[Federal Register Volume 70, Number 70 (Wednesday, April 13, 2005)]
[Proposed Rules]
[Pages 19376-19377]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-7436]


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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

46 CFR Part 67

[USCG-2003-14472]
RIN 1625-AA63

DEPARTMENT OF TRANSPORTATION

Maritime Administration

46 CFR Part 221

[Docket No. MARAD-2003-15171]
RIN 2133-AB51


Vessel Documentation: Lease Financing for Vessels Engaged in the 
Coastwise Trade; Second Rulemaking

AGENCIES: Coast Guard, DHS, and Maritime Administration, DOT.

ACTION: Joint notice of proposed rulemaking; withdrawal.

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SUMMARY: The Coast Guard and the Maritime Administration (MARAD) are 
withdrawing their joint notice of proposed rulemaking on documentation, 
under the lease-financing provisions, of vessels engaged in the 
coastwise trade. The joint notice of proposed rulemaking was superseded 
by legislation. A new notice of proposed rulemaking addressing the 
provisions of the new legislation will be published in the future.

DATES: The joint notice of proposed rulemaking is withdrawn on April 
13, 2005.

FOR FURTHER INFORMATION CONTACT: Patricia Williams, Deputy Director, 
National Vessel Documentation Center, Coast Guard, telephone 304-271-
2506 or John T. Marquez, Jr., Maritime Administration, telephone 202-
366-5320.

SUPPLEMENTARY INFORMATION:

Background

    On February 4, 2004, the Coast Guard and the Maritime 
Administration (MARAD) published a joint notice of proposed rulemaking 
entitled ``Vessel Documentation: Lease Financing for Vessels Engaged in 
the Coastwise Trade; Second Rulemaking'' in the Federal Register (69 FR 
5403). The rulemaking concerned the documentation of vessels under the 
lease-financing provisions of 46 U.S.C. 12106(e) and asked the 
following questions:
    1. To what extent and how should the Coast Guard prohibit or 
restrict the chartering back (whether by time charter, voyage charter, 
space charter, contract of affreightment, or other contract for the use 
of a vessel) of a lease-financed vessel to the owner, the parent, or to 
a subsidiary or affiliate of the parent? (Coast Guard.)
    2. To ensure that control of a lease-financed vessel engaged in the 
coastwise trade is not returned to the owner or a member of its group, 
should the Maritime Administrator's approval be required before an 
interest in or control of a U.S. documented vessel is transferred to a 
non-U.S. citizen? (Maritime Administration.)
    3. What limitations, if any, should the Coast Guard impose on the 
grandfather rights of lease-financed vessels with a coastwise 
endorsement issued before February 4, 2004? (Coast Guard.)
    4. Should the Coast Guard require that an application for coastwise 
endorsement under the lease-financing regulations be audited by a third 
party to further ensure that the transaction in fact qualifies under 
the lease-financing laws and regulations? (Coast Guard.)

Discussion of Comments on the Joint Notice of Proposed Rulemaking

    The comments received on the questions above clearly indicated that 
the lease-financing statute was subject to significantly differing 
interpretations and needed clarification. Congress also arrived at this 
conclusion and passed new legislation, signed into law on August 9, 
2004, (discussed below) to clarify the lease-financing statute. 
However, because this legislation did not address the issue of third-
party audits (question number 4 above) and because the notice of 
proposed rulemaking did not contain proposed regulatory text on that 
issue, comments to that question will be considered under the future 
Coast Guard rulemaking discussed below.

[[Page 19377]]

New Legislation

    On August 9, 2004, the President signed the Coast Guard and 
Maritime Transportation Act of 2004 (Pub. L. 108-293) (the Act), which 
addressed most of the questions listed above and negated the need for 
this rulemaking as follows:
    On the question of charters back to the owner (questions 1 and 2 
above), section 608(a) of the new Act added new paragraph (f) to 46 
U.S.C. 12106 to clarify Congress's position on the issue by requiring 
that the owner of a lease-financed vessel certify annually that it (or, 
if the vessel is owned by a trust or similar arrangement, the 
beneficiary of the trust or similar arrangement) is independent from, 
and not an affiliate of, any charterer of the vessel or any person who 
has the right, directly or indirectly, to control or direct the 
movement or use of the vessel.
    On the question of limitations to grandfather rights (question 
number 3 above), section 608(c) of the Act required that the amendments 
made by section 608 and any regulations published after February 4, 
2004, with respect to coastwise endorsements do not apply to a 
certificate of documentation, or renewal of one, endorsed with a 
coastwise endorsement for a vessel under 46 U.S.C. 12106(e) or a 
replacement vessel of a similar size and function, that was issued 
before August 9, 2004, as long as the vessel is owned by the person 
named in the certificate, or by a subsidiary or affiliate of that 
person, and as long as the controlling interest in the owner has not 
been transferred to a person that was not an affiliate of the owner as 
of August 9, 2004. A similar grandfather provision in section 608(c) of 
the Act was applied to offshore supply vessels, except that it was 
limited only to 3 years after enactment of the Act or until August 9, 
2007.
    On the question of third-party auditing of applications for 
coastwise endorsements (question number 4 above), the Act did not 
address the issue and it is being carried forward to the future 
rulemaking discussed below.

Future Rulemaking

    The new Act requires that the Coast Guard publish final regulations 
by August 8, 2005, to carry out section 608 of the Act, including 
amendments made by the Act to 46 U.S.C. 12106. Therefore, the Coast 
Guard will publish in the Federal Register a new notice of proposed 
rulemaking with opportunity for public comment to address these 
changes. In addition, the Coast Guard will again consider the issue of 
third-party audits in the new notice and will address, in that notice, 
all comments on the subject submitted since the February 4, 2004, 
notice.

Withdrawal

    For the reasons stated above, the Coast Guard and MARAD are 
withdrawing the joint notice of proposed rulemaking published on 
February 4, 2004 (69 FR 5403).

    Authority: The Coast Guard's portion of this rulemaking is taken 
under authority of 46 U.S.C. 2103 and 12106 and Department of 
Homeland Security Delegation No. 0170.1. The Maritime 
Administration's portion of this rulemaking is taken under authority 
of 46 App. U.S.C. 802, 803, 808, 835, 839, 1114(b), 1195, 46 U.S.C. 
chs.301 and 313; 49 U.S.C. 336; 49 CFR 1.66.

    Dated: November 2, 2004.
Thomas H. Collins,
Admiral, Coast Guard Commandant.
    Dated: March 29, 2005.

    By Order of the Maritime Administrator.
Joel C. Richard,
Secretary, Maritime Administration.
[FR Doc. 05-7436 Filed 4-12-05; 8:45 am]
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