[Federal Register Volume 63, Number 146 (Thursday, July 30, 1998)]
[Proposed Rules]
[Pages 40690-40691]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-20290]
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DEPARTMENT OF TRANSPORTATION
Maritime Administration
RIN 2133-AB32
[Docket No. MARAD-98-3468]
46 CFR Part 298
Proposed Amendments to the Title XI; Closing Documentation and
Application
AGENCY: Maritime Administration, Department of Transportation.
ACTION: Proposed rule; request for comments.
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SUMMARY: The Maritime Administration (MARAD) is considering changes to
the existing application form used by the agency in evaluating whether
to issue, under Title XI of the Merchant Marine Act, 1936, as amended,
a commitment to guarantee obligations for the construction of vessels
in shipyards located in the United States or for the modernization of
such yards, and the documentation forms used by the agency in closing
such commitments. The purpose of this proposed rule is to solicit
public review and comment of the proposed changes to the application
form and the closing documentation.
DATES: Comments should be submitted on or before August 31, 1998, to
the address listed below.
ADDRESSES: Signed, written comments should refer to the docket number
that appears at the top of this document and must be submitted to the
Docket Clerk, U.S. DOT Dockets, Room PL-401, 400 Seventh Street, SW,
Washington, DC 20590-001. All comments received will be available for
examination at the above address between 10 a.m. and 5 p.m., Monday
through Friday except Federal Holidays. An electronic version of the
new application forms and the closing documents is available from the
persons listed below on computer disk or on the World Wide Web at
http://marad.dot.gov.
FOR FURTHER INFORMATION CONTACT: Richard Lorr, Office of Chief Counsel,
Maritime Administration, MAR-223, Room 7228, 400 Seventh Street, SW,
Washington, DC 20590, telephone 202-366-5168 or fax 202-366-7485 with
respect to the closing documentation, and Jean E. McKeever, Office of
Ship Financing, Maritime Administration, MAR-530, Room 8122, 400
Seventh Street, SW, Washington, DC 20590, telephone 202-366-5744 or fax
202-366-7901 with respect to the application forms.
SUPPLEMENTARY INFORMATION: On February 17, 1998, MARAD issued an
Advance Notice of Proposed Rulemaking (ANPRM) and request for comments
on whether MARAD should amend its existing regulations or alter its
existing administrative practices governing the Title XI application
process, standards for evaluation and approval of applications, and the
process of documentation for closing of commitments to guarantee
obligations. The ANPRM was issued in response to Executive Order 12862
issued by President Clinton which called for agencies to strive for a
``customer-driven government'' that matches or exceeds the best service
available in the private sector.
MARAD requested that its customers, shipyard and shipowner
executives, their lawyers, accountants, investment bankers and other
professionals, who have used or are familiar with the Title XI program,
provide MARAD with their views about how the Title XI program could be
improved. MARAD requested specific comments on several topics including
the following:
1. Whether changes to the current application form (Form MA-163)
are needed and, if so, what specific changes would make the application
process more efficient without eliminating critical information needed
by MARAD;
2. Whether there should be separate application forms for export
vessels, U.S.-flag vessels, and shipyard modernizations, and what
specific information should be requested by each;
3. Whether MARAD should waive the requirement in the application
form for the submission of plans and specifications if a vessel design
has previously been approved by MARAD;
4. Whether MARAD should permit electronic filing of all or a part
of a Title XI application;
5. Whether MARAD should create special closing documentation to
govern shipyard modernization guarantees; and
6. Whether the current closing documentation on a commitment to
guarantee imposes requirements that are unnecessary and redundant, and
what changes should be made to the standard documentation.
The response of commenters to these questions and the actions that
MARAD is proposing are described below. Upon receipt of further public
comment to the proposed application forms and closing documentation,
MARAD will make final changes to the application forms and the
documentation. MARAD is preparing a separate Notice of Proposed
Rulemaking covering any conforming changes with respect to the content
of the application forms and the documentation and the other regulatory
issues that were raised in the ANPRM, but are not addressed herein.
The Application Form
Four commenters addressed the application form and requested that
the agency simplify and streamline the existing form. Five commenters
recommended that there be a separate application form for shipyard
modernizations and four commenters recommended an additional, separate
application form for export vessel projects.
MARAD has responded favorably to most of these recommendations.
MARAD has simplified and reorganized the application, and deleted
questions that were unnecessary or redundant, and clarified questions
that were ambiguous. MARAD is also placing the new application forms on
our home page and is printing the forms on letter-size paper instead of
legal-size paper.
MARAD created a separate application form for shipyard
modernizations, but did not draft a separate application form for
export vessels because the differences between the domestic and the
export applications were not substantial enough to justify the extra
form. However, the proposed vessel application form has a separate
section dealing with export transactions.
MARAD believes that the net result is clearer application forms
which are easier to follow and complete and which will impose a reduced
preparation time on applicants and should allow for a more expedited
processing of applications. MARAD welcomes any further suggestions
commenters have to the two proposed forms.
Plans and Specifications
The four commenters on the issue of approved vessel designs believe
that MARAD should not require the submission of plans and
specifications for vessel designs previously approved by MARAD. MARAD
agrees and the application form has been amended accordingly.
Electronic Filing
Seven commenters responded to this issue. A number of them thought
that electronic filing would raise
[[Page 40691]]
confidentiality concerns, while still others thought that paper filing
is not unduly burdensome. A few commenters said that electronic filing
of non-confidential information should be allowed as a means of
expediting the process. Neither MARAD nor the Department of
Transportation has the current capacity to utilize electronic filing
efficiently or to ensure the confidentiality of information submitted.
The Department is currently working on resolving these issues as part
of its centralized docket system. When such a system is in place, MARAD
will consider offering electronic filing to applicants as an option.
Shipyard Documentation
Five commenters stated that they believed MARAD should create
special documents to govern closings on commitments to guarantee
shipyard modernizations. Most commenters recognized that the
differences between the land transactions involved in shipyard
modernization projects and the maritime transactions involved in vessel
guarantees merited different closing documentation. In addition,
commenters requested that MARAD simplify the documentation. In
response, MARAD has prepared a separate set of closing documents for
shipyard modernizations. A decision was made not to include a land
mortgage since these mortgages vary considerably under local law.
U.S.-Flag and Export Closing Documents
Eight commenters informed us that the existing documents are
redundant, inconsistent with current financing practices, unnecessarily
voluminous and cumbersome, and difficult to understand. They said that
the current documents deter use of the program instead of facilitating
its use. They asked MARAD to streamline its documents to reduce
unnecessary work and legal fees and other expenses and to make the
documentation clearer.
The proposed closing documentation has been rewritten to address
many of these concerns. The proposed documentation for the financing of
vessels and shipyard modernizations has been simplified and rewritten
in plainer English. The length of the vessel documents has been reduced
by about 45% (for an uncomplicated transaction) to about 135 pages from
about 250 pages. Naturally, the size of the documentation will vary
depending on the need for intercreditor agreements, subordination
agreements, corporate guarantees, and other complexities that arise out
of the individual considerations of any specific transaction. Most
importantly, MARAD believes that the proposed revisions to the
documents have been made without sacrificing any of the essential
rights of the government, shipowners, shipyards or other parties.
In response to requests for documents to cover private placements
of obligations without the use of an Indenture Trustee, the agency has
developed an even more compact set of documents to cover guarantees of
direct debt instead of the necessarily more complicated public bond
offerings. These documents eliminate the need for a bond purchase
agreement, a trust indenture, bonds, and an authorization agreement.
They may be especially useful in attracting smaller applications, but
they can be used in larger transactions as well. Depending on the size
of the credit agreement and promissory note negotiated by the bank or
other direct lender, the documentation needed in these nontrustee
transactions could be reduced by about another 40 pages to about 95
pages in their entirety.
By offering the maritime industry and its underwriters and
attorneys the opportunity to use these clearer, more streamlined and
contemporary financial documents, MARAD will make the Title XI program
more attractive to shipowners and shipyards without compromising the
interests of the government. By reducing the burden and cost, MARAD
will carry out its statutory mission more effectively. MARAD welcomes
review of and comments on these documents.
By Order of the Maritime Administrator.
Dated: July 24, 1998.
Joel C. Richard,
Secretary.
[FR Doc. 98-20290 Filed 7-29-98; 8:45 am]
BILLING CODE 4910-81-P