[Federal Register Volume 61, Number 201 (Wednesday, October 16, 1996)]
[Rules and Regulations]
[Pages 53861-53866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26502]


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DEPARTMENT OF TRANSPORTATION

Maritime Administration

46 CFR Part 295

[Docket No. R-163]
RIN 2133-AB24


Maritime Security Program

AGENCY: Maritime Administration, Department of Transportation.

ACTION: Interim final rule and request for comments.

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SUMMARY: The Maritime Administration (MARAD) is issuing this interim 
final rule to provide procedures to implement the provisions of the 
Maritime Security Act of 1996 (the MSA). The MSA establishes a new 10-
year Maritime Security Program (MSP), commencing in Fiscal Year (FY) 
1996. The MSP supports the operations of U.S.-flag vessels in the 
foreign commerce of the United States through assistance payments. 
Participating vessel operators are required to make their ships and 
other commercial transportation resources available to the Government 
during times of war or national emergency.

DATES: This interim final rule is effective October 18, 1996. Comments 
are requested and must be received on or before November 15, 1996.

ADDRESSES: To be considered, comments shall be mailed, delivered in 
person or telefaxed (in which case an original must subsequently be 
forwarded) to the Secretary, Maritime Administration, Room 7210, 
Department of Transportation, 400 Seventh Street, SW, Washington, DC 
20590. All comments will be made available for inspection during normal 
business hours at the above address. Commentors wishing MARAD to 
acknowledge receipt of comments should enclose a stamped self-addressed 
envelope or postcard.

FOR FURTHER INFORMATION CONTACT: Raymond R. Barberesi, Director, Office 
of Sealift Support, Telephone 202-366-2323.

SUPPLEMENTARY INFORMATION:

Background

    Title VI of the Merchant Marine Act of 1936, as amended, 46 App. 
U.S.C. 1171 et seq. (Act), authorized the Secretary of Transportation 
(Secretary) to provide operating-differential subsidy (ODS) to U.S.-
flag ship operators for the operation of their vessels in essential 
services in the foreign commerce of the United States. These long-term 
ODS payments are generally based on the difference between U.S. 
operating costs, primarily wages, and those of principal foreign 
competitors. The ODS program helped to maintain a U.S.-flag merchant 
fleet to serve both the commercial and national security needs of the 
United States.
    Section 2 of the MSA amends Title VI of the Act. The current ODS 
program is retained as Subtitle A, and current ODS contracts with U.S.-
flag operators will be honored until they expire under their own terms.
    The MSA adds a new Subtitle B, authorizing a MSP, which provides 
assistance for U.S.-flag operators and vessels that meet certain 
qualifications. It requires the Secretary to encourage the 
establishment of a fleet of active, militarily useful, privately-owned 
vessels to meet national defense and other security requirements, while 
also maintaining an American presence in international commercial 
shipping. The MSA establishes a new 10-year program which is intended 
to support the operations of up to 47 U.S.-flag vessels in the foreign 
commerce of the United States. Payments to the operators start at $2.3 
million per ship in FY 1996, and decrease to $2.1 million per ship per 
year thereafter.
    Participating operators are required to make their ships and other 
commercial resources available upon request by the Secretary of Defense 
during time of war or national emergency. Unlike the ODS program, the 
MSP has few restrictions on vessels operating in the U.S. foreign 
commerce and eligible vessels may be built in foreign shipyards.
    This rule adds a new 46 CFR Part 295 to provide the procedures to 
implement the MSA with respect to the application for, and award of, 
MSP operating agreements that provide financial assistance to operators 
of vessels enrolled in the program, subject to acceptance of statutory 
conditions incorporated therein.
    The 10-year program will be administered on the basis of one-year 
renewable contracts, provided funding is available in subsequent years. 
Participating operators will be required to operate eligible vessels in 
the foreign commerce of the United States, and certain domestic areas 
such as Guam, with a minimum of operating restrictions, for at least 
320 days in any fiscal year. Payments will be reduced for each day any 
vessel carries civilian bulk preference cargoes in excess of 7,500 
tons.

Rulemaking Analysis and Notices

Executive Order 12866 (Regulatory Planning and Review), and Department 
of Transportation (DOT) Regulatory Policies

    This rulemaking is not considered to be an economically significant 
regulatory action under section 3(f) of E.O. 12866. This interim final 
rule also is not considered a major rule for purposes of Congressional 
review under P.L. 104-121. Since the program is designed to support 47 
vessels in FY 1997, each receiving up to $2.1 million annually, the 
Maritime Administrator finds that the program will not have an annual 
effect on the economy of $100 million or more. However, it is 
considered to be a significant rule under DOT's Regulatory Policies and 
Procedures (44 FR 11034, February 26, 1979). Accordingly, it has been 
reviewed by the Office of Management and Budget.
    The program will be subject to annual appropriations to provide 
payments to the participants of $2.3 million for each Agreement Vessel 
for fiscal year 1996 and $2.1 million for each fiscal year thereafter 
in which the agreement is in effect. These payments are up to 50 
percent less, per vessel, than payments made under the existing ODS 
program. A full regulatory evaluation is not necessary since this rule 
only

[[Page 53862]]

establishes the procedures to implement the Act which imposes 
conditions for enrollment of vessels in the MSP.
    Pursuant to authority granted by section 8 of the Act, MARAD is 
publishing this rule as an interim final rule ``excepted from 
compliance with the notice and comment requirements of section 553 of 
title 5, United States Code.'' This will facilitate establishment of 
the MSP as early as possible. A final rule will be published in the 
Federal Register after MARAD has had an opportunity to consider all 
comments on this interim final rule.

Federalism

    MARAD has analyzed this rulemaking in accordance with principles 
and criteria contained in E.O. 12612 and has determined that these 
regulations do not have sufficient federalism implications to warrant 
the preparation of a Federalism Assessment.

Regulatory Flexibility

    Although the Regulatory Flexibility Act of 1980, 5 U.S.C. 601 et 
seq., does not apply to final rules for which a proposed rulemaking was 
not required, MARAD has evaluated this rule under that Act and 
certifies that this rule will not have a significant economic impact on 
a substantial number of small entities. The participants in this 
program are not small entities.

Environmental Assessment

    MARAD has concluded that this interim final rule falls into a class 
of actions that are categorically excluded from review under the 
National Environmental Policy Act of 1969 (NEPA) because they would not 
individually or cumulatively have a significant impact on the human 
environment, as determined by Sec. 4.05 and Appendices 1 and 2 of 
Maritime Administrative Order MAO-600-1, which contains MARAD 
Procedures for Considering Environmental Impacts (50 FR 11606, March 
22, 1985) implementing NEPA. The interim final rule does not change the 
environmental effect of the current ODS program, which the MSP 
supersedes (and which is currently under a categorical exclusion 
pursuant to MAO-600-1), because the vessels eligible for the MSP (1) 
will continue to operate under the U.S. flag, and will continue to be 
governed by U.S.-flag state control while operating in the global 
commons; (2) are and will continue to be designed, constructed, 
equipped and operated in accordance with stringent United States Coast 
Guard and International Maritime Organization standards for maritime 
safety and marine environmental protection; and (3) when in waters 
subject to the port-state, will continue to be governed by port-state 
control. Therefore, this rule does not require an environmental impact 
statement or an environmental assessment pursuant to NEPA.

Paperwork Reduction

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507 et seq.), this rulemaking contains new information collection or 
record keeping requirements, which have been approved by OMB (approval 
number 2133-0525). These have been approved under emergency approval 
authority until November 30, 1996. The Maritime Administration has 
requested that this approval be extended for three years. Any comments 
concerning the application and other information requirements contained 
in this rule should be submitted to the above address.
    This rule does not impose any unfunded mandates.

List of Subjects in 46 CFR Part 295

    Assistance payments, Maritime carriers, Reporting and record 
keeping requirements.

    Accordingly, Part 295 is added to 46 CFR chapter II, subchapter C, 
to read as follows:

PART 295--MARITIME SECURITY PROGRAM (MSP)

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  Termination of authority.
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.

    Authority: 46 App. U.S.C. 1171 et seq., 49 CFR 1.66.

Subpart A--Introduction


Sec. 295.1   Purpose.

    This part prescribes regulations implementing the provisions of 
Subpart B 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 (46 App. U.S.C. 1101 et seq.).
    (b) Administrator, means the Maritime Administrator, Maritime 
Administration, U.S. Department of Transportation, to whom the 
authority to administer Title VI of the Act has been delegated, with 
the exception of entering into, amending and terminating subsidy 
contracts.
    (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, Maritime Administration.
    (i) Contractor, means the owner or operator of a vessel that enters 
into a MSP Operating Agreement for the vessel with the Maritime 
Administration under 46 CFR 295.20.
    (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 Contractor, means a Contractor, as defined in this 
section, who has a completed application for participation in the MSP 
on file with MARAD.
    (m) Eligible Vessel, means a vessel that meets the requirements of 
46 CFR 295.10(b), as added below.
    (n) Emergency Preparedness Program Agreement, means the agreement, 
required by section 653 of the Act, between a Contractor and the 
Secretary of Defense to make certain commercial transportation 
resources available during time of war or national emergency.
    (o) Enrollment, means the entry into a MSP Operating Agreement with 
the

[[Page 53863]]

Maritime Administration to operate a vessel(s) in the MSP Fleet in 
accordance with 46 CFR 295.20.
    (p) Fiscal Year, means any annual period beginning on October 1 and 
ending on September 30.
    (q) LASH Vessel, means a lighter aboard ship vessel.
    (r) Maritime Subsidy Board, means the Maritime Subsidy Board which 
is constituted by 46 CFR 1.67 and delegated authority to enter into, 
amend and terminate contracts.
    (s) Militarily Useful, means a measure of utility applicable only 
for deliberate planning. As applied to dry cargo vessels it means dry 
cargo ships, including integrated tug/barges, with a minimum capacity 
of 6,000 (DWT) capable of carrying, without significant modification, 
any of the following cargoes: unit equipment, ammunition, or sustaining 
supplies.
    (t) MSP Fleet, means the fleet of vessels operating under MSP 
Operating Agreements.
    (u) MSP Operating Agreement, means the MSP Operating Agreement, 
providing for MSP payments entered into by a Contractor and the 
Maritime Administration.
    (v) MSP Payments, means the payments made for the operation of 
U.S.-flag vessels 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, to maintain intermodal shipping 
capability and to meet national defense and security requirements in 
accordance with the terms and conditions of a MSP Operating Agreement.
    (w) Ocean Common Carrier, means a carrier that meets the 
requirements of 46 U.S.C. App. 1702(3)(6).
    (x) ODS, means Operating-differential Subsidy provided by Subtitle 
A, Title VI, of the Act.
    (y) Operating Day, means any day during which a vessel is operated 
in accordance with the terms and conditions of a MSP Operating 
Agreement.
    (z) 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.
    (aa) Secretary, means the Secretary of Transportation.
    (bb) 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 the Maritime Administration 
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 
the Applicant in its capacity 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 Maritime Administration 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, the Maritime Administration is authorized to waive the application 
of paragraph (2)(ii) of this section if the Maritime Administration, 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) Maritime Administration's determination. The Maritime 
Administration determines that the vessel is necessary to maintain a 
United States presence in international commercial shipping and the 
Contractor possesses the ability, experience, resources and other 
qualifications necessary to execute the obligations of the MSP 
Operating Agreement, or the Maritime Administration, 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 the Maritime Administration. Not later than 30 days 
after the enactment of the Maritime Security Act, the Maritime 
Administration shall accept applications for Enrollment of vessels in 
the MSP Fleet. Within 90 days after receipt of a completed application, 
the Maritime Administration shall enter into a MSP Operating Agreement 
with the applicant or provide in writing the reason for denial of that 
application.
    (b) Action by the Applicant. Applicants for MSP Payments shall 
submit information on the following:
    (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)


Sec. 295.12  Priority for awarding agreements.

    Subject to the availability of appropriations, the Maritime 
Administration 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:

[[Page 53864]]

    (1) U.S. citizen ownership. Vessels owned and operated by persons 
or related parties who are Citizens of the United States as defined in 
section 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.
    (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 (including mixed noncontiguous domestic and foreign commerce, 
but excluding mixed coastwise and foreign commerce) on May 17, 1995; 
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), 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 Maritime Administration 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 
section 295.2, 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--(1) General rule. 
If appropriated funds are not sufficient for MSP Operating Agreements 
within a first, second or third priority set forth herein, the Maritime 
Administration shall award a number of Operating Agreements to each 
applicant, so that the number of Operating Agreements awarded within 
such priority to that applicant bears approximately the same ratio to 
the total number of Operating Agreements in the priority 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.
    (2) Limited term MSP Operating Agreements. To the extent that funds 
are available prior to the effective dates of MSP Operating Agreements 
awarded under section 295.20(b)(2), the Maritime Administration may 
award limited term MSP Operating Agreements for periods terminating 
prior to those effective dates under section 295.20(b)(2), in 
accordance with section 295.12(d).

Subpart C--Maritime Security Program Operating Agreements


Sec. 295.20  General conditions.

    (a) Approval. The Maritime Administration 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 for 
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 the Maritime Administration.
    (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, 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. The Maritime Administration may approve 
the replacement of an Eligible Vessel in a MSP Operating Agreement 
provided the replacement vessel is eligible under section 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 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 the Maritime 
Administration. Within 5 business days of the receipt of such 
notification, the Maritime Administration shall issue a notice in the 
Federal Register of the Contractor's intent. The Contractor is 
prohibited from entering into any such contract until 5 business days 
after 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 the 
Maritime Administration 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 contained in section 652(m) of the Act.
    (f) Termination 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, the Maritime Administration 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 section 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 the Maritime Administration. In 
the event that no funds are appropriated, then all MSP Operating 
Agreements

[[Page 53865]]

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 section 295.30. To the 
extent that funds are appropriated in a subsequent fiscal year, the 
Maritime Administration shall enter into new MSP Operating Agreements 
in accordance with the applicable provisions contained in this part.
    (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 section 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 under a 
Operating Agreement shall notify the Maritime Administration of its 
intention to transfer the agreement (including all rights and 
obligations under the agreement) to any Eligible Contractor or related 
party. The proposed transfer shall become effective within 90 days 
unless disapproved by the Maritime Administration.


Sec. 295.21  MSP assistance conditions.

    (a) Term of MSP Operating Agreement. The Maritime Administration is 
authorized to enter into MSP Operating Agreements commencing in FY 
1996. 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 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 are void and the 
Contractor may request termination of the MSP Operating Agreement in 
accordance with section 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. 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) 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  Termination of authority.

    (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 the Maritime 
Administration within 30 days of the Contractor's intent; or
    (2) Newbuilding. 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 the Maritime Administration.


Sec. 295.23  Reporting requirements.

    The Contractor shall submit to the Director, Office of Financial 
Approvals, Maritime Administration, 400 Seventh St., S.W. Washington, 
D.C. 20590, 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; and
    (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.

(Approved by the Office of Management and Budget under control 
number 2133-0525)

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 
$2,300,000 for fiscal year 1996, and $2,100,000 for each fiscal year 
thereafter. 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 section 
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 which the vessel is operated, provided the total of such days 
within a fiscal year does not exceed 30 days.
    (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

[[Page 53866]]

pursuant to section 901(a), 901(b), or 901b, 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 consideration shall be given to reductions in amounts payable as 
set forth in section 295.30. All submissions shall be forwarded to the 
Director, Office of Accounting, MAR-330 Room 7325, Maritime 
Administration, 400 Seventh Street S.W., Washington, D.C. 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, as follows:

FY 1996--$191,666.66
FY 1997--$175,000.00
FY 1998--$175,000.00
FY 1999--$175,000.00
FY 2000--$175,000.00
FY 2001--$175,000.00
FY 2002--$175,000.00
FY 2003--$175,000.00
FY 2004--$175,000.00
FY 2005--$175,000.00

    (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 
Sec. 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 1996--$6,284.15
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) The Maritime Administration may require, for good cause, that a 
portion not to exceed 10% of the funds payable under this section be 
withheld until final review of the current billing period is completed.
    (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 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.
    (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 other proceedings appropriate in the 
circumstances. The decision of the Maritime Administrator shall be 
final.

    Dated: October 10, 1996.

    By order of the Maritime Administration.
Joel C. Richard,
Secretary, Maritime Administration.
[FR Doc. 96-26502 Filed 10-15-96; 8:45 am]
BILLING CODE 4910-81-P