to which section 381 of the Internal Revenue Code of 1954 
applies may be treated as if such transaction did not constitute a 
nonqualified withdrawal, and
    (2) A similar rule shall be applied in the case of a continuation of 
a partnership (within the meaning of subchapter K of such Code).
    (j) Treatment of Existing Funds.
    (1) Any person who was maintaining a fund or funds (hereinafter in 
this subsection referred to as ``old fund'') under this section (as in 
effect before the enactment of this subsection) may elect to continue 
such old fund but--
    (A) May not hold moneys in the old fund beyond the expiration date 
provided in the agreement under which such old fund is maintained 
(determined without regard to any extension or renewal entered into 
after April 14, 1970),
    (B) May not simultaneously maintain such old fund and a new fund 
established under this section, and
    (C) If he enters into an agreement under this section to establish a 
new fund, may agree to the extension of such agreement to some or all of 
the amounts in the old fund.
    (2) In the case of any extension of an agreement pursuant to 
paragraph (1)(C), each item in the old fund to be transferred shall be 
transferred in a nontaxable transaction to the appropriate account in 
the new fund established under this section. For purposes of subsection 
(h)(3)(C), the date of the deposit of any item so transferred shall be 
July 1, 1971, or the date of the deposit in the old fund, whichever is 
the later.
    (k) Definitions.
    For purposes of this section--
    (1) The term eligible vessel means any vessel--
    (A) Constructed in the United States and, if reconstructed, 
reconstructed in the United States,
    (B) Documented under the laws of the United States, and
    (C) Operated in the foreign or domestic commerce of the United 
States or in the fisheries of the United States.

Any vessel which (i) was constructed outside of the United States but 
documented under the laws of the United States on April 15, 1970, or 
(ii) constructed outside the United States for use in the United States 
foreign trade pursuant to a contract entered into before April 15, 1970, 
shall be treated as satisfying the requirements of subparagraph (A) of 
this paragraph and the requirements of subparagraph (A) of paragraph 
(2).
    (2) The term qualified vessel means any vessel--
    (A) Constructed in the United States and, if reconstructed, 
reconstructed in the United States,
    (B) Documented under the laws of the United States, and
    (C) Which the person maintaining the fund agrees with the Secretary 
of Transportation will be operated in the United States foreign, Great 
Lakes, or noncontiguous domestic trade or in the fisheries of the United 
States.
    (3) The term agreement vessel means any eligible vessel or qualified 
vessel which is subject to an agreement entered into under this section.
    (4) The term United States, when used in a geographical sense, means 
the continental United States including Alaska, Hawaii, and Puerto Rico.
    (5) The term United States foreign trade includes (but is not 
limited to) those areas in

[[Page 377]]

domestic trade in which a vessel built with construction-differential 
subsidy is permitted to operate under the first sentence of section 506 
of the Act.
    (6) The term joint regulations means regulations prescribed under 
subsection (1).
    (7) The term vessel includes cargo handling equipment which the 
Secretary of Transportation determines is intended for use primarily on 
the vessel. The term vessel also includes an ocean-going towing vessel 
or an ocean-going barge or comparable towing vessel or barge operated on 
the Great Lakes.
    (8) The term noncontiguous trade means (i) trade between the 
contiguous forty-eight States on the one hand and Alaska, Hawaii, Puerto 
Rico and the insular territories and possessions of the United States on 
the other hand, and (ii) trade from any point in Alaska, Hawaii, Puerto 
Rico, and such territories and possessions to any other point in Alaska, 
Hawaii, Puerto Rico, and such territories and possessions.
    (l) Records; Reports; Changes in Regulations.
    Each person maintaining a fund under this section shall keep such 
records and shall make such reports as the Secretary of Transportation 
or the Secretary of the Treasury shall require. The Secretary of the 
Treasury and the Secretary of Transportation shall jointly prescribe all 
rules and regulations, not inconsistent with the foregoing provisions of 
this section, as may be necessary or appropriate to the determination of 
tax liability under this section. If, after an agreement has been 
entered into under this section, a change is made either in the joint 
regulations or in the regulations prescribed by the Secretary of 
Transportation under this section which could have a substantial effect 
on the rights or obligations of any person maintaining a fund under this 
section, such person may terminate such agreement.



Sec. 391.1  Scope of section 607 of the Act and the regulations in this 

part.

    (a) In general. The regulations prescribed in this part provide 
rules for determining the income tax liability of any person a party to 
an agreement with the Secretary of Transportation establishing a capital 
construction fund (for purposes of this part referred to as the 
``fund'') authorized by section 607 of the Merchant Marine Act, 1936, as 
amended (for purposes of this part referred to as the ``Act''). With 
respect to such parties, section 607 of the Act in general provides for 
the nontaxability of certain deposits of money or other property into 
the fund out of earnings or gains realized from the operation of vessels 
covered in an agreement, gains realized from the sale or other 
disposition of agreement vessels or proceeds from insurance for 
indemnification for loss of agreement vessels, earnings from the 
investment or reinvestment of amounts held in a fund, and gains with 
respect to amounts or deposits in the fund. Transitional rules are also 
provided for the treatment of ``old funds'' existing on or before the 
effective date of the Merchant Marine Act of 1970 (see Sec. 391.10).
    (b) Cross references. For rules relating to eligibility for a fund, 
deposits, and withdrawals and other aspects, see the regulations 
prescribed by the Secretary of Transportation in title 46 (Merchant 
Marine) and by the Secretary of Commerce in title 50 (Fisheries) of the 
Code of Federal Regulations.
    (c) Code. For purposes of this part, the term Code means the 
Internal Revenue Code of 1954, as amended.



Sec. 391.2  Ceiling on deposits.

    (a) In general--(1) Total ceiling. Section 607(b) of the Act 
provides a ceiling on the amount which may be deposited by a party for a 
taxable year pursuant to an agreement. The amount which a party may 
deposit into a fund may not exceed the sum of the following subceilings:
    (i) The lower of (a) the taxable income (if any) of the party for 
such year (computed as provided in chapter 1 of the Code but without 
regard to the carryback of any net operating loss or net capital loss 
and without regard to section 607 of the Act) or (b) taxable income (if 
any) of such party for such year attributable under paragraph (b) of 
this section to the operation of agreement vessels (as defined in 
paragraph (f) of this section) in the foreign or domestic commerce of 
the United States or in the fisheries of the United States (see section 
607(b)(1)(A) of the Act),
    (ii) Amounts allowable as a deduction under section 167 of the Code 
for such year with respect to the agreement vessels (see section 
607(b)(1)(B) of the Act),
    (iii) The net proceeds (if not included in paragraph (a)(i) of this 
section) from (a) the sale or other disposition of any agreement vessels 
or (b) insurance or

[[Page 378]]

indemnity attributable to any agreement vessels (see section 
607(b)(1)(C) of the Act and paragraph (c) of this section), and
    (iv) Earnings and gains from the investment or reinvestment of 
amounts held in such fund (see section 607 (b)(1)(D) of the Act and 
paragraphs (d) and (g) of this section).
    (2) Overdeposits. (i) If for any taxable year an amount is deposited 
into the fund under a subceiling computed under paragraph (a)(1) of this 
section which is in excess of the amount of such subceiling for such 
year, then at the party's option such excess (or any portion thereof) 
may--
    (a) Be treated as a deposit into the fund for that taxable year 
under another available subceiling, or
    (b) Be treated as not having been deposited for the taxable year and 
thus, at the party's option, may be disposed of either by it being--
    (1) Treated as a deposit into the fund under any subceiling 
available in the first subsequent taxable year in which a subceiling is 
available, in which case such amount shall be deemed to have been 
deposited on the first day of such subsequent taxable year, or
    (2) Repaid to the party from the fund.
    (ii)(a) When a correction is made for an overdeposit, proper 
adjustment shall be made with respect to all items for all taxable years 
affected by the overdeposit, such as, for example, amounts in each 
account described in Sec. 391.4, treatment of nonqualified withdrawals, 
the consequences of qualified withdrawals and the treatment of losses 
realized or treated as realized by the fund. Thus, for example, if the 
party chooses to have the fund repay to him the amount of an 
overdeposit, amounts in each account, basis of assets, and any affected 
item will be determined as though no deposit and repayment had been 
made. Accordingly, in such a case, if there are insufficient amounts in 
an account to cover a repayment of an overdeposit (as determined before 
correcting the overdeposit), and the party had applied the proceeds of a 
qualified withdrawal from such account towards the purchase of a 
qualified vessel (within the meaning of Sec. 391.11(a)(2)), then such 
account and the basis of the vessel shall be adjusted as of the time 
such withdrawal was made and proceeds were applied, and repayment shall 
be made from such account as adjusted. If a party chooses to treat the 
amount of an overdeposit as a deposit under a subceiling for a 
subsequent year, similar adjustments to affected items shall be made. If 
the amount of a withdrawal would have exceeded the amount in the fund 
(determined after adjusting all affected amounts by reason of correcting 
the overdeposit), the withdrawal to the extent of such excess shall be 
treated as a repayment made at the time the withdrawal was made.
    (b) If the accounts (as defined in Sec. 391.4) that were increased 
by reason of excessive deposits contain sufficient amounts at the time 
the overdeposit is discovered to repay the party, the party may, at his 
option, demand repayment of such excessive deposits from such accounts 
in lieu of making the adjustments required by paragraph (a)(2)(ii)(a) of 
this section.
    (iii) During the period beginning with the day after the date an 
overdeposit was actually made and ending with the date it was disposed 
of in accordance with paragraph (a)(2)(i)(b) of this section, there 
shall be included in the party's gross income for each taxable year the 
earnings attributed to any amount of overdeposit on hand during such a 
year. The earnings attributable to any amount of overdeposit on hand 
during a taxable year shall be an amount equal to the product of--
    (a) The average daily earnings for each one dollar in the fund (as 
determined in paragraph (a)(2)(iv) of this section),
    (b) The amount of overdeposit (as determined in paragraph (a)(2)(vi) 
of this section), and
    (c) The number of days during the taxable year the overdeposit 
existed.
    (iv) For purposes of paragraph (a)(2)(iii)(a) of this section, the 
average daily earnings for each dollar in the fund shall be determined 
by dividing the total earnings of the fund for the taxable year by the 
sum of the products of--
    (a) Any amount on hand during the taxable year (determined under 
paragraph (a)(2)(v) of this section), and

[[Page 379]]

    (b) The number of days during the taxable year such amount was on 
hand in the fund.
    (v) For purposes of this paragraph--
    (a) An amount on hand in the fund or an overdeposit shall not be 
treated as on hand on the day deposited but shall be treated as on hand 
on the day withdrawn, and
    (b) The fair market value of such amounts on hand for purposes of 
this subparagraph shall be determined as provided in Sec. 20.2031-2 of 
the Estate Tax Regulations of this chapter but without applying the 
blockage and other special rules contained in paragraph (e) thereof.
    (vi) For purposes of paragraph (a)(2)(iii)(b) of this section, the 
amount of overdeposit on hand at any time is an amount equal to--
    (a) The amount deposited into the fund under a subceiling computed 
under paragraph (a)(1) of this section which is in excess of the amount 
of such subceiling, less
    (b) The sum of--
    (1) Amounts described in paragraph (a)(2)(vi)(a) of this section 
treated as a deposit under another subceiling for the taxable year 
pursuant to paragraph (a)(2)(i) of this section,
    (2) Amounts described in paragraph (a)(2)(vi)(a) of this section 
disposed of (or treated as disposed of) in accordance with paragraphs 
(a)(2) (i) or (ii) of this section prior to such time.
    (vii) To the extent earnings attributed under paragraph (a)(2)(iii) 
of this section represent a deposit for any taxable year in excess of 
the subceiling described in paragraph (a)(1)(iv) of this section for 
receipts from the investment or reinvestment of amounts held in the 
fund, such attributed earnings shall be subject to the rules of this 
paragraph for overdeposits.
    (3) Underdeposit caused by audit adjustment. [Reserved]
    (4) Requirements for deficiency deposits. [Reserved]
    (b) Taxable income attributable to the operation of an agreement 
vessel--(1) In general. For purposes of this section, taxable income 
attributable to the operation of an agreement vessel means the amount, 
if any, by which the gross income of a party for the taxable year from 
the operation of an agreement vessel (as defined in paragraph (f) of 
this section) exceeds the allowable deductions allocable to such 
operation (as determined under paragraph (b)(3) of this section). The 
term taxable income attributable to the operation of the agreement 
vessels means the sum of the amounts described in the preceding sentence 
separately computed with respect to each agreement vessel (or share 
therein) or, at the party's option, computed in the aggregate.
    (2) Gross income. (i) Gross income from the operation of agreement 
vessels means the sum of the revenues which are derived during the 
taxable year from the following:
    (a) Revenues derived from the transportation of passengers, freight, 
or mail in such vessels, including amounts from contracts for the 
charter of such vessels to others, from operating differential 
subsidies, from collections in accordance with pooling agreements and 
from insurance or indemnity net proceeds relating to the loss of income 
attributable to such agreement vessels.
    (b) Revenues derived from the operation of agreement vessels 
relating to commercial fishing activities, including the transportation 
of fish, support activities for fishing vessels, charters for commercial 
fishing, and insurance or indemnity net proceeds relating to the loss of 
income attributable to such agreement vessels.
    (c) Revenues from the rental lease, or use by others of terminal 
facilities, revenues from cargo handling operations and tug and lighter 
operations, and revenues from other services or operations which are 
incidental and directly related to the operation of an agreement vessel. 
Thus, for example, agency fees, commissions, and brokerage fees derived 
by the party at his place of business for effecting transactions for 
services incidental and directly related to shipping for the accounts of 
other persons are includible in gross income from the operation of 
agreement vessels where the transaction is of a kind customarily 
consummated by the party for his own account at such place of business.

[[Page 380]]

    (d) Dividends, interest, and gains derived from assets set aside and 
reasonably retained to meet regularly occurring obligations relating to 
the shipping or fishing business directly connected with the agreement 
vessel which obligations cannot at all times be met from the current 
revenues of the business because of layups or repairs, special surveys, 
fluctuations in the business, and reasonably forseeable strikes (whether 
or not a strike actually occurs), and security amounts retained by 
reason of participation in conferences, pooling agreements, or similar 
agreements.
    (ii) The items of gross income described in paragraphs (b)(2)(i) (c) 
and (d) of this section shall be considered to be derived from the 
operations of a particular agreement vessel in the same proportion that 
the sum of the items of gross income described in paragraphs (b)(2)(i) 
(a) and (b) of this section which are derived from the operations of 
such agreement vessel bears to the party's total gross income for the 
taxable year from operations described in paragraphs (b)(2)(i) (a) and 
(b) of this section.
    (iii) In the case of a party who uses his own or leased agreement 
vessels to transport his own products, the gross income attributable to 
such vessel operations is an amount determined to be an arm's length 
charge for such transportation. The arm's length charge shall be 
determined by applying the principles of section 482 of the Code and the 
regulations thereunder as if the party transporting the product and the 
owner of the product were not the same person but were controlled 
taxpayers within the meaning of Sec. 1.482-1(a)(4) of the Income Tax 
Regulations of this chapter. Gross income attributable to the operation 
of agreement vessels does not include amounts for which the party is 
allowed a deduction for percentage depletion under sections 611 and 613 
of the Code.
    (3) Deductions. From the gross income attributable to the operation 
of an agreement vessel or vessels as determined under paragraph (b)(2) 
of this section, there shall be deducted in accordance with the 
principles of Sec. 1.861-8 of the Income Tax Regulations of this 
chapter, the expenses, losses, and other deductions definitely related 
and therefore allocated and apportioned thereto and a ratable part of 
any expenses, losses, or other deductions which are not definitely 
related to any gross income of the party. Thus, for example, if a party 
has gross income attributable to the operation of an agreement vessel 
and other gross income and has a particular deduction definitely related 
to both types of gross income, such deductions must be apportioned 
between the two types of gross income on a reasonable basis in 
determining the taxable income attributable to the operation of the 
agreement vessel.
    (4) Net operating and capital loss deductions. The taxable income of 
a party attributable to the operation of agreement vessels shall be 
computed without regard to the carryback of any net operating loss 
deduction allowed by section 172 of the Code, the carryback of any net 
capital loss deduction allowed by section 165(f) of the Code, or any 
reduction in taxable income allowed by section 607 of the Act.
    (5) Method of accounting. Taxable income must be computed under the 
method of accounting which the party uses for Federal income tax 
purposes. Such method may include a method of reporting whereby items of 
revenue and expense properly allocable to voyages in progress at the end 
of any accounting period are eliminated from the computation of taxable 
income for such accounting period and taken into account in the 
accounting period in which the voyage is completed.
    (c) Net proceeds from transactions with respect to agreement 
vessels. [Reserved]
    (d) Earnings and gains from the investment or reinvestment of 
amounts held in a fund--(1) In general. (i) Earnings and gains received 
or accrued by a party from the investment or reinvestment of assets in a 
fund is the total amount of any interest or dividends received or 
accrued, and gains realized, by the party with respect to assets 
deposited in, or purchased with amounts deposited in, such fund. Such 
earnings and gains are therefore required to be included in the gross 
income of the party unless such amount, or a portion thereof, is not 
taken into account under section 607(d)(1)(C) of the Act and

[[Page 381]]

Sec. 391.3(b)(2)(ii) by reason of a deposit or deemed deposit into the 
fund. For rules relating to receipts from the sale or other disposition 
of nonmoney deposits into the fund, see paragraph (g) of this section.
    (ii) Earnings received or accrued by a party from investment or 
reinvestment of assets in a fund include the ratable monthly portion of 
original issue discount included in gross income pursuant to section 
1232(a)(3) of the Code. Such ratable monthly portion shall be deemed to 
be deposited into the ordinary income account of the fund, but an actual 
deposit representing such ratable monthly portion shall not be made. For 
basis of a bond or other evidence of indebtedness issued at a discount, 
see Sec. 391.3(b)(2)(ii)(b).
    (2) Gain realized. (i) The gain realized with respect to assets in 
the fund is the excess of the amount realized (as defined in section 
1001(b) of the Code and the regulations thereunder) by the fund on the 
sale or other disposition of a fund asset over its adjusted basis (as 
defined in section 1011 of the Code) to the fund. For the adjusted basis 
of nonmoney deposits, see paragraph (g) of this section.
    (ii) Property purchased by the fund (including property considered 
under paragraph (g)(1)(iii) of this section as purchased by the fund) 
which is withdrawn from the fund in a qualified withdrawal (as defined 
in Sec. 391.5) is treated as a disposition to which subdivision (i) of 
this subparagraph applies. For purposes of determining the amount by 
which the balance within a particular account will be reduced in the 
manner provided in Sec. 391.6(b) (relating to order of application of 
qualified withdrawals against accounts) and for purposes of determining 
the reduction in basis of a vessel, barge, or container (or share 
therein) pursuant to Sec. 391.6(c), the value of the property is its 
fair market value on the day of the qualified withdrawal.
    (3) Holding Period. Except as provided in paragraph (g) of this 
section, the holding period of fund assets shall be determined under 
section 1223 of the Code.
    (e) Leased vessels. In the case of a party who is a lessee of an 
agreement vessel, the maximum amount which such lessee may deposit with 
respect to any agreement vessel by reason of section 607(b)(1)(B) of the 
Act and paragraph (a)(1)(ii) of this section (relating to depreciation 
allowable) for any period shall be reduced by the amount (if any) which, 
under an agreement entered into under section 607 of the Act, the owner 
is required or permitted to deposit for such period with respect to such 
vessel by reason of section 607(b)(1)(B) of the Act and paragraph 
(a)(1)(ii) of this section. The amount of depreciation depositable by 
the lessee under this paragraph is the amount of depreciation deductible 
by the lessor on its income tax return, reduced by the amount described 
in the preceding sentence or the amount set forth in the agreement, 
whichever is lower.
    (f) Definition of agreement vessel. For purposes of this section, 
the term agreement vessel (as defined in Sec. 391.11 (a)(3) and 46 CFR 
390.6) includes barges and containers which are the complement of an 
agreement vessel and which are provided for in the agreements, agreement 
vessels which have been contracted for or are in the process of 
construction, and any shares in an agreement vessel. Solely for purposes 
of this section, a party is considered to have a ``share'' in an 
agreement vessel if he has a right to use the vessel to generate income 
from its use whether or not the party would be considered as having a 
proprietary interest in the vessel for purposes of State or Federal law. 
Thus, a partner may enter into an agreement with respect to his share of 
the vessel owned by the partnership and he may make deposits of his 
distributive share of the sum of the four subceilings described in 
paragraph (a)(1) of this section. Notwithstanding the provisions of 
Subchapter K of the Code (relating to the taxation of partners and 
partnerships), the Internal Revenue Service will recognize, solely for 
the purposes of applying this part, an agreement by an owner of a share 
in an agreement vessel even though the ``share'' arrangement is a 
partnership for purposes of the Code.
    (g) Special rules for nonmoney deposits and withdrawals--(1) In 
general. (i) Deposits may be made in the form of

[[Page 382]]

money or property of the type permitted to be deposited under the 
agreement. (For rules relating to the types of property which may be 
deposited into the fund, see 46 CFR 390.7(d), and 50 CFR Part 259.) For 
purposes of this paragraph, the term property does not include money.
    (ii) Whether or not the election provided for in paragraph (g)(2) of 
this section is made--
    (a) The amount of any property deposit, and the fund's basis for 
property deposited in the fund, is the fair market value of the property 
at the time deposited, and
    (b) The fund's holding period for the property begins on the day 
after the deposit is made.
    (iii) Unless such an election is made, deposits of property into a 
fund are considered to be a sale at fair market value of the property, a 
deposit of cash equal to such fair market value, and a purchase by the 
fund of such property for cash. Thus, in the absence of the election, 
the difference between the fair market value of such property deposited 
and its adjusted basis shall be taken into account as gain or loss for 
purposes of computing the party's income tax liability for the year of 
deposit.
    (iv) For fund's basis and holding period of assets purchased by the 
fund, see paragraphs (d) (2) and (3) of this section.
    (2) Election not to treat deposits of property other than money as a 
sale or exchange at the time of deposit. A party may elect to treat a 
deposit of property as if no sale or other taxable event had occurred on 
the date of deposit. If such election is made, in the taxable year the 
fund disposes of the property, the party shall recognize as gain or loss 
the amount he would have recognized on the day the property was 
deposited into the fund had the election not been made. The party's 
holding period with respect to such property shall not include the 
period of time such property was held by the fund. The election shall be 
made by a statement to that effect, attached to the party's Federal 
income tax return for the taxable year to which the deposit relates, or, 
if such return is filed before such deposit is made, attached to the 
party's return for the taxable year during which the deposit is actually 
made.
    (3) Effect of qualified withdrawal of property deposited pursuant to 
election. If property deposited into a fund, with respect to which an 
election under paragraph (g)(2) of this section is made, is withdrawn 
from the fund in a qualified withdrawal (as defined in Sec. 391.5) such 
withdrawal is treated as a disposition of such property resulting in 
recognition by the party of gain or loss (if any) as provided in 
paragraph (g)(2) of this section with respect to nonfund property. In 
addition, such withdrawal is treated as a disposition of such property 
by the fund resulting in recognition of gain or loss by the party with 
respect to fund property to the extent the fair market value of the 
property on the date of withdrawal is greater or less (as the case may 
be) than the adjusted basis of the property to the fund on such date. 
For purposes of determining the amount by which the balance within a 
particular account will be reduced in the manner provided in Sec. 
391.6(b) (relating to order of application of qualified withdrawals 
against accounts and for purposes of determining the reduction in basis 
of a vessel, barge, or container (or share therein) pursuant to Sec. 
391.6(c), the value of the property is its fair market value on the day 
of the qualified withdrawal. For rules relating to the effect of a 
qualified withdrawal of property purchased by the fund (including 
deposited property considered under paragraph (g)(1)(iii) of this 
section as purchased by the fund), see paragraph (d)(2)(ii) of this 
section.
    (4) Effect of nonqualified withdrawal of property deposited pursuant 
to election. If property deposited into a fund with respect to which an 
election under paragraph (g)(2) of this section is made, is withdrawn 
from the fund in a nonqualified withdrawal (as defined in Sec. 
391.7(b)), no gain or loss is to be recognized by the party with respect 
to fund property or nonfund property but an amount equal to the adjusted 
basis of the property to the fund is to be treated as a nonqualified 
withdrawal. Thus, such amount is to be applied against the various 
accounts in the manner provided in Sec. 391.7(c), such amount is to be 
taken into account in computing

[[Page 383]]

the party's taxable income as provided in Sec. 391.7(d), and such 
amount is to be subject to interest to the extent provided for in Sec. 
391.7(e). In the case of withdrawals to which this subparagraph applies, 
the adjusted basis of the property in the hands of the party is the 
adjusted basis on the date of deposit, increased or decreased by the 
adjustments made to such property while held in the fund, and in 
determining the period for which the party has held the property there 
shall be included, in addition to the period the fund held the property, 
the period for which the party held the property before the date of 
deposit of the property into the fund. For rules relating to the basis 
and holding period of property purchased by the fund (including 
deposited property considered under paragraph (g)(1)(ii) of this section 
as purchased by the fund) and withdrawn in a nonqualified withdrawal see 
Sec. 391.7(f).
    (5) Examples. The provisions of this paragraph are illustrated by 
the following examples:

    Example (1). X Corporation, which uses the calendar year as its 
taxable year, maintains a fund described in Sec. 391.1 X's taxable 
income (determined without regard to section 607 of the Act) is 
$100,000, of which $80,000 is taxable income attributable to the 
operation of agreement vessels (as determined under paragraph (b)(1) of 
this section). Under the agreement, X is required to deposit into the 
fund all earnings and gains received from the investment or reinvestment 
of amounts held in the fund, an amount equal to the net proceeds from 
transactions referred to in Sec. 391.2(c), and an amount equal to 50 
percent of its earnings attributable to the operation of agreement 
vessels provided that such 50 percent does not exceed X's taxable income 
from all sources for the year of deposit. The agreement permits X to 
make voluntary deposits of amounts equal to 100 percent of its earnings 
attributable to the operation of agreement vessels, subject to the 
limitation with respect to taxable income from all sources. The 
agreement also provides that deposits attributable to such earnings may 
be in the form of cash or other property. On March 15, 1973, X deposits, 
with respect to its 1972 earnings attributable to the operation of 
agreement vessels, stock with a fair market value at the time of deposit 
of $80,000 and an adjusted basis to X of $10,000. Such deposit 
represents agreement vessel income of $80,000. At the time of deposit, 
such stock had been held by X for a period exceeding 6 months. X does 
not elect under subparagraph (2) of this paragraph to defer recognition 
of the gain. Accordingly, under subparagraph (1)(iii) of this paragraph, 
the deposit is treated as a deposit of $80,000 and X realizes a long-
term capital gain of $70,000 on March 15, 1973.
    Example (2). The facts are the same as in example (1), except that X 
elects in accordance with subparagraph (2) of this paragraph not to 
treat the deposit as a sale or exchange. On July 1, 1974, the fund sells 
the stock for $85,000. The basis to the fund of the stock is $80,000 
(see subparagraph (1)(ii)(a) of this paragraph). With respect to non 
fund property, X recognizes $70,000 of long-term capital gain on the 
sale includible in its gross income for 1974. With respect to fund 
property, X realizes $5,000 of long-term capital gain (the difference 
between the amount received by the fund on the sale of the stock, 
$85,000, and the basis to the fund of the stock, $80,000), an amount 
equal to which is required to be deposited into the fund with respect to 
1974, as a gain from the investment or reinvestment of amounts held in 
the fund. Since the fund held the stock for a period exceeding 6 months, 
the $5,000 is allocated to the fund's capital gain account under Sec. 
391.4(c).
    Example (3). The facts are the same as in example (2), except that 
the fund sells the stock on July 1, 1974, for $75,000. As the basis to 
the fund of the stock is $80,000 with respect to fund property, X 
realizes a long-term capital loss on the sale (the difference between 
the amount received by the fund on the sale of the stock, $75,000, and 
the basis to the fund of the stock, $80,000), of $5,000, an amount equal 
to which is required to be charged against the fund's capital gain 
account under Sec. 391.4(e). Under subparagraph (2) of this paragraph, 
X recognizes $70,000 of long-term capital gain with respect to nonfund 
property on the sale which is includible in its gross income for 1974.
    Example (4). The facts are the same as in example (2), except that 
on July 1, 1974, X makes a qualified withdrawal (as defined in Sec. 
391.5(a)) of the stock and uses it to pay indebtedness pursuant to Sec. 
391.5(b). On the disposition by X considered to occur under subparagraph 
(3) of this paragraph on the qualified withdrawal, X recognizes $70,000 
of long-term capital gain with respect to nonfund property, which is 
includible in its gross income for 1974, and a long-term capital gain of 
$5,000 with respect to fund property, an amount equal to which is 
allocated to the fund's capital gain account under Sec. 391.4(c). The 
fund is treated as having a qualified withdrawal of an amount equal to 
the fair market value of the stock on the day of withdrawal, $85,000 
(see subparagraph (3) of this paragraph). In addition, $85,000 is 
applied against the various accounts in the order provided in Sec. 
391.6(b). The basis of the

[[Page 384]]

vessel with respect to which the indebtedness was incurred is to be 
reduced as provided in Sec. 391.6(c).
    Example (5). The facts are the same as in example (2), except that X 
withdraws the stock from the fund in a nonqualified withdrawal (as 
defined in Sec. 391.7(b)). Under subparagraph (4) of this paragraph, X 
recognizes no gain or loss with respect to fund or nonfund property on 
such withdrawal. An amount equal to the basis of the stock to the fund 
($80,000) is applied against the various accounts in the order provided 
in Sec. 391.7(c), and is taken into account in computing X's taxable 
income for 1974 as provided in Sec. 391.7(d). In addition, X must pay 
interest on the withdrawal as provided in Sec. 391.7(e). The basis to X 
of the stock is $10,000 notwithstanding the fact that the fair market 
value of such stock was $85,000 on the day of withdrawal (see paragraph 
(g)(4) of this section).



Sec. 391.3  Nontaxability of deposits.

    (a) In general. Section 607(d) of the Act sets forth the rules 
concerning the income tax effects of deposits made with respect to 
ceilings described in section 607(b) and Sec. 391.2. The specific 
treatment of deposits with respect to each of the subceilings is set 
forth in paragraph (b) of this section.
    (b) Treatment of deposits--(1) Earnings of agreement vessels. 
Section 607 (d)(1)(A) of the Act provides that taxable income of the 
party (determined without regard to section 607 of the Act) shall be 
reduced by an amount equal to the amount deposited for the taxable year 
out of amounts referred to in section 607(b)(1)(A) of the Act and Sec. 
391.2(a)(1)(i). For computation of the foreign tax credit, see paragraph 
(i) of this section.
    (2) Net proceeds from agreement vessels and fund earnings. (i)(a) 
Section 607(d)(1)(B) provides that gain from a transaction referred to 
in section 607(b)(1)(C) of the Act and Sec. 391.2(a)(1)(iii) (relating 
to ceilings on deposits of net proceeds from the sale or other 
disposition of agreement vessels) is not to be taken into account for 
purposes of the Code if an amount equal to the net proceeds from 
transactions referred to in such sections is deposited in the fund. Such 
gain is to be excluded from gross income of the party for the taxable 
year to which such deposit relates. Thus, the gain will not be taken 
into account in applying section 1231 of the Code for the year to which 
the deposit relates.
    (b) [Reserved]
    (ii)(a) Section 607(d)(1)(C) of the Act provides that the earnings 
(including gains and losses) from the investment and reinvestment of 
amounts held in the fund and referred to in section 607(b)(1)(D) of the 
Act and Sec. 391.2(a)(1)(iv) shall not be taken into account for 
purposes of the Code if an amount equal to such earnings is deposited 
into the fund. Such earnings are to be excluded from the gross income of 
the party for the taxable year to which such deposit relates.
    (b) However, for purposes of the basis adjustment under section 
1232(a)(3)(E) of the Code, the ratable monthly portion of original issue 
discount included in gross income shall be determined without regard to 
section 607(d)(1)(C) of the Act.
    (iii) In determining the tax liability of a party to whom paragraph 
(b)(1) of this section applies, taxable income, determined after 
application of paragraph (b)(1) of this section, is in effect reduced by 
the portion of deposits which represent gain or earnings respectively 
referred to in paragraph (b)(2) (i) or (ii) of this section. The excess, 
if any, of such portion over taxable income determined after application 
of paragraph (b)(1) of this section is taken into account in computing 
the net operating loss (under section 172 of the Code) for the taxable 
year to which such deposits relate.
    (3) Time for making deposits. (i) This section applies with respect 
to an amount only if such amount is deposited in the fund pursuant to 
the agreement and not later than the time provided in paragraph (b)(2) 
(ii), (iii), or (iv) of this section for the making of such deposit or 
the date the Secretary of Transportation provides, whichever is earlier.
    (ii) Except as provided in paragraph (b)(2) (iii) or (iv) of this 
section, a deposit may be made not later than the last day prescribed by 
law (including extensions thereof) for filing the party's Federal income 
tax return for the taxable year to which such deposit relates.
    (iii) If the party is a subsidized operator under an operating-
differential

[[Page 385]]

subsidy contract, and does not receive on or before the 59th day 
preceding such last day, payment of all or part of the accrued 
operating-differential subsidy payable for the taxable year, the party 
may deposit an amount equivalent to the unpaid accrued operating-
differential subsidy on or before the 60th day after receipt of payment 
of the accrued operating-differential subsidy.
    (iv) A deposit pursuant to Sec. 391.2(a)(3)(i) (relating to 
underdeposits caused by audit adjustments) must be made on or before the 
date prescribed for such a deposit in Sec. 391.2(a)(4).
    (4) Date of deposits. (i) Except as otherwise provided in paragraphs 
(b)(4) (ii) and (iii) of this section (with respect to taxable years 
beginning after December 31, 1969, and prior to January 1, 1972), in 
Sec. 391.2(a)(2)(i), or in Sec. 391.10(b), deposits made in a fund 
within the time specified in paragraph (b)(3) of this section are deemed 
to have been made on the date of actual deposit.
    (ii)(a) For taxable years beginning after December 31, 1969, and 
prior to January 1, 1971, where an application for a fund is filed by a 
taxpayer prior to January 1, 1972, and an agreement is executed and 
entered into by the taxpayer prior to March 1, 1972,
    (b) For taxable years beginning after December 31, 1970, and prior 
to January 1, 1972, where an application for a fund is filed by a 
taxpayer prior to January 1, 1973, and an agreement is executed and 
entered into by the taxpayer prior to March 1, 1973, and
    (c) For taxable years beginning after December 31, 1971, and prior 
to January 1, 1975, where an agreement is executed and entered into by 
the taxpayer on or prior to the due date, with extensions, for the 
filing of his Federal income tax return for such taxable year, deposits 
in a fund which are made within 60 days after the date of execution of 
the agreement, or on or before the due date, with extensions thereof, 
for the filing of his Federal income tax return for such taxable year or 
years, whichever date shall be later, shall be deemed to have been made 
on the date of the actual deposit or as of the close of business of the 
last regular business day of each such taxable year or years to which 
such deposits relate, whichever day is earlier.
    (iii) Notwithstanding paragraph (b)(4)(ii) of this section, for 
taxable years beginning after December 31, 1970, and ending prior to 
January 1, 1972, deposits made later than the last date permitted under 
paragraph (b)(4)(ii) but on or before January 9, 1973, in a fund 
pursuant to an agreement with the Secretary of Transportation acting by 
and through the Administrator of the National Oceanic and Atmospheric 
Administration, shall be deemed to have been made on the date of the 
actual deposit or as of the close of business of the last regular 
business day of such taxable year, whichever is earlier.
    (c) Determination of earnings and profits. [Reserved]
    (d) Accumulated earnings tax. As provided in section 607(d)(1)(E) of 
the Act amounts, while held in the fund, are not to be taken into 
account in computing the ``accumulated taxable income'' of the party 
within the meaning of section 531 of the Code. Amounts while held in the 
fund are considered held for the purpose of acquiring, constructing, or 
reconstructing a qualified vessel or barges and containers which are 
part of the complement of a qualified vessel or the payment of the 
principal on indebtedness incurred in connection with any such 
acquisition, construction, or reconstruction. Thus, for example, if the 
reasonable needs of the business (within the meaning of section 537 of 
the Code) justify a greater amount of accumulation for providing 
replacement vessels than can be satisfied out of the fund, such greater 
amount accumulated outside of the fund shall be considered to be 
accumulated for the reasonable needs of the business. For a further 
example, although amounts in the fund are not taken into account in 
applying the tax imposed by section 531 of the Code, to the extent there 
are amounts in a fund to provide for replacing a vessel, amounts 
accumulated outside of the fund to replace the same vessel are not 
considered to be accumulated for the reasonable needs of the business.
    (e) Nonapplicability of section 1231. If an amount equivalent to 
gain from a transaction referred to in section

[[Page 386]]

607(b)(1)(C) of the Act and Sec. 391.2(c) (1) and (5) is deposited into 
the fund and, therefore, such gain is not taken into account in 
computing gross income under the provisions of paragraph (b)(2) of this 
section, then such gain will not be taken into account for purposes of 
the computations under section 1231 of the Code.
    (f) Deposits of capital gains. In respect of capital gains which are 
not included in the gross income of the party by virtue of a deposit to 
which section 607(d) of the Act and this section apply, the following 
provisions of the Code do not apply; the minimum tax for tax preferences 
imposed by section 56 of the Code; the alternative tax imposed by 
section 1201 of the Code on the excess of the party's net long-term 
capital gain over his net short-term capital loss; and, in the case of a 
taxpayer other than a corporation, the deduction provided by section 
1202 of the Code of 50 percent of the amount of such excess. However, 
section 56 may apply upon a nonqualified withdrawal with respect to 
amounts treated under Sec. 391.7(d)(2) as being made out of the capital 
gain account.
    (g) Deposits of dividends. The deduction provided by section 243 of 
the Code (relating to the deductions for dividends from a domestic 
corporation received by a corporation) shall not apply in respect of 
dividends (earned on assets held in the fund) which are deposited into a 
fund, and which, by virtue of such deposits and the provisions of 
section 607(d) of the Act and this section, are not included in the 
gross income of the party.
    (h) Presumption of validity of deposit. All amounts deposited in the 
fund shall be presumed to have been deposited pursuant to an agreement 
unless, after an examination of the facts upon the request of the 
Commissioner of Internal Revenue or his delegate, the Secretary of 
Transportation determines otherwise. The Commissioner or his delegate 
will request such a determination where there is a substantial question 
as to whether a deposit is made in accordance with an agreement.
    (i) Special rules for application of the foreign tax credit--(1) In 
general. For purposes of computing the limitation under section 904 of 
the Code on the amount of the credit provided by section 901 of the Code 
(relating to the foreign tax credit), the party's taxable income from 
any source without the United States and the party's entire taxable 
income are to be determined after application of section 607(d) of the 
Act. Thus, amounts deposited for the taxable year with respect to 
amounts referred to in section 607(b)(1)(A) of the Act and Sec. 
391.2(a)(1)(i) (relating to taxable income attributable to the operation 
of agreement vessels) shall be treated as a deduction in arriving at the 
party's taxable income from sources without the United States (subject 
to the apportionment rules and paragraph (i)(2) of this section) and the 
party's entire taxable income for the taxable year. Amounts deposited 
with respect to gain described in section 607(d)(1)(B) of the Act and 
Sec. 391.2(c) (relating to net proceeds from the sale or other 
disposition of an agreement vessel and net proceeds from insurance or 
indemnity) and amounts deposited with respect to earnings described in 
section 607(d)(1)(C) of the Act and paragraph (b)(2)(ii) (relating to 
earnings from the investment and reinvestment of amounts held in a fund) 
of this section are not taken into account for purposes of the Code and 
hence are not included in the party's taxable income from sources 
without the United States or in the party's entire taxable income for 
purposes of this paragraph.
    (2) Apportionment of taxable income attributable to agreement 
vessels. For purposes of computing the overall limitation under section 
904(a)(2) of the Code the amount of the deposit made with respect to 
taxable income attributable to agreement vessels pursuant to Sec. 
391.2(a)(1)(i) which is allocable to sources without the United States 
is the total amount of such deposit multiplied by a fraction the 
numerator of which is the gross income from sources without the United 
States from the operation of agreement vessels and the denominator of 
which is the total gross income from the operation of agreement vessels 
computed as provided in Sec. 391.2(b)(2). For purposes of this 
paragraph, gross income from sources without the United States 
attributable to the operation of agreement vessels is

[[Page 387]]

to be determined under sections 61 through 863 of the Code and under the 
taxpayer's usual method of accounting provided such method is reasonable 
and in keeping with sound accounting practice. Any computation under the 
per-country limitation of section 904(a)(1) shall be made in the manner 
consistent with the provisions of the preceding sentences of this 
paragraph.



Sec. 391.4  Establishment of accounts.

    (a) In general. Section 607(e)(1) of the Act requires that three 
bookkeeping or memorandum accounts are to be established and maintained 
within the fund: The capital account, the capital gain account, and the 
ordinary income account. Deposits of the amounts under the subceilings 
in section 607(b) of the Act and Sec. 391.2 are allocated among the 
accounts under section 607(e) of the Act and this section.
    (b) Capital account. The capital account shall consist of:
    (1) Amounts referred to in section 607(b)(1)(B) of the Act and Sec. 
391.2 (a)(1)(ii) (relating to deposits for depreciation),
    (2) Amounts referred to in section 607(b)(1)(C) of the Act and Sec. 
391.2(a)(1)(iii) (relating to deposits of net proceeds from the sale or 
other disposition of agreement vessels) other than that portion thereof 
which represents gain not taken into account for purposes of computing 
gross income by reason of section 607(d)(1)(B) of the Act and Sec. 
391.3(b)(2) (relating to nontaxability of gain from the sale or other 
disposition of an agreement vessel),
    (3) Amounts representing 85 percent of any dividend received by the 
fund with respect to which the party would, but for section 607(d)(1)(C) 
of the Act and Sec. 391.3(b)(2)(ii) (relating to nontaxability of 
deposits of earnings from investment and reinvestment of amounts held in 
a fund), be allowed a deduction under section 243 of the Code, and
    (4) Amounts received by the fund representing interest income which 
is exempt from taxation under section 103 of the Code.
    (c) Capital gain account. The capital gain account shall consist of 
amounts which represent the excess of (1) deposits of long-term capital 
gains on property referred to in section 607(b)(1) (C) and (D) of the 
Act and Sec. 391.2(a)(1) (iii) and (iv) (relating respectively to 
certain agreement vessels and fund assets), over (2) amounts 
representing losses from the sale or exchange of assets held in the fund 
for more than 6 months (for purposes of this section referred to as 
``long-term capital losses''). For purposes of this paragraph and 
paragraph (d)(2) of this section, an agreement vessel disposed of at a 
gain shall be treated as a capital asset to the extent that gain thereon 
is not treated as ordinary income, including gain which is ordinary 
income under section 607(g)(5) of the Act (relating to treatment of gain 
on disposition of a vessel with a reduced basis) and Sec. 391.6(e) or 
under section 1245 of the Code (relating to gain from disposition of 
certain depreciable property). For provisions relating to the treatment 
of short-term capital gains on certain transactions involving agreement 
vessels or realized by the fund, see paragraph (d) of this section. For 
rules relating to the treatment of capital losses on assets held in the 
fund, see paragraph (e) of this section.
    (d) Ordinary income account. The ordinary income account shall 
consist of:
    (1) Amounts referred to in section 607(b)(1)(A) of the Act and Sec. 
391.2(a)(1)(i) (relating to taxable income attributable to the operation 
of an agreement vessel),
    (2) Amounts representing (i) deposits of gains from the sale or 
exchange of capital assets held for 6 months or less (for purposes of 
this section referred to as ``short-term capital gains'') referred to in 
section 607(b)(1) (C) or (D) of the Act and Sec. 391.2(a)(1) (iii) and 
(iv) (relating respectively to certain agreement vessels and fund 
assets), reduced by (ii) amounts representing losses from the sale or 
exchange of capital assets held in the fund for 6 months or less (for 
purposes of this section referred to as ``short-term capital losses''). 
For rules relating to the treatment of certain agreement vessels as 
capital assets, see paragraph (c) of this section,
    (3) Amounts representing interest (not including any tax-exempt 
interest referred to in section 607(e)(2)(D) of the Act and paragraph 
(b)(4) of this section) and other ordinary income received on assets 
held in the fund (not

[[Page 388]]

including any dividend referred to in section 607(e)(2)(C) of the Act 
and paragraph (d)(5) of this section),
    (4) Amounts representing ordinary income from a transaction 
(involving certain net proceeds with respect to an agreement vessel) 
described in section 607(b)(1)(C) of the Act and Sec. 391.2(a)(1)(iii), 
including gain which is ordinary income under section 607(g)(5) of the 
Act and Sec. 391.6(e) (relating to treatment of gain on the disposition 
of a vessel with a reduced basis) or under section 1245 of the Code 
(relating to gain from disposition of certain depreciable property), and
    (5) Fifteen percent of any dividend referred to in section 
607(e)(2)(C) of the Act and paragraph (b)(3) of this section received on 
any assets held in the fund.
    (e) Limitation on deduction for capital losses on assets held in a 
fund. Except on termination of a fund, long-term (and short-term) 
capital losses on assets held in a fund shall be allowed only as an 
offset to long-term (and short-term) capital gains on assets held in the 
fund, but only if such gains are deposited into the fund, and shall not 
be allowed as an offset to any capital gains on assets not held in the 
fund. The net long-term capital loss of the fund for the taxable year 
shall reduce the earliest long-term capital gains in the capital gain 
account at the beginning of the taxable year and the next short-term 
capital loss for the taxable year shall reduce the earliest short-term 
capital gains remaining in the ordinary income account at the beginning 
of the taxable year. Any such losses that are in excess of the capital 
gains in the respective accounts shall reduce capital gains deposited 
into the respective accounts in subsequent years (without regard to 
section 1212, relating to capital loss carrybacks and carryovers). On 
termination of a fund, any net long-term capital loss in the capital 
gain account and any net short-term capital loss remaining in the 
ordinary income accounts is to be taken into account for purposes of 
computing the party's taxable income for the year of termination as a 
long-term or short-term (as the case may be) capital loss recognized in 
the year the fund is terminated. With respect to the determination of 
the basis to a fund of assets held in such fund, see Sec. 391.2(g).



Sec. 391.5  Qualified withdrawals.

    (a) In general. (1) A qualified withdrawal is one made from the fund 
during the taxable year which is in accordance with section 670(f)(1) of 
the Act, the agreement, and with regulations prescribed by the Secretary 
of Transportation and which is for the acquisition, construction, or 
reconstruction of a qualified vessel (as defined in Sec. 391.11(a)(2)) 
or barges and containers which are part of the complement of a qualified 
vessel (or shares in such vessels, barges, and containers), or for the 
payment of the principal of indebtedness incurred in connection with the 
acquisition construction, or reconstruction of such qualified vessel (or 
a barge or container which is part of the complement of a qualified 
vessel).
    (2) For purposes of this section the term share is used to reflect 
an interest in a vessel and means a proprietary interest in a vessel 
such as, for example, that which results from joint ownership. 
Accordingly, a share within the meaning of Sec. 391.2(f) (relating to 
the definition of ``agreement vessel'' for the purpose of making 
deposits) will not necessarily be sufficient to be treated as a share 
within the meaning of this section.
    (3) For purposes of this section, the term acquisition means any of 
the following:
    (i) Any acquisition, but only to the extent the basis of the 
property acquired in the hands of the transferee is its cost. Thus, for 
example, if a party transfers a vessel and $1 million in an exchange for 
another vessel which qualifies for nonrecognition of gain or loss under 
section 1031(a) of the Code (relating to like-kind exchange), there is 
an acquisition to the extent of $1 million.
    (ii) With respect to a lessee's interest in a vessel, expenditures 
which result in increasing the amounts with respect to which a deduction 
for depreciation (or amortization in lieu thereof) is allowable.
    (b) Payments on indebtedness. Payments on indebtedness may 
constitute qualified withdrawals only if the party

[[Page 389]]

shows to the satisfaction of the Secretary of Transportation a direct 
connection between incurring the indebtedness and the acquisition, 
construction, or reconstruction of a qualified vessel or its complement 
of barges and containers whether or not the indebtedness is secured by 
the vessel or its complement of barges and containers. The fact that an 
indebtedness is secured by an interest in a qualified vessel, barge, or 
container is insufficient by itself to demonstrate the necessary 
connection.
    (c) Payments to related persons. Not- withstanding paragraph (a) of 
this section, payments from a fund to a person owned or controlled 
directly or indirectly by the same interests as the party within the 
meaning of section 482 of the Code and the regulations thereunder are 
not to be treated as qualified withdrawals unless the party demonstrates 
to the satisfaction of the Secretary of Transportation that no part of 
such payment constitutes a dividend, a return of capital, or a 
contribution to capital under the Code.
    (d) Treatment of fund upon failure to fulfill obligations. Section 
607(f)(2) of the Act provides that if the Secretary of Transportation 
determines that any substantial obligation under the agreement is not 
being fulfilled, he may, after notice and opportunity for hearing to the 
party, treat the entire fund, or any portion thereof, as having been 
withdrawn as a nonqualified withdrawal. In determining whether a party 
has breached a substantial obligation under the agreement, the Secretary 
will consider among other things, (1) the effect of the party's action 
or omission upon his ability to carry out the purposes of the fund and 
for which qualified withdrawals are permitted under section 607(f)(1) of 
the Act, and (2) whether the party has made material misrepresentations 
in connection with the agreement or has failed to disclose material 
information. For the income tax treatment of nonqualified withdrawals, 
see Sec. 391.7.



Sec. 391.6  Tax treatment of qualified withdrawals.

    (a) In general. Section 607(g) of the Act and this section provide 
rules for the income tax treatment of qualified withdrawals including 
the income tax treatment on the disposition of assets acquired with fund 
amounts.
    (b) Order of application of qualified withdrawals against accounts. 
A qualified withdrawal from a fund shall be treated as being made: 
First, out of the capital account; second, out of the capital gain 
account; and third, out of the ordinary income account. Such withdrawals 
will reduce the balance within a particular account on a first-in-first-
out basis, the earliest qualified withdrawals reducing the items within 
an account in the order in which they were actually deposited or deemed 
deposited in accordance with this part. The date funds are actually 
withdrawn from the fund determines the time at which withdrawals are 
considered to be made.
    (c) Reduction of basis. (1) If any portion of a qualified withdrawal 
for the acquisition, construction, or reconstruction of a vessel, barge, 
or container (or share therein) is made out of the ordinary income 
account, the basis of such vessel, barge, or container (or share 
therein) shall be reduced by an amount equal to such portion.
    (2) If any portion of a qualified withdrawal for the acquisition, 
construction or reconstruction of a vessel, barge, or container (or 
share therein) is made out of the capital gain account, the basis of 
such vessel, barge, or container (or share therein) shall be reduced by 
an amount equal to--
    (i) Five-eights of such portion, in the case of a corporation (other 
than an electing small business corporation, as defined in section 1371 
of the Code), or
    (ii) One-half of such portion, in the case of any other person.
    (3) If any portion of a qualified withdrawal to pay the principal of 
an indebtedness is made out of the ordinary income account or the 
capital gain account, then the basis of the vessel, barge, or container 
(or share therein) with respect to which such indebtedness was incurred 
is reduced in the manner provided by paragraphs (c) (1) and (2) of this 
section. If the aggregate amount of such withdrawal from the ordinary 
income account and capital gain account would cause a basis reduction in 
excess of the party's basis in such vessel, barge, or container (or

[[Page 390]]

share therein), the excess is applied against the basis of other 
vessels, barges, or containers (or shares therein) owned by the party at 
the time of withdrawal in the following order: (i) Vessels, barges, or 
containers (or shares therein) which were the subject of qualified 
withdrawals in the order in which they were acquired, constructed, or 
reconstructed; (ii) agreement vessels (as defined in section 607(k)(3) 
of the Act and Sec. 391.11(a)(3)) and barges and containers which are 
part of the complement of an agreement vessel (or shares therein) which 
were not the subject of qualified withdrawals, in the order in which 
such vessels, barges, or containers (or shares therein) were acquired by 
the party; and (iii) other vessels, barges, and containers (or shares 
therein), in the order in which they were acquired by the party. Any 
amount of a withdrawal remaining after the application of this paragraph 
is to be treated as a nonqualified withdrawal. If the indebtedness was 
incurred to acquire two or more vessels, barges, or containers (or 
shares therein), then the basis reduction in such vessels, barges, or 
containers (or shares therein) is to be made pro rata in proportion to 
the adjusted basis of such vessels, barges, or containers (or shares 
therein) computed, however, without regard to this section and 
adjustments under section 1016(a) (2) and (3) of the Code for 
depreciation or amortization.
    (d) Basis for depreciation. For purposes of determining the 
allowance for depreciation under section 167 of the Code in respect of 
any property which has been acquired, constructed, or reconstructed from 
qualified withdrawals, the adjusted basis for determining gain on such 
property is determined after applying paragraph (c) of this section. In 
the case of reductions in the basis of any property resulting from the 
application of paragraph (c)(3) of this section, the party may adopt a 
method of accounting whereby (1) payments shall reduce the basis of the 
property on the day such payments are actually made, or (2) payments 
made at any time during the first half of the party's taxable year shall 
reduce the basis of the property on the first day of the taxable year, 
and payments made at any time during the second half of the party's 
taxable year shall reduce the basis of the property on the first day of 
the succeeding taxable year. For requirements respecting the change of 
methods of accounting, see Sec. 1.446-1(e)(3) of the Income Tax 
Regulations of this chapter.
    (e) Ordinary income treatment of gain from disposition of property 
acquired with qualified withdrawals. [Reserved]



Sec. 391.7  Tax treatment of nonqualified withdrawals.

    (a) In general. Section 607(h) of the Act provides rules for the tax 
treatment of nonqualified withdrawals, including rules for adjustments 
to the various accounts of the fund, the inclusion of amounts in income, 
and the payment of interest with respect to such amounts.
    (b) Nonqualified withdrawals defined. Except as provided in section 
607 of the Act and Sec. 391.8 (relating to certain corporate 
reorganizations, changes in partnerships, and transfers by reason of 
death), any withdrawal from a fund which is not a qualified withdrawal 
shall be treated as a nonqualified withdrawal which is subject to tax in 
accordance with section 607(h) of the Act and the provisions of this 
section. Examples of nonqualified withdrawals are amounts remaining in a 
fund upon termination of the fund, and withdrawals which are treated as 
nonqualified withdrawals under section 607(f)(2) of the Act and Sec. 
391.5(d) (relating to failure by a party to fulfill substantial 
obligation under agreement) or under the second sentence of section 
607(g)(4) of the Act and Sec. 391.6(c)(3) (relating to payments against 
indebtedness in excess of basis).
    (c) Order of application of nonqualified withdrawals against 
deposits. A nonqualified withdrawal from a fund shall be treated as 
being made: First, out of the ordinary income account; second, out of 
the capital gain account; and third, out of the capital account. Such 
withdrawals will reduce the balance within a particular account on a 
first-in-first-out basis, the earliest nonqualified withdrawals reducing 
the items within an account in the order in which they were actually 
deposited or deemed deposited in accordance with this part. Nonqualified 
withdrawals for

[[Page 391]]

research, development, and design expenses incident to new and advanced 
ship design, machinery, and equipment, and any amount treated as a 
nonqualified withdrawal under the second sentence of section 607(g)(4) 
of the Act and Sec. 391.6(c)(3), shall be applied against the deposits 
within a particular account on a last-in-first-out basis. The date funds 
are actually withdrawn from the fund determines the time at which 
withdrawals are considered to be made. For special rules concerning the 
withdrawal of contingent deposits of net proceeds from the installment 
sale of an agreement vessel, see Sec. 391.2(c)(6).
    (d) Inclusion in income. (1) Any portion of a nonqualified 
withdrawal which, under paragraph (c) of this section, is treated as 
being made out of the ordinary income account is to be included in gross 
income as an item of ordinary income for the taxable year in which the 
withdrawal is made.
    (2) Any portion of a nonqualified withdrawal which, under paragraph 
(c) of this section, is treated as being made out of the capital gain 
account is to be included in income as an item of long-term capital gain 
recognized during the taxable year in which the withdrawal is made.
    (3) For effect upon a party's taxable income of capital losses 
remaining in a fund upon the termination of a fund (which, under 
paragraph (b) of this section, is treated as a nonqualified withdrawal 
of amounts remaining in the fund), see Sec. 391.4(e).
    (e) Interest. (1) For the period on or before the last date 
prescribed by law, including extensions thereof, for filing the party's 
Federal income tax return for the taxable year during which a 
nonqualified withdrawal is made, no interest shall be payable under 
section 6601 of the Code in respect of the tax on any item which is 
included in gross income under paragraph (d) of this section, and no 
addition to such tax for such period shall be payable under section 6651 
of the Code. In lieu of the interest and additions to tax under such 
sections, simple interest on the amount of the tax attributable to any 
item included in gross income under paragraph (d) of this section is to 
be paid at the rate of interest determined for the year of withdrawal 
under paragraph (e)(2) of this section. Such interest is to be charged 
for the period from the last date prescribed for payment of tax for the 
taxable year for which such item was deposited in the fund to the last 
date for payment of tax for the taxable year in which the withdrawal is 
made. Both dates are to be determined without regard to any extensions 
of time for payment. Interest determined under this paragraph which is 
paid within the taxable year shall be allowed as a deduction for such 
year under section 163 of the Code. However, such interest is to be 
treated as part of the party's tax for the year of withdrawal for 
purposes of collection and in determining any interest or additions to 
tax for the year of withdrawal under section 6601 or 6651, respectively, 
of the Code.
    (2) For purposes of section 607(h)(3)(C)(ii) of the Act, and for 
purposes of certain dispositions of vessels constructed, reconstructed, 
or acquired with qualified withdrawals described in Sec. 391.6(e), the 
applicable rate of interest for any nonqualified withdrawal--
    (i) Made in a taxable year beginning in 1970 and 1971 is 8 percent.
    (ii) Made in a taxable year beginning after 1971, the rate for such 
year as determined and published jointly by the Secretary of the 
Treasury or his delegate and the Secretary of Transportation. Such rate 
shall bear a relationship to 8 percent which the Secretaries determine 
to be comparable to the relationship which the money rates and 
investment yields for the calendar year immediately preceding the 
beginning of the taxable year bear to the money rates and investment 
yields for the calendar year 1970. The determination of the applicable 
rate for any such taxable year will be computed by multiplying 8 percent 
by the ratio which (a) the average yield on 5-year Treasury securities 
for the calendar year immediately preceding the beginning of such 
taxable year, bears to (b) the average yield on 5-year Treasury 
securities for the calendar year 1970. The applicable rate so determined 
shall be computed to the nearest one-hundredth of 1 percent. If such a 
determination and publication is made, the latest published percentage 
shall apply for any taxable year beginning in the calendar year

[[Page 392]]

with respect to which publication is made.
    (3) No interest shall be payable in respect of taxes on amounts 
referred to in section 607(h)(2) (i) and (ii) of the Act (relating to 
withdrawals for research and development and payments against 
indebtedness in excess of basis) or in the case of any nonqualified 
withdrawal arising from the application of the recapture provision of 
section 606(5) of the Merchant Marine Act, 1936, as in effect on 
December 31, 1969.
    (f) Basis and holding period in the case of property purchased by 
the fund or considered purchased by the fund. In the case of a 
nonqualified withdrawal of property other than money which was purchased 
by the fund (including deposited property considered under Sec. 391.2 
(g)(1)(ii) as purchased by the fund), the adjusted basis of the property 
in the hands of the party is its adjusted basis to the fund on the day 
of the withdrawal. In determining the period for which the taxpayer has 
held the property withdrawn in a nonqualified withdrawal, there shall be 
included only the period beginning with the date on which the withdrawal 
occurred. For basis and holding period in the case of nonqualified 
withdrawals of property other than money deposited into the fund, see 
Sec. 391.2(g)(4).



Sec. 391.8  Certain corporate reorganizations and changes in partnerships, 

and certain transfers on death. [Reserved]



Sec. 391.9  Consolidated returns. [Reserved]



Sec. 391.10  Transitional rules for existing funds.

    (a) In general. Section 607(j) of the Act provides that any person 
who was maintaining a fund or funds under section 607 of the Merchant 
Marine Act, 1936, prior to its amendment by the Merchant Marine Act of 
1970 (for purposes of this part referred to as ``old fund'') may 
continue to maintain such old fund in the same manner as under prior law 
subject to the limitations contained in section 607(j) of the Act. Thus, 
a party may not simultaneously maintain such old fund and a new fund 
established under the Act.
    (b) Extension of agreement to new fund. If a person enters into an 
agreement under the Act to establish a new fund, he may agree to the 
extension of such agreement to some or all of the amounts in the old 
fund and transfer the amounts in the old fund to which the agreement is 
to apply from the old fund to the new fund. If an agreement to establish 
a new fund is extended to amounts from an old fund, each item in the old 
fund to which such agreement applies shall be considered to be 
transferred to the appropriate account in the manner provided for in 
Sec. 391.8(d) in the new fund in a nontaxable transaction which is in 
accordance with the provisions of the agreement under which such old 
fund was maintained. For purposes of determining the amount of interest 
under section 607(h)(3)(C) of the Act and Sec. 391.7(e), the date of 
deposit of any item so transferred shall be deemed to be July 1, 1971, 
or the date of the deposit in the old fund, whichever is the later.



Sec. 391.11  Definitions.

    (a) As used in the regulations in this part and as defined in 
section 607(k) of the Act--
    (1) The term eligible vessel means any vessel--
    (i) Constructed in the United States, and if reconstructed, 
reconstructed in the United States,
    (ii) Documented under the laws of the United States, and
    (iii) Operated in the foreign or domestic commerce of the United 
States or in the fisheries of the United States. Any vessel which was 
constructed outside of the United States but documented under the laws 
of the United States on April 15, 1970, or constructed outside the 
United States for use in the U.S. foreign trade pursuant to a contract 
entered into before April 15, 1970, shall be treated as satisfying the 
requirements of paragraph (a)(1) of this section and the requirements of 
paragraph (a)(2)(i) of this section.
    (2) The term qualified vessel means any vessel--
    (i) Constructed in the United States and, if reconstructed, 
reconstructed in the United States,
    (ii) Documented under the laws of the United States, and

[[Page 393]]

    (iii) Which the person maintaining the fund agrees with the 
Secretary of Transportation will be operated in the U.S. foreign, Great 
Lakes, or noncontiguous domestic trade or in the fisheries of the United 
States.
    (3) The term agreement vessel means any eligible vessel or qualified 
vessel which is subject to an agreement entered into under section 607 
of the Act.
    (4) The term vessel includes cargo handling equipment which the 
Secretary of Transportation determines is intended for use primarily on 
the vessel. The term vessel also includes an ocean-going towing vessel 
or an ocean-going barge or comparable towing vessel or barge operated in 
the Great Lakes.
    (b) Insofar as the computation and collection of taxes are 
concerned, other terms used in the regulation in this part, except as 
otherwise provided in the Act or this part, have the same meaning as in 
the Code and the regulations thereunder.

[29 FR 10464, July 28, 1964]

                           PART 392 [RESERVED]



PART 393_AMERICA'S MARINE HIGHWAY PROGRAM--Table of Contents



Sec.
393.1 Purpose.
393.2 Definitions.
393.3 Marine Highway Corridors.
393.4 Marine Highway Projects.
393.5 Incentives, Impediments and Solutions.
393.6 Research on Marine Highway Transportation.

    Authority: Energy Independence and Security Act of 2007, Sections 
1121, 1122, and 1123 of Public Law 110-140, enacted into law on December 
19, 2007 (121 Stat. 1492).

    Source: 75 FR 18101, Apr. 9, 2010, unless otherwise noted.



Sec. 393.1  Purpose.

    (a) This part prescribes final regulations establishing a short sea 
transportation program as set forth in Sections 1121, 1122, and 1123 of 
the Energy Independence and Security Act of 2007, enacted into law on 
December 19, 2007.
    (b) The purpose of America's Marine Highway Program is described in 
Section 1121. Section 1121 states that ``[t]he Secretary shall designate 
short sea transportation routes as extensions of the surface 
transportation system to focus public and private efforts to use the 
waterways to relieve landside congestion along coastal corridors.'' 
America's Marine Highway Program consists of four primary components:
    (1) Marine Highway Corridor Designations. This regulation 
establishes the goals and methods by which specific Marine Highway 
Corridors (including Connectors and Crossings) will be identified and 
designated by the Secretary of Transportation. The purpose of 
designating Marine Highway Corridors is to integrate America's Marine 
Highway into the surface transportation system. The Marine Highway 
Corridors will serve as extensions of the surface transportation system. 
They are commercial coastal, inland, and intracoastal waters of the 
United States, described in terms of the specific landside 
transportation routes (road or rail line) that they supplement. They 
support the movement of passengers and cargo along these specified 
routes and mitigate the effects of landside congestion, such as 
increased emissions and energy inefficiencies. In addition to corridors, 
the Secretary may designate Marine Highway ``Connectors'' and 
``Crossings'' as described in paragraphs (h)(1) and (h)(2) of Sec. 
393.2. Through America's Marine Highway Program, the Department will 
encourage the development of multi-jurisdictional coalitions and focus 
public and private efforts and investment on shifting freight and 
passengers from at- or near capacity landside routes to more effectively 
utilize Marine Highway Corridors.
    (2) Marine Highway Project Designations. This regulation establishes 
the goals and methods by which specific Marine Highway Projects will be 
identified and designated by the Secretary of Transportation. The 
purpose is to designate projects that, if successfully implemented, 
expanded, or otherwise enhanced, would reduce external costs and provide 
the greatest benefit to the public. Closely linked to congestion relief, 
public benefits can include, but are not limited to, reduced emissions, 
including greenhouse gases, reduced energy consumption, reduced costs 
associated with landside transportation

[[Page 394]]

infrastructure maintenance savings, improved safety and transportation 
system resiliency and redundancy. Additional consideration will be given 
to Marine Highway Projects that represent the most cost-effective option 
among other modal improvements. Designated Marine Highway Projects may 
receive direct support from the Department as described in this section.
    (3) Incentives, Impediments and Solutions. This section outlines how 
the Department, in partnership with public and private entities, will 
identify potential incentives, seek solutions to impediments to 
encourage utilization of America's Marine Highway and incorporate it, 
including ferries, in State, regional, local, and Tribal government 
transportation planning.
    (4) Research. This section describes the research that the 
Department, working with the Environmental Protection Agency, will 
conduct to support America's Marine Highway, within the limitations of 
available resources, and to encourage multi-State planning. Research 
would include environmental and transportation impacts (benefits and 
costs), technology, vessel design, and solutions to impediments to the 
Marine Highway.
    (c) In addition, vessels engaged in Marine Highway operations may 
apply for Capital Construction Fund (CCF) benefits. This program was 
created to assist owners and operators of U.S.-flag vessels in 
accumulating the capital necessary for the modernization and expansion 
of the U.S. merchant marine by encouraging construction, reconstruction, 
or acquisition of vessels through the deferment of Federal income taxes 
on certain deposits of money placed into a CCF.



Sec. 393.2  Definitions.

    For the purposes of this part:
    (a) Administrator. The Maritime Administrator, Maritime 
Administration, U.S. DOT, who has been authorized by the Secretary of 
Transportation to administer America's Marine Highway Program.
    (b) Applicant. An entity that applies for designation of a Marine 
Highway Corridor or Project under this regulation.
    (c) Coastwise Shipping Laws. Laws, including the Jones Act, as set 
forth in Chapter 551 of Title 46, United States Code.
    (d) Corridor Sponsor. An entity that recommends a Corridor 
(including a Connector or Crossing, as described below) for designation 
as a Marine Highway Corridor. Corridor sponsors must be public entities, 
including but not limited to, Metropolitan Planning Organizations, State 
governments (including Departments of Transportation), port authorities 
and Tribal governments, who may submit recommendations for designation 
as a Marine Highway Corridor.
    (e) Department. The U.S. Department of Transportation (DOT).
    (f) Domestic Trade. Trade between points in the United States.
    (g) Lift-on/Lift-off (LO/LO) Vessel. A vessel of which the loading 
and discharging operations are carried out by cranes and derricks.
    (h) Marine Highway Corridor. A water transportation route that 
serves as an extension of the surface transportation system that can 
help mitigate congestion-related impacts along a specified land 
transportation route. It is identified and described in terms of the 
land transportation route that it supplements, and must, by transporting 
freight or passengers, provide measurable benefits to the surface 
transportation route in the form of traffic reductions, reduced 
emissions, energy savings, improved safety, system resiliency, and/or 
reduced infrastructure costs. Routes that cannot relieve landside 
congestion (i.e.; those to/from islands) are not eligible for 
designation under this program. In addition to ``Corridors,'' 
prospective sponsors can recommend Marine Highway ``Connectors'' and 
``Crossings'' for designation as described in paragraphs (h)(1) and 
(h)(2) of this section:
    (1) Marine Highway Connectors are routes that will provide 
substantial linkages to or between the larger corridors, and serve, in 
conjunction with a corridor, to move freight and/or passengers into, out 
of or within a region.
    (2) Marine Highway Crossings are routes that provide relief to 
congested border crossings, bridges, and tunnels or offer a shorter 
route than the

[[Page 395]]

landside alternative. Although they may not parallel a corridor or 
connector, crossings may provide relief to a corridor or connector, or 
to local or regional passenger and freight transportation systems. 
Crossings may include cross-harbor and inter-terminal passenger and/or 
freight services.
    (i) Marine Highway Project. A new Marine Highway service, or 
expansion of an existing service, that receives support from the 
Department and provides public benefit by transporting passengers and/or 
freight (container or wheeled) in support of all or a portion of a 
Marine Highway Corridor, Connector or Crossing. Projects are proposed by 
a project sponsor and designated by the Secretary under this program.
    (j) Marine Highway (or Short Sea Transportation): The carriage by 
vessel of passengers and/or cargo (intermodal containers, trailers, car 
floats, rail ferries and other cargoes loaded by wheeled technology) 
that is loaded at a port in the United States and unloaded either at 
another port in the United States, or that is loaded at a port in the 
United States and unloaded at a port in Canada located in the Great 
Lakes-Saint Lawrence Seaway System, or loaded at a port in Canada 
located in the Great Lakes-Saint Lawrence Seaway System and unloaded at 
a port in the United States. For the purposes of this specific program, 
routes and services that do not offer potential relief to a landside 
transportation route (i.e.; to/from islands) do not fall within this 
definition.
    (k) Project sponsor. Project sponsors must be public entities, 
including but not limited to, Metropolitan Planning Organizations, State 
governments (including State Departments of Transportation), port 
authorities and Tribal governments, who may submit applications for 
designation as a Marine Highway Project.
    (l) Roll-on/Roll-off (RO/RO) Vessel. Any vessel that has ramps 
allowing cargo to be loaded and discharged by means of wheeled vehicles 
so that cranes are not required. This includes, but is not limited to 
trailers, car floats and ferries, including rail ferries.
    (m) Secretary. The Secretary of Transportation.
    (n) United States Documented Vessel. A vessel documented under 46 
U.S.C. Chapter 121.



Sec. 393.3  Marine Highway Corridors.

    (a) Summary. The purpose of this section is to designate specific 
routes as Marine Highway Corridors (including Connectors and Crossings). 
Corridors will be designated by the Secretary. The goal of this 
designation process is to accelerate the development of multi-State and 
multi-jurisdictional Marine Highway Corridors to relieve landside 
congestion. Designation will encourage public/private partnerships, and 
help focus investment on those Marine Highway Corridors that offer the 
maximum potential public benefit in congestion-related emissions 
reduction, energy efficiency, safety and other areas. Corridors already 
designated as ``Corridors of the Future'' under DOT's National Strategy 
to Reduce Congestion that have commercial waterways that parallel or can 
otherwise benefit them will be fast-tracked for designation as Marine 
Highway Corridors.
    (b) Objectives. The primary objectives of the designation of Marine 
Highway Corridors are to:
    (1) Establish Marine Highway Corridors as ``extensions of the 
surface transportation system'' as provided by Section 1121 of the 
Energy Independence and Security Act of 2007.
    (2) Develop multi-jurisdictional coalitions that focus public and 
private efforts to use the waterways to relieve congestion-related 
impacts along land transportation routes for freight and passengers.
    (3) Obtain public benefit by shifting freight and passengers in 
measurable terms from land transportation routes to Marine Highway 
Corridors. In addition, public benefits can include, but are not limited 
to, reduced emissions, including greenhouse gases, reduced energy 
consumption, landside infrastructure maintenance savings, improved 
safety, and added system resiliency. Additional consideration will be 
given to Marine Highway Projects that represent the most cost-effective 
option among other modal improvements and projects that reduce border 
delays.

[[Page 396]]

    (4) Identify potential savings that could be realized by providing 
an alternative to land transportation infrastructure construction and 
maintenance.
    (c) Designation of Marine Highway Corridors. The Department will 
continue to accept Marine Highway Corridor recommendations from 
prospective Corridor sponsors. Corridor sponsors must be public 
entities, including but not limited to, Metropolitan Planning 
Organizations, State governments (including State Departments of 
Transportation), port authorities and Tribal governments. In addition to 
``Corridors,'' prospective sponsors may recommend Marine Highway 
``Connectors'' and ``Crossings'' for designation by the Secretary (see 
definitions). The Secretary will make Marine Highway Corridor 
designations. In certain cases the Secretary of Transportation may 
designate a Marine Highway Corridor, Connector or Crossing without 
receipt of a recommendation. The Department will publish all Marine 
Highway Corridors that receive designation by the Secretary on the 
Maritime Administration's Web site. Interested parties are encouraged to 
visit http://www.marad.dot.gov/ships--shipping--landing--page/mhi--home/
mhi--home.htm for the current list of Designated Corridors. When 
responding to specific solicitations for Marine Highway Corridors, 
Connectors and Crossings by the Secretary of Transportation, the 
sponsors should provide the following information in the recommendation:
    (1) Physical Description of Proposed Marine Highway Corridor. 
Describe the proposed Marine Highway Corridor (including Connector or 
Crossing), and its connection to existing or planned transportation 
infrastructure and intermodal facilities. Include key navigational 
factors such as available draft, channel width, bridge or lock clearance 
and identify if they could limit service.
    (2) Surface Transportation Corridor Served. Provide a summary of the 
land transportation route that the Marine Highway would benefit. Include 
a description of the route, its primary users, the nature, locations and 
occurrence of travel delays, urban areas affected, and other geographic 
or jurisdictional issues that impact its overall operation and 
performance.
    (3) Involved Parties. Provide the organizational structure of the 
parties recommending the Corridor designation including business 
affiliations, and private sector stakeholders. Multi-jurisdictional 
coalitions may include State Departments of Transportation, Metropolitan 
Planning Organizations, municipalities and other governmental entities 
(including Tribal) that have been engaged. Include the extent to which 
they support the corridor designation. Provide any affiliations with 
environmental groups or civic associations.
    (4) Passengers and Freight. Identify the number of likely passengers 
and/or quantity of freight that are candidates for shifting to water 
transportation on the proposed Marine Highway Corridor. If known, 
include specific shippers, manufacturers, distributors or other entities 
that could benefit from a Marine Highway alternative, and the extent to 
which these entities have been engaged.
    (5) Congestion Reduction. Describe the extent to which the proposed 
Corridor could relieve landside congestion in measurable terms. Include 
any known offsetting land transportation infrastructure savings (either 
construction or maintenance) that would result from the project.
    (6) Public benefits. Provide, if known, the savings over status quo 
in emissions, including greenhouse gases, energy consumption, landside 
infrastructure maintenance costs, safety and system resiliency. Specify 
if the Marine Highway Corridor represents the most cost-effective option 
among other modal improvements. Include consideration of the 
implications future growth may have on the proposal.
    (7) Impediments. Describe known or anticipated obstacles to shifting 
capacity to the proposed Marine Highway Corridor. Include any 
strategies, either in place or proposed, to deal with the impediments.
    (d) Scope of Department Support. Marine Highway Corridors, 
Connectors and Crossings that receive designation will be posted on a 
Web site maintained by the Maritime Administration. The

[[Page 397]]

Department of Transportation will coordinate with Corridor sponsors to 
identify the most appropriate actions to support the Corridors. Support 
could include any of the following, as appropriate and within agency 
resources:
    (1) Promote the Corridor with appropriate governmental, State, local 
and Tribal government transportation planners, private sector entities 
or other decision-makers.
    (2) Coordinate with ports, State Departments of Transportation, 
Metropolitan Planning Organizations, localities, other public agencies 
(including Tribal governments) and the private sector to support the 
designated corridor. Efforts can be aimed at obtaining access to land or 
terminals, developing landside facilities and infrastructure, and 
working with Federal, regional, State, local, and Tribal governmental 
entities to remove barriers to self-supporting operations.
    (3) Pursue memorandums of agreement with other Federal entities to 
transport Federally owned or generated cargo using waterborne 
transportation along the Marine Highway Corridor, when practical or 
available.
    (4) Assist with collection and dissemination of data for the 
designation and delineation of Marine Highway Corridors as available 
resources permit.
    (5) Work with Federal entities and regional, State, local and Tribal 
governments to include designated Corridors in transportation planning.
    (6) Bring specific impediments to the attention of the advisory 
board chartered to address such barriers.
    (7) Conduct research on issues specific to designated Corridors as 
available resources permit.
    (8) Utilize current or future Federal funding mechanisms, as 
appropriate, to support the Corridor.
    (9) Communicate with designated Corridor coalitions to provide 
ongoing support and identify lessons learned and best practices for the 
overall Marine Highway program.



Sec. 393.4  Marine Highway Projects.

    (a) Summary. The purpose of this section is to designate projects 
that, if successfully implemented, expanded, or otherwise enhanced, 
would reduce external costs and provide the greatest benefit to the 
public. In addition to congestion relief, public benefits can include, 
but are not limited to, reduced emissions, including greenhouse gases, 
reduced energy consumption, landside infrastructure maintenance savings, 
and improved safety. The Department will give additional consideration 
to Marine Highway Projects that represent the most cost-effective option 
among other modal improvements or reduce border crossing delays. Some 
Marine Highway Projects can also provide public benefit by offering 
routes that are more resilient to natural or human incidents that 
interrupt surface transportation, or provide additional, redundant 
surface transportation options. Designation can help focus public and 
private investment on pre-identified projects that offer the maximum 
potential public benefit. Designated Marine Highway Projects may receive 
support from the Department as described in this section.
    (b) Objectives. The primary objectives of the designation of Marine 
Highway Projects are to:
    (1) Reduce landside congestion-related impacts.
    (2) Identify proposed water transportation services that represent 
the greatest public benefit as measured in reduced emissions, including 
greenhouse gases, reduced energy consumption, landside infrastructure 
maintenance savings and improved safety.
    (3) Identify potential savings with water transportation projects 
that represent the most cost-effective option among other modal 
improvements or reduce border crossing delays.
    (4) Improve surface transportation system resiliency and provide 
additional options.
    (5) Focus resources on those projects that offer the greatest 
likelihood of successful operation.
    (6) Develop best practices for the Marine Highway Program.
    (7) Provide specific examples, with performance measures and 
quantifiable outcomes, of successful Marine Highway Projects for 
demonstration of the benefits of water transportation.
    (c) Designation of Marine Highway Projects. The Department will 
solicit applications for designation as specific

[[Page 398]]

Marine Highway Projects. Applications will be accepted from a Project 
sponsor. Project sponsors must be public entities, including but not 
limited to, Metropolitan Planning Organizations, State governments 
(including State Departments of Transportation), port authorities and 
Tribal governments. Project sponsors are encouraged to develop 
coalitions and public/private partnerships with the common objective of 
developing the specific Marine Highway Project. Potential partners can 
include vessel owners and operators, third party logistics providers, 
trucking companies, shippers, railroads, port authorities, State, 
regional, local and Tribal government transportation planners, 
environmental interests or any combination of entities working in 
collaboration under a single application. Candidate Projects can start a 
new operation or be an existing Marine Highway operation where expansion 
or improvements present maximum public benefit. Applications must meet 
the requirements of coastwise shipping laws and all applicable Federal, 
State and local laws.
    (d) Action by the Department of Transportation. The Department will 
evaluate and select Projects based on an analysis and technical review 
of the information provided by the applicant. The Department will also 
evaluate projects based on the results of an environmental analysis. 
Projects that support a designated Marine Highway Corridor (or Connector 
or Crossing), receive a favorable technical review, and meet other 
criteria as defined in 46 CFR 393.4(e), may be nominated by the Maritime 
Administrator for selection by the Secretary. Upon designation as a 
Marine Highway Project, the Department will coordinate with the Project 
sponsor to identify the most appropriate Departmental actions to support 
the project. Department support could include any of the following, as 
appropriate and within agency resources:
    (1) Promote the service with appropriate governmental, regional, 
State, local or Tribal government transportation planners, private 
sector entities or other decision makers.
    (2) Coordinate with ports, State Departments of Transportation, 
Metropolitan Planning Organizations, localities, other public agencies 
and the private sector to support the designated service. Efforts can be 
aimed at identifying resources, obtaining access to land or terminals, 
developing landside facilities and infrastructure, and working with 
Federal, regional, State, local or Tribal governmental entities to 
remove barriers to success.
    (3) Pursue memorandums of agreement with other Federal entities to 
transport Federally owned or generated cargo using the services of the 
designated project, when practical or available.
    (4) In cases where transportation infrastructure is needed, Project 
sponsors may request to be included on the Secretary of Transportation's 
list of high-priority transportation infrastructure projects under 
Executive Order 13274, ``Environmental Stewardship and Transportation 
Infrastructure Project Review.'' For these projects, Executive Order 
13274 provides that Federal agencies shall, to the maximum extent 
practicable, expedite their reviews for relevant permits or other 
approvals and take related actions as necessary, consistent with 
available resources and applicable laws.
    (5) Assist with developing individual performance measures for 
Marine Highway Projects.
    (6) Work with Federal entities and regional, State, local and Tribal 
governments to include designated Projects in transportation planning.
    (7) Bring specific impediments to the attention of the advisory 
board chartered to address these barriers.
    (8) Conduct research on issues specific to Marine Highway Projects.
    (9) Utilize current or future Federal funding mechanisms, as 
appropriate, to support the Projects.
    (10) Maintain liaison with sponsors and representatives of 
designated Projects to provide ongoing support and identify lessons 
learned and best practices for other projects and the overall Marine 
Highway program.
    (e) Application for Designation as a Marine Highway Project. This 
section specifies the criteria that the Department will use to evaluate 
Marine Highway Project applications. Applicants should provide the 
following:

[[Page 399]]

    (1) Applications for Proposed Projects. When responding to specific 
solicitations for Marine Highway Projects by the Department, describe 
the overall operation of the proposed project, including which ports and 
terminals will be served, number and type of vessels, size, quantity and 
type of cargo and/or passengers, routes, frequency, and other relevant 
information. Applicants should also include the following information in 
their project applications:
    (i) Marine Highway Corridor(s). Identify which, if known, designated 
Marine Highway Corridors, Connectors or Crossings will be utilized.
    (ii) Organization. Provide the organizational structure of the 
proposed project, including business affiliations, environmental, non-
profit organizations and governmental or private sector stakeholders.
    (iii) Partnerships.
    (A) Private Sector participation. Identify private sector partners 
and describe their levels of commitment. Private sector partners can 
include terminals, vessel operators, shipyards, shippers, trucking 
companies, railroads, third party logistics providers, shipping lines, 
labor, workforce and other entities deemed appropriate by the Secretary.
    (B) Public Sector partners: Identify State Departments of 
Transportation, Metropolitan Planning Organizations, municipalities and 
other governmental entities (including Tribal) that have been engaged 
and the extent to which they support the service. Include any 
affiliations with environmental groups or civic associations.
    (C) Documentation. Provide documents affirming commitment or support 
from entities involved in the project.
    (iv) External cost savings and public benefit.
    (A) Potential relief to surface transportation travel delays. 
Describe the extent to which the proposed project will relieve landside 
congestion in measurable terms now and in the future, such as reductions 
in vehicle miles traveled. Include the landside routes that stand to 
benefit from the water transportation operation.
    (B) Emissions benefits. Address the savings, in quantifiable terms, 
now and in the future over the current practice in emissions, including 
greenhouse gas emissions, criteria air pollutants or other environmental 
benefits the project offers.
    (C) Energy savings. Provide an analysis of potential reductions in 
energy consumption, in quantifiable terms, now and in the future over 
the current practice.
    (D) Landside transportation infrastructure maintenance savings. To 
the extent the data is available, indicate, in dollars per year, the 
projected savings of public funds that would result from a proposed 
project in road or railroad maintenance or repair, including pavement, 
bridges, tunnels or related transportation infrastructure. Include the 
impacts of accelerated infrastructure deterioration caused by vehicles 
currently using the route, especially in cases of oversize or overweight 
vehicles.
    (E) Safety improvements. Describe, in measurable terms, the 
projected safety improvements that would result from the proposed 
operation.
    (F) System resiliency and redundancy. To the extent data is 
available describe, if applicable, how a proposed Marine Highway Project 
offers a resilient route or service that can benefit the public. Where 
land transportation routes serving a locale or region are limited, 
describe how a proposed project offers an alternative and the benefit 
this could offer when other routes are interrupted as a result of 
natural or man-made incidents.
    (v) Capacity Alternatives. In cases where a Marine Highway Project 
is proposed as an alternative to constructing new land transportation 
capacity, indicate, in quantifiable terms, whether the proposed project 
represents the most cost-beneficial option among other modal 
improvements. Include in the comparison an analysis of the full range of 
benefits expected from the project. Include the projected savings in 
life-cycle costs of publicly maintained infrastructure.
    (vi) Business Planning. Indicate the degree to which the proposed 
project is associated with a service that is self-supporting:
    (A) Financial plan. Provide the project's financial plan and provide

[[Page 400]]

projected revenues and expenses. Include labor and operating costs, 
drayage, fixed and recurring infrastructure and maintenance costs, 
vessel or equipment acquisition or construction costs, etc. Include any 
anticipated changes in local or regional freight or passenger 
transportation, policy or regulations, ports, industry, corridors, or 
other developments affecting the project.
    (B) Demand for services. Identify shippers that have indicated an 
interest in and level of commitment to the proposed service, or describe 
the specific commodities, market, and shippers the service will attract, 
and the extent to which these entities have been engaged. In the case of 
services involving passengers, provide indicators of demand for the 
service, anticipated volumes and other factors that indicate likely 
utilization of the service. Include a marketing strategy, if one is in 
place.
    (C) Analysis. Provide, (or reference, if publicly available) market 
or transportation system research, data, and analysis used to develop or 
support the business model.
    (vii) Proposed Project Timeline. Include a proposed project timeline 
with estimated start dates and key milestones. Include the point in the 
timeline at which the enterprise is anticipated to attain self-
sufficiency (if applicable).
    (viii) Support. Describe any known or anticipated obstacles to 
either implementation or long-term success of the project. Include any 
strategies, either in place or proposed, to mitigate impediments. In the 
event that public sector financial support is being sought, describe the 
amount, form and duration of public investment required.
    (ix) Environmental Considerations. Applicants must provide all 
information on hand that would assist the Department in conducting 
environmental analysis of the proposed project under the National 
Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321 et seq.)
    (2) Cost and Benefits. The Department believes that benefit-cost 
analysis (BCA), including the monetization and discounting of costs and 
benefits to a common unit of measurement in present-day dollars, is 
important. The systematic process of comparing expected benefits and 
costs helps decision-makers organize information about, and evaluate 
trade-offs between alternative transportation investments. However, we 
also recognize that development of a thorough BCA can be prohibitively 
costly to applicants, especially in cases where Federal funding is not 
currently available. Applicants should provide a BCA, if one is 
available. At a minimum, applicants should provide estimates of the 
project's expected benefits in external cost savings and public benefit 
and costs of capacity alternatives [sections 393.4(e)(1)(iv) and 
393.4(e)(1)(v)].
    (3) Standards and Measures. The Department will post, on the 
Maritime Administration's Web site, (http://www.marad.dot.gov) proposed 
standards (i.e.: the definition and use of ton-miles, measures of 
landside congestion, etc.) and measures that, lacking more specific or 
technically supported applicant-provided data, will be used by the 
Department to evaluate applications. Some examples of measures are the 
use of a standard cargo tonnage per container, fuel consumption rates, 
vehicle emissions and safety data for various transportation options, 
and baseline maintenance, repair and construction costs for surface 
transportation infrastructure. While we recognize that these standards 
and measures may not be ideal, the intent is to establish a minimal 
baseline by which to evaluate external costs and public benefits of 
transportation options. In the event applicants provide more specific 
and supported measures, they will be used in evaluating the potential 
benefits and costs of a project.
    (4) Protection of Confidential Business Information. All information 
submitted as part of or in support of an application shall use publicly 
available data or data that can be made public and methodologies that 
are accepted by industry practice and standards, to the extent possible. 
If your application includes information that you consider to be trade 
secret or confidential commercial or financial information, please do 
the following:
    (i) Note on the front cover that the submission ``Contains 
Confidential Business Information (CBI);''

[[Page 401]]

    (ii) Mark each affected page ``CBI;'' and
    (iii) Clearly highlight or otherwise denote the CBI portions. The 
Department protects such information from disclosure to the extent 
allowed under applicable law. In the event the Department receives a 
Freedom of Information Act (FOIA) request for the information, the 
Department will follow the procedures described in its FOIA regulations 
at 49 CFR Sec. 7.17. Only information that is ultimately determined to 
be confidential under that procedure will be exempt from disclosure 
under FOIA.
    (5) Contents of Application. When responding to specific 
solicitations for Marine Highway Projects by the Department, applicants 
should include all of the information requested by Section 393.4(e)(1) 
and (2) above organized in a manner consistent with the elements set 
forth in that section. The Department reserves the right to ask any 
applicant to supplement the data in its application, but expects 
applications to be complete upon submission. The narrative portion of an 
application should not exceed 20 pages in length. The narrative should 
address all relevant information contained in paragraphs (e)(1)(i) 
through (ix) of Sec. 393.4. Documentation supporting the assertions 
made in the narrative portion may also be provided in the form of 
appendices, but limited to relevant information. Applications may be 
submitted electronically via the Federal Register (http://
www.regulations.gov). Applications submitted in writing must include the 
original and three copies and must be on 8.5 x 11 
single spaced paper, excluding maps, Geographic Information Systems 
(GIS) representations, etc. In the event that the sponsor of a Marine 
Highway Project that has already been designated by the Secretary seeks 
a modification to the designation because of a change in project scope, 
an expansion of the project, or other significant change to the project, 
the project sponsor should request the change in writing to the 
Secretary via the Administrator of the Maritime Administration. The 
request should contain any changed or new information that is relevant 
to the project.
    (6) Evaluation Process. Upon receipt by the Maritime Administrator, 
the application will be evaluated using the criteria outlined above 
during a technical review and an environmental analysis. The review will 
assess factors such as project scope, impact, public benefit, 
environmental effect, offsetting costs, cost to the Government (if any), 
the likelihood of long-term self-supporting operations, and its 
relationship with Marine Highway Corridors once designated (See section 
393.3 Marine Highway Corridors). Additional factors may be considered 
during the evaluation process. Upon completion of the technical review, 
applications will be forwarded to an inter-agency review team as 
described below. The Department will establish an inter-agency team to 
review each application received during the solicitation period 
(solicitation periods will be established via a future Federal Register 
Notice). The evaluation team will be led by the Office of the Secretary 
and will include members of the Maritime Administration, other 
Department of Transportation Operating Administrations, and as 
appropriate, representation from other Federal agencies and other 
representatives, as needed. The inter-agency team will evaluate 
applications using criteria that establishes the degree to which a 
proposed project can; reduce external cost and provide public benefit; 
offer a lower-cost alternative to increasing capacity in the Corridor, 
and; demonstrate the likelihood the service associated with the project 
will become self-supporting in a specified and reasonable timeframe. The 
Department will assign ratings of ``highly recommended,'' 
``recommended,'' or ``not recommended'' for each application based on 
the criteria set forth in section 393.4(e)(1) and (2) of this rule. 
Specific numerical scores will not be assigned. Within the overall 
criteria of External Cost Savings and Public Benefit, elements 
paragraphs (e)(1)(iv)(A) through (e)(1)(iv)(D) of this section will 
receive greater weight than will paragraphs (e)(1)(iv)(E) and 
(e)(1)(iv)(F) of this section. For the Business Planning elements, only 
paragraphs (e)(1)(vi)(A) and (e)(1)(vi)(B) of this section will be 
weighted; paragraph (e)(1)(vi)(C) of this section will

[[Page 402]]

be reviewed to assess the degree to which future projections such as 
operating costs and freight/passenger demand are accurate and reliable. 
Projects that have been deemed ``highly recommended'' and 
``recommended'' will be placed on a preliminary list of projects for 
designation. The Secretary will make final designations in a manner that 
provides a balance between geographic regions and business models (i.e. 
among freight and passenger, expansion and new service, and existing 
vessel/terminal and new construction) to the degree this can be 
achieved. Prospective project sponsors will be notified as to the status 
of their application in writing once a determination has been made.
    (7) Performance Monitoring. (i) Once designated projects enter the 
operational phase (either start of a new service, or expansion of 
existing service), the Department will evaluate them regularly to 
determine if the project's objectives are being achieved.
    (ii) Overall project performance will be in one of three 
categories--exceeds, meets, or does not meet original projections in 
each of the three areas defined below:
    Public benefit. Does the project meet the stated goals in shifting 
specific numbers of vehicles (number of trucks, rail cars or 
automobiles) off the designated landside routes? Other public benefits, 
including energy savings, reduced emissions, and safety improvements 
will be assumed to be a direct derivative of either numbers of vehicles 
shifted, or vehicle/ton miles avoided, unless specific factors change 
(such as a change in vessel fuel or emissions).
    Public cost. Is the overall cost to the Federal government (if any) 
on track with estimates at the time of designation? The overall cost to 
the Federal government represents the amount of Federal investment (i.e. 
direct funding, loan guarantees or similar mechanisms) reduced by the 
offsetting savings the project represents (road/bridge wear and tear 
avoided, infrastructure construction or expansion deferred).
    Timeliness factor. Is the project on track for the point at which 
the enterprise is projected to attain self-sufficiency? For example, if 
the project was anticipated to attain self-sufficiency after 36 months 
of operation, is it on track at the point of evaluation to meet that 
objective? This can be determined by assessing revenues, freight and 
passenger trends, expenses and other factors established in the 
application review process.



Sec. 393.5  Incentives, Impediments and Solutions.

    (a) Summary. The purpose of this section is to identify short term 
incentives and solutions to impediments in order to encourage use of the 
Marine Highway for freight and passengers.
    (b) Objectives. This section is aimed at increasing the use of the 
Marine Highways through the following primary objectives:
    (1) Encourage the integration of Marine Highways in transportation 
plans at the State, regional, local and Tribal levels.
    (2) Develop short term incentives aimed at expanding existing or 
starting new Marine Highway operations.
    (3) Identify and seek solutions to impediments to the Marine 
Highway.
    (c) Federal, State, Local, Regional and Tribal Transportation 
Planning. The Department will coordinate with Federal, State, local and 
Tribal governments and Metropolitan Planning Organizations to develop 
strategies to encourage the use of America's Marine Highways for 
transportation of passengers and cargo. The Department will:
    (1) Work with these entities to assess plans and develop strategies, 
where appropriate, to incorporate Marine Highway transportation, 
including ferries, and other marine transportation solutions for 
regional and interstate transport of freight and passengers in their 
statewide and metropolitan transportation plans.
    (2) Facilitate groups of States and multi-State transportation 
entities to determine how Marine Highway transportation can address 
traffic delays, bottlenecks, and other interstate transportation 
challenges to their mutual benefit.
    (3) Identify other Federal agencies that have jurisdiction over the 
project, or which currently provide funding for components of the 
project, in order to determine the extent to which those agencies should 
be consulted with and

[[Page 403]]

invited to assist in the coordination process.
    (4) Consult with Federal Highway Administration, Federal Motor 
Carrier Safety Administration, Federal Railroad Administration, Federal 
Transit Administration and other entities within DOT, as appropriate, 
for support and to evaluate costs and benefits of proposed Marine 
Highway Corridors and Projects.
    (d) Short-Term Incentives. The Department will develop proposed 
short-term incentives to encourage the use, initiation, or expansion of 
Marine Highway services in consultation with shippers and other 
participants in transportation logistics, and government entities, as 
appropriate.
    (e) Impediments and Solutions. The Department will either establish 
a board, or modify an existing body, in accordance with the Federal 
Advisory Committee Act (FACA), whose role is to identify impediments 
that hinder effective use of the Marine Highways and recommend 
solutions. The Board will meet regularly and report its findings and 
recommended solutions to the Maritime Administrator. Board membership 
will include, among others, representation by Federal Departments and 
Agencies, State Departments of Transportation, Metropolitan Planning 
Organizations and other local public entities including Tribal 
governments and private sector stakeholders. The Department will take 
actions, as appropriate, to address impediments to the Marine Highways.



Sec. 393.6  Research on Marine Highway Transportation.

    (a) Summary. The Department will work in consultation with the 
Environmental Protection Agency and other entities as appropriate, 
within the limits of available resources, to conduct research in support 
of America's Marine Highway or in direct support of designated Marine 
Highway Corridors and Projects.
    (b) Objectives. The primary objectives of selected research Projects 
are to:
    (1) Identify and quantify environmental and transportation-related 
benefits that can be derived from utilization of the Marine Highways as 
compared to other modes of surface transportation.
    (2) Identify existing or emerging technology, vessel design, and 
other improvements that would reduce emissions, increase fuel economy, 
and lower costs of Marine Highway transportation and increase the 
efficiency of intermodal transfers.

                        PARTS 394-399 [RESERVED]

[[Page 405]]



CHAPTER III--COAST GUARD (GREAT LAKES PILOTAGE), DEPARTMENT OF HOMELAND 

                                SECURITY




  --------------------------------------------------------------------
Part                                                                Page
400

[Reserved]

401             Great Lakes pilotage regulations............         407
402             Great Lakes pilotage rules and orders.......         425
403             Great Lakes pilotage uniform accounting 
                    system..................................         427
404             Great Lakes pilotage ratemaking.............         429
405-499         [Reserved]

[[Page 407]]

                           PART 400 [RESERVED]



PART 401_GREAT LAKES PILOTAGE REGULATIONS--Table of Contents



                            Subpart A_General

Sec.
401.100 Purpose.
401.105 OMB control numbers assigned pursuant to the Paperwork Reduction 
          Act.
401.110 Definitions.
401.120 Federal reservation of pilotage regulations.

                    Subpart B_Registration of Pilots

401.200 Application for registration.
401.210 Requirements and qualifications for registration.
401.211 Requirements for training of Applicant Pilots.
401.220 Registration of pilots.
401.230 Certificates of Registration.
401.240 Renewal of Certificates of Registration.
401.250 Suspension and revocation of Certificates of Registration.
401.260 Reports.

  Subpart C_Establishment of Pools by Voluntary Associations of United 
                        States Registered Pilots

401.300 Authorization for establishment of pools.
401.310 Application for establishment of pools.
401.320 Requirements and qualifications for authorization to establish 
          pools.
401.330 Certificates of Authorization.
401.335 Suspension or revocation of a Certificate of Authorization.
401.340 Compliance with working rules of pools.

     Subpart D_Rates, Charges, and Conditions for Pilotage Services

401.400 Calculation of pilotage units and determination of weighting 
          factor.
401.401 Surcharges.
401.405 Basic rates and charges on the St. Lawrence River and Lake 
          Ontario.
401.407 Basic rates and charges on Lake Erie and the navigable waters 
          from Southeast Shoal to Port Huron, MI.
401.410 Basic rates and charges on Lakes Huron, Michigan and Superior 
          and the St. Mary's River.
401.420 Cancellation, delay or interruption in rendition of services.
401.425 Provision for additional pilot.
401.427 Charge on past due accounts.
401.428 Basic rates and charges for carrying a U.S. pilot beyond normal 
          change point or for boarding at other than the normal boarding 
          point.
401.430 Prohibited charges.
401.431 Disputed charges.
401.432 Certification of support services.
401.440 Advance payment of charges.
401.450 Pilot change points.
401.451 Pilot rest periods.

        Subpart E_Penalties; Operations Without Registered Pilots

401.500 Penalties for violations.
401.510 Operation without Registered Pilots.

 Subpart F_Procedure Governing Revocation or Suspension of Registration 
                    and Refusal To Renew Registration

401.600 Right to hearing.
401.605 Notice.
401.610 Hearing.
401.615 Representation.
401.620 Burden of proof.
401.630 Appearance, testimony, and cross-examination.
401.635 Evidence which shall be excluded.
401.640 Record for decision.
401.645 Administrative Law Judge's decision; exceptions thereto.
401.650 Review of Administrative Law Judge's initial decision.

Subpart G_Operating Requirements for U.S. Registered Pilots and Holders 
    of Certificates of Authorization; Authority of the Director Over 
                               Operations

401.700 Operating requirements for U.S. registered pilots.
401.710 Operating requirements for holders of Certificates of 
          Authorization.
401.720 Authority of the Director over operations.

    Authority: 46 U.S.C. 2104(a), 6101, 7701, 8105, 9303, 9304; 
Department of Homeland Security Delegation No. 0170.1; 46 CFR 401.105 
also issued under the authority of 44 U.S.C. 3507.



                            Subpart A_General



Sec. 401.100  Purpose.

    The purpose of this part is to carry out those provisions of the 
Great Lakes Pilotage Act of 1960 (74 Stat. 259, 46 U.S.C. 216) relating 
to the registration of United States pilots, the formation of pools by 
voluntary associations of United States registered pilots and the 
establishment of rates, charges, and other conditions or terms for 
services

[[Page 408]]

performed by registered pilots to meet the provisions of the Act.

[26 FR 951, Jan. 31, 1961. Redesignated at 61 FR 32655, June 25, 1996, 
and further redesignated by USCG-1998-3976, 63 FR 35139, June 29, 1998]



Sec. 401.105  OMB control numbers assigned pursuant to the Paperwork Reduction Act.

    (a) Purpose. This section collects and displays the control numbers 
assigned to information collection and recordkeeping requirements in 
this subchapter by the Office of Management and Budget (OMB) pursuant to 
the Paperwork Reduction Act of 1980, (44 U.S.C. 3501 et seq.). The Coast 
Guard intends that this section comply with the requirements of 44 
U.S.C. 3507(f) which requires that agencies display a current control 
number assigned by the Director of the OMB for each approved agency 
information collection requirement.
    (b) Display.

------------------------------------------------------------------------
                                                                Current
                                                                  OMB
    46 CFR part of section where identified or described        control
                                                                  No.
------------------------------------------------------------------------
Part 404....................................................   1625-0086
------------------------------------------------------------------------


[49 FR 38122, Sept. 27, 1984. Redesignated at 61 FR 32655, June 25, 
1996, and further redesignated by USCG-1998-3976, 63 FR 35139, June 29, 
1998; USCG-2004-18884, 69 FR 58352, Sept. 30, 2004]



Sec. 401.110  Definitions.

    (a) As used in this chapter:
    (1) Act means the Great Lakes Pilotage Act of 1960, as amended (Pub. 
L. 86-555, 74 Stat. 259-262; 46 U.S.C. 216 through 216i).
    (2) Commandant means Commandant (CG-00), Attn: Commandant, U.S. 
Coast Guard Stop 7000, 2703 Martin Luther King Jr. Avenue SE., 
Washington, DC 20593-7000.
    (3) Canadian Registered Pilot means a person, other than a member of 
the regular complement of a vessel, who holds an appropriate Canadian 
license issued by an agency of Canada, and is registered by a designated 
agency of Canada on substantially the same basis as registration under 
the provisions of Subpart B of this part.
    (4) Movage means the underway movement of a vessel in navigation 
from or to a dock, pier, wharf, dolphins, buoys, or anchorage other than 
a temporary anchorage for navigational or traffic purposes in such 
manner as to constitute a distinct separate movement not a substantive 
portion of a translake movement on arrival or departure, within the 
geographic confines of a harbor or port complex within such harbor.
    (5) Great Lakes means Lakes Superior, Michigan, Huron, Erie, and 
Ontario, their connecting and tributary waters, the St. Lawrence River 
as far east as Saint Regis, and adjacent port areas.
    (6) Other officer means the master or any other member of the 
regular complement of the vessel concerned who is qualified for the 
navigation of those United States waters of the Great Lakes which are 
not designated by the President in Proclamation No. 3385 dated December 
22, 1960 and who is either licensed by the Secretary or certificated by 
an appropriate agency of Canada.
    (7) Secretary means the Secretary of Homeland Security or any person 
to whom he or she has delegated his or her authority in the matter 
concerned.
    (8) United States registered pilot means a person, other than a 
member of the regular complement of a vessel, who holds a license or 
merchant mariner credential authorizing navigation on the Great Lakes 
and suitably endorsed for pilotage on routes specified therein, issued 
under the authority of the provisions of Title 52 of the Revised 
Statutes, and who is also registered under the provisions of Subpart B 
of this part.
    (9) Director means Director, Great Lakes Pilotage. Communications 
with the Director may be sent to the following address: Commandant (CG-
WWM-2), Attn: Great Lakes Pilotage Branch, U.S. Coast Guard Stop 7509, 
2703 Martin Luther King Jr. Avenue SE., Washington, DC 20593-7509.
    (10) Rate computation definitions:
    (i) Length means the distance between the forward and after 
extremities of the ship.
    (ii) Breadth means the maximum breadth to the outside of the shell 
plating of the ship.

[[Page 409]]

    (iii) Depth means the vertical distance at amidships from the top of 
the keel plate to the uppermost continuous deck, fore and aft, and which 
extends to the sides of the ship. The continuity of a deck shall not be 
considered to be affected by the existence of tonnage openings, engine 
spaces, or a step in the deck.
    (11) Person includes an individual, registered pilot, partnership, 
corporation, association, voluntary association, authorized pool, or 
public or private organization, other than an agency.
    (12) Applicant Pilot means a person who holds a license or merchant 
mariner credential endorsed as a master, mate, or pilot issued under the 
authority of the provisions of Title 52 of the Revised Statutes, and has 
acquired at least twenty-four months licensed service or comparable 
experience on vessels or integrated tugs and tows, of 4,000 gross tons 
or over, operating on the Great Lakes or oceans, and who has applied for 
registration under the provisions of Subpart B of this part. Those 
persons qualifying with ocean service must have obtained at least six 
months of licensed service or comparable experience on the Great Lakes.
    (13) Applicant Trainee means a person who is in training to become 
an Applicant Pilot with an organization authorized to provide pilotage 
services.
    (14) Pool means an organization authorized to provide pilotage 
services.
    (15) Comparable experience means experience that is similar to the 
experience obtained by serving as an officer on a vessel. Training and 
experience while participating in a pilot training program of an 
authorized pilot organization is considered equivalent on a day for day 
basis to experience as an officer on a vessel. The training program of 
the authorized pilot organization must, however, include regularly 
scheduled trips on vessels of 4,000 gross tons or over in the company of 
a registered pilot.
    (16) Association means any organization that holds or held a 
Certificate of Authorization issued by the Great Lakes Pilotage Branch 
(CG-WWM-2) to operate a pilotage pool on the Great Lakes.
    (17) Merchant mariner credential or MMC means the credential issued 
by the Coast Guard under 46 CFR part 10. It combines the individual 
merchant mariner's document, license, and certificate of registry 
enumerated in 46 U.S.C. subtitle II part E as well as the STCW 
endorsement into a single credential that serves as the mariner's 
qualification document, certificate of identification, and certificate 
of service.

[26 FR 951, Jan. 31, 1961]

    Editorial Note: For Federal Register citations affecting Sec. 
401.110, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.fdsys.gov.



Sec. 401.120  Federal reservation of pilotage regulations.

    No state, municipal, or other local authority shall require the use 
of pilots or regulate any aspect of pilotage in any of the waters 
specified in the Act. Only those persons registered as United States 
Registered Pilots or Canadian Registered Pilots as defined in this 
subpart may render pilotage services on any vessel subject to the Act 
and the Memorandum of Arrangements, Great Lakes Pilotage.

[26 FR 951, Jan. 31, 1961. Redesignated at 61 FR 32655, June 25, 1996, 
and further redesignated by USCG-1998-3976, 63 FR 35139, June 29, 1998]



                    Subpart B_Registration of Pilots



Sec. 401.200  Application for registration.

    (a) An application for registration as a U.S. Registered Pilot shall 
be made on Form CG-4509, which shall be submitted with two full-face 
photographs, 1\1/2\ inches by 2 inches, signed on the face. These forms 
may be obtained from the Director.
    (b) [Reserved]

[32 FR 14220, Oct. 13, 1967, as amended by CGD 78-144b, 44 FR 64837, 
Nov. 8, 1979. Redesignated at 61 FR 32655, June 25, 1996, and further 
redesignated by USCG-1998-3976, 63 FR 35139, June 29, 1998; USCG-2008-
0906, 73 FR 56511, Sept. 29, 2008]



Sec. 401.210  Requirements and qualifications for registration.

    (a) No person shall be registered as a United States Registered 
Pilot unless:

[[Page 410]]

    (1) The individual holds a license or MMC endorsed as a master, 
mate, or pilot, issued under the authority of the provisions of Title 52 
of the Revised Statutes, and has acquired at least twenty-four months 
service as a licensed or credentialed officer or comparable experience 
on vessels or integrated tugs and tows, of 4,000 gross tons, or over, 
operating on the Great Lakes or oceans. Those applicants qualifying with 
ocean service must have obtained at least six months of service as a 
licensed or credentialed officer or comparable experience on the Great 
Lakes. Those applicants qualifying with comparable experience must have 
served a minimum of twelve months as a deck officer under the authority 
of their license or MMC.
    (2) The individual is a citizen of the United States.
    (3) The individual is of good moral character and temperate habits.
    (4) The individual is physically competent to perform the duties of 
a U.S. Registered Pilot and meets the medical requirements prescribed by 
the Commandant.
    (5) The individual has not reached the age of 70.
    (6) Until April 15, 2009, the individual possesses a validated 
Merchant Mariner's Document issued by the Coast Guard or a valid 
Transportation Worker Identification Credential (TWIC). After April 15, 
2009, the individual must posses a valid TWIC.
    (7) The individual agrees to be available for service under the 
terms and conditions as may be approved or prescribed by the Commandant.
    (8) The individual has complied with the requirements set forth in 
Sec. 401.220(b) for Applicant Pilots if applying for registration for 
waters in which a pilotage pool is authorized.
    (9) The individual agrees to comply with all applicable provisions 
of this part and amendments thereto.
    (b) Any person registered as a United States Registered Pilot 
pursuant to the provisions of this part whose application contains false 
or misleading statements furnished by the applicant in furtherance of 
his or her application shall be in violation of these regulations and 
may be proceeded against under Sec. 401.250(a) or Sec. 401.500.

[29 FR 10464, July 28, 1964]

    Editorial Note: For Federal Register citations affecting Sec. 
401.210, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.fdsys.gov.



Sec. 401.211  Requirements for training of Applicant Pilots.

    (a) The Director shall determine the number of Applicant Pilots 
required to be in training by each Association authorized to form a pool 
in order to assure an adequate number of Registered Pilots. No Applicant 
Pilot shall be selected for training unless:
    (1) The individual meets the requirements and qualifications set 
forth in paragraphs (a) (1) through (4), (6), (7), and (9) of Sec. 
401.210.
    (2) The individual shall not have reached the age of 60.
    (3) The individual possesses a radar observer competency certificate 
or equivalent U.S. Coast Guard endorsement.
    (b) For purpose of determining whether an applicant meets the 
experience requirements contained in Sec. 401.210(a)(1), not more than 
twelve months of ``comparable experience'' may be used in fulfilling the 
twenty-four month experience requirement.
    (c) The Director shall approve the United States Registered Pilots 
that are designated by the authorized pilot organization to provide 
training to those pilots that are in training to be registered pilots.
    (d) Persons desiring to be considered as an Applicant Pilot shall 
file with the Director a completed Application Form, CG-4509, with two 
full-face photographs, 1\1/2\ inches by 2 inches, signed on the face.
    (e) Individuals selected as Applicant Pilots by the Director shall 
be issued a U.S. Coast Guard Applicant Pilot Identification Card, which 
shall be valid until such time as (1) the applicant is registered as a 
pilot under Sec. 401.210; (2) the applicant withdraws from the training 
program, or (3) upon withdrawal by the Director.

[29 FR 10465, July 28, 1964]

[[Page 411]]


    Editorial Note: For Federal Register citations affecting Sec. 
401.211, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.fdsys.gov.



Sec. 401.220  Registration of pilots.

    (a) The Director shall determine the number of pilots required to be 
registered in order to assure adequate and efficient pilotage service in 
the United States waters of the Great Lakes and to provide for equitable 
participation of United States Registered Pilots with Canadian 
Registered Pilots in the rendering of pilotage services.
    (b) Registration of pilots shall be made from among those Applicant 
Pilots who have (1) completed the minimum number of trips prescribed by 
the Commandant over the waters for which application is made on 
oceangoing vessels, in company with a Registered Pilot, within 1 year of 
date of application, (2) completed a course of instruction for Applicant 
Pilots prescribed by the association authorized to establish the 
pilotage pool, (3) satisfactorily completed a written examination 
prescribed by the Commandant, evidencing his knowledge and understanding 
of the Great Lakes Pilotage Regulations, Rules and Orders; the 
Memorandum of Arrangements, Great Lakes Pilotage, between the United 
States and Canada; and other related matters including the working rules 
and operating procedures of his district, given at such time and place 
as the Commandant may designate within the pilotage district of the 
Applicant Pilot.
    (c) The Pilot Association authorized to establish a pool in which an 
Applicant Pilot has qualified for registration under paragraph (b) of 
this section shall submit to the Director in writing its recommendations 
together with its reasons for the registration of the Applicant.
    (d) Subject to the provisions of paragraphs (a), (b), and (c) of 
this section, a pilot found to be qualified under this subpart shall be 
issued a Certificate of Registration, valid for a term of five (5) years 
or until the expiration of his master's, mate's or pilot's endorsement 
issued under the authority of Title 52 of the Revised Statutes or until 
the pilot reaches age 70, whichever occurs first.
    (e) The Director may, when necessary to assure adequate and 
efficient pilotage service, issue a temporary certificate of 
registration for a period of less than 1 year to any person found 
qualified under this subpart regardless of age.

[29 FR 10465, July 28, 1964]

    Editorial Note: For Federal Register citations affecting Sec. 
401.220, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.fdsys.gov.



Sec. 401.230  Certificates of Registration.

    (a) A Certificate of Registration shall describe the part or parts 
of the Great Lakes within which the pilot is authorized to perform 
pilotage services and such description shall not be inconsistent with 
the terms of the pilotage authorization in his or her master's, mate's, 
or pilot's endorsement issued under the authority of Title 52 of the 
Revised Statutes.
    (b) A Certificate of Registration shall not authorize the holder to 
board any vessel, or to serve as a pilot of any vessel, without the 
permission of the owner or master. A Certificate of Registration shall 
be in the possession of a pilot at all times when he or she is in the 
service of a vessel, and shall be displayed upon demand of the owner or 
master, any United States Coast Guard officer or inspector, or a 
representative of the Director.
    (c) A Certificate of Registration evidencing registration of the 
holder is the property of the U.S. Coast Guard and it shall not be 
pledged, deposited, or surrendered to any person except as authorized by 
this part. A Certificate of Registration may not be photostated or 
copied. A Certificate which has expired without renewal, or renewal of 
which has been denied under the provisions of this section, shall be 
surrendered to the Director upon demand.
    (d) An application for a replacement of a lost, damaged, or defaced 
Certificate of Registration shall be made in writing to the Director 
together with two full-face photographs, 1\1/2\ inches by 2 inches, 
signed on the face. A replacement fee of five dollars ($5) by check or 
money order, drawn to the order of the

[[Page 412]]

U.S. Coast Guard, shall accompany any such application. A Certificate 
issued as a replacement for a lost, damaged, or defaced Certificate 
shall be marked so as to indicate that it is a replacement. Upon receipt 
of a Certificate issued as a replacement, the damaged or defaced 
Certificate shall be surrendered to the Director.
    (e) A Certificate of Registration may be voluntarily surrendered to 
the Director by a Registered Pilot at any time such pilot no longer 
desires to perform pilotage services; however, in the event such 
Registered Pilot has been served with a notice of hearing pursuant to 
Sec. 401.250, a voluntary surrender of the Certificate of Registration 
shall be at the option of the Director.

[29 FR 10465, July 28, 1964, as amended at 31 FR 9065, July 1, 1966; 32 
FR 14221, Oct. 13, 1967; CGD 78-144a, 44 FR 19363, Apr. 2, 1979; 61 FR 
5721, Feb. 14, 1996. Redesignated and amended at 61 FR 32655, June 25, 
1996, and further redesignated and amended by USCG-1998-3976, 63 FR 
35139, 35140, June 29, 1998; USCG-2002-13058, 67 FR 61279, Sept. 30, 
2002; USCG-2006-24371, 74 FR 11267, Mar. 16, 2009]



Sec. 401.240  Renewal of Certificates of Registration.

    (a) An application for renewal of a Certificate of Registration 
shall be submitted to the Director together with two full-face 
photographs, 1\1/2\ inches by 2 inches, signed on the face, at least 15 
days before the expiration date of the existing Certificate. The form 
for renewal of Certificates of Registration may be obtained from the 
Director. A renewal fee of 5 dollars by check or money order, drawn to 
the order of the U.S. Coast Guard, shall accompany an application for 
renewal of registration, which will be refunded if registration is not 
renewed. Failure of a Registered Pilot to comply with these requirements 
or file a complete and sufficient application may constitute cause for 
denying renewal of the Certificate of Registration.
    (b) No Certificate of Registration shall be renewed unless the 
applicant for renewal thereof meets the requirements and qualifications 
set forth in Sec. 401.210 for issuance of an original Certificate of 
Registration; excepting that compliance with Sec. 401.210(a)(4) shall 
not be required if the examination was satisfactorily passed on a 
previous application for registration within six (6) months next 
preceding the date of application for renewal.
    (c) If the Director determines that there is good cause for denying 
renewal of a Certificate of Registration, the applicant shall be 
notified in writing of such determination and the cause thereof. The 
applicant may thereupon apply within fifteen (15) days of the receipt of 
such notice for a hearing in regard to the cause for the denying of a 
renewal of the Certificate, which hearing shall be granted.
    (d) In any case in which the applicant has made timely and 
sufficient application for renewal of his registration, no such 
registration shall expire until such application shall have been finally 
determined by the Commandant unless the public health, interest, or 
safety requires otherwise.
    (e) Upon receipt of a renewal Certificate of Registration, the 
expired Certificate shall be surrendered to the Director.

[29 FR 10465, July 28, 1964, as amended at 32 FR 14221, Oct. 13, 1967; 
CGFR 68-57, 33 FR 6479, Apr. 27, 1968; 61 FR 5721, Feb. 14, 1996. 
Redesignated and amended at 61 FR 32655, June 25, 1996, and further 
redesignated and amended by USCG-1998-3976, 63 FR 35139, 35140, June 29, 
1998]



Sec. 401.250  Suspension and revocation of Certificates of Registration.

    (a) Certificate of Registration issued pursuant to the provisions of 
this part may be suspended or revoked upon a determination on the 
record, after opportunity for a hearing in accordance with the 
Administrative Procedure Act, as amended (5 U.S.C. 551 through 559), 
that the pilot (holder) has violated any provision of this chapter or is 
no longer eligible for registration.
    (b) When a Certificate of Registration which is about to expire is 
suspended, the renewal of such certificate may be withheld until the 
expiration of the period of suspension.
    (c) Whenever the public health, interest, or safety requires, the 
Director may deny a Registered Pilot dispatch for a period not to exceed 
30 days pending investigation by the U.S. Coast Guard or other agency 
having jurisdiction in the matter.

[[Page 413]]

    (d) Every U.S. Registered Pilot shall, whenever his or her license 
or MMC officer endorsement is revoked or suspended under the provisions 
of part 5 of this title, deliver his or her Certificate of Registration 
simultaneously with his or her license and/or MMC to the U.S. Coast 
Guard. If the license or officer endorsement is suspended, the 
Certificate of Registration will be held with the suspended license or 
officer endorsement and returned to the holder upon expiration of the 
suspension period.

[32 FR 14221, Oct. 13, 1967, as amended by CGFR 68-57, 33 FR 6478, Apr. 
27, 1968; 61 FR 5721, Feb. 14, 1996. Redesignated at 61 FR 32655, June 
25, 1996, and further redesignated and amended by USCG-1998-3976, 63 FR 
35139, 35140, June 29, 1998; USCG-2002-13058, 67 FR 61279, Sept. 30, 
2002; USCG-2006-24371, 74 FR 11267, Mar. 16, 2009]



Sec. 401.260  Reports.

    (a) A marine accident which occurs while a U.S. Registered Pilot is 
in the service of a vessel in U.S. or Canadian waters of the Great Lakes 
shall be reported by the Registered Pilot to the Director as soon as 
possible, but not later than 15 days after the accident. The report 
shall name and describe the vessel or vessels involved, and shall 
describe the accident, including type of accident, location, time, 
prevailing weather, damage to the vessel or vessels or property, and 
injury to persons or lives lost. This report does not relieve the pilot 
of responsibility for submitting any report required by other government 
agencies of the United States or Canada.
    (b) Every U.S. Registered Pilot shall file with the Director any 
change of his or her mailing address within 15 days after the change.
    (c) Every authorized pilotage pool of U.S. Registered Pilots 
rendering pilotage service shall submit, by the 10th day of the month 
following, a monthly report of availability, on a form provided by the 
Director, of all U.S. Registered Pilots and Applicant Pilots of that 
pool. The report shall include the availability of Canadian Registered 
Pilots who are assigned to that pool for administrative purposes. The 
report shall list the name of each pilot and show his or her 
availability status for each day of the month as: available, unavailable 
due to illness or injury, unavailable with advance notice for personal 
reasons, unavailability authorized by the pool for business reasons, 
unavailable without advance notice or unaccounted for, unavailable for 
disciplinary reasons. The report shall be maintained on a daily basis by 
an officer or employee of the pool, who shall be responsible for the 
completeness and accuracy of the report.

[31 FR 9065, July 1, 1966; 32 FR 14221, Oct. 13, 1967. Redesignated at 
61 FR 32655, June 25, 1996, and further redesignated by USCG-1998-3976, 
63 FR 35139, June 29, 1998; USCG-2002-13058, 67 FR 61279, Sept. 30, 
2002]



  Subpart C_Establishment of Pools by Voluntary Associations of United 

                        States Registered Pilots



Sec. 401.300  Authorization for establishment of pools.

    (a) Voluntary associations of U.S. registered pilots will be 
authorized to establish a pool or pools in the following areas of the 
U.S. waters of the Great Lakes designated by the President in 
Proclamation No. 3385 of December 22, 1960, as amended by Proclamation 
No. 3855 of June 10, 1968, or in such other areas as the Director may 
deem necessary to assure adequate and efficient pilotage services for 
the U.S. waters of the Great Lakes:
    (1) District No. 1. All United States waters of the St. Lawrence 
River between the international boundary at St. Regis and a line at the 
head of the river running (at approximately 127 True) between 
Carruthers Point Light and South Side Light extended to the New York 
shore.
    (2) District No. 2. All United States waters of Lake Erie westward 
of a line running (at approximately 026 True) from Sandusky Pierhead 
Light at Cedar Point to Southeast Shoal Light; all waters contained 
within the arc of a circle of one mile radius eastward of Sandusky 
Pierhead Light; the Detroit River; Lake St. Clair; the St. Clair River, 
and Northern approaches thereto south of latitude 430530" N.
    (3) District No. 3. All U.S. waters of the St. Marys River, Sault 
Sainte Marie Locks and approaches thereto

[[Page 414]]

between latitude 4559 N. at the southern approach and longitude 8433 
W. at the northern approach.
    (b) The Director shall determine the number of pools that will be 
authorized for establishment by voluntary associations of United States 
registered pilots in order to assure adequate and efficient pilotage 
services for the United States waters of the Great Lakes.

[26 FR 952, Jan. 31, 1961, as amended at 32 FR 14221, Oct. 13, 1967; 
CGFR 68-78, 33 FR 9823, July 9, 1968. Redesignated at 61 FR 32655, June 
25, 1996, and further redesignated by USCG-1998-3976, 63 FR 35139, June 
29, 1998]



Sec. 401.310  Application for establishment of pools.

    An application by a voluntary association for authorization to 
establish a pool shall be filed on the form to be obtained from the 
Director. The form shall require, among other things, furnishing of the 
following information:
    (a) The name and address of the association.
    (b) The names and addresses of all officers of the association.
    (c) Type of organization (partnership, corporation, etc.).
    (d) Copies of articles of incorporation, bylaws, partnership 
agreements, etc.
    (e) The names and addresses of all stockholders or partners, 
together with the extent of their financial interest.
    (f) A copy of the financial statements of the association.
    (g) The names, addresses, and Certificates of Registration numbers 
of all member pilots.
    (h) The District or area in which members of the association desire 
to render pilotage services.
    (i) An inventory of owned or leased boats, launches, radio 
equipment, vehicles, etc., which may be used in the performance of 
pilotage services.

[26 FR 952, Jan. 31, 1961, as amended at 32 FR 14221, Oct. 13, 1967. 
Redesignated at 61 FR 32655, June 25, 1996, and further redesignated by 
USCG-1998-3976, 63 FR 35139, June 29, 1998]



Sec. 401.320  Requirements and qualifications for authorization to 

establish pools.

    No voluntary association shall be authorized to establish a pool 
unless:
    (a) The Director determines that a pool is necessary for the 
efficient dispatching of vessels and the providing of pilotage services 
in the area concerned.
    (b) The stock, equity, or other financial interests coupled with 
voting rights or exercise of any right of control in the management of 
the voluntary association is held only by member Registered Pilots 
registered pursuant to Sec. 401.200, Sec. 401.210, or Sec. 
401.220(e), excluding Applicant Pilots.
    (c) The voluntary association establishes that it possesses the 
ability, experience, financial resources, and other qualifications 
necessary to enable it to operate and maintain an efficient and 
effective pilotage service.
    (d) The voluntary association agrees that:
    (1) Pilotage services will be provided on a first-come, first-serve 
basis to vessels giving proper notice of arrival time or pilotage 
service requirements, to the pilotage station, except that pilots will 
not be required to board vessels which do not provide safe boarding 
facilities;
    (2) It will submit working rules for approval of the Commandant;
    (3) It will adopt and use the Uniform System of Accounts, part 403 
of this chapter, and such other accounting procedures and reports as may 
be prescribed by the Commandant;
    (4) It will be subject to audit and inspection by the U.S. Coast 
Guard and will submit by April 1 of each year an unqualified long form 
audit report for the preceding year prepared by an Independent Certified 
Public Accountant, performed in accordance with Generally Accepted 
Auditing Standards promulgated by the American Institute of Certified 
Public Accountants.
    (5) It will be subject to such other provisions as may be prescribed 
by the Director governing the operation of and the costs which may be 
charged in connection with the pools;
    (6) It will coordinate on a reciprocal basis its pool operations 
with similar pool arrangements established by the Canadian Government 
and pursuant to the provisions of the United States-Canada Memorandum of 
Arrangements,

[[Page 415]]

Great Lakes Pilotage, or any other arrangements established by the 
United States and Canadian Governments.

[29 FR 10466, July 28, 1964, as amended at 31 FR 9066, July 1, 1966; 32 
FR 14221, Oct. 13, 1967; CGD 81-088, 47 FR 13808, Apr. 1, 1982; CGD 88-
111, 55 FR 17581, Apr. 25, 1990; 61 FR 5721, Feb. 14, 1996. Redesignated 
and amended at 61 FR 32655, June 25, 1996, and further redesignated and 
amended by USCG-1998-3976, 63 FR 35139, 35140, June 29, 1998]



Sec. 401.330  Certificates of Authorization.

    (a) Subject to Sec. 401.300(b), an association that is qualified to 
establish a pool in a District or area is issued a Certificate of 
Authorization that is valid until suspended or revoked under the 
procedures in Sec. 401.335.
    (b) A Certificate of Authorization shall be in such form as the 
Director may prescribe, but shall describe the area of the Great Lakes 
in which the pool will perform pilotage services. A Certificate of 
Authorization shall be posted in the principal place of business of an 
association in such manner so as to be available for examination by 
members of the association and the public.

[26 FR 953, Jan. 31, 1961, as amended at 32 FR 14221, Oct. 13, 1967; CG 
74-233, 40 FR 41527, Sept. 8, 1975. Redesignated and amended at 61 FR 
32655, June 25, 1996, and further redesignated and amended by USCG-1998-
3976, 63 FR 35139, 35140, June 29, 1998]



Sec. 401.335  Suspension or revocation of a Certificate of Authorization.

    (a) The Director may issue an order to suspend or revoke a 
Certificate of Authorization if--
    (1) The holder of a Certificate of Authorization does not continue 
to meet the requirements under Sec. 401.320; or
    (2) The holder of a Certificate of Authorization does not comply 
with the requirements of this part.
    (b) Before issuing an order to suspend or revoke, the Director 
notifies the holder of a Certificate of Authorization of the reasons for 
the proposed suspension or revocation and gives the holder an 
opportunity to be heard or to comply with the requirements of this part.
    (c) If the Director finds that the violation of a requirement of 
this part involves public health, interest, or safety, or that the 
violation is willful, the Director may issue an order to suspend the 
Certificate of Authorization without giving notice under paragraph (b) 
of this section. The order shall contain the reasons for the Director's 
action.
    (d) A holder who has its Certificate of Authorization suspended 
under paragraph (c) of this section shall have an opportunity to be 
heard by notifying the Director in writing.
    (e) The Director shall reinstate a Certificate of Authorization that 
has been suspended under paragraph (b) or (c) of this section when he 
determines that the holder is complying with this part.
[CGD 74-233, 40 FR 41527, Sept. 8, 1975. Redesignated and amended at 61 
FR 32655, June 25, 1996, and further redesignated and amended by USCG-
1998-3976, 63 FR 35139, 35140, June 29, 1998]



Sec. 401.340  Compliance with working rules of pools.

    (a) United States or Canadian registered pilots utilizing the 
facilities and dispatching services of any authorized pool shall comply 
with its working rules approved under Sec. 402.320, except to the 
extent inconsistent with the dispatch orders of the Director under Sec. 
401.720(b), and with other rules of the pool that are related to those 
facilities and services.
    (b) The voluntary associations of U.S. Registered Pilots authorized 
to establish a pilotage pool may require a U.S. Registered Pilot to 
execute a written authorization for the pool to bill for services, 
deduct authorized expenses, and to comply with the working rules and 
other rules of the pool relating to such facilities and services. 
Facilities and services of the pool may be denied to any U.S. Registered 
Pilot who fails or refuses to execute such authorizations.
    (c) U.S. Registered Pilots who fail to execute such an authorization 
shall not be considered members of the U.S. pool, and shall not be 
entitled to reciprocal dispatching and related services by United States 
and Canadian pilotage pools as provided for by the Memorandum of 
Arrangements. A U.S. Registered Pilot who fails or refuses to avail 
himself of the established facilities and services shall be considered 
as not being continuously available for service pursuant to section 4(a) 
of the Great Lakes Pilotage Act of 1960 (46

[[Page 416]]

U.S.C. 216 through 216i) and his agreement executed on the Application 
for Registration as a U.S. Registered Pilot, and may be subject to 
suspension or revocation proceedings as prescribed by Sec. 401.250.

[26 FR 9647, Oct. 12, 1961, as amended at 31 FR 9066, July 1, 1966; 32 
FR 14221, Oct. 13, 1967; CGD 74-233, 40 FR 41527, Sept. 8, 1975. 
Redesignated and amended at 61 FR 32655, June 25, 1996, and further 
redesignated and amended by USCG-1998-3976, 63 FR 35139, 35140, June 29, 
1998]



     Subpart D_Rates, Charges, and Conditions for Pilotage Services



Sec. 401.400  Calculation of pilotage units and determination of weighting 

factor.

    The equivalent pilotage unit number and appropriate weighting factor 
for each ship shall be computed by utilizing the following formula and 
table:
    (a) Pilotage unit computation:

Pilot Unit=(LengthxBreadthxDepth)/283.17 (measured in meters)

Pilot Unit=(LengthxBreadthxDepth)/10,000 (measured in feet)

    (b) Weighting factor table:

------------------------------------------------------------------------
                                                              Weighting
                  Range of pilotage units                      factor
------------------------------------------------------------------------
0-49......................................................          1.0
50-159....................................................          1.15
160-189...................................................          1.30
190-and over..............................................          1.45
------------------------------------------------------------------------

    (c) The charge for pilotage service is obtained by multiplying the 
weighting factor, obtained from paragraph (b) of this section by the 
appropriate basic rate specified in Sec. Sec. 401.405, 401.407, 
401.410, 401.420 and 401.425.

[CGFR 70-29a, 35 FR 10434, June 26, 1970, as amended by CGD 81-088; 47 
FR 13808, Apr. 1, 1982; CGD 84-089, 50 FR 7178, Feb. 27, 1985. 
Redesignated and amended at 61 FR 32655, June 25, 1996; 62 FR 5922, Feb. 
10, 1997. Redesignated and amended by USCG-1998-3976, 63 FR 35139, 
35140, June 29, 1998; USCG-2013-0534, 79 FR 12107, Mar. 4, 2014]



Sec. 401.401  Surcharges.

    To facilitate safe, efficient, and reliable pilotage, and for good 
cause, the Director may authorize surcharges on any rate or charge 
authorized by this subpart. Surcharges must be proposed for prior public 
comment and may not be authorized for more than 1 year.

[USCG-2013-0534, 79 FR 12107, Mar. 4, 2014]



Sec. 401.405  Basic rates and charges on the St. Lawrence River and Lake 

Ontario.

    Except as provided in Sec. 401.420, the following basic rates are 
payable for all services and assignments performed by U.S. registered 
pilots in the St. Lawrence River and Lake Ontario.
    (a) Area 1 (Designated Waters):

------------------------------------------------------------------------
               Service                        St. Lawrence River
------------------------------------------------------------------------
Basic Pilotage......................  $19.22 per kilometer or $34.02 per
                                       mile.\1\
Each Lock Transited.................  426.\1\
Harbor Movage.......................  1,395.\1\
------------------------------------------------------------------------
\1\ The minimum basic rate for assignment of a pilot in the St. Lawrence
  River is $931, and the maximum basic rate for a through trip is
  $4,084.

    (b) Area 2 (Undesignated Waters):

------------------------------------------------------------------------
                                                                 Lake
                          Service                              Ontario
------------------------------------------------------------------------
6-hour Period..............................................         $872
Docking or Undocking.......................................          832
------------------------------------------------------------------------


[62 FR 5922, Feb. 10, 1997]

    Editorial Note: For Federal Register citations affecting Sec. 
401.405, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.fdsys.gov.



Sec. 401.407  Basic rates and charges on Lake Erie and the navigable waters 

from Southeast Shoal to Port Huron, MI.

    Except as provided in Sec. 404.420, the following basic rates are 
payable for all services and assignments performed by U.S. registered 
pilots on Lake Erie and the navigable waters from Southeast Shoal to 
Port Huron, MI.
    (a) Area 4 (Undesignated Waters):

------------------------------------------------------------------------
                                                 Lake Erie
                                                  (East of
                    Service                      Southeast     Buffalo
                                                   Shoal)
------------------------------------------------------------------------
6-hour Period.................................         $849         $849
Docking or Undocking..........................          653          653
Any point on the Niagara River below the Black          N/A        1,667
 Rock Lock....................................
------------------------------------------------------------------------

    (b) Area 5 (Designated Waters):

[[Page 417]]



--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Toledo or any
                                                                                point on Lake                         Detroit Pilot
                    Any point on or in                      Southeast Shoal      Erie west of      Detroit River           Boat         St. Clair River
                                                                               Southeast Shoal
--------------------------------------------------------------------------------------------------------------------------------------------------------
Toledo or any port on Lake Erie west of Southeast Shoal..             $2,397             $1,417             $3,113             $2,397                N/A
Port Huron Change Point..................................          \1\ 4,176          \1\ 4,837              3,137              2,441              1,735
St. Clair River..........................................          \1\ 4,176                N/A              3,137              3,137              1,417
Detroit or Windsor or the Detroit River..................              2,397              3,113              1,417                N/A              3,137
Detroit Pilot Boat.......................................              1,735              2,397                N/A                N/A              3,137
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ When pilots are not changed at the Detroit Pilot Boat.


[62 FR 5922, Feb. 10, 1997. Redesignated by USCG-1998-3976, 63 FR 35139, 
June 29, 1998; USCG 1999-6098, 66 FR 36489, July 12, 2001; USCG-2002-
12840, 67 FR 47466, July 19, 2002; USCG-2002-11288, 68 FR 69577, Dec. 
12, 2003; USCG-2002-11288, 70 FR 12103, Mar. 10, 2005; USCG-2002-11288, 
71 FR 16517, Apr. 3, 2006; USCG-2006-24414, 72 FR 8131, Feb. 23, 2007; 
72 FR 13352, Mar. 21, 2007; USCG--2007-0039, 73 FR 15095, Mar. 21, 2008; 
73 FR 232, Jan. 5, 2009; USCG-2008-1126, 74 FR 35825, July 21, 2009; 
USCG-2009-0883, 75 FR 7970, Feb. 23, 2010; USCG-2010-0517, 76 FR 6363, 
Feb. 4, 2011; USCG-2011-0328, 77 FR 11773, Feb. 28, 2012; 78 FR 13542, 
Feb. 28, 2013; 79 FR 12107, Mar. 4, 2014]



Sec. 401.410  Basic rates and charges on Lakes Huron, Michigan and Superior 

and the St. Mary's River.

    Except as provided in Sec. 401.420, the following basic rates are 
payable for all services and assignments performed by U.S. registered 
pilots on Lakes Huron, Michigan, and Superior and the St. Mary's River.
    (a) Area 6 (Undesignated Waters):

------------------------------------------------------------------------
                                                            Lakes Huron
                         Service                           and Michigan
------------------------------------------------------------------------
6-hour Period...........................................            $708
Docking or Undocking....................................             672
------------------------------------------------------------------------

    (b) Area 7 (Designated Waters):

----------------------------------------------------------------------------------------------------------------
                           Area                                  De tour          Gros cap         Any harbor
----------------------------------------------------------------------------------------------------------------
Gros Cap..................................................            $2,648               N/A               N/A
Algoma Steel Corporation Wharf at Sault Ste. Marie,                    2,648               997               N/A
 Ontario..................................................
Any point in Sault Ste. Marie, Ontario, except the Algoma              2,219               997               N/A
 Steel Corporation Wharf..................................
Sault Ste. Marie, MI......................................             2,219               997               N/A
Harbor Movage.............................................               N/A               N/A               997
----------------------------------------------------------------------------------------------------------------

    (c) Area 8 (Undesignated Waters):

------------------------------------------------------------------------
                        Service                           Lake Superior
------------------------------------------------------------------------
6-hour Period..........................................             $601
Docking or Undocking...................................              571
------------------------------------------------------------------------


[62 FR 5923, Feb. 10, 1997]

    Editorial Note: For Federal Register citations affecting Sec. 
401.410, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.fdsys.gov.



Sec. 401.420  Cancellation, delay or interruption in rendition of services.

    (a) Except as provided in this section, whenever the passage of a 
ship is interrupted and the services of a U.S. pilot are retained during 
the period of the interruption or when a U.S. pilot is detained on board 
a ship after the end of an assignment for the convenience of the ship, 
the ship shall pay an additional charge calculated on a basic rate of 
$129 for each hour or part of an hour during which each interruption or 
detention lasts with a maximum basic rate of $2,021 for each continuous 
24-hour period during which the interruption or detention continues. 
There is no charge for an interruption or detention caused by ice, 
weather or traffic, except during the period beginning the 1st of 
December and ending on the 8th of the following April. No charge may be 
made for an interruption or detention if the total interruption or 
detention ends during the 6-hour period for

[[Page 418]]

which a charge has been made under Sec. Sec. 401.405 through 401.410.
    (b) When the departure or movage of a ship for which a U.S. pilot 
has been ordered is delayed for the convenience of the ship for more 
than one hour after the U.S. pilot reports for duty at the designated 
boarding point or after the time for which the pilot is ordered, 
whichever is later, the ship shall pay an additional charge calculated 
on a basic rate of $129 for each hour or part of an hour including the 
first hour of the delay, with a maximum basic rate of $2,021 for each 
continuous 24-hour period of the delay.
    (c) When a U.S. pilot reports for duty as ordered and the order is 
cancelled, the ship shall pay:
    (1) A cancellation charge calculated on a basic rate of $763;
    (2) A charge for reasonable travel expenses if the cancellation 
occurs after the pilot has commenced travel; and
    (3) If the cancellation is more than one hour after the pilot 
reports for duty at the designated boarding point or after the time for 
which the pilot is ordered, whichever is later, a charge calculated on a 
basic rate of $129 for each hour or part of an hour including the first 
hour, with a maximum basic rate of $2,021 for each 24-hour period.

[62 FR 5923, Feb. 10, 1997]

    Editorial Note: For Federal Register citations affecting Sec. 
401.420, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.fdsys.gov.



Sec. 401.425  Provision for additional pilot.

    The Director, Great Lakes Pilotage Staff, U.S. Coast Guard, or the 
General Manager, Great Lakes Pilotage Authority, Ltd., Canada, may 
require the assignment of two pilots to a ship upon request of the ship 
or when in his judgment, because of anticipated long transit, uncommon 
ship size, adverse weather or sea conditions or other abnormal 
circumstances, the assignment of two pilots is considered necessary for 
the safe navigation of the ship. The Director or General Manager shall 
direct which of the pilots is to be in charge, as circumstances require. 
The charge to the ship shall be twice the appropriate charge provided 
for in Sec. Sec. 401.405, 401.407, 401.410, and 401.420. This section 
does not apply to a ship in a direct transit of the undesignated waters 
of Lake Erie between Southeast Shoal and Port Colborne unless the ship 
is required by law to have a registered pilot on board in these waters.

[CGD 80-148, 46 FR 18717, Mar. 26, 1981, as amended at 61 FR 5721, Feb. 
14, 1996. Redesignated and amended at 61 FR 32655, June 25, 1996; 62 FR 
5923, Feb. 10, 1997, and further redesignated and amended by USCG-1998-
3976, 63 FR 35139, 35140, June 29, 1998]



Sec. 401.427  Charge on past due accounts.

    A charge of two percent (2%) per month shall be paid on the opening 
monthly balance on accounts remaining unpaid over thirty (30) days after 
the billing date.

[CGD 79-138, 45 FR 13078, Feb. 28, 1980. Redesignated at 61 FR 32655, 
June 25, 1996, and further redesignated by USCG-1998-3976, 63 FR 35139, 
June 29, 1998]



Sec. 401.428  Basic rates and charges for carrying a U.S. pilot beyond normal 

change point or for boarding at other than the normal boarding point.

    If a U.S. pilot is carried beyond the normal change point or is 
unable to board at the normal boarding point, the ship shall pay at the 
rate of $763 per day or part thereof, plus reasonable travel expenses to 
or from the pilot's base. These charges are not applicable if the ship 
utilizes the services of the pilot beyond the normal change point and 
the ship is billed for these services. The change points to which this 
section applies are designated in Sec. 401.450.

[62 FR 5923, Feb. 10, 1997]
    Editorial Note: For Federal Register citations affecting Sec. 
401.428, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and at www.fdsys.gov.



Sec. 401.430  Prohibited charges.

    No rate or charge shall be applied against any vessel, owner or 
master thereof, by a registered pilot which differs from the rates and 
charges set forth in this part, nor shall any rates or charges be made 
for services performed by a registered pilot, or for support services 
directly related to the provision of pilotage that a registered

[[Page 419]]

pilot requires a vessel to utilize, other than those for which a rate is 
prescribed in this part, without the approval of the Director.

[CGD 88-111, 55 FR 17581, Apr. 25, 1990. Redesignated at 61 FR 32655, 
June 25, 1996, and further redesignated by USCG-1998-3976, 63 FR 35139, 
June 29, 1998]



Sec. 401.431  Disputed charges.

    (a) Any rate or charge applied against any vessel, owner, or master 
thereof by a registered pilot which the owner or master disputes as a 
charge prohibited by Sec. 401.430, may be appealed to the Director for 
an advisory opinion as to whether such rate or charge is a prohibited 
charge.
    (b) The appeal shall be in writing and set forth the amounts and 
description of the rates and charges disputed. The appeal must be 
supported by evidence that a reasonable attempt has been made to resolve 
the matter between the parties and that a bona fide controversy exists.
    (c) The respondent shall be furnished a copy of the appeal and be 
notified by the appellant that the matter has been appealed for an 
advisory opinion.
    (d) The respondent shall be allowed a reasonable time, not less than 
twenty (20) days, in which to file with the Director and the appellant 
any data or arguments desired to be submitted in further defense of the 
disputed rates and charges.
    (e) The Administration shall consider all relevant matter presented 
and issue an advisory opinion which shall be accompanied by an express 
recital that all relevant material received has been considered. The 
advisory opinion shall set forth the rates and charges in dispute, a 
discussion of the facts and relevant material considered, and a 
statement of opinion.
    (f) When it is found that the disputed rates and charges, in the 
opinion of the Director, are charges prohibited by Sec. 401.430, the 
respondent shall have a reasonable time, but not more than thirty (30) 
days in which to refund moneys, adjust invoices, and otherwise conform 
to the advisory opinion.
    (g) Failure or refusal to comply with the advisory opinion within 
the time allowed may form a basis for a determination that there is a 
violation of the Great Lakes Pilotage Regulations subject to the 
provisions of Sec. 401.500.

[29 FR 10467, July 28, 1964, as amended at 32 FR 14221, Oct. 13, 1967; 
61 FR 5721, Feb. 14, 1996. Redesignated and amended at 61 FR 32655, June 
25, 1996, and further redesignated and amended by USCG-1998-3976, 63 FR 
35139, 35140, June 29, 1998]



Sec. 401.432  Certification of support services.

    Each association holding a Certificate of Authorization shall 
certify each year whether any support service entity is directly or 
indirectly related by beneficial ownership to that association or to a 
United States registered pilot who is also a member of that association.

[CGD 88-111, 55 FR 17581, Apr. 25, 1990. Redesignated at 61 FR 32655, 
June 25, 1996, and further redesignated by USCG-1998-3976, 63 FR 35139, 
June 29, 1998]



Sec. 401.440  Advance payment of charges.

    Subject to the approval of the Director, a United States or Canadian 
Registered Pilot performing pilotage services in accordance with the 
rates and charges set forth in this subpart may require advance payment 
of such rates or charges or a suitable bond securing payment.

[29 FR 10467, July 28, 1964, as amended at 32 FR 14221, Oct. 13, 1967. 
Redesignated at 61 FR 32655, June 25, 1996, and further redesignated by 
USCG-1998-3976, 63 FR 35139, June 29, 1998]



Sec. 401.450  Pilot change points.

    A Registered Pilot's assignment is completed when the vessel to 
which he is assigned completes its arrival at or, in the case of a 
through trip, passes any of the following places:
    (a) Snell Lock;
    (b) Cape Vincent;
    (c) Port Weller;
    (d) Port Colborne;
    (e) Detroit/Windsor, other than assignments originating or 
terminating at a point on the Detroit River;
    (f) Port Huron/Sarnia;
    (g) Detour;
    (h) Gros Cap;
    (i) Chicago with respect to assignments originating at Detour or 
Port Huron/Sarnia; and

[[Page 420]]

    (j) Duluth/Superior and Fort William/Port Arthur with respect to 
assignments originating at Gros Cap.

[CGFR 68-57, 33 FR 6479, Apr. 27, 1968. Redesignated at 61 FR 32655, 
June 25, 1996, and further redesignated by USCG-1998-3976, 63 FR 35139, 
June 29, 1998; USCG-2008-0906, 73 FR 56511, Sept. 29, 2008]



Sec. 401.451  Pilot rest periods.

    (a) Except as provided in paragraph (b) of this section:
    (1) Each Registered Pilot upon completing an assignment at a change 
point designated in Sec. 401.450, and
    (2) Each Registered Pilot upon completing a series of assignments 
totaling more than 10 hours with no more than 2 hours rest between 
assignments, shall not perform pilotage services for at least 10 hours.
    (b) In the event of an emergency or other compelling circumstances a 
pilotage pool may assign a Registered Pilot for service before his 10-
hour rest period required under paragraph (a) of this section is 
completed. Pilotage pools shall advise the Director of each assignment 
made under this paragraph.

[CGFR 68-57, 33 FR 6479, Apr. 27, 1968. Redesignated and amended at 61 
FR 32655, June 25, 1996, and further redesignated and amended by USCG-
1998-3976, 63 FR 35139, 35140, June 29, 1998]



        Subpart E_Penalties; Operations Without Registered Pilots



Sec. 401.500  Penalties for violations.

    Any person, including a pilot, master, owner, or agent, who violates 
any provision of this part shall be liable to the United States for a 
civil penalty as set forth in 46 U.S.C. 9308.

[CGD 88-111, 55 FR Apr. 25, 1990. Redesignated at 61 FR 32655, June 25, 
1996, and further redesignated by USCG-1998-3976, 63 FR 35139, June 29, 
1998]



Sec. 401.510  Operation without Registered Pilots.

    (a) A vessel may be navigated in the U.S. waters of the Great Lakes 
without a United States or Canadian Registered Pilot when the vessel or 
its cargo is in distress or jeopardy.
    (b) A vessel may be navigated in the U.S. waters of the Great Lakes 
without a United States or Canadian Registered Pilot when the Director, 
with the concurrence of the Commander, 9th Coast Guard District, 
notifies the master that a United States or Canadian Registered Pilot is 
not available.
    (1) Notification to the master that a pilot is not available will be 
made by the Director, either directly to the vessel or through the 
appropriate pilotage pool, orally or in writing as the circumstances 
admit, and shall not be deemed given until the notice is actually 
received by the vessel.
    (2) The determination that a pilot is not available will be made on 
an individual basis and only when a vessel has given proper notice of 
its pilotage service requirements to the pilotage pool having 
dispatching jurisdiction at the time. The vessel has no obligation or 
responsibility with respect to such notification other than properly 
informing the pilotage pool of its pilotage requirements. However, the 
failure or delay by the pool in processing a pilotage service request, 
or refusal or delay by the U.S. Coast Guard in notifying the vessel that 
a pilot is not available, does not constitute constructive notice that a 
pilot is not available, and the vessel is not relieved by such failure 
or delay from compliance with the Great Lakes Pilotage Act of 1960.
    (3) Upon receipt of proper notice of a vessel's pilotage 
requirements, the pilotage pool shall then determine from the tour de 
role the availability of a pilot to render the service required. If no 
pilot is reasonably expected to be available for service within 6 hours 
of the time the pilotage services are required by the vessel, the 
pilotage pool shall promptly inform the Commandant through the U.S. 
Coast Guard communications system in the manner as may be prescribed 
from time to time by the Commandant. The Commandant shall be informed 
of:
    (i) Name and flag of the vessel;
    (ii) Route of vessel for which a pilot is not available;
    (iii) Time elapsing before a pilot is reasonably expected to become 
available;
    (iv) Whether vessel has an ``other officer'' on board;
    (v) Familiarity of master with route to be transited by the vessel;
    (vi) Draft of vessel; and

[[Page 421]]

    (vii) Any circumstances of traffic or weather, or condition of the 
vessel or its cargo which would adversely affect the safety of the 
vessel in transiting without a pilot.
    (4) When a pilot is expected to become available within 6 hours of 
the time pilot services are required, the vessel shall be informed that 
a pilot is available and the approximate time the pilot will report on 
duty. However, should any unusual circumstance or condition exist which 
may justify notification that a pilot is not available in less than 6 
hours, the pilotage pool shall inform the Director as in paragraph 
(b)(3) of this section, along with the circumstances involved. 
Additionally, the vessel may contact the Director directly to request 
notification under paragraph (b)(1) of this section if a notice of pilot 
availability is not received from the appropriate pilotage pool within 
two hours of providing its pilotage requirements to the pool.
    (5) Any vessel which requires the services of a pilot and is 
navigated without a pilot or proceeds prior to receipt of a message that 
a pilot is not available pursuant to paragraph (b)(1) of this section 
shall be reported as in violation of section 7 of the Great Lakes 
Pilotage Act of 1960 by the pilotage pool to the local Coast Guard unit 
having jurisdiction. If the message is received after the vessel 
proceeds, such message shall not be delivered without concurrence of the 
Coast Guard officer to whom the violation was reported.
    (6) U.S. pilotage pools informing the Director that a pilot is not 
available for a vessel shall also obtain notice that a pilot is not 
available from the appropriate Canadian Supervisor of Pilots for those 
portions of the route which are in Canadian waters in the manner 
prescribed by them. The notice for Canadian District No. 1 waters shall 
be obtained from the Supervisor of Pilots, Department of Transport, 
Cornwall, Ontario, and the notice for Canadian District No. 2 waters 
shall be obtained from the Supervisor of Pilots, Department of 
Transport, Port Weller, Ontario. Authority to issue notice for Canadian 
waters of District No. 3 has been granted to the Director by the 
Department of Transport, Ottawa, and separate notice from Canada for 
this District is not required until such time as separate Canadian 
pilotage dispatch facilities may be established.
    (7) Notice that a pilot is not available shall not be delivered to 
any vessel unless the message contains the concurrence of the Commander, 
9th Coast Guard District, and notice for Canadian waters of Districts 
No. 1 and No. 2, if required, has been obtained from the appropriate 
Canadian authority.
    (8) In the event of an emergency or any other compelling 
circumstance, the Director may issue, without the specific request for 
service as provided under paragraph (b)(2) of this section, individual 
or general notification that a pilot or pilots are not available. 
Pilotage pools shall advise the Director of any condition or 
circumstance coming to their attention which may warrant such a 
determination.
[32 FR 14221, Oct. 13, 1967, as amended by CGD 88-111, 55 FR 17582, Apr. 
25, 1990; 55 FR 19145, May 8, 1990; 61 FR 5721, Feb. 14, 1996. 
Redesignated at 61 FR 32655, June 25, 1996, and further redesignated and 
amended by USCG-1998-3976, 63 FR 35139, 35140, June 29, 1998]



 Subpart F_Procedure Governing Revocation or Suspension of Registration 

                    and Refusal To Renew Registration



Sec. 401.600  Right to hearing.

    (a) A United States Registered Pilot, on receipt of notice from the 
U.S. Coast Guard that he or she has violated any regulation made 
pursuant to the Act, which violation the Director determines is grounds 
for suspension or revocation of the pilot's Certificate of Registration, 
shall have fifteen (15) days from the receipt of such notice in which to 
notify the Director that he or she elects to exercise his or her right 
to a hearing as to the grounds for the proposed suspension or 
revocation. A pilot failing to notify the Director within the prescribed 
period is deemed to have waived his or her right to a hearing.
    (b) A United States Registered Pilot whose application was timely 
filed, on receipt of notice that renewal of his or her Certificate of 
Registration has been denied pursuant to Sec. 401.240(c), who fails to 
notify the Director within fifteen

[[Page 422]]

(15) days of the receipt of such notice that he or she desires a 
hearing, is deemed to have waived his or her right to a hearing.

[29 FR 11595, Aug. 13, 1964, as amended at 32 FR 14222, Oct. 13, 1967; 
61 FR 5721, Feb. 14, 1996. Redesignated and amended at 61 FR 32655, June 
25, 1996, and further redesignated and amended by USCG-1998-3976, 63 FR 
35139, 35140, June 29, 1998; USCG-2002-13058, 67 FR 61279, Sept. 30, 
2002]



Sec. 401.605  Notice.

    (a) The Director, upon receipt of notice that a U.S. Registered 
Pilot elects to exercise his rights to a hearing, shall arrange for a 
hearing and notify the pilot of the time, date and place it is to be 
held.

[32 FR 14222, Oct. 13, 1967. Redesignated at 61 FR 32655, June 25, 1996, 
and further redesignated by USCG-1998-3976, 63 FR 35139, June 29, 1998]



Sec. 401.610  Hearing.

    (a) The hearing shall be held at the time and place designated with 
due regard to the convenience and necessity of the parties.
    (b) The hearing shall be held on the record before an Administrative 
Law Judge appointed as provided by section 11 of the Administrative 
Procedure Act (5 U.S.C. 3105). Hearings shall be conducted in accordance 
with sections 5, 7, and 8 of the Administrative Procedure Act, as 
amended (5 U.S.C. 554, 556, 557).

[32 FR 14222, Oct. 13, 1967. Redesignated at 61 FR 32655, June 25, 1996, 
and further redesignated by USCG-1998-3976, 63 FR 35139, June 29, 1998]



Sec. 401.615  Representation.

    (a) The U.S. Registered Pilot, designated ``respondent'' in a 
suspension or revocation hearing or ``applicant'' in a refusal-to-renew-
registration hearing, may be represented before the Administrative Law 
Judge by any person who is a member in good standing of the bar of the 
highest court of any State, Commonwealth, Territory, Possession, or the 
District of Columbia, upon filing with the Administrative Law Judge a 
written declaration that he is currently qualified and is authorized to 
represent the particular party in whose behalf he acts.
    (b) Whenever a person acting in a representative capacity appears in 
person or signs a paper in practice before the Administrative Law Judge, 
Director, Commandant, the Administrator, or other official of the U.S. 
Coast Guard, his personal appearance or signature shall constitute a 
representation that under the provisions of this subpart and applicable 
law he is authorized and qualified to represent the particular person in 
whose behalf he acts.
    (c) When any Registered Pilot is represented by an attorney at law, 
any notice or other written communication required or permitted to be 
given to or by such a U.S. Registered Pilot shall be given to or by such 
attorney. If a U.S. Registered Pilot is represented by more than one 
attorney, service by or upon any one of such attorneys shall be 
sufficient.

[32 FR 14222, Oct. 13, 1967, as amended at 61 FR 5721, Feb. 14, 1996. 
Redesignated at 61 FR 32655, June 25, 1996, and further redesignated and 
amended by USCG-1998-3976, 63 FR 35139, 35140, June 29, 1998]



Sec. 401.620  Burden of proof.

    (a) In a suspension or revocation hearing, the Director shall have 
the burden of establishing, by substantial evidence, the grounds for a 
suspension or revocation of a Certificate of Registration held by a 
pilot, as stated in the letter addressed to such pilot notifying him of 
the U.S. Coast Guard intention to suspend or revoke the pilot's 
registration.
    (b) In a refusal-to-renew-registration hearing, the Director shall 
have the burden of establishing the grounds for the Director's 
determination under Sec. 401.240(c) to deny renewal of the Certificate 
of Registration.

[32 FR 14222, Oct. 13, 1967, as amended at 61 FR 5721, Feb. 14, 1996. 
Redesignated and amended at 61 FR 32655, June 25, 1996, and further 
redesignated and amended by USCG-1998-3976, 63 FR 35139, 35140, June 29, 
1998]



Sec. 401.630  Appearance, testimony, and cross-examination.

    (a) The U.S. Registered Pilot may appear in person or by counsel and 
may testify at the hearing, call witnesses in

[[Page 423]]

his own behalf, and cross-examine witnesses appearing in behalf of the 
Director.
    (1) In any case in which the U.S. Registered Pilot, after being duly 
served with the notice of the time and place of the hearing, fails to 
appear at the time and place specified for the hearing, a notation to 
that effect shall be made in the record and the hearing may then be 
conducted ``in absentia.''
    (2) The Administrative Law Judge shall also cause to be placed in 
the record all the facts concerning the issuance and service of the 
notice of hearing and the allegations against the U.S. Registered Pilot.
    (b) The Director through counsel shall appear, present evidence, 
call witnesses, and cross-examine the witnesses called on behalf of the 
U.S. Registered Pilot.
    (c) In the discretion of the Administrative Law Judge, other 
witnesses may testify at the hearing.

[32 FR 14222, Oct. 13, 1967. Redesignated at 61 FR 32655, June 25, 1996, 
and further redesignated by USCG-1998-3976, 63 FR 35139, June 29, 1998]



Sec. 401.635  Evidence which shall be excluded.

    The Administrative Law Judge presiding at the hearing shall exclude 
irrelevant, immaterial, or unduly repetitious evidence.

[29 FR 11595, Aug. 13, 1964. Redesignated at 61 FR 32655, June 25, 1996, 
and further redesignated by USCG-1998-3976, 63 FR 35139, June 29, 1998]



Sec. 401.640  Record for decision.

    The transcript of testimony and oral argument at the hearing, 
together with any exhibits received, shall be made part of the record 
for decision, and the record shall be available to the respondent or 
applicant on payment of costs thereof.

[29 FR 11595, Aug. 13, 1964. Redesignated at 61 FR 32655, June 25, 1996, 
and further redesignated by USCG-1998-3976, 63 FR 35139, June 29, 1998]



Sec. 401.645  Administrative Law Judge's decision; exceptions thereto.

    At the conclusion of the hearing, the parties may submit briefs and 
recommended conclusions and findings within such time as the 
Administrative Law Judge shall determine appropriate. The Administrative 
Law Judge shall thereafter issue a written initial decision in the case, 
which decision shall be final and binding upon the Director, except as 
provided in Sec. 401.650.

[29 FR 11595, Aug. 13, 1964, as amended at 32 FR 14222, Oct. 13, 1967. 
Redesignated and amended at 61 FR 32655, June 25, 1996, and further 
redesignated and amended by USCG-1998-3976, 63 FR 35139, 35140, June 29, 
1998]



Sec. 401.650  Review of Administrative Law Judge's initial decision.

    (a) The Commandant may, on his own motion, or on the basis of a 
petition filed by the U.S. Registered Pilot in the proceedings or the 
Commandant, review any initial decision of the Administrative Law Judge 
by entering a written order stating that he elects to review the action 
of the Administrative Law Judge. Copies of all orders for review, 
replies, and decisions shall be served on all parties.
    (b) A petition for review shall be in writing and shall state the 
grounds upon which the petition relies. A petition for review shall be 
limited to the record before the Administrative Law Judge. Five (5) 
copies of such a petition for review, together with proof of service on 
all parties, shall be filed with the Commandant (CL) within fifteen (15) 
days after the date of service of the initial decision of the 
Administrative Law Judge. Parties may file replies, in writing, to a 
petition for review, with proof of service on other parties in the same 
manner and number of copies as is provided for filing of a petition for 
review and within ten (10) days after the date the petition for review 
is timely filed. A reply shall be limited to the record before the 
Administrative Law Judge and the petition for review.
    (c) If a petition for review is filed within the time prescribed, 
the initial decision of the Administrative Law Judge shall be final 
fifteen (15) days after expiration of the time prescribed for filing a 
reply thereto unless the Commandant prior to expiration of the fifteen 
(15) days after expiration of the time prescribed for filing a reply 
thereto enters a written order granting the petition for review. If no 
petition for

[[Page 424]]

review is filed within the time prescribed and the Commandant does not 
elect to review on his own motion, the initial decision of the 
Administrative Law Judge shall be final twenty (20) days after the date 
of service of the decision.
    (d) If the Commandant reviews the initial decision as provided in 
this section, he shall issue a written order affirming, amending, 
overruling, or remanding the initial decision of the Administrative Law 
Judge within thirty (30) days after the date on which he takes review. 
There is no other administrative remedy within the Department of 
Transportation.
    (e) When the Commandant has sustained an order of suspension or 
revocation of a registration, the respondent may appeal to the National 
Transportation Safety Board under 49 CFR 825.5 within ten (10) days 
after service of the Commandant decision.

[32 FR 14222, Oct. 13, 1967, as amended by CGD 76-189, 42 FR 31160, June 
20, 1977; 61 FR 5721, Feb. 14, 1996. Redesignated at 61 FR 32655, June 
25, 1996, and further redesignated and amended by USCG-1998-3976, 63 FR 
35139, 35140, June 29, 1998]



Subpart G_Operating Requirements for U.S. Registered Pilots and Holders 

    of Certificates of Authorization; Authority of the Director Over 

                               Operations



Sec. 401.700  Operating requirements for U.S. registered pilots.

    Each U.S. registered pilot shall--
    (a) Provide pilotage service when dispatched by his pool; and
    (b) Comply with the dispatching orders of the Director under Sec. 
401.720 (b).

[CGD 74-233, 40 FR 41527, Sept. 8, 1975. Redesignated and amended at 61 
FR 32655, June 25, 1996, and further redesignated and amended by USCG-
1998-3976, 63 FR 35139, 35140, June 29, 1998]



Sec. 401.710  Operating requirements for holders of Certificates of 

Authorization.

    Each holder of a Certificate of Authorization shall--
    (a) Comply with the terms of any agreement for services by 
registered pilots on the Great Lakes between an appropriate agency of 
Canada and the Secretary, his designated agent, or the Director;
    (b) Coordinate on a reciprocal basis its pool operations with pool 
operations of the Canadian Government, under the ``Memorandum of 
Arrangements, Great Lakes Pilotage, Between the Secretary of 
Transportation of the United States of America and the Minister of 
Transport of Canada'', effective July 7, 1970, as amended;
    (c) Provide continuous arrangements and facilities for the efficient 
dispatching of pilotage service on a first-come, first-serve basis to 
vessels that give notice of pilotage service requirements to the 
pilotage dispatch station, except pilots are not required to board a 
vessel that does not furnish safe boarding facilities;
    (d) Dispatch pilotage service under the terms of its approved 
working rules as referenced in Sec. 402.320;
    (e) Comply with its working rules approved under Sec. 402.320, 
except to the extent inconsistent with the dispatch orders of the 
Director under Sec. 401.720(b);
    (f) Comply with all accounting procedures and the reporting 
requirements in this chapter; and
    (g) Make available to the Commandant all of its financial and 
operating records.

[CGD 74-233, 40 FR 41527, Sept. 8, 1975, as amended at 61 FR 5721, Feb. 
14, 1996. Redesignated and amended at 61 FR 32655, June 25, 1996, and 
further redesignated and amended by USCG-1998-3976, 63 FR 35139, 35140, 
June 29, 1998]



Sec. 401.720  Authority of the Director over operations.

    (a) This section does not limit the authority of the Director under 
any other section in this chapter.
    (b) When pilotage service is not provided by the association 
authorized under 46 U.S.C. 9304 because of a physical or economic 
inability to do so, or when the Certificate of Authorization is under 
suspension or revocation under Sec. 401.335, the Director may order

[[Page 425]]

any U.S. registered pilot to provide pilotage service.

[CGD 74-233, 40 FR 41527, Sept. 8, 1975, as amended by CGD 75-228, 40 FR 
57673, Dec. 11, 1975. Redesignated and amended at 61 FR 32655, June 25, 
1996, and further redesignated and amended by USCG-1998-3976, 63 FR 
35139, 35140, June 29, 1998; USCG-2008-0906, 73 FR 56511, Sept. 29, 
2008]



PART 402_GREAT LAKES PILOTAGE RULES AND ORDERS--Table of Contents



                            Subpart A_General

Sec.
402.100 Purpose.

                    Subpart B_Registration of Pilots

402.210 Requirements and qualifications for registration.
402.220 Registration of pilots.

  Subpart C_Establishment of Pools by Voluntary Associations of United 
                        States Registered Pilots

402.320 Working rules.

    Authority: 46 U.S.C. 2104(a), 8105, 9303, 9304.



                            Subpart A_General



Sec. 402.100  Purpose.

    The purpose of this part is to implement those provisions of the 
Great Lakes Pilotage Regulations (part 401 of this chapter) which 
authorize or require the Commandant to issue supplementary rules and 
orders.

[27 FR 11947, Dec. 4, 1962, as amended at 32 FR 14223, Oct. 13, 1967; 61 
FR 5721, Feb. 14, 1996. Redesignated and amended at 61 FR 32655, June 
25, 1996, and further redesignated and amended by USCG-1998-3976, 63 FR 
35139, 35140, June 29, 1998]



                    Subpart B_Registration of Pilots



Sec. 402.210  Requirements and qualifications for registration.

    (a) Pursuant to Sec. 401.210(a)(4), each applicant for an original 
registration at the time of application and each Registered Pilot 
annually is required to pass a physical examination given by a licensed 
medical doctor and reported on the form furnished by the Director. The 
examination report shall describe the applicant's or Registered Pilot's 
visual acuity, color sense, physical condition, and competency to 
perform the duties of a U.S. Registered Pilot.
    (b) Any disease, physical or mental defect, or impairment to hearing 
or visual acuity, such as epilepsy, insanity, senility, acute venereal 
disease, neurosyphilis, hemiplegia, paralysis or missing arm, leg, or 
eye, muteness or pronounced speech impairment, acute kidney or gastro-
enteritis disease, extreme obesity, addiction of alcohol or narcotics, 
acute varicosity of the legs, cardiovascular disease or other disorder 
which would impair the applicant's ability to be available for service 
when required and to withstand the rigors of boarding vessels, climbing 
ladders or great heights, standing for long periods of time, and 
performing his duties under prolonged periods of nervous strain are 
causes for determination of physical incompetency.
    (c) An applicant for original registration must have a visual acuity 
either with or without glasses of at least 20/20 vision in one eye and 
at least 20/40 in the other. An applicant who wears glasses or contact 
lenses must also pass a test without glasses or lens of at least 20/40 
in one eye and at least 20/70 in the other. Registered Pilots, however, 
must have either with or without glasses or lens visual acuity of at 
least 20/30 in one eye and at least 20/50 in the other. A Registered 
Pilot who wears glasses or lens must also pass a test without glasses or 
lens of at least 20/50 in one eye and at least 20/100 in the other. The 
color sense of original applicants and Registered Pilots shall be tested 
by a pseudoisochromatic plate test. Passage of the Williams lantern test 
or its equivalent is an acceptable substitute for a pseudoisochromatic 
plate test.

[CGFR 68-57, 33 FR 6479, Apr. 27, 1968. Redesignated and amended at 61 
FR 32655, June 25, 1996, and further redesignated and amended by USCG-
1998-3976, 63 FR 35139, 35140, June 29, 1998; USCG-2011-0618, 76 FR 
60754, Sept. 30, 2011]



Sec. 402.220  Registration of pilots.

    (a) Each applicant pilot must complete the number of round trips 
specified in this section prior to registration as a U.S. registered 
pilot. The round

[[Page 426]]

trips must be made in company with a registered pilot, on oceangoing 
vessels of 4,000 gross tons or over, and must be within one year of the 
date of application.
    (1) If the applicant pilot holds a master's license or endorsement, 
a minimum of five round trips are required over the waters for which 
registration is desired.
    (2) If the applicant pilot holds a chief mate's license or 
endorsement or a second mate's license or endorsement, or, holds a first 
class pilot's license or endorsement with service in the capacity of 
first mate or second mate, a minimum of eight round trips are required 
over the waters for which registration is desired.
    (3) If the applicant pilot holds a first class pilot's license or 
endorsement or a third mate's license or endorsement, a minimum of 
twelve round trips are required over the waters for which registration 
is desired.
    (b) No course of instruction prescribed by a pilot association shall 
be approved unless it includes the following minimum criteria:
    (1) Instruction in the maneuvering characteristics of various types 
of vessels and propulsion machinery including the characteristics of 
direct-drive motor, geared-drive motor, turbo-electric, steam turbine 
and steam reciprocating drives. Study of maneuvering characteristics to 
include turning radius, times and distances to stop, time to back, etc.
    (2) Instruction in the effects of oceangoing vessels in restricted 
waters.
    (3) Instruction in the use of tugs, docking procedures in locks and 
piers, and transiting bridges.
    (4) Instruction in search and rescue and civil defense procedures as 
issued by the U.S. Coast Guard, Federal, State, and local port 
authorities.
    (5) Instruction in basic helm and engine telegraph orders in the 
Greek, Spanish, German, and Italian languages.
    (6) Instruction in communication, security, and signal procedures 
applicable to U.S. registered and foreign vessels on the Great Lakes as 
prescribed by the U.S. Coast Guard, St. Lawrence Seaway Development 
Corporation, U.S. Corps of Army Engineers, and port authorities.
    (7) Instruction in Customs, Immigration, Quarantine, Department of 
Agriculture, and Coast Guard regulations applicable to U.S. registered 
and foreign vessels on the Great Lakes.
    (8) Instruction in the Great Lakes Pilotage Act of 1960; Great Lakes 
Pilotage Regulations; Presidential Proclamation of December 22, 1960; 
and Memorandum of Arrangements Great Lakes Pilotage Between the Minister 
of Transport of Canada and the Secretary of Transportation of the United 
States of America, January 18, 1977.
    (9) Instruction in miscellaneous subjects including man-overboard 
recovery (i.e. Williamson turn); collision, fire, and explosion 
procedures; and maneuvering in ice.
    (10) Instruction in radar plotting and use of foreign made 
navigational equipment.

(Secs. 4 and 5, 74 Stat. 260 (46 U.S.C. 216b, 216c), as amended by Pub. 
L. 95-455; sec. 6(a)(4), 80 Stat. 937, as amended (49 U.S.C. 
1655(a)(4)); 49 CFR 1.46(a)))

[27 FR 11947, Dec. 4, 1962, as amended at 28 FR 4758, May 11, 1963; 31 
9067, FR July 1, 1966; CGD 78-144b, 44 FR 64838, Nov. 8, 1979. 
Redesignated at 61 FR 32655, June 25, 1996, and further redesignated by 
USCG-1998-3976, 63 FR 35139, June 29, 1998; USCG-2008-0906, 73 FR 56511, 
Sept. 29, 2008; USCG-2006-24371, 74 FR 11267, Mar. 16, 2009]



  Subpart C_Establishment of Pools by Voluntary Associations of United 

                        States Registered Pilots



Sec. 402.320  Working rules.

    (a) Sections 401.320(d)(2) and (6) of this chapter require that 
voluntary associations of U.S. Registered Pilots authorized to establish 
pilotage pools agree to submit Working Rules for approval of the 
Director and that they will coordinate their pool operations with Canada 
on a reciprocal basis. The following approved Working Rules are on file 
in the office of the Director and are available for public inspection by 
any person properly and directly concerned:
    (1) The Working Rules and Dispatching Procedures for the designated 
waters of District No. 1 adopted by the

[[Page 427]]

St. Lawrence Seaway Pilots' Association, Inc., Cape Vincent, N.Y., dated 
May 1, 1980, amended to March 24, 1999.
    (2) The Working Rules and Dispatch Procedures for the undesignated 
waters of District No. 1 adopted by the St. Lawrence Seaway Pilots' 
Association, Inc., Cape Vincent, N.Y., dated July 27, 1982.
    (3) The Working Rules, Dispatching Procedures, and General Rules of 
District No. 2 adopted by the Lakes Pilots Association, Inc., Port 
Huron, MI., dated March 30, 1999.
    (4) The Working Rules for District No. 3, adopted by the Western 
Great Lakes Pilots Association, LLP, Superior, WI., dated February 24, 
2001 amended to February 28, 2007.
    (b) [Reserved]
[USCG-2008-0906, 73 FR 56511, Sept. 29, 2008]



PART 403_GREAT LAKES PILOTAGE UNIFORM ACCOUNTING SYSTEM--Table of Contents



                            Subpart A_General

Sec.
403.100 Applicability of system of accounts and reports.
403.105 Records.
403.110 Accounting entities.
403.115 Accounting period.
403.120 Notes to financial statements.

                 Subpart B_Inter-Association Settlements

403.200 General.

                    Subpart C_Reporting Requirements

403.300 Financial reporting requirements.

                         Subpart D_Source Forms

403.400 Uniform pilot's source form.
    Authority: 46 U.S.C. 2104(a), 8105, 9303, 9304; 49 CFR 1.46 (mmm).
    Source: 60 FR 18369, Apr. 11, 1995, unless otherwise noted. 
Redesignated by USCG-1998-3976, 63 FR 35139, June 29, 1998.



                            Subpart A_General

    Source: 60 FR 18369, Apr. 11, 1995, unless otherwise noted. 
Redesignated at 61 FR 32655, June 25, 1996.



Sec. 403.100  Applicability of system of accounts and reports.

    Each Association shall keep its books of account, records and 
memoranda, and make reports to the Director in accordance with the 
guidelines of the Generally Accepted Accounting Principles (GAAP) issued 
by the Financial Accounting Standards Board. These guidelines are 
available by writing to the Director, Great Lakes Pilotage at the 
address listed in Sec. 401.110(a)(9) of this chapter.

[60 FR 18369, Apr. 11, 1995. Redesignated and amended at 61 FR 32655, 
June 25, 1996, and further redesignated and amended by USCG-1998-3976, 
63 FR 35139, 35140, June 29, 1998]



Sec. 403.105  Records.

    (a) Each Association shall maintain the general books of account and 
all books, records, and supporting memoranda in such manner as to 
provide, at any time, full information relating to any account. 
Supporting memoranda must provide sufficient information to verify the 
nature and character of each entry and its proper classification.
    (b) Each Association shall maintain all books, records and memoranda 
in a manner that will readily permit audit and examination by the 
Director or the Director's representatives. All books, records and 
memoranda shall be protected from loss, theft, or damage by fire, flood 
or otherwise, and shall be retained for 10 years unless otherwise 
authorized by the Director.



Sec. 403.110  Accounting entities.

    Each Association shall be a separate accounting entity. However, the 
records shall be maintained with sufficient particularity to allocate 
items to each pilotage pool operation or nonpool operation and to 
support the equitable proration of items that are common to two or more 
pilotage pools.



Sec. 403.115  Accounting period.

    Each Association subject to this part shall maintain its accounts on 
a calendar year basis unless otherwise approved by the Director.



Sec. 403.120  Notes to financial statements.

    (a) All matters that are not clearly identified in the body of the 
financial

[[Page 428]]

statements of the Association, but which may materially influence 
interpretations or conclusions that may reasonably be drawn in regard to 
financial condition or earnings of the Association, shall be clearly and 
completely stated as footnotes to the financial statements.
    (b) Financial items that are not otherwise required to be reported 
in the Association financial statements, but which may affect ratemaking 
calculations, are required to be reported to the Director in the notes 
to the financial statements. Any financial items that are not reported 
to the Director will not be considered by the Director during ratemaking 
procedures contained in part 404 of this chapter.

[60 FR 18369, Apr. 11, 1995. Redesignated and amended at 61 FR 32655, 
June 25, 1996, and further redesignated by USCG-1998-3976, 63 FR 35139, 
35140, June 29, 1998]



                 Subpart B_Inter-Association Settlements

    Source: 60 FR 18369, Apr. 11, 1995, unless otherwise noted. 
Redesignated at 61 FR 32655, June 25, 1996, and further redesignated by 
USCG-1998-3976, 63 FR 35139, June 29, 1998.



Sec. 403.200  General.

    Each Association that shares revenues and expenses with the Canadian 
Great Lakes Pilotage Authority (GLPA) shall submit settlement statements 
regarding these activities. The settlement statements shall be completed 
in accordance with the terms of agreements between the United States and 
Canada and guidance from the Director of Great Lakes Pilotage.



                    Subpart C_Reporting Requirements



Sec. 403.300  Financial reporting requirements.

    (a) General:
    (1) The financial statements shall list each active account, 
including subsidiary accounts.
    (2) The financial statements, together with any other required 
statistical data, shall be submitted to the Director within 30 days of 
the end of the reporting period, unless otherwise authorized by the 
Director.
    (3) An officer of the Association shall certify the accuracy of the 
financial statements.
    (b) Required Reports:
    (1) By April 1 of each year, each Association shall obtain an annual 
unqualified long form audit report for the preceding year, audited and 
prepared in accordance with generally accepted auditing standards by an 
independent certified public accountant.
    (2) Each Association shall forward their annual unqualified long 
form audit report, and any associated settlement statements, to the 
Director no later than April 7 of each year.

[60 FR 18369, Apr. 11, 1995, as amended at 61 FR 21084, May 9, 1996. 
Redesignated at 61 FR 32655, June 25, 1996, and further redesignated by 
USCG-1998-3976, 63 FR 35139, June 29, 1998]



                         Subpart D_Source Forms



Sec. 403.400  Uniform pilot's source form.

    (a) Each Association shall record pilotage transactions on a form 
approved by the Director. The approved form shall be issued to pilots by 
authorized United States pilotage pools.
    (b) Pilots shall complete forms in detail as soon as possible after 
completion of assignment and return the entire set to the dispatching 
office, together with adequate support for reimbursable travel expenses.
    (c) Upon receipt by the Association, the forms shall be completed by 
insertion of rates and charges as specified in part 401 of this chapter.
    (d) Copies of the form shall be distributed as follows:
    (1) Original to accompany invoice;
    (2) First copy to Director;
    (3) Second copy to billing office for accounting record;
    (4) Third copy to pilot's own Association for pilot's personal 
record;
    (5) Fourth copy to corresponding Canadian Association or agency for 
office use.
    (e) Associations shall account by number for all pilot source forms 
issued.

[60 FR 18369, Apr. 11, 1995. Redesignated and amended at 61 FR 32655, 
June 25, 1996, and further redesignated and amended by USCG-1998-3976, 
63 FR 35139, 35140, June 29, 1998]

[[Page 429]]



PART 404_GREAT LAKES PILOTAGE RATEMAKING--Table of Contents



Sec.
404.1 General ratemaking provisions.
404.5 Guidelines for the recognition of expenses.
404.10 Ratemaking procedures and guidelines.

Appendix A to Part 404--Ratemaking Analyses and Methodology
Appendix B to Part 404--Ratemaking Definitions and Formulas
Appendix C to Part 404--Procedures for Annual Review of Base Pilotage 
          Rates

    Authority: 46 U.S.C. 2104(a), 8105, 9303, 9304; Department of 
Homeland Security Delegation No. 0170.1.



Sec. 404.1  General ratemaking provisions.

    (a) The purpose of this part is to provide guidelines and procedures 
for Great Lakes pilotage ratemaking. Included in this part are 
explanations of the steps followed in developing a pilotage rate 
adjustment, the analysis used, and the guidelines followed in arriving 
at the pilotage rates contained in part 401 of this chapter.
    (b) Great Lakes pilotage rates shall be reviewed annually in 
accordance with the procedures detailed in Appendix C to this part. The 
Director shall review Association audit reports annually and, at a 
minimum, the Director shall complete a thorough audit of pilot 
association expenses and establish pilotage rates in accordance with the 
procedures detailed in Sec. 404.10 of this part at least once every 
five years. An interested party or parties may also petition the 
Director for a review at any time. The petition must present a 
reasonable basis for concluding that a review may be warranted. If the 
Director determines, from the information contained in the petition, 
that the existing rates may no longer be reasonable, a full review of 
the pilotage rates will be conducted. If the full review shows that 
pilotage rates are within a reasonable range of their target, no 
adjustment to the rates will be initiated.

[60 FR 18370, Apr. 11, 1995, as amended at 61 FR 21084, May 9, 1996. 
Redesignated and amended at 61 FR 32655, June 25, 1996, and further 
redesignated and amended by USCG-1998-3976, 63 FR 35139, 35140, June 29, 
1998]



Sec. 404.5  Guidelines for the recognition of expenses.

    (a) The following is a listing of the principal guidelines followed 
by the Director when determining whether expenses will be recognized in 
the ratemaking process:
    (1) Each expense item included in the rate base is evaluated to 
determine if it is necessary for the provision of pilotage service, and 
if so, what dollar amount is reasonable for that expense item. Each 
Association is responsible for providing the Director with sufficient 
information to show the reasonableness of all expense items. The 
Director will give the Association the opportunity to defend any 
expenses that are questioned. However, subject to the terms and 
conditions contained in other provisions of this part, expense items 
that the Director determines are not reasonable and necessary for the 
provision of pilotage services will not be recognized for ratemaking 
purposes.
    (2) In determining reasonableness, each expense item is measured 
against one or more of the following:
    (i) Comparable or similar expenses paid by others in the maritime 
industry,
    (ii) Comparable or similar expenses paid by other industries, or
    (iii) U.S. Internal Revenue Service guidelines.
    (3) Lease costs for both operating and capital leases are recognized 
for ratemaking purposes to the extent that they conform to market rates. 
In the absence of a comparable market, lease costs are recognized for 
ratemaking purposes to the extent that they conform to depreciation plus 
an allowance for return on investment (computed as if the asset had been 
purchased with equity capital). The portion of lease costs that exceed 
these standards is not recognized for ratemaking purposes.
    (4) For each Association, a market-equivalent return-on-investment 
is allowed for the net capital invested in the Association by its 
members. Assets subject to return on investment provisions are subject 
to reasonableness provisions. If an asset or other investment is not 
necessary for the provision of pilotage services, the return element is 
not allowed for ratemaking purposes.

[[Page 430]]

    (5) For ratemaking purposes, the revenues and expenses generated 
from Association transactions that are not directly related to the 
provision of pilotage services are included in ratemaking calculations 
as long as the revenues exceed the expenses from these transactions. For 
non-pilotage transactions that result in a net financial loss for the 
Association, the amount of the loss is not recognized for ratemaking 
purposes. The Director reviews non-pilotage activities to determine if 
any adversely impact the provision of pilotage service, and may make 
ratemaking adjustments or take other steps to ensure the provision of 
pilotage service.
    (6) Medical, pension, and other benefits paid to pilots, or for the 
benefit of pilots, by the Association are treated as pilot compensation. 
The amount recognized for each of these benefits is the cost of these 
benefits in the most recent union contract for first mates on Great 
Lakes vessels. Any expenses in excess of this amount are not recognized 
for ratemaking purposes.
    (7) Expense items that are not reported to the Director by the 
Association are not considered by the Director in ratemaking 
calculations.
    (8) Expenses are appropriate and allowable if they are reasonable, 
and directly related to pilotage. Each Association must substantiate its 
expenses, including legal expenses. In general, the following are not 
recognized as reasonable expenses for ratemaking purposes:
    (i) Undocumented expenses;
    (ii) Expenses for lobbying;
    (iii) Expenses for personal matters;
    (iv) Expenses that are not commensurate with the work performed; and
    (v) Any other expenses not directly related to pilotage.
    (9) In any Great Lakes pilotage district where revenues and expenses 
from Canadian pilots are commingled with revenues and expenses from U.S. 
pilots, Canadian revenues and expenses are not included in the U.S. 
calculations for setting pilotage rates.
    (10) Reasonable profit sharing for non-pilot employees of pilot 
associations will be allowed as an expense for ratemaking purposes. 
Profit sharing that benefits pilots will be treated as part of pilot 
compensation.

[60 FR 18370, Apr. 11, 1995. Redesignated at 61 FR 32655, June 25, 1996, 
and further redesignated by USCG-1998-3976, 63 FR 35139, June 29, 1998]



Sec. 404.10  Ratemaking procedures and guidelines.

    (a) Appendix A to this part is a description of the types of 
analyses performed and the methodology followed in the development of a 
base pilotage rate. Ratemaking calculations in appendix A of this part 
are made using the definitions and formulas contained in appendix B of 
this part. Appendix C of this part is a description of the methodology 
followed in the development of annual reviews to base pilotage rates. 
Pilotage rates actually implemented may vary from the results of the 
calculations in appendices A, B and C of this part, because of 
agreements with Canada requiring identical rates, or because of other 
circumstances to be determined by the Director. Additional analysis may 
also be performed as circumstances require. The guidelines contained in 
Sec. 404.05 are applied in the steps identified in appendix A to this 
part.
    (b) A separate ratemaking calculation is made for each of the 
following U.S. pilotage areas:

Area 1--the St. Lawrence River;
Area 2--Lake Ontario;
Area 4--Lake Erie;
Area 5--the navigable waters from South East Shoal to Port Huron, MI;
Area 6--Lakes Huron and Michigan;
Area 7--the St. Mary's River; and
Area 8--Lake Superior.

[60 FR 18370, Apr. 11, 1995. Redesignated and amended at 61 FR 32655, 
June 25, 1996, and further redesignated and amended by USCG-1998-3976, 
63 FR 35139, 35140, June 29, 1998]



    Sec. Appendix A to Part 404--Ratemaking Analyses and Methodology

                Step 1: Projection of Operating Expenses

    (1) The Director projects the amount of vessel traffic annually. 
Based upon that projection, the Director forecasts the amount of fair 
and reasonable operating expenses that pilotage rates should recover. 
This consists of the following phases:
    (a) Submission of financial information from each Association;
    (b) determination of recognizable expenses;

[[Page 431]]

    (c) adjustment for inflation or deflation; and
    (d) final projection of operating expenses. Each of these phases is 
detailed below.

              Step 1.A--Submission of Financial Information

    (1) Each Association is responsible for providing detailed financial 
information to the Director, in accordance with part 403 of this 
chapter.

            Step 1.B--Determination of Recognizable Expenses

    (1) The Director determines which Association expenses will be 
recognized for ratemaking purposes, using the guidelines for the 
recognition of expenses contained in Sec. 404.05. Each Association is 
responsible for providing sufficient data for the Director to make this 
determination.

             Step 1.C--Adjustment for Inflation or Deflation

    (1) In making projections of future expenses, expenses that are 
subject to inflationary or deflationary pressures are adjusted. Costs 
not subject to inflation or deflation are not adjusted. Annual cost 
inflation or deflation rates will be projected to the succeeding 
navigation season, reflecting the gradual increase or decrease in costs 
throughout the year. The inflation adjustment will be based on the 
preceding year's change in the Consumer Price Index for the North 
Central Region of the United States.

               Step 1.D--Projection of Operating Expenses

    (1) Once all adjustments are made to the recognized operating 
expenses, the Director projects these expenses for each pilotage area. 
In doing so, the Director takes into account foreseeable circumstances 
that could affect the accuracy of the projection. The Director will 
determine, as accurately as reasonably practicable, the ``projection of 
operating expenses.''

             Step 2: Projection of Target Pilot Compensation

    (1) The second step in the Great Lakes pilotage ratemaking 
methodology is to project the amount of target pilot compensation that 
pilotage rates should provide in each area. This step consists of the 
following phases:
    (a) Determination of target rate of compensation;
    (b) determination of number of pilots needed in each pilotage area; 
and
    (c) multiplication of the target compensation by the number of 
pilots needed to project target pilot compensation needed in each area. 
Each of these phases is detailed below.

         Step 2.A--Determination of Target Rate of Compensation

    (1) Target pilot compensation for pilots providing services in 
undesignated waters approximates the average annual compensation for 
first mates on U.S. Great Lakes vessels. The average annual compensation 
for first mates is determined based on the most current union contracts, 
and includes wages and benefits received by first mates.
    (2) Target pilot compensation for pilots providing services in 
designated waters approximates the average annual compensation for 
masters on U.S. Great Lakes vessels. It is calculated as 150% of the 
compensation earned by first mates on U.S. Great Lakes vessels.

           Step 2.B--Determination of Number of Pilots Needed

    (1) The basis for the number of pilots needed in each area of 
designated waters is established by dividing the projected bridge hours 
for that area by 1,000. Bridge hours are the number of hours a pilot is 
aboard a vessel providing basic pilotage service.
    (2) The basis for the number of pilots needed in each area of 
undesignated waters is established by dividing the projected bridge 
hours for that area by 1,800.
    (3) In determining the number of pilots needed in each pilotage 
area, the Director is guided by the results of the calculations in steps 
2.A. and 2.B. However, the Director may also find it necessary to make 
adjustments to these numbers in order to ensure uninterrupted pilotage 
service in each area, or for other reasonable circumstances that the 
Director determines are appropriate.

            Step 2.C--Projection of Target Pilot Compensation

    (1) The ``projection of target pilot compensation'' is determined 
separately for each pilotage area by multiplying the number of pilots 
needed in that area by the target pilot compensation for pilots working 
in that area.

                      Step 3: Projection of Revenue

    (1) The third step in the Great Lakes pilotage ratemaking 
methodology is to project the revenue that would be received in each 
pilotage area if existing rates were left unchanged. This consists of a 
projection of future vessel traffic and pilotage revenue.

                     Step 3.A--Projection of Revenue

    (1) The Director generates the most accurate projections reasonably 
possible of the pilotage service that will be required by vessel traffic 
in each pilotage area. These projections are based on historical data 
and all other relevant data available. Projected demand for pilotage 
service is multiplied by

[[Page 432]]

the existing pilotage rates for that service, to arrive at the 
``projection of revenue.''

                 Step 4: Calculation of Investment Base

    (1) The fourth step in the Great Lakes pilotage ratemaking 
methodology is the calculation of the investment base of each 
Association. The investment base is the recognized capital investment in 
the assets employed by each Association required to support pilotage 
operations. In general, it is the sum of available cash and the net 
value of real assets, less the value of land. The investment base will 
be established through the use of the balance sheet accounts, as amended 
by material supplied in the Notes to the Financial Statement. The 
formula used in calculating the investment base is detailed in Appendix 
B to this part.

      Step 5: Determination of Target Rate of Return on Investment

    (1) The fifth step in the Great Lakes pilotage ratemaking 
methodology is to determine the Target Rate of Return on Investment. For 
each Association, a market-equivalent return-on-investment (ROI) is 
allowed for the recognized net capital invested in the Association by 
its members.
    (2) The allowed Return on Investment (ROI) is based on the preceding 
year's average annual rate of return for new issues of high grade 
corporate securities.
    (3) Assets subject to return on investment provisions must be 
reasonable in both purpose and amount. If an asset or other investment 
is not necessary for the provision of pilotage services, that portion of 
the return element is not allowed for ratemaking purposes.

                    Step 6: Adjustment Determination

    (1) The next step in the Great Lakes pilotage ratemaking methodology 
is to insert the results from steps 1, 2, 3, and 4 into a formula that 
is based on a basic regulatory rate structure, and comparing the results 
to step 5. This basic regulatory rate structure takes into account 
revenues, expenses and return on investment, and is of the following 
form:

------------------------------------------------------------------------
                                     Ratemaking projections for basic
              Line                               pilotage
------------------------------------------------------------------------
1.                               + Revenue (from step 3)
2.                               - Operating Expenses (from step 1)
3.                               - Pilot Compensation (from step 2)
                                ----------------------------------------
4.                               = Operating Profit/(Loss)
5.                               - Interest Expense (from Audit reports)
                                ----------------------------------------
6.                               = Earnings Before Tax
7.                               - Federal Tax Allowance
                                ----------------------------------------
8.                               = Net Income
9.                               Return Element (Net Income + Interest)
10.                              / Investment Base (from step 4)
                                ----------------------------------------
11.                              = Return on Investment
------------------------------------------------------------------------

    (2) The Director will compare the projected return on investment (as 
calculated using the formula above) to the target return on investment 
(from step 5), to determine whether an adjustment to the base pilotage 
rates is necessary. If the projected return on investment is 
significantly different from the target return on investment, the 
revenues that would be generated by the current pilotage rates are not 
equal to the revenues that would need to be recovered by the pilotage 
rates.
    (3) The base pilotage revenues that are needed are calculated by 
determining what change in projected revenue will make the target return 
on investment equal to the projected return on investment. This 
``projection of revenue needed'' is used in determining the basis for 
proposed adjustments to the base pilotage rates. The mechanism for 
adjusting the base pilotage rates is discussed in Step 7 below. The 
required return, tax, and interest elements may be considered additions 
to the operating expenses and pilot compensation components of the base 
pilotage rates.

                  Step 7: Adjustment of Pilotage Rates

    The final step in the Great Lakes pilotage ratemaking methodology is 
to adjust base pilotage rates if the calculations from Step 6 show that 
pilotage rates in a pilotage area should be adjusted, and if the 
Director determines that it is appropriate to go forward with a rate 
adjustment. Rate adjustments are calculated in accordance with the 
procedures found in this step. However, pilotage rates calculated in 
this step are subject to adjustment based on requirements of the 
Memorandum of Arrangements between the United States and Canada, and 
other supportable circumstances that may be appropriate.
    (2) Pilotage rate adjustments are calculated for each area by 
multiplying the existing pilotage rates in each area by the rate 
multiplier. The rate multiplier is calculated by inserting the result 
from the steps detailed above into the following formula:

------------------------------------------------------------------------
              Line                        Ratemaking projections
------------------------------------------------------------------------
1.                               + Revenue Needed (from step 6)
2.                               / Revenue (from step 3)
                                ----------------------------------------
3.                               = Rate multiplier
------------------------------------------------------------------------


[[Page 433]]


[60 FR 18370, Apr. 11, 1995. Redesignated and amended at 61 FR 32655, 
June 25, 1996; 62 FR 5923, Feb. 10, 1997. Redesignated and amended by 
USCG-1998-3976, 63 FR 35139, 35140, June 29, 1998; USCG-2002-11288, 68 
FR 69578, Dec. 12, 2003]



    Sec. Appendix B to Part 404--Ratemaking Definitions and Formulas

    The following definitions apply to the ratemaking formula contained 
in this appendix.
    (1) Operating Revenue--means the sum of all operating revenues 
received by the Association for pilotage services, including revenues 
such as docking, moveage, delay, detention, cancellation, and lock 
transit.
    (2) Operating Expense--means the sum of all operating expenses 
incurred by the Association for pilotage services, less the sum of 
disallowed expenses.
    (3) Target Pilot Compensation--means the compensation that pilots 
are intended to receive for full time employment. For pilots providing 
services in undesignated waters, the target pilot compensation is the 
average annual compensation for first mates on U.S. Great Lakes vessels. 
For pilots providing services in designated waters, the target pilot 
compensation is 150% of the average annual compensation for first mates 
on U.S. Great Lakes vessels.
    (4) Operating Profit/(Loss)--means Operating Revenue less Operating 
Expense and Target Pilot Compensation.
    (5) Interest Expense--means the reported Association interest 
expense on operations, as adjusted to exclude any interest expense 
attributable to losses from non-pilotage operations.
    (6) Earnings Before Tax--means Operating Profit/(Loss), less the 
Interest Expense.
    (7) Federal Tax Allowance--means the Federal statutory tax on 
Earnings Before Tax, for those Associations subject to Federal tax.
    (8) Net Income--means the Earnings Before Tax, less the Federal Tax 
Allowance.
    (9) Return Element (Net Income plus Interest)--means the Net Income, 
plus Interest Expense. The return element can be considered the sum of 
the return to equity capital (the Net Income), and the return to debt 
(the Interest Expense).
    (10) Investment Base (separately determined)--means the net 
recognized capital invested in the Association, including both equity 
and debt. Should capital be invested in other than pilotage operations, 
that capital is excluded from the rate base.
    (11) Return on Investment--means the Return element, divided by the 
Investment Base, and expressed as a percent.

                         Investment Base Formula

    (1) Regulatory Investment (Investment Base) is the recognized 
capital investment in the useful assets employed by the pilot groups. In 
general, it is the sum of available cash and the net value of real 
assets, less the value of land. The investment base is established 
through the use of the balance sheet accounts, as amended by material 
supplied in the Notes to the Financial Statement.
    (2) The Investment Base is calculated using financial data from the 
Great Lakes pilot associations, as audited and approved by the Director. 
The Investment Base would be calculated as follows:

                               Description


Recognized Assets:
                                 + Total Current Assets
                                 - Total Current Liabilities
                                 + Current Notes Payable
                                 + Total Property and Equipment (Net)
                                 - Land
                                 + Total Other Assets
                                ----------------------------------------
                                 = Total Recognized Assets
 
Non-Recognized Assets
                                 + Total Investments and Special Funds
                                ----------------------------------------
                                 = Total Non-Recognized Assets
Total Assets
                                 + Total Recognized Assets
                                 + Total Non-Recognized Assets
                                ----------------------------------------
                                 = Total Assets
 
Recognized Sources of Funds
                                 + Total Stockholders' Equity
                                 + Long-Term Debt
                                 + Current Notes Payable
                                 + Advances from Affiliated Companies
                                 + Long-Term Obligations-Capital Leases
                                ----------------------------------------
                                 = Total Recognized Sources
 
Non-Recognized Sources of Funds
                                 + Pension Liability
                                 + Other Non-Current Liabilities
                                 + Deferred Federal Income Taxes
                                 + Other Deferred Credits
                                ----------------------------------------
                                 = Total Non-Recognized Sources
 
Total Sources of Funds
                                 + Total Recognized Sources
                                 + Total Non-Recognized Sources
                                ----------------------------------------
                                 = Total Sources of Funds
 

    (3) Using the figures developed above, the Investment Base is the 
Recognized Assets times the ratio of Recognized Sources of Funds to 
Total Sources of Funds.

[60 FR 18370, Apr. 11, 1995. Redesignated at 61 FR 32655, June 25, 1996, 
and further redesignated by USCG-1998-3976, 63 FR 35139, June 29, 1998]



   Sec. Appendix C to Part 404--Procedures for Annual Review of Base 
                             Pilotage Rates

    The ratemaking methodology detailed in appendix A is used by the 
Director to determine base pilotage rates at least once every

[[Page 434]]

five years, as required by Sec. 404.1. In the intervening years the 
Director will review, if warranted by cost changes, recalculate base 
pilotage rates proposed for coordination with Canada using the following 
procedures:
    Step 1: Calculate the total economic costs for the base period (i.e. 
pilot compensation expense plus all other recognized expenses plus the 
return element) and divide by the total bridge hours used in setting the 
base period rates;
    Step 2: Calculate the ``expense multiplier,'' the ratio of other 
expenses and the return element to pilot compensation for the base 
period;
    Step 3: Calculate an annual ``projection of target pilot 
compensation'' using the same procedures found in Step 2 of appendix A;
    Step 4: Increase the projected pilot compensation in Step 3 by the 
expense multiplier in Step 2;
    Step 5: Adjust the result in Step 4, as required, for inflation or 
deflation;
    Step 6: Divide the result in Step 5 by projected bridge hours to 
determine total unit costs;
    Step 7: Divide prospective unit costs in Step 6 by the base period 
unit costs in Step 1;
    Step 8: Adjust the base period rates by the percentage change in 
unit costs in Step 7. For example if the total economic costs per bridge 
hour is $30.00 for the base period and $33.00 for the prospective rate 
period, then the rates established for the base period would be 
increased by 10% to determine the proposed rates for the prospective 
rate period, which would then be subject to negotiation with Canada.

[60 FR 18370, Apr. 11, 1995. Redesignated and amended at 61 FR 32655, 
June 25, 1996, and further redesignated and amended by USCG-1998-3976, 
63 FR 35139, 35140, June 29, 1998]

                        PARTS 405	499 [RESERVED]

[[Page 435]]



                              FINDING AIDS




  --------------------------------------------------------------------

  A list of CFR titles, subtitles, chapters, subchapters and parts and 
an alphabetical list of agencies publishing in the CFR are included in 
the CFR Index and Finding Aids volume to the Code of Federal Regulations 
which is published separately and revised annually.

  Table of CFR Titles and Chapters
  Alphabetical List of Agencies Appearing in the CFR
  List of CFR Sections Affected

[[Page 437]]



                    Table of CFR Titles and Chapters




                     (Revised as of October 1, 2014)

                      Title 1--General Provisions

         I  Administrative Committee of the Federal Register 
                (Parts 1--49)
        II  Office of the Federal Register (Parts 50--299)
       III  Administrative Conference of the United States (Parts 
                300--399)
        IV  Miscellaneous Agencies (Parts 400--500)

                    Title 2--Grants and Agreements

            Subtitle A--Office of Management and Budget Guidance 
                for Grants and Agreements
         I  Office of Management and Budget Governmentwide 
                Guidance for Grants and Agreements (Parts 2--199)
        II  Office of Management and Budget Guidance (Parts 200--
                299)
            Subtitle B--Federal Agency Regulations for Grants and 
                Agreements
       III  Department of Health and Human Services (Parts 300--
                399)
        IV  Department of Agriculture (Parts 400--499)
        VI  Department of State (Parts 600--699)
       VII  Agency for International Development (Parts 700--799)
      VIII  Department of Veterans Affairs (Parts 800--899)
        IX  Department of Energy (Parts 900--999)
        XI  Department of Defense (Parts 1100--1199)
       XII  Department of Transportation (Parts 1200--1299)
      XIII  Department of Commerce (Parts 1300--1399)
       XIV  Department of the Interior (Parts 1400--1499)
        XV  Environmental Protection Agency (Parts 1500--1599)
     XVIII  National Aeronautics and Space Administration (Parts 
                1800--1899)
        XX  United States Nuclear Regulatory Commission (Parts 
                2000--2099)
      XXII  Corporation for National and Community Service (Parts 
                2200--2299)
     XXIII  Social Security Administration (Parts 2300--2399)
      XXIV  Housing and Urban Development (Parts 2400--2499)
       XXV  National Science Foundation (Parts 2500--2599)
      XXVI  National Archives and Records Administration (Parts 
                2600--2699)
     XXVII  Small Business Administration (Parts 2700--2799)
    XXVIII  Department of Justice (Parts 2800--2899)

[[Page 438]]

       XXX  Department of Homeland Security (Parts 3000--3099)
      XXXI  Institute of Museum and Library Services (Parts 3100--
                3199)
     XXXII  National Endowment for the Arts (Parts 3200--3299)
    XXXIII  National Endowment for the Humanities (Parts 3300--
                3399)
     XXXIV  Department of Education (Parts 3400--3499)
      XXXV  Export-Import Bank of the United States (Parts 3500--
                3599)
    XXXVII  Peace Corps (Parts 3700--3799)
     LVIII  Election Assistance Commission (Parts 5800--5899)

                        Title 3--The President

         I  Executive Office of the President (Parts 100--199)

                           Title 4--Accounts

         I  Government Accountability Office (Parts 1--199)
        II  Recovery Accountability and Transparency Board (Parts 
                200--299)

                   Title 5--Administrative Personnel

         I  Office of Personnel Management (Parts 1--1199)
        II  Merit Systems Protection Board (Parts 1200--1299)
       III  Office of Management and Budget (Parts 1300--1399)
         V  The International Organizations Employees Loyalty 
                Board (Parts 1500--1599)
        VI  Federal Retirement Thrift Investment Board (Parts 
                1600--1699)
      VIII  Office of Special Counsel (Parts 1800--1899)
        IX  Appalachian Regional Commission (Parts 1900--1999)
        XI  Armed Forces Retirement Home (Parts 2100--2199)
       XIV  Federal Labor Relations Authority, General Counsel of 
                the Federal Labor Relations Authority and Federal 
                Service Impasses Panel (Parts 2400--2499)
        XV  Office of Administration, Executive Office of the 
                President (Parts 2500--2599)
       XVI  Office of Government Ethics (Parts 2600--2699)
       XXI  Department of the Treasury (Parts 3100--3199)
      XXII  Federal Deposit Insurance Corporation (Parts 3200--
                3299)
     XXIII  Department of Energy (Parts 3300--3399)
      XXIV  Federal Energy Regulatory Commission (Parts 3400--
                3499)
       XXV  Department of the Interior (Parts 3500--3599)
      XXVI  Department of Defense (Parts 3600--3699)
    XXVIII  Department of Justice (Parts 3800--3899)
      XXIX  Federal Communications Commission (Parts 3900--3999)
       XXX  Farm Credit System Insurance Corporation (Parts 4000--
                4099)
      XXXI  Farm Credit Administration (Parts 4100--4199)

[[Page 439]]

    XXXIII  Overseas Private Investment Corporation (Parts 4300--
                4399)
     XXXIV  Securities and Exchange Commission (Parts 4400--4499)
      XXXV  Office of Personnel Management (Parts 4500--4599)
    XXXVII  Federal Election Commission (Parts 4700--4799)
        XL  Interstate Commerce Commission (Parts 5000--5099)
       XLI  Commodity Futures Trading Commission (Parts 5100--
                5199)
      XLII  Department of Labor (Parts 5200--5299)
     XLIII  National Science Foundation (Parts 5300--5399)
       XLV  Department of Health and Human Services (Parts 5500--
                5599)
      XLVI  Postal Rate Commission (Parts 5600--5699)
     XLVII  Federal Trade Commission (Parts 5700--5799)
    XLVIII  Nuclear Regulatory Commission (Parts 5800--5899)
      XLIX  Federal Labor Relations Authority (Parts 5900--5999)
         L  Department of Transportation (Parts 6000--6099)
       LII  Export-Import Bank of the United States (Parts 6200--
                6299)
      LIII  Department of Education (Parts 6300--6399)
       LIV  Environmental Protection Agency (Parts 6400--6499)
        LV  National Endowment for the Arts (Parts 6500--6599)
       LVI  National Endowment for the Humanities (Parts 6600--
                6699)
      LVII  General Services Administration (Parts 6700--6799)
     LVIII  Board of Governors of the Federal Reserve System 
                (Parts 6800--6899)
       LIX  National Aeronautics and Space Administration (Parts 
                6900--6999)
        LX  United States Postal Service (Parts 7000--7099)
       LXI  National Labor Relations Board (Parts 7100--7199)
      LXII  Equal Employment Opportunity Commission (Parts 7200--
                7299)
     LXIII  Inter-American Foundation (Parts 7300--7399)
      LXIV  Merit Systems Protection Board (Parts 7400--7499)
       LXV  Department of Housing and Urban Development (Parts 
                7500--7599)
      LXVI  National Archives and Records Administration (Parts 
                7600--7699)
     LXVII  Institute of Museum and Library Services (Parts 7700--
                7799)
    LXVIII  Commission on Civil Rights (Parts 7800--7899)
      LXIX  Tennessee Valley Authority (Parts 7900--7999)
       LXX  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 8000--8099)
      LXXI  Consumer Product Safety Commission (Parts 8100--8199)
    LXXIII  Department of Agriculture (Parts 8300--8399)
     LXXIV  Federal Mine Safety and Health Review Commission 
                (Parts 8400--8499)
     LXXVI  Federal Retirement Thrift Investment Board (Parts 
                8600--8699)
    LXXVII  Office of Management and Budget (Parts 8700--8799)
      LXXX  Federal Housing Finance Agency (Parts 9000--9099)
   LXXXIII  Special Inspector General for Afghanistan 
                Reconstruction (Parts 9300--9399)

[[Page 440]]

    LXXXIV  Bureau of Consumer Financial Protection (Parts 9400--
                9499)
    LXXXVI  National Credit Union Administration (Parts 9600--
                9699)
     XCVII  Department of Homeland Security Human Resources 
                Management System (Department of Homeland 
                Security--Office of Personnel Management) (Parts 
                9700--9799)
     XCVII  Council of the Inspectors General on Integrity and 
                Efficiency (Parts 9800--9899)
      XCIX  Military Compensation and Retirement Modernization 
                Commission (Parts 9900--9999)

                      Title 6--Domestic Security

         I  Department of Homeland Security, Office of the 
                Secretary (Parts 1--99)
         X  Privacy and Civil Liberties Oversight Board (Parts 
                1000--1099)

                         Title 7--Agriculture

            Subtitle A--Office of the Secretary of Agriculture 
                (Parts 0--26)
            Subtitle B--Regulations of the Department of 
                Agriculture
         I  Agricultural Marketing Service (Standards, 
                Inspections, Marketing Practices), Department of 
                Agriculture (Parts 27--209)
        II  Food and Nutrition Service, Department of Agriculture 
                (Parts 210--299)
       III  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 300--399)
        IV  Federal Crop Insurance Corporation, Department of 
                Agriculture (Parts 400--499)
         V  Agricultural Research Service, Department of 
                Agriculture (Parts 500--599)
        VI  Natural Resources Conservation Service, Department of 
                Agriculture (Parts 600--699)
       VII  Farm Service Agency, Department of Agriculture (Parts 
                700--799)
      VIII  Grain Inspection, Packers and Stockyards 
                Administration (Federal Grain Inspection Service), 
                Department of Agriculture (Parts 800--899)
        IX  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Fruits, Vegetables, Nuts), Department 
                of Agriculture (Parts 900--999)
         X  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Milk), Department of Agriculture 
                (Parts 1000--1199)
        XI  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Miscellaneous Commodities), Department 
                of Agriculture (Parts 1200--1299)
       XIV  Commodity Credit Corporation, Department of 
                Agriculture (Parts 1400--1499)
        XV  Foreign Agricultural Service, Department of 
                Agriculture (Parts 1500--1599)

[[Page 441]]

       XVI  Rural Telephone Bank, Department of Agriculture (Parts 
                1600--1699)
      XVII  Rural Utilities Service, Department of Agriculture 
                (Parts 1700--1799)
     XVIII  Rural Housing Service, Rural Business-Cooperative 
                Service, Rural Utilities Service, and Farm Service 
                Agency, Department of Agriculture (Parts 1800--
                2099)
        XX  Local Television Loan Guarantee Board (Parts 2200--
                2299)
       XXV  Office of Advocacy and Outreach, Department of 
                Agriculture (Parts 2500--2599)
      XXVI  Office of Inspector General, Department of Agriculture 
                (Parts 2600--2699)
     XXVII  Office of Information Resources Management, Department 
                of Agriculture (Parts 2700--2799)
    XXVIII  Office of Operations, Department of Agriculture (Parts 
                2800--2899)
      XXIX  Office of Energy Policy and New Uses, Department of 
                Agriculture (Parts 2900--2999)
       XXX  Office of the Chief Financial Officer, Department of 
                Agriculture (Parts 3000--3099)
      XXXI  Office of Environmental Quality, Department of 
                Agriculture (Parts 3100--3199)
     XXXII  Office of Procurement and Property Management, 
                Department of Agriculture (Parts 3200--3299)
    XXXIII  Office of Transportation, Department of Agriculture 
                (Parts 3300--3399)
     XXXIV  National Institute of Food and Agriculture (Parts 
                3400--3499)
      XXXV  Rural Housing Service, Department of Agriculture 
                (Parts 3500--3599)
     XXXVI  National Agricultural Statistics Service, Department 
                of Agriculture (Parts 3600--3699)
    XXXVII  Economic Research Service, Department of Agriculture 
                (Parts 3700--3799)
   XXXVIII  World Agricultural Outlook Board, Department of 
                Agriculture (Parts 3800--3899)
       XLI  [Reserved]
      XLII  Rural Business-Cooperative Service and Rural Utilities 
                Service, Department of Agriculture (Parts 4200--
                4299)

                    Title 8--Aliens and Nationality

         I  Department of Homeland Security (Immigration and 
                Naturalization) (Parts 1--499)
         V  Executive Office for Immigration Review, Department of 
                Justice (Parts 1000--1399)

                 Title 9--Animals and Animal Products

         I  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 1--199)

[[Page 442]]

        II  Grain Inspection, Packers and Stockyards 
                Administration (Packers and Stockyards Programs), 
                Department of Agriculture (Parts 200--299)
       III  Food Safety and Inspection Service, Department of 
                Agriculture (Parts 300--599)

                           Title 10--Energy

         I  Nuclear Regulatory Commission (Parts 0--199)
        II  Department of Energy (Parts 200--699)
       III  Department of Energy (Parts 700--999)
         X  Department of Energy (General Provisions) (Parts 
                1000--1099)
      XIII  Nuclear Waste Technical Review Board (Parts 1300--
                1399)
      XVII  Defense Nuclear Facilities Safety Board (Parts 1700--
                1799)
     XVIII  Northeast Interstate Low-Level Radioactive Waste 
                Commission (Parts 1800--1899)

                      Title 11--Federal Elections

         I  Federal Election Commission (Parts 1--9099)
        II  Election Assistance Commission (Parts 9400--9499)

                      Title 12--Banks and Banking

         I  Comptroller of the Currency, Department of the 
                Treasury (Parts 1--199)
        II  Federal Reserve System (Parts 200--299)
       III  Federal Deposit Insurance Corporation (Parts 300--399)
        IV  Export-Import Bank of the United States (Parts 400--
                499)
         V  Office of Thrift Supervision, Department of the 
                Treasury (Parts 500--599)
        VI  Farm Credit Administration (Parts 600--699)
       VII  National Credit Union Administration (Parts 700--799)
      VIII  Federal Financing Bank (Parts 800--899)
        IX  Federal Housing Finance Board (Parts 900--999)
         X  Bureau of Consumer Financial Protection (Parts 1000--
                1099)
        XI  Federal Financial Institutions Examination Council 
                (Parts 1100--1199)
       XII  Federal Housing Finance Agency (Parts 1200--1299)
      XIII  Financial Stability Oversight Council (Parts 1300--
                1399)
       XIV  Farm Credit System Insurance Corporation (Parts 1400--
                1499)
        XV  Department of the Treasury (Parts 1500--1599)
       XVI  Office of Financial Research (Parts 1600--1699)
      XVII  Office of Federal Housing Enterprise Oversight, 
                Department of Housing and Urban Development (Parts 
                1700--1799)
     XVIII  Community Development Financial Institutions Fund, 
                Department of the Treasury (Parts 1800--1899)

[[Page 443]]

               Title 13--Business Credit and Assistance

         I  Small Business Administration (Parts 1--199)
       III  Economic Development Administration, Department of 
                Commerce (Parts 300--399)
        IV  Emergency Steel Guarantee Loan Board (Parts 400--499)
         V  Emergency Oil and Gas Guaranteed Loan Board (Parts 
                500--599)

                    Title 14--Aeronautics and Space

         I  Federal Aviation Administration, Department of 
                Transportation (Parts 1--199)
        II  Office of the Secretary, Department of Transportation 
                (Aviation Proceedings) (Parts 200--399)
       III  Commercial Space Transportation, Federal Aviation 
                Administration, Department of Transportation 
                (Parts 400--1199)
         V  National Aeronautics and Space Administration (Parts 
                1200--1299)
        VI  Air Transportation System Stabilization (Parts 1300--
                1399)

                 Title 15--Commerce and Foreign Trade

            Subtitle A--Office of the Secretary of Commerce (Parts 
                0--29)
            Subtitle B--Regulations Relating to Commerce and 
                Foreign Trade
         I  Bureau of the Census, Department of Commerce (Parts 
                30--199)
        II  National Institute of Standards and Technology, 
                Department of Commerce (Parts 200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  Foreign-Trade Zones Board, Department of Commerce 
                (Parts 400--499)
       VII  Bureau of Industry and Security, Department of 
                Commerce (Parts 700--799)
      VIII  Bureau of Economic Analysis, Department of Commerce 
                (Parts 800--899)
        IX  National Oceanic and Atmospheric Administration, 
                Department of Commerce (Parts 900--999)
        XI  Technology Administration, Department of Commerce 
                (Parts 1100--1199)
      XIII  East-West Foreign Trade Board (Parts 1300--1399)
       XIV  Minority Business Development Agency (Parts 1400--
                1499)
            Subtitle C--Regulations Relating to Foreign Trade 
                Agreements
        XX  Office of the United States Trade Representative 
                (Parts 2000--2099)
            Subtitle D--Regulations Relating to Telecommunications 
                and Information
     XXIII  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                2300--2399)

[[Page 444]]

                    Title 16--Commercial Practices

         I  Federal Trade Commission (Parts 0--999)
        II  Consumer Product Safety Commission (Parts 1000--1799)

             Title 17--Commodity and Securities Exchanges

         I  Commodity Futures Trading Commission (Parts 1--199)
        II  Securities and Exchange Commission (Parts 200--399)
        IV  Department of the Treasury (Parts 400--499)

          Title 18--Conservation of Power and Water Resources

         I  Federal Energy Regulatory Commission, Department of 
                Energy (Parts 1--399)
       III  Delaware River Basin Commission (Parts 400--499)
        VI  Water Resources Council (Parts 700--799)
      VIII  Susquehanna River Basin Commission (Parts 800--899)
      XIII  Tennessee Valley Authority (Parts 1300--1399)

                       Title 19--Customs Duties

         I  U.S. Customs and Border Protection, Department of 
                Homeland Security; Department of the Treasury 
                (Parts 0--199)
        II  United States International Trade Commission (Parts 
                200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  U.S. Immigration and Customs Enforcement, Department 
                of Homeland Security (Parts 400--599)

                     Title 20--Employees' Benefits

         I  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 1--199)
        II  Railroad Retirement Board (Parts 200--399)
       III  Social Security Administration (Parts 400--499)
        IV  Employees' Compensation Appeals Board, Department of 
                Labor (Parts 500--599)
         V  Employment and Training Administration, Department of 
                Labor (Parts 600--699)
        VI  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 700--799)
       VII  Benefits Review Board, Department of Labor (Parts 
                800--899)
      VIII  Joint Board for the Enrollment of Actuaries (Parts 
                900--999)
        IX  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 1000--1099)

[[Page 445]]

                       Title 21--Food and Drugs

         I  Food and Drug Administration, Department of Health and 
                Human Services (Parts 1--1299)
        II  Drug Enforcement Administration, Department of Justice 
                (Parts 1300--1399)
       III  Office of National Drug Control Policy (Parts 1400--
                1499)

                      Title 22--Foreign Relations

         I  Department of State (Parts 1--199)
        II  Agency for International Development (Parts 200--299)
       III  Peace Corps (Parts 300--399)
        IV  International Joint Commission, United States and 
                Canada (Parts 400--499)
         V  Broadcasting Board of Governors (Parts 500--599)
       VII  Overseas Private Investment Corporation (Parts 700--
                799)
        IX  Foreign Service Grievance Board (Parts 900--999)
         X  Inter-American Foundation (Parts 1000--1099)
        XI  International Boundary and Water Commission, United 
                States and Mexico, United States Section (Parts 
                1100--1199)
       XII  United States International Development Cooperation 
                Agency (Parts 1200--1299)
      XIII  Millennium Challenge Corporation (Parts 1300--1399)
       XIV  Foreign Service Labor Relations Board; Federal Labor 
                Relations Authority; General Counsel of the 
                Federal Labor Relations Authority; and the Foreign 
                Service Impasse Disputes Panel (Parts 1400--1499)
        XV  African Development Foundation (Parts 1500--1599)
       XVI  Japan-United States Friendship Commission (Parts 
                1600--1699)
      XVII  United States Institute of Peace (Parts 1700--1799)

                          Title 23--Highways

         I  Federal Highway Administration, Department of 
                Transportation (Parts 1--999)
        II  National Highway Traffic Safety Administration and 
                Federal Highway Administration, Department of 
                Transportation (Parts 1200--1299)
       III  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 1300--1399)

                Title 24--Housing and Urban Development

            Subtitle A--Office of the Secretary, Department of 
                Housing and Urban Development (Parts 0--99)
            Subtitle B--Regulations Relating to Housing and Urban 
                Development
         I  Office of Assistant Secretary for Equal Opportunity, 
                Department of Housing and Urban Development (Parts 
                100--199)

[[Page 446]]

        II  Office of Assistant Secretary for Housing-Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 200--299)
       III  Government National Mortgage Association, Department 
                of Housing and Urban Development (Parts 300--399)
        IV  Office of Housing and Office of Multifamily Housing 
                Assistance Restructuring, Department of Housing 
                and Urban Development (Parts 400--499)
         V  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 500--599)
        VI  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 600--699) [Reserved]
       VII  Office of the Secretary, Department of Housing and 
                Urban Development (Housing Assistance Programs and 
                Public and Indian Housing Programs) (Parts 700--
                799)
      VIII  Office of the Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Section 8 Housing Assistance 
                Programs, Section 202 Direct Loan Program, Section 
                202 Supportive Housing for the Elderly Program and 
                Section 811 Supportive Housing for Persons With 
                Disabilities Program) (Parts 800--899)
        IX  Office of Assistant Secretary for Public and Indian 
                Housing, Department of Housing and Urban 
                Development (Parts 900--1699)
         X  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Interstate Land Sales 
                Registration Program) (Parts 1700--1799)
       XII  Office of Inspector General, Department of Housing and 
                Urban Development (Parts 2000--2099)
        XV  Emergency Mortgage Insurance and Loan Programs, 
                Department of Housing and Urban Development (Parts 
                2700--2799) [Reserved]
        XX  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 3200--3899)
      XXIV  Board of Directors of the HOPE for Homeowners Program 
                (Parts 4000--4099) [Reserved]
       XXV  Neighborhood Reinvestment Corporation (Parts 4100--
                4199)

                           Title 25--Indians

         I  Bureau of Indian Affairs, Department of the Interior 
                (Parts 1--299)
        II  Indian Arts and Crafts Board, Department of the 
                Interior (Parts 300--399)
       III  National Indian Gaming Commission, Department of the 
                Interior (Parts 500--599)
        IV  Office of Navajo and Hopi Indian Relocation (Parts 
                700--799)

[[Page 447]]

         V  Bureau of Indian Affairs, Department of the Interior, 
                and Indian Health Service, Department of Health 
                and Human Services (Part 900)
        VI  Office of the Assistant Secretary-Indian Affairs, 
                Department of the Interior (Parts 1000--1199)
       VII  Office of the Special Trustee for American Indians, 
                Department of the Interior (Parts 1200--1299)

                      Title 26--Internal Revenue

         I  Internal Revenue Service, Department of the Treasury 
                (Parts 1--End)

           Title 27--Alcohol, Tobacco Products and Firearms

         I  Alcohol and Tobacco Tax and Trade Bureau, Department 
                of the Treasury (Parts 1--399)
        II  Bureau of Alcohol, Tobacco, Firearms, and Explosives, 
                Department of Justice (Parts 400--699)

                   Title 28--Judicial Administration

         I  Department of Justice (Parts 0--299)
       III  Federal Prison Industries, Inc., Department of Justice 
                (Parts 300--399)
         V  Bureau of Prisons, Department of Justice (Parts 500--
                599)
        VI  Offices of Independent Counsel, Department of Justice 
                (Parts 600--699)
       VII  Office of Independent Counsel (Parts 700--799)
      VIII  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 800--899)
        IX  National Crime Prevention and Privacy Compact Council 
                (Parts 900--999)
        XI  Department of Justice and Department of State (Parts 
                1100--1199)

                            Title 29--Labor

            Subtitle A--Office of the Secretary of Labor (Parts 
                0--99)
            Subtitle B--Regulations Relating to Labor
         I  National Labor Relations Board (Parts 100--199)
        II  Office of Labor-Management Standards, Department of 
                Labor (Parts 200--299)
       III  National Railroad Adjustment Board (Parts 300--399)
        IV  Office of Labor-Management Standards, Department of 
                Labor (Parts 400--499)
         V  Wage and Hour Division, Department of Labor (Parts 
                500--899)
        IX  Construction Industry Collective Bargaining Commission 
                (Parts 900--999)

[[Page 448]]

         X  National Mediation Board (Parts 1200--1299)
       XII  Federal Mediation and Conciliation Service (Parts 
                1400--1499)
       XIV  Equal Employment Opportunity Commission (Parts 1600--
                1699)
      XVII  Occupational Safety and Health Administration, 
                Department of Labor (Parts 1900--1999)
        XX  Occupational Safety and Health Review Commission 
                (Parts 2200--2499)
       XXV  Employee Benefits Security Administration, Department 
                of Labor (Parts 2500--2599)
     XXVII  Federal Mine Safety and Health Review Commission 
                (Parts 2700--2799)
        XL  Pension Benefit Guaranty Corporation (Parts 4000--
                4999)

                      Title 30--Mineral Resources

         I  Mine Safety and Health Administration, Department of 
                Labor (Parts 1--199)
        II  Bureau of Safety and Environmental Enforcement, 
                Department of the Interior (Parts 200--299)
        IV  Geological Survey, Department of the Interior (Parts 
                400--499)
         V  Bureau of Ocean Energy Management, Department of the 
                Interior (Parts 500--599)
       VII  Office of Surface Mining Reclamation and Enforcement, 
                Department of the Interior (Parts 700--999)
       XII  Office of Natural Resources Revenue, Department of the 
                Interior (Parts 1200--1299)

                 Title 31--Money and Finance: Treasury

            Subtitle A--Office of the Secretary of the Treasury 
                (Parts 0--50)
            Subtitle B--Regulations Relating to Money and Finance
         I  Monetary Offices, Department of the Treasury (Parts 
                51--199)
        II  Fiscal Service, Department of the Treasury (Parts 
                200--399)
        IV  Secret Service, Department of the Treasury (Parts 
                400--499)
         V  Office of Foreign Assets Control, Department of the 
                Treasury (Parts 500--599)
        VI  Bureau of Engraving and Printing, Department of the 
                Treasury (Parts 600--699)
       VII  Federal Law Enforcement Training Center, Department of 
                the Treasury (Parts 700--799)
      VIII  Office of International Investment, Department of the 
                Treasury (Parts 800--899)
        IX  Federal Claims Collection Standards (Department of the 
                Treasury--Department of Justice) (Parts 900--999)
         X  Financial Crimes Enforcement Network, Department of 
                the Treasury (Parts 1000--1099)

[[Page 449]]

                      Title 32--National Defense

            Subtitle A--Department of Defense
         I  Office of the Secretary of Defense (Parts 1--399)
         V  Department of the Army (Parts 400--699)
        VI  Department of the Navy (Parts 700--799)
       VII  Department of the Air Force (Parts 800--1099)
            Subtitle B--Other Regulations Relating to National 
                Defense
       XII  Defense Logistics Agency (Parts 1200--1299)
       XVI  Selective Service System (Parts 1600--1699)
      XVII  Office of the Director of National Intelligence (Parts 
                1700--1799)
     XVIII  National Counterintelligence Center (Parts 1800--1899)
       XIX  Central Intelligence Agency (Parts 1900--1999)
        XX  Information Security Oversight Office, National 
                Archives and Records Administration (Parts 2000--
                2099)
       XXI  National Security Council (Parts 2100--2199)
      XXIV  Office of Science and Technology Policy (Parts 2400--
                2499)
     XXVII  Office for Micronesian Status Negotiations (Parts 
                2700--2799)
    XXVIII  Office of the Vice President of the United States 
                (Parts 2800--2899)

               Title 33--Navigation and Navigable Waters

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Corps of Engineers, Department of the Army (Parts 
                200--399)
        IV  Saint Lawrence Seaway Development Corporation, 
                Department of Transportation (Parts 400--499)

                          Title 34--Education

            Subtitle A--Office of the Secretary, Department of 
                Education (Parts 1--99)
            Subtitle B--Regulations of the Offices of the 
                Department of Education
         I  Office for Civil Rights, Department of Education 
                (Parts 100--199)
        II  Office of Elementary and Secondary Education, 
                Department of Education (Parts 200--299)
       III  Office of Special Education and Rehabilitative 
                Services, Department of Education (Parts 300--399)
        IV  Office of Vocational and Adult Education, Department 
                of Education (Parts 400--499)
         V  Office of Bilingual Education and Minority Languages 
                Affairs, Department of Education (Parts 500--599)
        VI  Office of Postsecondary Education, Department of 
                Education (Parts 600--699)
       VII  Office of Educational Research and Improvement, 
                Department of Education (Parts 700--799)[Reserved]
            Subtitle C--Regulations Relating to Education

[[Page 450]]

        XI  National Institute for Literacy (Parts 1100--1199)
       XII  National Council on Disability (Parts 1200--1299)

                          Title 35 [Reserved]

             Title 36--Parks, Forests, and Public Property

         I  National Park Service, Department of the Interior 
                (Parts 1--199)
        II  Forest Service, Department of Agriculture (Parts 200--
                299)
       III  Corps of Engineers, Department of the Army (Parts 
                300--399)
        IV  American Battle Monuments Commission (Parts 400--499)
         V  Smithsonian Institution (Parts 500--599)
        VI  [Reserved]
       VII  Library of Congress (Parts 700--799)
      VIII  Advisory Council on Historic Preservation (Parts 800--
                899)
        IX  Pennsylvania Avenue Development Corporation (Parts 
                900--999)
         X  Presidio Trust (Parts 1000--1099)
        XI  Architectural and Transportation Barriers Compliance 
                Board (Parts 1100--1199)
       XII  National Archives and Records Administration (Parts 
                1200--1299)
        XV  Oklahoma City National Memorial Trust (Parts 1500--
                1599)
       XVI  Morris K. Udall Scholarship and Excellence in National 
                Environmental Policy Foundation (Parts 1600--1699)

             Title 37--Patents, Trademarks, and Copyrights

         I  United States Patent and Trademark Office, Department 
                of Commerce (Parts 1--199)
        II  U.S. Copyright Office, Library of Congress (Parts 
                200--299)
       III  Copyright Royalty Board, Library of Congress (Parts 
                300--399)
        IV  Assistant Secretary for Technology Policy, Department 
                of Commerce (Parts 400--599)

           Title 38--Pensions, Bonuses, and Veterans' Relief

         I  Department of Veterans Affairs (Parts 0--199)
        II  Armed Forces Retirement Home (Parts 200--299)

                       Title 39--Postal Service

         I  United States Postal Service (Parts 1--999)
       III  Postal Regulatory Commission (Parts 3000--3099)

                  Title 40--Protection of Environment

         I  Environmental Protection Agency (Parts 1--1099)

[[Page 451]]

        IV  Environmental Protection Agency and Department of 
                Justice (Parts 1400--1499)
         V  Council on Environmental Quality (Parts 1500--1599)
        VI  Chemical Safety and Hazard Investigation Board (Parts 
                1600--1699)
       VII  Environmental Protection Agency and Department of 
                Defense; Uniform National Discharge Standards for 
                Vessels of the Armed Forces (Parts 1700--1799)
      VIII  Gulf Coast Ecosystem Restoration Council (Parts 1800--
                1899)

          Title 41--Public Contracts and Property Management

            Subtitle A--Federal Procurement Regulations System 
                [Note]
            Subtitle B--Other Provisions Relating to Public 
                Contracts
        50  Public Contracts, Department of Labor (Parts 50-1--50-
                999)
        51  Committee for Purchase From People Who Are Blind or 
                Severely Disabled (Parts 51-1--51-99)
        60  Office of Federal Contract Compliance Programs, Equal 
                Employment Opportunity, Department of Labor (Parts 
                60-1--60-999)
        61  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 61-1--61-999)
   62--100  [Reserved]
            Subtitle C--Federal Property Management Regulations 
                System
       101  Federal Property Management Regulations (Parts 101-1--
                101-99)
       102  Federal Management Regulation (Parts 102-1--102-299)
  103--104  [Reserved]
       105  General Services Administration (Parts 105-1--105-999)
       109  Department of Energy Property Management Regulations 
                (Parts 109-1--109-99)
       114  Department of the Interior (Parts 114-1--114-99)
       115  Environmental Protection Agency (Parts 115-1--115-99)
       128  Department of Justice (Parts 128-1--128-99)
  129--200  [Reserved]
            Subtitle D--Other Provisions Relating to Property 
                Management [Reserved]
            Subtitle E--Federal Information Resources Management 
                Regulations System [Reserved]
            Subtitle F--Federal Travel Regulation System
       300  General (Parts 300-1--300-99)
       301  Temporary Duty (TDY) Travel Allowances (Parts 301-1--
                301-99)
       302  Relocation Allowances (Parts 302-1--302-99)
       303  Payment of Expenses Connected with the Death of 
                Certain Employees (Part 303-1--303-99)
       304  Payment of Travel Expenses from a Non-Federal Source 
                (Parts 304-1--304-99)

[[Page 452]]

                        Title 42--Public Health

         I  Public Health Service, Department of Health and Human 
                Services (Parts 1--199)
        IV  Centers for Medicare & Medicaid Services, Department 
                of Health and Human Services (Parts 400--599)
         V  Office of Inspector General-Health Care, Department of 
                Health and Human Services (Parts 1000--1999)

                   Title 43--Public Lands: Interior

            Subtitle A--Office of the Secretary of the Interior 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Lands
         I  Bureau of Reclamation, Department of the Interior 
                (Parts 400--999)
        II  Bureau of Land Management, Department of the Interior 
                (Parts 1000--9999)
       III  Utah Reclamation Mitigation and Conservation 
                Commission (Parts 10000--10099)

             Title 44--Emergency Management and Assistance

         I  Federal Emergency Management Agency, Department of 
                Homeland Security (Parts 0--399)
        IV  Department of Commerce and Department of 
                Transportation (Parts 400--499)

                       Title 45--Public Welfare

            Subtitle A--Department of Health and Human Services 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Welfare
        II  Office of Family Assistance (Assistance Programs), 
                Administration for Children and Families, 
                Department of Health and Human Services (Parts 
                200--299)
       III  Office of Child Support Enforcement (Child Support 
                Enforcement Program), Administration for Children 
                and Families, Department of Health and Human 
                Services (Parts 300--399)
        IV  Office of Refugee Resettlement, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 400--499)
         V  Foreign Claims Settlement Commission of the United 
                States, Department of Justice (Parts 500--599)
        VI  National Science Foundation (Parts 600--699)
       VII  Commission on Civil Rights (Parts 700--799)
      VIII  Office of Personnel Management (Parts 800--899)
         X  Office of Community Services, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 1000--1099)
        XI  National Foundation on the Arts and the Humanities 
                (Parts 1100--1199)

[[Page 453]]

       XII  Corporation for National and Community Service (Parts 
                1200--1299)
      XIII  Office of Human Development Services, Department of 
                Health and Human Services (Parts 1300--1399)
       XVI  Legal Services Corporation (Parts 1600--1699)
      XVII  National Commission on Libraries and Information 
                Science (Parts 1700--1799)
     XVIII  Harry S. Truman Scholarship Foundation (Parts 1800--
                1899)
       XXI  Commission on Fine Arts (Parts 2100--2199)
     XXIII  Arctic Research Commission (Part 2301)
      XXIV  James Madison Memorial Fellowship Foundation (Parts 
                2400--2499)
       XXV  Corporation for National and Community Service (Parts 
                2500--2599)

                          Title 46--Shipping

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Maritime Administration, Department of Transportation 
                (Parts 200--399)
       III  Coast Guard (Great Lakes Pilotage), Department of 
                Homeland Security (Parts 400--499)
        IV  Federal Maritime Commission (Parts 500--599)

                      Title 47--Telecommunication

         I  Federal Communications Commission (Parts 0--199)
        II  Office of Science and Technology Policy and National 
                Security Council (Parts 200--299)
       III  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                300--399)
        IV  National Telecommunications and Information 
                Administration, Department of Commerce, and 
                National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 400--499)

           Title 48--Federal Acquisition Regulations System

         1  Federal Acquisition Regulation (Parts 1--99)
         2  Defense Acquisition Regulations System, Department of 
                Defense (Parts 200--299)
         3  Health and Human Services (Parts 300--399)
         4  Department of Agriculture (Parts 400--499)
         5  General Services Administration (Parts 500--599)
         6  Department of State (Parts 600--699)
         7  Agency for International Development (Parts 700--799)
         8  Department of Veterans Affairs (Parts 800--899)
         9  Department of Energy (Parts 900--999)

[[Page 454]]

        10  Department of the Treasury (Parts 1000--1099)
        12  Department of Transportation (Parts 1200--1299)
        13  Department of Commerce (Parts 1300--1399)
        14  Department of the Interior (Parts 1400--1499)
        15  Environmental Protection Agency (Parts 1500--1599)
        16  Office of Personnel Management, Federal Employees 
                Health Benefits Acquisition Regulation (Parts 
                1600--1699)
        17  Office of Personnel Management (Parts 1700--1799)
        18  National Aeronautics and Space Administration (Parts 
                1800--1899)
        19  Broadcasting Board of Governors (Parts 1900--1999)
        20  Nuclear Regulatory Commission (Parts 2000--2099)
        21  Office of Personnel Management, Federal Employees 
                Group Life Insurance Federal Acquisition 
                Regulation (Parts 2100--2199)
        23  Social Security Administration (Parts 2300--2399)
        24  Department of Housing and Urban Development (Parts 
                2400--2499)
        25  National Science Foundation (Parts 2500--2599)
        28  Department of Justice (Parts 2800--2899)
        29  Department of Labor (Parts 2900--2999)
        30  Department of Homeland Security, Homeland Security 
                Acquisition Regulation (HSAR) (Parts 3000--3099)
        34  Department of Education Acquisition Regulation (Parts 
                3400--3499)
        51  Department of the Army Acquisition Regulations (Parts 
                5100--5199)
        52  Department of the Navy Acquisition Regulations (Parts 
                5200--5299)
        53  Department of the Air Force Federal Acquisition 
                Regulation Supplement (Parts 5300--5399) 
                [Reserved]
        54  Defense Logistics Agency, Department of Defense (Parts 
                5400--5499)
        57  African Development Foundation (Parts 5700--5799)
        61  Civilian Board of Contract Appeals, General Services 
                Administration (Parts 6100--6199)
        63  Department of Transportation Board of Contract Appeals 
                (Parts 6300--6399)
        99  Cost Accounting Standards Board, Office of Federal 
                Procurement Policy, Office of Management and 
                Budget (Parts 9900--9999)

                       Title 49--Transportation

            Subtitle A--Office of the Secretary of Transportation 
                (Parts 1--99)
            Subtitle B--Other Regulations Relating to 
                Transportation
         I  Pipeline and Hazardous Materials Safety 
                Administration, Department of Transportation 
                (Parts 100--199)

[[Page 455]]

        II  Federal Railroad Administration, Department of 
                Transportation (Parts 200--299)
       III  Federal Motor Carrier Safety Administration, 
                Department of Transportation (Parts 300--399)
        IV  Coast Guard, Department of Homeland Security (Parts 
                400--499)
         V  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 500--599)
        VI  Federal Transit Administration, Department of 
                Transportation (Parts 600--699)
       VII  National Railroad Passenger Corporation (AMTRAK) 
                (Parts 700--799)
      VIII  National Transportation Safety Board (Parts 800--999)
         X  Surface Transportation Board, Department of 
                Transportation (Parts 1000--1399)
        XI  Research and Innovative Technology Administration, 
                Department of Transportation (Parts 1400--1499) 
                [Reserved]
       XII  Transportation Security Administration, Department of 
                Homeland Security (Parts 1500--1699)

                   Title 50--Wildlife and Fisheries

         I  United States Fish and Wildlife Service, Department of 
                the Interior (Parts 1--199)
        II  National Marine Fisheries Service, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 200--299)
       III  International Fishing and Related Activities (Parts 
                300--399)
        IV  Joint Regulations (United States Fish and Wildlife 
                Service, Department of the Interior and National 
                Marine Fisheries Service, National Oceanic and 
                Atmospheric Administration, Department of 
                Commerce); Endangered Species Committee 
                Regulations (Parts 400--499)
         V  Marine Mammal Commission (Parts 500--599)
        VI  Fishery Conservation and Management, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 600--699)

[[Page 457]]





           Alphabetical List of Agencies Appearing in the CFR




                     (Revised as of October 1, 2014)

                                                  CFR Title, Subtitle or 
                     Agency                               Chapter

Administrative Committee of the Federal Register  1, I
Administrative Conference of the United States    1, III
Advisory Council on Historic Preservation         36, VIII
Advocacy and Outreach, Office of                  7, XXV
Afghanistan Reconstruction, Special Inspector     22, LXXXIII
     General for
African Development Foundation                    22, XV
  Federal Acquisition Regulation                  48, 57
Agency for International Development              2, VII; 22, II
  Federal Acquisition Regulation                  48, 7
Agricultural Marketing Service                    7, I, IX, X, XI
Agricultural Research Service                     7, V
Agriculture Department                            2, IV; 5, LXXIII
  Advocacy and Outreach, Office of                7, XXV
  Agricultural Marketing Service                  7, I, IX, X, XI
  Agricultural Research Service                   7, V
  Animal and Plant Health Inspection Service      7, III; 9, I
  Chief Financial Officer, Office of              7, XXX
  Commodity Credit Corporation                    7, XIV
  Economic Research Service                       7, XXXVII
  Energy Policy and New Uses, Office of           2, IX; 7, XXIX
  Environmental Quality, Office of                7, XXXI
  Farm Service Agency                             7, VII, XVIII
  Federal Acquisition Regulation                  48, 4
  Federal Crop Insurance Corporation              7, IV
  Food and Nutrition Service                      7, II
  Food Safety and Inspection Service              9, III
  Foreign Agricultural Service                    7, XV
  Forest Service                                  36, II
  Grain Inspection, Packers and Stockyards        7, VIII; 9, II
       Administration
  Information Resources Management, Office of     7, XXVII
  Inspector General, Office of                    7, XXVI
  National Agricultural Library                   7, XLI
  National Agricultural Statistics Service        7, XXXVI
  National Institute of Food and Agriculture      7, XXXIV
  Natural Resources Conservation Service          7, VI
  Operations, Office of                           7, XXVIII
  Procurement and Property Management, Office of  7, XXXII
  Rural Business-Cooperative Service              7, XVIII, XLII, L
  Rural Development Administration                7, XLII
  Rural Housing Service                           7, XVIII, XXXV, L
  Rural Telephone Bank                            7, XVI
  Rural Utilities Service                         7, XVII, XVIII, XLII, L
  Secretary of Agriculture, Office of             7, Subtitle A
  Transportation, Office of                       7, XXXIII
  World Agricultural Outlook Board                7, XXXVIII
Air Force Department                              32, VII
  Federal Acquisition Regulation Supplement       48, 53
Air Transportation Stabilization Board            14, VI
Alcohol and Tobacco Tax and Trade Bureau          27, I
Alcohol, Tobacco, Firearms, and Explosives,       27, II
     Bureau of
AMTRAK                                            49, VII
American Battle Monuments Commission              36, IV
American Indians, Office of the Special Trustee   25, VII

[[Page 458]]

Animal and Plant Health Inspection Service        7, III; 9, I
Appalachian Regional Commission                   5, IX
Architectural and Transportation Barriers         36, XI
     Compliance Board
Arctic Research Commission                        45, XXIII
Armed Forces Retirement Home                      5, XI
Army Department                                   32, V
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 51
Bilingual Education and Minority Languages        34, V
     Affairs, Office of
Blind or Severely Disabled, Committee for         41, 51
     Purchase from People Who Are
Broadcasting Board of Governors                   22, V
  Federal Acquisition Regulation                  48, 19
Bureau of Ocean Energy Management, Regulation,    30, II
     and Enforcement
Census Bureau                                     15, I
Centers for Medicare & Medicaid Services          42, IV
Central Intelligence Agency                       32, XIX
Chemical Safety and Hazardous Investigation       40, VI
     Board
Chief Financial Officer, Office of                7, XXX
Child Support Enforcement, Office of              45, III
Children and Families, Administration for         45, II, III, IV, X
Civil Rights, Commission on                       5, LXVIII; 45, VII
Civil Rights, Office for                          34, I
Council of the Inspectors General on Integrity    5, XCVIII
     and Efficiency
Court Services and Offender Supervision Agency    5, LXX
     for the District of Columbia
Coast Guard                                       33, I; 46, I; 49, IV
Coast Guard (Great Lakes Pilotage)                46, III
Commerce Department                               2, XIII; 44, IV; 50, VI
  Census Bureau                                   15, I
  Economic Analysis, Bureau of                    15, VIII
  Economic Development Administration             13, III
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 13
  Foreign-Trade Zones Board                       15, IV
  Industry and Security, Bureau of                15, VII
  International Trade Administration              15, III; 19, III
  National Institute of Standards and Technology  15, II
  National Marine Fisheries Service               50, II, IV
  National Oceanic and Atmospheric                15, IX; 50, II, III, IV, 
       Administration                             VI
  National Telecommunications and Information     15, XXIII; 47, III, IV
       Administration
  National Weather Service                        15, IX
  Patent and Trademark Office, United States      37, I
  Productivity, Technology and Innovation,        37, IV
       Assistant Secretary for
  Secretary of Commerce, Office of                15, Subtitle A
  Technology Administration                       15, XI
  Technology Policy, Assistant Secretary for      37, IV
Commercial Space Transportation                   14, III
Commodity Credit Corporation                      7, XIV
Commodity Futures Trading Commission              5, XLI; 17, I
Community Planning and Development, Office of     24, V, VI
     Assistant Secretary for
Community Services, Office of                     45, X
Comptroller of the Currency                       12, I
Construction Industry Collective Bargaining       29, IX
     Commission
Consumer Financial Protection Bureau              5, LXXXIV; 12, X
Consumer Product Safety Commission                5, LXXI; 16, II
Copyright Royalty Board                           37, III
Corporation for National and Community Service    2, XXII; 45, XII, XXV
Cost Accounting Standards Board                   48, 99
Council on Environmental Quality                  40, V
Court Services and Offender Supervision Agency    5, LXX; 28, VIII
     for the District of Columbia
Customs and Border Protection                     19, I

[[Page 459]]

Defense Contract Audit Agency                     32, I
Defense Department                                2, XI; 5, XXVI; 32, 
                                                  Subtitle A; 40, VII
  Advanced Research Projects Agency               32, I
  Air Force Department                            32, VII
  Army Department                                 32, V; 33, II; 36, III, 
                                                  48, 51
  Defense Acquisition Regulations System          48, 2
  Defense Intelligence Agency                     32, I
  Defense Logistics Agency                        32, I, XII; 48, 54
  Engineers, Corps of                             33, II; 36, III
  National Imagery and Mapping Agency             32, I
  Navy Department                                 32, VI; 48, 52
  Secretary of Defense, Office of                 2, XI; 32, I
Defense Contract Audit Agency                     32, I
Defense Intelligence Agency                       32, I
Defense Logistics Agency                          32, XII; 48, 54
Defense Nuclear Facilities Safety Board           10, XVII
Delaware River Basin Commission                   18, III
District of Columbia, Court Services and          5, LXX; 28, VIII
     Offender Supervision Agency for the
Drug Enforcement Administration                   21, II
East-West Foreign Trade Board                     15, XIII
Economic Analysis, Bureau of                      15, VIII
Economic Development Administration               13, III
Economic Research Service                         7, XXXVII
Education, Department of                          2, XXXIV; 5, LIII
  Bilingual Education and Minority Languages      34, V
       Affairs, Office of
  Civil Rights, Office for                        34, I
  Educational Research and Improvement, Office    34, VII
       of
  Elementary and Secondary Education, Office of   34, II
  Federal Acquisition Regulation                  48, 34
  Postsecondary Education, Office of              34, VI
  Secretary of Education, Office of               34, Subtitle A
  Special Education and Rehabilitative Services,  34, III
       Office of
  Vocational and Adult Education, Office of       34, IV
Educational Research and Improvement, Office of   34, VII
Election Assistance Commission                    2, LVIII; 11, II
Elementary and Secondary Education, Office of     34, II
Emergency Oil and Gas Guaranteed Loan Board       13, V
Emergency Steel Guarantee Loan Board              13, IV
Employee Benefits Security Administration         29, XXV
Employees' Compensation Appeals Board             20, IV
Employees Loyalty Board                           5, V
Employment and Training Administration            20, V
Employment Standards Administration               20, VI
Endangered Species Committee                      50, IV
Energy, Department of                             2, IX; 5, XXIII; 10, II, 
                                                  III, X
  Federal Acquisition Regulation                  48, 9
  Federal Energy Regulatory Commission            5, XXIV; 18, I
  Property Management Regulations                 41, 109
Energy, Office of                                 7, XXIX
Engineers, Corps of                               33, II; 36, III
Engraving and Printing, Bureau of                 31, VI
Environmental Protection Agency                   2, XV; 5, LIV; 40, I, IV, 
                                                  VII
  Federal Acquisition Regulation                  48, 15
  Property Management Regulations                 41, 115
Environmental Quality, Office of                  7, XXXI
Equal Employment Opportunity Commission           5, LXII; 29, XIV
Equal Opportunity, Office of Assistant Secretary  24, I
     for
Executive Office of the President                 3, I
  Administration, Office of                       5, XV
  Environmental Quality, Council on               40, V
  Management and Budget, Office of                2, Subtitle A; 5, III, 
                                                  LXXVII; 14, VI; 48, 99

[[Page 460]]

  National Drug Control Policy, Office of         21, III
  National Security Council                       32, XXI; 47, 2
  Presidential Documents                          3
  Science and Technology Policy, Office of        32, XXIV; 47, II
  Trade Representative, Office of the United      15, XX
       States
Export-Import Bank of the United States           2, XXXV; 5, LII; 12, IV
Family Assistance, Office of                      45, II
Farm Credit Administration                        5, XXXI; 12, VI
Farm Credit System Insurance Corporation          5, XXX; 12, XIV
Farm Service Agency                               7, VII, XVIII
Federal Acquisition Regulation                    48, 1
Federal Aviation Administration                   14, I
  Commercial Space Transportation                 14, III
Federal Claims Collection Standards               31, IX
Federal Communications Commission                 5, XXIX; 47, I
Federal Contract Compliance Programs, Office of   41, 60
Federal Crop Insurance Corporation                7, IV
Federal Deposit Insurance Corporation             5, XXII; 12, III
Federal Election Commission                       5, XXXVII; 11, I
Federal Emergency Management Agency               44, I
Federal Employees Group Life Insurance Federal    48, 21
     Acquisition Regulation
Federal Employees Health Benefits Acquisition     48, 16
     Regulation
Federal Energy Regulatory Commission              5, XXIV; 18, I
Federal Financial Institutions Examination        12, XI
     Council
Federal Financing Bank                            12, VIII
Federal Highway Administration                    23, I, II
Federal Home Loan Mortgage Corporation            1, IV
Federal Housing Enterprise Oversight Office       12, XVII
Federal Housing Finance Agency                    5, LXXX; 12, XII
Federal Housing Finance Board                     12, IX
Federal Labor Relations Authority                 5, XIV, XLIX; 22, XIV
Federal Law Enforcement Training Center           31, VII
Federal Management Regulation                     41, 102
Federal Maritime Commission                       46, IV
Federal Mediation and Conciliation Service        29, XII
Federal Mine Safety and Health Review Commission  5, LXXIV; 29, XXVII
Federal Motor Carrier Safety Administration       49, III
Federal Prison Industries, Inc.                   28, III
Federal Procurement Policy Office                 48, 99
Federal Property Management Regulations           41, 101
Federal Railroad Administration                   49, II
Federal Register, Administrative Committee of     1, I
Federal Register, Office of                       1, II
Federal Reserve System                            12, II
  Board of Governors                              5, LVIII
Federal Retirement Thrift Investment Board        5, VI, LXXVI
Federal Service Impasses Panel                    5, XIV
Federal Trade Commission                          5, XLVII; 16, I
Federal Transit Administration                    49, VI
Federal Travel Regulation System                  41, Subtitle F
Financial Crimes Enforcement Network              31, X
Financial Research Office                         12, XVI
Financial Stability Oversight Council             12, XIII
Fine Arts, Commission on                          45, XXI
Fiscal Service                                    31, II
Fish and Wildlife Service, United States          50, I, IV
Food and Drug Administration                      21, I
Food and Nutrition Service                        7, II
Food Safety and Inspection Service                9, III
Foreign Agricultural Service                      7, XV
Foreign Assets Control, Office of                 31, V
Foreign Claims Settlement Commission of the       45, V
     United States
Foreign Service Grievance Board                   22, IX
Foreign Service Impasse Disputes Panel            22, XIV
Foreign Service Labor Relations Board             22, XIV
Foreign-Trade Zones Board                         15, IV

[[Page 461]]

Forest Service                                    36, II
General Services Administration                   5, LVII; 41, 105
  Contract Appeals, Board of                      48, 61
  Federal Acquisition Regulation                  48, 5
  Federal Management Regulation                   41, 102
  Federal Property Management Regulations         41, 101
  Federal Travel Regulation System                41, Subtitle F
  General                                         41, 300
  Payment From a Non-Federal Source for Travel    41, 304
       Expenses
  Payment of Expenses Connected With the Death    41, 303
       of Certain Employees
  Relocation Allowances                           41, 302
  Temporary Duty (TDY) Travel Allowances          41, 301
Geological Survey                                 30, IV
Government Accountability Office                  4, I
Government Ethics, Office of                      5, XVI
Government National Mortgage Association          24, III
Grain Inspection, Packers and Stockyards          7, VIII; 9, II
     Administration
Gulf Coast Ecosystem Restoration Council          40, VIII
Harry S. Truman Scholarship Foundation            45, XVIII
Health and Human Services, Department of          2, III; 5, XLV; 45, 
                                                  Subtitle A,
  Centers for Medicare & Medicaid Services        42, IV
  Child Support Enforcement, Office of            45, III
  Children and Families, Administration for       45, II, III, IV, X
  Community Services, Office of                   45, X
  Family Assistance, Office of                    45, II
  Federal Acquisition Regulation                  48, 3
  Food and Drug Administration                    21, I
  Human Development Services, Office of           45, XIII
  Indian Health Service                           25, V
  Inspector General (Health Care), Office of      42, V
  Public Health Service                           42, I
  Refugee Resettlement, Office of                 45, IV
Homeland Security, Department of                  2, XXX; 6, I; 8, I
  Coast Guard                                     33, I; 46, I; 49, IV
  Coast Guard (Great Lakes Pilotage)              46, III
  Customs and Border Protection                   19, I
  Federal Emergency Management Agency             44, I
  Human Resources Management and Labor Relations  5, XCVII
       Systems
  Immigration and Customs Enforcement Bureau      19, IV
  Transportation Security Administration          49, XII
HOPE for Homeowners Program, Board of Directors   24, XXIV
     of
Housing and Urban Development, Department of      2, XXIV; 5, LXV; 24, 
                                                  Subtitle B
  Community Planning and Development, Office of   24, V, VI
       Assistant Secretary for
  Equal Opportunity, Office of Assistant          24, I
       Secretary for
  Federal Acquisition Regulation                  48, 24
  Federal Housing Enterprise Oversight, Office    12, XVII
       of
  Government National Mortgage Association        24, III
  Housing--Federal Housing Commissioner, Office   24, II, VIII, X, XX
       of Assistant Secretary for
  Housing, Office of, and Multifamily Housing     24, IV
       Assistance Restructuring, Office of
  Inspector General, Office of                    24, XII
  Public and Indian Housing, Office of Assistant  24, IX
       Secretary for
  Secretary, Office of                            24, Subtitle A, VII
Housing--Federal Housing Commissioner, Office of  24, II, VIII, X, XX
     Assistant Secretary for
Housing, Office of, and Multifamily Housing       24, IV
     Assistance Restructuring, Office of
Human Development Services, Office of             45, XIII
Immigration and Customs Enforcement Bureau        19, IV
Immigration Review, Executive Office for          8, V
Independent Counsel, Office of                    28, VII

[[Page 462]]

Indian Affairs, Bureau of                         25, I, V
Indian Affairs, Office of the Assistant           25, VI
     Secretary
Indian Arts and Crafts Board                      25, II
Indian Health Service                             25, V
Industry and Security, Bureau of                  15, VII
Information Resources Management, Office of       7, XXVII
Information Security Oversight Office, National   32, XX
     Archives and Records Administration
Inspector General
  Agriculture Department                          7, XXVI
  Health and Human Services Department            42, V
  Housing and Urban Development Department        24, XII, XV
Institute of Peace, United States                 22, XVII
Inter-American Foundation                         5, LXIII; 22, X
Interior Department                               2, XIV
  American Indians, Office of the Special         25, VII
       Trustee
  Bureau of Ocean Energy Management, Regulation,  30, II
       and Enforcement
  Endangered Species Committee                    50, IV
  Federal Acquisition Regulation                  48, 14
  Federal Property Management Regulations System  41, 114
  Fish and Wildlife Service, United States        50, I, IV
  Geological Survey                               30, IV
  Indian Affairs, Bureau of                       25, I, V
  Indian Affairs, Office of the Assistant         25, VI
       Secretary
  Indian Arts and Crafts Board                    25, II
  Land Management, Bureau of                      43, II
  National Indian Gaming Commission               25, III
  National Park Service                           36, I
  Natural Resource Revenue, Office of             30, XII
  Ocean Energy Management, Bureau of              30, V
  Reclamation, Bureau of                          43, I
  Secretary of the Interior, Office of            2, XIV; 43, Subtitle A
  Surface Mining Reclamation and Enforcement,     30, VII
       Office of
Internal Revenue Service                          26, I
International Boundary and Water Commission,      22, XI
     United States and Mexico, United States 
     Section
International Development, United States Agency   22, II
     for
  Federal Acquisition Regulation                  48, 7
International Development Cooperation Agency,     22, XII
     United States
International Joint Commission, United States     22, IV
     and Canada
International Organizations Employees Loyalty     5, V
     Board
International Trade Administration                15, III; 19, III
International Trade Commission, United States     19, II
Interstate Commerce Commission                    5, XL
Investment Security, Office of                    31, VIII
James Madison Memorial Fellowship Foundation      45, XXIV
Japan-United States Friendship Commission         22, XVI
Joint Board for the Enrollment of Actuaries       20, VIII
Justice Department                                2, XXVIII; 5, XXVIII; 28, 
                                                  I, XI; 40, IV
  Alcohol, Tobacco, Firearms, and Explosives,     27, II
       Bureau of
  Drug Enforcement Administration                 21, II
  Federal Acquisition Regulation                  48, 28
  Federal Claims Collection Standards             31, IX
  Federal Prison Industries, Inc.                 28, III
  Foreign Claims Settlement Commission of the     45, V
       United States
  Immigration Review, Executive Office for        8, V
  Offices of Independent Counsel                  28, VI
  Prisons, Bureau of                              28, V
  Property Management Regulations                 41, 128
Labor Department                                  5, XLII
  Employee Benefits Security Administration       29, XXV
  Employees' Compensation Appeals Board           20, IV
  Employment and Training Administration          20, V

[[Page 463]]

  Employment Standards Administration             20, VI
  Federal Acquisition Regulation                  48, 29
  Federal Contract Compliance Programs, Office    41, 60
       of
  Federal Procurement Regulations System          41, 50
  Labor-Management Standards, Office of           29, II, IV
  Mine Safety and Health Administration           30, I
  Occupational Safety and Health Administration   29, XVII
  Office of Workers' Compensation Programs        20, VII
  Public Contracts                                41, 50
  Secretary of Labor, Office of                   29, Subtitle A
  Veterans' Employment and Training Service,      41, 61; 20, IX
       Office of the Assistant Secretary for
  Wage and Hour Division                          29, V
  Workers' Compensation Programs, Office of       20, I
Labor-Management Standards, Office of             29, II, IV
Land Management, Bureau of                        43, II
Legal Services Corporation                        45, XVI
Library of Congress                               36, VII
  Copyright Royalty Board                         37, III
  U.S. Copyright Office                           37, II
Local Television Loan Guarantee Board             7, XX
Management and Budget, Office of                  5, III, LXXVII; 14, VI; 
                                                  48, 99
Marine Mammal Commission                          50, V
Maritime Administration                           46, II
Merit Systems Protection Board                    5, II, LXIV
Micronesian Status Negotiations, Office for       32, XXVII
Military Compensation and Retirement              5, XCIX
     Modernization Commission
Millennium Challenge Corporation                  22, XIII
Mine Safety and Health Administration             30, I
Minority Business Development Agency              15, XIV
Miscellaneous Agencies                            1, IV
Monetary Offices                                  31, I
Morris K. Udall Scholarship and Excellence in     36, XVI
     National Environmental Policy Foundation
Museum and Library Services, Institute of         2, XXXI
National Aeronautics and Space Administration     2, XVIII; 5, LIX; 14, V
  Federal Acquisition Regulation                  48, 18
National Agricultural Library                     7, XLI
National Agricultural Statistics Service          7, XXXVI
National and Community Service, Corporation for   2, XXII; 45, XII, XXV
National Archives and Records Administration      2, XXVI; 5, LXVI; 36, XII
  Information Security Oversight Office           32, XX
National Capital Planning Commission              1, IV
National Commission for Employment Policy         1, IV
National Commission on Libraries and Information  45, XVII
     Science
National Council on Disability                    34, XII
National Counterintelligence Center               32, XVIII
National Credit Union Administration              5, LXXXVI; 12, VII
National Crime Prevention and Privacy Compact     28, IX
     Council
National Drug Control Policy, Office of           21, III
National Endowment for the Arts                   2, XXXII
National Endowment for the Humanities             2, XXXIII
National Foundation on the Arts and the           45, XI
     Humanities
National Highway Traffic Safety Administration    23, II, III; 47, VI; 49, V
National Imagery and Mapping Agency               32, I
National Indian Gaming Commission                 25, III
National Institute for Literacy                   34, XI
National Institute of Food and Agriculture        7, XXXIV
National Institute of Standards and Technology    15, II
National Intelligence, Office of Director of      32, XVII
National Labor Relations Board                    5, LXI; 29, I
National Marine Fisheries Service                 50, II, IV
National Mediation Board                          29, X
National Oceanic and Atmospheric Administration   15, IX; 50, II, III, IV, 
                                                  VI

[[Page 464]]

National Park Service                             36, I
National Railroad Adjustment Board                29, III
National Railroad Passenger Corporation (AMTRAK)  49, VII
National Science Foundation                       2, XXV; 5, XLIII; 45, VI
  Federal Acquisition Regulation                  48, 25
National Security Council                         32, XXI
National Security Council and Office of Science   47, II
     and Technology Policy
National Telecommunications and Information       15, XXIII; 47, III, IV
     Administration
National Transportation Safety Board              49, VIII
Natural Resources Conservation Service            7, VI
Natural Resource Revenue, Office of               30, XII
Navajo and Hopi Indian Relocation, Office of      25, IV
Navy Department                                   32, VI
  Federal Acquisition Regulation                  48, 52
Neighborhood Reinvestment Corporation             24, XXV
Northeast Interstate Low-Level Radioactive Waste  10, XVIII
     Commission
Nuclear Regulatory Commission                     2, XX; 5, XLVIII; 10, I
  Federal Acquisition Regulation                  48, 20
Occupational Safety and Health Administration     29, XVII
Occupational Safety and Health Review Commission  29, XX
Ocean Energy Management, Bureau of                30, V
Offices of Independent Counsel                    28, VI
Office of Workers' Compensation Programs          20, VII
Oklahoma City National Memorial Trust             36, XV
Operations Office                                 7, XXVIII
Overseas Private Investment Corporation           5, XXXIII; 22, VII
Patent and Trademark Office, United States        37, I
Payment From a Non-Federal Source for Travel      41, 304
     Expenses
Payment of Expenses Connected With the Death of   41, 303
     Certain Employees
Peace Corps                                       2, XXXVII; 22, III
Pennsylvania Avenue Development Corporation       36, IX
Pension Benefit Guaranty Corporation              29, XL
Personnel Management, Office of                   5, I, XXXV; 45, VIII
  Human Resources Management and Labor Relations  5, XCVII
       Systems, Department of Homeland Security
  Federal Acquisition Regulation                  48, 17
  Federal Employees Group Life Insurance Federal  48, 21
       Acquisition Regulation
  Federal Employees Health Benefits Acquisition   48, 16
       Regulation
Pipeline and Hazardous Materials Safety           49, I
     Administration
Postal Regulatory Commission                      5, XLVI; 39, III
Postal Service, United States                     5, LX; 39, I
Postsecondary Education, Office of                34, VI
President's Commission on White House             1, IV
     Fellowships
Presidential Documents                            3
Presidio Trust                                    36, X
Prisons, Bureau of                                28, V
Privacy and Civil Liberties Oversight Board       6, X
Procurement and Property Management, Office of    7, XXXII
Productivity, Technology and Innovation,          37, IV
     Assistant Secretary
Public Contracts, Department of Labor             41, 50
Public and Indian Housing, Office of Assistant    24, IX
     Secretary for
Public Health Service                             42, I
Railroad Retirement Board                         20, II
Reclamation, Bureau of                            43, I
Recovery Accountability and Transparency Board    4, II
Refugee Resettlement, Office of                   45, IV
Relocation Allowances                             41, 302
Research and Innovative Technology                49, XI
     Administration
Rural Business-Cooperative Service                7, XVIII, XLII, L
Rural Development Administration                  7, XLII
Rural Housing Service                             7, XVIII, XXXV, L

[[Page 465]]

Rural Telephone Bank                              7, XVI
Rural Utilities Service                           7, XVII, XVIII, XLII, L
Saint Lawrence Seaway Development Corporation     33, IV
Science and Technology Policy, Office of          32, XXIV
Science and Technology Policy, Office of, and     47, II
     National Security Council
Secret Service                                    31, IV
Securities and Exchange Commission                5, XXXIV; 17, II
Selective Service System                          32, XVI
Small Business Administration                     2, XXVII; 13, I
Smithsonian Institution                           36, V
Social Security Administration                    2, XXIII; 20, III; 48, 23
Soldiers' and Airmen's Home, United States        5, XI
Special Counsel, Office of                        5, VIII
Special Education and Rehabilitative Services,    34, III
     Office of
State Department                                  2, VI; 22, I; 28, XI
  Federal Acquisition Regulation                  48, 6
Surface Mining Reclamation and Enforcement,       30, VII
     Office of
Surface Transportation Board                      49, X
Susquehanna River Basin Commission                18, VIII
Technology Administration                         15, XI
Technology Policy, Assistant Secretary for        37, IV
Tennessee Valley Authority                        5, LXIX; 18, XIII
Thrift Supervision Office, Department of the      12, V
     Treasury
Trade Representative, United States, Office of    15, XX
Transportation, Department of                     2, XII; 5, L
  Commercial Space Transportation                 14, III
  Contract Appeals, Board of                      48, 63
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 12
  Federal Aviation Administration                 14, I
  Federal Highway Administration                  23, I, II
  Federal Motor Carrier Safety Administration     49, III
  Federal Railroad Administration                 49, II
  Federal Transit Administration                  49, VI
  Maritime Administration                         46, II
  National Highway Traffic Safety Administration  23, II, III; 47, IV; 49, V
  Pipeline and Hazardous Materials Safety         49, I
       Administration
  Saint Lawrence Seaway Development Corporation   33, IV
  Secretary of Transportation, Office of          14, II; 49, Subtitle A
  Surface Transportation Board                    49, X
  Transportation Statistics Bureau                49, XI
Transportation, Office of                         7, XXXIII
Transportation Security Administration            49, XII
Transportation Statistics Bureau                  49, XI
Travel Allowances, Temporary Duty (TDY)           41, 301
Treasury Department                               5, XXI; 12, XV; 17, IV; 
                                                  31, IX
  Alcohol and Tobacco Tax and Trade Bureau        27, I
  Community Development Financial Institutions    12, XVIII
       Fund
  Comptroller of the Currency                     12, I
  Customs and Border Protection                   19, I
  Engraving and Printing, Bureau of               31, VI
  Federal Acquisition Regulation                  48, 10
  Federal Claims Collection Standards             31, IX
  Federal Law Enforcement Training Center         31, VII
  Financial Crimes Enforcement Network            31, X
  Fiscal Service                                  31, II
  Foreign Assets Control, Office of               31, V
  Internal Revenue Service                        26, I
  Investment Security, Office of                  31, VIII
  Monetary Offices                                31, I
  Secret Service                                  31, IV
  Secretary of the Treasury, Office of            31, Subtitle A
  Thrift Supervision, Office of                   12, V
Truman, Harry S. Scholarship Foundation           45, XVIII
United States and Canada, International Joint     22, IV
   Commission
[[Page 466]]

United States and Mexico, International Boundary  22, XI
     and Water Commission, United States Section
U.S. Copyright Office                             37, II
Utah Reclamation Mitigation and Conservation      43, III
     Commission
Veterans Affairs Department                       2, VIII; 38, I
  Federal Acquisition Regulation                  48, 8
Veterans' Employment and Training Service,        41, 61; 20, IX
     Office of the Assistant Secretary for
Vice President of the United States, Office of    32, XXVIII
Vocational and Adult Education, Office of         34, IV
Wage and Hour Division                            29, V
Water Resources Council                           18, VI
Workers' Compensation Programs, Office of         20, I
World Agricultural Outlook Board                  7, XXXVIII

[[Page 467]]



List of CFR Sections Affected



All changes in this volume of the Code of Federal Regulations (CFR) that 
were made by documents published in the Federal Register since January 
1, 2009 are enumerated in the following list. Entries indicate the 
nature of the changes effected. Page numbers refer to Federal Register 
pages. The user should consult the entries for chapters, parts and 
subparts as well as sections for revisions.
For changes to this volume of the CFR prior to this listing, consult the 
annual edition of the monthly List of CFR Sections Affected (LSA). The 
LSA is available at www.fdsys.gov. For changes to this volume of the CFR 
prior to 2001, see the ``List of CFR Sections Affected, 1949-1963, 1964-
1972, 1973-1985, and 1986-2000'' published in 11 separate volumes. The 
``List of CFR Sections Affected 1986-2000'' is available at 
www.fdsys.gov.

                                  2009

46 CFR
                                                                   74 FR
                                                                    Page
Chapter II
315.6 Regulation at 73 FR 49358 clarified..........................11502
390 Regulation at 73 FR 56739 clarified............................11503
    Authority citation correctly revised...........................17097
390.1 Regulation at 73 FR 56740 clarified..........................11503
390.2 Regulation at 73 FR 56740 clarified..........................11503
390.3 Regulation at 73 FR 56740 clarified..........................11503
390.5 Regulation at 73 FR 56740 clarified..........................11503
    (c)(7)(iii) correctly amended..................................17097
390.7 Regulation at 73 FR 56740 clarified..........................11503
390.8 Regulation at 73 FR 56740 clarified..........................11503
390.9 Regulation at 73 FR 56740 clarified..........................11503
390.10 Regulation at 73 FR 56740 clarified.........................11503
390.11 Regulation at 73 FR 56740 clarified.........................11503
390.12 Regulation at 73 FR 56740 and 56741 clarified...............11503
390.13 Regulation at 73 FR 56740 clarified.........................11503
390 Regulation at 73 FR 56740 and 56741 clarified..................11503
    Appendices I, II, IV and V correctly amended...................17097
Chapter III
401.110 (a)(8) and (12) amended; (a)(17) added.....................11267
    (a)(2) and (9) amended.........................................49241
401.210 (a)(1) and (6) revised.....................................11267
401.220 (d) amended................................................11267
401.230 (a) amended................................................11267
401.250 (d) amended................................................11267
401.405 (a) and (b) revised...................................232, 35824
401.407 (a) and (b) revised...................................232, 35825
401.410 (a), (b) and (c) revised..............................232, 35825
401.420 (a), (b), (c)(1) and (3) amended......................233, 35825
401.428 Amended...............................................233, 35825
402.220 (a)(1), (2) and (3) amended................................11267

                                  2010

46 CFR
                                                                   75 FR
                                                                    Page
Chapter II
388.2 (c) revised..................................................28206
388.3 (a) introductory text and (2) introductory text revised......28206
389 Regulation at 73 FR 30787 confirmed; revised...................62474
393 Revised........................................................18101
Chapter III
401.110 (a)(9) amended.............................................60004
401.405 (a) and (b) revised.........................................7970

[[Page 468]]

401.407 (a) and (b) revised.........................................7970
401.410 (a), (b) and (c) revised....................................7970
401.420 (a), (b), (c)(1) and (3) amended............................7971
401.428 Amended.....................................................7971

                                  2011

46 CFR
                                                                   76 FR
                                                                    Page
Chapter II
221 Clarification..................................................37280
Chapter III
401.110 (a)(7) amended.............................................60754
401.405 (a) and (b) revised.........................................6363
401.407 (a) and (b) revised.........................................6363
401.410 (a), (b) and (c) revised....................................6363
401.420 (a), (b), (c)(1) and (3) amended............................6364
401.428 Amended.....................................................6364
402.210 (a) amended................................................60754

                                  2012

46 CFR
                                                                   77 FR
                                                                    Page
Chapter II
251 Removed.........................................................5194
252 Removed.........................................................5194
276 Removed.........................................................5194
280 Removed.........................................................5194
281 Removed.........................................................5194
282 Removed.........................................................5194
283 Removed.........................................................5194
327 Revised........................................................65633
Chapter III
401.110 (a)(7), (9) and (16) amended...............................59790
401.405 (a) and (b) revised........................................11773
401.407 (a) and (b) revised........................................11773
401.410 (a), (b) and (c) revised...................................11774
401.420 (a), (b), (c)(1) and (3) amended...........................11774
401.428 Amended....................................................11774

                                  2013

46 CFR
                                                                   78 FR
                                                                    Page
Chapter II
221 Authority citation revised.....................................35771
221.1 (a)(1) and (2) amended.......................................35771
221.3 (c) introductory text and (d)(5) amended; (u) revised........35771
221.5 (a) amended..................................................35771
221.11 (a) introductory text amended...............................35771
221.13 (a) amended.................................................35771
221.15 (a)(3), (c)(2), (4) and (f)(2) amended......................35771
221.61 Introductory text revised...................................35771
Chapter III
401.110 (a)(2), (9) and (16) amended...............................60165
401.405 (a), table footnote and (b) revised........................13542
401.407 (a), (b) and table footnote revised........................13542
401.410 (a), (b) and (c) revised...................................13542
401.420 (a), (b) and (c)(1) amended................................13543
401.428 Amended....................................................13543

                                  2014

  (Regulations published from January 1, 2014, through October 1, 2014)

46 CFR
                                                                   79 FR
                                                                    Page
Chapter II
308 Revised........................................................17898
Chapter III
401.400 (b) revised................................................12107
401.401 Added......................................................12107
401.405 (a) and (b) revised........................................12107
401.407 (a) and (b) revised........................................12107
401.410 (a), (b) and (c) revised...................................12107
401.420 (a), (b), (c)(1) and (3) amended...........................12108
401.428 Amended....................................................12108


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