[Federal Register Volume 69, Number 138 (Tuesday, July 20, 2004)]
[Rules and Regulations]
[Pages 43328-43338]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-16454]


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DEPARTMENT OF TRANSPORTATION

Maritime Administration

46 CFR Part 296

[Docket No. MARAD-2004-18489]
RIN 2133-AB62


Maritime Security Program

AGENCY: Maritime Administration, Department of Transportation.

ACTION: Interim final rule and request for comments.

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SUMMARY: The Maritime Administration (MARAD) is issuing this interim 
final rule to provide procedures to implement provisions of the 
National Defense Authorization Act for Fiscal Year 2004, the Maritime 
Security Act of 2003 (MSA 2003). The MSA 2003 authorizes the creation 
of a new Maritime Security Program (MSP) that establishes a fleet of 
active, commercially viable, privately owned vessels to meet national 
defense and other security requirements and to maintain a United States 
presence in international commercial shipping. This interim final rule 
establishes the new MSP and provides, among other things, application 
procedures and deadlines for enrollment of vessels in the MSP.

DATES: Effective Date: This interim final rule is effective on October 
1, 2004.
    Comment Date: MARAD will consider comments received not later than 
August 19, 2004.
    Application Due Date: Applications for enrollment of vessels in the 
MSP are due by October 15, 2004, to the address listed in the ADDRESSES 
section below.

ADDRESSES: Comment Submission: You may submit comments [identified by 
DOT DMS Docket Number MARAD-2004-18489] by any of the following 
methods:
     Web site: http://dms.dot.gov. Follow the instructions for 
submitting comments on the DOT electronic docket site.
     Fax: 1-202-493-2251.
     Mail: Docket Management Facility; U.S. Department of 
Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, 
Washington, DC 20590-001.
     Hand Delivery: Room PL-401 on the plaza level of the 
Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 
a.m. and 5 p.m., Monday through Friday, except Federal Holidays.
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting 
comments.
    Instructions: All submissions must include the agency name and 
docket number for this rulemaking. Note that all comments received will 
be posted without change to http://dms.dot.gov including any personal 
information provided. Please see the Privacy Act heading under 
Regulatory Notices.
    Docket: For access to the docket to read background documents or 
comments received, go to http://dms.dot.gov at any time or to Room PL-
401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., 
Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, 
except Federal Holidays.
    Application Submission: Submit applications for enrollment of 
vessels in the MSP to the Secretary, Maritime Administration, Room 
7218, Maritime Administration, U.S. Department of Transportation, 400 
Seventh Street, SW., Washington, D.C. 20590.

FOR FURTHER INFORMATION CONTACT: Taylor E. Jones II, Director, Office 
of Sealift Support, Maritime Administration, Telephone 202-366-2323. 
For legal questions, call Murray Bloom, Chief, Division of Maritime 
Programs, Maritime Administration, 202-366-5320. For military utility 
questions, call LTC Todd Robbins, U.S. Transportation Command, 618-229-
1451/1529.

SUPPLEMENTARY INFORMATION:

Background

    On October 8, 1996 the President signed the Maritime Security Act 
of 1996 establishing the Maritime Security Program (MSP) for FYs 1996 
through 2005 to provide financial assistance of up to $2.1 million per 
vessel per year to operators of U.S.-flag vessels with approved MSP 
Operating Agreements. The MSP is funded at $100 million per year for 
each year from FY 1996 through FY 2005, which covers a maximum of 47 
vessels.
    On November 24, 2003, the President signed the National Defense 
Authorization Act for Fiscal Year 2004, which contained the MSA 2003 
creating a new MSP for FY 2006 through FY 2015. This program also 
provides financial assistance to operators of U.S.-flag vessels that 
meet certain qualifications. The MSA 2003 requires that the Secretary 
of Transportation, in consultation with the Secretary of Defense, 
establish a fleet of active, commercially viable, militarily useful, 
privately-owned vessels to meet national defense and other security 
requirements. Section 53111 of the MSA 2003 authorizes $156 million 
annually for FYs 2006, 2007, and 2008; $174 million annually for FYs 
2009, 2010, and 2011; and $186 million annually for FYs 2012, 2013, 
2014, and 2015 to support the operation of up to 60 U.S.-flag vessels 
in the foreign commerce of the United States. Payments to participating 
operators are limited to $2.6 million per ship per year for FYs 2006 
through 2008, $2.9 million per ship per year for FYs 2009 through 2011, 
and $3.1 million per ship per year for FYs 2012 through 2015. Payments 
are subject to annual appropriations. Participating operators are 
required to make their commercial transportation resources available 
upon request by the Secretary of Defense during times of war or 
national emergency.
    Subtitle A, section 3517 of the MSA 2003 provides for a pilot 
program under which the Secretary of Transportation may enter into an 
agreement(s) to reimburse MSP vessel operators up to 80 percent of the 
cost of performing maintenance and repairs in U.S. shipyards versus the 
cost of performing this work in a geographic region in which the MSP 
vessel generally operates. Funding to perform qualified maintenance and 
repair work in the United States on MSP vessels is authorized to be 
appropriated in the amount of $19.5 million for each of fiscal years 
2006 through 2011.

Military Utility

    The U.S. Transportation Command, on behalf of the Secretary of 
Defense, will issue a press release or another form of announcement 
within 20 days after the issuance of this regulation describing the 
current operational requirements of the Department of Defense for 
determining the award of operating agreements within a priority. 
Current requirements may be stated in terms of capability to perform a 
particular mission or in terms of vessel characteristics (militarily 
useful square footage, deck height, deck strength, draft, ammunition 
certification, etc.) or in other operational terms.

Rulemaking Analyses and Notices

Executive Order 12866 (Regulatory Planning and Review), and Department 
of Transportation (DOT) Regulatory Policies; Pub. L. 104-121

    This rulemaking is considered to be an economically significant 
regulatory action under section 3(f) of Executive

[[Page 43329]]

Order 12866. This interim final rule is also considered a major rule 
for purposes of Congressional review under Pub. L. 104-121. Since the 
program is designed to support up to 60 vessels in FY 2006, each 
receiving up to $2.6 million annually, the Maritime Administrator finds 
that the program may have an annual effect on the economy of $100 
million or more. Thus, it is considered to be a significant rule under 
Executive Order 12866 and DOT's Regulatory Policies and Procedures (44 
FR 11034, February 26, 1979), and has been reviewed by OMB. Changes 
made in response to OMB suggestions or recommendations will be 
documented in the public record. Under Executive Order 12866, MARAD is 
required to provide an analysis of information developed as part of its 
decisionmaking process, including the benefits anticipated from the 
regulatory action, the costs anticipated from the action, and an 
assessment of the costs and benefits of potentially effective and 
reasonably feasible alternatives to the regulatory action. MARAD's 
regulatory analysis follows.

Background

    The Maritime Security Act of 1996 (MSA) was passed with strong 
bipartisan support in Congress and was signed into law on October 8, 
1996. The MSA outlined, in detail, the establishment of a fleet of 
vessels, pursuant to agreement, engaged in U.S. foreign commerce and 
available for use by the Department of Defense during times of war or 
national emergency. Based on the success of the program under the 
original MSA, Congress, as part of the recently enacted Maritime 
Security Act of 2003 (MSA 2003), created a new program that permits an 
increase in both the number of participant vessels as well as the 
payment amounts such vessels will receive under the program.

Benefits

    The major benefit of the MSA 2003 is that it will provide the 
Department of Defense (DOD) with assured access of up to 60 vessels 
that may be used during times of war or national emergency. The 
existing MSP fleet of 47 vessels consists primarily of containerships, 
which are mainly designed for the sustainment phase of sealift 
operations that support military operations. In Operation Iraqi 
Freedom, 35 MSP vessels were employed in support of military 
operations. In addition, the MSP provides necessary support to help 
maintain a U.S.-flag presence in international commerce. The MSP 
vessels are a major component of the U.S.-flag capability that 
contributes to the U.S. mariner base for utilization on both commercial 
and DOD organic fleet.

Costs

    From the inception of the program, Congress set strict limits, not 
subject to the Secretary of Transportation's discretion, on the number 
of participant vessels and the annual payment per vessel. The MSA 2003 
will permit an increase in the number of participant vessels from 47 
authorized under the original MSA (for FYs 1996-2005) to 60 (authorized 
for FYs 2006-2015). Similarly, the payments per vessel may be increased 
from $2.1 million (under the original MSA for FYs 1997-2005) to $2.6 
million (for FYs 2006-2008); $2.9 million (for FYs 2009-2011); and $3.1 
million (for FYs 2012-2015). The maximum programmatic payment that 
Congress directed through the MSA 2003 is $156 million, $174 million, 
and $186 million per year for FYs 2006-2008, 2009-2011, and 2012-2015 
respectively, subject to appropriation.

Analysis of Alternatives

    The MSA 2003 expands the MSP program that was originally 
established by Congress in 1996 by increasing the number of participant 
vessels, annual funding amounts, and expenditure amounts for the new 
MSP program. However, beyond the increased size of the new MSP program 
under the MSA 2003, the underlying statutes are substantially similar, 
and envision a new MSP program that is essentially a continuation of 
the prior MSP program under the original MSA. Under both the original 
MSA and the MSA 2003, Congress prescribed the salient details of the 
MSP program, including ship ownership, vessel eligibility, vessel 
documentation, program duration, the number of participants, the amount 
of funding, and, under the MSA 2003, guidelines regarding the 
composition of the fleet. Since the MSA 2003 provides detailed 
requirements for continuing the MSP program, MARAD has little 
discretion to propose regulatory options. In fact, given the highly 
prescriptive nature of both the original MSA and MSA 2003, MARAD 
believes that no viable regulatory alternatives exist in lieu of 
implementing these regulations, which continue and expand the current 
MSP program.

Administrative Procedure Act

    Pursuant to authority granted by section 3533 of the MSA 2003, 
which provides an exception from compliance with the notice and comment 
requirements of section 553 of Title 5, United States Code, MARAD is 
publishing this rule as an interim final rule. This will facilitate 
establishment of the new MSP as early as possible. A final rule will be 
published in the Federal Register after MARAD has had an opportunity to 
consider all comments on this interim final rule. Section 3533 provides 
that all interim rules under that section that are not superseded 
earlier by final rules shall expire no later than 270 days after the 
effective date of Subtitle C, or October 1, 2004. Accordingly, these 
interim regulations shall no longer be effective after June 27, 2005.

Executive Order 13132

    We have analyzed this rulemaking in accordance with the principles 
and criteria contained in Executive Order 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, 
the current Federal-State relationship, or the current distribution of 
power and responsibilities among various local officials. Therefore, 
consultation with State and local officials was not necessary.

Executive Order 13175

    MARAD does not believe that this interim final rule will 
significantly or uniquely affect the communities of Indian tribal 
governments when analyzed under the principles and criteria contained 
in Executive Order 13175 (Consultation and Coordination with Indian 
Tribal Governments). Therefore, the funding and consultation 
requirements of this Executive Order do not apply.

Regulatory Flexibility

    Because no notice of proposed rulemaking is required for this 
interim final rule, as set forth in section 3533 of Subtitle C, Title 
XXXV, of the National Defense Authorization Act for Fiscal Year 2004, 
the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) 
do not apply. However, the Maritime Administrator certifies that this 
interim final rule will not have a significant economic impact on a 
substantial number of small entities. We anticipate that few, if any, 
small entities will participate in this program due to the nature of 
the shipping industry and the capital costs associated with ships that 
are eligible for the program.

Unfunded Mandates Reform Act of 1995

    This interim final rule will not impose an unfunded mandate under 
the Unfunded Mandates Reform Act of

[[Page 43330]]

1995. It will 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 interim final rule is 
the least burdensome alternative that achieves this objective of U.S. 
policy.

Environmental Assessment

    We have analyzed this interim final rule for purposes of compliance 
with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 
4321 et seq.) and we 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), neither the preparation of an Environmental 
Assessment, an Environmental Impact Statement, nor a Finding of No 
Significant Impact for this rulemaking is required. This interim final 
rule does not change the environmental effects of the current MSP, 
which has been operational since FY 1997, and thus no further analysis 
under NEPA is required. The vessels eligible for the MSP under the MSA 
2003 (1) will continue to operate under the U.S. flag, and will 
continue to be governed by U.S.-flag state control while operating in 
the foreign commerce of the United States; and (2) are and will 
continue to be designed, constructed, equipped and operated in 
accordance with stringent United States Coast Guard and International 
Maritime Organization standards for maritime safety and maritime 
environmental protection.

Paperwork Reduction

    MARAD has requested that the Office of Management and Budget revise 
its approval of an information collection under the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3507 et seq.). The title of the information 
collection is Application and Reporting Elements for Participation in 
the Maritime Security Program, OMB 2133-0525.
    This information collection requires vessel operators to continue 
to submit initial applications, amendments to applications (if 
necessary), and monthly and annual reports. We estimate that the number 
of annual respondents under the new MSP program will increase from 12.5 
to 15, the average total number of annual responses will increase from 
132 to 198.5, and that the average annual recordkeeping and reporting 
burden program total will increase from 152 hours to 224 hours. We 
estimate that the total average annual cost burden associated with this 
information collection will be $10,726.65, or $715.11 per respondent.
    In accordance with the Paperwork Reduction Act, MARAD published a 
60-day notice in the Federal Register seeking public comment on the 
information collection on May 28, 2004 (69 FR 30744).

Privacy Act

    Anyone is able to search the electronic form of all comments 
received into any of our dockets by the name of the individual 
submitting the comment (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc.). You may review DOT's 
complete Privacy Act Statement in the Federal Register published on 
April 11, 2000 (Volume 65, Number 70; Pages 19477-78) or you may visit 
http://dms.dot.gov.

List of Subjects in 46 CFR Part 296

    Assistance payments, Maritime carriers, Reporting and record 
keeping requirements.


0
Accordingly, Part 296 is added to 46 CFR Chapter II, Subchapter C, to 
read as follows:

PART 296--MARITIME SECURITY PROGRAM (MSP)

Subpart A--Introduction
Sec.
296.1 Purpose.
296.2 Definitions.
296.3 Applications.
296.4 Waivers.
Subpart B--Eligibility
296.10 Citizenship requirements of owners, charterers and operators.
296.11 Vessel requirements.
296.12 Applicants.
Subpart C--Priority for Granting Applications
296.20 Tank vessels.
296.21 Participating Fleet Vessels.
296.22 Other vessels.
Subpart D--Maritime Security Program Operating Agreements
296.30 General conditions.
296.31 MSP assistance conditions.
296.32 Reporting requirements.
Subpart E--Payment and Billing Procedures
296.40 Billing procedures.
296.41 Payment procedures.
Subpart F--Appeals Procedures
296.50 Administrative determinations.
Subpart G--Maintenance and Repair Reimbursement Pilot Program
296.60 Applications.

    Authority: Pub. L. 108-136, 117 Stat. 1392; 46 App. U.S.C. 
1114(b), 49 CFR 1.66.

Subpart A--Introduction


Sec.  296.1  Purpose.

    This part prescribes regulations implementing the provisions of 
Subtitle C, Maritime Security Fleet Program, Title XXXV of the National 
Defense Authorization Act for Fiscal Year 2004, the Maritime Security 
Act of 2003 (MSA 2003), governing Maritime Security Program (MSP) 
payments for vessels operating in the foreign trade or mixed foreign 
and domestic commerce of the United States allowed under a registry 
endorsement issued under 46 U.S.C. 12105. The MSA 2003 provides for 
joint responsibility between the Department of Defense (DOD) and the 
Department of Transportation (DOT) for administering the law. These 
regulations provide the framework for the coordination between DOD and 
DOT in implementing the MSA 2003. Implementation of the MSA 2003 has 
been delegated by the Secretary of Transportation to the Maritime 
Administrator, U.S. Maritime Administration and by the Secretary of 
Defense to the Commander, U.S. Transportation Command, respectively.


Sec.  296.2  Definitions.

    For the purposes of this part:
    Act means the Merchant Marine Act, 1936, as amended (46 App. U.S.C. 
1101 et seq.).
    Administrator means the Maritime Administrator, U.S. Maritime 
Administration (MARAD), U.S. DOT, who is authorized by the Secretary of 
Transportation to administer the MSA 2003, in consultation with the 
Commander, U.S. Transportation Command (USTRANSCOM).
    Agreement Vessel means a vessel covered by an MSP Operating 
Agreement.
    Applicant means an applicant for an MSP Operating Agreement.
    Bulk Cargo means cargo that is loaded and carried in bulk without 
mark or count.
    Chapter 121 means the vessel documentation provisions of chapter 
121 of title 46, United States Code.
    Citizen of the United States means an individual who is a United 
States citizen, or a corporation, partnership or association as 
determined under section 2 of the Shipping Act, 1916, as amended (46 
App. U.S.C. 802).
    Commander means Commander, USTRANSCOM, who is authorized by the 
Secretary of Defense to administer the MSA 2003, in consultation with 
the Administrator.
    Contracting Officer means the Associate Administrator for National 
Security, MARAD.
    Contractor means the owner or operator of a vessel that enters into 
an

[[Page 43331]]

MSP Operating Agreement for the vessel with the Secretary of 
Transportation (acting through MARAD) pursuant to section 53103 of the 
MSA 2003.
    Documentation Citizen means an entity able to document a vessel 
under 46 U.S.C. chapter 121. This definition includes a trust.
    DOD means the U.S. Department of Defense.
    Domestic Trade means trade between two or more ports and/or points 
in the United States.
    Eligible Vessel means a vessel that meets the requirements of 
section 53102(b) of the MSA 2003.
    Emergency Preparedness Agreement (EPA) means the agreement, 
required by section 53107 of the MSA 2003, between a Contractor and the 
Secretary of Transportation (acting through MARAD) to make certain 
commercial transportation resources available during time of war or 
national emergency or whenever determined by the Secretary of Defense 
to be necessary for national security or contingency operation.
    Enrollment means the entry into an MSP Operating Agreement with 
MARAD to operate a vessel(s) in the MSP Fleet in accordance with Sec.  
296.30.
    Fiscal Year means any annual period beginning on October 1 and 
ending on September 30.
    Fleet means the Maritime Security Program Fleet established under 
section 53102(a) of the MSA 2003.
    Foreign Commerce means:
    (1) For any vessel other than a liquid or a dry bulk carrier, a 
cargo freight service, including direct and relay service, operated 
exclusively in the foreign trade or in mixed foreign and domestic trade 
allowed under a registry endorsement under section 12105 of title 46, 
United States Code, where the origination point or the destination 
point of cargo carried is the United States, regardless of whether the 
vessel provides direct service between the United States and a foreign 
country, or commerce or trade between foreign countries; and
    (2) For liquid and dry bulk cargo carrying services, trading 
between foreign ports in accordance with normal commercial bulk 
shipping practices in such manner as will permit United States-
documented vessels to freely compete with foreign-flag bulk carrying 
vessels in their operation or in competing for charters.
    LASH Vessel means a lighter aboard ship vessel.
    Militarily Useful is defined, in terms of minimum military 
capabilities, according to DOD Joint Strategic Planning Capabilities 
Plan (JSCAP) guidance.
    MSP Fleet means the fleet of vessels operating under MSP Operating 
Agreements.
    MSP Operating Agreement means the agreement between a Contractor 
and MARAD that provides for MSP payments.
    MSP Payments means the payments made for the operation of U.S.-flag 
vessels in the foreign commerce.
    Noncontiguous Domestic Trade means transportation of cargo between 
a point in the contiguous 48 states and a point in Alaska, Hawaii, or 
Puerto Rico, other than a point in Alaska north of the Arctic Circle.
    Operating Day means any calendar day during which a vessel is 
operated in accordance with the terms and conditions of the MSP 
Operating Agreement.
    Operator is a person that either owns a vessel or charters in a 
vessel at a financial risk through a demise charter that transfers 
virtually all the rights and obligations of the vessel owner to the 
vessel operator, such as that of crewing, supplying, maintaining, 
insuring and navigating the vessel.
    Owner means an entity that has title and/or beneficial ownership of 
a vessel. Only an owner that is a person is eligible to enter into an 
MSP Operating Agreement.
    Participating Fleet Vessel means any vessel that:
    (1) On October 1, 2005--
    (i) Meets the citizenship requirements of paragraph (1), (2), (3), 
or (4) of section 53102(c) of the MSA 2003;
    (ii) Is less than 25 years of age, or is less than 30 years of age 
in the case of a LASH vessel; and
    (2) On December 31, 2004, is covered by an MSP Operating Agreement.
    Person includes corporations, limited liability companies, 
partnerships, and associations existing under or authorized by the laws 
of the United States, or any State, Territory, District, or possession 
thereof, or of any foreign country. A trust is not a person.
    Roll-on/Roll-off Vessel means a vessel that has ramps allowing 
cargo to be loaded and discharged by means of wheeled vehicles so that 
cranes are not required.
    SecDef means Secretary of Defense acting through the Commander 
USTRANSCOM.
    Secretary means the Secretary of Transportation acting through the 
Maritime Administrator.
    Section 2 Citizen means a United States citizen within the meaning 
of section 2 of the Shipping Act, 1916, 46 U.S.C. 802, without regard 
to any statute that ``deems'' a vessel to be owned and operated by a 
Section 2 citizen.
    Tank Vessel means, as stated in 46 U.S.C. 2101(38), a self-
propelled tank vessel that is constructed or adapted to carry, or that 
carries, oil or hazardous material in bulk as cargo or cargo residue. 
In addition, the vessel must be double hulled and capable of carrying 
simultaneously more than two separated grades of refined petroleum 
products.
    Transfer of an MSP Operating Agreement includes any sale, 
assignment or transfer of the MSP Operating Agreement, either directly 
or indirectly, or through any sale, reorganization, merger, or 
consolidation of the MSP Contractor.
    United States includes the 50 U.S. states, the District of 
Columbia, the Commonwealth of Puerto Rico, the Northern Mariana 
Islands, Guam, American Samoa, and the Virgin Islands.
    United States Citizen Trust means:
    (1) Subject to paragraph (3), a trust that is qualified under this 
definition.
    (2) A trust is qualified only if:
    (i) Each of the trustees is a citizen of the United States under 
section 2 of the Shipping Act, 1916, as amended; and
    (ii) The application for documentation of the vessel under 46 
U.S.C. chapter 121, includes the affidavit of each trustee stating that 
the trustee is not aware of any reason involving a beneficiary of the 
trust that is not a citizen of the United States, or involving any 
other person that is not a citizen of the United States, as a result of 
which the beneficiary or other person would hold more than 25 percent 
of the aggregate power to influence or limit the exercise of the 
authority of the trustee with respect to matters involving any 
ownership or operation of the vessel that may adversely affect the 
interests of the United States.
    (3) If any person that is not a citizen of the United States has 
authority to direct or participate in directing a trustee for a trust 
in matters involving any ownership or operation of the vessel that may 
adversely affect the interests of the United States or in removing a 
trustee for a trust without cause, either directly or indirectly 
through the control of another person, the trust instrument provides 
that persons who are not citizens of the United States may not hold 
more than 25 percent of the aggregate authority to so direct or remove 
a trustee.
    (4) This definition shall not be considered to prohibit a person 
who is not a citizen of the United States from holding more than 25 
percent of the beneficial interest in a trust.

[[Page 43332]]

    United States Documented Vessel means a vessel documented under 46 
U.S.C. chapter 121.


Sec.  296.3  Applications.

    (a) Action by MARAD.--Time deadlines. Applications for enrollment 
of vessels in the MSP are due by October 15, 2004 to the Secretary, 
Maritime Administration, Room 7218, Maritime Administration, U.S. 
Department of Transportation, 400 Seventh Street, SW., Washington, D.C. 
20590. If, for any reason, after the award of an Operating Agreement, 
the Contractor is unwilling or unable to enter into an MSP Operating 
Agreement, MARAD may award that contract to an Applicant having an 
eligible vessel that applied but was not awarded an MSP Operating 
Agreement. MARAD may also open a new round of applications at a later 
date. Any applications received before October 15, 2004 shall be deemed 
to have been submitted on October 15, 2004. Within 90 days after 
receipt of a completed application, the Secretary shall approve the 
application, in conjunction with the SecDef, or provide in writing the 
reason for denial of that application. Execution of a standard MSP 
Operating Agreement shall take place reasonably soon after approval of 
the application.
    (b) Action by the applicant. Each applicant for an MSP Operating 
Agreement shall submit an application under OMB control number 2133-
0525 to the Secretary, Maritime Administration in the manner prescribed 
on that form. Applicants may request an application form from MARAD's 
Office of Sealift Support, or the application form can be downloaded 
from the MARAD Web site, www.marad.dot.gov, and completed using 
Microsoft Word. Completed forms must be received by MARAD no later than 
close of business (5 p.m. Eastern Time) on October 15, 2004, and may be 
submitted in person, by U.S. mail, Federal Express, United Parcel 
Service, or DHL. Information required shall include:
    (1) An affidavit of U.S. citizenship that comports with the 
requirements of 46 CFR part 355, if applying as a Section 2 citizen. 
Otherwise, an affidavit which demonstrates that the applicant is 
qualified to document a vessel under 46 U.S.C. chapter 121. If the 
applicant is a vessel operator and proposes to employ a vessel manager, 
then an affidavit of U.S. citizenship meeting the same requirements as 
applicable to the operator is required from the vessel manager;
    (2) Certificate of Incorporation;
    (3) Copies of by-laws or other governing instruments;
    (4) Maritime related affiliations;
    (5) Financial data:
    (i) Provide an audited financial statement or a completed MARAD 
Form MA-172 dated within 120 days after the close of the most recent 
fiscal period; and
    (ii) Provide estimated annual forecast of maritime operations for 
the next five years showing revenue and expense, including explanations 
of any significant increase or decrease of these items;
    (6) Intermodal network:
    (i) If applicable, a statement describing the applicant's operating 
and transportation assets, including vessels, container stocks, trucks, 
railcars, terminal facilities, and systems used to link such assets 
together;
    (ii) The number of containers and their twenty-foot equivalent 
units (TEUs) by size and type owned and/or long-term leased by the 
applicant distinguishing those that are owned from those that are 
leased; and
    (iii) The number of chassis by size and type owned and/or long-term 
leased by the applicant distinguishing those that are owned from those 
that are leased;
    (7) Diversity of trading patterns: A list of countries and trade 
routes serviced along with the types and volumes of cargo carried;
    (8) Applicant's record of owning and/or operating vessels: Provide 
number of ships owned and/or operated, specifying flag, in the last ten 
years, trades involved, number of employees in your ship operations 
department, vessel or ship managers utilized in the operation of your 
vessels, and any other information relevant to your record of owning or 
operating vessels;
    (9) Bareboat charter arrangements, if applicable;
    (10) Vessel data including vessel type, size, and construction 
date;
    (11) Military Utility: An assessment of the value of the vessel to 
DOD sealift requirements. Provide characteristics which indicate the 
value of the vessels to DOD including items of specific value, e.g., 
ramp strengths, national defense sealift features;
    (12) Special Security Agreements: If applicable, provide a copy of 
your Special Security Agreement;
    (13) If applicable, Certification from documentation citizen who is 
the demise charterer of the MSP vessel: In a letter submitted at the 
time of the application addressed to the Administrator and the 
Commander from the Chief Executive Officer, or equivalent, of a 
documentation citizen that is the proposed Contractor of an MSP 
Operating Agreement, provide a statement that there are no treaties, 
statutes, regulations, or other laws of the foreign country of the 
parent, that would prohibit the proposed Contractor from performing its 
obligations under an MSP Operating Agreement. The statement should be 
substantially in the following format:

    ``I, ------------, Chief Executive Officer of ------------, 
certify to you that there are no treaties, statutes, regulations, or 
other laws of the foreign country(ies) of ------------'s ultimate 
foreign parent or intermediate parents that would prohibit --------
---- from performing its obligations under an Operating Agreement 
with the Maritime Administration pursuant to the Maritime Security 
Act of 2003.'';

    (14) Agreement from the ultimate foreign parent of the 
documentation citizen: An agreement to be signed and submitted at the 
time of application from the equivalent of the Chief Executive Officer 
of the ultimate foreign parent of a documentation citizen not to 
influence the operation of the MSP vessel in a manner that will 
adversely affect the interests of the United States. The Agreement 
should be substantially in the following format:

    ``I, ------------, am the Chief Executive Officer [or 
equivalent] of ------------, the ultimate foreign parent of --------
----, a documentation citizen of the United States that is applying 
for an MSP Operating Agreement. I agree on behalf of the ``foreign 
parent'' that neither ------------ (the ultimate foreign parent) nor 
any representative of ------------ (the ultimate foreign parent) 
will in any way influence the operation of the MSP vessel in a 
manner that will adversely affect the interests of the United 
States.'';

    (15) Replacement vessel plan and age waiver: If applicable, an 
applicant must submit a replacement vessel plan along with an age 
waiver request if the applicant seeks an age waiver for an existing 
vessel(s). Arrangements to obtain replacements for over-age vessel(s) 
must be approved by the Secretary at the same time as the application 
for an MSP Operating Agreement. The age restriction for over-age 
vessels shall not apply to a Participating Fleet Vessel during the 30-
month period beginning on the date the vessel begins operating under an 
MSP Operating Agreement under the MSA 2003 provided that the Secretary 
has determined that the Contractor has entered into an arrangement for 
a replacement vessel that will be eligible to be included in an MSP 
Operating Agreement, and;
    (16) Anti-Lobbying Certificate: A certificate as required by 49 CFR 
part 20

[[Page 43333]]

stating that no funds provided under MSP have been used for lobbying to 
obtain an Operating Agreement.

(Approved by the Office of Management and Budget under Control 
Number 2133-0525)


Sec.  296.4  Waivers.

    In general. In special circumstances, and for good cause shown, the 
procedures prescribed in this part may by waived in writing by the 
Secretary, by mutual agreement of the Secretary in consultation with 
the SecDef, and the Contractor, so long as the procedures adopted are 
consistent with the MSA 2003 and with the objectives of these 
regulations.

Subpart B--Eligibility


Sec.  296.10  Citizenship requirements of owners, charterers and 
operators.

    Citizenship requirements are deemed to have been met if during the 
period of an operating agreement under this chapter that applies to the 
vessel, all of the conditions of any of the paragraphs (a), (b), (c), 
or (d) of this section are met, and subject to conditions in paragraph 
(e):
    (a) A vessel to be included in an MSP Operating Agreement is owned 
and operated by one or more persons that are citizens of the United 
States under section 2 of the Shipping Act, 1916 (46 App. U.S.C. 
802)(Section 2 citizens).
    (b) A vessel to be included in an MSP Operating Agreement is owned 
by a person that is a Section 2 citizen or a United States Citizen 
Trust, and the vessel is demise chartered to a person--
    (1) That is eligible to document the vessel under 46 U.S.C. chapter 
121;
    (2) Whose chairman of the board of directors, chief executive 
officer, and a majority of the members of the board of directors are 
Section 2 citizens; and are appointed and subjected to removal only 
upon approval by the Secretary as follows:
    (i) Proposed changes to the chairman of the board, chief executive 
officer, and membership of the board of directors must be submitted to 
the Administrator 60 days before scheduled to take effect; and
    (ii) MARAD must approve or disapprove changes within 30 days of 
receiving the proposed changes;
    (3) That certifies to the Secretary in a format substantially 
similar to the format at Sec.  296.3(b)(13) that there are no treaties, 
statutes, regulations, or other laws that would prohibit the Contractor 
from performing its obligations under an Operating Agreement at the 
time of application for an MSP Operators Agreement; and
    (4) The ultimate foreign parent of that person proffers, at the 
time of application for an MSP Operating Agreement, an agreement in a 
format substantially similar to the format at Sec.  296.3(b)(14) not to 
influence the vessel's operation in a way that is detrimental to the 
United States.
    (c) A vessel to be included in an MSP Operating Agreement is owned 
by a defense contractor who is a person that:
    (1) Is eligible to document the vessel under 46 U.S.C. chapter 121;
    (2) Operates or manages other United States-documented vessels for 
the SecDef, or charters other vessels to the SecDef;
    (3) Has entered into a special security agreement with the SecDef;
    (4) Certifies to the Secretary, at the time of application, in a 
format substantially similar to the format of Sec.  296.3(b)(13), that 
there are no treaties, statutes, regulations, or other laws that would 
prohibit the Contractor from performing its obligations under an 
Operating Agreement; and
    (5) Has its ultimate foreign parent proffer, at the time of 
application for an MSP Operating Agreement, an agreement in a format 
substantially similar to the format of Sec.  296.3(b)(14) not to 
influence the vessel's operation in a way that is detrimental to the 
United States.
    (d) The vessel is owned by a documentation citizen and demise 
chartered to a Section 2 citizen.
    (e) Where applicable, the Secretary and the SecDef shall notify the 
Senate Committees on Armed Services, and Commerce, Science, and 
Transportation and the House of Representatives Committee on Armed 
Services that they concur with the certifications by the documentation 
citizens under Sec.  296.3(b)(13) and that they have reviewed the 
agreements proffered by the ultimate foreign parent under Sec.  
296.3(b)(14), and agree that there are no other legal, operational, or 
other impediments that would prohibit the contractors for the vessels 
from performing their obligations under MSP Operating Agreements.


Sec.  296.11  Vessel requirements.

    (a) Eligible vessel. A vessel is eligible to be included in an MSP 
Operating Agreement if:
    (1) The vessel is:
    (i) Determined by the SecDef to be suitable for use by the United 
States for national defense or military purposes in time of war or 
national emergency; and
    (ii) Determined by the Secretary to be commercially viable;
    (2) The vessel is operated or, in the case of a vessel to be 
purchased or constructed, will be operated to provide transportation in 
the foreign commerce of the United States;
    (3) The vessel is self-propelled and is:
    (i) A Roll-on/Roll-off vessel with a carrying capacity of at least 
80,000 square feet or 500 twenty-foot equivalent units and is 15 years 
of age or less on the date the vessel is included in the MSP;
    (ii) A tank vessel that is constructed in the United States after 
November 24, 2003;
    (iii) A tank vessel that is 10 years of age or less on the date the 
vessel is included in the MSP Fleet;
    (iv) A LASH vessel that is 25 years of age or less on the date the 
vessel is included in the fleet; or
    (v) Any other type of vessel that is 15 years of age or less on the 
date the vessel is included in the fleet;
    (4) The vessel is:
    (i) A United States documented vessel under 46 U.S.C. chapter 121; 
or
    (ii) Not a United States-documented vessel under 46 U.S.C. chapter 
121, but the owner of the vessel has demonstrated an intent to have the 
vessel documented under 46 U.S.C. chapter 121 at the time the vessel is 
to be included in the MSP fleet; and
    (5) The vessel is eligible for a certificate of inspection if the 
Secretary of the Department in which the United States Coast Guard is 
operating determines that:
    (i) The vessel is classed and designed in accordance with the rules 
of the American Bureau of Shipping (ABS) or another classification 
society accepted by such Secretary;
    (ii) The vessel complies with applicable international agreements 
and associated guidelines as determined by the country in which the 
vessel was documented immediately before becoming a U.S.-flag vessel; 
and
    (iii) The flag country has not been identified by such Secretary as 
inadequately enforcing international vessel regulations.
    (b) Waiver of age restriction of vessels. The SecDef, in 
conjunction with the Secretary, may waive the age restriction in 
paragraph (a) of this section if the Secretaries jointly determine that 
the waiver:
    (1) Is in the national interest;
    (2) Is appropriate to allow the maintenance of the economic 
viability of the vessel and any associated operating network; and
    (3) Is necessary due to the lack of availability of other vessels 
and operators that comply with the requirements of the MSA 2003.


Sec.  296.12  Applicants.

    Applicant. Owners or operators of an eligible vessel may apply to 
MARAD for inclusion of that vessel in the MSP Fleet

[[Page 43334]]

pursuant to the provisions of the MSA 2003. Applications shall be 
addressed to the Secretary, Maritime Administration, Room 7218, 
Maritime Administration, U.S. Department of Transportation, 400 Seventh 
Street, SW., Washington, DC 20590.

Subpart C--Priority for Granting Applications


Sec.  296.20  Tank vessels.

    (a) First priority for the award of MSP Operating Agreements under 
MSA 2003 shall be granted to a tank vessel that is constructed in the 
United States after October 1, 2004.
    (b) First priority for the award of MSP Operating Agreements under 
the MSA 2003 may be granted to a tank vessel that is less than ten 
years of age on the date it enters an MSP Operating Agreement:
    (1) Provided that a binding contract for a replacement vessel to be 
operated under the MSP Operating Agreement and to be built in the 
United States has been executed and approved by the Secretary not later 
than nine months after the first date appropriated funds are available 
for construction assistance; and
    (2) No payment can be made for an existing tank vessel granted 
priority one status after the earlier of:
    (i) Four years after the first date appropriated funds are 
available to carry out the construction of a tanker in the United 
States; or
    (ii) The date of delivery of the replacement tank vessel.
    (c) A tank vessel under this section must be eligible to be 
included in the MSP under Sec.  296.11(a);
    (d) A tank vessel under this section must be owned and operated 
during the period of the operating agreement by one or more persons 
that are citizens of the United States under section 2 of the Shipping 
Act of 1916 (46 App. U.S.C. 802); and
    (e) The Secretary will not enter into more than five Operating 
Agreements for tank vessels under this priority. If the five tank 
vessel Operating Agreement slots are not fully subscribed, the 
Secretary, in consultation with the SecDef, may award the non-
subscribed slots to lower priority vessels, if deemed appropriate. If 
the Secretary determines that no funds are, or are likely to be, 
allocated for any tank vessel construction in the United States, the 
five slots may be awarded permanently to non-tank vessels. The 
Secretary may temporarily award a slot reserved for a tank vessel under 
construction to a lower priority vessel during the construction period 
of that vessel if an existing tank vessel offered by the tank vessel 
Contractor is not eligible for priority for that slot. If no existing 
tank vessel is offered by the tank vessel Contractor, the Secretary may 
temporarily award an MSP Operating Agreement to a non-tank vessel of 
another Contractor until a new tank vessel's construction is completed 
in the United States. Such temporary agreements shall be terminated at 
the convenience of the Secretary under terms set forth in the temporary 
MSP Operating Agreement.


Sec.  296.21  Participating Fleet Vessels.

    (a) Priority. To the extent that appropriated funds are available 
after applying the first priority, tank vessels, in Sec.  296.20, the 
second priority is applicable to Participating Fleet Vessels.
    (b) Number of Operating Agreements. MARAD will not enter into more 
than 47 Operating Agreements for Participating Fleet Vessels.
    (c) Reduction of Participating Fleet Vessel Operating Agreements. 
The number of Operating Agreements available to Participating Fleet 
Vessels shall be reduced by one for:
    (1) Each Participating Fleet Vessel for which an application for 
enrollment in the MSP is not received by the Secretary, Maritime 
Administration on October 15, 2004; or
    (2) Each Participating Fleet Vessel for which an application for 
enrollment in the MSP is received by the Secretary, Maritime 
Administration on October 15, 2004, but the application is not approved 
by the Secretary of Transportation and the SecDef by January 12, 2005.
    (d) Authority to enter into an Operating Agreement. (1) 
Applications for inclusion of a Participating Fleet Vessel under the 
priority in paragraph (a) of this section will be accepted only from a 
person that has authority to enter into an MSP Operating Agreement for 
the vessel with respect to the full term of the Operating Agreement. 
Applicants must certify that they have the requisite authority and 
provide the basis on which they rely for such certification, such as a 
copy of a vessel title of ownership or a demise charter.
    (2) The full term of the Operating Agreement is the period from 
October 1, 2005 through September 30, 2015. If a vessel proposed to be 
included in the MSP will become ineligible for the program prior to 
September 30, 2015, due to vessel age restrictions, then the full term 
of the Operating Agreement for that vessel for purposes of paragraph 
(d)(1) of this section is the period the vessel meets the applicable 
age restrictions. MARAD may still award an operating agreement through 
September 30, 2015, to an applicant having authority to enter into an 
MSP Operating Agreement for a vessel whose age eligibility expires 
before that date, provided an appropriate replacement vessel is 
approved by MARAD.
    (3) For the purposes of paragraph (d)(1) of this section, in the 
case of a vessel that is subject to a demise charter that terminates by 
its terms on September 30, 2005 (without giving effect to any extension 
provided therein for completion of a voyage or to effect the actual 
redelivery of the vessel), or that is terminable at will by the owner 
of the vessel after such date, only the owner of the vessel (provided 
the owner of the vessel is a ``person'' as defined in Sec.  296.2) 
shall be treated as having the authority referred to in paragraph 
(d)(1) of this section.
    (4) If two or more applicants claim authority for the same vessel, 
the Secretary may request additional information bearing on the issue 
of which party has authority to enter into an Operating Agreement, and 
the Secretary shall, in his/her sole discretion, decide the matter as 
he/she deems appropriate.
    (e) During the 30-month period commencing October 1, 2005, the age 
restrictions set forth under Sec.  296.11(a) and Sec.  296.41(c) do not 
apply to a Participating Fleet Vessel operating under an MSP Operating 
Agreement, provided:
    (1) The Contractor has entered into an arrangement to obtain and 
operate under that MSP Operating Agreement a replacement vessel for 
that Participating Fleet Vessel; and
    (2) The Secretary determines that the replacement vessel will be 
eligible to be included in the MSP Fleet under Sec.  296.11(a).


Sec.  296.22  Other vessels.

    (a) Third priority. To the extent that appropriated funds are 
available after applying the first priority, tank vessels, in Sec.  
296.20, and the second priority, Participating Fleet Vessels, in Sec.  
296.21, the third priority is for any other vessel that is eligible to 
be included in an MSP Operating Agreement under Sec.  296.11(a), and 
that, during the period of that Agreement, will be:
    (1) Owned and operated by one or more persons that are citizens of 
the United States under section 2 of the Shipping Act, 1916 (46 App. 
U.S.C. 802); or
    (2) Owned by a person that is eligible to document the vessel under 
46 U.S.C. chapter 121 and operated by a person that is a citizen of the 
United States

[[Page 43335]]

under section 2 of the Shipping Act, 1916 (46 App. U.S.C. 802).
    (b) Fourth priority. To the extent that appropriations are 
available after applying the first priority in Sec.  296.20, the second 
priority in Sec.  296.21, and the third priority in paragraph (a) of 
this section, the fourth priority is for any other vessel that is 
eligible to be included in an MSP Operating Agreement under Sec.  
296.11(a).
    (c) Discretion within priority. The Secretary--
    (1) Subject to paragraph (c)(2) of this section, may award 
operating agreements within each priority as the Secretary considers 
appropriate; and
    (2) Shall award Operating Agreements within a priority--
    (i) In accordance with operational requirements specified by the 
SecDef;
    (ii) In the cases of the priorities listed in paragraphs (a) and 
(b) of this section, according to the applicants' records of owning and 
operating vessels; and
    (iii) Subject to the approval of the SecDef.

Subpart D--Maritime Security Program Operating Agreements


Sec.  296.30  General conditions.

    (a) Approval. (1) The Secretary, in conjunction with the SecDef, 
may approve applications to enter into an MSP Operating Agreement and 
make MSP Payments with respect to vessels that are determined by the 
Secretary to be commercially viable and those that are deemed by the 
SecDef to be militarily useful for meeting the sealift needs of the 
United States in time of war or national emergencies. The Secretary 
will announce an initial award of no more than 60 MSP Operating 
Agreements and announce those applications deemed ineligible by January 
12, 2005. In addition, the Secretary will advise those applicants found 
to be eligible but not included in the initial award that those 
applicants will be wait-listed for an award of an MSP Operating 
Agreement if additional slots become available.
    (2) The Commander will establish general evaluation criteria for 
operational requirements for considering replacement vessels described 
in Sec.  296.21(e), and for vessels eligible under the third and fourth 
priorities described in Sec.  296.22. These general evaluation criteria 
will be made available by the Commander in sufficient time for 
preparing applications.
    (b) Effective date. (1) General rule. Unless otherwise provided, 
the effective date of an MSP Operating Agreement is October 1, 2005.
    (2) Exceptions. In the case of an Eligible Vessel to be included in 
an MSP Operating Agreement that is on charter to the U.S. Government, 
other than a charter under the provisions of an Emergency Preparedness 
Program Agreement provided by section 53107 of the MSA 2003, unless an 
earlier date is requested by the applicant, the effective date for an 
MSP Operating Agreement shall be:
    (i) The expiration or termination date of the Government charter 
covering the vessel; or
    (ii) Any earlier date on which the vessel is withdrawn from that 
charter, but not before October 1, 2005.
    (c) Replacement vessels. A Contractor may replace an MSP vessel 
under an MSP Operating Agreement with another vessel that is eligible 
to be included in the MSP under Sec.  296.11(a), if the Secretary, in 
conjunction with the SecDef, approves the replacement vessel. The 
replacement vessel must qualify with the same or with more militarily 
useful capability as the MSP vessel to be replaced for operational 
requirements as determined by the Commander.
    (d) Termination by the Secretary. If the Contractor materially 
fails to comply with the terms of the MSP Operating Agreement:
    (1) The Secretary shall notify the Contractor and provide a 
reasonable opportunity for the Contractor to comply with the MSP 
Operating Agreement;
    (2) The Secretary shall terminate the MSP Operating Agreement if 
the Contractor fails to achieve such compliance; and
    (3) Upon such termination, any funds obligated by the relevant MSP 
Operating Agreement shall be available to the Secretary to carry out 
this chapter.
    (e) Early termination by Contractor, generally. An MSP Operating 
Agreement shall terminate on a date specified by the Contractor if the 
Contractor notifies the Secretary not later than 60 days before the 
effective date of the proposed termination that the Contractor intends 
to terminate the Agreement. The Contractor shall be bound by the 
provisions relating to vessel documentation and national security 
commitments, and by its Emergency Preparedness Agreement for the full 
term, from October 1, 2005 through September 30, 2015, of the MSP 
Operating Agreement.
    (f) Early termination by Contractor, with available replacement. An 
MSP Operating Agreement shall terminate without further obligation on 
the part of the Contractor upon the expiration date of the three-year 
period beginning on the date a vessel begins operating under the MSP, 
if:
    (1) The Contractor notifies the Secretary, by not later than two 
years after the date the vessel begins operation under an MSP Operating 
Agreement, that the Contractor intends to terminate the Agreement; and
    (2) The Secretary, in conjunction with the SecDef, determines that:
    (i) An application for an MSP Operating Agreement has been received 
for a replacement vessel that is acceptable to the Secretaries; and
    (ii) During the period of an MSP Operating Agreement that applies 
to the replacement vessel, the replacement vessel will be:
    (A) Owned and operated by one or more persons that are citizens of 
the United States under section 2 of the Shipping Act, 1916 (46 App. 
U.S.C. 802); or
    (B) Owned by a person that is a Documentation Citizen and operated 
by a person that is a citizen of the United States under section 2 of 
the Shipping Act, 1916 (46 App. U.S.C. 802).
    (g) Non-renewal for lack of funds. If, by the first day of a fiscal 
year, sufficient funds have not been appropriated under the authority 
of MSA 2003 for that fiscal year, the Secretary shall notify the 
Senate's Committees on Armed Services and Commerce, Science, and 
Transportation, and the House of Representatives' Committee on Armed 
Services, that MSP Operating Agreements for which sufficient funds are 
not available, will not be renewed for that fiscal year if sufficient 
funds are not appropriated by the 60th day of that fiscal year. If only 
partial funding is appropriated by the 60th day of such fiscal year, 
then the Secretary, in consultation with the SecDef, shall select the 
vessels to retain under MSP Operating Agreements, based on the 
Secretaries' determinations of the most militarily useful and 
commercially viable vessels. In the event that no funds are 
appropriated, then all MSP Operating Agreements shall be terminated 
and, each Contractor shall be released from its obligations under the 
MSP Operating Agreement. Final payments under the terminated agreements 
shall be made in accordance with Sec.  296.41. To the extent that funds 
are appropriated in a subsequent fiscal year, former operating 
agreements may be reinstated if mutually acceptable to the 
Administrator and the Contractor provided the MSP vessel remains 
eligible.
    (h) Release of vessels from obligations: If an MSP Operating 
Agreement is terminated by the Contractor, with available replacement

[[Page 43336]]

under paragraph (f) of this section, or if sufficient funds are not 
appropriated for payments under an MSP Operating Agreement for any 
fiscal year by the 60th day of that fiscal year, then--
    (1) Each vessel covered by the terminated MSP Operating Agreement 
is released from any further obligation under the MSP Operating 
Agreement;
    (2) The owner and operator of a non-tank vessel may transfer and 
register the applicable vessel under a foreign registry deemed 
acceptable by the Secretary and the SecDef, notwithstanding section 9 
of the Shipping Act, 1916 (46 App. U.S.C. 808) and 46 CFR part 221;
    (3) The owner and operator of a tank vessel must formally apply to 
MARAD pursuant to section 9 of the Shipping Act, 1916 to transfer and 
register the vessel under a foreign registry; and
    (4) If section 902 of the Act is applicable to a vessel that has 
been transferred to a foreign registry due to a terminated MSP 
Operating Agreement, then that vessel is available to be requisitioned 
by the Secretary pursuant to section 902 of the Act.
    (5) Paragraph (h) of this section is not applicable to vessels 
under MSP Operating Agreements that have been terminated for any other 
reason.
    (i) Foreign transfer of vessel. A Contractor may transfer a non-
tank vessel to a foreign registry, without approval of the Secretary, 
if the Secretary, in conjunction with the SecDef, determines that the 
contractor will provide a replacement vessel:
    (1) Of equal or greater military capability or of a capacity that 
is equivalent or greater as measured in deadweight tons, gross tons, or 
container equivalent units, as appropriate;
    (2) That is a documented vessel under 46 U.S.C. chapter 121 by the 
owner of the vessel to be placed under a foreign registry; and
    (3) That is not more than 10 years of age on the date of that 
documentation.
    (j) Transfer of Operating Agreements. A Contractor subject to an 
MSP Operating Agreement may transfer that Agreement (including all 
rights and obligations under that Agreement) to any person eligible to 
enter into an Operating Agreement under Sec.  296.10 provided that 
prior approval to transfer the Agreement is granted by the Secretary 
and the SecDef. The Contractor should allow at least 90 days for 
processing of a transfer request.


Sec.  296.31  MSP assistance conditions.

    (a) Term of MSP Operating Agreement. MSP Operating Agreements are 
authorized for ten years, starting on October 1, 2005 and ending on 
September 30, 2015, but payments to Contractors are subject to annual 
appropriations each fiscal year. MARAD may enter into MSP Operating 
Agreements for a period less than the full term authorized under the 
MSA 2003.
    (b) Terms under a Continuing Resolution (CR). In the event funds 
are available under a CR, the terms and conditions of the MSP Operating 
Agreements shall be in force provided sufficient funds are available to 
fully meet obligations under MSP Operating Agreements, and only for the 
period stipulated in the applicable CR. If funds are not appropriated 
at sufficient levels for any portion of a fiscal year, the Secretary 
shall determine to which MSP Operating Agreement to apply the available 
funds. With regard to an MSP Operating Agreement that does not receive 
funds, the terms and conditions of any applicable MSP Operating 
Agreement may be voided and the Contractor may request termination of 
the MSP Operating Agreement.
    (c) National security requirements. Each MSP Operating Agreement 
shall require the owner or operator of an Eligible Vessel included in 
that agreement to enter into an EPA pursuant to section 53107 of the 
MSA 2003. The EPA shall be a document incorporating the terms of the 
Voluntary Intermodal Sealift Agreement (VISA), as approved by the 
Secretary and the SecDef, or other agreement approved by the 
Secretaries.
    (d) Vessel operating agreements. The MSP Operating Agreement shall 
require that during the period an Eligible Vessel is included in that 
Agreement, the Eligible Vessel shall:
    (1) Documentation: Be documented as a U.S.-flag vessel under 46 
U.S.C. chapter 121;
    (2) Operation: Be operated exclusively in the U.S.-foreign trade or 
in mixed foreign and domestic trade allowed under a registry 
endorsement issued under 46 U.S.C. 12105, except for tankers, which may 
be operated in foreign-to-foreign commerce, and shall not otherwise be 
operated in the coastwise trade of the United States; and
    (3) Noncontiguous domestic trade: Not receive MSP payments during a 
period in which the Contractor participates in noncontiguous domestic 
trade unless the Contractor is a citizen within the meaning of section 
2(c) of the Shipping Act, 1916.
    (e) Obligation of the U.S. Government. The amounts payable as MSP 
payments under an MSP Operating Agreement shall constitute a 
contractual obligation of the United States Government to the extent of 
available appropriations.
    (f) U.S. Merchant Marine Academy cadets. The MSP Operator shall 
agree to carry two U.S. Merchant Marine Academy cadets, if available, 
on each voyage.


Sec.  296.32  Reporting requirements.

    The Contractor shall submit to the Director, Office of Financial 
and Rate Approvals, Maritime Administration, 400 Seventh St., SW., 
Washington, DC 20590, one of the following reports, including 
management footnotes where necessary to make a fair financial 
presentation:
    (a) Form MA-172: Not later than 120 days after the close of the 
Contractor's semiannual accounting period, a Form MA-172 on a 
semiannual basis, in accordance with 46 CFR 232.6; or
    (b) Financial Statement: Not later than 120 days after the close of 
the Contractor's annual accounting period, an audited financial 
statement in accordance with 46 CFR 232.6 and the most recent vessel 
operating cost data submitted as part of its Emergency Preparedness 
Agreement.

(Approved by the Office of Management and Budget under Control 
Number 2133-0005.)

Subpart E--Billing and Payment Procedures


Sec.  296.40  Billing procedures.

    Submission of voucher. For contractors operating under more than 
one MSP Operating Agreement, the contractor may submit a single monthly 
voucher applicable to all its agreements. Each voucher submission shall 
include a certification that the vessel(s) for which payment is 
requested were operated in accordance with Sec.  296.31(d) and 
applicable MSP Operating Agreements with MARAD, and consideration shall 
be given to reductions in amounts payable as set forth in Sec.  
296.41(b) and (c). All submissions shall be forwarded to the Director, 
Office of Accounting, MAR-330, Room 7325, Maritime Administration, 400 
Seventh Street, SW., Washington, DC 20590. Payments shall be paid and 
processed under the terms and conditions of the Prompt Payment Act, 31 
U.S.C. 3901.


Sec.  296.41  Payment procedures.

    (a) Amount payable. An MSP Operating Agreement shall provide, 
subject to the availability of appropriations and to the extent the 
agreement is in effect, for each Agreement Vessel, an annual payment of 
up to $2,600,000 for FY 2006, FY 2007, FY 2008; $2,900,000 for FY 2009,

[[Page 43337]]

FY 2010, FY 2011; and $3,100,000 for FY 2012, FY 2013, FY 2014, FY 
2015. This amount shall be paid in equal monthly installments at the 
end of each month. The annual amount payable shall not be reduced 
except as provided in paragraphs (b) and (c) of this section.
    (b) Reductions in amount payable. (1) The annual amount otherwise 
payable under an MSP Operating Agreement shall be reduced on a pro rata 
basis for each day less than 320 in a fiscal year that an Agreement 
Vessel:
    (i) Is not operated exclusively in the U.S.-foreign trade or in 
mixed foreign and domestic trade allowed under a registry endorsement 
issued under 46 U.S.C. 12105, except for tank vessels, which may be 
operated in foreign-to-foreign commerce;
    (ii) Is operated in the coastwise trade; or
    (iii) Is not documented under 46 U.S.C. chapter 121.
    (2) To the extent that a Contractor operates MSP vessels less than 
320 days under the provisions of Sec.  296.31(d), payments will be 
reduced for each day less than 320 days.
    (c) No payment. (1) Regardless of whether the Contractor has or 
will operate for 320 days in a fiscal year, a Contractor shall not be 
paid:
    (i) For any day that an MSP Agreement Vessel is engaged in 
transporting more than 7,500 tons (using the U.S. English standard of 
short tons, which converts to 6,696.75 long tons, or 6,803.85 metric 
tons) of civilian bulk preference cargoes pursuant to section 901(a), 
901(b), or 901b of the Act, provided that it is bulk cargo;
    (ii) During a period in which the Contractor participates in 
noncontiguous domestic trade, unless that Contractor is a citizen of 
the United States within the meaning of section 2 of the Shipping Act, 
1916 (46 App. U.S.C. 802(c));
    (iii) While under charter to the United States Government other 
than a charter pursuant to an Emergency Preparedness Agreement under 
section 53107 of the MSA 2003. A voyage charter that is essentially a 
contract of affreightment will not be considered to be a charter;
    (iv) For a vessel in excess of 25 years of age, except for a LASH 
vessel in excess of 30 years of age or a tank vessel which is limited 
to 20 years of age, unless the vessel is a participating fleet vessel 
meeting the requirements of Sec.  296.21(e);
    (v) For days in excess of 30 days in a fiscal year in which a 
vessel is drydocked or undergoing survey, inspection, or repair unless 
prior to the expiration of the vessel's 30-day period, approval is 
obtained from MARAD for an extension beyond 30 days. Drydocking, 
survey, inspection, or repair periods of 30 days or less are considered 
operating days; and
    (vi) If the contracted vessel is not operated or maintained in 
accordance with the terms of the MSP Operating Agreement.
    (2) To the extent that non-payment days under paragraph (c) of this 
section are known, Contractor payments shall be reduced at the time of 
the current billing. The daily reduction amounts shall be based on the 
annual amounts in paragraph (a) of this section divided by 365 days 
(366 days in leap years) and rounded to the nearest cent. Daily 
reduction amounts shall be applied.
    (3) MARAD may require, for good cause, that a portion of the funds 
payable under this section be withheld if the provisions of Sec.  
296.31(d) have not been met.
    (4) Amounts owed to MARAD for reductions applicable to a prior 
billing period shall be electronically transferred using MARAD's 
prescribed format, or a check may be forwarded to the Maritime 
Administration, P.O. Box 845133, Dallas, Texas 75284-5133, or the 
amount owed can be credited to MARAD by offsetting amounts payable in 
future billing periods.

Subpart F--Appeals Procedures


Sec.  296.50  Administrative determinations.

    (a) Policy. A Contractor who disagrees with the findings, 
interpretations or decisions of the Contracting Officer with respect to 
the administration of this part may submit an appeal to the 
Administrator. Such appeals shall be made in writing to the Secretary, 
within 60 days following the date of the document notifying the 
Contractor of the administrative determination of the Contracting 
Officer. Such an appeal should be addressed to the Maritime 
Administrator, Attn.: MSP Contract Appeals, Maritime Administration, 
400 Seventh St., SW., Washington, DC 20590.
    (b) DOD determinations. The MSA 2003 assigns joint and separate 
roles and responsibilities to the Secretary and to the SecDef. The 
Administrator and the Commander will enter into an agreement describing 
the interagency process for making joint and separate findings, 
interpretations, and decisions necessary to implement the MSA 2003. A 
Contractor who disagrees with the initial findings, interpretations or 
decisions regarding the implementation of the MSA 2003--whether joint 
or separate in nature--shall communicate such disagreement to the 
Contracting Officer. Pursuant to the interagency agreement or other 
agreement of the Administrator and the Commander, any disagreement or 
dispute of a Contractor may, where appropriate, be transferred to the 
Director, Policy and Plans, U.S. Transportation Command (Director), for 
resolution. A Contractor who disagrees with the findings, 
interpretations, or decisions of the Director, with respect to the 
administration of this part, may submit an appeal to the Commander. 
Such an appeal shall be made in writing to the Commander within 60 days 
following the date of the document notifying the Contractor of the 
administrative determination of the Director. Such an appeal should be 
addressed to the Commander, U.S. Transportation Command, 508 Scott 
Drive, Scott Air Force Base, IL 62225-5357.
    (c) Process. The Administrator, or the Commander in the case of a 
DOD determination, may require the person making the request to furnish 
additional information, or proof of factual allegations, and may order 
any proceeding appropriate in the circumstances. The decision of the 
Administrator, or the Commander in the case of a DOD determination, 
shall be final.

Subpart G--Maintenance and Repair Reimbursement Pilot Program


Sec.  296.60  Applications.

    Section 3517, Subtitle A of Title XXXV establishes a five-year 
pilot program for MSP vessels to perform maintenance and repair (M&R) 
work in United States shipyards.
    (a) The M&R pilot program is authorized at $19.5 million per year 
for FYs 2006-2011.
    (b) The M&R pilot program is a voluntary program and MSP operators 
are not required to participate.
    (c) Subject to available funding, expenses are reimbursable at 80 
percent of the difference between the fair and reasonable costs of the 
repairs in a foreign shipyard in the geographic region in which the MSP 
vessel operates and the fair and reasonable costs of performing the 
repairs in a United States shipyard.
    (1) An MSP operator must apply at least 180 days in advance of 
anticipated M&R work.
    (2) The application must include estimates of M&R costs in the 
United States and outside the United States in the geographic region in 
which the MSP vessel operates.
    (d) MARAD has 60 days to notify the M&R applicant if the repair 
work meets the requirements of the M&R pilot program, if there is a 
shipyard in the

[[Page 43338]]

United States that can perform the approved repairs, and whether funds 
are available.
    (e) Qualified M&R work includes any required inspection and any M&R 
work determined in the course of an inspection that is necessary to 
comply with the laws of the United States.
    (f) Qualified M&R work does not include routine M&R or emergency 
M&R that is necessary to enable a vessel to return to a port in the 
United States.

    Dated: July 15, 2004.

    By Order of the Maritime Administrator.
Joel C. Richard,
Secretary, Maritime Administration.
[FR Doc. 04-16454 Filed 7-19-04; 8:45 am]
BILLING CODE 4910-81-P