[Federal Register Volume 66, Number 85 (Wednesday, May 2, 2001)]
[Proposed Rules]
[Pages 21902-21907]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-11021]


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DEPARTMENT OF TRANSPORTATION

Coast Guard

46 CFR Part 67

[USCG 2001-8825]
RIN 2115-AG08


Vessel Documentation: Lease-Financing for Vessels Engaged in the 
Coastwise Trade

AGENCY: Coast Guard, DOT.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Coast Guard proposes to amend its regulations on the 
documentation of vessels engaged in the coastwise trade. These 
proposals address statutory amendments eliminating certain barriers to 
seeking foreign financing by lease for U.S.-flag vessels. These 
proposals would clarify the information needed to determine the 
eligibility of a vessel financed in this manner for a coastwise 
endorsement.

DATES: Comments and related material must reach the Docket Management 
Facility on or before July 2, 2001.
    Comments sent to the Office of Management and Budget (OMB) on 
collection of information must reach OMB on or before July 2, 2001.

ADDRESSES: To make sure your comments and related material are not 
entered more than once in the docket, please submit them by only one of 
the following means:
    (1) By mail to the Docket Management Facility (USCG-2001-8825), 
U.S. Department of Transportation, room PL-401, 400 Seventh Street SW., 
Washington, DC 20590-0001.
    (2) By delivery to room PL-401 on the Plaza level of the Nassif 
Building, 400 Seventh Street SW., Washington, DC, between 9 a.m. and 5 
p.m., Monday through Friday, except Federal holidays. The telephone 
number is 202-366-9329.
    (3) By fax to the Docket Management Facility at 202-493-2251.
    (4) Electronically through the Web Site for the Docket Management 
System at http://dms.dot.gov.
    You must also mail comments on collection of information to the 
Office of Information and Regulatory Affairs, Office of Management and 
Budget, 725 17th Street NW., Washington, DC 20503, ATTN: Desk Officer, 
U.S. Coast Guard.
    The Docket Management Facility maintains the public docket for this 
rulemaking. Comments and material received from the public, as well as 
documents mentioned in this preamble as being available in the docket, 
will become part of this docket and will be available for inspection or 
copying at room PL-401 on the Plaza level of the Nassif Building, 400 
Seventh Street SW., Washington, DC, between 9 a.m. and 5 p.m., Monday 
through Friday, except Federal holidays. You may also find this docket 
on the Internet at 
http://dms.dot.gov.

FOR FURTHER INFORMATION CONTACT: If you have questions on this proposed 
rule, call Patricia Williams, Deputy Director, National Vessel 
Documentation Center, Coast Guard, telephone 304-271-2506. If you have 
questions on viewing or submitting material to the docket, call Dorothy 
Beard, Chief, Dockets, Department of Transportation, telephone 202-366-
9329.

SUPPLEMENTARY INFORMATION:

Request for Comments

    We encourage you to participate in this rulemaking by submitting 
comments and related material. If you do so, please include your name 
and address, identify the docket number for this rulemaking (USCG-2001-
8825) indicate the specific section of this document to which each 
comment applies, and give the reason for each comment. You may submit 
your comments and material by mail, hand delivery, fax, or electronic 
means to the Docket Management Facility at the address under ADDRESSES; 
but please submit your comments and material by only one means. If you 
submit them by mail or hand delivery, submit them in an unbound format, 
no larger than 8\1/2\ by 11 inches, suitable for copying and electronic 
filing. If you submit them by mail and would like to know they reached 
the Facility, please enclose a stamped, self-addressed postcard or 
envelope. We will consider all comments and material received during 
the comment period. We may change this proposed rule in view of them.

Public Meeting

    We do not now plan to hold a public meeting. But you may submit a 
request for one to the Docket Management Facility at the address under 
ADDRESSES explaining why one would be beneficial. If we determine that 
one would aid this rulemaking, we will hold one at a time and place 
announced by a later notice in the Federal Register.

[[Page 21903]]

Background and Purpose

    In 1996, Congress amended the vessel documentation laws to promote 
lease financing of vessels engaged in the coastwise trade (section 
1113(d) of Public Law 104-324, the Coast Guard Authorization Act of 
1996) (``the 1996 Act'') (46 U.S.C. 12106(e)). Lease financing has 
become a very common way to finance capital assets in the maritime 
industry. Under lease financing, ownership of the vessel is in the name 
of the lessor, with a demise charter to the charterer of the vessel. (A 
demise or bareboat charter is an agreement in which the charterer 
assumes the responsibility for operating, crewing, and maintaining the 
vessel as if the charterer owned it.) Many vessel operators choose to 
acquire or build vessels through lease financing, instead of the 
traditional mortgage financing, because of possible cost benefits. But, 
until the 1996 Act, operators were prevented from obtaining this 
financing from U.S. companies that are less than 75 per cent U.S. owned 
because the leasing company had to be a U.S. citizen under section 2 of 
the Shipping Act, 1916, (46 U.S.C. app. 802), which requires at least 
75 per cent U.S. ownership. This situation severely restricted the 
source of available capital.
    Under section 1113(d) of the 1996 Act, Congress eliminated this 
technical impediment to vessel financing by adding a new paragraph (e) 
to 46 U.S.C. 12106. Under 46 U.S.C. 12106(e), Congress authorized the 
Secretary of Transportation (since delegated to the Commandant of the 
Coast Guard) to issue coastwise endorsements if (1) the vessel is 
eligible for documentation; (2) the owner, a parent entity of the 
owner, or subsidiary of a parent of the owner is primarily engaged in 
leasing or other financing transactions; (3) the vessel is under a 
demise charter to a person certifying that the person is a U.S. citizen 
for engaging in coastwise trade under section 2 of the Shipping Act, 
1916; and (4) the demise charter is for at least 3 years.
    According to the legislative history for the 1996 Act (see House 
Conference Report No. 104-854; Public Law 104-324, 1996 U.S. Code 
Congressional and Administrative News, p. 4323), Congress intended to 
broaden the sources of capital for owners of U.S. vessels engaged in 
the coastwise trade by creating new lease-financing options. At the 
same time, Congress did not intend to undermine the basic principle of 
U.S. maritime law that vessels operated in domestic trades must be 
built in shipyards in the U.S. and be operated and controlled by U.S. 
citizens, which is vital to U.S. military and economic security. In 
that report, Congress directed the Coast Guard to establish the 
necessary regulations to administer 46 U.S.C. 12106(e), including the 
filing of demise charters for vessels issued a coastwise endorsement 
under that provision.
    The Coast Guard's National Vessel Documentation Center (NVDC) has 
received requests by owners and prospective owners of U.S. vessels 
wanting to avail themselves of the lease-finance provisions under 46 
U.S.C. 12106(e). The NVDC began implementing the new statutory 
provisions on a case-by-case basis. Initially, the NVDC based its 
determinations of eligibility for a coastwise endorsement on (1) a 
letter submitted by the owner or owner's attorney explaining the nature 
of the business relationship and how that relationship satisfied the 
statutory provisions and (2) a copy of the demise charter. However, it 
became clear to the NVDC that verification of the lease-finance 
arrangement and, specifically, of whether the leasing entity was 
``primarily engaged in leasing or other financing transactions,'' could 
not be readily ascertained. The NVDC concluded that the term ``leasing 
or other financing transactions'' in 46 U.S.C. 12106(e) was ambiguous.
    To assist in clarifying the phrase ``leasing or other financing 
transactions,'' the NVDC looked to the Conference Report. On page 4326, 
the report states: ``Section 1113(d) of the Conference substitute adds 
a new subsection (e) to section 12106 which would permit a coastwise 
endorsement for non-U.S. citizen vessel ownership where (1) ownership 
is primarily a financial investment in the vessel without the ability 
and intent to control the vessel's operations by a person not primarily 
engaged in the direct operation or management of vessels and (2) where 
the owner has transferred to a qualified American citizen full 
possession, control and command of the U.S. built vessel in a demise 
charter and the demise charterer is considered the owner pro hac vice 
during the charter term. It is intended that banks, leasing companies, 
or other financial institutions qualify as owners of U.S. flag-vessels 
under this section even if they have a vessel owning and operating 
affiliate so long as the majority of the aggregate revenues of any such 
group are not derived from the operation or management of vessels by 
group members.''
    In light of the Conference Report, the NVDC began requiring 
additional evidence that the arrangement, and all parties to it, meet 
the statutory requirements as envisioned by Congress. Specifically, the 
NVDC began requiring certifications, in the form of affidavits, and 
supporting documentation verifying the following:
    (1) That the entity owning the vessel and seeking the coastwise 
endorsement is a bank, leasing company, or other financial entity 
organized under the laws of the United States or a State.
    (2) That ownership of the vessel is primarily a financial 
investment without the ability and intent to control the vessel's 
operations by an entity not primarily engaged in the direct operation 
or management of vessels.
    (3) That the owner will transfer, to a qualified U.S. citizen under 
46 U.S.C. app. 802, full possession, control, and command of a U.S.-
built vessel through a demise charter for a period of at least 3 years. 
The owner must verify that, for the purposes of the charter, the demise 
charterer is considered the owner during the term of the charter. The 
owner also must submit, to the NVDC, a copy of the charter.
    (4) That the majority of the aggregate revenues of the entity, the 
parent entity, or a subsidiary of the parent entity is not derived from 
the operation or management of vessels.
    (5) That the entity is not primarily engaged in the operation or 
management of commercial foreign-flag vessels used for the carriage of 
cargo unrelated to the vessel's owner or charterer.
    During the year 2000, at least 15 business entities applied for a 
coastwise endorsement under the lease-finance provisions. Only one 
business entity has not been able to certify that they meet the above 
requirements.

Discussion of the Proposed Regulations

    This rulemaking is intended to implement 46 U.S.C. 12106(e) on 
lease-financing. The proposed regulations are based on the current 
practice of the NVDC, as described above.
    In Sec. 67.3, Definitions, the definition of ``person'' would be 
revised and the definitions of new terms used in these amendments 
(``parent,'' ``primarily engaged in leasing or other financing 
transactions,'' and ``subsidiary'') would be added.
    Proposed Sec. 67.20 is new and would set out the requirements for 
qualifying for a coastwise endorsement under lease-financing.
    Proposed Sec. 67.147 is new and would list the items, in addition 
to those in Sec. 67.141, that are needed to apply for a coastwise 
endorsement involving lease-financing.
    Section 67.167, Requirement for exchange of Certificate of

[[Page 21904]]

Documentation, would be revised to identify when a Certificate of 
Documentation with a coastwise endorsement under lease-financing would 
become invalid.
    Proposed Sec. 67.179 is new and would apply to barges in the 
coastwise trade, which are exempt, under Sec. 67.9(c), from the 
requirement that they be documented with a coastwise endorsement. The 
purpose for this requirement is to allow barges that can qualify to 
operate under lease-financing to do so without documentation so that 
they are on the same footing with other coastwise barges. This would 
reduce a potential burden, because there would be no need to obtain 
documents for barges at a cost of $113 or more per vessel, plus the 
cost of preparing the applications for documents.
    We ask for your comments on these proposals and specifically on 
implementing the phrase ``leasing or other financing transactions'' in 
proposed Sec. 67.20(a)(2) and 46 U.S.C. 12106(e)(1)(B).

Regulatory Evaluation

    This proposed rule is not a ``significant regulatory action'' under 
section 3(f) of Executive Order 12866 and does not require an 
assessment of potential costs and benefits under section 6(a)(3) of 
that Order. The Office of Management and Budget has not reviewed it 
under that Order. It is not ``significant'' under the regulatory 
policies and procedures of the Department of Transportation (DOT) (44 
FR 11040, February 26, l979). A draft Regulatory Evaluation under 
paragraph 10e of the regulatory policies and procedures of DOT is 
available in the docket as indicated under ADDRESSES.
    This proposed rule, in Secs. 67.147 and 67.179, would require 
vessel and barge owners and charterers opting to take advantage of the 
lease-financing provisions in 46 U.S.C. 12106(e) to submit certain 
documents to the NVDC. According to Coast Guard's data, there are 87 
business entities that have applied under the lease-finance provisions 
since the passage of the 1996 Act. Therefore, we estimate that the 
number of entities opting to do the same in the future will be 
approximately 30 annually.
    There are no mandatory costs associated with this rulemaking. The 
cost imposed on those who choose to take advantage of lease-financing 
would include the cost of preparing and submitting the required 
documents. Those costs would vary from applicant to applicant and would 
probably be the same both for vessels under proposed Sec. 67.147 and 
barges under proposed Sec. 67.179. For further information on those 
costs, see the section on ``Collection of Information'' in this 
preamble.

Small Entities

    Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we 
considered whether this proposed rule would have a significant economic 
impact on a substantial number of small entities. The term ``small 
entities'' comprises small businesses, not-for-profit organizations 
that are independently owned and operated and are not dominant in their 
fields, and governmental jurisdictions with populations of less than 
50,000.
    The proposed rule would affect vessel owners and charterers who 
choose to take advantage of the lease-financing option. This option 
reduces the burden on owners by allowing them to have access to the 
cheapest financing available anywhere in the world. Under the proposed 
rule, to take advantage of the lease-financing option, the vessel owner 
and charterer must submit affidavits and a copy of their demise charter 
to the NVDC. The estimated cost of preparing and submitting this 
material would be minimal and is discussed further under ``Collection 
of Information'' in this preamble. Companies would tend to choose 
lease-financing only if they expect its costs to be offset by increased 
profits.
    Therefore, the Coast Guard certifies under 5 U.S.C. 605(b) that 
this proposed rule would not have a significant economic impact on a 
substantial number of small entities. If you think that your business, 
organization, or governmental jurisdiction qualifies as a small entity 
and that this rule would have a significant economic impact on it, 
please submit a comment to the Docket Management Facility at the 
address under ADDRESSES. In your comment, explain why you think it 
qualifies and how and to what degree this rule would economically 
affect it.

Assistance for Small Entities

    Under section 213(a) of the Small Business Regulatory Enforcement 
Fairness Act of 1996 (Public Law 104-121), we want to assist small 
entities in understanding this proposed rule so that they can better 
evaluate its effects on them and participate in the rulemaking. If the 
rule would affect your small business, organization, or governmental 
jurisdiction and you have questions concerning its provisions or 
options for compliance, please consult Patricia Williams, Deputy 
Director, National Vessel Documentation Center (NVDC), Coast Guard, 
telephone 304-271-2506.
    Small businesses may send comments on the actions of Federal 
employees who enforce, or otherwise determine compliance with, Federal 
regulations to the Small Business and Agriculture Regulatory 
Enforcement Ombudsman and the Regional Small Business Regulatory 
Fairness Boards. The Ombudsman evaluates these actions annually and 
rates each agency's responsiveness to small business. If you wish to 
comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR 
(1-888-734-3247).

Collection of Information

    This proposed rule would call for a collection of information under 
the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). As defined 
in 5 CFR 1320.3(c), ``collection of information'' comprises reporting, 
recordkeeping, monitoring, posting, labeling, and other, similar 
actions. The title and description of the information collections, a 
description of those who must collect the information, and an estimate 
of the total annual burden follow. The estimate covers the time for 
reviewing instructions, searching existing sources of data, gathering 
and maintaining the data needed, and completing and reviewing the 
collection. This estimate applies to the documents to be submitted 
under proposed Secs. 67.147 and 67.179. This collection would be added 
to the burden estimate under OMB Control Number OMB 2115-0110.
    Title: Vessel Documentation: Lease-Financing for Vessels Engaged in 
the Coastwise Trade.
    Summary of the Collection of Information: This proposed rulemaking 
would add new collection-of-information requirements, in proposed 
Secs. 67.147 and 67.179, for vessel owners and charterers applying to 
engage in the coastwise trade under the lease-financing provisions of 
46 U.S.C. 12106(e). These new requirements would require a change in 
previously approved OMB Collection 2115-0110.
    Need for Information: The Coast Guard needs this information to 
determine whether an entity meets the statutory requirements.
    Proposed Use of Information: The Coast Guard would use this 
information to determine whether an entity meets the statutory 
requirements.
    Number of Respondents: Approximately, 30 entities a year, including 
charter amendments and sub-charters.
    Frequency of Response: Whenever an entity seeks to qualify to 
engage in the coastwise trade under 46 U.S.C. 12106(e), a qualified 
entity amends the

[[Page 21905]]

charter, or the demise charterer sub-charters the vessel by demise 
charter.
    Burden of Response: The burden resulting from this proposed rule 
would arise from the requirements in proposed Secs. 67.147 and 67.179 
that affidavits be prepared and submitted, along with a copy of the 
demise charter, to the NVDC. We estimate that it would take a total of 
12 hours to prepare the affidavits and make the submissions. As for the 
per-hour cost to accomplish this administrative task, we estimate that 
it could be as low as $67 per hour. However, most, if not all, of the 
applicants so far, chose to use law firms to accomplish these tasks, 
even though the proposed rule would not require their use. Hourly cost 
for legal assistance could be substantially higher. To align our 
estimates more closely with industry practice, we used $167 per hour 
for a total of $2004 per application.
    Estimate of Total Annual Burden: The total annual hour burden for 
industry is 12 hours per application  x  $167 per hour (the higher of 
the two figures discussed above)  x  30 applications per year for a 
total of $60,120 per year.
    As required by the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507(d)), we have submitted a copy of this proposed rule to the Office 
of Management and Budget (OMB) for its review of the collection of 
information.
    We ask for public comment on the proposed collection of information 
to help us determine how useful the information is; whether it can help 
us perform our functions better; whether it is readily available 
elsewhere; how accurate our estimate of the burden of collection is; 
how valid our methods for determining burden are; how we can improve 
the quality, usefulness, and clarity of the information; and how we can 
minimize the burden of collection.
    If you submit comments on the collection of information, submit 
them both to OMB and to the Docket Management Facility where indicated 
under ADDRESSES, by the date under DATES.
    You need not respond to a collection of information unless it 
displays a currently valid control number from OMB. Before the 
requirements for this collection of information become effective, we 
will publish notice in the Federal Register of OMB's decision to 
approve, modify, or disapprove the collection.

Federalism

    We have analyzed this proposed rule under Executive Order 13132 and 
have determined that it does not have implications for federalism under 
that order.

Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) 
requires Federal agencies to assess the effects of their regulatory 
actions not specifically required by law. In particular, the Act 
addresses actions that may result in the expenditure by a State, local, 
or tribal government, in the aggregate, or by the private sector of 
$100,000,000 or more in any one year. Though this proposed rule would 
not result in such an expenditure, we do discuss the effects of this 
rule elsewhere in this preamble.

Taking of Private Property

    This proposed rule would not effect a taking of private property or 
otherwise have taking implications under Executive Order 12630, 
Governmental Actions and Interference with Constitutionally Protected 
Property Rights.

Civil Justice Reform

    This proposed rule meets applicable standards in sections 3(a) and 
3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize 
litigation, eliminate ambiguity, and reduce burden.

Protection of Children

    We have analyzed this proposed rule under Executive Order 13045, 
Protection of Children from Environmental Health Risks and Safety 
Risks. This rule is not an economically significant rule and does not 
concern an environmental risk to health or risk to safety that may 
disproportionately affect children.

Environment

    We have considered the environmental impact of this proposed rule 
and concluded that, under figure 2-1, paragraph (34)(d), of Commandant 
Instruction M16475.lC, this rule is categorically excluded from further 
environmental documentation. This proposed rulemaking is administrative 
in nature and identifies the information necessary to apply for a 
coastwise endorsement under 46 U.S.C. 12106(e). A ``Categorical 
Exclusion Determination'' is available in the docket where indicated 
under ADDRESSES.

List of Subjects in 46 CFR Part 67

    Reporting and recordkeeping requirements, Vessels.

    For the reasons discussed in the preamble, the Coast Guard proposes 
to amend 46 CFR part 67 as follows:

PART 67--DOCUMENTATION OF VESSELS

    1. The authority citation for part 67 continues to read as follows:

    Authority: 14 U.S.C. 664; 31 U.S.C. 9701; 42 U.S.C. 9118; 46 
U.S.C. 2103, 2107, 2110, 12106, 12120, 12122; 46 U.S.C. app. 841a, 
876; 49 CFR 1.45, 1.46.

    2. In Sec. 67.3, revise the definition for the term ``person;'' and 
add, in alphabetical order, definitions for the terms ``entity,'' 
``parent,'' ``primarily engaged in leasing or financing,'' and 
``subsidiary'' to read as follows:


Sec. 67.3  Definitions.

* * * * *
    Entity means a corporation; partnership; limited liability 
partnership; limited liability company; association; joint venture; 
trust arrangement; and the government of the United States, a State, or 
a political subdivision of the United States or a State; and includes a 
trustee, beneficiary, receiver, or similar representative of any of 
them.
* * * * *
    Parent means a person that owns or controls more than 50 per cent 
of another entity.
    Person means an individual or an entity.
    Primarily engaged in leasing or other financing transactions means 
that more than 50% of the aggregate revenue of an entity is derived 
from banking or similar financial transactions.
* * * * *
    Subsidiary means any entity more than 50 per cent of which is 
directly or indirectly owned or controlled by another person.
* * * * *
    3. Add Sec. 67.20 to read as follows:


Sec. 67.20  Coastwise endorsement for a vessel that is owned by a 
lease-financing company and is under a demise charter.

    (a) A vessel under a demise charter that is eligible for a 
coastwise endorsement under 46 U.S.C. 12106(e) may receive that 
endorsement if it meets the following:
    (1) The vessel is eligible for documentation under 46 U.S.C. 12102.
    (2) The vessel is considered built in the United States under 
Sec. 67.97 and has not lost coastwise privileges under Sec. 67.19(d).
    (3) The entity that owns the vessel, a parent of that entity, or a 
subsidiary of a parent of that entity is primarily engaged in leasing 
or other financing transactions and not in vessel operations or 
management.
    (4) The majority of the aggregate revenues of the entity that owns 
the

[[Page 21906]]

vessel, a parent of that entity, or a subsidiary of a parent of that 
entity is not derived from the operation or management of one or more 
vessels.
    (5) The entity that owns the vessel, a parent of that entity, or a 
subsidiary of a parent of that entity is not primarily engaged in the 
operation or management of commercial, foreign-flag vessels used for 
the carriage of cargo for parties unrelated to the vessel's owner or 
charterer.
    (6) The vessel is under a demise charter to a person that certifies 
to the Director, National Vessel Documentation Center, that the person 
is a citizen of the United States for engaging in the coastwise trade 
under 46 U.S.C. app. 802.
    (7) The demise charter is for a period of at least 3 years, unless 
a shorter period is authorized by the Director, National Vessel 
Documentation Center, under circumstances such as--
    (i) When the vessel's remaining life would not support a charter of 
3 years; or
    (ii) To preserve the use or possession of the vessel.
    (b) To apply for a coastwise endorsement for a vessel under a 
demise charter, see Sec. 67.147.


Sec. 67.35  [Amended]

    4. In Sec. 67.35, at the end of paragraph (c), add the words ``or 
the vessel qualifies under Sec. 67.20''.
    5. In Sec. 67.36, revise paragraphs (c)(1) and (c)(2) to read as 
follows:


Sec. 67.36  Trust.

* * * * *
    (c) * * *
    (1) It meets the requirements of paragraph (a) of this section and 
at least 75 per cent of the equity interest in the trust is owned by 
citizens; or
    (2) It meets the requirements of Sec. 67.20.
    6. In Sec. 67.39, revise paragraphs (c)(1) and (c)(2) to read as 
follows:


Sec. 67.39  Corporation.

* * * * *
    (c) * * *
    (1) It meets the requirements of paragraph (a) of this section and 
at least 75 per cent of the stock interest in the corporation is owned 
by citizens; or
    (2) It meets the requirements of Sec. 67.20.
* * * * *
    7. Add Sec. 67.147 to read as follows:


Sec. 67.147  Application procedure: Coastwise endorsement for a vessel 
that is owned by a lease-financing company and is under a demise 
charter.

    (a) In addition to the items under Sec. 67.141, the entity owning 
the vessel (other than a barge under Sec. 67.179) and seeking a 
coastwise endorsement under Sec. 67.20 must submit the following to the 
National Vessel Documentation Center:
    (1) A certification, in the form of an affidavit, and supporting 
documentation from an officer of the entity owning the vessel 
certifying the following:
    (i) That the entity owning the vessel is a bank, leasing company, 
or other financial entity organized under the laws of the United States 
or a State.
    (ii) That ownership of the vessel is primarily a financial 
investment without the ability and intent to control the vessel's 
operations and that the entity owning the vessel is not primarily 
engaged in the direct operation or management of the vessel.
    (iii) That the entity owning the vessel will transfer to a 
qualified United States citizen under 46 U.S.C. app. 802 the full 
possession, control, and command of the vessel through a demise charter 
for a period of at least 3 years, unless a shorter period is authorized 
under Sec. 67.20(a)(7). The certification must include a statement that 
the charterer will be deemed to be the owner pro hac vice for the term 
of the charter.
    (iv) That the majority of the aggregate revenues of the entity that 
owns the vessel, a parent of that entity, or a subsidiary of a parent 
of that entity is not derived from the operation or management of one 
or more vessels.
    (v) That the entity that owns the vessel, a parent of that entity, 
or a subsidiary of a parent of that entity is not primarily engaged in 
the operation or management of commercial, foreign-flag vessels used 
for the carriage of cargo unrelated to the vessel's owner or charterer.
    (2) A copy of the charter, which must provide that the charterer is 
deemed to be the owner pro hac vice for the term of the charter.
    (b) The charterer of a vessel under paragraph (a) of this section 
must provide detailed citizenship information in the format of form CG-
1258, Application for Documentation, section G, citizenship. The 
citizenship information may be attached to the form CG-1258 that is 
submitted under Sec. 67.141 and must be signed by, or on behalf of, the 
charterer.
    (c) Whenever a charter under paragraph (a) of this section is 
amended, the vessel owner must file a copy of the amendment with the 
Director, National Vessel Documentation Center, within 10 days after 
the effective date of the amendment.
    (d) Whenever the charterer of a vessel under paragraph (a) of this 
section demise charters the vessel to a sub-charterer--
    (1) The charterer must file a copy of the sub-charter with the 
Director, National Vessel Documentation Center, within 10 days after 
the effective date of the sub-charter; and
    (2) The sub-charterer must provide detailed citizenship information 
in the format of form CG-1258, Application for Documentation, section 
G, citizenship.
    (e) A person that submits a false certification under this section 
is subject to penalty under 46 U.S.C. 12122.
    8. In Sec. 67.167, in paragraph (c)(8), remove the last ``or''; in 
paragraph (c)(9), remove the period and add, in its place, ``; or''; 
and add paragraph (c)(10) to read as follows:


Sec. 67.167  Requirement for exchange of Certificate of Documentation.

* * * * *
    (c) * * *
    (10) For a vessel under 46 U.S.C. 12106(e)--
    (i) The demise charter expires or is transferred to another 
charterer;
    (ii) The citizenship of the charterer or sub-charterer changes to 
the extent that they are no longer qualified for a coastwise 
endorsement;
    (iii) The entity that owns the vessel, a parent of that entity, or 
a subsidiary of a parent of that entity is no longer primarily engaged 
in leasing or other financing transactions;
    (iv) The majority of the aggregate revenues of the entity that owns 
the vessel, a parent of that entity, or a subsidiary of a parent of 
that entity is derived from operation or management of vessels; or
    (v) The entity that owns the vessel, a parent of that entity, or a 
subsidiary of a parent of that entity becomes primarily engaged in 
operation or management of foreign-flag vessels used for the carriage 
of cargo unrelated to the vessel's owner or charterer.
* * * * *
    9. Add Sec. 67.179 to subpart M to read as follows:


Sec. 67.179  Application procedure: Coastwise operation of a barge that 
is owned by a lease-financing company and is under a demise charter.

    (a) The entity owning a barge qualified to engage in coastwise 
trade under the lease-financing provisions of 46 U.S.C. 12106(e) must 
submit the following to the National Vessel Documentation Center:
    (1) A certification, in the form of an affidavit, and supporting 
documentation from an officer of the entity owning the barge certifying 
the following:
    (i) That the entity owning the barge is a bank, leasing company, or 
other financial entity organized under the laws of the United States or 
a State.

[[Page 21907]]

    (ii) That ownership of the barge is primarily a financial 
investment without the ability and intent to control the barge's 
operations by a person not primarily engaged in the direct operation or 
management of the barge.
    (iii) That the entity owning the barge will transfer to a qualified 
United States citizen under 46 U.S.C. app. 802 the full possession, 
control, and command of the U.S.-built barge through a demise charter 
for a period of at least 3 years, unless a shorter period is authorized 
under Sec. 67.20(a)(7). The certification must include a statement that 
the charterer will be deemed to be the owner pro hac vice for term of 
the charter.
    (iv) That the majority of the aggregate revenues of the entity that 
owns the barge, a parent of that entity, or a subsidiary of a parent of 
that entity is not derived from the operation or management of one or 
more vessels.
    (v) That the entity that owns the barge, a parent of that entity, 
or a subsidiary of a parent of that entity is not primarily engaged in 
the operation or management of commercial, foreign-flag vessels used 
for the carriage of cargo for unrelated to the barge's owner or 
charterer.
    (vi) That the barge is qualified to engage in the coastwise trade 
and that it is owned by an entity eligible to own vessels documented 
with a registry endorsement.
    (2) A copy of the charter agreement, which must provide that the 
charterer will be deemed to be the owner pro hac vice.
    (b) The charterer of the barge under paragraph (a) of this section 
must provide detailed citizenship information in the format of form CG-
1258, Application for Documentation, section G, citizenship. The 
citizenship information must be signed by, or on behalf of, the 
charterer.
    (c) Whenever a charter under paragraph (a) of this section is 
amended, the barge owner must file a copy of the amendment with the 
Director, National Vessel Documentation Center, within 10 days after 
the effective date of the amendment.
    (d) Whenever the charterer of a barge under paragraph (a) of this 
section demise charters the barge to a sub-charterer--
    (1) The charterer must file a copy of the sub-charter with the 
Director, National Vessel Documentation Center, within 10 days after 
the effective date of the sub-charter; and
    (2) The sub-charterer must provide detailed citizenship information 
in the format of form CG-1258, Application for Documentation, section 
G, citizenship.
    (e) A person that submits a false certification under this section 
is subject to penalty under 46 U.S.C. 12122.

    Dated: February 13, 2001.
R.C. North,
Rear Admiral, U.S. Coast Guard, Assistant Commandant for Marine Safety 
and Environmental Protection.
[FR Doc. 01-11021 Filed 5-1-01; 8:45 am]
BILLING CODE 4910-15-U