[Federal Register Volume 66, Number 99 (Tuesday, May 22, 2001)]
[Notices]
[Pages 28219-28220]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-12837]



[[Page 28219]]

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DEPARTMENT OF TRANSPORTATION

Maritime Administration

[Docket No. MARAD-2001-9705]


F/V DEFENDER--Applicability of Ownership and Control Requirements 
for Fishery Endorsement

AGENCY: Maritime Administration, Department of Transportation.

ACTION: Invitation for public comments on a petition requesting MARAD 
to issue a determination that the ownership and control requirements of 
the American Fisheries Act of 1998 and 46 CFR Part 356 are in conflict 
with an international investment agreement.

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SUMMARY: The Maritime Administration (MARAD, we, our, or us) is 
soliciting public comments on a petition from the owners and mortgagees 
of the vessel Defender--Official Number 554030 (hereinafter the 
``Vessel''). The petition requests that MARAD issue a decision that the 
American Fisheries Act of 1998 (``AFA''), Division C, Title II, 
Subtitle I, Pub. L. 105-277, and our regulations at 46 CFR part 356 (65 
FR 44860 (July 19, 2000)) are in conflict with the U.S.-Japan Treaty 
and Protocol Regarding Friendship, Commerce and Navigation, 206 UNTS 
143, TIAS 2863, 4 UST 2063 (1953) (``U.S.-Japan FCN'' or ``Treaty''). 
The petition is submitted pursuant to 46 CFR 356.53 and 213(g) of AFA, 
which provide that the requirements of the AFA and the implementing 
regulations will not apply to the owners or mortgagees of a U.S.-flag 
vessel documented with a fishery endorsement to the extent that the 
provisions of the AFA conflict with an existing international agreement 
relating to foreign investment to which the United States is a party. 
If MARAD determines that the AFA and MARAD's implementing regulations 
conflict with the U.S.-Japan FCN, the requirements of 46 CFR part 356 
and the AFA will not apply to the extent of the inconsistency. 
Accordingly, interested parties are invited to review the petition and 
to submit their views on this petition and whether there is a conflict 
between the U.S.-Japan FCN and the requirements of both the AFA and 46 
CFR part 356. In addition to receiving the views of interested parties, 
MARAD will consult with other Departments and Agencies within the 
Federal Government that have responsibility or expertise related to the 
interpretation of or application of international investment 
agreements.

DATES: You should submit your comments early enough to ensure that 
Docket Management receives them not later than June 21, 2001.

ADDRESSES: Comments should refer to the docket number that appears at 
the top of this document. Written comments may be submitted by mail to 
the Docket Clerk, U.S. DOT Dockets, Room PL-401, Department of 
Transportation, 400 7th St., SW., Washington, DC 20590-0001. You may 
also send comments electronically via the Internet at http://dms.dot.gov/submit/. All comments will become part of this docket and 
will be available for inspection and copying at the above address 
between 10 a.m. and 5 p.m., E.T., Monday through Friday, except Federal 
Holidays. An electronic version of this document and all documents 
entered into this docket are available on the World Wide Web at http://dms.dot.gov.

FOR FURTHER INFORMATION CONTACT: John T. Marquez, Jr. of the Office of 
Chief Counsel at (202) 366-5320. You may send mail to John T. Marquez, 
Jr., Maritime Administration, Office of Chief Counsel, Room 7228, MAR-
222, 400 Seventh St., SW., Washington, DC 20590-0001 or you may send e-
mail to [email protected].

SUPPLEMENTARY INFORMATION:

Background

    The AFA was enacted in 1998 to give U.S. interests a priority in 
the harvest of U.S.-fishery resources by increasing the requirements 
for U.S. Citizen ownership, control and financing of U.S.-flag vessels 
documented with a fishery endorsement. MARAD was charged with 
promulgating implementing regulations for fishing vessels of 100 feet 
or greater in registered length while the Coast Guard retains 
responsibility for vessels under 100 feet.
    Section 202 of the AFA raises, with some exceptions, the U.S.-
Citizen ownership and control standards for U.S.-flag vessels that are 
documented with a fishery endorsement and operating in U.S.-waters. The 
ownership and control standard was increased from the controlling 
interest standard (greater than 50%) of Sec. 2(b) of Shipping Act, 1916 
(``1916 Act''), as amended, 46 App. U.S.C. 802(b), to the standard 
contained in Sec. 2(c) of the 1916 Act, 46 App. U.S.C. 802(c), which 
requires that 75 percent of the ownership and control in a vessel 
owning entity be vested in U.S. Citizens. In addition, section 204 of 
the AFA repeals the ownership grandfather ``savings provision'' in the 
Anti-Reflagging Act of 1987, Pub. L. 100-239, Sec. 7(b), 101 Stat 1778 
(1988), which permits foreign control of companies owning certain 
fishing vessels.
    Section 202 of the AFA also establishes new requirements to hold a 
preferred mortgage on a vessel with a fishery endorsement. State or 
federally chartered financial institutions must now comply with the 
controlling interest standard of Sec. 2(b) of the 1916 Act in order to 
hold a preferred mortgage on a vessel with a fishery endorsement. 
Entities other than state or federally chartered financial institutions 
must either meet the 75% ownership and control requirements of 
Sec. 2(c) of the 1916 Act or utilize an approved U.S.-Citizen Trustee 
that meets the 75% ownership and control requirements to hold the 
preferred mortgage for the benefit of the non-citizen lender.
    Section 213(g) of the AFA provides that if the new ownership and 
control provisions or the mortgagee provisions are determined to be 
inconsistent with an existing international agreement relating to 
foreign investment to which the United States is a party, such 
provisions of the AFA shall not apply to the owner or mortgagee on 
October 1, 2001, with respect to the particular vessel and to the 
extent of the inconsistency. MARAD's regulations at 46 CFR 356.53 set 
forth a process wherein owners or mortgagees may petition MARAD, with 
respect to a specific vessel, for a determination that the implementing 
regulations are in conflict with an international investment agreement. 
Petitions must be noticed in the Federal Register with a request for 
comments. The Chief Counsel of MARAD, in consultation with other 
Departments and Agencies within the Federal Government that have 
responsibility or expertise related to the interpretation of or 
application of international investment agreements, will review the 
petitions and, absent extenuating circumstances, render a decision 
within 120 days of the receipt of a fully completed petition.

The Petitioners

    F/V Defender, LLC is a Washington limited liability company which 
owns the F/V Defender in its entirety. Its membership is comprised of 
the following five entities: (1) Ohai Fisheries, Inc., (2) Ohai 
Enterprises, Inc., (3) Fram Fisheries, Inc., (4) the Girls, LLC, and 
(5) Lisa Pace, an individual. Each of the entities is owned by U.S. 
Citizens and organized under the laws of the State of Washington or is 
an individual U.S. Citizen. The Petitioner asserts that it meets the 
U.S. Citizen ownership requirements set forth in 46 CFR Part 356 and is 
qualified to document a vessel with a fishery endorsement.

[[Page 28220]]

    Prior to 2001, the Vessel was owned by F/V Defender Limited 
Partnership. The Partnership was owned 49% by Unisea, Inc. Unisea, 
Inc., a Washington corporation, is wholly owned by Nippon Suisan 
Kaisha, Ltd., a Japanese company, and therefore does not qualify as a 
U.S. Citizen under the AFA. In response to the passage of the AFA, 
Unisea sold its interest in F/V Limited Partnership to Ohai 
Enterprises, Inc., one of the members of the F/V Defender, LLC, the 
current vessel owner. To facilitate this sale, a refinancing of the 
Vessel that involved Unisea paying off the original preferred mortgage 
on the vessel was negotiated. Under the refinancing arrangement, Unisea 
now holds a preferred mortgage on the vessel as security for the loan 
that it provided to pay off the original mortgage on the Vessel.
    Unisea no longer has any ownership interest in the Vessel. However, 
Unisea is a fish processing company which has had a history of 
purchasing substantially all of the Vessel's catch. The petition states 
that Unisea and F/V Defender, LLC have entered into a fishing agreement 
which would require F/V Defender, LLC to sell 90% of the vessel's catch 
to Unisea through the year 2009.

The Petition

    This notice provides a summary of the issues presented in the 
petition. The portion of the petition in which the Petitioner describes 
the inconsistencies that it suggests exist between the AFA, MARAD's 
implementing rules and the Japan FCN can be viewed over the internet 
and is available for downloading through either the DOT Docket 
Management System by following the instructions in this notice under 
ADDRESSES or through MARAD's web site at http://www.marad.gov/afa.html.
    In consideration of the financing provided by Unisea, the members 
of F/V Defender, LLC have committed the Vessel to continue to sell 90% 
of its catch to Unisea through 2009. Petitioners believe that the loan 
agreements and the fishing agreement do not convey impermissible 
control to a Non-Citizen; however, 46 U.S.C. 356.45 prohibits a fish 
processor from advancing funds to a vessel owner in return for a 
security interest in the vessel. The vessel owner submits in the 
petition, on behalf of Unisea, the mortgagee of the vessel, that such a 
restriction on holding a security interest in the vessel conflicts with 
Articles V and VII of the Japan FCN as it discriminates on the basis of 
alienage against a Japanese mortgagee's ability to obtain adequate 
security for loans that it has made to the vessel owner.

Requested Action

    The petition requests that the Chief Counsel make a determination 
that the exclusive fishing agreement entered into between F/V Defender, 
LLC and Unisea and the preferred mortgage issued in favor of Unisea may 
remain in force as any restriction on the fishing agreement or the 
preferred mortgage imposed by the AFA or 46 CFR Part 356 would be 
inconsistent with the protections provided to existing investments of 
Unisea as a mortgagee under the Japan-FCN.

    Dated: May 16, 2001.

    By Order of the Maritime Administrator.
Joel Richard,
Secretary, Maritime Administration.
[FR Doc. 01-12837 Filed 5-21-01; 8:45 am]
BILLING CODE 4910-81-P