[Federal Register Volume 62, Number 135 (Tuesday, July 15, 1997)]
[Rules and Regulations]
[Pages 37733-37741]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-18559]


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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: Final rule.

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SUMMARY: The Maritime Administration (MARAD) is issuing this final rule 
to provide procedures to implement the provisions of the Maritime 
Security Act of 1996 (MSA). The MSA establishes a new Maritime Security 
Program (MSP), which authorizes payments through FY 2005. 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 final rule is effective July 17, 1997.

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

SUPPLEMENTARY INFORMATION:

Background

    Section 2 of the MSA amended Title VI of the Merchant Marine Act, 
1936, as amended, 46 App. U.S.C. 1171 et seq. (Act), by adding a new 
Subtitle B, which authorizes MSP to provide assistance for operators of 
U.S.-flag vessels that meet certain qualifications. It requires the 
Secretary of Transportation (Secretary) to establish 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. Section 655 of the MSA 
authorized $100 million annually through fiscal year 2005 to support 
the operation of up to 47 U.S.-flag vessels in the foreign commerce of 
the United States. Payments to participating operators are $2.1 million 
per ship, per year. Participating operators are required to make their 
ships available upon request by the Secretary of Defense during times 
of war or national emergency. Unlike the operating-differential subsidy 
(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.

Interim Final Rule

    As authorized by section 8 of the MSA, MARAD issued an interim 
final rule on October 16, 1996, (61 FR 53861), which added a new 46 CFR 
Part 295. That rule provides 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. The program will be administered on the basis of one-year 
renewable contracts, provided funding is available in subsequent years. 
The rule provides that participating operators will be required to 
operate eligible vessels in the foreign commerce of the United States, 
and certain specified mixed foreign and domestic areas, with a minimum 
of operating restrictions, for at least 320 days in any fiscal year. It 
provides that payments will be made on a prorated basis for vessels 
operated less than 320 days in any year, exclusive of days a MSP vessel 
is being drydocked, surveyed or repaired. In addition, no payments will 
be made for each day any vessel carries civilian bulk preference 
cargoes of 7,500 tons or more.
    The interim final rule issued on October 16, 1996, allowed an 
initial comment period ending November 15, 1996. This comment period 
was later extended to December 2, 1996 by notice published in the 
Federal Register (61 FR 58663; November 18, 1996). MARAD received 13 
comments from persons or entities with an interest in the MSP, 
including vessel operators, labor unions, representatives of U.S. 
shipyards, and U.S. insurers providing U.S. marine hull insurance. In 
addition, on October 11, 1996, MARAD invited applications for 
participation in the MSP by

[[Page 37734]]

advertisement in the Federal Register (61 FR 53483) using the 
application approved under OMB Approval No. 2133-0525. Based on these 
applications MARAD awarded 47 contracts for annual payment of $98.7 
million. Accordingly, the application process has been closed until 
such time as additional funding may become available.

Editorial and Clarifying Comments Adopted

    The commentors submitted many helpful, editorial and clarifying 
comments which MARAD is incorporating in the final rule. In general, 
the final rule drops all references to FY 1996. The term Eligible 
Contractor is being deleted as it is confusing and now holds no 
relevance. The reference in Sec. 295.10(b)(3) will read ``applicant,'' 
not ``contractor'' and reference will be made to the Maritime Security 
Fleet Program instead of Maritime Security Program in Sec. 295.1 
``Purpose.'' With respect to the hull insurance comments affecting the 
marine insurance industry, MARAD will encourage use of the American 
market for marine hull insurance to the maximum extent possible when 
rates, terms and conditions offered by American underwriters are 
competitive with those offered by foreign underwriters. In order to 
satisfy the Congressional intent of providing a less restrictive 
program, this requirement will not be mandatory.

Summary of Substantive Comments by Section

Definition of Militarily Useful

Sec. 295.2(q)
    Comment: MARAD received three comments, two that requested 
clarification of the term ``militarily useful'' and one that requested 
that the term be deleted entirely. According to that commentor, the 
Department of Defense (DOD) is the expert in the area of military 
utility and, as written, the definition exceeds the authority of the 
MSA.
    Response: MARAD disagrees with the comment that a definition of 
``militarily useful'' exceeds the MSA. Under the MSA, responsibility 
for the determination of military utility belongs to MARAD in 
conjunction with DOD, pursuant to authority contained in section 
651(b)(1)(c) of the Act. MARAD agrees that DOD criteria should be 
considered and therefore will use the Joint Strategic Capabilities Plan 
(JSCAP) definition of ``militarily useful'' in the final rule to define 
the type of vessel utility that would qualify a vessel as being 
eligible for the MSP. MARAD agrees with the comments that requested 
clarification and will include the applicable JSCAP definition 
describing vessel types deemed acceptable for MSP use. The regulation 
at Sec. 295.2(q) will be amended accordingly.

Definition of ``Related Party''

Sec. 295.2(x)(New)
    Comment: MARAD received five comments from carriers on the issue of 
clarifying the term ``related party'' used in numerous provisions of 
the Interim Final Rule. Three commentors requested clarification of the 
definition of the term and two commentors requested that the reference 
be deleted from Sec. 295.12(a)(1).
    Response: The term ``related party'' is defined in the MSA in 
section 656(h), which specifies that the definition is for the purposes 
of section 656 only. At the time the Interim Final Rule was published, 
many questions concerning the interpretation of section 656 had not 
been resolved and references to the non-contiguous domestic trades were 
not finalized. As a result, no definition of this term was 
contemplated. However, in view of the comments received and the use of 
the term in section 652(i) of the Act and its reflective language in 
Sec. 295.12 of the regulations, MARAD agrees that a general definition 
is required. Accordingly, MARAD believes consistency requires that the 
definition used in section 656(h) of the Act be used in general in the 
regulations. That definition will be added to the definitions section 
of the regulations with a new Sec. 295.2(x) ``Related Party.''
    With regard to the reference to related parties in 
Sec. 295.12(a)(1), that section was intended to mirror the language of 
section 652(i)(1)(A)(i) of the Act relating to the ordering of 
priorities in the granting of MSP awards. However, while the pertinent 
language of that section of the Act reserves the highest first priority 
eligibility to citizens of the United States, the language of 
Sec. 295.12(a)(1) of the interim final rule extended that priority to 
include related parties. Commentors requested that the term ``related 
party'' be deleted from Sec. 295.12(a)(1), ``U.S. Citizen Ownership.'' 
MARAD agrees and this reference will be deleted.

Applications

Sec. 295.11(a)(2) (Revised)
    Since MSP is authorized only through fiscal year 2005 and since it 
has been fully implemented with annual renewable contracts, 
applications will only be accepted in response to public invitation by 
MARAD. Section 295.11(a)(2) has been clarified to establish the limits 
within which applications will be accepted by MARAD.

Reflagging U.S. Vessels on the Basis of MSP Denial

Sec. 295.11(a)(4)
    Comment: One commentor suggested that MARAD make clear that the 
rejection for enrollment in the MSP of any U.S.-flag vessel which 
requires, but did not receive either an affirmative defense or military 
purposes determination or an age waiver, does not entitle the vessel to 
be transferred to foreign registry without approval by DOT under 
section 9 of the Shipping Act, 1916 (46 App. U.S.C. 808) (1916 Act).
    Response: Generally, section 9(c)(2) of the 1916 Act provides that 
a U.S.-documented vessel may not be transferred to a foreign registry 
or operated under the authority of a foreign country without the 
approval of the Secretary. Section 6 of the MSA adds a new subsection 
(e) to section 9 of the 1916 Act. Pursuant to paragraph (2) of the new 
subsection (e) an eligible vessel which has applied for an operating 
agreement under the MSP, and which has not received an award within 90 
days of application, may transfer to a foreign registry without 
approval by the Secretary. After careful analysis, MARAD has determined 
that the new section 9(e)(2) would not remove the requirement for 
approval by MARAD for transfer to foreign registry of a U.S.-flag 
vessel that applied for MSP but was not qualified for award other than 
by reason of age. The statute applies only to vessels eligible under 
section 651(b)(1), which encompasses all vessel eligibility 
requirements, with the exception of age. Therefore, if MARAD has 
determined that the applicant is qualified and the vessel is eligible 
under the provisions of section 651(b)(1), but does not award a MSP 
operating agreement due to lack of funds or an inadequate program 
level, the applicant may remove the subject vessel from U.S. registry 
and reflag the vessel under a foreign registry without section 9 
approval by MARAD. This reflag would only apply to vessels eligible for 
awards within a priority in which awards have been authorized. Vessels 
under ODS contract or on MSC charter for which MSP applications have 
been denied would be eligible to reflag only after those obligations 
have expired.

[[Page 37735]]

Proration

Sec. 295.12(d)(1)
    Comment: Rounding problems may produce more eligible vessels than 
available slots.
    Response: One comment was received regarding rounding of fractional 
eligibility in the proration process. The point was that inclusion of 
all fractional eligibility could result in a number of eligible vessels 
that exceeds the funding available for a particular priority. MARAD 
agrees. However, the problem of fractional vessels versus slots was 
anticipated by the language of section 652(o)(2) of the Act. 
Specifically, that section states that, if the number of vessels 
eligible in a priority exceeds the available funding for the priority, 
the number of awards to each person shall be made in approximately the 
same ratio as the number of vessels that the individual applied for 
bears to the total number of vessels applied for in the priority. The 
term grants latitude within the process to round awards up or down, as 
needed, to correct rounding problems and adjust awards. Accordingly, 
Sec. 295.12(d)(1) provides a mechanism for dealing with rounding 
problems and no changes are required.

Replacement Vessels

Sec. 295.20(c)
    Comment: One comment was received concerning the statutory 
authority and practical application of Sec. 295.20(c), which permits 
the replacement of vessels enrolled in the MSP.
    Response: In section 8(a), the MSA authorizes the Secretary to 
prescribe rules as necessary to carry out the MSA. Providing for the 
orderly replacement of vessels enrolled in the program, should such 
replacement become necessary, falls within the purview of the 
Secretary's mandate under section 8(a). Practical application of such 
replacement would result from the loss of an enrolled vessel, or from 
an enrolled vessel otherwise becoming ineligible for participation in 
the program, for example, by becoming overage. The intent of 
Sec. 295.20(c) is to provide the mechanism for such replacement. 
Criteria are already established. Section 295.20(c) refers back to 
Sec. 295.10, which establishes the eligibility criteria and reflects 
section 651 of the Act. No change will be made in Sec. 295.20(c).

Notice to Shipbuilders

Sec. 295.20(d)
    Comment: MARAD received four comments on Sec. 295.20(d). Two of the 
commentors stated that the section exceeded the statutory authority of 
the MSA by providing that MARAD issue notice in the Federal Register of 
a contractor's intent to build a vessel in a foreign shipyard, and a 
third commentor stated that this notice may be harmful to MSP 
contractors. The commentors suggested that MARAD simply develop a list 
of shipyards capable of building various types of vessels and make the 
list available to the MSP contractors. A contractor then could satisfy 
the requirements of section 652(b) of the MSA by directly providing 
notice to the shipbuilders. One commentor suggested that the 
prohibition against entering a contract with a foreign shipbuilder be 
extended from 5 to 10 working days after MARAD's publication of notice 
of the applicant's intent, and also that any interested U.S. 
shipbuilder should be allowed not less than 30 days, and not more than 
120 days, to submit a design and price to the Maritime Administration. 
Further, the commentor suggested that MARAD require MSP contractors to 
make both foreign and domestic bid prices known to MARAD. MARAD would 
determine whether the U.S. bid is competitive and then notify the 
contractor that, if they select the foreign offer, the vessel would not 
be eligible for MSP payments.
    Response: MARAD's role in issuing notices in instances where an MSP 
contractor proposes construction of a vessel or vessels by a foreign 
shipbuilder was intended to expedite the notification process while 
ensuring that every shipbuilder in the United States would have proper 
and timely notice. The agency considered the idea of providing a list 
of shipbuilders to each MSP contractor. However, after review, MARAD 
decided that such a list would be an inadequate notification tool when 
considering the ever changing maritime environment. It is appropriate 
for MARAD to exercise its discretion to provide adequate notice to U.S. 
shipbuilders, and it would satisfy Congressional intent that they be 
given an opportunity to compete for contracts. MARAD believes that 
publishing in the Federal Register is in the best interest of U.S. 
shipbuilders, since these notices are public documents and potential 
U.S. shipbuilders have access to the information. MARAD agrees with the 
comment concerning the length of the notice period because it will 
allow a more reasonable time period for U.S. shipbuilders to learn of 
the notice and respond to it. Section 295.20(d) will be amended to 
provide that MARAD publish notice of a contractor's intent within 10 
days of notification by the contractor, and that the contractor will be 
required to wait an additional 10 days from the date of publication 
before entering into any contract with a foreign shipyard.
    With regard to a mandatory delay of 30 to 120 days for U.S. 
shipyards to respond to a foreign contracting notice published by 
MARAD, MARAD does not believe that it has authority under the MSA to 
require such extended delay. The apparent intent of the legislation was 
only that notification be given, not that an extended delay should be 
imposed. Since the notification from the contractor is required ``not 
later than 30 days'' after a solicitation of a bid from a foreign yard, 
the bidding process should not be sufficiently advanced that U.S. 
shipyards could not provide bids in an expeditious manner. Accordingly, 
MARAD will not attempt to impose any further restriction on the 
contractors by requiring a longer waiting period.
    With respect to the comment that MARAD evaluate bids and withhold 
MSA payments if the MSP operator selects a foreign shipyard, the MSA 
contains no authority for MARAD to deny an award or withhold MSP 
payments based on its evaluation of the U.S. bid being competitive.

Early Termination

Sec. 295.20(e)
    Comment: One commentor suggested that Sec. 295.20(e) should be 
rewritten substantially in the form of section 652(m) of the Act, or 
that the phrase ``* * * to the extent and for the period * * *,'' be 
inserted before, ``* * * contained in section 652(m) of the Act.''
    Response: Section 295.20(e) concerns the obligations of a 
contractor to keep an Agreement Vessel documented under U.S. registry 
if the contractor voluntarily elects to terminate the MSP Agreement 
before its termination date. The inclusion of the language ``* * * to 
the extent and for the period * * *'' would add some clarity to this 
provision by directly linking Sec. 295.20(e) to the period of time 
specified for retention under U.S. registry in section 652(m) of the 
Act. Section 295.20(e) will be amended accordingly.

Termination for Lack of Funds

Sec. 295.20(f)
    Comment: One commentor has proposed that the title of this part be 
changed to ``Nonrenewal for Lack of Funds.'' In addition, the commentor 
suggested that vessels transferred to another registry under this 
regulation should be transferred to ``Effective United States Control'' 
registries deemed acceptable by MARAD.

[[Page 37736]]

    Response: The first proposed amendment, i.e., the use of 
``Nonrenewal'' vs. ``Termination,'' would conform the regulation to the 
language of section 652(n) of the Act. Section 295.20(f) will be 
amended accordingly. With regard to the language on ``Effective United 
States Control,'' it should be noted that the language contained in 
that section of the Act specifies that ``* * * the vessel owner or 
operator may transfer and register such vessel under a foreign registry 
deemed acceptable by the Secretary of Transportation, notwithstanding 
any other provision of law.'' The language adopted in Sec. 295.20(f) 
states ``* * * the contractor may transfer and register the applicable 
vessel under a foreign registry deemed acceptable to the Maritime 
Administration.'' Since the Administrator has been delegated authority 
by the Secretary to authorize such transfers, MARAD believes that the 
language contained in Sec. 295.20(f) adequately covers this situation 
and that no additional change is required.

Transfer of Operating Agreements

Sec. 295.20(i)
    In light of the issues raised by many commentors regarding possible 
transfers of MSP operating agreements, additional safeguards have been 
included in Sec. 295.20(i) to ensure that, in the event an Agreement is 
transferred by a Contractor to another person or entity, the person or 
entity to whom an Agreement is transferred, and the vessel to be 
covered by the Agreement after transfer, meet the original eligibility 
requirements.

Limitations

Sec. 295.21(e)
    Comment: One commentor noted that section 804 of the Act was 
substantially changed by section 5 of the MSA, and recommended that ``* 
* * as amended,'' be added to the first sentence of Sec. 295.21(e) 
after ``* * * section 804.''
    Response: MARAD agrees, and will make the change.

Determination of Section 656 Service Level Criteria

Sec. 295.21(f)
    Comment: MARAD received four extensive comments regarding how it 
should interpret the statute with regard to service levels and provide 
objective criteria to determine the allowable levels of service 
provided by MSP contractors in noncontiguous domestic trades. Most of 
the commentors requested that the service levels be determined at their 
historical levels, not anticipated carrying capacity. One commentor, in 
addition to advocating the use of historical capacity figures for this 
purpose, suggested that the applicant or contractor submit this 
information under oath, subject to validation by an objective source, 
and that the number of TEU's carried in the noncontiguous trades be 
reported annually by MSP contractors under oath, and subject to audit.
    Response: Upon receipt of the applications for the MSP, MARAD 
published notification of those applications wherein the applicants 
requested approval to continue existing noncontiguous domestic 
operations. These notices were separate from the Interim Final Rule, 
and the comments were received separately from those of this 
rulemaking. Notices were published for Sea-Land Service, Inc., for 
services to Hawaii, Puerto Rico and Alaska; Crowley Maritime Corp., for 
Alaska; and OSG Car Carriers, Inc., for Alaska, Hawaii, Puerto Rico and 
the U.S. Virgin Islands.
    Comments were received from seven commentors on the published 
levels of existing service claimed by the applicants, particularly 
where service to Alaska and Hawaii is involved. However, the volume and 
complexity of those comments mandated a thorough and separate 
examination of the implementation of section 656 of the Act.
    MARAD is reserving a section in the Final Rule for determination of 
limitations on operations in the non-contiguous domestic trades, and 
will publish a Notice of Proposed Rulemaking regarding those provisions 
after the issue has been resolved. Section 295.21(f) has been reserved 
for that purpose.

Need for Financial Data

Sec. 295.23
    Comment: MARAD received numerous comments which stated that the 
requirement for filing form MA-172 and an audited financial statement 
was beyond the statutory authority contained in the MSP and should be 
removed.
    MARAD does not agree. In collecting such information, MARAD is 
exercising its discretion to require information necessary to perform 
its responsibilities and to monitor the efficiency and effectiveness of 
the maritime industry. However, in an effort to minimize the 
administrative burden on the contractor, the rule has been changed. 
MARAD is not requiring the submission of Form MA-172. The Final Rule 
will provide that, in the alternative, an applicant may submit an 
audited financial statement and vessel operating cost data submitted as 
part of its Emergency Preparedness Program Agreement. Final approval of 
the MSP data collection requirement was made by OMB on February 24, 
1997, under approval number 2133-0525.

Reduction in Amount Payable

Sec. 295.30 (b)
    Comment: MARAD received three comments which requested that the 30-
day limitation on the number of days a vessel may be drydocked, 
surveyed, inspected or repaired be made more flexible.
    Response. MARAD agrees in part with the commentors regarding the 
30-day limitation. Some legitimate shipyard periods may require a 
greater length of time. However, in its capacity as funds 
administrator, the agency must assess some reasonable time frame for 
work or maintenance to be performed in order to ensure that the program 
is for operating vessels. Therefore, the final rule at 
Sec. 295.30(b)(1) will be revised to permit greater than 30-day periods 
upon approval from MARAD.

Calculation for Partial Months

Sec. 295.31(a)(3) (New)
    After experience gained in the start-up of the MSP in December 1996 
and January 1997, MARAD realized that clarification was required 
regarding billing and payment for partial months. To remedy the 
problems experienced, a new Sec. 295.31(a)(3) was developed. The new 
paragraph provides for potential prorating. The original 
Sec. 295.31(a)(3) has been redesignated Sec. 295.31(a)(4), and 
subsequent material has been redesignated accordingly.

Withholding 10 Percent of Funds Payable Until Final Review of the 
Billing Period

Sec. 295.31(a)(4)
    Comment: MARAD received two comments stating that withholding 10 
percent of funds payable until final review of the billing period 
exceeds the authority of the MSA.
    Response: MARAD disagrees with the commentors that withholding of 
funds exceeds the authority granted by the MSA. Pursuant to 46 App. 
U.S.C. 1114(b), the Secretary, acting through the Administrator by 
delegation, has the authority to adopt all necessary rules and 
regulations to carry out the Act.
    The intent of Sec. 295.31(a)(4) is to provide a readily available 
source for the recapture of funds in the event that

[[Page 37737]]

a Contractor fails to meet the requirements of Sec. 295.21(d). Section 
295.21(d) reflects the language of section 652(b) of the Act, which 
requires that a vessel must be operated in U.S.-foreign, or specified 
mixed foreign and domestic trade, and must remain documented under 46 
U.S.C., Chapter 121. However, MARAD agrees with the commentors that the 
establishment of an across-the-board level of 10 percent would not be 
necessary in all cases under the MSP. Therefore, MARAD will exercise 
its discretion to withhold funds based on a carrier's normal operating 
experience. Section 295.31(a)(4) is being amended accordingly.

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 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 Executive Order 12866 and 
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 is subject to annual appropriations to provide payments 
to the participants of $2.1 million for each Agreement Vessel for each 
fiscal year in which the agreement is in effect. These payments are 
approximately 50 percent less, per vessel, than the average payments 
made under the existing ODS program. A full regulatory evaluation is 
not necessary since this rule only establishes the procedures to 
implement the Act, which imposes conditions for enrollment of vessels 
in the MSP.

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 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 section 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 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; and (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. 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 
recordkeeping requirements, which were approved by OMB (approval number 
2133-0525) under emergency approval authority until February 28, 1997. 
This approval was subsequently extended by OMB for the customary three 
years on February 24, 1997.
    This rule does not impose any unfunded mandates.

List of Subjects in 46 CFR Part 295

    Assistance payments, Maritime carriers, Reporting and recordkeeping 
requirements.

    Accordingly, Part 295 of 46 CFR Chapter II, Subchapter C, is 
revised 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  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.

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

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

[[Page 37738]]

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 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, 
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

[[Page 37739]]

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:
    (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, 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.
    (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

[[Page 37740]]

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 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 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.

[[Page 37741]]

Sec. 295.23  Reporting requirements.

    The Contractor shall submit to the Director, Office of Financial 
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 annual financial 
statement in accordance with 46 CFR 232.6 and the most recent vessel 
operating cost data submitted as part of its Emergency Preparedness 
Agreement.

(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 
$2,100,000 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 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.

    By order of the Maritime Administrator.

    Dated: July 10, 1997.
Joel C. Richard,
Secretary, Maritime Administration.
[FR Doc. 97-18559 Filed 7-14-97; 8:45 am]
BILLING CODE 4910-81-P