[Federal Register Volume 67, Number 149 (Friday, August 2, 2002)]
[Proposed Rules]
[Pages 50406-50408]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-19593]


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DEPARTMENT OF TRANSPORTATION

Maritime Administration

46 CFR Part 221

[Docket No. MARAD-2002-12842]


General Approval of Time Charters

AGENCY: Maritime Administration, DOT.

ACTION: Policy review with request for comments.

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SUMMARY: Section 9 of the Shipping Act of 1916 requires prior approval 
of the Secretary of Transportation of U.S. vessel charters to persons 
who are not U.S. citizens. In 1992, the Maritime Administration (MARAD, 
we, us, or our), which is charged with responsibility for administering 
section 9, issued regulations that granted general prior approval of 
time charters and other forms of temporary use agreements to persons 
who are not U.S. citizens.
    Pursuant to this notice, we are requesting public comment on 
whether the policy of granting general approval of time charters should 
be changed.

DATES: Interested parties are requested to submit comments on or before 
September 3, 2002.

ADDRESSES: Comments should refer to docket number MARAD-2002-12842. 
Written comments may be submitted by mail to the Docket Clerk, U.S. DOT 
Dockets, Room PL-401, Department of

[[Page 50407]]

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.

FOR FURTHER INFORMATION CONTACT: Edmund T. Sommer, Jr., Chief, Division 
of General and International Law, Office of the Chief Counsel, Maritime 
Administration, Department of Transportation, Room 7228, 400 7th Street 
SW., Washington, DC 20590, telephone (202) 366-5181.
    Comments regarding this policy review should refer to the docket 
number that appears at the top of this document. Written comments may 
be submitted to the Docket Clerk, U.S. DOT Dockets, Room PL-401, 400 
7th Street, SW., Washington, DC 20590. Comments may also be submitted 
by electronic means via the Internet at http://dmses.dot.gov/submit. 
All comments received will be available for examination 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 is available 
on the World Wide Web at http://dms.dot.gov.

SUPPLEMENTARY INFORMATION: Section 9 of the Shipping Act of 1916, 46 
App U.S.C. 808, requires the approval of the Secretary of 
Transportation (MARAD) for, inter alia, the charter to noncitizens of 
documented vessels owned by citizens of the United States.
    In 1989, as a result in substantial changes in the Ship Mortgage 
Act and amendments to section 9, MARAD began a rulemaking to amend our 
regulations at 46 CFR part 221--Regulated Transactions Involving 
Documented Vessels and other Maritime Interests.
    In view of the significant changes in the statutory provisions to 
which the regulations in part 221 are addressed, the interim final rule 
published February 2, 1989, (54 FR 5382, amended at 54 FR 8195), 
adopted a conservative approach to interpretation and application of 
the new law, pending the opportunity to obtain comments from all 
interested parties. It therefore continued the preexisting requirement 
that time charters of vessels to noncitizens for 6 months or longer be 
submitted for review and approval.
    After evaluation of the comments received on the first interim 
final rule, a number of amendments and clarifications of the rule 
appeared to be warranted. Mindful of Congress' admonition that MARAD 
should ``temper the consideration of a transfer in interest or control 
to a [noncitizen] with a concern that the vessel may be needed in time 
of war or national emergency'', and in an attempt to balance this 
national security role with the desire of many that MARAD completely 
relinquish its regulatory role in these transactions, we proposed in an 
April 13, 1990, NPRM a regulation that would significantly relax 
regulation of the financing and transfer of documented vessels. One 
proposed change was that general approval for all charters (other than 
demise charters for operation in the coastwise trade) to noncitizens be 
granted for periods of up to five years, and that certain limited 
charters, such as space charters, slot charters, drilling contracts, 
and contracts of affreightment (except where a named vessel is 
dedicated to the contract), be granted general approval, regardless of 
their duration. Information copies of all charters granted general 
approval would have to be filed with MARAD.
    In the April 13, 1990 NPRM (55 FR 14040), the views of interested 
parties were specifically invited with regard to further liberalization 
of the section which granted general approvals. One possibility on 
which we asked for comment was general approval for transactions 
involving transfers of an interest in or control of citizen-owned 
documented vessels to persons who are noncitizens for purposes of 
section 2, but who, nevertheless, are eligible to document a vessel 
pursuant to 46 U.S.C. 12102 (documentation citizens). Another 
possibility was general approval for transactions under section 9(c)(1) 
so as to place U.S. citizens on an exact par with documentation 
citizens, which need not apply for such approvals (section 9(c)(1) 
applies only to documented vessels owned by citizens of the United 
States, a section 2 test). In all events, we noted, bareboat/demise 
charters to non-section 2 citizens of vessels operating in coastwise 
trade would be excepted.
    While there were many specific comments on certain issues, 
commenters generally agreed that MARAD should provide general approval 
for all transfers short of a change of registry. Their position was 
that MARAD should recognize the distinction between the two basic 
classes of section 9 transfer: (1) Those involving transfer of flag for 
operation (whether or not involving sale to new owners), and (2) other 
section 9 transactions in which the vessel remains under U.S. flag. In 
respect to national security, commenters suggested, the two classes 
present risks very different in kind and degree. In the one, there may 
be not only a foreign owner and a foreign crew, but a new sovereign 
whose national interests would have to be respected. As stated by one 
commenter, ``[i]f the ship is certifiably of present or foreseeable 
importance for national defense, the case for refusing approval is 
evidently strong.'' In the other class of transfers, even in the case 
of a sale, the owner will remain an American corporation subject to 
American law (including requisition authority in time of emergency), 
the vessel will and must remain documented under U.S. flag, and the 
officers and crew will still consist of American citizens. In this 
case, as was pointed out, national security interests are fully 
preserved regardless of the form or substance of the transaction. The 
commenter stated that ``[t]his analysis suggests an order of 
supervision different for each of these classes (of transfer).''
    Upon reexamination of the legislative history of Public Law 100-710 
and analysis of the many comments received on this issue, we accepted 
the argument for different ``order(s) of supervision'' for the two 
distinct classes of transfer as not inconsistent with that legislative 
history or with MARAD's national security responsibilities under 
section 9. Accordingly, in a second interim final rule published July 
3, 1991 (56 FR 30654), we provided general approval for all section 9 
transactions other than transfer of registry except certain transfers 
to ``Bowaters'' corporations, sales for scrapping in a foreign country 
and bareboat charters of vessels operating in the coastwise trade. 
Consistent with MARAD's national security role, however, that general 
section 9 approval was not applicable during any period of national 
emergency nor would it apply to transactions involving certain named 
countries with whom trade is prohibited. The requirement that 
information copies of all charters be filed was eliminated, in favor of 
an ``as requested'' filing requirement.
    With the endorsement of many and the objection of none (save those 
who favored further liberalization), the final rule, published June 3, 
1992 (57 FR 23470), incorporated the above changes. Part 221 as now 
written grants general approval for the sale, mortgage, lease, charter, 
etc. (but not transfer of registry) of citizen-owned vessels to 
noncitizens, so long as the country is not at war, there is no 
Presidential declaration of national emergency invoking Section 37 of 
the Shipping Act and the noncitizen

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is not subject to the control of a country with whom trade is 
prohibited.
    Reinstatement of a requirement for MARAD review and written 
approval of time charters to noncitizens of documented vessels would 
require a rulemaking proceeding to amend 46 CFR part 221.
    Commenters are requested to specifically address the question of 
what, if any, economic impact a return to case by case review prior to 
approval of time charters would cause?

    Dated: July 30, 2002.

    By Order of the Maritime Administrator.
Joel C. Richard,
 Secretary, Maritime Administration.
[FR Doc. 02-19593 Filed 8-1-02; 8:45 am]
BILLING CODE 4910-81-P