[Federal Register Volume 82, Number 230 (Friday, December 1, 2017)]
[Rules and Regulations]
[Pages 56895-56899]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25898]



Maritime Administration

46 CFR Part 296

RIN 2133-AB85

Maritime Security Program

AGENCY: Maritime Administration, Department of Transportation.

ACTION: Final rule.


SUMMARY: The Maritime Administration (``MARAD'') is amending its 
regulations to implement amendments to the Maritime Security Act of 
2003 by the National Defense Authorization Act for Fiscal Year 2013 
(``NDAA 2013''), the Consolidated Appropriations Act, 2016 (``CAA 
2016''), and the National Defense Authorization Act for Fiscal Year 
2016 (``NDAA 2016''). The revisions to the regulations, among other 
things, make changes to vessel eligibility for participation in the 
Maritime Security Program (``MSP''), authorize the extension of current 
MSP Operating Agreements, amend the procedures for the award of new MSP 
Operating Agreements, extend the MSP through 2025, update the MSP 
Operating Agreement payments and schedule of payments, and eliminate 
the Maintenance and Repair Pilot Program.

DATES: This final rule becomes effective on January 2, 2018.

FOR FURTHER INFORMATION CONTACT: William G. McDonald, Director, Office 
of Sealift Support, U.S. Department of Transportation, Maritime 
Administration, 1200 New Jersey Avenue SE., Washington, DC 20590. 
Telephone (202) 366-0688; Fax (202) 366-5904, electronic mail to 
[email protected].



    Section 3508 of the NDAA 2013 authorized the extension of the 
Maritime Security Program through fiscal year 2025. Under section 3508, 
the Secretary of Transportation, acting through the Maritime 
Administrator, is authorized to offer to extend the existing 60 MSP 
Operating Agreements through fiscal year 2025. Section 3508 authorized 
a new payment schedule of increasing MSP Operating Agreement payments 
through fiscal year 2025. These payment amounts were subsequently 
updated by the CAA 2016 and the NDAA 2016. Section 3508 of the NDAA 
2013 also provided a new procedure for awarding MSP Operating 
Agreements, including a new priority system for the award of operating 
agreements. Under the new priority, award will be first based on vessel 
type as determined by military requirements and then based on the 
citizenship status of the applicant. Section 3508 revised the procedure 
for the transfer of MSP Operating Agreements by eliminating the 
requirement to first offer an MSP Operating Agreement to a U.S. Citizen 
under 46 U.S.C. 50501. In addition, Section 3508 eliminated the 
procedure for early termination of MSP Operating Agreements based on 
the availability of replacement vessels. Section 3508 also eliminated 
the eligibility of Lighter Aboard Ship (LASH) vessels to participate in 
the MSP Fleet as a stand-alone category of vessel. The rule eliminates 
the Maintenance and Repair Pilot Program, which has sunset and was not 
extended by the NDAA 2013. The rule also updates MARAD's address for 
the purposes of submitting required reports and vouchers.

Rulemaking Analysis and Notices

    Executive Orders 12866 (Regulatory Planning and Review), 13563 
(Improving Regulation and Regulatory Review) and DOT Regulatory 
Policies and Procedures. Under E.O. 12866 (58 FR 51735, October 4, 
1993), supplemented by E.O. 13563 (76 FR 3821, January 18, 2011) and 
DOT policies and procedures, MARAD must determine whether a regulatory 
action is ``significant'' and, therefore, subject to Office of 
Management and Budget (OMB) review and the requirements of the E.O.s. 
The Orders define ``significant regulatory action'' as one likely to 
result in a rule that may: (1) Have an annual effect on the economy of 
$100 million or more or adversely affect in a material way the economy, 
a sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or tribal 
government or communities; (2) create a serious inconsistency or 
otherwise interfere with an action taken or planned by another Agency; 
(3) materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; and (4) raise novel legal or policy issues arising out of 
legal mandates, the President's priorities, or the principles set forth 
in the E.O.s.
    A determination has been made that this rulemaking is not 
considered a significant regulatory action under section 3(f) of 
Executive Order 12866. This rulemaking will not result in an annual 
effect on the economy of $100 million or more. It is also not 
considered a major rule for purposes of Congressional review under 
Public Law 104-121. This rulemaking is also not significant under the 
Regulatory Policies and Procedures of the Department of Transportation 
(44 FR 11034, February 26, 1979). The costs and overall economic impact 
of this rulemaking do not require further analysis because the 
rulemaking will create no additional costs or new substantive burdens 
to participants in or applicants to the existing program as it 
addresses only new processing procedures.

Executive Order 13771 (Reducing Regulation and Controlling Regulatory 

    This rule is not an E.O. 13771 regulatory action because this rule 
is not significant under E.O. 12866.

[[Page 56896]]

Executive Order 13132 (Federalism)

    This rulemaking was analyzed in accordance with the principles and 
criteria contained in Executive Order 13132 (``Federalism''), and it 
has been determined that it does not have sufficient Federalism 
implications to warrant the preparation of a Federalism summary impact 
statement. The revisions to the regulations, among other things, make 
changes to vessel eligibility for participation in the MSP, authorize 
the extension of current MSP Operating Agreements, amend the procedures 
for the award of new MSP Operating Agreements, update the MSP Operating 
Agreement payments and schedule of payments, and eliminate the 
Maintenance and Repair Pilot Program. This rulemaking has no 
substantial effect on the States, or on the current Federal-State 
relationship, or on the current distribution of power and 
responsibilities among the various local officials. Nothing in this 
document preempts any State law or regulation. Therefore, MARAD did not 
consult with State and local officials because it was not necessary.

Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980 requires MARAD to assess 
whether this rulemaking would have a significant economic impact on a 
substantial number of small entities and to minimize any adverse 
impact. MARAD certifies that this rulemaking will not have a 
significant economic impact on a substantial number of small entities 
because MSP participants (13 in total) and applicants (11 in the most 
recent solicitation for applications) do not constitute a substantial 
number of small entities.

Executive Order 13211 (Energy Supply, Distribution, or Use)

    MARAD has determined that this rulemaking will not significantly 
affect energy supply, distribution, or use. Therefore, no Statement of 
Energy Effects is required.

Executive Order 12630 (Taking of Private Property)

    This rulemaking will not effect a taking of private property or 
otherwise have taking implications under Executive Order 12630, 
Governmental Actions and Interference with Constitutionally Protected 
Property Rights.

International Trade Impact Assessment

    This rulemaking does not contain standards-related activities that 
create unnecessary obstacles to the foreign commerce of the United 

Privacy Impact Assessment

    Section 522(a)(5) of the Transportation, Treasury, Independent 
Agencies, and General Government Appropriations Act, 2005 (Pub. L. 108-
447, div. H, 118 Stat. 2809 at 3268) requires the Department of 
Transportation and certain other Federal agencies to conduct a privacy 
impact assessment of each proposed rule that will affect the privacy of 
individuals. Claims submitted under this rule will be treated the same 
as all legal claims received by MARAD. The processing and treatment of 
any claim within the scope of this rulemaking by MARAD shall comply 
with all legal, regulatory and policy requirements regarding privacy.

Unfunded Mandates Reform Act of 1995

    The Unfunded Mandates Reform Act of 1995 requires Agencies to 
evaluate whether an Agency action would result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $156 million or more (as adjusted for inflation) in 
any 1 year, and if so, to take steps to minimize these unfunded 
mandates. This rulemaking will not impose unfunded mandates under the 
Unfunded Mandates Reform Act of 1995. It will not result in costs of 
$156 million or more to either State, local, or tribal governments, in 
the aggregate, or to the private sector, and is the least burdensome 
alternative that achieves the objectives of the rule.

Regulation Identifier Number (RIN)

    A regulation identifier number (RIN) is assigned to each regulatory 
action listed in the Unified Agenda of Federal Regulations. The 
Regulatory Information Service Center publishes the Unified Agenda in 
April and October of each year. The RIN contained in the heading of 
this document can be used to cross-reference this action with the 
Unified Agenda.

Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et 
seq.), Federal agencies must obtain approval from OMB for each 
collection of information they conduct, sponsor, or require through 
regulations. This rulemaking updates the regulations due to amendments 
to the Maritime Security Act. This rulemaking contains no new or 
amended information collection or recordkeeping requirements that have 
been approved or require approval by OMB.

Comments on the Proposed Rule

    In response to the agency's Federal Register document published on 
August 5, 2015 (80 FR 46527) seeking public comment on its proposed 
revisions to 46 CFR part 296, a total of five separate comment 
submissions were made by or on behalf of the following entities: APL 
Marine Services, Ltd. and its affiliated companies (``APL''), American 
Roll-on Roll-off Carrier Group Inc. (``ARC Group''), Schuyler Line 
Navigation Company, LLC, Liberty Global Logistics LLC, and the 
Transportation Trades Department, AFL-CIO (``TTD''). The agency 
responds below to all comments.
    One commenter noted that 46 CFR 296.30(h)(2) of the existing 
regulations was omitted from the proposed rulemaking and should be 
retained in a final rule. We agree. The NDAA 2013 did not eliminate the 
provision permitting an owner or operator of an MSP vessel to transfer 
and register such a vessel under an acceptable foreign registry in the 
event sufficient funds are not appropriated for any fiscal year by the 
60th day of that fiscal year. The text of 46 CFR 296.30(h)(2) is 
retained in the final rule.
    The commenter also noted that the definition of Foreign Commerce 
unduly omitted certain services that were not affected by the NDAA 
2013. We agree. While excluding from the definition of Foreign Commerce 
certain bulk carrying services, the NDAA 2013 did not otherwise 
substantively change the definition of Foreign Commerce. The proposed 
definition unnecessarily eliminated currently MSP-eligible services. 
Therefore, these existing services are retained in the final rule. The 
commenter also recommended amending 46 CFR 296.31(d)(2), to make that 
section more consistent with the text of 46 U.S.C. 53105(a) and the 
regulatory definition of Foreign Commerce of 46 CFR 296.2. We agree 
that 46 CFR 296.31(d)(2), as currently drafted, is inconsistent with 46 
U.S.C. 53105(a) with its use of ``foreign trade,'' an undefined term, 
instead of ``foreign commerce'' and thus may invite confusion. 
Accordingly, we are amending 46 CFR 296.31(d)(2) by replacing ``foreign 
trade'' with ``foreign commerce'' and retaining reference to the 
registry endorsement requirement.
    Three commenters recommended increasing annual payments under the 
MSP. Two recommended an annual payment of $5 million per vessel 
starting in fiscal year 2017. MSP payment amounts are established by 
statute. MARAD cannot adjust annual payment amounts without a 
corresponding legislative authorization.

[[Page 56897]]

Nevertheless, the increased payments authorized by the NDAA 2016 and 
CAA 2016 are included in the final rule.
    Two commenters critiqued MARAD's administration of the MSP and made 
recommendations that would require significant amendments to our 
regulations. These recommendations are beyond the scope of the current 
rulemaking implementing the NDAA 2013, but will be considered in the 
event of a future rulemaking.

List of Subjects in 46 CFR Part 296

    Assistance payments, Maritime carriers, Reporting and recordkeeping 

    For the reasons set out in the preamble, the Maritime 
Administration amends 46 CFR part 296 as follows:


1. The authority citation for part 296 is revised to read as follows:

    Authority:  Pub. L. 108-136, Pub. L. 109-163, Pub. L. 112-239; 
49 U.S.C. 322(a), 46 U.S.C. chapter 531, 49 CFR 1.93.

2. Amend Sec.  296.2 by:
a. Revising the definitions of Foreign Commerce, MSA 2003, 
Participating Fleet Vessel, and Section 2 Citizen; and
b. Removing the definition of Lash Vessel.
    The revisions to read as follows:

Sec.  296.2   Definitions.

* * * * *
    Foreign Commerce means 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 46 U.S.C. 12111 where the origination point or the destination 
point of any 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.
* * * * *
    MSA 2003 means the Maritime Security Act of 2003, as amended.
* * * * *
    Participating Fleet Vessel means a vessel that--
    (1) On October 1, 2015--
    (i) Meets the requirements of paragraph (1), (2), (3), or (4) of 
section 53102(c) of the MSA; and
    (ii) Is less than 20 years of age if the vessel is a tank vessel, 
or is less than 25 years of age for all other vessel types; and
    (2) on December 31, 2014, is covered by an MSP Operating Agreement 
under 46 U.S.C. chapter 531.
* * * * *
    Section 2 Citizen means a United States citizen within the meaning 
of 46 U.S.C. 50501, without regard to any statute that ``deems'' a 
vessel to be owned and operated by a United States citizen within the 
meaning of 46 U.S.C. 50501.
* * * * *

3. Amend Sec.  296.11 by revising paragraph (a)(3) to read as follows:

Sec.  296.11   Vessel requirements.

    (a) * * *
    (3) The vessel is self-propelled and--
    (i) Is a tank vessel that is 10 years of age or less on the date 
the vessel is included in the Fleet; or
    (ii) Is any other type of vessel that is 15 years of age or less on 
the date the vessel is included in the Fleet;
* * * * *

Sec. Sec.  296.21, 296.22, 296.23   [Removed and reserved]

4. Remove and reserve Sec. Sec.  296.21 through 296.23.

5. Revise Sec.  296.24 to read as follows:

Sec.  296.24   Subsequent awards of MSP Operating Agreements.

    (a) MARAD intends to ensure that all available MSP Operating 
Agreements are fully utilized at all times in order to maximize the 
benefit of the MSP. Accordingly, when an MSP Operating Agreement 
becomes available through termination by the Secretary or early 
termination by the MSP contractor, and no transfer under 46 U.S.C. 
53105(e) is involved, MARAD will reissue the MSP Operating Agreement 
pursuant to the following criteria:
    (1) The proposed vessel shall meet the requirements for vessel 
eligibility in 46 U.S.C. 53102(b);
    (2) The applicant shall meet the vessel ownership and operating 
requirements for priority in 46 U.S.C. 53102(c); and
    (3) Priority will be assigned on the basis of vessel type 
established by military requirements specified by the Secretary of 
Defense. After consideration of military requirements, priority shall 
be given to an applicant that is a United States citizen under section 
50501 of this title.
    (b) MARAD shall allow an applicant at least 30 days to submit an 
application for a new MSP Operating Agreement.
    (c) MARAD and USTRANSCOM will determine if the applications 
received form an adequate pool for award of a reissued MSP Operating 
Agreement. If so, MARAD will award a reissued MSP Operating Agreement 
from that pool of qualified applicants in its discretion according to 
the procedures of paragraph (a) of this section, subject to approval of 
the Secretary of Defense. MARAD and USTRANSCOM may decide to open a new 
round of applications. MARAD shall provide written reasons for denying 
applications. In as much as MSP furthers a public purpose and MARAD 
does not acquire goods or services through MSP, the selection process 
for award of MSP Operating Agreements does not constitute an 
acquisition process subject to any procurement law or the Federal 
Acquisition Regulations.

6. Revise Sec.  296.30 to read as follows:

Sec.  296.30   General conditions.

    (a) Approval. The Secretary, in conjunction with the Secretary of 
Defense, may approve applications to enter into a MSP Operating 
Agreement and make MSP Payments with respect to vessels that are 
determined by the Secretary to be commercially viable and deemed by the 
Secretary of Defense to be militarily useful for meeting the sealift 
needs of the United States in time of war or national emergencies. The 
Secretary announced an initial award of 60 MSP Operating Agreements on 
January 12, 2005. In June 2014, the Secretary extended the term of all 
60 MSP Operating Agreements through FY 2025.
    (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 
Agreement (EPA) provided by 46 U.S.C. 53107, as amended, 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 section 296.11(a), if the Secretary, in 
conjunction with the Secretary of Defense, approves the replacement 
    (d) Termination by the Secretary. If the Contractor materially 
fails to comply

[[Page 56898]]

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 
the MSP.
    (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 MSP Operating Agreement. The Contractor shall be bound 
by the provisions relating to vessel documentation and national 
security commitments, and by its EPA for the full term, from October 1, 
2005, through September 30, 2025, of the MSP Operating Agreement.
    (f) [Reserved]
    (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, as amended, for that fiscal year, the Secretary will 
notify the Senate 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 Secretary of Defense, 
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 MSP 
Operating Agreements shall be made in accordance with Sec.  296.41. To 
the extent that funds are appropriated in a subsequent fiscal year, 
former MSP 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 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 a 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 foreign registry deemed acceptable 
by the Secretary and the SecDef, notwithstanding 46 U.S.C. chapter 561 
and 46 CFR part 221;
    (3) 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; and
    (4) Paragraph (h) of this section is not applicable to vessels 
under MSP Operating Agreements that have been terminated for any other 
    (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 Secretary of Defense, 
determines that the contractor will provide a replacement vessel:
    (1) Of equal or greater military capability and 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 
    (j) Transfer of MSP Operating Agreements. A contractor under an MSP 
Operating Agreement may transfer the agreement (including all rights 
and obligations under the MSP Operating Agreement) to any person that 
is eligible to enter into the MSP Operating Agreement under this 
chapter if the Secretary and the Secretary of Defense determine that 
the transfer is in the best interests of the United States. A 
transaction shall not be considered a transfer of an MSP Operating 
Agreement if the same legal entity with the same vessels remains the 
contracting party under the MSP Operating Agreement.

7. Amend Sec.  296.31 by revising paragraphs (a) and (d)(2) to read as 

Sec.  296.31   MSP assistance conditions.

    (a) Term of MSP Operating Agreement. MSP Operating Agreements are 
authorized for 20 years, starting on October 1, 2005, and ending on 
September 30, 2025, 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, as amended.
* * * * *
    (d) * * *
    (2) Operation: Be operated exclusively in the foreign commerce or 
in mixed foreign commerce and domestic trade allowed under a registry 
endorsement issued under 46 U.S.C. 12111, and shall not otherwise be 
operated in the coastwise trade of the United States; and
* * * * *

8. Amend Sec.  296.32 by revising the introductory text to read as 

Sec.  296.32   Reporting requirements.

    The Contractor shall submit to the Director, Office of Financial 
Approvals, Maritime Administration, 2nd Floor, West Building, 1200 New 
Jersey Ave. SE., Washington, DC 20590, one of the following reports, 
including management footnotes where necessary to make a fair financial 
* * * * *

9. Revise Sec.  296.40 to read as follows:

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 MSP Operating 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, Maritime Administration, 2nd Floor, West 
Building, 1200 New Jersey Ave. SE., Washington, DC 20590. Payments 
shall be paid and processed under the terms and conditions of the 
Prompt Payment Act, 31 U.S.C. 3901.

10. Amend Sec.  296.41 by revising paragraph (a) to read as follows:

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

[[Page 56899]]

MSP Operating Agreement is in effect, for each Agreement Vessel, an 
annual payment equal to $2,600,000 for FY 2006, FY 2007, FY 2008; 
$2,900,000 for FY 2009, FY 2010, FY 2011; $3,100,000 for FY 2012, FY 
2013, FY 2014, and FY 2015; $3,500,000 for FY 2016; $4,999,950 for FY 
2017; $5,000,000 for FY 2018, FY 2019, and FY 2020; $5,233,463 for FY 
2021; and $3,700,000 for FY 2022, FY 2023, FY 2024, and FY 2025. 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.
* * * * *

Subpart G--[Removed]

11. Remove Subpart G, consisting of Sec.  296.60.

    Dated: November 28, 2017.

    By Order of the Maritime Administrator.
T. Mitchell Hudson, Jr.,
Secretary, Maritime Administration.
[FR Doc. 2017-25898 Filed 11-30-17; 8:45 am]