[Federal Register Volume 68, Number 192 (Friday, October 3, 2003)]
[Notices]
[Pages 57507-57508]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-25077]


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DEPARTMENT OF TRANSPORTATION

Maritime Administration

[Docket MARAD-2003-16248]


Notice of Request To Transfer Maritime Security Program Operating 
Agreements MA/MSP-29 Through MA/MSP-43 to Maersk Line, Limited

    By letter dated September 18, 2003 (which incorporates earlier 
correspondence of July 10, 2003), Maersk Line, Limited (Maersk) has 
requested approval from the Maritime Administration (MARAD) to transfer 
Maritime Security Program (MSP) Operating Agreements Nos. MA/MSP-29 
through 43 (Agreements) from U.S. Ship Management, Inc. (USSM) to 
itself. The MSP was established by the Maritime Security Act of 1996, 
Pub. L. 104-239, and is contained in sections 651 through 656 of the 
Merchant Marine Act, 1936, as amended, 46 App. U.S.C. 1187--1187e. The 
MSP serves to maintain an active, privately owned, U.S.-flag and U.S. 
citizen crewed liner fleet in international trade. At present, MSP 
provides operating payments to 47 vessels, under single-vessel MSP 
Operating Agreements.
    The vessels at issue here, or their predecessors, were originally 
operated by Sea-Land Service, Inc. (Sea-Land) as the international 
liner division of Sea-Land. The transportation assets of the 
international liner division, other than the MSP Agreements or title to 
the vessels, were sold to Maersk in 1999. Maersk is a company organized 
in the United States, but is owned by the A.P. Moller Group, a Danish 
consortium.
    At the time of the sale to Maersk, Sea-Land proposed to transfer 
the MSP Agreements to USSM, a newly-created U.S. citizen company. On 
December 8, 1999, the Maritime Administrator authorized transfer of the 
MSP Agreements from Sea-Land to USSM. In order to maintain the U.S. 
citizen status of the vessels for MSP purposes, titles to the vessels 
covered by the Agreements were either transferred to trusts qualified 
under section 1136(c) of the Coast Guard Authorization Act of 1996, or 
required to remain in existing U.S. citizen trusts, as applicable. A 
vessel owned by a qualified section 1136(c) trust and bareboat 
chartered to a U.S. citizen is deemed to be owned and operated by a 
U.S. citizen for MSP purposes, notwithstanding foreign beneficial 
ownership of the trust. Sea-Land assigned the bareboat charters of all 
15 vessels to USSM, the MSP contract holder, which, in turn, time 
chartered the 15 vessels to Maersk, through September 30, 2005, when 
the current MSP expires.
    Maersk claims a right of election under Article 2(b)(vi) of the 
time charters to become the MSP contractor for the 15 vessels, at any 
time during the term of the time charters, subject to the qualification 
that the arrangement is ``permitted under applicable laws and 
regulations and the terms of the Operating Agreement.'' On November 7, 
2002, Maersk requested that MARAD confirm Maersk's eligibility to 
become the contractor for the vessels as provided in the time charters.
    An opinion by MARAD's Chief Counsel, Robert B. Ostrom, issued on 
April 29, 2003, concluded that, ``Maersk qualifies as an eligible 
transferee of the MSP Agreements from USSM.'' That opinion stated that 
it was limited solely to the question of Maersk's eligibility as a 
transferee under applicable statutes and regulations, ``and in no way 
addresses whether MARAD would grant approval for such a transfer if an 
application were filed.'' In addition, that opinion did not address 
whether the proposed vessel operation and ownership arrangements would 
be acceptable.
    On April 30, 2003, Maersk delivered to USSM a Notice of Election. 
In accordance with the Notice of Election, USSM was required to respond 
within five business days or be declared in default of the time 
charters. On May 9, 2003 Maersk delivered to USSM a Notice of Default, 
which then triggered a 60 day period for USSM to remedy said default. 
By letter dated July 3, 2003 USSM rejected Maersk's Notice of Default. 
By letter dated July 9, 2003, Maersk advised USSM that it had declared 
USSM in default of the time charters on that date and is unilaterally 
seeking to act for USSM with regard to transfer of the Agreements. 
Maersk asserts that it has the right to submit the subject transfer 
application on behalf of, or in place of, USSM.
    USSM filed a complaint in U.S. District Court for the District of 
Columbia, styled U.S. Ship Management, Inc. v. U.S. Maritime 
Administration, No. 1:03-cv-00951-RJL (filed April 29, 2003), 
contesting the legality of MARAD's legal opinion. That case is ongoing 
at this time. USSM also vigorously opposes Maersk's application. USSM 
further asserts that Maersk cannot act as attorney-qqin-fact, because 
the time charters giving rise to the attorney-in-fact powers contain 
several conditions which have not been satisfied. One of those 
conditions, USSM avers, is that the MSP Agreement transfer be approved 
by MARAD, which has not occurred.
    A copy of Maersk's request, and other documents pertinent to this 
request, will be available for inspection at the Department of 
Transportation (DOT) Dockets Facility and on the DOT Web site (address 
information follows). Any person, firm or corporation having an 
interest in this matter, and who desires to submit comments concerning 
it, may file such comments as follows. You should mention the docket 
number that appears at the top of this notice. Written comments should 
be submitted to the Docket Clerk, U.S. DOT Dockets, Room PL-401, Nassif 
Building, Department of Transportation, 400 Seventh Street, SW, 
Washington, DC 20590. Comments may also be filed electronically via the 
Internet at http://dmses.dot.gov/submit/ submit/. You may call Docket 
Management at (202) 366-9324. You may visit the docket room to inspect 
and copy comments at the above address between 10 a.m. and 5 p.m. ET, 
Monday through Friday, except holidays. An electronic version of this 
document is available on the World Wide Web at http://dms.dot.gov. 
Comments must be received by the close of business October 24, 2003.
    This notice is published as a matter of discretion. Section 652(j) 
of the Act, as implemented by MARAD's regulations at 46 CFR 295.20(i), 
permits the transfer of an MSP Operating Agreement by the MSP 
contractor to a qualified transferee unless MARAD disapproves the 
transfer within 90 days of receiving a completed application. Due to 
the unusual nature of this application, wherein the MSP contractor has 
not itself submitted an application and in fact opposes the submission 
of an application, no decision has been made on whether MARAD accepts 
the submission as an application properly submitted under Sec.  
295.20(i). Accordingly, no transfer of the MSP Operating Agreements may 
be consummated unless and until expressly approved by MARAD. Further, 
MARAD will not permit a transfer of the Agreements unless and until 
satisfied that the vessels associated

[[Page 57508]]

with those Agreements remain available for operation under those 
Agreements, or other acceptable vessels are available to substitute for 
the current vessels.
    The fact of this publication should in no way be considered a 
favorable or unfavorable decision on the matter in question, as filed 
or as it may be amended. As noted above, the MARAD Chief Counsel 
Opinion of April 29, 2003 did not address whether MARAD would grant 
approval. MARAD will consider all comments submitted in a timely 
fashion, and will take such action thereto as may be deemed 
appropriate.

    By Order of the Maritime Administration.

    Dated: September 29, 2003.
Joel C. Richard,
Secretary, Maritime Administration.

[FR Doc. 03-25077 Filed 10-2-03; 8:45 am]
BILLING CODE 4910-81-P