[Federal Register Volume 66, Number 99 (Tuesday, May 22, 2001)]
[Notices]
[Pages 28220-28221]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-12838]


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DEPARTMENT OF TRANSPORTATION

Maritime Administration

[Docket No. MARAD-2001-9670]


Pacific Prince--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 Pacific Prince--Official Number 697280 (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 Sec. 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

[[Page 28221]]

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. Sec. 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

    Pacific Prince, LLC is a Washington limited liability company which 
owns, in its entirety the fishing vessel Pacific Prince. Pacific 
Prince, LLC is owned by two individual U.S. Citizens and meets the U.S. 
Citizen ownership requirements of the AFA. MARAD has not yet determined 
whether Pacific Prince, LLC also complies with the requirement that it 
be controlled by U.S. Citizens.

The Petition

    The Petitioners have filed a consolidated petition for the vessels 
Pacific Prince and Caitlin Ann. The Caitlin Ann has a registered length 
of less than 100 feet and therefore is not directly addressed in this 
notice. However, because the loan agreements, loan guaranties, and 
fishing agreements on the vessels are related, there will be some 
discussion related to both vessels. This notice provides a summary of 
the issues 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.
    The Vessel was purchased by Pacific Prince, LLC from Fishing Vessel 
Pacific Prince General Partnership in early 2000. In order to fund the 
purchase of the Vessel, the owners arranged financing through the U.S. 
Bank National Association (``U.S. Bank''). As part of the buy-out 
transaction, U.S. Bank required a partial guaranty of payment from a 
party with financial strength greater than could be offered by the 
individual U.S. Citizen owners of Pacific Prince, LLC and Caitlin Ann, 
LLC, the owner of the Caitlin Ann. A payment guaranty was obtained from 
Westward Seafoods, Inc. a Washington corporation (``Westward'') which 
is a wholly owned subsidiary of the Maruha Corporation of Japan and not 
a citizen of the United States for the purposes of 46 U.S.C. 12102(c) 
and 46 CFR Part 356. Pursuant to the terms of the guaranty, Westward is 
obligated to make any of the first nine quarterly payments on the 
Pacific Prince loan, if and to the extent that those payments are not 
made when due by Pacific Prince, LLC. In the event that Westward is 
required to make all or part of a payment to U.S. Bank on behalf of 
Pacific Prince, LLC, the payments will be deemed to be a loan by 
Westward to Pacific Prince, LLC, secured by a junior preferred mortgage 
on the Vessel and will be repaid out of excess earnings from the 
operation of the Vessel. Any amount advanced by Westward under the 
guaranty that is not repaid, in full, prior to the maturity of the U.S. 
Bank loan, will become due and payable at that time.
    In consideration of the guaranty provided by Westward, the members 
of Pacific Prince, LLC, and Caitlan Ann, LLC have committed the Pacific 
Prince and Caitlin Ann to continue to sell their catch exclusively to 
Westward for the next four years, as they have in the past, so long as 
they continue to be paid a competitive market price for their fish.

Requested Action

    The petition requests that the Chief Counsel make a determination 
that the exclusive fishing agreement and the guaranty agreement entered 
into between Pacific Prince, LLC, Caitlin Ann, LLC, and Westward may 
remain in force as any restriction on the guaranty or fishing agreement 
imposed by the AFA or 46 CFR part 356 would be inconsistent with the 
protections provided to existing investments of Westward and Maruha 
under the Japan-FCN. Because the rules prohibit a fish processor such 
as Westward from holding a preferred mortgage on a vessel, even through 
a mortgage trustee, the petition also seeks a determination that 
Westward's second preferred mortgage on the Vessels, provided as 
security for any payment made pursuant to the guaranty, does not convey 
impermissible control to a Non-Citizen and should be allowed to remain 
in place as any restrictions on the preferred mortgage would conflict 
with the protections afforded Westward and Maruha as Mortgagees under 
the Japan-FCN.

    Dated: May 16, 2001.

    By Order of the Maritime Administrator.
Joel Richard,
 Secretary, Maritime Administration.
[FR Doc. 01-12838 Filed 5-21-01; 8:45 am]
BILLING CODE 4910-81-P