[Federal Register Volume 80, Number 77 (Wednesday, April 22, 2015)]
[Notices]
[Pages 22611-22613]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09371]


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DEPARTMENT OF TRANSPORTATION

Maritime Administration

[Docket No. MARAD 2015-0049]


Application of Cargo Preference Requirements to the Federal Ship 
Financing Program

AGENCY: Maritime Administration, MARAD, Department of Transportation.

[[Page 22612]]


ACTION: Notice of Proposed Policy Clarification.

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SUMMARY: The Maritime Administration (MARAD) is seeking comments on a 
proposed policy clarification for the application of the Cargo 
Preference Act of 1954 (CPA 1954), 46 U.S.C. 55305, to applications, 
commitments and guarantees under MARAD's Federal Ship Financing Program 
(Title XI), 46 U.S.C. Chapter 537.

DATES: Comments may be submitted on or before May 22, 2015.

ADDRESSES: You may submit comments identified by DOT Docket Number 
MARAD-2015-0049 by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Search MARAD-2015-0049 and follow the instructions for submitting 
comments.
     Email: [email protected]. Include MARAD-2015-0049 
in the subject line of the message.
     Fax: (202) 493-2251.
     Mail: Docket Management Facility, U.S. Department of 
Transportation, 1200 New Jersey Avenue SE., West Building, Room W12-
140, Washington, DC 20590. To confirm that your comments reached the 
facility, please enclose a stamped, self-addressed postcard or 
envelope.
     Hand Delivery/Courier: Docket Management Facility, U.S. 
Department of Transportation, 1200 New Jersey Avenue SE., West 
Building, Room W12-140, Washington, DC 20590. The Docket Management 
Facility is open 9:00 a.m. to 5:00 p.m., Monday through Friday, except 
on Federal holidays.

    Note: If you fax, mail or hand deliver your input, you should 
include your name and a mailing address, an email address, or a 
telephone number in the body of your document so that you can be 
contacted if there are questions regarding your submission. If 
submitting inputs by mail or hand delivery, submit them in an 
unbound format, no larger than 8 \1/2\ by 11 inches, suitable for 
copying and electronic filing.


FOR FURTHER INFORMATION CONTACT: Owen J. Doherty, Associate 
Administrator for Business and Finance Development, Maritime 
Administration, 1200 New Jersey Avenue SE., Washington, DC 20590, (202) 
366-9595, [email protected].

SUPPLEMENTARY INFORMATION: After review of policies and practices 
regarding the application of the CPA 1954 to applications, commitments 
and guarantees under MARAD's Title XI program, it was determined that 
applicants often lack a full understanding of those policies and 
practices, despite the issuance of an earlier policy clarification 
document (76 FR 37402) in 2011. In response to applicant questions and 
input from program participants, this proposed policy clarification 
seeks to explain MARAD practices to better inform those seeking to 
benefit from Title XI.

 Section 1: What is Cargo Preference?

    The CPA 1954 mandates that shippers use U.S.-flag vessels to 
transport a portion of government-impelled, ocean borne cargoes. 
Through statutory amendments in 2008 to 46 U.S.C. 55305(b), the CPA 
1954 was clarified to state that the statute applies whenever the U.S. 
Government provides financing in any way with Federal funds for the 
account of any person. MARAD, as the agency charged with implementing 
and overseeing compliance administration of the CPA 1954, previously 
determined that ``financing in any way'' includes Federal loan 
guarantee programs, such as Title XI.

 Section 2: What are the Cargo Preference requirements?

    There are both transportation and administrative requirements 
associated with the CPA 1954:
    Transportation: At least 50 percent of the gross tons of the 
equipment or materials which are transported by ocean under a given 
Title XI application, letter commitment and guarantee of obligations 
must be transported on privately-owned commercial vessels of the United 
States, to the extent those vessels are available at fair and 
reasonable rates. MARAD defines ``gross ton'' to mean a metric ton or 
cubic meter of cargo, by whichever measure the number is greater; that 
number is the standard by which compliance with the CPA 1954 will be 
evaluated.
    Administrative: For each covered shipment, consistent with 46 CFR 
381.3, within thirty (30) days of the foreign export loading, the 
shipper (Title XI applicant or its representative) must submit a 
legible copy of a rated on-board ocean master bill of lading to MARAD. 
This requirement exists whether the particular shipment was transported 
aboard a U.S.-flag or a foreign-flag vessel. The bills of lading must 
be submitted to the Office of Cargo and Commercial Sealift, Maritime 
Administration, 1200 New Jersey Avenue SE., Washington, DC 20590 or via 
email to [email protected]. The bills of lading or the transmittal 
cover must clearly state the Title XI application or loan guarantee to 
which they apply and must contain the following information: (1) The 
name of the vessel carrying the cargo(s); (2) The carrying vessel's 
International Maritime Organization (IMO) number; (3) The carrying 
vessel's flag of registry; (4) The date of cargo loading; (5) The port 
of loading; (6) The port(s) of trans-shipment (if any); (7) The port of 
final destination; (8) A description of the cargo(s); (9) The gross 
weight of the cargo(s) in kilograms and the volume of the cargo(s) in 
cubic meters; and (10) The total ocean freight revenue in U.S. dollars.

 Section 3: When do the Cargo Preference requirements begin?

    The cargo preference requirements apply as soon as an application 
is submitted for Title XI financing. The requirements are therefore in 
place well before a decision is made on a Title XI application, a 
letter commitment is issued or a guarantee closing takes place. The CPA 
1954 will generally apply, particularly for construction-period 
financing, to all foreign components that are transported by ocean and 
included in the ``Actual Cost'' of the project in accordance with 46 
CFR 298.13(b). At the outset, all applicants will be required to submit 
a ``transportation plan'' for review by MARAD to ensure that sufficient 
planning has occurred to meet the cargo preference requirements. This 
requirement will be discussed with each applicant and potential 
applicant at the earliest possible time. Additionally, applicants and 
prospective applicants should discuss their plans to pursue a Title XI 
guarantee with shipyard constructing the vessel at the earliest 
possible time to ensure that the shipyard is aware and will comply with 
the associated cargo preference requirements.
    This programmatic administration is necessary to ensure compliance 
with the CPA 1954. Once MARAD issues a guarantee under Title XI, the 
``financed'' cargoes included in that guarantee are within the meaning 
of the CPA 1954. However, this can be far too late to ensure compliance 
with the CPA 1954 requirements. This programmatic administration is 
similar to the manner in which Federal grants or contracts generally 
work; that is, if a party seeks reimbursement for an item obtained 
prior to the execution of a Federal grant or contract, that item still 
must be compliant with applicable Federal laws, such as the Buy 
American Act, regardless of the fact that the item had been procured 
before Federal financing was approved or confirmed.
    In the event that a Title XI application is not approved, there are 
no reimbursements for transportation costs associated with CPA 1954 
compliance.

[[Page 22613]]

Rather it will be a cost associated with pursuing a Title XI loan 
guarantee.

 Section 4: What if an available U.S.-flag vessel cannot be found or 
the total ocean freight rate appears too expensive?

    Only MARAD can issue a determination that no qualified U.S.-flag 
vessels are available at fair and reasonable rates. If a Title XI 
applicant, through diligent efforts, is unable to find a U.S.-flag 
carrier, without prior consultation with MARAD and a determination of 
non-availability of qualified U.S.-flag carriage, the applicant's due 
diligence alone will not excuse that applicant from cargo preference 
requirements. Title XI applicants and prospective applicants are 
encouraged to communicate with U.S.-flag carriers at the earliest 
possible time to ensure the greatest degree of coordination and to 
obtain the best rates. In the event that a Title XI applicant or 
prospective applicant experiences difficulty obtaining U.S.-flag 
service, or if it can only find partial U.S.-flag service, the 
applicant is encouraged to contact MARAD as soon as possible at 
[email protected] or (202) 366-4610. With proper planning, U.S.-flag 
service can generally be obtained at fair and reasonable rates. Early 
planning and coordination are the keys to meeting cargo preference 
requirements in Title XI as in all other Federal programs.

 Section 5: What if non-compliance with Cargo Preference requirements 
occurs?

    At MARAD's option, as the administrator of the Title XI program, 
non-compliant parties may be denied a letter commitment or, consistent 
with 46 U.S.C. 55305(d)(2)(B), may required to provide make-up cargoes 
for carriage aboard U.S.-flag vessels to offset the lost cargo carriage 
supporting work under the Title XI financing application. In extreme 
cases where knowing and willful violations occur, consistent with 46 
U.S.C. 55305(d)(2)(C), MARAD can issue a civil penalty of not more than 
$25,000 for each violation, with each day of a continuing violation 
following the date of shipment counting as a separate violation. 
Additionally, cargo preference requirements are incorporated into Title 
XI letter commitments; therefore, failure to properly adhere to cargo 
preference requirements could impact MARAD's ability to close on a 
Title XI guarantee because the recipient has not met its obligations 
under the letter commitment. However, with early planning and 
coordination with MARAD, no cargo preference violations need occur 
under any Title XI application, letter commitment or guarantee.

 Section 6: What is the purpose of Cargo Preference?

    The CPA 1954 provides a revenue base that helps to retain and 
encourages a privately owned and operated U.S.-flag merchant fleet. The 
U.S.-flag fleet is a vital resource, providing essential sealift 
capability to globally project and sustain the U.S. Armed Forces or 
support other national emergencies, maintaining a cadre of skilled 
seafarers available in time of national emergencies, and helping to 
protect U.S. economic interests. The U.S. maritime industry also 
supports thousands of sea-going, shore-based, and secondary, associated 
jobs, supporting the Nation's economic growth. It is imperative that 
Federal programs, such as Title XI, and Title XI applicants and 
beneficiary shipyards, as members of the U.S. maritime industry, 
support this national priority through proper adherence to cargo 
preference requirements. Therefore, while the use of U.S.-flag vessels 
to carry 50 percent of the gross tons of ocean borne cargoes is the 
statutory minimum, MARAD, as the agency charged with administering both 
Title XI and the CPA 1954, encourages the use of U.S.-flag vessels more 
than the minimum whenever possible.

Privacy Act

    In accordance with 5 U.S.C. 553(c), DOT solicits comments from the 
public to better inform its rulemaking process. DOT posts these 
comments, without edit, to www.regulations.gov, as described in the 
system of records notice, DOT/ALL-14 FDMS, accessible through 
www.dot.gov/privacy. In order to facilitate comment tracking and 
response, we encourage commenters to provide their name, or the name of 
their organization; however, submission of names is completely 
optional. Whether or not commenters identify themselves, all timely 
comments will be fully considered. If you wish to provide comments 
containing proprietary or confidential information, please contact the 
agency for alternate submission instructions.
    (Authority: 46 U.S.C. 55305; 46 U.S.C. Ch. 537)
* * * * *

    By Order of the Maritime Administrator.

    Dated: April 17, 2015.
Thomas M. Hudson, Jr.,
Acting Secretary, Maritime Administration.
[FR Doc. 2015-09371 Filed 4-21-15; 8:45 am]
BILLING CODE 4910-81-P