[Federal Register Volume 67, Number 73 (Tuesday, April 16, 2002)]
[Proposed Rules]
[Pages 18547-18560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-9005]


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DEPARTMENT OF TRANSPORTATION

Maritime Administration

46 CFR Part 356

[Docket No. MARAD-2002-11984]
RIN 2133-AB46


Requirements to Document U.S.-Flag Fishing Industry Vessels of 
100 Feet or Greater in Registered Length and To Hold a Preferred 
Mortgage on Such Vessels

AGENCY: Maritime Administration, Department of Transportation.

ACTION: Notice of proposed rulemaking (``NPRM'').

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SUMMARY: The Maritime Administration (``MARAD, we, our, or us'') is 
soliciting public comments on amendments to its regulations which 
implement the U.S. citizenship requirements set forth in the American 
Fisheries Act of 1998 (``AFA'') for vessels of 100 feet or greater in 
registered length for which a fishery endorsement to the vessel's 
documentation is sought.
    On July 24, 2001, the Congress passed a package of amendments to 
the AFA as section 2202 of the Supplemental Appropriations Act, 2001. 
This NPRM proposes to implement the new statutory requirements for the 
owners of Fishing Vessels, Fish Processing Vessels and Fish Tender 
Vessels of 100 feet or greater in registered length (collectively 
referred to as ``Fishing Industry Vessels''), amend the requirements to 
hold a Preferred Mortgage on such Fishing Industry Vessels, and make 
other minor amendments to the regulations to address issues that arose 
during the early stages of MARAD's implementation of the new AFA 
regulations.

DATES: You should submit your comments early enough to ensure that 
Docket Management receives them not later than June 17, 2002.

ADDRESSES: Comments should refer to docket number MARAD-2002-11984. 
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://dmses.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 other documents entered into this docket are available 
on the World Wide Web at http://dms.dot.gov. A redline/strikeout 
version of the amended regulations that tracks the added and deleted 
text can also be obtained from the docket at http://dms.dot.gov or from 
MARAD's website at http://www.marad.dot.gov/afa.html.

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:

Who May File Comments?

    Anyone may file written comments about proposals made in any 
rulemaking document that requests public comments, including any state 
government agency, any political subdivision of a State, or any 
interested person.

How Do I Prepare and Submit Comments?

    Your comments must be written in English. To ensure that your 
comments are correctly filed in the Docket, please include the docket 
number of this NPRM in your comments.
    We encourage you to write your primary comments in a concise 
fashion. However, you may attach necessary additional documents to your 
comments. There is no limit on the length of the attachments. Please 
submit two copies of your comments, including the attachments, to 
Docket Management at the address given above under

[[Page 18548]]

ADDRESSES. If possible, one copy should be in an unbound format to 
facilitate copying and electronic filing.
    In addition to comments on the proposed rule, we specifically 
request that you address in your comments whether the information 
collection in this proposal is necessary for the agency to properly 
perform its functions and will have practical utility, the accuracy of 
the burden estimates, ways to minimize this burden, and ways to enhance 
quality, utility, and clarity of the information to be collected.

How Can I Be Sure That My Comments Were Received?

    If you want Docket Management to notify you upon its receipt of 
your comments, enclose a self-addressed, stamped postcard in the 
envelope containing your comments. Upon receiving your comments, Docket 
Management will return the postcard by mail. If you send comments by e-
mail, you will receive a message by e-mail confirming receipt of your 
comments. Your e-mail address should be noted with your comments.

Is Information That I Submit to MARAD Made Available to the Public?

    When you submit information to us as part of this NPRM, during any 
rulemaking proceeding, or for any other reason, we may make that 
information publicly available unless you ask that we keep the 
information confidential. If you wish to submit any information under a 
claim of confidentiality, you should submit three copies of your 
complete submission, including the information you claim to be 
confidential business information, to the Chief Counsel, Maritime 
Administration, at the address given above under FOR FURTHER 
INFORMATION CONTACT. You should mark ``CONFIDENTIAL'' on each page of 
the original document that you would like to keep confidential.
    In addition, you should submit two copies, from which you have 
deleted the claimed confidential business information, to Docket 
Management at the address given above under ADDRESSES. When you send 
comments containing information claimed to be confidential business 
information, you should also include a cover letter setting forth with 
specificity the basis for any such claim (for example, it is exempt 
from mandatory public disclosure under the Freedom of Information Act, 
5 U.S.C. 552).
    We will decide whether or not to treat your information as 
confidential. You will be notified in writing of our decision to grant 
or deny confidentiality before the information is publicly disclosed 
and you will be given an opportunity to respond.

How Can I Read the Comments Submitted by Other People?

    You may read the comments received by Docket Management at the 
address and during the hours provided above under ADDRESSES.
    Comments may also be viewed on the Internet. To read the comments 
on the Internet, take the following steps: Go to the Docket Management 
System (``DMS'') Web page of the Department of Transportation (http://dms.dot.gov/). On that page, click on ``search.'' On the next page 
(http://dms.dot.gov/search/), type in the four-digit docket number 
shown on the first page of this document. The docket number for this 
NPRM is 11984. After typing the docket number, click on ``search.'' On 
the next page, which contains docket summary information for the docket 
you selected, click on the desired comments. You may download the 
comments.
    Please note that even after the comment closing date, we will 
continue to file relevant information in the Docket as it becomes 
available. Accordingly, we recommend that you periodically check the 
Docket for new material.

Background

    The AFA imposed new citizenship requirements for both the owners of 
Fishing Industry Vessels of 100 feet or greater in registered length as 
well as entities that hold a Preferred Mortgage on such vessels. The 
AFA raised the U.S. citizen ownership and control standard for U.S.-
flag Fishing Industry Vessels operating in U.S. waters from a 
controlling interest standard (greater than 50%) to a 75 percent 
interest requirement as set forth in section 2(c) of the Shipping Act, 
1916, as amended (``1916 Act''). In addition to the requirements of 
section 2(c) of the 1916 Act, the AFA specifically delineated certain 
criteria for purposes of determining whether ``control'' of the owner 
of a Fishing Industry Vessel is vested in Citizens of the United 
States.
    Section 202(b) of the AFA also imposed new requirements to hold a 
Preferred Mortgage on Fishing Industry Vessels of 100 feet or greater 
by amending the definition of ``Preferred Mortgage'' at 46 U.S.C. 
31322(a)(4) with respect to such vessels. Section 31322(a)(4) of Title 
46, United States Code, as amended by the AFA on October 21, 1998, 
defined a Preferred Mortgage with respect to a Fishing Industry Vessel 
of 100 feet or greater as one that is held by a mortgagee that: (1) Is 
a person that meets the 75% U.S. citizen ownership and control standard 
for fishing industry vessels under 46 U.S.C. 12102(c); (2) is a state 
or federally chartered financial institution that satisfies the 
controlling interest criteria of section 2(b) of the Shipping Act, 
1916, 46 U.S.C. 802(b); or (c) is a person that complies with the 
mortgage trustee provisions of 46 U.S.C. 12102(c)(4).
    As the effective date of the AFA approached, it became apparent 
that many traditional lenders in the fishing industry were having 
problems either complying with or demonstrating that they complied with 
the new standards to hold a Preferred Mortgage; therefore, Congress 
amended the requirements to broaden the category of lenders that will 
qualify to hold a Preferred Mortgage on Fishing Industry Vessels of 100 
feet or greater and to limit the extent to which a demonstration of 
U.S. Citizenship would be required.
    Section 2202(b) of the Supplemental Appropriations Act, 2001, 
Public Law 107-20, amended the definition of ``Preferred Mortgage'' at 
46 U.S.C. 31322(a)(4) with respect to Fishing Industry Vessels of 100 
feet or greater. As amended, 46 U.S.C. 31322(a)(4), defines a Preferred 
Mortgage with respect to such vessels as a mortgage that has as its 
Mortgagee:
    (1) A person eligible to own a vessel with a fishery endorsement 
under 46 U.S.C. 12102(c);
    (2) A state or federally chartered financial institution that is 
insured by the Federal Deposit Insurance Corporation;
    (3) A farm credit lender established under title 12, chapter 23, of 
the United States Code [12 U.S.C. 2001 et seq.];
    (4) A commercial fishing and agriculture bank established pursuant 
to State law;
    (5) A commercial lender organized under the laws of the United 
States or of a State and eligible to own a vessel under 46 U.S.C. 
12102(a) of this title; or
    (6) A Mortgage Trustee that complies with the requirements of 46 
U.S.C. 31322(f). In addition, the amendments to the AFA defined the 
terms ``commercial lender'' and ``lending syndicate'' and relocated the 
Mortgage Trustee provisions from 46 U.S.C. 12102(c)(4) to 46 U.S.C. 
31322(f).
    In order to ensure that MARAD would have time to implement new 
regulations related to the eligibility of lenders to hold a Preferred 
Mortgage on Fishing Industry Vessels and the extent to which they could 
exercise control over vessel owners through loan or mortgage covenants, 
Congress delayed the effective date of 46 U.S.C. 31322(a), as amended 
by section 202(b) of the AFA and section 2202 of the Supplemental

[[Page 18549]]

Appropriations Act, 2001, until April 1, 2003, and directed MARAD, in 
determining whether a vessel owner complies with the requirements of 
section 46 U.S.C. 12102(c), not to consider the citizenship status of a 
lender, in its capacity as a lender with respect to that vessel owner, 
until after April 1, 2003. Accordingly, we have not reviewed loan 
transactions in determining whether a vessel owner will qualify as a 
U.S. Citizen and will not begin to consider loan or mortgage 
transactions in our analysis until April 1, 2003, when the new 
requirements become effective.
    Finally, section 2202(e) of the Supplemental Appropriations Act, 
2001, included changes to section 213(g) of the AFA. As originally 
enacted, section 213(g) of the AFA stated that if the requirements of 
46 U.S.C. 12102(c) or 46 U.S.C. 31322(a), as amended by the AFA, were 
determined to be inconsistent with the provisions of an international 
investment agreement to which the United States was a party with 
respect to the owner or mortgagee of a fishing industry vessel on 
October 1, 2001, the requirements of the AFA would not apply to the 
owner or mortgagee of that specific vessel to the extent of the 
inconsistency. Congress amended section 213(g) of the AFA to change the 
date upon which an ownership or mortgage interest was required to be in 
place in order for an owner or mortgagee to claim the protection of an 
international investment agreement. The date was changed from October 
1, 2001, to July 24, 2001.

Discussion of Proposed Rule

Section 356.3  Definitions

    Three new terms are being added to the definitions in Sec. 356.3. 
The new terms are ``Commercial Lender,'' ``Fishing Industry Vessel,'' 
and ``Lender Syndicate.'' The definitions of ``Commercial Lender'' and 
``Lender Syndicate'' mirror the definitions provided by Congress in 
sections 2202(g) and (h), respectively, of the Supplemental 
Appropriations Act, 2001. The term ``Fishing Industry Vessel'' is a new 
term that is being added to the regulation to refer to a Fishing 
Vessel, Fish Tender Vessel or Fish Processing Vessel as defined in 
Sec. 356.3.
    Paragraph (3) under the definition of ``Controlling Interest'' has 
been deleted because a state or federally chartered financial 
institution no longer has to qualify as a U.S. Citizen under the 
controlling interest standard in order to hold a Preferred Mortgage on 
a Fishing Industry Vessel.
    The definition of the term ``Mortgage Trustee'' has been amended by 
removing the requirement in paragraph (2) that a Mortgage Trustee 
qualify as a U.S. Citizen and replacing that paragraph with language 
requiring the Mortgage Trustee to be eligible to hold a Preferred 
Mortgage pursuant to 46 CFR 356.19(a)(1)-(4). This change implements 
the broader range of parties that are now eligible to serve as a 
Mortgage Trustee.
    The term ``Preferred Mortgage'' is amended to track the definition 
of 46 U.S.C. 31322(a)(4), as amended. The paragraphs under Sec. 356.3 
have been renumbered to incorporate the new definitions that have been 
added to the section.
    The second sentence in the definition of ``Non-Citizen'' has been 
deleted because there is no longer any special citizenship status for a 
state or federally chartered financial institution that satisfies the 
controlling interest requirements of section 2(b) of the Shipping Act, 
1916. Finally, the definition of ``Trust'' is amended to conform the 
definition of a mortgage trust to the new requirements for Mortgage 
Trustees.

Section 356.5  Affidavit of U.S. Citizenship

    Paragraph 356.5(d) provides the form of the Affidavit of U.S. 
Citizenship to be used by a corporation. The form is amended to add a 
new paragraph 6 which indicates that the vessel owner has submitted the 
documents required by 46 CFR 356.13 of MARAD's regulations. The 
existing paragraph 6 is renumbered as paragraph 7. The inclusion of 
this new paragraph in the Affidavit of U.S. Citizenship was deemed to 
be necessary to help insure that vessel owners have reviewed the 
requirements and have submitted the required documentation.

Section 356.7  Methods of Establishing Ownership by United States 
Citizens

    Paragraph 356.7(c)(1)(ii) has been amended by removing the language 
that applies the fair inference method to state or federally chartered 
financial institution that is acting as a Mortgage. The amendments to 
the American Fisheries Act deleted this standard to qualify as a 
Preferred Mortgagee.

Section 356.11  Impermissible Control by a Non-Citizen

    Paragraph 356.11(a)(7) has been amended to make it clear that an 
entity that has not been approved as a U.S. Citizen, but which is 
eligible to hold a Preferred Mortgage pursuant to 46 CFR 356.19(a)(2)-
(5), may exercise mortgage or loan covenants to cause the sale of a 
Fishing Industry Vessel. Similarly, a Mortgage Trustee that is 
qualified to hold a Preferred Mortgage pursuant to 46 CFR 356.19(a)(2)-
(5) may exercise mortgage or loan covenants for a Non-Citizen or an 
entity that does not qualify under 46 CFR 356.19(a)(2)-(5), provided 
that the Citizenship Approval Officer has approved the use of such loan 
or mortgage covenants.

Section 356.13  Information Required To Be Submitted by Vessel Owners

    Section 356.13(a) has been amended by clarifying in paragraph (5) 
that financing documents will only be required from entities that have 
not been approved to hold a Preferred Mortgage on Fishing Industry 
Vessels or that have not received general approval for their loan 
documents pursuant to 46 CFR 356.21.
    A new element has also been added to the list of material that 
vessel owners are required to submit with their Affidavit of U.S. 
Citizenship. The new requirement is a certification for vessels that 
exceed 165 feet in registered length or 750 tons or that have engines 
capable of producing more than 3,000 horsepower. The vessel owner must 
provide a statement indicating whether such vessels meet certain 
requirements set forth in Sec. 356.47 in order to be eligible for 
documentation with a fishery endorsement. While this information can be 
obtained by researching Coast Guard files on specific vessels, it was 
determined that we would not be able to research the information in a 
timely manner for all of the vessels that are subject to these new 
restrictions. Therefore, the vessel owner will be required to certify 
that the vessel is eligible for documentation pursuant to one of the 
exceptions in Sec. 356.47.

Section 356.15  Filing of Affidavit of U.S. Citizenship

    Section 356.15 has been amended by deleting sections 356.15(a), 
(b), and (c) that dealt with filing requirements prior to October 1, 
2001. It is no longer necessary to maintain these requirements in the 
regulations now that the October 1, 2001, date has passed. The 
remaining paragraphs have been reordered in order to present the 
requirements for filing an Affidavit of U.S. Citizenship in a logical 
order.
    A more significant amendment to Sec. 356.15 is the addition of a 
new paragraph (d) that allows vessel owners or prospective vessel 
owners to request a letter ruling to determine whether a

[[Page 18550]]

proposed ownership structure will meet the requirements of the 
regulations and allow the owner to document a vessel with a fishery 
endorsement. In the preamble to the final regulations (65 FR 44860, 
44865-66 (July 19, 2000)), we stated that we would issue letter rulings 
for vessel owners prior to June 1, 2001, but that we did not plan to 
issue letter rulings after October 1, 2001, because letter rulings 
necessarily involve hypothetical transactions and can absorb an 
inordinate amount of time and resources. While we continue to be 
concerned about the burden on limited resources that may be presented 
by requests for letter rulings, we recognize that the ability to obtain 
a letter ruling before a transaction is finalized is extremely useful 
to vessel owners and other parties that are required to qualify as U.S. 
Citizens. Therefore, we have amended the regulations to indicate that 
we will continue to issue letter rulings after October 1, 2001, to 
vessel owners and other entities that are required to qualify as U.S. 
Citizens under these regulations. If the process of issuing letter 
rulings becomes too burdensome, it may be necessary to reconsider this 
position in the future.

Section 356.17  Annual Requirements for Vessel Owners

    Section 356.17 is amended by deleting the requirement that owners 
of multiple Fishing Industry Vessels file a certification prior to the 
renewal date for the certificate of documentation for each vessel. 
Therefore, a vessel owner will be allowed to file one consolidated 
Affidavit of U.S. Citizenship on an annual basis for all of its Fishing 
Industry Vessels. The Affidavit must be filed in conjunction with first 
certificate of documentation renewal for one of the owner's Fishing 
Industry Vessels in a calendar year. Although the vessel owner is not 
required to file a separate certification before the documentation 
renewal date for each vessel, the vessel owner is still required to 
notify the Citizenship Approval Officer during the course of the year 
if there are any changes with respect to the information submitted for 
particular vessels.

Section 356.19  Requirements to hold a Preferred Mortgage

    Section 2202(b) of the Supplemental Appropriations Act, 2001, 
amended 46 U.S.C. 31322(a)(4) by deleting the definition of a Preferred 
Mortgage for Fishing Industry Vessels of 100 feet or greater where the 
mortgagee is a state or federally chartered financial institution that 
meets the controlling interest requirement of the 1916 Act, and by 
expanding the definition of Preferred Mortgage for such vessels by 
increasing the universe of entities that can act as the mortgagee. 
Accordingly, Sec. 356.19 has been amended by deleting the requirements 
to hold a Preferred Mortgage in Secs. 356.19(a)(2) through (d) and by 
adding new language to incorporate the new entities that will qualify 
to hold a Preferred Mortgage. The list of entities that will now 
qualify to hold a Preferred Mortgage includes: (1) Citizens of the 
United States who are eligible under 46 U.S.C. 12102(c) to own a vessel 
with a fishery endorsement; (2) state or federally chartered financial 
institutions that are insured by the Federal Deposit Insurance 
Corporation; (3) farm credit lenders established under title 12, 
chapter 23, of the United States Code [12 U.S.C. 2001 et seq.]; (4) 
commercial fishing and agriculture banks established pursuant to State 
law; (5) Commercial Lenders organized under the laws of the United 
States or of a State and eligible to own a vessel under 46 U.S.C. 
12102(a); and (6) Mortgage Trustees that comply with the requirements 
of 46 U.S.C. 31322(f) and 46 CFR 356.27-356.31.
    A new paragraph (b) has been added to the section to describe the 
information that the various entities must submit to the Citizenship 
Approval Officer so that a determination can be made as to whether the 
entities are qualified to hold a Preferred Mortgage on a Fishing 
Industry Vessel. A new paragraph (c) requires the certification for 
each entity to be submitted on an annual basis for as long as the 
entity holds a Preferred Mortgage on a Fishing Industry Vessel.
    A new paragraph (d) was also added to make clear that an entity, 
other than a Mortgage Trustee, that is eligible to hold a Preferred 
Mortgage on a Fishing Industry Vessel may exercise rights and covenants 
under loan or mortgage agreements and is not required to obtain 
approval from MARAD. However, an entity that has not been determined by 
the Citizenship Approval Officer to be a U.S. Citizen that is eligible 
to own a Fishing Industry Vessel may not operate such a vessel except 
as authorized in 46 CFR 356.25. The ability of a Mortgage Trustee that 
holds a Preferred Mortgage on a Fishing Industry Vessel to exercise 
loan or mortgage covenants is addressed separately under Sec. 356.27.

Section 356.21  General Approval of Non-Citizen Lender's Standard Loan 
or Mortgage Agreements

    Section 356.21 has been amended to allow lenders that are not able 
to hold a Preferred Mortgage directly to get approval of the standard 
loan or mortgage agreements that they will use in conjunction with a 
Mortgage Trustee. This approval was available before for ``Non-Citizen 
Lenders;'' however, the amendments to the AFA have created a class of 
lenders that may or may not qualify as U.S. Citizens, but who are 
nevertheless eligible to hold a Preferred Mortgage directly and to 
exercise loan and mortgage covenants without requiring approval from 
MARAD. Accordingly, the term ``Non-Citizen Lender'' is replaced with 
the term ``lender'' throughout the section, and we have made it clear 
that the approval of standard loan and mortgage covenants is available 
to those entities that are not eligible to hold a Preferred Mortgage 
directly.
    Finally, we have also amended paragraph (d) by deleting the penalty 
imposed on the owner of a fishing industry vessel if a lender uses loan 
or mortgage covenants that were not approved by the Citizenship 
Approval Officer. Instead, we have added language to indicate that the 
Citizenship Approval Officer may determine that the transaction results 
in an impermissible transfer of control to a Non-Citizen and that 
therefore, the arrangement does not satisfy the requirements to qualify 
as a Preferred Mortgage. Furthermore, the lender will lose its general 
approval and will be required to obtain approval of its loan and 
mortgage covenants on a case-by-case basis in the future.

Section 356.23  Restrictive Loan Covenants Approved for Use by Lenders

    Section 356.23 has been amended by deleting the term ``Non-Citizen 
Lender'' in the title and the body of the section and substituting the 
term ``lenders'' in its place. As noted above, the amendments to the 
AFA have created a class of lenders that may or may not qualify as U.S. 
Citizens, but who are nevertheless eligible to hold a Preferred 
Mortgage directly and to exercise restrictive loan and mortgage 
covenants without requiring approval from MARAD. Accordingly, the term 
``lender'' has been substituted for ``Non-Citizen Lender'' throughout 
the section because the approval of these restrictive loan covenants is 
not required for all ``Non-Citizen Lenders'' but rather only for those 
who do not meet the requirements to hold a Preferred Mortgage directly.

Section 356.27  Mortgage Trustee Requirements

    The Mortgage Trustee requirements were amended to delete references 
to a requirement that the Mortgage Trustee demonstrate that it 
qualifies as a U.S. Citizen because Mortgage Trustees are

[[Page 18551]]

no longer required to qualify as a U.S. Citizen if they otherwise meet 
one of the requirements of 46 U.S.C. 31322(a)(4)(A)-(E). Where 
references to proving citizenship were included in Sec. 356.27, we have 
substituted a requirement that the Mortgage Trustee supply the 
appropriate information to demonstrate that it complies with the 
requirements of 46 CFR 356.19(b)(1)-(5) to be eligible to hold a 
Preferred Mortgage on Fishing Industry Vessels.
    A new paragraph (4) was also added to the Trustee Application which 
requires the Mortgage Trustee to agree to furnish the Citizenship 
Approval Officer with copies of the Trust Agreement as well as any 
other issuance, assignment or transfer of an interest related to the 
transaction if the beneficiary under the trust arrangement is not a 
Commercial Lender, a Lender Syndicate or an entity eligible to hold a 
Preferred Mortgage under 46 CFR 356.19(a)(1)-(5). This submission is 
necessary so that the Citizenship Approval Officer can make a 
determination that the trust arrangement does not result in an 
impermissible transfer of control.

Section 356.31  Maintenance of Mortgage Trustee Approval

    Section 356.31 was amended by deleting the requirement in paragraph 
(a)(1) that a Mortgage Trustee provide an Affidavit of U.S. Citizenship 
on an annual basis. A Mortgage Trustee is no longer required to qualify 
as a U.S. Citizen, provided that it is otherwise qualified to hold a 
Preferred Mortgage on a Fishing Industry Vessel. Accordingly, Mortgage 
Trustees will be required to submit the appropriate documentation 
required under Sec. 356.19(b)(1)-(5) to demonstrate that they are 
qualified to hold a Preferred Mortgage on Fishing Industry Vessels.

Section 356.45  Advance of Funds

    Section 356.45(a)(2)(iv) does not currently allow Non-Citizens to 
advance funds to a vessel owner and to obtain a security interest in 
property of the vessel owner to secure the debt. Because Non-Citizens 
will now be allowed to utilize a Mortgage Trustee to hold a Preferred 
Mortgage on a vessel for the benefit of the Non-Citizen Lender, we 
propose to amend Sec. 356.45(a)(2)(iv) by inserting language at the end 
that would allow a Non-Citizen to advance funds to a vessel owner and 
to have a security interest in the vessel or other collateral, provided 
that the Non-Citizen uses a qualified Mortgage Trustee to hold the 
mortgage and debt instrument for the benefit of the Non-Citizen.

Section 356.47  Special Requirements for Large Vessels

    Section 356.47 implements special requirements for certain large 
vessels. Vessels that exceed 165 feet in registered length or 750 gross 
tons or that have engines capable of producing in excess of 3000 
horsepower are ineligible for documentation with a fishery endorsement 
pursuant to 46 U.S.C. 12102(c)(5), as redesignated by section 
2202(a)(2) of the Supplemental Appropriations Act, 2001. A vessel that 
meets any of the above criteria can be exempted from the prohibition on 
obtaining a fishery endorsement if it meets all of the following 
requirements: (1) A certificate of documentation was issued for the 
vessel and endorsed with a fishery endorsement that was effective on 
September 25, 1997; (2) the vessel is not placed under foreign registry 
after October 21, 1998; and (3) in the event of the invalidation of the 
fishery endorsement after October 21, 1998, application is made for a 
new fishery endorsement within 15 business days of the invalidation.
    There are a number of events that can render a vessel's 
documentation and fishery endorsement immediately invalid under Coast 
Guard regulations. If one of these events occurs, such as the death of 
one of the tenants in a tenancy by the entirety ownership arrangement, 
and the owner does not apply for a new fishery endorsement within 15 
business days, the vessel could potentially suffer a permanent loss of 
its eligibility to be documented with a fishery endorsement. Because of 
the harsh result that could occur if one of these events occurred and 
the vessel owner did not address the issue within the prescribed time 
period, MARAD's regulations state that the 15 day period will not begin 
to run until the vessel owner receives written notification from MARAD 
or the Coast Guard identifying the reason for such invalidation. In 
other words, the vessel's fishery endorsement will not be deemed 
invalid for purposes of complying with Sec. 356.47(b)(3) until notice 
is given. This requirement ensures that a vessel owner is aware of the 
consequences of failing to apply for a new fishery endorsement within 
the specified period of time in the event of an invalidation.
    We believe that the sale in bankruptcy of a Fishing Industry Vessel 
that meets the criteria of paragraph 356.47(a) can also lead to an 
unintended and harsh result if the vessel is purchased by a Mortgagee 
that is not qualified to own a vessel with a fishery endorsement. A 
Mortgagee is permitted under 46 U.S.C. 31329 to purchase a vessel on 
which it holds a Preferred Mortgage, even though the Mortgagee may not 
be qualified to own a documented vessel. The Coast Guard's regulations 
at 46 CFR 67.161 provide that such a sale to a Mortgagee is not deemed 
to be a foreign sale or to invalidate the vessel's documentation for 
purposes of complying with certain specified statutory provisions; 
however, the endorsement on the vessel is not deemed to remain valid. 
Therefore, as a practical matter, a Mortgagee that is not qualified to 
own a Fishing Industry Vessel is restricted from purchasing such a 
vessel on which it holds a mortgage and subsequently holding the vessel 
for resale to a qualified buyer, as permitted by 46 U.S.C. 31329(b), 
because the vessel would lose its eligibility to be documented with a 
fishery endorsement if an application for a new fishery endorsement is 
not submitted within 15 business days by a qualified owner. 
Consequently, a Mortgagee would be deprived of using a statutorily 
permitted means of protecting the value of its collateral by purchasing 
the vessel and subsequently selling the vessel to a qualified buyer. 
Furthermore, this could adversely impact the ability of vessel owners 
to obtain financing from entities that are eligible to hold a Preferred 
Mortgage on Fishing Industry Vessels, but which are not eligible to own 
Fishing Industry Vessels. Accordingly, we have amended 
Sec. 356.47(b)(3) to clarify that a Fishing Industry Vessel's fishery 
endorsement will not be deemed invalid for purposes of complying with 
this paragraph, if the vessel is purchased pursuant to 46 U.S.C. 31329 
by a Mortgagee that is not eligible to own a vessel with a fishery 
endorsement, provided that the Mortgagee is eligible to hold a 
Preferred Mortgage on such vessel at the time of the purchase.
    We also propose to amend Sec. 356.47 by adding a new paragraph (e) 
that will require the owners of vessels that are greater than 165 feet 
in registered length or 750 gross tons or that have engines capable of 
producing in excess of 3,000 shaft horsepower to submit with their 
annual Affidavit of U.S. Citizenship a certification that the vessel is 
eligible to be documented with a fishery endorsement because it 
complies with Sec. 356.47(b), (c) or (d) of these regulations. While 
this information can be obtained by researching Coast Guard files on 
specific vessels, we have determined that we would not be able to 
research the information in a timely manner for all of the vessels that 
are subject to these new restrictions. Therefore, the vessel owner will 
be required to certify that the vessel is

[[Page 18552]]

eligible for documentation pursuant to one of the exceptions in 
Sec. 356.47.

Sec. 356.51  Exemptions for Specific Vessels

    Paragraph (a) states that certain vessels will be exempt from the 
requirements of 46 U.S.C. 12102(c) ``until such time as 50% of the 
interest owned and controlled in the vessel changes.'' We added the 
phrase ``after October 1, 2001,'' after ``such time'' in paragraph (a) 
in order to clarify that the ownership structure on October 1, 2001, is 
the baseline from which we will measure any change in ownership of a 
vessel that is exempt from the requirements of 46 U.S.C. 12102(c) 
pursuant to this section.
    In addition, there were several technical amendments to Sec. 356.51 
to correct typographical errors in the final regulation. The Official 
Number for the vessel EXCELLENCE was corrected in Sec. 356.51(a)(1) and 
(c). Section 356.51(e) was deleted and a reworded version of the 
section was inserted as a new paragraph (d).
    The current paragraph (d) relates to the exemption from the 
ownership and control requirements for Fishing Industry Vessels engaged 
in fisheries in the exclusive economic zone under the authority of the 
Western Pacific Fishery Management Council and for purse seine vessels 
that are engaged in tuna fishing in the Pacific Ocean outside of the 
exclusive economic zone of the United States or pursuant to the South 
Pacific Regional Fisheries Treaty. Such vessels are exempted, pursuant 
to 46 U.S.C. 12102(c)(4), as redesignated by section 2202 of the 
Supplemental Appropriations Act, 2001, from complying with the new 
ownership and control requirements of the AFA. Our current regulations 
exempt the vessels from the requirement to meet the higher ownership 
and control standard of the AFA; however, the regulations require the 
owners of such vessels to file an Affidavit of U.S. Citizenship with 
MARAD to demonstrate that the vessel complies with the ownership and 
control standard that existed prior to the passage of the AFA. Because 
many of these vessels and the vessel owners are located in remote 
areas, the requirement to file an Affidavit of U.S. Citizenship with 
MARAD has proven to be a difficult requirement for many vessel owners 
to satisfy. Furthermore, upon further consideration, we have determined 
that the intent of the statutory exemption was to allow the owners of 
such vessels to forgo the requirement to file an Affidavit of U.S. 
Citizenship with MARAD. Accordingly, we are proposing to delete the 
requirement to file an Affidavit of U.S. Citizenship with MARAD, and we 
are adding a new paragraph (f) that will require the vessel owner to 
notify both MARAD's Citizenship Approval Officer and the Coast Guard's 
National Vessel Documentation Center that it is claiming the exemption 
available to the vessel under 46 CFR 356.51(e). Vessel owners will then 
be required to follow the Coast Guard's regulatory procedures that were 
in effect prior to the passage of the AFA to document the vessel with a 
fishery endorsement.

Section 356.53  Conflicts With International Agreements

    Section 213(g) of the AFA states that if the requirements of 46 
U.S.C. 12102(c) or 46 U.S.C. 31322(a), as amended by the AFA, are 
determined to be inconsistent with the provisions of an international 
investment agreement to which the United States was a party with 
respect to the owner or mortgagee of a fishing industry vessel on 
October 1, 2001, the requirements of the AFA will not apply to the 
owner or mortgagee of that specific vessel to the extent of the 
inconsistency. Section 2202(e) of the Supplemental Appropriations Act, 
2001, amends section 213(g) of the AFA to change the date upon which an 
ownership or mortgage interest must be in place in order for an owner 
or mortgagee to claim the protection of an international investment 
agreement. The date was changed from October 1, 2001, to July 24, 2001. 
Accordingly, we have amended Sec. 356.53 by substituting the July 24, 
2001 date for ``October 1, 2001'' and ``September 30, 2001'' where 
those dates appear in the section.
    We propose to amend paragraph (d) to give the Chief Counsel the 
discretion as to whether a petition under this section should be 
published in the Federal Register. The decision as to whether a 
petition should be published in the Federal Register will hinge on 
whether the petition contains new and unique arguments on which the 
Chief Counsel believes that the public should be given an opportunity 
to comment. Because of the expense and time involved in publishing 
these petitions in the Federal Register and the fact that no comments 
were received in response to any of the petitions that were published 
in the last year, we determined that it would be best to provide 
discretion to the Chief Counsel to determine whether a petition 
warrants publication and public comment.
    The proposed amendments also include the deletion of paragraph 
(b)(5), which addresses the timing of submissions prior to October 1, 
2001. This section is no longer necessary now that October 1, 2001, has 
passed.
    Finally, section 213(g) of the AFA provides that a vessel owner is 
not subject to the requirements of the AFA to the extent that those 
requirements are found to be inconsistent with an international 
agreement relating to foreign investment to which the United States is 
a party with respect to the vessel owner. However, section 213(g) also 
states that the requirements of the AFA shall apply to the owner if any 
ownership interest in the vessel owner is transferred to or otherwise 
acquired by a foreign individual or entity after July 24, 2001. This 
requirement is incorporated in the regulations in paragraph (g)(2). 
Paragraph (g)(2) states that we will consider a ``transfer of ownership 
interest'' to be a transfer of interest in the primary vessel owner. We 
believe that our original regulatory interpretation of what constitutes 
a transfer of ownership interest is too narrow and should be defined 
more broadly in the regulation. Accordingly, we propose to delete 
paragraph (g)(2) and to replace it with new paragraphs (g)(2)-(4).
    As amended, paragraph (g)(2) will broaden our interpretation of 
what constitutes a transfer of ownership interest from merely a 
transfer of interest in the primary vessel owning entity, to both: (1) 
A transfer of direct ownership interest in the primary vessel owning 
entity; and (2) a transfer of an indirect ownership interest at any 
tier where such transfer would result in a transfer of 5% or more of 
the interest in the primary vessel owning company. Furthermore, the 
proposed paragraph (g)(2) clarifies that a vessel owner can not 
circumvent these requirements by creating additional ownership layers. 
Accordingly, if the primary vessel owning entity is wholly owned by 
another entity, we will consider the parent entity to be the primary 
vessel owner.

Rulemaking Analysis and Notices

Executive Order 12866 and DOT Regulatory Policies and Procedures

    We have reviewed this NPRM under Executive Order 12866 and have 
determined that this is not a significant regulatory action. 
Additionally, this NPRM is not likely to result in an annual effect on 
the economy of $100 million or more. The purpose of this NPRM is: to 
implement amendments to the requirements to hold a Preferred Mortgage 
on Fishing Industry Vessels of 100 feet or greater in registered 
length; to implement statutory changes to section 213(g) of the AFA, 
which allows

[[Page 18553]]

vessel owners and mortgagees to petition MARAD for a determination that 
the AFA does not apply to them because it is inconsistent with an 
international investment agreement; and to make other technical changes 
and revisions to MARAD's regulations regarding the ownership and 
control of Fishing Industry Vessels by U.S. Citizens.
    This NPRM is also not significant under the Regulatory Policies and 
Procedures of the Department of Transportation (44 FR 11034, February 
26, 1979). The costs and benefits associated with this rulemaking are 
so minimal that no further analysis is necessary. Because the economic 
impact should be minimal, further regulatory evaluation is not 
necessary.

Federalism

    We analyzed this rulemaking in accordance with the principles and 
criteria contained in E.O. 13132 (``Federalism'') and have determined 
that it does not have sufficient federalism implications to warrant the 
preparation of a federalism summary impact statement. The regulations 
have no substantial effects on the States, or on the current Federal-
State relationship, or on the current distribution of power and 
responsibilities among the various local officials. Therefore, 
consultation with State and local officials was not necessary.

Regulatory Flexibility Act

    This rulemaking will not have a significant economic impact on a 
substantial number of small entities. The proposed regulations relating 
to vessel owners are of a technical nature that will not result in a 
significant economic impact. Furthermore, this NPRM will make it easier 
for owners of Fishing Industry Vessels to obtain financing for their 
vessels by expanding the universe of lenders that are eligible to hold 
a Preferred Mortgage on a Fishing Industry Vessel as security for a 
loan. Therefore, we certify that this NPRM will not have a significant 
economic impact on a substantial number of small business entities.

Environmental Impact Statement

    We have analyzed this NPRM for purposes of compliance with the 
National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) and 
have concluded that under the categorical exclusions provision in 
section 4.05 of Maritime Administrative Order (``MAO'') 600-1, 
``Procedures for Considering Environmental Impacts,'' 50 FR 11606 
(March 22, 1985), the preparation of an Environmental Assessment, and 
an Environmental Impact Statement, or a Finding of No Significant 
Impact for this rulemaking is not required. This rulemaking involves 
administrative and procedural regulations which clearly have no 
environmental impact.

Paperwork Reduction Act

    The Office of Management and Budget (``OMB'') previously reviewed 
the information collection requirements under 46 CFR part 356 and 
assigned OMB control number 2133-0530. This NPRM establishes a new 
requirement for the collection of information. OMB will be requested to 
review and approve the information collection requirements under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501, et. seq.). We request 
that commenters address in their comments whether the information 
collection in this proposal is necessary for the agency to properly 
perform its functions and will have practical utility, the accuracy of 
the burden estimates, ways to minimize this burden, and ways to enhance 
quality, utility, and clarity of the information to be collected.
    In accordance with the Paperwork Reduction Act, this notice 
announces MARAD's intentions to request an amendment to its approval 
for the subject information collection to allow processing of 
applications to determine the eligibility of owners of vessels of 100 
feet or greater in registered length to obtain a fishery endorsement to 
the vessel's documentation, to determine the eligibility of lending 
institutions to hold a Preferred Mortgage on a Fishing Vessel, a Fish 
Processing Vessel, or a Fish Tender Vessel of 100 feet or greater in 
registered length and to determine the eligibility of Mortgage Trustees 
to hold a Preferred Mortgage on such vessels for the benefit of a Non-
Citizen Lender. Copies of this request may be obtained from the Office 
of Chief Counsel at the address given above under ADDRESSES.
    Title of Collection: [Eligibility of U.S.-Flag Vessels of 100 Feet 
or Greater In Registered Length to Obtain a Fishery Endorsement to the 
Vessel's Documentation] 46 CFR part 356.
    Type of Request: Modification of existing information collection.
    OMB Control Number: 2133-0530.
    Form Number: None.
    Expiration Date of Approval: Three years following approval by OMB.
    Summary of the Collection of Information: Owners of vessels of 100 
feet or greater in registered length who wish to obtain a fishery 
endorsement to the vessel's documentation are currently required to 
file an Affidavit of United States Citizenship demonstrating that they 
comply with the requirements of section 2(c) of the 1916 Act, 46 App. 
U.S.C. 802(c) and with the requirements of 46 U.S.C. 12102(c). Other 
documentation that must be submitted with the Affidavit includes a copy 
of the Articles of Incorporation, Bylaws or other comparable documents, 
a description of any management agreements entered into with Non-
Citizens, a certification that any management contracts with Non-
Citizens do not convey control in a Fishing Vessel, Fish Processing 
Vessel, or Fish Tender Vessel to a Non-Citizen, and a copy of any time 
charters or voyage charters with Non-Citizens.
    Mortgagees who plan to finance vessels of 100 feet or greater in 
registered length that have a fishery endorsement or for which a 
fishery endorsement to the vessel's documentation is sought must submit 
a certification to demonstrate that they meet the statutory definition 
of a ``Preferred Mortgagee'' at 46 U.S.C. 31322(a)(4). Prior to this 
rulemaking a Preferred Mortgagee was required to submit an Affidavit of 
United States Citizenship to demonstrate that it complies with the 
United States Citizen ownership and control requirements of section 
2(c) of the 1916 Act, 46 App. U.S.C. 802(c), or in the case of a state 
or federally chartered financial institution, the Controlling Interest 
requirements of section 2(b) of the 1916 Act. If a Mortgagee does not 
comply with the definition of a ``Preferred Mortgagee,'' it must use a 
Mortgage Trustee that qualifies as a Citizen of the United States to 
hold the Preferred Mortgage for the benefit of the Non-Citizen Lender. 
The Mortgage Trustee must file an application for approval as a 
Mortgage Trustee that includes evidence that it is eligible to hold a 
Preferred Mortgage and that it complies with the requirements of 46 
U.S.C. 31322. In addition to the Affidavit of United States 
Citizenship, corporations and other entities must submit documents 
which demonstrate that the entity is organized and existing under the 
laws of the United States, such as Articles of Incorporation and 
Bylaws, or other comparable documents. Annually, owners of vessels, 
mortgagees and applicable mortgage trustees must submit prescribed 
citizenship information to MARAD's Citizenship Approval Officer.
    Need and Use of the Information: The information collection will be 
used to verify statutory compliance with the United States Citizen 
ownership and control requirements under section 2(b) and section 2(c) 
of the 1916 Act and 46

[[Page 18554]]

U.S.C. 12102(c) for owners, charterers, Mortgagees, and Mortgage 
Trustees of vessels of 100 feet or greater in registered length for 
which a fishery endorsement to the vessel's documentation is being 
sought. The information collection is being modified to require owners 
of vessels that are greater than 165 feet or 750 gross tons or that 
have engines capable of producing more than 3000 horsepower to submit a 
certification indicating that the vessel was documented with a fishery 
endorsement on September 25, 1997 and that the fishery endorsement has 
remained valid, therefore the vessel is eligible for continued 
documentation with a fishery endorsement. In addition, rather than 
demonstrate that they meet specific U.S. Citizenship standards, 
Preferred Mortgagees will now be required to submit information to 
demonstrate that they comply with the new statutory definition of a 
Preferred Mortgagee at 46 U.S.C. 31322(a)(4). Without the information 
it would be impossible to know whether certain vessels are eligible for 
documentation with a fishery endorsement and whether a Preferred 
Mortgagee is eligible to hold a Preferred Mortgage on a Fishing 
Industry Vessel. This amendment to the collection of information does 
not result in an increased burden, but it does result in a change in 
the type of information that is being collected.
    Description of Respondents: Owners, Bareboat Charterers, 
Mortgagees, and Mortgage Trustees of vessels of 100 feet or greater in 
registered length for which a fishery endorsement to the Vessel's 
documentation is being sought.
    Annual Responses: Responses will be required on an occasional and 
an annual basis. Updates will be required during the year if there are 
changes to the ownership or financing of the vessel. There are 
approximately 550 vessels and 400 vessel owners that are subject to 
this regulation. Approximately 450 responses are expected from owners 
and bareboat charterers and less than 50 responses are expected from 
Mortgagees and Mortgage Trustees.
    Annual Burden: 1000 hours.

Unfunded Mandates Reform Act of 1995

    This proposed rule would not impose an unfunded mandate under the 
Unfunded Mandates Reform Act of 1995. It would not result in costs of 
$100 million or more, in the aggregate, to any of the following: State, 
local, or Native American tribal governments, or the private sector. 
This proposed rule is the least burdensome alternative that achieves 
the objective of the rule.

Regulatory Identification Number (RIN)

    The Department of Transportation assigns a regulation identifier 
number (RIN) to each regulatory action listed in the Unified Agenda of 
Federal Regulations. The Regulatory Information Service Center 
publishes the Unified Agenda in April and October of each year. The RIN 
number is contained in the heading of this document to cross-reference 
this action with the Unified Agenda.

List of Subjects in 46 CFR Part 356

    Citizenship, Fishery endorsement, Fishing industry vessels, Fishing 
vessels, International investment agreements, Mortgages, Mortgage 
trustee, Preferred mortgages.

    Accordingly, we propose to amend 46 CFR part 356 as follows:

PART 356--REQUIREMENTS FOR VESSELS OF 100 FEET OR GREATER IN 
REGISTERED LENGTH TO OBTAIN A FISHERY ENDORSEMENT TO THE VESSEL'S 
DOCUMENTATION

    1. The authority citation for part 356 is revised to read as 
follows:

    Authority: 46 App. U.S.C. 12102; 46 App. U.S.C. 31322; Public 
Law 105-277, Division C, Title II, Subtitle I, section 203 (46 App. 
U.S.C. 12102 note), section 210(e), and section 213(g), 112 Stat. 
2681; Public Law 107-20, section 2202, 115 Stat. 168-170; 49 CFR 
1.66.

Subpart A--General Provisions


Sec. 356.3  [Amended]

    2. Section 356.3 is amended as follows:
    a. Paragraphs (g) and (h) are redesignated as paragraphs (h) and 
(i).
    b. Paragraphs (i) through (k) are redesignated as paragraphs (k) 
through (m).
    c. Paragraphs (l) through (x) are redesignated as paragraphs (o) 
through (aa).
    d. Paragraph (e)(2) and newly designated paragraphs (h)(2), (u) and 
(y)(2) are revised.
    e. New paragraphs (g), (j), and (n) are added.
    f. In newly designated paragraph (q), paragraph (q)(2) is removed, 
paragraph (q)(3) is redesignated as paragraph (q)(2), and new paragraph 
(q)(3) is added.
    g. In newly designated paragraphs (p) and (q), add the word 
``Fishing'' following the word ``Industry'' .
    h. In newly designated paragraph (s), remove the second sentence.
    The additions and revisions read as follows:


Sec. 356.3  Definitions.

* * * * *
    (e) * * *
    (2) Other criteria that must be met by entities other than 
individuals include:
    (i) In the case of a corporation:
    (A) The chief executive officer, by whatever title, and chairman of 
the board of directors and all officers authorized to act in the 
absence or disability of such persons must be Citizens of the United 
States; and
    (B) No more of its directors than a minority of the number 
necessary to constitute a quorum are Non-Citizens;
    (ii) In the case of a partnership all general partners are Citizens 
of the United States;
    (iii) In the case of an association:
    (A) All of the members are Citizens of the United States;
    (B) The chief executive officer, by whatever title, and the 
chairman of the board of directors (or equivalent committee or body) 
and all officers authorized to act in their absence or disability are 
Citizens of the United States; and,
    (C) No more than a minority of the number of its directors, or 
equivalent, necessary to constitute a quorum are Non-Citizens;
    (iv) In the case of a joint venture:
    (A) It is not determined by the Citizenship Approval Officer to be 
in effect an association or a partnership; and,
    (B) Each co-venturer is a Citizen of the United States;
    (v) In the case of a Trust that owns a Fishing Vessel, Fish 
Processing Vessel, or Fish Tender Vessel:
    (A) The Trust is domiciled in the United States or a State;
    (B) The Trustee is a Citizen of the United States; and
    (C) All beneficiaries of the trust are persons eligible to document 
vessels pursuant to the requirements of 46 U.S.C. 12102;
    (vi) In the case of a Limited Liability Company (LLC) that is not 
found to be in effect a general partnership requiring all of the 
general partners to be Citizens of the United States:
    (A) Any Person elected to manage the LLC or who is authorized to 
bind the LLC, and any Person who holds a position equivalent to a Chief 
Executive Officer, by whatever title, and the Chairman of the Board of 
Directors in a corporation are Citizens of the United States; and,
    (B) Non-Citizens do not have authority within a management group, 
whether through veto power, combined voting, or otherwise, to exercise 
control over the LLC.
* * * * *

[[Page 18555]]

    (g) Commercial Lender means an entity that is primarily engaged in 
the business of lending and other financing transactions and that has a 
loan portfolio in excess of $100,000,000, of which not more than 50 per 
centum in dollar amount consists of loans to borrowers in the 
commercial fishing industry, as certified by the Commercial Lender to 
the Citizenship Approval Officer.
* * * * *
    (h) * * *
    (2) Other criteria that must be met by entities other than an 
individual include:
    (i) In the case of a corporation:
    (A) The Chief Executive Officer, by whatever title, and the 
Chairman of the Board of Directors (or equivalent committee or body) 
and all officers authorized to act in their absence or disability are 
Citizens of the United States; and,
    (B) No more than a minority of the number of its directors, or 
equivalent, necessary to constitute a quorum are Non-Citizens;
    (ii) In the case of a partnership all general partners are Citizens 
of the United States;
    (iii) In the case of an association:
    (A) The Chief Executive Officer, by whatever title, and the 
Chairman of the Board of Directors (or equivalent committee or body) 
and all officers authorized to act in their absence or disability are 
Citizens of the United States; and,
    (B) No more than a minority of the number of its directors, or 
equivalent, necessary to constitute a quorum are Non-Citizens;
    (iv) In the case of a joint venture:
    (A) It is not determined by the Citizenship Approval Officer to be 
in effect an association or partnership; and
    (B) A majority of the equity is owned by and vested in Citizens of 
the United States free and clear of any trust or fiduciary obligation 
in favor of any Non-Citizen;
    (v) In the case of a Limited Liability Company (LLC) that is not 
found to be in effect a general partnership requiring all of the 
general partners to be Citizens of the United States:
    (A) Any Person elected to manage the LLC or who is authorized to 
bind the LLC, and any Person who holds a position equivalent to the 
Chief Executive Officer, by whatever title, and the Chairman of the 
Board of Directors in a corporation and any Persons authorized to act 
in their absence are Citizens of the United States; and,
    (B) Non-Citizens do not have authority within a management group, 
whether through veto power, combined voting, or otherwise, to exercise 
control over the LLC;
* * * * *
    (j) Fishing Industry Vessel means a Fishing Vessel, Fish Processing 
Vessel, or Fish Tender Vessel;
* * * * *
    (n) Lender Syndicate means an arrangement established for the 
combined extension of credit of not less than $20,000,000 made up of 
four or more entities that each have a beneficial interest, held 
through an agent, under a trust arrangement established pursuant to 
paragraph 46 U.S.C. 31322(f), no one of which may exercise powers 
thereunder without the concurrence of at least one other unaffiliated 
beneficiary.
* * * * *
    (s) Non-Citizen Lender means a lender that does not qualify as a 
Citizen of the United States.
* * * * *
    (u) Preferred Mortgage means a mortgage on a Fishing Industry 
Vessel that has as the Mortgagee:
    (1) A person eligible to own a vessel with a fishery endorsement 
under 46 U.S.C. 12102(c);
    (2) A state or federally chartered financial institution that is 
insured by the Federal Deposit Insurance Corporation;
    (3) A farm credit lender established under title 12, chapter 23, of 
the United States Code [12 U.S.C. 2001 et seq.];
    (4) A commercial fishing and agriculture bank established pursuant 
to State law;
    (5) A commercial lender organized under the laws of the United 
States or of a State and eligible to own a vessel under 46 U.S.C. 
12102(a); or
    (6) A Mortgage Trustee that complies with the requirements of 46 
U.S.C. 31322(f) and 46 CFR 356.27-356.31.
* * * * *
    (y) * * *
    (2) In the case of a mortgage trust, a trust that is domiciled in 
and existing under the laws of the United States, or of a State, that 
has as its trustee a Mortgage Trustee as defined in Sec. 356.3, and 
that is authorized to act on behalf of a beneficiary in accordance with 
the requirements of Secs. 356.27-356.31.
* * * * *

Subpart B--Ownership and Control

    3. In Sec. 356.5, revise paragraph (d) to read as follows:


Sec. 356.5  Affidavit of U.S. Citizenship.

* * * * *
    (d) The prescribed form of the Affidavit of U.S. Citizenship is as 
follows:

    State of ______ County of ______ Social Security Number: 
__________I, ______ (Name) of ______ (Residence address) being duly 
sworn, depose and say:
    1. That I am the ______ (Title of office(s) held) of ______, 
(Name of corporation) a corporation organized and existing under the 
laws of the State of ______ (hereinafter called the 
``Corporation''), with offices at ______, (Business address) in 
evidence of which incorporation a certified copy of the Articles or 
Certificate of Incorporation (or Association) is filed herewith (or 
has been filed) together with a certified copy of the corporate 
Bylaws. [Evidence of continuing U.S. citizenship status, including 
amendments to said Articles or Certificate and Bylaws, should be 
filed within 45 days of the annual documentation renewal date for 
vessel owners. Other parties required to provide evidence of U.S. 
citizenship status must file within 30 days after the annual meeting 
of the stockholders or annually, within 30 days after the original 
affidavit if there has been no meeting of the stockholders prior to 
that time.];
    2. That I am authorized by and in behalf of the Corporation to 
execute and deliver this Affidavit of U.S. Citizenship;
    3. That the names of the Chief Executive Officer, by whatever 
title, the Chairman of the Board of Directors, all Vice Presidents 
or other individuals who are authorized to act in the absence or 
disability of the Chief Executive Officer or Chairman of the Board 
of Directors, and the Directors of the Corporation are as 
follows:\1\
---------------------------------------------------------------------------

    \1\ Offices that are currently vacant should be noted when 
listing Officers and Directors in the affidavit.

----------------------------------------------------------------------
Name  Title  Date and Place of Birth

----------------------------------------------------------------------
----------------------------------------------------------------------

(The foregoing list should include the officers, whether or not they 
are also directors, and all directors, whether or not they are also 
officers.) Each of said individuals is a Citizen of the United 
States by virtue of birth in the United States, birth abroad of U.S. 
citizen parents, by naturalization, by naturalization during 
minority through the naturalization of a parent, by marriage (if a 
woman) to a U.S. citizen prior to September 22, 1922, or as 
otherwise authorized by law, except (give name and nationality of 
all Non-Citizen officers and directors, if any). The By-laws of the 
Corporation provide that ______ (Number) of the directors are 
necessary to constitute a quorum; therefore, the Non-Citizen 
directors named represent no more than a minority of the number 
necessary to constitute a quorum.
    4. Information as to stock, where Corporation has 30 or more 
stockholders:\2\
---------------------------------------------------------------------------

    \2\ Strike inapplicable paragraph 4.
---------------------------------------------------------------------------

    That I have access to the stock books and records of the 
Corporation; that said stock books and records have been examined 
and disclose (a) that, as of ______, (Date) the Corporation had 
issued and outstanding

[[Page 18556]]

______ (Number) shares of ______, (Class) the only class of stock of 
the Corporation issued and outstanding [if such is the case], owned 
of record by ______ (Number) stockholders, said number of 
stockholders representing the ownership of the entire issued and 
outstanding stock of the Corporation, and (b) that no stockholder 
owned of record as of said date five per centum (5%) or more of the 
issued and outstanding stock of the Corporation of any class. [If 
different classes of stock exist, give the same information for each 
class issued and outstanding, showing the monetary value and voting 
rights per share in each class. If there is an exception to the 
statement in clause (b), the name, address, and citizenship of the 
stockholder and the amount and class of stock owned should be stated 
and the required citizenship information on such stockholder must be 
submitted.] That the registered addresses of ______ owners of record 
of ______ shares of the issued and outstanding ______ (Class) stock 
of the Corporation are shown on the stock books and records of the 
Corporation as being within the United States, said ______ shares 
being ______ per centum (______%) of the total number of shares of 
said stock (each class). [The exact figure as disclosed by the stock 
books of the corporation must be given and the per centum figure 
must not be less than 65 per centum for a corporation that must 
satisfy the controlling interest requirements of section 2(b) of the 
Shipping Act, 1916, 46 App. U.S.C. Sec. 802(b), or not less than 95 
per centum for an entity that is demonstrating ownership in a vessel 
for which a fishery endorsement is sought. These per centum figures 
apply to corporate stockholders as well as to the primary 
corporation. The same statement should be made with reference to 
each class of stock, if there is more than one class.]
    4. Information as to stock, where Corporation has less than 30 
stockholders: That the information as to stock ownership, upon which 
the Corporation relies to establish that 75% of the stock ownership 
is vested in Citizens of the United States, is as follows:

----------------------------------------------------------------------
Name of Stockholder
----------------------------------------------------------------------
Number of shares owned (each class)
----------------------------------------------------------------------
Percentage of shares owned (each class)
----------------------------------------------------------------------

and that each of said individual stockholders is a Citizen of the 
United States by virtue of birth in the United States, birth abroad 
of U.S. citizen parents, by naturalization during minority through 
the naturalization of a parent, by marriage (if a woman) to a U.S. 
citizen prior to September 22, 1922, or as otherwise authorized by 
law. [Note: If a corporate stockholder, give information with 
respect to State of incorporation, the names of the officers, 
directors, and stockholders and the appropriate percentage of shares 
held, with statement that they are all U.S. citizens. Nominee 
holders of record of 5% or more of any class of stock and the 
beneficial owners thereof should be named and their U.S. citizenship 
information submitted to MARAD.]
    5. That 75% of the interest in (each) said Corporation, as 
established by the information hereinbefore set forth, is owned by 
Citizens of the United States; that the title to 75% of the stock of 
(each) class of the stock of (each) said Corporation is vested in 
Citizens of the United States free from any trust or fiduciary 
obligation in favor of any person not a Citizen of the United 
States; that such proportion of the voting power of (each) said 
Corporation is vested in Citizens of the United States; that through 
no contract or understanding is it so arranged that more than 25% 
the voting power of (each) said Corporation may be exercised, 
directly or indirectly, in behalf of any person who is not a Citizen 
of the United States; and that by no means whatsoever, is any 
interest in said Corporation in excess of 25% conferred upon or 
permitted to be exercised by any person who is not a Citizen of the 
United States; and \3\
---------------------------------------------------------------------------

    \3\ Strike inapplicable paragraph 5.
---------------------------------------------------------------------------

    [Note: An entity that is required to comply with the controlling 
interest requirements of section 2(b) of the Shipping Act, 1916, 46 
App. U.S.C. 802(b), should use the following alternate paragraph (5) 
and strike the inapplicable paragraph (5).]
    5. That the Controlling Interest in (each) said Corporation, as 
established by the information hereinbefore set forth, is owned by 
Citizens of the United States; that the title to a majority of the 
stock of (each) said Corporation is vested in Citizens of the United 
States free from any trust or fiduciary obligation in favor of any 
person not a Citizen of the United States; that such proportion of 
the voting power of (each) said Corporation is vested in Citizens of 
the United States; that through no contract or understanding is it 
so arranged that the majority of the voting power of (each) said 
Corporation may be exercised, directly or indirectly, in behalf of 
any person who is not a Citizen of the United States; and that by no 
means whatsoever, is control of (each) said Corporation conferred 
upon or permitted to be exercised by any person who is not a Citizen 
of the United States; and
    6. That the affiant has submitted all of the necessary 
documentation required under 46 CFR 356.13 in connection with this 
Affidavit of U.S. Citizenship for the vessels herein identified.
    Vessel Name      Official Number
    1.__________       __________
    2.__________       __________
    [Note: Paragraph 7 should be included in the Affidavit of U.S. 
Citizenship submitted by an entity that is listed as the owner on 
the Certificate of Documentation for a Fishing Industry Vessel.]
    7. That affiant has carefully examined this affidavit and 
asserts that all of the statements and representations contained 
therein are true to the best of his knowledge, information, and 
belief.
----------------------------------------------------------------------
----------------------------------------------------------------------
(Name and title of affiant)
______________      ____________________
(Signature of affiant)          Date
Penalty for False Statement: A fine or imprisonment, or both, are 
provided for violation of the proscriptions contained in 18 U.S.C. 
1001 (see also, 18 U.S.C. 286, 287).
* * * * *


Sec. 356.7  [Amended]

    4. Section 356.7(c)(1)(ii) is amended by removing ``in the case of 
a state or federally chartered financial institution acting as a 
Mortgagee''.


Sec. 356.11  [Amended]

    5. Section 356.11(a)(7) is amended as follows:
    a. By removing ``through approved loan covenants where there is a 
Preferred Mortgage on the vessel''; and
    b. By inserting after the word ``than'' the following: ``by an 
entity that is eligible to hold a Preferred Mortgage on the vessel 
pursuant to Sec. 356.19(a)(2) through (5); by an approved Mortgage 
Trustee that meets the requirements of Sec. 356.19(a)(2) through (5) 
and that is exercising loan or mortgage covenants on behalf of a 
beneficiary that does not qualify as a U.S. Citizen or that does not 
satisfy the requirements of Sec. 356.19(a)(2) through (5), provided 
that the loan or mortgage covenants have been approved by the 
Citizenship Approval Officer;''.

Subpart C--Requirement for Vessel Owners


Sec. 356.13  [Amended]

    6. Section 356.13 is amended as follows:
    a. By removing the word ``and'' at the end of paragraph (a)(11);
    b. By removing the period at the end of paragraph (a)(12) and 
inserting in lieu thereof a semicolon followed by the word ``and'';
    c. By revising paragraph (a)(5); and
    d. By adding a new paragraph (a)(13).
    The additions read as follows:


Sec. 356.13  Information required to be submitted by vessel owners.

    (a) * * *
    (5) Any loan agreements or other financing documents applicable to 
a Fishing Industry Vessel where the lender has not been approved by 
MARAD to hold a Preferred Mortgage on Fishing Industry Vessels, 
excepting standard loan documents that have received general approval 
from the Citizenship Approval Officer pursuant to Sec. 356.21 for use 
with an approved Mortgage Trustee.
* * * * *
    (13) A copy of the Large Vessel Certification required by 
Sec. 356.47.
* * * * *
    7. Section 356.15 is amended as follows:
    a. By removing paragraphs (a), (b), and (c);
    b. By redesignating paragraphs (e) and (f) as paragraphs (a) and 
(b);
    c. By redesignating paragraph (d) as paragraph (c) and by removing 
the

[[Page 18557]]

words ``will necessarily'' from the third sentence and inserting in 
lieu thereof the word ``may''; and
    d. By adding a new paragraph (d) to read as follows:


Sec. 356.15  Filing of affidavit of U.S. Citizenship.

* * * * *
    (d) The owner of Fishing Industry Vessel or a prospective owner of 
such a vessel may request a letter ruling from the Citizenship Approval 
Officer in order to determine whether the owner under a proposed 
ownership structure will qualify as a U.S. Citizen that is eligible to 
document the vessel with a fishery endorsement. A complete request for 
a letter ruling must be accompanied by an Affidavit of U.S. Citizenship 
and all other documentation required by Sec. 356.13. The Citizenship 
Approval Officer will issue a letter ruling based on the ownership 
structure that is proposed; however, the Citizenship Approval Officer 
reserves the right to reverse the determination if any of the elements 
of the ownership structure, contractual arrangements, or other material 
relationships are altered when the vessel owner submits the executed 
Affidavits and supporting documentation.


Sec. 356.17  [Amended]

    8. Section 356.17 is amended in paragraph (b) as follows:
    a. By removing the word ``only'' in the first sentence and the 
entirety of the third sentence; and
    b. By removing the word ``vessels'' after ``multiple'' in the 
second sentence and inserting in lieu thereof the term ``Fishing 
Industry Vessels''.

Subpart D--Mortgages

    9. Section 356.19 is revised to read as follows:


Sec. 356.19  Requirements to hold a Preferred Mortgage.

    (a) In order for a Mortgagee to be eligible to obtain a Preferred 
Mortgage on a Fishing Vessel, Fish Processing Vessel, or Fish Tender 
Vessel, it must be:
    (1) A Citizen of the United States;
    (2) A state or federally chartered financial institution that is 
insured by the Federal Deposit Insurance Corporation;
    (3) A farm credit lender established under title 12, chapter 23, of 
the United States Code [12 U.S.C. 2001 et seq.];
    (4) A commercial fishing and agriculture bank established pursuant 
to State law;
    (5) A commercial lender organized under the laws of the United 
States or of a State and eligible to own a vessel under 46 U.S.C. 
12102(a); or
    (6) A Mortgage Trustee that complies with the requirements of 46 
U.S.C. 31322(f) and 46 CFR 356.27 through 356.31.
    (b) A Mortgagee must demonstrate to the Citizenship Approval 
Officer that it satisfies one of the requirements set forth in 
Sec. 356.19(a) before it will qualify to hold a Preferred Mortgage on a 
Fishing Industry Vessel. The required information that must be 
submitted in order to make such a demonstration for each category in 
paragraph (a) of this section is as follows:
    (1) If a Mortgagee plans to qualify as a United States Citizen 
under paragraph (a)(1) of this section, the Mortgagee must file an 
Affidavit of United States Citizenship demonstrating that it complies 
with the citizenship requirements of 46 U.S.C. 12102(c) and section 
2(c) of the 1916 Act, which require that 75% of the ownership and 
control in the Mortgagee be vested in U.S. Citizens at each tier and in 
the aggregate. In addition to the Affidavit of U.S. Citizenship, a 
certified copy of the Articles of Incorporation and Bylaws, or other 
comparable corporate documents must be submitted to the Citizenship 
Approval Officer.
    (2) A state or federally chartered financial institution must 
provide a certification that indicates whether it is a state chartered 
or federally chartered financial institution and that certifies that it 
is insured by the Federal Deposit Insurance Corporation (``FDIC''). The 
certification must include the FDIC Certification Number assigned to 
the institution.
    (3) A farm credit lender must provide a certification indicating 
that it qualifies as a farm credit lender established under title 12, 
chapter 23, of the United States Code [12 U.S.C. 2001 et seq.];
    (4) A commercial fishing and agriculture bank must provide a 
certification indicating that it has been lawfully established as a 
commercial fishing and agriculture bank pursuant to State law and that 
it is in good standing;
    (5) A Commercial Lender must provide evidence that it is engaged 
primarily in the business of lending and other financing transactions 
and a certification that it has a loan portfolio in excess of $100 
million, of which no more than 50 percent of the dollar amount of the 
loan portfolio consists of loans to borrowers in the commercial fishing 
industry. The certification must include information regarding the 
approximate size of the loan portfolio and the percentage of the 
portfolio that consists of loans to borrowers in the commercial fishing 
industry. In addition, a Commercial Lender must submit an affidavit to 
the Citizenship Approval Officer to demonstrate that it qualifies under 
one of the following criteria:
    (i) An individual who is a citizen of the United States;
    (ii) An association, trust, joint venture, or other entity--
    (A) All of whose members are citizens of the United States; and
    (B) That is capable of holding title to a vessel under the laws of 
the United States or of a State;
    (iii) A partnership whose general partners are citizens of the 
United States, and the controlling interest in the partnership is owned 
by citizens of the United States;
    (iv) A corporation established under the laws of the United States 
or of a State, whose chief executive officer, by whatever title, and 
chairman of its board of directors are citizens of the United States 
and no more of its directors are Non-citizens than a minority of the 
number necessary to constitute a quorum;
    (v) The United States Government; or
    (vi) The government of a State.
    (6) A Mortgage Trustee must submit the Mortgage Trustee Application 
and other documents required in Sec. 356.27. If the beneficiary under 
the trust arrangement has not demonstrated to the Citizenship Approval 
Officer that it qualifies as a Commercial Lender, a Lender Syndicate or 
an entity eligible to hold a Preferred Mortgage under paragraphs (a)(1) 
through (4) of this section, the Mortgage Trustee must submit to the 
Citizenship Approval Officer copies of the trust agreement, security 
agreement, loan documents, Preferred Mortgage, and any issuance, 
assignment or transfer of interest so that a determination can be made 
as to whether any of the arrangements results in an impermissible 
transfer of control of the vessel to a person not eligible to own a 
vessel with a fishery endorsement under 46 U.S.C. 12102(c).
    (c) A Mortgagee is required to provide the certification required 
by paragraph (b) of this section to the Citizenship Approval Officer on 
an annual basis during the time in which it holds a Preferred Mortgage 
on a Fishing Industry Vessel. The annual certification must be 
submitted at least 30 calendar days prior to the annual anniversary 
date of the original filing.
    (d) An entity that is deemed qualified to hold a Preferred Mortgage 
under paragraphs (a)(1) through (5) and that has submitted the 
appropriate certification to the Citizenship Approval Officer under 
paragraph (b) of this section may exercise rights under loan

[[Page 18558]]

or mortgage covenants with respect to a Fishing Industry Vessel without 
any approval from MARAD. However, if the Mortgagee has not been 
approved by the Citizenship Approval Officer as a U.S. Citizen eligible 
to own a Fishing Industry Vessel, it may only operate such vessel to 
the extent provided for in Sec. 356.25.
    10. Section 356.21 is amended as follows:
    a. By removing ``Non-Citizen Lender's'' in the heading of the 
section;
    b. By removing the term ``Non-Citizen Lender'' everywhere that it 
appears in the section and adding in its place the term ``lender''; and
    c. By revising paragraphs (a) introductory text and (e) to read as 
follows:


Sec. 356.21  General approval of standard loan or mortgage agreements.

    (a) A lender that is engaged in the business of financing Fishing 
Industry Vessels and that is not qualified to hold a Preferred Mortgage 
on Fishing Industry Vessels pursuant to Sec. 356.19(a)(2) through (5), 
may apply to the Citizenship Approval Officer for general approval of 
its standard loan and mortgage agreements for such vessels. In order to 
obtain general approval for its standard loan and mortgage agreements, 
a lender using an approved Mortgage Trustee must submit to the 
Citizenship Approval Officer:
* * * * *
    (e) A lender that has received general approval for its lending 
program and that uses covenants in a loan or mortgage on a Fishing 
Vessel, Fish Processing Vessel, or Fish Tender Vessel that have not 
been approved by the Citizenship Approval Officer will be subject to 
loss of its general approval and the Citizenship Approval Officer will 
review and approve all mortgage and loan covenants on a case-by-case 
basis. The Citizenship Approval Officer may also determine that the 
arrangement results in an impermissible transfer of control to a Non-
Citizen and therefore does not meet the requirements to qualify as a 
Preferred Mortgage. If the lender knowingly files a false certification 
with the Citizenship Approval Officer or has used covenants in a loan 
or mortgage on a Fishing Vessel, Fish Processing Vessel, or Fish Tender 
Vessel that are materially different from the approved covenants, it 
may also be subject to civil and criminal penalties pursuant to 18 
U.S.C. 1001.
    11. Section 356.23 is amended as follows:
    a. By removing the term ``Non-Citizen Lenders'' in the section 
heading and adding in its place the term ``lenders;'' and
    b. By revising paragraph (a) to read as follows:


Sec. 356.23  Restrictive loan covenants approved for use by lenders.

    (a) We approve the following standard loan covenants, which may 
restrict the activities of the borrower without the lender's consent 
and which may be included in loan agreements or other documents between 
an owner of a Fishing Industry Vessel and an unrelated lender that does 
not meet the requirements of Sec. 356.19(a)(1) through (5) and that is 
using an approved Mortgage Trustee to hold the mortgage and debt 
instrument for the benefit of the lender, so long as the lender's 
consent is not unreasonably withheld:
* * * * *

Subpart E--Mortgage Trustees

    12. Section 356.27 is amended by revising paragraphs (a), (b)(1), 
(c)(2) and (g) to read as follows:


Sec. 356.27  Mortgage Trustee requirements.

    (a) A lender who is not qualified under Sec. 356.19(a)(1) through 
(5) to hold a Preferred Mortgage directly on a Fishing Industry Vessel 
may use a qualified Mortgage Trustee to hold, for the benefit of the 
lender, the Preferred Mortgage and the debt instrument for which the 
Preferred Mortgage is providing security.
    (b) * * *
    (1) Be eligible to hold a Preferred Mortgage on a Fishing Industry 
Vessel under Sec. 356.19(a)(1) through (5);
* * * * *
    (c) * * *
    (2) The appropriate certification and documentation required under 
Sec. 356.19(b)(1) through (5) to demonstrate that it is qualified to 
hold a Preferred Mortgage on Fishing Industry Vessels;
* * * * *
    (g) An application to be approved as a Mortgage Trustee should 
include the following:

    The undersigned (the ``Mortgage Trustee'') hereby applies for 
approval as Mortgage Trustee pursuant to 46 U.S.C. 31322(f) and the 
Regulation (46 CFR part 356), prescribed by the Maritime 
Administration (``MARAD''). All terms used in this application have 
the meaning given in the Regulation.
    In support of this application, the Mortgage Trustee certifies 
to and agrees with MARAD as hereinafter set forth:
    The Mortgage Trustee certifies:
    (a) That it is acting or proposing to act as Mortgage Trustee on 
a Fishing Vessel, Fish Processing Vessel, or Fish Tender Vessels 
documented, or to be documented under the U.S. registry;
    (b) That it--
    (1) Is organized as a corporation under the laws of the United 
States or of a State and is doing business in the United States;
    (2) Is authorized under those laws to exercise corporate trust 
powers;
    (3) Is qualified to hold a Preferred Mortgage on Fishing 
Industry Vessels pursuant to 46 CFR 356.19(a);
    (4) Is subject to supervision or examination by an official of 
the United States Government or a State; and
    (5) Has a combined capital and surplus of at least $3,000,000 as 
set forth in its most recent published report of condition, a copy 
of which, dated __________, is attached.
    The Mortgage Trustee agrees:
    (a) That it will, so long as it shall continue to be on the List 
of Approved Mortgage Trustees referred to in the Regulation:
    (1) Notify the Citizenship Approval Officer in writing, within 
20 days, if it shall cease to be a corporation which:
    (i) Is organized under the laws of the United States or of a 
State, and is doing business under the laws of the United States or 
of a State;
    (ii) Is authorized under those laws to exercise corporate trust 
powers;
    (iii) Is qualified under 46 CFR 356.19(a) to hold a Preferred 
Mortgage on Fishing Industry Vessels;
    (iv) Is subject to supervision or examination by an authority of 
the U.S. Government or of a State; and
    (v) Has a combined capital and surplus (as set forth in its most 
recent published report of condition) of at least $3,000,000.
    (2) Notify the Citizenship Approval Officer in writing, of any 
changes in its name, address, officers, directors, stockholders, 
articles of incorporation or bylaws within 30 calendar days of such 
changes;
    (3) Furnish to the Citizenship Approval Officer on an annual 
basis:
    (i) The appropriate certification and documentation required 
under Sec. 356.19(b)(1)-(5) to demonstrate that it is qualified to 
hold a Preferred Mortgage on Fishing Industry Vessels;
    (ii) A current copy of the Articles of Incorporation and Bylaws, 
or other comparable corporate documents;
    (iii) A copy of the most recent published report of condition of 
the Mortgage Trustee; and,
    (iv) A list of the Fishing Vessels, Fish Processing Vessels, and 
Fish Tender Vessels and the respective lenders for which it is 
acting as Mortgage Trustee;
    (4) Furnish to the Citizenship Approval Officer copies of each 
Trust Agreement as well as any other issuance, assignment or 
transfer of an interest related to the transaction if the 
beneficiary under a trust arrangement is not a Commercial Lender, a 
Lender Syndicate or eligible to be hold a Preferred Mortgage under 
46 CFR 356.19(a)(1) through (5);
    (5) Furnish to the Citizenship Approval Officer any further 
relevant and material information concerning its qualifications as 
Mortgage Trustee under which it is acting or proposing to act as 
Mortgage Trustee, as the Citizenship Approval Officer may from time 
to time request; and,

[[Page 18559]]

    (6) Permit representatives of the Maritime Administration, upon 
request, to examine its books and records relating to the matters 
referred to herein;
    (b) That it will not issue, assign, or in any manner transfer to 
a person not eligible to own a documented vessel, any right under a 
mortgage of a Fishing Vessel, Fish Processing Vessel, or Fish Tender 
Vessel, or operate such vessel without the approval of the 
Citizenship Approval Officer; except that it may operate the vessel 
to the extent necessary for the immediate safety of the vessel, for 
its direct return to the United States or for its movement within 
the United States for repairs, drydocking or berthing changes, but 
only under the command of a Citizen of the United States for a 
period not to exceed 15 calendar days;
    (c) That after a responsible official of such Mortgage Trustee 
obtains knowledge of a foreclosure proceeding, including a 
proceeding in a foreign jurisdiction, that involves a documented 
Fishing Vessel, Fish Processing Vessel, or Fish Tender Vessel on 
which it holds a mortgage pursuant to approval under the Regulation 
and to which 46 App. U.S.C. 802(c), 46 U.S.C. 31322(a)(4) or 46 
U.S.C. 12102(c) is applicable, it shall promptly notify the 
Citizenship Approval Officer with respect thereto, and shall ensure 
that the court or other tribunal has proper notice of those 
provisions; and
    (d) That it shall not assume any fiduciary obligation in favor 
of Non-Citizen beneficiaries that is in conflict with any 
restrictions or requirements of the Regulation. This application is 
made in order to induce the Maritime Administration to grant 
approval of the undersigned as Mortgage Trustee pursuant to 46 
U.S.C. 31322 and the Regulation, and may be relied on by the 
Citizenship Approval Officer for such purposes. False statements in 
this application may subject the applicant to fine or imprisonment, 
or both, as provided for violation of the proscriptions contained in 
18 U.S.C. 286, 287, and 1001. Dated this ______________day of 
______________, 20____.

ATTEST:
----------------------------------------------------------------------
(Print or type name below)
(SEAL)
MORTGAGE TRUSTEE'S NAME & ADDRESS
By:--------------------------------------------------------------------
(Print or type name below)
TITLE------------------------------------------------------------------

    13. Section 356.31 is amended by revising paragraph (a)(1) to read 
as follows:


Sec. 356.31  Maintenance of Mortgage Trustee approval.

    (a) * * *
    (1) The appropriate certification and documentation required under 
Sec. 356.19(b)(1) through (5) to demonstrate that it is qualified to 
hold a Preferred Mortgage on Fishing Industry Vessels;
* * * * *

Subpart F--Charters, Management Agreements and Exclusive or Long-
Term Contracts


Sec. 356.45  [Amended]

    14. Section 356.45(a)(2)(iv) is amended by adding at the end 
thereof the following: ``, unless a qualified Mortgage Trustee is used 
to hold the debt instrument for the benefit of the Non-Citizen.''

Subpart G--Special Requirements for Certain Vessels

    15. Section 356.47 is amended by adding a sentence to the end of 
paragraph (b)(3) and adding a new paragraph (e) to read as follows:


Sec. 356.47  Special requirements for large vessels.

* * * * *
    (b) * * *
    (3) * * * The fishery endorsement of a Fishing Industry Vessel that 
meets the criteria of paragraph (a) of this section is not deemed to be 
invalid for purposes of complying with this paragraph, if the vessel is 
purchased pursuant to 46 U.S.C. 31329 by a Mortgagee that is not 
eligible to own a vessel with a fishery endorsement, provided that the 
Mortgagee is eligible to hold a Preferred Mortgage on such vessel at 
the time of the purchase;
* * * * *
    (e) The owner of a vessel that meets any of the criteria in 
paragraph (a) of this section is required to submit a certification 
each year in conjunction with its Affidavit of U.S. Citizenship in 
order to document that the vessel is eligible for documentation with a 
fishery endorsement. The certification should indicate that the vessel 
meets the criteria of paragraph (a) of this section; however, it is 
eligible to be documented with a fishery endorsement because it 
complies with the requirements of either paragraph (b), (c), or (d) of 
this section. A form of the certification will be available on the 
MARAD website at http://www.marad.dot.gov/afa.html or may be obtained 
by contacting the Citizenship Approval Officer.
    16. Section 356.51 is amended as follows:
    a. By adding ``after October 1, 2001,'' after ``such time'' in 
paragraph (a);
    b. By removing the number ``296779'' following the vessel name 
``EXCELLENCE'' in paragraphs (a)(1) and (c) and adding in its place the 
number ``967502'';
    c. By removing paragraph (e).
    d. By redesignating paragraph (d) as paragraph (e);
    e. By adding paragraphs (d) and (f); and
    f. By revising newly designated paragraphs (e) introductory text 
and (e)(1).
    The additions read as follows:


Sec. 356.51  Exemptions for specific vessels.

* * * * *
    (d) Owners of vessels that are exempt from the new ownership and 
control requirements of the AFA and part 356 pursuant to paragraph (a) 
of this section must still comply with the requirements for a fishery 
endorsement under the federal law that was in effect on October 21, 
1998. The owners must submit to the Citizenship Approval Officer on an 
annual basis:
    (1) An Affidavit of United States Citizenship in accordance with 
Sec. 356.15 demonstrating that they comply with the Controlling 
Interest requirements of section 2(b) of the 1916 Act. The Affidavit 
must note that the owner is claiming an exemption from the requirements 
of this part 356 pursuant to Sec. 356.51(e); and
    (2) A description of the current ownership structure, a list of any 
changes in the ownership structure that have occurred since the filing 
of the last Affidavit, and a chronology of all changes in the ownership 
structure that have occurred since October 21, 1998.
    (e) The following Fishing Industry Vessels are exempt from the new 
ownership and control standards under the AFA and part 356 for vessel 
owners and Mortgagees:
    (1) Fishing Industry Vessels engaged in fisheries in the exclusive 
economic zone under the authority of the Western Pacific Fishery 
Management Council established under section 302(a)(1)(H) of the 
Magnuson-Stevens Fishery Conservation and Management Act (16 U.S.C. 
1852(a)(1)(H)); and
* * * * *
    (f) Fishing Industry Vessels that are claiming the exemption 
provided for in paragraph (e) of this section must certify to the 
Citizenship Approval Officer that the vessel is exempt from the 
ownership and control requirements of this part 356 pursuant to the 
exemption in Sec. 356.51(e). The vessel owner will be required to 
follow the U.S. Coast Guard's procedures for documenting a vessel with 
a fishery endorsement, as in effect prior to the passage of the AFA. 
The vessel owner must also notify the Coast Guard's National Vessel 
Documentation Center that it is claiming an exemption from the 
ownership and control requirements of this part 356 pursuant to 
Sec. 356.51(e).

Subpart H--International Agreements

    17. Section 356.53 is amended as follows:

[[Page 18560]]

    a. By adding ``July 24, 2001'' in place of ``October 1, 2001'' in 
both places where it appears in paragraph (a) and by removing the last 
sentence of paragraph (a);
    b. By adding ``July 24, 2001'' in place of ``October 1, 2001'' in 
both places where it appears in paragraph (b)(1);
    c. By adding the word ``and'' at the end of paragraph (b)(3);
    d. By adding ``July 24, 2001'' in place of ``October 1, 2001'' and 
in place of ``September 30, 2001'' in paragraph (b)(4);
    e. By removing the word ``and'' at the end of paragraph (b)(4);
    f. By removing paragraph (b)(5);
    g. By removing the word ``will'' in the first sentence of paragraph 
(d) and adding the word ``may'' in lieu thereof; by adding ``if the 
petition presents unique issues that have not been addressed in 
previous determinations.'' after the word ``comment'' in the first 
sentence of paragraph (d); and by inserting ``,if any,'' after the word 
``comments'' in the third sentence of paragraph (d);
    h. By adding ``July 24, 2001'' in place of ``September 30, 2001'' 
in paragraph (f)(4);
    i. By adding ``July 24, 2001'' in place of ``October 1, 2001'' in 
paragraph (g)(1);
    j. By revising paragraph (g)(2); and
    k. By adding new paragraphs (g)(3) and (g)(4).
    The revisions and additions read as follows:


Sec. 356.53  Conflicts with international agreements.

* * * * *
    (g) * * *
    (2) To the owner of a Fishing Vessel, Fish Processing Vessel, or 
Fish Tender Vessel on July 24, 2001, if any ownership interest in that 
owner is transferred to or otherwise acquired by a Non-Citizen or if 
the percentage of foreign ownership in the vessel is increased after 
such date.
    (3) An ownership interest is deemed to be transferred under this 
paragraph (g) if:
    (i) There is a transfer of direct ownership interest in the primary 
vessel owning entity. If the primary vessel owning entity is wholly 
owned by another entity, the parent entity will be considered the 
primary vessel owning entity;
    (ii) There is a transfer of indirect ownership at any tier that 
results in a transfer of 5% or more of the interest in the primary 
vessel owning entity.
    (4) A transfer of interest in a vessel owner does not include:
    (i) Transfers of disparately held shares of a vessel-owning entity 
if it is a publicly traded company and the total of the shares 
transferred in a particular transaction equals less than 5% of the 
shares in that class. An interest in a vessel owning entity that 
exceeds 5% of the shares in a class can not be sold to the same Non-
Citizen through multiple transactions involving less than 5% of the 
shares of that class of stock in order to maintain the exemption for 
the vessel owner; or
    (ii) Transfers pursuant to a divorce or death.

    Dated: April 9, 2002.

    By Order of the Maritime Administrator.

Joel C. Richard,
Secretary, Maritime Administration.
[FR Doc. 02-9005 Filed 4-15-02; 8:45 am]
BILLING CODE 4910-81-P