[Title 46 CFR ]
[Code of Federal Regulations (annual edition) - October 1, 2013 Edition]
[From the U.S. Government Printing Office]



[[Page i]]

          

          Title 46

Shipping


________________________

Parts 200 to 499

                         Revised as of October 1, 2013

          Containing a codification of documents of general 
          applicability and future effect

          As of October 1, 2013
                    Published by the Office of the Federal Register 
                    National Archives and Records Administration as a 
                    Special Edition of the Federal Register

[[Page ii]]

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                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 46:
          Chapter II--Maritime Administration, Department of 
          Transportation                                             3
          Chapter III--Coast Guard (Great Lakes Pilotage), 
          Department of Homeland Security                          405
  Finding Aids:
      Table of CFR Titles and Chapters........................     437
      Alphabetical List of Agencies Appearing in the CFR......     457
      List of CFR Sections Affected...........................     467

[[Page iv]]





                     ----------------------------

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 46 CFR 201.1 refers 
                       to title 46, part 201, 
                       section 1.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
together to determine the latest version of any given rule.
    To determine whether a Code volume has been amended since its 
revision date (in this case, October 1, 2013), consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

    Each volume of the Code contains amendments published in the Federal 
Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
number of the Federal Register and date of publication. Publication 
dates and effective dates are usually not the same and care must be 
exercised by the user in determining the actual effective date. In 
instances where the effective date is beyond the cut-off date for the 
Code a note has been inserted to reflect the future effective date. In 
those instances where a regulation published in the Federal Register 
states a date certain for expiration, an appropriate note will be 
inserted following the text.

OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
placed as close as possible to the applicable recordkeeping or reporting 
requirements.

PAST PROVISIONS OF THE CODE

    Provisions of the Code that are no longer in force and effect as of 
the revision date stated on the cover of each volume are not carried. 
Code users may find the text of provisions in effect on any given date 
in the past by using the appropriate List of CFR Sections Affected 
(LSA). For the convenience of the reader, a ``List of CFR Sections 
Affected'' is published at the end of each CFR volume. For changes to 
the Code prior to the LSA listings at the end of the volume, consult 
previous annual editions of the LSA. For changes to the Code prior to 
2001, consult the List of CFR Sections Affected compilations, published 
for 1949-1963, 1964-1972, 1973-1985, and 1986-2000.

``[RESERVED]'' TERMINOLOGY

    The term ``[Reserved]'' is used as a place holder within the Code of 
Federal Regulations. An agency may add regulatory information at a 
``[Reserved]'' location at any time. Occasionally ``[Reserved]'' is used 
editorially to indicate that a portion of the CFR was left vacant and 
not accidentally dropped due to a printing or computer error.

INCORPORATION BY REFERENCE

    What is incorporation by reference? Incorporation by reference was 
established by statute and allows Federal agencies to meet the 
requirement to publish regulations in the Federal Register by referring 
to materials already published elsewhere. For an incorporation to be 
valid, the Director of the Federal Register must approve it. The legal 
effect of incorporation by reference is that the material is treated as 
if it were published in full in the Federal Register (5 U.S.C. 552(a)). 
This material, like any other properly issued regulation, has the force 
of law.
    What is a proper incorporation by reference? The Director of the 
Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
approval is based are:
    (a) The incorporation will substantially reduce the volume of 
material published in the Federal Register.
    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
process.
    (c) The incorporating document is drafted and submitted for 
publication in accordance with 1 CFR part 51.
    What if the material incorporated by reference cannot be found? If 
you have any problem locating or obtaining a copy of material listed as 
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CFR INDEXES AND TABULAR GUIDES

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separate volume, revised annually as of January 1, entitled CFR Index 
and Finding Aids. This volume contains the Parallel Table of Authorities 
and Rules. A list of CFR titles, chapters, subchapters, and parts and an 
alphabetical list of agencies publishing in the CFR are also included in 
this volume.

[[Page vii]]

    An index to the text of ``Title 3--The President'' is carried within 
that volume.
    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
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    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

REPUBLICATION OF MATERIAL

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in the Code of Federal Regulations.

INQUIRIES

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the top of odd-numbered pages.
    For inquiries concerning CFR reference assistance, call 202-741-6000 
or write to the Director, Office of the Federal Register, National 
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    The e-CFR is a regularly updated, unofficial editorial compilation 
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of the Federal Register and the Government Printing Office. It is 
available at www.ecfr.gov.

    Charles A. Barth,
    Director,
    Office of the Federal Register.
    October 1, 2013.







[[Page ix]]



                               THIS TITLE

    Title 46--Shipping is composed of nine volumes. The parts in these 
volumes are arranged in the following order: Parts 1-40, 41-69, 70-89, 
90-139, 140-155, 156-165, 166-199, 200-499, and 500 to end. The first 
seven volumes containing parts 1-199 comprise chapter I--Coast Guard, 
DHS. The eighth volume, containing parts 200-- 499, includes chapter 
II--Maritime Administration, DOT and chapter III--Coast Guard (Great 
Lakes Pilotage), DHS. The ninth volume, containing part 500 to end, 
includes chapter IV--Federal Maritime Commission. The contents of these 
volumes represent all current regulations codified under this title of 
the CFR as of October 1, 2013.

    For this volume, Bonnie Fritts was Chief Editor. The Code of Federal 
Regulations publication program is under the direction of Michael L. 
White, assisted by Ann Worley.

[[Page 1]]



                           TITLE 46--SHIPPING




                  (This book contains parts 200 to 499)

  --------------------------------------------------------------------
                                                                    Part

chapter ii--Maritime Administration, Department of 
  Transportation............................................         201

chapter iii--Coast Guard (Great Lakes Pilotage), Department 
  of Homeland Security......................................         401

[[Page 3]]



    CHAPTER II--MARITIME ADMINISTRATION, DEPARTMENT OF TRANSPORTATION




  --------------------------------------------------------------------

              SUBCHAPTER A--POLICY, PRACTICE AND PROCEDURE
Part                                                                Page
200             [Reserved]

201             Rules of practice and procedure.............           7
202             Procedures relating to review by Secretary 
                    of Transportation of actions by Maritime 
                    Subsidy Board...........................          29
203             Procedures relating to conduct of certain 
                    hearings under the Merchant Marine Act, 
                    1936, as amended........................          33
204             Claims against the Maritime Administration 
                    under the Federal Tort Claims Act.......          35
205             Audit appeals; policy and procedure.........          37
   SUBCHAPTER B--REGULATIONS AFFECTING MARITIME CARRIERS AND RELATED 
                               ACTIVITIES
221             Regulated transactions involving documented 
                    vessels and other maritime interests....          38
232             Uniform financial reporting requirements....          52
  SUBCHAPTER C--REGULATIONS AFFECTING SUBSIDIZED VESSELS AND OPERATORS
249             Approval of underwriters for marine hull 
                    insurance...............................          62
251-252         [Reserved]

272             Requirements and procedures for conducting 
                    condition surveys and administering 
                    maintenance and repair subsidy..........          65
276             [Reserved]

277             Domestic and foreign trade; interpretations.          74
280-283         [Reserved]

287             Establishment of construction reserve funds.          74
289             Insurance of construction-differential 
                    subsidy vessels, operating-differential 
                    subsidy vessels and of vessels sold or 
                    adjusted under the Merchant Ship Sales 
                    Act 1946................................          90

[[Page 4]]

295             Maritime Security Program (MSP).............          91
296             Maritime Security Program (MSP).............          99
                SUBCHAPTER D--VESSEL FINANCING ASSISTANCE
298             Obligation guarantees.......................         117
                         SUBCHAPTER E [RESERVED]
                 SUBCHAPTER F--POSITION REPORTING SYSTEM
307             Establishment of mandatory position 
                    reporting system for vessels............         151
                   SUBCHAPTER G--EMERGENCY OPERATIONS
308             War risk insurance..........................         154
309             Values for war risk insurance...............         177
                         SUBCHAPTER H--TRAINING
310             Merchant Marine training....................         185
               SUBCHAPTER I-A--NATIONAL SHIPPING AUTHORITY
315             Agency agreements and appointment of agents.         212
317             Bonding of ship's personnel.................         214
324             Procedural rules for financial transactions 
                    under Agency agreements.................         216
325             Procedure to be followed by general agents 
                    in preparation of invoices and payment 
                    of compensation pursuant to provisions 
                    of NSA Order No. 47.....................         221
326             Marine protection and indemnity insurance 
                    under agreements with agents............         222
327             Seamen's claims; administrative action and 
                    litigation..............................         224
328             Slop chests.................................         234
329             Voyage data.................................         236
330             Launch services.............................         238
332             Repatriation of seamen......................         238
335             Authority and responsibility of general 
                    agents to undertake emergency repairs in 
                    foreign ports...........................         240
336             Authority and responsibility of general 
                    agents to undertake in continental 
                    United States ports voyage repairs and 
                    service equipment of vessels operated 
                    for the account of the National Shipping 
                    Authority under general agency agreement         242
337             General agent's responsibility in connection 
                    with foreign repair custom's entries....         243

[[Page 5]]

338             Procedure for accomplishment of vessel 
                    repairs under National Shipping 
                    Authority master lump sum repair 
                    contract--NSA-LUMPSUMREP................         244
339             Procedure for accomplishment of ship repairs 
                    under National Shipping Authority 
                    individual contract for minor repairs--
                    NSA-WORKSMALREP.........................         255
340             Priority use and allocation of shipping 
                    services, containers and chassis, and 
                    port facilities and services for 
                    national security and national defense 
                    related operations......................         256
            SUBCHAPTER I-B--CONTROL AND UTILIZATION OF PORTS
345             Restrictions upon the transfer or change in 
                    use or in terms governing utilization of 
                    port facilities.........................         263
346             Federal port controllers....................         265
347             Operating contract..........................         268
349             Reemployment rights of certain merchant 
                    seamen..................................         274
                       SUBCHAPTER J--MISCELLANEOUS
350             Seamen's service awards.....................         278
351             Depositories................................         280
355             Requirements for establishing United States 
                    citizenship.............................         280
356             Requirements for vessels of 100 feet or 
                    greater in registered length to obtain a 
                    fishery endorsement to the vessel's 
                    documentation...........................         284
370             Claims......................................         310
380             Procedures..................................         311
381             Cargo preference--U.S.-flag vessels.........         315
382             Determination of fair and reasonable rates 
                    for the carriage of bulk and packaged 
                    preference cargoes on U.S.-flag 
                    commercial vessels......................         320
383             [Reserved]

385             Research and development grant and 
                    cooperative agreements regulations......         323
386             Regulations governing public buildings and 
                    grounds at the United States Merchant 
                    Marine Academy..........................         332
387             Utilization and disposal of surplus Federal 
                    real property for development or 
                    operation of a port facility............         334
388             Administrative waivers of the Coastwise 
                    Trade Laws..............................         337

[[Page 6]]

389             Determination of availability of coastwise-
                    qualified vessels for transportation of 
                    platform jackets........................         341
            SUBCHAPTER K--REGULATIONS UNDER PUBLIC LAW 91-469
390             Capital Construction Fund...................         345
391             Federal income tax aspects of the Capital 
                    Construction Fund.......................         373
392             [Reserved]

393             America's Marine Highway Program............         393
394-399         [Reserved]

[[Page 7]]



               SUBCHAPTER A_POLICY, PRACTICE AND PROCEDURE



                           PART 200 [RESERVED]



PART 201_RULES OF PRACTICE AND PROCEDURE--Table of Contents



                 Subpart A_General Information (Rule 1)

Sec.
201.1 Scope of rules.
201.2 Mailing address; hours.
201.3 Authentication of rules, orders, determinations and decisions of 
          the Administration.
201.4-201.5 [Reserved]
201.6 Documents in foreign languages.
201.7 Information; special instructions.
201.8 Use of gender and number.
201.9 Suspension, amendment, etc., of rules.

  Subpart B_Appearance and Practice Before the Administration (Rule 2)

201.15 Appearance in person or by representative.
201.16 Authority for representation.
201.17 Written appearance.
201.18 Practice before the Administration defined.
201.19 Presiding officers.
201.20 Attorneys at law.
201.21 [Reserved]
201.22 Firms and corporations.
201.23 [Reserved]
201.24 Suspension or disbarment.
201.25 Statement of interest.
201.26 Former employees.

                       Subpart C_Parties (Rule 3)

201.30 Parties; how designated.
201.31 Public counsel.
201.32 Substitution of parties.

       Subpart D_Form, Execution and Service of Documents (Rule 4)

201.41 Form and appearance of documents filed with the Administration.
201.42 Subscription, authentication of documents.
201.43 Service by parties.
201.44 Date of service.
201.45 Certificate of service.
201.46 Copies of documents for use of the Administration.

                         Subpart E_Time (Rule 5)

201.51 Computation.
201.52 Additional time after service by mail.
201.53 Extension of time to file documents.
201.54 Reduction of time to file documents.
201.55 Postponement of hearing.

                     Subpart F_Rule Making (Rule 6)

201.61 Petition for issuance, amendment, or repeal of rule or 
          regulation.
201.62 Notice of proposed rule making.
201.63 Participation in rule making.
201.64 Contents of rules.
201.65 Effective date of rules.

    Subpart G_Formal Proceedings, Notice, Pleadings, Replies (Rule 7)

201.71 Commencement of proceedings.
201.72 Notice.
201.73 Joinder of proceedings.
201.74 Declaratory orders.
201.75 Petitions--general.
201.76 Applications for Government aid.
201.77 Amendments or supplements to pleadings.
201.78 Petition for leave to intervene.
201.79 Motions.
201.80 Answers to applications, petitions, or motions.

   Subpart H_Responsibilities and Duties of Presiding Officer (Rule 8)

201.85 Commencement of functions of Department of Transportation Office 
          of Hearings.
201.86 Presiding officer.
201.87 Authority of presiding officer.
201.88 Postponement or change of place by presiding officer.
201.89 Disqualification of presiding officer.

                 Subpart I_Summary Disposition (Rule 9)

201.91 Filing of motions, answers.
201.92 Ruling on motion.
201.93 Review of ruling, appeal.

  Subpart J_Prehearing Conference; Settlements; Procedural Agreements 
                                (Rule 10)

201.101 Prehearing conference.
201.102 Prehearing rulings.
201.103 Opportunity for agreement of parties and settlement of case.

              Subpart K_Discovery and Depositions (Rule 11)

201.109 Discovery and production of documents.
201.110 Depositions: request for orders to take; time of filing.
201.111 Contents of order.
201.112 Record of examination; oath; objections.
201.113 Submission to witness, changes, signing.

[[Page 8]]

201.114 Certification and filing by officer; copies.
201.115 Waiver of objections and admissibility.
201.116 Time of filing.
201.117 Inclusion in record.
201.118 Witness fees; expenses of taking depositions.

                      Subpart L_Subpoenas (Rule 12)

201.121 Application for subpoena ad testificandum.
201.122 Application for subpoena duces tecum.
201.123 Standards for issuance of subpoena duces tecum.
201.124 Service and quashing of subpoenas.
201.125 Attendance and mileage fees.
201.126 Service of subpoenas.
201.127 Subpoena of Administration employees, documents, or things.

                 Subpart M_Hearing Procedures (Rule 13)

201.131 Presentation of evidence.
201.132 Conduct of the hearing.
201.133 Appeal from ruling of presiding officer.
201.134 Separation of functions.

                      Subpart N_Evidence (Rule 14)

201.136 Evidence admissible.
201.137 Rights of parties as to presentation of evidence.
201.138 Unsponsored written material.
201.139 Documents containing matter both material and not material.
201.140 Records in other proceedings.
201.141 Stipulations.
201.142 Further evidence required by presiding officer during hearing.
201.143 Exceptions to rulings of presiding officer unnecessary.
201.144 Offer of proof.

 Subpart O_The Record: Contents; Development; Perfection; Confidential 
                           Treatment (Rule 15)

201.146 Receipt of documents after hearing.
201.147 Official transcript.
201.148 Corrections of transcript.
201.149 Copies of data or evidence.
201.150 Record for decision.
201.151 Objections to public disclosure of information.

Subpart P_Briefs, Requests for Findings, Decisions, Exceptions (Rule 16)

201.155 Briefs; request for findings.
201.156 Requests for extension of time for filing briefs.
201.157 Reopening of a case by presiding officer prior to decision.
201.158 Decisions, authority to make and kinds.
201.159 Decisions, contents and service.
201.160 Decision based on official notice.
201.161 Exceptions to, and review by the Administration of initial or 
          recommended decisions.
201.162 Replies to exceptions.
201.163 Request for extension of time for filing exceptions and replies 
          thereto.
201.164 Certification of record by presiding officer.

     Subpart Q_Oral Argument; Submittal for Final Decision (Rule 17)

201.166 Oral argument.
201.167 Submission to Administration for final decision.

 Subpart R_Stay of Administration's Decision, Reopening of Proceedings 
                                (Rule 18)

201.171 Stay of Administration's decision.
201.172 Time for filing petition to reopen.
201.173 Reopening by Administration and modification or setting aside of 
          decision.
201.174 Petition for reopening.
201.175 Answers to petition to reopen.

           Subpart S_Judicial Standards of Practice (Rule 19)

201.181 General matters.
201.182 Improper pressures.
201.183 Ex parte communications.

                   Subpart T_Effective Date (Rule 20)

201.185 Effective date and applicability of rules.

    Authority: 46 App. U.S.C. 1114(b); 49 CFR 1.66 and 1.69.

    Source: General Order 41, 3d Rev., 29 FR 14475, Oct. 22, 1964; 29 FR 
15374, Nov. 17, 1964, unless otherwise noted.



                 Subpart A_General Information (Rule 1)



Sec.  201.1  Scope of rules.

    The regulations in this part govern practice and procedure before 
the Maritime Administration and Maritime Subsidy Board (as described in 
49 CFR 1.66 and 1.67), hereinafter referred to collectively as the 
``Administration,'' under the Merchant Marine Act, 1920, as amended, 
Merchant Marine Act, 1936, as amended, Merchant Ship Sales Act, 1946, 
Administrative Procedure Act, and related Acts. In addition, certain 
proceedings under sections 605(c)

[[Page 9]]

and 805(a) of the Merchant Marine Act, 1936, as amended, shall be 
conducted in accordance with part 203 of this chapter except as may be 
provided otherwise by the Administration.

[55 FR 12358, Apr. 3, 1990]



Sec.  201.2  Mailing address; hours.

    Documents required to be filed in, and correspondence relating to, 
proceedings governed by the regulations in this part should be addressed 
to ``Secretary, Maritime Administration, Department of Transportation, 
Washington, DC 20590.'' The Office of the Secretary, Maritime 
Administration, including the public document reading room, located in 
room 7210, 400 Seventh Street, SW., Washington, DC 20590, is open from 
8:30 a.m. to 5:00 p.m.

[55 FR 12358, Apr. 3, 1990, as amended at 63 FR 9157, Feb. 24, 1998]



Sec.  201.3  Authentication of rules, orders, determinations and
decisions of the Administration.

    All rules, orders, determinations or decisions issued in any 
proceeding covered by the regulations in this part shall, unless 
otherwise specifically provided by the Administration, be signed and 
authenticated by seal by the Secretary of the Administration in the name 
of the Administration.



Sec.Sec. 201.4-201.5  [Reserved]



Sec.  201.6  Documents in foreign languages.

    Every document, exhibit, or other paper written in a language other 
than English and filed with the Administration or offered in evidence in 
any proceeding before the Administration under the regulations in this 
part or in response to any rule or order of the Administration pursuant 
to the regulations in this part, shall be filed or offered in the 
language in which it is written and shall be accompanied by an English 
translation thereof duly subscribed.



Sec.  201.7  Information; special instructions.

    Information as to procedure under the regulations in this part, and 
instructions supplementing the regulations in this part in special 
instances, will be furnished upon application to the Secretary of the 
Administration.



Sec.  201.8  Use of gender and number.

    Words importing the singular number may extend and be applied to 
several persons or things; words importing the plural number may include 
the singular; and words importing the masculine gender may be applied to 
females.



Sec.  201.9  Suspension, amendment, etc., of rules.

    The regulations in this part may, from time to time, be suspended, 
amended, or revoked, in whole or in part. Notice of any such action will 
be published in the Federal Register. Also, any regulation in this part 
may be waived by the Administration or the Presiding Officer to prevent 
undue hardship in any particular case.



  Subpart B_Appearance and Practice Before the Administration (Rule 2)



Sec.  201.15  Appearance in person or by representative.

    A party may appear in person or by an officer, partner, or regular 
employee of the party, or by or with counsel or other duly qualified 
representative, in any proceeding under the regulations in this part. A 
party may offer testimony, produce and examine witnesses, and be heard 
upon brief and at oral argument if oral argument is granted. Any person 
compelled to appear in a proceeding pursuant to subpoena may be 
accompanied, represented, and advised by counsel and may purchase a 
transcript of his testimony.



Sec.  201.16  Authority for representation.

    Any individual acting in a representative capacity in any proceeding 
before the Administration may be required by the Administration or the 
Presiding Officer to show his authority to act in such capacity.



Sec.  201.17  Written appearance.

    Persons who appear at any hearing shall deliver a written notation 
of appearance to the reporter, stating for whom the appearance is made. 
The

[[Page 10]]

written appearance shall be made a part of the record.



Sec.  201.18  Practice before the Administration defined.

    Practice before the Administration shall be deemed to comprehend all 
matters connected with any presentation to the Administration or its 
staff.



Sec.  201.19  Presiding officers.

    Hearings on any matter before the Administration will be held by a 
duly designated Member or Members thereof, or a Hearing Examiner 
qualified under section 11 of the Administrative Procedure Act, assigned 
by the Chief Hearing Examiner, who shall be designated as the Presiding 
Officers. Where appropriate the Administration may designate other 
members of the staff to serve as Presiding Officers in hearings not 
required by statute, as provided inSec. 201.86.



Sec.  201.20  Attorneys at law.

    Attorneys at law who are admitted to practice before the Federal 
courts or before the courts of any State or territory of the United 
States may practice before the Administration. An attorney's own 
representation that he is such in good standing before any of the courts 
herein referred to will be sufficient proof thereof.



Sec.  201.21  [Reserved]



Sec.  201.22  Firms and corporations.

    Except as regards law firms, practice before the Administration by 
firms or corporations on behalf of others shall not be permitted.



Sec.  201.23  [Reserved]



Sec.  201.24  Suspension or disbarment.

    The Administration may, in its discretion, deny admission to, 
suspend, or disbar any person from practice before the Administration 
who it finds does not possess the requisite qualifications to represent 
others or is lacking in character, integrity, or to have engaged in 
unethical or improper professional conduct. Disrespectful, disorderly, 
or contumacious language or contemptuous conduct at any hearing before 
the Administration or a presiding officer shall constitute grounds for 
immediate exclusion from said hearing by the Presiding Officer. Any 
person who has been admitted to practice before the Administration may 
be disbarred from such practice only after he has been afforded an 
opportunity to be heard.



Sec.  201.25  Statement of interest.

    The Administration, in its discretion, may call upon any 
practitioner for a full statement of the nature and extent of his 
interest in the subject matter presented by him before the 
Administration. Attorneys retained on a contingent fee basis shall file 
with the Administration a copy of the contract of employment.

[General Order 41, 3d Rev., 29 FR 14475, Oct. 22, 1964; 29 FR 15374, 
Nov. 17, 1964, as amended at 60 FR 38735, July 28, 1995]



Sec.  201.26  Former employees.

    (a) No former officer or employee of the Administration, after his 
or her employment with the Administration has ceased, shall act as agent 
or attorney for anyone other than the United States in connection with 
any particular matter in which a specific party or parties are involved 
and in which the United States is a party or has a direct and 
substantial interest and in which the former officer or employee 
participated personally and substantially as an officer or employee of 
the Maritime Administration through decision, approval, disapproval, 
recommendation, the rendering of advice, investigation, or otherwise 
while so employed by the Maritime Administration.
    (b) No former officer or employee of the Administration shall 
practice, appear, or represent anyone, directly or indirectly, other 
than the United States, before the Administration in any matter for a 
period of 1 year subsequent to the termination of his or her employment 
with the Administration in connection with any proceeding, application, 
request for a ruling or other determination, contract, claim, 
controversy, or other particular matter involving a specific party or 
parties in which the United States is a party or directly and 
substantially interested

[[Page 11]]

and which was under his or her official responsibility as an officer or 
employee of the Administration at any time during the last year of his 
or her service.
    (c) Any person in doubt as to the applicability of paragraph (a) or 
(b) of thisSec. 201.26 to a particular case or to the postemployment 
activities of a former officer or employee of the Administration may 
address an application to the Administration for the Administration's 
consent to appear, stating his former connection with the Administration 
or predecessor agency, identifying the matter in which he or she desires 
to appear and describe in detail his or her participation in or 
responsibility for the particular matter and the specific party or 
parties involved and the extent, if any, in which the former officer or 
employee had participated while employed by the Administration. The 
applicant shall be promptly advised as to his or her privilege to appear 
in the particular matter. Separate consents to appear must be obtained 
in each particular matter.

[G.O. 41, 3d Rev., Amdt. 3, 36 FR 4377, Mar. 5, 1971]



                       Subpart C_Parties (Rule 3)



Sec.  201.30  Parties; how designated.

    The term party, whenever used in these Rules, shall include any 
natural person, corporation, association, firm, partnership, trustee, 
receiver, agency, public or private organization, or governmental 
agency. A party requesting official action subject to these Rules shall 
be designated as applicant. A party whose petition for leave to 
intervene is granted pursuant toSec. 201.78 shall be designated as 
intervenor. Only a party as designated in this section may introduce 
evidence or examine witnesses at hearings.



Sec.  201.31  Public counsel.

    The Assistant General Counsel, Chief, Division of Operating Subsidy 
Contracts, shall be a party to all proceedings involving operating-
differential subsidy contracts. The Assistant General Counsel and his 
representatives shall be designated as Public Counsel and shall be 
served with copies of all papers, pleadings, and documents in such 
proceedings. In addition the General Counsel may designate any member of 
his staff to serve as Staff Counsel in contract appeal cases or any 
other proceeding governed by the regulations in this part. Public 
Counsel or Staff Counsel shall participate in any proceeding to which he 
is a party, to the extent he deems required in the public interest, 
subject to the separation of functions required by section 5(c) of the 
Administrative Procedure Act.



Sec.  201.32  Substitution of parties.

    Upon petition and for good cause shown, the Administration may order 
a substitution of parties; except that in case of death of a party 
substitution may be ordered upon suggestion and without the filing of a 
petition.



       Subpart D_Form, Execution and Service of Documents (Rule 4)



Sec.  201.41  Form and appearance of documents filed with the
Administration.

    All papers to be filed under the regulations in this part may be 
reproduced by printing or by any other process, provided the copies are 
clear and legible; shall be dated, the original signed in ink, and shall 
show the docket description and title of the proceeding, and the title, 
if any, and address of the signatory. If typewritten, the impression 
shall be on only one side of the paper and shall be double spaced, 
except that quotations shall be single spaced and indented. Documents 
not printed, except correspondence and exhibits, should be on strong, 
durable paper and shall not be more than 8\1/2\ inches wide and 12 
inches long, with a left margin 1\1/2\ inches wide. Printed documents 
shall be printed in clear type (never smaller than pica or 11-point 
type) adequately leaded, and the paper shall be opaque and unglazed. 
Briefs, if printed, shall be printed on paper not less than 6\1/8\ 
inches wide and 9\1/4\ inches long, with inside margin not less than 1 
inch wide. All briefs over 15 pages shall contain a subject index with 
page references and a list of authorities cited.

[[Page 12]]



Sec.  201.42  Subscription, authentication of documents.

    (a) Documents filed shall be subscribed: (1) By the person or 
persons filing same, (2) by an officer thereof if it be a corporation, 
(3) by an officer or employee if it be a government instrumentality, or 
(4) by an attorney or other person having authority with respect 
thereto.
    (b) Documents submitted pursuant to stipulation of counsel where no 
sponsoring witness will be used must be verified.



Sec.  201.43  Service by parties.

    All documents, when tendered for filing should show that service has 
been made upon all parties to the proceeding. Such service shall be made 
by delivering one copy to each party in person or by mailing by first-
class mail properly addressed with postage prepaid. When a party has 
appeared by attorney or other representative, service upon such attorney 
or other representative will be deemed service upon the party. All 
documents served by mail preferably should be mailed in sufficient time 
to reach the parties on the date on which the original is due to be 
filed and should be air mailed if addressee is more than 300 miles 
distant.



Sec.  201.44  Date of service.

    The date of service of documents shall be the day when the matter 
served is deposited in the United States mail, shown by the postmark 
thereon, or is delivered in person, as the case may be.



Sec.  201.45  Certificate of service.

    The original of every document filed with the Administration and 
required to be served upon all parties to a proceeding shall be 
accompanied by a certificate of service signed by the party making 
service, stating that such service has been made upon each party to the 
proceeding. Certificates of service may be in substantially the 
following form:

    I hereby certify that I have this day served the foregoing document 
upon all parties of record in this proceeding by mailing, postage 
prepaid (or by delivering in person) a copy to each such party.
    Dated at ------------------ this ------------ day of --------------
--, 19----
(Signature)----------------
 For----------------



Sec.  201.46  Copies of documents for use of the Administration.

    Except as otherwise provided in the regulations in this part, an 
original and fifteen copies of every document shall be filed for use of 
the Administration, except written testimony and exhibits to be made a 
part of a record, which shall be filed in triplicate unless otherwise 
directed.



                         Subpart E_Time (Rule 5)



Sec.  201.51  Computation.

    In computing any period of time under these Rules, the time begins 
with the day following the act, event, or default, and includes the last 
day of the period, unless it is a Saturday, Sunday, or national legal 
holiday. When the period of time prescribed or allowed is less than 
seven (7) days, intermediate Saturdays, Sundays, and holidays shall be 
excluded from the computation.



Sec.  201.52  Additional time after service by mail.

    Whenever service of a document has been made by mail in accordance 
withSec. 201.43 three (3) days shall be added to the prescribed period 
for answer.



Sec.  201.53  Extension of time to file documents.

    Applications for extension of time for the filing of any document 
shall set forth the reasons for the application and may be granted upon 
a showing of good cause on the part of applicant. Answers to such 
applications are permitted.



Sec.  201.54  Reduction of time to file documents.

    Except as prohibited by law, for good cause the Administration, or 
the Presiding Officer with respect to matters pending before him, may 
reduce any time limit prescribed in the regulations in this part.

[[Page 13]]



Sec.  201.55  Postponement of hearing.

    Applications for postponement of any hearing date may be granted 
upon a showing of good cause on the part of the applicant. Answers to 
such applications are permitted.



                     Subpart F_Rule Making (Rule 6)



Sec.  201.61  Petition for issuance, amendment, or repeal of rule
or regulation.

    Any interested person may file with the Administration a petition 
for the issuance, amendment, or repeal of a rule designed to implement, 
interpret, or prescribe law, policy, organization, procedure, or 
practice requirements of the Administration. The petition shall set 
forth the interest of petitioner and the nature of the relief desired, 
shall include any facts, views, arguments, and data deemed relevant by 
petitioner, and shall be subscribed to. If such petition is for the 
amendment or repeal of a rule, it shall be accompanied by proof of 
service on all persons, if any, specifically named in such rule, and 
shall conform in all other aspects to subpart D of this part. Answers to 
such petition shall conform to the requirements of subpart D of this 
part.



Sec.  201.62  Notice of proposed rule making.

    After receipt of petitions and any answers thereto described in 
Sec.  201.61, or upon its own initiative, the Administration may, in its 
discretion, direct that notice thereof be published in the Federal 
Register unless all persons subject thereto are named and either are 
personally served or otherwise have actual notice thereof in accordance 
with law. Except where publication of notice of proposed rule making and 
public hearing is required by statute, this section shall not apply to 
interpretative rules, general statements of policy, organization rules, 
rules of procedure, or practice of the Administration, or amendments 
thereto, or any situation in which the Administration for good cause 
finds that notice and public procedure thereon are impracticable, 
unnecessary, or contrary to the public interest.



Sec.  201.63  Participation in rule making.

    Interested persons will be afforded an opportunity to participate in 
rule making through submission of written data, views, or arguments, 
with or without opportunity to present the same orally in any manner: 
Provided, That where the proposed rules are such as are required by 
statute to be made on the record after opportunity for a hearing, or 
where a hearing is ordered by the Administration upon petition of any 
party or upon its own initiative, such hearing shall be conducted 
pursuant to sections 7 and 8 of the Administrative Procedure Act.



Sec.  201.64  Contents of rules.

    The Administration will incorporate in any rule to be adopted a 
concise general statement of their basis and purpose.



Sec.  201.65  Effective date of rules.

    The publication or service of any substantive rule shall be made not 
less than 30 days prior to its effective date except: (a) As otherwise 
provided by the Administration for good cause found and published in the 
Federal Register or (b) in the case of rules granting or recognizing 
exemption or relieving restriction, interpretative rules, and statements 
of policy.



    Subpart G_Formal Proceedings, Notice, Pleadings, Replies (Rule 7)



Sec.  201.71  Commencement of proceedings.

    Formal proceedings may be commenced with respect to any phase of an 
application for Government aid or other relief, the processing of which 
by statute requires a public hearing. The Administration may, in its 
discretion, also direct the holding of a hearing not required by statute 
for any purpose authorized in the statutes it administers.



Sec.  201.72  Notice.

    Notice of any matter which may result in or involves the institution 
of a formal proceeding will be given by publication in the Federal 
Register in sufficient detail and in sufficient time to apprise 
interested persons of the nature of the issues to be heard and to

[[Page 14]]

allow for an opportunity to file petitions for leave to intervene.



Sec.  201.73  Joinder of proceedings.

    (a) Two or more matters which have been set for hearing by the 
Administration, and which involve similar issues, may be consolidated 
for the purpose of hearing. Such consolidation may, at the discretion of 
the Administration, or Presiding Officer after hearing has been ordered, 
be ordered upon petition of any party to said hearing or upon the 
initiative of the Administration.
    (b) A petition to consolidate shall be filed not later than the 
first prehearing conference in the proceeding with which consolidation 
is requested, and shall relate only to then pending applications. If 
made at such conference, the petition may be oral. A petition which is 
not timely filed shall be dismissed unless the petitioner shall clearly 
show good cause for the failure to file said petition on time. A 
petition which does not relate to an application pending at the time of 
or before a prehearing conference in a proceeding with which 
consolidation is requested, shall likewise be dismissed unless the 
petitioner shall clearly show good cause for a failure to file the 
application within the prescribed period.



Sec.  201.74  Declaratory orders.

    The Administration may issue a declaratory order to terminate a 
proceeding or to remove uncertainty. Petitions for the issuance thereof 
shall state clearly and concisely the nature of the controversy or 
uncertainty, shall cite the statutory authority involved, shall include 
a complete statement of the facts and grounds supporting the petition, 
together with a full disclosure of petitioner's interest.



Sec.  201.75  Petitions--general.

    All petitions shall be written and shall state the petitioner's 
grounds of interest in the subject matter, the facts relied upon, and 
the relief sought, and shall cite the authority upon which the petition 
rests. The petition shall be served upon all parties named therein or 
affected thereby. Answers to petitions may be filed.



Sec.  201.76  Applications for Government aid.

    Applications for operating-differential subsidies, charter of 
Government-owned vessels, and other types of Government aid shall 
conform to the requirements set forth in the various general orders and 
other regulations of the Administration specifically provided therefor.



Sec.  201.77  Amendments or supplements to pleadings.

    Amendments or supplements to any pleading will be allowed or refused 
in the discretion of the Administration if the case has not been 
assigned for hearing, otherwise in the discretion of the presiding 
officer designated to conduct the hearing; Provided, That after a 
prehearing conference has been held no amendment shall be allowed which 
would substantially broaden the issues, unless an opportunity is 
afforded all parties to answer such amended pleadings and to prepare for 
hearing upon the broadened issues. The presiding officer may direct a 
party to state its case more fully and in more detail by way of 
amendment. If a response to an amended pleading is necessary, it may be 
filed and served. Amendments or supplements allowed prior to hearing 
will be served in the same manner as the original pleading. Whenever by 
the regulations in this part a pleading is required to be subscribed, 
the amendment or supplement shall also be subscribed.



Sec.  201.78  Petition for leave to intervene.

    A petition for leave to intervene may be filed in any proceeding 
before the Administration. The petition will be granted by the presiding 
officer if the proposed intervenor establishes that it has a substantial 
interest in the proceeding and will not unduly broaden the issues 
therein or unduly delay the proceeding. All such petitions shall be 
filed prior to the opening of the prehearing conference, or if none is 
held, before the commencement of hearing, unless petitioner shows good 
cause for allowing the petition at a later time. Intervention petitions 
shall be served in the same manner as other petitions, and shall be 
subject to answer. Intervention petitions will be granted where

[[Page 15]]

necessary to protect substantial interests of the petitioner and where 
intervention will not materially broaden the issues. A person granted 
permission to intervene becomes a party to the proceeding.



Sec.  201.79  Motions.

    All motions and requests for rulings shall state the relief sought, 
the authority relied upon, and the facts alleged. If made before or 
after the hearing, such motions shall be in writing. If made at the 
hearing, they may be stated orally: Provided, however, That the 
presiding officer may require that such motion be reduced to writing and 
filed and served in the same manner as a formal motion. Answers to 
formal motions shall comply with the requirements ofSec. 201.80. 
Motions and answers thereto shall be addressed to the presiding officer 
if the case is pending before such officer. Oral argument upon a written 
motion in which an answer has been filed may be granted within the 
discretion of the Administration or the presiding officer, as the case 
may be. A repetitious motion will not be entertained.



Sec.  201.80  Answers to applications, petitions, or motions.

    A pleading filed in response to an application, petition, or motion 
is called an answer. An answer may be filed to any application, 
petition, motion or pleading which is required to be served on the 
answering party or noticed in the Federal Register. An answer to a 
written application, petition, or motion shall be in writing and shall 
be filed within ten days after service of the pleading which it answers. 
Any new matter raised in an answer shall be deemed to be controverted. A 
response to an answer is called a reply. A short reply restricted to 
such new matters may be filed within five days of service of the answer.



   Subpart H_Responsibilities and Duties of Presiding Officer (Rule 8)



Sec.  201.85  Commencement of functions of Department of Transportation
Office of Hearings.

    In proceedings handled by the Department of Transportation Office of 
Hearings, its functions shall attach upon notice of the institution of a 
formal proceeding involving a prehearing conference and/or a hearing by 
the Administration.

[General Order 41, 3d Rev., 29 FR 14475, Oct. 22, 1964; 29 FR 15374, 
Nov. 17, 1964, as amended at 63 FR 9157, Feb. 24, 1998]



Sec.  201.86  Presiding officer.

    An Administrative Law Judge in the Department of Transportation 
Office of Hearings will be designated by the Department's Chief 
Administrative Law Judge to preside at hearings required by statute, or 
directed to be held under the Administration's discretionary authority 
in hearings not required by statute, in rotation so far as practicable, 
unless the Administration shall designate one or more of its officials 
to serve as presiding officer(s) in hearings required by statute, or 
member(s) of the staff in proceedings not required by statute.

[63 FR 9157, Feb. 24, 1998]



Sec.  201.87  Authority of presiding officer.

    The officer designated to hear a case shall have authority to 
arrange and issue notice of the date, time and place of hearings; under 
appropriate circumstances consolidate dockets for joint hearing; sign 
and issue subpoenas authorized by law; take or cause depositions to be 
taken; rule upon proposed amendments or supplements to pleadings; hold 
conferences for the settlement or simplification of matters embraced in 
the proceedings; regulate the course of the hearing; prescribe the order 
in which evidence shall be presented; dispose of procedural requests or 
similar matters; hear and initially rule upon all motions and petitions 
before him; administer oaths and affirmations; examine witnesses, direct 
witnesses to testify or produce available evidence and to submit 
reports, studies and analyses of data available to them which may be 
generally relevant and material to the determination of any questions of 
fact in issue; rule upon offers of proof and receive competent,

[[Page 16]]

relevant, material, reliable, and probative evidence; exclude 
irrelevant, immaterial, unreliable, repetitious or cumulative evidence; 
exclude cross-examination which is primarily intended to elicit self-
serving declarations in favor of the witness; and limit cross-
examination of any questions of fact in issue; for a full and true 
disclosure of the facts in issue; act upon petitions to intervene; act 
upon submission of facts, or argument; initially consider offers of 
settlement or other proposals of adjustment upon which recommendations 
to the Administration may be made; hear oral argument at the close of 
testimony; fix the time for filing briefs, motions and other documents 
to be filed in connection with hearings and replies thereto; and issue 
the initial or recommended decisions and dispose of any other pertinent 
matter that normally and properly arises in the course of proceedings. 
When the presiding officer is unavailable for any reason, and the 
exercise of any of his powers and functions, as described herein, is 
due, timely, and necessary, the Chief Administrative Law Judge may 
exercise such powers and functions until the presiding officer becomes 
available or until his successor is designated.

[General Order 41, 3d Rev., 29 FR 14475, Oct. 22, 1964; 29 FR 15374, 
Nov. 17, 1964, as amended at 63 FR 9157, Feb. 24, 1998]



Sec.  201.88  Postponement or change of place by presiding officer.

    If, in the judgment of the presiding officer, convenience or 
necessity so requires he may postpone the time or change the place of 
hearing.



Sec.  201.89  Disqualification of presiding officer.

    Any presiding officer may at any time withdraw if he deems himself 
disqualified, in which case another presiding officer will be 
designated. If a party to a proceeding, or his representative, files in 
good faith a timely and sufficient affidavit of personal bias or 
disqualification of a presiding officer, the Administration will 
determine the matter as a part of the record and decision in the case.



                 Subpart I_Summary Disposition (Rule 9)



Sec.  201.91  Filing of motions, answers.

    Any party or (if a petition to intervene shall have been filed but 
not have been acted upon) any prospective party may at or before the 
first prehearing conference in any proceeding, or at such later time as 
might be allowed by the presiding officer, move with supporting 
affidavits for a summary disposition in his favor of all or any part of 
the proceeding. Any adverse party may within 20 days serve opposing 
affidavits or may countermove for summary disposition. Oral argument 
thereon may be granted in the discretion of the presiding officer.



Sec.  201.92  Ruling on motion.

    The presiding officer may grant such motion if the application, 
motion, or other pleadings, affidavits or depositions, if any, and 
matters of official notice show that there is no genuine issue as to any 
material facts, that there is no necessity that further facts be 
developed in the record, and that such party is entitled to a decision 
as a matter of law.



Sec.  201.93  Review of ruling, appeal.

    The order of the presiding officer denying a motion for summary 
disposition shall be subject to interlocutory appeal under the 
provisions ofSec. 201.123. An order granting a motion for summary 
disposition is automatically reviewable by the Administration in 
accordance with the provisions ofSec. 201.133 and shall not be final 
until acted upon by the Administration.



  Subpart J_Prehearing Conference; Settlements; Procedural Agreements 
                                (Rule 10)



Sec.  201.101  Prehearing conference.

    Prior to any hearing a prehearing conference may be held before the 
presiding officer. Written notice of a prehearing conference shall be 
transmitted by the Secretary of the Administration or the Chief Hearing 
Examiner to all parties of record including persons whose petitions for 
leave to intervene in the proceeding have not

[[Page 17]]

theretofore been granted, and where practicable, by general release to 
the public press.
    (a) At the prehearing conference the following matters, among 
others, shall be considered: (1) Petitions for leave to intervene; (2) 
motions for consolidation or severance of dockets for joint or separate 
hearing to the extent that the Administration has not theretofore taken 
specific action; (3) simplification and delineation of the issues to be 
heard; (4) designation of matters in respect of which official notice 
may be taken; (5) requests for discovery and production of evidence 
considered to be generally relevant and material to the issues in the 
proceeding; (6) stipulations; (7) limitation of number of witnesses, 
particularly the avoidance of duplicate expert witnesses; (8) procedure 
applicable to the proceeding; (9) offers of settlement, as hereinafter 
to be more particularly discussed inSec. 201.103; and (10) scheduling 
of the dates for exchange of exhibits, written testimony both 
affirmative and rebuttal and establishing the date, time and place for 
hearing.
    (b) If deemed necessary or appropriate, the presiding officer may 
also, on his own motion, or on motion of Public Counsel direct any party 
to a proceeding to prepare and submit exhibits setting forth studies, 
forecasts, or estimates on matters relevant and material to the issues 
in the proceeding to be sponsored by witnesses available for cross-
examination thereon.



Sec.  201.102  Prehearing rulings.

    The presiding officer will, where practicable, issue prehearing 
rulings, acting on petitions for leave to intervene, delineating the 
issues, summarizing the rulings made at the conference, specifying a 
schedule for the exchange of exhibits and written testimony, the date, 
time and place of hearing and specifying a time for the filing of 
exceptions to the rulings. The prehearing rulings shall be served upon 
all parties to the proceeding and any persons who participated in the 
conference. Exceptions to the prehearing rulings may be filed by any 
such party or person within the time specified therein. The presiding 
officer may serve amended rulings in the light of the exceptions 
presented. Such rulings and amendments, if any, shall constitute the 
official account of the conference and shall control the subsequent 
course of the proceeding, but they may be reconsidered and modified at 
any time to protect the public interest or to prevent injustice.



Sec.  201.103  Opportunity for agreement of parties and settlement
of case.

    Where time, the nature of the proceeding, and the public interest 
permit, all interested parties shall have the opportunity for submission 
to and consideration by the presiding officer of offers of settlement, 
or proposals of adjustment together with facts and/or arguments relevant 
to such offers or proposals without prejudice to the rights of the 
parties. The presiding officer need not be present at any negotiations 
of such nature. The presiding officer shall issue an initial or 
recommended decision thereon recommending approval or disapproval of 
such offer of settlement or proposal of adjustment to the Administration 
for final action thereon. No agreement, offer, or proposal shall be 
admissible in evidence over the objection of any party in any hearing on 
the matter. When any settlement does not dispose of the whole 
proceeding, the remaining issues shall be determined in accordance with 
sections 7 and 8 of the Administrative Procedure Act.



              Subpart K_Discovery and Depositions (Rule 11)



Sec.  201.109  Discovery and production of documents.

    Upon request of any party showing good cause therefor, at the 
prehearing conference or otherwise upon notice to all other parties, the 
Administration or presiding officer may direct any party to produce and 
permit the inspection and copying or photographing, by or on behalf of 
the moving party, of any designated documents, papers, books, accounts, 
letters, photographs, objects, or tangible things, not privileged which 
constitute or contain evidence relating to any matter, not privileged, 
which is relevant to the subject matter involved in the pending 
proceeding, and which

[[Page 18]]

are in his possession, custody or control. The order shall specify the 
time, place, and manner of making the inspection and taking the copies 
and photographs and may prescribe such terms and conditions as are just. 
In lieu of such inspections the material may be produced in exhibit form 
and served upon all parties to a formal proceeding. Such exhibits may 
also, upon request of any party, be offered in evidence at a hearing.



Sec.  201.110  Depositions: request for orders to take; time of filing.

    The Administration or presiding officer may, upon proper request of 
a party to a proceeding or under circumstances deemed proper, issue an 
order to take a deposition regarding any matter, not privileged, which 
is relevant to the subject matter involved in the proceedings. A motion 
to take a deposition shall be filed not less than fifteen (15) days 
before the proposed date for taking the deposition, unless a shorter 
period is fixed underSec. 201.54, and shall set forth the reason for 
the deposition, the place and time of taking, the officer before whom it 
is to be taken, the name and address of each witness to be examined, if 
known, and, if the name is not known, a general description sufficient 
to identify him or the particular class or group to which he belongs, 
and whether the deposition is to be based upon written interrogatories 
or upon oral examination. If the deposition is to be based upon oral 
examination, the motion shall contain a statement of the matters 
concerning which each witness will testify. If the deposition is to be 
based on written interrogatories, the motion shall be accompanied by the 
interrogatories to be propounded, serially numbered. Copies of all 
motions to take depositions, and accompanying interrogatories, if any, 
shall conform to the requirements of subpart D of this part. Objection 
to the taking of such depositions may be made in an answer to such 
motion. Without prejudice to objection, the answer may also state 
objection to any individual interrogatory, and if the deposition is 
permitted, the presiding officer will rule upon such objections to 
interrogatories. A party served with an order to take a deposition on 
written interrogatories shall have ten (10) days after date of service 
of such order unless a shorter period is fixed underSec. 201.54, 
within which to file and serve written cross interrogatories, which 
shall be served pursuant to subpart D of this part. Answers to 
applications for cross interrogatories may be filed in accordance with 
Sec.  201.80. Upon the issuance of an order by the Administration or the 
presiding officer for the taking of a deposition, the Docket Clerk shall 
mail a copy thereof to all parties, including the party who requested 
the deposition. An application to take a deposition in a foreign country 
will be entertained when necessary or convenient, and authority to take 
such deposition will be granted upon such notice and other terms and 
directions as are lawful and appropriate.



Sec.  201.111  Contents of order.

    The order issued authorizing the taking of a deposition will state 
the name and address of each witness or a general description sufficient 
to identify him or the particular class or group to which he belongs, 
the matters concerning which the witness may be questioned, the place 
where, the time when, and the officer before whom the deposition is to 
be taken, any or all of which may or may not be the same as set forth in 
the motion filed. If the deposition is to be taken upon written 
interrogatories, a list of the interrogatories will accompany the order.



Sec.  201.112  Record of examination; oath; objections.

    The officer before whom the deposition is to be taken shall put the 
witness under oath and shall personally, or by someone acting under his 
direction and in his presence, record the testimony of the witness. The 
testimony shall be taken stenographically, shall be translated to 
English, if necessary, and shall be transcribed unless the parties agree 
otherwise. All objections made at the time of the examination to the 
qualifications of the officer taking the deposition, or to the manner of 
taking it, or to the evidence presented, or to the conduct of any party, 
and any other objections to the proceedings, shall be noted by the 
officer upon the

[[Page 19]]

deposition. Any party served with a notice to take an oral deposition 
may cross-examine a witness whose testimony is taken under such 
deposition. In lieu of cross-examination, parties served with notice of 
taking a deposition may transmit written interrogatories or cross-
interrogatories to the officer taking the deposition, who shall propound 
them to the witness and record the answers verbatim together with any 
objections interposed thereto by adverse parties.



Sec.  201.113  Submission to witness, changes, signing.

    When the testimony is fully transcribed the deposition of each 
witness shall be submitted to him for examination and shall be read to 
or by him. Any changes in form or substance which the witness desires to 
make shall be entered upon the deposition by the officer with a 
statement of the reasons given by the witness for making them. The 
deposition shall then be signed by the witness, unless the parties by 
stipulation waive the signing or the witness is ill or cannot be found 
or refuses to sign. If the deposition is not signed by the witness, the 
officer shall sign it and state on the record the fact of the waiver or 
of the illness or absence of the witness or the fact of the refusal to 
sign, together with the reason, if any, given therefor; and the 
deposition may then be used as fully as though signed, unless upon 
objection the presiding officer holds that the reasons given for the 
refusal to sign require rejection of the deposition in whole or in part.



Sec.  201.114  Certification and filing by officer; copies.

    The officer taking the deposition shall certify on the deposition 
that the witness was duly sworn by him and that the deposition is a true 
record of the testimony given by the witness, and that said officer is 
not of counsel or attorney to either of the parties and is not directly 
or indirectly interested in the outcome of the proceeding or 
investigation. He shall then securely seal the deposition in an envelope 
endorsed with the title of the proceeding and marked ``Deposition of 
(here insert name of witness)'', and shall promptly send the original 
and two copies thereof, together with the original and two copies of all 
exhibits, by registered mail to the Administration. Parties shall make 
their own arrangements with the officer taking the deposition for copies 
of the testimony and exhibits.



Sec.  201.115  Waiver of objections and admissibility.

    Objections to the form of question and answer shall be made before 
the officer taking the deposition by parties or representatives present, 
and if not so made, shall be deemed waived. Depositions shall, when 
offered at the hearing, be subject to proper legal objections.



Sec.  201.116  Time of filing.

    Any depositions to be offered in evidence shall be filed with the 
presiding officer not later than the close of the offering party's 
presentation.



Sec.  201.117  Inclusion in record.

    No deposition or part thereof shall constitute a part of the record 
in any proceeding until received in evidence.



Sec.  201.118  Witness fees; expenses of taking depositions.

    Witnesses whose depositions are taken pursuant to the regulations in 
this part, and the officer taking such deposition, shall severally be 
entitled to the same fees and mileage as are paid in the courts of the 
United States. All expenses of taking such depositions shall be paid by 
the party at whose instance the deposition is taken.



                      Subpart L_Subpoenas (Rule 12)



Sec.  201.121  Application for subpoena ad testificandum.

    An application for a subpoena requiring attendance of a witness at a 
hearing may be made without notice by any party to the presiding 
officer, or, in the event that a presiding officer has not been assigned 
to a proceeding or the presiding officer is not available, to the Chief 
Hearing Examiner, for action by him or by a member of the 
Administration. A subpoena for the attendance of a witness shall be 
issued on oral application at any time and shall be issued

[[Page 20]]

upon request of any interested party upon tender of an original and two 
copies of such subpoena. A record of the issuance of such a subpoena 
shall be entered in the docket.



Sec.  201.122  Application for subpoena duces tecum.

    An application for a subpoena duces tecum for documentary or 
tangible evidence shall be in duplicate except that for good cause shown 
it may be made during the course of a hearing on the record to the 
presiding officer. Such application need not be served upon all parties. 
All such applications, whether written or oral, shall contain a 
statement or showing of general relevance and reasonable scope of the 
evidence sought and shall be accompanied by an original and two copies 
of the subpoena sought which shall describe the documentary or tangible 
evidence to be subpoenaed with as much particularity as is feasible.



Sec.  201.123  Standards for issuance of subpoena duces tecum.

    The officer considering any application for a subpoena duces tecum 
shall issue the subpoena requested if he is satisfied the application 
complies with this section and the request is not unreasonable, 
oppressive, excessive in scope or unduly burdensome. No attempt shall be 
made to determine the admissibility of evidence in passing upon an 
application for a subpoena duces tecum and no detailed or burdensome 
showing shall be required as a condition to the issuance of any 
subpoena.



Sec.  201.124  Service and quashing of subpoenas.

    Subpoenas issued under this section may be served upon the person to 
whom directed in accordance with subpart D of this part. Any person upon 
whom a subpoena is served may within seven (7) days after service or at 
any time prior to the return date thereof, whichever is earlier, file a 
motion to quash or modify the subpoena with the officer who issued the 
subpoena for action by him, and serve a copy of such motion to quash 
upon the party requesting the subpoena. If the person to whom the motion 
to modify or quash the subpoena has been addressed or directed has not 
acted upon such a motion by the return date, such date shall be stayed 
pending his final action thereon. The Administration may at any time 
review, upon its own initiative, the ruling of the officer denying a 
motion to quash a subpoena. In such cases, the Administration may at any 
time order that the return date of a subpoena which it has elected to 
review be stayed pending Administration action thereon.



Sec.  201.125  Attendance and mileage fees.

    Persons attending hearings under requirement of subpoenas are 
entitled to the same fees and mileage as in the courts of the United 
States, to be paid by the party at whose instance the persons are 
called.



Sec.  201.126  Service of subpoenas.

    If service of subpoena is made by a United States marshal or his 
deputy, such service shall be evidenced by his return thereon. If made 
by any other person, such person shall make affidavit thereto, 
describing the manner in which service is made, and return such 
affidavit on or with the original subpoena. In case of failure to make 
service, the reasons for the failure shall be stated on the original 
subpoena. In making service the original subpoena shall be exhibited to 
the person served, shall be read to him if he is unable to read, and a 
copy thereof shall be left with him. The original subpoena, bearing or 
accompanied by required return, affidavit, or statement, shall be 
returned without delay to the Administration, or if so directed on the 
subpoena, to the presiding officer before whom the person named in the 
subpoena is required to appear.



Sec.  201.127  Subpoena of Administration employees, documents,
or things.

    No subpoena for the attendance of an Administration officer or 
employee, or for the production of Administration documents or things 
shall be complied with except upon written authorization of the General 
Counsel upon written application by the party requesting the subpoena.

[[Page 21]]



                 Subpart M_Hearing Procedures (Rule 13)



Sec.  201.131  Presentation of evidence.

    (a) Testimony. Where appropriate, the Presiding officer may direct 
that the testimony of witnesses be prepared in written exhibit form and 
shall be served at designated dates in advance of the hearing. Evidence 
as to events occurring after the exhibit-exchange dates shall be 
presented by a revision of exhibits. Witnesses sponsoring exhibits shall 
be made available for cross-examination. However, unless authorized by 
the presiding officer, witnesses will not be permitted to read prepared 
testimony into the record. The evidentiary record shall be limited to 
factual and expert opinion testimony. Argument will not be received in 
evidence but rather should be presented in opening and/or closing 
statements of counsel and in briefs to the presiding officer 
subsequently filed.
    (b) Exhibits. All exhibits and responses to requests for evidence 
shall be numbered consecutively by the party submitting same and 
appropriately indexed as to number and title and shall be exchanged on 
dates prior to the hearing prescribed in the prehearing rulings. Written 
testimony should be identified alphabetically. Two copies shall be sent 
to each party and two to the presiding officer. No response to a request 
for evidence will be received into the record unless offered and 
received as an exhibit at the hearing. The exhibits, other than the 
written testimony, shall include appropriate footnotes or narrative 
material explaining the source of the information used and the methods 
employed in statistical compilations and estimates and shall contain a 
short commentary explaining the conclusions which the offeror draws from 
the data. Rebuttal exhibits should refer specifically to the exhibits 
being rebutted. Where one part of a multipage exhibit is based upon 
another part, appropriate cross-reference should be made. The principal 
title of each exhibit should state precisely what it contains and may 
also contain a statement of the purpose for which the exhibit is 
offered. However, such explanatory statement, if phrased in an 
argumentative fashion, will not be considered as a part of the 
evidentiary record. Additional exhibits pertinent to the issues may be 
submitted in a proceeding with the approval of the presiding officer.
    (c) Cooperation on basic data. Parties having like interests are 
specifically encouraged to cooperate with each other in joint 
presentations particularly in such items as basic passenger, cargo, and 
scheduling data compiled from official or semiofficial sources, and any 
other evidence susceptible to joint presentation. Duplicate presentation 
of the same evidence should be avoided wherever possible.
    (d) Authenticity. The authenticity of all documents submitted as 
proposed exhibits in advance of the hearing shall be deemed admitted 
unless written objection thereto is filed prior to the hearing, except 
that a party will be permitted to challenge such authenticity at a later 
time upon a clear showing of good cause for failure to have filed such 
written objection.
    (e) Statement of position and trial briefs. A written statement of 
position should be exchanged by all counsel with copies to all other 
parties prior to the beginning of the hearing: Provided, however, That 
Public Counsel or counsel for a public body which has intervened as its 
interests may appear, may offer his statement of position at the 
conclusion of the evidentiary hearing, unless such is impracticable. 
This statement should include a showing of the theory of the case of the 
party submitting the statement and will not be subject to cross-
examination. Trial briefs are acceptable but will not be required.



Sec.  201.132  Conduct of the hearing.

    (a) Order of presentation. Normally the order of presentation at the 
hearing will be alphabetical in each of the following categories:
    (1) MarAd statistical material.
    (2) Shipper interests, United States and foreign government 
departments.
    (3) Applicants.
    (4) Intervenors.
    (5) Public counsel.

Normally, rebuttal should be presented without any adjournment in the 
proceedings.

[[Page 22]]

    (b) Burden of proof. The burden of proof shall be (1) upon an 
applicant for any form of government aid or grant; and (2) upon a 
proponent for the issuance of any rule or order within the jurisdiction 
of the Administration. The burden of going forward with rebuttal 
evidence in proceedings involving matters under paragraphs (b) (1) and 
(2) of this section shall fall upon opposing intervenors. Whenever an 
intervenor is permitted by the presiding officer to raise or advance a 
new issue in the proceeding, the burden of proof as to such issue shall 
fall upon such intervenor. If the burden of proof is met as to such new 
issue, the other parties shall have the burden of going forward with 
rebuttal evidence in such regard.
    (c) Requirement for submission of corrected copies of exhibits. Each 
party shall present three fully corrected copies of its exhibits to be 
offered in evidence, one for the docket and two for the presiding 
officer.
    (d) Offer of exhibits in evidence. The exhibits and written 
testimony sponsored by each witness shall be offered in evidence at the 
close of his direct examination to the extent practicable. After ruling 
upon motions to strike they shall be received in evidence subject to 
cross-examination. The presiding officer, in his discretion, may defer 
such ruling until after completion of cross-examination.
    (e)(1) Cross-examination. Cross-examination shall be limited to the 
scope of the direct examination and, except for Public Counsel and 
counsel for public bodies which have intervened as their interests may 
appear, to witnesses whose testimony is adverse to the party desiring to 
cross-examine--this being intended specifically to prohibit so-called 
``friendly cross-examination''. Cross-examination, which is not 
necessary to test the truth and completeness of the direct testimony and 
exhibits, will not be permitted.
    (2) Re-cross-examination. Second rounds of cross-examination 
normally will not be permitted unless it is necessary to cover new 
matters raised by a subsequent examination. Cross-examination of any 
particular witness shall be limited to one attorney for each party and 
shall not include subjects which are not germane to the interest 
represented by the cross-examiner.
    (f) Oral motions. Oral presentation on any motion or objection shall 
be limited to the party or parties making the motion or objection and 
the party or parties against which the motion or objection is directed 
and Public Counsel. Such presentation shall also be limited to one 
attorney for each party.
    (g) Official notice; public document items. Whenever there is 
offered (in whole or in part) a public document, such as an official 
report, decision, opinion, or published scientific or economic 
statistical data issued by any of the executive departments (or their 
subdivisions), legislative agencies or committees, or administrative 
agencies of the Federal Government (including Government-owned 
corporations), or a similar document issued by a State or its agencies, 
and such document (or part thereof) has been shown by the offerer to be 
reasonably available to the public, such document need not be produced 
or marked for identification, but may be offered for official notice as 
a public document item by specifying the document or relevant part 
thereof.
    (h) Oral argument at hearings. A request for oral argument at the 
close of testimony will be granted or denied by the presiding officer in 
his discretion.



Sec.  201.133  Appeal from ruling of presiding officer.

    Rulings of presiding officers may not be appealed prior to, or 
during the course of, the hearing except where the presiding officer has 
granted a Motion for Summary Disposition under subpart I of this part, 
or in extraordinary circumstances where prompt decision by the 
Administration is necessary to prevent unusual delay, expense, or 
detriment to the public interest, in which instances the matter shall be 
referred forthwith by the presiding officer to the Administration. Any 
such appeal shall be filed within fifteen (15) days from the date of the 
ruling by the presiding officer.



Sec.  201.134  Separation of functions.

    The separation of functions as required by section 5(c) of the 
Administrative Procedure Act shall be observed

[[Page 23]]

in adversary proceedings involving controverted factual issues arising 
under the regulations in this part.



                      Subpart N_Evidence (Rule 14)



Sec.  201.136  Evidence admissible.

    In any proceeding under the regulations in this part all evidence 
which is relevant, material, reliable and probative, and not unduly 
repetitious or cumulative shall be admissible. Irrelevant and immaterial 
or unduly repetitious or cumulative evidence shall be excluded.



Sec.  201.137  Rights of parties as to presentation of evidence.

    Every party shall have the right to present his case or defense by 
oral or documentary evidence, to submit rebuttal evidence, and to 
conduct such cross-examination as may be required for a full and true 
disclosure of the facts.



Sec.  201.138  Unsponsored written material.

    (a) Material that may be deemed evidence. Where a formal hearing is 
held, a party shall be afforded an opportunity to participate through 
submission of relevant, material, reliable and probative written 
evidence including official notice matters covered inSec. 201.132(g): 
Provided, That such evidence submitted by persons not present at the 
hearing will not be made a part of the record if opposed to by any party 
for good cause shown.
    (b) Material that may not be deemed evidence. Letters expressing 
views or urging action and other unsponsored written material in respect 
of matters embraced in, or related to, a formal hearing will be placed 
in the correspondence section of the docket of the proceeding. These 
data are not to be deemed part of the evidence or part of the record in 
the material unless sponsored at the public hearing by an authenticating 
and supporting witness.



Sec.  201.139  Documents containing matter both material and not
material.

    Where written matter offered in evidence is embraced in a document 
containing other matter which is not intended to be offered in evidence, 
the party offering shall present the original document to all parties at 
the hearing for their inspection, and shall offer a true copy of the 
matter which is to be introduced unless the presiding officer determines 
that the matter is short enough to be read into the record. Opposing 
parties shall be afforded an opportunity to introduce in evidence, or by 
stipulations other portions of the original document which are material 
and relevant.



Sec.  201.140  Records in other proceedings.

    When any portion of the record before the Administration in any 
proceeding other than the one being heard is offered in evidence, a true 
copy of such portion shall be presented for the record in the form of an 
exhibit unless the parties represented at the hearing stipulate upon the 
record that such portion may be incorporated by reference.



Sec.  201.141  Stipulations.

    The parties may, by stipulation in writing filed at the prehearing 
conference, or by written or oral stipulation presented at the hearing 
or by written stipulation subsequent to the hearing, agree upon any 
facts involved in the proceeding and include them in the record with the 
consent of the presiding officer. Proposed written stipulations shall be 
subscribed by the sponsors and served upon all parties of record. Only 
upon acceptance by all parties to the proceeding may a stipulation be 
noted for the record or received as evidence.



Sec.  201.142  Further evidence required by presiding officer during
hearing.

    At any time during the hearing the presiding officer may call for 
the production of further relevant and material evidence, reports, 
studies, and analyses upon any issue, and require such evidence, where 
available, to be presented by the party or parties concerned, either at 
the hearing or adjournment thereof in accordance withSec. 201.132(b). 
Such material shall be received subject to appropriate motions, cross-
examination and/or rebuttal. If a witness refuses to testify or produce

[[Page 24]]

the evidence as requested, the presiding officer shall report such 
refusal to the Administration forthwith.



Sec.  201.143  Exceptions to rulings of presiding officer unnecessary.

    Formal exceptions to rulings of the presiding officer are 
unnecessary. It is sufficient that a party, at the time the ruling of 
the presiding officer is made or sought, makes known the action which he 
desires the presiding officer to take or his objection to an action 
taken, and his grounds therefor.



Sec.  201.144  Offer of proof.

    An offer of proof made in connection with an objection taken to any 
ruling of the presiding officer rejecting or excluding proffered oral 
testimony shall consist of a statement of the substance of the evidence 
which counsel contends would be adduced by such testimony; and, if the 
excluded evidence consists of evidence in documentary or written form or 
of reference to documents or records, a copy of such evidence shall be 
marked for identification and shall accompany the record as the offer of 
proof.



 Subpart O_The Record: Contents; Development; Perfection; Confidential 
                           Treatment (Rule 15)



Sec.  201.146  Receipt of documents after hearing.

    Documents to be submitted for the record after the close of the 
hearing will not be received in evidence except upon ruling of the 
presiding officer. Such documents when submitted shall be accompanied by 
proof that copies have been served upon all parties, who shall have an 
opportunity to comment thereon; and shall be received not later than ten 
(10) days after the close of the hearing except for good cause shown, 
and not less than ten (10) days prior to the date set for filing briefs. 
Exhibit numbers should be assigned by counsel or the party. In computing 
the time within which to file such documents or other writings the five 
(5) additional days provided inSec. 201.54 shall not apply. Documents 
which are submitted but do not comply with the provisions of this rule 
will be filed in the correspondence section of the docket.



Sec.  201.147  Official transcript.

    The Administration will designate the official reporter for all 
hearings. The official transcript of testimony taken, together with any 
exhibits and any briefs or memoranda of law filed therewith shall be 
filed with the Administration. Transcripts of testimony will be 
available in any proceeding under the regulations in this section, and 
will be supplied by the official reporter to the parties and to the 
public except when required for good cause to be held confidential, at 
rates not to exceed the maximum rates fixed by the contract between the 
Administration and the reporter.



Sec.  201.148  Corrections of transcript.

    Motions made at the hearing to correct the record will be acted upon 
by the presiding officer. Motions made after the hearing to correct the 
record as to matters of substance rather than form, shall be filed with 
the presiding officer within ten (10) days after receipt of the 
transcript, unless otherwise directed by the presiding officer, and 
shall be served on all parties. Such motions may be in the form of a 
letter and shall certify the date when the transcript was received. If 
no objections are received within ten (10) days after date of service, 
the transcript will, upon approval of the presiding officer, be changed 
to reflect such corrections. If objections are received, the motion will 
be acted upon with due consideration of the stenographic record of the 
hearing.



Sec.  201.149  Copies of data or evidence.

    Every person compelled to submit data or evidence shall be entitled 
to retain or procure a copy of transcript thereof on payment of proper 
costs.



Sec.  201.150  Record for decision.

    The transcript of testimony and exhibits, together with all papers 
and requests (except the correspondence section of the docket), 
including rulings and any recommended or initial decisions filed in the 
proceeding shall constitute the exclusive record for decision. Final 
decisions will be predicated

[[Page 25]]

on the same record, including the initial decision of the presiding 
officer.



Sec.  201.151  Objections to public disclosure of information.

    Upon objection to public disclosure of any information sought to be 
elicited during a hearing, and a showing of cause satisfactory to the 
presiding officer, the witness shall disclose such information only in 
the presence of the presiding officer, official reporter and such 
attorneys or representatives of each party with demonstrated interests, 
as the presiding officer shall determine and after all present have been 
sworn to secrecy. The transcript of testimony shall be held 
confidential. Within five (5) days after such testimony is given, or 
document received, the objecting party shall file with the presiding 
officer a verified written motion to withhold such information from 
public disclosure, setting forth sufficient identification of same and 
the basis upon which public disclosure should not be made. Copies of 
said transcript and motion need not be served upon any other parties 
than those sworn to secrecy unless so ordered by the presiding officer.



Subpart P_Briefs, Requests for Findings, Decisions, Exceptions (Rule 16)



Sec.  201.155  Briefs; request for findings.

    The time for filing briefs to the presiding officer, and extensions 
thereof, shall be fixed by him. The period of time allowed shall be the 
same for all parties unless the presiding officer, for good cause shown, 
directs otherwise. Normally there shall be an opening brief by the 
moving parties, an answering brief by the proponents of a contrary 
conclusion and a short reply by the moving parties. Briefs and 
statements of position as authorized, shall be served upon all parties 
pursuant to subpart D of this part. Briefs shall include a summary of 
evidence, together with references to exhibit numbers and pages of the 
transcript, and memoranda of law with appropriate citations of the 
authorities relied upon. They shall contain proposed findings of fact 
and conclusions in serially numbered paragraphs.



Sec.  201.156  Requests for extension of time for filing briefs.

    Requests for extension of time within which to file briefs shall 
conform to the requirements ofSec. 201.53. Except for good cause 
shown, such requests shall be filed and served not later than five (5) 
days before the expiration of the time fixed for the filing of briefs.



Sec.  201.157  Reopening of a case by presiding officer prior
to decision.

    At any time prior to the filing of his initial or recommended 
decision, the presiding officer, either upon petition or upon his own 
initiative may, for good cause shown and upon reasonable notice, reopen 
the case for the receipt of further evidence.



Sec.  201.158  Decisions, authority to make and kinds.

    To the presiding officer is delegated the authority to render 
initial or recommended decisions in all proceedings before him, 
including motions, petitions and other pleadings. Tentative or final 
decisions will be rendered by the Administration. The same officers who 
preside at the reception of evidence pursuant to section 7 of the 
Administrative Procedure Act shall render the initial or recommended 
decisions except where such officers become unavailable to the 
Administration, in which case another Presiding Officer will be 
designated to make such decision or certify the record to the 
Administration. Where the Administration requires the entire record in 
the case to be certified to it for initial decision, the Presiding 
Officer shall first recommend a decision, except that in rule making:
    (a) In lieu thereof the Administration may issue a tentative 
decision or any of its responsible officers may recommend a decision or 
(b) any such procedure may be omitted in any case in which the 
Administration finds upon the record that due and timely execution of 
its functions in the public interest imperatively and unavoidably so 
requires.



Sec.  201.159  Decisions; contents and service.

    All initial, recommended, tentative, and final decisions, whether 
rendered

[[Page 26]]

orally or in writing shall include a statement of findings and 
conclusions, as well as the reasons or bases therefor, upon the material 
issues presented, as well as a statement of the appropriate rule, order, 
sanction, relief to be imposed, or the denial thereof. A copy of each 
decision when issued or when transcribed if orally rendered (and all 
orally presented decisions shall be stenographically recorded) shall be 
served on the parties to the proceeding, and furnished to interested 
persons upon request.



Sec.  201.160  Decision based on official notice.

    Official notice may be taken of such matters as might be judicially 
noticed by the courts, or of technical or scientific facts within the 
general or specialized knowledge of the Administration as an expert body 
or of a document required to be filed with or published by a duly 
constituted governmental body: Provided, That where a decision or part 
thereof rests on the official notice of a material fact not appearing in 
the evidence of the record, the fact of official notice shall be so 
stated in the decision, and any party, on timely request, shall be 
afforded an opportunity to show the contrary.



Sec.  201.161  Exceptions to, and review by the Administration of 
initial or recommended decisions.

    Within twenty (20) days after the service date of the initial or 
recommended decision, whether oral or in writing, unless a shorter 
period is fixed underSec. 201.54, any party may file exceptions to any 
conclusions, findings, or statements contained in such decision, and a 
brief in support of such exceptions. Such exceptions and brief shall 
constitute one document, shall indicate with particularity alleged 
errors, shall indicate pages of transcript and exhibit numbers when 
referring to the record, and shall be served on all parties pursuant to 
subpart D of this part. Whenever the presiding officer renders an 
initial decision, in the absence of the filing of exceptions thereto, or 
notice of review thereof by the Administration, such decision, shall 
upon the issuance of an appropriate order by the Administration, become 
the decision of the Administration. Upon the filing of exceptions to, or 
notice of review of, an initial or recommended decision, such decision 
shall become inoperative until the Administration determines the matter. 
Where exceptions are filed to, or the Administration reviews, an initial 
or recommended decision, the Administration, except as it may limit the 
issues upon notice or by rule, will have all the powers which it would 
have in making the initial decision. Whenever the Administration shall 
determine to review an initial or recommended decision on its own 
initiative, notice of such intention shall be served upon the parties 
within thirty (30) days after the date when the initial or recommended 
decision is orally rendered and, if in writing, served.



Sec.  201.162  Replies to exceptions.

    Any party may file and serve a reply to exceptions within twenty 
(20) days after date of service thereof, unless a shorter period is 
fixed pursuant toSec. 201.54. Such reply shall indicate pages of the 
transcript and exhibit numbers when referring to the record.



Sec.  201.163  Request for extension of time for filing exceptions
and replies thereto.

    Requests for extension of time within which to file exceptions, and 
briefs in support thereof, or replies to exceptions shall conform to the 
applicable provisions of subpart E of this part. Except for good cause 
shown, such requests shall be filed and served not later than five (5) 
days before the expiration of the time fixed for the filing of such 
documents.



Sec.  201.164  Certification of record by presiding officer.

    The presiding officer shall certify and transmit the entire record 
to the Administration when: (a) Exceptions are filed or the time 
therefor has expired, (b) notice is given by the Administration that the 
initial or recommended decision will be reviewed on its own initiative, 
or (c) the Administration requires the case to be certified to it for 
initial decision.

[[Page 27]]



     Subpart Q_Oral Argument; Submittal for Final Decision (Rule 17)



Sec.  201.166  Oral argument.

    If oral argument before the Administration is desired on exceptions 
or replies to exceptions to an initial, recommended, or tentative 
decision, or on a motion, petition, or application, a request therefor 
shall be made in writing properly addressed to the Administration. Any 
party may make such request irrespective of his filing exceptions or 
replies. If a brief on exceptions or replies thereto are filed, the 
request for oral argument shall be incorporated therein. Requests for 
oral argument on any motion, petition, or application shall be made in 
the motion, petition, or application or in the reply thereto. Requests 
for oral argument will be granted or denied in the discretion of the 
Administration, and, if granted, the notice of oral argument will set 
forth the order of presentation and the amount of time to be allotted. 
Those who appear before the Administration for oral argument should 
confine their argument to points of controlling importance and shall 
limit their argument to points upon which exceptions have been filed. 
Where the facts of a case are adequately and accurately dealt with in 
the initial, recommended, or tentative decision, parties should, as far 
as possible, address themselves in argument to the conclusions. Effort 
should be made by parties taking the same position to agree in advance 
of the argument upon those who are to present their side of the case. 
The names of persons who will argue and the amount of time requested by 
each should be received by the Administration not later than ten (10) 
days before the date set for the argument. Ordinarily, consolidation of 
appearances at oral argument will permit the parties' interests to be 
presented more effectively in the time allotted.



Sec.  201.167  Submission to Administration for final decision.

    A proceeding will be deemed submitted to the Administration for its 
determination as follows: (a) If oral argument is had, on the date of 
completion thereof, or if memoranda on points of law are permitted to be 
filed after argument, the last date of such filing; (b) if oral argument 
is not had, the last date when exceptions or replies thereto are filed, 
or if exceptions are not filed, the expiration date for such exceptions 
or the date when all parties have stated that no exceptions will be 
filed; (c) in the case of an initial decision, the date of notice of the 
Administration to review the decision, if such notice is given.



 Subpart R_Stay of Administration's Decision, Reopening of Proceedings 
                                (Rule 18)



Sec.  201.171  Stay of Administration's decision.

    The Administration's decision or order shall be stayed pending 
resolution by the Administration of a petition for reopening, duly 
filed, and for so long as such Administration's action has not been 
finally disposed of in accordance with the provisions of section 7 of 
Department of Commerce Order 117 (Revised).



Sec.  201.172  Time for filing petition to reopen.

    Except for good cause shown, and upon leave granted, petition to 
reopen underSec. 201.174, shall be filed with the Administration 
within twenty (20) days after the date of service of the 
Administration's decision or order in the proceeding, unless a different 
period is fixed underSec. 201.54.



Sec.  201.173  Reopening by Administration and modification or setting
aside of decision.

    Upon petition and a showing of compelling cause, filed in accordance 
withSec. 201.174, or on its own motion, the Administration may at any 
time reopen any proceeding under the regulation in this part for 
rehearing, reargument, or reconsideration in whole or in part. After 
reasonable notice and opportunity for hearing or such other procedure as 
the Administration may direct, the Administration may alter, modify or 
set aside in whole or in part its decision therein if it finds such 
action is required by changed conditions in fact or law or by the public 
interest.

[[Page 28]]



Sec.  201.174  Petition for reopening.

    A petition for reopening for the purpose of rehearing, reargument, 
or reconsideration, shall be made in writing, shall state the grounds 
relied upon, and conform to the requirements of subpart D of this part. 
If the petition is for the purpose of rehearing, said petition shall 
state the nature and purpose of the new evidence to be adduced and that 
such evidence was not available at the time of the prior hearing. If the 
petition be for reargument or reconsideration, the matter claimed to 
have been erroneously decided shall be specified and the alleged errors 
briefly stated. In case of exceptional circumstances, satisfactorily 
shown by the petitioner, a request for modification of rules or orders 
may be made by telegram or otherwise, upon notice to all parties or 
attorneys of record, but such request shall be followed by a petition 
filed and served in accordance with subpart D of this part.



Sec.  201.175  Answers to petition to reopen.

    Answers to petitions to reopen shall conform to the requirements of 
subpart D of this part.



           Subpart S_Judicial Standards of Practice (Rule 19)



Sec.  201.181  General matters.

    (a) In general, the functions of the Administration involve hearing 
procedures comparable to those of a court and accordingly parties to 
proceedings before the Administration and persons representing these 
parties are expected to conduct themselves with honor and dignity. For 
the same reasons, the members of the Administration and those of its 
employees who participate with the Administration in the determination 
of formal proceedings are expected to conduct themselves with the same 
fidelity to standards of propriety that characterizes a court and its 
staff. The standing and the effectiveness of the Administration are in 
direct relation to the observance by it, its staff and the parties and 
attorneys appearing before it of the highest of judicial and 
professional ethics.
    (b) It is essential in cases to be determined after notice and 
hearing and upon a record, or in any other cases which the 
Administration by order may designate, that the judicial character of 
the Administration be recognized and protected. As a consequence, from 
the time of the filing of an application or a petition which can be 
granted by the Administration only after notice and opportunity for 
hearing, or in the case of other matters from the time of notice by the 
Administration that such matters shall be determined after notice and 
opportunity for hearing, no ex parte communications, as hereinafter 
defined, are to constitute or be considered part of the record on which 
the final decision is to be predicated.



Sec.  201.182  Improper pressures.

    It is determined to be improper that there be any effort by any 
person interested in a case before the Administration to attempt to sway 
the judgment of the Administration by undertaking to bring pressure or 
influence to bear upon the Administration, its staff, or the presiding 
officer assigned to the proceeding. It is further determined to be 
improper that such interested persons or any member of the 
Administration's staff or the presiding officer directly or indirectly 
give statements to the press or radio, by paid advertisements or 
otherwise, designed to influence the Administration's judgment in the 
matter. In addition, it is further determined to be improper that any 
person solicit communications to the Administration or any of its 
members, its staff or the presiding officer in the case other than by 
counsel of record who shall serve copies thereof on all other parties to 
the proceeding.



Sec.  201.183  Ex parte communications.

    (a) Requests for expeditious treatment of matters pending with the 
Administration are deemed communications on the merits and as such are 
improper except when forwarded from parties to a proceeding and served 
upon all other parties thereto. Such communications from parties to a 
proceeding should be in the form of a motion and are to be dealt with as 
such by the Administration, the presiding officer, and

[[Page 29]]

the parties to the proceeding. Any such request which is not made as a 
motion shall be placed in the public correspondence file and will not be 
considered by the Administration or any of its staff members or the 
presiding officer in connection with the disposition of the case.
    (b) Written or oral communications involving any substantive or 
procedural issue in a matter subject to public hearing directed to a 
Member of the Administration, its staff, or the presiding officer in the 
case, from any individual in private or public life shall be deemed a 
private communication in respect of the merits of the case. These 
communications, unless otherwise provided for by law or a published rule 
of the Administration are deemed ex parte communications and are not to 
be considered part of any record or the basis for any official action by 
the Administration, members of its staff or the presiding officer: 
Provided, however, That this prohibition shall not be determined to 
apply to informal petitions or applications filed with the 
Administration; the usual informal communications between counsel 
including discussions directed toward the development of a stipulation 
or settlement between parties; communications of a nature deemed proper 
in proceedings in U.S. Federal courts; and communications which merely 
inquire as to the status of a proceeding without discussing issues or 
expressing points of view. Any prohibited communications in writing 
received by a Member of the Administration, its staff or the presiding 
officer shall be made public by placing it in the correspondence file of 
the docket which is available for public inspection and will not be 
considered by the Administration or the presiding officer as part of the 
record for decision. If the ex parte communication is received orally, a 
memorandum setting forth the substance of the conversation shall be made 
and filed in the correspondence section of the appropriate public 
docket.



                   Subpart T_Effective Date (Rule 20)



Sec.  201.185  Effective date and applicability of rules.

    The regulations in this part shall become effective October 23, 
1964, and shall apply only to cases which are designated for hearing on 
or after October 23, 1964: Provided, however, That the regulations in 
this part shall be applicable to cases designated for hearing prior to 
October 23, 1964, if consolidated with a case designated for hearing on 
or after that date. All other cases designated for hearing prior to 
October 23, 1964, shall be governed by the rules in effect immediately 
prior to such date.



PART 202_PROCEDURES RELATING TO REVIEW BY SECRETARY OF TRANSPORTATION
OF ACTIONS BY MARITIME SUBSIDY BOARD--Table of Contents



Sec.
202.1 Purpose.
202.2 Time and place for filings.
202.3 Form of petitions, requests and replies.
202.4 Petitions and requests for review--content.
202.5 Replies and requests that review not be exercised--content.
202.6 Grant or denial of review.
202.7 Supplemental briefs.
202.8 Oral argument.
202.9 Decisions by the Secretary of Transportation.
202.10 Petitions for reconsideration.
202.11 Ex parte communications.

    Authority: Sec. 204, 49 Stat. 1987, as amended; sec. 204(b), as 
amended, 46 U.S.C. 1114(b); Reorganization Plan No. 7 of 1961 (26 FR 
7315).

    Source: 32 FR 2705, Feb. 9, 1967, unless otherwise noted.



Sec.  202.1  Purpose.

    The rules of this part prescribe procedures relating to Secretarial 
review of any decision, report, order or action of the Maritime Subsidy 
Board (Board) pursuant to Department Order 117-A (31 FR 8087, 15331). 
Section 6 of Department Order 117-A is reprinted here for the 
convenience of the public.

    Sec. 6. Review and finality of actions by Maritime Subsidy Board. 
.01 The Secretary of Transportation (hereinafter referred to as 
``Secretary'') may, on his own motion or on the basis of a petition 
filed as hereinafter

[[Page 30]]

provided, review any decision, report and/or order of the Maritime 
Subsidy Board based on a hearing held pursuant to (a) statutory 
requirements or (b) Board order, by entering a written order stating 
that he elects to review the action of the Board. Copies of all orders 
for review shall be served on all parties of record (which phrase 
includes the Board). Petitions for review under this paragraph may be 
filed by parties of record, shall be in writing, and shall state the 
grounds upon which petitioner relies. Ten (10) copies of such petitions 
for review, together with proof of service thereof on all parties of 
record, shall be filed with the Secretary within fifteen (15) days after 
the date of the service of the Board's decision, report or order. 
Parties of record may file replies in writing thereto. Ten (10) copies 
of such replies, together with proof of service thereof on the 
petitioner and all other parties of record, shall be filed with the 
Secretary within ten (10) days after the date the petition for review is 
timely filed. Petitions for review and replies thereto shall be limited 
to the record before the Board. If a petition for review is filed within 
the time prescribed, a decision, report or order of the Board shall be 
final fifteen (15) days after expiration of the time prescribed for 
filing a reply thereto unless the Secretary, prior to expiration of the 
fifteen (15) days, enters a written order granting the petition for 
review. If no petition for review is filed within the time prescribed, a 
decision, report or order of the Board shall be final twenty (20) days 
after the date of service of the decision unless the Secretary, prior to 
expiration of the twenty (20) days, enters a written order stating that 
he elects to review the action of the Board. If upon any review the 
decision of the Secretary rests on official notice of a material fact 
not appearing in the evidence in the record, any party of record shall, 
if request is made within ten (10) days after the date of service of the 
Secretary's decision on said party, be afforded an opportunity to show 
the contrary. The said ten (10) days shall constitute the period for a 
``timely request'' within the meaning of section 7(d) of the 
Administrative Procedure Act.
    .02 The Secretary may on his own motion review all actions of the 
Maritime Subsidy Board other than those referred to in paragraph .01 of 
this section by entering a written order stating that he elects to 
review the action of the Board. Any person having an interest in any 
action of the Board under this paragraph shall have the privilege of 
submitting to the Secretary within ten (10) days after the date of such 
Board action, a request that the Secretary undertake such review. Such 
request shall be in writing and shall state the grounds upon which the 
person submitting the same relies and his interest in the action for 
which review is requested. Ten (10) copies of such requests shall be 
submitted to the Secretary. Any other person having an interest in such 
matter shall have the privilege of submitting within fifteen (15) days 
after the date of the Board's action, a written request that the 
Secretary not exercise such review. Copies of request that the Secretary 
undertake or not exercise review will be open for public inspection at 
the office of the Secretary of the Board. If either a request that the 
Secretary undertake review or a request that he not exercise review is 
submitted within the time prescribed, an action of the Board shall be 
final in ten (10) days after expiration of the time prescribed for 
submission of a request that review not be exercised unless the 
Secretary, prior to the expiration of the ten (10) days, enters a 
written order stating that he elects to review the action of the Board. 
If neither a request that the Secretary undertake review nor a request 
that he not exercise review is submitted within the time prescribed, an 
action of the Board shall be final in twenty (20) days after the date of 
such action unless the Secretary, prior to expiration of the twenty (20) 
days, enters a written order stating that he elects to review the action 
of the Board. Copies of all orders for review shall be served upon the 
Board, and upon all persons filing requests as herein described.
    .03 If a timely petition for reconsideration is filed under the 
rules prescribed by the Board, the time for filing a petition or request 
for review by the Secretary under paragraph .01 or .02 of this section, 
respectively, or the entry of an order by the Secretary on his own 
motion electing to review an action of the Board under paragraph .01 or 
.02 of this section, shall, in the case of actions under paragraph .01 
of this section run from the date of service of the Board's action and, 
in the case of actions under paragraph .02 of this section, run from the 
date of the Board's action, finally disposing of the issues presented by 
the petition for reconsideration.
    .04 In computing any period of time under this section, the time 
begins with the day following the act, event, or default, and includes 
the last day of the period unless it is Saturday, Sunday, or national 
legal holiday, in which event the period runs until the end of the next 
day which is not a Saturday, Sunday, or such holiday. The prescribed 
time for action by the Secretary in a proceeding in which additional 
days have been added pursuant to the provisions of this paragraph shall 
be extended by the total of such additional days.
    .05 Petitions and requests for review by the Secretary shall not be 
filed:
    a. Unless the petitioner shall have first exhausted his 
administrative remedies (other than a petition for reconsideration) 
before the Maritime Subsidy Board; nor

[[Page 31]]

    b. With respect to interlocutory decisions of the Maritime Subsidy 
Board in actions or proceedings referred to in paragraphs .01 and .02 of 
this section.
    .06 The Secretary may, for good cause and/or in order to prevent 
undue hardship in any particular case, waive or modify any procedural 
provision of this section by written order.



Sec.  202.2  Time and place for filings.

    All petitions, requests and replies relating to Secretarial review 
of Maritime Subsidy Board actions shall be filed with the Office of the 
Secretary of Transportation, Department of Transportation. Such papers 
shall be filed in accordance with the provisions of and within the time 
periods prescribed by Department Order 117-A.



Sec.  202.3  Form of petitions, requests and replies.

    (a) All papers presented to the Secretary, other than records, shall 
bear on the cover the name and post office address of the party, and the 
name and address of the principal attorney or authorized representative 
(if any) for the party concerned. Certification shall be made that 
service of the paper has been made upon all parties of record (if any) 
and upon the Secretary of the Maritime Subsidy Board. One copy of every 
paper filed with the Secretary must in addition bear at its close the 
hand written signature of the party or attorney.
    (b) All papers presented to the Secretary, other than records, 
shall, unless they are fewer than 10 pages in length, be preceded by a 
subject index of the matter contained therein, with page references, and 
a table of the cases (alphabetically arranged), textbooks, statutes and 
other material cited, with references to the pages where they are cited.
    (c) Whenever a reference is made to a transcript, exhibit or other 
part of the record, such reference must be accompanied by a specific 
citation identifying the document and indicating the relevant page 
number of the document concerned.
    (d) Papers filed with the Secretary should be logically arranged, 
with proper headings, concise, and free from irrelevant and unduly 
repetitious matter.
    (e) It will not be necessary to reproduce the opinion of the Board.



Sec.  202.4  Petitions and requests for review--content.

    Petitions and requests for review shall contain in the order here 
indicated--
    (a) A reference to the decision, report, order or action of the 
Board;
    (b) A concise statement of the interest of the party submitting the 
paper;
    (c) A concise summary statement of the case containing that which is 
material to the consideration of the questions presented;
    (d) A listing of each of the grounds upon which the party seeking 
review relies, expressed in the terms and circumstances of the case, 
each ground set forth in a separate, numbered paragraph;
    (e) The argument, generally amplifying the material in paragraph (d) 
of this section and exhibiting clearly the points of law, policy and 
fact being presented, citing the authorities, statutes and other 
material relied upon. The argument should separately identify and treat 
each of the grounds upon which review is sought. In cases where 
reversible legal error is contended, a full legal argument on the points 
concerned should be presented. In cases where policy error is contended, 
it should be pointed out what policy of the Board is alleged to be 
wrong, what is wrong with it and what policy the submitting party 
advocates as the correct one. In cases where reversible factual error is 
contended, the findings of fact alleged to be erroneous should be 
pointed out along with citations to the record where appropriate. The 
party should further indicate precisely what it contends to be the 
correct findings of fact, with supporting references;
    (f) A conclusion, specifying with particularity the action which the 
submitting party believes the Secretary should take.



Sec.  202.5  Replies and requests that review not be exercised--content.

    Replies and requests that review not be exercised shall contain in 
the order here indicated--
    (a) A reference to the decision, report, order, or action of the 
Board;

[[Page 32]]

    (b) A concise statement of the interests of the party submitting the 
paper;
    (c) Where deemed necessary by the submitting party, a concise 
summary statement of the case explicitly pointing out any inaccuracy or 
omission in the statement of the other side, with references to the 
record where appropriate;
    (d) A listing of the reasons why review should not be exercised, 
each reason set forth in a separate, numbered paragraph;
    (e) The argument generally amplifying the material in paragraph (d) 
of this section and, in addition, specifically replying to the points of 
law, policy and fact presented by the other side (each stated 
separately) citing the authorities, statutes, and other material relied 
upon by the submitting party;
    (f) A conclusion, specifying with particularity the action which the 
submitting party believes the Secretary should take.



Sec.  202.6  Grant or denial of review.

    (a) A petition or request for review by the Secretary of any 
decision, report, order or action of the Board will not be granted 
unless significant and important questions of over-all policy requiring 
the Secretary's attention are involved or there appears to be 
significant legal, policy, or factual error in the Board's action.
    (b) The parties and the Secretary of the Board will be notified, by 
Order, of the Secretary's decision to review a case on his own motion, 
and of his decision to review or to deny review of a case where a 
petition or request concerning review has been filed.
    (c) Promptly upon notice of a decision by the Secretary to review a 
case subject to review under section 6.01 of Department Order 117-A, the 
Secretary of the Board shall certify to the Secretary the complete 
record of the proceeding before the Board and shall serve upon all 
parties a copy of such certification which shall adequately identify the 
matter so certified. The Secretary of the Board shall further serve upon 
all parties a copy of any further communication from the Board or 
Maritime Administration on such a case.



Sec.  202.7  Supplemental briefs.

    If an order taking review is entered by the Secretary, further 
briefs supplementing the arguments set forth in the petitions and 
replies may be requested in cases where the Secretary deems such to be 
appropriate and desirable.



Sec.  202.8  Oral argument.

    Generally, oral argument will not be necessary. However, the 
Secretary reserves the right to schedule such when he deems it 
desirable.



Sec.  202.9  Decisions by the Secretary of Transportation.

    Decisions of the Secretary will be reached in accordance with 
applicable law and the evidence. Upon the determination of a case taken 
under review by the Secretary, a written decision and opinion which 
states the Secretary's conclusions and an explanation thereof will be 
issued.



Sec.  202.10  Petitions for reconsideration.

    Petitions for reconsideration of decisions by the Secretary in any 
case taken under review will be considered, upon a showing of good 
cause, if filed within ten (10) days of service of the Secretary's 
decision.



Sec.  202.11  Ex parte communications.

    Oral or written communications with the Department concerning a 
matter subject to Secretarial review under section 6.01 of Department 
Order 117-A, unless otherwise provided by law or by order, rule, or 
regulation of the Department, shall be deemed ex parte communications 
and shall not be part of the record and shall not be considered in 
making any recommendation, decision or action; Provided, however, That 
this rule shall not apply to customary informal communications with 
Department counsel, including discussions directed toward the 
development of a stipulation or settlement between parties; 
communications of a nature deemed proper in proceedings in U.S. Federal 
courts; and communications with Department counsel which merely inquire 
as to procedures or the status of a proceeding without discussing issues 
or expressing points of view. Any

[[Page 33]]

written communication subject to the above stated rule received by the 
Department shall be placed in the correspondence file of the case, which 
is available for public inspection. If an oral communication subject to 
the above stated rule is received, a memorandum setting for the 
substance of the conversation shall be made and placed in the 
correspondence file.



PART 203_PROCEDURES RELATING TO CONDUCT OF CERTAIN HEARINGS UNDER THE
MERCHANT MARINE ACT, 1936, AS AMENDED--Table of Contents



Sec.
203.1 Scope of rules.
203.2 Applications.
203.3 Opposition to applications.
203.4 Replies.
203.5 Types of hearings.
203.6 Oral evidentiary hearing before one or more members.

    Authority: Secs. 204(b), 605(c) and 805(a), Merchant Marine Act, 
1936, as amended (46 U.S.C. app. 1114(b), 1175(c) and 1223(a)).

    Source: 55 FR 12358, Apr. 3, 1990, unless otherwise noted.



Sec.  203.1  Scope of rules.

    (a) The provisions of this part apply to applications which involve 
statutorily mandated hearings under sections 605(c) and 805(a) of the 
Merchant Marine Act, 1936, as amended (46 U.S.C. app. 1175(c), 1223(a)), 
hereinafter referred to as the ``Act'', conducted by the Maritime 
Administrator or Maritime Subsidy Board of the Maritime Administration, 
hereinafter referred to collectively as the ``Administration''.
    (b) The provisions of this part are to be construed consistently 
with the Administration Rules of Practice and Procedure in 46 CFR part 
201. If this part and 46 CFR part 201 conflict, this part shall govern.



Sec.  203.2  Applications.

    (a) Notice of all applications subject to this part shall be 
published in the Federal Register, in accordance with the provisions of 
46 CFR 201.72.
    (b) All applications under section 605(c) of the Act shall specify, 
at a minimum, full details of the existing or proposed new or amended 
service, to include itineraries and the number and type of vessels 
currently operated in the trade or trade route, the number and type of 
vessels proposed to be operated in the trade or trade route, the 
frequency of sailings and port calls and the nature and extent of U.S.-
flag and any foreign-flag competition. As a matter of discretion, the 
Administration may request additional information, which may be 
protected by a confidentiality ruling, if justified. If the application 
is one for additional service on a route in which the applicant has an 
established service, or for an existing service, then the applicant must 
include information on its previous three years of operation. Applicants 
for permission under section 805(a) of the Act must describe clearly the 
scope of permission sought, including details of proposed domestic 
service and existing or proposed foreign service, as well as the 
applicant's operating structure.
    (c) Applications under section 605(c) of the Act shall be filed on 
Form MA-964, in accordance with the instructions annexed thereto. Copies 
of Form MA-964 may be obtained on request from the Secretary of the 
Administration.
    (d) Applications for permission under section 805(a) of the Act 
shall be submitted in accordance with the procedures set forth in 46 CFR 
part 380, and shall comply with all of the requirements of that part.



Sec.  203.3  Opposition to applications.

    (a) Required documents. A person seeking to oppose an application 
shall file with the Secretary of the Administration, and concurrently 
serve upon the applicant, a petition for leave to intervene, together 
with an answer, within the time period specified in the Federal Register 
notice of the application. Normally, twenty days will be provided.
    (b) Petition for leave to intervene. The petition for leave to 
intervene shall specify the basis upon which such person asserts a right 
to intervene and shall set forth with particularity:
    (1) The number and type of U.S.-flag vessels currently operated by 
the person seeking intervention in the trade or trade route to which the 
application pertains.

[[Page 34]]

    (2) The frequency of sailings of vessels operated by such person in 
the trade or trade route to which the application pertains in the 36 
calendar months immediately preceding the date of the application.
    (3) The specific ports of call conducted by such person in the trade 
or trade route to which the application pertains in the 36 calendar 
months immediately preceding the date of the application.
    (4) The average annual carriage by such person for the past 36 
months on the trade route to which the application pertains.
    (5) If applicable, specific information detailing firm and definite 
plans for the inauguration of a new service, including, as appropriate, 
but not limited to, approval by the board of directors or general 
partners, membership in applicable conference agreements, office 
openings or the retention of agents in the proposed service area, 
acquisition of vessels and related equipment, subsidy applications, 
applications for any needed Government approvals or advertisement for 
the proposed service.
    (6) Such other information as the person believes should be 
considered in a determination of such person's right to intervene.
    (c) Answer. (1) The answer shall be simultaneously filed with the 
petition for leave to intervene and shall specify the basis upon which 
such person asserts the application should be denied or granted subject 
to modifications.
    (2) The answer shall set forth with particularity:
    (i) The ground upon which opposition is based;
    (ii) The factual matters which such person believes must be 
determined by the Administration;
    (iii) The legal matters which such person believes must be 
determined by the Administration;
    (iv) For each factual and legal matter raised such person's position 
and basis therefor; and
    (v) The precise nexus between each factual and legal matter raised 
and the decision of the Administration.
    (d) Right to intervene in Opposition to applications. (1) Leave to 
intervene in opposition to applications under section 605(c) of the Act 
will only be granted to operators of U.S.-flag vessels, and only to the 
extent, as demonstrated by the petition for leave to intervene, that 
such person provides an existing service, or that such person has firm 
and definite plans to provide a service, by a showing that its vessels 
operate in the same trade or on the same trade route as that proposed by 
the applicant and so operate in a manner competitive with the specific 
service proposed by the applicant. Although persons seeking intervention 
need not call at the same specific ports proposed by the applicant by 
direct vessel calls, any filing based on intermodal service in 
opposition to an application shall demonstrate that such person 
regularly competes by intermodal service for cargo moving to or from 
ports in the service proposed by the applicant. The burden of 
demonstrating competition between the vessels of the person seeking 
intervention and those of the applicant will be with the person seeking 
such intervention. Leave to intervene will not be granted to those 
conducting a competing service on an intermittent or de minimis basis.
    (2) Leave to intervene in opposition to applications under section 
805(a) of the Act will be granted, as provided in the statute, to every 
person, firm, or corporation ``having any interest'' in such 
application.



Sec.  203.4  Replies.

    Within ten (10) days after the date for filing answers, the 
applicant may file a reply specifically addressed to the issues raised 
in the answers and to oppose the grant to any petitioner of leave to 
intervene.



Sec.  203.5  Types of hearings.

    (a) Oral Evidentiary Hearing: If, upon review of the application, 
answers, petitions to intervene and replies, the Administration 
determines that the proceeding involves a disputed issue of material 
fact which cannot be resolved on the basis of available information of 
record, and that the case is anticipated to involve the submission of 
extensive evidence, or the Administration determines that it is 
otherwise appropriate, the Administration may issue an order referring 
the case to an Administrative

[[Page 35]]

Law Judge for oral evidentiary hearing. Such hearing shall be conducted 
in accordance with the procedures set out in 46 CFR part 201. The 
Administration may resolve issues of intervention in such order or refer 
such issues to the Administrative Law Judge. The burden of establishing 
that there is a disputed issue of material fact is upon the party 
seeking the oral evidentiary hearing.
    (b) Hearing on Submission of Written Evidence and Argument: If, upon 
review of the application, answers, petitions to intervene and replies, 
the Administration determines that the proceeding involves a disputed 
issue of material fact which cannot be resolved on the basis of 
available information of record, but which is not anticipated to involve 
the submission of extensive evidence, the Administration may fulfill the 
hearing requirement in sections 605(c) and 805(a) of the Act by 
rendering a decision solely on the merits of papers submitted, provided 
that a full and true disclosure of the facts is made and such procedure 
is fair to all parties. The Administration may, in its discretion, 
direct the submission of briefs on legal issues together with evidence 
in written form, and/or the holding of oral argument before the 
Administration prior to issuing its final decision on the proceeding.
    (c) Show Cause Proceeding: If, upon review of the application, 
answers, petitions to intervene and replies, the Administration 
determines that the proceeding does not or is not likely to involve a 
disputed issue of material fact or that if such facts exist they can be 
resolved on the basis of available information subject to official 
notice, and if the case is not anticipated to involve the submission of 
extensive evidence, the Administration may determine to handle the 
matter by show-cause proceeding. In that event, it will issue a decision 
setting out its tentative conclusions on all of the matters of fact and 
law at issue in the proceeding. A Notice summarizing such decision shall 
be published in the Federal Register in accordance with 46 CFR 201.72. 
Interested persons may file comments, including support or rebuttal for 
any matter officially noticed, within 30 days of the date of service of 
the tentative decision and responses to such comments shall be filed 
within ten days thereafter unless a shorter or longer period is provided 
by the Administration for such comments and answers.



Sec.  203.6  Oral evidentiary hearing before one or more members.

    If an oral evidentiary hearing is to be conducted, the Maritime 
Administration, or the Maritime Subsidy Board or one or more of its 
members, may conduct such hearing. A member who is not present at the 
hearing may participate in the consideration and the decision of the 
case where the oral evidentiary hearing, if held, has been 
stenographically recorded in full and transcribed for the member's 
review.



PART 204_CLAIMS AGAINST THE MARITIME ADMINISTRATION UNDER THE FEDERAL
TORT CLAIMS ACT--Table of Contents



Sec.
204.1 Scope and procedure for filing claims.
204.2 Claims payable.
204.3 Claims not payable.
204.4 Time limitations on claims.
204.5 Notification to claimant of action on claim.
204.6 Payment of claims.
204.7 Delegation of authority.
204.8 Where to file claims.
204.9 Indemnity or contribution.
204.10 Attorney's fees.

    Authority: 28 U.S.C. 2672; 28 CFR 14.11; 49 CFR 1.45(a)(2), (3), and 
(16).

    Source: 50 FR 25711, June 21, 1985, unless otherwise noted.



Sec.  204.1  Scope and procedure for filing claims.

    This part prescribes the requirements and procedure for 
administrative settlement of claims against the United States, involving 
the Maritime Administration, under the Federal Tort Claims Act, based on 
death, personal injury, or damage to or loss of property. The 
controlling regulations are promulgated by the Department of Justice at 
28 CFR Part 14--Administrative Claims Under Federal Tort Claims Act. 
These regulations supplement those of the Department of Justice and 
provide specific guidance regarding claims processing in the Maritime 
Administration.

[[Page 36]]



Sec.  204.2  Claims payable.

    Claims for death, personal injury, or damage to or loss of real or 
personal property are payable when the death, injury or damage is caused 
by a negligent or wrongful act or omission of an employee of the 
Maritime Administration, while acting within the scope of employment and 
under circumstances in which the United States, if a private person, 
would be liable to the claimant under the law of the place where the act 
or omission occurred.



Sec.  204.3  Claims not payable.

    A claim is not payable under the regulations in this part 204, if 
such tort claim is excluded from the scope of the Federal Tort Claims 
Act, as amended, pursuant to 28 U.S.C. 2680.



Sec.  204.4  Time limitations on claims.

    (a) A claim can be settled only if presented in writing within two 
years after it accrues.
    (b) The two year statute of limitations is not tolled until the 
Office of the Chief Counsel of the Maritime Administration receives from 
a claimant, or the claimant's duly authorized agent or legal 
representative, an executed Standard Form 95, ``Claims for Damage, 
Injury, or Death,'' or written notification of an incident, together 
with a claim for money damages in a sum certain, for death, personal 
injury, or damage to or loss of real or personal property. When a claim 
is received in any office, mail unit, or other Maritime Administration 
activity other than the Office of the Chief Counsel, such office, unit 
or activity shall transmit it to the Office of the Chief Counsel without 
delay.

[50 FR 25711, June 21, 1985, as amended at 64 FR 54782, Oct. 8, 1999]



Sec.  204.5  Notification to claimant of action on claim.

    (a) If a claim is approved (either for the amount claimed or less 
than such full amount), the claimant, prior to the disbursement of an 
award, shall sign a document releasing the United States, its agents and 
employees from all further claims relating to the incident giving rise 
to the approved claim.
    (b) If the claim is finally denied, the official vested with such 
authority shall inform the claimant by certified or registered mail of 
the final denial of the claim. Notification of final denial shall 
include a statement that a claimant who does not accept or is 
dissatisfied with the action may institute suit against the United 
States not later than six months after the date of mailing of the notice 
of final denial.
    (c) A claimant may regard the failure of the Maritime Administration 
to make a final disposition of a claim within six months after the date 
of receipt of the claim by the Maritime Administration as a final denial 
for the purpose of filing suit.



Sec.  204.6  Payment of claims.

    (a) Once the amount to be paid has been agreed upon, the agency 
shall attempt to forward a check for such amount to the claimant within 
thirty days.
    (b) If a claimant is represented by an attorney, both the claimant 
and the claimant's attorney shall be designated as payees on any check 
delivered to the claimant's attorney.



Sec.  204.7  Delegation of authority.

    (a) Subject to written approval of the Attorney General of the 
United States of any payment in excess of $100,000, the Chief Counsel of 
the Maritime Administration is authorized to approve the award, 
compromise, or settlement of any tort claim and to authorize payment of 
the claim.
    (b) The Chief Counsel is authorized to deny any claim and to settle 
and authorize payment of any tort claim involving the Maritime 
Administration in an amount not exceeding $100,000.

[64 FR 54783, Oct. 8, 1999]



Sec.  204.8  Where to file claims.

    Claimants must file claims with the Chief Counsel (MAR-220), 
Maritime Administration, Department of Transportation, Room 7232, SW, 
Washington, DC 20590 at the Nassif Building, 7th and D Streets.

[64 FR 54783, Oct. 8, 1999]

[[Page 37]]



Sec.  204.9  Indemnity or contribution.

    (a) Sought by the United States. If a claim arises under 
circumstances in which the United States is entitled to indemnity or 
contribution under a contract or the applicable law governing joint 
tort-feasors, the Chief Counsel of the Maritime Administration shall 
notify the third party of the claim and request the third party to honor 
its obligation to the United States or to accept its share of joint 
liability. If the issue of third party indemnity or contribution is not 
satisfactorily adjusted, the underlying claim shall be settled only 
after consultation with the Department of Justice as provided in 28 CFR 
14.7
    (b) Sought from the United States. Claims for indemnity or 
contribution from the United States shall be settled under this part 
only if the incident giving rise to liability and the claim is otherwise 
cognizable under this part.



Sec.  204.10  Attorney's fees.

    Attorney's fees for any claim settled under this part are limited to 
not more than twenty percent of the amount paid in settlement.



PART 205_AUDIT APPEALS; POLICY AND PROCEDURE--Table of Contents



Sec.
205.1 Purpose.
205.2 Policy.
205.3 Procedure.
205.4 Finality of decisions.
205.5 Contracts containing disputes article.

    Authority: Sec. 204, 49 Stat. 1987, 1998, 2004, 2011; 46 U.S.C. 
1114, 1155, 1176, 1212.

    Source: 66 FR 23861, May 10, 2001, unless otherwise noted.



Sec.  205.1  Purpose.

    This part establishes the policy and procedure for parties to use 
when seeking redress and appeals of audit decisions involving contracts 
with the Maritime Subsidy Board or the Maritime Administration (MARAD, 
we, our, or us). A party to a contract (you or your) may appeal MARAD's 
findings, interpretations, or decisions of annual or special audits.



Sec.  205.2  Policy.

    If you disagree with audit findings and fail to settle any 
differences with the appropriate Office Director, you may ask the 
appropriate office Associate Administrator to review the audit findings. 
If you disagree with the Associate Administrator, you may appeal to the 
Maritime Administrator (Administrator).



Sec.  205.3  Procedure.

    (a) You have 90 days from the date you receive the initial audit 
findings to file a written request for review of the audit findings with 
the appropriate Associate Administrator. Your written request must state 
the legal or factual bases for your disagreement. The appropriate 
Associate Administrator will issue a written determination.
    (b) You have 30 days following the Associate Administrator's final 
audit determination to submit your appeal in writing to the 
Administrator. Your written appeal must set forth the legal and factual 
bases for your appeal. The Administrator may, at his or her discretion, 
extend the time limitation in the case of extenuating circumstances.
    (c) We will notify you, in writing, if you must submit additional 
facts for our consideration of the appeal. We will notify you, in 
writing, once the Administrator has made a decision regarding your 
appeal.



Sec.  205.4  Finality of decisions.

    The Administrator's decision will be the final administrative action 
on all audit appeals.



Sec.  205.5  Contracts containing disputes article.

    When a contract contains a disputes article, the disputes article 
will govern the bases for negotiating disputes regarding audit findings, 
interpretations, or decisions made by MARAD and any appeals.

[[Page 38]]



    SUBCHAPTER B_REGULATIONS AFFECTING MARITIME CARRIERS AND RELATED 
                               ACTIVITIES





PART 221_REGULATED TRANSACTIONS INVOLVING DOCUMENTED VESSELS AND OTHER
MARITIME INTERESTS--Table of Contents



                         Subpart A_Introduction

Sec.
221.1 Purpose.
221.3 Definitions.
221.5 Citizenship declarations.
221.7 Applications and fees.

  Subpart B_Transfers to Noncitizens or to Registry or Operation Under 
                     Authority of a Foreign Country

221.11 Required approvals.
221.13 General approval.
221.15 Approval for transfer of registry or operation under authority of 
          a foreign country or for scrapping in a foreign country.
221.17 Sale of a documented vessel by order of a district court.
221.19 Possession or sale of vessels by mortgagees or trustees other 
          than pursuant to court order.

Subpart C [Reserved]

Subpart D--Transactions Involving Maritime Interests in Time of War or 
National Emergency Under 46 App. U.S.C. 835 [Reserved]

                        Subpart E_Civil Penalties

221.61 Purpose.
221.63 Investigation.
221.65 Criteria for determining penalty.
221.67 Stipulation procedure.
221.69 Hearing Officer.
221.71 Hearing Officer referral.
221.73 Initial Hearing Officer consideration.
221.75 Response by party.
221.77 Disclosure of evidence.
221.79 Request for confidential treatment.
221.81 Counsel.
221.83 Witnesses.
221.85 Hearing procedures.
221.87 Records.
221.89 Hearing Officer's decision.
221.91 Appeals.
221.93 Collection of civil penalties.

Subpart F--Other Transfers Involving Documented Vessels [Reserved]

                      Subpart G_Savings Provisions

221.111 Status of prior transactions--controlling dates.

    Authority: 46 U.S.C. chs. 301, 313, and 561; 49 CFR 1.93.

    Source: 57 FR 23478, June 3, 1992, unless otherwise noted.



                         Subpart A_Introduction



Sec.  221.1  Purpose.

    (a) This part implements statutory responsibilities of the Secretary 
of Transportation (the Secretary) with respect to:
    (1) The regulation pursuant to 46 U.S.C. 56101 and 56103of 
transactions involving transfers of:
    (i) An interest in or control of Documented Vessels owned by 
Citizens of the United States (including the Transfer of a Controlling 
Interest in such owners) to Noncitizens or;
    (ii) A Documented Vessel to registry or Operation under Authority of 
a Foreign Country or for scrapping in a foreign country; and
    (2) Transactions involving maritime interests in time of war or 
national emergency under 46 U.S.C. 56102.
    (b) The responsibilities in paragraph (a) (1) and (2) of this 
section have been delegated by the Secretary to the Maritime 
Administrator.

[57 FR 23478, June 3, 1992, as amended at 63 FR 6880, Feb. 11, 1998; 78 
FR 35771, June 14, 2013]



Sec.  221.3  Definitions.

    For the purpose of this part, when used in capitalized form:
    (a) Bowaters Corporation means a Noncitizen corporation organized 
under the laws of the United States or of a State that has satisfied the 
requirements of 46 U.S.C. 12118 and holds a valid Certificate of 
Compliance issued by the Coast Guard.
    (b) Charter means any agreement or commitment by which the 
possession or services of a vessel are secured for a

[[Page 39]]

period of time, or for one or more voyages, whether or not a demise of 
the vessel.
    (c) Citizen of the United States means a Person (including 
receivers, trustees and successors or assignees of such Persons as 
provided in 46 U.S.C. 50502), including any Person (stockholder, partner 
or other entity) who has a Controlling Interest in such Person, any 
Person whose stock or equity is being relied upon to establish the 
requisite U.S. citizen ownership, and any parent corporation, 
partnership or other entity of such Person at all tiers of ownership, 
who, in both form and substance at each tier of ownership, satisfies the 
following requirements--
    (1) An individual who is a Citizen of the United States, by birth, 
naturalization or as otherwise authorized by law;
    (2) A corporation organized under the laws of the United States or 
of a State, the Controlling Interest of which is owned by and vested in 
Citizens of the United States and whose chief executive officer, by 
whatever title, chairman of the board of directors and all officers 
authorized to act in the absence or disability of such persons are 
Citizens of the United States, and no more of its directors than a 
minority of the number necessary to constitute a quorum are Noncitizens;
    (3) A partnership organized under the laws of the United States or 
of a State, if all general partners are Citizens of the United States 
and a Controlling Interest in the partnership is owned by Citizens of 
the United States;
    (4) An association organized under the laws of the United States or 
of a State, whose chief executive officer, by whatever title, chairman 
of the board of directors (or equivalent committee or body) and all 
officers authorized to act in their absence or disability are Citizens 
of the United States, no more than a minority of the number of its 
directors, or equivalent, necessary to constitute a quorum are 
Noncitizens, and a Controlling Interest in which is vested in Citizens 
of the United States;
    (5) A joint venture, if it is not determined by the Maritime 
Administrator to be in effect an association or a partnership, which is 
organized under the laws of the United States or of a State, if each 
coventurer is a Citizen of the United States. If a joint venture is in 
effect an association, it will be treated as is an association under 
paragraph (c)(4) of this section, or, if it is in effect a partnership, 
will be treated as is a partnership under paragraph (c)(3) of this 
section; or
    (6) A Trust described in paragraph (t)(1) of this section.
    (d) Controlling interest owned by and vested in Citizens of the 
United States means that--
    (1) In the case of a corporation:
    (i) Title to a majority of the stock thereof is owned by and vested 
in Citizens of the United States, free from any trust or fiduciary 
obligation in favor of any Noncitizen;
    (ii) The majority of the voting power in such corporation is vested 
in Citizens of the United States;
    (iii) Through no contract or understanding is it so arranged that 
the majority of the voting power may be exercised, directly or 
indirectly, in behalf of any Noncitizen; and
    (iv) By no other means whatsoever control of the corporation is 
conferred upon or permitted to be exercised by any Noncitizen;
    (2) In the case of a partnership, all general partners are Citizens 
of the United States and ownership and control of a majority of the 
partnership interest, free and clear of any trust or fiduciary 
obligation in favor of any Noncitizen, is vested in a partner or 
partners each of whom is a Citizen of the United States;
    (3) In the case of an association, a majority of the voting power is 
vested in Citizens of the United States, free and clear of any trust or 
fiduciary obligation in favor of any Noncitizen; and
    (4) In the case of a joint venture, a majority of the equity is 
owned by and vested in Citizens of the United States free and clear of 
any trust or fiduciary obligation in favor of any Noncitizen; but
    (5) In the case of a corporation, partnership, association or joint 
venture owning a vessel which is operated in the coastwise trade, the 
amount of interest and voting power required to be owned by and vested 
in Citizens of the United States shall be not less than 75 percent as 
required by 46 U.S.C. 50501.

[[Page 40]]

    (e) Documented vessel means a vessel documented under chapter 121, 
title 46, United States Code or a vessel for which an application for 
such documentation is pending.
    (f) Fishing vessel means a vessel that commercially engages in the 
planting, cultivating, catching, taking, or harvesting of fish, 
shellfish, marine animals, pearls, shells, or marine vegetation or an 
activity that can reasonably be expected to result in the planting, 
cultivating, catching, taking, or harvesting of fish, shellfish, marine 
animals, pearls, shells, or marine vegetation.
    (g) Fish processing vessel means a vessel that commercially prepares 
fish or fish products other than by gutting, decapitating, gilling, 
skinning, shucking, icing, freezing, or brine chilling.
    (h) Fish tender vessel means a vessel that commercially supplies, 
stores, refrigerates, or transports (except in foreign commerce) fish, 
fish products, or materials directly related to fishing or the 
preparation of fish to or from a Fishing Vessel, Fish Processing Vessel, 
or another Fish Tender Vessel or a fish processing facility.
    (i) Hearing Officer means an individual designated by the Maritime 
Administrator to conduct hearings under Subpart E of this part and 
assess civil penalties.
    (j) Noncitizen means a Person who is not a Citizen of the United 
States.
    (k) Operation under the authority of a foreign country means any 
agreement, undertaking or device by which a Documented Vessel is 
voluntarily subjected to any restriction or requirement, actual or 
contingent, under the laws or regulations of a foreign country or 
instrumentality thereof concerning use or operation of the vessel that 
is or may be in derogation of the rights and obligations of the owner, 
operator or master of the vessel under the laws of the United States, 
unless such restriction or requirement is of general applicability and 
uniformly imposed by such country or instrumentality in exercise of its 
sovereign prerogatives with respect to public health, safety or welfare, 
or in implementation of accepted principles of international law 
regarding cabotage or safety of navigation.
    (l) Party means the Person alleged to have violated the statute or 
regulations for which a civil penalty may be assessed.
    (m) Person includes individuals and corporations, partnerships, 
joint ventures, associations and Trusts existing under or authorized by 
the laws of the United States or of a State or, unless the context 
indicates otherwise, or any foreign country.
    (n) Pleasure vessel means a vessel that has been issued a 
Certificate of Documentation with a recreational endorsement and is 
operated only for pleasure pursuant to 46 U.S.C. 12109.
    (o) Settlement means the process whereby a civil penalty or other 
disposition of the alleged violation is agreed to by the Hearing Officer 
and the Party in accordance withSec. 221.73 of this part.
    (p) State means a State of the United States, Guam, Puerto Rico, the 
Virgin Islands, American Samoa, the District of Columbia, the 
Commonwealth of the Northern Mariana Islands, and any other territory or 
possession of the United States.
    (q) Transfer means the passing of control of or an interest in a 
Documented Vessel and includes the involuntary conveyance by a foreign 
judicial or administrative tribunal of any interest in or control of a 
Documented Vessel owned by a Citizen of the United States to a 
Noncitizen that is not eligible to own a Documented Vessel.
    (r) Trust means:
    (1) In the case of ownership of a Documented Vessel, a Trust that is 
domiciled in and existing under the laws of the United States, or of a 
State, of which the trustee is a Citizen of the United States and a 
Controlling Interest in the Trust is held for the benefit of Citizens of 
the United States; or
    (s) United States, when used in the geographic sense, means the 
States of the United States, Guam, Puerto Rico, the Virgin Islands, 
American Samoa, the District of Columbia, the Commonwealth of the 
Northern Mariana Islands, and any other territory or possession of the 
United States; when used in other than the geographic sense, it means 
the United States Government.
    (t) United States Government means the Federal Government acting by 
or

[[Page 41]]

through any of its departments or agencies.
    (u) Vessel Transfer Officer means the Maritime Administration's 
Vessel Transfer and Disposal Officer, whose address is MAR-630, Maritime 
Administration, United States Department of Transportation, 1200 New 
Jersey Ave. SE., Washington, DC 20590, or that person's delegate.

[57 FR 23478, June 3, 1992, as amended at 63 FR 6880, Feb. 11, 1998; 69 
FR 34310, June 21, 2004; 78 FR 35771, June 14, 2013]



Sec.  221.5  Citizenship declarations.

    (a) Pursuant to 46 U.S.C. 31306(a), when an instrument transferring 
an interest in a Documented Vessel owned by a Citizen of the United 
States is presented to the United States Government for filing or 
recording, the Person filing shall submit therewith Maritime 
Administration Form No. MA-899 so it may be determined if 46 U.S.C. 
56101 and 56103 apply to the transaction. Form No. MA-899 is available 
from the Coast Guard Documentation Office at the port of record of the 
vessel or from the Vessel Transfer Officer.
    (b) The filing required by paragraph (a) of this section is not 
required for transactions involving vessel types described inSec. 
221.11(b)(1)(i) through (iv) of this part.
    (c) The filing required by paragraph (a) of this section is waived 
for transactions which are given general approval in this part.
    (d) If the transfer of interest is one which requires written 
approval of the Maritime Administrator, the Person filing shall submit 
therewith evidence of that approval.
    (e) A declaration filed by any Person other than an individual shall 
be signed by an official authorized by that Person to execute the 
declaration.

[57 FR 23478, June 3, 1992, as amended at 78 FR 35771, June 14, 2013]



Sec.  221.7  Applications and fees.

    (a) Applications. Whenever written approval of the Maritime 
Administrator is required for transfers to Noncitizens or to foreign 
registry or Operation Under Authority of a Foreign Country, or pursuant 
to a Maritime Administration contract or Order, an application on 
Maritime Administration Form MA-29 or MA-29B giving full particulars of 
the proposed transaction shall be filed with the Vessel Transfer 
Officer.
    (b) Fees. Applications for written approval of any of the following 
transactions shall be accompanied by the specified fee:
    (1) Transactions requiring approval for:

(i) Sale and delivery by a Citizen of the United States to a
 Noncitizen, or Transfer to foreign registry or Operation Under
 Authority of a Foreign Country, of a Documented Vessel, per
 vessel--
  (A) Of 1,000 gross tons and over...............................   $325
  (B) Of less than 1,000 gross tons..............................    170
(ii) Transfer of any interest in, or control of, a Documented        250
 Vessel owned by a Citizen of the United States to a Noncitizen,
 per vessel......................................................
(iii) Charter of a Documented Vessel owned by a Citizen of the       250
 United States to a Noncitizen, per vessel.......................
(iv) Sale or Transfer of an interest in or the control of an         325
 interest in an entity that is a Citizen of the United States and
 owns, or is the direct or indirect parent of an entity that
 owns, any Documented Vessel, if by such sale or Transfer the
 Controlling Interest in such entity is vested in, or held for
 the benefit of, any Noncitizen..................................
 

    (2) Transactions requiring written approval pursuant to a Maritime 
Administration contract or Order:

(i) Transfer of ownership or registry, or, both, of the vessel,     $260
 per vessel......................................................
(ii) Sale or Transfer of any interest in the owner of the vessel,    235
 if by such sale or Transfer the Controlling Interest in the
 owner is vested in, or held for the benefit of, a Noncitizen,
 per vessel......................................................
(iii) Charter of the vessel to a Noncitizen, per vessel..........    240
 

    (c) Modification of applications or approvals. An application for 
modification of any pending application or prior approval, or of an 
outstanding Maritime Administration contract or Order, shall be 
accompanied by the fee established for the original application.
    (d) Reduction or waiver of fees. The Maritime Administrator, in 
appropriate circumstances, and upon a written finding, may reduce any 
fee imposed by paragraph (b) or (c) of this section, or may waive the 
fee entirely in extenuating circumstances where the interest of the 
United States Government would be served.

[57 FR 23478, June 3, 1992, as amended at 63 FR 6880, Feb. 11, 1998]

[[Page 42]]



  Subpart B_Transfers to Noncitizens or to Registry or Operation Under 
                     Authority of a Foreign Country



Sec.  221.11  Required approvals.

    (a) Except as provided in section 12119 of title 46, United States 
Code, a Person may not, without the approval of the Maritime 
Administrator:
    (1) Sell, lease, charter, deliver, or in any manner Transfer to a 
Noncitizen, or agree (unless such agreement by its terms requires 
approval of the Maritime Administrator in order to effect such 
transfer), to sell, lease, charter, deliver, or in any manner Transfer 
to a Noncitizen, any interest in or control of a Documented Vessel owned 
by a Citizen of the United States or a vessel the last documentation of 
which was under the laws of the United States except as provided in this 
part; or
    (2) Place any Documented Vessel, or any vessel the last 
documentation of which was under the laws of the United States, under 
foreign registry or operate that vessel under the authority of a foreign 
country, except as provided in this part.
    (b)(1) The approvals required by paragraph (a)(1) of this section 
are not required for the following Documented Vessel types if the vessel 
has been operated exclusively and with bona fides for one or more of the 
following uses, under a Certificate of Documentation with an appropriate 
endorsement and no other, since initial documentation or renewal of its 
documentation following construction, conversion, or transfer from 
foreign registry, or, if it has not yet so operated, if the vessel has 
been designed and built and will be operated for one or more of the 
following uses:
    (i) A Fishing vessel;
    (ii) A Fish processing vessel;
    (iii) A Fish tender vessel; and
    (iv) A Pleasure vessel.
    (2) A vessel of a type specified in paragraphs (b)(1)(i) through 
(iii) of this section will not be ineligible for the approval granted by 
this paragraph by reason of also holding or having held a Certificate of 
Documentation with a coastwise or registry endorsement, so long as any 
trading under that authority has been only incidental to the vessel's 
principal employment in the fisheries and directly related thereto.

[57 FR 23478, June 3, 1992, as amended at 63 FR 6880, Feb. 11, 1998; 78 
FR 35771, June 14, 2013]



Sec.  221.13  General approval.

    (a) Transactions other than transfer of registry or operation under 
authority of a foreign country. (1) The Maritime Administrator hereby 
grants the approval required by 46 U.S.C. 56101 for the sale, lease, 
Charter, delivery, or any other manner of Transfer to a Noncitizen of an 
interest in or control of a Documented Vessel owned by a Citizen of the 
United States or a vessel the last documentation of which was under the 
laws of the United States except:
    (i) As limited by paragraph (b) of this section for transfers to 
Bowaters Corporations;
    (ii) As limited bySec. 221.15(d) of this part for sales for 
scrapping;
    (iii) Bareboat or demise Charters of vessels operating in the 
coastwise trade.

A Documented Vessel shall remain documented following any transaction 
approved by this paragraph (a)(1). Other approvals may be required by 
statutes other than 46 App. U.S.C. 808(c)(1) and/or by contract for 
certain vessels.
    (2) The approvals granted by paragraph (a)(1) of this section shall 
not apply to any such Transfer proposed to be made during any period 
when the United States is at war or during any national emergency, the 
existence of which has invoked the provisions of section 37 of the 
Shipping Act, 1916, as amended (46 App. U.S.C. 835), or to any such 
Transfer proposed to be made to a citizen of any country when such 
transfer would be contrary to the foreign policy of the United States as 
declared by an executive department of the United States.
    (3) An information copy of any sales agreement, bareboat or demise 
Charter entered into pursuant to this approval shall be submitted to the 
Vessel Transfer Officer not later than thirty days following a request 
by that official.
    (4) Except for Charters to Noncitizens of documented bulk cargo 
vessels engaged in carrying bulk raw and processed agricultural 
commodities from

[[Page 43]]

the United States to ports in the geographic area formerly known as the 
Union of Soviet Socialist Republics, or to other permissible ports of 
discharge for transshipment to the geographic area formerly known as the 
Union of Soviet Socialist Republics, pursuant to an operating- 
differential subsidy agreement that is consistent with the requirements 
of 46 CFR parts 252 and 294, this approval excludes and does not apply 
to Transfers to a Person who is subject, directly or indirectly, to 
control of an entity within any country listed by the Department of 
Commerce in 15 CFR part 740, Supplement 1, Country Group E, unless such 
transferee is an individual who has been lawfully admitted into, and 
resides in, the United States, or to Charters for the carriage of 
cargoes of any kind to or from, or for commercial operation while within 
the waters of (as distinct from passage through), any of these 
countries. This list of countries is subject to change from time to 
time. Information concerning current restrictions may be obtained from 
the Vessel Transfer Officer.
    (b) Bowaters corporations. (1) For documented Vessels other than 
those operating in the coastwise trade, the approvals granted in 
paragraph (a) of this section shall apply to Bowaters Corporations.
    (2) The Maritime Administrator hereby grants approval for the time 
charter of a Documented Vessel of any tonnage by a Citizen of the United 
States to a Bowaters Corporation for operation in the coastwise trade, 
subject to the following conditions:
    (i) If non-self-propelled or, if self-propelled and less than 500 
gross tons, no such vessel shall engage in the fisheries or in the 
transportation of merchandise or passengers for hire between points in 
the United States embraced within the coastwise laws except as a service 
for a parent or subsidiary corporation; and
    (ii) If non-self-propelled or, if self-propelled and less than 500 
gross tons, no such vessel may be subchartered or subleased from any 
such Bowaters Corporation except:
    (A) At prevailing rates;
    (B) For use otherwise than in the domestic noncontiguous trades;
    (C) To a common or contract carrier subject to part 3 of the 
Interstate Commerce Act, as amended, which otherwise qualifies as a 
Citizen of the United States and which is not connected, directly or 
indirectly, by way of ownership or control with such corporation.

[57 FR 23478, June 3, 1992, as amended at 63 FR 6880, Feb. 11, 1998; 69 
FR 54248, Sept. 8, 2004; 78 FR 35771, June 14, 2013]



Sec.  221.15  Approval for transfer of registry or operation under
authority of a foreign country or for scrapping in a foreign country.

    In no case will approval be granted to place under foreign registry 
or to operate under the authority of a foreign country a Fishing Vessel, 
Fish Processing Vessel, or Fish Tender Vessel that has had its fishery 
endorsement revoked pursuant to Appendix D of Public Law 106-554, 114 
Stat 2763. Subject to this exclusion, approval requests will be 
considered as set forth in this section.
    (a) Vessels of under 1,000 gross tons. (1) The Maritime 
Administrator hereby grants approval for the Transfer to foreign 
registry and flag or Operation Under the Authority of a Foreign Country 
or for scrapping in a foreign country of Documented Vessels or vessels 
the last documentation of which was under the laws of the United States 
and which are of under 1,000 gross tons if at the time of such Transfer 
there are no liens or encumbrances recorded against the vessel in the 
U.S. Coast Guard Documentation Office at its last U.S. port of record.
    (2) This approval shall not apply if the vessel is to be placed 
under the registry, or operated under the authority of, or scrapped in 
any country listed inSec. 221.13(a)(4) of this part.
    (3) This approval shall not apply to any such Transfer proposed to 
be made during any period when the United States is at war or during any 
national emergency, the existence of which has invoked the provisions of 
46 U.S.C. 56102, or to any such Transfer proposed to be made to a 
citizen of any country when such transfer would be contrary to the 
foreign policy of the United States as declared by an executive 
department of the United States.

[[Page 44]]

    (b) Vessels of 1,000 gross tons or more. (1) Applications for 
approval of Transfer to foreign registry and flag or Operation Under the 
Authority of a Foreign Country or for scrapping in a foreign country of 
Documented Vessels or vessels the last documentation of which was under 
the laws of the United States and which are of 1,000 gross tons or more 
will be evaluated in light of--
    (i) The type, size speed, general condition, and age of the vessel;
    (ii) The acceptability of the owner, proposed transferee and the 
country of registry or the country under the authority of which the 
vessel is to be operated; and
    (iii) The need to retain the vessel under U.S. documentation, 
ownership or control for purposes of national defense, maintenance of an 
adequate merchant marine, foreign policy considerations or the national 
interest.
    (2) If the application is found to be acceptable under the criteria 
of this paragraph, approval will be granted. For vessels of under 3,000 
gross tons, in the absence of unusual circumstances, no conditions will 
be imposed on the transfer. For vessels of 3,000 gross tons and above, 
approval will be granted upon acceptance by the owner of the terms and 
conditions referred to in paragraph (c) or (d) of this section, as 
applicable. Additional terms deemed appropriate by the Maritime 
Administrator may be imposed. The terms and conditions shall be 
contained in an Approval Notice and Agreement (``Contract'') executed 
prior to issuance of the Transfer Order. Unless otherwise specified, the 
terms and conditions shall remain in effect for the period of the 
remaining economic life of the vessel or for the duration of a national 
emergency proclaimed by the President prior or subsequent to such 
Transfer, whichever period is longer. The economic life of a vessel for 
purposes of this regulation is deemed to be twenty (20) years for 
tankers and other liquid bulk carriers and twenty-five (25) years for 
other vessel types. This period is to be calculated from the date the 
vessel was originally accepted for delivery from the shipbuilder, but 
may be extended for such additional period of time as may be determined 
by the Maritime Administrator if the vessel has been substantially 
rebuilt or modified in a manner that warrants such extension.
    (c) Foreign transfer other than for scrapping. If the foreign 
Transfer of a vessel referred to in paragraph (b) of this section is 
other than for the purpose of scrapping the vessel and other than a 
Transfer to the government of an acceptable foreign country, and in the 
absence of unusual circumstances as determined by the Maritime 
Administrator (for example a Transfer to an entity controlled by the 
government of an acceptable foreign country), the following conditions 
will be imposed on the transferee:
    (1) Ownership. (i) Without the prior written approval of the 
Maritime Administrator, there shall be no further Transfer of ownership, 
change in the registry or Operation of such vessel Under the Authority 
of a Foreign Country; provided, however, that, if the Transfer of 
ownership is to a Citizen of the United States or other entity qualified 
under 46 U.S.C. 12102(a) to document a vessel and the vessel is 
thereafter documented under U.S. law, no prior written approval shall be 
required but the transferee shall notify the Vessel Transfer Officer in 
writing of such change in the ownership and the U.S. documentation 
within thirty (30) days after such change in ownership and 
documentation.
    (ii) The restrictions contained in paragraph (c)(1)(i) of this 
section shall not be applicable to a change in ownership resulting from 
the death of the vessel owner, so long as notification of any such 
Transfer of ownership occurring by reason of death shall be filed with 
the Vessel Transfer Officer within 60 days from the date of such 
Transfer identifying with particularity the name, legal capacity, 
citizenship, current domicile or address of, or other method of direct 
communication with, the transferee(s).
    (2) Requisition. The vessel shall, if requested by the United 
States, be sold or Chartered to the United States on the same terms and 
conditions upon which a vessel owned by a Citizen of the United States 
or documented under U.S. law could be requisitioned for purchase or 
Charter pursuant to 46 U.S.C. chapters 563 and 565. If the vessel is

[[Page 45]]

under the flag of a country that is a member of the North Atlantic 
Treaty Organization (NATO), the Maritime Administrator will consider 
this condition satisfied if the owner furnishes satisfactory evidence 
that the vessel is already in noncommercial service under the direction 
of the government of a NATO country.
    (3) Trade. Without the prior written approval of the Maritime 
Administrator, the vessel shall not carry cargoes of any kind to or 
from, or be operated commercially while within the waters of (as 
distinct from passage through), a country referred to inSec. 
221.13(a)(4) of this part, nor shall there be any Charter or other 
Transfer of an interest in the vessel, other than to a Citizen of the 
United States, for carriage of cargoes of any kind to or from, or for 
commercial operation while within the waters of (as distinct from 
passage through), any such country.
    (4) Default. In the event of default under any or all of the 
conditions set forth in paragraphs (c) (1), (2) or (3) of this section, 
the owner shall pay to the Maritime Administration, without prejudice to 
any other rights that the United States may have, as liquidated damages 
and not as a penalty, the sum of not less than $25,000 or more than 
$1,000,000, as specified in the contract, and the vessel shall be 
subject to the penalties imposed by 46 App. U.S.C. 808 and 839. Pursuant 
to 46 U.S.C. 56105, the Maritime Administrator may remit forfeiture of 
the vessel upon such conditions as may be required under the 
circumstances of the particular case, including the payment of a sum in 
lieu of forfeiture, and execution of a new agreement containing 
substantially the same conditions set forth above and such others as the 
Maritime Administrator may deem appropriate and which will be applicable 
to the vessel for the remaining period of the original agreement. In 
order to secure the payment of any such sums of money as may be required 
as a result of default, the transferee shall contractually agree, in 
form and substance approved by the Chief Counsel of the Maritime 
Administration, to comply with the above conditions and to provide a 
United States commercial surety bond or other surety acceptable to the 
Maritime Administrator for an amount not less than $25,000 and not more 
than $1,000,000, depending upon the type, size and condition of the 
vessel. ``Other surety'' may be any one of the following:
    (i) An irrevocable letter of credit, which is acceptable to the 
Maritime Administrator, issued or guaranteed by a Citizen of the United 
States or by a federally insured depository institution;
    (ii) A pledge of United States Government securities;
    (iii) The written guarantee of a friendly government of which the 
transferee is a national;
    (iv) A written guarantee or bond by a United States corporation 
found by the Maritime Administrator to be financially qualified to 
service the undertaking to pay the stipulated amount;
    (v) If the transferee is controlled in any manner by one or more 
Citizens of the United States, a contractual agreement in form and 
substance acceptable to the Chief Counsel of the Maritime Administration 
by the transferee and the Citizens of the United States with authority 
to exercise such control, if found by the Maritime Administrator to be 
financially qualified, jointly and severally to pay the stipulated 
amount, such agreement to be secured by the written guarantee of the 
transferee and each of the Citizens of the United States or other form 
of guarantee as may be required by the Maritime Administrator; or
    (vi) Any other surety acceptable to the Maritime Administrator and 
approved as to form and substance by the Chief Counsel of the Maritime 
Administration.
    (d) Foreign transfer for scrapping. If the transfer of control, 
whether or not there is a transfer of registry, of a vessel referred to 
in paragraph (b) of this section is for the purpose of scrapping the 
vessel abroad, the following conditions will be imposed on the 
transferee:
    (1) The vessel or any interest therein shall not be subsequently 
sold to any Person without the prior written approval of the Maritime 
Administrator, nor shall it be used for the carriage of cargo or 
passengers of any kind whatsoever.
    (2) Within a period of 18 months from the date of approval of the 
sale, the

[[Page 46]]

hull of the vessel shall be completely scrapped, dismantled, 
dismembered, or destroyed in such manner and to such extent as to 
prevent the further use thereof, or any part thereof, as a ship, barge, 
or any other means of transportation.
    (3) The scrap resulting from the demolition of the hull of the 
vessel, the engines, machinery, and major items of equipment shall not 
be sold to, or utilized by, any citizen or instrumentality of a country 
referred to inSec. 221.13(a)(4) of the part, nor may such scrap be 
exported to these countries. The engines, machinery and major items of 
equipment shall not be exported to destinations within the United 
States.
    (4) In the event of default under any or all of the conditions set 
forth in paragraphs (d) (1), (2) or (3) of this section, the transferee 
shall pay to the Maritime Administration, without prejudice to any other 
rights that the United States may have, as liquidated damages and not as 
a penalty, the sum of not less than $25,000 or more than $1,000,000, as 
specified in the contract, depending upon the size, type and condition 
of the vessel. This payment shall be secured by a surety company bond or 
other surety satisfactory to the Maritime Administrator. ``Other 
surety'' may be one of those set out in paragraph (c)(4) (i) through 
(vi) of this section.
    (5) There shall be filed with the Vessel Transfer Officer a 
certificate or other evidence satisfactory to the Chief Counsel of the 
Maritime Administration, duly attested and authenticated by a United 
States Consul, that the scrapping of the vessel (hull only) and disposal 
or utilization of the resultant scrap and the engines, machinery and 
major items of equipment have been accomplished in accord with 
paragraphs (d) (2) and (3) of this section.
    (e) Resident agent for service. (1) Any proposed foreign transferee 
shall, prior to the issuance and delivery of the Transfer Order covering 
the vessel or vessels to be transferred, designate and appoint a 
resident agent in the United States to receive and accept service of 
process or other notice in any action or proceeding instituted by the 
United States relating to any claim arising out of the approved 
transaction.
    (2) The resident agent designated and appointed by the foreign 
transferee shall be subject to approval by the Maritime Administrator. 
To be acceptable, the resident agent must maintain a permanent place of 
business in the United States and shall be a banking or lending 
institution, a ship-owner or ship-operating corporation or other 
business entity that is satisfactory to the Maritime Administrator.
    (3) Appointment and designation of the resident agent shall not be 
terminated, revoked, amended or altered without the prior written 
approval of the Maritime Administrator.
    (4) The foreign transferee shall file with the Vessel Transfer 
Officer a written copy of the appointment of the resident agent, which 
copy shall be fully endorsed by the resident agent stating that it 
accepts the appointment, that it will act thereunder and that it will 
notify the Vessel Transfer Officer in writing in the event it becomes 
disqualified from so acting by reason of any legal restrictions. Service 
of process or notice upon any officer, agent or employee of the resident 
agent at its permanent place of business shall constitute effective 
service on, or notice to, the foreign transferee.
    (f) Administrative provisions. (1) The subsequent Transfer of 
ownership or registry of vessels that have been Transferred to foreign 
ownership or registry or both, or to Operation Under the Authority of a 
Foreign Country, that remain subject to Maritime Administration 
contractual control as set forth above, will be subject to substantially 
the same Maritime Administration policy considerations that governed the 
original Transfer, including such changes or modifications that have 
subsequently been made and continued in effect. Approval of these 
subsequent Transfers will be subject to the same terms and conditions 
governing the foreign Transfer at the time of the previous Transfer, as 
modified (if applicable).
    (2) The authorization for all approved transactions, either by 
virtue of U.S.C. chapter 561 or the Maritime Administration's Contract 
with the vessel owner, will be by notification in the form of a Transfer 
Order upon receipt of the executed Contract, the required

[[Page 47]]

bond or other surety, and other supporting documentation required by the 
Contract.
    (3) In order that the Maritime Administration's records may be 
maintained on a current basis, the transferor and transferee of the 
vessel are required to notify the Vessel Transfer Officer of the date 
and place where the approved transaction was completed, and the name of 
the vessel, if changed. This information relating to the completion of 
the transaction and any change in name shall be furnished as soon as 
possible, but not later than 10 days after the same has occurred.

[57 FR 23478, June 3, 1992, as amended at 63 FR 6881, Feb. 11, 1998; 66 
FR 55596, Nov. 2, 2001; 78 FR 35771, June 14, 2013]



Sec.  221.17  Sale of a documented vessel by order of a district court.

    (a) A Documented Vessel may be sold by order of a district court 
only to a Person eligible to own a Documented Vessel or to a mortgagee 
of the vessel. Unless waived by the Maritime Administrator, a Person 
purchasing the vessel pursuant to court order or from a mortgagee not 
eligible to document a vessel who purchased the vessel pursuant to a 
court order must document the vessel under chapter 121 of title 46, 
United States Code.
    (b) A Person purchasing the vessel, pursuant to court order or from 
a mortgagee not eligible to document a vessel who purchased the vessel 
pursuant to a court order, and wishing to obtain waiver of the 
documentation requirement must submit a request including the reason 
therefor to the Vessel Transfer Officer.
    (c)(1) A mortgagee not eligible to own a Documented Vessel shall not 
operate, or cause operation of, the vessel in commerce. Except as 
provided in paragraph (c)(2) of this section, the vessel may not be 
operated for any purpose without the prior written approval of the 
Maritime Administrator.
    (2) The Maritime Administrator hereby grants approval for a 
mortgagee not eligible to own a Documented Vessel to operate the vessel 
to the extent necessary for the immediate safety of the vessel or for 
repairs, drydocking or berthing changes, but only under the command of a 
Citizen of the United States.

[57 FR 23478, June 3, 1992, as amended at 63 FR 6881, Feb. 11, 1998]



Sec.  221.19  Possession or sale of vessels by mortgagees or trustees
other than pursuant to court order.

    (a) A mortgagee or a trustee of a preferred mortgage on a Documented 
Vessel that is not eligible to own a Documented Vessel does not require 
the express approval of the Maritime Administrator to take possession of 
the vessel in the event of default by the mortgagor other than by 
foreclosure pursuant to 46 U.S.C. 31329, if provided for in the mortgage 
or a related financing document, but in such event the vessel may not be 
operated, or caused to be operated, in commerce. The vessel may not, 
except as provided in paragraph (b) of this section, be operated for any 
other purpose unless approved in writing by the Maritime Administrator, 
nor may the vessel be sold to a Noncitizen without the approval of the 
Maritime Administrator.
    (b) The Maritime Administrator hereby grants approval for such 
mortgagee or trustee to operate the vessel to the extent necessary for 
the immediate safety of the vessel, for its direct return to the United 
States or for its movement within the United States, or for repairs, 
drydocking or berthing changes, but only under the command of a Citizen 
of the United States.
    (c) A Noncitizen mortgagee that has brought a civil action in rem 
for enforcement of a preferred mortgage lien on a citizen-owned 
Documented Vessel pursuant to 46 U.S.C. 31325(b)(1) may petition the 
court pursuant to 46 U.S.C. 31325(e)(1) for appointment of a receiver 
and, if the receiver is Person eligible to own a Documented Vessel, to 
authorize the receiver to operate the mortgaged vessel on such terms and 
conditions as the court deems appropriate. If the receiver is not a 
Citizen of the United States, the vessel may not be operated in 
coastwise trade without prior written approval of the Maritime 
Administrator.

[57 FR 23478, June 3, 1992, as amended at 63 FR 6881, Feb. 11, 1998]

[[Page 48]]

Subpart C [Reserved]

Subpart D--Transactions Involving Maritime Interests in Time of War or 
National Emergency Under 46 App. U.S.C. 835 [Reserved]



                        Subpart E_Civil Penalties



Sec.  221.61  Purpose.

    This subpart describes procedures for the administration of civil 
penalties that the Maritime Administration may assess under 46 U.S.C. 
31309 and 31330, and 46 U.S.C. 56101, pursuant to 49 U.S.C. 336.
    Note: Pursuant to 46 U.S.C. 31309, a general penalty of not more 
than $12,000 may be assessed for each violation of chapter 313 or 46 
U.S.C. subtitle III administered by the Maritime Administration, and the 
regulations in this part that are promulgated thereunder, except that a 
person violating 46 U.S.C. 31328 or 31329 and the regulations 
promulgated thereunder is liable for a civil penalty of not more than 
$30,000 for each violation. A person that charters, sells, transfers or 
mortgages a vessel, or an interest therein, in violation of 46 App. 
U.S.C. 808 is liable for a civil penalty of not more than $12,000 for 
each violation. These penalty amounts are in accordance with Pub. L. 
101-410, amended by Pub. L. 104-134. Criminal penalties may also apply 
to violations of these statutes.

[68 FR 33406, June 4, 2003, as amended at 78 FR 35771, June 14, 2013]



Sec.  221.63  Investigation.

    (a) When the Vessel Transfer Office obtains information that a 
Person may have violated a statute or regulation for which a civil 
penalty may be assessed under this subpart, that Officer may investigate 
the matter and decide whether there is sufficient evidence to establish 
a prima facie case that a violation occurred.
    (b) If that Officer decides there is a prima facie case, then that 
Officer may enter into a stipulation with the Party in accordance with 
Sec.  221.67 of this subpart, or may refer the matter directly to a 
Hearing Officer for procedures in accordance withSec. 221.73 to 221.89 
of this subpart.



Sec.  221.65  Criteria for determining penalty.

    In determining any penalties assessed, the Vessel Transfer Officer 
underSec. 221.67 and the Hearing Officer under Sec.Sec. 221.73 to 
221.89 of this part shall take into account the nature, circumstances, 
extent and gravity of the violation committed and, with respect to the 
Party, the degree of culpability, any history of prior offenses, ability 
to pay and other matters that justice requires.



Sec.  221.67  Stipulation procedure.

    (a) When the Vessel Transfer Office decides to proceed under this 
section, that Office shall notify the Party in writing by registered or 
certified mail--
    (1) Of the alleged violation and the applicable statute and 
regulations;
    (2) Of the maximum penalty that may be assessed for each violation;
    (3) Of a summary of the evidence supporting the violation;
    (4) Of the penalty that the Vessel Transfer Officer will accept in 
settlement of the violation;
    (5) Of the right to examine all the material in the case file and 
have a copy of all written documents provided upon request;
    (6) That by accepting the penalty, the Party waives the right to 
have the matter considered by a Hearing Officer in accordance with 
Sec.Sec. 221.73 to 221.89 of this subpart, and that if the Party 
elects to have the matter considered by a Hearing Officer, the Hearing 
Officer may assess a penalty less than, equal to, or greater than that 
stipulated in settlement if the Hearing Officer finds that a violation 
occurred; and
    (7) That a violation will be kept on record and may be used by the 
Maritime Administration in aggravation of an assessment of a penalty for 
a subsequent violation by that Party.
    (b) Upon receipt of the notification specified in paragraph (a) of 
this section, a Party may within 30 days--
    (1) Agree to the stipulated penalty in the manner specified in the 
notification; or
    (2) Notify in writing the Vessel Transfer Officer that the Party 
elects to have the matter considered by a Hearing Officer in accordance 
with the

[[Page 49]]

procedure specified in Sec.Sec. 221.73 through 221.89 of this subpart.
    (c) If, within 30 days of receipt of the notification specified in 
paragraph (a) of this section, the Party neither agrees to the penalty 
nor elects the informal hearing procedure, the Party will be deemed to 
have waived its right to the informal hearing procedure and the penalty 
will be considered accepted. If a monetary penalty is assessed, it is 
due and payable to the United States, and the Maritime Administration 
may initiate appropriate action to collect the penalty.



Sec.  221.69  Hearing Officer.

    (a) The Hearing Officer shall have no responsibility, direct or 
supervisory, for the investigation of cases referred for the assessment 
of civil penalties.
    (b) The Hearing Officer shall decide each case on the basis of the 
evidence before him or her, and must have no prior connection with the 
case. The Hearing Officer is solely responsible for the decision in each 
case referred to him or her.
    (c) The Hearing Officer is authorized to administer oaths and issue 
subpoenas necessary to the conduct of a hearing, to the extent provided 
by law.



Sec.  221.71  Hearing Officer referral.

    If, pursuant toSec. 221.67(b)(2) of this subpart, a Party elects 
to have the matter referred to a Hearing Officer, the Vessel Transfer 
Officer may--
    (a) Decide not to proceed with penalty action, close the case, and 
notify the Party in writing that the case has been closed; or
    (b) Refer the matter to a Hearing Officer with the case file and a 
record of any prior violations by the Party.



Sec.  221.73  Initial Hearing Officer consideration.

    (a) When a case is received for action, the Hearing Officer shall 
examine the material submitted. If the Hearing Officer determines that 
there is insufficient evidence to proceed, or that there is any other 
reason which would make penalty action inappropriate, the Hearing 
Officer shall return the case to the Vessel Transfer Officer with a 
written statement of the reason. The Vessel Transfer Officer may close 
the case or investigate the matter further. If additional evidence 
supporting a violation is discovered, the Vessel Transfer Officer may 
resubmit the matter to the Hearing Officer.
    (b) If the Hearing Officer determines that there is reason to 
believe that a violation has been committed, the Hearing Officer 
notifies the Party in writing by registered or certified mail of--
    (1) The alleged violation and the applicable statute and 
regulations;
    (2) The maximum penalty that may be assessed for each violation;
    (3) The general nature of the procedure for assessing and collecting 
the penalty;
    (4) The amount of the penalty that appears to be appropriate, based 
on the material then available to the Hearing Officer;
    (5) The right to examine all the material in the case file and have 
a copy of all written documents provided upon requests; and
    (6) The right to request a hearing.
    (c) If at any time it appears that the addition of another Party to 
the proceedings is necessary or desirable, the Hearing Officer will 
provide the additional Party and the Party alleged to be in violation 
with notice as described above.
    (d) At any time during a proceeding, before the Hearing Officer 
issues a decision underSec. 221.89, the Hearing Officer and the Party 
may agree to a Settlement of the case.



Sec.  221.75  Response by party.

    (a) Within 30 days after receipt of notice from the Hearing Officer, 
the Party, or counsel for the Party, may--
    (1) Pay the amount specified in the notice as being appropriate;
    (2) In writing request a hearing, specifying the issues in dispute; 
or
    (3) Submit written evidence or arguments in lieu of a hearing.
    (b) The right to a hearing is waived if the Party does not submit a 
request to the Hearing Officer within 30 days after receipt of notice 
from the Hearing Officer, unless additional time has been granted by the 
Hearing Officer.
    (c) The Hearing Officer has discretion as to the venue and 
scheduling of a hearing. The hearing will normally be

[[Page 50]]

held at the office of the Hearing Officer. A request for a change of 
location of a hearing or transfer to another Hearing Officer must be in 
writing and state the reasons why the requested action is necessary or 
desirable. Action on the request is at the discretion of the Hearing 
Officer.
    (d) A Party who has requested a hearing may amend the specification 
of the issues in dispute at any time up to 10 days before the scheduled 
date of the hearing. Issues raised later than 10 days before the 
schedule hearing may be presented only at the discretion of the Hearing 
Officer.



Sec.  221.77  Disclosure of evidence.

    The Party shall, upon request, be provided a free copy of all the 
evidence in the case file, except material that would disclose or lead 
to the disclosure of the identity of a confidential informant and any 
other information properly exempt from disclosure.



Sec.  221.79  Request for confidential treatment.

    (a) In addition to information treated as confidential underSec. 
221.77 of this subpart, a request for confidential treatment of a 
document or portion thereof may be made by the Person supplying the 
information on the basis that the information is--
    (1) Confidential financial information, trade secrets, or other 
material exempt from disclosure by the Freedom of Information Act (5 
U.S.C. 552);
    (2) Required to be held in confidence by 18 U.S.C. 1905; or
    (3) Otherwise exempt by law from disclosure.
    (b) The Person desiring confidential treatment must submit the 
request to the Hearing Officer in writing and the reasons justifying 
nondisclosure. The Hearing Officer shall forward any request for 
confidential treatment to the appropriate official of the Maritime 
Administration for a determination hereon. Failure to make a timely 
request may result in a document being considered as nonconfidential and 
subject to release.
    (c) Confidential material shall not be considered by the Hearing 
Officer in reaching a decision unless--
    (1) It has been furnished by a Party; or
    (2) It has been furnished pursuant to a subpoena.



Sec.  221.81  Counsel.

    A Party has the right to be represented at all stages of the 
proceeding by counsel. After receiving notification that a Party is 
represented by counsel, the Hearing Officer will direct all further 
communications to that counsel.



Sec.  221.83  Witnesses.

    A Party may present the testimony of any witness either through a 
personal appearance or through a written statement. The Party may 
request the assistance of the Hearing Officer in obtaining the personal 
appearance of a witness. The request must be in writing and state the 
reasons why a written statement would be inadequate, the issue or issues 
to which the testimony would be relevant, and the substance of the 
expected testimony. If the Hearing Officer determines that the personal 
appearance of the witness may materially aid in the decision on the 
case, the Hearing Officer will seek to obtain the witness' appearance. 
The Hearing Officer may move the hearing to the witness' location, 
accept a written statement, or accept a stipulation in lieu of 
testimony.



Sec.  221.85  Hearing procedures.

    (a) The Hearing Officer shall conduct a fair and impartial 
proceeding in which the Party is given a full opportunity to be heard. 
At the opening of a hearing, the Hearing Officer shall advise the Party 
of the nature of the proceedings and of the alleged violation.
    (b) The material in the case file pertinent to the issues to be 
determined by the Hearing Officer shall first be presented. The Party 
may examine, respond to and rebut this material. The Party may offer any 
facts, statements, explanations, documents, sworn or unsworn testimony, 
or other exculpatory items that bear on the issues, or which may be 
relevant to the size of an appropriate penalty. The Hearing Officer may 
require the authentication of any written exhibit or statement.
    (c) At the close of the Party's presentation of evidence, the 
Hearing Officer

[[Page 51]]

may allow the introduction of rebuttal evidence. The Hearing Officer may 
allow the Party to respond to rebuttal evidence submitted.
    (d) In receiving evidence, the Hearing Officer shall not be bound by 
the strict rules of evidence. In evaluating the evidence presented, the 
Hearing Officer shall give due consideration to the reliability and 
relevance of each item of evidence.
    (e) After the evidence in the case has been presented, the Party may 
present argument on the issues in the case. The party may also request 
an opportunity to submit a written statement for consideration by the 
Hearing Officer. The Hearing Officer shall allow a reasonable time for 
submission of the statement and shall specify the date by which it must 
be received. If the statement is not received within the specified time, 
the Hearing Officer may render a decision in the case without 
consideration of the statement.



Sec.  221.87  Records.

    (a) A verbatim transcript of a hearing will not normally be 
prepared. The Hearing Officer will prepare notes on material and points 
raised by the Party in sufficient detail to permit a full and fair 
review of the case.
    (b) A Party may, at its own expense, cause a verbatim transcript to 
be made, in which event the Party shall submit, without charge, two 
copies to the Hearing Officer within 30 days of the close of the 
hearing.



Sec.  221.89  Hearing Officer's decision.

    (a) The Hearing Officer shall issue a written decision. Any decision 
to assess a penalty shall be based on substantial evidence in the 
record, and shall state the basis for the decision.
    (b) If the Hearing Officer finds that there is not substantial 
evidence in the record establishing the alleged violation, the Hearing 
Officer shall dismiss the case. A dismissal is without prejudice to the 
Vessel Transfer Officer's right to refile the case if additional 
evidence is obtained. A dismissal following a rehearing is final and 
with prejudice.
    (c) The Hearing Officer shall notify the Party in writing, by 
certified or registered mail, of the decision and, if adverse, shall 
advise the Party of the right to an administrative appeal to the 
Maritime Administrator or an individual designated by the Administrator 
from that decision.
    (d) If an appeal is not filed within the prescribed time, the 
decision of the Hearing Officer constitutes final agency action in the 
case.



Sec.  221.91  Appeals.

    (a) Any appeal from the decision of the Hearing Officer must be 
submitted in writing by the Party to the Hearing Officer within 30 days 
from the date of receipt of the Hearing Officer's decision.
    (b) The only issues that will be considered on appeal are those 
issues specified in the appeal which were raised before the Hearing 
Officer and jurisdictional questions.
    (c) There is no right to oral argument on an appeal.
    (d) The Maritime Administrator or an individual designated by the 
Administrator will issue a written decision on the appeal, and may 
affirm, reverse, or modify the decision, or remand the case for new or 
additional proceedings. In the absence of a remand, the decision on 
appeal is final agency action.
    (e) The Maritime Administrator or an individual designated by the 
Administrator shall notify the Party in writing, by certified or 
registered mail, of the decision on appeal and, if adverse, shall advise 
the Party of the right of appeal to the courts.



Sec.  221.93  Collection of civil penalties.

    Within 30 days after receipt of the Hearing Officer's decision, or a 
decision on appeal, the Party must submit payment of any assessed 
penalty in the manner specified in the decision letter. Failure to make 
timely payment will result in the institution of appropriate action to 
collect the penalty.

Subpart F--Other Transfers Involving Documented Vessels [Reserved]

[[Page 52]]



                      Subpart G_Savings Provisions



Sec.  221.111  Status of prior transactions--controlling dates.

    (a) The Maritime Administrator hereby grants approval for any 
transaction occurring on or after January 1, 1989 and prior to July 3, 
1991 that was lawful under 46 CFR part 221, revised as of October 1, 
1989.
    (b) The Maritime Administrator hereby grants approval for any 
transaction occurring on or after July 3, 1991 and prior to June 3, 1992 
that was lawful under 46 CFR part 221, revised as of October 1, 1991.
    (c) Any transaction approved by the Maritime Administrator prior to 
January 1, 1989, or any transaction that did not require such approval 
prior to that date, shall continue to be lawful.



PART 232_UNIFORM FINANCIAL REPORTING REQUIREMENTS--Table of Contents



Sec.
232.1 Purpose and applicability.
232.2 General instructions.
232.3 Chart of accounts.

                              Balance Sheet

232.4 Balance sheet accounts.

                            Income Statement

232.5 Income statement accounts.
232.6 Financial report filing requirement.

    Authority: Section 204(b), Merchant Marine Act, 1936, as amended (46 
App. U.S.C. 1114(b)); 49 CFR 1.66.

    Source: 48 FR 30122, June 30, 1983, unless otherwise noted.



Sec.  232.1  Purpose and applicability.

    (a) Purpose. The purpose of this regulation is to establish uniform 
reporting requirements for the preparation of financial reports and 
submissions of information to the Maritime Administration. The Maritime 
Administration will, as necessary, issue clarifying instructions to 
those subject to these reporting requirements to assist in their 
interpretation and application. The uniform reporting requirements 
consist of:
    (1) A chart of accounts defined in this regulation.
    (2) Standard financial report formats, set forth in Form MA-172 
(Revised).
    (b) Applicability. This regulation is application to all 
participants in financial assistant programs administered by the 
Maritime Administration, U.S. Department of Transportation, that are 
required to file periodic financial reports with that agency.

[48 FR 30122, June 30, 1983, as amended at 58 FR 62043, Nov. 24, 1993]



Sec.  232.2  General instructions.

    (a) Use of generally accepted accounting principles. All contractors 
shall conform their accounting policies to generally accepted accounting 
principles (promulgated by the Financial Accounting Standards Board of 
the American Institute of Certified Public Accountants).
    (b) Need to conform accounting information. All contractors may 
continue to use their current accounting system, if the system provides 
a basis for the preparation of reports in the prescribed formats and is 
consistent with generally accepted accounting principles.
    (c) Reconciliation of financial reports. When a program participant 
issues certified financial statements following accounting policies 
different from those followed for the financial statement filed with the 
Maritime Administration (such as reports filed with the Securities and 
Exchange Commission, public service commissions or other regulatory 
agencies, or reports using other acceptable accounting methods differing 
from methods used for this regulation's purposes), the program 
participant shall clearly set forth the nature and amount of each 
adjustment necessary to reconcile the published statements with those 
filed with the Maritime Administration.
    (d) Submission of questions. (1) A contractor may submit in writing, 
or by electronic options (such as facsimile and Internet), if 
practicable, any question involving the interpretation of any provision 
of this part for consideration and decision to the Director, Office of 
Financial and Rate Approvals, for the Maritime Security Program, or 
Director, Office of Ship Financing, for the Maritime Loan Guarantee 
Program (Title XI), Maritime Administration, Department of 
Transportation, 400 Seventh Street, SW., Washington, DC

[[Page 53]]

20590. Appeals from such interpretation will be in accordance with the 
interpretation letter.
    (2) A contractor who has a question of financial accounting or 
reporting procedure pending before the Maritime Administration at the 
time a financial report is due shall file the report in accordance with 
established scheduled dates. The contractor shall include in the report 
a footnote disclosure that adequately describes the question pending, 
the manner of presentation in the report, and the relative impact on the 
balance sheet and income statement, respectively.
    (e) Effective Date. This regulation is effective as of December 27, 
1993 and its requirements are mandatory for financial reports for 
accounting periods ending on or after December 31, 1993.

[48 FR 30122, June 30, 1983, as amended at 58 FR 62043, Nov. 24, 1993; 
68 FR 62537, Nov. 5, 2003; 69 FR 61449, Oct. 19, 2004]



Sec.  232.3  Chart of accounts.

    (a) Purpose of accounts. A contractor shall use this chart of 
accounts as a guide for preparing the financial statements and for other 
required financial reports required to be submitted to the Maritime 
Administration. However, whenever there is a conflict between the 
meaning of any term used in the Chart of Accounts in this part 232 and 
that stated in any revision to generally accepted accounting principles, 
the meaning of the latter shall control and shall be followed.
    (b) Account numbers. Contractors are not required to use these 
account numbers or titles for their internal accounting.

(Approved by the Office of Management and Budget under control number 
2133-0005)

[48 FR 30122, June 30, 1983, as amended at 58 FR 62044, Nov. 24, 1993]

                              Balance Sheet



Sec.  232.4  Balance sheet accounts.

    (a) Accounts defined. Each account is identified by an account 
number and an account title, followed by a text describing the 
accounting information to be included in that account. Where considered 
necessary, accounting procedures are also included to explain how the 
contractor shall disclose information for reporting purposes.
    (b) Purpose of balance sheet accounts. The balance sheet accounts 
are intended to disclose the financial condition of the contractor as of 
a given date.
    (A) Asset Accounts.
    (1) 100 Cash.
    (i) This account shall include the amount of current funds available 
on demand in the hands of financial officers or deposited in banks or 
trust companies, including cash in transit for which agents or others 
have received credit. Cash appropriated or otherwise restricted for any 
purpose shall be included in Account 300, ``Restricted Funds.''
    (ii) Compensating balances included in this account shall be 
disclosed by appropriate footnote.
    (2) 120 Marketable Securities.
    (i) This account shall include securities and other temporary 
investments which are available for general purposes of the business. In 
no case shall securities of the reporting contractor or of a related 
party be included in this account. Separate subaccounts may be used to 
account for discounts and premiums on marketable securities.
    (ii) For financial reporting, the lower of aggregate cost or market 
value at the balance sheet date shall be used to value securities 
included in this account.
    (3) 140 Notes Receivable.
    (i) This account shall include the amount of all obligations in the 
form of short-term notes receivable or other evidences (except interest 
coupons) of money receivable and due on demand or within one year from 
date of issue.
    (ii) Separate subaccounts shall be used to segregate notes 
receivable from related parties.
    (4) 150 Accounts Receivable.
    (i) This account shall include trade or traffic receivables and 
claims receivable from insurance underwriters and other miscellaneous 
receivables not otherwise provided for in other accounts. Accrued 
accounts receivable for interest, dividends, rents, royalties,

[[Page 54]]

charters and other unmatured receivables of a current nature shall be 
reported in this account, except those accrued amounts which are 
required to be deposited to a restricted fund.
    (ii) Separate subaccounts shall be used to segregate trade or 
traffic receivables, claims receivables and miscellaneous receivables. 
Receivables arising from transactions with related parties shall also be 
segregated.
    (iii) This account shall also be used to report construction-
differential subsidy (CDS) and operating-differential subsidy (ODS) 
estimated to have accrued to the contractor and which remain unpaid as 
of the balance sheet date.
    (iv) Separate subaccounts shall be maintained by contract number 
and, under each contract, identified by year of termination and by 
category of subsidy as applicable, e.g., for CDS categories may include 
design and inspection costs; and for ODS categories may include wages, 
maintenance and repair, and any other category for which the contractor 
receives an operating subsidy.
    (5) 160 Allowance for Bad Debts.
    This account shall be credited at the close of each accounting 
period for estimated uncollectable notes and accounts.
    (6) 170 Other Current Assets.
    (i) Inventories, prepaid expenses and other items that are expected 
to be used or consumed within 12 months of purchase or acquisition shall 
be reported in this account.
    (ii) Acquisition of similar items that will not be used or consumed 
within one year should be reported as part of account 360, Other Assets.
    (iii) For Financial Report purposes, this account shall be used to 
record the contra entries of accrued deposits in account 300 Restricted 
Funds.
    (7) 300 Restricted Funds.
    (i) This account shall include the amount of cash and securities (at 
cost) deposited to any restricted fund, including but not limited to 
Title XI Reserve or Restricted Fund, Capital Construction Fund, 
Construction Reserve Fund, Title XI Escrow Fund, Title XI Construction 
Fund, Drilling Rig Reserve Fund, Insurance Fund, Debt Retirement Fund, 
special and guarantee deposits.
    (ii) For each fund established, subsidiary accounts shall be used to 
separately account for cash or securities deposited to the fund. At the 
close of each accounting period accrual entries shall be made to account 
for earned but undeposited investment income.
    (iii) Compensating balances under an agreement which legally 
restricts the use of such funds and constitutes support for borrowing 
arrangements shall be included in this account.
    (iv) Deposits required to be made into any Restricted Fund are to be 
included in the column ``Accrued for Deposit''--appearing in Schedule 
211. The contra entry for the accrual shall be credited to account 170 
Other Current Assets.
    (8) 310 Investments.
    (i) This account shall include amounts of investment instruments 
intended to be held more than one year and includes securities of 
related parties, noncurrent notes receivable and noncurrent accounts 
receivable, both from related parties and others, cash value of life 
insurance policies and other investments. Noncurrent marketable 
securities shall be carried at the lower of aggregate cost or market 
value at the balance sheet date.
    (ii) Separate subaccounts shall be maintained for the various 
investments, including those resulting from related party transactions.
    (iii) For financial reporting purposes, the lower of cost or market 
value at the close of business on the balance sheet date will be used to 
value the securities included in the account except as noted below.
    (iv) Investments in related parties must be reported using the 
equity or consolidated basis of accounting as adopted by the Financial 
Accounting Standards Board.
    (9) 330 Property and Equipment.
    (i) This account shall include the cost of acquisition or 
construction and related capitalizable cost, including additions and 
betterments and all other associated cost necessary to place the 
respective property and equipment in acceptable condition for its 
intended use. This account shall also include the capitalized amount of 
financing leases, computed in accordance with generally

[[Page 55]]

accepted accounting principles, as prescribed by the Securities and 
Exchange Commission and the Financial Accounting Standard Board.
    (ii) Subaccounts shall be maintained by type and category of 
property and equipment such as, but not limited to, the following: (A) 
Floating equipment, including self-propelled vessels for transporting 
cargo or passengers in U.S. foreign or worldwide foreign commerce, tugs 
and barges, drilling platforms used in offshore operations, fishing and 
associated service vessels, service vessels used in conjunction with 
off-shore drilling platforms and deep-water mining operations, lighters 
primarily used to transport cargo within port areas and river systems or 
carried aboard mother vessels--i.e., LASH and SEABEE lighters and 
barges, other floating equipment ancillary to the operator's primary 
vessel operations; (B) containers and flat racks; (C) chassis and 
trailer equipment; (D) terminal property and cargo handling equipment; 
(E) other property and equipment; (F) leaseholds, leasehold improvements 
and Capital Leases; and (G) construction work-in-progress (to provide 
information by project or by type of capitalized asset cost category). 
For each asset account within account 330 a separate depreciation or 
amortization accumulation account must be established except for work-
in-progress accounts.
    (10) 360 Deferred Charges.
    (i) This account shall be used to report expenses, the payment for 
which the contractor has become liable currently, but which will not be 
charged to income within one year of the balance sheet date.
    (ii) Separate subaccounts shall be maintained to identify the 
different categories of expense included in this account. These 
subaccounts may include such items as prepaid insurance; the expense of 
issuing long-term debt and for absorption of discounts on the stated 
value of the debt instruments; organization expenses; deferred 
prepayments and other deferred charges.
    (iii) Separate subaccounts shall be maintained for amortization of 
the various deferred charges included in this account.
    (11) 380 Other Assets.
    All assets, not otherwise provided for above, shall be reported in 
this account. Separate subaccounts shall be maintained for the various 
types of assets, including notes and accounts receivable which are not 
due in the normal course of business within one year of the balance 
sheet date. Each type of asset shall be further segregated to disclose 
amounts due from officers and employees of the reporting contractor or 
operator, officers and employees of related parties, related parties 
themselves, allowance for the trade in of vessels to the Maritime 
Administration (where the allowance is to be applied by the agency on 
behalf of the contractor toward progress payments on new construction) 
and other assets not otherwise accounted for as miscellaneous assets.
    (12) 390 Intangible Assets.
    (i) This account shall be used to report the amount of goodwill 
attributed to the cost of acquiring a business or segment of a business 
from an unrelated party, as well as the cost of acquiring by purchase, 
development or other means such intangible assets as patents, 
copyrights, trade names, operating rights, and similar assets.
    (ii) The contractor shall maintain separate subaccounts for the 
identified intangible assets, including subaccounts to identify their 
respective amortization.
    (B) Liability Accounts.
    (1) 400 Notes Payable and Current Portion of Long-Term Debt.
    (i) The amount reported for this account shall include the face 
value of notes, drafts and other evidences of indebtedness issued by the 
contractor which are payable on demand or within one year of the balance 
sheet date.
    (ii) Separate subaccounts shall be used to identify different groups 
of creditors, e.g., banks, insurance companies, officers and employees, 
related parties and all other creditors.
    (iii) The amount of capitalized lease liability maturing during the 
twelve months following the balance sheet date shall also be reported in 
this account. A record shall be maintained for each lease agreement, 
with a description of the type of equipment under lease.

[[Page 56]]

    (iv) This account shall not include obligations due within one year 
which the contractor intends to refinance on a long-term basis or which 
are payable from restricted funds. Long-term refinancing of short-term 
obligations means replacement with long-term obligations or equity 
securities or renewal, extension, or replacement with short-term 
obligations for an uninterrupted period extending beyond one year from 
the balance sheet date. Such short-term obligations are to be recorded 
in account 510, Long-term Debt.
    (2) 420 Accounts Payable.
    (i) The amount reported for this account shall include accounts 
payable--trade; accounts payable--traffic; pension and welfare funds; 
accounts payable--Maritime Administration; and other accounts payable.
    (ii) Sufficient information shall be maintained to identify 
individual creditors and the general categories or classification of the 
liabilities.
    (iii) Debts of individual creditors not incurred in the normal 
course of business shall be identified by group, e.g., officers and 
employees, affiliated companies, officers and employees of an affiliated 
company, and other appropriate groupings of creditors not otherwise 
affiliated in any way with the contractor.
    (3) 440 Accrued Liabilities.
    (i) This account shall be used to report the amount of accrued 
taxes, accrued operating expenses and other accrued liabilities arising 
in the regular course of business.
    (ii) Subaccounts shall be maintained for each category of liability.
    (4) 450 Other Current Liabilities.
    (i) This account shall include all current liabilities for which no 
other account has been provided.
    (ii) Subaccounts shall be maintained to account separately for each 
class of current liabilities that arise from transactions with officers 
or employees, affiliated companies and officers or employees of 
affiliated companies, and must be readily identifiable to facilitate 
financial reporting requirements.
    (5) 470 Advance Payments and Deposits.
    (i) This account shall be used to report the balance of collections 
from customers for services not yet provided by the contractor.
    (ii) Sufficient accounting information shall be maintained to 
readily disclose collections from related parties.
    (6) 510 Long-Term Debt.
    (i) This account shall be used to report the noncurrent portion of 
long-term debt, including mortgage notes payable to the Maritime 
Administration, U.S. Government insured or guaranteed debt obligations 
issued under Title XI of the Act, and the face amount of bonds, 
debentures and other long-term debt not provided for in other accounts.
    (ii) Subaccounts shall be maintained to disclose unsecured and 
secured debt by creditor and by secured asset.
    (iii) This account shall also include the balance of the long-term 
portion of capitalized lease liabilities. Reporting shall be by lease 
agreement and type of asset leased.
    (iv) This account shall also include obligations due within one year 
which are expected to be refinanced on a long-term basis in accordance 
with the discussion of Account 400.
    (v) Separate subaccounts shall be maintained to record the premiums 
for each class of funded debt (which shall be amortized over the 
respective lives of the securities by credit to Account 670, Other 
Revenue).
    (7) 530 Other Liabilities.
    (i) This account shall be used to report the balance of all other 
liabilities maturing after one year from the balance sheet date and for 
which no other account has been specifically provided.
    (ii) Subsidiary accounts shall be maintained for each category or 
type of liability and accounted for by debtor.
    (iii) Reporting of balances outstanding shall show separately 
amounts due to officers and employees, affiliated companies and officers 
and employees of affiliated companies.
    (8) 560 Deferred Credits.
    This account shall be used to report the amount of accumulated 
deferred income taxes, income or credits for which no other account is 
specifically provided.
    (C) Equity Accounts.
    (1) 570 Invested Capital.

[[Page 57]]

    This account shall be used to report the amount of capital 
contribution by an individual in a proprietary company, by partners of a 
partnership, and by stockholders of a corporation for the par or stated 
value of the capital stock outstanding and additional paid-in capital.
    (2) 580 Treasury Stock.
    This account shall be used to report the cost to the contractor of 
its stock that has been reacquired.
    (3) 590 Retained Earnings.
    (i) This account shall be used to report the balance of restricted 
and unrestricted retained earnings for an incorporated business entity. 
Subsidiary accounts shall be used for each class of restricted earnings.
    (ii) Partnerships should make appropriate changes of titles to 
account for partners accounts.
    (iii) For purposes of meeting the Maritime Administration's Dividend 
Policy for Operators Receiving ODS (46 CFR part 283), accounting 
information for unrestricted retained earnings shall be made available 
to show the income or loss taken into retained earnings, dividends and 
other distributions paid, and the current balance of unrestricted 
retained earnings available for distribution.

[48 FR 30122, June 30, 1983, as amended at 58 FR 62044, Nov. 24, 1993; 
58 FR 64798, Dec. 9, 1993]

                            Income Statement



Sec.  232.5  Income Statement Accounts.

    (a) Accounts Defined. Each account shall be identified by an account 
number and an account title followed by a text describing the accounting 
information to be included in that account.
    (b) Purpose of Income and Expense Accounts. The income and expense 
accounts shall show for each reporting period the amount of money the 
contractor is entitled to receive for services rendered; the income 
accrued from investments in securities and property; accrued expenses; 
and income and expense attributable to extraordinary items.
    (D) Revenue Accounts.
    (1) 600 Vessel Revenue.
    (i) This account shall be used to report revenue (including 
surcharges) from operations. As used here, vessel refers to any asset 
that qualifies for obligation guarantees pursuant to regulations issued 
under Title XI of the Act (46 CFR part 298).
    (ii) For contractors who operate vessels in the U.S. foreign 
commerce with a construction or operating-differential subsidy agreement 
(CDSA or ODSA), operating revenue attributed to such vessels shall be 
separately accounted for to report the following: Freight-foreign, 
freight-coastwise and intercoastal; passenger-foreign, passenger-
coastwide and intercoastal; charter revenue; and other voyage revenue. 
Contractors with an ODSA shall further describe freight and passenger 
revenue--foreign (including surcharges), U.S. foreign commerce revenue 
outbound and foreign commerce revenue (transportation between foreign 
ports). Revenue shall be accounted for to facilitate reporting the 
source of revenue by trade route or service area.
    (iii) All other contractors shall report vessel revenue by category 
or class, or by operating segment or division if different business 
segments or operating divisions produce vessel revenue.
    (iv) Except as otherwise provided in paragraph (D)(1)(i) of this 
section, vessel revenue shall be accounted for following generally 
accepted accounting principles for the segment of the maritime industry 
of which the contractor is a part and shall be applied consistently 
between reporting periods.
    (2) 640 Operating-Differential Subsidy.
    (i) This account shall be used to report the revenue accrued under 
provisions of the ODSA.
    (ii) Subsidiary accounts shall be used to account for the amount of 
subsidy accrued by expense classifications to include: Wages of officers 
and crew; subsistence of officers and crew; maintenance, repairs and 
upkeep not compensated by insurance; hull and machinery insurance 
premiums; protection and indemnity insurance premiums; protection and 
indemnity insurance; deductible expense attributed to illness or injury 
of crew members; and other expense categories as may be specified in the 
ODSA.
    (iii) Records shall be maintained by vessel for each trade route or 
service

[[Page 58]]

area in which a vessel subject to an ODSA operates.
    (iv) If ODS is accrued at substantially different rates developed by 
the contractor applicable to any year in which final rates have not been 
agreed to, the difference between the ODS accruals based on billing 
rates established by MARAD and the ODS accruals based on the 
contractor's rates shall be disclosed in appropriate footnotes to the 
balance sheet and to the income statement.
    (3) 650 Other Shipping Operations Revenue.
    This account shall be used to report revenue earned from shipping 
activities other than vessel operations. Examples are revenue from 
pooling agreements, terminal services provided to others, and cargo 
handling services performed for others; cargo equipment rentals, and 
repairs to cargo equipment belonging to others; agency fees, commissions 
and brokerage fees earned.
    (4) 670 Other Revenue.
    This account shall be used to report revenue from the following 
sources: Interest bearing securities, dividends from capital stock, 
gains from the sale of assets not accounted for under the provisions 
prescribed for account 995, amortization of premium on funded debt, 
income or loss from subsidiaries, and other revenue not otherwise 
provided for, including nonshipping operations revenue.
    (E) Expense Accounts.
    (1) 700 Vessel Operating Expense.
    (i) This account shall be used to report expenses of vessel 
operations of any kind. As used here, vessel has the same meaning as in 
paragraph (D)(1)(i) of this section.
    (ii) For contractors with an ODSA who operate vessels subject to 
such an agreement in the U.S.-foreign commerce or worldwide foreign 
commerce, vessel expense shall be recorded by category as follows: 
Salaries and wages of officers and unlicensed crew, including relief 
crews and others regularly employed aboard the vessel; fringe benefits, 
such as pension and welfare, vacation payments to unions on behalf of 
the officers, crew and others, accrued payroll taxes; consumable stores, 
supplies and equipment, sales taxes, delivery and inspection charges; 
vessel maintenance and repair expense, including laundry service, 
inspection services, cost of maintaining expendable equipment and other 
costs not recoverable from insurance which are integral parts of vessels 
(including the purchase of permanent equipment and spares required by 
the classification societies in the United States and its territories 
and possessions); hull and machinery insurance costs, including premium 
expense, deductibles which have been incurred or paid, protection and 
indemnity insurance, including premium expense, personal injury and 
illness deductibles which have been incurred or paid, and second 
seaman's insurance premiums; premiums for other marine risk insurance 
involving the vessel and not properly chargeable to hull and machinery 
insurance or to protection and indemnity insurance accounts; vessel fuel 
and incidental costs; charter hire expenses, including time, trip, 
short-term and long-term bareboat charter hire; and other vessel 
expenses not properly chargeable to other accounts described herein 
which are incidental to the operation of vessels.
    (iii) For contractors who own or operate vessels not subject to an 
ODSA, vessel expense shall include all expenses directly attributable to 
the operation of vessels. Such expense shall include such expense 
classifications as generally in use by the segment of the industry with 
which the contractor is identified. To the extent applicable, the 
expense classifications mentioned in the preceding paragraph (ii) shall 
be used.
    (iv) Contractors operating vessels to transport cargo or passengers 
shall maintain appropriate vessel expense records for the purpose of 
filing vessel operating reports with the Maritime Administration.
    (2) 750 Vessel Port Call Expense.
    (i) This account shall be used to report the expenses of a vessel at 
each port of call. Port call expenses may include: Charges for wharfage 
and dockage of the vessel, pilotage, entry dues and fees, port dues and 
taxes; anchor dues; canal tolls; launch hire, and tug hire; dispatch and 
husbanding fees of agents; and other port and terminal expenses.

[[Page 59]]

    (ii) Port charges attributable to the vessel's cargo or passengers 
are not to be reported in this account. Such expenses shall be reported 
in Account 760, Cargo Handling Expense.
    (3) 760 Cargo Handling Expense.
    This account shall be used to report all expenses directly 
attributable to the handling of cargo or passengers for a fee. This 
account shall include: Cost of preparing a vessel to receive cargo; cost 
of loading and discharging of the vessel's cargo, including stevedoring 
and equipment and service charges of stevedoring contractors; cost of 
transporting cargo from the point of delivery into the possession of the 
contractor to the loading port and from the discharge port to the point 
of delivery stipulated by the freight agreement if different from the 
port of discharge; brokerage expense, including commissions paid 
brokers' agencies for the procurement of passengers or freight; cargo 
loading plans, demurrage, costs incidental to receiving, delivering and 
warehousing at freight station facilities; and other charges for cargo 
services performed by others.
    (4) 800 Inactive Vessel Expense.
    (i) This account shall be used to report all expenses incurred 
during and directly incident to inactive periods of vessels.
    (ii) Expenses in this account include: Wages of officers and crew; 
contributions to crew fringe benefit plans; accrued payroll taxes; 
subsistence cost of personnel assigned to inactive vessels; consumables 
other than subsistence items; vessel maintenance expense; vessel 
repairs; insurance expense; charter hire cost; wharfage and dockage; 
port expense; and miscellaneous expenses.
    (5) 860 Other Shipping Operations Expense.
    This account shall be used to report cost of container leasing, 
maintenance and repair cost and costs of shipping related activities in 
which the contractor engages to support vessels, such as terminal 
operations, cargo equipment, fleet operations, cargo pooling agreements, 
container loading and other activities that are not accounted for 
elsewhere and that are ancillary to the contractor's vessel operations.
    (6) 900 General and Administrative Expenses.
    (i) This account shall be used to report the administrative and 
general expenses incurred in the operation of the business.
    (ii) This account shall include: Compensation of corporate officers, 
directors, administrative and service employees; fringe benefits of 
general and administrative personnel; legal fees; accounting and 
auditing fees; other professional fees; office and storage expense; 
utilities; communications expense; data processing expense; dues; 
subscriptions; entertainment; travel expense; insurance expense; 
maintenance and repair expense for office facilities; fixtures and 
equipment; fees and commissions paid to managing agents; advertising 
expense; foreign currency conversion; and other expenses to enhance the 
operation of the business.
    (7) 940 Depreciation and Amortization Expense.
    (i) This account shall be maintained by class of assets as accounted 
for in the property and equipment accounts.
    (ii) Subaccounts shall be grouped by classifications such as: 
Vessels; terminals; cargo equipment; office furniture and fixtures; and 
nonshipping assets.
    (8) 950 Other Expense.
    This account is to be used to report expenses not chargeable to any 
other expense account. Such charges may include: Amortization of 
deferred charges; taxes other than income; debt discount and expense; 
nonshipping operations expense; organization and preoperating expense 
and other miscellaneous deferred charges; as well as doubtful notes and 
accounts receivable.
    (9) 960 Interest Expense.
    (i) This account shall be used to report all interest expense 
accrued and charged to income during the period.
    (ii) Subaccounts shall be maintained by debt source/contract to 
provide information needed to fulfill reporting disclosure requirements.
    (10) 970 Income Taxes.
    (i) This account shall be used to report accrued income tax 
liability for the current year's operation exclusive of extraordinary 
items, discontinued operations and the cumulative effect of a change in 
accounting policy.

[[Page 60]]

    (ii) Sufficient accounting records shall be maintained to meet 
income and expense allocation requirements that may exist as a result of 
a Capital Construction Fund Agreement entered into under 46 CFR parts 
390 and 391, pursuant to provisions of Title VI of the Act.
    (11) 990 Cumulative Effect of Change in Accounting Policy.
    (i) This account shall be used to report the cumulative effect of a 
change in accounting policy or a change required under generally 
accepted accounting principles.
    (ii) A footnote shall be added to the income statement explaining 
the substance of the old and new accounting methods and the reason 
supporting the change in accounting policy.
    (iii) The amount reported in this account shall be net of all taxes.
    (12) 995 Income or Loss from Extraordinary Items Net of Taxes.
    (i) Amounts representing gain or loss from extraordinary items, as 
defined by generally accepted accounting principles customarily applied 
in the industry of which the contractor is a part, shall be reported in 
this account. Generally, these transactions would be attributed to 
insurance proceeds from the total loss of a vessel or catastrophic 
losses to shore-based facilities, as well as from sales of damaged 
assets scrapped because of a natural catastrophe, and disposal of assets 
used primarily in a business segment which is being discontinued.
    (ii) Sufficient records shall be maintained to fully describe and 
account for all aspects of each item reported in this account, and when 
a firm commitment is made to dispose of an operating business segment, a 
provision for anticipated gain or loss to be realized in the subsequent 
period from disposal of assets and winding down of operations of the 
discontinued segment shall be taken into income in the year the 
contractor makes the decision.
    (iii) Amounts in this account must be net of all taxes including 
Federal income taxes.

[48 FR 30122, June 30, 1983, as amended at 58 FR 62044, Nov. 24, 1993]



Sec.  232.6  Financial report filing requirement.

    (a) Reporting Frequency and Due Dates. The contractor shall file a 
semiannual financial report and an annual financial report, in the 
format referred to inSec. 232.1(a)(2), which MARAD shall make 
available to the contractor. This Form MA-172 (Revised) shall be 
prepared in accordance with generally accepted accounting principles and 
modified to the extent necessary to comply with this regulation. The 
annual financial report shall be reconciled to the financial statements 
audited by independent certified public accountants (CPAs) licensed to 
practice by a state or other political subdivision of the United States, 
or licensed public accountants licensed to practice by regulatory 
authority or other political subdivision of the United States on or 
before December 31, 1970. Both the annual and semiannual financial 
reports shall be due within 120 days after the close of the contractor's 
annual or semiannual accounting period. If certified (CPA) statements 
are not available when required, company certified statements are to be 
submitted within the due dates, and the CPA statements shall be 
submitted as soon as available. The respondent may, in place of any 
Schedule(s) contained in the Form MA-172, submit a schedule or schedules 
from its audited financial statements, or a computer print-out or 
schedule, consistent with the instructions provided in the MARAD 
formats. MARAD will accept electronic options (such as facsimile and 
Internet) for transmission of required information to MARAD, if 
practicable.
    (b) Certification. Annual and semiannual reports shall be approved 
by the Respondent and Official of Respondent whom MARAD may contact 
regarding the report in the reporting formats prescribed as the MA-172 
submission.
    (c) Presumption of confidentiality. MARAD will initially presume 
that each part of the financial reports or data submitted as prescribed 
by this Regulation, other than Schedule 101--Identity of Respondent and 
Schedules 102 and 103, only with respect to the

[[Page 61]]

names and titles of directors and principal officers and employees, is 
privileged or confidential within the meaning of 5 U.S.C. 552(b)(4). In 
the event of a subsequent request for any portion of the reports or data 
under 5 U.S.C. 552, the submitter will be notified of such request and 
given the opportunity to comment. The contractor shall claim 
confidentiality at that time by memorandum or letter stating the basis, 
in detail, for such assertion of exemption, including but not limited to 
statutory and decisional authorities. Those parts not so claimed by the 
submitter to be confidential will be disclosed, and those parts so 
claimed will be subject to initial determination by the Freedom of 
Information Act Officer.

(Approved by the Office of Management and Budget under control number 
2133-0005)

[48 FR 30122, June 30, 1983, as amended at 68 FR 62537, Nov. 5, 2003; 69 
FR 61449, Oct. 19, 2004]

[[Page 62]]



   SUBCHAPTER C_REGULATIONS AFFECTING SUBSIDIZED VESSELS AND OPERATORS





PART 249_APPROVAL OF UNDERWRITERS FOR MARINE HULL INSURANCE--
Table of Contents



Sec.
249.1 Purpose.
249.2 Policy.
249.3 Amounts of insurance.
249.4 Eligibility.
249.5 Eligibility criteria.
249.6 Application procedures.
249.7 Approval.
249.8 Limitation on risk.
249.9 American market participation.
249.10 Non-discrimination policy.
249.11 Confidentiality.
249.12 Waivers.

    Authority: Sec. 204(b), 1109, Merchant Marine Act, 1936, as amended 
(46 App. U.S.C. 1114(b), 1279b); 49 CFR 1.66.

    Source: 53 FR 23119, June 20, 1988, unless otherwise noted.



Sec.  249.1  Purpose.

    This part prescribes certain regulations governing the placement of 
marine hull insurance on vessels built or operated with subsidy or 
covered by vessel obligation guarantees issued pursuant to Title XI of 
the Merchant Marine Act, 1936, as amended (Act). (46 U.S.C. 1271-1279)



Sec.  249.2  Policy.

    (a) It is the policy of the Maritime Administration (MARAD) that 
companies subject to requirements for the placement of marine hull 
insurance shall be afforded the widest possible opportunity to obtain 
the necessary coverage, with minimal regulatory constraints, with 
financially sound underwriters, and that such placement should not 
create any unnecessary impediments to competitive maritime operations.
    (b) It is also the policy of MARAD to require owners of vessels with 
ODS or Title XI obligation guarantees to allow the American marine 
insurance market the opportunity to compete for the marine hull 
insurance on their vessels before such insurance is placed. Consistent 
with sound business judgment, owners will be expected to place their 
insurance with the American market to the maximum extent possible when 
the rates, terms and conditions offered by American underwriters are 
competitive with those offered by foreign underwriters.



Sec.  249.3  Amounts of insurance.

    MARAD will inform the owner of each vessel that is subsidized or 
covered by vessel obligation guarantees, prior to initial placement and 
at least annually thereafter, of the minimum amount of insurance 
required to be placed on the vessel.



Sec.  249.4  Eligibility.

    In General. All required marine hull insurance must be placed with:
    (a) Underwriters licensed to do business in one or more of the 
United States;
    (b) Underwriters at Lloyds;
    (c) Member companies of the Institute of London Underwriters; or
    (d) Other underwriters specifically approved in advance by the 
Maritime Administration.



Sec.  249.5  Eligibility criteria.

    (a) U.S. Underwriters. Underwriters licensed to do business in a 
state are eligible to participate without further consideration, 
provided they have at least a B security rating, as published in the 
latest edition of A.M. Best's Insurance Reports, and the amount of 
insurance does not exceed the limitation on risk prescribed inSec. 
249.8.
    (b) Foreign Underwriters. (1) Underwriters at Lloyds are eligible to 
participate without further consideration.
    (2) Underwriters which are members of the Institute of London 
Underwriters (ILU) (i.e., member companies, not parents or affiliates of 
the member companies) are eligible to participate without further 
consideration, provided that the ILU member company actually 
underwriting the risk maintains a trust fund in the United States for 
the benefit of its U.S. policyholders in an amount at least equal to the 
minimum provided inSec. 249.7(d), and the

[[Page 63]]

amount insured does not exceed the limitation on risk prescribed in 
Sec.  249.8. Parent companies or affiliates of the ILU member companies 
are treated as other foreign underwriters under subsection (c) of this 
section.
    MARAD reserves the right to review this eligibility at any time.
    (c) Other Foreign Underwriters. Foreign underwriters, other than 
those specified in paragraphs (b) (1) and (2) of this section, may also 
be eligible to participate in the writing of marine hull insurance on 
MARAD program vessels, if approved to do so in accordance with the 
procedures contained in Sec.Sec. 249.6 and 249.7.
    (d) Documentation of eligibility. It shall be the responsibility of 
the vessel owner and its broker to ensure that the requirements of this 
section are met, and they should be able to provide MARAD, upon request, 
with documentation to that effect.



Sec.  249.6  Application procedures.

    (a) MARAD may grant specific approval for underwriters described in 
Sec.  249.5(c) to participate in the writing of marine hull insurance on 
MARAD program vessels, only in advance of any actual placement.
    (b) Only those foreign underwriters who have obtained a high rating 
(A or comparable) from an accepted international rating service may 
apply, and if approved, such approval will be contingent upon continued 
maintenance of such rating. MARAD will make available to interested 
parties the names of any accepted international rating service.
    (c) To seek approval, an applicant shall submit to MARAD:
    (1) Certified financial data for the five previous years in 
sufficient detail to enable MARAD to assess the financial strength and 
solvency of the applicant. Normally, this would be the same data which 
the underwriter must submit to the regulatory agency in its country of 
domicile. However, MARAD may request additional data if the applicant's 
submissions are considered inadequate;
    (2) A comprehensive description and English language version of the 
insurance regulatory regime that is in place in the insurer's country of 
domicile. (After review, MARAD may contact the foreign national 
regulatory authorities, as appropriate);
    (3) An affidavit in writing, executed by an agent of the applicant 
who is a domiciliary of the United States, and supported by appropriate 
documentation, to demonstrate that there is nothing in either law or 
practice to preclude a U.S. insurer from obtaining the same access to 
the applicant's home market as the applicant is seeking to the U.S. 
market, and
    (4) The details of its reinsurance program, if it wishes to write 
any risks in excess of five percent of its policyholders' surplus. These 
details shall be accompanied by a statement that clearly demonstrates 
the special circumstances and good cause by which MARAD should be 
persuaded to modify its general policy on limitation of risk described 
inSec. 249.8.



Sec.  249.7  Approval.

    (a) Approval of the applicant will be based upon an assessment of 
the applicant's financial condition and solvency, its rating by an 
accepted international rating service, suitability of the regulatory 
regime under which the applicant must operate in its home country, and 
on the principle of reciprocal non-discrimination. MARAD will not 
approve access to the U.S. hull insurance market, if U.S. insurers are 
denied similar access to the hull insurance market in the applicant's 
home country.
    (b) MARAD will publish in the Federal Register each Notice of 
Application received from foreign underwriters described inSec. 
249.5(c), affording interested persons an opportunity to bring to 
MARAD's attention any discriminatory laws or practices relating to the 
placement of marine hull insurance which might exist in the applicant's 
country of domicile.
    (c) In granting approval, MARAD will consider all materials 
available to it, and may impose reasonable terms and conditions upon any 
such approvals granted.
    (d) Upon approval, applicant will be required to establish and 
maintain for the benefit of its U.S. policyholders a U.S. trust fund in 
the amount of at least $1.5 million, such amount to be

[[Page 64]]

reviewed periodically (but not more frequently than annually), and 
adjusted as appropriate. This requirement may be satisfied by means of 
an appropriate irrevocable letter of credit.
    (e) All policies, at the time of issuance, shall contain the latest 
American Institute of Marine Underwriters' forms, or equivalent, as 
approved by MARAD.
    (f) All policies issued by foreign underwriters shall include New 
York Suable Clause or Service of Suit (USA) Clause.
    (g)(1) To maintain approval, foreign underwriters, other than those 
specified inSec. 249.5(b), shall, in addition to retaining the high 
rating from an accepted international rating service, file annual 
financial statements in the same level of detail as required for 
original approval. Such statements shall be due within 120 days after 
the close of the underwriter's annual accounting period.
    (2) In addition, a new affidavit concerning the lack of 
discriminatory laws or practices related to hull insurance in the 
underwriter's home market, as described inSec. 249.6(c)(3), shall be 
filed annually at the same time as the financial statements.
    (h) Since there is no annual reapproval required, foreign 
underwriters which are approved shall agree to submit additional 
information, as requested by MARAD, if it has reason to believe there 
has been a change in the underwriter's financial status or business 
practices which could affect the quality of its security. Failure to 
provide such information on a timely basis could result in immediate 
withdrawal of the authorization to write hull insurance on MARAD program 
vessels.



Sec.  249.8  Limitation on risk.

    (a) Underwriters may take a line on any single risk in excess of 
five percent of its Policyholders' Surplus only with the prior approval 
of MARAD. MARAD will grant such approval to certain underwriters only in 
special circumstances, and for good cause shown. The standard to be 
applied in such cases shall be that the underwriter's net retention on 
any single risk may not exceed five percent of its Policyholders' 
Surplus, the gross amount of the risk may not exceed its surplus, and 
the reinsurers must have a high (A or comparable) rating from an 
accepted international rating service.
    (b) The vessel owner shall also provide MARAD with a mortgagee's 
interest policy in an amount equal to the difference between the net 
retention and the amount of the line taken by such underwriter.



Sec.  249.9  American market participation.

    (a) Owners of vessels receiving ODS or Title XI vessel obligation 
guarantees, or their brokers, shall offer to the American marine 
insurance market the opportunity to compete for the placement of marine 
hull insurance on each vessel. Consistent with sound business judgment, 
owners will be expected to place their insurance with the American 
market to the maximum extent possible when the rates, terms and 
conditions offered by American underwriters are competitive with those 
offered by foreign underwriters. MARAD will make available a list of 
approved American underwriters and their capacities.
    (b) In the event that less than 50 percent of the placement is made 
with the American marine insurance market, the owners, or their brokers, 
shall file an affidavit confirming that the risk has been offered to a 
substantial portion of the American market. The affidavit shall list the 
American underwriters to which the risk was offered, and such 
underwriters shall account for at least 50 percent of the approved 
American market capacity, or 75 percent in the event that more than 75 
percent of the risk was placed in foreign markets.
    (c) Failure to comply with (a) or (b), above, may result in MARAD 
requiring that the risk be reoffered and that the existing placement be 
modified, as deemed appropriate.



Sec.  249.10  Non-discrimination policy.

    To administer effectively the policy regarding non-discrimination 
against U.S. insurers in other countries, as described in Sec.Sec. 
249.6(b)(3) and 249.7(a), MARAD seeks the assistance of the American 
marine insurance industry to

[[Page 65]]

provide information at the time of publication of Notice of Application 
described inSec. 249.7(b) concerning the existence of any 
discriminatory laws or practices in the marine hull insurance market 
abroad. Upon receipt of such information, MARAD will take whatever 
action it deems appropriate.



Sec.  249.11  Confidentiality.

    (a) If the data submitted under this rule contain information that 
the submitter considers to be commercial or financial information and 
privileged or confidential, or otherwise exempt from disclosure under 
the Freedom of Information Act (FOIA) (5 U.S.C. 552), the submitter 
shall assert a claim of exemption at the time the data are submitted. 
The claim shall be made in a letter contained in a sealed enveloped 
marked ``Confidential Information,'' addressed to the Secretary, 
Maritime Administration. The submitter shall stamp or mark 
``confidential'' on the top of each page containing information claimed 
to be confidential.
    (b) In claiming an exemption under FOIA, the submitter must state 
the basis for such action, including supporting information showing: (1) 
That the information claimed to be confidential is a trade secret or 
commercial or financial information in accordance with statutory and 
decisional authority; and (2) that measures have been taken by the 
submitter of the information to ensure that the information has not been 
disclosed or otherwise made available to the public, or, if the 
information has been disclosed or otherwise becomes available to the 
public, why such disclosure or availability does not compromise the 
confidential nature of the information.
    (c) In the event of a subsequent request for any portion of the data 
under the FOIA, those submissions not so claimed by the submitter will 
be disclosed, and those so claimed will be subject to the initial 
determination by the Secretary, Maritime Administration.
    (d) If the Secretary makes a determination unfavorable to the 
submitter, the submitter will be advised that MARAD will not honor the 
request for confidentiality at the time of any request for production of 
information under the FOIA by third parties.



Sec.  249.12  Waivers.

    The provision of this part may be waived in writing, for special 
circumstances and good cause shown, provided the procedures adopted are 
consistent with the Act and with the intent of these regulations.

                        PARTS 251	252 [RESERVED]



PART 272_REQUIREMENTS AND PROCEDURES FOR CONDUCTING CONDITION SURVEYS
AND ADMINISTERING MAINTENANCE AND REPAIR SUBSIDY--Table of Contents



                            Subpart A_General

Sec.
272.1 Purpose.
272.2 Scope.
272.3 Definitions.
272.4 Effective date.
272.5 Prior instructions superseded.

 Subpart B_Requirements and Procedures for Determining the Condition of 
                            Eligible Vessels

272.11 Scope.
272.12 Determining the condition of eligible vessels.
272.13 Operator's responsibilities.
272.14 Survey procedures.
272.15 Execution of condition survey reports.
272.16 Non-compliance with survey requirements.

 Subpart C_Eligibility Criteria for M&R Subsidy; Substantiation of M&R 
                                Expenses

272.21 General eligibility criteria.
272.22 Improvements and other similar work.
272.23 Examples of ineligible expenses.
272.24 Subsidy repair summaries.
272.25 Requirements for subsidy repayment.

                           Subpart D_Penalties

272.31 Determination of penalty.
272.32 Mitigation of penalty.
272.33 Appeals.

       Subpart E_Examination, Audit, Review and Appeal Procedures

272.41 Requirements for examination and allocation of M&R expenses.
272.42 Audit requirements and procedures.

[[Page 66]]

272.43 Review and appeal procedures.
272.44 Dates.

    Authority: 46 App. U.S.C. 1114(b), 1173, 1176; 49 CFR 1.66.

    Source: 55 FR 34919, Aug. 27, 1990, unless otherwise noted.



                            Subpart A_General



Sec.  272.1  Purpose.

    The purpose of this part is to prescribe the requirements and 
procedures for determining the condition of vessels receiving operating-
differential subsidy, to prescribe the requirements for reporting and 
substantiating maintenance and repair (M&R) expenses, and to establish 
the criteria and procedures for determining whether a M&R expense is 
subsidizable.



Sec.  272.2  Scope.

    Except as otherwise provided in subpart B, the provisions of this 
part apply only to vessels operating under an operating-differential 
subsidy agreement which provides for the payment of M&R subsidy, except 
that this part does not apply to any vessel operating under an 
operating-differential subsidy agreement for the carriage of bulk raw 
and processed agricultural commodities from the United States to the 
Union of Soviet Socialist Republics, pursuant to part 294 of this 
chapter.



Sec.  272.3  Definitions.

    For the purposes of this part:
    (a) Act means the Merchant Marine Act, 1936, as amended, 46 App. 
U.S.C. 1101 et seq.
    (b) MARAD means the Maritime Administration, a unit of the United 
States Department of Transportation, as distinguished from the Board 
(which is a unit of MARAD).
    (c) Board means the Maritime Subsidy Board of the Maritime 
Administration.
    (d) Domestic Origin:
    (1) Labor. With respect to labor, Domestic Origin means that the 
work shall be performed by a U.S. ship repair facility, a U.S. 
independent contractor, or by the Operator's own shore gang.
    (2) Materials. With respect to materials, Domestic Origin means that 
all articles, materials, and supplies shall be of the growth, production 
or manufacture of the United States.
    (e) Eligible Vessel means a vessel operated under an ODSA, other 
than an ODSA subject to part 294 of this chapter, which provides for the 
payment of M&R subsidy with respect to the operation of that vessel.
    (f) Equipment means that part of an Eligible Vessel that is not part 
of the vessel's hull or machinery.
    (g) Expendable equipment means those articles, outfittings and 
furnishings that are portable, semi-portable or detachable, that are 
used in equipping a ship for service and in its normal day-to-day 
maintenance and operation, and that are subject to casual or gradual 
deterioration and replacement. It does not include items classified as 
stores and supplies or Spare Parts.
    (h) Improvement means work to be performed on an Eligible Vessel 
which is a modification, alteration, addition or betterment, which may 
be accomplished separately from M&R, but may be eligible for M&R subsidy 
pursuant toSec. 272.22 of this part.
    (i) M&R and M&R Subsidy mean, respectively, maintenance and repairs 
and maintenance and repair subsidy payable pursuant to section 603 of 
the Act.
    (j) ODS and ODSA refer, respectively, to operating-differential 
subsidy provided under an operating-differential subsidy agreement 
entered into pursuant to title VI of the Act.
    (k) Operator means any individual, partnership, corporation, or 
association that enters into an ODSA with the Board pursuant to title VI 
of the Act.
    (l) Permanent equipment means Equipment that is, or is intended to 
become when installed, an integral, permanent, built-in part of the 
vessel.
    (m) Region Office means any one of the four Maritime Administration 
Region Offices in New York, NY; New Orleans, LA; San Francisco, CA; and 
Chicago, IL; established pursuant to section 809 of the Act.
    (n) Spare parts means such items as spare propellers and tailshafts 
and self-contained operable units of machinery or equipment, as well as 
those items generally recognized within the maritime industry as Spare 
Parts.

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    (o) United States means the states of the United States, the 
District of Columbia and Puerto Rico.



Sec.  272.4  Effective date.

    The provisions of this part apply to voyages of every Eligible 
Vessel which terminate on or after September 26, 1990.



Sec.  272.5  Prior instructions superseded.

    The provisions of this part supersede any provisions of MARAD 
Circular Letters and Accounting Instructions applicable to M&R and dated 
prior to the effective date of these regulations to the extent that the 
provisions of this part may be inconsistent with the provisions of such 
prior instructions.



 Subpart B_Requirements and Procedures for Determining the Condition of 
                            Eligible Vessels



Sec.  272.11  Scope.

    This subpart applies to any Eligible Vessel, other than one 
operating under an ODSA subject to part 294 of this chapter.



Sec.  272.12  Determining the condition of eligible vessels.

    The Operator of an Eligible Vessel shall make the vessel available 
whenever MARAD may require, in any of the following instances:
    (a) At the commencement of the first subsidized voyage, except for a 
newly constructed vessel which enters subsidized service immediately 
upon delivery by the shipyard, and for which there is a prior condition 
survey report. If that subsidized service commences outside the 
continental limits of the United States, the vessel may be surveyed at 
the first United States port of call;
    (b) At the commencement of the first voyage following the effective 
date for M&R subsidy established by MARAD, if such M&R rate was not 
established at the commencement of the vessel's first voyage;
    (c) Upon the discontinuance of a M&R subsidy rate;
    (d) Upon resumption of subsidized voyages after temporary withdrawal 
from subsidized operation. The vessel shall not be considered as having 
been temporarily withdrawn from subsidized service if it performed 
unsubsidized voyages in a subsidized service of the Operator;
    (e) Upon withdrawal from subsidized service, either temporarily 
(subject to the provisions of paragraph (d) ofSec. 272.14), or 
permanently;
    (f) During the dry docking period incident to the vessel's American 
Bureau of Shipping Special Surveys;
    (g) Upon termination of the last voyage under the ODSA, or at the 
end of the contract period, with respect to subsidized vessels in idle 
status at that time; or
    (h) At any other time that MARAD considers to be appropriate.



Sec.  272.13  Operator's responsibilities.

    Whenever MARAD notifies an Operator that a survey of an Eligible 
Vessel is required under this section, the Operator shall:
    (a) Make the vessel immediately available for survey if the vessel 
is in a port of the United States at the time of notification, or make 
the vessel available for survey immediately upon arrival at the first 
port of call in the United States if the vessel is not in a port of the 
United States at the time of notification; and
    (b) Furnish to the Secretary of the Board the following:
    (1) A copy of each American Bureau of Shipping report and every 
other salvage association or damage survey report; and
    (2) Copies of certificates or other evidence of compliance with 
applicable laws, rules, and regulations as to vessel condition and 
operation, including, but not limited to, those administered by the 
United States Coast Guard, Environmental Protection Agency, Federal 
Communications Commission, Public Health Service, or their respective 
successors, and compliance with all applicable treaties and conventions 
to which the United States is a signatory.

(Approved by the Office of Management and Budget under control number 
2133-0007)



Sec.  272.14  Survey procedures.

    (a) Prior to survey. Unless otherwise directed by MARAD, the 
Operator of a vessel which is required to be surveyed

[[Page 68]]

under this subpart shall contact the ship operations unit of the Region 
Office in which the survey is to be conducted.
    (b) Operator's assistance to surveyor. The Operator shall assist the 
marine surveyor performing the survey for MARAD and shall permit access 
by that surveyor to all parts of the vessel, its log books, and other 
official records. The Operator may designate a representative to 
accompany the marine surveyor during the survey, but no Operator's 
representative is required to be present during the survey.
    (c) On-subsidy surveys. An on-subsidy survey consists of the 
following:
    (1) Vessel survey. This includes an inspection and the completion of 
reports by the surveyor, in sufficient detail to reveal a comprehensive 
picture of the conditions noted.
    (2) On-subsidy survey report. The on-subsidy survey report consists 
of:
    (i) Ship Survey Report, Form MA-58; and
    (ii) As appropriate for the circumstances of the survey and the 
respective vessel, Forms MA-55 (Turbines and Gears Report); MA-56 (Tooth 
Contact Report); MA-57 (Drydock Report); and MA-59 (Measurements of 
Piston Rings and Grooves).
    (d) Off-subsidy surveys. An off-subsidy survey consists of the 
following:
    (1) Repair specifications. The Operator shall prepare and furnish to 
the appropriate Region Office detailed repair specifications covering 
all repair work attributable to completed subsidized service.
    (2) Off-subsidy survey report. The survey report for an off-subsidy 
survey consists of the repair specifications required by paragraph 
(c)(1) of this section, and the findings of the Region Office on these 
specifications after the survey required by paragraph (c)(2) of this 
section.



Sec.  272.15  Execution of condition survey reports.

    Every survey report shall be signed by:
    (a) The Operator's representative, when designated pursuant toSec. 
272.13(a), but only if that representative was in attendance during the 
survey;
    (b) The Operator's superintendent engineer or equivalent;
    (c) The marine surveyor who conducted the survey; and
    (d) The appropriate representative of the Region Office for the 
Region in which the survey was conducted.



Sec.  272.16  Non-compliance with survey requirements.

    MARAD may disallow any one or more M&R claims otherwise eligible for 
subsidy if an Operator fails to:
    (a) Contact the appropriate Region Office as required bySec. 
272.14(a);
    (b) Comply with provisions ofSec. 272.14(c)(1) with respect to 
repair specifications, or to make the vessel reasonably available for 
inspection before its next sailing; or
    (c) Comply with any other requirement specified in this subpart B.



 Subpart C_Eligibility Criteria for M&R Subsidy; Substantiation of M&R 
                                Expenses



Sec.  272.21  General eligibility criteria.

    (a) Eligible maintenance and repairs. Costs of maintenance and 
repair are eligible for M&R subsidy participation if they are:
    (1) Performed on an Eligible Vessel;
    (2) Necessary, because of subsidized operation, for the M&R or 
replacement of damaged or worn parts of the vessel's hull, machinery, or 
Permanent Equipment;
    (3) Uncompensated by insurance;
    (4) Considered fair and reasonable by the Board;
    (5) Of Domestic Origin; and
    (6) Otherwise eligible in accordance with provisions of this part.
    (b) Off-subsidy survey items. Any M&R contained in an executed off-
subsidy survey report is eligible maintenance and repair if:
    (1) Paragraphs (a) (1) through (6) of this section are met;
    (2) The work is accomplished by the Operator before or during the 
next drydocking period (periodic or otherwise); and
    (3) The vessel is either owned by the same Operator who owned it at 
the time of the off-subsidy survey, or ownership was transferred to the 
Federal

[[Page 69]]

Government pursuant to section 510 of the Act (46 App. U.S.C. 1160).
    (c) Operator furnished items. In addition to the general 
requirements of paragraph (a) of this section, the cost of the 
Operator's materials, supplies, or both, furnished by the Operator which 
are necessary to the performance of eligible M&R, is eligible for M&R 
subsidy if:
    (1) The items for which the cost was incurred are issued by the 
Operator from ship's inventory or the Operator's shoreside inventory, or 
are issued by direct purchase to the ship repair yard, other independent 
contractor, or shore gang labor; and
    (2) No subsidy, whether M&R or otherwise, has previously been paid 
for such material, supplies, or both; and
    (3) The items are of Domestic Origin.
    (d) Costs associated with shore gang labor. In addition to the 
general requirements of paragraph (a) of this section, the costs 
incurred with respect to the Operator's employment of U.S. shore gang 
labor necessary for the performance of eligible M&R are eligible for M&R 
subsidy participation only if such costs are:
    (1) For direct labor charges;
    (2) For eligible Spare Parts, as described in paragraph (e) of this 
section; or
    (3) Incidental to the payment of wages for the direct labor, to the 
extent that such costs are required by State or Federal law or by 
collective bargaining agreements.
    (e) Spare parts. Spare parts are eligible for M&R subsidy if they 
are:
    (1) Necessary for eligible M&R;
    (2) Issued by the Operator from the Operator's shoreside inventory 
or issued by direct purchase to a U.S. ship repair yard, U.S. 
independent contractor, or U.S. shore gang labor; and
    (3) Placed aboard an Eligible Vessel, and
    (4) Of Domestic Origin.



Sec.  272.22  Improvements and other similar work.

    (a) Eligible expenditures. Any expenditure not in excess of $200,000 
for work effected during any one or a series of repair periods, which 
the Operator and MARAD consider to be an Improvement, is eligible for 
M&R subsidy if otherwise eligible for such subsidy pursuant to 
provisions of this Part.
    (b) Capital expenditures. An expenditure in excess of $200,000 for 
work effected during any one or a series of repair periods, which is not 
necessary for maintenance or repair shall be considered to be a capital 
expenditure, ineligible for M&R subsidy, except that work on an Eligible 
Vessel which the operator considers to be an Improvement is eligible for 
M&R subsidy if, before awarding this work:
    (1) The Operator submits a written request to the Director, Office 
of Ship Operations, for consideration of the expenditures;
    (2) The Director determines that the work is an Improvement and is 
technically acceptable; and
    (3) The Associate Administrator for Maritime Aids approves M&R 
subsidy for the work, as appropriate, pursuant to the provisions of 
title VI of the Act.
    (c) Improvements performed in more than one repair period. Whenever 
an Operator desires to spread the work incident to any Improvement over 
more than one repair period, the operator shall give written notice to 
the Director, Office of Ship Operations, prior to commencement of the 
work, as to the scope of work involved, expected benefits, the number of 
voyages over which the work will be spread and the estimated total cost. 
The operator shall report in the Subsidy Repair Summary (Form MA-140) 
the actual total cost of such work, covering the repair period in which 
it is finally completed, and shall attach a copy of the acknowledgement 
of such notification to the Form MA-140.



Sec.  272.23  Examples of ineligible expenses.

    Expenses ineligible for M&R subsidy participation include, but are 
not limited to, the following examples:
    (a) Specialized improvements. Any expenditure or Improvement 
required to alter, outfit or otherwise equip a vessel for its intended 
subsidized service which MARAD determines should have been performed 
before the initial entry of the vessel into subsidized service;
    (b) Convenience items. Any expenditure for items that the Region 
Director determines to be aboard a ship only for

[[Page 70]]

the convenience of the Operator or crew members, and which are not 
considered integral parts of the vessel and are not required for 
seaworthiness, navigation or the health or well-being of the crew or 
passengers.
    (c) Unsupported expenses. Any expense item which the Operator fails 
to substantiate adequately with documentation, as required bySec. 
272.24.
    (d) Untimely requests for review. Any disallowed expense item for 
which the Operator fails to make a timely request for review, as 
required bySec. 272.43.
    (e) Untimely appeals. Any expense item disallowed in the final 
determination by the Director, Office of Ship Operations, for which the 
Operator fails to make a timely appeal to the Board, pursuant toSec. 
272.43.
    (f) Absence of notice of multi-repair period Improvements. Any 
expenses for an Improvement extending over more than one repair period 
in which the Operator did not notify the Director, Office of Ship 
Operations, as required bySec. 272.22(c).
    (g) Cargo expenses. Any expense of special cargo fittings of a 
temporary nature, dunnage, ceiling, battens, the cleaning of cargo holds 
and tanks for cargo, the reading and certification of temperatures for 
refrigerated cargoes, and similar expenses.
    (h) Stevedore damage. Any expense or any damage to the vessels or 
cargo gear directly attributable to a stevedore.
    (i) Rented equipment. Any expense for the rental of Permanent or 
Expendable Equipment, such as compressors, paint floats, and other 
similar items for use by shore gangs or ship's crew on repair or other 
work, radar, radio telephones, and other similar items for use by ship's 
crew in ship operations.
    (j) Special requirements for trade routes. Any expense for the 
initial installation of equipment necessary for the vessel's particular 
trade route, such as Suez Canal davits, which should have been installed 
before the entry of the vessel into the particular subsidized service.
    (k) General operating expenses. Any expense for the loading of 
stores, the landing and sorting of laundry, pilot service, tug charges, 
removing surplus equipment to warehouses, and other similar expenses 
which do not involve actual maintenance and repair.
    (l) Items attributable to unsubsidized operations. Any item of 
maintenance or repair that is clearly attributable to unsubsidized 
operation, including expenses noted in on-subsidy surveys for repairs 
which clearly should have been made before departure from the last 
United States port on the first voyage:
    (1) In subsidized service, or
    (2) Upon resumption of subsidized operation following temporary 
withdrawal.
    (m) Overdue classification and inspection requirements. Any expenses 
for work required by a classification society or an agency of the 
Federal Government, which was due (irrespective of any grace period 
granted) and not completed before the first voyage:
    (1) In subsidized service, or
    (2) Upon resumption of subsidized operation following temporary 
withdrawal, except when such work is attributable to prior subsidized 
service.
    (n) Foreign maintenance and repairs. Any expense for any item of 
M&R, including insurance repairs, that is not of Domestic Origin.
    (o) Marine or other loss. Any part of an expense or a repair which 
is recovered or recoverable from an insurer or another party.
    (p) Consumables, expendables. Any procurement expense for 
consumables, expendables, and Expendable Equipment, when used or 
installed by ship's crew or furnished for inclusion in ship's inventory, 
and any expense for maintenance, repair, or replacement of Expendable 
Equipment.
    (q) Excessive costs. Costs for M&R which MARAD considers excessive, 
after allowing the Operator an opportunity to present all relevant facts 
pertinent to such costs.
    (r) Overhead costs. Any expense included in shore gang labor charges 
which is an overhead item, as prescribed by 46 CFR part 232--Uniform 
Financial Reporting Requirements.
    (s) Guarantee items. Any expense for an item adjudged or noted as 
being a guarantee item of a construction or repair contractor.

[55 FR 34919, Aug. 27, 1990, as amended at 57 FR 34690, Aug. 6, 1992]

[[Page 71]]



Sec.  272.24  Subsidy repair summaries.

    (a) Filing requirements. The Operator of an Eligible Vessel shall 
submit to the appropriate MARAD regional Ship Operations Office a 
Subsidy Repair Summary (Form MA-140) for each quarter of a calendar year 
in which one or more of the Operator's Eligible Vessels (including any 
vessel which has been temporarily withdrawn from subsidized service) 
terminates a voyage. This quarterly report shall include supporting 
documents and information, as described in paragraph (c) of this 
section. This summary may be for either a single voyage or multiple 
voyages, and shall be filed not later than 120 days after:
    (1) The close of the calendar quarter in which a voyage is 
terminated, or
    (2) The date the reported vessel is temporarily or permanently 
withdrawn from subsidized service.
    (b) Form requirements. MARAD will make available one copy of Form 
MA-140 upon request. Each Operator shall furnish its own supply of the 
form and prepare each form for submission. Information on any Form MA-
140 shall pertain to only one vessel. The Operator's superintendent 
engineer or other responsible official shall certify every summary 
submitted by an Operator in the following manner:

This is to certify that, to the best of my knowledge and belief, and 
based on recorded entries through (Date), this is a true and correct 
statement of repair and maintenance expenditures for the period stated, 
and that the repair and maintenance items indicated as eligible for 
subsidy participation are reasonably attributable to service subsequent 
to commencement of the first voyage under the Operating-Differential 
Subsidy Agreement and were necessary, satisfactorily completed, and the 
price is fair and reasonable (exceptions are listed on separate page).

    (c) Categorization. The Operator shall exercise due diligence in 
identifying each item in the Form MA-140 within the following three 
separate categories:
    (1) Claimed for subsidy. This includes the following:
    (i) M&R
    (ii) Spare Parts
    (iii) Improvements
    (2) Marine loss. If any M&R expense is incurred because of marine 
loss, the Operator shall list such an M&R expense under this separate 
category, and shall exclude such expense from the totals for the 
``Claimed for Subsidy'' and ``Non-Subsidized Items'' categories provided 
for in this section.
    (3) Non-subsidized items. This category shall include builders' 
guarantee items, foreign repairs, and other items of M&R expense not 
claimed for subsidy.
    (d) Required supporting documents and information--(1) General. The 
Operator shall support every item in the Form MA-140 with documents or 
other information, in sufficient detail to permit MARAD to determine the 
fairness and reasonableness of the prices for the submitted work. With 
respect to any claims for M&R performed outside the United States, the 
Operator shall submit with the claim a certificate, signed either by the 
Operator (if it uses its own shore gang labor or materials from its own 
inventory) or by an official of the ship repair yard or the independent 
contractor performing the work, stating that the M&R were performed with 
materials, labor, or both, of Domestic Origin.
    (2) U.S. Independent contractors. If a U.S. independent contractor 
performed M&R work, the Operator shall support each such expense with 
one copy of the contractor's invoices covering the work performed. If an 
invoice is not itemized and fully descriptive of the work performed with 
item prices then the Operator shall attach to the contractor's invoice 
other supporting documentation, such as specifications, prepared in 
sufficient detail to permit a determination of the fairness and 
reasonableness of the prices for each segment of the work performed.
    (3) Operator's shore gang. If an Operator's own U.S. shore gang has 
performed any M&R work, the Operator shall submit with the Form MA-140 
specifications covering that work, prepared in sufficient detail 
(including the material and labor cost of each item) to permit a 
determination of the specific cost of each segment of work performed.
    (4) Operator furnished material. Whenever an Operator furnishes to a 
contractor material obtained either from the Operator's own ship stores 
or

[[Page 72]]

shoreside inventory, or by direct purchase for a specific job, the 
Operator shall include on the invoice, requisition form or other form of 
transfer memorandum the item number for which the material was used and 
the contract number covering the work performed.
    (5) Spare parts. The Operator shall ensure that the invoice covering 
any Spare Part for an Eligible Vessel which is to be used or installed 
as an integral, permanent part of the vessel, indicates the specific 
piece or part of the vessel's hull, machinery, or Equipment for which 
the Spare Part was obtained.
    (6) Foreign repairs. Operators receiving M&R subsidy shall submit 
copies of all U.S. Customs entry forms detailing foreign expenditures on 
behalf of Eligible Vessels. The copies shall include all expenditures 
made during the quarter.

(Approved by the Office of Management and Budget under control number 
2133-0007)



Sec.  272.25  Requirements for subsidy repayment.

    (a) Repayment of M&R subsidy for compensated marine or other loss. 
If an Operator eventually receives compensation from an insurer or any 
other person for a marine loss or any other loss for which M&R subsidy 
has been paid, the Operator shall repay to MARAD an amount equal to the 
amount of subsidy paid with respect to that loss.
    (b) Repayment of M&R subsidy for Improvements--three year service 
requirement. If, within three years after the completion of an 
Improvement for which M&R subsidy was paid, the Operator permanently 
withdraws the Eligible Vessel from the ODSA, the Operator shall repay to 
MARAD an amount equal to the amount of M&R subsidy paid with respect to 
that Improvement unless MARAD shall have determined that such action was 
beyond the control of the Operator.
    (c) Repayment of M&R subsidy due to allocation of costs. If the 
allocation of total M&R costs required bySec. 272.41(e) of this part 
results in the allocation of a lesser amount of subsidizable M&R costs 
than were actually paid for during the calendar year, the Operator shall 
repay to MARAD the amount of ODS which was paid in excess of the 
allocated subsidizable costs.
    (d) Administrative action. If an Operator fails to repay an M&R 
subsidy required to be repaid by this section, MARAD may either reduce 
any ODS payable by the amount of M&R subsidy required to be repaid by 
this section, or take any other action necessary to secure repayment.



                           Subpart D_Penalties



Sec.  272.31  Determination of penalty.

    Operators whose Eligible Vessels have undergone foreign repairs, 
which MARAD determines are non-emergency in nature, may be subject to a 
penalty in an amount equal to the total cost (exclusive of applicable 
U.S. Customs duties) of such foreign repairs and purchases, such penalty 
to be effected by a deduction from the Operator's total ODS otherwise 
accrued. The Director, Office of Ship Operating Assistance, shall notify 
the Operator by letter with respect to:
    (a) MARAD's determination of a penalty and the reasons therefore; 
and
    (b) Whether the determination is final or subject to the submission 
of additional information.



Sec.  272.32  Mitigation of penalty.

    The Director, Office of Ship Operating Assistance, may decide, after 
a non-emergency foreign repair occurs, to mitigate the penalty. Any 
mitigation of penalty shall be based on a determination that special 
circumstances existed at the time of repair. The Director shall not 
consider the difference in the price of foreign and domestic repair work 
in making this determination, and shall not grant prior approval of 
foreign repairs. In determining whether special circumstances existed, 
the Director shall consider, among others, the following factors:
    (a) The trading area of the vessel both before and after the repair 
was performed;
    (b) Loss of revenue and effect on vessel utilization if the vessel 
had returned to the United States for repairs;
    (c) The additional operating expense which would have resulted from 
a return to the United States to repair the vessel; and
    (d) Whether the repairs could have been deferred until return to the

[[Page 73]]

United States, taking into consideration the Coast Guard requirements 
for dry docking and special surveys.



Sec.  272.33  Appeals.

    The Operator may appeal final penalty determinations of the 
Director, Office of Ship Operating Assistance, to the Board, as provided 
inSec. 272.43(c) of this part.



       Subpart E_Examination, Audit, Review and Appeal Procedures



Sec.  272.41  Requirements for examination and allocation of M&R expenses.

    (a) Examination requirement. Pursuant to the specific limitations on 
M&R subsidy in section 603 of the Act, the Region Office shall examine 
the expenses submitted by an operator on Form MA-140 in order to 
determine eligibility to receive M&R subsidy and the reasonableness of 
such expenses.
    (b) Operator's responsibility. During the examination, the operator 
shall provide, at the request of the Director or other official of the 
Region Office, any further documentation or information necessary to 
support an M&R expense. If such documentation or information, including 
information required under paragraph (e) of this section, is not 
received at the Region Office on a timely basis, the Director or other 
official of the Region Office may disallow the M&R expense.
    (c) Notification of examination results. At the completion of the 
examination the Director or other appropriate official of the applicable 
Region Office shall notify the Operator by letter of the results of the 
examination, and shall state the reason for each disallowance of an item 
claimed for subsidy and/or each nonapproval of a marine loss item.
    (d) Record retention requirements. To facilitate an audit 
examination of M&R made pursuant toSec. 272.42 of this part, the 
Operator shall maintain files arranged by vessel and voyage, which shall 
include, at a minimum, a copy of the Region Office notice letter, a copy 
of the Form MA-140 with all supporting documents submitted therewith, 
and the condition survey report. The Operator shall retain all the 
required materials in files for not less than 3 years after completion 
of the audit.
    (1) Limitation on approval. Any approval for payment of M&R subsidy 
for a marine loss item shall be subject to rescission or modification if 
the Operator subsequently receives insurance or other compensation for 
the item. The Region Finance Officer may at any time request 
verification that the Operator has not received such compensation.
    (2) Status report on approved marine loss items. The Operator shall 
advise the Region Finance Office by letter as to whether insurance or 
other compensation will be recovered for the marine loss item. The 
Operator is responsible for ensuring that the letter reaches the 
applicable Region Office within 120 days after:
    (i) The date on which all repairs for damage attributed to the 
``Policy Voyage'' (as defined in the Operator's insurance policy) are 
completed, when the amount for such repairs does not exceed the 
franchise or deductible of the policy, or
    (ii) The date of the underwriter's rejection of the Operator's 
marine loss insurance claim or claims.

(Reporting and recordkeeping requirements contained in paragraph (d) 
introductory text were approved by the Office of Management and Budget 
under control number 2133-0007)

[55 FR 34919, Aug. 27, 1990, as amended at 61 FR 32706, June 25, 1996]



Sec.  272.42  Audit requirements and procedures.

    (a) Required audit. In connection with the audit of the Operator's 
subsidizable expenses, the Office of the Inspector General, Department 
of Transportation, shall audit for MARAD the Operator's M&R costs, as 
necessary, for the determination of final subsidy rates. The Operator 
shall substantiate those costs recorded on the books of account which 
have been approved by the Administration.
    (b) Notification of audit results. Upon completion of the audit by 
the Office of Inspector General, the MARAD Office of Financial Approvals 
shall notify the Operator of the audit results, including

[[Page 74]]

any items disallowed and the reasons for such disallowance.

[57 FR 34690, Aug. 6, 1992]



Sec.  272.43  Review and appeal procedures.

    (a) Exclusive procedures. Notwithstanding the audit appeal 
procedures of part 205 of this chapter, the provisions of this section 
shall be the exclusive remedy available to an Operator for the review 
and appeal of any disallowance of subsidy for a M&R expense claimed or 
any penalty assessed pursuant toSec. 272.31.
    (b) Request for review. An Operator may request review by:
    (1) The Director, Office of Ship Operations, with respect to any 
disallowance by the Region office of a claimed M&R expense, after 
receiving the notification required bySec. 272.41(c); or
    (2) The Director, Office of Financial Approvals, with respect to any 
disallowance of a claimed M&R expense, after receiving the notification 
required bySec. 272.42(b).
    (c) Timeliness of request. The Operator shall file all requests for 
review pursuant to paragraph (b) of this section within 60 days after 
the date of the audit notification. Any disallowance with respect to 
which the Operator fails to file a timely request for review shall be 
final and shall not be subject to appeal to the Board pursuant to 
paragraph (e) of this section.
    (d) Notification of review determination. The appropriate MARAD 
Office Director shall notify the Operator by letter, with respect to 
each timely filed review request, of the Director's determination and 
the reasons for each disallowance and whether the determination is final 
or subject to the submission of additional information.
    (e) Appeal to the Maritime Subsidy Board--(1) Right to appeal. An 
Operator may appeal a MARAD Office Director's final determination issued 
pursuant toSec. 272.32 (penalties) orSec. 272.43 (review of claims 
disallowance or of audit results) of this section to the Board in 
writing.
    (2) Contents and timeliness. The Operator shall set forth in any 
appeal the reasons for the Operator's objection to a penalty or 
disallowance of M&R subsidy and shall file such appeal with the 
Secretary of the Board within 60 days after the date of the notification 
sent to the operator by the appropriate Director pursuant to paragraph 
(d) of this section orSec. 272.33.



Sec.  272.44  Dates.

    The dates noted on the letters or notifications sent to the Operator 
by officials of the Region Office, any Director or any other official or 
MARAD, pursuant to the provisions of this part, shall be conclusive for 
the purposes of determining the timeliness of any requests for review 
made under the provisions of this part.

                           PART 276 [RESERVED]



PART 277_DOMESTIC AND FOREIGN TRADE; INTERPRETATIONS--Table of Contents





Sec.  277.1  Guam, Midway and Wake.

    Steamship service between ports of the United States mainland and 
ports in the islands of Guam, Midway and Wake is not ``domestic 
intercoastal or coastwise service'' within the meaning of section 805(a) 
of the Merchant Marine Act, 1936. This interpretation is limited to 
Guam, Midway and Wake and does not signify that a similar interpretation 
is or would be applicable to Hawaii, Puerto Rico or Alaska.

(Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114. Interprets or 
applies sec. 805, 49 Stat. 2012, as amended; 46 U.S.C. 1223)

[G.O. 73, 15 FR 9065, Dec. 19, 1950]

                        PARTS 280	283 [RESERVED]



PART 287_ESTABLISHMENT OF CONSTRUCTION RESERVE FUNDS--Table of Contents



Sec.
287.1 Definitions.
287.2 Scope of section 511 of the Act and the regulations in this part.
287.3 Requirements as to vessel operations.
287.4 Application to establish fund.
287.5 Tentative authorization to establish fund.
287.6 Establishment of fund.
287.7 Circumstances permitting reimbursement from a construction reserve 
          fund.
287.8 Investment of funds in securities.
287.9 Valuation of securities in fund.
287.10 Withdrawals from fund.
287.11 Time deposits.
287.12 Election as to nonrecognition of gain.

[[Page 75]]

287.13 Deposit of proceeds of sales or indemnities.
287.14 Deposit of earnings and receipts.
287.15 Time for making deposits.
287.16 Tax liability as to earnings deposited.
287.17 Basis of new vessel.
287.18 Allocation of gain for tax purposes.
287.19 Requirements as to new vessels.
287.20 Obligation of deposits.
287.21 Period for construction of certain vessels.
287.22 Time extensions for expenditure or obligation.
287.23 Noncompliance with requirements.
287.24 Extent of tax liability.
287.25 Assessment and collection of deficiencies.
287.26 Reports by taxpayers.
287.27 Controlled corporation.
287.28 Administrative jurisdiction.

    Authority: Secs. 204, 511, 49 Stat. 1987, as amended, 54 Stat. 1106, 
as amended; 46 U.S.C. 1114, 1161.

    Source: General Order 38 (2d Rev.), 30 FR 7215, May 29, 1965; 30 FR 
8162, June 25, 1965, unless otherwise noted.

    Editorial Note: The regulations contained in this part were codified 
by the Internal Revenue Service in Treasury Decision 6820, 30 FR 6030, 
Apr. 29, 1965. For text see also 26 CFR part 2.



Sec.  287.1  Definitions.

    (a) As used in the regulations in this part, except as otherwise 
expressly provided--
    (1) Act means the Merchant Marine Act, 1936, as amended (46 U.S.C., 
ch. 27).
    (2) Section means one of the sections of the regulations in this 
part.
    (3) Administration means the Maritime Administration of the 
Department of Transportation.
    (4) Citizen means a person who, if an individual, was born or 
naturalized as a citizen of the United States or, if other than an 
individual, meets the requirements of section 905(c) of the Act and 
section 2 of the Shipping Act, 1916, as amended (46 U.S.C. 802).
    (5) Taxpayer means a citizen who has established or seeks to 
establish a construction reserve fund under the provisions of section 
511 of the Act and the regulations in this part, and may include a 
partnership.
    (6) Corporation includes associations, joint-stock companies and 
insurance companies.
    (7) Stock includes the shares in an association, joint-stock 
company, or insurance company.
    (8) Affiliate or associate means a person directly or indirectly 
controlling, controlled by, or under common control with, another 
person.
    (9) Control, as used in paragraph (a)(8) of this section, means the 
possession of the power to direct in any manner the management and 
policies of a person, and the terms controlling and controlled shall 
have the meanings correlative to the foregoing.
    (10) Person means an individual, a corporation, a partnership, an 
association, an estate, a trust, or a company.
    (11) Partnership includes a syndicate, group, pool, joint venture, 
or other unincorporated organization.
    (12) Construction, if so determined by the Administration, shall 
include reconstruction and reconditioning.
    (13) Reconstruction and reconditioning shall include the 
reconstruction, reconditioning, or modernization of a vessel for 
exclusive use on the Great Lakes, including the Saint Lawrence River and 
Gulf, if the Administration determines that the objectives of the Act 
will be promoted by such reconstruction, reconditioning, or 
modernization, and, notwithstanding any other provisions of law, such 
vessel shall be deemed to be a new vessel within the meaning of section 
511 of the Act for such reconstruction, reconditioning, or 
modernization.
    (14) Purchase-money indebtedness means any indebtedness, or evidence 
thereof, created as the result of the purchase of a vessel by the 
taxpayer.
    (15) Contract, contract for the construction, and construction 
contract shall include, if so determined by the Administration, a 
contract for reconstruction or reconditioning and shall include, in the 
case of a taxpayer who constructs a new vessel in a shipyard owned by 
such taxpayer, an agreement, between such taxpayer and the 
Administration with respect to such construction, and containing 
provisions deemed necessary or advisable by the Administration to carry 
out the purposes and policy of section 511 of the Act.
    (b) Insofar as the computation and collection of taxes are 
concerned, other terms used in the regulations in this

[[Page 76]]

part, except as otherwise provided, have the same meaning as in the 
Internal Revenue Code and the regulations thereunder.



Sec.  287.2  Scope of section 511 of the Act and the regulations in this part.

    (a) Applicability of regulations. The regulations prescribed in this 
part--
    (1) Apply to gain realized from the sale or loss of vessels, 
earnings from the operation of vessels, and interest (or otherwise) with 
respect to amounts previously deposited in the construction reserve 
fund, for a taxable year beginning after December 31, 1964, and
    (2) Apply to the expenditure, obligation, or withdrawal, during a 
taxable year beginning after December 31, 1964, of any deposits of gain, 
earnings, and interest (or otherwise) of the character referred to in 
paragraph (a)(1) of this section without regard to the taxable year in 
which the deposits were made.
    (b) Nonrecognition and accumulation. Section 511 of the Act 
provides, under conditions specified, for the nonrecognition, for income 
and excess-profits tax purposes, of the gain realized from the sale or 
indemnification for loss of certain vessels including certain vessels in 
the course of construction, or shares therein. It also permits the 
accumulation of the proceeds of such sales or indemnification and of 
certain earnings without liability under part I (section 531 and 
following), subchapter G, chapter 1 of the Internal Revenue Code of 
1954, and the regulations thereunder (26 CFR 1.531 through 1.537-1 
(Income Tax Regulations)).
    (c) Availability of benefits. The benefits of section 511 of the Act 
are available to any citizen as defined in paragraph (a)(4) ofSec. 
287.1, who, during any taxable year owns, in whole or in part, a vessel 
or vessels within the scope ofSec. 287.3. A citizen operating such a 
vessel or vessels owned by any other person or persons can derive no 
benefit from the provisions relating to the nonrecognition of gain from 
the sale or loss of such vessel or vessels so owned, but may establish a 
construction reserve fund in which he may deposit earnings from the 
operation of such vessel or vessels.
    (d) Applicability of section 511. Section 511 of the Act applies 
only with respect to sales or losses of vessels within the scope of 
Sec.  287.3 or in respect of earnings derived from the operation of such 
vessels. A loss to be within section 511 of the Act must be an actual or 
constructive total loss. Whether there is a total loss, actual or 
constructive, will be determined by the Administration.



Sec.  287.3  Requirements as to vessel operations.

    Section 511 of the Act applies with respect to vessels operated in 
the foreign or domestic commerce of the United States or in the 
fisheries of the United States and vessels acquired or being constructed 
for the purpose of such operation. The foreign commerce of the United 
States includes commerce or trade between the United States (including 
the District of Columbia), the territories and possessions which are 
embraced within the coastwise laws, and a foreign country or other 
territories and possessions of the United States. The domestic commerce 
of the United States includes commerce or trade between ports of the 
United States and its territories and possessions, embraced within the 
coastwise laws and on inland rivers. The fisheries include the fisheries 
of the United States and its territories and possessions. Section 511 of 
the Act does not apply to vessels operated in the foreign commerce or 
fisheries of any country other than the United States.



Sec.  287.4  Application to establish fund.

    (a) Any person claiming to be entitled to the benefits of section 
511 of the Act may make application, in writing, to the Administration 
for permission to establish a construction reserve fund. The original 
application shall be executed and verified by the taxpayer, or if the 
taxpayer is a corporation, by one of its principal officers, in 
triplicate, and shall be accompanied by eight conformed copies when 
filed with the Administration. MARAD will accept electronic options 
(such as facsimile and Internet) for transmission of required 
information to MARAD, if practicable.
    (b) Form of application:

[[Page 77]]

  Application for Permission To Establish a Construction Reserve Fund 
          Under Sec. 511, Merchant Marine Act, 1936, as Amended

    The undersigned applicant, ------, hereby applies, under section 
511, Merchant Marine Act, 1936, as amended, and the regulations 
prescribed by the Secretary of Transportation acting by and through the 
Maritime Administrator (hereinafter referred to as ``Administrator'') 
(46 CFR Part 287) and the Secretary of the Treasury, Internal Revenue 
Service (26 CFR Part 2) for permission to establish a construction 
reserve fund to be used for the construction or acquisition of a new 
vessel or vessels as defined by subsection (a) of said section 511, and 
submits in support of its application the following information:
    A. Identity and nationality of applicant.
    1. Exact name.
    2. Status (individual, partnership, corporation, etc.).
    3. Give the place of incorporation--whether under the laws of the 
United States, or of a State, Territory, District, or possession 
thereof.
    4. Address of principal executive offices.
    5. A statement, if applicant is an individual or a partnership, 
should be attached in the application in affidavit form, containing 
information that applicant is a citizen of the United States by virtue 
of birth in the United States, naturalization, etc.; give place and date 
of birth and/or naturalization; if derivative U.S. citizenship is 
alleged through naturalization of parent while a minor, the number, date 
and place of issue of the certificate of derivative citizenship of 
applicant should be cited together with any other pertinent details 
relative thereto.
    6. (a) The name, office, and nationality of each officer and 
director of the applicant owning shares of stock in the corporation 
should be submitted together with the number and class of capital shares 
owned.
    (b) In order that the U.S. citizenship status of a corporation 
applicant may be determined by the Administration, an affidavit as in 
accordance with Part 355 of this Chapter shall be furnished together 
with a current copy of the Articles or Certificate of Incorporation 
certified by the Secretary of the State where incorporated (or 
appropriate officer, if other than a State, as provided in ``A.3'' 
above), and a copy of the current By-Laws certified by the Secretary of 
the Corporation.
    7. The name, address and nationality of, and number and class of 
capital shares owned by, each person not named in answer to Item 6, 
owning of record, or beneficially if known, 5 percent or more of the 
outstanding capital shares of any class of the applicant. (The applicant 
shall be required, upon request, to furnish such additional data as may 
be deemed necessary to establish the U.S. citizenship of the applicant 
pursuant to section 2, Shipping Act, 1916, or section 905(c), Merchant 
Marine Act, 1936, as amended.)
    8. A brief statement of the general effect of each voting agreement, 
voting trust, or other arrangement whereby the voting rights in any 
shares of the applicant are owned, controlled or exercised, or whereby 
the control of the applicant is in any way held or exercised by any 
person not the holder of legal title to such shares. Give the name, 
address, nationality, and business of any such person, and, if not an 
individual, the form of organization.
    B. Business of the applicant and proposed use of the new vessel.
    9. A brief description of (a) the shipping business, or (b) the 
fishing business, and (c) any other business activities of the 
applicant.
    10. If engaged in the domestic or foreign commerce of the United 
States, full details concerning the services, routes, or lines on which 
vessels owned or chartered by the applicant are or have been operated.
    11. If applicant is engaged in the fisheries of the United States, 
full details concerning the location of the fishing operations and the 
method employed.
    C. Proceeds to be deposited.
    12. If applicant proposes to deposit the proceeds from the sale of a 
vessel, a description of the transaction from which the funds were 
obtained, including the name of the vessel sold, name of purchaser, 
selling price, date and terms of sale, consideration received by the 
applicant, amount and description of any mortgage or other lien on the 
vessel at the time of sale, whether such mortgage or lien was satisfied 
from the proceeds of sale, brief description of vessel as to size, 
speed, tonnage, etc., age of vessel at the time of sale, and value and 
accrued depreciation for income tax purposes at time of sale.
    13. If applicant proposes to deposit proceeds of indemnity from loss 
of a vessel, the name of the vessel, date and description of the loss, 
amount of indemnity and date received, name of underwriter, amount and 
description of any mortgage or other lien on the vessel at time of loss, 
whether such mortgage or lien was satisfied from the proceeds of the 
indemnity, age of vessel at time of loss, brief description of vessel as 
to size, speed, tonnage, etc., and value and accrued depreciation for 
income tax purposes at time of loss.
    14. If applicant proposes to deposit earnings from the operation of 
vessels, a statement of the amount of such earnings to be deposited, the 
period during which earned, and their source, including the vessels, 
services, routes, or lines involved.
    D. The new vessel.

[[Page 78]]

    15. Statement whether applicant proposes: (a) To have a new vessel 
built to specifications, or (b) to acquire a vessel already constructed 
or under construction. If the former, and a contract for construction 
has been entered into at the time of the making of this application, 
state the date said contract was entered into, the parties thereto, the 
terms thereof, and date of delivery thereunder. If the latter, give name 
of vessel, builder, from whom purchased, or to be purchased, date when 
construction commenced, and date when delivered, or if vessel is still 
under construction, anticipated date of delivery.
    16. The general characteristics of the proposed new vessel, 
including (a) principal dimensions; (b) gross, net and deadweight 
tonnage; (c) bale and grain capacities of all cargo holds; (d) 
capacities of all tanks, storage spaces, refrigerator cargo spaces and 
separately chilled cargo spaces; (e) number and classes of passenger 
accommodations; (f) type and power, and in case of steam machinery, the 
gauge pressure, total temperature, and vacuum expected of propulsive 
machinery; (g) kind of fuel to be burned; and (h) sustained sea speed at 
designed load draft.
    17. If the proposed new vessel is to operate in the domestic or 
foreign commerce of the United States, a statement of how it will meet 
the needs of the service, route or line for which it is intended, with 
emphasis on the following factors: (a) Cargo accommodations--cargo space 
and fittings and appliances for handling and stowing cargo; (b) 
passenger accommodations; (c) construction and design; and (d) 
accommodations for officers and crews.
    18. If the proposed new vessel is to be operated in the fisheries of 
the United States, a description of the vessel, and a statement of how 
the vessel will meet the needs of such operations.
    19. If the proposed new vessel is intended to replace a vessel or 
vessels requisitioned or purchased by the United States, a statement of 
how the proposed replacement vessel will meet the needs of the service, 
route, line, or use for which it is intended.
    20. If the proposed new vessel is less than 2,000 gross tons or of 
less speed than 12 knots, a description of the features which would make 
it desirable for use by the United States in case of war or national 
emergency.
    E. The construction reserve fund.
    21. A description of the deposit or deposits which the applicant 
proposes to make in the construction reserve fund, including the amounts 
to be deposited in cash, notes, mortgages or other evidences of 
indebtedness, irrevocable commitments, or securities, giving reference 
to the source as described in items C-12, C-13, or C-14.
    22. Name and address of proposed depository or depositories for the 
construction reserve fund.
    F. Taxable year of applicant.
    23. Whether applicant files its Federal income tax return on a 
calendar year or fiscal year basis and if on the latter, the beginning 
of its fiscal year.
    G. Exhibits to be furnished.
    24. The following documents shall be filed as exhibits attached to 
the application:
    Exhibit I--If available at the time this application is filed, an 
authenticated copy of any irrevocable commitment to finance the 
construction or acquisition of the new vessel proposed to be deposited 
in the construction reserve fund pursuant to the provisions of 46 CFR 
287.13(d).
    Exhibit II--If the applicant is a corporation, a copy of each 
contract or agreement presently in effect, referred to in answer to Item 
8.
    H. Covenants of the applicant.
    25. The applicant hereby agrees as follows:
    (a) That the construction reserve fund shall be subject to the 
provisions of section 511, Merchant Marine Act, 1936, as amended, to the 
regulations prescribed by the Administrator, and the Secretary of the 
Treasury with respect to the establishment, maintenance, expenditure, 
and use of such fund, and to such resolutions as may be adopted by the 
Administrator with respect to such fund;
    (b) That it will furnish copies of any contracts entered into for 
the construction or acquisition of new vessels which the Administrator 
may require;
    (c) That it will furnish hull plans and specifications, machinery 
plans and specifications, and data with respect to communication 
facilities if and to the extent required by the Administrator; and
    (d) If no contract for the construction of a new vessel as set forth 
in paragraph D, sub-division 15(a) hereof, has been entered into at the 
time of making of this application, it will, upon entering into said 
contract, furnish to the Administrator the date thereof, the parties 
thereto, the terms thereof and date of delivery thereunder. Name of 
applicant:

(Date)__________________________________________________________________
 By_____________________________________________________________________
                                                           (Name, typed)
________________________________________________________________________
                                                                 (Title)
________________________________________________________________________
                                                             (Signature)

I, ------, certify that I am the ------ (Title of office) of ------ 
(Exact name of applicant) the applicant on whose behalf I am authorized 
to execute the foregoing application and agreements; that the applicant 
is a citizen of the United States, in accordance with the requirements 
of the Merchant Marine Act,

[[Page 79]]

1936, as amended; that this application is made for the purpose of 
inducing the Secretary of Transportation, represented by the Maritime 
Administrator to grant to the applicant, pursuant to the provisions of 
section 511 of the Merchant Marine Act, 1936, as amended, and the 
regulations promulgated by the Secretary of the Treasury and the 
Maritime Administrator thereunder, with all of which I am familiar, 
permission to establish a construction reserve fund; that I have 
carefully examined the application and all documents submitted in 
connection therewith and, to the best of my knowledge, information and 
belief, the statements and representations contained in said application 
and related documents are full, complete, accurate, and true.

    Date:
________________________________________________________________________
                                                                  (Name)
________________________________________________________________________
                                                                 (Title)
________________________________________________________________________
                                                             (Signature)

    Attention: A false statement in this application is punishable by 
law (18 U.S.C. 1001).

              instructions as to preparation of application

    1. Applications shall be prepared in the form provided according to 
the lettered items and serially numbered paragraphs. They must be signed 
and sworn to as provided. Eleven copies of the applications shall be 
filed with the Maritime Administrator, at least one copy of which shall 
be signed.
    2. Each application shall be complete. Items or part of items which 
are inapplicable may, however, be omitted. The information required by 
Article 25 need be furnished only as stated in that item. The applicant 
may incorporate by specific reference information previously furnished 
the Maritime Administrator provided that such information so 
incorporated shall have been furnished at least in triplicate.
    3. If any information called for by an applicable item is not 
furnished, and explanation of the omission shall be given. The applicant 
may furnish such relevant information as it may desire, in addition to 
that specified in the form.
    4. Any additional information called for by the Maritime 
Administrator from time to time shall be furnished as an amendment or 
amendments to the application. The original and 11 copies of each 
amendment shall be filed, shall refer to the application, and shall be 
identified as an amendment and dated. Without any specific request from 
the Maritime Administrator the applicant shall file from time to time as 
amendments any information necessary to keep the information contained 
therein or furnished in connection therewith current and correct while 
the application is pending.

    (c) Fee. Each such application shall be accompanied by the sum of 
$225, which sum will be retained to recover the cost of processing the 
application.

(Approved by the Office of Management and Budget under control number 
2133-0032)

[G.O. 38, 2d Rev., 30 FR 7215, May 29, 1965, as amended by Amdt. 1, 31 
FR 3397, Mar. 4, 1966; 47 FR 25530, June 14, 1982; 68 FR 62537, Nov. 5, 
2003; 69 FR 61451, Oct. 19, 2004]



Sec.  287.5  Tentative authorization to establish fund.

    Where the time between the receipt by the Administration of the 
application for permission to establish a construction reserve fund and 
the date prior to which an amount received from the sale or loss of a 
vessel must be deposited to come within the scope of section 511 of the 
Act is insufficient to permit a determination of the eligibility of the 
applicant, the Administration may tentatively authorize the 
establishment of a construction reserve fund and the deposit of such 
amount therein. Such tentative authorization shall be subject to 
rescission by the Administration if subsequently it is determined that 
the applicant is not entitled to the benefits of section 511 of the Act, 
or has not complied with the statutory requirements. For example, a 
tentative authorization will be rescinded if the Administration 
ascertains that the applicant is not a citizen. Upon such determination, 
the fund shall be closed and all amounts on deposit therein shall be 
withdrawn.



Sec.  287.6  Establishment of fund.

    (a) Authorization by the Administration. If the application is 
approved by the Administration, the Administration will adopt Orders 
authorizing the establishment of a construction reserve fund with the 
depository or depositories designated by the taxpayer and approved by 
the Administration. The Orders will provide for joint control by the 
Administration and the taxpayer over such fund, will set forth the 
conditions governing the establishment and maintenance of the fund and 
the making of deposits therein and withdrawals

[[Page 80]]

therefrom, and will designate the representatives authorized to execute 
instruments of withdrawal on behalf of the Administration.
    (b) Resolution or agreement of the taxpayer. A certified copy of the 
Orders of the Administration will be furnished the taxpayer. If the 
taxpayer is a corporation, it shall promptly adopt, through its board of 
directors, a resolution satisfactory in form and substance to the 
Administration, authorizing the establishment and maintenance of the 
fund in conformity with the action of the Administration. If the 
taxpayer is not a corporation, it shall promptly execute an agreement 
with the depository satisfactory in form and substance to the 
Administration to conform to the action of the Administration as set 
forth in the Orders. Certified copies of the Orders of the 
Administration and of the resolution of the taxpayer (if it is a 
corporation) will be furnished to the depository by the Administration 
and the taxpayer, respectively, for its guidance in maintaining the fund 
and honoring instruments of withdrawal. The taxpayer, if a corporation, 
shall also furnish the Administration with a certified copy of its 
resolution, or if not a corporation a duplicate original of its 
agreement with the depository.

    Note: The resolutions referred to in this section shall be retained 
2 years after a final release or settlement agreement is completed 
between the Maritime Administration/Maritime Subsidy Board and the 
taxpayer.

    (c) Constructive action not recognized. Constructive deposits, 
substitutions or withdrawals will not be recognized by the 
Administration in the establishment and maintenance of the fund.
    (d) Failure to make deposits as basis for termination of fund. In 
the event no deposit is made into the fund for more than five years, any 
amounts remaining in the fund shall be removed from the fund at the 
discretion of the Administration and, if so removed, the fund shall be 
terminated. In the event of such termination, seeSec. 287.23 for 
recognition of gain.



Sec.  287.7  Circumstances permitting reimbursement from a construction
reserve fund.

    (a) Payments prior to establishment of fund. If, prior to the 
establishment of a construction reserve fund under the regulations in 
this part, a taxpayer has made necessary payments under a contract which 
satisfies the provisions of the regulations in this part and section 511 
of the Act for the construction or acquisition of a new vessel, such 
taxpayer may, if subsequently authorized to establish a construction 
reserve fund under the regulations in this part, draw against such fund 
as reimbursement for the amount, if any, of other funds which, with the 
approval or ratification of the Administration, the taxpayer used for 
making such necessary payments prior to the establishment of the fund.
    (b) Payments subsequent to establishment of fund. If, subsequent to 
the establishment of a construction reserve fund under the regulations 
in this part, the taxpayer has made necessary payments under a contract 
which satisfies the provisions of the regulations in this part and 
section 511 of the Act for the construction or acquisition of a new 
vessel, such taxpayer may draw against such fund as reimbursement for 
the amount, if any, of other funds which, with the approval or 
ratification of the Administration, the taxpayer had used for the 
purpose of making such necessary payments.



Sec.  287.8  Investment of funds in securities.

    (a) Obligations of or guaranteed by the United States. Interest-
bearing direct obligations of the United States, or obligations fully 
guaranteed as to principal and interest by the United States may be 
deposited in the construction reserve fund in lieu of cash, may be 
purchased with cash on deposit in the fund, or may be substituted for 
securities or commitment to finance in the fund, subject to the 
provisions of paragraph (b) of this section.
    (b) Other securities. In cases where the taxpayer desires to deposit 
any securities in the fund in lieu of cash other than those of or 
guaranteed by the United States or to purchase such other securities 
with cash on deposit in

[[Page 81]]

the fund, or to substitute such other securities for securities or 
commitment to finance in the fund, the taxpayer shall make written 
application to the Administration and shall not consummate the 
transaction until the written consent of the Administration shall have 
been received. The application shall describe the securities fully. 
Every approval by the Administration of such application shall be 
conditioned upon agreement by the taxpayer forthwith to dispose of such 
securities upon subsequent request by the Administration. Immediately 
upon the purchase of any securities for deposit in the fund, the 
taxpayer shall advise the Administration, giving the date of purchase, a 
description of the securities, and the price paid therefor (net, 
brokerage and other charges, and gross). Ordinarily, the Administration 
will not approve the deposit in the fund in lieu of cash, or the 
purchase with cash on deposit in the fund or the substitution for 
securities in the fund of securities not actively traded in on exchanges 
registered under the Securities Exchange Act of 1934 (15 U.S.C. Chapter 
2B), or securities which are not legal for investment of trust funds. 
Whenever the Administration approves the substitution of other 
securities for securities in the fund, such substitution shall be 
effected only upon or after the deposit of the substituted securities 
into the fund.
    (c) Cash. Cash may be substituted for amounts which are on deposit 
in the fund in any other form.
    (d) Devalued securities. In the event the Administration determines 
that the market value at any date of any securities in the fund has 
decreased to a figure which is less than 90 percent of the market value 
at the time of deposit into the fund, then within 60 days after the 
taxpayer receives notice of such determination the taxpayer shall 
(except as otherwise provided in this paragraph) deposit into the fund 
cash or securities in an amount equal to the difference between the 
current market value of the devalued securities and the market value of 
such securities at the time of their original deposit. However, if any 
securities in the fund are valued at the time of their deposit at less 
than the market value of such securities at the time of their deposit 
the taxpayer shall be required to deposit only an amount equal to that 
portion of the difference between the current market value of the 
devalued securities and the market value of such securities at the time 
of their original deposit which bears the same ratio to such total 
difference as the amount at which the securities were valued at the time 
of their deposit bears to the market value at the time of such deposit.



Sec.  287.9  Valuation of securities in fund.

    (a) Equipment values. In cases where securities are deposited in the 
fund in lieu of cash, or are purchased with cash on deposit in the fund, 
or are substituted for securities in the fund, the value of such 
securities must not be less than the amount of cash in lieu of which 
they are so deposited or with which they are so purchased, or the value 
at the time of deposit of the securities for which they were so 
substituted. If the securities on deposit in the fund are replaced by 
cash from the general funds of the taxpayer, the amount of cash to be 
deposited in the fund in lieu thereof shall be not less than the amount 
at which such securities were valued at the time of their deposit in the 
fund.
    (b) Determination of value. (1) For the purpose of determining the 
amount in the fund, the value of securities shall be their ``market 
value'' (which shall be the basis for determining value, unless 
otherwise agreed to by the administration) and shall be determined in 
the following manner:
    (i) In instances where no actual purchase is involved, such as the 
initial deposit of securities in the fund in lieu of cash, the last 
sales price thereof on the principal exchange on the day the deposit was 
made shall be deemed to be the ``market value'' thereof, or, if no such 
sales were made, the ``market value'' thereof will be determined by the 
Administration on such basis as it may deem to be fair and reasonable in 
each case.
    (ii) In instances where the purchase of securities with cash on 
deposit in the fund is involved, ``market value'' shall be the gross 
price paid (adjusted for accrued interest); Provided, That if such 
securities are purchased otherwise

[[Page 82]]

than upon a registered exchange the price shall be within the range of 
transactions on the exchange on the date of such purchase, or, if there 
were no such transactions, then the ``market value'' thereof will be 
determined by the Administration on such basis as it may deem to be fair 
and reasonable in each case.
    (2) Purchase-money obligations secured by mortgages on vessels sold 
or irrevocable commitments to finance the construction or acquisition of 
new vessels which are deposited in the construction reserve fund as 
provided inSec. 287.13 ordinarily will be considered as equivalent to 
their face value.



Sec.  287.10  Withdrawals from fund.

    (a) Withdrawals for obligations or liquidation. (1) Checks, drafts, 
or other instruments of withdrawal to meet obligations under a contract 
for the construction or acquisition of new vessel or vessels or for the 
liquidation of existing or subsequently incurred purchase-money 
indebtedness, after having been executed by the taxpayer, shall be 
forwarded to the Administration in Washington, DC, with appropriate 
explanation of the purpose of the proposed withdrawal, including 
properly certified invoices or other supporting papers. Such instruments 
of withdrawal, if payable to the Administration, will be deposited by 
the Administration for collection, and the proceeds thereof, upon 
collection, will be credited to the appropriate contract with the 
Administration; but if drawn to the order of payees other than the 
Administration, after countersignature on behalf of the Administration, 
will ordinarily be forwarded to the payees.
    (2) An amount obligated under a contract for the construction or 
acquisition of a new vessel or vessels or for the liquidation of 
existing or subsequently incurred purchase-money indebtedness, whether 
the obligor has the entire or a partial interest therein within the 
scope of section 511 of the Act, may not, so long as the contract or 
indebtedness continues in full force and effect, be withdrawn except to 
meet payments due or to become due under such contract or for such 
liquidation.
    (b) Other withdrawals. Checks, drafts, or other instruments of 
withdrawal executed by the taxpayer for purposes other than to meet 
obligations under a contract for the construction or acquisition of a 
new vessel or vessels or for the liquidation of existing or subsequently 
incurred purchase-money indebtedness, whether the taxpayer has the 
entire or a partial interest therein, shall be drawn by the taxpayer to 
its own order and forwarded to the Administration in Washington, DC, 
with appropriate explanation of the purpose of the proposed withdrawal. 
Such withdrawals may occur by reason of a determination by the 
Administration that the taxpayer is not entitled to the benefits of 
section 511 of the Act (seeSec. 287.5), or that a particular deposit 
has been improperly made (seeSec. 287.13), or by reason of the 
election of the taxpayer to make such withdrawals. Upon receipt of such 
checks, drafts, or other instruments of withdrawal, the Administration 
will give notice thereof to the Commissioner of Internal Revenue. The 
Commissioner will advise the Administration of the receipt of the notice 
and the date it was received. The Administration shall not countersign 
such checks, drafts, or other instruments of withdrawal or transmit them 
to the taxpayer until the expiration of 30 days from the date of receipt 
of the notice by the Commissioner, unless the Commissioner or such 
official of the Internal Revenue Service as he may designate for the 
purpose consents in writing to earlier countersignature by the 
Administration and transmittal to the taxpayer. Upon the expiration of 
such 30-day period, or prior thereto if the aforesaid consent of the 
Commissioner has been obtained, the Administration will countersign the 
check, draft, or other instrument of withdrawal and forward it to the 
taxpayer.
    (c) Inapplicability to certain transactions. The provisions of this 
section shall not be applicable to transactions deemed to be withdrawals 
by reason of the sale of securities held in the fund for an amount less 
than the market value thereof at the time of their deposit (seeSec. 
287.23), nor to the cancellation of an irrevocable commitment deposited 
in the fund, upon proof satisfactory to the Administration that the

[[Page 83]]

terms of such commitment have been fully satisfied.



Sec.  287.11  Time deposits.

    Deposits in the construction reserve fund not invested in securities 
may be placed in time deposits when, in the judgment of the taxpayer, it 
is desirable and feasible so to do. The taxpayer shall promptly advise 
the Administration of any time deposit arrangements made with the 
depository. The Administration reserves the right at any time to require 
the termination or modification of any such arrangements. With prior 
approval of the Administration a time deposit may be made in a 
depository other than the one with which the construction reserve fund 
is established.



Sec.  287.12  Election as to nonrecognition of gain.

    (a) Election requirements. As a prerequisite to the nonrecognition 
of gain on the sale or loss of a vessel (or of a part interest therein) 
for Federal income tax purposes, the taxpayer, after establishing a 
construction reserve fund, must make an election with respect to such 
vessel or interest in the manner set forth in this paragraph.
    (1) In general. Except as provided in paragraph (a)(2) of this 
section, the election must be made in the taxpayer's Federal income tax 
return (or, in the case of a partnership, in the partnership return of 
income) for the taxable year in which the gain with respect to the sale 
or loss of the vessel is realized. The election as to the nonrecognition 
of gain shall be shown by a statement to that effect, submitted as a 
part of, and attached to, the return. The statement, which need not be 
on any prescribed form, shall set forth a computation of the amount of 
the realized gain, the identity of the vessel, the nature and extent of 
the taxpayer's interest therein, whether such vessel was sold or lost 
and the date of sale or loss, the full sale price or full amount of 
indemnity, and the amount and date of each payment thereof, the basis of 
tax purposes and any other data affecting the determination of the 
realized gain.
    (2) Certain Government payments. In case a vessel is purchased or 
requisitioned by the United States, or is lost, in any taxable year and 
the taxpayer receives payment for the vessel so purchased or 
requisitioned, or receives from the United States indemnity on account 
of such loss, subsequent to the end of such taxable year, the taxpayer 
shall make his election by filing notice thereof with the Commissioner 
of Internal Revenue, Washington, DC, 20224, prior to the expiration of 
60 days after receipt of the payment or indemnity. The taxpayer shall 
file a copy of the notice with the Secretary, Maritime Administration, 
Washington, DC, 20590. The form of the notice of election shall be 
prepared by the taxpayer and shall be substantially as follows:

  Election Relative to Nonrecognition of Gain Under Section 511(c)(2), 
                        Merchant Marine Act, 1936

    Pursuant to the provisions of section 511(c)(2) of the Merchant 
Marine Act, 1936, as amended, notice is hereby given that the 
undersigned taxpayer elects that gain in respect of the sale to the 
United States, or indemnification received from the United States on 
account of the loss, of the vessel named below or share therein shall 
not be recognized. The circumstances involved in the computation of such 
gain are as follows:

Name and other identification of vessel_________________________________

Nature and extent of the taxpayer's interest in the vessel______________

Nature of disposition, i.e., sale or loss_______________________________

Date of disposition_____________________________________________________

Full sale price or full amount of indemnity received by taxpayer________

Amount and date of each payment of sale price or indemnity received by 
taxpayer________________________________________________________________

Amount and date of each previous deposit of such payments in 
construction reserve fund_______________________________________________

Identification of each check or other instrument by which payment made 
to taxpayer_____________________________________________________________

Tax basis of taxpayer's interest in vessel______________________________

Any other data affecting the determination of the realized gain_________

Amount of gain (submit computation)_____________________________________

________________________________________________________________________
                                                      (Name of taxpayer)
 By_____________________________________________________________________

[[Page 84]]

(Date of execution)_____________________________________________________



Sec.  287.13  Deposit of proceeds of sales or indemnities.

    (a) Manner of deposit. The deposit required by section 511 of the 
Act must be made in a construction reserve fund established with a 
depository or depositories approved by the Administration and subject to 
the joint control of the Administration and the taxpayer. It is not 
necessary to establish a separate fund with respect to each vessel or 
share in a vessel sold or lost.
    (b) Amount of deposit. With respect to any vessel sold or lost, or a 
share therein, the deposit must be in an amount equal to the ``net 
proceeds'' of the sale, or the ``net indemnity'' for the loss. By ``net 
proceeds'' and ``net indemnity'' is meant (1) the depositor's interest 
in the adjusted basis of the vessel plus (2) the amount of gain which 
would be recognized for tax purposes in the absence of section 511 of 
the Act. In determining ``net proceeds'', the amount necessarily paid or 
incurred for brokers' commissions is to be deducted from the gross 
amount of the sales price. In the event the taxpayer is an affiliate or 
associate of the buyer, the amount of the sales price shall not exceed 
the fair market value of the vessel or vessels sold as determined by the 
Administration. In such case the taxpayer shall furnish evidence 
sufficient, in the opinion of the Administration, to establish that the 
sales price is not in excess of the fair market value. In determining 
``net indemnity'', the amount necessarily paid or incurred purely for 
collection, or rate of exchange discounts on the payment, of the 
indemnity is to be deducted from the gross amount of collectible 
indemnity. In case of the sale or loss of several vessels or share 
therein, a deposit of the ``net proceeds'' or ``net indemnity'' with 
respect to one or more of the vessels or shares is permissible. Where 
several vessels or shares are sold for a lump sum, the ``net proceeds'' 
allocated to each vessel or share shall be determined in accordance with 
any reasonable rule satisfactory to the Commissioner of Internal 
Revenue. The taxpayer must deposit the full amount of each payment 
(including cash, notes, or other evidences of indebtedness) as a single 
deposit in the construction reserve fund. A payment divided between two 
or more depositories will be regarded as a single deposit. Amounts 
received by the taxpayer prior to the date of consummation of the sale 
of the vessel shall be considered as having been received by the 
taxpayer at the time the sale is consummated.
    (c) Purchase-money obligations. Where the proceeds from the sale of 
a vessel include purchase-money obligations, such obligations together 
with the entire collateral therefor, or, in the case of deposit of the 
proceeds of a share in the vessel, a proportionate part of the 
obligations and collateral as determined by the Administration, shall be 
deposited, with the remainder of the proceeds, in the construction 
reserve fund as a part of the ``net proceeds''. The depository shall 
receive payment of all amounts due on such purchase-money obligations 
and such amounts shall be placed in the fund in substitution for the 
portion of the obligations paid. All installments of purchase-money 
obligations shall be paid directly into the fund by the obligor. In the 
event any such installment is not so deposited, the Administration, at 
any time after the due date, may require the taxpayer to deposit an 
amount equal to such installment. If the taxpayer so desires, he may 
deposit in the construction reserve fund cash or approved securities in 
an amount equal to the face value of any purchase-money obligations in 
lieu of depositing such obligations.
    (d) Vessel subject to mortgage at time of sale or loss. Where a 
vessel is subject to a mortgage or other encumbrance at the time of its 
sale or loss and the taxpayer actually receives only an amount 
representing the equity therein or a share in such equity corresponding 
to his share in the vessel, he shall deposit in the construction reserve 
fund such amount and concurrently therewith other funds in an amount 
equal to the difference between the amount received and the ``net 
proceeds'' or ``net indemnity''. Such other funds may be in the form of 
cash, or, subject to the

[[Page 85]]

approval of the Administration, (1) interest-bearing securities, or (2) 
an irrevocable and unconditional commitment to finance the construction 
or acquisition of a new vessel in whole or in part by an obligor 
approved by the Administration in an amount equal to the amount by which 
the ``net proceeds'' exceed the cash or securities deposited in the 
fund.
    (e) Unauthorized deposits. A deposit which is not provided for by 
section 511 of the Act shall, without unreasonable delay, be withdrawn 
from the fund and tax liability will be determined as though such 
deposit had not been made. (See Sec.Sec. 287.10 and 287.24.)



Sec.  287.14  Deposit of earnings and receipts.

    (a) Earnings. A citizen may deposit all or any part of earnings 
derived from the operation, within the scope ofSec. 287.3, of a vessel 
or vessels owned either by himself or any other person, if such earnings 
are intended for construction or acquisition of new vessels. Such 
earnings may include payments received by an owner, as compensation for 
use of his vessel, from other persons by whom it is so operated. 
Earnings from other sources may not be deposited. The earnings from 
operation of vessels which are eligible for deposit are the net earnings 
determined without regard to any deduction for depreciation, 
obsolescence, or amortization with respect to such vessels.
    (b) Receipts. Receipts from deposited funds, in the form of interest 
or otherwise, may be deposited.



Sec.  287.15  Time for making deposits.

    (a) Proceeds of sale or indemnification. Deposits of amounts 
representing proceeds of the sale or indemnification for loss of a 
vessel or share therein must be made within 60 days after receipt by the 
taxpayer.
    (b) Earnings and receipts. Earnings and receipts for the taxable 
year may be deposited at any time. (SeeSec. 287.14.)



Sec.  287.16  Tax liability as to earnings deposited.

    Deposit in the construction reserve fund of earnings from the 
operation of a vessel or vessels, or receipts, in the form of interest 
or otherwise, with respect to amounts previously deposited does not 
exempt the taxpayer from tax liability with respect thereto nor postpone 
the time such earnings or receipts are includible in gross income. 
Earnings and receipts deposited in a construction reserve fund 
established in accordance with the provisions of section 511 of the Act 
and the regulations in this part will be deemed to have been accumulated 
for the reasonable needs of the business within the meaning of part 1 
(section 531 and following), subchapter G, chapter 1 of the Internal 
Revenue Code of 1954, so long as the requirements of section 511 of the 
Act and the regulations in this part are satisfied relative to the use 
of the fund in the construction, reconstruction, reconditioning, or 
acquisition of new vessels, or for the liquidation of purchase-money 
indebtedness on such vessels. For incurrence of tax liability due to 
noncompliance with the requirements of section 511 of the Act and the 
regulations in this part with respect to deposits in the construction 
reserve fund, see the provisions ofSec. 287.23.



Sec.  287.17  Basis of new vessel.

    The basis for determining gain or loss and for depreciation for the 
purpose of the Federal income tax with respect to a new vessel 
constructed, reconstructed, reconditioned, or acquired by the taxpayer, 
or with respect to which purchase-money indebtedness is liquidated as 
provided in section 511(g) of the Act, with funds deposited in the 
construction reserve fund, is reduced by the amount of the unrecognized 
gain represented in the funds allocated under the provisions of the 
regulations in this part to the cost of such vessel. (SeeSec. 287.18.)



Sec.  287.18  Allocation of gain for tax purposes.

    (a) General rules of allocation. As provided inSec. 287.17, if 
amounts on deposit in a construction reserve fund are expended, 
obligated, or withdrawn for construction, reconstruction, 
reconditioning, or acquisition of new vessels, or for the liquidation of 
purchase-money indebtedness of such vessels, the portion thereof which 
represents gain shall be applied in reduction of the basis of such new 
vessels. The rules

[[Page 86]]

set forth below in this paragraph shall apply in allocating the 
unrecognized gain to the amounts so expended, obligated, or withdrawn:
    (1) If the ``net proceeds'' of a sale or ``net indemnity'' in 
respect of a loss are deposited in more than one deposit, the portion 
thereof representing unrecognized gain shall be considered as having 
been deposited first.
    (2) Amounts expended, obligated, or withdrawn from the construction 
reserve fund shall be applied against amounts deposited in the order of 
deposit.
    (3) If any deposit consists in part of gain not recognized under 
section 511(c) of the Act, then any expenditure, obligation, or 
withdrawal applied against such deposit shall be considered to consist 
of gain in the same proportion that the part of the deposit which 
constitutes gain bears to the total amount of the deposit.
    (b) Date of obligation. The date funds are obligated under a 
contract for the construction, reconstruction, reconditioning, or 
acquisition of new vessels, or for the liquidation of purchase-money 
indebtedness on such vessels, rather than the date of payment from the 
fund, will determine the order of application against the deposits in 
the fund. When a contract for the construction, reconstruction, 
reconditioning, or acquisition of new vessels, or for the liquidation of 
purchase-money indebtedness on such vessels is entered into, amounts on 
deposit in the construction reserve fund will be deemed to be obligated 
to the extent of the amount of the taxpayer's liability under the 
contract. Deposits will be deemed to be so obligated in the order of 
deposit, each new contract obligating the earliest deposit not 
previously expended, obligated, or withdrawn. If the liability under the 
contract exceeds the amount in the construction reserve fund, the 
contract will be deemed to obligate, to the extent of that part of such 
excess not otherwise satisfied, the earliest deposit or deposits 
thereafter made.
    (c) Illustration. The foregoing rules are illustrated in the 
following example:

    Example. (1) A taxpayer who makes his returns on the calendar year 
basis sells a vessel in 1963 for $1,000,000, realizing a gain of 
$400,000. Payment of $100,000 is received in March 1963 when the 
contract is signed, and the balance of $900,000 is received in June 1963 
on delivery of the vessel. The $1,000,000 is deposited in a construction 
reserve fund in July 1963. In December 1963, the taxpayer also deposits 
$150,000, representing earnings of that year. In 1964, he sells another 
vessel for $1,000,000, realizing a gain of $250,000. The sale price of 
$1,000,000 is received on delivery of the vessel in February 1964, and 
deposited in the construction reserve fund in March 1964. In September 
1964, the taxpayer purchases for cash out of the construction reserve 
fund a new vessel for $1,750,000. To the cost of this vessel must be 
allocated the 1963 deposits of $1,150,000 and $600,000 of the March 1964 
deposit. This leaves in the fund $400,000 of the March 1964 deposit. The 
amount of the unrecognized gain to be applied against the basis of the 
new vessel is $550,000, computed as follows: Gain of $400,000 
represented in the 1963 deposits, plus the same proportion of the 
$250,000 gain represented in the March 1964 deposit ($1,000,000) which 
the amount ($600,000) allocated to the vessel is of the amount of the 
deposit, i.e., $400,000 plus 600,000/1,000,000 of $250,000 or $150,000, 
a total of $550,000. This reduces the basis of the new vessel to 
$1,200,000 ($1,750,000 less $550,000).
    (2) In 1965, the taxpayer sells a third vessel for $3,000,000, 
realizing a gain of $900,000. The $3,000,000 is received and deposited 
in the construction reserve fund in June 1965, making a total in the 
fund of $3,400,000. In December 1965, the taxpayer contracts for the 
construction of a second new vessel to cost a maximum of $3,200,000, 
thereby obligating that amount of the fund, and in June 1966, receives 
permission to withdraw the unobligated balance amounting to $200,000. To 
the cost of the second new vessel must be allocated the $400,000 balance 
of the March 1964 deposit and $2,800,000 of the June 1965 deposit. The 
unrecognized gain to be applied against the basis of such new vessel is 
that proportion of the gain represented in each deposit which the 
portion of the deposit allocated to the vessel bears to the amount of 
such deposit, i.e., 400,000/1,000,000 of $250,000, or $100,000 plus 
2,800,000/3,000,000 of $900,000, or $840,000 making a total of $940,000. 
The $200,000 withdrawal is applied against the June 1965 deposit and the 
portion thereof which represents gain will be recognized as income for 
1965, the year in which realized. The computation of the recognized gain 
is as follows: 200,000/3,000,000 of $900,000, or $60,000.



Sec.  287.19  Requirements as to new vessels.

    (a) Requirements. For the purposes of section 511 of the Act and the 
regulations in this part, the new vessel must be--

[[Page 87]]

    (1) Documented under the laws of the United States when it is 
acquired by the taxpayer, or the taxpayer must agree that when acquired 
it will be documented under the laws of the United States;
    (2)(i) Constructed in the United States after December 31, 1939, or 
(ii) its construction has been financed under Title V or Title VII of 
the Act, or (iii) its construction has been aided by a mortgage insured 
under Title XI of the Act; and
    (3) Either (i) of such type, size, and speed as the Administration 
determines to be suitable for use on the high seas or Great Lakes in 
carrying out the purposes of the Act, but of not less than 2,000 gross 
tons or of less speed than 12 knots, except that a particular vessel may 
be of lesser tonnage or speed if the Administration determines and 
certifies that the particular vessel is desirable for use by the United 
States in case of war or national emergency, or (ii) constructed to 
replace a vessel or vessels requisitioned or purchased by the United 
States, in which event it must be of such type, size, and speed as to 
constitute a suitable replacement for the vessel requisitioned or 
purchased, but if a vessel already built is acquired to replace a vessel 
or vessels requisitioned or purchased by the United States, such vessel 
must meet the requirements set forth in paragraph (a)(3)(i) of this 
section. Ordinarily, under paragraph (a)(3)(i) of this section, a vessel 
constructed more than five years before the date on which deposits in a 
construction reserve fund are to be expended or obligated for 
acquisition of such vessel will not be considered suitable for use in 
carrying out the purpose of the Act, except that the five-year age 
limitation provided above in this sentence shall not apply to a vessel 
to be reconstructed before being placed in operation by the taxpayer.
    (b) Time of construction. A vessel will be deemed to be constructed 
after December 31, 1939, only if construction was commenced after that 
date. Subject to the provisions of this section, a new vessel may be 
newly built for the taxpayer, or may be acquired after it is built.
    (c) Replacement of vessels. It is not necessary that vessels shall 
be replaced vessels for vessel. The new vessels may be more or less in 
number than the replaced vessels, provided the other requirements of 
this section are met.



Sec.  287.20  Obligation of deposits.

    (a) Time for obligation. Within three years from the date of any 
deposit in a construction reserve fund, unless extension is granted as 
provided inSec. 287.22, such deposit must be obligated under a 
contract for the construction or acquisition of a new vessel or vessels 
(or in the discretion of the Administration for a share therein), with 
not less than 12\1/2\ percent of the construction or contract price of 
the entire vessel or vessels actually paid or irrevocably committed on 
account thereof or must be expended or obligated for the liquidation of 
existing or subsequently incurred purchase-money indebtedness to persons 
other than a parent company of, or a company affiliated or associated 
with, the mortgagor on a new vessel or vessels. Amounts on deposit in a 
construction reserve fund will be deemed to be obligated for expenditure 
when a binding contract of construction or acquisition has been entered 
into or when purchase-money indebtedness has been incurred and, if 
obligated under a contract of construction or acquisition, will be 
deemed to be irrevocably committed when due and payable in accordance 
with the terms of the contract of construction or acquisition.
    (b) Requirements for obligation. Unless otherwise authorized by the 
Administration, contracts for the construction of new vessels must be 
for a fixed price, or provide for a base price that may be adjusted for 
changes in labor and material costs not exceeding 15 percent of the base 
price. The fixed or base price, as the case may be, shall be fair and 
reasonable as determined by the Maritime Administration. Any financial 
or other interests between the taxpayer and the contractor shall be 
disclosed to the Administration by the taxpayer. Plans and 
specifications for the new vessel or vessels must be approved by the 
Administration to the extent it deems necessary. A deposit in a 
construction reserve fund may be expended

[[Page 88]]

or obligated for expenditure for procurement under an acquisition or 
construction contract of a part interest in a new vessel or vessels only 
after obtaining the written consent of the Administration. The granting 
of such consent shall be entirely in the discretion of the 
Administration and it may impose such conditions with respect thereto as 
it may deem necessary or advisable for the purpose of carrying out the 
provisions of section 511 of the Act. Applications for such consent 
shall be executed in triplicate, and, together with eight conformed 
copies thereof, filed with the Administration.



Sec.  287.21  Period for construction of certain vessels.

    A new vessel constructed otherwise than under the provisions of 
Title V of the Act, and not purchased from the Administration must, 
within six months from the date of the construction contract, or within 
the period of any extension, be completed to the extent of not less than 
5 percent as estimated by the Administration and certified by it to the 
Secretary of the Treasury. In case of a contract covering more than one 
vessel it will be sufficient if one of the vessels is 5 percent 
completed within the six months' period from the date of the contract or 
within the period of any extension, and so certified. All construction 
must be completed with reasonable dispatch as determined by the 
Administration. If, for causes within the control of the taxpayer, the 
entire construction is not completed with reasonable dispatch, the 
Administration will so certify to the Secretary of the Treasury. For the 
effect of such certification, seeSec. 287.23.



Sec.  287.22  Time extensions for expenditure or obligation.

    (a) Extensions. The Administration, upon application and a showing 
of proper circumstances, (1) may allow an extension of time within which 
deposits shall be expended or obligated, not to exceed one year, and 
upon a second application received before the expiration of the first 
extension, may allow an additional extension not to exceed one year, and 
(2) may allow an extension or extensions of time within which five 
percent of the construction shall have been completed as provided in 
Sec.  287.21 not to exceed one year in the aggregate, and (3) may allow 
any other extensions that may be provided by amendment to the Act.
    (b) Application required. A taxpayer seeking an extension of time 
shall make application therefor, and transmit it with an appropriate 
statement of the circumstances, including the reasons justifying the 
requested extension or extensions, and appropriate documents in 
substantiation of the statement, to the Administration. The 
Administration will notify the Commissioner of Internal Revenue of any 
extension granted. In case an application for extension is denied, the 
taxpayer will be liable for delay as though no application had been 
made.



Sec.  287.23  Noncompliance with requirements.

    (a) Noncompliance. The amount of the gain which is that portion of 
the construction reserve fund otherwise constituting taxable income 
under the law applicable to the taxable year in which such gain was 
realized shall be included in the taxpayer's gross income for such 
taxable year for income or excess-profits tax purposes, if:
    (1) A portion of such fund is withdrawn for purposes other than--
    (i) The construction, reconstruction, reconditioning, or acquisition 
of a new vessel; or
    (ii) The liquidation of existing or subsequently incurred purchase-
money indebtedness to persons other than a parent company of, or a 
company affiliated or associated with, the mortgagor on a new vessel or 
vessels; or
    (2) The taxpayer fails to comply with the requirements of section 
511 of the Act or the regulations in this part relating to the 
utilization of construction reserve funds in the construction, 
reconstruction, reconditioning, or acquisition of a new vessel, or the 
liquidation of purchase-money indebtedness on such a vessel.

If securities on deposit in a construction reserve fund are sold and the 
amount placed in the fund in lieu thereof is less than the value of the 
securities at the time of their deposit, the difference between such 
market

[[Page 89]]

value and the amount placed in the fund in lieu of the securities will 
be deemed to have been withdrawn. With respect to the substitution of 
new financing in the case of an irrevocable commitment, see paragraph 
(d) ofSec. 287.13.
    (b) Amount recognized. In the event of noncompliance with the 
prescribed conditions relative to any contract for construction, 
reconstruction, reconditioning, or acquisition of new vessels, or for 
the liquidation of purchase-money indebtedness on such vessels, 
recognition will extend to the entire amount of the gain represented in 
that portion of the construction reserve fund obligated under such 
contract. Thus, if the Administration determines and certifies to the 
Secretary of the Treasury that for causes within the control of the 
taxpayer construction under a contract is not completed with reasonable 
dispatch, the entire amount of the gain represented in the portion of 
the construction reserve fund obligated under the contract will be 
recognized even though all other conditions have been satisfied. In case 
of noncompliance with the requirements of section 511 of the Act or the 
regulations in this part, see the provisions ofSec. 287.18 as to the 
allocation of gain.
    (c) Unreasonable accumulation. Noncompliance with the provisions of 
section 511 of the Act or the regulations in this part relative to the 
utilization of the deposited amounts may also, inasmuch as the provision 
of section 511(f) of the Act is then inapplicable, warrant an 
examination to ascertain whether such amounts constitute an unreasonable 
accumulation of earnings and profits within the meaning of part I 
(section 531 and following), subchapter G, chapter 1 of the Internal 
Revenue Code of 1954, or corresponding provisions of prior law. If 
amounts are deposited and the fund maintained in good faith for the 
purpose of construction, reconstruction, reconditioning, and acquisition 
of new vessels, or for the liquidation of purchase-money indebtedness on 
such vessels, such amounts will be deemed to have been accumulated for 
the reasonable needs of the business.



Sec.  287.24  Extent of tax liability.

    (a) Declared value excess-profits tax. Gain which is includible in 
gross income underSec. 287.23 shall be included in gross income for 
all income and excess-profits tax purposes, but not for the purposes of 
the declared value excess-profits tax and the capital stock tax as 
provided in section 511(i) of the Act. In lieu of any adjustment with 
respect to such declared value excess-profits tax, there is imposed for 
any taxable year ending on or before June 30, 1945, in which the gain is 
realized an additional tax of 1.1 percent of the amount of the gain. No 
additional capital stock tax liability is incurred.
    (b) Improper deposits. In the case of deposits in the construction 
reserve fund of amounts derived from sources other than those specified 
in section 511 of the Act, or in the case of failure to deposit an 
amount equal to the ``net proceeds'' or ``net indemnity'' within the 
period prescribed in section 511(c) of the Act andSec. 287.15, the 
taxpayer obtains no suspension or postponement of any tax liability and 
the tax is collectible without regard to the provisions of section 
511(c) of the Act.
    (c) Time for filing claim subsequent to election under section 
511(c)(2). If an election is made under section 511(c)(2) of the Act, 
and paragraph (a)(2) ofSec. 287.12, and if computation or 
recomputation in accordance therewith is otherwise allowable but is 
prevented, on the date of filing of notice of such election, or within 
six months thereafter, by any statute of limitation, such computation or 
recomputation nevertheless shall be made notwithstanding such statute if 
a claim therefor is filed within six months after the date of making 
such election. If as the result of such computation or recomputation an 
overpayment is disclosed, a claim for refund on Form 843 should also be 
filed within such six months' period.



Sec.  287.25  Assessment and collection of deficiencies.

    Any additional tax, including the 1.1 percent amount imposed by 
section 511(i) of the Act, due on account of withdrawal from a 
construction reserve fund, or failure to comply with section 511 of the 
Act or the regulations in this

[[Page 90]]

part, is collectible as a deficiency. Interest upon such deficiency will 
run from the date the withdrawal or noncompliance occurs. The amount of 
any deficiency, including interest and additions to the tax, determined 
as a result of such withdrawal or noncompliance, may be assessed, or a 
proceeding in court for the collection thereof may be begun without 
assessment, at any time and without regard to any period of limitations 
or any other provisions of law or rule of law, including the doctrine of 
res judicata.



Sec.  287.26  Reports by taxpayers.

    (a) Information required. With each income tax return filed for a 
taxable year during any part of which a construction reserve fund is in 
existence the taxpayer shall submit a statement setting forth a detailed 
analysis of such fund. The statement, which need not be on any 
prescribed form, shall include the following information with respect to 
the construction reserve fund:
    (1) The actual balance in the fund at the beginning and end of the 
taxable year;
    (2) The date, amount, and source of each deposit during the taxable 
year;
    (3) If any deposit referred to in paragraph (a)(2) of this section 
consists of proceeds from the sale, or indemnification of loss, of a 
vessel or share thereof, the amounts of the unrecognized gain;
    (4) The date, amount, and purpose of each expenditure or withdrawal 
from the fund; and
    (5) The date and amount of each contract, under which deposited 
funds are deemed to be obligated during the taxable year, for the 
construction, reconstruction, reconditioning, or acquisition of new 
vessels, or for the liquidation of purchase-money indebtedness on such 
vessels, and the identification of such vessels.
    (b) Records required. Taxpayers shall keep such records and make 
such additional reports as the Commissioner of Internal Revenue or the 
Administration may require.

    Note: The records referred to in this section shall be retained for 
a period of six months beyond the termination or closing out of the 
reserve fund.



Sec.  287.27  Controlled corporation.

    For the purpose of section 511 of the Act and the regulations in 
this part a new vessel is considered as constructed, reconstructed, 
reconditioned, or acquired by the taxpayer if constructed, 
reconstructed, reconditioned, or acquired by a corporation at a time 
when the taxpayer owns not less than 95 percent of the total number of 
shares of each class of stock of the corporation.



Sec.  287.28  Administrative jurisdiction.

    Sections 287.3 to 287.11, inclusive, Sec.Sec. 287.13 to 187.15, 
inclusive, and Sec.Sec. 287.19 to 287.22, inclusive, deal primarily 
with matters under the jurisdiction of the Administration. Sections 
287.12, 287.16 to 287.18, inclusive, and Sec.Sec. 287.23 to 287.27, 
inclusive, deal primarily with matters under the jurisdiction of the 
Commissioner of Internal Revenue. Generally, matters relating to the 
establishment, maintenance, expenditure, and use of construction reserve 
funds and the construction, reconstruction, reconditioning, or 
acquisition of new vessels are under the jurisdiction of the 
Administration; and matters relating to the determination, assessment, 
and collection of taxes are under the jurisdiction of the Commissioner 
of Internal Revenue. Correspondence should be addressed to the 
particular authority having jurisdiction in the matter.



PART 289_INSURANCE OF CONSTRUCTION-DIFFERENTIAL SUBSIDY VESSELS, 
OPERATING-DIFFERENTIAL SUBSIDY VESSELS AND OF VESSELS SOLD OR ADJUSTED
UNDER THE MERCHANT SHIP SALES ACT 1946--Table of Contents



Sec.
289.1 Definition.
289.2 Vessels included.
289.3 Provision in subsidy agreements and mortgages.
289.4 Insurance by owners.
289.5 Insurance by the United States.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114. 
Interpret or apply sec. 12, 60 Stat. 49, as amended; 50 U.S.C. App. 
1745.

[[Page 91]]


    Source: General Order 67 Rev., 18 FR 230, Jan. 10, 1953, unless 
otherwise noted.



Sec.  289.1  Definition.

    For the purpose of this part, when reference is made to the phrase 
interest of the United States, it shall mean:
    (a) As to vessels constructed or sold with construction-differential 
subsidy and/or national defense feature allowance under Title V or VII 
of the Merchant Marine Act, 1936, as amended, the value of the 
construction-differential subsidy allowance, plus the allowance for 
national defense features;
    (b) As to vessels constructed or sold under Title V or VII of the 
Merchant Marine Act of 1936, as amended, and adjusted in price pursuant 
to section 9 of the Merchant Ship Sales Act of 1946, the difference 
between the pre-war domestic cost and the statutory sales price as 
defined in the Merchant Ship Sales Act of 1946.



Sec.  289.2  Vessels included.

    Vessels subject to the provisions of this part are:
    (a) All vessels which may in the future be constructed or sold with 
construction-differential subsidy allowances and/or national defense 
features allowance under Title V or VII of the Merchant Marine Act 1936, 
as amended.
    (b) All vessels which have previously been constructed or sold with 
construction-differential subsidy allowances and national defense 
features allowances under Title V or VII of the Merchant Marine Act, 
1936, as amended;
    (c) All vessels which have previously been constructed with 
construction-differential subsidy allowances or national defense 
features allowance under Title V or VII of the Merchant Marine Act of 
1936, as amended, and later adjusted in price pursuant to section 9 of 
the Merchant Ship Sales Act of 1946;
    (d) All vessels which are subsidized under operating-differential 
subsidy agreements.



Sec.  289.3  Provision in subsidy agreements and mortgages.

    (a) All construction-differential subsidy agreements and mortgages 
relative to vessels covered inSec. 289.2(a) shall provide, wherever 
possible, that the Maritime Administrator may, in his discretion, 
require the owner to insure, with commercial underwriters, the interest 
of the United States.
    (b) All future construction-differential subsidy agreements and 
future operating subsidy agreements shall require that owners insure 
vessels covered inSec. 289.2 (a) and (d) in amounts acceptable to the 
Maritime Administration.



Sec.  289.4  Insurance by owners.

    Owners of vessels covered inSec. 289.2 will not be required to 
arrange commercial insurance to cover the interest of the United States, 
exclusive of its mortgage interest, but the United States reserves the 
right to require, whenever the contracts so provide, that this be done 
at some future date, should it deem it necessary.



Sec.  289.5  Insurance by the United States.

    The United States will self-insure its interest, exclusive of 
mortgage interest, as defined inSec. 289.1.



PART 295_MARITIME SECURITY PROGRAM (MSP)--Table of Contents



                         Subpart A_Introduction

Sec.
295.1 Purpose.
295.2 Definitions.
295.3 Waivers.

          Subpart B_Establishment of MSP Fleet and Eligibility

295.10 Eligibility requirements.
295.11 Applications.
295.12 Priority for awarding agreements.

        Subpart C_Maritime Security Program Operating Agreements

295.20 General conditions.
295.21 MSP assistance conditions.
295.22 Commencement and termination of operations.
295.23 Reporting requirements.

                Subpart D_Payment and Billing Procedures

295.30 Payment.
295.31 Criteria for payment.

                      Subpart E_Appeals Procedures

295.40 Administrative determinations.


[[Page 92]]


    Authority: 46 App. U.S.C. 1171 et seq.; 46 App. U.S.C. 1114 (b), 49 
CFR 1.66.

    Source: 62 FR 37737, July 15, 1997, unless otherwise noted.



                         Subpart A_Introduction



Sec.  295.1  Purpose.

    This part prescribes regulations implementing the provisions of 
subtitle B (Maritime Security Fleet Program) of title VI of the Merchant 
Marine Act, 1936, as amended, governing Maritime Security Program 
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.



Sec.  295.2  Definitions.

    For the purposes of this part:
    (a) Act, means the Merchant Marine Act, 1936, as amended by the 
Maritime Security Act of 1996 (MSA)(46 App. U.S.C. 1101 et seq.).
    (b) Administrator, means the Maritime Administrator, U.S. Maritime 
Administration (MARAD), U.S. Department of Transportation, who is 
authorized to administer the MSA.
    (c) Agreement Vessel, means a vessel covered by a MSP Operating 
Agreement.
    (d) Applicant, means an applicant for a MSP Operating Agreement.
    (e) Bulk Cargo, means cargo that is loaded and carried in bulk 
without mark or count.
    (f) Chapter 121, means the vessel documentation provisions of 
chapter 121 of title 46, United States Code.
    (g) Citizen of the United States, means an individual or a 
corporation, partnership or association as determined under section 2 of 
the Shipping Act, 1916, as amended (46 App. U.S.C. 802).
    (h) Contracting Officer, means the Associate Administrator for 
National Security, MARAD.
    (i) Contractor, means the owner or operator of a vessel that enters 
into a MSP Operating Agreement for the vessel with MARAD pursuant to 
Sec.  295.20 of this part.
    (j) DOD, means the U.S. Department of Defense.
    (k) Domestic Trade, means trade between two or more ports and/or 
points in the United States.
    (l) Eligible Vessel, means a vessel that meets the requirements of 
Sec.  295.10(b) of this part.
    (m) Emergency Preparedness Program Agreement, means the agreement, 
required by section 653 of the act, 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.
    (n) Enrollment, means the entry into a MSP Operating Agreement with 
the MARAD to operate a vessel(s) in the MSP Fleet in accordance with 
Sec.  295.20 of this part.
    (o) Fiscal Year, means any annual period beginning on October 1 and 
ending on September 30.
    (p) LASH Vessel, means a lighter aboard ship vessel.
    (q) Militarily Useful, is defined according to DOD Joint Strategic 
Planning Capabilities Plan (JSCAP) guidance as follows:
    (1) U.S. Sources--All active and inactive ocean-going ships (and 
certain other specially selected vessels) within the following types and 
criteria from United States sources with a minimum speed of 12 knots.
    (2) Dry Cargo--All dry cargo ships, including integrated tug/barges 
(ITBs) with a minimum capacity of 6,000 tons (DWT) capable of carrying, 
without significant modification, any of the following cargoes: unit 
equipment, ammunition, or sustaining supplies.
    (r) MSP Fleet, means the fleet of vessels operating under MSP 
Operating Agreements.
    (s) MSP Operating Agreement, means the MSP Operating Agreement, 
providing for MSP payments entered into by a Contractor and MARAD.
    (t) MSP Payments, means the payments made for the operation of U.S.-
flag vessels in the foreign trade or mixed foreign and domestic trade of 
the United States allowed under a registry endorsement issued under 46 
U.S.C. 12105, to maintain intermodal shipping capability and to meet 
national defense and security requirements in accordance with the terms

[[Page 93]]

and conditions of the MSP Operating Agreement.
    (u) Ocean Common Carrier, means a carrier that meets the 
requirements of the MSA, section 654(3).
    (v) ODS, means Operating-Differential Subsidy provided by Subtitle 
A, Title VI, of the Act.
    (w) Operating Day, means any day during which a vessel is operated 
in accordance with the terms and conditions of the MSP Operating 
Agreement.
    (x) Related party, means:
    (1) a holding company, subsidiary, affiliate, or associate of a 
contractor who is a party to an operating agreement under Subtitle B, 
Title VI, of the Act; and
    (2) an officer, director, agent, or other executive of a contractor 
or of a person referred to in paragraph (x)(1) of this section.
    (y) 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.
    (z) Secretary, means the Secretary of Transportation.
    (aa) United States Documented Vessel, means a vessel documented 
under Chapter 121 of Title 46, United States Code.



Sec.  295.3  Waivers.

    In special circumstances, and for good cause shown, the procedures 
prescribed in this part may be waived in writing by the Maritime 
Administration, by mutual agreement of the Maritime Administration and 
the Contractor, so long as the procedures adopted are consistent with 
the Act and with the objectives of these regulations.



          Subpart B_Establishment of MSP Fleet and Eligibility



Sec.  295.10  Eligibility requirements.

    (a) Applicant. Any person may apply to MARAD for Enrollment of 
Eligible Vessels in MSP Operating Agreements for inclusion in the MSP 
Fleet pursuant to the provisions of subtitle B, title VI, of the act. 
Applications shall be addressed to the Secretary, Maritime 
Administration, 400 Seventh Street, S.W., Washington, D.C. 20590.
    (b) Eligible Vessel. A vessel eligible for enrollment in a MSP 
Operating Agreement shall be self-propelled and meet the following 
requirements:
    (1) Vessel Type--(i) Liner Vessel. The vessel shall be operated by a 
person as an Ocean Common Carrier.
    (ii) Specialty vessel. Whether in commercial service, on charter to 
the DOD, or in other employment, the vessel shall be either:
    (A) a Roll-on/Roll-off vessel with a carrying capacity of at least 
80,000 square feet or 500 twenty-foot equivalent units; or
    (B) a LASH vessel with a barge capacity of at least 75 barges; or
    (iii) Other vessel. Any other type of vessel that is determined by 
the MARAD to be suitable for use by the United States for national 
defense or military purposes in time of war or national emergency; and
    (2) Vessel Requirements--(i) U.S. Documentation. Except as provided 
in paragraph (b)(2)(iv) of this section, the vessel is a U.S.-documented 
vessel; and
    (ii) Age. Except as provided in paragraph (b)(2)(iii), on the date a 
MSP Operating Agreement covering the vessel is first entered into is:
    (A) a LASH Vessel that is 25 years of age or less; or
    (B) any other type of vessel that is 15 years of age or less.
    (iii) Waiver Authority. In accordance with section 651(b)(2) of the 
act, MARAD is authorized to waive the application of paragraph 
(b)(2)(ii) of this section if MARAD, in consultation with the Secretary 
of Defense, determines that the waiver is in the national interest.
    (iv) Intent to document U.S. Although the vessel may not be a U.S.-
documented vessel, it shall be considered an Eligible Vessel if the 
vessel meets the criteria for documentation under 46 U.S.C. chapter 121, 
the vessel owner has demonstrated an intent to have the vessel 
documented under 46 U.S.C. chapter 121, and the vessel will be less than 
10 years of age on the date of that documentation; and
    (3) MARAD's determination. MARAD determines that the vessel is 
necessary to maintain a United States presence in international 
commercial shipping and the applicant possesses the ability,

[[Page 94]]

experience, resources and other qualifications necessary to execute the 
obligations of the MSP Operating Agreement, or MARAD, after consultation 
with the Secretary of Defense, determines that the vessel is militarily 
useful for meeting the sealift needs of the United States.



Sec.  295.11  Applications.

    (a) Action by MARAD--(1) Time Deadlines. Not later than 30 days 
after the enactment of the Maritime Security Act of 1996, Pub. L. 104-
239, MARAD shall accept applications for Enrollment of vessels in the 
MSP Fleet. Within 90 days after receipt of a completed application, 
MARAD shall enter into a MSP Operating Agreement with the applicant or 
provide in writing the reason for denial of that application.
    (2) Closure of Applications. Applications for MSP Operating 
Agreements shall be made only at such time as, and in response to, 
publication of invitations to apply by MARAD in the Federal Register. 
After the Administrator has fully allocated authorized contracting 
authority through the award of the maximum number of vessels allowed 
underSec. 295.30(a), MARAD will not accept any applications for award 
of new Operating Agreements until additional contracting authority 
becomes available, or existing contracting authority reverts back to 
MARAD.
    (3) Reflagging for Eligible vessels. Except as provided in paragraph 
(a)(4) of this section, an applicant may remove a vessel from U.S. 
registry without MARAD approval if an application for a MSP Operating 
Agreement has been filed for that vessel, the applicant is qualified, 
and it has been determined by MARAD to be eligible under MSA section 
651(b)(1) under a priority for which sufficient funds are available and 
the Administrator has not awarded an Operating Agreement for the vessel 
within 90 days of that application.
    (4) Reflagging ODS and MSC chartered vessels. Vessels eligible under 
MSA section 651(b)(1) which are also subject to ODS contracts or on 
charter to MSC, and for which applications have been denied pursuant to 
Sec.  295.11(a)(1) of this part, may be removed from U.S. registry only 
after those agreements have expired and only after the age requirement 
in section 9(e)(3) of the Shipping Act, 1916 (46 App. U.S.C. 808) has 
been met.
    (b) Action by the Applicant. Applicants for MSP Payments shall 
submit information on the following (Note: MARAD will accept electronic 
options (such as facsimile and Internet) for transmission of required 
information to MARAD, if practicable):
    (1) Intermodal network. A statement describing its operating and 
transportation assets, including vessels, container stocks, trucks, 
railcars, terminal facilities, and systems used to link such assets 
together;
    (2) Diversity of trading patterns. A list of countries and trade 
routes serviced along with the types and volumes of cargo carried;
    (3) Vessel construction date;
    (4) Vessel type and size; and
    (5) Military Utility. An assessment of the value of the vessel to 
DOD sealift requirements.

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

[62 FR 37737, July 15, 1997, as amended at 68 FR 62537, Nov. 5, 2003; 69 
FR 61451, Oct. 19, 2004]



Sec.  295.12  Priority for awarding agreements.

    Subject to the availability of appropriations, MARAD shall enter 
into individual MSP Operating Agreements for Eligible Vessels according 
to the following priorities:
    (a) First priority requirements. First priority shall be accorded to 
any Eligible Vessel meeting the following requirements:
    (1) U.S. citizen ownership. Vessels owned and operated by persons 
who are Citizens of the United States as defined inSec. 295.2; or
    (2) Other corporations. Vessels less than 10 years of age and owned 
and operated by a corporation that is:
    (i) eligible to document a vessel under 46 U.S.C. chapter 121; and
    (ii) affiliated with a corporation operating or managing for the 
Secretary of Defense other vessels documented under 46 U.S.C. chapter 
121, or chartering other vessels to the Secretary of Defense.

[[Page 95]]

    (3) Limitation on number of vessels. Limitation on the total number 
of Eligible Vessels awarded under paragraph (a) of this section shall 
be:
    (i) For any U.S. citizen under paragraph (a)(1), the number of 
vessels may not exceed the sum of:
    (A) the number of U.S.-flag documented vessels that the Contractor 
or a related party operated in the foreign commerce of the United States 
on May 17, 1995, except mixed coastwise and foreign commerce; and
    (B) the number of U.S.-flag documented vessels the person chartered 
to the Secretary of Defense on that date; and
    (ii) For any corporation under paragraph (a)(2) of this section, not 
more than five Eligible Vessels.
    (4) Related party. For the purpose of this section a related party 
with respect to a person shall be treated as the person.
    (b) Second priority requirements. To the extent that appropriated 
funds are available after applying the first priority in paragraph (a) 
of this section, the MARAD shall enter into individual MSP Operating 
Agreements for Eligible Vessels owned and operated by a person who is:
    (1) U.S. citizen. A Citizen of the United States, as defined in 
Sec.  295.2(g), that has not been awarded a MSP Operating Agreement 
under the priority in paragraph (a) of this section, or
    (2) Other. A person (individual or entity) eligible to document a 
vessel under 46 U.S.C. chapter 121, and affiliated with a person or 
corporation operating or managing other U.S.-documented vessels for the 
Secretary of Defense or chartering other vessels to the Secretary of 
Defense.
    (c) Third priority. To the extent that appropriated funds are 
available after applying the first and second priority, any other 
Eligible Vessel.
    (d) Number of MSP Operating Agreements Awarded. If appropriated 
funds are not sufficient to award agreements to all vessels within a 
priority set forth herein, MARAD shall award to each eligible applicant 
in that priority a number of Operating Agreements that bears 
approximately the same ratio to the total number of Operating Agreements 
requested under that priority, and for which timely applications have 
been made, as the amount of appropriations available for MSP Operating 
Agreements for Eligible Vessels in the priority bears to the amount of 
appropriations necessary for MSP Operating Agreements for all Eligible 
Vessels in the priority.



        Subpart C_Maritime Security Program Operating Agreements



Sec.  295.20  General conditions.

    (a) Approval. MARAD may approve applications to enter into a MSP 
Operating Agreement and make MSP Payments with respect to vessels that 
are determined to be necessary to maintain a United States presence in 
international commercial shipping or those that are deemed, after 
consultation with the Secretary of Defense, to be militarily useful for 
meeting the sealift needs of the United States in national emergencies.
    (b) Effective date--(1) General Rule. Unless otherwise provided in 
the contract, the effective date of a MSP Operating Agreement is the 
date when executed by the Contractor and MARAD.
    (2) Exceptions. In the case of an Eligible Vessel to be included in 
a MSP Operating Agreement that is subject to an ODS contract under 
subtitle A, title VI, of the act or on charter to the U.S. Government, 
other than a charter under the provisions of an Emergency Preparedness 
Program Agreement provided by section 653 of the act, unless an earlier 
date is requested by the applicant, the effective date for a MSP 
Operating Agreement shall be:
    (i) The expiration or termination date of the ODS contract or 
Government charter covering the vessel, respectively, or
    (ii) Any earlier date on which the vessel is withdrawn from that 
contract or charter.
    (c) Replacement Vessels. MARAD may approve the replacement of an 
Eligible Vessel in a MSP Operating Agreement provided the replacement 
vessel is eligible underSec. 295.10.
    (d) Notice to shipbuilders. The Contractor agrees that no later than 
30 days after soliciting any offer or bid for the construction of any 
vessel in a foreign shipyard, and before entering into

[[Page 96]]

any contract for construction of a vessel in a foreign shipyard, the 
Contractor shall provide notice of its intent to enter into such a 
contract (for vessels being considered for U.S.-flag registry) to MARAD. 
Within 10 business days after the receipt of such notification, MARAD 
shall issue a notice in the Federal Register of the Contractor's intent. 
The Contractor is prohibited from entering into any such contract until 
10 business days after the date of publication of such notice.
    (e) Early termination. A MSP Operating Agreement shall terminate on 
a date specified by the Contractor if the Contractor notifies MARAD 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 to the extent and for 
the period contained in section 652(m) of the Act.
    (f) Non-renewal for lack of funds. If, by the first day of a fiscal 
year, insufficient funds have been appropriated under section 655 of the 
act for that fiscal year, MARAD shall notify the Congress that MSP 
Operating Agreements for which insufficient funds are available will be 
terminated on the 60th day of that fiscal year if sufficient funds are 
not appropriated or otherwise made available by that date. If only 
partial funding is appropriated by the 60th day of such fiscal year, 
then MSP Operating Agreements for which funds are not available shall be 
terminated using the pro rata distribution method used to award MSP 
Operating Agreements set forth inSec. 295.12(d). With respect to each 
terminated agreement the Contractor shall be released from any further 
obligation under the agreement, and the Contractor may transfer and 
register the applicable vessel under a foreign registry deemed 
acceptable by MARAD. 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 agreement. Final 
payments under the terminated agreements shall be made in accordance 
withSec. 295.30. To the extent that funds are appropriated in a 
subsequent fiscal year, existing operating agreements may be renewed if 
mutually acceptable to the Administrator and the Contractor and the MSP 
vessel remains eligible.
    (g) Operation under a Continuing Resolution. In the event a 
Continuing Resolution (CR) is in place that does not provide sufficient 
appropriations to fully meet obligations under MSP Operating Agreements, 
a Contractor may request termination of the agreement in accordance with 
paragraph (f), herein, andSec. 295.30.
    (h) Requisition authority. To the extent section 902 of the act is 
applicable to any vessel transferred foreign under this section, the 
vessel shall remain available to be requisitioned by the Maritime 
Administration under that provision of law.
    (i) Transfer of Operating Agreements. A Contractor subject to an 
Agreement may transfer that Agreement (including all rights and 
obligations thereunder) to any person eligible to enter into an 
Agreement under the same priority established in section 652(i)(1)(A) of 
the act as the Contractor, provided that:
    (1) The Contractor gives notice of any such transfer to the Maritime 
Administrator by filing a completed application;
    (2) The transfer is not disapproved in writing by the Maritime 
Administrator within 90 days of the notification; and
    (3) the vessel to be covered by the Agreement after transfer is the 
same vessel originally covered by the Agreement or is an eligible vessel 
under section 651(b) of the act and is the same type, and comparable to, 
the vessel originally covered by the Agreement.



Sec.  295.21  MSP assistance conditions.

    (a) Term of MSP Operating Agreement. MSP Operating Agreements shall 
be effective for a period of not more than one fiscal year, and unless 
otherwise specified in the Agreement, shall be renewable, subject to the 
availability of appropriations or amounts otherwise made available, for 
each subsequent fiscal year through the end of FY 2005. In the event 
appropriations are enacted after October 1 with respect to any 
subsequent fiscal year, October 1 shall be

[[Page 97]]

considered the effective date of the renewed agreement, provided 
sufficient funds are made available and subject to the Contractor's 
rights for early termination pursuant to section 652(m) of the act.
    (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 terms and 
conditions of any applicable MSP Operating Agreement may be voided and 
the Contractor may request termination of the MSP Operating Agreement in 
accordance withSec. 295.20(f).
    (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 Emergency Preparedness Program Agreement 
pursuant to section 653 of the act.
    (d) Vessel operating requirements. 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; and
    (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, and shall not otherwise be operated in the 
coastwise trade of the United States.
    (e) Limitations. Limitations on Contractors with respect to the 
operation of foreign-flag vessels shall be in accordance with section 
804 of the act, as amended. The operation of vessels, other than 
Agreement Vessels, in the noncontiguous trades shall be limited in 
accordance with service levels and conditions permitted in section 656 
of the act.
    (f) Non-Contiguous Domestic Trade. [Reserved]
    (g) Obligation of the U.S. Government. The amounts payable as MSP 
Payments under a MSP Operating Agreement shall constitute a contractual 
obligation of the United States Government to the extent of available 
appropriations.



Sec.  295.22  Commencement and termination of operations.

    (a) Time frames. A Contractor that has been awarded a MSP Operating 
Agreement shall commence operations of the Eligible Vessel, under the 
applicable agreement or a subsequently renewed agreement, within the 
time frame specified as follows:
    (1) Existing vessel. Within one year after the initial effective 
date of the MSP Operating Agreement in the case of a vessel in existence 
on that date and after notification to MARAD within 30 days of the 
Contractor's intent; or
    (2) New building. Within 30 months after the initial effective date 
of the MSP Operating Agreement in the case of a vessel to be constructed 
after that date.
    (b) Unused authority. In the event of a termination of unused 
authority pursuant to paragraph (a) of this section, such authority 
shall revert to MARAD.



Sec.  295.23  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 [Note: 
MARAD will accept electronic options (such as facsimile and Internet) 
for transmission of required information to MARAD, if practicable.]:
    (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 annual financial 
statement in accordance with 46 CFR 232.6 and the most recent vessel 
operating cost data

[[Page 98]]

submitted as part of its Emergency Preparedness Agreement.

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

[62 FR 37737, July 15, 1997, as amended at 68 FR 62538, Nov. 5, 2003; 69 
FR 61451, Oct. 19, 2004]



                Subpart D_Payment and Billing Procedures



Sec.  295.30  Payment.

    (a) Amount payable. A 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 $2,100,000 
for each fiscal year. 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 paragraph (b) of this section and 
Sec.  295.31(a)(3).
    (b) Reductions in amount payable. (1) The annual amount otherwise 
payable under a 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 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. Days during which the vessel is drydocked or 
undergoing survey, inspection, or repair shall be considered to be days 
during which the vessel is operated, provided the total of such days 
within a fiscal year does not exceed 30 days, unless prior to the 
expiration of a vessel's 30 day period, approval is obtained from MARAD 
for an extension of the 30 day provision.
    (2) There shall be no payment for any day that a 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.



Sec.  295.31  Criteria for payment

    (a) 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 withSec. 295.21(d) and 
applicable MSP Operating Agreements with MARAD, and consideration shall 
be given to reductions in amounts payable as set forth inSec. 295.30. 
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.
    (1) Payments shall be made per vessel, in equal monthly 
installments, of $175,000.
    (2) To the extent that reductions underSec. 295.30(b) are known, 
such reductions shall be applied at the time of the current billing. The 
daily reduction amounts shall be based on the annual amounts in 
295.30(a) of this part divided by 365 days (366 days in leap years) and 
rounded to the nearest cent. Daily reduction amounts shall be applied as 
follows:

FY 1997--$5,753.42
FY 1998--$5,753.42
FY 1999--$5,753.42
FY 2000--$5,737.70
FY 2001--$5,753.42
FY 2002--$5,753.42
FY 2003--$5,753.42
FY 2004--$5,737.70
FY 2005--$5,753.42

    (3) In the event a monthly payment is for a period less than a 
complete month, that month's payment shall be calculated by multiplying 
the appropriate daily rate inSec. 295.31(a)(2) by the actual number of 
days the Eligible Vessel operated in accordance withSec. 295.21.
    (4) MARAD may require, for good cause, that a portion of the funds 
payable under this section be withheld if the provisions ofSec. 
295.21(d) have not been met.
    (5) 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

[[Page 99]]

845133, Dallas, Texas 75284-5133, or the amount owed can be credited to 
MARAD by offsetting amounts payable in future billing periods.
    (b) [Reserved]



                      Subpart E_Appeals Procedures



Sec.  295.40  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 Maritime 
Administrator. Such appeals shall be made in writing to the Maritime 
Administrator, 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, Att.: MSP Contract Appeals, Maritime Administration, 400 
Seventh St., S.W. Washington, D.C. 20590.
    (b) Process. The Maritime Administrator 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 Maritime Administrator shall be 
final.



PART 296_MARITIME SECURITY PROGRAM (MSP)--Table of Contents



                         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.
296.23 Discretion within priority.
296.24 Subsequent awards of MSP Operating Agreements.

        Subpart D_Maritime Security Program Operating Agreements

296.30 General conditions.
296.31 MSP assistance conditions.
296.32 Reporting requirements.

                Subpart E_Billing and Payment 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, Pub. L. 109-163; 49 U.S.C. 322(a), 49 
CFR 1.66.

    Source: 70 FR 55588, Sept. 22, 2005, unless otherwise noted.



                         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:

[[Page 100]]

    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. The 
term, ``applicant'' excludes a trust.
    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.
    Coastwise Trade means trade between points in the United States.
    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 MSP Operating Agreement for the vessel with the Secretary of 
Transportation (acting through MARAD) pursuant toSec. 53103 of the MSA 
2003. The term, ``Contractor'' excludes a trust.
    Defense Contractor means a person that operates or manages United 
States documented vessels for the Secretary of Defense or charters 
vessels to the Secretary of Defense and has entered into a special 
security agreement with the Secretary of Defense.
    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 points in the United States.
    Eligible Vessel means a vessel that meets the requirements ofSec. 
53102(b) of the MSA 2003.
    Emergency Preparedness Agreement means an agreement, required by 
Sec.  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 withSec. 
296.30.
    Fiscal Year means any annual period beginning on October 1 and 
ending on September 30.
    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 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; and
    (2) For liquid and dry bulk cargo carrying services, includes 
trading between ports in the United States and foreign ports or 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.
    MSA 2003 means the Maritime Security Act of 2003.
    MSP Fleet means the fleet of vessels established under section 
53102(a) of the MSA 2003 and operated under MSP Operating Agreements.
    MSP Operating Agreement means the assistance agreement between a 
Contractor and MARAD that provides for

[[Page 101]]

MSP payments, but is not a ``procurement contract.''
    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 and operates that 
vessel directly 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. For purposes of holding an MSP 
Operating Agreement, the term ``person'' excludes a trust.
    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.
    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.
    Secretary means the Secretary of Transportation acting through the 
Maritime Administrator.
    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) of this definition, a trust that is 
qualified under this definition.
    (2) A trust is qualified only if:
    (i) Each of the trustees is a Section 2 Citizen; 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 Section 2 Citizen, or involving any other person that is 
not a Section 2 Citizen, 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 Section 2 Citizen has authority to 
direct or participate in directing a trustee for a

[[Page 102]]

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 Section 2 Citizens 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 Section 2 Citizen from holding more than 25 percent of the 
beneficial interest in a trust.
    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 were due by October 15, 2004 to the Secretary, 
Maritime Administration, Room 7218, Maritime Administration, U.S. 
Department of Transportation, 400 Seventh Street, SW., Washington, DC 
20590. Any applications received before October 15, 2004 were deemed to 
have been submitted on October 15, 2004. Within 90 days after receipt of 
a completed application, the Secretary was obligated to 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 took place reasonably soon after approval of the 
application. Contractors of MSP Operating Agreements were required to 
submit ownership information and signed charters to MARAD for approval 
by July 1, 2005.
    (b) Action by the Applicant. Each applicant for an MSP Operating 
Agreement was required to submit an application under OMB control number 
2133-0525 to the Secretary, Maritime Administration in the manner 
prescribed on that form. Application forms were made available from 
MARAD's Office of Sealift Support, or the application form could be 
downloaded from the MARAD Web site, http://www.marad.dot.gov, 
Information required included:
    (1) An Affidavit of Section 2 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 is required. 
If the applicant is a vessel operator and proposes to employ a vessel 
manager, then the applicant must supply an affidavit for the vessel 
manager that meets the same citizenship requirements applicable to the 
applicant;
    (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

[[Page 103]]

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: Provide 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 
any 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(ies) 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). 
The vessel replacement plan shall include the vessel's characteristics, 
a letter of intent or other document indicating agreement for purchase 
of vessel, and a forecast of operations for five years for the 
replacement vessel. 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 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 be 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 
entire

[[Page 104]]

period of an MSP 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 Section 2 Citizens.
    (b) A vessel to be included in an MSP Operating Agreement is owned 
by either a person that is a Section 2 Citizen or a United States 
Citizen Trust, and the vessel is demise chartered to a non-Section 2 
Citizen--
    (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 subject 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 atSec. 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 MSP Operating Agreement at the 
time of application for an MSP Operating 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 atSec. 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 
and operated by a defense contractor or a related person to include 
affiliated or related companies within the same corporate group 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 ofSec. 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 MSP 
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 ofSec. 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 underSec. 296.3(b)(13) and that they have reviewed the 
agreements proffered by the ultimate foreign parent underSec. 
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

[[Page 105]]

transportation in the foreign commerce;
    (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 MSP 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 MSP 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
    (A) 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:
    (1) 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;
    (2) 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
    (3) The flag country has not been identified by such Secretary as 
inadequately enforcing international vessel regulations.
    (B) [Reserved]
    (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.
    (c) Telecommunications and Other Electronic Equipment. The 
telecommunications and other electronic equipment on an existing vessel 
that is redocumented under the laws of the United States for operation 
under an MSP Operating Agreement shall be deemed to satisfy all Federal 
Communications Commission equipment certification requirements, if
    (1) Such equipment complies with all applicable international 
agreements and associated guidelines as determined by the country in 
which the vessel was documented immediately before becoming documented 
under the laws of the United States;
    (2) That country has not been identified by the Secretary as 
inadequately enforcing international regulations as to that vessel; and
    (3) At the end of its useful life, such equipment will be replaced 
with equipment that meets Federal Communications Commission equipment 
certification standards (see 47 CFR Chapter I).

[70 FR 55588, Sept. 22, 2005; 70 FR 59400, Oct. 12, 2005]



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 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

[[Page 106]]

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: (i) That the Contractor agrees to execute a binding 
agreement approved by the Secretary for a replacement vessel to be 
operated under the MSP Operating Agreement and to be built in the United 
States not later than nine months after the first date appropriated 
funds are available for construction and operating assistance for a 
minimum of three tank vessels;
    (ii) A tank vessel under this section is eligible to be included in 
the MSP underSec. 296.11(a); and
    (iii) A tank vessel under this section is owned and operated during 
the period of the MSP Operating Agreement by one or more persons that 
are Section 2 Citizens;
    (2) No payment can be made for an existing tank vessel granted 
priority one status after the earlier of:
    (i) Four years following the date this MSP Operating Agreement is 
effective, except if amounts are available for construction of a minimum 
of three tank vessels under the National Defense Tank Vessel 
Construction Assistance Program (NDTVCP) by October 1, 2007, then no 
payments shall be made for the existing ``tank vessel'' after four years 
following the date such amounts are available; or
    (ii) The date of delivery of the replacement tank vessel constructed 
in the United States after October 1, 2004.
    (3) The Secretary will not enter into more than five MSP Operating 
Agreements for tank vessels under this priority. If the five tank vessel 
MSP 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 
nevertheless be awarded to existing tank vessels or the slots may be 
awarded permanently to any eligible 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 any eligible vessel of another 
Contractor until a new tank vessel's construction is completed in the 
United States. Such temporary MSP Operating Agreements may be terminated 
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, inSec. 296.20, the 
second priority is applicable to Participating Fleet Vessels.
    (b) Number of MSP Operating Agreements. MARAD will not enter into 
more than 47 MSP Operating Agreements for Participating Fleet Vessels.
    (c) Reduction of Participating Fleet Vessel MSP Operating 
Agreements. The number of MSP 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 MSP 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 MSP Operating Agreement. 
Applicants must certify that they have the requisite authority as of 
October 1, 2005 and for the full period of

[[Page 107]]

the MSP Operating Agreement thereafter 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 that remains in effect until September 30, 
2015.
    (2) The full term of the MSP 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 MSP 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 MSP 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. For companies requesting an age waiver, the Applicant 
must submit an appropriate replacement vessel at least 120 days prior to 
the date of expiration of age eligibility.
    (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 inSec. 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 MSP 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 underSec. 296.11(a) andSec. 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 underSec. 296.11(a).
    (f) In the event that a Participating Fleet Vessel will be 
unavailable to participate in the MSP on October 1, 2005, due to an 
unforeseen casualty to the vessel, a Contractor may offer an eligible 
replacement vessel. The replacement vessel must subsequently be approved 
by MARAD and DOD. The replacement vessel must operate under an MSP 
Operating Agreement in sufficient time to meet the 180 minimum operation 
days required during the fiscal year to avoid being in default of the 
MSP Operating Agreement.



Sec.  296.22  Other vessels.

    (a) Third Priority. To the extent that appropriated funds are 
available after applying the first priority, tank vessels, inSec. 
296.20, and the second priority, Participating Fleet Vessels, inSec. 
296.21, the third priority is for any other vessel that is eligible to 
be included in an MSP Operating Agreement underSec. 296.11(a), and 
that, during the period of that MSP Operating Agreement, will be:
    (1) Owned and operated by one or more persons that are Section 2 
Citizens; 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 Section 2 
Citizen.
    (b) Fourth Priority. To the extent that appropriations are available 
after applying the first priority inSec. 296.20, the second priority 
inSec. 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 underSec. 296.11(a).



Sec.  296.23  Discretion within priority.

    The Secretary--
    (a) Subject to paragraph (b) of this section, may award MSP 
Operating Agreements within each priority as the Secretary considers 
appropriate; and

[[Page 108]]

    (b) Shall award MSP Operating Agreements within a priority--
    (1) In accordance with operational requirements specified by the 
SecDef;
    (2) In the cases of the Priorities III and IV, according to the 
applicants' records of owning and operating vessels; and
    (3) Subject to the approval of the SecDef.
    (c) The Secretary does not have discretion to override the priority 
requirements with respect to the initial award of MSP Operating 
Agreements.



Sec.  296.24  Subsequent awards of MSP Operating Agreements.

    (a) Until October 1, 2005, if, for any reason, after the award of an 
MSP Operating Agreement, the Applicant is unwilling or unable to 
commence operations pursuant to the terms of the MSP Operating 
Agreement, MARAD may, pursuant to the priority criteria, award that MSP 
Operating Agreement to an Applicant having an eligible vessel that 
applied but was not awarded an MSP Operating Agreement.
    (b) After October 1, 2005, 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, expiration of a temporary MSP Operating Agreement 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 must meet the requirements for vessel 
eligibility in 46 U.S.C. 53102(b);
    (2) The applicant must meet the vessel ownership and operating 
requirements for priority in 46 U.S.C. 53103(c); and
    (3) Priority will be assigned in accordance with operational 
requirements specified by the SecDef.
    (c) MARAD will use the following procedures in reissuing an MSP 
Operating Agreement. MARAD and USTRANSCOM will determine if the 
applications received on October 15, 2004 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, subject to approval of the SecDef. MARAD and 
USTRANSCOM may decide to open a new round of applications. Applicants 
for reissued MSP Operating Agreements must meet the citizenship 
requirements of Priority III. Inasmuch 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.



        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 
announced an initial award of 60 MSP Operating Agreements on January 12, 
2005. In addition, the Secretary advised 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 established general evaluation criteria for 
operational requirements for considering replacement vessels described 
inSec. 296.21(e), and for vessels eligible under the third and fourth 
priorities described inSec. 296.22. These general evaluation criteria 
were 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

[[Page 109]]

to the U.S. Government, other than a charter under the provisions of an 
Emergency Preparedness Agreement (EPA) provided bySec. 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 underSec. 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 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, 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 MSP Operating 
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 Section 2 
Citizens; or
    (B) Owned by a person that is a Documentation Citizen and operated 
by a person that is a Section 2 Citizen.
    (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 will 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

[[Page 110]]

under the terminated MSP Operating Agreements shall be made in 
accordance withSec. 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 an MSP Operating 
Agreement is terminated by the Contractor, with available replacement 
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 or a tank vessel not 
built under the NDTVCP 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 built under the NDTVCP 
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 MSP Operating Agreements. A Contractor subject to an 
MSP Operating Agreement may transfer that MSP Operating Agreement 
(including all rights and obligations under that MSP Operating 
Agreement) to any person eligible to enter into an MSP Operating 
Agreement underSec. 296.10 and of the same or more restrictive U.S. 
citizen priority, provided that prior approval to transfer the MSP 
Operating 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 10 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 
under a CR at sufficient levels for any portion of a fiscal year, the 
Secretary will select the vessels to retain within the funding level of 
the previous fiscal year, in consultation with the SecDef, based on the 
Secretaries' determination of the most militarily useful and 
commercially viable vessels. 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.

[[Page 111]]

    (c) National security requirements. Each MSP Operating Agreement 
shall require the owner or operator of an Eligible Vessel included in 
that MSP Operating 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 
MSP Operating 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 foreign commerce, 
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, i.e., directly or 
indirectly owns, charters, or operates, a vessel engaged in 
noncontiguous domestic trade unless the Contractor is a Section 2 
Citizen.
    (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 on the MSP vessel 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 EPA, or if not current year 
data, a Schedule 310 of the MA-172.


(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 MSP Operating Agreements. Each voucher 
submission shall include a certification that the vessel(s) for which 
payment is requested were operated in accordance withSec. 296.31(d) 
and applicable MSP Operating Agreements with MARAD, and consideration 
shall be given to reductions in amounts payable as set forth inSec. 
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 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; 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.

[[Page 112]]

    (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 foreign commerce, 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 ofSec. 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 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 Section 2 
Citizen;
    (iii) While under charter to the United States Government other than 
a charter pursuant to an EPA underSec. 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 ofSec. 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 ofSec. 
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 Maritime Administration or the 
Contracting Officer with respect to the administration of this part or 
any other dispute or complaint concerning MSP Operating Agreements 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 Operating Agreement Appeals, Maritime 
Administration, 400 Seventh St., SW., Washington, DC 20590. Such an 
appeal is a prerequisite to exhausting administrative remedies.

[[Page 113]]

    (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 make 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. 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.

    (a) Introduction. This section sets forth MARAD's regulations 
governing its Maintenance and Repair (M&R) Reimbursement Pilot Program. 
The M&R program is presently a 5-year program, authorized at $19.5 
million per year for FY 2006-2011.
    (b) M&R participants. Every existing Contractor in MSP may enter 
into an agreement under 46 U.S.C. 3517, to perform qualified M&R of one 
or more MSP vessels in United States shipyards, subject to the terms of 
this section. Every MSP Contractor entering into an MSP operating 
agreement, including those agreements transferred from an existing MSP 
Contractor, or newly issued or reissued from MARAD, after March 8, 2007, 
must agree to enter into an agreement under 46 U.S.C. 3517, to perform 
qualified M&R of one or more MSP vessels in United States shipyards, 
subject to the terms of this section. Each vessel that is subject to an 
M&R agreement will receive a priority in the allocation of MSP payments 
if the amount available for a fiscal year for making payments under MSP 
operating agreements is not sufficient to pay the full amount authorized 
under each agreement for such fiscal year.
    (c) Terms of Agreement. An agreement under this section:
    (1) Will require that except as provided in paragraph (d) of this 
section, all qualified M&R on the vessel will be performed in the United 
States;
    (2) Will require the Administrator to reimburse the Contractor in 
accordance with paragraph (j) of this section for the costs of qualified 
M&R performed in the United States; and
    (3) Will apply to qualified M&R performed during the 5-year period 
beginning on the date the vessel begins operating under the operating 
agreement under chapter 531 of title 46, United States Code.
    (d) Exception to Requirement to Perform Work in the United States. A 
Contractor will not be required to have qualified M&R work performed in 
the United States under this section if:
    (1) The Administrator determines that there is no facility capable 
of meeting all technical requirements of the qualified M&R in the United 
States located in the geographic area in which the vessel normally 
operates available to perform the work in the time required by the 
Contractor to maintain its regularly scheduled service;
    (2) The Administrator determines that there are insufficient funds 
to pay reimbursement under paragraph (j) of this section with respect to 
the work; or

[[Page 114]]

    (3) The Administrator fails to make the certification described in 
paragraph (h)(2) of this section.
    (e) Qualified M&R. In this section the term ``qualified M&R'' means:
    (1) Except as provided in paragraph (e)(2) of this section:
    (i) Any inspection of a vessel that is--
    (A) Required under chapter 33 of title 46, United States Code; and
    (B) Performed in the period in which the vessel is subject to an 
agreement under this section;
    (ii) Any M&R of a vessel that is determined, in the course of an 
inspection referred to in paragraph (e)(1)(i) of this section, to be 
necessary; and
    (iii) Any additional M&R the Contractor intends to undertake at the 
same time as the work described in paragraph (e)(1)(ii) of this section; 
but (2) does not include:
    (i) M&R not agreed to by the Contractor to be undertaken at the same 
time as the work described in paragraph (e)(1) of this section;
    (ii) Work carried out as part of continuous machinery surveys and 
other similar requirements not associated with a drydocking of the 
vessel; or
    (iii) Any emergency work that is necessary to enable a vessel to 
return to a port in the United States.
    (f) Qualification of Shipyard. MARAD will assess the following 
factors in determining whether a proposed shipyard is capable of 
undertaking the proposed M&R:
    (1) The dimension of the facility relative to the size of the 
vessel;
    (2) The capacity and the reach of the lifting cranes necessary for 
performing the specified work; and
    (3) The skills and experience of sufficient numbers of workers to 
complete the job in time to maintain the vessel's schedule.
    (g) Required information. Under each M&R agreement, the participant 
must provide within 30 days of enrollment a schedule for regular and 
special surveys for each vessel in the agreement. At the same time, and 
on an annual basis by January 1 of each calendar year, each M&R 
participant must submit a schedule of anticipated M&R for each vessel 
under an M&R agreement for the coming year. In addition, the M&R 
participant must provide for each such vessel the anticipated itinerary 
for the coming year.
    (h) Notification Requirements. (1) NOTIFICATION BY CONTRACTOR.--The 
Administrator is not required to pay reimbursement to a Contractor under 
this section for qualified M&R, unless the Contractor--
    (i) Notifies the Administrator of the intent of the Contractor to 
obtain the qualified M&R, by not later than 90 days before the date of 
the performance of the qualified M&R; and
    (ii) Includes in such notification:
    (A) A description of all qualified M&R that the Contractor should 
reasonably expect may be performed;
    (B) A description of the vessel's normal route and port calls in the 
United States;
    (C) An estimate of the cost, with supporting documentation, of 
obtaining the qualified M&R described under paragraph (h)(1)(ii)(A) of 
this section in the United States; and
    (D) An estimate of the cost, with supporting documentation, of 
obtaining the qualified M&R described under paragraph (h)(1)(ii)(A) of 
this section outside the United States, in the country in which the 
Contractor otherwise would undertake the qualified M&R.
    (2) CERTIFICATION BY ADMINISTRATOR.--
    (i) Not later than 30 days after the date of receipt of notification 
under paragraph (h)(1) of this section, the Administrator will certify 
to the Contractor--
    (A) Whether the cost estimates provided by the Contractor are fair 
and reasonable;
    (B) If the Administrator determines that such cost estimates are not 
fair and reasonable, the Administrator's estimate of fair and reasonable 
costs for such work;
    (C) Whether there are available to the Administrator sufficient 
funds to pay reimbursement under paragraph (j) of this section with 
respect to such work; and
    (D) That the Administrator commits such funds to the Contractor for 
such reimbursement, if such funds are available for that purpose.

[[Page 115]]

    (ii) If the Contractor notification described in paragraph (h)(1) of 
this section does not include an estimate of the cost of obtaining 
qualified M&R in the United States, then not later than 30 days after 
the date of receipt of such notification, the Administrator will:
    (A) Certify to the Contractor whether there is a facility capable of 
meeting all technical requirements of the qualified M&R in the United 
States located in the geographic area in which the vessel normally 
operates available to perform the qualified M&R described in the 
notification by the Contractor under paragraph (h)(1) of this section in 
the time period required by the Contractor to maintain its regularly 
scheduled service; and
    (B) If there is such a facility, require the Contractor to resubmit 
such notification with the required cost estimate for such facility.
    (i) Allocation of available funds. If the funds available to MARAD 
are insufficient to accommodate every M&R project required to be 
performed in U.S. shipyards, MARAD will select those work projects 
suitable for accomplishment in United States shipyards, for which MARAD 
will reimburse the differential costs of the M&R. MARAD will base such 
determinations on the amount of funds available, the projected cost of 
each repair, the number of vessels operated by the vessel operator and 
the proximity of the vessels' itineraries to suitable U.S. shipyard 
locations.
    (j) Reimbursement. (1) IN GENERAL.--The Administrator will, subject 
to the availability of appropriations, reimburse a Contractor for costs 
incurred by the Contractor for qualified M&R performed in the United 
States under this section.
    (2) AMOUNT.--The amount of reimbursement will be equal to the 
difference between--
    (i) The fair and reasonable cost of obtaining the qualified M&R in 
the United States; and
    (ii) The fair and reasonable cost of obtaining the qualified M&R 
outside the United States, in the country in which the Contractor would 
otherwise undertake the qualified M&R.
    (3) DETERMINATION OF FAIR AND REASONABLE COSTS.--
    (i) The Administrator will determine fair and reasonable costs for 
purposes of paragraph (j)(2) of this section after considering the 
supporting documentation submitted by the Contractor. If it is too 
difficult to accurately ascertain the foreign costs of anticipated M&R, 
the Maritime Administrator may decide to compute the foreign cost of M&R 
by reference to a percentage of the domestic cost of the M&R, based on 
available general information.
    (ii) MARAD will also pay for other costs borne by the M&R 
participant reasonably associated with the qualified M&R performed in a 
U.S. shipyard that would not be incurred if the vessel was repaired in a 
foreign shipyard. Such costs include:
    (A) Any additional vessel maintenance and repair preparation costs, 
including costs for additional engineering, design and contract bid 
proposal costs;
    (B) Costs (including capital and operating costs) for ``lost time'' 
for transit to a U.S. shipyard in excess of the transit period to a 
foreign shipyard on the same trade route to which the vessel is assigned 
and for the time spent in a U.S. shipyard which exceeds the estimated 
time required by a foreign shipyard for the same work.
    (C) Costs for additional labor, supervision, overhead and other work 
involving shore-side personnel.
    (iii) Upon approval of each specific M&R project, the Administrator 
will establish with the Contractor a set level of funding to be provided 
by MARAD. If, during the course of performing M&R in a U.S. shipyard, it 
is discovered that the repairs will entail additional unanticipated 
costs, the Administrator shall provide MARAD's share of funding 
corresponding to the percentage of the domestic M&R costs originally 
agreed to by MARAD, but not in excess of 20 percent of the original 
funding level agreed to by MARAD. Cost overruns will be the obligation 
of the M&R participant unless MARAD determines that it is fair to 
reimburse the M&R participant and sufficient funds are available to do 
so.
    (iv) Payment of MARAD's share of the shipyard contract price may be 
made as work progresses or upon completion of the M&R and finalization 
of

[[Page 116]]

costs, as MARAD may determine. Vouchers for payment may be submitted to 
the Associate Administer for Marine Asset Development. Payments shall be 
paid and processed under the terms and conditions of the Prompt Payment 
Act, 31 U.S.C. 3901. However, pursuant to 31 U.S.C. 3902(f), interest on 
late payments will be paid only if appropriated funds for paying 
reimbursement under the M&R Pilot Program are available.

[72 FR 5344, Feb. 6, 2007]

[[Page 117]]



                SUBCHAPTER D_VESSEL FINANCING ASSISTANCE





PART 298_OBLIGATION GUARANTEES--Table of Contents



                         Subpart A_Introduction

Sec.
298.1 Purpose.
298.2 Definitions.
298.3 Applications.

                          Subpart B_Eligibility

298.10 Citizenship.
298.11 Vessel requirements.
298.12 Applicant and operator's qualifications.
298.13 Financial requirements.
298.14 Economic soundness.
298.15 Investigation fee.
298.16 Substitution of participants.
298.17 Evaluation of applications.
298.18 Financing Shipyard Projects.
298.19 Financing Eligible Export Vessels.

                          Subpart C_Guarantees

298.20 Term, redemptions, and interest rate.
298.21 Limits.
298.22 Amortization of Obligations.
298.23 Refinancing.
298.24 Financing a Vessel more than a year after delivery.
298.25 Excess interest or other consideration.
298.26 Lease payments.
298.27 Advances.

                         Subpart D_Documentation

298.30 Nature and content of Obligations.
298.31 Mortgage.
298.32 Required provisions in documentation.
298.33 Escrow fund.
298.34 [Reserved]
298.35 Title XI Reserve Fund and Financial Agreement.
298.36 Guarantee Fee.
298.37 Examination and audit.
298.38 Partnership agreements and limited liability company agreements.
298.39 Exemptions.

 Subpart E_Defaults and Remedies, Reporting Requirements, Applicability 
                             of Regulations.

298.40 Defaults.
298.41 Remedies after default.
298.42 Reporting requirements--financial statements.
298.43 Applicability of the regulations.

Subpart F--Administration [Reserved]

    Authority: 46 App. U.S.C. 1114(b), 1271 et seq.; 49 CFR 1.66.

    Source: 65 FR 45152, July 20, 2000, unless otherwise noted.



                         Subpart A_Introduction



Sec.  298.1  Purpose.

    This part prescribes regulations implementing Title XI of the 
Merchant Marine Act, 1936, as amended, governing Federal ship financing 
assistance (46 App. U.S.C. 1271 et seq.). This part uses ``you'' and 
``we'' throughout. You and your refer to the applicant for Title XI 
financing assistance unless we note or imply otherwise. We, us, and our 
refer to the Maritime Administration, the Secretary of the Maritime 
Administration, or the Secretary of Transportation, as applicable.



Sec.  298.2  Definitions.

    For the purpose of this part:
    Act means the Merchant Marine Act, 1936, as amended (46 App. U.S.C. 
1101 through 1294).
    Actual Cost of a Vessel or Shipyard Project means, as of any 
specified date, the aggregate, as determined by us, of all amounts paid 
by or for the account of the Obligor on or before that date and all 
amounts which the Obligor is then obligated to pay from time to time 
thereafter, for the construction, reconstruction or reconditioning of 
such Vessel or Shipyard Project.
    Advanced Shipbuilding Technology means:
    (1) Numerically controlled machine tools, robots, automated process 
control equipment, computerized flexible manufacturing systems, 
associated computer software, and other technology for improving 
shipbuilding and related industrial production which advance the state-
of-the-art; and
    (2) Novel techniques and processes designed to improve shipbuilding 
quality, productivity, and practice, and to

[[Page 118]]

promote sustainable development, including engineering design, quality 
assurance, concurrent engineering, continuous process production 
technology, energy efficiency, waste minimization, design for 
recyclability or parts reuse, inventory management, upgraded worker 
skills, and communications with customers and suppliers; and
    (3) Other elements contributing to a shipyard's efficiency or 
productivity assisting it to more effectively operate in the 
shipbuilding industry.
    Citizen of the United States means a person who, if an individual, 
is a Citizen of the United States by birth, naturalization or as 
otherwise authorized by law or, if other than an individual, meets the 
requirements of Section 2 of the Shipping Act, 1916, as amended (46 App. 
U.S.C. 802), as further described at 46 CFR 221.3(c).
    Closing means a meeting of various participants or their 
representatives in a Title XI financing, at which a commitment to issue 
Guarantees is executed, or at which all or part of the Obligations are 
authenticated and issued and the proceeds are made available for a 
purpose set forth in section 1104(a) of the Act, or at which a Vessel is 
delivered and a Mortgage is executed as security to us or a Shipyard 
Project is completed and a Mortgage or other security is executed to us.
    Commitment Closing means a meeting of various participants or their 
representatives in a Title XI financing at which a commitment to issue 
Guarantees is executed and the forms of the Obligations and the related 
Title XI documents are also either agreed upon or executed.
    Depository means the U.S. Department of Treasury, acting in its 
capacity under Section 1109 of the Act.
    Depreciated Actual Cost of a Vessel or Shipyard Project means the 
Actual Cost of the Vessel or Shipyard Project, as defined in this 
section (less a residual value of 2\1/2\ percent of United States 
shipyard construction cost or, in the case of Shipyard Project, a 
residual value as appropriate), depreciated on a straightline basis over 
the useful life of the Vessel or Shipyard Project as determined by us, 
not to exceed twenty-five years from the date the Vessel or Shipyard 
Project was delivered by the shipbuilder or manufacturer or, if the 
Vessel or Shipyard Project has been reconstructed or reconditioned, the 
Actual Cost of the Vessel or Shipyard Project depreciated on a 
straightline basis from the date the Vessel or Shipyard Project was 
delivered by the shipbuilder or manufacturer to the date of such 
reconstruction or reconditioning, on the basis of the original useful 
life of the Vessel or Shipyard Project, and from the date of said 
reconstruction or reconditioning on a straightline basis and on the 
basis of a useful life of the Vessel or Shipyard Project determined by 
us, plus all amounts paid or obligated to be paid for the reconstruction 
or reconditioning, depreciated on a straightline basis and on the basis 
of a useful life of the Vessel or Shipyard Project determined by us.
    Documentation means all or part of the agreements relating to an 
entire Title XI financing which must be furnished to us, irrespective of 
whether we are a party to each agreement.
    Eligible Export Vessel means a Vessel constructed, reconstructed, or 
reconditioned in the United States for use in world-wide trade which 
will, upon delivery or redelivery, be placed under or continued to be 
documented under the laws of a country other than the United States.
    Eligible Shipyard means a private shipyard located in the United 
States.
    General Shipyard Facility means:
    (1) For operations on land, any structure or appurtenance thereto 
designed for the construction, repair, rehabilitation, refurbishment, or 
rebuilding of any Vessel, including graving docks, building ways, ship 
lifts, wharves and pier cranes; the land necessary for any structures or 
appurtenances; and equipment necessary for the performance of any 
function referred to in this definition; and
    (2) For operations other than on land, any Vessel, floating drydock, 
or barge constructed in the United States, within the meaning ofSec. 
298.11(a), and used for, or a type that is usually used for, activities 
referred to in paragraph (1) of this definition.
    Guarantee means the contractual commitment of the United States of 
America, represented by us, endorsed on each Obligation, to make payment

[[Page 119]]

to the Obligee or an agent, upon demand, of the unpaid interest on, and 
the unpaid balance of the principal of such Obligation, including 
interest accruing between the date of default and the date of payment.
    Guarantee Fee means the fee payable to us in consideration for the 
issuance of the Guarantees.
    Indenture Trustee means a bank with corporate trust powers, or a 
trust company, with a capital and surplus of at least $25,000,000, which 
is located in and organized and doing business under the laws of the 
United States, any State or territory thereof, the District of Columbia 
or the Commonwealth of Puerto Rico, which has duties under the terms of 
a Trust Indenture, entered into with the Obligor, providing for the 
issuance and registration of the ownership and transfer of Obligations, 
the disbursement of funds held in trust by the Indenture Trustee for the 
redemption and payment of interest and principal with respect to 
Obligations, demands by the Indenture Trustee for payment under the 
Guarantees in the event of default and the remittance of payments 
received to the Obligees. Pursuant to our specific authorization, the 
Indenture Trustee may also authenticate the Guarantees.
    Letter Commitment means a letter from us to you, setting forth 
specific determinations made by us with respect to your proposed 
project, as required by the Act and regulations of this part, and 
stating our commitment to execute Guarantees, subject to compliance by 
you with any conditions specified therein.
    Maritime Administration means the agency created within the 
Department of Transportation by Reorganization Plan No. 21 of 1950 (64 
Stat. 1273), amended by Reorganization Plan No. 7 of 1961 (75 Stat. 
840), as amended by Public Law 91-469 (84 Stat. 1036).
    Modern Shipbuilding Technology means a technology to be introduced 
into the shipyard that is comprised of the best available proven 
technology, techniques, and processes appropriate to advancing the 
state-of-the-art of the applicant shipyard, or exceeds the best 
available processes of American shipbuilding, and that will enhance its 
productivity and make it more competitive internationally.
    Mortgage means a first Preferred Mortgage on any Vessel or a first 
mortgage with respect to a Shipyard Project.
    Obligation means any note, bond, debenture, or other evidence of 
indebtedness, as defined in section 1101(c) of the Act, issued for one 
of the purposes specified in section 1104(a) of the Act.
    Obligee means the holder of an Obligation.
    Obligor means any party primarily liable for payment of principal of 
or interest on any Obligation.
    Paying Agent means any Person appointed by the Obligor to pay the 
principal of or interest on the Obligations on behalf of the Obligor.
    Person means any individual, estate, foundation, corporation, 
partnership, limited partnership, joint venture, association, joint-
stock company, trust, unincorporated organization or other acceptable 
legal business entity, government, or any agency or political 
subdivision thereof.
    Preferred Mortgage means:
    (1) In the case of a mortgage on a Vessel documented under United 
States law, whenever made, a mortgage that--
    (i) Includes the whole of a Vessel;
    (ii) Is filed in substantial compliance with 46 U.S.C. 31321;
    (iii) Covers a documented Vessel or a Vessel for which an 
application for documentation has been filed that is in substantial 
compliance with the requirements of 46 U.S.C. Ch. 121 and the 
regulations prescribed under that Chapter by the United States Coast 
Guard; and
    (iv) Is otherwise in compliance with the provisions of Chapter 313 
of Title 46 of the U.S. Code.; and
    (2) In the case of a mortgage on an Eligible Export Vessel, whenever 
made, a mortgage that--
    (i) Constitutes a mortgage that is established as security on an 
Eligible Export Vessel under the laws of a foreign country;
    (ii) Was executed under the laws of that foreign country and under 
which laws the ownership of the Vessel is documented;

[[Page 120]]

    (iii) Is registered under the laws of that foreign country in a 
public register at the port of registry of the Vessel or at a central 
office;
    (iv) Otherwise satisfies the requirements of 46 U.S.C. 31301(6)(B) 
to constitute a Preferred Mortgage; and
    (v) Has us as the mortgagee, or such other mortgagee as is permitted 
by the applicable foreign law and approved by us.
    Related Party means as that term is defined by generally accepted 
accounting principles outlined in paragraph 24 of Statement of Financial 
Accounting Standards No. 57, Related Party Disclosures.
    Secretary means the Secretary of Transportation, acting by and 
through the Maritime Administrator, Department of Transportation, the 
Maritime Administrator or any official of the Maritime Administration to 
whom is duly delegated the authority, from time to time, to perform the 
functions of the Secretary of Transportation or the Maritime 
Administrator, Department of Transportation.
    Secretary's Note means a promissory note from the Obligor to the 
Secretary in an amount equal to the aggregate amount of the Obligations, 
which is issued simultaneously with the Guarantees.
    Security Agreement means the primary contract between the Obligor 
and the Secretary, providing for the transfer to the Secretary by the 
Obligor of all right, title and interest of the Obligor in certain 
described property (including rights under contracts in existence or to 
be entered into), and containing other provisions relating to 
representations and responsibilities of the Obligor to the Secretary as 
security for the issuance of Guarantees.
    Shipyard Project means Advanced Shipbuilding Technology and Modern 
Shipbuilding Technology or both unless otherwise specified.
    Vessel means all types of vessels, whether in existence or under 
construction, including passenger, cargo and combination passenger-cargo 
carrying vessels, tankers, towboats, barges and dredges which are or 
will be documented under the laws of the United States, floating 
drydocks which have a capacity of at least thirty-five thousand or more 
lifting tons and a beam of one hundred and twenty-five feet or more 
between the wing walls and oceanographic research or instruction or 
pollution treatment, abatement or control vessels, which are owned by 
citizens of the United States; except that an Eligible Export Vessel 
will not be documented under the laws of the United States.

[65 FR 45152, July 20, 2000, as amended at 67 FR 61282, Sept. 30, 2002]



Sec.  298.3  Applications.

    (a) Process and certification. When you apply for a commitment to 
execute Guarantees, you must:
    (1) Complete Form MA-163 and send it to the Secretary, Maritime 
Administration, U.S. Department of Transportation, 400 Seventh Street, 
SW., Washington, DC 20590. [Note: MARAD will accept electronic options 
(such as facsimile and Internet) for transmission of required 
information (excluding closing documents and documents submitted in 
connection with defaults) to MARAD, if practicable.]
    (2) Certify the application in the manner that Form MA 163 
prescribes.
    (b) Required information. You must include all required information 
on Form MA 163 or in attached exhibits and schedules submitted with the 
application. You must also include the following regarding the Vessel or 
Vessels, if applicable:
    (1) Any demise charters,
    (2) Time charters in excess of six months,
    (3) Contracts of affreightment,
    (4) Drilling contracts, and/or
    (5) Other contractual arrangements.
    (c) Declaration of Lobbying form. You must also file the Declaration 
of Lobbying form as required by 31 U.S.C. 1352 with the initial 
application as part of the formal submission.
    (d) Attachments. Each exhibit, schedule, and attachment must contain 
a statement, on the first page clearly identifying the document as an 
attachment to the application. You must state on each attachment the:
    (1) Name of the applicant; and
    (2) Date of the application.
    (e) Amendment. You must mark ``Amendment,'' on any amendment of data 
contained in the application. Each

[[Page 121]]

first page must contain a statement clearly identifying the document as 
an amendment to your application and must include the:
    (1) Name of the applicant;
    (2) Date of application; and
    (3) Certification required on Form MA 163.
    (f) Application time schedule. You must submit each application to 
us at least four (4) months prior to the anticipated date by which you 
require a Letter Commitment.
    (1) We may consider applications with less than four (4) months 
notice, prior to the anticipated date by which you require a Letter 
Commitment, if you submit written documentation to us that extenuating 
circumstances exist.
    (2) During the first fifteen (15) calendar days after you submit 
your application, we will preliminarily review your application for 
adequacy and completeness.
    (i) If we find that your application is incomplete, or if we require 
additional data, we will notify you promptly in writing, and you will 
have fifteen (15) calendar days, from the date of each request for 
additional information, to correct deficiencies.
    (ii) If you have not corrected the deficiencies or have not made 
substantial progress toward correcting them, within the 15 calendar 
days, then we may terminate the processing of your application without 
prejudice.
    (3) Once we consider your Title XI application complete, we will act 
on the application within a period of 60 calendar days, unless for good 
cause, we find it necessary to extend the 60 day period.
    (4) If you do not complete your application and we do not act upon 
your application within four (4) months from the submission date, unless 
we extend the time period, we will notify you in writing that processing 
of the application is terminated and that you may reapply at a later 
date.
    (i) If we terminate your application without prejudice, we will not 
require you to pay a new filing fee for a later application for a 
similar project that you file within one year of the termination date.
    (ii) If you submit an application for a substantially different 
project, you must pay a new filing fee. We will determine whether the 
application is substantially different on a case-by-case basis.
    (5) If we issue you a Letter Commitment, you must submit two (2) 
sets of the Closing documentation to us for review at least six (6) 
weeks prior to the anticipated Closing. The six weeks time period will 
give us time to complete an adequate review of the documentation. You 
must use our standard form of documentation.
    (g) Degrees of risk. When processing applications, we will consider 
the different degrees of risk involved with different applications.
    (h) Additional assurances. Before we approve your application, we 
may require additional assurances if you are not a well established firm 
with strong financial qualifications and strong market shares seeking 
financing guarantees for replacement vessels in an established market in 
which projected demand exceeds supply. The additional assurances may 
include:
    (1) Firm charter commitments;
    (2) Parent company guarantees;
    (3) Greater equity participation;
    (4) Private financing participation;
    (5) Security interest on other property; and
    (6) Similar arrangements to any of these additional assurances.
    (i) Filing Fee. When you submit your application, you must include a 
$5,000 filing fee, which will be non-refundable, irrespective of whether 
we issue a Letter Commitment. However, the $5,000 filing fee is credited 
toward the investigation fee described inSec. 298.15(b).
    (j) Confidential Information. (1) If we receive a request for 
release of your information, we will notify you. If you believe that 
your application, including attachments, contains information you 
consider to be trade secrets or commercial or financial information and 
privileged or confidential, or otherwise exempt from disclosure under 
the Freedom of Information Act (FOIA) (5 U.S.C. 552), you may assert a 
claim of confidentiality. When submitting your application, you should 
mark ``Confidential'' on the pages that you

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consider confidential. The same requirement applies to any amendment to 
the application.
    (2) FOIA requests. We will apply the procedures contained in the 
Department of Transportation's regulations at 49 CFR 7.17 regarding FOIA 
requests for information that the submitter has designated as 
confidential. We will consider your claim of confidentiality at the time 
someone requests the information under FOIA.
    (3) Statement of objections. If we receive a request for release of 
your information, we will notify you. We will give you a reasonable 
period of time to give us a written, detailed statement explaining your 
objections to our release of the information. We will not give you 
notice if:
    (i) We determine that we should not disclose the information;
    (ii) The information has been lawfully published or made available 
to the public; or
    (iii) Law (other than 5 U.S.C. 552) requires us to disclose the 
information.
    (4) Our notification of intent to disclose. If your objections to 
release of the information do not persuade us, we will notify you of our 
intent to disclose in a reasonable number of days before we intend to 
disclose the information. The written notice will include:
    (i) A statement explaining our reasons for not accepting the 
submitter's disclosure objections;
    (ii) A description of the business information that we will 
disclose; and
    (iii) A specific disclosure date.
    (k) Priority. We will give priority for processing applications to:
    (1) Vessels capable of serving as a United States naval and military 
auxiliary in time of war or national emergency,
    (2) Requests for financing construction of equipment or vessels less 
than one year old as opposed to the refinancing of existing equipment or 
vessels that are one year old or older,
    (3) Any applications involving the purchase of vessels currently 
financed under Title XI if the purpose is to process the assumption of 
the obligations,
    (4) Applications from those willing to take guarantees for less than 
the normal term for that class of vessel.
    (5) Eligible Export Vessels. We may issue a commitment to guarantee 
Obligations for an Eligible Export Vessel if we determine, in our sole 
discretion, that the issuance of a commitment to guarantee Obligations 
for an Eligible Export Vessel will not cause us to deny an economically 
sound application to issue a commitment to guarantee Obligations for 
vessels documented under the laws of the United States operating in the 
domestic or foreign commerce of the United States, after considering:
    (i) The status of pending applications for commitments to guarantee 
obligations for vessels documented under the laws of the United States 
and operating or to be operated in the domestic or foreign commerce of 
the United States;
    (ii) The economic soundness of the applications referred to in 
paragraph (k)(5)(i) of this section; and
    (iii) The amount of guarantee authority available.

(Unless indicated otherwise in this part 298, information collection 
requirements have been approved by the Office of Management and Budget 
under control number 2133-0018.)

[65 FR 45152, July 20, 2000, as amended at 68 FR 62538, Nov. 5, 2003; 69 
FR 61451, Oct. 19, 2004]



                          Subpart B_Eligibility



Sec.  298.10  Citizenship.

    (a) Applicability. Before you receive a legal or beneficial interest 
in a Vessel financed under Title XI of the Act which is operating in or 
will be operated in the U.S. coastwise trade, you and any other Person, 
(including the shipowner and any bareboat charterer), must establish 
your United States citizenship, within the definition of ``Citizen of 
the United States'' inSec. 298.2.
    (b) Prior to Letter Commitment. Before we issue the Letter 
Commitment, you and any Person identified in paragraph (a) of this 
section, who is required to establish United States citizenship must 
establish United States citizenship in the form and manner stated in 46 
CFR part 355.
    (c) Commitment Closing. (1) Within 10 days before every Commitment 
Closing, unless we waive this requirement for good cause, you and all 
Persons identified with the project who have

[[Page 123]]

previously established United States citizenship in accordance with 
paragraphs (a) and (b) of this section, must submit pro forma 
Supplemental Affidavits of Citizenship which we have approved for 
Closing as to form and substance, and
    (2) On the date of the Closing, three (3) executed copies of 
Supplemental Affidavits of Citizenship that:
    (i) Show evidence of the continuing United States citizenship of the 
Persons in paragraph (a) of this section; and
    (ii) Bear the date of the Closing.
    (d) Additional information. If we request additional material 
essential to clarify or support evidence of U.S. citizenship, you, the 
Obligor, or any Person identified in paragraph (a) of this section must 
submit the additional information.

(Approved by the Office of Management and Budget under control number 
2133-0012)



Sec.  298.11  Vessel requirements.

    When you apply for a Guarantee, the Vessel for which you intend to 
receive financing for construction, reconstruction, or reconditioning 
must meet the following criteria:
    (a) United States Construction. A Vessel, including an Eligible 
Export Vessel, financed by an Obligation Guarantee must be constructed 
in the United States. United States construction means that the Vessel 
is assembled in a shipyard geographically located within the United 
States.
    (1) A U.S.-flag Vessel must meet the applicable United States Coast 
Guard requirements.
    (2) An Eligible Export Vessel must be constructed in accordance with 
the requirements of the International Maritime Organization and must 
meet the applicable:
    (i) Laws, rules, and regulations of its country of documentation,
    (ii) Treaties, conventions on international agreements to which that 
country is a signatory, and
    (iii) Laws of the ports it serves.
    (b) Actual Cost. We must approve your estimated Actual Cost for the 
construction, reconstruction, or reconditioning of a Vessel as a 
condition for issuance of the Letter Commitment. The estimated cost of 
the Vessel may include escalation for the anticipated construction 
period of the Vessel. We may contact the shipyard directly and may 
require you to have the shipyard that has contracted to build the Vessel 
to submit additional technical data, backup cost details, and other 
evidence if we have insufficient data.
    (c) Class, condition, and operation. The Vessel must be constructed, 
maintained, and operated so as to meet the highest classification, 
certification, rating, and inspection standards for vessels of the same 
age and type imposed by:
    (1) The American Bureau of Shipping (ABS), or
    (2) Another classification society that also meets the inspection 
standards of the United States Coast Guard with respect to the 
documentation of U.S.-flag vessels, or
    (3) In the case of an Eligible Export Vessel, such standards as may 
be imposed by a member of the International Association of 
Classification Societies (IACS), classification societies to be ISO 9000 
series registered or Quality Systems Certificate Scheme qualified IACS 
members who have been recognized by the United States Coast Guard as 
meeting acceptable standards with such recognition including, at a 
minimum, that the society meets the requirements of IMO Resolution 
A.739(18) with appropriate certificates required at delivery, so long as 
the home country of the IACS member accords equal reciprocity, as 
determined by us, to United States classification societies.
    (4) Except in the case of an Eligible Export Vessel, the Vessel must 
be in compliance with all applicable laws, rules, and regulations as to 
condition and operation, including, but not limited to, those 
administered by the:
    (i) United States Coast Guard,
    (ii) Environmental Protection Agency,
    (iii) Federal Communications Commission,
    (iv) Public Health Service, or
    (v) Their respective successor agencies, and
    (vi) All applicable treaties and conventions to which the United 
States is a signatory, including, but not limited to, the International 
Convention for Safety of Life at Sea.

[[Page 124]]

    (d) Documentation. (1) An Eligible Export Vessel must be documented 
in a country that is party to the International Convention for Safety of 
Life at Sea, or other treaty, convention, or international agreement 
governing vessel inspection to which the United States is a signatory, 
and must comply with the applicable laws, rules, and regulations of its 
country of documentation, all applicable treaties, conventions on 
international agreements to which that country is a signatory, and the 
laws of the ports it serves.
    (2) All other Eligible Vessels must be documented under U.S. 
registry.
    (e) Reconstruction or reconditioning. Repairs necessary for the 
Vessel to meet the classification standards approved by us, or any 
regulatory body, or for previous inadequate maintenance and repair, will 
not constitute reconstruction or reconditioning within the meaning of 
this paragraph.
    (f) Condition survey. If your application involves a reconstructed 
or reconditioned Vessel, you must make the Vessel available at a time 
and place acceptable to us so that we may conduct a condition survey. 
You must:
    (1) Pay the cost of the condition survey.
    (2) Ensure that the scope and extent of the condition survey will 
not be less effective than that required by the last ABS special survey 
completed (if the Vessel is classified), next due or overdue, whichever 
date is nearest in accordance with the Vessel's age.
    (3) Ensure that the Vessel meets the standard of the survey 
necessary for retention of class (if the Vessel is classified), and
    (4) Ensure that the operating records of the Vessel reflect normal 
operation of the Vessel's main propulsion and other machinery and 
equipment, consistent with accepted commercial experience and practice.
    (g) Metric Usage. Our preferred system of measurement and weights 
for Vessels and Shipyard Projects is the metric system.



Sec.  298.12  Applicant and operator's qualifications.

    (a) Operator's qualifications. We will not issue a Letter Commitment 
without a prior determination that you, the bareboat charterer, or other 
Person identified in the application as the operator of the Vessel(s) or 
Shipyard Project, possesses the necessary experience, ability and other 
qualifications to properly operate and maintain the Vessel(s) or 
Shipyard Project which serve as security for the Guarantees. You must 
also comply with all requirements of this part.
    (b) Identity and ownership of applicant. In order for us to assess 
the likelihood that the project will be successful, we need information 
about you and the proposed project. To permit this assessment, you must 
provide the following information in your application for Title XI 
guarantees:
    (1) Incorporated companies. If you or any bareboat charterer is an 
incorporated company, you must submit the following identifying 
information:
    (i) Name of company, place and date of incorporation, and tax 
identification number, or if appropriate, international identification 
number of the company;
    (ii) Address of principal place of business; and
    (iii) Certified copy of certificate of incorporation and bylaws.
    (2) Partnerships, limited partnerships, limited liability companies, 
joint ventures, associations, unincorporated companies. If you or any 
bareboat charterer is a partnership, limited partnership, limited 
liability company, joint venture, association, or unincorporated 
company, you must submit the following identifying information:
    (i) Name of entity, place and date of formation, and tax 
identification number, or if appropriate, international identification 
number of entity;
    (ii) Address of principal place of business; and
    (iii) Certified copy of certificate of formation, partnership 
agreement or other documentation forming the entity.
    (3) Other entities. For any entity that does not fit the 
descriptions in paragraphs (b)(1) and (b)(2) of this section, we will 
specify the information that the entity must submit regarding its 
identity and ownership.
    (4) You and any bareboat charterer must provide a brief statement of 
the

[[Page 125]]

general effect of each voting agreement, voting trust or other 
arrangement whereby the voting rights of any interest in you or the 
bareboat charterer are controlled or exercised by any person who is not 
the holder of legal title to such interest.
    (5) You and any bareboat charterer must provide the following 
information regarding the entity's officers, directors, partners or 
members:
    (i) Name and address;
    (ii) Office or position; and
    (iii) Nationality and interest owned (for example, shares owned and 
whether voting or non-voting).
    (c) Business and affiliations of applicants. You must include:
    (1) A brief description of your principal business activities during 
the past five years.
    (2) A list of all business entities that directly or indirectly, 
through one or more intermediaries, control, are controlled by, or are 
under common control with you.
    (3) The nature of the business transacted by each listed entity and 
the relationship between these entities. This information may be 
presented in the form of a chart.
    (4) Whether any of the affiliated entities have previously applied 
for or received Title XI assistance.
    (5) A statement indicating whether the applicant, any predecessor or 
affiliated entity has been in bankruptcy or reorganization under any 
insolvency or reorganization proceeding and if so, give details.
    (6) A statement indicating whether the applicant or any predecessor 
or affiliated entity is now, or during the past five years has been, in 
default under any agreement or undertaking with others or with the 
United States of America, or is currently delinquent on any Federal 
debt, and if so, provide explanatory information.
    (7) A list of your banking references:
    (i) Principal bank(s) or lending institutions(s)--name and address;
    (ii) Nature of relationship; and
    (iii) Individual references--name(s), telephone and fax number of 
banking officer(s).
    (d) Management of applicant. You must include:
    (1) A brief description of the principal business activities during 
the past five years of each officer, director, partner or member you 
listed in paragraph (b)(5) of this section and if these persons (have) 
act(ed) as executive officers in other entities, indicate the names of 
these entities and whether such entities have defaulted on any U.S. 
Government debt, and
    (2) The name and address of each organization engaged in business 
activities which have a direct financial relationship to those carried 
on or to be carried on by you with which any person listed in paragraph 
(d)(1) of this section has any present business connection, the name of 
each such person and, briefly, the nature of such connection.
    (e) Applicant's property and activity. You must provide:
    (1) A brief description of the general character and location of the 
principal assets employed in your business and those of your affiliate, 
other than vessels. Describe financial encumbrances, if any;
    (2) A general description of the vessels currently owned and/or 
operated by you or your affiliates and a description of the areas of 
operation; and,
    (3) In the case of an Eligible Shipyard which is an applicant for a 
guarantee for a Shipyard Project, a brief description of the general 
character (that is, the number of building ways, launch method, drydocks 
and size) and location (that is, water depth, length of riverfront) of 
the principal properties of the applicant employed in its business. You 
must also describe any financial encumbrances.
    (f) Operating ability. (1) You must submit a detailed statement 
showing your ability to successfully operate the financed Vessel(s).
    (2) If a company other than you will operate the Vessel(s), then the 
information in paragraph (f)(1) of this section must be provided for the 
operating company together with a copy of the operating agreement.
    (3) You must submit a copy of any management agreement(s) between 
you and any related or unrelated organization(s) which will affect the 
management of the Title XI Vessel or shipyard.

[[Page 126]]

    (4) In the case of an Eligible Shipyard, which is an applicant for a 
guarantee for a Shipyard Project, a detailed statement must be submitted 
showing your ability to successfully operate the Shipyard Project and 
construct/reconstruct Vessels, including name, education, background of, 
and licenses held by, all senior supervisory personnel concerned with 
the physical operation of the Shipyard Project.
    (5) Where an operator has an historical performance record, we will 
consider this record in evaluating your operating ability. For newly 
formed entities, we will evaluate the performance of affiliates and/or 
companies associated with the principals (where the principals have a 
significant degree of control) in determining your operating ability. 
However, unless the affiliates or principals have an obligation with 
respect to the debt, we will not consider historical performance in 
evaluating your creditworthiness.



Sec.  298.13  Financial requirements.

    (a) In general. To be eligible for guarantees, you and/or your 
parent organization (when applicable), and any other participants in the 
project having a significant financial or contractual relationship with 
you must submit information, respectively, on their financial condition. 
You must submit this information at the time of the application. You 
must supplement this information if we require it in subsequent 
requests. You must submit information satisfactory to us to show that 
financial resources are available to support the Title XI project.
    (b) Cost of the project. You must submit the following cost 
information with respect to the project:
    (1) Vessel financing Guarantees. A detailed statement of the 
estimated Actual Cost of construction, reconstruction, or reconditioning 
of the Vessel(s) including those items which would normally be 
capitalized as Vessel construction costs. Net interest during 
construction is the total estimated construction period interest on non-
equity funds less estimated earnings from the escrow fund, if such fund 
is to be established prior to Vessel(s) delivery.
    (2) Foreign components. (i) You must exclude each item of foreign 
components and services from Actual Cost, unless we specifically grant a 
waiver for the item. We will not grant a waiver for major foreign 
components of the hull and superstructure.
    (ii) In deciding whether to grant a waiver for foreign components 
and services, we will consider your certification, to be reviewed by us, 
stating that:
    (A) A foreign item or service is not available in the United States 
on a timely or price-competitive basis, or
    (B) The domestic item or service is not of sufficient quality.
    (iii) Although excluded from Actual Cost, foreign components of the 
hull and superstructure can be regarded as owner-furnished equipment 
that may be used in satisfying your equity requirements imposed by 
paragraph (f) of this section.
    (3) Costs incurred by written contracts. If any of the costs have 
been incurred by written contracts such as shipyard contract, management 
or operating agreement, you should forward signed copies with the 
application. We may require you to have the contracting shipyard submit 
back-up cost details and technical data. You must submit this 
information in the format given in the Title XI application procedures.
    (4) Shipyard Project. In the case of Shipyard Project, a detailed 
statement of the actual cost of such technology, including those items 
which would normally be capitalizable. If you incurred any of the costs 
through written contracts, you should forward signed copies of the 
contract with the application. We may require you to have manufacturers 
submit back-up cost details and technical data. You must submit this 
information in the format given in the Title XI application procedures.
    (5) Shore facilities, cargo containers, etc. A detailed statement 
showing the actual cost of any shore facilities, cargo containers, etc., 
required to be purchased in conjunction with the project.
    (6) Additional project costs. A detailed statement showing any other 
costs associated with the project which were not included in paragraphs 
(b)(1) through (5) of this section, such as:
    (i) Legal and accounting fees;
    (ii) Printing costs;

[[Page 127]]

    (iii) Vessel insurance;
    (iv) Underwriting fees;
    (v) Fee to a Related Party; and
    (vi) Other fees.
    (7) Request for Actual Cost Approval and Reimbursement. If the 
project involves refinancing, you must also submit the exhibit entitled 
Request for Actual Cost Approval and Reimbursement, its summary sheet 
and supplemental schedules at the time of filing the application.
    (c) Financing. (1) You must:
    (i) Describe, in detail, how the costs of the project (sums referred 
to in paragraph (b) of this section) will be funded and the timing of 
such funding.
    (ii) Include any vessel trade-ins, related or third party 
financings, etc.
    (iii) Provide the proposed terms and conditions of all private 
funding, from both equity and debt sources and clearly identify all 
parties involved.
    (iv) Obtain our approval of the terms and conditions for co-
financing (involving a blend of Title XI and private financing for the 
debt portion), including the ability of the co-financiers to exercise 
their rights against collateral shared with us for any transaction.
    (v) Demonstrate with financial statements that at least 12\1/2\ 
percent, or 25 percent as applicable, of the construction or 
reconstruction costs of the Vessel(s) or the cost of the Shipyard 
Project will be in the form of equity and not additional debt, except to 
the extent allowed by paragraph (h) of this section.
    (vi) Disclose all of the Vessel(s), Shipyard Project financing in 
the format given in the Title XI application procedures.
    (2) Financial Information. You must provide us with financial 
statements, prepared in accordance with U.S. generally accepted 
accounting principles (GAAP), and include notes that explain the basis 
for arriving at the figures except that for Eligible Export Vessels, 
your financial statements must be in accordance with GAAP if formed in 
the U.S., or reconciled to GAAP if formed in a foreign country unless a 
satisfactory justification is provided explaining the inability to 
reconcile. The financial statements must include the following [Note: 
MARAD will accept electronic options (such as facsimile and Internet) 
for transmission of required information to MARAD, if practicable.]:
    (i) The most recent financial statements for you, your parent 
company and other significant participants, as applicable (year end or 
intermediate), and the three most recent audited statements with details 
of all existing debt. If you are a new entity and are to be funded from 
or guaranteed by external source(s), you must provide such statements 
for such source(s);
    (ii) Your pro forma balance sheet and that of any guarantor (if 
applicable) as of the estimated date of execution of the Guarantees 
reflecting the assumption of the Title XI Obligations, including the 
current liability; and
    (iii) Your pro forma balance sheets and that of the guarantor (if 
applicable) for five years after the Closing.

(Approved by the Office of Management and Budget under control number 
2133-0005)

    (d) Financial definitions. For the purpose of this section and 
Sec.Sec. 298.35 and 298.42 of this part:
    (1) ``Company'' means any Person subject to financial requirements 
imposed under paragraph (f) of this section and inSec. 298.35, as well 
as the reporting requirements imposed bySec. 298.42.
    (2) ``Working Capital'' means the excess, if any, of current assets 
over current liabilities, both determined in accordance with GAAP and 
adjusted as follows:
    (i) In determining current assets you must exclude:
    (A) Any securities, obligations or evidence of indebtedness of a 
Related Party or of any stockholder, director, officer or employee (or 
any member of his family) of the Company or of such Related Party, 
except advances to agents required for the normal current operation of 
the Company's vessels and current receivables arising out of the 
ordinary course of business and not outstanding for more than 60 days; 
and
    (B) An amount equal to any excess of unterminated voyage revenue 
over unterminated voyage expenses.
    (ii) In determining current liabilities, you must deduct any excess 
of unterminated voyage expenses over unterminated voyage revenue and add

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one half of all annual charter hire and other lease obligations (having 
a term of more than six months) due and payable within the succeeding 
fiscal year, other than charter hire and such other lease obligations 
already included and reported as a current liability on the Company's 
balance sheet.
    (3) ``Equity'' or ``net worth'' means, as of any date, (the total of 
paid-in-capital stock, paid-in surplus, earned surplus and appropriated 
surplus,) and all other amounts that would be included in net worth in 
accordance with GAAP, but does not include:
    (i) Any receivables from any stockholder, director, Officer or 
employee (or their family) of the Company or from any Related Party 
(other than current receivables arising out of the ordinary course of 
business and not outstanding for more than 60 days), and
    (ii) Any increment resulting from the reappraisal of assets.
    (4) ``Long-Term Debt'' means, as of any date, the total notes, 
bonds, debentures, equipment obligations and other evidence of 
indebtedness that would be included in long term debt in accordance with 
GAAP. You must include any guarantee or other liability for the debt of 
any other Person not otherwise included on the balance sheet.
    (5) ``Capitalizable Cost'' means the aggregate of the Actual Cost of 
the Vessel or Shipyard Project and those other items which customarily 
would be capitalized as Vessel costs or Shipyard Project costs under 
GAAP.
    (6) ``Depreciated Capitalizable Cost'' means the Capitalizable Cost 
of a Vessel or Shipyard Project, depreciated on a straightline basis 
over the same useful life as determined by us for Actual Cost, and 
depreciated as required bySec. 298.21(g).
    (e) Applicability. The financial resources must be adequate to meet 
the Equity requirements in the project and Working Capital requirements, 
as set forth in paragraph (f) of this section.
    (1) The various financial requirements shall be met by the owner of 
the Vessel or Vessels or Shipyard Project to be security to us for the 
Guarantees, except that if the owner is not the operator, the overall 
financial requirements will be allocated among the owner, the operator 
and other parties as determined by us.
    (2) The Company must satisfy the applicable financial requirements, 
in addition to any other financial requirements already imposed or which 
may be imposed upon it in connection with other Vessels financed under 
the Title XI program or in connection with other Shipyard Project 
financed under the Title XI program.
    (3) A determination as to whether the Company has satisfied all 
financial requirements shall be based on the assumption that the 
projected financing has been completed. Accordingly, you must submit:
    (i) A pro forma balance sheet at the time of the application, 
reflecting any adjustment made pursuant to paragraph (f)(1)(i) of this 
section, and
    (ii) A revised pro forma balance sheet, reflecting the completion of 
the projected financing, at least five business days before the first 
Closing at which the Obligations are issued.
    (f) Financial requirements at Closing. Financial requirements can 
apply to one or more Companies, and are determined as follows:
    (1) Owner as operator. Where the owner is to be the Vessel operator, 
minimum requirements at Closing usually are as follows:
    (i) Working Capital. The Company's Working Capital shall not be less 
than one dollar. This Working Capital requirement is based on the 
premise that the Company engages in a service-type activity with only 
normal vessel inventory. If Working Capital includes other inventory, in 
addition to such normal Vessel inventory, we may adjust the requirement 
as appropriate. Also, if we determine that the Company's Working Capital 
includes amounts receivable that it reasonably could not expect to 
collect within one year, we may make adjustments to the Working Capital 
requirements.
    (ii) Long-Term Debt. The Company's Long-Term Debt must not be 
greater than twice its Equity.
    (iii) Equity (net worth). The Company's Equity must be:
    (A) The greater of:
    (1) 50 percent of its Long-Term Debt; or

[[Page 129]]

    (2) 90 percent of its Equity as shown on the last audited balance 
sheet, dated not earlier than six months before the date of issuance of 
the Letter Commitment; or
    (B) Such other amount as may be specified by us.
    (2) Lessee or charterer as operator. Where a lessee or charterer is 
to be the Vessel operator, minimum requirements at Closing usually are 
as follows:
    (i) Working Capital. The operator's Working Capital requirement will 
be the same as that which would have otherwise been imposed on the owner 
as operator under paragraph (f)(1)(i) of this section and based on the 
same premise stated in that paragraph.
    (ii) Long-Term Debt. The operator's Long-Term Debt will be the same 
as that which would have otherwise been imposed on the owner as operator 
under paragraph (f)(1)(ii) of this section.
    (iii) Equity (net worth). The operator's equity requirement will be 
the same as that which would have otherwise been imposed on the owner as 
operator under paragraph (f)(1)(iii) of this section.
    (iv) The owner's Equity shall at least be equal to the difference 
between the Capitalizable Cost or Depreciated Capitalizable Cost of the 
Vessel (whichever is applicable) and the total amount of the Guarantees.
    (3) Owner as General Shipyard Facility. Where the owner of Shipyard 
Project is a General Shipyard Facility, minimum requirements at Closing 
will be the same as those set forth in paragraph (f)(1) of this section 
for an owner as operator.
    (g) Adjustments to financial requirements at Closing. If the owner, 
although not operating a Vessel, assumes any of the operating 
responsibilities, we may adjust the respective Working Capital and 
Equity requirements of the owner and operator, otherwise applicable 
under paragraph (f) of this section, by increasing the requirements of 
the owner and decreasing those of the operator by the same amount.
    (h) Subordinated debt considered to be Equity. With our consent, 
part of the Equity requirements applicable under paragraphs (c) and (f) 
of this section may be satisfied by debt, fully subordinated as to the 
payment of principal and interest on the Secretary's Note and any claims 
secured as provided for in the Security Agreement or the Mortgage. 
Repayment of subordinated debt may be made only from funds available for 
payment of dividends or for other distributions, in accordance with 
requirements of the Title XI Reserve Fund and Financial Agreement 
(described inSec. 298.35). Such subordinated debt shall not be secured 
by any interest in property that is security for Guarantees under Title 
XI, unless the Obligor and the lender enter into a written agreement, 
satisfactory to us, providing, among other things, that if any Title XI 
financing or advance by us to the Obligor shall occur in the future, 
such security interest of the lender shall become subordinated to any 
indebtedness to us incurred by the Obligor and to any security interest 
obtained by us in that property or other property, with respect to the 
subsequent indebtedness.
    (i) Modified requirements. We may waive or modify the financial 
terms or requirements otherwise applicable under this section and 
Sec.Sec. 298.35 and 298.42, upon determining that there is adequate 
security for the Guarantees. We may impose similar financial 
requirements on any Person providing other security for the Guarantees.

[65 FR 45152, July 20, 2000, as amended at 68 FR 62538, Nov. 5, 2003; 69 
FR 61451, Oct. 19, 2004]



Sec.  298.14  Economic soundness.

    (a) Economic Evaluation. We shall not issue a Letter Commitment for 
guarantees unless we find that the proposed project, regarding the 
Vessel(s) or Shipyard Project for which you seek Title XI financing or 
refinancing, will be economically sound. The economic soundness and your 
ability to repay the Obligations will be the primary basis for our 
approval of a Letter Commitment. We will consider the value of the 
collateral for which we will issue the Obligations as only a secondary 
consideration in determining your ability to repay the Obligations.
    (b) Basic feasibility factors. In making the economic soundness 
findings, we

[[Page 130]]

shall consider all relevant factors, including, but not limited to:
    (1) The need in the particular segment of the maritime industry for 
new or additional capacity, including any impact on existing equipment 
for which a guarantee under this title is in effect;
    (2) The market potential for the employment of the Vessel or 
utilization of the Shipyard Project of a General Shipyard Facility over 
the life of the guarantee;
    (3) Projected revenues and expenses associated with employment of 
the Vessel or utilization of the Shipyard Project of a General Shipyard 
Facility;
    (4) Any charters, contracts of affreightment, transportation 
agreements, or similar agreements or undertakings relevant to the 
employment of the Vessel or utilization of the Shipyard Project of a 
General Shipyard Facility;
    (5) For inland waterways, the need for technical improvements 
including but not limited to increased fuel efficiency, or improved 
safety; and
    (6) Other relevant criteria.
    (c) Project Feasibility. To demonstrate the economic feasibility of 
the project over the Guarantee period, you must submit the following 
information:
    (1) Purpose. A detailed purpose for the obligations to be 
guaranteed.
    (2) Necessary exhibits. Necessary exhibits to support your project 
feasibility as supplements to the application.
    (3) Relevant market information. Information regarding the relevant 
market including a written narrative of the market (or potential market) 
for the project including full details on the following, as applicable:
    (i) Nature and amount of cargo/passengers available for carriage and 
your projected share (provide also the number of units; that is 
containers, trailers, etc.);
    (ii) Services or routes in which the Vessel(s) will be employed, 
including an itinerary of ports served, with the arrival and departure 
times, sea time, port time, hours working or idle in port, off hire days 
and reserve or contingency time, proposed number of annual sailings and 
number of annual working days for the Vessel(s) or, with respect to 
Shipyard Project, how the equipment will be employed;
    (iii) Suitability of the Vessel(s) or Shipyard Project for their 
anticipated use;
    (iv) Significant factors influencing your expectations for the 
future market for the Vessel(s) or Shipyard Project, for example, 
competition, government regulations, alternative uses, and charter 
rates; and
    (v) Particulars of any charters, contracts of affreightment, 
transportation agreements, etc. You should supplement the narrative by 
providing copies of any marketing studies and/or supporting information 
(for instance, existing or proposed charters, contracts of 
affreightment, transportation agreements, and letters of intent from 
prospective customers).
    (vi) The potential for purchasing existing equipment of a reasonable 
condition and age from another source, including information regarding:
    (A) Market assessment concerning the availability and cost of 
existing equipment that may be an alternative to new construction or the 
new Shipyard Project;
    (B) The cost of modification, reconditioning, or reconstruction of 
existing equipment to make it suitable for intended use; and
    (C) Descriptions of any bids or offers which you had made to 
purchase existing equipment, especially Vessels which currently are 
financed with Title XI Obligations including date of offer, Vessels, and 
amount of offer.
    (4) Revenues. A detailed statement of the revenues expected to be 
earned from the project based upon the information in paragraph (c) of 
this section. Vessel revenue projections shall include shipping/hire 
rates for current market conditions or market conditions expected to 
exist at the time of Vessel delivery taking into account seasonal or 
temporary fluctuations. The revenues shall be based on a realistic 
estimate of the Vessel(s) or the new Shipyard Project utilization rate 
and at a breakeven rate for the project. A justification for the 
utilization rate shall be supplied and should indicate the number of 
days per year allowed for maintenance, drydocking, inspection, etc.

[[Page 131]]

    (5) Expenses for Vessel financing. For applications for Vessel 
financing, a detailed statement of estimated Vessel expenses including 
the following (where applicable):
    (i) Estimated Vessel daily operating expenses, including wages, 
insurance, maintenance and repair, fuel, etc. and a detailed projection 
of anticipated costs associated with long term maintenance of the 
Vessel(s) such as drydocking and major mid-life overhauls, with a time 
frame for these events over the period of the Guarantee;
    (ii) If applicable, a detailed breakdown of those expenses 
associated with the Vessel(s) voyage, such as port fees, agency fees and 
canal fees that are assessed as a result of the voyage; and
    (iii) A detailed breakdown of annual capital costs and 
administrative expenses, segregated as to:
    (A) Interest on debt;
    (B) Principal amortization; and
    (C) Salaries and other administrative expenses (indicate basis of 
allocation).
    (6) Expenses for a Shipyard Project. For applications for a Shipyard 
Project, a statement of estimated expenses related to the Shipyard 
Project, including the following (where applicable):
    (i) A detailed breakdown of estimated daily operating expenses for 
the shipyard, such as wages, including staffing, and segregated as to 
straight-time, overtime and fringe benefits; utility costs; costs of 
stores, supplies, and equipment; maintenance and repair cost; insurance 
costs; and, other expenses (indicate items included); and
    (ii) A detailed breakdown of annual capital costs and administrative 
expenses, segregated as to:
    (A) Interest on debt;
    (B) Principal amortization; and
    (C) Salaries and other administrative expenses (indicate basis of 
allocation).
    (7) Forecast of Operations. Utilizing the revenues and expenses 
provided in paragraphs (c)(4),(5) and (6) of this section, you shall 
provide a forecast of operating cash flow, as defined in paragraph 
(d)(4) of this section, for the Title XI project for the first full year 
of operations and the next four years. The cash flow statements should 
be footnoted to explain the assumptions used.
    (d) Objective Criteria. We must make a finding of economic soundness 
as to each project based on an assessment of the entire project. In 
order for the project to receive approval, we must determine that a 
project meets the following criteria:
    (1) The projected long-term demand (equal to length of time that you 
request financing) for the particular Vessel(s) or new Shipyard Project 
to be financed must exceed the supply of similar vessels or new shipyard 
project in the applicable markets. We will determine the supply of 
similar vessels and similar shipyard projects based on:
    (i) Existing equipment,
    (ii) Similar vessels or new shipyard project under construction, and
    (iii) The projected need for new equipment in that particular 
segment of the maritime industry.
    (2) We will base our determination of the project's economic 
soundness on the following:
    (i) Conformity of your projections with our supply and demand 
analyses;
    (ii) Availability of charters, letters of intent, outstanding 
contractual commitments, contracts of affreightment, transportation 
agreements or similar agreements or undertakings; and
    (iii) Your existing market share compared with the market share 
necessary to meet projected revenues.
    (3) In cases where market conditions are temporarily inadequate for 
you to service the Obligation indebtedness at the time of Vessel 
delivery, or completion of the Shipyard Project, we may approve your 
application only if you have sufficient outside sources of cash flow to 
service your indebtedness during this temporary period.
    (4) With respect to the asset for which Obligations are to be 
issued, the operating cash flow to Obligation debt service ratio over 
the term of the Guarantee must be in excess of 1:1. Operating cash flow 
means revenues less operating and capital expenses including taxes paid 
but exclusive of interest, accrued taxes, depreciation and amortization 
for the Title XI asset. Debt service means interest plus principal.



Sec.  298.15  Investigation fee.

    (a) In general. Before we issue a Letter Commitment, you shall pay 
us an

[[Page 132]]

investigation fee. The Letter Commitment will state the fee which is 
based on the formula in paragraph (b) of this section.
    (1) The investigation fee covers the cost of the investigation of 
the project described in the application and the participants in the 
project, the appraisal of properties offered as security, Vessel 
inspection during construction, reconstruction, or reconditioning (where 
applicable) and other administrative expenses.
    (2) If, for any reason, we disapprove the application, you shall pay 
one-half of the investigation fees.
    (b) Base Fee. (1) The investigation fee shall be one-half (\1/2\) of 
one percent on Obligations to be issued up to and including $10,000,000, 
plus
    (2) One-eighth (\1/8\) of one percent on all Obligations to be 
issued in excess of $10,000,000.
    (c) Credit for filing fee. You will receive credit for the $5,000 
filing fee that you paid upon filing the original application (described 
inSec. 298.3) towards the investigation fee.



Sec.  298.16  Substitution of participants.

    (a) You may request our permission to substitute participants to a 
Mortgage and/or Security Agreement in a financing that is receiving 
assistance authorized by Title XI of the Act.
    (b) A non-refundable fee of $3,000 is due, payable at the time of 
the request. The fee defrays all costs of processing and reviewing a 
joint application by a mortgagor and/or Obligor and a proposed 
transferee of a Vessel or Shipyard Project, which is security for Title 
XI debt, if the proposed transferee is to assume the Mortgage and/or the 
Security Agreement.



Sec.  298.17  Evaluation of applications.

    (a) In evaluating project applications, we shall also consider 
whether the application provides for:
    (1) The capability of the Vessel(s) serving as a naval and military 
auxiliary in time of war or national emergency.
    (2) The financing of the Vessel(s) within one year after delivery.
    (3) The acquisition of Vessel(s) currently financed under Title XI 
by assumption of the total obligation(s).
    (4) The Guarantees extend for less than the normal term for that 
class of vessel.
    (5) In the case of an Eligible Shipyard, the capability of the 
shipyard to engage in naval vessel construction in time of war or 
national emergency.
    (6) In the case of Shipyard Project, the Guarantees extend for less 
than the technological life of the asset.
    (b) In determining the amount of equity which you must provide, we 
will consider, among other things, the following:
    (1) Your financial strength;
    (2) Adequacy of collateral; and
    (3) The term of the Guarantees.



Sec.  298.18  Financing Shipyard Projects.

    (a) Initial criteria. We may issue Guarantees to finance a Shipyard 
Project at a General Shipyard Facility. We may approve such Guarantees 
after we consider whether the Guarantees will result in shipyard 
modernization and support increased productivity.
    (b) Detailed statement. You must provide a detailed statement, with 
the Guarantee application, which will provide the basis for our 
consideration.
    (c) Required conditions. We shall approve your application for loan 
guarantees under this section if we determine the following:
    (1) The term for such Guarantees will not exceed the reasonable 
economic useful life of the collective assets which comprise this 
Shipyard Project;
    (2) There is sufficient collateral to secure the Guarantee; and
    (3) Your application will not prevent us from guaranteeing debt for 
a Shipyard Project that, in our sole opinion, will serve a more 
desirable use of appropriated funds. In making this determination, we 
will consider:
    (i) The types of vessels which will be built by the shipyard,
    (ii) The productivity increases which will be achieved,
    (iii) The geographic location of the shipyard,
    (iv) The long-term viability of the shipyard,
    (v) The soundness of the financial transaction,
    (vi) Any financial impact on other Title XI transactions, and

[[Page 133]]

    (vii) The furtherance of the goals of the Shipbuilding Act.



Sec.  298.19  Financing Eligible Export Vessels.

    (a) Notification to Secretary of Defense. (1) We will provide prompt 
notice of our receipt of an application for a loan Guarantee for an 
Eligible Export Vessel to the Secretary of Defense.
    (2) During the 30-day period, beginning on the date on which the 
Secretary of Defense receives such notice, the Secretary of Defense may 
disapprove the loan guarantee if the Secretary of Defense makes an 
assessment that the Vessel's potential use may cause harm to United 
States national security interests.
    (3) The Secretary of Defense may not disapprove a loan Guarantee 
under this section solely on the basis of the type of vessel to be 
constructed with the loan Guarantee. The authority of the Secretary of 
Defense to disapprove a loan Guarantee under this section may not be 
delegated to any official other than a civilian officer of the 
Department of Defense appointed by the President, by and with the advice 
and consent of the Senate. We will not approve a loan guarantee 
disapproved by the Secretary of Defense.
    (b) Vessel eligibility. We may not approve a Guarantee for an 
Eligible Export Vessel unless:
    (1) We find that the construction, reconstruction, or reconditioning 
of the Vessel will aid in the transition of United States shipyards to 
commercial activities or will preserve shipbuilding assets that would be 
essential in time of war or national emergency;
    (2) The owner of the Vessel agrees with us that the Vessel shall not 
be transferred to any country designated by the Secretary of Defense as 
a country whose interests are hostile to the interests of the United 
States; and
    (3) We determine that the countries in which the shipowner, its 
charterers, guarantors, or other financial interests supporting the 
transaction, if any, have their chief executive offices or have located 
a substantial portion of their assets, present an acceptable financial 
or legal risk to our collateral interests. Our determination will be 
based on confidential risk assessments provided by the Inter-Agency 
Country Risk Assessment System and will take into account any other 
factors related to the loan guarantee transaction that we deem 
pertinent.



                          Subpart C_Guarantees



Sec.  298.20  Term, redemptions, and interest rate.

    (a) In general. The maturity date of the Obligations must be 
satisfactory to us and must not exceed the anticipated physical and 
economic life of the Vessel or Vessels or Shipyard Project, and may be 
less than but no more than:
    (1) Twenty-five years from the date of delivery from the shipbuilder 
of a single new Vessel which is to be security for Guarantees;
    (2) Twenty-five years from the date of delivery from the shipyard of 
the last of multiple Vessels which are to be security for the Guarantees 
but that the amount of the Guarantees will relate to the amount of the 
depreciated actual cost of the multiple Vessels as of the Closing;
    (3) The later of twenty-five years from the date of original 
delivery of a reconstructed, or reconditioned Vessel which is to be 
security for the Guarantees, or at the expiration of the remaining 
useful life of the Vessel, as we determine; or
    (4) The technological life of the Shipyard Project.
    (b) Required redemptions. Where multiple Vessels or multiple 
Shipyard Project assets are to be used as security for the Guarantees, 
as set forth in paragraph (a) of this section, we may require payments 
of principal prior to maturity (redemptions) regarding all related 
Obligations, as we may deem necessary to maintain adequate security for 
the Guarantees.
    (c) Interest rate. We will make a determination as to the 
reasonableness of the interest rate of each Obligation, taking into 
account the range of interest rates prevailing in the private market for 
similar loans and the risks that we assume.



Sec.  298.21  Limits.

    (a) Actual Cost basis. We will issue a guarantee on an amount of the 
Obligation satisfactory to us based on the

[[Page 134]]

economic soundness of the transaction. The Obligation amount may be less 
than but not more than 75 percent or 87\1/2\ percent, whichever is 
applicable, under the provisions of section 1104A(b)(2) or section 
1104B(b)(2) of the Act of the Actual Cost of the Vessel or Vessels or 
Shipyard Project asset(s).
    (1) If minimum horsepower of the main engine is a requirement for 
Guarantees up to 87\1/2\ percent of the Actual Cost, the standard for 
the horsepower will be continuous rated horsepower.
    (2) Where we refinance existing debt, the amount of new Obligations 
we issue for the existing debt may not exceed the lesser of:
    (i) The amount of outstanding debt being refinanced (whether or not 
receiving assistance under Title XI); or
    (ii) Seventy-five or 87\1/2\ percent, whichever is applicable, of 
the Depreciated Actual Cost of the Vessel or Shipyard Project with 
respect to which the new Obligations are being issued.
    (b) Actual Cost items. Actual Cost is comprised essentially of those 
items which would customarily be capitalized as Vessel or Shipyard 
Project construction costs such as designing, engineering, constructing 
(including performance bond premiums that we approve), inspecting, 
outfitting and equipping.
    (1) Cost items include those items usually specified in Vessel or 
Shipyard Project construction contracts, e.g., changes and extras, cost 
of owner furnished equipment, shoreside spare parts and commitment fees 
and interest on the Obligations or other borrowings incurred during the 
construction period (excluding interest paid on subordinated debt 
considered to be Equity), and less income realized from investment of 
Escrow Fund deposits during the construction period.
    (2) Commissions (which represent a portion of the total shipyard 
contract price) may be included in the foreign equipment and services 
amount of the Actual Cost of an export project, provided:
    (i) A majority of the work done by the parties receiving the 
commissions is in the form of design and engineering work, and
    (ii) The commissions represent a small amount of the total contract 
price.
    (3) You may include Guarantee Fees determined in accordance with the 
provisions of section 1104(e) of the Act as an item of Actual Cost.
    (4) In approving an item of Actual Cost, we will consider all 
pertinent factors.
    (c) Items excludible from Actual Cost. Actual Cost shall not include 
any other costs such as the following:
    (1) Legal fees or expenses;
    (2) Accounting fees or expenses;
    (3) Commitment fees or interest other than those specifically 
allowed;
    (4) Fees, commissions or charges for granting or arranging for 
financing;
    (5) Fees or charges for preparing, printing and filing an 
application for Title XI Guarantees and supporting documents, for 
services rendered to obtain approval of the application and for 
preparing, printing and processing documents relating to the application 
for Guarantees;
    (6) Underwriting or trustee's fees;
    (7) Foreign, federal, state or local taxes, user fees, or other 
governmental charges;
    (8) Investigation fee determined in accordance with section 1104(f) 
of the Act andSec. 298.15;
    (9) Predelivery Vessel operating expenses, Vessel insurance premiums 
and other items which may not be properly capitalized by the owner as 
costs of the Vessel under GAAP;
    (10) The cost of the condition survey required bySec. 298.11(f) 
and all work necessary to meet the standards set forth in that 
paragraph;
    (11) The cost to the Shipowner of a Vessel which is to be 
reconstructed, or reconditioned, e.g., cost of acquisition or repair 
work;
    (12) Generally, any amount payable to the shipyard for early 
delivery of the Vessel;
    (13) Generally, any amount payable to the manufacturer of the 
Shipyard Project for early delivery of the equipment to the General 
Shipyard Facility;
    (14) Predelivery Shipyard Project expenses which may not be properly 
capitalized by the General Shipyard Facility as costs of the Shipyard 
Project under GAAP; and
    (15) The cost of major foreign components and other foreign 
components for

[[Page 135]]

which there is no waiver and their assembly when comprising any part of 
the hull and superstructure of a Vessel.
    (d) Substantiation of Actual Cost. (1) Before we make distribution 
from the Escrow Fund or Construction Fund (described in Sec.Sec. 
298.33 and 298.34), and prior to our final Actual Cost determination for 
each Vessel or Shipyard Project, you must submit to us documents 
substantiating all claimed costs eligible under paragraph (b) of this 
section or, alternatively, appropriate certification of such costs by an 
agent who has received our approval.
    (2) These documents may include, but need not be limited to, copies 
of invoices, change orders, subcontracts, and where we require, 
statements from independent certified or independent licensed public 
accountants that the costs for which you seek payment or reimbursement 
were actually paid or are payable for the construction of a Vessel or 
Shipyard Project.
    (3) You must summarize, index and arrange these documents according 
to cost categories by following the directions contained in our forms.
    (e) Escalation as part of Actual Cost. Escalation clauses in 
construction contracts shall be subject to our approval. After a review 
of the base contract price and the escalation clauses, we shall, in 
order to estimate the Actual Cost amount to be stated in the Letter 
Commitment, add to the approved base contract price the amount of 
estimated escalation as approved by us. We must subsequently approve the 
amount of escalation cost you claimed as a component of Actual Cost.
    (f) Monies received in respect of construction. (1) If you or any 
Person acting on your behalf, from time to time receives moneys due for 
construction of a Vessel or Shipyard Project (described in the Security 
Agreement) from the shipbuilder, guarantors, sureties or other Persons, 
you shall give us written notice of such fact.
    (2) As long as we have not paid the Guarantees, you or other 
recipient shall promptly deposit these moneys with us to be held by the 
Depository in accordance with the Depository Agreement.
    (3) We will determine the extent to which Actual Cost is to be 
reduced by these moneys.
    (4) In no event shall Actual Cost be reduced with respect to 
payments by the shipyard to a Vessel or Shipyard Project owner of 
liquidated damages for late delivery of the Vessel or Shipyard Project .
    (5) If we have paid the Guarantees, you or other recipient must 
promptly pay these moneys, including any liquidated damages, to us for 
deposit into the Maritime Guaranteed Loans account.
    (g) Depreciated Actual Cost. After a Vessel or Shipyard Project has 
been delivered or redelivered (in the case of reconstruction or 
reconditioning), the limitation on the amount of Guarantees will be 75 
or 87\1/2\ percent, whichever is applicable, of the Depreciated Actual 
Cost of the Vessel or Shipyard Project.

[65 FR 45152, July 20, 2000, as amended at 67 FR 61282, Sept. 30, 2002]



Sec.  298.22  Amortization of Obligations.

    (a) Generally, after delivery or completion of Shipyard Project, and 
until maturity of the Obligations, provisions of the Trust Indenture or 
other part of the Documentation require you to make periodic payment of 
principal and interest on the Obligations.
    (b) Usually, the payment of principal (amortization) shall be made 
semi-annually, but in no event, less frequently than on an annual basis, 
and in either case the amortization shall be in equal payments of 
principal (level principal), unless we consent to the periodic payment 
of a constant aggregate amount, comprised of both interest and principal 
components which are variable in amount (level payment). No other 
proposed method of amortization will be allowed which would reduce the 
amount of periodic amortization below that determined under the level 
principal or level payment basis at any time prior to maturity of the 
Obligations, except where:
    (1) You can demonstrate to our satisfaction that there will be 
adequate funds to discharge the Obligations at maturity;
    (2) You establish a fund with the Depository in which you deposit an 
equal

[[Page 136]]

annual amount necessary to redeem the outstanding Obligations at 
maturity; or
    (3) With regard to Eligible Export Vessels, in accordance with such 
other terms as we determine to be more favorable and to be compatible 
with export credit terms offered by foreign governments for the sale of 
vessels built in foreign shipyards.

[65 FR 45152, July 20, 2000, as amended at 67 FR 61282, Sept. 30, 2002]



Sec.  298.23  Refinancing.

    (a) We may approve guarantees of Obligations to be secured by one or 
more Vessels or a Shipyard Project issued to refinance existing Title XI 
debt for either Vessels or for Shipyard Project and existing non-Title 
XI debt, so long as the existing debt has been previously issued for one 
of the purposes set forth in sections 1104(a)(1) through (4) of the Act. 
Section 1104 (a) (1) of the Act requires that, if the existing 
indebtedness was incurred more than one year after the delivery or 
redelivery of the related Vessel or Shipyard Project, the proceeds of 
such Obligations will be applied to the construction, reconstruction or 
reconditioning of other Vessels or Shipyard Project or as provided in 
Sec.  298.24.
    (b) We shall require any security lien on the Vessel(s) or Shipyard 
Project to be discharged immediately before we place a Mortgage or other 
security interest on any of the above assets. You must satisfy all 
necessary eligibility requirements as set forth in subpart B of this 
part, including economic soundness.



Sec.  298.24  Financing a Vessel more than a year after delivery.

    (a) We may approve Guarantees for a Vessel which has been delivered 
(or redelivered in the case of reconstruction or reconditioning of a 
Vessel) more than one year prior to the issuance of the Guarantees only 
if:
    (1) The issuance of the Guarantees would otherwise satisfy the 
requirements of the Act and the regulations in this part, and
    (2) The proceeds of the Obligation financing such existing Vessel 
are used to finance:
    (i) The construction, reconstruction, or reconditioning of a 
different Vessel within one year of that Vessel's delivery or 
redelivery, as the case may be, or
    (ii) Facilities or equipment pertaining to marine operations. Such 
facilities or equipment must be of a specialized nature, used 
principally for servicing vessels and in handling waterborne cargo in 
the close proximity of the berthing area, excluding over-the-road 
equipment (other than chassis and containers), permanent or 
semipermanent structures and real estate, as well as new or less than 
one year old.
    (b) At the Closing of Guarantees covered by this section, you must 
deposit the proceeds of the Obligation into an Escrow Fund established 
to pay for the cost unless you demonstrate to our satisfaction that all 
such costs have been paid.



Sec.  298.25  Excess interest or other consideration.

    We shall not execute Guarantees if any agreement in the 
Documentation directly or indirectly provides for:
    (a) The payment to an Obligee of interest, or other compensation for 
services which have not been performed, in a manner that such 
compensation or payment is being provided as interest in excess of the 
rate approved by us; or
    (b) Grants of security to an Obligee in addition to the Guarantees.



Sec.  298.26  Lease payments.

    You must obtain our approval of the amount and conditions of lease 
or charter hire payments if the payment of principal and interest on 
Obligations would be dependent, in any way, upon the lease or charter 
hire payments for a Vessel or Shipyard Project.



Sec.  298.27  Advances.

    (a) In general. (1) In accordance with section 207 and Title XI of 
the Act, we have the discretion to make or commit to make an advance or 
payment of funds to, or on behalf of the owner, or operator or directly 
to any other person or entity for items, including, but not limited to:
    (i) Principal,
    (ii) Interest,

[[Page 137]]

    (iii) Insurance, and
    (iv) Other vessel-related expenses or fees.
    (2) We will make advances or payments only to protect, preserve or 
improve the collateral held as our security for Title XI debt.
    (3) When requesting an advance, you must demonstrate that:
    (i) Your problems are short term (less than two years) by using 
market and cash flow analysis and other projections.
    (ii) An advance(s), would assist you over temporary difficulties; 
and
    (iii) There is adequate collateral for the advance.
    (b) Filing requirements. (1) You shall apply for an advance or other 
payment as early as is reasonably possible.
    (2) Principal and interest payments. We must receive a request for 
an advance for principal and interest payments at least 30 days before 
the initial payment date.
    (3) Insurance payments. We must receive a request for an advance of 
insurance payments at least 30 days before a renewal or termination 
date.
    (4) Extenuating circumstances. We may consider requests for 
assistance with less notice, upon written documentation of extenuating 
circumstances.
    (5) Supporting data. Any requests for assistance must be accompanied 
by supporting data regarding:
    (i) Need for the advance,
    (ii) Financial assistance you sought from other sources,
    (iii) The measures that you are taking and have taken to alleviate 
the situation,
    (iv) Financial projections,
    (v) Proposed term of the repayment,
    (vi) Current and projected market conditions,
    (vii) Information on other available collateral,
    (viii) Liens and other creditor information, and
    (ix) Any other information which we may request.



                         Subpart D_Documentation



Sec.  298.30  Nature and content of Obligations.

    (a) Single page. An Obligation, in the form of a note, bond of any 
type, or other debt instrument, when engraved, printed or lithographed 
on a single sheet of paper must include on its face the:
    (1) Name of the Obligor,
    (2) Principal sum,
    (3) Rate of interest,
    (4) Date of maturity, and
    (5) Guarantee of the United States, authenticated by the Indenture 
Trustee, if any.
    (b) Several pages. If the Obligation is typewritten, printed or 
reproduced by other means on several pages of paper, the Guarantee of 
the United States and the authentication certificate of the Indenture 
Trustee, if any, may appear at the end of the typewritten Obligation.
    (c) Rights and responsibilities. The instrument which is evidence of 
indebtedness shall also contain all information necessary to apprise the 
Obligees of their rights and responsibilities including, but not limited 
to:
    (1) Time and manner for payment of principal and interest,
    (2) Redemptions,
    (3) Default procedure, and
    (4) Notification (in case of registered Obligations) of sale or 
other transfer of the instruments.



Sec.  298.31  Mortgage.

    (a) In general. Under normal circumstances, a Guarantee shall not be 
endorsed on any Obligation until we receive satisfactory evidence that 
we hold a Mortgage in one or more Vessels or a Mortgage or other 
security interest in the Shipyard Project. During construction of a new 
Vessel or any Shipyard Project, a security interest may be perfected by 
a filing under the Uniform Commercial Code.
    (b) Ensuring validity of security interest. In order to ensure that 
our Mortgages or other security interests are valid and enforceable, we 
shall require that the Obligor obtain legal opinions, in form and 
substance satisfactory to us, from independent, outside legal counsel 
satisfactory to us, including foreign independent outside legal Counsel 
for Eligible Export Vessels, which opinions shall state, among other 
things, that the Mortgage or other security interest(s) are valid and 
enforceable:

[[Page 138]]

    (1) In the country in which the Vessel is documented (or, in the 
case of a security interest, in jurisdictions acceptable to us);
    (2) In the United States; and
    (3) For vessels operating on specified trade routes, in the country 
or countries involved in this service, unless we determine that those 
destinations are too numerous, in which case, we will instead require an 
opinion of foreign validity and enforceability in the Vessel's primary 
port of operation.
    (c) Alternative forms of security. In the case where a Mortgage or 
security interest on the financed assets may not be available or 
enforceable, we will require alternative forms of security.
    (d) Mortgage in our favor. The Security Agreement shall provide that 
upon delivery of a new Vessel or upon final completion of the Shipyard 
Project, or at the time Guarantees are issued with respect to an 
existing Vessel or the Shipyard Project, a Mortgage on the Vessel and a 
Mortgage or other security interest on the Shipyard Project will be 
executed in our favor, unless we determine that a Mortgage or a security 
interest is not available or enforceable in accordance with paragraph 
(c) of this section.
    (e) Filing. You must file the Mortgage with the United States Coast 
Guard's National Vessel Documentation Center. You must file the Mortgage 
for an Eligible Export Vessel with the proper foreign authorities. For 
assets of a General Shipyard Facility, you must file a Mortgage and 
security interest with the proper authorities within the appropriate 
state for recording. After you have recorded the Mortgage, you must 
deliver to us the Mortgage and evidence of the filing of the security 
interest.
    (f) Mortgage secured by multiple Vessels. (1) When two or more 
Vessels are to be security for Guarantees, the Security Agreement may 
provide that one Mortgage relating to all the Vessels (Fleet Mortgage) 
shall be executed, perfected and delivered to us by the Obligor.
    (2) If the Fleet Mortgage relates to undelivered Vessels, the Fleet 
Mortgage will be executed upon delivery of the first vessel. At the time 
of each subsequent Vessel delivery, the Obligor shall execute a 
supplement to the Fleet Mortgage which makes that Vessel subject to our 
Mortgage lien.
    (3) The Fleet Mortgage shall provide that payment by the Obligor of 
the entire amount of Obligations covered or to be covered by Guarantees 
shall be required to discharge the Fleet Mortgage, regardless of the 
amount of the Secretary's Note or Notes issued and outstanding at the 
time of execution and delivery of the Fleet Mortgage or the number of 
Vessels covered by the Fleet Mortgage.
    (4) The discharge date of the Fleet Mortgage shall be the maturity 
date of the Secretary's Note. We may require, as authorized by section 
1104(c)(2) of the Act, such payments of principal prior to maturity 
(redemptions), regarding all related Obligations, as deemed necessary to 
maintain adequate security for the Guarantees.
    (5) Each Fleet Mortgage shall provide that in the event of 
constructive total loss, requisition of title or sale of any Vessel 
covered by the Fleet Mortgage, indebtedness represented by the 
Obligations shall be paid, unless we otherwise determine that there 
remains adequate security for the Guarantees, and the Vessel shall be 
discharged from the Mortgage lien.
    (g) Adequacy of collateral. (1) Under normal circumstances, a First 
Preferred Mortgage on the Vessel(s) or Shipyard Project will be adequate 
security for the Guarantees.
    (2) If, however, we determine that the Mortgage on the Vessel(s) or 
Shipyard Project is not sufficient to provide adequate security, as a 
condition to approving the Letter Commitment or processing the 
application, we may require additional collateral, such as a mortgage(s) 
on other vessel(s) or Shipyard Project or on other assets, special 
escrow funds, pledges of stock, charters, contracts, notes, letters of 
credit, accounts receivable assignments, and guarantees.



Sec.  298.32  Required provisions in documentation.

    (a) Performance under shipyard and related contracts. Generally, 
shipyard and related contracts must contain provisions for:

[[Page 139]]

    (1) Furnishing by the shipyard or contractor of the Shipyard Project 
of satisfactory insurance and a satisfactory performance bond where 
Obligations are issued during the construction period, except that if 
the shipyard or contractor of the Shipyard Project demonstrates to our 
satisfaction that it has sufficient financial resources and operational 
capacity to complete the project, posting of a bond will not be 
required;
    (2) Allowing access to the Vessel or Shipyard Project, as well as 
all related work projects being performed by the contractor and 
subcontractors, to our representative, at all reasonable times, to 
inspect performance of the work and to observe trials and other tests 
for the purpose of determining that the Vessel or Shipyard Project is 
being constructed, reconstructed, or reconditioned in accordance with 
contract plans and specifications approved by us;
    (3) Submitting to us, upon request, one set of shipyard plans, in 
form and substance satisfactory to us, for the Vessel or Shipyard 
Project as built;
    (4) Making periodic payments for the work in accordance with an 
agreed schedule, submitted by the shipyard or contractor, as 
appropriate, in a form acceptable to us, based on percentage of 
completion, after such percentage and satisfactory performance are 
certified by the Obligor, shipyard or contractor, as appropriate, and 
our representative as to each payment;
    (5) Prohibiting the use of proceeds from the sale of Obligations for 
the payment of work performed outside the shipyard, unless we consent in 
writing to such use; and
    (6) Requiring that all components of the hull and superstructure of 
a U.S.-documented Vessel and an Eligible Export Vessel shall be 
assembled in the United States.
    (7) If Obligation will not be issued during the construction period 
of the Vessel and Shipyard Project, requiring that shipyard-related 
contracts shall generally include the provisions specified in paragraphs 
(a)(2), (a)(3) and (a)(6) of this section.
    (b) Assignments and general covenants from Obligor to us. The 
Obligor shall assign rights and shall covenant with us, as we require, 
including, but not limited to, the following:
    (1) Assignment of all or part of the right, title and interest under 
the construction contract and related contracts, except those rights 
expressly reserved therein by the Obligor relating to such things as 
patent infringement and liquidated damages;
    (2) Assignment of rights to receive all moneys which from time to 
time become due regarding Vessel or Shipyard Project construction;
    (3) Assignment, where applicable, of all or a part of the bareboat 
charter, time charter, contracts of affreightment or other agreements 
relating to the use of the Vessel or Shipyard Project and all hire 
payable to the Obligor, and delivery to us of required consents by 
appropriate parties to any such assignments;
    (4) Covenants relating to the filing of satisfactory evidence of 
continuing United States citizenship, in accordance with 46 CFR part 
355, with the exception of Eligible Export Vessels and shipyards with 
Shipyard Projects; warranty of Vessel or Shipyard Project title free 
from all liens other than those specifically excepted; maintaining 
United States documentation of the Vessel or documentation under the 
laws of a country other than the United States with regard to an 
Eligible Export Vessel; compliance with the provisions of 46 U.S.C. 
31301-31343, except that Eligible Export Vessels shall comply with the 
definition of a ``preferred mortgage'' in 46 U.S.C. 31301(6)(B), 
requiring, among other things, that the Mortgage shall comply with the 
mortgage laws of the foreign country where the Vessel is documented and 
shall have been registered under those laws in a public register; Notice 
of Mortgage, payment of all taxes (except if being contested in good 
faith); annual financial statements audited by independent certified or 
independent licensed public accountant.
    (5) Covenants to keep records of construction costs paid by or for 
the Obligor's account and to furnish us with a detailed statement of 
those costs, distinguishing between:
    (i) Items paid or obligated to be paid, attested to by independent 
certified

[[Page 140]]

public accountants unless otherwise verified by us; and
    (ii) Costs of American and foreign materials (including services) in 
the hull and superstructure.
    (6) Covenants to maintain Marine and War Risk Hull and Machinery 
insurance on the Vessel or Eligible Export Vessel in an amount equal to 
110% of the outstanding Obligations or up to the full commercial value 
of the Vessel or Eligible Export Vessel, whichever is greater; Marine 
and War Risk Protection and Indemnity insurance; Interim War Risk 
Binders for Hull and Machinery, and Protection and Indemnity coverages 
underwritten by us as authorized by Title XII of the Act; and such 
additional insurance as may be required by us. All insurance required to 
be maintained shall be placed with the United States Government and 
American and/or British (and/or other foreign, if permitted by us by 
prior written notice) insurance companies, underwriters' associations or 
underwriting funds approved by us through marine insurance brokers and/
or underwriting agents approved by us. All insurance required to be 
maintained shall be placed under the latest (at the time of issue) forms 
of American Institute of Marine Underwriters policies approved by us 
and/or under such other forms of policies which we may approve in 
writing and/or policies issued by or for us insuring the Vessel or 
Eligible Export Vessel against the usual risks provided for under such 
forms, including such amounts of increase value or other forms of ``that 
total loss only'' insurance permitted by the Hull and Machinery 
insurance policies;
    (7) Collateralize other debt due to us under other Title XI 
financings;
    (8) Covenants to maintain shipyard insurance on the Shipyard Project 
in an amount equal to 110% of the outstanding Obligations or up to the 
full commercial value of the Shipyard Project, whichever is greater, and 
such additional insurance as may be required by us; and
    (9) Covenants to maintain additional types of insurance as may be 
required by us with respect to Eligible Export Vessels, i.e. political 
risk insurance, to cover such items as the political, financial, and/or 
economic risk in a foreign country.



Sec.  298.33  Escrow fund.

    (a) Escrow Fund Deposits. At the time of the sale of the 
Obligations, the Obligor shall deposit with the Depository in an escrow 
fund (the ``Escrow Fund'') all of the proceeds of that sale unless the 
Obligor is entitled to withdraw funds under paragraph (b) of this 
section. The Obligor must also deposit into the Escrow Fund on the 
Closing date an amount equal to six months interest at the rate borne by 
the Obligations, unless we find the existence of adequate consideration 
or accept other consideration in lieu of the interest deposit.
    (b) Escrow Fund Withdrawals. You, as Obligor, may make a written 
request for us to disburse funds from the Escrow Fund. Within a 
reasonable time thereafter, we shall disburse directly to the Indenture 
Trustee, any Paying Agent for such Obligations, or any other Person 
entitled to payment any amount which you are obligated to pay or have 
paid, on account of the items and amounts or any other item approved by 
us, provided that we are satisfied with the accuracy and completeness of 
the information contained in the following submissions:
    (1) A responsible officer of the Obligor shall deliver an officer's 
certificate, in form and substance satisfactory to us, stating that:
    (i) There is no default under the construction contract or the 
Security Agreement;
    (ii) There have been no occurrences which have or would adversely 
and materially affect the condition of the Vessel, its hull or any of 
its component parts, or the Shipyard Project;
    (iii) The amounts of the request are in accordance with the 
construction contract including the approved disbursement schedule and 
each item in these amounts is properly included in our approved estimate 
of Actual Cost;
    (iv) With respect to the request, once the contractor is paid there 
will be no liens or encumbrances on the applicable Vessel, its hull or 
component parts, or the Shipyard Project for which the withdrawal is 
being requested except for those already approved by us; and

[[Page 141]]

    (v) If the Vessel or Shipyard Project has already been delivered or 
completed, it is in class, if required, and is being maintained in the 
highest and best condition. The Obligor must also attach an officer's 
certificate of the shipyard and other general contractors, in form and 
substance satisfactory to us, stating that there are no liens or 
encumbrances as provided in paragraph (b)(1)(iv) of this section and 
attaching the invoices and receipts supporting each proposed withdrawal 
to our satisfaction.
    (2) No payment or reimbursement under this section shall be made:
    (i) To any Person until the total amount paid by or for the account 
of the Obligor from sources other than the proceeds of such Obligations 
equals at least 12\1/2\ percent or 25 percent as applicable, of the 
Actual Cost of the Vessel or Shipyard Project is made;
    (ii) To the Obligor which would have the effect of reducing the 
total amounts paid by the Obligor pursuant to paragraph (b)(2)(ii) of 
this section; or
    (iii) To any Person on account of items, amounts or increases 
representing changes and extras or owner furnished equipment, if any, 
unless such items, amounts and increases shall have been previously 
approved by us; provided, however, that when the amount guaranteed by us 
equals 75 percent or less of the Actual Cost and the Obligor 
demonstrates to our satisfaction the ability to pay in the remaining 25 
percent, or more, then after the initial 12\1/2\ percent of Actual Cost 
has been paid by or on behalf of the Obligor for such Vessel or 
completed Shipyard Project and up to 37\1/2\ percent of Actual Cost has 
been withdrawn from the Escrow Fund for such Vessel or Shipyard Project, 
the Obligor must pay the remaining Obligor's equity of at least 12\1/2\ 
percent (as determined by us) before additional monies can be withdrawn 
from the Escrow Fund relating to such Vessel or Shipyard Project.
    (3) We will not be required to make any disbursement except out of 
the cash available in the Escrow Fund. If any sale or payment on 
maturity results in a loss in the principal amount of the Escrow Fund 
invested in securities so sold or matured, the requested disbursement 
from the Escrow Fund shall be reduced by an amount equal to such loss, 
and the Obligor must pay to any Person entitled thereto, the balance of 
the requested disbursement from the Obligor's funds other than the 
proceeds of such Obligations.
    (4) If we assume the Obligor's rights and duties under the 
Obligations or we pay the Guarantees, all amounts in the Escrow Fund 
(including realized income which has not yet been paid to the Obligor), 
shall be paid to us and be credited against any amounts due or to become 
due to us under the Security Agreement and the Secretary's Note.
    (5) Other rights and duties with respect to withdrawals from the 
Escrow Fund shall be set out in the closing documentation in form and 
substance satisfactory to us.
    (c) Investment and liquidation of the Escrow Fund. We may invest the 
Escrow Fund in obligations of the United States. We will deposit amounts 
in the Escrow Fund into an account with the U.S. Treasury Department and 
upon agreement with the Obligor, shall deliver to the U.S. Treasury 
Department instructions for the investment, reinvestment and liquidation 
of the Escrow Fund. We will have no liability to the Obligor for acting 
in accordance with such instructions.
    (d) Income on the Escrow Fund. Unless there is an existing default, 
any income realized on the Escrow Fund shall be paid to the Obligor upon 
our receipt of such income.
    (e) Termination date of the Escrow Fund. The Escrow Fund shall 
terminate 90 days after the delivery date of the last Vessel or Shipyard 
Project covered by the Security Agreement (the ``Termination Date''). In 
the event that on such date the payment of the full amount of the 
aggregate Actual Cost of all of the Vessels or Shipyard Project has not 
been made or the amounts with respect to such Actual Cost are not then 
due and payable, then we and the Obligor by written agreement shall 
extend the Termination Date for such period as we and the Obligor shall 
determine is sufficient to allow for such contingencies. Any amounts 
remaining in the Escrow Fund on the Termination Date which

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are in excess of 87\1/2\ percent or 75 percent of Actual Cost, as the 
case may be, shall be applied to retire a pro rata portion of the 
Obligations.

[65 FR 45152, July 20, 2000, as amended at 67 FR 61282, Sept. 30, 2002]



Sec.  298.34  [Reserved]



Sec.  298.35  Title XI Reserve Fund and Financial Agreement.

    (a) Purpose. In order to provide us with further security and to 
ensure payment of the interest and principal due on the Obligations, we 
will require the Company to enter into a Title XI Reserve Fund and 
Financial Agreement (Agreement) at the first Closing at which the 
Company issues Obligations. We may waive or modify provisions of the 
Agreement based on our evaluation of the aggregate security for the 
Guarantees.
    (b) Financial covenants. There will be two sets of covenants. One 
set of covenants will be imposed regardless of the Company's financial 
condition (primary covenants). The other set of covenants will be 
imposed only if the Company does not meet specific financial conditions 
(supplemental covenants). The primary and supplemental covenants are to 
be set forth in the Agreement. Covenants shall be imposed on the Company 
as follows:
    (1) Primary covenants. So long as Guarantees are in effect the 
Company shall not, without our prior written consent:
    (i) Make any distribution of earnings, except as may be permitted as 
follows:
    (A) From retained earnings in an amount specified in paragraph 
(b)(1)(i)(C) of this section, provided that, in the fiscal year in which 
the distribution of earnings is made there is no operating loss to the 
date of such payment of such distribution of earnings, and there was no 
operating loss in the immediately preceding three fiscal years, or there 
was a one-year operating loss during the immediately preceding three 
fiscal years, but such loss was not in the immediately preceding fiscal 
year, and there was positive net income for the three year period;
    (B) If distributions of earnings may not be made under paragraph 
(b)(1)(i)(A) of this section, a distribution can be made in an amount 
equal to the total operating net income for the immediately preceding 
three fiscal year period, provided that:
    (1) There were no two successive years of operating losses;
    (2) There is no operating loss to the date of such distribution in 
the fiscal year in which such distribution is made; and
    (3) The distribution of earnings made would not exceed an amount 
specified in paragraph (b)(1)(i)(C) of this section;
    (C) Distributions of earnings may be made from earnings of prior 
years in an aggregate amount equal to 40 percent of the Company's total 
net income after tax for each of the prior years, less any distributions 
that were made in such years; or the aggregate of the Company's total 
net income after tax for such prior years, provided that, after making 
such distribution, the Company's Long-Term Debt does not exceed its Net 
Worth. In computing net income for purposes of this paragraph 
(b)(1)(i)(C), extraordinary gains, such as gains from the sale of 
assets, will be excluded;
    (ii) Enter into any service, management or operating agreement for 
the operation of the Vessel or the Shipyard Project (excluding 
husbanding type agreements), or appoint or designate a managing or 
operating agent for the operation of the Vessel or the Shipyard Project 
(excluding husbanding agents) unless approved by us;
    (iii) Sell, mortgage, transfer, or demise charter the Vessel or the 
Shipyard Project or any assets to any non-Related Party except as 
permitted in paragraph (b)(1)(vii) of this section or sell, mortgage, 
transfer, or demise charter the Vessel or any assets to a Related Party, 
unless such transaction is at a fair market value as determined by an 
independent appraiser acceptable to us, and is a total cash transaction;
    (iv) Enter into any agreement for both sale and leaseback of the 
same assets so sold unless the proceeds from such sale are at least 
equal to the fair market value of the property sold;
    (v) Guarantee, or otherwise become liable for the obligations of any 
other Person, except with respect to any undertakings as to the fees and 
expenses

[[Page 143]]

of the Indenture Trustee, except endorsement for deposit of checks and 
other negotiable instruments acquired in the ordinary course of business 
and except as otherwise permitted in this section;
    (vi) Directly or indirectly embark on any new enterprise or business 
activity not directly connected with the business of shipping or other 
activity in which the Company is actively engaged;
    (vii) Enter into any merger or consolidation or convey, sell, demise 
charter, or otherwise transfer, or dispose of any portion of its 
properties or assets (any and all of which acts are encompassed within 
the words ``sale'' or ``sold'' as used in this section), provided that, 
the Company will not be deemed to have sold such properties or assets if 
the net book value of the aggregate of all the assets sold by the 
Company during any period of 12 consecutive calendar months does not 
exceed ten percent of the total net book value of all of the Company's 
assets; the Company retains the proceeds of the sale of assets for use 
in accordance with the Company's regular business activities; and the 
sale is not otherwise prohibited by paragraph (b)(1)(iii) of this 
section. The Company may not consummate such sale without our prior 
written consent if the Company has not, prior to the time of such sale, 
submitted to us, as required, its most recently audited financial 
statements referred to inSec. 298.42(a) and any attempt to consummate 
a sale absent such approval will be null and void ab initio.
    (2) Supplemental Covenants which may become applicable. Unless, 
after giving effect to such transaction or transactions, during any 
fiscal year of the Company, the Company's Working Capital is equal to at 
least one dollar, the Company's Long-Term Debt does not exceed two times 
the Company's Net Worth and the Company's Net Worth is at least the 
amount specified by us, the Company shall not, without our prior written 
consent:
    (i) Withdraw any capital;
    (ii) Redeem any share capital or convert any of the same into debt;
    (iii) Pay any dividend (except dividends payable in capital stock of 
the Company);
    (iv) Make any loan or advance (except advances to cover current 
expenses of the Company), either directly or indirectly, to any 
stockholder, director, officer, or employee of the Company, or to any 
other Related Party;
    (v) Make any investments in the securities of any Related Party;
    (vi) Prepay in whole or in part any indebtedness to any stockholder, 
director, officer, or employee of the Company, or to any Related Party, 
which has a stated maturity of more than one year from such date;
    (vii) Increase any direct employee compensation (as defined in this 
paragraph) paid to any employee in excess of $100,000 per annum; nor 
increase any direct employee compensation which is already in excess of 
$100,000 per annum; nor initially employ or re-employ any person at a 
direct employee compensation rate in excess of $100,000 per annum; 
provided, however, that beginning with January 1, 2000 the $100,000 
limit may be increased annually based on the previous years' closing 
Consumer Price Index for All Urban Consumers published by the Bureau of 
Labor Statistics. For the purpose of this paragraph, the term ``direct 
employee compensation'' is the total amount of any wage, salary, bonus 
commission, or other form of direct payment to any employee from all 
companies with guarantees under the Act as reported to the Internal 
Revenue Service for any fiscal year.
    (viii) Acquire any fixed assets other than those required for the 
maintenance of the Company's existing assets, including normal 
maintenance and operation of any vessel or vessels owned or chartered by 
the Company;
    (ix) Either enter into or become liable (directly or indirectly) 
under charters and leases (having a term of six months or more) for the 
payment of charter hire and rent on all such charters and leases which 
have annual payments aggregating in excess of an amount specified by us;
    (x) Pay any indebtedness subordinated to the Obligations or to any 
other Title XI obligations;

[[Page 144]]

    (xi) Create, assume, incur, or in any manner become liable for any 
indebtedness, except current liabilities, or short term loans, incurred 
or assumed in the ordinary course of business as such business presently 
exists;
    (xii) Make any investment whether by acquisition of stock or 
indebtedness, or by loan, advance, transfer of property, capital 
contribution, guarantee of indebtedness or otherwise, in any Person, 
other than obligations of the United States, bank deposits or 
investments in securities of the character permitted for monies in the 
Title XI Reserve Fund; and,
    (xiii) Create, assume, permit or suffer to exist or continue any 
mortgage, lien, charge or encumbrance upon, or pledge of, or subject to 
the prior payment of any indebtedness, any of its property or assets, 
real or personal, tangible or intangible, whether now owned or 
thereafter acquired, or own or acquire, or agree to acquire, title to 
any property of any kind subject to or upon a chattel mortgage or 
conditional sales agreement or other title retention agreement, except 
loans, mortgages and indebtedness guaranteed by us under Title XI of the 
Act or related to the construction of a vessel approved for Title XI by 
us, and liens incurred in the ordinary course of business as such 
business presently exists.
    (c) Title XI Reserve Fund Net Income. The Agreement shall provide 
that within 105 days after the end of its accounting year, the Company 
will compute its net income attributable to the operation of the 
Vessel(s) that were constructed, reconstructed, reconditioned or 
refinanced with Title XI financing assistance (Title XI Reserve Fund Net 
Income). The computation utilizes a ratio expressed as a percentage, and 
applies this percentage to the Company's total net income after taxes. 
The numerator of the ratio is be the total original capitalized cost of 
all Company Vessels (whether leased or owned) which were constructed, 
reconstructed, reconditioned or refinanced with the assistance of 
Guarantees. The denominator shall be the total original capitalized cost 
of all the Company's fixed assets. In the case of Shipyard Project, the 
Agreement shall provide that within 105 days after the end of its 
accounting year, the Company shall submit its audited financial 
statements showing its net cash flow in a manner acceptable to us, in 
lieu of any other computation of Reserve Fund Net Income specified in 
this section for Vessels. The net income after taxes, computed in 
accordance with GAAP, will be adjusted as follows:
    (1) The depreciation expense applicable to the accounting year shall 
be added back.
    (2) There shall be subtracted:
    (i) An amount equal to the principal amount of debt required to be 
paid or redeemed, and actually paid or redeemed by the Company (other 
than from the Title XI Reserve Fund) during the year; and
    (ii) The principal amount of Obligations retired or paid (as defined 
in the Security Agreement), prepaid or redeemed, in excess of the 
required redemptions or payments which may be used by the Company as a 
credit against future required redemptions or other required payments 
with respect to the Obligations.
    (d) Deposits. Unless the Company, as of the close of its accounting 
year, was subject to and in compliance with the financial requirements 
set forth in paragraph (b)(2) of this section, the Company shall make 
one or more deposits to us to be held by the Depository (the Title XI 
Reserve Fund), as further provided for in the Depository Agreement. The 
amount of deposit as to any year, or period less than a full year, where 
applicable, will be determined as follows:
    (1) Fifty percent of the Title XI Reserve Fund Net Income, less an 
amount equal to 10% of the Company's total original equity investment in 
the Vessel or Vessels, (if the Company is the owner of the assets), will 
be deposited into the Title XI Reserve Fund.
    (2) In the case of Shipyard Project, the shipyard shall make a 
deposit at two percent of its net cash flow, as defined by GAAP, and as 
shown on its audited financial statements.
    (3) Any additional amounts that may be required pursuant to the 
Security Agreement or any other agreement in the documentation to which 
the Company is a party.

[[Page 145]]

    (4) Any additional amounts that may be required, pursuant to 
provisions of the Security Agreement or any other agreement in the 
documentation to which the Company is a party.
    (5) Irrespective of the Company's deposit requirement, as stated in 
paragraphs (d) (1) through (4) of this section, the Company will not be 
required to make any deposits into the Title XI Reserve Fund if any of 
the following events will have occurred:
    (i) The Company will have discharged the Obligations and related 
Secretary's Note and will have paid other sums secured under the 
Security Agreement and Preferred Mortgage;
    (ii) All Guarantees with respect to outstanding Obligations will 
have terminated pursuant to the provisions of the Security Agreements, 
other than by reason of payment of the Guarantees; or
    (iii) The amount in the Title XI Reserve Fund, (including any 
securities at market value), is equal to, or in excess of 50 percent of 
the principal amount of outstanding Obligations.
    (e) Fund in lieu of Title XI Reserve Fund. If the Company has 
established a Capital Construction Fund (CCF), pursuant to section 607 
of the Act, whether interim or permanent, at any time when a deposit 
would otherwise be required to be made into the Title XI Reserve Fund, 
and the Company elects to make such deposits to the CCF, the Company 
must enter into an agreement, satisfactory to us, providing that all 
such deposits of assets therein will be security (CCF Security Amount) 
to the United States in lieu of the Title XI Reserve Fund. The deposit 
requirements of the Title XI Reserve Fund and Financial Agreement will 
be deemed satisfied by deposits of equal amounts in the CCF, and 
withdrawal of the CCF Security Amount will be subject to our prior 
written consent. If, for any reason, the CCF terminates prior to the 
payment of the Obligations, the Secretary's Note and all other amounts 
due under or secured by the Security Agreement or Mortgage, the CCF 
Security Amount will be deposited or redeposited in the Title XI Reserve 
Fund.

[65 FR 45152, July 20, 2000, as amended at 67 FR 61282, Sept. 30, 2002]



Sec.  298.36  Guarantee Fee.

    (a) Rates in general. (1) For annual periods, beginning with the 
date of the Security Agreement and prior to the delivery date of a 
Vessel or Shipyard Project, we shall charge a Guarantee Fee set at a 
rate of not less than \1/4\ of 1 percent and not more than \1/2\ of 1 
percent of the excess of the average principal amount of the Obligations 
estimated to be outstanding during the annual periods covered by said 
Guarantee Fee over the average principal amount, if any, on deposit in 
the Escrow Fund during said annual period (Average Principal Amount of 
Obligations Outstanding).
    (2) For annual periods beginning with the delivery date of a Vessel 
or Shipyard Project, the Guarantee Fee shall be set at an annual rate of 
not less than \1/2\ of 1 percent and not more than 1 percent of the 
Average Principal Amount of Obligations Outstanding during the annual 
periods covered by the Guarantee Fee. You will be responsible for 
payment of the Guarantee Fee.
    (b) Rate calculation. (1) The Guarantee Fee rate generally shall 
vary inversely with the ratio of Equity to Long-Term Debt (Variable 
Rate) of the Person who we consider to be the primary source of credit 
in the transaction (Credit Source), for example,
    (i) The long term time charterer (where the charter hire represents 
the source of payment of interest and principal with respect to the 
Obligations),
    (ii) The guarantor of the Obligations,
    (iii) The Obligor, or
    (iv) The bareboat charterer.
    (2) Where the Variable Rate is used, we may make such adjustments to 
the computation of Equity and Long-Term Debt considered necessary to 
reflect more accurately the financial condition of the Credit Source.
    (3) We shall base our determination of Equity and Long-Term Debt on 
information contained in forms or statements on file with us prior to 
the date on which the Guarantee Fee is to be paid.
    (4) With our consent, you may include in Equity and exclude from 
Long-Term Debt, any subordinated indebtedness representing loans from 
any credit source.

[[Page 146]]

    (5) We may establish a fixed rate or other method of calculation of 
the Guarantee Fee, upon an evaluation of the aggregate security for the 
Guarantees.
    (c) Variable Rate prior to Vessel or Shipyard Project. For annual 
periods beginning prior to the delivery date of a Vessel or Shipyard 
Project being constructed, reconstructed, or reconditioned, the 
Guarantee Fee shall be determined as follows:
    (1) If the Equity is less than 15 percent of the Long-Term Debt, the 
Guarantee Fee rate shall be \1/2\ of 1 percent of the Average Principal 
Amount of Obligations Outstanding during the annual period covered by 
the Guarantee Fee.
    (2) If the Equity is at least 15 percent of the Long-Term Debt, but 
less than the Long-Term Debt, the Guarantee Fee rate shall be \3/8\ of 1 
percent of the Average Principal Amount of Obligations Outstanding 
during the annual period covered by the Guarantee Fee.
    (3) If the Equity is equal to or exceeds the Long-Term Debt, the 
Guarantee Fee rate shall be \1/4\ of 1 percent of the Average Principal 
Amount of Obligations Outstanding during the annual period covered by 
the Guarantee Fee.
    (d) Variable Rate after Vessel or Shipyard Project delivery or 
completion. For annual periods beginning on or after the Vessel or 
Shipyard Project delivery date, the Guarantee Fee shall be determined as 
follows:
    (1) If the Equity is less than 15 percent of the Long-Term Debt, the 
Guarantee Fee rate shall be 1 percent of the Average Principal Amount of 
Obligations Outstanding during the annual period covered by the 
Guarantee Fee.
    (2) If the Equity is at least 15 percent of the Long-Term Debt but 
less than 60 percent of the Long-Term Debt, the Guarantee Fee rate shall 
be \3/4\ of 1 percent of the Average Principal Amount of Obligations 
Outstanding during the annual period covered by the Guarantee Fee.
    (3) If the Equity is at least 60 percent of the Long-Term Debt, but 
less than the Long-Term Debt, the Guarantee Fee rate shall be \5/8\ of 1 
percent of the Average Principal Amount of Obligations outstanding 
during the annual period covered by the Guarantee Fee.
    (4) If the Equity is equal to or exceeds the Long-Term Debt, the 
Guarantee Fee rate shall be \1/2\ of 1 percent of the Average Principal 
Amount of Obligations outstanding during the annual period covered by 
the Guarantee Fee.
    (e) Payment of Guarantee Fee. (1) The Guarantee Fee covering the 
full period of the stated maturity of the Obligations commencing with 
the date of the Security Agreement shall be paid to us concurrently with 
the execution and delivery of said Agreement. The project's entire 
Guarantee Fee payment shall be made by you to us in an amount equal to 
the sum of the present value of the separate products obtained by 
applying the pertinent pre or post delivery Guarantee Fee rate or rates 
to the projected amount of the Average Principal Amount of Obligations 
Outstanding for each year of the stated maturity of the Obligations. In 
calculating the present value used in determining the amount of the 
Guarantee Fee to be paid, we shall use a discount rate based on 
information contained in the President's most recently submitted budget.
    (2) The Guarantee Fee may be included in Actual Cost, is eligible to 
be financed, and is non-refundable.
    (f) Proration of Guarantee Fee. The Guarantee Fee shall be prorated 
where a Vessel delivery is scheduled to occur during the annual period 
with respect to which payment of said Guarantee Fee is being made, as 
follows:
    (1) Undelivered Vessel. If the Guarantee Fee relates to an 
undelivered Vessel, the predelivery rate is applicable to the Average 
Principal Amount of Obligations Outstanding for the period from the date 
of the Security Agreement to the delivery date, and the delivered Vessel 
rate is applicable for the balance of the annual period in which the 
delivery occurs.
    (2) Multiple Vessels. If the Guarantee Fee relates to more than one 
Vessel, the amount of outstanding Obligations will be allocated to each 
Vessel in the manner prescribed inSec. 298.33(d), and an amount shall 
be determined for each Vessel by using the rate that is applicable under 
paragraph (c) or (d) of this

[[Page 147]]

section. The Guarantee Fee shall be the aggregate of the amounts 
calculated for each Vessel.



Sec.  298.37  Examination and audit.

    (a)(1) We shall have the right to examine and audit the books, 
records (including original logs, cargo manifests and similar records) 
and books of account, which pertain directly to the project, of the 
Obligor, bareboat charterer, time charterer or any other Person who has 
an agreement with respect to control of, or a financial interest in, a 
Vessel or Shipyard Project, as well as records of a Related Party and 
domestic agents connected with such Persons, and shall have full, free 
and complete access to these items at all reasonable times.
    (2) We shall have the right to full, free and complete access, at 
all reasonable times, to each Vessel or Shipyard Project for which 
Guarantees are in force.
    (3) When a Vessel is in port or undergoing repairs, we may make 
photostatic or other copies of any books, records and other relevant 
documents or papers being examined or audited.
    (b) The Person in control of the premises where we conduct the 
examination or audit must furnish, without charge, adequate office space 
and other facilities that we reasonably require in performing the 
examination, audit or inspection.



Sec.  298.38  Partnership agreements and limited liability company
agreements.

    Partnership and limited liability company agreements must be in form 
and substance satisfactory to us prior to any Guarantee Closing, 
especially relating, but not limited to:
    (a) Duration of the entity;
    (b) Adequate partnership or limited liability company funding 
requirements and mechanisms;
    (c) Dissolution of the entity and withdrawal of a general partner or 
member;
    (d) The termination, amendment, or other modification of the entity 
without our prior written consent; and
    (e) Distribution of funds or ownership interest.



Sec.  298.39  Exemptions.

    We may exempt an applicant from any requirement of this part, unless 
required by statute or other regulations, in exceptional cases, on 
written findings that:
    (a) The case materially involves factors not considered in the 
promulgation of this part;
    (b)(1) A national emergency makes it necessary to approve the 
exemption, or
    (2) The exemption will substantially relieve the financial liability 
of the United States;
    (c) The exemption will not substantially impact effective regulation 
of the Title XI program, consistent with the objectives of this part;
    (d) The exemption will not be unjustly discriminatory; and
    (e) For Eligible Export Vessels, such exemption would assist in 
creating financing terms that would be compatible with export credit 
terms for the sale of vessels built in shipyards other than those in the 
United States.



 Subpart E_Defaults and Remedies, Reporting Requirements, Applicability 
                             of Regulations



Sec.  298.40  Defaults.

    (a) In General. Provisions concerning the existence and declaration 
of a default and demand for payment of the Obligations (described in 
paragraphs (b) and (c) of this section) shall be included in the 
Security Agreement and in other parts of the Documentation.
    (b) Principal and interest Payment Default. Unless we have assumed 
the Obligor's rights and duties under the Obligation and agreements and 
have made any payments in default under terms in the Obligation or 
related agreements, the following procedures regarding principal and 
interest payment default shall apply:
    (1) No demand shall be made for payment under the Guarantees unless 
the default shall have continued for 30 days (Payment Default).
    (2) After the expiration of said 30-day period, demand for payment 
of all amounts due under the Guarantees must be made no later than 60 
days afterward.

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    (3) After demand for payment is made by or on behalf of the 
Obligees, we shall make payment under the Guarantees, except if we 
determine that a Payment Default has not occurred or that such Payment 
Default has been remedied prior to demand being made.
    (c) Security Default. If a default occurs under the Security 
Agreement which is other than a Payment Default (Security Default), 
section 1105(b) of the Act allows us, in our sole discretion, to declare 
such default a Security Default, and we may notify the Obligee or agent 
of the Obligee of such Security Default, stating that demand for payment 
under the Guarantees must be made no later than 60 days after the date 
of such notification.
    (d) Payment of Guarantees. If we receive notice of demand for 
payment of the Guarantees, we shall, no later than 30 days after the 
date of such demand (provided that we shall not have, upon such terms as 
may be provided in the Obligations or related agreements, prior to that 
demand, assumed the Obligor's rights and duties under the Obligation and 
agreements and shall have made any payments in default), make payment to 
the Obligees, Indenture Trustee or any other agent of the unpaid 
principal amount of Obligations and unpaid interest accrued and accruing 
thereon up to, but not including, the date of payment.



Sec.  298.41  Remedies after default.

    (a) In general. The Security Agreement or other parts of the 
Documentation shall include provisions governing remedies after a 
default, which relate to our rights and duties, the rights and duties of 
the Obligor, and other appropriate Persons.
    (b) Action by the Secretary. (1) We may take the Vessel or Shipyard 
Project and hold, lease, charter, operate or use the Vessel or Shipyard 
Project, accounting only for the net profits to the Obligor after a 
default has occurred and is continuing and before making payment 
required under the Guarantees.
    (2) After making payment required under the Guarantees, we may 
initiate or otherwise participate in legal proceedings of every type, or 
take any other action considered appropriate, to protect rights and 
interests granted to us under:
    (i) Sections 1105(c), 1105(e) and 1108(b) of the Act,
    (ii) The Security Agreement,
    (iii) Other applicable provisions of law, and
    (iv) The Documentation.
    (c) Security proceeds to Secretary. Our interest in proceeds 
realized from the disposition of or collection regarding the security 
granted to us in consideration for the Guarantees (except all proceeds 
from the sale, requisition, charter or other disposition of property 
purchased by us at a foreclosure or other public sale, which proceeds 
shall belong to and vest exclusively in us), shall be an amount equal 
to, but not in excess of, the sum of (in order of priority of 
application of the proceeds):
    (1) All moneys due and unpaid and secured by the Mortgage or 
Security Agreement;
    (2) All advances, including interest thereon, by us, under the 
Security Agreement and all our reasonable charges and expenses;
    (3) The accrued and unpaid interest on the Secretary's Note;
    (4) The accrued and unpaid balance of the principal of the 
Secretary's Note; and
    (5) To the extent of any collaterization by the Obligor of other 
debt due to us from the Obligor under other Title XI financings, such 
other Title XI debt.
    (d) Security proceeds to Obligor. You shall be entitled to the 
proceeds from the sale or other disposition of security, described in 
paragraph (c) of this section, if and to the extent that the proceeds 
realized are in excess of the amounts described in paragraphs (c)(1) 
through (5) of this section.



Sec.  298.42  Reporting requirements--financial statements.

    (a) In general. The financial statements of the Company shall be 
audited at least annually, in accordance with generally accepted 
auditing standards, by independent certified public accountants licensed 
to practice by the regulatory authority of a State or other political 
subdivision of the United States or, licensed public accountants 
licensed to practice by the

[[Page 149]]

regulatory authority or other political subdivision of the United States 
on or before December 31, 1970.
    (b) Eligible Export Vessels. In the case of Eligible Export Vessels, 
the accounts of the Company shall be audited at least annually, and 
unless otherwise agreed to by us, we shall require that the financial 
statements be in accordance with generally accepted accounting 
principles, by accountants as described in paragraph (a) of this section 
or by independent public accountants licensed to practice by the 
regulatory authority or other political subdivision of a foreign 
country, provided such accountants are satisfactory to us. The 
accountants performing such audits may be the regular auditors of the 
Company.
    (c) Reports of Company and other Persons. Except as we require 
otherwise, the Company must file a semiannual financial report and an 
annual financial report, prepared in accordance with generally accepted 
accounting principles, with us as specified in the Documentation. You 
must include:
    (1) The balance sheet and a statement of paid-in-capital and 
retained earnings at the close of the required reporting period,
    (2) A statement of income for the period, and
    (3) Any other statement that we consider necessary to accurately 
reflect the Company's financial condition and the results of its 
operations.
    (d) Required form. We will specify in a letter to the Company the 
form required for reporting and the number of copies that you must 
submit
    (e) Other Persons. We may after providing the Company notice, also 
require the Company to submit financial statements of any other Person, 
directly or indirectly participating in the project, if the financial 
condition of that Person affects our security for the Guarantees.
    (f) Timeliness. The required financial report for the annual period 
will be due within 105 days after the close of each fiscal year of the 
Company, commencing with the first fiscal year ending after the date of 
the Security Agreement. The required semiannual report will be due 
within 105 days after each semiannual period, commencing with the first 
semiannual period ending after the date of the Security Agreement.
    (g) Public accountant's report. The annual report will be 
accompanied by the public accountant's report based on an audit of the 
company's financial statements. We may require an audit by the public 
accountants of the financial statements contained in the company's 
semiannual report. We also may require certification of the semiannual 
report by the accountants. Where independent certification is not 
required, a responsible corporate officer will attach a certification 
that such report is based on the accounting records and, to the best of 
that officer's knowledge and belief, is accurate and complete.
    (h) Leveraged lease financing. If the method of financing involved 
is a leveraged lease financing, or a trust is the owner of the Vessels, 
we may modify the requirements for annual and semiannual accounting 
reports of the Obligor accordingly.
    (i) Letter of confirmation. The Company must furnish, along with its 
financial report, a letter of confirmation issued by its insurance 
underwriter(s) or broker(s) that the Company has paid premiums on 
insurance applicable to the preservation, protection and operation of 
the asset, which information must state the term for which the insurance 
is in force.



Sec.  298.43  Applicability of the regulations.

    (a) The regulations in this part are effective August 21, 2000, and 
apply to all applications made, Letter Commitments, Commitments to 
Guarantee Obligations or Guarantees issued or entered into on or after 
August 21, 2000, under section 1104(a) of the Merchant Marine Act, 1936, 
as amended.
    (b) The regulations in this part do not apply to any applications 
made, Letter Commitments, Commitments to Guarantee Obligations, or 
Guarantees issued under those regulations in effect before August 21, 
2000. See 46 CFR, parts 200 to 499, edition revised as of October 1, 
1996 and 46 CFR, parts 200 to 499, edition revised as of October 1, 1999 
for regulations that apply to applications made, Letter Commitments,

[[Page 150]]

Commitments to Guarantee Obligations, or Guarantees issued before August 
21, 2000.

Subpart F--Administration [Reserved]



                         SUBCHAPTER E [RESERVED]



[[Page 151]]



                 SUBCHAPTER F_POSITION REPORTING SYSTEM





PART 307_ESTABLISHMENT OF MANDATORY POSITION REPORTING SYSTEM 
FOR VESSELS--Table of Contents



Sec.
307.1 Purpose.
307.3 Definitions.
307.5 Provisions of general applicability.
307.7 Information required in report.
307.9 When to report.
307.11 Report changes.
307.13 Where to report.
307.15 Release of information from reports.
307.17 Distress messages and hostile action reports.
307.19 Penalties.

    Authority: Secs. 204(b), 212(A), 1203(a), Merchant Marine Act, 1936, 
as amended (46 U.S.C. 1114(b), 1122(a), 1283)); Pub. L. 97-31; 46 CFR 
1.66.

    Source: 51 FR 18329, May 19, 1986, unless otherwise noted.



Sec.  307.1  Purpose.

    This part establishes that operators of U.S.-flag oceangoing vessels 
in U.S. foreign trade and certain foreign-flag vessels as described in 
46 U.S.C. 1283 must report on their locations according to the 
provisions of this regulation to enhance the safety of vessel operations 
at sea and provide a contingency for events of national emergency.



Sec.  307.3  Definitions.

    As used in this part:
    (a) Administrator means the Maritime Administrator of the Department 
of Transportation.
    (b) MARAD means the Maritime Administration, Department of 
Transportation.
    (c) Coast Guard means the United States Coast Guard, Department of 
Transportation.
    (d) AMVER means the Automated Mutual-Assistance Vessel Rescue System 
operated by the U.S. Coast Guard as it applies to U.S.-flag ships and 
certain non-U.S.-flag ships in U.S. foreign commerce under this 
regulation.



Sec.  307.5  Provisions of general applicability.

    (a) The following operators must comply with the reporting 
requirements contained in this part:
    (1) Operators of United States-flag vessels of one thousand gross 
tons or more, operating in the foreign commerce of the United States.
    (2) Operators of foreign-flag vessels of one thousand gross tons, or 
more, for which an Interim War Risk Insurance Binder has been issued 
under the provisions of Title XII, Merchant Marine Act, 1936, as amended 
(46 U.S.C. 1281 et seq.).
    (b) Operators of other merchant vessels may choose to submit reports 
and have voyage information forwarded to MARAD, when approved by the 
Coast Guard and MARAD. Information voluntarily provided by them will be 
released by Coast Guard only for safety purposes or to satisfy certain 
advance notification requirements of 33 CFR part 160. Requests should be 
addressed to the Maritime Administration, 400 Seventh Street, SW., 
Washington, DC 20590, Attn: MAR-742.



Sec.  307.7  Information required in report.

    (a) Types of Reports. Reports on vessel departure, arrival, position 
and deviation are required under this part. Sailing plans are optional, 
and may be sent prior to departure, or may be combined with departure 
reports.
    (b) Report Content. Content of each type of required report are 
specified below. Note that the word ``MAREP'' must be included in the 
text of each message if MARAD is to receive the information.
    (1) Sailing Plan Report. Sailing plan reports, though optional, must 
contain the following:
    (i) Vessel name,
    (ii) International Radio Call Sign,
    (iii) Intended time of departure,
    (iv) Port of departure and latitude/longitude,
    (v) Port of destination and latitude/longitude,
    (vi) Estimated time of arrival,
    (vii) Route information, and
    (viii) The keyword ``MAREP''.

[[Page 152]]


If optional remarks are included, they must follow at the end of the 
text.
    (2) Departure Report. Departure reports must contain the following:
    (i) Vessel name,
    (ii) International Radio Call Sign,
    (iii) Time of departure,
    (iv) Port of departure,
    (v) Latitude and longitude, and
    (vi) The keyword ``MAREP''.

If optional remarks are included, they must follow at the end of the 
text.
    (3) Position Report. Position reports must contain the following:
    (i) Vessel name,
    (ii) International Radio Call Sign,
    (iii) Time at reported position,
    (iv) Latitude and longitude, and
    (v) The keyword ``MAREP''.

If optional remarks are included, they must follow at the end of the 
text.
    (4) Deviation Report. Deviation reports are necessary to report 
sailing plan changes or other changes and must contain the following:
    (i) Vessel name,
    (ii) International Radio Call Sign,
    (iii) The changes to prior reports, and
    (iv) The keyword ``MAREP''.

If optional remarks are included, they must follow at the end of the 
text.
    (5) Arrival Report. Arrival reports must contain the following:
    (i) Vessel name,
    (ii) International Radio Call Sign,
    (iii) Port name,
    (iv) Latitude and longitude,
    (v) Time of arrival, and
    (vi) The keyword ``MAREP''.

If optional remarks are included, they must follow at the end of the 
text.



Sec.  307.9  When to report.

    (a) Operators required to report under this regulation shall send 
reports during the Radio Officer's normal duty hours.
    (b) Operators shall send reports as follows:
    (1) Departure Reports must be sent as soon as practicable upon 
leaving the Port of Departure.
    (2) Position Reports must be sent within twenty-four hours of 
departure, and subsequently, no less frequently that every forty-eight 
hours until arrival.
    (3) Arrival Reports must be sent immediately prior to or upon 
arrival at the Port of Destination.
    (4) Deviation Reports may be sent at the discretion of the vessel 
operator. Reports may be sent more frequently than the above schedule, 
as, for example, in heavy weather or under other adverse conditions.



Sec.  307.11  Report changes.

    The Administrator, through MARAD advisory or special warning, may 
direct changes in reporting frequency and specify particular information 
to be included in the comments section of AMVER messages.



Sec.  307.13  Where to report.

    To ensure that no charge is applied, all AMVER reports must be 
passed through specified radio stations. Those stations which currently 
accept AMVER reports and apply no coastal station, ship station, or 
landline charge are listed in each issue of the ``AMVER Bulletin'' 
publication, together with respective International Radio Call Sign, 
location, frequency bands, and hours of operation. The ``AMVER 
Bulletin'' is available from AMVER Maritime Relations Office, U.S. Coast 
Guard, Battery Park Building, New York, NY 10004. Although AMVER reports 
may be sent through other stations, the Coast Guard cannot reimburse the 
sender for any charges applied.

[51 FR 18329, May 19, 1986, as amended at 65 FR 47678, Aug. 3, 2000]



Sec.  307.15  Release of information from reports.

    (a) The information collected under these instructions will be 
released to recognized search-and-rescue authorities, to make advance 
notice to the U.S. Coast Guard of arrival in U.S. ports as required by 
certain sections of 33 CFR. The information collected will also be 
forwarded to the MARAD.
    (b) AMVER reports will remain voluntary for foreign ships unless 
otherwise directed by their governments, and will be kept strictly 
confidential by the U.S. Coast Guard. Information collected from such 
foreign ships will not be forwarded to MARAD.

[[Page 153]]

    (c) any information provided in the remarks line will be stored in 
AMVER's automatic data processing system for later review. However, no 
immediate action will be taken, nor will the information be routinely 
passed to other organizations. The remarks line cannot be used as a 
substitute for sending information to other search-and-rescue 
authorities or organizations. However, AMVER will, at the request of 
other SAR authorities, forward remarks line information to the 
requesting agencies.



Sec.  307.17  Distress messages and hostile action reports.

    (a) AWVER reports shall not replace distress messages and hostile 
action reports prescribed by Chapter 5, Defense Mapping Agency (DMA) 
Publication 117.
    (b) Vessel owners or operators subject to this part shall summarize 
distress messages or hostile action reports in the comments sections of 
AMVER reports.



Sec.  307.19  Penalties.

    The owner or operator of a vessel in the waterborne foreign commerce 
of the United States is subject to a penalty of $50 for each day of 
failure to file an AMVER report required by this part. Such penalty 
shall constitute a lien upon the vessel, and such vessel may be libeled 
in the district court of the United States in which the vessel may be 
found.

[[Page 154]]



                    SUBCHAPTER G_EMERGENCY OPERATIONS





PART 308_WAR RISK INSURANCE--Table of Contents



                            Subpart A_General

Sec.
308.1 Eligibility for vessel insurance.
308.2 Requirements for eligible vessels.
308.3 Applications for insurance; warranties; supporting documents; 
          payment of binder fees.
308.4 [Reserved]
308.5 Voluntary contract of commitment.
308.6 Period of interim binders, updating application information and 
          new applications.
308.7 Premiums and payment thereof.
308.8 War risk insurance underwriting agency agreement.

           Subpart B_War Risk Hull and Disbursements Insurance

308.100 Insured amount.
308.101 [Reserved]
308.102 Issuance of interim binder; terms and conditions; fees.
308.103 Insured amounts under interim binder.
308.104 Additional war risk insurance.
308.105 Reporting casualties and filing claims.
308.106 [Reserved]
308.107 War risk hull insurance policy.

          Subpart C_War Risk Protection and Indemnity Insurance

308.200 Insured amount--application.
308.201 [Reserved]
308.202 Issuance of interim binder; terms and conditions.
308.203 Amount insured under interim binder.
308.204 Additional war risk protection and indemnity insurance.
308.205 Reporting casualties and filing claims.
308.206 [Reserved]
308.207 War risk protection and indemnity insurance policy.

              Subpart D_Second Seamen's War Risk Insurance

308.300 Insured amount--application.
308.301 [Reserved]
308.302 Issuance of interim binder; terms and conditions.
308.303 Amounts insured under interim binder.
308.304 Reporting casualties and filing claims.
308.305 [Reserved]
308.306 Second Seamen's War Risk Policy, Form MA-242.

               Subpart E_War Risk Builder's Risk Insurance

308.400 Authority.
308.401 Eligibility for insurance.
308.402 Insurance during vessel construction period.
308.403 Insured amounts.
308.404 Application for insurance.
308.405 Form of application.
308.406 Issuance of policies; terms and conditions.
308.407 Premiums and payment.
308.408 Right of Maritime Administrator to change rate of premium.
308.409 Standard form of War Risk Builder's Risk Insurance Policy, Form 
          MA-283.
308.410 Reporting casualties and filing claims.

                   Subpart F_War Risk Cargo Insurance

                             I--Introduction

308.500 Authority.
308.501 Cargoes on which coverage is available.
308.502 Additional insurance.
308.503 Rate schedules.
308.504 Definition of territories and possessions.

                II--Open Policy War Risk Cargo Insurance

308.505 General.
308.506 Application for an Open Cargo Policy.
308.507 Security for payment of premiums.
308.508 Issuance of an Open Cargo Policy.
308.509 Collateral deposit fund.
308.510 Surety bond.
308.511 Cancellation of Open Cargo Policy.
308.512 Declaration of shipments under Open Cargo Policy.
308.513 Payment of premiums and fees.
308.514 Return premium.
308.515 Payment in event of loss.
308.516 Failure to comply with Clause 21.
308.517 Open Cargo Policy, Form MA-300.
308.518 Standard optional endorsement No. 1, Form MA-300-A.
308.519 Standard optional endorsement No. 2, Form MA-300-B.
308.520 Standard optional endorsement No. 3, Form MA-300-C.
308.521 Application for Open Cargo Policy, Form MA-301.
308.522 Collateral deposit fund, letter of transmittal, Form MA-302.
308.523 Application for revision of Open Cargo Policy, Form MA-303.

[[Page 155]]

308.524 Application for cancellation of Open Cargo Policy, Form MA-304.
308.525 Application for decrease in amount of cash collateral fund, Form 
          MA-305.
308.526 Certificate for repayment of decrease of collateral deposit 
          fund, Form MA-306.
308.527 Application for return premium, Form MA-307.
308.528 Surety Bond A, Form MA-308.
308.529 Surety Bond B, Form MA-309.
308.530 Letter requesting increase or decrease in amount of surety bond, 
          Form MA-310.
308.531 Endorsement of surety bond increasing or decreasing amount of 
          coverage, Form MA-311.
308.532 Release of surety bond, Form MA-312.
308.533 Closing report, Form MA-313.
308.534 Certificate to be attached to closing report, Form MA-313-A.
308.535 Certificate to be attached to final closing report, Form MA-313-
          B.
308.536 Declaration where failure to comply with Clause 21 was 
          inadvertent, Form MA-314.

                III--Facultative War Risk Cargo Insurance

308.538 General.
308.539 Application.
308.540 Premiums.
308.541 Issuance.
308.542 Warranty re thirty-day shipments.
308.543 Cancellation.
308.544 Facultative binder, Form MA-315.
308.545 Facultative cargo policy, Form MA-316.
308.546 Standard optional endorsement No. 1-A, Form MA-316-A.
308.547 Application for return premium, Form MA-317.

                               IV--General

308.548 Standard form of underwriting agency agreement for cargo, Form 
          MA-318.
308.549 Application for appointment of Cargo Underwriting Agent, Form 
          MA-319.
308.550 Certificate, Form MA-320.
308.551 War risk insurance clearing agency agreement for cargo, Form MA-
          321.
308.552 Effective date.

                       Subpart G_Records Retention

308.600 Records retention requirement.

    Authority: Secs. 204, 1202, 1203, 1209, Merchant Marine Act of 1936, 
as amended (46 App. U.S.C. 1114, 1282, 1283, 1289; 49 CFR 1.66).

    Source: 61 FR 1131, Jan. 16, 1996, unless otherwise noted.



                            Subpart A_General



Sec.  308.1  Eligibility for vessel insurance.

    Any vessel within one of the following categories shall be eligible 
for insurance, but shall remain eligible only while meeting the 
qualifications criteria in one of said categories. An eligible vessel is 
not insured unless and until an application is submitted as required in 
subpart B, C, or D of this part 308 and the Maritime Administrator, 
Department of Transportation, (Maritime Administrator) Maritime 
Administration (MARAD), approves said application.
    (a) A vessel registered, enrolled, or licensed under the laws of the 
United States of America (United States); any undocumented vessel owned 
or chartered by or made available to the United States or any department 
or agency thereof; any tug or barge or other watercraft (documented 
under the laws of the United States, or undocumented) owned by a citizen 
of the United States and used in essential water transportation; and 
United States citizen-owned watercraft used in the fishing trade or 
industry, except when used exclusively in or for sport fishing.
    (b) Any vessel, other than a vessel described in paragraph (a) of 
this section determined by the Maritime Administrator to be engaged in 
the national defense or the national economy of the United States and 
subject to an unqualified Contract of Commitment with the United States 
in a form required by the Maritime Administrator, and which is:
    (1) Owned by a United States corporation, or a foreign corporation 
in which a majority of the stock is owned and controlled by a citizen or 
citizens of the United States, whether direct or through intervening 
corporations, foreign or domestic. Where such intervening corporations 
are foreign, the ultimate majority ownership and control of the stock of 
such corporations must be vested in a citizen or citizens of the United 
States as defined in section 1201(d), Merchant Marine Act, 1936, as 
amended (46 App. U.S.C. 1281(d));
    (2) Owned by a foreign corporation which is not directly or 
beneficially owned by a citizen or citizens of the

[[Page 156]]

United States, but which vessel is under a long-term charter or other 
long-term contract covering the use of the vessel on terms deemed by the 
Maritime Administrator to subject the vessel to United States control in 
the event of an emergency. The charterer of such vessel must be either a 
citizen or citizens of the United States or a foreign corporation in 
which a majority of the stock is owned and controlled by a citizen or 
citizens of the United States, whether direct or indirect through 
intervening corporations, foreign or domestic. Where such intervening 
corporations are foreign, ultimate majority ownership and control of the 
stock of such corporations must be vested in a citizen or citizens of 
the United States, as defined in 46 App. U.S.C. 1281(d).
    (c) Any other vessel, at the sole discretion of the Maritime 
Administrator, but only while engaged in a service which has been 
determined by the Maritime Administrator to be in the interest of the 
national defense or the national economy of the United States. Vessels 
in this category are not eligible for war risk insurance interim 
binders.



Sec.  308.2  Requirements for eligible vessels.

    (a) Restrictions--foreign-flag vessels. Interim insurance is 
available on any vessel described inSec. 308.1 (a) and (b) of this 
part, provided application for interim insurance is submitted as 
required in subparts B, C, or D of this part 308, and the Maritime 
Administrator approves said application: Provided, That only vessels of 
Panamanian, Honduran, Bahamian, Republic of the Marshall Islands or 
Liberian registry not more than 20 years old will be considered eligible 
underSec. 308.1 (b) of this part for interim insurance, subject at all 
times to the determination specified in paragraph (b) of this section.
    (b) Special rules--foreign-flag vessels. For the purpose of 
providing interim insurance on vessels described inSec. 308.1(b), the 
Maritime Administrator shall consider the characteristics, employment, 
and general management of the vessel. The Maritime Administrator 
formally determines that the following vessels are engaged in a service 
in the interest of the national defense or the national economy of the 
United States and qualify for an interim binder:
    (1) Vessels substantially engaged in the foreign commerce of the 
United States or which would be required in the event of war or national 
emergency;
    (2) Tankers of not less than 2,000 deadweight tons;
    (3) Dry cargo vessels, including containerships, breakbulk, and dry 
bulk vessels;
    (4) Heavy lift vessels;
    (5) Refrigerated vessels and other classes of ships in short supply 
in the United States-flag fleet;
    (6) Passenger vessels; and
    (7) Other vessels with special capabilities, as determined by the 
Maritime Administrator.
    (c) Vessel Position Reports. All vessels for which war risk 
insurance interim binders have been issued shall file a Vessel Position 
Report. The purpose of this report is to inform cognizant U.S. agencies 
of vessel arrivals, departures and at-sea locations. Failure to make 
required regular reports will cause MARAD to issue a one-time notice of 
default. If failure to report continues, MARAD shall cancel the interim 
binder for the subject vessel and any insurance attaching thereunder. 
MARAD will issue reporting instructions and formats with the binders.
    (d) Notice of change in status of vessel after binder issued. Any 
breach of the warranty prescribed hereunder as to vessels in all 
categories with respect to Department of Commerce Transportation Orders 
T-1 and T-2 (44 CFR Parts 401, 402 and 403), as well as the additional 
warranties as to vessels in categories (b)(1) and (b)(2) of this 
section, with respect to maintenance of eligibility for insurance and 
availability of the insured vessels to the U.S. Government in time of 
emergency, shall terminate the binders and any insurance attaching 
thereunder. In the event of the sale, demise charter, requisition, 
confiscation, change of flag, total loss, or any other change in status 
which, by the terms of the binder causes the binder to terminate, prompt 
notice shall be given in writing to the American War Risk Agency, 14 
Wall Street, New York, NY 10005.

[[Page 157]]

    (e) Nature of change in status of other vessels. It is the intention 
of the parties that any breach of the warranty as to operation in the 
approved service of vessels described inSec. 308.1(c) shall terminate 
the insurance. In the event of the sale, demise charter, requisition, 
confiscation, change of flag, total loss, any other change in status or 
change in operation of the vessel in the approved service prompt notice 
shall be given to the American War Risk Agency, 14 Wall Street, New 
York, NY 10005.



Sec.  308.3  Applications for insurance; warranties; supporting 
documents; payment of binder fees.

    (a) Application, binder forms. A single application for War Risk 
Insurance shall be filed on Form MA-528, specifying the types of 
insurance coverages for which the applicant is applying. A single 
application may be submitted for several vessels, if the application 
identifies each vessel to be insured and the coverage(s) required, by 
completing appendices A and B to that form. An interim binder for war 
risk insurance coverage, of the types described in subparts B, C and D 
of this part, shall be on Form MA-942, which may be obtained from the 
American War Risk Agency or from the Office of Subsidy and Insurance.
    (b) Warranties--(1) In general. Applications for war risk hull and 
protection and indemnity insurance in any eligible category of this Part 
308 shall include a warranty that, at all times during the effective 
period of the binder and any insurance attaching thereunder, the insured 
vessel, regardless of its nation of registry, will comply with 
Department of Commerce Transportation Orders T-1 and T-2 (44 CFR parts 
401, 402, and 403), or any modifications thereof so long as they remain 
in force and that the vessel will not be chartered, unless in accordance 
with the provisions ofSec. 221.11 and 221.13 of this chapter, which 
requirement is applicable to any charter in existence at the time the 
applicant applies for insurance.
    (2) Vessels described inSec. 308.1(a). Applications for war risk 
insurance on a vessel described inSec. 308.1(a) shall contain the 
warranty that at, and from the date of issuance of the interim binder, 
and for and during the term of any insurance attaching thereunder, such 
vessel will remain eligible within its category.
    (3) Vessels described inSec. 308.1(b). Applications for war risk 
insurance on a vessel described inSec. 308.1(b) shall contain the 
warranties that at all times the vessel will remain eligible within its 
applicable category; that the vessel will be made available for use by 
the United States pursuant to the signed Contract of Commitment 
submitted with the insurance applications, as required by the Maritime 
Administration; that the vessel will remain in the approved service; and 
that no controlling interest in the vessel shall be transferred by a 
subsequent sale or long-term charter, except on the condition that the 
successor in interest agrees to be bound by the terms of the applicant's 
Contract of Commitment. All instruments transferring any controlling 
interest in the vessel, including long-term charter or merger 
agreements, shall be submitted to the Maritime Administration for prior 
approval.
    (4) Vessels described inSec. 308.1(c). Applications for war risk 
insurance on a vessel described inSec. 308.1(c) shall contain 
warranties that the vessel will remain in the approved service and that 
any change in flag or service will be reported in advance to the 
Maritime Administration for a new determination as to whether the 
vessel's service is in the interest of the national defense or the 
national economy of the United States. Vessels in this category are not 
eligible for war risk insurance interim binders.
    (5) Vessel locator filing requirements. Applications for insurance 
on vessels in all categories, except tugs and barges and vessels used 
exclusively in the fishing trade or industry, described inSec. 
308.1(a), shall contain a warranty that at all times the vessel will 
file reports as required under the U.S. Merchant Vessel Locator Filing 
System (USMER) as prescribed inSec. 308.2(c) of this section.
    (c) Filing applications for insurance. All applications for 
insurance on a vessel shall be made to the American War Risk Agency, 14 
Wall Street, New York, New York 10005, underwriting

[[Page 158]]

agent for the Maritime Administration.
    (d) Required submissions with--(1) In general. An application for 
insurance on a vessel described inSec. 308.1(b) shall be accompanied 
by:
    (i) A contract of commitment, in the form prescribed inSec. 308.5 
of this part. In the event the vessel is determined to be ineligible 
under the terms of this part 308, the applicant will be so advised and 
the executed contract of commitment and any official foreign government 
action or approval will be returned to the applicant by the Maritime 
Administration.
    (ii) An executed agreement contained in the application for 
insurance that any charter or other contract covering the use of the 
vessel during the period of the binder or any insurance attaching 
thereunder shall be subject to termination or suspension without notice 
in the event the United States requires the use of the vessel under the 
voluntary contract of commitment submitted by the applicant.
    (2) Certification of citizenship. An application for insurance on 
such a vessel shall be supported by execution of the citizenship 
certification, in the format set out in appendix C to Form MA-528, as 
described in paragraph (a) of this section. That certification shall be 
required to establish the U.S. citizenship of the majority ownership and 
control of the vessel-owning corporation, whether that ownership is 
direct or through intervening corporations.
    (3) Existing long-term charters. An application for a vessel in this 
category which is at the time of application under long-term charter or 
other long-term contract, either to the applicant or from the applicant 
to a third party, shall be jointly submitted by the owner and the 
charterer, and in addition to the other materials required under this 
paragraph, shall be accompanied by a copy of the long-term contract 
covering the use of the vessel and all addenda thereto, certified to be 
full and complete copies (except as to rate of hire or freight) and a 
completed appendix C to Form MA-528, establishing the U.S. citizenship 
of the majority of the shareholders and control of the charterer. The 
charterer shall also furnish to MARAD a certified copy of any amendment 
to such charter which may be issued subsequent to the issuance of any 
binder of insurance under this Part 308.
    (4) Foreign government action or approval. An application for a 
vessel in this category also shall be accompanied by a certified copy of 
the evidence of any official action or approval required by the 
government of the country of registry as a prerequisite to the execution 
of a contract of commitment with the United States.
    (5) Additional materials. With respect to a vessel in this category, 
the applicant shall submit the following additional materials:
    (i) A statement describing the service in which the vessel is 
engaged, including a listing of the vessel's voyages and ports of call 
during the immediately preceding six (6) month period, indicating the 
tonnage and type of cargo carried on such voyages and the reasons why 
such service should be deemed to be in the interest of the national 
defense or the national economy of the United States;
    (ii) Material demonstrating the management and financial 
capabilities of the applicant; and
    (iii) In the case of a new vessel or a vessel which has not for the 
six (6) months immediately prior to the date of the application been 
engaged in the foreign commerce of the United States, a statement, 
signed by a responsible company official, certifying the extent to which 
the vessel will be engaged in the foreign commerce of the United States 
for the six (6) months immediately following the issuance of any interim 
binder of insurance under this part 308.
    (e) Requests for changes in binders. All requests for changes in 
binders and inquiries relative to the insurance after the interim 
binders have been issued shall be directed to the American War Risk 
Agency, 14 Wall Street, New York, NY 10005.
    (f) Fees. A check payable in U.S. funds to the ``Maritime 
Administration, Department of Transportation'' for the total amount of 
all binder fees payable by such applicant shall accompany each 
application. Binder fees are not returnable.

[[Page 159]]

    (g) Availability of Application Forms. Form MA-528 may be obtained 
from either the American War Risk Agency (Underwriting Agent), at the 
address in paragraph (e) of this section, or the Maritime 
Administration, Attention: Director, Office of Subsidy and Insurance, 
400 Seventh Street, SW., Washington, DC 20590.

(Approved by the Office of Management and Budget under control number 
2133-0011)



Sec.  308.4  [Reserved]



Sec.  308.5  Voluntary contract of commitment.

    Applications for insurance on vessels described inSec. 308.1(b) 
shall be accompanied by a contract of commitment, in triplicate 
originals, executed by the owner (or by the owner and the charterer 
where required bySec. 308.3). Contracts of commitment to make the 
vessel available to the United States during any period in which vessels 
may be requisitioned under section 902 of the Act (46 App. U.S.C. 1242) 
shall be submitted on standard contract form which may be obtained from 
the American War Risk Agency or MARAD. The effective date of the 
contract of commitment will be the effective date of the binder and will 
be inserted in the contract of commitment by MARAD.



Sec.  308.6  Period of interim binders, updating application information
and new applications.

    (a) All existing interim binders remain in full force and effect 
without the necessity of re-application or the payment of additional 
fees so long as the Secretary of Transportation's authority to provide 
such insurance has been extended and is continuous.
    (b) Assureds under interim binders are required to notify the 
American War Risk Agency annually, by June 30th, of any change in the 
information provided in their original binder applications including, 
but not limited to, change of address, vessel name or vessel 
characteristics.
    (c) New applications for interim binders on U.S.-flag vessels, with 
necessary attachments (as specified in S 308.3), as well as checks for 
the binder fees prescribed made payable to ``Maritime Administration, 
Department of Transportation,'' shall be filed with the American War 
Risk Agency, 14 Wall Street, New York, New York 10005. All interim 
binders on U.S.-flag vessels shall become effective as of the date of 
determination of eligibility by the Maritime Administration.
    (d) New applications for interim binders on U.S. citizen-owned or 
controlled foreign-flag vessels, with necessary attachments (as 
specified inSec. 308.3), as well as checks for the binder fees 
prescribed made payable to ``Maritime Administration, Department of 
Transportation,'' shall be filed for review in accordance with 
eligibility requirements specified inSec. 308.2, and mailed to the 
American War Risk Agency, 14 Wall Street, New York, New York 10005. All 
interim binders on foreign-flag vessels will become effective on the 
date the owner's contract of commitment is executed by the Maritime 
Administration.

(Approved by the Office of Management and Budget under control number 
2133-0011)



Sec.  308.7  Premiums and payment thereof.

    Rate to be fixed promptly upon the happening of the event causing 
the American Institute Hull War Risks and Strikes Clauses dated December 
1, 1977 (including Automatic Termination and Cancellation Provisions) 
for attachment to American Institute Hull Clauses dated June 2, 1977 of 
any war risk policies to become operative and premium shall be payable 
within ten days after receipt of notice of the amount thereof by the 
assured. Premiums shall be paid to the Underwriting Agent that issued 
the binders by check payable to the order of ``Maritime Administration, 
Department of Transportation.'' In the event that it is subsequently 
determined that insurance under interim binders did not attach, premiums 
paid will be refunded by the Maritime Administrator.



Sec.  308.8  War risk insurance underwriting agency agreement.

    Standard form MA-355 of underwriting agency agreement applicable 
shall be executed by the Maritime Administrator and domestic insurance

[[Page 160]]

companies or groups of domestic insurance companies authorized to do a 
marine insurance business in any States of the United States, appointing 
such companies or groups of companies as Underwriting Agents to issue 
binders and policies covering hull, protection and indemnity, and Second 
Seamen's war risk insurance under subparts B, C, and D of this part. It 
shall contain provisions including, but not limited to the appointment 
of the agent, duties of the agent, books and records, compensation, 
standard of performance, indemnification effective date, amendment and 
termination, and nondiscrimination.



           Subpart B_War Risk Hull and Disbursements Insurance



Sec.  308.100  Insured amount.

    An applicant for war risk hull insurance shall state the amount of 
insurance desired but any payment of claim for damage to or actual or 
constructive total loss of the vessel insured shall be made as provided 
inSec. 308.103(a). An applicant desiring disbursements insurance may 
at his option obtain such additional insurance but any claim for loss of 
disbursements as a consequence of the actual or constructive total loss 
of the vessel insured shall be made as provided inSec. 308.103(c).



Sec.  308.101  [Reserved]



Sec.  308.102  Issuance of interim binder; terms and conditions; fees.

    Upon acceptance of an application, an interim binder in the form set 
forth inSec. 308.106, will be issued and there shall be deemed to be 
incorporated therein by references all the terms, conditions, and 
warranties contained in the application for war risk hull and 
disbursements insurance and the standard war risk hull insurance policy 
(set forth inSec. 308.107), to the same extent as if such application 
and policy were made a part of the binder. The binder fee (not 
refundable) for U.S.-flag vessels shall be $25 per application for 
vessels under 500 gross tons; $100 per application for vessels 500 gross 
tons or over; and $100 per LASH or similar type barge application. The 
binder fee (not refundable) for foreign-flag vessels shall be $50 per 
application for vessels under 500 gross tons; $200 per application for 
vessels 500 tons or over; and $200 per LASH or similar type barge 
application. All fees are payable in U.S. funds by check to order of the 
``Maritime Administration, Department of Transportation.''



Sec.  308.103  Insured amounts under interim binder.

    (a) Valuation. The valuation in the policy for damage to, or actual 
or constructive total loss of the vessel insured shall be a stated 
valuation (exclusive of National Defense features paid for by the 
Government) determined by the Secretary of Transportation which shall 
not exceed the amount that would be payable if the vessel had been 
requisitioned for title under section 902(a) of the Merchant Marine Act, 
1936, as amended (46 App. U.S.C. 1242(a)) at the time of the attachment 
of the insurance under said policy: Provided, however, That in the case 
of a construction subsidized vessel, for the period of insurance prior 
to requisition for title or use, the valuation so determined shall be 
reduced by such proportion as the amount of construction subsidy paid 
with respect to the vessel bears to the entire construction cost and 
capital improvements thereof (excluding the cost of national defense 
features), and for the period of insurance after requisition for use the 
valuation so determined shall not exceed the amount which would be 
payable under 46 App. U.S.C. 1242(a) in the case of requisition for 
title or use: Provided, further, that the insured shall have the right 
within sixty days after the attachment of the insurance under said 
policy, or within sixty days after determination of such valuation by 
the Secretary of Transportation, whichever is later, to reject such 
valuation, and shall pay, at the rate provided for in said policy, 
premiums upon such asserted valuation as the insured shall specify at 
the time of rejection, but such asserted valuation shall not operate to 
the prejudice of the Government in any subsequent action on the policy. 
In the event of the actual or constructive total loss of the vessel, if 
the insured has not rejected such valuation the amount of any claim 
therefor

[[Page 161]]

which is adjusted, compromised, settled, adjudged, or paid shall not 
exceed such stated amount, but if the insured has so rejected such 
valuation, the insured shall be paid as a tentative advance only, 75 per 
centum of such valuation so determined by the Secretary of 
Transportation and shall be entitled to sue the United States in a court 
having jurisdiction of such claims to recover such valuation as would be 
equal to the just compensation which such court determines would have 
been payable if the vessel had been requisitioned for title under 46 
App. U.S.C. 1242(a) at the time of the attachment of the insurance under 
said policy: Provided, however, That in the case of a construction-
subsidized vessel, the valuation determined by the court as such just 
compensation for any period of insurance prior to actual requisition for 
title or use of the vessel shall be reduced by such proportion as the 
amount of construction subsidy paid with respect to the vessel bears to 
the entire construction cost and capital improvements thereof (excluding 
the cost of national defense features), and for any period of insurance 
after actual requisition for use, the valuation determined by the court 
shall be the amount which would have been payable under 46 App. U.S.C. 
1212 in the case of requisition for title: And provided further, that in 
the event of an election by the insured to reject the stated valuation 
fixed by the Secretary of Transportation and to sue in the courts, the 
amount of the judgment will be payable without regard to any limitations 
provided by statute, although the excess of any amounts advanced on 
account of just compensation that is over the amount of the court 
judgment shall be required to be refunded by the insured. In the event 
of such court determination, premiums under the policy shall be adjusted 
on the basis of the valuation as finally determined and of the rate 
provided for in said policy. The ``stated valuation'' of the vessel 
insured refers to the vessel as described inSec. 309.5 of this 
chapter.
    (b) Insurance risks. Insurance risks covered by the terms of the 
standard form of war risk hull insurance policy (Sec.  308.107), except 
damage to or actual or constructive total loss of the vessel insured as 
set forth in paragraph (a) of this section and loss of disbursements 
(limited to consumable and subsistence stores, slop chests, bar stock 
and bunker fuel lost as a consequence of the actual or constructive 
total loss of the vessel insured) as set forth in paragraph (c) of this 
section and identified as disbursements, shall be insured for an amount 
not in excess of the ``sum insured'' as referred to in said policy.
    (c) Disbursements. Disbursements shall be insured as authorized 
under section 1203(c), Title XII, Merchant Marine Act, 1936, as amended, 
(46 App. U.S.C. 1283(c)) and shall be limited to consumable and 
subsistence stores, slop chests, bar stock and bunker fuel. 
Disbursements insurance shall be optional and is insurance additional to 
the war risk hull insurance provided under this subpart, and payment of 
claim shall be limited to the actual value of the disbursements lost as 
a consequence of the actual or constructive total loss of the vessel 
insured.



Sec.  308.104  Additional war risk insurance.

    Owners or charterers may obtain, on an excess basis, additional war 
risk insurance in such amounts as desired and such insurance shall not 
inure to the benefit of the Maritime Administrator as underwriter.



Sec.  308.105  Reporting casualties and filing claims.

    All casualties occurring after insurance under a binder has attached 
shall be reported promptly to the Underwriting Agent that issued the 
binder and all claim documents shall likewise be filed with such 
Underwriting Agent, but payment of the amounts due in settlement of 
claims will be made by the Maritime Administrator.



Sec.  308.106  [Reserved]



Sec.  308.107  War risk hull insurance policy.

    Standard Form MA-240, issued by the Maritime Administrator, acting 
for the United States, through authority delegated by the Secretary of 
Transportation, may be obtained from the American War Risk Agency or 
MARAD.

[[Page 162]]



          Subpart C_War Risk Protection and Indemnity Insurance



Sec.  308.200  Insured amount--application.

    An applicant for war risk protection and indemnity insurance shall 
state the amount of insurance desired but such amount shall not exceed 
$750 per gross ton of the Vessel.



Sec.  308.201  [Reserved]



Sec.  308.202  Issuance of interim binder; terms and conditions.

    Upon acceptance of an application, an interim binder in form as set 
forth inSec. 308.3 will be issued and there shall be deemed to be 
incorporated therein by reference all the terms, conditions, and 
warranties contained in the application for war risk protection and 
indemnity insurance (set forth inSec. 308.3) and the standard war risk 
protection and indemnity insurance policy (set forth inSec. 308.207) 
to the same extent as if such application and policy were made a part of 
the binder. The binder fee (not refundable) shall be $100 per 
application for U.S.-flag LASH or similar type barges; $25 per 
application for all other U.S.-flag vessels; $200 per application for 
foreign-flag LASH or similar type barges; and $50 per application for 
all other foreign-flag vessels. All fees are payable in U.S. funds by 
check to the order of ``Maritime Administration, Department of 
Transportation.''



Sec.  308.203  Amount insured under interim binder.

    The amount insured shall be the amount stated in the application, 
but not in excess of $750 per gross ton of the vessel.



Sec.  308.204  Additional war risk protection and indemnity insurance.

    Owners or charterers may obtain, on an excess basis, additional war 
risk protection and indemnity insurance in such amounts as desired and 
such insurance shall not inure to the benefit of the Maritime 
Administrator, as underwriter.



Sec.  308.205  Reporting casualties and filing claims.

    All casualties occurring after insurance under a binder has attached 
shall be reported promptly to, and all claim documents filed with the 
Office of Subsidy and Insurance, Maritime Administration, Department of 
Transportation, Washington, DC, 20590.



Sec.  308.206  [Reserved]



Sec.  308.207  War risk protection and indemnity insurance policy.

    The standard form of war risk protection and indemnity insurance 
policy, Form MA-241, may be obtained from the American War Risk Agency 
or MARAD.



              Subpart D_Second Seamen's War Risk Insurance



Sec.  308.300  Insured amount--application.

    An applicant for Second Seamen's war risk insurance shall not state 
the amount of insurance desired, which shall be as provided inSec. 
308.303.



Sec.  308.301  [Reserved]



Sec.  308.302  Issuance of interim binder; terms and conditions.

    Upon acceptance of an application, an interim binder in form as set 
forth inSec. 308.3 will be issued and there shall be deemed to be 
incorporated therein by reference all the terms, conditions, and 
warranties contained in the application for Second Seamen's war risk 
insurance (set forth inSec. 308.3) and the Second Seamen's War Risk 
Policy (1955) (set forth inSec. 308.306) to the same extent as if such 
application and policy were made a part of the binder. The binder fee 
(not refundable) shall be $75 per application for U.S.-flag vessels and 
$150 per application for foreign-flag vessels. All fees are payable in 
U.S. funds by check to the order of ``Maritime Administration, 
Department of Transportation.''



Sec.  308.303  Amounts insured under interim binder.

    The amounts insured are the amounts specified in the Second Seamen's 
War Risk Policy (1955) or as

[[Page 163]]

modified by shipping articles, collective bargaining agreements or other 
applicable employment agreements which are in effect as of the date of a 
casualty involving the subject vessel. Upon the attachment of this 
binder, the number of crew members and modified benefits payable as of 
that date shall be declared immediately to the Underwriting Agent that 
issued the binder. Any subsequent changes shall be likewise declared.



Sec.  308.304  Reporting casualties and filing claims.

    All casualties occurring after insurance under a binder has attached 
shall be reported promptly to, and all claim documents filed with, the 
Maritime Administration, Attention: Director, Office of Subsidy and 
Insurance, Washington, DC 20590.



Sec.  308.305  [Reserved]



Sec.  308.306  Second Seamen's War Risk Policy, Form MA-242.

    (a) The standard form of Second Seamen's War Risk Policy Form MA-
242, may be obtained from the American War Risk Agency or MARAD.
    (b) [Reserved]



               Subpart E_War Risk Builder's Risk Insurance



Sec.  308.400  Authority.

    The Secretary of Transportation has delegated authority to the 
Maritime Administrator to perform the functions vested in the Secretary 
of Transportation by Title XII of the Merchant Marine Act, 1936, as 
amended. The Maritime Administrator, pursuant to a finding by the 
Secretary under section 1202(a) of the Act authorized, (46 App. U.S.C. 
1982(a)) has authorized the issuance of war risk insurance on American 
vessels under construction in shipyards in the United States.



Sec.  308.401  Eligibility for insurance.

    A vessel is eligible for insurance if it is an American vessel as 
defined in section 1201(a), Title XII of Merchant Marine Act, 1936, as 
amended, (46 App. U.S.C. 1281) being constructed in a shipyard within 
the United States.



Sec.  308.402  Insurance during vessel construction period.

    (a) Prelaunching period. This period is from the date and time the 
first material destined for inclusion as part of the vessel becomes at 
risk at the shipyard of the builder to the date and time the vessel 
first becomes water-borne after launching.
    (b) Postlaunching period. This period is from the date and time the 
vessel first becomes water-borne after launching to the date and time of 
delivery of the vessel by the builder.
    (c) Portions of periods. A vessel may be insured for a portion of 
either period as cited in paragraph (a) or (b) of this section at the 
sole discretion of the Maritime Administrator.



Sec.  308.403  Insured amounts.

    (a) Prelaunching period. The amount insured during this period will 
be the cost of material destined for inclusion as a part of the vessel 
at risk at the shipyard of the builder, plus the cost of labor, other 
direct charges, overhead, and profit not exceeding 10 percent, all as 
determined from the builder's records.
    (b) Postlaunching period. The amount insured during this period will 
be: (1) An amount not in excess of the difference in amount between the 
total amount of war risk insurance obtainable from companies authorized 
to do an insurance business in a State of the United States and the 
contract price of the vessel plus the cost of the materials and 
equipment furnished by the owner and not included in such contract 
price, or (2) an amount not in excess of the contract price of the 
vessel plus the cost of materials and equipment furnished by the owner 
and not included in the contract price: Provided, That no war risk 
insurance is obtainable from companies authorized to do an insurance 
business in a State of the United States.
    (c) Maximum liability. The amount of any claim for damage to or the 
total or constructive total loss of the vessel adjusted, compromised, 
settled, adjudged or paid shall not exceed the amount insured: Provided, 
That the amount payable hereunder shall not exceed the

[[Page 164]]

maximum sum which the Maritime Administrator, as Underwriter, is 
authorized to pay under any applicable Acts of Congress: Provided, 
further, That where MARAD is an Excess Underwriter, the amount payable 
under this insurance for damage to or the total or constructive total 
loss of the vessel, after all sums due and payable under primary and 
excess insurance written by commercial Underwriters have been exhausted, 
shall be the balance, if any, of said claims.



Sec.  308.404  Application for insurance.

    Application for insurance shall be made to the Maritime 
Administration, Attention: Director, Office of Subsidy and Insurance, 
Washington, DC 20590. The applications shall be signed by all parties to 
be named as assureds, unless they have filed with the Director, Office 
of Subsidy and Insurance, written designations of a broker or brokers to 
act for them, in which case the applications may be signed by such 
broker or brokers.



Sec.  308.405  Form of application.

    Applications shall be submitted in duplicate and may be obtained 
from the American War Risk Agency or MARAD.



Sec.  308.406  Issuance of policies; terms and conditions.

    Upon acceptance of an application, a policy in the form specified in 
Sec.  308.409 will be issued with endorsements MA-283(A) and MA-283(D), 
or MA-283(B) and MA-283(D), or MA-283(C), and MA-283(D), as appropriate.



Sec.  308.407  Premiums and payment.

    For the prelaunching period premium will be charged on the average 
value at risk during each calendar month or the daily pro rata part 
thereof for periods of less than one calendar month. For the 
postlaunching period premium will be charged on the amount insured for 
the full period. Premiums shall be due and payable within thirty days 
after receipt by the Assured of notice of the amount thereof and if not 
paid within that period the insurance shall become null and void and of 
no effect from the beginning of the period for which the premium charge 
is made unless the Maritime Administrator agrees otherwise. Payment 
shall be made to the Maritime Administration, Department of 
Transportation, Washington, DC 20590, by check payable to the order of 
``Maritime Administration, Department of Transportation.''



Sec.  308.408  Right of Maritime Administrator to change rate
of premium.

    The Maritime Administrator, acting for the Secretary of 
Transportation, shall have the right to change the rate of premium at 
any time, and unless the revised rate of premium is accepted in writing 
by the Assured within fifteen days after receipt by the Assured of 
notice of the revised rate, the policy shall become null and void and of 
no effect as of midnight, Standard Time, at the location of the shipyard 
on the fifteenth day after receipt of said notice. Premium at the 
revised rate shall be payable for the fifteen-day period during which 
the insurance remained in force unless the Assured, within such period, 
dispatches notice to the Maritime Administration by telegraph of his 
refusal to accept such revised rate of premium, in which event premium 
at the revised rate shall be payable for that portion of the fifteen-day 
period prior to dispatch of such notice. Upon the dispatch of such 
notice of non-acceptance the insurance shall terminate.



Sec.  308.409  Standard form of War Risk Builder's Risk Insurance
Policy, Form MA-283.

    The standard form of War Risk Builder's Risk Insurance Policy, Form 
MA-283 may be obtained from the American War Risk Agency or MARAD.



Sec.  308.410  Reporting casualties and filing claims.

    Casualties shall be reported promptly to, and all claims documents 
filed with MARAD, Attention, Director, Office of Subsidy and Insurance, 
Washington, DC 20590.

[[Page 165]]



                   Subpart F_War Risk Cargo Insurance

                             I--Introduction



Sec.  308.500  Authority.

    The Secretary of Transportation has delegated authority to the 
Maritime Administrator to perform the functions vested in the Secretary 
by Title XII of the Merchant Marine Act, 1936, as amended, which 
authority includes the insurance set forth in this Subpart, as provided 
under section 1203(b) of the Act (46 App. U.S.C. 1283(b)). For the 
purposes of this Subpart F--War Risk Cargo Insurance, the terms 
``cargo'' and ``cargoes'' as used herein shall include loaded or empty 
containers located aboard U.S.-flag and foreign-flag vessels insured 
under Title XII, Merchant Marine Act, 1936, as amended. Cargo war risk 
insurance will be written under either an open policy or a facultative 
policy in accordance with the provisions of this subpart.



Sec.  308.501  Cargoes on which coverage is available.

    The Maritime Administrator will be prepared to provide marine 
insurance against loss or damage by the risks of war under approved 
clauses on shipments of cargoes coming within one or more of the 
following categories:
    (a) Shipped or to be shipped on any American vessel, as defined in 
section 1201(a) of the Merchant Marine Act, 1936, as amended (46 App. 
U.S.C. 1281(a));
    (b) Shipped or to be shipped on any foreign flag vessels owned by 
citizens of the United States;
    (c) Owned by citizens or residents of the United States, its 
Territories or possessions;
    (d) Imported to, or exported from, the United States, its 
Territories or possessions, under contracts of sale or purchase by the 
terms of which the risk of loss by war risks or the obligation to 
provide insurance against such risks is assumed by or falls upon a 
citizen or resident of the United States, its Territories or 
possessions;
    (e) Sold or purchased by citizens or residents of the United States, 
its Territories or possessions, under contracts of sale or purchase by 
the terms of which the risk of loss by war risks or the obligation to 
provide insurance against such risks is assumed by or falls upon a 
citizen or resident of the United States, its Territories or 
possessions;
    (f) Shipped between ports in the United States, or between ports in 
the United States and its Territories and possessions, or between ports 
in such Territories or possessions; and
    (g) Shipped or to be shipped on any foreign flag vessels, whether or 
not owned by citizens of the United States, if such vessels are engaged 
in transportation in the water-borne commerce of the United States or in 
such other transportation by water or such other services as may be 
deemed by the Maritime Administrator to be in the interest of the 
national defense or the national economy of the United States, when so 
engaged.



Sec.  308.502  Additional insurance.

    The assured may place increased value or additional insurance in 
other markets beyond the amount of insurance provided by the Maritime 
Administrator, but such insurance must be non-participating with the 
Maritime Administrator's coverage, and without benefit of salvage or 
right of contribution.



Sec.  308.503  Rate schedules.

    Rate schedules published by the Maritime Administrator may be 
obtained from an underwriting agent. All rate schedules are subject to 
change by the Maritime Administrator at any time without notice. If no 
rate is published for a voyage on which war risk coverage is available, 
the Maritime Administrator will name a rate through an underwriting 
agent upon application.



Sec.  308.504  Definition of territories and possessions.

    Whenever reference is made to the territories and possessions of the 
United States in this subpart or in any supplement thereto or any policy 
of insurance issued pursuant to the provisions thereof, said territories 
and possessions shall be deemed to include only the Virgin Islands of 
the United States, the Commonwealth of Puerto

[[Page 166]]

Rico, American Samoa, Guam, Wake Island, Midway Islands, and the Panama 
Canal Zone.

                II--Open Policy War Risk Cargo Insurance



Sec.  308.505  General.

    The Maritime Administrator is prepared to provide an open cargo war 
risk insurance policy covering any cargoes described inSec. 308.501. 
The policy will be in the standard form of War Risk Open Cargo Policy, 
Form MA-300, prescribed inSec. 308.517. All policies will be issued by 
underwriting agents appointed by the Maritime Administrator. All 
underwriting agents will be domestic insurance companies authorized to 
do a marine insurance business in a State of the United States.



Sec.  308.506  Application for an Open Cargo Policy.

    Application for an Open Cargo Policy shall be made by filing Form 
MA-301, prescribed inSec. 308.521, with an underwriting agent of the 
Maritime Administration. The application shall state the applicant's 
name and address; the person or persons to whom loss shall be payable; 
the nature and geographic scope of the shipments to be covered under the 
policy which shall not be broader than the coverage authorized inSec. 
308.501; the requested effective date, which shall not be earlier than 
the date of the completion of the requirements for the issuance of the 
policy; and the basis of valuation to be incorporated in the policy. An 
applicant may specify one basis of valuation for imports and another for 
exports, and he may specify different bases of valuation for different 
commodities or voyages, provided that each basis of valuation specified 
by the applicant shall define the value by the use of facts which 
existed prior to the date of the shipment and which are readily 
ascertainable by either party after the safe arrival or loss of the 
shipment.



Sec.  308.507  Security for payment of premiums.

    Clause 21 of the policy requires the assured to maintain with the 
Maritime Administrator a collateral deposit fund or a surety bond, to 
secure the payment of the premiums, in an amount which shall at all 
times exceed the unpaid premiums on all risks which have attached under 
the policy. The minimum amount of the fund or of the surety bond shall 
be $1,000. Clause 21 also provides that, within seven (7) days from the 
time knowledge comes to the assured that the amount of the deposit or 
the surety bond is insufficient to meet the requirements of Clause 21, 
the assured shall deposit additional collateral or increase the surety 
bond in an amount not less than double the amount of such insufficiency, 
and for a sum which shall be a multiple of $500. If the assured fails to 
increase the deposit or the surety bond within the seven (7) day period, 
the policy automatically becomes void at the end of the seven (7) day 
period except as to risks which have attached prior to that date. The 
procedure for establishing a collateral deposit fund is prescribed in 
Sec.  308.509, and the procedure for posting and maintaining a surety 
bond is prescribed inSec. 308.510. An application for the issuance of 
an open cargo policy shall be ineffective unless a collateral deposit 
fund is established and maintained, or a surety bond is posted and 
maintained, in accordance with the provisions of this section and 
Sec.Sec. 308.509 and 308.510.



Sec.  308.508  Issuance of an Open Cargo Policy.

    (a) Time. The underwriting agent will issue an Open Cargo Policy 
within (15) days after the completion by the applicant of the 
requirements set forth in Sec.Sec. 308.506 and 308.507 unless the time 
for issuance is extended by the Maritime Administrator in writing. The 
underwriting agent may not make any Open Cargo Policy effective with 
respect to shipments attaching on a date earlier than the date when the 
application was completed, but he may make it effective on the date of 
the completion of the application or any date thereafter requested by 
the applicant.
    (b) Numbering. Each Open Cargo Policy supplied to the underwriting 
agent by the Maritime Administrator shall be numbered by the Maritime 
Administration before it is supplied to the underwriting agent. No two 
numbers shall be the same. The underwriting

[[Page 167]]

agent when issuing the policy shall add at the end of the policy number 
the agency number assigned to that underwriting agent, and where 
policies are issued by more than one office of an underwriting agent, 
the issuing office shall also be identified in the policy number. For 
example, policies issued by an office in New York will be designated by 
``NY'' and policies issued in San Francisco will be designated by ``SF'' 
prefixed to the underwriting agent's agency number.



Sec.  308.509  Collateral deposit fund.

    (a) Requirements. An assured electing to use a cash collateral 
deposit fund pursuant toSec. 308.507 shall comply with the provisions 
of this section and Clause 21 of the Open Cargo Policy, Form MA-300, 
prescribed inSec. 308.517.
    (b) Cash or Government bonds. To establish a collateral deposit fund 
the applicant shall deposit with the underwriting agent a check payable 
to the order of the ``Maritime Administration, Department of 
Transportation'' for the amount of the fund, or United States Government 
bonds having a par value at the time of deposit of the amount of the 
fund, which shall be a multiple of $500 but not less than $1,000, 
together with a letter of transmittal executed by the applicant on Form 
MA-302, prescribed inSec. 308.522. Upon receipt of the deposit, the 
underwriting agent shall assign it a serial number and transmit it to 
the Maritime Administration, Attention: Director, Office of Financial 
Management, Washington, DC 20590. It is the responsibility of the 
assured to make sure that this deposit fund is sufficient at all times 
to cover the premiums payable on all risks which have attached under the 
policy, so as to prevent the termination of the insurance under the 
provisions of Clause 21.
    (c) Overdue premiums. Pursuant to Clause 20, if the assured fails to 
pay any premium when it becomes due and payable, he thereby breaches the 
policy and it automatically ceases to insure any shipments which would 
otherwise have attached after the expiration of fifteen (15) days 
following the due date of the premium, unless within the fifteen (15) 
day period the premium has been paid and the assured has otherwise 
complied with the requirements of the policy, including the filing of 
the closing report required by Clause 19 and the payment of the 
reinstatement fee of $25 required by Clause 20. If the assured fails to 
pay the premium within the fifteen (15) day period, the Maritime 
Administrator may deduct from the assured's collateral deposit fund all 
amounts due.
    (d) Increase in amount of collateral as required by Clause 21. If 
the assured fails to deposit additional collateral in the fund within 
seven (7) days from the time knowledge comes to the assured that the 
amount of collateral is insufficient to meet the requirements of Clause 
21, the policy shall be void except as to risks which have attached 
prior to the expiration of the seven (7) day period.
    (e) Changes in amount of collateral. The assured may increase or 
decrease the amount of the collateral deposit fund by amounts of not 
less than $500 or multiples thereof, provided that the amount of the 
fund shall not be less than the amount required by Clause 21, or the 
required minimum of $1,000, whichever is greater. The effect of any 
change in the amount of the collateral deposit shall be the sole 
responsibility of the assured, and the permission granted by this 
paragraph to change the amount of collateral in the fund shall in no 
manner relieve the assured of the responsibility imposed by Clause 21.
    (f) Increase of collateral. To increase the amount of the collateral 
on deposit in the fund, the assured shall transmit to the underwriting 
agent on Form MA-302, prescribed inSec. 308.522, a check payable to 
the order of the ``Maritime Administration, Department of 
Transportation'' or United States Government bonds having a par value at 
the time of deposit of not less than the amount of the requested 
increase. The increase shall become effective upon the date of the 
receipt of the application and check or bonds by the underwriting agent, 
as shown on Form MA-302.
    (g) Decrease of collateral. To decrease the collateral deposit fund, 
the assured shall file with the underwriting agent an application on 
Form MA-305, prescribed inSec. 308.525. The decrease shall

[[Page 168]]

become effective upon the date of the receipt of the application by the 
underwriting agent as shown on Form MA-305.
    (h) Refund of collateral. Whenever the assured becomes entitled to a 
refund of the collateral deposit, in whole or in part, by reason of a 
request for a partial return of such collateral, or the cancellation of 
the policy and the payment in full of all premiums then or thereafter 
due, or the waiver by the Maritime Administrator of the requirements of 
maintaining the collateral deposit fund because the assured is a 
department or agency of the United States or is acting on behalf of such 
a department or agency, or the substitution of a surety bond in the 
place and stead of the collateral deposit fund, as provided inSec. 
308.510(j), the Maritime Administrator will refund to the assured the 
amount of the collateral deposit to which the assured is entitled; 
provided, however, that the repayment of such collateral shall not be 
made by the Maritime Administrator until the assured has filed a closing 
report and paid in full all premiums with respect to all shipments which 
had attached at the time of the receipt by the underwriting agent of the 
application for the refund, Form MA-305, and a certificate executed in 
duplicate on Form MA-306, prescribed inSec. 308.526, and, in the event 
of the substitution of a surety bond for the collateral deposit fund, 
the receipt by the underwriting agent of the surety bond properly 
executed, in accordance withSec. 308.510.



Sec.  308.510  Surety bond.

    (a) Requirements. An assured electing to post a surety bond pursuant 
toSec. 308.507 shall comply with the provisions of this section and 
Clause 21 of the Open Cargo Policy, Form MA-300, prescribed inSec. 
308.517.
    (b) Amount of bond. An applicant who wishes to post a surety bond 
shall deliver to the underwriting agent a surety bond on Form MA-308, 
prescribed inSec. 308.528, executed by the assured as principal, and 
by the surety, in such amount as the assured determines to be necessary 
to comply with Clause 21. Such amount shall be a multiple of $500 but 
shall not be less than $1,000. Upon receipt of the surety bond, the 
underwriting agent shall assign a serial number to it and transmit it to 
the Maritime Administration, Attention: Director, Office of Financial 
Approvals, Washington, DC 20590. It shall be the responsibility of the 
assured to provide that the amount of the bond is sufficient at all 
times to cover the premium payable on all risks which have attached 
under the policy, so as to prevent the termination of the insurance 
under the provisions of Clause 21.
    (c) Surety. The sufficiency of the surety executing the bond shall 
be subject to approval by the Maritime Administrator. The underwriting 
agent may accept on behalf of the Maritime Administrator a surety bond 
executed by a surety named on the United States Treasury Department's 
approved list of sureties whose bonds are acceptable to the United 
States Treasury Department to secure obligations due the United States, 
provided the bond is within the maximum amount for which the surety is 
so authorized to write bonds as shown by the approved list.
    (d) Overdue premiums. Pursuant to Clause 20, if the assured fails to 
pay any premium when it becomes due and payable, he thereby breaches the 
policy and it automatically ceases to insure any shipments which would 
otherwise have attached after the expiration of fifteen (15) days 
following the due date of the premium, unless within the fifteen (15) 
day period the premium has been paid and the assured has otherwise 
complied with the requirements of the policy, including the filing of 
the closing report required by Clause 19 and the payment of the 
reinstatement fee of $25 required by Clause 20. If the assured fails to 
pay the premium within the fifteen (15) day period, all amounts due 
shall become a liability collectible under the surety bond and from the 
assured.
    (e) Increase in amount of bond as required by Clause 21. If the 
assured fails to increase the amount of the surety bond within seven (7) 
days from the time knowledge comes to the assured that the amount of the 
bond is insufficient to meet the requirements of Clause 21, the policy 
shall be void except as to risks which have attached prior to the 
expiration of the seven (7) day period.

[[Page 169]]

    (f) Changes in amount of bond. The assured may increase or decrease 
the amount of the surety bond by amounts of not less than $500 or 
multiples thereof, provided that the amount of the bond shall not be 
less than the amount required by Clause 21, or the required minimum of 
$1,000, whichever is greater. The effect of any change in the amount of 
the bond shall be the sole responsibility of the assured, and the 
permission granted by this paragraph to change the amount of the bond 
shall in no manner relieve the assured of the responsibility imposed by 
Clause 21.
    (g) Increase in amount of bond. To increase the surety bond the 
assured shall transmit to the underwriting agent, on Form MA-310, 
prescribed inSec. 308.530, an endorsement duly executed by the assured 
and the surety company on Form MA-311, prescribed inSec. 308.531. The 
increase shall become effective upon the date of the receipt of the 
endorsement by the underwriting agent as shown on Form MA-311.
    (h) Decrease in amount of bond. To decrease the amount of the bond, 
the assured shall transmit to the underwriting agent, on Form MA-310, 
prescribed inSec. 308.530, an endorsement duly executed by the assured 
and the surety on Form MA-311, prescribed inSec. 308.531. The decrease 
shall become effective upon the date of the receipt of the endorsement 
by the underwriting agent as shown on Form MA-311, except as to 
shipments which on that date are known or reported to the assured to be 
in transit and which have attached under the policy and upon which 
premium has not been paid in full.
    (i) Termination of bond. Whenever the assured becomes entitled to a 
termination of a surety bond by reason of the cancellation of the policy 
and the payment in full of all premiums then or thereafter due, or the 
waiver by the Maritime Administrator of the requirements of maintaining 
the surety bond by an assured which is a department or agency of the 
United States or is acting on behalf of such a department or agency, or 
the substitution of a collateral deposit fund in the place or stead of 
the surety bond, the underwriting agent shall execute a release on Form 
MA-312, prescribed inSec. 308.532. The release shall be made effective 
as of:
    (1) The effective date of the cancellation of the policy when the 
bond is terminated for that reason, or
    (2) The date of the Maritime Administrator's directive waiving the 
requirement of a surety bond when the bond is terminated for that 
reason, or
    (3) The effective date of the establishment of a collateral deposit 
fund when the bond is terminated for that reason.
    (j) Substitution of bond for collateral deposit. An assured may 
substitute a surety bond for a collateral deposit fund by delivering to 
the underwriting agent a surety bond on Form MA-309, prescribed inSec. 
308.529, executed by the assured as principal, and by the surety, in 
such amount as the assured determines to be necessary to comply with 
Clause 21. Such amount shall be a multiple of $500, but shall not be 
less than $1,000. The collateral deposit fund will be refunded to the 
assured after the bond has been posted, in accordance with the 
provisions ofSec. 308.509(h).



Sec.  308.511  Cancellation of Open Cargo Policy.

    An assured may cancel an Open Cargo Policy by delivering to the 
underwriting agent, at least fifteen (15) days prior to the requested 
date of cancellation, an application for cancellation executed by the 
assured on Form MA-304, prescribed inSec. 308.524, together with the 
original policy. The policy shall be cancelled as of the effective date 
requested in the application, which, unless otherwise agreed by the 
Maritime Administrator in writing, shall not be a date earlier than 
fifteen (15) days following the date of the receipt of the application 
as acknowledged by the underwriting agent on Form MA-304, with respect 
to all risks that have not attached prior to said effective date. Such 
cancellation shall not relieve the assured of the obligation to file 
closing reports with respect to all risks which attached prior to the 
effective date of the cancellation and to pay all unpaid premiums. 
Within four (4) months of the effective date of cancellation, unless 
otherwise agreed

[[Page 170]]

by the Maritime Administrator in writing, the assured must file a 
closing report in duplicate on Form MA-313, prescribed inSec. 308.533, 
of all shipments covered by the policy for which closing reports have 
not been previously filed. The assured shall mark this closing report 
``Final Closing Report on Cancellation of Policy'', and file a 
certificate on Form MA-313-B, prescribed inSec. 308.535, executed by 
the assured in duplicate. Thereafter, when all unpaid premiums have been 
paid, the assured will become entitled to a refund of the collateral 
deposit, or cancellation of the surety bond in accordance with 
Sec.Sec. 308.509 and 308.510. If the assured has lost or mislaid the 
original policy and is unable to produce it for cancellation, the 
assured shall execute a letter of indemnity and such other documents as 
may be required by the Maritime Administrator.



Sec.  308.512  Declaration of shipments under Open Cargo Policy.

    (a) Closing report. (1) The assured shall file with the underwriting 
agent, not later than the twenty-fifth day of each month, a closing 
report for all inward shipments and a closing report for all outward 
shipments, and pay the premium and fees, for all shipments covered 
during the preceding calendar month, as required by Clause 19. Each 
closing report shall be filed in duplicate on Form MA-313, prescribed in 
Sec.  308.533, supported by a certificate executed by the assured on 
Form MA-313-A, prescribed inSec. 308.534. If the assured has no 
shipments to report during any calendar month, the closing report, Form 
MA-313, shall, nevertheless, be filed with one or both of the following 
statements, depending upon their applicability, noted thereon certifying 
that:
    (i) No inward shipment coming within the scope of this policy 
arrived at destination during the preceding calendar month, and that 
during the preceding calendar month no knowledge has come to the assured 
of an inward shipment covered under the terms of the policy which will 
not arrive by reason of loss, frustration or other similar cause,
    (ii) No outward shipment coming within the scope of this policy was 
made during the preceding calendar month, and
    (iii) Whenever a sea passage is made with respect to cargo covered 
under the policy by a barge or sailing vessel the assured shall note 
that fact upon the closing report, unless the Maritime Administrator 
otherwise agrees.
    (2) An assured reporting for one calendar month shall not include 
therein a report of a shipment due to be reported in the report for the 
next succeeding calendar month. Thus, the report of January closing 
shipments filed in February does not include February closings.
    (b) Inward shipments. The closing report covering inward shipments 
shall include:
    (1) All such shipments which have arrived at the port of destination 
during the preceding calendar month, and
    (2) All such shipments with respect to which inability to so arrive 
by reason of loss, frustration, or other similar causes has come to the 
knowledge of the assured during the preceding calendar month.
    (c) Outward shipments. The closing report covering outward shipments 
shall include all such shipments which attached under the policy during 
the preceding calendar month.
    (d) Definition of inward and outward shipments. A shipment will be 
classified as an inward shipment or as an outward shipment by reference 
to the geographical location of the assured with respect to the movement 
of the shipment. The address of the assured as stated in the application 
filed by him for the policy shall be deemed to be the assured's 
geographical location for the purpose of determining whether the 
shipment is inward or outward. To illustrate, if an assured has stated 
in his application that his address is in Hawaii, the assured's 
shipments of goods from the United States to Hawaii would be classified 
as inward, and his shipments from Hawaii to the United States would be 
classified as outward. Any shipments that cannot be classified as inward 
or outward under this definition shall be treated as inward shipments 
for the purposes of the declaration.

[[Page 171]]

    (e) Supplemental closing report. If an assured files a closing 
report and thereafter discovers that one or more additional shipments 
should have been included in the report, then, even though the assured 
has executed the certificate on Form MA-313-A, prescribed inSec. 
308.534, or Form MA-313-B, prescribed inSec. 308.535, in connection 
with the closing report, the assured must nevertheless amend the closing 
report by filing a supplemental closing report supported by an 
appropriate certificate. The supplemental closing report must be 
accompanied by a statement in writing signed by the assured giving the 
reasons for the omission of such shipments from the original closing 
report. If the Maritime Administrator finds that the failure to file the 
complete closing report was either inadvertent or unintentional or arose 
by reason of causes beyond the control of the assured, the otherwise 
automatic termination of the policy by reason of a breach of the 
warranty embodied in Clause 20 shall be avoided pursuant to the 
provisions of Clause 23.



Sec.  308.513  Payment of premiums and fees.

    The assured shall pay the premium, when his closing report is filed, 
for all shipments shown on his closing report for the preceding month, 
at the rates prescribed by the Maritime Administrator and in effect on 
the date of the ocean bill of lading, or if an ocean bill of lading was 
not issued, on the date of the equivalent shipping document, or if no 
ocean bill of lading or equivalent shipping document was issued, or if 
such documents were undated, on the date the goods were laden on the 
overseas vessel, as required by Clause 19. All payments of premium or 
fees must be made by check or money order payable to the order of the 
``Maritime Administration, Department of Transportation.''



Sec.  308.514  Return premium.

    No premium will be returned to the assured with respect to a 
shipment of goods that attached under the policy except where there was 
a declaration of value at variance with Clause 8, or an error in the 
application of a rate or in the computation of a premium, or the insured 
goods were short-shipped. An application for the return of a premium 
shall be made on Form MA-307, prescribed inSec. 308.527, filed in 
duplicate with the Underwriting Agent who will transmit it to the 
Maritime Administrator for payment.



Sec.  308.515  Payment in event of loss.

    All claims for losses shall be filed by the assured with the 
Underwriting Agent who issued the policy. Such claims must be supported 
by the customary documents required in connection with war risk 
insurance claims, together with appropriate declarations as required by 
Clause 9, and such further data as may now or hereafter be required by 
the Maritime Administrator.



Sec.  308.516  Failure to comply with Clause 21.

    (a) If the assured willfully fails to maintain a collateral deposit 
fund or a surety bond in an amount sufficient to meet the requirements 
of Clause 21, the policy becomes void from the date the fund or bond was 
first insufficient, but, if the assured's failure was inadvertent, the 
policy may be reinstated when the assured complies with Clause 21, and 
shows to the satisfaction of the Maritime Administrator that his failure 
was inadvertent and not willful. If the failure was in fact inadvertent, 
the assured shall file a declaration on Form MA-314, prescribed inSec. 
308.536, executed in duplicate, with the Underwriting Agent within seven 
(7) days from the time knowledge comes to the assured of the 
insufficiency of the collateral deposit fund or surety bond unless the 
time for filing such declaration is extended by permission of the 
Maritime Administrator. If the space provided in the declaration, Form 
MA-314, for an explanation of the circumstances whereby the assured 
first had knowledge that the collateral was not sufficient, the assured 
shall attach to the declaration a detailed statement and include the 
same by reference in the declaration.
    (b) If any policy becomes void by reason of the failure of the 
assured to deposit additional collateral or increase the amount of its 
surety bond under

[[Page 172]]

the provisions of Clause 21, the Maritime Administrator reserves the 
right to refuse to issue another policy to such assured for a period of 
90 days.



Sec.  308.517  Open Cargo Policy, Form MA-300.

    The standard form of War Risk Open Cargo, Form MA-300, may be 
obtained from the American War Risk Agency or MARAD.



Sec.  308.518  Standard optional endorsement No. 1, Form MA-300-A.

    Standard Optional Endorsement No. 1, which may be obtained from the 
American War Risk Agency or MARAD, limits the amount payable for the 
loss of goods to the actual bona fide pecuniary loss to the Assured, 
exclusive of any allowance for anticipated or accrued profit arising out 
of the insured venture. An Assured may elect to have his Open Cargo 
Policy endorsed with Standard Optional Endorsement No. 1 applicable on 
all shipments, or on all outward shipments, or on all inward shipments, 
or on named commodities except goods sold by the Assured prior to 
loading on board the overseas vessel and shipped for the account and at 
the risk of third persons other than a branch subsidiary or affiliate of 
the Assured. When an Assured has elected to have Standard Optional 
Endorsement No. 1 made applicable to certain named commodities he may 
not change to a different basis of valuation for those commodities until 
after he has given ninety (90) days written notice to the Maritime 
Administrator through the Underwriting Agent of his election to make the 
change. Application for Standard Optional Endorsement No. 1 may be made 
to the Underwriting Agent which is authorized to issue the endorsement 
without prior approval of the Maritime Administrator.



Sec.  308.519  Standard optional endorsement No. 2, Form MA-300-B.

    Standard Optional Endorsement No. 2, which may be obtained from the 
American War Risk Agency or MARAD, amends the policy to cover shipments 
made to the Assured or shipped by the Assured as agent for the account 
and risk of a principal. Application for Standard Optional Endorsement 
No. 2 may be made to the Underwriting Agent, which is authorized to 
issue the endorsement without prior approval of the Maritime 
Administrator.



Sec.  308.520  Standard optional endorsement No. 3, Form MA-300-C.

    Standard Optional Endorsement No. 3, which may be obtained from the 
American War Risk Agency or MARAD, amends the policy to include 
shipments of diamonds for industrial purposes, or rubies or sapphires, 
natural or synthetic, used for instruments or watch jewels imported to 
the Continental United States (excluding Alaska). Application for 
Standard Optional Endorsement No. 3 may be made to the Underwriting 
Agent, which shall transmit it to the Maritime Administrator for 
approval or disapproval of the issuance of the endorsement.



Sec.  308.521  Application for Open Cargo Policy, Form MA-301.

    The standard form of application for a War Risk Open Cargo Policy 
may be obtained from the American War Risk Agency or MARAD.



Sec.  308.522  Collateral deposit fund, letter of transmittal,
Form MA-302.

    The standard form of letter of transmittal for use in establishing a 
collateral deposit fund, may be obtained from the American War Risk 
Agency or MARAD.



Sec.  308.523  Application for revision of Open Cargo Policy,
Form MA-303.

    An application for the revision of an Open Cargo Policy shall be 
filed in duplicate with the Underwriting Agent on a form which may be 
obtained from the American War Risk Agency or MARAD.



Sec.  308.524  Application for cancellation of Open Cargo Policy,
Form MA-304.

    The standard form of application for cancellation of an Open Cargo 
Policy Form MA-304 may be obtained from the American War Risk Agency or 
MARAD.

[[Page 173]]



Sec.  308.525  Application for decrease in amount of cash collateral
fund, Form MA-305.

    Application for decrease in the amount of the cash collateral 
deposit fund shall be made on Form MA-305, which may be obtained from 
the American War Risk Agency or MARAD.



Sec.  308.526  Certificate for repayment of decrease of collateral
deposit fund, Form MA-306.

    The standard form of certificate for repayment of the amount of the 
decrease of the collateral deposit fund, Form MA-306, may be obtained 
from the American War Risk Agency or MARAD.



Sec.  308.527  Application for return premium, Form MA-307.

    An application for the return of premium, which may be obtained from 
the American War Risk Agency or MARAD, shall be filed in duplicate with 
the Underwriting Agent on Form MA-307.



Sec.  308.528  Surety Bond A, Form MA-308.

    The Standard Form of Surety Bond A, Form MA-308, which may be 
obtained from the American War Risk Agency or MARAD, shall be used by an 
Assured who elects to post a surety bond as security for payment of the 
premiums pursuant to Clause 21 of the policy:



Sec.  308.529  Surety Bond B, Form MA-309.

    An Assured who elects to substitute a surety bond for a collateral 
deposit fund shall submit Form MA-309, which may be obtained form the 
American War Risk Agency or MARAD.



Sec.  308.530  Letter requesting increase or decrease in amount
of surety bond, Form MA-310.

    An endorsement increasing or decreasing the amount of the surety 
bond, Form MA-310, shall be transmitted to the underwriting agent and 
may be obtained from the American War Risk Agency or MARAD.



Sec.  308.531  Endorsement of surety bond increasing or decreasing 
amount of coverage, Form MA-311.

    The Standard Form of Endorsement which shall be used in increasing 
or decreasing the amount of a surety bond, Form MA-311, may be obtained 
from the American War Risk Agency or MARAD.



Sec.  308.532  Release of surety bond, Form MA-312.

    The Standard Form of Release of Surety bond, Form MA-312, may be 
obtained from the American War Risk Agency or MARAD.



Sec.  308.533  Closing report, Form MA-313.

    This form, which may be obtained from the American War Risk Agency 
or MARAD, shall be filed in duplicate with the Underwriting Agent not 
later than the 25th day of each month.



Sec.  308.534  Certificate to be attached to closing report,
Form MA-313-A.

    The standard form of Certificate to be attached to the closing 
report, Form MA-313-A, may be obtained from the American War Risk Agency 
or MARAD and shall be filed each month.



Sec.  308.535  Certificate to be attached to final closing report,
Form MA-313-B.

    The Standard Form of Certificate, Form MA-313-B, shall be attached 
to the final closing report after cancellation of the policy, and may be 
obtained from the American War Risk Agency or MARAD.



Sec.  308.536  Declaration where failure to comply with Clause 21 
was inadvertent, Form MA-314.

    An Assured that fails inadvertently to maintain a collateral deposit 
fund or surety bond in an amount sufficient to meet the requirements of 
Clause 21 of the Policy shall file this Declaration, Form MA-314, which 
may be obtained from the American War Risk Agency or MARAD.

[[Page 174]]

                III--Facultative War Risk Cargo Insurance



Sec.  308.538  General.

    The Maritime Administrator is prepared to provide facultative war 
risk insurance policies covering any cargoes described inSec. 308.501 
which are designated by an applicant prior to the attachment of risks, 
if the applicant does not have an Open Cargo Policy issued by the 
Maritime Administrator, or if he has a shipment which is not covered by 
his Open Cargo Policy. However, a person with regular shipments is urged 
to avail himself of the advantages of the automatic coverage of an Open 
Cargo Policy. The Maritime Administrator reserves the right to decline 
to quote rates or bind insurance on shipments of cargo that could be 
covered by an Open Cargo Policy unless the applicant can show to the 
satisfaction of the Maritime Administrator that the risk is not one of a 
series of similar risks forming part of a continual flow of business for 
the applicant. The policy will be in the standard form of War Risk 
Facultative Cargo Policy, Form MA-316, prescribed inSec. 308.545. All 
policies shall be issued by Underwriting Agents appointed by the 
Maritime Administrator. All Underwriting Agents shall be domestic 
insurance companies authorized to do a marine insurance business in a 
State of the United States.



Sec.  308.539  Application.

    (a) Preliminary request. Application for a Facultative Cargo Policy 
shall be made by filing a preliminary request in writing (including 
telegram) with an Underwriting Agent of the Maritime Administration, 
setting forth the following information:
    (1) The name and address of the applicant;
    (2) The amount of insurance requested;
    (3) The commodity and quantity to be insured;
    (4) The voyage to be covered;
    (5) The name of the vessel upon which the cargo will be shipped, if 
known, the name of the steamship line, if known, and the date of 
shipment, if the applicant is submitting the request to bind war risk in 
writing; for security reasons, if the applicant is submitting the order 
to bind war risk insurance by telefax, neither the name of the vessel 
nor the name of the steamship line nor the anticipated date of sailing, 
should be mentioned. Mentioning such information in a telefax may result 
in a denial of insurance to the applicant. Any envelope transmitting a 
letter containing such information shall be marked ``confidential.''
    (b) Binder. Before the insurance can be bound, the applicant shall 
provide the Underwriting Agent with a properly prepared binder on Form 
MA-315 prescribed inSec. 308.544. The binder must be submitted in 
duplicate, accompanied by check or Money Order payable to the order of 
the Maritime Administration, Department of Transportation'' for the full 
amount of the premium computed on the amount to be insured at the rate 
set by the Maritime Administrator. Any application for facultative cargo 
war risk insurance received by an Underwriting Agent later than 4 p.m. 
(Local War Time) shall be considered the next day's business.
    (c) Optional loss limits clause. Clause 9 of the standard form of 
facultative cargo policy, Form MA-316, prescribed inSec. 308.545, 
limits the amount payable for loss to the fair market value at the place 
and approximate time of the attachment of risk, plus the cost of marine 
insurance, transportation and expenses incident thereto, and war risk 
insurance with respect to the lost or damaged goods, or if it is 
impossible to determine the fair market value at place and time of 
attachment of risk, the fair market value at the designated port of 
arrival on the date of the attachment of the risk, plus the cost of 
marine insurance, transportation and expenses incidental thereto, and 
war risk insurance with respect to the lost or damaged goods, or if the 
goods had been purchased prior to loading, the actual amount paid or 
payable to the seller for the goods less all discounts, plus the cost of 
marine insurance, transportation and expenses incidental thereto, and 
war risk insurance with respect to the lost or damaged goods. In lieu of 
these loss limits, the Assured by so specifying in his application, and 
the binder may have attached to the policy when issued Standard Optional

[[Page 175]]

Endorsement No. 1-A, Form MA-316, prescribed inSec. 308.546, which 
limits the amount payable for loss to the actual bona fide pecuniary 
loss to the Assured, exclusive of any allowance for anticipated or 
accrued profits arising out of the insured venture.



Sec.  308.540  Premiums.

    (a) Rates. Rate Schedules for war risk facultative cargo insurance 
will be published by the Maritime Administrator from time to time, and 
may be obtained from an Underwriting Agent. All Rate Schedules are 
subject to change by the Maritime Administrator without notice. If no 
rate is published for a voyage on which war risk facultative cargo 
insurance is available, the Maritime Administrator will name a rate 
through an Underwriting Agent upon application. Whenever an applicant 
for war risk facultative cargo insurance receives a definite rate 
quotation and desires to bind insurance at the quoted rate, an order to 
bind the insurance in accordance with the procedure set forth in this 
subpart should be submitted within two business days following the day 
of quotation accompanied by check or Money Order payable to the order of 
``Maritime Administration, Department of Transportation'' for the full 
amount of the premium thereon computed on the amount to be insured at 
the rate set by the Maritime Administrator, or the quotation will 
expire.
    (b) Return premium. Where goods are short-shipped, the amount of 
insurance may be reduced by an amount computed by applying to the 
original amount of insurance the proportion which the quantity of 
merchandise short-shipped (i.e., bales, barrels, tons, and other 
designations of quantity) bears to the total quantity of merchandise 
originally declared for insurance. Where more than one class of 
merchandise is insured under one policy (e.g., fuel, oil and gasoline) 
the reduced amount of insurance must be computed separately on each 
item. Where the amount of insurance is reduced, the Maritime 
Administrator will give consideration to requests for proportionate 
returns of premium. An application for the return of a premium must be 
submitted to the Underwriting Agent in quadruplicate on Form MA-317, 
prescribed inSec. 308.547.



Sec.  308.541  Issuance.

    (a) Binder. The Underwriting Agent is authorized to issue a 
facultative policy in Form MA-316, prescribed inSec. 308.545, when 
there has been presented to him a properly prepared binder on Form MA-
315, prescribed inSec. 308.544, together with the payment of the 
premium as required, and such policy shall be issued as soon as possible 
after the binder form has been presented to the Underwriting Agent. 
Prior to the issuance of the policy, the Underwriting Agent is 
authorized to accept the risk on behalf of the Maritime Administrator by 
signing the binder. The Maritime Administrator will provide each 
Underwriting Agent with a supply of facultative policies which shall not 
be valid until countersigned by the Underwriting Agent. The Underwriting 
Agent shall keep a permanent record of all such policies and the Assured 
to whom the policy is issued.
    (b) Numbering. Each Facultative Cargo Policy supplied to the 
Underwriting Agent by the Maritime Administrator shall be numbered by 
the Maritime Administration before it is supplied to the Underwriting 
Agent. No two numbers shall be the same. The Underwriting Agent when 
issuing the policy shall add at the end of the Policy number the agency 
number assigned to that Underwriting Agent, and where policies are 
issued by more than one office of an Underwriting Agent the issuing 
office shall also be identified in the policy number. For example, the 
policies issued by an office in New York will be designated ``NY'' and 
policies issued in San Francisco will be designated by ``SF'' prefixed 
to the Underwriting Agent's agency number.



Sec.  308.542  Warranty re thirty-day shipments.

    If, after an effective binding of war risk insurance on a shipment 
of cargo, the assured believes that it will be impossible to comply with 
the warranty requiring the goods to be shipped and in transit within 
thirty days from the effective date of binding, such an assured may 
apply to the Maritime Administrator, through the Underwriting

[[Page 176]]

Agent, to modify the warranty. If the Maritime Administrator is 
satisfied that an extension of time within which the goods are warranted 
to be shipped and in transit should be granted, he will do so, but 
additional premium may be charged in the discretion of the Maritime 
Administrator.



Sec.  308.543  Cancellation.

    Facultative war risk insurance is not subject to cancellation by the 
Assured unless the goods are not shipped within thirty days following 
the effective date of binding, and then only if the policy is returned 
for cancellation.



Sec.  308.544  Facultative binder, Form MA-315.

    The standard form of War Risk Facultative Cargo Binder, which may be 
obtained from the American War Risk Agency of MARAD, shall be completed 
by the applicant and submitted, in duplicate, to an Underwriting Agent 
before the insurance can be bound.



Sec.  308.545  Facultative cargo policy, Form MA-316.

    The standard form of War Risk Facultative Cargo Policy, Form MA-316, 
may be obtained from the American War Risk Agency or MARAD.



Sec.  308.546  Standard optional endorsement No. 1-A, Form MA-316-A.

    Standard Optional Endorsement No. 1-A limits the amount payable for 
the loss of goods to the actual bona fide pecuniary loss to the Assured, 
exclusive of any allowance for anticipated or accrued profit arising out 
of the insured venture. (Similar provisions for Open Cargo Policies are 
contained in Standard Optional Endorsement No. 1, Form MA-300-A, 
prescribed inSec. 308.518.) Application for Standard Optional 
Endorsement No. 1-A shall be made to the Underwriting Agent at the time 
application is made for the policy. The Underwriting Agent is authorized 
to issue the endorsement without prior approval of the Maritime 
Administrator. This form may be obtained from the American War Risk 
Agency or MARAD.



Sec.  308.547  Application for return premium, Form MA-317.

    An application for the return of premium must be filed in duplicate 
with the Underwriting Agent on Form MA-317, which may be obtained from 
the American War Risk Agency or MARAD.

                               IV--General



Sec.  308.548  Standard form of underwriting agency agreement for 
cargo, Form MA-318.

    This form, which may be obtained from the American War Risk Agency 
or MARAD, is the standard form of underwriting agency agreement 
applicable with respect to agreements executed by the Maritime 
Administrator and domestic insurance companies authorized to do a marine 
insurance business in any State of the United States, appointing such 
companies as Underwriting Agents to issue war risk cargo policies in 
accordance with the provision of the agreement and this subpart.



Sec.  308.549  Application for appointment of Cargo Underwriting Agent,
Form MA-319.

    Any domestic insurance company authorized to do a marine insurance 
business in any State of the United States may apply for appointment as 
a Cargo Underwriting Agent by submitting to the Maritime Administrator a 
letter and Form MA-399, which may be obtained from the American War Risk 
Agency or MARAD.



Sec.  308.550  Certificate, Form MA-320.

    Wherever any provision of this subpart, or any amendment thereto, 
requires the Assured to make a declaration or certification under the 
penalties of perjury, and the form of the declaration or certificate is 
not prescribed, the Assured may execute a certificate on Form MA-320-A 
for an individual, on Form MA-320-B for a partnership, or on Form MA-
320-C for a corporation, which forms may be obtained from the American 
War Risk Agency or MARAD.

[[Page 177]]



Sec.  308.551  War risk insurance clearing agency agreement for cargo,
Form MA-321.

    The standard form of clearing agency agreement, Form MA-321, shall 
be executed by the Maritime Administrator and domestic insurance 
companies, or groups of domestic insurance companies authorized to do a 
marine insurance business in any State of the United States, appointing 
such companies or groups of companies as clearing agents, which form may 
be obtained from the American War Risk Agency or MARAD.



Sec.  308.552  Effective date.

    This subpart shall be effective as and when the Maritime 
Administrator finds that war risk cargo insurance adequate for the needs 
of the waterborne commerce of the United States cannot be obtained on 
reasonable terms and conditions from companies authorized to do an 
insurance business in a State of the United States.



                       Subpart G_Records Retention



Sec.  308.600  Records retention requirement.

    The records specified in Sec.Sec. 308.8, 308.517, and 308.548 of 
this part shall be retained until a release is granted by the MARAD, at 
which time MARAD will take custody of the records.



PART 309_VALUES FOR WAR RISK INSURANCE--Table of Contents



Sec.
309.1 Procedure.
309.2 Definitions.
309.3 Stated valuation.
309.4 Maximum amount insured.
309.5 Condition of vessel.
309.6 Adjustments for condition, equipment, and other considerations.
309.7 Modifications.
309.8 Vessel data forms.
309.101 Amendment of interim binders.

                           Stores and Supplies

309.201 Purpose.
309.202 Definitions.
309.203 Value at time of loss.
309.204 Proof of loss.

    Authority: Secs. 204, 1209, Merchant Marine Act, 1936, as amended 
(46 U.S.C. 1114, 1289); Reorganization Plans No. 21 of 1950 (64 Stat. 
1273), No. 7 of 1961 (75 Stat. 840) as amended by Pub. L. 91-469 (84 
Stat. 1036); Department of Commerce Organization Order 10-8 (38 FR 
19707, July 23, 1973); Maritime Administrative Order 440-3 (December 6, 
1973).

    Source: 39 FR 30487, Aug. 23, 1974, unless otherwise noted.



Sec.  309.1  Procedure.

    The Ship Valuation Committee, Maritime Administration, shall publish 
bianually in the notice section of the Federal Register a general notice 
which shall set forth the stated valuations of individual vessels upon 
which interim binders for war risk hull insurance have been issued. Such 
values shall be effective with respect to a six-month period commencing 
on January 1 and ending on June 30, or a six-month period commencing on 
July 1 and ending on December 31 of each calendar year; Provided, 
however, That if there is a substantial change in market values during 
the effective period of a state valuation, the Maritime Administration 
reserves the right to revise such valuations at any time during such 
period.



Sec.  309.2  Definitions.

    (a) Ship Valuation Committee means the Ship Valuation Committee 
referred to in Maritime Administrative Order 440-3.
    (b) The date a vessel is built is the date the vessel is delivered 
by the shipbuilder.
    (c) The deadweight tonnage of a vessel means her deadweight capacity 
established in accordance with normal Summer Freeboard as assigned 
pursuant to the International Load Line Convention, 1966, and shall be 
her capacity (in tons of 2,240 pounds) for cargo, fuel, fresh water, 
spare parts, and stores, but exclusive of permanent ballast.
    (d) The speed of a vessel means the speed determined in accordance 
with the formulae provided in part 246 of this chapter.
    (e) A passenger vessel is a vessel which carries more than twelve 
passengers.



Sec.  309.3  Stated valuation.

    A stated valuation represents just compensation for the vessel to 
which it applies computed by the Ship Valuation Committee in accordance 
with

[[Page 178]]

sections 902(a) and 1209(a)(2) of the Merchant Marine Act, 1936, as 
amended (46 U.S.C. 1242(a), 1289(a)(2)). The stated valuation of a 
vessel does not include vessel stores and supplies, which consist of (a) 
consumable stores, (b) subsistence stores, (c) slop chest, (d) bar 
stock, and (e) fuel, as defined in Maritime Administration Inventory 
Book Forms MA-4736, A through K, which will be valued separately.



Sec.  309.4  Maximum amount insured.

    A stated valuation is the maximum amount for which the Maritime 
Administration will provide war risk hull insurance for damage to or 
actual or constructive total loss of the vessel to which such valuation 
applies and for which claims for damage to or actual or constructive 
total loss of such insured vessel may be adjusted, compromised, settled, 
adjudged, or paid by the Maritime Administration with respect to 
insurance attaching during the effective period of such valuation under 
the standard forms of war risk hull insurance interim binder or policy 
prescribed by Sec.Sec. 308.106 and 308.107 of this chapter.



Sec.  309.5  Condition of vessel.

    If the true condition of a vessel is not known, the Ship Valuation 
Committee, in determining the stated valuation of the vessel, may assume 
that it is in a condition that would entitle it to the highest 
classification of the American Bureau of Shipping, or the equivalent if 
the vessel is a foreign-flag vessel, with all required certificates, 
including but not limited to, marine inspection certificates of the 
United States Coast Guard, the United States Public Health Service, and 
the Federal Communications Commission, with all outstanding requirements 
and recommendations necessary for retention of class accomplished, 
without regard to any grace period; and, so far as due diligence can 
make her so, the vessel is tight, staunch, strong, and well and 
sufficiently tacked, appareled, furnished, and equipped, and in every 
respect seaworthy and in good running condition and repair, with clean 
swept holds and in all respects fit for service. The stated valuation of 
a vessel in substandard condition is subject to downward adjustment as 
provided inSec. 309.6(a).



Sec.  309.6  Adjustments for condition, equipment, and other
considerations.

    (a) Adjustment for a vessel in substandard condition. If the 
Maritime Administration determines that a vessel is in substandard 
condition from that assumed by the Committee as provided inSec. 309.5, 
there shall be subtracted from the stated valuation of such vessel an 
amount estimated by the Maritime Administration as the cost of putting 
the vessel in the condition assumed by the Committee when determining 
its stated valuation.
    (b) Special equipment. If the depreciated reproduction cost less 
construction subsidy, if any, of any special equipment of material 
utility in the handling of cargo or utilization of a vessel, not 
otherwise taken into account in determining the stated valuation of such 
vessel, is in excess of $50,000, an amount estimated by the Maritime 
Administration as the fair and reasonable value of such equipment shall 
be added to the stated valuation of such vessel.
    (c) Government installations. A stated valuation determined pursuant 
to this part shall not include any allowance for any special 
installations or equipment to the extent that their cost was borne by 
the United States.



Sec.  309.7  Modifications.

    The Maritime Administration reserves the right to exempt any vessel 
from the scope of this part, or to amend, modify, or terminate the 
provisions hereof.



Sec.  309.8  Vessel data forms.

    (a) To accompany application for insurance. Each application for war 
risk insurance, submitted in accordance withSec. 308.3 of this 
chapter, shall be accompanied by a completed Form MA-828, Vessel Data. 
Copies of this form may be obtained from either the American War Risk 
Agency, 14 Wall Street, New York, N.Y. 10005, or the Director, Office of 
Marine Insurance (MAR-540) Maritime Administration 400 Seventh Street 
SW., Washington, DC 20590.

[[Page 179]]

    (b) Modification to vessels. Revised vessel data shall be submitted 
on the appropriate form prescribed in paragraph (a) of this section 
whenever a vessel undergoes a physical change which increases or 
decreases its value by five percent or more.

(Approved by the Office of Management and Budget under control number 
2133-0011)

[39 FR 30487, Aug. 23, 1974, as amended at 47 FR 25330, June 14, 1982; 
50 FR 50167, Dec. 9, 1985]



Sec.  309.101  Amendment of interim binders.

    The interim binder for a vessel whose stated valuation is 
established pursuant to this part shall be deemed to have been amended 
on the first day of the effective period of such valuation, as provided 
in the notice publishing such valuation, by inserting in the space 
provided therefor, or in substitution for any value appearing in such 
space, the stated valuation of the vessel set forth in such notice. A 
stated valuation shall apply with respect to insurance attaching during 
the effective period of such valuation; Provided, however, That if there 
is a substantial change in market values during such period, the 
Maritime Administration reserves the right to revise the valuations 
provided for therein at any time during said period; And provided 
further, That the assured shall have the right within 60 days after the 
date of publication of a stated valuation or within 60 days after the 
attachment of the insurance under the interim binder to which such 
valuation applies, whichever is later, to reject such valuation and 
proceed as authorized by section 1209(a)(2), Merchant Marine Act, 1936, 
as amended (46 U.S.C. 1289(a)(2)).

                           Stores and Supplies

    Authority: Sec. 204, 49 Stat. 1987, as amended, sec. 1209, 64 Stat. 
775, as amended, 70 Stat. 984; 46 U.S.C. 1114, 1289.

    Source: Sections 309.201 through 309.204 contained in G.O. 100, 29 
FR 2944, Mar. 4, 1964; 29 FR 3706, Mar. 25, 1964, unless otherwise 
noted.



Sec.  309.201  Purpose.

    It is the purpose of Sec.Sec. 309.201 through 309.204 to prescribe 
the method for determining the values of stores and supplies on board a 
vessel when lost, for which claims for loss will be paid, and to 
prescribe the procedure for payment of claims for such loss, when stores 
and supplies are covered under a disbursements clause of a War Risk Hull 
Insurance Binder or a War Risk Hull Insurance Policy issued by the 
United States on forms prescribed by Sec.Sec. 308.106 and 308.107 of 
this chapter, or when stores and supplies are covered by a War Risk 
Disbursements Policy issued by the United States pursuant to section 
1203(c) of the Merchant Marine Act, 1936, as amended (46 U.S.C. 
1283(c)). The vessel values established by Sec.Sec. 309.1 through 
309.8 (General Order 82) do not include any allowance for the loss of 
stores and supplies, as distinguished from equipment and spare parts 
which are included in such vessel values.



Sec.  309.202  Definitions.

    Stores and supplies are those articles and commodities used and 
consumed in the day-to-day operation of a vessel by the operation and 
maintenance of machinery and equipment; the maintenance of clean and 
sanitary conditions; the feeding of passengers, officers, and crew; and 
stocked for the use and convenience of passengers, officers, and crew. 
Vessel stores and supplies include (a) consumable stores, (b) 
subsistence stores, (c) slop chest, (d) bar stock, and (e) fuel, as 
defined in Maritime Administration Inventory Books, Forms MA-4736, A 
through K.



Sec.  309.203  Value at time of loss.

    The value of unused stores and supplies on board a vessel at the 
time of loss, and for which claims for loss will be paid equals:
    (a) The value of such stores and supplies on board at the completion 
of the previous voyage, plus
    (b) The value of stores and supplies purchased and placed on board 
the vessel before the commencement of the voyage during which the loss 
occurred, plus
    (c) The value of stores and supplies purchased and placed on board 
the vessel after the commencement of such voyage, less

[[Page 180]]

    (d) That portion of the sum of paragraphs (a), (b), and (c) of this 
section which was sold, transferred, used or consumed to, but not 
including, the date of the loss.



Sec.  309.204  Proof of loss.

    Claims for reimbursement for total loss of stores and supplies may 
be submitted by the owner to the Chief, Division of Insurance, Maritime 
Administration, Washington, DC 20590, based on one of two alternative 
methods of proof, as provided in paragraphs (a) and (b) of this section. 
Owners may use either method for each category of stores and supplies.
    (a) Formula. In cases where the owner and the Chief, Division of 
Insurance, Maritime Administration, have agreed, in advance of the loss, 
upon amounts representing, or the method for determining, the average 
daily consumption costs of stores and supplies for the owner's vessel, 
claims for total loss of such stores and supplies may be submitted by 
the owner on Affidavit in Proof of Claim for the loss of stores and 
supplies, Exhibit A. In such cases, the value of the consumable stores 
at time of loss is determined as follows:
    (1) The value of consumable stores on board at the time the vessel 
was ready to sail, determined by multiplying the number of days for 
which the vessel is stored by the average daily consumption cost in 
dollars, plus
    (2) The cost of consumable stores, if any, purchased in foreign 
ports for the homeward voyage, less
    (3) The average daily consumption cost times the number of days from 
the date the vessel was ready to sail to, but not including, the date of 
loss, plus the actual amount of consumable stores transferred or sold. 
The values of slop chest stores, bar stock and fuel, at the time of loss 
are determined in the same manner by using the applicable daily 
consumption costs for such stores. The value of subsistence stores at 
the time of loss is determined as follows:
    (i) The value of subsistence stores on board at the time the vessel 
was ready to sail, determined by multiplying the agreed cost for one man 
per day by the number of crew signed on and the number of passengers, if 
any, and multiplying that product by the number of days for which the 
vessel is stored, plus
    (ii) The cost of subsistence stores, if any, purchased in foreign 
ports for the homeward voyage, less
    (iii) The number of crew signed on and the average number of 
passengers, if any, times the agreed cost of one man per day times the 
number of days from the date the vessel was ready to sail to, but not 
including, the date of loss, plus the actual amount of subsistence 
stores transferred or sold.
    (b) Verified costs. In cases where the owner and the Chief, Division 
of Insurance, Maritime Administration, have not agreed in advance of the 
loss upon amounts representing, or the method for determining, the 
average daily consumption costs of Stores and Supplies for the owner's 
vessel, claims for total loss of such Stores and Supplies must be 
submitted by the owner on Affidavit in Proof of Claims for the Loss of 
Stores and Supplies, Exhibit B. In such cases, the value of the 
consumable stores will be determined as follows:
    (1) The value of consumable stores on board the vessel at the time 
the vessel was ready to sail, determined by certified inventories of the 
owner of amounts on board the vessel at the termination of the preceding 
voyage or date of last inventory, less actual consumption to date of 
sailing, plus a certified statement by the owner of actual additional 
purchases made from date of termination of the preceding voyage or date 
or last inventory to date vessel was lost, subject to audit by the 
Maritime Administration, less
    (2) The average daily consumption cost determined by dividing the 
amount determined as in paragraph (b)(1) of this section by the number 
of days for which the vessel was stored, times the number of days from 
the date the vessel was ready to sail to, but not including, the date of 
loss, plus actual amount of consumable stores transferred or sold.
    The values of subsistence stores, slop chest, bar stock, and fuel, 
at the time of loss are determined in the same manner, supported by 
certified inventories of the owner and invoices.

[[Page 181]]

                                Exhibit A

affidavit in proof of claim for the loss of unused stores and supplies 
on board the ss--------------

State of

 ss:

County of

    I am the ------ of ------, the Owner of the SS ------, which was 
lost as a result of enemy action on or about the ------ day of ------, 
------. I make this affidavit in support of the above-named Owner's 
claim for the loss of the actual value of the said vessel's unused 
Stores and Supplies. The statements herein contained are based upon the 
personal knowledge of deponent or upon the books of records of the Owner 
or its agent which deponent believes are true and accurate.
    (A) ``Stores and Supplies'', for loss of which claim is being made, 
are limited to consumable and subsistence stores as defined in Maritime 
Administration Inventory Manual, Vessel Inventories, Part I, and do not 
include radio supplies, expendable equipment, scrap, junk and spare 
parts. \1\
---------------------------------------------------------------------------

    \1\ Strike out either paragraph (A) or (B).
---------------------------------------------------------------------------

    (B) It has been the consistent accounting practice of the Owner to 
group together Consumable Stores as defined in the Maritime 
Administration Inventory Manual, Vessel Inventories, Part I, and 
Expendable Equipment, but the amount herein stated to be the value of 
consumable stores for the purpose of making this claim does not exceed 
------ \2\ percent of the aggregate of such consumable stores and 
expendable equipment. \1\ I am familiar with the insurance carried on 
the Stores and Supplies on the SS ------; and, from the effective date 
of War Risk Insurance Binder No------ Policy No------ issued by the 
United States of America, which covers the total loss of Stores and 
Supplies in the amount of $------, to the date of such vessel's loss on 
------, there was no war risk insurance on such Stores and Supplies 
other than that provided by said Binder or Policy.
---------------------------------------------------------------------------

    \2\ Insert percentage agreed upon with Chief, Division of Insurance, 
Maritime Administration.
---------------------------------------------------------------------------

    The period for which the vessel was stored with Stores and Supplies 
for use on the voyage on which she was lost, beginning with the last day 
of storing, was ------ days for Consumable Stores, ------ days for 
Subsistence Stores, ------ days for Slop Chest, ------ days for Bar 
Stock and ------ days for Fuel. The number of days from the last day of 
storing to, but not including, the date on which the vessel was lost, 
was ------ days for Consumable Stores, ------ days for Subsistence 
Stores, ------ days for Slop Chest, ------ days for Bar Stock and ------ 
days for Fuel.
    I. Consumable (Excluding Subsistence) Stores: \3\
---------------------------------------------------------------------------

    \3\ If the figure needed to fill the blank in paragraph (A) or (B) 
is not available, the formula cannot be used; the Owner must submit 
actual inventories and a record of purchases on Affidavit Exhibit B.
---------------------------------------------------------------------------

    (A) The average daily consumption cost of Consumable Stores for this 
vessel for the year prior to the voyage on which she was lost was \4\ 
$------.
---------------------------------------------------------------------------

    \4\ Strike out paragraph (A) or (B).
---------------------------------------------------------------------------

    (B) The figure required for (A) is not readily available, and the 
average daily cost of Consumable Stores for this vessel for the last 
calendar year set up on the Owner's books was \4\ $------.
    The amount of Consumable Stores on board at the time this vessel was 
ready to sail (the number of days for which the vessel was stored times 
the average daily consumption cost, as above) was $------.
    To this amount is added the actual cost of Consumable Stores 
purchased in Foreign Ports for the homeward voyage (as per statement 
attached) \5\ $------, making the total amount on board at date of 
sailing $------.
---------------------------------------------------------------------------

    \5\ Strike out this sentence if vessel was lost on outward leg of 
voyage.
---------------------------------------------------------------------------

    The average daily consumption cost, as above, times the number of 
days from the date the vessel was ready to sail to, but not including, 
the date of loss, as above, is $------.
    To this amount is added the actual amount of Consumable Stores 
transferred or sold (as per statement attached) $------, making $------, 
which, subtracted from the amount of Consumable Stores on board at date 
of sailing, as above, is $------, which sum is claimed to be the actual 
value of the vessel's unused Consumable Stores at the time of the loss, 
according to the best of deponent's knowledge, information and belief.
    II. Subsistence Stores:
    The amount of Subsistence Stores on board, that is the number of the 
crew signed on ( ) and the average number of passengers, if any ( ), 
times the number of days for which the vessel was stored as above ( ), 
times the applicable factor \6\ of cost for one man per day ( ) was $--
----.
---------------------------------------------------------------------------

    \6\ The factor of cost per man per day, as prescribed by the 
Maritime Administration for voyages beginning in 19 , is $------.
---------------------------------------------------------------------------

    To this amount is added the actual cost of Subsistence Stores 
purchased in Foreign Ports for the homeward voyage (as per statement 
attached) \5\ $------, making the amount on board on date of sailing $--
----.
    The amount of Subsistence Stores consumed, that is the number of 
crew signed on ( ) and the average number of passengers, if

[[Page 182]]

any ( ) times the number of days between the last day of storing the 
vessel and the date on which the vessel was lost ( ) times the 
applicable factor \6\ of cost for one man per day was $------.
    To this amount is added the actual amount of Subsistence Stores 
transferred or sold (as per statement attached), $------, making $------
, which, subtracted from the amount of Subsistence Stores on board at 
date of sailing, as above, is $------, which sum is claimed to be the 
actual value of the unused Subsistence Stores at the time of the loss, 
according to the best of deponent's knowledge, information and belief.
    III. Slop Chest: \7\
---------------------------------------------------------------------------

    \7\ If the figure needed to fill the blank in paragraph (A) or (B) 
is not available, the formula cannot be used; the Owner must submit 
actual inventories and a record of purchases on Affidavit Exhibit B.
---------------------------------------------------------------------------

    (A) The average daily consumption cost of Slop Chest Stores for this 
vessel for the year prior to the voyage on which she was lost was \8\ 
$------.
---------------------------------------------------------------------------

    \8\ Strike out paragraph (A) or (B).
---------------------------------------------------------------------------

    (B) The figure required for (A) is not readily available, and the 
average daily cost of Slop Chest Stores for this vessel for the last 
calendar year set up on the Owner's books was \8\ $------.
    The amount of Slop Chest Stores on board at the time this vessel was 
ready to sail (the number of days for which the vessel was stored times 
the average daily consumption cost, as above) was $------.
    To this amount is added the actual cost of Slop Chest Stores 
purchased in Foreign Ports for the homeward voyage (as per statement 
attached) \5\ $------, making the total amount on hand at date of 
sailing $------.
    The average daily consumption cost, as above times the number of 
days from the date the vessel was ready to sail to, but not including, 
the date of loss, as above, is $------.
    To this is added the actual amount of Slop Chest Stores transferred 
or sold (as per statement attached) $------, making $------, which, 
subtracted from the amount of Slop Chest Stores on board at date of 
sailing, as above, is $------, which sum is claimed to be the actual 
value of the vessel's unsold Slop Chest Stores at the time of the loss 
according to the best of deponent's knowledge, information and belief.
    IV. Bar Stock: \9\
---------------------------------------------------------------------------

    \9\ If the figure needed to fill the blank in paragraph (A) or (B) 
is not available, the formula cannot be used; the Owner must submit 
actual inventories and a record of purchases on Affidavit Exhibit B.
---------------------------------------------------------------------------

    (A) The average daily consumption cost of Bar Stock for this vessel 
for the year prior to the voyage on which she was lost was \10\ $------.
---------------------------------------------------------------------------

    \10\ Strike out paragraph (A) or (B).
---------------------------------------------------------------------------

    (B) The figure required for (A) is not readily available, and the 
average daily cost of Bar Stock for this vessel for the last calendar 
year set up on the Owner's books was \10\ $------.
    The amount of Bar Stock on board at the time this vessel was ready 
to sail (the number of days for which the vessel was stored times the 
average daily consumption cost, as above) was $------.
    To this amount is added the actual cost of Bar Stock purchased in 
Foreign Ports for the homeward voyage (as per statement attached) \5\ 
$------, making the total amount on hand at date of sailing $------.
    The average daily consumption cost, as above, times the number of 
days from the date the vessel was ready to sail to, but not including, 
the date of loss, as above, is $------.
    To this amount is added the actual amount of Bar Stock transferred 
or sold (as per statement attached) $------, making $------, which, 
subtracted from the amount of Bar Stock on board at the time of sailing, 
as above, is $------, which sum is claimed to be the actual value of the 
vessel's unused Bar Stock at the time of the loss according to the best 
of deponent's knowledge, information and belief.
    V. Fuel: \11\
---------------------------------------------------------------------------

    \11\ If the figure needed to fill the blank in paragraph (A) or (B) 
is not available, the formula cannot be used; the Owner must submit 
actual inventories and a record of purchases on Affidavit Exhibit B.
---------------------------------------------------------------------------

    (A) The average daily consumption cost of Fuel for this vessel for 
the year prior to the voyage on which she was lost was \11\ $------.
    (B) The figure required for (A) is not readily available, and the 
average daily cost of Fuel for this vessel for the last calendar year 
set up on the Owner's books was \12\ $------.
---------------------------------------------------------------------------

    \12\ Strike out paragraph (A) or (B).
---------------------------------------------------------------------------

    The amount of Fuel on board at the time this vessel was ready to 
sail (the number of days for which the vessel was stored times the 
average daily consumption cost, as above) was $------.
    To this amount is added the actual cost of Fuel purchased in Foreign 
Ports for homeward voyage (as per statement attached) \5\ $------, 
making the total amount on hand at date of sailing $------.
    The average daily consumption cost, as above, times the number of 
days from the date the vessel was ready to sail to, but not including, 
the date of loss, as above, is $------.
    To this amount is added the actual amount of Fuel transferred or 
sold (as per statement attached) $------, making $------, which,

[[Page 183]]

subtracted from the amount of Fuel on board at the time of sailing, as 
above, is $------, which sum is claimed to be the actual value of the 
vessel's unused Fuel at the time of the loss according to the best of 
deponent's knowledge, information and belief.

Unused Consumable Stores, other than--
  Subsistence Stores.......................  $------
  Subsistence Stores.......................  ------
  Slop Chest...............................  ------
  Bar Stock................................  ------
  Fuel.....................................  ------
                                            ----------------------------
    Total..................................  $------
 

                                              By: ----------------------
    Sworn to before me this ------------ day of ----------------, 19--
--.

                                                           Notary Public

                                Exhibit B

affidavit in proof of claim for the loss of unused stores and supplies 
on board the ss--------------

State of

 ss:

County of

    I am the ------ of ------, the Owner of the SS ------, which was 
lost as a result of enemy action on or about the -------------- day of 
--------------, --------. I make this affidavit in support of the above-
named Owner's claim for the loss of the actual value of the said 
vessel's unused Stores and Supplies. The statements herein contained are 
based upon the personal knowledge of deponent or upon the books of 
records of the Owner or its agent which deponent believes are true and 
accurate.
    ``Stores and Supplies'', for loss of which claim is being made, are 
limited to consumable and subsistence stores as defined in Maritime 
Administration Inventory Manual, Vessel Inventories, Part I, and do not 
include radio supplies, expendable equipment, scrap, junk and spare 
parts.
    I am familiar with the insurance carried on the Stores and Supplies, 
on the SS ------; and, from the effective date of War Risk Insurance 
Binder No. ------ Policy No. ------ issued by the United States of 
America, which covers the total loss of Stores and Supplies in the 
amount of $------, to the date of such vessel's loss on ------, there 
was no war risk insurance on such Stores and Supplies other than that 
provided by said Binder or Policy.
    The period for which the vessel was stored with Stores and Supplies 
for use on the voyage on which she was lost, beginning with the last day 
of storing, was ------ days for Consumable Stores, ------ days for 
Subsistence Stores, ------ days for Slop Chest, ------ days for Bar 
Stock and ------ days for Fuel. The number of days from the last day of 
storing to, but not including, the date on which the vessel was lost, 
was ------ days for Consumable Stores, ------ days for Subsistence 
Stores, ------ days for Slop Chest, ------ days for Bar Stock and ------ 
days for Fuel.
    I. Consumable (excluding Subsistence) Stores:
    (1) The value of Consumable Stores on board the vessel at the time 
the vessel was ready to sail, as shown by the attached certified 
inventory of amounts on board the vessel at the termination of the 
preceding voyage or date of last inventory on ------, less actual 
consumption to date of sailing, amounting to $------, plus the actual 
additional purchases made for the voyage on which the vessel was lost, 
as shown by the attached invoices, amounting to $------, was $------.
    (2) The average daily consumption factor of $------ (determined by 
dividing the amount determined as in (1) by the number of days for which 
the vessel was stored) times the number of days from the date the vessel 
was ready to sail to, but not including, the date of loss ( ) is $----
--.
    To this amount is added the actual amount of Consumable Stores 
transferred or sold (as per statement attached) $------, making $------, 
which, subtracted from the amount of Consumable Stores on board at the 
time the vessel was ready to sail, as shown in (1) above, is $------, 
which sum is claimed to be the actual value of the vessel's unused 
Consumable Stores at the time of the loss according to the best of 
deponent's knowledge, information and belief.
    II. Subsistence Stores:
    (1) The value of Subsistence Stores on board the vessel at the time 
the vessel was ready to sail, as shown by the attached certified 
inventory of amounts on board the vessel at the termination of the 
preceding voyage or date of last inventory on ------ less actual 
consumption to date of sailing, amounting to $------, plus the actual 
additional purchases made for the voyage on which the vessel was lost, 
as shown by the attached invoices, amounting to $------, was $------.
    (2) The average daily consumption factor of $------ (as determined 
by dividing the amount determined as in (1) by the number of days for 
which the vessel was stored) times the number of days from the date the 
vessel was ready to sail to, but not including, the date of loss ( ) is 
$------.
    To this amount is added to the actual amount of Subsistence Stores 
transferred or sold (as per statement attached) $------, making $------, 
which, subtracted from the amount of Subsistence Stores on board at the 
time the vessel was ready to sail, as shown in (1) above, is $------, 
which sum is claimed to be the actual value of the vessel's unused 
Subsistence Stores at the time of the

[[Page 184]]

loss according to the best of deponent's knowledge, information and 
belief.
    III. Slop Chest Stores:
    (1) The value of Slop Chest Stores on board the vessel at the time 
the vessel was ready to sail, as shown by the attached certified 
inventory of amounts on board the vessel at the termination of the 
preceding voyage or date of last inventory on ------ less actual 
consumption to date of sailing, amounting to $------, plus the actual 
additional purchases made for the voyage on which the vessel was lost, 
as shown by the attached invoices, amounting to $------, was $------.
    (2) The average daily consumption factor of $------ (determined by 
dividing the amount determined as in (1) by the number of days for which 
the vessel was stored) times the number of days from the date the vessel 
was ready to sail to, but not including, the date of loss ( ) is $----
--.
    To this amount is added the actual amount of Slop Chest Stores 
transferred or sold (as per statement attached) $------, making $------, 
which, subtracted from the amount of Slop Chest Stores on board at the 
time the vessel was ready to sail, as shown in (1) above, is $------, 
which sum is claimed to be the actual value of the vessel's unused Slop 
Chest Stores at the time of the loss according to the best of deponent's 
knowledge, information and belief.
    IV. Bar Stock:
    (1) The value of Bar Stock on board the vessel at the time the 
vessel was ready to sail, as shown by the attached certified inventory 
of amounts on board the vessel at the termination of the preceding 
voyage or date of last inventory on ------ less actual consumption to 
date of sailing, amounting to $------, plus the actual additional 
purchases made for the voyage on which the vessel was lost, as shown by 
the attached invoices, amounting to $------, was $------.
    (2) The average daily consumption factor of $------ (determined by 
dividing the amount determined as in (1) by the number of days for which 
the vessel was stored) times the number of days from the date the vessel 
was ready to sail to, but not including, the date of loss ( ) is $----
--.
    To this amount is added the actual amount of Bar Stock transferred 
or sold (as per statement attached) $------, making $------, which, 
subtracted from the amount of Bar Stock on board at the time the vessel 
was ready to sail, as shown in (1) above, is $------, which sum is 
claimed to be the actual value of the vessel's unused Bar Stock at the 
time of the loss according to the best of deponent's knowledge, 
information and belief.
    V. Fuel:
    (1) The value of Fuel on board the vessel at the time the vessel was 
ready to sail, as shown by the attached certified inventory of amounts 
on board the vessel at the termination of the preceding voyage or date 
of last inventory on ------ less actual consumption to date of sailing, 
amounting to $------, plus the actual additional purchase made for the 
voyage on which the vessel was lost, as shown by the attached invoices, 
amounting to $------, was $------.
    (2) The average daily consumptions factor of $------ (determined by 
dividing the amount determined as in (1) by the number of days for which 
the vessel was stored) times the number of days from the date the vessel 
was ready to sail to, but not including, the date of loss ( ) is $----
--.
    To this amount is added the actual amount of Fuel transferred or 
sold (as per statement attached) $------, making $------, which, 
subtracted from the amount of Fuel on board at the time the vessel was 
ready to sail, as shown in (1) above, is $------, which sum is claimed 
to be the actual value of the vessel's unused Fuel at the time of the 
loss according to the best of deponent's knowledge, information and 
belief.

Claim is hereby made for:
  Unused Consumable Stores, other than--
    Subsistence Stores........................................   $------
    Subsistence Stores........................................   $------
    Slop Chest................................................   $------
    Bar Stock.................................................   $------
    Fuel......................................................   $------
                                                               ---------
        Total.................................................   $------
 

 By:--------------

    Sworn to before me this ------------ day of ----------------, 19--
--.

                                                           Notary Public

[[Page 185]]



                          SUBCHAPTER H_TRAINING





PART 310_MERCHANT MARINE TRAINING--Table of Contents



 Subpart A_Regulations and Minimum Standards for State, Territorial or 
                Regional Maritime Academies and Colleges

Sec.
310.1 Definitions.
310.2 Federal assistance.
310.3 Schools and courses.
310.4 Training Ship.
310.5 Personnel.
310.6 Entrance requirements.
310.7 Federal student subsistence allowances and student incentive 
          payments.
310.8 Leave.
310.9 Medical attention and injury claims.
310.10 Discipline and dismissal.
310.11 Cadet uniforms.
310.12 Scope and effect.
310.12-1 Form of agreement.

Subpart B [Reserved]

  Subpart C_Admission and Training of Midshipmen at the United States 
                         Merchant Marine Academy

310.50 Purpose.
310.51 Definitions.
310.52 General.
310.53 Nominations and vacancies.
310.54 General requirements for eligibility.
310.55 Scholastic requirements.
310.56 Physical requirements.
310.57 Application and selection of midshipmen.
310.58 Service obligation for students executing or reexecuting 
          contracts.
310.59 Courses of instruction.
310.60 Training on subsidized vessels.
310.61 Training on other vessels and by other facilities or agencies.
310.62 Allowances and expenses; required deposit.
310.63 Uniforms and textbooks.
310.64 Privileges.
310.65 Graduation.
310.66 Foreign students.
310.67 Academy regulations.

    Authority: 46 App. U.S.C. 1295; 49 CFR 1.66.

    Source: 46 FR 37694, July 22, 1981, unless otherwise noted.



 Subpart A_Regulations and Minimum Standards for State, Territorial or 
                Regional Maritime Academies and Colleges



Sec.  310.1  Definitions.

    For purposes of this subpart A:
    (a) The 1958 Act means the Maritime Academy Act of 1958, Pub. L. 85-
672.
    (b) Act means the Maritime Education and Training Act of 1980, Pub. 
L. 96-453, as amended.
    (c) Administration means the Maritime Administration, United States 
Department of Transportation.
    (d) Agreement means an agreement between a State, or Territorial or 
Regional maritime academy or college and the Maritime Administrator, 
Department of Transportation as authorized by the 1958 Act or the Act 
and set forth inSec. 310.13 of this part.
    (e) Secretary means Secretary of Transportation.
    (f) Maritime Administrator means the Maritime Administrator, 
Department of Transportation.
    (g) Cadet means cadet enrolled in the United States Maritime Service 
and in good standing at a State or Territorial or Regional maritime 
academy or college meeting the requirements of the 1958 Act.
    (h) Commanding Officer means the Commanding Officer of a training 
ship furnished by the Administration.
    (i) Cost of Education Provided means the financial costs incurred by 
the Federal Government in providing student incentive payments for 
students at the State maritime academies.
    (j) Deputy means the Deputy Maritime Administrator, Department of 
Transportation.
    (k) Maritime Service means the United States Maritime Service.
    (l) Midshipman means a student in good standing at a State maritime 
academy or college who has accepted midshipman status in the United 
States Naval Reserve (including the Merchant Marine Reserve, United 
States Naval Reserve) under the Act.

[[Page 186]]

    (m) Officers means all officers and faculty employed by a State 
maritime academy or college.
    (n) Region Director means the Director of the Administration's 
region office in which a School is located or in which a training ship 
is located.
    (o) School means State or Territorial or regional maritime academy 
or college meeting the requirements of the Act.
    (p) Superintendent means the superintendent or president of a 
School.
    (q) Supervisor means the employee of the Administration designated 
to supervise the Federal Government's interest in a School under the 
provisions of the Act, an agreement, and this subpart.
    (r) Training Ship means a vessel used for training by a school and 
furnished by the Administration to a State or Territory, and includes 
the ship itself and all its equipment, apparel, appliances, machinery 
boilers, spare and replacement parts and other property contained in it.

[46 FR 37694, July 22, 1981, as amended at 69 FR 31901, June 8, 2004]



Sec.  310.2  Federal assistance.

    (a) The Maritime Administrator may enter into agreements with the 
present or later established schools (not more than one such school in 
each State or Territory) meeting the requirements of the Act to make 
annual payments, for not in excess of four (4) years in the case of each 
such agreement, to be used for the maintenance and support of such 
Schools. The amount of each such annual payment shall be not less than 
the amount furnished to such School for its maintenance and support by 
the State or Territory in which such academy is located or, in the case 
of a Regional maritime academy an amount equal to the amount furnished 
to such academy for its maintenance and support by all States or 
Territories, r both, cooperating to support such School, but shall not 
exceed $100,000. However, the amount shall not exceed $25,000, if such 
academy does not meet the requirements of subsection 1304(f)(2) of the 
Act.
    (b) Pursuant to the provisions of section 1304(c) of the Act, The 
Maritime Administrator, may furnish to any State or Territory of the 
United States for use as a Training Ship by a school any suitable vessel 
that is under his or her jurisdiction, obtain such vessel from any 
department or agency of the United States, or may construct and furnish 
a suitable vessel, if such vessel is not available.
    (c) The Maritime Administrator may pay to any School the amount of 
the costs of all fuel consumed by a Training Ship furnished under the 
provisions of section 1304(c)(1) of the Act while such vessel is being 
used for training purposes by such a School, if such funds have been 
appropriated and are available for that purpose.
    (d) As a condition to receiving any payments or the use of any 
Training Ship under the provisions of the Act, the school shall comply 
with the requirements of the Act and this subpart and shall agree in 
writing to conform to such requirements.
    (e) As a further condition to receiving any payments or the use of 
any Training Ship, a School shall agree that, with respect to the 
training program for merchant marine officers, consistent with 
provisions of the Act, the 1958 Act, and the Agreement, it will comply 
with the following provisions of law and implementing regulations duly 
promulgated thereunder, to the extent applicable, including, but not 
limited to: Title VI, Civil Rights Act, 1964 (42 U.S.C. 2000d); the Age 
Discrimination Act of 1975 (42 U.S.C. 6101); the Vocational 
Rehabilitation Act--section 504 (29 U.S.C. 794); and 15 CFR Part 8. Each 
school shall give assurances that it will take any and all measures 
necessary to effectuate compliance.



Sec.  310.3  Schools and courses.

    (a) Schools with Federal aid. The following schools are presently 
operating with Federal aid under the 1958 Act or the Act:

California Maritime Academy
Maine Maritime Academy
Massachusetts Maritime Academy
State University of New York Maritime College
Texas Maritime College of the Texas A&M University at Galveston
The Great Lakes Maritime Academy

    (b) General rules for operation of a School. (1) The Schools shall 
maintain

[[Page 187]]

adequate berthing, messing and classroom instruction facilities ashore, 
or have plans to establish same at the earliest possible time, unless 
prevented from doing so by conditions beyond the control of the School. 
During a period a school is implementing an approved plan, Cadets may be 
housed and instructed on a Training Ship. However, the approved plan may 
include the ongoing use of the Training Ship as an instructional and 
laboratory facility and for the berthing of entering class cadets for a 
period not to exceed six months for purposes of shipboard 
indoctrination.
    (2) The School shall arrange for the Cadet or Midshipman to take the 
United States Coast Guard original licensing examination prior to the 
date of graduation.
    (3) As a condition to receiving payments of any amount allowable by 
the 1958 Act and the Act in excess of $25,000 for any year, a School 
shall agree to admit student residents of other States to the extent of 
at least ten percent (10%) of each entering class, if such out-of-State 
students apply for admission and are otherwise qualified for such 
admission. The calculation of residents of other States shall exclude 
residents of foreign countries, but shall include residents of 
Territories and possessions of the United States (including the 
Commonwealth of Puerto Rico).
    (4) Upon the request of the Administration a school shall furnish 
such reports and estimates as may be required in the preparation of 
Federal Budget estimates.
    (5) State authorities shall prescribe and administer rules and 
regulations for the internal organization and administration of each 
School.
    (6) The Administration shall have the right to inspect shore base 
facilities at all reasonable times.
    (7) Records pertaining to a School, its officers, crew, Cadets, the 
Training Ship, and shore base, shall be maintained by each School and 
shall be available to the Supervisor upon request. A detailed record of 
applications for admissions, enrollments, reenrollments, absences with 
or without leave, hospitalizations, determinations of students not in 
good standing, disenrollments, graduations, and other data concerning 
cadets and Midshipmen shall be kept by each school for the period of 
enrollment plus one year. Copies of these records shall be furnished to 
the Supervisor upon request.
    (8) The Administration may include in any pamphlets, brochures or 
other public information materials an adequate description of each 
School giving the reader knowledge of the existence of the School, its 
purposes and where to obtain application forms and further information.
    (c) Curriculum. (1) The minimum period of training shall be three 
(3) years. For the Cadets and Midshipmen at the schools located in 
California, Maine, Massachusetts, New York and Texas at least six (6) 
months of the total time must be aboard a Training Ship in cruise 
status. A maximum of two (2) months of training time aboard commercial 
vessels of not less than 2,500 horsepower may be substituted for two (2) 
months of the specified cruise time. For the cadets at the Great Lakes 
Maritime Academy, six (6) months of the time shall be aboard Great Lakes 
commercial vessels and an additional three (3) months shall be aboard 
either a Training Ship in a cruise status or Great Lakes commercial 
vessels while underway. Cadets in training status aboard commercial 
vessels shall sign on board as cadets and shall pursue their training 
within the framework of formal sea projects prepared and monitored by 
their respective Schools.
    (2) State authorities shall prescribe and be responsible for the 
courses of instruction and general system of training and the addition 
of such reasonable maritime courses as may be prescribed by Federal 
authorities, subject to approval by the Maritime Administrator. The 
curriculum as a composite shall, as a minimum, meet the requirements set 
out in the Federal Curriculum Standards for Merchant Marine Officers 
Training Program.
    (3) Copies of the Federal Curriculum Standards for Merchant Marine 
Officers Training Program at the State maritime academies may be 
obtained

[[Page 188]]

from the Maritime Administration, Office of Policy and Plans, 400 
Seventh Street, SW, Washington, DC 20590.

(Sec. 204(b), Merchant Marine Act, 1936, as amended (46 U.S.C. 1114(b)); 
Pub. L. 97-31 (August 6, 1981); 49 CFR 1.66 (46 FR 47458, Sept. 28, 
1981))

[46 FR 37694, July 22, 1981, as amended at 49 FR 13365, Apr. 4, 1984; 69 
FR 31901, June 8, 2004]



Sec.  310.4  Training Ship.

    The Administration may furnish a Training Ship, if such is 
available, to any School. Training Ships which may be designated for use 
by a School will be delivered to the School at a location determined by 
the Administration, in condition found to be in class by the American 
Bureau of Shipping and certificated by the U.S. Coast Guard. If a 
Training Ship is not available, adequate cruising facilities shall be 
the responsibility of the State and its School. The furnishing of a 
Training Ship shall be subject to the following terms and conditions:
    (a) General provisions. (1) The State, acting through the School 
shall exercise reasonable care to safeguard the interests of the 
Administration and avoid (i) injury to any person aboard the Training 
Ship, and (ii) loss and damage of every nature with respect to the 
Training Ship. Also, the school shall have reasonable layup procedures 
during noncruise status of the Training Ship.
    (2) Excerpts from log books and reports shall be submitted as 
directed by the Supervisor.
    (3) Initial telegraphic or telephonic reports shall be made promptly 
to the Supervisor and the appropriate Region Director in the event of an 
accident causing (i) serious injury to any person, or to the Training 
Ship, or (ii) damage inflicted by the Training Ship upon any other ship 
or other property. Such reports shall be followed by complete written 
details of the occurrence.
    (4) The Supervisor shall determine whether or not the berth of the 
Training Ship at the base in its home port is suitable from the 
standpoint of safe mooring. When the Training Ship is not on cruise, the 
Commanding Officer or Superintendent shall keep the Supervisor informed 
of the location of the Training Ship and any contemplated change of 
berth.
    (5) The following notice shall be posted conspicuously aboard each 
Training Ship furnished to a State for use by a School:
    This training ship is the property of the United States of America. 
It is furnished to the State of -------- by the Department of 
Transportation, Maritime Administration, for the purpose of training 
young men and women to become officers in the merchant marine of the 
United States. Neither the State, the Commanding Officer, nor any other 
person has any right, power or authority to create, incur or permit to 
be imposed upon this vessel, any lien whatever.
    (6) No changes requiring U.S. Coast Guard approval shall be made to 
the Training Ship without the written approval of the Administration.
    (7) In the event of the termination of the use of a Training Ship by 
the State or by the Maritime Administrator, the State shall return to 
the State base port, the Training Ship and all property whatsoever owned 
by the Administration. Title to all additions, replacements, and 
renewals made by the State shall vest in the Administration without 
charge.
    (b) Termination of use. The Maritime Administrator may terminate the 
use of a Training Ship upon such reasonable notice to the State as the 
circumstances may permit in the judgment of the Maritime Administrator. 
If use of the Training Ship is terminated by the Maritime Administrator, 
the Maritime Administrator may:
    (1) Substitute another Training Ship;
    (2) Require the sharing of a Training Ship by two or more Schools; 
or
    (3) Cooperate with the School in arranging for training time aboard 
commercial vessels for its Cadets and Midshipmen.
    (c) Property aboard the Training Ship. The State shall have the 
complete use of a Training Ship as defined, subject to the following 
terms and conditions:
    (1) All property, or its equivalent furnished by the Administration, 
shall be returned to the Administration when use of the Training Ship is 
terminated. The only exceptions are: spare and replacement parts 
consumed; and losses

[[Page 189]]

due to ordinary wear and tear, unavoidable accident and perils of the 
sea. All other property otherwise lost or destroyed shall be replaced at 
the expense of the State.
    (2) Administration property shall not be permanently removed from 
the Training Ship to the shore base without the prior written approval 
of the Supervisor.
    (3) The administration shall take inventories of State and Federal 
property aboard the Training Ship at such times as it deems necessary. 
The school, at its expense, shall furnish such assistance as may be 
necessary in taking such inventories.
    (d) Condition Surveys. Before a Training Ship is released to a 
School and manned by officers under State control, a condition survey 
shall be made by duly authorized representatives of the School and the 
Administration. If the Training Ship is found in order, the School 
representative shall sign a receipt for the Training Ship. Subsequently, 
after due notice to the State authorities, a condition survey may be 
made of the Training Ship whenever deemed advisable by the 
Administration, and, in any event, upon redelivery of the Training Ship 
by the State to the Administration.
    (e) Maintenance and repairs--(1) Administration payment. A Training 
Ship shall be maintained in good repair by the Secretary as provided by 
the 1958 Act and the Act. Expenses for repairs, changes and alterations, 
repairs to equipage and replacements of equipage in accordance with the 
Administration's approved allowance lists for the Training Ship (i.e. 
authorized under the Act and to the extent that funds are available), 
shall be borne by the Administration under the following terms and 
conditions:
    (i) When it is necessary to repair or drydock the Training Ship 
because of damage (except in an emergency, when on foreign cruise), the 
Commanding Officer or Superintendent shall notify the Supervisor and 
appropriate Region Director by telephone or telegraph in order to enable 
a representative of the Region Director, if available, to be present, 
when the survey of the damage is made.
    (ii) Repairs which need not be carried out during the annual 
overhaul period shall be made by the Cadets or Midshipmen, if possible, 
under the supervision of the officers. When repair material is required 
for this purpose, the Commanding Officer or Superintendent shall forward 
to the Supervisor a list of such material and estimated costs, and a 
description of the repairs to be carried out by the Cadets or 
Midshipmen. The Supervisor shall promptly advise the Commanding Officer 
or Superintendent whether or not such work comes under the heading of 
repairs, and if procurement of the material is authorized.
    (iii) Requisitions covering repairs, renewals, and betterments shall 
be prepared in quintuplicate by the heads of departments of the Training 
Ship and submitted by the Commanding Officer or Superintendent to the 
Supervisor at least forty-five (45) days before the date of the annual 
overhaul, with one copy to the Region Director.
    (iv) The State is authorized to expend not to exceed $5,000 for 
emergency repairs which become necessary while the Training Ship is on 
foreign cruise. The Administration shall reimburse the State upon 
submission of vouchers to, and approval by, the Maritime Administrator. 
To obtain reimbursement for emergency repairs estimated to cost in 
excess of $5,000, authorization must be obtained by the State from the 
Supervisor prior to undertaking such repairs. The Commanding Officer 
shall be responsible for all necessary filings with the United States 
Customs Service to avoid duties upon all emergency repairs performed 
outside the United States. If penalties are imposed, for non-filing or 
improper filing, they shall be solely the responsibility of the State.
    (2) State payment. Except as otherwise provided in this section, the 
State shall, at its own expense, accomplish the following:
    (i) Undertake usual preventive maintenance of the Training Ship, 
adhere to minimum levels of preventive maintenance as prescribed by the 
Administration, and keep the Training Ship clean and painted, above the 
waterline according to good maritime practices.

[[Page 190]]

    (ii) Cause the Training Ship to be fumigated if required by the 
Administration and forward to the Supervisor a copy of the fumigation 
certificate.
    (iii) Pay for all consumable stores, freshwater and costs incidental 
to the operation of the Training Ship.
    (iv) Pay for fuel of the training ship except that the 
Administration may assist in paying the cost of fuel consumed on the 
Training Ship while being used for training purposes if funds are 
appropriated and available for such purposes.
    (f) Cruises. The school shall submit the cruise itinerary of the 
Training Ship including a listing of foreign ports to be visited, for 
approval of the Supervisor at least sixty (60) days in advance of the 
date such cruise is scheduled to begin. The Supervisor shall arrange 
with the Department of State for clearance of the Training Ship to visit 
foreign ports.
    (g) Hospitalization. The School shall be responsible for all medical 
treatment and hospitalization of all persons aboard the Training Ship at 
all times, including officers and Cadets and Midshipmen. If available, 
facilities of the United States Public Health Service should be 
utilized.
    (h) Repatriation and return to home port. The School shall be 
responsible for the return to the home port of the Training Ship of all 
persons, including officers and Cadets and Midshipmen, who originally 
embarked on a training cruise from a Continental United States port and 
who are left behind, after the departure of the Training Ship from any 
port, foreign or domestic, or are to be brought home from the ship at 
any time or for any reason. The School shall be solely responsible for 
all expenses of repatriation and return to home port.



Sec.  310.5  Personnel.

    (a) Selection and appointment of Superintendent and faculty by State 
authorities. (1) The State shall select and appoint the Superintendent 
of a School in accordance with qualifications established by appropriate 
State authorities. The State shall notify the Maritime Administrator 
whenever a new Superintendent is appointed and furnished with 
appropriate background information on the appointee for informational 
purposes.
    (2) The State shall appoint faculty members in disciplines other 
than engineering and navigation on the basis of the same criteria used 
in the employment of such personnel in State-supported colleges and 
universities throughout the State. Faculty members in navigation and 
engineering courses, including steam and diesel, shall meet appropriate 
academic and practical experience standards adopted by the school and 
approved by the Administration.
    (b) Personnel for Training Ships--(1) Commanding Officer. The 
Commanding Officer shall hold a valid Master's Ocean, Unlimited Tonnage 
license including Radar Observer endorsement issued by the United States 
Coast Guard and shall have served at least two (2) years as Master, 
Chief Officer, Commanding Officer, or Executive Officer either (i) on 
oceangoing vessels under the authority of said Master's Ocean, Unlimited 
Tonnage license, or (ii) in the case of sea service as a member of the 
Uniformed Services of the United States, on ships accepted by the United 
States Coast Guard as equivalent for qualifying service for issue of a 
Master's Ocean, Unlimited Tonnage license.
    (2) Chief Engineer. The Chief Engineer must hold a valid Chief 
Engineer's (Steam) Ocean, Unlimited Horsepower license, issued by the 
United States Coast Guard and have served as Chief Engineer of an 
oceangoing steamship of comparable horsepower to that of the particular 
Training Ship.
    (3) Watch Officers. Both Deck and Engineer Watch Officers in charge 
of a watch, underway, shall hold valid Ocean, Unlimited Tonnage 
licenses, issued by the United States Coast Guard, in their particular 
field.
    (4) Radio Officers. During each training cruise the Training Ship 
shall have assigned one or more radio officers holding a valid license 
issued by the United States Coast Guard, in accordance with its 
regulations.
    (5) Licensed Engineer. When a Training Ship boiler is in operation, 
there shall be a Licensed Engineer qualified to stand the watch aboard 
at all times.

[[Page 191]]

    (c) Insignia for officers and other School personnel. The State may 
furnish insignia for officers and other school personnel, other than 
officers of the United States Navy, United States Naval Reserve, United 
States Maritime Service and United States Coast Guard.

(Approved by the Office of Management and Budget under control number 
2133-0010)

(Sec. 204(b), Merchant Marine Act, 1936, as amended (46 U.S.C. 1114(b)); 
Pub. L. 97-31 (August 6, 1981); 49 CFR 1.66 (46 FR 47458, Sept. 28, 
1981))

[46 FR 37694 July 22, 1981, as amended at 47 FR 25530, June 14, 1982; 49 
FR 13365, Apr. 4, 1984]



Sec.  310.6  Entrance requirements.

    (a) Enrollment prior to April 1, 1982. A candidate for admission to 
a school who wishes to be considered for Federal student subsistence 
payments shall:
    (1) Be a citizen of the United States.
    (2) Be obligated to (i) complete the Naval Science curriculum (ii) 
take all necessary and positive steps to obtain a commission as ensign 
in the United States Naval Reserve, (iii) apply before graduation for 
such commission, and (iv) accept such commission if offered. A breach of 
this agreement will result in termination of cadet status and of Federal 
student subsistence payments, and may lead to legal action for recovery 
of all past such payments. The requirements of this paragraph shall not 
apply at The Great Lakes Maritime Academy.
    (3) Be obligated to sit for the appropriate licensing examination of 
the United States Coast Guard. A breach of this agreement will result in 
termination of cadet status and of Federal student subsistence payments, 
and may lead to legal action for recovery of all past such payments.
    (4) Meet the physical standards specified by the United States Coast 
Guard for original licensing as a merchant marine officer. The written 
certification of the Superintendent of the school, based on a physical 
examination by a doctor, the results of which are on record at the 
school, that a candidate meets these requirements, will be acceptable to 
the Administration.
    (5) Possess a secondary school education or equivalent, satisfactory 
for admission as an undergraduate, to colleges or universities under 
control of the State in which the school is located.
    (6) Meet requirements established by the school in regard to such 
criteria as the individual's secondary school grades, rank in graduating 
class, aptitude, achievement, and qualities of leadership.
    (b) Enrollment on or after April 1, 1982. A candidate for admission 
to a school who wishes to be considered for the Federal student 
incentive payments shall:
    (1) Meet the requirements of paragraphs (a) (1), (4), (5), and (6) 
of this section.
    (2) Be at least seventeen (17) years of age and not have passed the 
twenty-fifth (25th) birthday on the day of enrollment at a School.
    (3) Apply for, be offered, and have accepted midshipman status in 
the United States Naval Reserve (including the Merchant Marine Reserve, 
United States Naval Reserve) and simultaneously have applied and been 
accepted for Enlisted Reserve status.
    (4) Be obligated to complete the naval science curriculum.

[46 FR 37694, July 22, 1981, as amended at 48 FR 24080, May 31, 1983]



Sec.  310.7  Federal student subsistence allowances and student
incentive payments.

    (a) Subsistence allowances--(1) Selection and allocation. In 
accordance with the Administration's established freshmen subsidy 
allocation for each School, the school shall select the individuals in 
its new entering class who will be enrolled in the United States 
Maritime Service as cadets and start to receive Federal student 
subsistence payments for uniforms, textbooks and subsistence as provided 
in the 1958 Act. The freshman subsidy allocations for each school are as 
follows: California Maritime Academy 99; Maine Maritime Academy 135; 
Massachusetts Maritime Academy 69; State University of New York Maritime 
College 200; Great Lakes Maritime Academy 45; and the

[[Page 192]]

Texas Maritime College 32. Each student who meets the entrance 
requirements inSec. 310.6(a) and applies for enrollment in the United 
States Maritime Service shall be entitled to consideration for a student 
subsistence payment at a rate and under the conditions in the 1958 Act. 
The list identifying the selected students shall be forwarded to the 
Administration on or before October 31, 1981. The Federal student 
subsistence payments will be paid to the School while a cadet is in 
attendance but not in excess of four (4) academic years for any one 
student.
    (2) Resignation or disenrollment. There will be no substitution for 
students removed or dropped from the list of those originally receiving 
Federal student subsistence payments. Subsidized students who resign or 
are disenrolled from a school shall not, on subsequent reenrollment, be 
in a position to reclaim their subsidy status.
    (3) Selection criteria; rate of payment. The selection of the 
students to receive such payments shall be made by the School in 
accordance with criteria established by the School, with the prior 
approval of the Administration. The rate of Federal student subsistence 
payments will be determined by the Administration according to the 1958 
Act or the Act.
    (4) ROTC enrollment. Subsidized cadets who make a commitment to an 
Armed Force Reserve Officer Training Corps will be removed from the 
Administration subsidy rolls effective on the date they receive funds 
from a U.S. military service. Should they leave the program for any 
reason they may not reclaim the Administration subsidy as a cadet.
    (5) Payment procedure. The Administration shall make the Federal 
student subsistence payments no more frequently than monthly, directly 
to the School upon the presentation of a statement containing the names 
of each Cadet selected by the Academy (within the quotas furnished 
pursuant to paragraph (a) of this section) to be enrolled in the 
Maritime Service and to receive the Federal student subsistence 
payments. For newly selected Cadets in a new entering class, the 
statement supporting the first voucher for payment shall certify that 
the cadets have met the entrance requirements inSec. 310.6.
    (6) Certification procedure. All vouchers submitted for payment 
shall contain a certification by the Superintendent that the payment 
will be used to assist in defraying the cost of the uniforms, textbooks, 
and subsistence of each Cadet on the basis of the amount to which the 
cadet is entitled, as reflected by the attached Daily Attendance Report. 
No cadet shall receive a federal student subsistence payment for any 
time during which he or she is absent without leave or for absence due 
to a condition not in line of duty, or when determined by the School to 
be not in good standing.
    (7) Insufficient appropriations. If it appears that the amount 
appropriated by Congress under the Act shall not be sufficient to make 
payments at the maximum rate, not in excess of $1,200 per academic year 
per cadet, the Maritime Administrator, after consultation with the 
Schools, may determine the exact rate to be paid at each School for the 
remainder of the fiscal year.
    (b) Federal student incentive payments--(1) General provisions. In 
accordance with the Administration's established subsidy quotas for 
classes entering after April 1982, each school shall identify to the 
Administration, no later than February 1 annually, those students who 
have been selected to receive the student incentive payment authorized 
by the Act. The students so identified must meet the requirements of 
Sec.  310.6(b). The Administration shall provide the school with the 
necessary service obligation contracts. The contracts will be signed by 
the designated students and returned by the School to the Supervisor and 
shall become effective when signed by the Supervisor or his or her 
designee. A copy shall be returned to the School for transmittal to the 
student. Payments will be issued to midshipmen in amounts equaling $4000 
for each academic year of attendance whom execute the service obligation 
contracts providing for such payment amount. Payments shall commence to 
accrue on the day each such midshipman begins his or her first term of 
work at the School. Such payments shall be made quarterly to the 
midshipman until the completion of his or

[[Page 193]]

her course of instruction but in no event for more than four (4) 
academic years. The School shall submit a quarterly certified Daily 
Attendance Report listing the names of all designated midshipmen who are 
entitled to student incentive payments. Midshipmen who do not take all 
necessary steps to maintain their midshipman status, who lose their 
midshipman status due to action by the U.S. Navy, or who make the 
commitment identified in paragraph (a)(4) of this section will have 
their student incentive payment terminated.
    (2) Temporary reallocation of Federal student incentive payments. If 
a School does not have a sufficient number of eligible freshmen to 
utilize all of its alloted payments, then the unused subsidies may be 
reallocated on a need basis to academies with eligible students. In the 
next academic year, each School's subsidy quota for entering students 
will revert to its original level.
    (3) Form of the service obligation contract. The service obligation 
contract shall obligate the midshipman to--
    (i) Use the student incentive payment to defray the cost of 
uniforms, books and subsistence;
    (ii) Complete the course of instruction at the School;
    (iii) Take the examination for a license as an officer in the 
merchant marine of the United States on or before the date of graduation 
from a School and fulfill the requirements for such license not later 
than three (3) months after such graduation;
    (iv) Maintain a valid license as an officer in the merchant marine 
of the United States for at least six (6) years following the date of 
graduation from a School, accompanied by the appropriate national and 
international endorsements and certification required by the United 
States Coast Guard for service aboard vessels on domestic and 
international voyages (``appropriate'' means the same endorsements and 
certifications held at the date of graduation, or the equivalent);
    (v) Apply for an appointment as, and accept if tendered, and serve 
as a commissioned officer in the United States Naval Reserve (including 
the Merchant Marine Reserve, United States Naval Reserve), the United 
States Coast Guard Reserve, or any other Reserve unit of an armed force 
of the United States for at least six (6) years following the date of 
graduation from a school; and
    (vi) Serve in the foreign or domestic commerce or both, and the 
national defense of the United States for at least three (3) years 
following graduation from a School--
    (A) As a merchant marine officer serving on vessels documented under 
the laws of the United States or on vessels owned and operated by the 
United States or by any State or Territory of the United States;
    (B) As an employee in a United States maritime-related industry, 
profession, or marine science (as determined by the Maritime 
Administrator), if the Maritime Administrator determines that service 
under paragraph (b)(3)(vi)(A) of this section is not available to such 
individual;
    (C) As a commissioned officer on active duty in an armed force of 
the United States or in the National Oceanic and Atmospheric 
Administration or in other maritime-related employment with the Federal 
Government which serves the national security interests of the United 
States, as determined to be satisfactory by the Maritime Administrator; 
or
    (D) By combining the services specified in paragraphs (b)(3)(vi)(A), 
(b)(3)(vi)(B) and (b)(3)(vi)(C) of this section; and
    (E) Such employment in the Federal Government must be both 
significantly maritime-related and serve the national security interests 
of the United States. ``Significantly'' is equated to a material or 
essential portion of an individual's responsibilities. It does not mean 
a ``majority'' of such individual's responsibilities, but means more 
than just an incidental part.
    (4) Marine-related employment. (i) graduates who intend to claim 
employment in a United States maritime-related industry, profession of 
marine science as meeting all or part of the service obligation under 
paragraph (b)(3)(vi) of this section, shall submit evidence to the 
Supervisor that they have conscientiously sought employment as a 
merchant marine officer, and

[[Page 194]]

that such employment is not available. Such evidence and other 
information available, shall be considered in any finding. In view of 
current and projected employment opportunities, afloat, the Maritime 
Administrator will grant the shoreside employment option infrequently 
and only on the basis of comprehensive evidence.
    (ii) The Maritime Administrator may consider the positions of 
operational, management and administrative responsibility in the 
following marine-related categories under the provisions of paragraph 
(b)(3)(vi) of this section: Civilian employment in Federal and State 
agencies related to maritime affairs, steamship companies, stevedoring 
companies, vessel chartering and operations, cargo terminal operations, 
naval architecture, shipbuilding and repair, municipal and state port 
authorities, port development, marine engineering, and tug and barge 
companies. The above list is not all inclusive and is only intended to 
serve as a general guide.
    (5) Afloat employment year. For purposes of the service obligation, 
a satisfactory year of afloat employment shall be the lesser of--
    (i) 150 days; or
    (ii) The number of days employed afloat that is at least equal to 
the median number of days of seafaring employment under articles 
achieved by deck or engine officers in the most recent calendar year for 
which statistics are available.
    (6) Reporting requirement. (i) The schools must promptly submit 
copies of all resignation forms (containing the name, reason, address 
and telephone number) of juniors and seniors to the Supervisor, to be 
used for monitoring and enforcement purposes. Each graduate must submit 
an annual Service Obligation Compliance Report form (MA-930) to the 
Maritime Administration (Supervisor) between January 1 and March 1 
following his or her graduation. After the initial report is submitted, 
each graduate must continue to submit annual reports during the same 
time frame between January 1 and March 1 for six (6) consecutive years 
thereafter, or until all components of the service obligation are 
fulfilled, whichever is latest. Each graduate will file a minimum of 
seven (7) reports in order to give information on all six (6) years of 
the armed forces reserve and merchant marine officer license service 
obligations. Graduates are encouraged to submit their Service Obligation 
Compliance Report forms (MA-930) to MARAD using the web-based Internet 
system at https://mscs.marad.dot.gov. Reports may also be mailed to: 
Compliance Specialist, Office of Policy and Plans, Maritime 
Administration, Department of Transportation, 400 7th St., SW., Room 
7123, Washington, DC 20590. In case a deferment has been granted to 
engage in a maritime-related graduate course of study, annual reports 
must be submitted during the extension period resulting from such 
deferments. Examples of the reporting requirements are as follows.

    Example 1: Midshipman graduates on June 30, 2004. His or her first 
reporting date is between January 1, 2005 and March 1, 2005 and each 
following period between January 1 and March 1 for six (6) consecutive 
years thereafter (or until all components of the service obligation are 
fulfilled, whichever is latest) for a minimum of seven (7) reports.
    Example 2: Midshipman has a deferred graduation on November 30, 
2004. His or her first reporting date is between January 1, 2005 and 
March 1, 2005 and each following period between January 1 and March 1 
for six (6) consecutive years thereafter (or until all components of the 
service obligation are fulfilled, whichever is latest) for a minimum of 
seven (7) reports.
    Example 3: Midshipman has a deferment following graduation on June 
30, 2004, to attend graduate school for two (2) years. His or her first 
reporting date is between January 1, 2005 and March 1, 2005 and during 
the same time frame between January 1 and March 1 for two (2) years 
during graduate school, and then during the same January 1 to March 1 
time frame for six (6) consecutive years thereafter (or until all 
components of the service obligation are fulfilled, whichever is latest) 
for a total of nine (9) reports.

    (ii) The Maritime Administration will provide reporting forms. 
However, non-receipt of such forms will not exempt a graduate from 
submitting information as required by this paragraph. The reporting form 
has been approved by the Office of Management and Budget (2133-0509).

[[Page 195]]

    (7) Breach of contract--(i) Breach before graduation. (A) If the 
Maritime Administrator determines that any individual who has accepted 
Federal student incentive payments for a minimum of two (2) academic 
years has failed to fulfill any part of the contract set forth inSec. 
310.7(b)(3), such individual may be ordered by the Secretary of Defense 
to active duty in one of the Armed Forces of the United States to serve 
a period of time not to exceed two (2) years. In cases of hardship as 
determined by the Maritime Administrator, the Maritime Administrator may 
waive this provision in whole or in part.
    (B) If the Secretary of Defense is unable or unwilling to order an 
individual to active duty under paragraph (b)(7)(i)(A) of this section, 
or if the Maritime Administrator determines that reimbursement of the 
cost of education provided would better serve the interests of the 
United States, the Maritime Administrator may recover from the 
individual the amount of student incentive payments, plus interest and 
attorney's fees.
    (C) The Maritime Administrator is authorized to reduce the amount to 
be recovered under paragraph (b)(7)(i)(B) of this section from such 
individual to reflect partial performance of service obligations and 
such other factors as the Maritime Administrator determines merit such 
reduction.
    (D) For purposes of paragraph (b)(7)(i)(A) of this section, an 
``academic year'' is defined as the completion by a student of the 
required number of semesters, trimesters, or quarters, as applicable, 
whether at school or at sea, which comprise a complete course of study 
for an academic year. Thus, liability under paragraph (b)(7)(i)(A) of 
this section begins for students at the beginning of their third (3rd) 
academic year, whether at school or at sea.
    (ii) Breach after graduation. (A) If the Maritime Administrator 
determines that an individual has failed to fulfill any part of the 
service obligations (described inSec. 310.7(b)(3)), such individual 
may be ordered to active duty to serve a period of time not less than 
two (2) years and not more than the unexpired portion of the service 
obligation contract relating to service in the foreign or domestic 
commerce or the national defense, as determined by the Maritime 
Administrator. The Maritime Administrator, in consultation with the 
Secretary of Defense, shall determine in which service the individual 
shall be ordered to active duty to serve such period of time. In cases 
of hardship, as determined by the Maritime Administrator, the Maritime 
Administrator may waive this provision in whole or in part.
    (B) If the Secretary of Defense is unable or unwilling to order an 
individual to active duty under paragraph (b)(7)(ii)(A) of this section 
or if the Maritime Administrator determines that reimbursement of the 
Cost of Education Provided would better serve the interests of the 
United States, the Maritime Administrator may recover from the 
individual the Cost of Education Provided, plus interest and attorney's 
fees.
    (C) The Maritime Administrator may reduce the amount to be recovered 
under paragraph (b)(7)(ii)(B) of this section from such individual to 
reflect partial performance of service obligations and such other 
factors as the Maritime Administrator determines merit such reduction.
    (8) Waivers. Waivers may be granted in cases where there would be 
undue hardship or impossibility of performance of the provisions of the 
contract due to accident, illness or other justifiable reason. 
Applications for waiver will be submitted to the Supervisor.
    (9) Deferments. In exceptional cases the Administration may grant a 
deferment of all or part of the service commitment under paragraphs 
(b)(3)(ii) through (vi) of this section for a period not to exceed two 
years, only for graduates considered to have superior academic and 
conduct records while at the school, for the purpose of their entry 
after graduation into a marine-or maritime-related graduate course of 
study at an accredited graduate school. However, the Secretary of the 
department in which the United States Coast Guard is operating and the 
Secretary of Commerce, with respect to the National Oceanic and 
Atmospheric Administration, which has jurisdiction over such service 
shall approve any

[[Page 196]]

deferment of service as a commissioned officer. Applications for such 
deferment shall be made through the Superintendent of Midshipman's 
school, who shall forward each application together with the 
Superintendent's recommendation for approval or disapproval and an 
evaluation of the applicant's academic and conduct records, to the 
Supervisor for appropriate action.
    (10) Determination of compliance with service obligation contract; 
deferment; waiver; and appeal procedures. (i) An official of the 
Administration designated by the Supervisor shall:
    (A) Render determinations of whether a student or graduate has 
breached his or her service agreement;
    (B) Grant or deny a deferment of the service obligation under 
paragraph (b)(9) of this section, except obligations otherwise a part of 
the graduate Reserve officer status;
    (C) Grant or deny a waiver of the requirements of the service 
agreement in hardship cases.
    (ii)(A) If a student or graduate disagrees with the decision of the 
designated official, the student or graduate may appeal that decision to 
the Maritime Administrator. The appeal must set forth all the legal and 
factual grounds on which the student or graduate bases the appeal. Any 
grounds not set forth in the appeal are waived.
    (B) Appeals must be filed with the Maritime Administrator within 30 
calendar days of the date of receipt by such student or graduate of the 
written decision of the designated official. Appeals must be filed at 
the Office of the Secretary, Maritime Administration, Room 7210, 400 7th 
St., SW., Washington, DC 20590. Each decision will include a notice of 
appeal rights.
    (C) A decision is deemed to be received by a student or graduate 
five (5) working days after the date it is mailed by first class mail, 
postage prepaid, to the address for such student or graduate listed with 
the Office of Policy and Plans. It is the responsibility of such student 
or graduate to ensure that their current mailing address is on file with 
the Office of Policy and Plans, 400 7th St., SW., Washington, DC 20590.
    (D) If the appeal is sent by conventional mail (through the United 
States Postal Service), the date of filing is determined by the postmark 
date. If no legible postmark date appears on the mailing, the appeal is 
deemed to be filed five (5) working days before the date of its receipt 
in the Office of the Secretary. If delivered by other than the United 
States Postal Service, an appeal is filed with the Maritime 
Administrator on the date it is physically delivered to the Office of 
the Secretary at the address referenced in paragraph (b)(10)(ii)(B) of 
this section. The date of filing by commercial delivery (not United 
States Postal Service) is the date it is received at the address for the 
Office of the Secretary set forth in paragraph (b)(10)(ii)(B) of this 
section. Appeals may not be submitted by facsimile or by electronic 
mail. Requests for extension of the time to file an appeal may be 
submitted by facsimile or electronic mail to the Office of the 
Secretary. Requests for extension of time do not stop or toll the 
running of the time for filing an appeal. Appeals may only be filed 
after the deadline if the Maritime Administrator or his designee, in 
their sole discretion, grants an extension.
    (E) In computing the number of days, the first day counted is the 
day after the event from which the time period begins to run. If the 
date that ordinarily would be the last day for filing falls on a 
Saturday, Sunday, or Federal holiday, the filing period will include the 
first workday after that date.

    Example to paragraph (b)(10)(ii)(E): If a graduate receives a 
decision on July 1, the 30-day period for filing an appeal starts to run 
on July 2. The appeal would ordinarily be timely only if postmarked on 
or physically delivered by July 31. If July 31 is a Saturday, however, 
the last day for obtaining a postmark by mailing or physical delivery 
would be Monday, August 2.

    (iii) The Maritime Administrator will issue a written decision for 
each timely appeal. This decision constitutes final agency action.
    (iv) If a student or graduate fails to appeal within the time set 
forth in paragraph (b)(10)(ii) of this section, the decision of the 
designated official will be final and constitute final agency action.

[[Page 197]]

    (11) Remedies. To aid in the recovery of the cost of education under 
this section, the Maritime Administrator may request the Attorney 
General to begin court proceedings, and the Maritime Administrator may 
make use of the Federal debt collection procedure in chapter 176 of 
title 28, United States Code, or other applicable administrative 
remedies.

[46 FR 37694, July 22, 1981, as amended at 48 FR 24080, May 31, 1983; 49 
FR 13365, Apr. 4, 1984; 65 FR 39558, June 27, 2000; 66 FR 36176, July 
11, 2001; 69 FR 31901, June 8, 2004; 69 FR 61606, Oct. 20, 2004; 70 FR 
28833, May 19, 2005]



Sec.  310.8  Leave.

    (a) Enrolled before April 1, 1982. Limitations on cadet leave, 
without loss of Federal student subsistence, with the specific limits to 
be set at the discretion of the Superintendent on an academic year 
basis, are:
    (1) If hospitalized, sick at home, or confined in the sick bay, 
leave shall not exceed four (4) months.
    (2) For an emergency due to the serious illness, injury or death of 
a very near relative, leave shall not exceed seven (7) days.
    (3) Annual leave shall not exceed thirty (30) days.
    (4) Christmas and Easter leave shall not exceed a total of twelve 
(12) days, and leave may be granted for all legal holidays--Federal and 
state. This leave is in addition to that granted in paragraph (a)(3) of 
this section.
    (5) Leave in addition to that provided in paragraphs (a) (3) and (4) 
of this section may be granted only if approved in advance by the 
Supervisor, upon direct request by the Superintendent.
    (b) Enrolled on or after April 1, 1982. Midshipmen will be granted 
leave without loss of incentive payments as follows:
    (1) Medical leave, as authorized by the school, not to exceed four 
(4) months.
    (2) Christmas and Easter leave and all legal holidays--Federal and 
state--as authorized by the school. This leave is in addition to that 
granted in paragraph (b)(3) of this section.
    (3) Excused absences, as authorized by the school, not to exceed 
thirty (30) days per academic year. All unauthorized leave and all 
excused absences in excess of thirty (30) days will result in loss of 
incentive payments. Midshipmen receiving student incentive payments may 
be granted leaves of absence without pay, as approved by the 
Superintendent, for periods not to exceed one (1) academic year at a 
time. Midshipmen in a pay status will only be granted a leave of absence 
if they continue to meet all requirements for graduation in this part, 
including age requirements.

[48 FR 24081, May 31, 1983]



Sec.  310.9  Medical attention and injury claims.

    (a) Medical attention and hospitalization. The school shall be 
responsible for arranging that a medical officer shall be attached or on 
call to the school. During the cruise, the School shall assign a medical 
officer to the Training Ship.
    (b) Compensation claims of Cadets or Midshipmen. Compensation claims 
for personal injuries or death sustained by a federally-assisted cadet 
or midshipman in the performance of official duty shall be forwarded to 
the Supervisor for transmission to the Office of Workers' Compensation 
Programs. The Supervisor shall furnish necessary forms.
    (c) Medical care and compensation for Officers and other personnel. 
Officers and other personnel of the School, and of the Training Ship may 
avail themselves of any medical facilities furnished by the State or 
Federal Government for which they qualify. See, for example, 42 CFR part 
32. Such persons who are not Federal employees shall look to the State 
alone for pay, allowances, compensation and other benefits during injury 
or illness.

[46 FR 37694, July 22, 1981, as amended at 48 FR 24081, May 31, 1983]



Sec.  310.10  Discipline and dismissal.

    (a) Each School shall establish and publish rules and regulations 
governing Cadet and Midshipman discipline and providing for a demerit 
system for infractions of these rules and regulations. Serious or 
excessive violations of the rules and regulations by a Cadet or 
Midshipman may be considered as evidence of inaptitude for the demanding

[[Page 198]]

career of a merchant marine officer and warrant dismissal by the school.
    (b) Each Cadet or Midshipman shall, upon admission to the School, be 
furnished a copy of the School's rules and regulations.
    (c) Any Cadet or Midshipman placed on probation for failure to meet 
the conduct requirements of the school may, at the discretion of the 
Superintendent, be listed as not in good standing for any period not to 
exceed six (6) months for the purpose ofSec. 310.7(a)(5).



Sec.  310.11  Cadet uniforms.

    Cadet uniforms shall be supplied at the school in accordance with 
the uniform regulations of the School. Those regulations shall prescribe 
a distinctive insignia or device approved by the Maritime Administrator.



Sec.  310.12  Scope and effect.

    (a) If any provisions of this subpart conflict with laws and 
regulations of the State, the appropriate State authorities shall notify 
the Maritime Administrator in writing of such conflict and pertinent 
circumstances. The Maritime Administrator, as a matter of discretion, 
shall take, or not take, any action determined appropriate under the 
1958 Act or the Act.
    (b) The Maritime Administrator may, after consultation with the 
Superintendents of the schools issue binding executive instructions 
supplementing this subpart.



Sec.  310.12-1  Form of Agreement.

    The form of agreement between the Maritime Administrator and schools 
for annual maintenance and support payments, Federal student subsistence 
and incentive payments and fuel assistance under the 1958 Act and the 
Act may be obtained from the Office of Policy and Plans, Maritime 
Administration, 400 7th St., SW., Washington, DC 20590.

[70 FR 28833, May 19, 2005]

Subpart B [Reserved]



  Subpart C_Admission and Training of Midshipmen at the United States 
                         Merchant Marine Academy

    Authority: Secs. 204(b) and 1301-1308, Merchant Marine Act, 1936, as 
amended, (46 U.S.C. 1114(b) and 1295-1295g); 49 CFR 1.66 (46 FR 47458, 
September 28, 1981).

    Source: 47 FR 21812, May 20, 1982, unless otherwise noted.



Sec.  310.50  Purpose.

    The regulations in this subpart govern the nomination, admission and 
appointment of midshipmen to the United States Merchant Marine Academy,



Sec.  310.51  Definitions.

    (a) Academy means the United States Merchant Marine Academy.
    (b) Act means the Maritime Education and Training Act of 1980, Pub. 
L. 96-453, 94 Stat. 1997, as subsequently amended, 46 App. U.S.C. 1295-
1295g.
    (c) Administration means the Maritime Administration, Department of 
Transportation.
    (d) Administrator means the Administrator of the Maritime 
Administration.
    (e) Citizen means an individual who, by birth or naturalization, 
owes national allegiance to the United States, but the term excludes 
United States nationals.
    (f) Cost of Education Provided means the financial costs incurred by 
the Federal Government for providing training or financial assistance to 
students at the United States Merchant Marine Academy, including direct 
financial assistance, room, board, classroom academics, and other 
training activities.
    (g) Foreign student means an individual who owes national allegiance 
to a country or political entity other than the United States, and the 
term includes United States nationals.
    (h) NOAA means the National Oceanic and Atmospheric Administration.
    (i) USNR means the United States Naval Reserve.

[47 FR 21812, May 20, 1982, as amended at 69 FR 31902, June 8, 2004]

[[Page 199]]



Sec.  310.52  General.

    (a) Midshipmen are appointed to the Academy for training to prepare 
them to become officers in the U.S. merchant marine. The Academy, 
located at Kings Point, New York, is maintained by the Government as a 
part of the Administration. After successful completion of the 4-year 
course of study, a graduate of the Academy shall receive a Bachelor of 
Science degree and a merchant marine license as either a third officer 
or third assistant engineer (or both licenses upon completion of a 
special curriculum and passing the respective license examinations) 
issued by the U.S. Coast Guard. If qualified, a graduate may be 
commissioned as an officer in a reserve component of an armed force of 
the United States.
    (b) Midshipmen entering the Academy after April 1, 1982, are 
required by the Act to sign an agreement committing them to service 
obligations following the date of graduation. The terms of the service 
obligation contract are set forth inSec. 310.58 of this subpart.



Sec.  310.53  Nominations and vacancies.

    (a) Nominating officials. (1) Each Senator and Member of the House 
of Representatives (including delegates from Guam, the Virgin Islands 
and the District of Columbia and the Resident Commissioner from Puerto 
Rico), the Panama Canal Commission, the Governor of the Northern Mariana 
Islands, and the Delegate to the House of Representatives from American 
Samoa may nominate ten (1) candidates to compete for admission to the 
Academy.
    (2) In accordance with the Act (46 U.S.C. 1295b (b)(1)), nominating 
officials may only nominate candidates who are residents of the State or 
other geographic area which the particular nominating official 
represents, as follows:

------------------------------------------------------------------------
   The candidate must be a resident of--        To be nominated by--
------------------------------------------------------------------------
The State.................................  A Member of the U.S. Senate
                                             representing that State.
The State.................................  A Member of the U.S. House
                                             of Representatives whose
                                             Congressional District is
                                             located in that State.
Guam......................................  The Delegate to the U.S.
                                             House of Representatives
                                             representing Guam.
Virgin Islands............................  The Delegate to the U.S.
                                             House of Representatives
                                             representing the Virgin
                                             Islands.
District of Columbia......................  The Delegate to the U.S.
                                             House of Representatives
                                             representing the District
                                             of Columbia.
Commonwealth of Puerto Rico...............  The Resident Commissioner to
                                             the United States from
                                             Puerto Rico.
American Samoa............................  The Delegate to the House of
                                             Representatives
                                             representing American
                                             Samoa.
Any area or installation located in the     Panama Canal Commission.
 Republic of Panama which is made
 available to the United States pursuant
 to the (i) the Panama Canal Treaty of
 1977, (ii) the agreements relating to and
 implementing the Treaty signed September
 7, 1977, and (iii) the Agreement between
 the United States of America and the
 Republic of Panama Concerning Air Traffic
 Control and Related Services, concluded
 January 8, 1979; Provided, That no
 residence in the Republic of Panama is
 required if nomination is due to his or
 her parent's employment in the Panama
 Canal or in the Republic of Panama by the
 United States Government or the Panama
 Canal Commission.
Northern Mariana Islands..................  Governor of the Northern
                                             Mariana Islands.
Trust Territory of the Pacific Islands....  Secretary of the Interior.
------------------------------------------------------------------------

    (3) Individuals must be residents of the Trust Territory of the 
Pacific Islands to qualify for designation by the Secretary of the 
Interior.
    (4) Nominating officials may select nominees, and the Secretary of 
the Interior may select designees, by any method they wish, including a 
screening examination.
    (5) Candidates from nations other the United States must be 
nominated by an official of their home government and have their 
applications approved by the United States Government official specified 
inSec. 310.66 (a), or (c) or (d).
    (b) Vacancies. (1) The number of vacancies in each entering class 
allocated to each State is in proportion to the representation in 
Congress from that State.

[[Page 200]]

    (2) In each entering class, two vacancies shall be allocated each 
year for individuals nominated by the Panama Canal Commission; one 
vacancy each to nominees from Puerto Rico, Guam, Virgin Islands, 
Northern Marian Islands and American Samoa; and four vacancies to 
nominees from the District of Columbia.
    (3) Not to exceed four (4) individuals at any one time may be 
admitted from the Trust Territory of the Pacific Islands and twelve (12) 
individuals from nations located in the Western Hemisphere, other than 
the United States, but not more than two (2) individuals from any one of 
such nations shall receive training at the same time.
    (4) The Administrator may permit, upon approval of the Secretary of 
State, not more than thirty (30) individuals at one time from nations 
other than the United States to receive instruction at the Academy, 
subject to the condition that the foreign nations reimburse the 
Administrator for the cost of such training.
    (5) The distribution of each entering class by State is:

Alabama................................................................4
Alaska.................................................................1
Arizona................................................................3
Arkansas...............................................................2
California............................................................19
Colorado...............................................................4
Connecticut............................................................4
Delaware...............................................................1
Florida...............................................................10
Georgia................................................................5
Hawaii.................................................................2
Idaho..................................................................2
Illinois...............................................................9
Indiana................................................................3
Iowa...................................................................4
Kansas.................................................................3
Kentucky...............................................................2
Louisiana..............................................................4
Maine..................................................................2
Maryland...............................................................5
Massachusetts..........................................................5
Michigan...............................................................7
Minnesota..............................................................3
Mississippi............................................................3
Missouri...............................................................3
Montana................................................................2
Nebraska...............................................................2
Nevada.................................................................2
New Hampshire..........................................................2
New Jersey.............................................................6
New Mexico.............................................................2
New York..............................................................15
North Carolina.........................................................6
North Dakota...........................................................1
Ohio...................................................................8
Oklahoma...............................................................2
Oregon.................................................................3
Pennsylvania..........................................................10
Rhode Island...........................................................2
South Carolina.........................................................4
South Dakota...........................................................1
Tennessee..............................................................4
Texas.................................................................13
Utah...................................................................2
Vermont................................................................1
Virginia...............................................................5
Washington.............................................................5
West Virginia..........................................................2
Wisconsin..............................................................4
Wyoming................................................................1

    (6) The distribution of each entering class otherwise provided under 
the Act is:

Northern Mariana Islands..............................................1.
Puerto Rico...........................................................1.
District of Columbia..................................................4.
Republic of Panama....................................................2.
Guam..................................................................1.
American Samoa........................................................1.
Virgin Islands........................................................1.
Administrator..........................................Not to exceed 40.

    (7) The distribution of students provided for under the Act without 
reference to entering class is:

------------------------------------------------------------------------
                                                                 Not to
                                                               exceed at
                                                                any one
                                                                  time
------------------------------------------------------------------------
Trust Territory of the Pacific Islands.......................          4
Western Hemisphere nations (other than U.S.).................         12
Foreign nations..............................................         30
------------------------------------------------------------------------

    (c) Request for nomination. A person interested in admission to the 
Academy who feels that he or she meets the requirements in this subpart 
should request a nomination from his or her Senator or Representative or 
other appropriate nominating official listed in paragraph (a) of this 
section.
    (d) Date for nominations. The nominating official will send a 
nomination form for each nominee to the Admissions Office, U.S. Merchant 
Marine Academy, Kings Point, Long Island, New York 11024, normally 
between August 1 and December 31 of the school year preceding that in 
which admission to the Academy is desired.
    (e) Appointments. (1) The Administrator shall make appointments to 
fill the vacancies allocated pursuant to paragraph (b) of this section 
from among qualified nominees, in order of merit, from each geographical 
area.

[[Page 201]]

The order of merit shall be established according to the procedure as 
specified inSec. 310.57(b). Such appointments first shall be made from 
among residents of each geographic area listed in paragraph (b) of this 
section. Thereafter, appointments shall be made from among residents of 
each geographic area listed in paragraph (b) of this section. Thereafter 
appointments shall be made from among remaining qualified nominees 
(national alternates) in order of merit regardless of the area of 
residence.
    (2) The Administrator may appoint, without competition, not more 
than forty (40) qualified citizens who possess qualities deemed to be of 
special value to the Academy. In making these appointments, the 
Administrator shall give special consideration to achieving a national 
demographic balance and to recognizing individuals with qualities deemed 
to be of special value to the Academy.

[47 FR 21812, May 20, 1982, as amended at 51 FR 17741, May 15, 1986; 60 
FR 44438, Aug. 28, 1995]



Sec.  310.54  General requirements for eligibility.

    (a) Citizenship. All candidates shall be citizens of the United 
States except: (1) Nominees from foreign nations; (2) nominees from the 
Northern Mariana Islands; (3) designees from the Trust Territory of the 
Pacific Islands; and (4) nominees from American Samoa, who may be 
American nationals. No person who is not a citizen shall be entitled to 
any office or position in the U.S. merchant marine by reason of his or 
her graduation from the Academy, until such person shall have become a 
citizen.
    (b) Age. On July 1 of the year of admission to the Academy, a 
candidate shall be not less than seventeen (17) years of age and shall 
not have passed his or her twenty-fifth (25) birthday.
    (c) Character. A candidate shall be of good moral character. The 
Administrator may reject the nomination of any candidate whose character 
is incompatible with the Academy's standards. No person who has been 
dismissed or compelled to resign from the U.S. Military Academy, the 
U.S. Naval Academy, the U.S. Air Force Academy, the U.S. Coast Guard 
Academy, the Academy or a State maritime academy for improper conduct 
shall be eligible for appointment as a midshipman at the Academy. No 
person whose last discharge from any armed force was under conditions 
other than honorable or who has had a merchant mariner document removed 
or suspended for cause shall be eligible for appointment as a 
midshipman.
    (d) Investigation. To be eligible for appointment, all candidates 
who are United States citizens shall be completely loyal to the United 
States and shall meet the requirements established by the Department of 
the Navy for designation as Midshipman, USNR (including the Merchant 
Marine Reserve, USNR). Candidates for appointment shall execute 
documents approved by the Administrator for the purpose of a security 
and suitability investigation. Appointment as a Midshipman, USNR 
(including the Merchant Marine Reserve, USNR) shall be a condition of 
admission for an individual who is a citizen. A candidate who is 
conditionally appointed to the Academy pending completion of a Navy 
security and suitability investigation shall be subject to immediate 
separation should the candidate, as a result of the investigation, fail 
to meet the requirements established for appointment as Midshipman, 
USNR.
    (e) Waivers. There shall be no waivers of general eligibility 
requirements.

(Sec. 204(b), Merchant Marine Act, 1936, as amended (46 U.S.C. 1114(b)); 
Pub. L. 97-31 (August 6, 1981); 49 CFR 1.66)

[47 FR 21812, May 20, 1982, as amended at 49 FR 45858, Nov. 21, 1984]



Sec.  310.55  Scholastic requirements.

    (a) Academic requirements--(1) Credits. Applicants shall have 
satisfactorily completed their high school education at an accredited 
secondary school, or equivalent, and shall present at least 15 units of 
credit for subjects acceptable to the Academy, comprised of:
    (i) 7 required units, as follows:
    (A) 3 units of Mathematics (from algebra, geometry and 
trigonometry);
    (B) 3 units of English; and
    (C) 1 unit of Physics or Chemistry.
    (ii) 8 other units, preferably chosen from the following fields:

[[Page 202]]

    (A) Additional mathematics and science;
    (B) Foreign language;
    (C) Economics; and,
    (D) Social science.
    (2) Evidence of academic work. Before approval of an application, 
each applicant shall submit evidence showing completion of high school 
education, or showing that such education will be completed no later 
than June 30 of the year in which admission is sought.
    (b) Scholastic examinations--(1) Required entrance examinations. 
Applicants shall qualify in either the College Board's Scholastic 
Aptitude Tests (SAT) or the American College Testing Program (ACT) 
examinations, administered nationally on scheduled dates at convenient 
testing centers. A candidate electing to use the College Board shall 
take both the mathematics and the verbal section of the SAT. A candidate 
electing to use the ACT, shall take all the tests, namely, English, 
Mathematics, Social Sciences and Natural Sciences. Minimum qualifying 
scores on the entrance examinations will be determined by the 
Superintendent of the Academy for each entering class prior to any 
offers of appointment for the particular class. Any score below the 
minimum on any one section of an examination shall make the nominee 
ineligible for admission. All examination costs shall be borne by the 
applicant. Nominees shall take all the required examinations by the 
February testing date in the year for which they seek appointment, 
unless the Academy's Admissions Office grants special authorization to 
take later examinations.
    (2) Forwarding test results. Candidates shall be responsible for 
requesting the testing services to submit their scores directly to the 
Academy.
    (3) Test information. Information on the entrance examinations may 
be obtained from--

The candidate's high school guidance office; or,
College Board, P.O. Box 592, Princeton, N.J. 08540; or,
College Board, P.O. Box 1025, Berkeley, CA. 94701; or,
American College Testing Program, P.O. Box 168, Iowa City, IA 52240.

    (c) Prior Scholastic Record. Applicants shall demonstrate scholastic 
achievement by having attained a relatively high standing in relation to 
their fellow students and by having shown proficiency in mathematics and 
science courses. With respect to applicants who completed high school at 
least one year before applying for admission to the Academy, 
consideration will be given to satisfactory college level study or any 
special study undertaken to strengthen their academic backgrounds, 
particularly in respect to determining whether such supplementary 
academic activity offsets any deficiency in high school scholastic 
records.
    (d) Waivers. No waivers of scholastic requirements will be granted.



Sec.  310.56  Physical requirements.

    (a) Physical standards. (1) A candidate shall meet the physical 
requirements prescribed by the Department of the Navy for appointment as 
Midshipman, USNR (including the Merchant Marine Reserve, USNR) and the 
requirements prescribed by the U.S. Coast Guard for original licensing 
as a third mate and third assistant engineer. All candidates shall have 
color perception and refractive error within the limits prescribed by 
the Department of the Navy or by the U.S. Coast Guard, whichever are 
higher.
    (2) The requirement to meet these standards is a continuing one and 
shall apply through graduation from the Academy. Failure to meet the 
standards while attending the Academy is grounds for, and may lead to 
disenrollment. Individuals who have completed at least two years of 
study and, as a result of an accident, illness or other cause (during 
official duty), fail to meet this requirement may be permitted to remain 
at the Academy at the discretion of, and under conditions set by, the 
Administrator. Those individuals permitted to remain through graduation 
will agree to fulfill aspects of the service obligation which they are 
capable of, as deemed appropriate by the Administrator.
    (b) Qualifying physical examinations. All candidates for the Academy 
shall have a physical and dental examination conducted by a service 
academy

[[Page 203]]

examining facility designated by the Service Academies Central Medical 
Review Board. The required physical examination shall occur within 1 
year preceding the date of admission to the Academy. Although there is 
no charge for such examination, all expenses (including travel, meals 
and hotel accommodations) incurred in obtaining such examination shall 
be borne by the applicant. Candidates may be subject to reexamination 
upon reporting to the Academy and at any time while attending the 
Academy.
    (c) Physical reexamination. A candidate who is rejected for failure 
to meet the physical requirements may request either a reevaluation of 
the examination results or a reexamination. A midshipman failing to meet 
the physical requirements while attending the Academy is entitled to 
make the same request.
    (d) Waivers. Some medical requirements may be waived for enrolled 
students and applicants to the USMMA who require such a medical waiver 
to qualify for admission and/or retention. Since commissioning in the 
United States Navy, or any other branch of the Armed Forces, is a 
requirement for graduation, no waivers will be granted for medical 
conditions which would prevent commissioning in at least a restricted 
status in the U.S. Navy Reserve. Individuals interested in waiver 
consideration may request a waiver by writing to the Superintendent, 
USMMA. The granting of medical waivers will be based on U.S. Navy 
guidelines and regulations for waiver consideration for admission to the 
U.S. Naval Academy and the physical requirements consistent with 
commissioning as a reserve officer in the U.S. Navy in a restricted line 
program. Individuals requesting medical waivers must be able to meet all 
other admission requirements, including the physical examination 
requirement for an original U.S. Coast Guard merchant marine license as 
a third mate and/or third assistant engineer. The decision of the 
Superintendent on any requested waiver is administratively final.

[47 FR 21812, May 20, 1982, as amended at 55 FR 46952, Nov. 8, 1990]



Sec.  310.57  Application and selection of midshipmen.

    (a) Application. All candidates shall submit an application for 
admission to the Academy's Admissions Office. Prospective candidates 
also should submit an application, but are not considered official 
candidates until their nominations are received. Candidates shall submit 
with their applications an official transcript and personality record 
from the candidate's high school and, if applicable, such records from 
any school attended after high school graduation. Application forms are 
available upon request by writing to the Admissions Office at the 
Academy. MARAD will accept electronic options (such as facsimile and 
Internet) for transmission of only Part I of required information to 
MARAD, if practicable.
    (b) Selection of Midshipmen. Selection of midshipmen for appointment 
to fill vacancies allotted to the various States and other locations, as 
specified inSec. 310.53(b) (1) and (2) of this subpart, shall be in 
order of merit. The order of merit shall be determined on the scores of 
the required entrance examinations, on assessment of the academic 
background of the individual and on such other factors as are considered 
by the Academy to be effective indicators of motivation and the 
probability of successful completion of training at the Academy. No 
preference shall be granted in selecting individuals for appointment 
because one or more members of their immediate families are alumni of 
the Academy.
    (c) Notification of selection. Results of the selection process will 
be made known about May 1 each year. The Academy shall advise each 
candidate and his or her nominating official of his or her status as a 
principal candidate, as an alternate candidate or as an unqualified 
candidate. Alternates will replace principal candidates who decline 
appointment or fail to meet the physical requirements or the security 
and suitability investigation.
    (d) Service obligation agreement. Each candidate selected for 
appointment to the Academy after April 1, 1982, who is a citizen of the 
United States, shall sign a service obligation contract as a condition 
of admission. The contract is prescribed inSec. 310.58 of this 
subpart.

[[Page 204]]

    (e) Reporting to the Academy. Candidates who accept offers of 
appointment shall, pursuant to instructions issued by the Academy, 
report to the Academy on a specified date in mid-July for orientation 
and induction.
    (f) Oath. Each midshipman who is a citizen of the United States 
shall take the following oath of office at the Academy:

    ``I, ------, having been appointed a midshipman to the U.S. Merchant 
Marine Academy, accept appointment and do solemnly swear (or affirm) 
that I will support and defend the Constitution of the United States 
against all enemies, foreign and domestic; that I will bear true faith 
and allegiance to the same; that I will comply with all the regulations 
of the U.S. Merchant Marine Academy; that I take this obligation freely, 
without any mental reservation or purpose of evasion; and that I will 
well and faithfully discharge the duties of the office on which I am 
about to enter, so help me God.''

    (g) Birth Certificate. Each candidate shall present a certificate of 
birth authenticated by an authorized official.

[47 FR 21812, May 20, 1982, as amended at 68 FR 62538, Nov. 5, 2003; 69 
FR 61451, Oct. 19, 2004]



Sec.  310.58  Service obligation for students executing or reexecuting
contracts.

    (a) The service obligation contract shall obligate each midshipman 
who is a citizen and who executes or reexecutes a service obligation 
contract to:
    (1) Complete the course of instruction at the Academy;
    (2) Fulfill the requirements for a license as an officer in the 
merchant marine of the United States on or before the date of graduation 
from the Academy;
    (3) Maintain a license as an officer in the merchant marine of the 
United States for at least six (6) years following the date of 
graduation from the Academy accompanied by the appropriate national and 
international endorsements and certifications as required by the United 
States Coast Guard for service aboard vessels on both domestic and 
international voyages (``appropriate'' means the same endorsements and 
certifications held at the date of graduation, or the equivalent);
    (4) Apply for an appointment as, accept any tendered appointment as 
and serve as a commissioned officer in the USNR (including the Merchant 
Marine Reserve, USNR), the United States Coast Guard Reserve, or any 
other Reserve component of an armed force of the United States for at 
least six (6) years following the date of graduation from the Academy;
    (5) Serve in the foreign or domestic commerce and the national 
defense of the United States for at least five (5) years following the 
date of graduation from the Academy:
    (i) As a merchant marine officer serving on vessels documented under 
the laws of the United States or on vessels owned and operated by the 
United States or by any State or territory of the United States;
    (ii) As an employee in a United States maritime-related industry, 
profession or marine science (as determined by the Maritime 
Administrator), if the Maritime Administrator determines that service 
under paragraph (a)(5)(i) of this section is not available;
    (iii) As a commissioned officer on active duty in an armed force of 
the United States or in the National Oceanic and Atmospheric 
Administration; or
    (iv) Other maritime-related employment with the Federal Government 
which serves the national security interests of the United States, as 
determined by the Maritime Administrator; or
    (v) By combining the services specified in paragraphs (a)(5)(i), 
(ii), (iii) and (iv) of this section; and,
    (vi) Such employment in the Federal Government that satisfies 
paragraph (a)(5)(iv) of this section must be both significantly 
maritime-related and serve the national security interests of the United 
States. ``Significantly'' is equated to a material or essential portion 
of an individual's responsibilities. It does not mean a ``majority'' of 
such individual's responsibilities, but means more than just an 
incidental part; and
    (6) Submit periodic reports to the Administration to establish 
compliance with all the terms of the contract.
    (b) Service as a merchant marine officer. For purposes of the 
service obligation set forth in paragraph (a)(5)(i) of this section, a 
satisfactory year of service on vessels in the United States

[[Page 205]]

merchant marine as a merchant marine officer shall be the lesser of--
    (1) 150 days; or
    (2) The number of days that is at least equal to the median number 
of days of seafaring employment under articles achieved by deck or 
engine officers in the most recent calendar year for which statistics 
are available.
    (c) Marine-related employment. (1) Graduates who do not meet the sea 
service requirement in paragraph (b) of this section and who claim 
employment in a United States maritime-related industry, profession or 
marine science as meeting all or part of the service obligation under 
paragraph (a)(5) of this section and the serve obligation contract shall 
submit evidence to the Administration that they have conscientiously 
sought employment as a merchant marine officer, and that such employment 
is not available. Such evidence submitted, and other information 
available to the Administration, shall be considered in any finding. In 
view of current and projected employment opportunities afloat, the 
Administrator will grant the shoreside employment option infrequently 
and only on the basis of comprehensive evidence.
    (2) The Administrator may consider positions of operational, 
management or administrative responsibility, including, but not limited 
to, the following marine-related categories, to be under the provisions 
ofSec. 310.58(a)(5)(ii) of this subpart and the service obligation 
contract: Civilian employment in Federal and State agencies related to 
maritime affairs; steamship companies; stevedoring companies; vessel 
chartering and operations; cargo terminal operations; naval 
architecture; shipbuilding and repair; municipal and State port 
authorities; and port development, marine engineering, and tug and barge 
companies.
    (d) Reporting requirements. (1) Each graduate must submit an annual 
Service Obligation Compliance Report form (MA-930) to the Maritime 
Administration between January 1 and March 1 following his or her 
graduation. After the initial report is submitted, each graduate must 
continue to submit annual reports during the same time frame between 
January 1 and March 1 for six (6) consecutive years thereafter, or until 
all components of the service obligation are fulfilled, whichever is 
latest. Each graduate will file a minimum of seven (7) reports in order 
to give information on all six (6) years of the service obligation. 
Graduates are encouraged to submit their Service Obligation Compliance 
Report forms (MA-930) to MARAD using the web-based Internet system at 
https://mscs.marad.dot.gov. Reports may also be mailed to: Compliance 
Specialist, Office of Policy and Plans, Maritime Administration, 
Department of Transportation, 400 7th St., SW., Room 7123, Washington, 
DC 20590.
    (i) Example 1: Midshipman graduates on June 30, 2004. His or her 
first reporting date is between January 1, 2005 and March 1, 2005 and 
thereafter between January 1 and March 1 for six (6) consecutive years 
(or until all components of the service obligation are fulfilled, 
whichever is latest) for a minimum of seven (7) reports.
    (ii) Example 2: Midshipman has a deferred graduation on November 30, 
2004. His or her first reporting period is between January 1, 2005 and 
March 1, 2005 and thereafter between January 1 and March 1 for six (6) 
consecutive years (or until all components of the service obligation are 
fulfilled, whichever is latest) for a minimum of seven (7) reports.
    (iii) Example 3: Midshipman graduated in June 2003 and has already 
begun his or her service obligation reporting. His or her reports are 
now due between January 1 and March 1 of each reporting year.
    (2) The Maritime Administration will provide reporting forms upon 
request. However, non-receipt of such forms will not exempt a graduate 
from submitting service obligation information as required by this 
paragraph. Graduates are encouraged to submit their Service Obligation 
Compliance Report forms (MA-930) electronically at https://
mscs.marad.dot.gov. The reporting form has been approved by the Office 
of Management and Budget (2133-0509).
    (e) Breach of contract. (1) Breach before graduation: (i) If the 
Maritime Administrator determines that an individual who has attended 
the Academy for not less than two (2) academic

[[Page 206]]

years has failed to complete the course of instruction at the Academy, 
such individual may be ordered by the Secretary of Defense to active 
duty in one of the Armed Forces of the United States to serve for a 
period of time not to exceed two (2) years. In cases of hardship, as 
determined by the Maritime Administrator, the Maritime Administrator may 
waive this provision in whole or in part.
    (ii) If the Secretary of Defense is unable or unwilling to order an 
individual to active duty under the previous paragraph, or if the 
Maritime Administrator determines that reimbursement of the Cost of 
Education Provided by the Federal Government would better serve the 
interests of the United States, the Maritime Administrator may recover 
from the individual the Cost of Education Provided by the Federal 
Government.
    (iii) For purposes of paragraph (e)(1)(i) of this section, an 
``academic year'' is defined as the completion by a student of a total 
of three (3) trimesters, whether at the Academy or at sea. Thus, 
liability under paragraph (e)(1)(i) of this section begins for students 
when they begin their seventh (7th) trimester, whether at the Academy or 
at sea.
    (2) Breach after graduation: (i) If the Maritime Administrator 
determines that an individual has failed to fulfill any part of the 
service obligation contract (described inSec. 310.58(a)), such 
individual may be ordered to active duty to serve a period of time not 
less than three (3) years and not more than the unexpired portion of the 
service obligation contract relating to service in the foreign or 
domestic commerce or the national defense, as determined by the Maritime 
Administrator. The Maritime Administrator, in consultation with the 
Secretary of Defense, shall determine in which service the individual 
shall be ordered to active duty to serve such period of time. In cases 
of hardship, as determined by the Maritime Administrator, the Maritime 
Administrator may waive this provision in whole or in part.
    (ii) If the Secretary of Defense is unable or unwilling to order an 
individual to active duty under paragraph (e)(2)(i) of this section or 
if the Maritime Administrator determines that reimbursement of the Cost 
of Education Provided would better serve the interests of the United 
States, the Maritime Administrator may recover from the individual the 
Cost of Education Provided.
    (iii) The Maritime Administrator may reduce the amount to be 
recovered from such individual to reflect partial performance of service 
obligations and such other factors as the Maritime Administrator 
determines merit such reduction.
    (f) Waivers. The Maritime Administrator shall have the discretion to 
grant waivers of all or a portion of the service obligation contract in 
cases where there would be undue hardship or impossibility of 
performance due to accident, illness or other justifiable reason. 
Applications for waivers shall be submitted in writing to the Academies 
Program Officer, Office of Policy and Plans, Maritime Administration, 
400 7th St., SW., Washington, DC 20590.
    (g) Deferments. In exceptional cases, the Administration may grant a 
deferment of all or part of the agreement under paragraph (a)(5) of this 
section and the service obligation contract, for a period not to exceed 
2 years, only for graduates considered to have superior academic and 
conduct records while at the Academy and only for the purpose of 
entering a marine or maritime-related graduate course of study approved 
by the Administrator or for the purpose of pursuing studies as 
recipients of scholarships or fellowships of national significance; 
Provided, that any deferment of service as a commissioned officer under 
paragraph (a)(5)(iii) of this section and the service obligation 
contract shall be subject to the sole approval of the Secretary of the 
department which has jurisdiction over such service (including the 
Secretary of the department in which the U.S. Coast Guard is operating 
and the Secretary of Commerce with respect to NOAA). A graduate shall 
make application for such deferment through the Superintendent of the 
Academy, who shall forward each application, together with the 
Superintendent's recommendation for approval or disapproval and an 
evaluation of the applicant's academic and conduct

[[Page 207]]

records, to the Academies Program Officer, Maritime Administration, 
Office of Policy and Plans, NASSIF Building, 400 7th St., SW., 
Washington, DC 20590 for appropriate action.
    (h) Determination of compliance with service obligation contract; 
deferment; waiver; and appeal procedures. (1) A designated official of 
the Administration shall:
    (i) Determine whether a student or graduate has breached his or her 
service obligation contract;
    (ii) Grant or deny a deferment of the service obligation, except for 
obligations otherwise a part of the graduate's commissioned officer 
status; and,
    (iii) Grant or deny a waiver of the requirements of the service 
obligation contract in cases of undue hardship or impossibility of 
performance due to accident, illness or other justifiable reason.
    (2)(i) If a student or graduate disagrees with the decision of the 
designated official, the student or graduate may appeal that decision to 
the Maritime Administrator. The appeal will set forth all the legal and 
factual grounds on which the student or graduate bases the appeal. Any 
grounds not set forth in the appeal are waived.
    (ii) Appeals must be filed with the Maritime Administrator within 
thirty (30) calendar days of the date of receipt by such student or 
graduate of the written decision of the designated official. Appeals 
must be filed at the Office of the Maritime Administrator, Maritime 
Administration, Room 7210, 400 7th St., SW., Washington, DC 20590. Each 
decision will include a notice of appeal rights.
    (iii) A decision is deemed to be received by a student or graduate 
five (5) working days after the date it is mailed by first class mail, 
postage prepaid, to the address for such student or graduate listed with 
the Office of Policy and Plans. It is the responsibility of such student 
or graduate to ensure that their current mailing address is on file with 
the Office of Policy and Plans, Maritime Administration, 400 7th St., 
SW., Washington, DC 20590. Students and graduates can determine the 
current address on file with the Office of Policy and Plans by logging 
into the service obligation contract compliance Web site at http://
mscs.marad.dot.gov. Changes in the address listed can be made through 
the Internet.
    (3) The Maritime Administrator will issue a written decision for 
each timely appeal. This decision constitutes final agency action.
    (4) If a student or graduate fails to appeal within the time set 
forth in paragraph (h)(2) of this section, the decision of the 
designated official will be final and constitute final agency action.
    (i) Remedies. To aid in the recovery of the Cost of Education 
Provided the Maritime Administrator may request the Attorney General to 
begin court proceedings, and the Maritime Administrator also may make 
use of the Federal debt collection procedures in chapter 176 of title 
28, United States Code, and other applicable administrative remedies.

[47 FR 21812, May 20, 1982, as amended at 60 FR 44438, Aug. 28, 1995; 65 
FR 39558, June 27, 2000; 66 FR 36177, July 11, 2001; 69 FR 9759, Mar. 2, 
2004; 69 FR 29081, May 20, 2004; 69 FR 31903, June 8, 2004; 69 FR 61454, 
Oct. 19, 2004; 70 FR 28833, May 19, 2005]



Sec.  310.59  Courses of instruction.

    (a) At Academy. Three major curriculums are offered: Nautical 
Science, for the preparation of deck officers; Marine Engineering, for 
the preparation of engineering officers; and the Dual License Program, a 
combined course which leads to licenses in both specialties. All 
midshipmen who are citizens shall take naval science courses prescribed 
by the Department of the Navy. All curriculums include general education 
courses and electives.
    (b) Sea year. Midshipmen spend one-half of their sophomore (third 
class) year and one-half of their junior (second class) year training at 
sea aboard one or more merchant vessels. In addition to practical 
shipboard assignments, midshipmen are required to complete written study 
assignments incorporating material from the major segments of the 
Academy curriculums.



Sec.  310.60  Training on subsidized vessels.

    All operators of subsidized merchant vessels, in accordance with 
contractual

[[Page 208]]

arrangements, are required to employ for training at least two 
midshipmen, as assigned by the Superintendent of the Academy, which 
employment shall be in accordance with the following provisions.
    (a) Work assignments. All practical work assignments for midshipmen 
shall be in accordance with courses prescribed by the Superintendent of 
the Academy.
    (b) Working hours. In order to permit midshipmen to complete their 
academic assignments, vessel employers shall not require midshipmen to 
work more than 8 hours each day. Midshipmen shall devote at least 3 
hours of their own time each day to study.
    (c) Pay. Midshipmen shall receive pay while employed aboard merchant 
vessels directly from the steamship company employers at the same rate 
received by cadets and midshipmen at the other Federal academies. A 
change in the rate of pay for midshipmen at the Academy shall occur 
after a change in the rate of pay for cadets/midshipmen at the other 
Federal academies and shall be effective either on June 15th or on 
December 15th of the same calendar year, whichever occurs first. While 
aboard ship, they shall be berthed in single-occupancy rooms or in rooms 
with other midshipmen in that part of the vessel designated for licensed 
officers (or in first-class passenger quarters) and shall mess with the 
licensed officers. The steamship company employers shall also pay the 
midshipmen such subsistence and room allowance in port, transportation 
allowances, and other bonuses or allowances as are paid to the licensed 
officers of the vessel in which the midshipmen are employed.
    (d) Berthing and messing. While aboard ship, midshipmen shall be 
berthed in single-occupancy rooms or in rooms with other midshipmen in 
that part of the vessel designated for licensed officers (or in first-
class passenger quarters) and shall mess with the licensed officers.

(Secs. 204(b) and 1301-1308, Merchant Marine Act, 1936, as amended, (46 
U.S.C. 1114(b); and 1295 through 1295g); Pub. L. 96-453; Pub. L. 97-31; 
49 CFR 1.66 (46 FR 47458, Sept. 28, 1981); EO 12387 (47 FR 44981, Oct. 
13, 1982)

[47 FR 21812, May 20, 1982, as amended at 52 FR 21534, June 8, 1987]



Sec.  310.61  Training on other vessels and by other facilities
or agencies.

    The Administrator may arrange for training of midshipmen on 
Government-owned vessels, in cooperation with other governmental and 
private agencies, and on other vessels documented under the laws of the 
United States if the owner of such vessel cooperates in such use. 
Midshipmen may be assigned for training in shipyards, plants, and 
industrial and educational organizations for instructional purposes 
only.



Sec.  310.62  Allowances and expenses; required deposit.

    (a) Items furnished. Each midshipman shall receive: Free tuition, 
quarters and subsistence; limited medical and dental care; and certain 
travel expenses, in accordance with chapter 5, part A, of the Joint 
Travel Regulations For Members Of Uniform Services, Vol. 1 (U.S. 
Department of Defense publication, Serial No. 0516-LP-255-0265), while 
traveling under official Academy orders.
    (b) Required Deposit. Prior to admission to the Academy, each 
midshipman shall make a specified deposit, as established by Academy 
regulations, to help defray the cost of items and services generally of 
a personal nature which are not provided by the Academy. Additional 
deposits, as prescribed in Academy regulations, are required to be made 
in subsequent years. Failure to make any required deposit will result in 
denial of admission, suspension or disenrollment.



Sec.  310.63  Uniforms and textbooks.

    The Academy shall supply midshipmen uniforms and textbooks in 
accordance with Academy regulations.

[[Page 209]]



Sec.  310.64  Privileges.

    (a) Midshipmen may be granted a leave of absence of approximately 
four (4) weeks after completing each of the first, second and third 
years of training.
    (b) Classes and exercises are suspended on New Year's Day, 
Washington's Birthday, Memorial Day, Independence Day, Labor Day, 
Columbus Day, Veterans' Day, Thanksgiving Day, Christmas Day and such 
other days as may be designated by the President as holidays for Federal 
employees.
    (c) Midshipmen may be granted approximately 2 weeks leave during the 
period which includes Christmas Day and New Year's Day.
    (d) Liberty and other privileges are granted to midshipmen meriting 
them under Academy regulations.
    (e) Relatives and friends of midshipmen may visit at the Academy 
during such ours as the Superintendent may prescribe.
    (f) There shall be a Ship's Service Store maintained as a non-
appropriated fund activity at the Academy primarily to serve the needs 
of the midshipmen.



Sec.  310.65  Graduation.

    (a) Classes enrolled prior to April 1, 1982. (1) A midshipman will 
be graduated from the Academy upon the successful attainment of the 
following requirements:
    (i) Completion of the required course of study;
    (ii) Fulfillment of the requirements for a license as an officer in 
the merchant marine of the United States;
    (iii) Filing for a commission in the USNR (including the Merchant 
Marine Reserve, USNR); and
    (iv) Compliance with the prescribed midshipman disciplinary and 
honor systems.
    (2) Graduates receive the degree of Bachelor of Science and a U.S. 
Coast Guard license either as third officer or third assistant engineer 
or both. They also may be granted commissions as Ensign, USNR (including 
the Merchant Marine Reserve, USNR) by the Department of the Navy.
    (3) In return for the education received at Government expense, each 
applicant shall sign an agreement to serve in one of the following 
categories immediately after graduation:
    (i) Sail on his or her license at sea for not less than six (6) 
months each year for three (3) consecutive years; or
    (ii) Sail on his or her license at sea for not less than four (4) 
months each year for four (4) consecutive years; or
    (iii) Apply for and serve on active duty for training on board a 
U.S. Navy ship for a minimum period of thirty (30) consecutive days each 
year for a period of three (3) consecutive years, and be either employed 
ashore for the balance of each year in some phase of the maritime 
industry or engaged in full-time graduate studies related to the 
maritime field; or
    (iv) Apply for and serve on full-time active duty as a commissioned 
officer in a uniformed service of the United States for a period of 3 
consecutive years.
    (b) Classes enrolled after April 1, 1982. (1) A midshipman will be 
graduated from the Academy upon the successful attainment of the 
following requirements:
    (i) Completion of the required course of study;
    (ii) Fulfillment of the requirements for a license as an officer in 
the merchant marine of the United States;
    (iii) Application for an appointment, and acceptance if tendered of 
an appointment, as a commissioned officer in the USNR (including the 
Merchant Marine Reserve, USNR), the U.S. Coast Guard Reserve, or any 
other Reserve component of an armed force of the United States; and,
    (iv) Compliance with the prescribed midshipman disciplinary and 
honor systems.
    (2) Graduates receive the degree of Bachelor of Science and a U.S. 
Coast Guard license either as third officer or third assistant engineer 
or both. They also may be commissioned as a reserve officer in an armed 
force as described in paragraph (b)(1) of this section.
    (3) The service obligation incurred by graduates is prescribed in 
Sec.  310.58 of this subpart.



Sec.  310.66  Foreign students.

    (a) Appointments from the Trust Territory of the Pacific Islands. 
The Administrator may permit, upon designation

[[Page 210]]

by the Secretary of the Interior, individuals from the Trust Territory 
of the Pacific Islands to receive instruction at the Academy. Not more 
than 4 such individuals may receive instruction at any one time. 
Residents of the Trust Territory of the Pacific Islands are neither 
citizens nor nationals of the United States.
    (b) Appointments from the Northern Mariana Islands. The Governor of 
the Northern Mariana Islands may nominate individuals for one position 
each year allocated to residents of the Northern Mariana Islands. Such 
residents are neither citizens nor nationals of the United States.
    (c) Appointments from nations located in the Western Hemisphere. The 
President may designate individuals from nations located in the Western 
Hemisphere, other than the United States, to receive instruction at the 
Academy. Not more than 12 individuals may receive instruction under this 
paragraph at any one time, and not more than 2 individuals receiving 
instruction under this paragraph at any one time may be from the same 
nation. The Secretary may allow, upon approval of the Secretary of 
State, additional individuals from the Republic of Panama to receive 
instruction at the Academy on a reimbursable basis.
    (d) Appointments from nations other than the United States. In 
addition to the appointments under paragraphs (a), (b) and (c) of this 
section, the Administrator, with the approval of the Secretary of State, 
may permit individuals from any nations other than the United States to 
receive instruction at the Academy. Not more than 30 such individuals 
may receive instruction at any one time.
    (e) Candidate Sponsors. A representative of the Administration or a 
diplomatic representative of the United States in the candidate's 
country of residence will be designated as the Candidate's Sponsor. It 
will be the responsibility of the Candidate's Sponsor to act as liaison 
with the appropriate officials of the candidate's country of residence 
and to coordinate all activities, including funding arrangements, 
entrance examinations, medical examinations, country clearances, travel 
papers, transportation to the Academy, obtaining the necessary 
designation by the Department of the Interior in the case of candidates 
from the Trust Territory of Pacific Islands under paragraph (a) of this 
section, the nomination of the Governor of the Northern Mariana Islands 
under paragraph (b) of this section, the nomination of a designee of the 
President in the case of candidates from nations located in the Western 
Hemisphere under paragraph (c) of this section, and the approval of the 
Department of State in the case of candidates from nations other than 
the United States under paragraph (d) of this section. In addition, the 
Candidate's Sponsor shall furnish to the Admissions Office of the 
Academy a report as to the candidate's proficiency in the use of 
idiomatic English.
    (f) Admissions Procedure--(1) Applications. Applications for 
enrollment of foreign students shall be processed through the 
appropriate diplomatic channels of the applicant's country and the 
appropriate offices in the United States Departments of State or of the 
Interior, whichever is applicable. Applications shall reach the 
appropriate office of the United States Government by January 1 of the 
year in which admission is sought. After endorsement by the authorized 
official of the United States Government, the application will be 
forwarded promptly to the Academy's Admissions Office.
    (2) Qualifications. Each candidate shall:
    (i) Be a bona fide citizen of the country transmitting the 
application and meet the requirements as to age and character set forth 
inSec. 310.54 of this subpart;
    (ii) Possess the physical qualifications, specified inSec. 310.56 
of this subpart, and undergo a physical examination as arranged by the 
Academy's Admissions Office;
    (iii) Be proficient in reading, writing and speaking idiomatic 
English; and,
    (iv) Satisfy the following scholastic requirements:
    (A) Meet the minimum qualifying scores on the entrance examinations 
as specified inSec. 310.55 of this subpart. When available, special 
foreign language College Board examinations may be substituted for the 
College Board or

[[Page 211]]

American College Testing Program examinations. Detailed certificates 
covering schoolwork of foreign students are required. Transcripts shall 
be submitted in the English language.
    (B) Submit a certificate from his or her Government that he or she 
is conversant with the literature of his or her native country and that 
he or she has completed a course in the literature of his or her native 
language generally equivalent to two (2) years of secondary schoolwork 
in literature in the United States. In lieu of this certificate, a 
candidate may produce evidence of having acquired the units for 
literature from accredited United States schools.
    (g) Cost of instruction. Students admitted to the Academy pursuant 
to paragraphs (a), (b) and (c) of this section shall be subject only to 
the same fees as are paid by citizen midshipmen. The cost of instruction 
(including the same allowances as received by midshipmen at the Academy 
appointed from the United States) for students admitted to the Academy 
under paragraph (d) of this section must be reimbursed to the 
Administrator by the nation from which the student comes. Such 
reimbursement shall be the incremental cost of providing the instruction 
to each of such foreign students (including the cost of allowances). The 
amount of reimbursement shall be established by the Academy separately 
for each entering class and each upper class prior to January 1 of the 
year in which the academic year begins and will be payable annually in 
advance of commencement of the academic year. Instructions as to payment 
procedures will be provided with the statement of the amount to be 
reimbursed. Students admitted to the Academy pursuant to paragraph (d) 
of this section shall pay the same fees paid by citizen midshipmen.
    (h) Uniforms, textbooks and allowances. The Academy shall provide to 
foreign students receiving instruction at the Academy all required 
uniforms and textbooks and allowances for transportation as are provided 
to citizen midshipmen.
    (i) Rules and regulations. Subject to such exceptions as shall be 
jointly agreed to by the Administrator and the Secretary of the Interior 
with respect to individuals from the Trust Territory of the Pacific 
Islands, foreign students, including students from the Northern Mariana 
Islands, receiving instruction at the Academy shall be subject to the 
same rules and regulations governing admission, attendance, discipline, 
resignation, discharge, dismissal and graduation as citizen midshipmen; 
but such persons shall not be entitled to hold any license authorizing 
service on any merchant vessel of the United States solely by reason of 
graduation from the Academy.
    (j) Oath. In lieu of the oath of allegiance to the United States, a 
substitute oath shall be required of students who are not citizens of 
the United States, as follows:

    ``I, ------, a citizen of ------, aged -- years and -- months, 
having been appointed to receive instruction at the U.S. Merchant Marine 
Academy, do solemnly swear (or affirm) to comply with all regulations of 
the U.S. Merchant Marine Academy and to give my utmost efforts to 
accomplish satisfactorily the required curriculum with the full 
knowledge that I shall be disenrolled from the U.S. Merchant Marine 
Academy if deficient in conduct, health or studies.''

[47 FR 21812, May 20, 1982, as amended at 60 FR 44439, Aug. 28, 1995]



Sec.  310.67  Academy regulations.

    The Superintendent of the Academy is delegated authority to issue 
all regulations necessary for the accomplishment of the Academy's 
mission.

[[Page 212]]



               SUBCHAPTER I-A_NATIONAL SHIPPING AUTHORITY





PART 315_AGENCY AGREEMENTS AND APPPOINTMENT OF AGENTS--Table of Contents



Sec.
315.1 Purpose.
315.3 Definitions.
315.5 Appointment of agents.
315.6 Transferred vessels and contracts.
315.7 Administration of agency agreements.
315.9 Duties of agents.
315.11 Vessel deactivation procedures.

    Authority: 50 U.S. C. App. 1744; 49 CFR 1.66.

    Source: 58 FR 44285, Aug. 20, 1993, unless otherwise noted.



Sec.  315.1  Purpose.

    This part summarizes the procedures governing the award and 
administration of Agency Agreements in the form of Service Agreements 
and Ship Manager Contracts entered into between the United States of 
America, acting by and through the Director, National Shipping Authority 
(NSA) of the Maritime Administration (MARAD), Department of 
Transportation, and Agents which will manage or otherwise conduct the 
business of one or more vessels owned, controlled or time-chartered by 
the United States, which vessel(s) may be assigned to Agents from time 
to time pursuant to the specific provisions of a Service Agreement or 
Ship Manager Contract.



Sec.  315.3  Definitions.

    (a) Agent includes a General Agent, Berth Agent and Ship Manager, 
designated as such under a standard form of Service Agreement or Ship 
Manager Contract to manage and conduct the business of vessels of which 
the United States is owner, owner pro hac vice or time charterer.
    (b) Citizen of the United States means a person (including 
receivers, trustees and successors or assignees of such Persons as 
provided in 46 App. U.S.C. 803), including any Person (stockholder, 
partner or other entity) who has a controlling interest in such person, 
any person whose stock or equity is being relied upon to establish the 
requisite U. S. citizen ownership, and any parent corporation, 
partnership or other entity of such Person at all tiers of ownership, 
who, in both form and substance at each tier of ownership, satisfies the 
following requirements--
    (1) An individual who is a Citizen of the United States, by birth, 
naturalization or as otherwise authorized by law;
    (2) A corporation organized under the laws of the United States or 
of a State, the controlling interest of which is owned by and vested in 
Citizens of the United States and whose chief executive officer, by 
whatever title, chairman of the board of directors and all officers 
authorized to act in the absence or disability of such persons are 
Citizens of the United States, and no more of its directors than a 
minority of the number necessary to constitute a quorum are noncitizens;
    (3) A partnership organized under the laws of the United States or 
of a State, if all general partners are Citizens of the United States 
and a controlling interest in the partnership is owned by Citizens of 
the United States;
    (4) An association organized under the laws of the United States or 
of a State, whose chief executive officer, by whatever title, chairman 
of the board of directors (or equivalent committee or body) and all 
officers authorized to act in their absence or disability are Citizens 
of the United States, no more than a minority of the number of its 
directors, or equivalent, necessary to constitute a quorum are 
noncitizens, and a controlling interest in which is vested in Citizens 
of the United States;
    (5) A joint venture, if it is not determined by the Maritime 
Administrator to be in effect an association or partnership, which is 
organized under the laws of the United States or of a State, if each 
conventurer is a Citizen of the United States. If a joint venture is in 
effect an association, it will be treated as is an association under 
paragraph (b)(4) of this section, or, if it is in effect a partnership, 
will be treated as is a partnership under paragraph (b)(3) of this 
section.
    (c) Director, National Shipping Authority, or Director means the 
Maritime Administrator. It also means the Associate Administrator for 
Shipbuilding

[[Page 213]]

and Ship Operations, or the Associate Administrator for Marketing, 
respectively, when the NSA is operating under authority delegated by the 
Maritime Administrator.
    (d) NDRF means a National Defense Reserve Fleet site.
    (e) United States means the States of the United States, Guam, 
Puerto Rico, the Virgin Islands, American Samoa, the District of 
Columbia, the Commonwealth of the northern Mariana Islands and any other 
territory or possession of the United States.

[58 FR 44285, Aug. 20, 1993, as amended at 69 FR 34310, June 21, 2004]



Sec.  315.5  Appointment of agents.

    (a) Eligibility. The Director shall restrict the appointment as 
Agent to qualified applicants. Each applicant shall establish that 
eligibility according to procedures that may be obtained from MARAD and 
shall:
    (1) Be a Citizen of the United States, as defined inSec. 315.3(b) 
of this part;
    (2) Demonstrate the necessary ability, experience and resources as 
an operator of vessels or ports, or shoreside husbander of vessels; and
    (3) Continue to meet all such requirements throughout the term of 
the appointment.
    (b) Procedures. Information about procedures for appointment as 
General Agent, Berth Agent or Ship Manager may be obtained from, and 
inquiries and other written communications shall be submitted to, the 
Maritime Administration, Attn: Office of Acquisition, MAR-383, 
Department of Transportation, 400 Seventh Street SW., Washington, DC 
20590, tel. (202)366-1943. Inquiries should be made during normal 
business hours.
    (c) Approval. After final approval of an Agent by MARAD, the 
contracting office shall transmit the Service Agreement or Ship Manager 
contract to the Agent for execution and return to MARAD.
    (d) Agreements. The standard text of the Service Agreement and Ship 
Manager Contract may be obtained from the Office of Acquisition at the 
address appearing in paragraph (b) of this section, by mail or in person 
during normal business hours.



Sec.  315.6  Transferred vessels and contracts.

    The requirements ofSec. 315.5(a)(1) shall not apply to a 
contractor managing vessels owned by the United States under a contract 
or contracts previously awarded by another Federal agency if the 
contract, and the vessels managed under such contract, are subsequently 
transferred to the Maritime Administration, provided the period of 
performance of the transferred contract does not exceed the period of 
performance of the original contract, including options.

[73 FR 49358, Aug. 21, 2008]



Sec.  315.7  Administration of agency agreements.

    (a) Amendments. The MARAD contracting office shall prepare 
modifications to all Service Agreements and Ship Manager Contracts that 
are required due to changes in the Federal Acquisition Regulation or 
Transportation Acquisition Regulation, or changes in MARAD policy or 
procedure.
    (b) Annual review of General Agent representations and 
certifications. The contracting office shall require that each General 
Agent certify annually that all representations and certifications 
incorporated in a Service Agreement are current, complete and accurate, 
or provide new representations and certifications.



Sec.  315.9  Duties of agents.

    The Agent shall perform all duties prescribed in the Service 
Agreement or Ship Manager Contract and shall be guided by such 
directions, orders or regulations as may be issued by MARAD.



Sec.  315.11  Vessel deactivation procedures.

    When an Agent is responsible as vessel operator to decommission and 
deliver a vessel to the NDRF, that Agent shall observe all the 
procedures and requirements prescribed by MARAD contained in 
instructions which may be obtained from the MARAD Division of Reserve 
Fleet (MAR-743) at the address specified inSec. 315.5(b) of this part. 
Tel. (202) 366-5752.

[[Page 214]]



PART 317_BONDING OF SHIP'S PERSONNEL--Table of Contents



Sec.
1. What this order does.
2. Amount of bond.
3. Premiums.
4. Posting of bond.
5. Measures to protect ship's payrolls.
6. Surety and form of bond.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114.

    Source: AGE-3, 16 FR 6751, July 12, 1951, unless otherwise noted. 
Redesignated at 45 FR 44587, July 1, 1980.



Section 1  What this order does.

    This order requires that General Agents, appointed under Service 
Agreement ``G.A.A., 3/19/51'' shall not advance or entrust any monies or 
slop chest property of the United States to a master, purser or any 
other member of the ship's personnel unless such person is under a bond 
indemnifying the United States against loss of such monies or property 
caused solely or in part by the dishonesty or lack of care of any such 
person in the performance of the duties of any petition covered by the 
bond.



Sec. 2  Amount of bond.

    The amount of the bond must be governed by the amount of monies 
advanced or value of slop chest property entrusted, and shall, at all 
times, not be less than the value of slop chest property entrusted plus 
advances of monies for which a satisfactory accounting has not been 
made.



Sec. 3  Premiums.

    The bonds provided for shall be furnished without cost to the 
National Shipping Authority, but the cost of the premiums of such bonds 
shall be included in the overhead expense of the General Agent.



Sec. 4  Posting of bond.

    The General Agent shall retain an executed copy of each such bond in 
its principal office for examination by the National Shipping Authority 
at any time.

[Amdt. 1, 16 FR 9527, Sept. 19, 1951. Redesignated at 45 FR 44587, July 
1, 1980]



Sec. 5  Measures to protect ship's payrolls.

    (a) General Agents are not required to consider the amount of the 
payroll delivered to the Master at the conclusion of a voyage in 
determining the amount of bond required for any one person filling a 
bonded position hereunder. However, the person paying off the crew 
should be either the Master, or purser, or some other member of the 
ship's personnel acting for the Master who has been bonded pursuant to 
this order. If, however, the person paying off is a shoreside employee 
of the General Agent, such employee shall be bonded under the General 
Agents' general fidelity bond.
    (b) The principal risk involved where payrolls are delivered to a 
vessel at the conclusion of a voyage is loss through hold-up. Therefore, 
reasonable protection shall be taken by all General Agents where 
payrolls are delivered to a vessel or elsewhere. Because the 
circumstances of each case will vary, the General Agents shall use their 
best judgment in determining whether armored car service, armed guards 
or similar types of protection should be employed (in other words, the 
General Agents should follow their usual practices). The cost of these 
services may be included in vessel operating expenses.
    (c) General Agents are not required to purchase hold-up insurance, 
since subject to the terms, conditions and limitations of Service 
Agreement ``G.A.A., 3/19/51'' losses resulting from this exposure are 
assumed by the National Shipping Authority.



Sec. 6  Surety and form of bond.

    Each bond provided for by this order shall be duly executed by an 
authorized surety appearing on the current approved list of companies 
acceptable as sureties on Federal bonds published by the U.S. Treasury 
Department. The form of bond required by the National Shipping Authority 
to be used by the General Agents shall be as follows:

[[Page 215]]

                      Department of Transportation

          maritime administration, national shipping authority

                     Position Fidelity Schedule Bond

    In consideration of the annual premium ------ (hereafter called the 
``Surety'') hereby agrees to pay to ------ or its successors (hereafter 
called the ``Agent'') or the United States of America, (hereafter called 
the ``United States''), represented by the Director, National Shipping 
Authority of the Maritime Administration, Department of Transportation 
(hereafter called the ``Director''), as their interests may appear, the 
amount of any pecuniary loss of money or slop chest property caused, 
solely or in part, by reason of the dishonesty or lack of care of any 
person in the performance of the duties of any position, now or 
hereafter listed in the Schedule of Positions and Amounts forming part 
hereof (hereafter called the ``Schedule''), on any and all vessels from 
time to time allocated to the Agent by the Director.
    This bond is executed and accepted subject to the following 
agreements, limitations and conditions:
    First. Liability under this bond begins with the ---------- day of 
----------------, 19---- in respect of each person then filling any 
position named in the Schedule on any and all vessels then allocated to 
the Agent by the Director. As to any position or positions bearing the 
same designation as that of any position or positions named in the 
Schedule on any vessel or vessels thereafter allocated to the Agent by 
the Director, liability under this bond shall automatically begin as 
soon as such position or positions are filled, provided the Director or 
the Agent shall within ninety (90) days of the date such position or 
positions are filled notify the Surety in writing of the date such 
position or positions are filled. As between the Agent and the Director, 
it shall be the responsibility of the Agent to give the notice to the 
Surety as provided herein. Without affecting its liability hereunder, 
the Surety agrees that neither the Agent nor the Director need furnish 
the names of vessels on which positions are bonded hereunder at any time 
during the effective period of this bond.
    Second. If the Agent or the Director shall request the Surety to 
increase or decrease the amount of coverage applicable to any position 
named in the Schedule, the Surety shall make such change by written 
acceptance showing the increase or decrease in the amount of coverage 
and the effective date thereof, which effective date shall not be prior 
to the date of such request; provided, however, that if the Director 
shall within ninety (90) days after receipt of notice of a decrease 
resulting from a request by the Agent, advise the Surety that it does 
not consent to such decrease, such decrease shall become inoperative and 
coverage shall continue in the amount applicable prior to such decrease 
as if such decrease had never been made.
    Third. If the Surety knows or has reason to believe that any person 
filling any position named in the Schedule has caused any loss of money 
or property entrusted to him by reason of his dishonesty or lack of care 
in the performance of the duties of such position, the Surety may 
terminate the coverage of this bond as to such person by giving notice 
in writing to the Agent and the Director at least thirty (30) days prior 
to the completion, in a continental United States port, of the then 
current voyage of the vessel on which such person is filling a position, 
in which case the coverage of this bond as to such person shall 
terminate when the crew is paid off upon such completion of the voyage. 
The Agent may cancel the coverage of this bond (a) as an entirety or (b) 
as to any position named in the Schedule by giving the Surety fifteen 
(15) days' written notice accompanied by written approval of the 
Director to such cancellation. The Director may cancel the coverage of 
this bond (a) as an entirety or (b) as to any position named in the 
Schedule upon fifteen (15) days' written notice to the Surety. In the 
event of any such cancellation the Surety shall refund to the Agent any 
unearned premiums computed pro rata.
    Fourth. After discovery and report to the Agent or the Director of 
any loss hereunder, the Agent or the Director shall give the Surety 
written notice thereof, and within ninety (90) days after such written 
notice to the Surety shall file with the Surety affirmative proof of 
loss itemized and sworn to on forms furnished by the Surety. Prior 
discovery and report to the Agent of such loss shall not affect the 
right of the Director to notify the Surety of such loss and to file 
proof of loss. As between the Agent and the Director, it shall be the 
responsibility of the Agent to give the notice and to file the proof of 
loss with the Surety as provided herein. ``Discovery and report'' as 
used herein is defined in paragraph Tenth hereof.
    Fifth. Any suit to recover on account of any loss hereunder shall be 
brought before the expiration of five years from the report to the Agent 
or the Director of the act causing such loss.
    Sixth. The Agent will declare at the original effective date of this 
bond, and at each subsequent premium anniversary date, the total number 
of persons then filling each position named in the Schedule, and the 
annual premium will be computed for the ensuing year on the basis of the 
aggregate coverage represented by such declaration. Upon such premium 
anniversary date there will be a computation of additional premium or 
refund of premium in proportion to the change in the coverage each year.

[[Page 216]]

    Seventh. Settlement of any claim hereunder shall be made by check 
payable to the Agent unless otherwise instructed by the Director, but no 
settlement of any claim hereunder may be made for an amount less than 
the full amount of the loss for which the claim is made without the 
written consent of the Director thereto.
    Eighth. The Surety shall not be entitled to any reimbursement, 
salvage or recovery,--except from insurance, reinsurance, collateral or 
indemnity taken by the Surety for its own benefit,--on account of any 
loss hereunder until the Agent or the Director, as their interests may 
appear, is reimbursed in full.
    Ninth. No modification or change of any nature of the provisions of 
this bond shall take effect unless the Director shall have given his 
written consent thereto, except that the Agent may increase the coverage 
hereunder in accordance with the provisions of paragraph First hereof 
without such consent of the Director.
    Tenth. (a) Any action, approval or consent which by the provisions 
of this bond is required to be taken or signed by the Director shall be 
effective if taken or signed by the Director or by his authorized 
representative, and wherever and whenever herein any right, power, or 
authority is granted or given to the Director, such right, power, or 
authority may be exercised in all cases by his authorized 
representative, and the act or acts of such authorized representative, 
when taken shall constitute the act of the Director hereunder.
    (b) ``Discovery and report'' by the Agent as used herein shall be 
deemed to mean discovery by any person and the report of such discovery 
to an executive officer or head of a department or division concerned 
with such discovery and report of the Agent at the Agent's principal 
place of business within the continental United States. ``Discovery and 
report'' by the Director shall be deemed to mean discovery by any person 
and the report of such discovery to an executive officer or head of a 
division or section concerned with such discovery and report at the 
Director's headquarters.
    (c) Notices, approvals and requests required by the provisions 
hereof shall be sent to the Surety addressed to it at its home office 
at.
    (d) Notices, acceptances and requests required to be sent to the 
Agent shall be sent to The Agent, ---------------- (Name and head office 
address).
    (e) Notices and requests to be sent to the Director shall be 
addressed to the Director, National Shipping Authority of the Maritime 
Administration, Department of Transportation, at the Director's 
headquarters.
    Signed, sealed and dated this ------------ day of --------------, 
19----.

 [corporate seal]_______________________________________________________
                                                                (Surety)

Attest or witness:

                                                        ------ By ------
                                                        ------ By ------

                                                            Schedule of Positions and Amounts
 The positions set forth hereinafter in this Schedule are all located on board the vessel or vessels allocated by the Director from time to time to the
                                                                   Agent named herein
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Number persons filling    Amount coverage on
              Item No.                Description position          position                  each            Aggregate coverage          Premium
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
 
 
 
--------------------------------------------------------------------------------------------------------------------------------------------------------


[AGE-3, 16 FR 6751, July 12, 1951, as amended by Amdt. 1, 16 FR 9527, 
Sept. 19, 1951. Redesignated at 45 FR 44587, July 1, 1980]



PART 324_PROCEDURAL RULES FOR FINANCIAL TRANSACTIONS UNDER AGENCY
AGREEMENTS--Table of Contents



                                Accounts

Sec.
1. Books of account.
2. Bank account.

                         Accounting for Revenues

3. Accounting for revenues.

                          Funding of Operations

4. Funding of operations.

                              Disbursements

5. Disbursements at principal office of agent.
6. Disbursements at other domestic ports.
7. Disbursements at foreign ports.

                                Documents

8. Disbursement documents.
9. Maintenance of documents.

[[Page 217]]

10. Lost documents.

                            Reports and Audit

11. Reports to the owner.
12. Audit.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114.

    Source: FIS-1, 16 FR 2885, Apr. 3, 1951, unless otherwise noted. 
Redesignated at 45 FR 44587, July 1, 1980.

                                Accounts



Section 1  Books of account.

    A separate set of books of account shall be opened for the purpose 
of recording the various transactions in connection with the said agency 
agreement. The books of original entry and ledgers may be similar in 
design to those heretofore employed by the agent unless it develops that 
they are inadequate, in which event the deficiency shall be remedied 
promptly. The accounts required in operations under this agency 
agreement, however, shall conform to the chart in the uniform system 
prescribed by the Maritime Administration in General Order No. 22, 
Revised (46 CFR part 282) and recordings in the accounts shall be in 
accordance with the descriptions thereof contained in the said uniform 
system.



Sec. 2  Bank account.

    A separate joint bank account will be maintained in a depository or 
depositories designated by the agent and approved by the National 
Shipping Authority (referred to in this order as the owner), into which 
all collections under the agency agreement will be deposited and from 
which disbursements in connection with the activities, maintenance and 
business of the vessels thereunder will be made. Upon designation by the 
agent and approval by the owner of the depository or depositories, the 
owner will issue an order for the establishment of the joint bank 
account. The order will set forth the conditions governing the 
establishment and maintenance of the account and the making of deposits 
therein and withdrawals therefrom. A signed copy of the order of the 
owner will be furnished the agent and the agent promptly shall adopt, 
through its Board of Directors, a resolution satisfactory in form and 
substance to the owner, authorizing the establishment and maintenance of 
the account in conformity with the action of the owner. A signed copy of 
the order of the owner and a certified copy of the resolution of the 
agent will be furnished by the owner to the depository for its guidance 
in maintaining the fund and honoring instruments of withdrawal. The 
order will provide, among other things, that:
    (a) Withdrawals from this bank account may be made by the agent 
without the countersignature of the owner for disbursements in 
connection with the activities, maintenance and business of the vessels 
assigned under agency agreements, except disbursements involving 
payments to the agent directly, or to any other persons specifically 
designated by the Director, National Shipping Authority, in which 
instances the countersignature of a designated representative of the 
owner will be required, (b) withdrawals may be made from the account by 
the owner without the countersignature of the agent whenever and to the 
extent the owner shall determine that the balance in the account in 
excess of current operating requirements warrants such action, (c) the 
bank shall have no rights against the joint account on account of 
indebtedness of the agent either by way of set-off or otherwise, (d) the 
bank may receive for deposit in the joint account any funds tendered to 
it by any person with instructions that the same be deposited in the 
said account, and the bank shall have no responsibility to inquire as to 
the source of such funds, and (e) the bank shall disburse funds from the 
joint account in accordance with checks, drafts, or other orders for the 
payment of money, drawn as provided in the order, without making any 
inquiry as to the purpose or use to which such withdrawals are to be 
put.

                         Accounting for Revenues



Sec. 3  Accounting for revenues.

    (a) General. (1) The Agent shall be responsible for the prompt 
collection of all vessel operating revenue, shall issue such 
instructions as may be necessary to its branch houses or sub-agents, and 
shall take such other steps as may be

[[Page 218]]

necessary to insure prompt remittance to it of vessel operating revenue 
collected outside its principal office.
    (2) Freight revenue collected, less refunds made therefrom, shall be 
remitted to the owner promptly subsequent to the close of each month. 
Disbursements except for refunds shall not be made from freight revenue 
collections unless specifically authorized by the owner.
    (3) Passenger revenue collections shall be accounted for in 
accordance with procedures to be described.
    (4) The agent shall in all cases perform his audit and review 
functions promptly and shall be in a position to supply complete 
documentation for a current audit by representatives of the owner.
    (b) Revenue documents--(1) Freight revenue. The agent shall require 
its domestic and foreign branch houses, sub-agents, or other 
representatives, to prepare and submit revenue documents (manifests, 
bills of lading, out turn weight certificates, correction notices, etc.) 
to it. The manifest, in addition to showing the name of shipper, 
consignee, weight or measurement, freight rate and basis (whether the 
freight rate applies on measurement or weight basis), and amount of 
freight, shall show also advance charges, prepaid beyond charges, etc. A 
recapitulation sheet shall be made of the totals shown on the individual 
manifest sheets for each port. The aggregate totals of weight and 
measurement freight shall be converted to freight payable tons of bulk, 
general, heavy lifts, and commodities subject to special stevedoring 
rates if freight carried is subject to an over-all stevedoring 
agreement.
    (2) Passenger revenue. Agents to whom combination passenger and 
freight vessels have been assigned under agency agreements and who 
heretofore have established a passenger accounting procedure, may 
continue to follow such procedure under the agency operations, unless 
such procedure is found to be inadequate by the owner.
    (3) Certifications of revenue documents. The following 
certifications will be signed by branch houses or sub-agents:

    (i) Freight manifests. Certified to be a true and correct reflection 
of cargo loaded and rates charged.

                                               Branch house or sub-agent
 By:____________________________________________________________________
                                                              Name Title

    (ii) Passenger manifests. Certified to be a true and correct 
reflection of passengers carried and rates charged.

                                               Branch house or sub-agent
 By:____________________________________________________________________
                                                              Name Title
    (4) Definition of manifest. The term manifest as used in this order, 
shall be interpreted to include appropriate equivalent documents as 
customarily used.

                          Funding of Operations



Sec. 4  Funding of operations.

    Cash advances will be made by the owner in such amounts and at such 
times as are required to adequately fund the activities, maintenance and 
business of the vessels assigned under agency agreements.

                              Disbursements



Sec. 5  Disbursements at principal office of agent.

    All expenses directly applicable to the activities, maintenance and 
business of the vessels assigned under agency agreements shall be paid 
from funds advanced by the owner unless otherwise specifically provided. 
When paid by check, invoices shall reflect the numbers of the checks by 
which the invoices were paid; when paid other than by check of the agent 
at his principal office, invoices must bear evidence of payment.



Sec. 6  Disbursements at other domestic ports.

    Disbursements at domestic ports other than the principal office of 
the agent for expenses as referred to in section 5 shall be made by one 
of the three following methods:
    (a) After proper certification by the branch house or subagent, 
invoices shall be forwarded to the agent for payment, or
    (b) The branch house or subagent shall pay invoices and thereafter 
apply

[[Page 219]]

to the agent for reimbursement, supporting its voucher with invoices 
bearing evidence of payment covering individual disbursement, or
    (c) The agent may advance from time to time from the joint bank 
account the funds necessary to meet the requirements of such branch 
houses or subagents in connection with the activities, maintenance and 
business of the vessels assigned under the agency agreement. In such 
cases the branch house or subagent shall pay invoices from such advances 
and make proper accounting to the agent for each advance supported by 
invoices bearing evidence of payment and accompanied by remittance 
covering any unexpended balance of the advance, promptly after the 
departure of each vessel for which such advance was made.



Sec. 7  Disbursements at foreign ports.

    Disbursement procedures at foreign ports may differ in the case of 
individual agents and in view of existing conditions. Disbursements at 
foreign ports shall be made by one of the following methods or by any 
other method outlined to and approved by the owner in advance of its 
use:
    (a) The agent may advance from time to time from the joint bank 
account the funds necessary to meet the requirements of the business of 
the vessels assigned under the agency agreement. In such cases the 
foreign branch house or sub-agent shall pay invoices from such advances 
and shall make proper accounting to the agent for all advances supported 
by invoices bearing satisfactory evidence of payment. Any gains or 
losses in exchange on such advances or disbursements shall be for the 
account of the owner.
    (b) The foreign branch house or sub-agent may pay all invoices from 
his own funds and thereafter draw on the agent for reimbursement, at the 
same time forwarding the disbursements account by air mail.
    (c) The agent may establish Letters of Credit making funds available 
to the foreign branch house or sub-agent against which funds may be 
drawn by the sub-agent for branch house for payment of properly approved 
documents.

                                Documents



Sec. 8  Disbursement documents.

    (a) Preparation of invoices by contractors and/or vendors. (1) 
Invoices from contractors or vendors shall be supported by evidence of 
delivery of supplies (delivery receipts), performance of services, or 
use in facilities furnished the vessels, and shall include the 
following:
    (i) Name of vessel.
    (ii) Name of port at which the services, supplies, or facilities 
were furnished.
    (iii) Date of delivery or service.
    (iv) Necessary details as to the nature of services, supplies, or 
facilities furnished including quantity, rate, price and total amount.
    (2)(i) In addition to the foregoing, contractors or vendors shall 
certify each invoice or voucher (original only) in the following manner:

    I certify that the above bill is correct and just and that payment 
therefor has not been received.

 Name of contractor or vendor___________________________________________
 By:____________________________________________________________________
                                                              Name Title
    (ii) The agent shall advise its domestic and foreign branch houses, 
sub-agents, or other representatives to the effect that the foregoing 
information and certifications must be shown on all invoices or vouchers 
when received from contractors or vendors.
    (iii) In instances where the foregoing certification is unobtainable 
for foreign purchases only, it may be waived: Provided, That, in lieu of 
such certification the agent certifies the invoice as follows:

    We certify that the prescribed certification of the payee was 
unobtainable.

                                            General agent or berth agent
 By:____________________________________________________________________
                                                              Name Title
    (3) In instances where it is not possible or practicable to obtain 
invoices bearing evidence of payment covering disbursements at foreign 
ports, that requirement will be waived, provided the agent certifies as 
follows:


[[Page 220]]


    We certify that, to the best of our knowledge and belief, this 
invoice has been paid.

                                            General agent or berth agent
 By:____________________________________________________________________
                                                              Name Title
    (4) Invoices rendered to the agent by its branch houses or sub-
agents shall be only those of the contractors or vendors who actually 
rendered the services or furnished the supplies or facilities.
    (5) If the laws of any country require the foreign sub-agent or 
branch house to retain the original invoice with stamps affixed, or if 
such laws require the original receipt as prima facie evidence of 
payment, the corresponding duplicate copy of the invoice, in proper 
form, must be forwarded to the agent with notation to that effect made 
thereon by the foreign sub-agent or branch house.
    (b) Certification of master, ship's officers, branch houses, sub-
agents, or duly authorized representatives. (1) Evidence of delivery of 
supplies, performance of services, or use of facilities, as normally 
provided by delivery receipts, or an equivalent form, comprises an 
essential part of proper documentation for disbursing purposes.
    (i) Where supplies are delivered or services or facilities are 
furnished directly to a vessel, evidence of delivery or performance 
normally should be signed by a ship's officer.
    (ii) Where such evidence is not signed by a ship's officer, any duly 
authorized representative of the agent may sign as ``Duly Authorized 
Representative,'' provided the agent shall be responsible for the 
designation of proper and qualified representatives and provided the 
agent shall furnish, when so required by the owner, adequate evidence 
that the signing representative was duly authorized by him. In instances 
in which the agent may not be able to identify in advance the 
representative who may sign, the agent shall have the responsibility for 
determining that the person signing was qualified to execute evidence of 
delivery of supplies, performance of services, or use of facilities 
involved.
    (2) For charges for watching cargo, stevedoring, wharfage, receiving 
and delivering cargo, clerking and checking, or other services or 
facilities not rendered directly to the vessel, for which normally 
delivery receipts or any equivalent form are not furnished, the 
following certification on the face of the original invoice by a duly 
authorized representative of the agent is required.

    I certify that the services or facilities as specified have been 
furnished.

                                                                    Name

                                          Duly authorized representative
    (3) Ships' payrolls shall be certified by the master (or his 
authorized representative) as follows:

    I certify that this payroll is true and correct, and that the 
persons named hereon have performed the services for the period stated.


                                               Master (or his authorized
                                                         representative)
    (4) In instances where vessels are under foreign articles the 
payroll shall bear proper evidence of having been paid off before a 
United States Shipping Commissioner or an American Consul.
    (5) The slop chest account shall be certified by the master as 
follows:

    I hereby certify that the above is a true statement of all Slop 
Chest transactions on this vessel and voyage.

                                               Master (or his authorized
                                                         representative)
    (6) A similar certification shall be made by the Chief Steward (or 
his authorized representative) covering bar transactions (if any).
    (c) Certification by branch house or sub-agent where agent does not 
handle transactions directly. The certification of the branch house or 
sub-agent must be shown on the original invoice (if rendered singly) or 
on the summary disbursement statement (if rendered in groups) in the 
following manner:
    (1) On single invoices.

    I certify that the prices charged are reasonable and correct.

                                               Branch house or sub-agent
 By:____________________________________________________________________
                                                              Name Title
    (2) On the summary statement.


[[Page 221]]


    I certify that the prices charged per invoices detailed above are 
reasonable and correct.

                                               Branch house or sub-agent
 By:____________________________________________________________________
                                                              Name Title



Sec. 9  Maintenance of documents.

    The agent shall maintain the originals of all documents at his 
principal office. All documents originating at other domestic ports and 
at foreign ports shall be transmitted as currently as possible to the 
principal office of the agent. The agent shall in all cases perform his 
audit and review functions promptly and shall be in a position to supply 
complete documentation for a current audit by representatives of the 
owner. The agent shall maintain to the maximum extent possible a 
complete and orderly file of all authorizations for facilities, services 
and supplies, and complete tariffs and port schedules covering charges 
at domestic and foreign ports incident to the operation of the vessels 
assigned under the agency agreement.



Sec. 10  Lost documents.

    In the event of the loss of documents, photostat, carbon, or other 
suitable copies may be substituted therefor, in which event the 
following certification shall be placed on such copies:

    I certify that, to the best of my knowledge and belief, this is a 
true copy of an original that has been lost.

                                               Branch house or sub-agent
 By:____________________________________________________________________
                                                              Name Title

                            Reports and Audit



Sec. 11  Reports to the owner.

    The agent shall submit to the local District Finance Officer of the 
owner, in triplicate, not later than 20 days after the end of each 
month, its general ledger trial balance and such schedules and support 
thereof as may be required. The agent shall also submit to the owner, in 
original and four copies, not later than 10 days after the end of each 
month a statement in the form and content to be prescribed reflecting 
cash receipts and cash disbursements for the preceding month and 
cumulative totals for the year to date; the original and one copy will 
be transmitted to the local District Finance Officer and three copies 
will be transmitted to the Chief, Office of Finance, Maritime 
Administration, Washington.

[FIS-1, 16 FR 2885, Apr. 3, 1951, as amended at 33 FR 5952, Apr. 18, 
1968. Redesignated at 45 FR 44587, July 1, 1980]



Sec. 12  Audit.

    (a) The owner will audit as currently as possible subsequent to 
audit by the agent, all documents relating to the activities, 
maintenance and business of the vessels assigned under agency 
agreements.
    (b) The agent shall maintain all documents in his principal office, 
for the time being in accordance with his customary practice of filing.
    (c) Subsequent to audit by the owner, at such intervals as may be 
determined, the owner will authorize entries to be made to revenue and 
expense accounts and to accounts reflecting relations between the owner 
and the agent.

    Note: Books of accounts and documents referred to in the above 
order, shall be retained until the completion of the audit by the 
General Accounting Office, at which time the Maritime Administration 
will take custody of the records.

[16 FR 2885, Apr. 3, 1951, as amended at 21 FR 8105, Oct. 23, 1956. 
Redesignated at 45 FR 44587, July 1, 1980]



PART 325_PROCEDURE TO BE FOLLOWED BY GENERAL AGENTS IN PREPARATION
OF INVOICES AND PAYMENT OF COMPENSATION PURSUANT TO PROVISIONS OF 
NSA ORDER NO. 47--Table of Contents



Sec.
1. What this order does.
2. Terms.
3. Preparation of invoices.
4. Method of payment.
5. Accounting.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114.

    Source: FIS-2, 16 FR 10026, Oct. 2, 1951, unless otherwise noted. 
Redesignated at 45 FR 44587, July 1, 1980.

[[Page 222]]



Section 1  What this order does.

    This order prescribes procedures for the preparation of invoices 
for, and payment and the accounting for, compensation payable to General 
Agents of the National Shipping Authority for services rendered in 
connection with the husbanding and conduct of the business of dry cargo 
vessels assigned to General Agents under the standard form of Service 
Agreement GAA, March 19, 1951, as prescribed in NSA Order No. 47. (AGE-4 
of this chapter).



Sec. 2  Terms.

    The terms employed in this order shall have the same meaning as 
those contained in NSA Order No. 47.



Sec. 3  Preparation of invoices.

    (a) Pursuant to Article 4 of the Service Agreement, the General 
Agent shall prepare monthly invoices for compensation earned during the 
preceding month under the applicable provisions of NSA Order No. 47.
    (1) Invoices shall be prepared so as to show separately husbanding 
services and other services in conducting the business of the vessels.
    (2) Husbanding services shall be stated to indicate the names of all 
vessels delivered to the General Agent during the month involved, the 
number of days each vessel was serviced or operated by the General Agent 
during the month, rate of compensation per day, and the amount produced 
by the calculation.
    (3) Services in conducting the business of the vessels shall be 
stated to indicate the name of the vessel, the voyage number, the amount 
of revenue, the rate of compensation, and the amount produced by the 
calculation; and, in the instance of vessels employed in MSTS service, 
the number of days the vessels were so employed, the rate of 
compensation per day, and the amount produced by the calculation.
    (b) Invoices shall be certified by a duly authorized officer of the 
General Agent as follows:

    I certify that this invoice is correct and just, that it is a 
correct statement of the compensation calculated in accordance with the 
provisions of NSA Order No. 47 due the undersigned General Agent for the 
month of ---------- under Service Agreement No. ------ made as of ------ 
with the National Shipping Authority, and that payment thereof has not 
been received.

________________________________________________________________________
                                                   Name of General Agent
________________________________________________________________________
                                                               Signature
________________________________________________________________________
                                                                   Title



Sec. 4  Method of payment.

    The General Agent shall prepare check drawn on the NSA Special bank 
account for countersignature by an authorized representative of the 
Owner. All such payments to the General Agent shall be considered as 
payments on account and are subject to post-audit by the Owner.



Sec. 5  Accounting.

    The General Agent shall record the amounts of compensation paid from 
the NSA Special bank account in its agency books, in the following 
designated accounts:

    Account 887--Husbanding Compensation.
    Account 888--All Other Compensation.
    This account shall be maintained to show separately compensation 
paid under sections 3(a), 3(b), 3(c), and 3(d) of NSA Order No. 47.

    Note: Invoices and account books referred to in the above order, 
shall be retained until the completion of the audit by the General 
Accounting Office, at which time the Maritime Administration will take 
custody of the records.

[16 FR 2885, Apr. 3, 1951, as amended at 21 FR 8105, Oct. 23, 1956. 
Redesignated at 45 FR 44587, July 1, 1980]



PART 326_MARINE PROTECTION AND INDEMNITY INSURANCE UNDER AGREEMENTS
WITH AGENTS--Table of Contents



Sec.
326.1 Purpose.
326.2 Insurer.
326.3 Insured.
326.4 Reports of accidents and occurrences.
326.5 Report of claims.
326.6 Settlement of claims.
326.7 Litigation.

    Authority: 50 U.S.C. App. 1744; 46 U.S.C. 121a; 1114(b); 49 CFR 
1.66.

    Source: 53 FR 37572, Sept. 27, 1988, unless otherwise noted.

[[Page 223]]



Sec.  326.1  Purpose.

    This part states that the Maritime Administration (MARAD) shall be 
responsible for providing or obtaining marine protection and indemnity 
(P&I) insurance for any vessel that has been placed in the National 
Defense Reserve Fleet (NDRF), which includes the Ready Reserve Force 
component, which vessel is assigned under a General Agency Agreement. 
These various forms of Agreements are entered into by the United States, 
acting by and through the National Shipping Authority, MARAD, and a 
private company (Agent). An agreement also contains procedures for the 
Agent to report accidents and occurrences of a P&I nature to MARAD and 
to report and settle P&I claims.



Sec.  326.2  Insurer.

    MARAD shall be responsible for providing or obtaining P&I insurance 
for all vessels assigned to Agents under an Agreement. At its election, 
MARAD may be a self-insurer of any one or more vessels covered by the 
Agreement, or may obtain P&I insurance coverage under one or more 
policies written by underwriters of marine insurance. MARAD shall 
determine the amount of coverage to be provided or obtained.



Sec.  326.3  Insured.

    The insureds are: The United States of America, acting by and 
through the Director, National Shipping Authority, Maritime 
Administration, Department of Transportation, and its Agents (including 
Agents' employees). Sub-agents shall be insureds only as expressly 
provided in the Agreement. Independent contractors of the Agents are not 
insureds.



Sec.  326.4  Reports of accidents and occurrences.

    The Agent shall report every accident or occurrence of a P&I nature 
promptly to both the Director, Office of Trade Analysis and Insurance, 
Maritime Administration, 500 Seventh Street, SW., Room 8121, Washington, 
DC 20590, Tel. (202) 366-1461, and the contracting officer named in the 
Agreement. If MARAD has obtained P&I insurance through a marine 
insurance underwriter, the Agent also shall concurrently file a report 
of such accident or occurrence with the underwriter. MARAD shall 
disclose full details as the identity of such underwriter to the Agent.



Sec.  326.5  Report of claims.

    The Agent also shall submit a quarterly report of all claims of a 
P&I insurance nature to the Director, Office of Trade Analysis and 
Insurance. The report shall contain all relevant information, e.g., the 
names of the vessels and of the claimant, the date of the injury or 
occurrence, the amount claimed, the basis for any payments already 
disbursed in behalf of the United States, estimated future costs and an 
evaluation of the claim of the merits.



Sec.  326.6  Settlement of claims.

    (a) After ascertaining from MARAD the availability of funds, the 
Agent is authorized to settle individual claims of a P&I insurance 
nature that do not exceed $5,000. For a settlement in excess of $5,000, 
the Agent shall obtain MARAD's prior approval through the Director, 
Office of Trade Analysis and Insurance. If MARAD has placed the P&I 
insurance with an insurance underwriter, the Agent also shall obtain the 
prior approval of the underwriter to settle claims.
    (b) The amount of individual claims that do not exceed the Agent's 
limit for settlement shall be chargeable by the Agent to the vessel 
expense and shall be accounted for in accordance with current accounting 
instructions of MARAD.
    (c) When settling any such claim, the Agent shall advise the 
claimant that such settlement shall be accounted for in accordance with 
current accounting instructions, and shall also advise the claimant that 
such settlement is not to be construed as an admission of liability by 
or on behalf of the United States, the Agent or any other person.
    (d) The Agent shall apply sound judgment and follow standard 
practices of vessel operators in the settlement or other disposition of 
such P&I insurance claims, and shall settle such claims only when the 
settlement is adequately

[[Page 224]]

supported by all the facts and circumstances and is in the best interest 
of the United States.



Sec.  326.7  Litigation.

    (a) If a court suit of a P&I nature is filed which arises out of the 
activities of the Agent under its Agreement, wherein the Agent is named 
as the party defendant or one of the parties' defendant irrespective of 
whether the risk is covered by P&I insurance, the Agent shall 
immediately forward copies of the pleading and all other related legal 
documents, by first class mail, to the Chief Counsel, Maritime 
Administration, Department of Transportation, Washington, DC 20590, and 
to the Attorney General, Attn: Civil Division, Torts Branch, Department 
of Justice, Washington, DC 20530. No agent or authorized subagent shall 
incur any legal expenses in connection with any claim of a P&I nature, 
unless approved in advance by MARAD, and by the underwriter, where 
applicable. However, the Agent may incur legal expenses if the mission 
of the vessel will be frustrated or impeded and/or time will not permit 
such prior approval.
    (b) In the event of any attachment or seizure of a vessel, whether 
or not the risk is of a P&I nature, the Agent shall immediately notify 
the Chief Counsel, Maritime Administration, Washington, DC 20590, Tel. 
(202) 366-05711, by telegram, radio, or cable.



PART 327_SEAMEN'S CLAIMS; ADMINISTRATIVE ACTION AND LITIGATION--
Table of Contents



  Subpart A_Clarification Act Claims: Seamen's Claims; Administrative 
                          Action and Litigation

Sec.
327.1 Purpose.
327.2 Statutory provisions.
327.3 Required claims submission.
327.4 Claim requirements.
327.5 Filing claims.
327.6 Notice of allowance or disallowance.
327.7 Administrative disallowance presumption.
327.8 Court action.

  Subpart B_Admiralty Extension Act Claims; Administrative Action and 
                               Litigation

327.20 Admiralty Jurisdiction Extension Claims: Required claims.
327.21 Definitions.
327.22 Who may present claims.
327.23 Insurance and other subrogated claims.
327.24 Actions by claimant.
327.25 Contents of a claim.
327.26 Evidence supporting a claim.
327.27 Proof of amount claimed for personal injury.
327. 28 Proof of amount claimed for loss of, or damage to, property.
327.29 Effect of other payments to claimant.
327.30 Statute of limitations for AEA and claim requirements.
327.31 Statute of limitations not tolled by administrative consideration 
          of claims.
327.32 Notice of claim acceptance or denial.
327.33 Claim denial presumption.
327.34 Court action.

                    Subpart C_Other Admiralty Claims

327.40 Other Admiralty claims.
327.41 Definitions.
327.42 Who may present claims.
327.43 Insurance and other subrogated claims.
327.44 Actions by claimant.
327.45 Contents of a claim.
327.46 Evidence supporting a claim.
327.47 Proof of amount claimed for personal injury.
327. 48 Proof of amount claimed for loss of, or damage to, property.
327.49 Effect of other payments to claimant.
327.50 Statute of limitations for other admiralty claims and claim 
          requirements.
327.51 Statute of limitations not tolled by administrative consideration 
          of claims.
327.52 Notice of claim acceptance or denial.

    Authority: 46 U.S.C. Chapters 301-309.

    Source: 77 FR 65633, Oct. 30, 2012, unless otherwise noted.



  Subpart A_Clarification Act Claims: Seamen's Claims; Administrative 
                         Action and Litigation.



Sec.  327.1  Purpose.

    This part prescribes rules and regulations pertaining to the filing 
of claims designated inSec. 327.3 and the administrative allowance, or 
disallowance (actual and presumed), of such claims, in whole or in part, 
filed by officers and

[[Page 225]]

members of crews (hereafter referred to as ``seamen'') employed on 
vessels as employees of the United States through the National Shipping 
Authority (NSA), Maritime Administration (MarAd), or successor.



Sec.  327.2  Statutory provisions.

    These regulations are enacted to implement the administrative claims 
procedures set forth in 50 U.S.C. App. 1291(a).



Sec.  327.3  Required claims submission.

    All claims specified in 50 U.S.C. App. 1291(a) shall be submitted 
for administrative consideration, as provided in Sec.Sec. 327.4 and 
327.5, prior to institution of court action thereon.



Sec.  327.4  Claim requirements.

    (a) Form. The claim may be in any form and shall be
    (1) In writing,
    (2) Designated as a claim,
    (3) Disclose that the object sought is the administrative allowance 
of the claim,
    (4) Comply with the requirements of this part, and
    (5) Filed as provided inSec. 327.5.
    (6) The claim must be signed or attested to by the claimant. The 
statements made in the claim should be made to the best of the knowledge 
of the claimant and are subject to the provision of 18 U.S.C. 287 and 
1001 and all other penalty provisions for making false, fictitious, or 
fraudulent claims, statements or entries, or falsifying, concealing, or 
covering up a material fact in any matter within the jurisdiction of any 
department or agency of the United States. Any lawsuits filed contrary 
to the provisions of section 5 of the Suits in Admiralty Act, as amended 
by Public Law 877, 81st Congress (64 Stat. 1112; 46 U.S.C. 30901 et 
seq.), shall not be in compliance with the requirements of this part.
    (b) Contents. Each claim shall include the following information:
    (1) With respect to the seaman:
    (i) Name;
    (ii) Mailing address;
    (iii) Date of birth;
    (iv) Legal residence address;
    (v) Place of birth; and
    (vi) Merchant mariner license or document number and social security 
number.
    (2) With respect to the basis for the claim:
    (i) Name of vessel on which the seaman was serving when the incident 
occurred that is the basis for the claim;
    (ii) Place where the incident occurred;
    (iii) Time of incident--year, month and day, and the precise time of 
day, to the minute, where possible;
    (iv) Narrative of the facts and circumstances surrounding the 
incident, including a statement explaining why the United States is 
liable for this claim;
    (v) Pictures, video recordings and other physical evidence related 
to the case and
    (vi) The names, addresses, and telephone numbers, if available, of 
others who can supply factual information about the incident and its 
consequences.
    (3) A sum certain dollar amount of claim, which includes a total for 
all amounts sought. The claim shall explain the amounts sought for:
    (i) Past loss of earnings or earning capacity;
    (ii) Future loss of earnings or earning capacity;
    (iii) Medical expenses paid out of pocket;
    (iv) Pain and suffering; and
    (v) Any other loss arising out of the incident (describe).
    (4) All medical and clinical records of physicians and hospitals 
related to a seaman's claim for injury, illness, or death shall be 
attached. If the claimant does not have a copy of each record, the 
claimant shall identify every physician and hospital having records 
relating to the seaman and shall provide written authorization for MarAd 
to obtain all such records. The claim shall also include the number of 
days the seaman worked as a merchant mariner and the earnings received 
for the current calendar year, as well as for the two preceding calendar 
years.
    (5) If the claim does not involve a seaman's death, the following 
information shall be submitted with the claim:

[[Page 226]]

    (i) Date the seaman signed a reemployment register as a merchant 
mariner;
    (ii) Copy of the medical fit-for-duty certificate issued to the 
seaman;
    (iii) Date and details of next employment as a seaman; and
    (iv) Date and details of next employment as other than a seaman.
    (6) If the claim is for other than personal injury, illness or 
death, the claim shall provide all supporting information concerning the 
nature and dollar amount of the loss.



Sec.  327.5  Filing claims.

    (a) Claims may be filed by or on behalf of seamen or their surviving 
dependents or beneficiaries, or by their legal representatives. Claims 
shall be filed either by personal delivery or by registered mail.
    (b) The claimant shall send the claim directly to the Chief, 
Division of Marine Insurance, Maritime Administration, Department of 
Transportation, 1200 New Jersey Ave. SE., Washington, DC 20590. A copy 
of each claim shall be filed with the Ship Manager or General Agent of 
the vessel with respect to which such claim arose.



Sec.  327.6  Notice of allowance or disallowance.

    MarAd shall give prompt notice in writing of the allowance or 
disallowance of each claim, in whole or in part, by mail to the last 
known address of, or by personal delivery to, the claimant or the 
claimant's legal representative. In the case of administrative 
disallowance, in whole or in part, such notice shall contain a brief 
statement of the reason for such disallowance.



Sec.  327.7  Administrative disallowance presumption.

    If MarAd fails to give written notice of allowance or disallowance 
of a claim in accordance withSec. 327.6 within sixty (60) calendar 
days following the date of the receipt of such claim by the proper 
person designated inSec. 327.5, such claim shall be presumed to have 
been ``administratively disallowed,'' within the meaning in section 1(a) 
of 50 U.S.C. App. 1291(a).



Sec.  327.8  Court action.

    (a) No seamen, having a claim specified in subsections (2) and (3) 
of section 1(a) of 50 U.S.C. App. 1291(a), their surviving dependents 
and beneficiaries, or their legal representatives shall institute a 
court action for the enforcement of such claim unless such claim shall 
have been prepared and filed in accordance with Sec.Sec. 327.4 and 
327.5 and shall have been administratively disallowed in accordance with 
Sec.  327.6 or 327.7.
    (b) This part prescribes rules and regulations pertaining to the 
filing of claims designated inSec. 327.3 and the administrative 
allowance, or disallowance (actual and presumed), of such claims, in 
whole or in part, filed by officers and members of crews (hereafter 
referred to as ``seamen'') employed on vessels through the National 
Shipping Authority (NSA), Maritime Administration (MarAd), or successor 
organization.



  Subpart B_Admiralty Extension Act Claims; Administrative Action and 
                               Litigation



Sec.  327.20  Admiralty Jurisdiction Extension Claims: Required claims.

    (a) Pursuant to 46 U.S.C. 30101(c) of the Admiralty Extension Act 
(AEA), administrative claims involving the extension of admiralty 
jurisdiction to cases of damage or injury on land caused by a Maritime 
Administration vessel on navigable waters must be presented in writing 
to the Maritime Administration in accordance with Sec.Sec. 327.20 
through 327.34 prior to institution of a court action thereon.
    (b) A civil action against the United States for injury or damage 
done or consummated on land by a vessel on navigable waters may not be 
brought until the earlier occurrence of either the denial of the claim 
by the Maritime Administration or the presumptive denial of the claim 
which arises 6 months after the claim has been presented in writing to 
the Maritime Administration. 46 U.S.C. 30101(c)(2). Note that the 6 
month period of review will not begin until a valid claim is filed 
pursuant toSec. 327.25.
    (c) Proceedings against the United States pursuant to the 
requirements of

[[Page 227]]

the AEA and these regulations is the exclusive remedy available against 
the United States of America, acting by and through the Maritime 
Administration, with respect to such injuries and damages.



Sec.  327.21  Definitions.

    The following definitions apply to this subpart:
    (a) Accrual date. The day on which the alleged wrongful act or 
omission results in injury or damage for which a claim is made.
    (b) Claim. A written notification of an incident, signed by the 
claimant, describing the incident and explaining why the United States 
is liable. The claim shall be accompanied by a demand for the payment of 
a sum certain of money, with a statement as to how that sum certain was 
calculated and all documents supporting the amount claimed. Where 
damages for medical injuries are made, the doctor's statement relating 
the injuries to the accident should be attached as well as medical 
release forms for each treating physician, hospital, and medical care 
provider.



Sec.  327.22  Who may present claims.

    (a) General rules. (1) A claim for property loss or damage may be 
presented by anyone having an interest in the property, including an 
insurer or other subrogee.
    (2) A claim for personal injury may be presented by the person 
injured.
    (3) A claim based on death may be presented by the executor or 
administrator of the decedent's estate, or any other person legally 
entitled to assert such a claim under local law. The claimant's status 
must be stated in the claim.
    (4) A claim for medical, hospital, or burial expenses may be 
presented by any person who by reason of family relationship has, in 
fact, incurred the expenses.
    (b) A joint claim must be presented in the names of and signed by, 
the joint claimants, and the settlement will be made payable to the 
joint claimants.
    (c) A claim may be presented by a duly authorized agent, legal 
representative or survivor, if it is presented in the name of the 
claimant. If the claim is not signed by the claimant, the agent, legal 
representative, or survivor shall indicate their title or legal capacity 
and provide evidence of their authority to present the claim.
    (d) Where the same claimant has a claim for damage to or loss of 
property and a claim for personal injury or a claim based on death 
arising out of the same incident, they must be combined in one claim.



Sec.  327.23  Insurance and other subrogated claims.

    (a) The claims of an insured (subrogor) and an insurer (subrogee) 
for damages arising out of the same incident constitute a single claim.
    (b) An insured (subrogor) and an insurer (subrogee) may file a claim 
jointly or separately. If the insurer has fully reimbursed the insured, 
payment will only be made to the insurer. If separate claims are filed, 
the settlement will be made payable to each claimant to the extent of 
that claimant's undisputed interest. If joint claims are filed, the 
settlement will be sent to the insurer.
    (c) Each claimant shall include with a claim, a written disclosure 
concerning insurance coverage including:
    (1) The names and addresses of all insurers;
    (2) The kind and amount of insurance;
    (3) The policy number;
    (4) Whether a claim has been or will be presented to an insurer, 
and, if so, the amount of that claim; and whether the insurer has paid 
the claim in whole or in part, or has indicated payment will be made.
    (d) Each subrogee shall substantiate an interest or right to file a 
claim by appropriate documentary evidence and shall support the claim as 
to liability and measure of damages in the same manner as required of 
any other claimant. Documentary evidence of payment to a subrogor does 
not constitute evidence of liability of the United States or conclusive 
evidence of the amount of damages. The Maritime Administration makes an 
independent determination on the issues of fact and law based upon the 
evidence of record.

[[Page 228]]



Sec.  327.24  Actions by claimant.

    (a) Form of claim. The claim must meet the requirements of this 
section.
    (b) Presentation. The claim must be presented in writing to the 
Office of Chief Counsel, Attn. Chief Counsel, Maritime Administration, 
Department of Transportation, 1200 New Jersey Ave. SE., Washington, DC 
20590-0001.



Sec.  327.25  Contents of a claim.

    (a) A valid claim will contain the following:
    (1) Identification of the Maritime Administration as the agency 
whose act or omission gave rise to the claim;
    (2) The full name and mailing address of the claimant. If this 
mailing address is not claimant's residence, the claimant shall also 
include residence address;
    (3) The date, time, and place of the incident giving rise to the 
claim;
    (4) The amount claimed, in a sum certain, supported by independent 
evidence of property damage or loss, personal injury, or death, as 
applicable together with supporting medical records and a HIPPA 
compliant medical waiver for each treating physician or hospital;
    (5) A detailed description of the incident giving rise to the claim 
and the factual basis upon which it is claimed the Maritime 
Administration is liable for the claim;
    (6) A description of any property damage or loss, including the 
identity of the owner, if other than the claimant, as applicable;
    (7) The nature and extent of the injury, as applicable;
    (8) The full name, title, if any, and address of any witness to the 
incident and a brief statement of the witness' knowledge of the 
incident;
    (9) A description of any insurance carried by the claimant or owner 
of the property and the status of any insurance claim arising from the 
incident; and
    (10) An agreement by the claimant to accept the total amount claimed 
in full satisfaction and final settlement of the claim, lien or 
subrogation claim on the claimed amount, or any assignment of the claim.
    (b) A claimant or duly authorized agent or legal representative must 
sign in ink a claim and any amendment to that claim. The claim shall 
include a statement that the information provided is true and correct to 
the best of the claimant's knowledge, information, and belief. If the 
person's signature does not include the first name, middle initial, if 
any, and surname, that information must be included in the claim. A 
married woman must sign her claim in her given name, e.g., ``Mary A. 
Doe,'' rather than ``Mrs. John Doe.''



Sec.  327.26  Evidence supporting a claim.

    (a) The claimant shall present any evidence in the claimant's 
possession that supports the claim. This evidence shall include, if 
available, statements of witnesses, accident or casualty reports, 
photographs and drawings.
    (b) Notwithstanding anything in the regulations in this subpart, the 
claimant shall provide such additional reasonable documents and evidence 
as requested by the Maritime Administration with respect to the claim. 
Failure to respond to reasonable requests for additional information and 
documentation can result in a determination that a valid claim has not 
been submitted.



Sec.  327.27  Proof of amount claimed for personal injury.

    The following evidence must be presented when appropriate in claims:
    (a) Itemized medical, hospital, and burial bills.
    (b) A written report by the attending physician including:
    (1) The nature and extent of the injury and the treatment;
    (2) The necessity and reasonableness of the various medical expenses 
incurred;
    (3) Duration of time injuries prevented or limited employment;
    (4) Past, present, and future limitations on employment;
    (5) Duration and extent of pain and suffering and of any disability 
or physical disfigurement;
    (6) A current prognosis;
    (7) Any anticipated medical expenses;
    (8) Any past medical history of the claimant relevant to the 
particular injury alleged; and
    (9) If required by the Maritime Administration, an examination by an 
independent medical facility or physician to provide independent medical

[[Page 229]]

evidence against which to evaluate the written report of the claimant's 
physician. The Maritime Administration determines the need for this 
examination, makes mutually convenient arrangements for such an 
examination, and bears the costs thereof.
    (c) All hospital records or other medical documents from either this 
injury or any relevant past injury.
    (d) If the claimant is employed, a written statement by the 
claimant's employer certifying the claimant's:
    (1) Age;
    (2) Occupation;
    (3) Hours of employment;
    (4) Hourly rate of pay or weekly salary;
    (5) Time lost from work as a result of the incident; and
    (6) Claimant's actual period of employment, full-time or part-time, 
and any effect of the injury upon such employment to support claims for 
lost earnings.
    (e) If the claimant is self-employed, written statements, or other 
evidence showing:
    (1) The amount of earnings actually lost; and
    (2) The Federal tax return if filed for the three previous years.
    (f) If the claim arises out of injuries to a person providing 
services to the claimant, statement of the cost necessarily incurred to 
replace the services to which claimant is entitled under law.



Sec.  327.28  Proof of amount claimed for loss of, or damage to, property.

    The following evidence must be presented when appropriate:
    (a) For each particular lost item, evidence of its value such as a 
bill of sale and a written appraisal, or two written appraisals, from 
separate disinterested dealers or brokers, market quotations, commercial 
catalogs, or other evidence of the price at which like property can be 
obtained in the community. The Maritime Administration may waive these 
requirements when circumstances warrant. The reasonable cost of any 
appraisal may be included as an element of damage if not deductible from 
any bill submitted to claimant.
    (b) For each particular damaged item which can be economically 
repaired, evidence of cost of repairs such as a receipted bill and one 
estimate, or two estimates, from separate disinterested repairmen. The 
Maritime Administration may waive these requirements when circumstances 
warrant. The reasonable cost of any estimate may be included as an 
element of damage if not deductible from any repair bill submitted to 
claimant.
    (c) For any claim for property damage which may result in payment in 
excess of $20,000.00, a survey or appraisal shall be performed as soon 
as practicable after the damage accrues, and, unless waived in writing, 
shall be performed jointly with a government representative.
    (d) If the item is so severely damaged that it cannot be 
economically repaired or used, it shall be treated as a lost item.
    (e) If a claim includes loss of earnings or use during repairs to 
the damaged property, the following must also be furnished and supported 
by competent evidence:
    (1) The date the property was damaged;
    (2) The name and location of the repair facility;
    (3) The beginning and ending dates of repairs and an explanation of 
any delay between the date of damage and the beginning date;
    (4) A complete description of all repairs performed, segregating any 
work performed for the owner's account and not attributable to the 
incident involved, and the costs thereof;
    (5) The date and place the property was returned to service after 
completion of repairs, and an explanation, if applicable, of any delay;
    (6) Whether or not a substitute for the damaged property was 
available. If a substitute was used by the claimant during the time of 
repair, an explanation of the necessity of using the substitute, how it 
was used, and for how long, and the costs involved. Any costs incurred 
that would have been similarly incurred by the claimant in using the 
damaged property must be identified;
    (7) Whether or not during the course of undergoing repairs the 
property

[[Page 230]]

would have been used, and an explanation submitted showing the identity 
of the person who offered that use, the terms of the offer, time of 
prospective service, and rate of compensation; and
    (8) If at the time of damage the property was under charter or hire, 
or was otherwise employed, or would have been employed, the claimant 
shall submit a statement of operating expenses that were, or would have 
been, incurred. This statement shall include wages and all bonuses which 
would have been paid, the value of fuel and the value of consumable 
stores, separately stated, which would have been consumed, and all other 
costs of operation which would have been incurred including, but not 
limited to, license and parking fees, personnel expenses, harbor fees, 
wharfage, dockage, shedding, stevedoring, towage, pilotage, inspection, 
tolls, lockage, anchorage and moorage, grain elevation, storage, and 
customs fees.
    (f) For each item which is lost, actual or constructive, proof of 
ownership.



Sec.  327.29  Effect of other payments to claimant.

    The total amount to which the claimant may be entitled is normally 
computed as follows:
    (a) The total amount of the loss, damage, or personal injury 
suffered for which the United States is liable, less any payment the 
claimant has received from the following sources:
    (1) The military member or civilian employee who caused the 
incident;
    (2) The military member's or civilian employee's insurer; and
    (3) Any joint tort-feasor or insurer.
    (b) No deduction is generally made for any payment the claimant has 
received by way of voluntary contributions, such as donations of 
charitable organizations.



Sec.  327.30  Statute of limitations for AEA and claim requirements.

    A civil suit must be filed within two years of the Accrual Date. No 
civil suit may be brought until the earlier occurrence of either the 
denial of a claim or the presumptive denial of the claim after 6 months 
from the date the claim was properly presented in writing to the 
Maritime Administration.



Sec.  327.31  Statute of limitations not tolled by administrative 
consideration of claims.

    The statute of limitations for filing a civil action under 46 U.S.C. 
30101(b) is not tolled by MarAd's administrative consideration of a 
claim.



Sec.  327.32  Notice of claim acceptance or denial.

    The Maritime Administration shall give prompt notice in writing of 
the acceptance or denial of each claim in whole or in part, by mail to 
the last known address of, or by personal delivery to, the claimant or 
the claimant's legal representative. In the case of denial, such notice 
shall contain a brief statement of the reason for such a denial.



Sec.  327.33  Claim denial presumption.

    If the Maritime Administration fails to give written notice of 
acceptance or denial of a claim in accordance withSec. 327.30 within 6 
months following the date of receipt of such a claim by the proper 
person designated inSec. 327.24(b), such claim shall be presumed to 
have been denied by the Maritime Administration.



Sec.  327.34  Court action.

    No person, surviving dependent or beneficiary, or legal 
representative, having a claim specified under 46 U.S.C. 30101(a) 
against the Maritime Administration, shall institute a court action 
against the Maritime Administration unless an administrative claim has 
previously been properly presented and filed in accordance withSec. 
327.22,Sec. 327.23, andSec. 327.24, and such administrative claim 
has been subsequently denied in accordance withSec. 327.32 orSec. 
327.33.



                    Subpart C_Other Admiralty Claims



Sec.  327.40  Other Admiralty claims.

    (a) Admiralty claims caused by United States owned and operated 
vessels on navigable waters or otherwise that are not covered under the 
Clarification Act (50 U.S.C. app. 1291(a)), the Admiralty Extension Act 
(46 U.S.C. 30101) or the Contracts Disputes Act (41

[[Page 231]]

U.S.C. 601 et. seq.) may be filed with the Maritime Administration in 
accordance with Sec.Sec. 327.40 through 327.52.
    (b) A civil action against the United States for admiralty claims 
caused by United States owned and operated vessels on navigable waters 
or otherwise that are not covered under the Clarification Act (50 U.S.C. 
App. 1291(a)), the Admiralty Extension Act (46 U.S.C. 30101) or the 
Contracts Disputes Act (41 U.S.C. 601 et. seq.) may be brought without 
the filing of an administrative claim. This Part III sets forth the 
optional procedure for filing such claims with the Maritime 
Administration in advance of litigation. Once litigation is filed, the 
authority to handle such claims is vested with the Justice Department, 
not the agency.
    (c) Proceeding against the United States pursuant to the 
requirements this Part III is not a requirement for filing suit against 
the United States of America, acting by and through the Maritime 
Administration, with respect to such admiralty claims.



Sec.  327.41  Definitions.

    The following definitions apply to this subpart:
    (a) Accrual date. The day on which the alleged wrongful act or 
omission results in injury or damage for which a claim is made.
    (b) Claim. A written notification of an incident, signed by the 
claimant, describing the incident and explaining why the United States 
is liable. The claim shall be accompanied by a demand for the payment of 
a sum certain of money, with a statement as to how that sum certain was 
calculated and all documents supporting the amount claimed. Where 
damages for medical injuries are made, the doctor's statement relating 
the injuries to the accident should be attached as well as medical 
release forms for each treating physician, hospital, and medical care 
provider.



Sec.  327.42  Who may present claims.

    (a) General rules. (1) A claim for property loss or damage may be 
presented by anyone having an interest in the property, including an 
insurer or other subrogee.
    (2) A claim for personal injury may be presented by the person 
injured.
    (3) A claim based on death may be presented by the executor or 
administrator of the decedent's estate, or any other person legally 
entitled to assert such a claim under local law. The claimant's status 
must be stated in the claim.
    (4) A claim for medical, hospital, or burial expenses may be 
presented by any person who by reason of family relationship has, in 
fact, incurred the expenses.
    (5) A joint claim must be presented in the names of and signed by, 
the joint claimants, and the settlement must be made payable to the 
joint claimants.
    (b) A claim may be presented by a duly authorized agent, legal 
representative or survivor, if it is presented in the name of the 
claimant. If the claim is not signed by the claimant, the agent, legal 
representative, or survivor shall indicate their title or legal capacity 
and provide evidence of their authority to present the claim.
    (c) Where the same claimant has a claim for damage to or loss of 
property and a claim for personal injury or a claim based on death 
arising out of the same incident, they must be combined in one claim.



Sec.  327.43  Insurance and other subrogated claims.

    (a) The claims of an insured (subrogor) and an insurer (subrogee) 
for damages arising out of the same incident constitute a single claim.
    (b) An insured (subrogor) and an insurer (subrogee) may file a claim 
jointly or separately. If the insurer has fully reimbursed the insured, 
payment will only be made to the insurer. If separate claims are filed, 
the settlement will be made payable to each claimant to the extent of 
that claimant's undisputed interest. If joint claims are filed, the 
settlement will be sent to the insurer.
    (c) Each claimant shall include with a claim, a written disclosure 
concerning insurance coverage including:
    (1) The names and addresses of all insurers;
    (2) The kind and amount of insurance;
    (3) The policy number; and

[[Page 232]]

    (4) Whether a claim has been or will be presented to an insurer, 
and, if so, the amount of that claim; and whether the insurer has paid 
the claim in whole or in part, or has indicated payment will be made.
    (d) Each subrogee shall substantiate an interest or right to file a 
claim by appropriate documentary evidence and shall support the claim as 
to liability and measure of damages in the same manner as required of 
any other claimant. Documentary evidence of payment to a subrogor does 
not constitute evidence of liability of the United States or conclusive 
evidence of the amount of damages. The Maritime Administration makes an 
independent determination on the issues of fact and law based upon the 
evidence of record.



Sec.  327.44  Actions by claimant.

    (a) Form of claim. The claim should meet the requirements ofSec. 
327.44.
    (b) Presentation. The claim must be presented in writing to the 
Office of Chief Counsel, Attn: Chief Counsel, Maritime Administration, 
Department of Transportation, 1200 New Jersey Ave. SE., Washington, DC 
20590-0001.



Sec.  327.45  Contents of a claim.

    (a) A properly filed claim shall include the following, however, any 
of the following requirements may be waived by the Maritime 
Administration:
    (1) Identification of the Maritime Administration as the agency 
whose act or omission gave rise to the claim;
    (2) The full name and mailing address of the claimant. If this 
mailing address is not claimant's residence, the claimant shall also 
include residence address;
    (3) The date, time, and place of the incident giving rise to the 
claim;
    (4) The amount claimed, in a sum certain, supported by independent 
evidence of property damage or loss, personal injury, or death, as 
applicable together with supporting medical records and a HIPPA 
compliant medical waiver for each treating physician, hospital, or 
medical provider;
    (5) A detailed description of the incident giving rise to the claim 
and the factual basis upon which it is claimed the United States is 
liable for the claim;
    (6) A description of any property damage or loss, including the 
identity of the owner, if other than the claimant, as applicable;
    (7) The nature and extent of the injury, as applicable;
    (8) The full name, title, if any, and address of any witness to the 
incident and a brief statement of the witness' knowledge of the 
incident;
    (9) A description of any insurance carried by the claimant or owner 
of the property and the status of any insurance claim arising from the 
incident; and
    (10) An agreement by the claimant to accept the total amount claimed 
in full satisfaction and final settlement of the claim, lien, or 
subrogation claim on the claimed amount, or any assignment of the claim.
    (b) A claimant or duly authorized agent or legal representative must 
sign in ink a claim and any amendment to that claim. The claim shall 
include a statement that the information provided is true and correct to 
the best of the claimant's knowledge, information, and belief. If the 
person's signature does not include the first name, middle initial, if 
any, and surname, that information must be included in the claim. A 
married woman must sign her claim in her given name, e.g., ``Mary A. 
Doe,'' rather than ``Mrs. John Doe.''



Sec.  327.46  Evidence supporting a claim.

    (a) The claimant should present any evidence in the claimant's 
possession that supports the claim. This evidence shall include, if 
available, statements of witnesses, accident or casualty reports, 
photographs and drawings.
    (b) Notwithstanding anything in the regulations in this subpart, the 
claimant shall provide such additional documents and evidence as 
requested by the Maritime Administration with respect to the claim. 
Failure to respond to reasonable requests for additional information and 
documentation can result in a determination that a proper claim has not 
been submitted.

[[Page 233]]



Sec.  327.47  Proof of amount claimed for personal injury.

    The following evidence must be presented when appropriate in claims:
    (a) Itemized medical, hospital, and burial bills.
    (b) A written report by the attending physician including:
    (1) The nature and extent of the injury and the treatment;
    (2) The necessity and reasonableness of the various medical expenses 
incurred;
    (3) Duration of time injuries prevented or limited employment;
    (4) Past, present, and future limitations on employment;
    (5) Duration and extent of pain and suffering and of any disability 
or physical disfigurement;
    (6) A current prognosis;
    (7) Any anticipated medical expenses;
    (8) Any past medical history of the claimant relevant to the 
particular injury alleged; and
    (9) At the request of the Maritime Administration, an examination by 
an independent medical facility or physician may be required to provide 
independent medical evidence against which to evaluate the written 
report of the claimant's physician. The Maritime Administration 
determines the need for this examination, makes mutually convenient 
arrangements for such an examination, and bears the costs thereof.
    (c) All hospital records or other medical documents from either this 
injury or any relevant past injury.
    (d) If the claimant is employed, a written statement by the 
claimant's employer certifying the claimant's:
    (1) Age;
    (2) Occupation;
    (3) Hours of employment;
    (4) Hourly rate of pay or weekly salary;
    (5) Time lost from work as a result of the incident; and
    (6) Claimant's actual period of employment, full-time or part-time, 
and any effect of the injury upon such employment to support claims for 
lost earnings.
    (e) If the claimant is self-employed, written statements, or other 
evidence showing:
    (1) The amount of earnings actually lost, and
    (2) The Federal tax return, if filed, for the three previous years.
    (f) If the claim arises out of injuries to a person providing 
services to the claimant, statement of the cost necessarily incurred to 
replace the services to which claimant is entitled under law.



Sec.  327.48  Proof of amount claimed for loss of, or damage to,
property.

    The following evidence should be presented when appropriate:
    (a) For each particular lost item, evidence of its value such as a 
bill of sale and a written appraisal, or two written appraisals, from 
separate disinterested dealers or brokers, market quotations, commercial 
catalogs, or other evidence of the price at which like property can be 
obtained in the community. The Maritime Administration may waive these 
requirements when circumstances warrant. The reasonable cost of any 
appraisal may be included as an element of damage if not deductible from 
any bill submitted to claimant.
    (b) For each particular damaged item which can be economically 
repaired, evidence of cost of repairs such as a receipted bill and one 
estimate, or two estimates, from separate disinterested repairmen. The 
Maritime Administration may waive these requirements when circumstances 
warrant. The reasonable cost of any estimate may be included as an 
element of damage if not deductible from any repair bill submitted to 
claimant.
    (c) For any claim which may result in payment in excess of 
$20,000.00, a survey or appraisal shall be performed as soon as 
practicable after the damage accrues, and, unless waived in writing, 
shall be performed jointly with a government representative.
    (d) If the item is so severely damaged that it cannot be 
economically repaired or used, it shall be treated as a lost item.
    (e) If a claim includes loss of earnings or use during repairs to 
the damaged property, the following must also be furnished and supported 
by competent evidence:

[[Page 234]]

    (1) The date the property was damaged;
    (2) The name and location of the repair facility;
    (3) The beginning and ending dates of repairs and an explanation of 
any delay between the date of damage and the beginning date;
    (4) A complete description of all repairs performed, segregating any 
work performed for the owner's account and not attributable to the 
incident involved, and the costs thereof;
    (5) The date and place the property was returned to service after 
completion of repairs, and an explanation, if applicable, of any delay;
    (6) Whether or not a substitute for the damaged property was 
available. If a substitute was used by the claimant during the time of 
repair, an explanation of the necessity of using the substitute, how it 
was used, and for how long, and the costs involved. Any costs incurred 
that would have been similarly incurred by the claimant in using the 
damaged property must be identified;
    (7) Whether or not during the course of undergoing repairs the 
property would have been used, and an explanation submitted showing the 
identity of the person who offered that use, the terms of the offer, 
time of prospective service, and rate of compensation; and
    (8) If at the time of damage the property was under charter or hire, 
or was otherwise employed, or would have been employed, the claimant 
shall submit a statement of operating expenses that were, or would have 
been, incurred. This statement shall include wages and all bonuses which 
would have been paid, the value of fuel and the value of consumable 
stores, separately stated, which would have been consumed, and all other 
costs of operation which would have been incurred including, but not 
limited to, license and parking fees, personnel expenses, harbor fees, 
wharfage, dockage, shedding, stevedoring, towage, pilotage, inspection, 
tolls, lockage, anchorage and moorage, grain elevation, storage, and 
customs fees.
    (f) For each item which is lost, actual or constructive, proof of 
ownership.



Sec.  327.49  Effect of other payments to claimant.

    The total amount to which the claimant may be entitled is normally 
computed as follows:
    (a) The total amount of the loss, damage, or personal injury 
suffered for which the United States is liable, less any payment the 
claimant has received from the following sources:
    (1) The military member or civilian employee who caused the 
incident;
    (2) The military member's or civilian employee's insurer; and
    (3) Any joint tort-feasor or insurer.
    (b) No deduction is generally made for any payment the claimant has 
received by way of voluntary contributions, such as donations of 
charitable organizations.



Sec.  327.50  Statute of limitations for other admiralty claims and 
claim requirements.

    A civil suit must be filed within the statute of limitations of the 
specific admiralty claim. The start date for such statute of limitations 
determinations shall be the Accrual Date.



Sec.  327.51  Statute of limitations not tolled by administrative 
consideration of claims.

    The statute of limitations for filing a civil action under 46 U.S.C. 
30101(b) is not tolled by the Maritime Administration's administrative 
consideration of a claim.



Sec.  327.52  Notice of claim acceptance or denial.

    The Maritime Administration shall give prompt notice in writing of 
the acceptance or denial of each claim in whole or in part, by mail to 
the last known address of, or by personal delivery to, the claimant or 
the claimant's legal representative. In the case of denial, such notice 
shall contain a brief statement of the reason for such a denial.



PART 328_SLOP CHESTS--Table of Contents



Sec.
1. What this order does.
2. General Agent's requirements.
3. Master's requirements.
4. General provisions.


[[Page 235]]


    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114. 
Interpret or apply sec. 11, 23 Stat. 56; 46 U.S.C. 670.



Section 1  What this order does.

    In accordance with the provisions of section 11 f the act of 
Congress approved June 26, 1884, 23 Stat. 56; 46 U.S.C. 670, this order 
requires all vessels operated by the National Shipping Authority under 
General Agency Agreement 3-19-51, Amendment 8-65, to be provided with a 
slop chest subject to all limitations contained in said act.

[OPR-1, 16 FR 4137, May 5, 1951, as amended at 33 FR 5952, Apr. 18, 
1968. Redesignated at 45 FR 44587, July 1, 1980]



Sec. 2  General Agent's requirements.

    The General Agent shall:
    (a) Obtain from the Master, a requisition for slop chest items 
required for the intended voyage. Purchase for the account of the NSA, 
from recognized bona fide slop chest suppliers, at prices not in excess 
of the fair and reasonable level prevailing at the respective domestic 
ports, only such items and quantities reflecting past experience of 
actual requirements.
    (b) Arrange for delivery on board to the custody of the Master all 
slop chest items purchased, together with a copy of the vendor's invoice 
showing items, units, unit cost and totals.
    (c) Furnish the Master with a Slop Chest Statement showing on hand 
at the beginning of each voyage the items, units, unit cost, totals and 
selling price per unit of each item. The selling price shall approximate 
but not exceed 110 percent of the reasonable wholesale value of the same 
at the port at which the voyage commenced. The Slop Chest Statement 
shall also provide spaces for:
    (1) Quantities and total value sold.
    (2) Quantities and total cost value on hand, end of voyage.
    (3) Quantities of each item required for next voyage.
    (d) Submit to the Coast Director in the district in which the 
General Agent is located, upon termination of each voyage a copy of the 
Slop Chest Statement obtained from the Master as provided for in section 
3(b) of this order and a copy of all invoices for slop chest purchases 
showing items by brand or trade name, unit cost and total.
    (e) Account to the cognizant Coast Director for the purchase, 
delivery to the Master, receipts from sales, condemnations, transfers 
and all other transactions in connection with slop chests.

[OPR-1, 16 FR 4137, May 5, 1951, as amended by Amdt. 1, 33 FR 6475, Apr. 
27, 1968. Redesignated at 45 FR 44587, July 1, 1980]



Sec. 3  Master's requirements.

    The Master shall:
    (a) Receive and receipt for the quantities of slop chest items 
delivered on board.
    (b) Upon the termination of each voyage complete the Slop Chest 
Statement referred to in section 2(c) of this order, as to quantities 
and total value sold, quantities and total cost value on hand at end of 
voyage and quantities of each item required for the next voyage.
    (c) Sell, from time to time as specified by him, any of the contents 
of the slop chest to any or every seaman applying therefor, at the unit 
price, specified by the Slop Chest Statement furnished the Master by the 
General Agent as provided in section 2(c) of this order.
    (d) Account to the General Agent for all slop chest items received 
on board, for all receipts and for all other slop chest transactions 
engaged in during the voyage.
    (e) Cause entry to be made in the ship's log authenticated by the 
person designated by the Master to be in charge of the slop chest, 
together with signatures of two other witnesses, for all losses 
sustained due to fire, water or other damage which renders articles 
unsaleable. Such log entries shall itemize the quantities damaged and 
the cost thereof.
    (f) Submit a detailed written report to the General Agent covering 
losses incurred due to damage, theft or pilferage of slop chest items. 
The report shall be submitted at the termination of the voyage during 
which the damage, theft or pilferage occurred.
    (g) Retain on board, all damaged slop chest items, for survey, 
removal and

[[Page 236]]

disposition by the General Agent at a domestic port.

[OPR-1, 16 FR 4137, May 5, 1951. Redesignated at 45 FR 44587, July 1, 
1980]



Sec. 4  General provisions.

    (a) All slop chest items, damaged or otherwise, shall be removed or 
transferred only in compliance with applicable regulations dealing with 
Property Removals.
    (b) In the transfer of a vessel from one General Agent to another 
General Agent the physical transfer of the complete slop chest shall 
also be accomplished between the respective General Agents. The General 
Agents participating in such transfer shall complete and have their 
respective representatives sign, a joint inventory containing the unit 
cost price and extensions of all slop chest items, a copy of which shall 
be submitted to the Division of Operations, NSA, Washington, DC 20590, 
together with a copy of the Slop Chest Statement for the voyage 
terminated prior to transfer of the vessel. An additional copy of the 
Slop Chest Statement shall be submitted to the Comptroller's Office, 
Division of Accounts, Maritime Administration, Washington, DC 20590.
    (c) In pricing the contents of the slop chest, the General Agent 
shall comply with all applicable regulations of the Office of Price 
Stabilization, Economic Stabilization Agency.
    (d) It shall be the responsibility of each General Agent and Master 
to exercise reasonable care and diligence in the compliance with the 
Owner's obligations hereunder and in the protection and disposition of 
slop chest items.
    (e) Neither the General Agent nor the Master shall place insurance 
on the contents of the slop chest purchased for the account of the NSA.

All slop chests purchased on or after the effective date of this 
regulation shall conform to the instructions contained in this order.

    Note: Records and logs referred to in the above order, shall be 
retained until the completion of the audit by the General Accounting 
Office, at which time the Maritime Administration will take custody of 
the records.

[OPR-1, 16 FR 4137, May 5, 1951, as amended at 21 FR 8105, Oct. 23, 
1956; 33 FR 5952, Apr. 18, 1968. Redesignated at 45 FR 44587, July 1, 
1980]



PART 329_VOYAGE DATA--Table of Contents



Sec.
1. What this order does.
2. Voyage numbers.
3. Voyage commencements.
4. Voyage terminations.
5. Idle status period.
6. General provisions.
7. Operation under current GAA/MSTS Southeast Asia Program.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114.

    Source: OPR-2, 16 FR 5950, June 22, 1951, unless otherwise noted. 
Redesignated at 45 FR 44587, July 1, 1980.



Section 1  What this order does.

    The General Agents, as appointed by the National Shipping Authority, 
promulgated under GAA, 3/19/51, shall be instructed in the manner of 
recording voyage activities of dry cargo vessels operated for the 
account of the National Shipping Authority.



Sec. 2  Voyage numbers.

    (a) The voyages of National Shipping Authority vessels shall be 
numbered consecutively commencing with voyage No. 1 having the prefixed 
designation NSA and followed by the General Agents' abbreviated 
designation and voyage number, as NSA-1/ABC-1.
    (b) The continuity of NSA voyage numbers shall not change with berth 
agency operations or in the transfer of vessels to other General Agents.
    (c) The General Agents' designated abbreviation and voyage numbers 
shall terminate upon transfer of the vessel and the succeeding General 
Agent shall affix his abbreviated designation and initial voyage 
numbers, as NSA-13/XYZ-1.



Sec. 3  Voyage commencements.

    (a) All voyages shall commence at 0001 hours of the date on which 
any of the following activities occur first:
    (1) Vessel goes on loading berth, or
    (2) Vessel sails outward on a new voyage, or

[[Page 237]]

    (3) Following termination of the previous voyage as prescribed in 
section 4(a) of this order.
    (4) Following termination of an idle status period as prescribed in 
section 5 (a) and (b) of this order.



Sec. 4  Voyage terminations.

    (a) All voyages shall terminate at a continental United States port 
at 2400 hours of the date on which any of the following activities were 
completed, whichever occurs last:
    (1) Final discharge of cargo or ballast.
    (2) Paying off of crew from sea articles.
    (3) Completion of voyage repairs.
    (b) [Reserved]



Sec. 5  Idle status period.

    (a) The General Agent shall place a vessel in idle status during the 
period of reactivation or deactivation or upon redelivery from Military 
Sea Transportation Service notwithstanding the fifteen (15) days minimum 
period as provided for in paragraph (b) of this section.
    (b) The General Agent shall place a vessel in idle status, although 
the voyage may have commenced, whenever and as soon as it is anticipated 
that the minimum period of inactivity will exceed fifteen (15) days, 
due, but not limited to: (1) Repairs, (2) labor, (3) awaiting 
allocation, (4) awaiting cargo.
    (c) Should the anticipated period of inactivity terminate prior to 
the expiration of the 15 day minimum idle status period, except as 
provided in paragraph (a) of this section, the General Agent shall 
cancel the idle status and antedate the succeeding voyage commencement 
to the termination of the previous voyage as prescribed in section 4(a) 
of this order.
    (d) Should an idle status period be established after a voyage has 
commenced, the voyage shall be suspended for the duration of the idle 
status period and resumed when the idle status period is terminated.
    (e) Idle status periods as defined in this order, shall be 
established only in continental United States ports.
    (f) Idle status periods shall be treated as separate accounting 
periods.

[OPR-2, 16 FR 5950, June 22, 1951, as amended by Amdt. 1, 17 FR 3830, 
Apr. 30, 1952; Amdt. 2, 22 FR 165, Jan. 8, 1957. Redesignated at 45 FR 
44587, July 1, 1980]



Sec. 6  General provisions.

    (a) In cases of overlapping activities and all other questions 
arising in respect to voyage commencements, terminations and idle status 
periods as defined in sections 4 and 5 of this order, the General Agent 
shall immediately inform the nearest Coast Director, or his local 
representative of the circumstances and submit recommendations for 
terminating a voyage. The resulting recommendations, decisions and 
instructions shall be confirmed in writing to the General Agent, with a 
copy of such correspondence being sent to the Division of Operations, 
N.S.A., Washington 25, DC.
    (b) In the event a vessel is employed in intermediate voyage or 
voyages, or in cross trading outside the continental United States, the 
voyage shall continue until terminated at a continental United States 
port.
    (c) There shall be no voyage terminations outside continental United 
States ports except in cases of,
    (1) Total loss or constructive total loss of the vessel.
    (2) Transfer of operations.



Sec. 7  Operation under current GAA/MSTS Southeast Asia Program.

    In order to adapt the provisions of NSA Order 35 (OPR-2) to the 
particular circumstances of the present GAA/MSTS Southeast Asia Program, 
the following material partially modifying certain sections of that 
order is published.

For General Agency operations not related to the current GAA/MSTS 
Southeast Asia Program, NSA Order 35 (OPR-2) remains unchanged and 
wholly applicable. Except where specifically altered by the material 
which follows, it also remains applicable to the present situation.

For voyages made under the current GAA/MSTS program only, the following 
provisions concerning voyage commencements and terminations shall apply 
in lieu of those appearing in

[[Page 238]]

sections 3 and 4 of NSA Order 35 (OPR-2). Continental United States 
ports do not include ports in the states of Alaska or Hawaii.
    (a) The commencement of the initial voyage shall occur in a 
continental U.S. port at 0001 hours of the day the vessel is tendered 
and accepted for use by MSTS. Subsequent voyages shall commence in a 
continental U.S. port at 0001 hours of the day after either of the 
following activities occurs:
    (1) The previous voyage terminates.
    (2) Reduced operational status period terminates and vessel returns 
to full operational status.
    (b) Voyages shall terminate in a continental U.S. port at 2400 hours 
of the day that the following action is completed:
    (1) Paying off of the crew from sea articles.
    (c) Since, in all instances, the voyage termination procedure takes 
precedence over the voyage commencement procedure and since it is 
mandatory that voyages terminate in a continental U.S. port, the 
following exception to the requirement of paragraph (b) of this section 
shall be effective when warranted:
    (1) If the vessel completes payoff as in paragraph (b) of this 
section and takes departure within the same calendar day, the General 
Agent shall immediately inform the nearest Coast Director of Area 
Representative of the circumstances and submit recommendations regarding 
voyage termination. The resulting recommendations, decisions, and 
instructions shall be confirmed in writing to the General Agent, copy to 
Division of Operations, Washington, DC 20590.
    (d) Where a vessel is employed in intermediate voyages or in cross 
trading outside the continental United States, the original voyage shall 
continue until terminated under conditions in paragraph (b) of this 
section.

[OPR-2, Amdt. 3, 33 FR 6710, May 2, 1968. Redesignated at 45 FR 44587, 
July 1, 1980]



PART 330_LAUNCH SERVICES--Table of Contents



Sec.
1. What this order does.
2. Authority for launch hire.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114.

    Source: OPR-3, 16 FR 12791, Dec. 20, 1951, unless otherwise noted. 
Redesignated at 45 FR 44587, July 1, 1980.



Section 1  What this order does.

    This order prescribes the circumstances under which launch hire will 
be accepted by National Shipping Authority as vessel operating expense.



Sec. 2  Authority for launch hire.

    Launch hire in foreign and domestic ports will be accepted by 
National Shipping Authority as vessel operating expense, subject to the 
provisions of Article 5 of GAA 3-19-51 and BAA 9-19-51, only under the 
following circumstances:
    (a) When incurred by the Master of an NSA vessel, or by an agent of 
NSA or by his sub-agent, for the purpose of properly conducting the 
owners' activities and business of NSA vessels;
    (b) When incurred in transporting liberty parties to or from an NSA 
vessel with the approval of the Master or the General Agent as properly 
for account of the vessel owner; and
    (c) When incurred for the transportation of workmen required aboard 
the vessel, if the contract for the work provides that such service 
shall be for account of NSA, and the launch service is authorized by the 
representative of NSA or the agent who ordered the work to be performed 
for account of NSA.



PART 332_REPATRIATION OF SEAMEN--Table of Contents



Sec.
1. What this order does.
2. Definitions.
3. Classification of repatriates.
4. Manner of repatriation.
5. Repatriation charges.
6. General provisions.

    Authority: Sec. 204, 49 Stat. 1937, as amended; 46 U.S.C. 1114.

    Source: OPR-5, 18 FR 1446, Mar. 13, 1953, unless otherwise noted. 
Redesignated at 45 FR 44587, July 1, 1980.



Section 1  What this order does.

    This order prescribes the manner in which seamen separated from 
vessels

[[Page 239]]

operated for the account of the National Shipping Authority shall be 
repatriated and explains how charges in connection with such 
repatriation shall be handled.



Sec. 2  Definitions.

    (a) For the purpose of this order, the term seaman shall include 
every person, irrespective of capacity or rating, whose last service has 
been on a vessel operated for the account of the National Shipping 
Authority, upon which vessel he had signed shipping articles and whether 
or not he had signed off such articles before a consular or other 
authorized official, but shall not include the master of such a vessel.
    (b) The term General Agent shall include any designated 
representative of such General Agent.



Sec. 3  Classification of repatriates.

    Seamen in need of repatriation, whether being repatriated to or from 
the United States, shall be classified as follows:
    (a) Seamen separated from their vessels because of the destruction 
of, abandonment of, or damage to their vessels, or because of 
termination of shipping articles at a port outside the continental 
limits of the United States.
    (b) Seamen separated from their vessels as the result of illness or 
injury received in the service of their vessels or otherwise through no 
fault of their own.
    (c) Seamen separated from their vessels for any cause whatsoever not 
described in paragraph (a) or (b) of this section.



Sec. 4  Manner of repatriation.

    (a) A seaman described in paragraph (a) of section 3 of this order 
shall be repatriated in accordance with the provisions of the shipping 
articles, or the applicable collective bargaining agreement, employment 
contract, or statute. If a seaman in this class is repatriated as a 
passenger, the General Agent of the vessel of which he was last a crew 
member shall arrange for his passage and pay the amount of expense 
involved.
    (b) A seaman described in paragraph (b) of section 3 of this order 
may be repatriated as a passenger where space is available and 
circumstances permit. If applicable collective bargaining agreements, 
employment contracts, or statutes do not conflict, he may return as a 
workaway or, at the discretion of the master of the repatriating vessel, 
he may sign on articles either as a replacement of to complete a 
vessel's complement or, when deemed advisable by the official 
authorizing the repatriation and with the approval of the master of the 
repatriating vessel, he may be signed on the articles as a repatriated 
seaman (non-working). If a seaman in this class is repatriated as a 
passenger, or repatriate seaman (non-working), the General Agent of the 
vessel of which he was last a crew member shall arrange for his passage 
and pay the amount of expense involved.
    (c) A seaman described in paragraph (c) of section 3 of this order 
shall be returned as a workaway or, at the discretion of the master of 
the repatriating vessel, he may sign on as a replacement or to complete 
a vessel's complement. Only in unusual cases, and only with the prior 
approval of the Chief, Division of Operations, shall a seaman in this 
class be repatriated as a passenger or as a repatriate seaman (non-
working). If a seaman in this class is repatriated as a passenger, or as 
a repatriate seaman (non-working), the General Agent of the vessel of 
which he was last a crew member shall arrange for his passage and pay 
the amount of expense involved.
    (d) A master shall be repatriated in accordance with applicable 
collective bargaining agreement, employment contract, statute, or 
established commercial practice.



Sec. 5  Repatriation charges.

    (a) If it is deemed necessary to repatriate a seaman as a passenger 
aboard a privately operated vessel, plane, train, or other conveyance, 
the full amount of the reasonably incurred expense in connection 
therewith shall be billed against the General Agent of the vessel of 
which he was last a crew member.
    (b) If a seaman is repatriated as a passenger, or as a repatriate 
seaman (non-working), aboard a vessel operated for the account of the 
National

[[Page 240]]

Shipping Authority under a General Agency Agreement, a flat 
transportation charge of $5.00 per day shall be made for every day spent 
aboard the repatriating vessel, including day of embarkation and day of 
debarkation, which charge shall be in addition to necessary train or 
other conveyance expense, United States and foreign government taxes, 
port dues, landing fees or other charges of every nature levied in 
connection with such repatriation. In such a case, the General Agent of 
the vessel of which the repatriate was last a crew member shall be 
billed for the amount of expense involved, and appropriate entries 
covering the receipts and disbursements resulting from the repatriation 
shall be made in the proper books of account by the General Agent 
concerned. In the event the General Agent repatriating a seaman is also 
the General Agent of the vessel on which the seaman last served, it will 
not be necessary to issue a formal billing, but it is required that 
appropriate entries be made on the agency books of account to reflect a 
revenue of $5.00 per day in the account of the vessel rendering the 
transportation service and that a charge covering the cost of 
repatriation be recorded against the vessel on which the seaman last 
served. In all cases, the General Agent charged with the repatriation 
expense shall take necessary steps to secure reimbursement of such 
expense from the P & I underwriters insuring the vessel against which 
the expense is charged. No charge is to be made in the case of a seaman 
repatriate who signs on vessel articles as a workaway or in any other 
capacity except as a repatriate seaman (non-working). When repatriation 
is required, it shall be effected by the first available means 
considered appropriate by the official authorizing such repatriation.



Sec. 6  General provisions.

    (a) In case of repatriation of any seaman as a passenger aboard a 
vessel operated for account of the National Shipping Authority, the 
requirements of the applicable collective bargaining agreement or 
employment contract shall be met. In any event, a seaman repatriate 
shall receive at least as good accommodations as would be his due while 
sailing in his capacity.
    (b) Unless otherwise directed, a seaman when repatriated as a 
passenger aboard a vessel operated for the account of the National 
Shipping Authority, shall be issued a ticket in the form prescribed by 
the General Agent of the vessel for its own vessels. Such ticket shall 
be surrendered to the master of the repatriating vessel. When 
repatriated as a repatriate seaman (non-working), the master of the 
repatriating vessel shall be furnished with a certificate from the 
official authorizing the repatriation setting forth that the 
circumstances require that the seaman be signed on as a repatriate 
seaman (non-working). The master shall ascertain the seaman's full name 
and rating, cause of repatriation, and the names of the vessels and the 
General Agent to be charged with the cost of the repatriation.
    (c) It is recognized that the procedure set forth in this order will 
not cover all situations arising out of obligations to repatriate seamen 
nor fix ultimate responsibility for repatriation expenses which may 
sometimes depend upon determinations of fact which cannot be made prior 
to repatriation. In cases of emergency or in situations not covered in 
this order, the General Agent shall proceed in accordance with 
established commercial practice.
    (d) Nothing in this order shall be construed to interfere with the 
proper exercise of authority by United States consular officials 
relative to repatriation of seamen in accordance with applicable 
statutes.



PART 335_AUTHORITY AND RESPONSIBILITY OF GENERAL AGENTS TO UNDERTAKE
EMERGENCY REPAIRS IN FOREIGN PORTS--Table of Contents



Sec.
1. What this order does.
2. General Agents' authority.
3. General Agents' responsibilities.
4. General provisions.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114.

    Source: SRM-2, 16 FR 5321, June 6, 1951, unless otherwise noted. 
Redesignated at 45 FR 44587, July 1, 1980.

[[Page 241]]



Section 1  What this order does.

    This order outlines General Agents' responsibilities and limited 
authority in connection with repairs in foreign ports to vessels 
operated for the account of the National Shipping Authority under 
General Agency Agreement.



Sec. 2  General Agents' authority.

    The General Agents are hereby delegated authority to undertake for 
the account of the National Shipping Authority only such emergency 
repairs outside the Continental United States as may be necessary to 
enable vessels to complete their voyages, provided the repair costs are 
not in excess of $5,000 per vessel.



Sec. 3  General Agents' responsibilities.

    In the event the cost of emergency repairs to a vessel in a foreign 
port is estimated to exceed $5,000, requests for approval shall be 
transmitted by General Agents by cable or wire addressed to Chief, 
Division of Ship Repair and Maintenance, National Shipping Authority, 
Washington, DC 20590, and shall include the following information:
    (a) The cost and time to effect permanent repairs on a straight time 
and overtime basis;
    (b) The cost and time to effect such temporary repairs on a straight 
time and overtime basis as will enable the vessel to return to the 
United States under its own power or under tow;
    (c) Whether required repairs can be effected by the use of 
facilities under the direct control of the Army, Navy, or other agencies 
of the United States Government, and if so, at what cost and time; and
    (d) Where major repairs are involved, a recommendation regarding the 
advisability of repairing the vessel or abandoning it.

[SRM-2, 16 FR 5321, June 6, 1951, as amended at 33 FR 5952, Apr. 18, 
1968. Redesignated at 45 FR 44587, July 1, 1980]



Sec. 4  General provisions.

    The General Agents shall keep the Division of Ship Repair and 
Maintenance in Washington fully posted in detail as to the nature, 
extent, cost, and estimated time for completion of all foreign repairs 
where such repairs are for the account of the National Shipping 
Authority.

As soon as practicable after completion of either temporary or permanent 
repairs, the General Agent shall forward to the Division of Ship Repair 
and Maintenance, Washington, DC the following:
    (a) A copy of the repair specifications;
    (b) An itemized statement of the costs of the repairs supported by 
copies of invoices;
    (c) A copy of the completion certificate showing the repair period, 
signature of a National Shipping Authority representative (if 
available), the Agent's technical representative, the Chief Engineer, 
and the Master of the vessel;
    (d) A report indicating the causes and circumstances leading to the 
repairs.

General Agents shall forthwith instruct their subagents and other 
representatives in foreign areas and their Masters and Chief Engineers 
with respect to their operations, pursuant to this directive.

This directive is intended strictly to limit repairs in foreign waters 
on vessels under National Shipping Authority control to those absolutely 
necessary to enable the vessels to complete their respective voyages at 
a port in the United States.

This directive shall not be construed to affect outstanding directives 
of the Office of the Comptroller.

    Note: Records and supporting documents referred to in the above 
order, shall be retained until the completion of the audit by the 
General Accounting Office, at which time the Maritime Administration 
will take custody of the records.

[16 FR 5321, June 6, 1951, as amended at 21 FR 8105, Oct. 23, 1956. 
Redesignated at 45 FR 44587, July 1, 1980]

[[Page 242]]



PART 336_AUTHORITY AND RESPONSIBILITY OF GENERAL AGENTS TO UNDERTAKE
IN CONTINENTAL UNITED STATES PORTS VOYAGE REPAIRS AND SERVICE EQUIPMENT
OF VESSELS OPERATED FOR THE ACCOUNT OF THE NATIONAL SHIPPING AUTHORITY 
UNDER GENERAL AGENCY AGREEMENT--Table of Contents



Sec.
1. What this order does.
2. General Agents' authority.
3. General provisions.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114.



Section 1  What this order does.

    This order outlines General Agents' limited authority to arrange for 
and award contracts for voyage repairs and servicing equipment of 
vessels operated for the account of the National Shipping Authority 
under General Agency Agreement.

[SRM-3, Rev., 18 FR 5035, Aug. 22, 1953. Redesignated at 45 FR 44587, 
July 1, 1980]



Sec. 2  General Agents' authority.

    The General Agents are:
    (a) Hereby delegated authority to arrange for and award contracts 
for voyage repairs on vessels operated under the General Agency 
Agreement for the account of the National Shipping Authority when the 
aggregate cost of all such repairs in any one Continental United States 
port is not in excess of $25,000.
    (b) Also delegated authority to arrange for and order the 
performance of minor repairs to or servicing of pantry and galley 
equipment, radios, gyro compasses, fathometers, radio direction finders, 
fire extinguisher systems, ships clocks, binoculars, barometers, 
typewriters, adding machines, and any other vessel equipment of a 
similar nature where the aggregate amount does not exceed $2,500 in any 
one continental United States port.

[SRM-3, Rev., 18 FR 5035, Aug. 22, 1953, as amended by Amdt. 2, 31 FR 
16713, Dec. 30, 1966. Redesignated at 45 FR 44587, July 1, 1980]



Sec. 3  General provisions.

    (a) The voyage repairs, as covered by section 2(a), may be awarded 
by the General Agents within the limitation specified under the Master 
Repair Contract if the contractor is a holder thereof or if the 
contractor does not hold a Master Repair Contract under NSA-WORKSMALREP 
if the contract price does not exceed $2,000 and said contract is made 
in accordance with NSA Order 46 (SRM-5, Revised) and NSA Order 51 (SRM-
6, Revised).
    (b) The repairs to or servicing of ships equipment, as covered by 
section 2(b), may be awarded by the General Agents, within the 
limitation specified, by letter or purchase order.
    (c) It is to be understood by all General Agents that the authority 
delegated by this order is not to be construed to cover alterations, 
additions, changes or betterments.
    (d) The prime General Agents shall submit, in duplicate, to the 
Atlantic, Gulf or Pacific Coast Director, Maritime Administration, 
within whose District the Agents home offices are situated a monthly 
listing of all awards made by the General Agents and their Sub-Agents. 
This listing shall reflect individually the contractor, complete 
contract number, vessel, type of award, e.g., negotiated or bid, cost 
and repair period. This listing is to be submitted substantially in the 
following form:

--------------------------------------------------------------------------------------------------------------------------------------------------------
            Contractor                   Contract No.              Vessel                 Award          Amount           Start             Completed
--------------------------------------------------------------------------------------------------------------------------------------------------------
Steamboat Repairs, Inc............  MA-600-USL-1.........  John Doe.............  Bid.................    $8,000  Jan. 1, 1953........      Jan. 9, 1953
Steamboat Repairs, Inc............  MA-600-USL-1A........  John Doe.............  Negotiated..........     1,000  ....................     Jan. 10, 1953
--------------------------------------------------------------------------------------------------------------------------------------------------------


A copy of the monthly listing shall be forwarded by each prime General 
Agent to each Coast Director of the District in which any of the work 
involved was awarded. If no work was awarded by a General Agent under 
his delegated authority, a report to that effect shall be

[[Page 243]]

submitted to the pertinent Coast Director as prescribed in this section. 
The required reports shall be submitted to the Coast Directors within 
five (5) days after the last day of the month being reported upon. This 
reporting requirement has been approved by the Bureau of the Budget in 
accordance with the Federal Reports Act of 1942.

    Note: Records and supporting documents referred to in the above 
order, shall be retained until the completion of the audit by the 
General Accounting Office, at which time the Maritime Administration 
will take custody of the records.

[SRM-3, Rev., 18 FR 5035, Aug. 22, 1953, as amended at 21 FR 8106, Oct. 
23, 1956. Redesignated at 45 FR 44587, July 1, 1980]



PART 337_GENERAL AGENT'S RESPONSIBILITY IN CONNECTION WITH FOREIGN
REPAIR CUSTOM'S ENTRIES--Table of Contents



Sec.
1. What this order does.
2. Submission of repair entries.
3. Application for remission of duties.
4. Evidence required.
5. General Agent's authority to effect payment of duties.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114.

    Source: 16 FR 9658, Sept. 21, 1951, unless otherwise noted. 
Redesignated at 45 FR 44587, July 1, 1980.



Section 1  What this order does.

    This order outlines the procedure to be followed by General Agents 
in filing foreign repair entries and obtaining relief from Custom's 
duties on equipment purchased for or repairs made to ships owned by or 
Bareboat Chartered to the U.S. Maritime Administration and operated 
under General Agency Agreement.



Sec. 2  Submission of repair entries.

    At the first United States port of arrival upon termination of a 
foreign voyage, the ship's Master must file with the District Director 
of Customs as defined in 19 CFR 1.1(d) an affidavit on Custom's Form 
3417 certifying that no equipment was purchased for or repairs made to 
the ship at a foreign port or if this is not the case, an affidavit on 
Custom's Form 3415 describing the equipment purchased and/or repairs 
made. If equipment was purchased and/or repairs were made in a foreign 
port, the Master simultaneously with or shortly after filing of Custom's 
Form 3415, must file a repair entry on Custom's Form 7535 together with 
invoices and required supporting documents.

[16 FR 9658, Sept. 21, 1951, as amended at 33 FR 5952, Apr. 18, 1968. 
Redesignated at 45 FR 44587, July 1, 1980]



Sec. 3  Application for remission of duties.

    An application for relief from the payment of duties imposed is to 
be filed with the District Director of Customs as defined in 19 CFR 
1.1(d) if the following circumstances prevail:
    (a) When an item covered by the entry is not within the class of 
items liable to duty (i.e., that the item does not constitute equipment, 
repair parts or materials within the meaning of section 466 of the 
Tariff Act of 1930);
    (b) When the purchase of the equipment, repair parts or materials or 
the making of the repairs was necessitated by stress of weather and/or 
other casualty encountered during the regular course of the particular 
voyage and was necessary to secure the safety and seaworthiness of the 
vessel; or
    (c) When the equipment, repair parts or materials were manufactured 
or produced in the United States and the labor involved was performed by 
residents of the United States or by members of the regular crew of the 
vessel.

To insure consideration in the liquidation (i.e., the assessment of 
duty) of the entry, the application for relief must be filed within 90 
days from the date of the entry, except in meritorious cases, the 
District Director may grant an extension of 90 more days upon written 
request therefor.

[16 FR 9658, Sept. 21, 1961, as amended at 33 FR 5952, Apr. 18, 1968. 
Redesignated at 45 FR 44587, July 1, 1980]



Sec. 4  Evidence required.

    When relief is claimed on the grounds of stress of weather or other 
casualty, there must be submitted to the Collector the following:
    (a) An affidavit of the Master which shall set out fully the nature 
of the

[[Page 244]]

casualty and/or stress of weather encountered; when and where the 
casualty and/or stress of weather occurred; nature of the damage 
sustained; the port where the repairs were made or the equipment 
purchased and a statement of the Master as to whether the repairs or 
equipment purchased were required to secure the safety or seaworthiness 
of the vessel to enable her to reach a port of destination in the United 
States;
    (b) Itemized invoices covering the cost of repairs made or equipment 
purchased;
    (c) Abstracts of the vessel's log;
    (d) Classification surveyor's report confirming vessel's 
classification when the repairs were made in order to insure 
seaworthiness.

The Master shall certify as true copies or originals, as the case may 
be, one copy of each repair bill, abstract of vessel's log, survey 
report and other documents used in support of the application for 
relief. If a document is written in a foreign language, it should be 
accompanied by a translation certified to be accurate.



Sec. 5  General Agent's authority to effect payment of duties.

    (a) In those cases where the conditions outlined in section 3 of 
SRM-4 do not prevail, the General Agent shall effect payment of duties 
imposed by Customs and shall include the expenditure in the voyage 
accounts of the vessel. In those cases where the conditions as outlined 
in section 3 of SRM-4 do prevail, the General Agent shall exhaust every 
means toward obtaining remission of duty imposed.
    (b) Should the General Agent fail to obtain remission of duties in 
such cases, he shall refer the matter to the appropriate Coast Director 
for his (The Director) determination as to whether further appeal to the 
Bureau of Customs is warranted or that payment of duty should be made by 
the General Agent.

    Note: Records and supporting documents referred to in the above 
order, shall be retained until the completion of the audit by the 
General Accounting Office, at which time the Maritime Administration 
will take custody of the records.

[SRM-4, 16 FR 9658, Sept. 21, 1951, as amended by Amdt. 1, 18 FR 5035, 
Aug. 22, 1953; 21 FR 8106, Oct. 23, 1956. Redesignated at 45 FR 44587, 
July 1, 1980]



PART 338_PROCEDURE FOR ACCOMPLISHMENT OF VESSEL REPAIRS UNDER NATIONAL
SHIPPING AUTHORITY MASTER LUMP SUM REPAIR CONTRACT_NSA-LUMPSUMREP--
Table of Contents



Sec.
1. What this order does.
2. Use of contract for competitive bid and negotiated price awards.
3. Specifications.
4. Procedure for securing competitive bids.
5. Procedure for negotiated price awards.
6. Awarding of work.
7. Job order numbering.
8. Extra work and changes.
9. Payment.
10. Bonds.
11. Guarantee obligations.
12. Disposition of removed equipment and scrap.
13. Insurance.
14. Anti-Kickback and Davis-Bacon Acts.
15. Subcontracts.
16. Liquidated damages.
17. Performance of work resulting from damage sustained while undergoing 
          repairs.
18. Group classification.
19. Ship Repair Summaries.
20. Reports of awards.
21. Delegations of authority.

    Authority: Sec. 204, 49 Stat. 1987, as amended; 46 U.S.C. 1114. 
Interpret or apply R.S. 3709, as amended; 41 U.S.C. 5.

    Source: SRM-5, Revised, 18 FR 5035, Aug. 22, 1953, unless otherwise 
noted. Redesignated at 45 FR 44587, July 1, 1980.



Section 1  What this order does.

    This order cancels NSA Order No. 32 (SRM-1); and outlines the 
procedure to be followed by the several Coast Directors, their field 
Ship Repair and Maintenance Staffs, the General Agents of the Authority, 
and the ship repair contractors in the award and performance of vessel 
repairs under the National Shipping Authority Master Repair Contract, 
NSA-LUMPSUMREP. The Coast Directors, field Ship Repair and Maintenance 
Staffs and the General Agents shall be referred to hereafter in this

[[Page 245]]

order as representatives of the Authority.



Sec. 2  Use of contract for competitive bid and negotiated price awards.

    (a) The NSA-LUMPSUMREP Contract is a Master form of fixed price 
contract and is applicable to ship repair work awarded as a result of 
competitive bidding or negotiation. As a general rule all work awarded 
under the NSA-LUMPSUMREP Contract must be awarded upon the basis of 
competitive bids. Revised Statute section 3709 (41 U.S.C. 5), which 
requires the award of contracts on the basis of competitive bids, 
however, permits award upon a negotiated basis in certain situations, 
that is, ``where immediate delivery or performance is required by the 
public exigency.''
    (b) There are set forth in paragraphs (b)(1) to (3) of this section 
three (3) examples of situations where the negotiation of fixed price 
awards for the accomplishment of work under the NSA-LUMPSUMREP Contract 
will be permitted in lieu of competitive bidding:
    (1) Where the desired results from competitive bidding cannot be 
obtained. For example, where there is doubt as to the reality of 
competition or the fairness or reasonableness of a low bid, all bids 
shall be rejected. If the ship's availability permits a new Invitation 
for Bids for the work in question shall be issued. If the bids received 
as a result of the second invitation are not considered satisfactory the 
bids are to be again rejected and prices of all specification items are 
to be negotiated with and the job awarded to the lowest bidder. If the 
low bidder refuses to accept the award upon the condition referred to 
the offer of award subject to price negotiation may be made to the next 
lowest bidder, etc. Negotiated awards in such cases shall be made in 
accordance with the conditions set forth on the invitation form, e.g., 
time specified, liquidated damages, etc. If a satisfactory price cannot 
be secured by negotiation with the bidders as herein proved an award may 
be made upon a negotiated basis approved in section 5 of this order.
    (2) Where the element of time is paramount. There will be instances 
where expeditious ship turnarounds will necessitate the award of work 
without the delay involved in awarding on the basis of competitive bids. 
In such cases immediate negotiation for a fixed price with one 
contractor will be permissible. However, full consideration must be 
given to the factors involved in order to determine whether, under the 
circumstances, the time requirements make necessary the negotiation of 
price rather than using the competitive bid procedure. Such relevant 
factors are the individual ship's commitments with respect to loading 
berths, sailing dates, and the charter hire, etc., that might accrue in 
the event additional ship lay-time is required because of competitive 
bidding. Definite dollar and time values cannot be established as 
specific guides for determining when to negotiate. The individual ship 
and circumstances involved are the governing elements. The practice of 
consistently favoring one contractor where this type of repair is 
required will not be permitted but instead, to the maximum extent 
possible, all qualified contractors in the particular port shall be 
given the opportunity to perform work for the National Shipping 
Authority.
    (3) Extra items of work found subsequent to the awarding of the work 
covered by the original specifications. Where extra items of work are 
required after the commencement of the awarded work, it is permissible 
to negotiate with the contractor who is performing the awarded work, for 
the accomplishment of such extra work under the provisions of Article 6 
of the NSA-LUMPSUMREP Contract. A discussion of this procedure is set 
out in section 8 of this order. However, where items of extra work are 
found after examinations have been made as called for by the original 
specifications, negotiation with the contractor to perform such items of 
extra work shall be permitted only if the aggregate estimated cost of 
such items of extra work would not amount to a substantial part of the 
entire job. If the items of extra work amount to a substantial part of 
the entire job, they shall be awarded in the same manner and after 
consideration of the same factors as are set forth above for awarding 
original work.

[[Page 246]]



Sec. 3  Specifications.

    (a) It shall be incumbent upon the representatives of the Authority 
on each and every vessel requiring repairs for the account of the 
National Shipping Authority to prepare complete, detailed and fully 
descriptive specifications of the particulars of each repair item, 
identified in each particular case by the appropriate voyage number. 
Decisions of the Coast Directors' Ship Repair and Maintenance Staffs 
with respect to the need for any particular item in repair 
specifications shall be final. The specifications for voyage repairs 
shall itemize the work involved and shall be numbered consecutively and 
shall be arranged in accordance with the group classification set forth 
in section 18 of this order with the segregation by the three 
departments, namely, deck, engine and steward.
    (b) The specifications shall in their final written form be explicit 
in every respect and shall include drydocking, if required, as well as 
all other items of work known to be required or discernible through 
visual inspection and examination regardless of the fact that later 
decision may be made to eliminate or defer some of the items of work. In 
no case shall an item of work, the accomplishment of which is 
problematical, be so identified or segregated in the specifications. 
Resorting to such general phraseology as ``overhaul as necessary,'' 
``open up for examination and repair or renew as necessary,'' ``repair 
or renew,'' etc., shall not be permitted in preparing and writing the 
specifications.
    (c) Where an exact and final determination of the extent of the work 
cannot be ascertained until an examination has been made, the particular 
items involved shall so specify and the specifications with respect to 
said items shall be limited to such examinations as are necessary.
    (d) If it is desired by the representatives of the Authority to 
change any item in the specifications after the specifications have been 
issued to bid such changes shall be reduced to writing and shall be 
distributed to the invited bidders at least by such time prior to the 
time originally specified for the opening of bids as shall reasonably 
permit the bidders to revise their estimates. If determined to be 
necessary or desirable under the circumstances, the representative of 
the Authority may extend the time for opening of bids.
    (e) Any exceptions taken to the specifications by a prospective 
bidder shall be made known to the represent- ative of the Authority 
prior to the time specified for opening the bids. If it is finally 
determined by the representative of the Authority that the exceptions 
are justified, then the procedure set forth in the preceding sub-
paragraph shall be followed. Exceptions accompanying bids not processed 
as herein prescribed, but made known at the time the bids are opened 
will not be acceptable, and will be a cause for rejecting such bids.
    (f) When it is anticipated that the cost of a job will be in excess 
of a Coast Director's delegated authority, one (1) copy of 
specifications, and in case of bids a copy of Invitation for Bids, 
Instructions to Bidders and listing of contractors invited to bid shall 
be forwarded to the Chief, Division of Ship Repair and Maintenance, 
Washington, DC, simultaneously with the specifications being issued to 
the contractors.
    (g) In all cases where materials, parts or equipment are required in 
connection with the performance of any particular repair item the 
representatives of the Authority shall utilize to the fullest possible 
extent spares and replacement parts stocked in Maritime Administration 
warehouses. Prior to arranging for the purchase or furnishing of repair 
parts by repair contractors, it shall be the responsibility of the 
representatives of the Authority awarding work to determine that the 
required parts are not available in the Maritime Administration 
warehouse in the area involved, contingent upon the urgency of the 
particular situation, ship's sailing schedule, etc.



Sec. 4  Procedure for securing competitive bids.

    (a) The geographical area within which bids will be invited involves 
the exercise of sound administrative judgment. All the relevant factors 
should be considered in deciding over what areas competitive bids should 
be invited. Such factors will include the

[[Page 247]]

scope and nature of the work, the location of the vessel, and the time 
and expense involved in shifting and returning the vessel to its loading 
berth consistent with the operating requirements.
    (b) Invitations for Bids shall be sent to all contractors, within 
the area as determined in paragraph (a) of this section, who are 
considered to be financially qualified and to be capable of performing 
all of the work set forth in the specifications either by the 
utilization of their own or subcontractors' facilities. In this regard 
attention is invited to section 15 of this order.
    (c) When inviting Bids the NSA form entitled ``Invitation for Bids, 
Instruction for Bidders, and Specifications for Repairs, Renewals, 
Alterations and Additions to the Vessel ----------'' shall be used.
    (d) Attention is called to the fact that the Invitation for Bids 
form includes a statement of the completion date for the work. In the 
event bids are invited the individual vessel's period of availability 
and the extent of the proposed work shall be considered in fixing a 
completion date that is consistent with the scope of the work involved. 
Consideration must be given to the fact that it will not be possible in 
every case to get lower bids by extending a completion date beyond the 
normal time required to do the work merely because the vessel's 
availability is exceptionally long. At the same time, care is to be 
exercised to insure that the repair period is not shortened, when there 
is no urgent need for the use of the vessel, to such an extent that it 
is impossible for the contractor to accomplish the work under normal 
working conditions. A completion date can only be fixed so as to be 
financially and otherwise to the best interests of the Government after 
due consideration has been given to all of the factors involved.
    (e) The Invitations for Bids shall provide that the contractors 
shall submit, simultaneously with their responses to Invitations for 
Bids, unit prices for each item of specification work in a separate 
sealed envelope. Only the envelope containing the separate item prices 
of the contractor determined to be the low bidder shall be retained by 
the representative of the Authority and shall not be opened until after 
the award is made. All other envelopes containing separate item prices 
shall be returned un- opened to each contractor by the representative of 
the Authority. In the event the low bid is rejected, the itemized prices 
of the low bidder shall be returned to him in the unopened envelope. 
Item prices submitted by contractors will not be subject to public 
perusal.
    (f) Vessel repair work contracted for by representatives of the 
National Shipping Authority is subject to the provisions of the Davis-
Bacon Act, except in those cases where at the time of the issuance of 
the Invitations for Bids the site of the work is not known. Where bids 
are being invited from bidders in more than one port area, the port area 
in which the award will be made will not be known, and the Invitations 
for Bids, accordingly, must state that the work in question is not 
subject to the Davis-Bacon Act.
    (g) The Invitations for Bids shall also include a statement of the 
per day liquidated damages, for the particular type vessel on which the 
work is to be performed.
    (h) The Invitation for Bids shall state where the bids are to be 
opened.
    (i) When Invitations for Bids are issued by a General Agent, the 
General Agent, at the time the invitations are issued shall make 
available to the local Ship Repair and Maintenance office, three (3) 
copies of the specifications, three (3) copies of a list of contractors 
to whom invitations have been sent, and three (3) copies of the 
Invitation for Bids.
    (j) Where the scope and probable cost of the work and the time 
required for effecting such work are secondary as compared to the ship's 
time, and where the preparation of formal specifications and the 
issuance of formal Invitations for Bids are not practicable, the 
representative of the Authority may orally contact as many qualified 
contractors as is feasible, in order to obtain written ``Spot Bids.'' 
Each contractor who indicates its intention to bid shall be fully 
advised as to the specific work involved and given an opportunity to 
inspect the vessel to enable it to prepare a bid. The contractor shall

[[Page 248]]

be verbally advised of a time and place for the submission of the ``Spot 
Bids.'' If such bids are invited by the General Agent, the General Agent 
shall also advise the Coast Director or his duly appointed 
representative of the time and place of opening the ``Spot Bids,'' and 
if practicable, the NSA representative shall attend such opening. If 
submission of such spot bids is not in writing the contractors shall 
immediately confirm their respective Spot Bids by written tenders. The 
representative of the Authority shall, if requested by responsive 
contractors, furnish invitations for bids and supporting specifications 
to the contractors.



Sec. 5  Procedure for negotiated price awards.

    (a) In the award of vessel repair work upon the basis of negotiation 
or request for quotation, other than work covered by a supplemental job 
order, the contractor shall be furnished with the information provided 
for in Article 1(a) of the NSA-LUMPSUMREP Contract.
    (b) The contractor, within the time specified in a request for a 
quotation, may quote a price and shall submit itemized prices and the 
price breakdown provided for in Article 1(c) of the NSA-LUMPSUMREP 
Contract. In the event a mutually satisfactory price cannot be agreed 
to, a price shall be determined by the representative of the Authority 
making the award which shall be set out in the job order or the 
supplemental job order issued to the contractor. Within thirty (30) days 
from the receipt of such job order or supplemental job order the 
contractor may appeal such price to the Director of the Authority as a 
dispute under Article 27 of the NSA-LUMPSUMREP Contract.



Sec. 6  Awarding of work.

    (a) Those portions of all bids reflecting the total aggregate cost 
of the work involved shall be opened publicly. The work shall be awarded 
to the contractor submitting the lowest qualified bid. The term lowest 
shall mean the bid most advantageous to the Government after evaluation 
of all bids by the application of differentials and any other relevant 
factors set forth in the Invitation for Bids. All pertinent costs of 
moving the vessel from the port where said vessel is located at the time 
bids are invited to the port of the responsive bidders' work sites and/
or plants are to be stated on the Invitation for Bids. If the vessel is 
scheduled to return to the same port where located at the time bids were 
invited, all costs of returning the vessel to that port shall also be 
included on the Invitation for Bids and considered in the bid 
evaluation.
    (b) Immediately after an award of a job order or a supplemental job 
order on a negotiated basis a written report shall be submitted by the 
representative of the Authority, making the award, to the appropriate 
Coast Director's office stating the pertinent reasons for awarding the 
job on a negotiated rather than bid basis. A copy of this report must be 
attached to the Ship Repair Summary.
    (c) When an award is made, a job order in the form attached to the 
NSA-LUMPSUMREP Contract shall be issued to the contractor and when 
awards are made in excess of the Coast Directors' Authority one copy 
each of all job orders and supplemental job orders and supporting 
specifications are to be forwarded to the Chief, Division of Ship Repair 
and Maintenance, Washington, DC, simultaneously with the issuance of 
said orders to the contractors.



Sec. 7  Job order numbering.

    (a) The NSA-LUMPSUMREP Contract number shall be inserted in every 
job order and supplemental job order thereto awarded to a Contractor. 
The Chiefs of local Ship Repair and Maintenance offices shall give 
consecutive numbers starting with No. 1 to job orders awarded by them to 
each contractor. The General Agents shall give consecutive numbers 
starting with No. 1 to job orders awarded by each General Agent. Job 
orders and supplemental job orders covering work awarded by a General 
Agent shall bear the initials of the prime General Agent, as a prefix to 
the numeral for example, ``Job Order No. USL-1.'' Thus, the first award 
made by a local Ship Repair and Maintenance office to each respective 
master repair contractor

[[Page 249]]

shall bear ``Job Order No. 1''. The first award made by each General 
Agent to each respective master repair contractor shall also bear ``Job 
Order No. 1'' and in addition the Prime General Agents initials. Sub-
agents shall use the initials of the Prime General Agent in identifying 
the job order number. Any additional means of numbering other than the 
numeral and Prime Agent's initials are not to be used. Supplemental job 
orders shall contain the original job order number suffixed by the 
letter ``A'' on the first supplemental job order, the letter ``B'' on 
the second supplemental job order, and so forth.



Sec. 8  Extra work and changes.

    (a) At any time after the award of an original job order and during 
the time the work thereunder is being performed, additional or extra 
work or changes in the work covered by the job order may be directed by 
the representative of the Authority.
    (b) Such additional or changed work shall be directed by a written 
Change Order as provided in Article 6 of the NSA-LUMPSUMREP Contract.
    (c) A supplemental job order shall be issued to the Contractor 
covering such Change Order(s), which supplemental order shall include 
the agreed amount of contract price increase or decrease and any 
revision in the completion date of the job order work, as modified by 
the Change Order(s).
    (d) In the event a change in the contract price or revision in the 
completion date cannot be agreed upon the representative of the 
Authority shall determine the contract price or revised completion date 
and issue a supplemental job order to the contractor who shall proceed 
with the work covered by the Change Order(s) and the Contractor may 
appeal such contract price or revised completion date as provided in 
Article 27 of the NSA-LUMPSUMREP Contract.



Sec. 9  Payment.

    (a) Repair contractors invoices covering work awarded by the field 
staff of the National Shipping Authority:
    (1) Repair Contractors will submit invoices for repair costs covered 
by job orders under Master Repair Contract or work orders under 
WORKSMALREP Contracts, directly to the local office of the National 
Shipping Authority awarding the work.
    (2) The local office of the National Shipping Authority will:
    (i) Review repair contractors' invoices to determine that the 
charges have been billed in accordance with the prices provided in the 
job order and repair contract.
    (ii) Attach to each repair contractor's invoice, a copy of the 
WORKSMALREP work order or job order and supplemental job order(s), if 
any; a signed completion certificate; and, in the case of competitive 
bids, abstract of bids listing the contractors who submitted bids, the 
bid prices and completion time specified by each contractor, the name of 
the contractor to whom the work was awarded, and an explanation of the 
basis for the award when the contract is not awarded to the lowest 
bidder.
    (iii) Review each repair contractor's invoice and attachments to 
ascertain completeness of supports and whether repair items included 
therein have been placed under the appropriate repair group numbers as 
set out in section 18 and make corrections as necessary.
    (iv) Forward the invoices and supports to the District Ship Repair 
and Maintenance office for final review.
    (3) The District office shall make a final review and if in order 
forward the contractor's invoices and other supports relating to (i) 
voyage and idle status repairs to the principal office of the General 
Agent, and (ii) reactivation repairs and all others which do not involve 
General Agency operated ships to the appropriate District Finance 
Officer.
    (4) The General Agent, upon receiving repair contractors' invoices 
and attachments thereto from the District Ship Repair and Maintenance 
office will:
    (i) Review each invoice and attachments to assure that the payment 
authorized by the District office appears to be proper on the basis of 
the attachments.

[[Page 250]]

    (ii) Upon determination that all necessary supporting documents are 
attached, make payment directly to the contractor.
    (5) The District Finance Officer, upon receiving repair contractors' 
invoices pursuant to paragraph (a)(3)(ii) of this section will process 
them in accordance with prescribed procedures.
    (b) Repair contractors invoices covering work awarded by General 
Agents:
    (1) Repair contractors will submit invoices for repair costs covered 
by job orders under Master Repair Contracts or work orders and 
WORKSMALREP contracts directly to the principal office of the General 
Agent or author- ized Sub-Agent contracting for the ship repair work.
    (2) The General Agent or authorized Sub-Agent, upon receipt of an 
invoice from a contractor, will follow the procedure outlined in 
paragraph (a) (2)(i thru iii) and (4)(ii) of this section.

[SRM-5, Rev., 18 FR 5035, Aug. 22, 1953, as amended at 33 FR 5952, Apr. 
18, 1968. Redesignated at 45 FR 44587, July 1, 1980]



Sec. 10  Bonds.

    (a) All bids in response to an Invitation for Bids and all 
quotations in response to a request for a quotation in excess of $2,000, 
shall be accompanied by a guaranty or a bid bond in a sum equal to 
twenty-five (25) percent of such bid or quotation to insure the 
acceptance of the job order covering the awarded work and the furnishing 
of the performance and payment bonds required by Article 14 of the NSA-
LUMPSUMREP Contract. The stand- ard Government form of bid bond 
(Standard Form 24 Revised November 1950) shall be used.
    (b) In compliance with the perform- ance bond and payment bond 
requirements of Article 14 of the NSA-LUMPSUMREP Contract, the standard 
form of individual performance bond (Standard Form 25 Revised November 
1950) and the standard form of individual payment bond (Standard Form 
25A Revised November 1950) respectively, shall be used. Such bonds (in 
the respective penal sums of 50 percent of the respective job order 
contract prices but if the job order contract price is in excess of 
$1,000,000 in the penal sum of 40 percent of such job order contract 
price) shall guarantee the Contractor's performance and payment 
obligations in connection with the work covered by an original job order 
awarded on either competitive bid or negotiated basis, as that work may 
be modified by supplemental job orders to such original job orders.
    (c) The individual bid, performance and payment bonds shall be 
submitted by the contractors to the awarding offices (General Agents or 
local offices of NSA) to verify the correctness of the penalty amount, 
contract and job order numbers, etc. The individual bonds shall then be 
forwarded by the awarding office to the office of the appropriate Coast 
Director for final action and approval pursuant to existing regulations.
    (d) For the convenience of contractors, in lieu of submitting 
individual bid, performance and payment bonds they may file with the 
Authority approved annual or blanket bid, performance and payment bonds 
covering the Contractor's bond obligations under job orders (as such job 
orders may be modified by supplemental job orders) awarded under said 
contracts in such annual period. Annual bonds shall be submitted by the 
Contractors or their surety representative to the appropriate Coast 
Director's office for clearance pursuant to existing regulations. In 
this regard all annual bonds must be of the open penalty type.
    (e) No repair voucher (progress or final) where bond coverage is 
required shall be passed for payment until such time as the required 
bid, performance and payment bonds have been given final clearance.



Sec. 11  Guarantee obligations.

    (a) Under the provisions of Article 10 of the NSA-LUMPSUMREP 
Contract the Contractor's guarantee liability extends to defects and 
deficiencies in the Contractor's work developing within sixty (60) days 
from the date of the acceptance of all the work and the accepted 
redelivery of the vessel to the Authority.
    (b) Notice of such defects and deficiencies must be given to the 
Contractor not later than ninety (90) days after the acceptance of the 
work.

[[Page 251]]

    (c) As soon as practicable, after the acceptance of work performed 
under a job order, and the supplemental job orders thereto, the office 
awarding the job order shall furnish to the General Agent two copies of 
the specifications, job order and supplemental job orders, together with 
a statement of the date of the expiration of the Contractor's guarantee 
responsibility with respect to some work.
    (d) The General Agent shall during the period of the Contractor's 
guarantee responsibility screen all deficiencies and defects and repair 
items and list separately against the respective specifications, all 
items which represent defects or deficiencies in the Contractor's work.
    (e) In order that the Contractor may be notified of such defects and 
deficiencies prior to the expiration of the 90-day notice period, the 
General Agent, particularly with respect to vessels in foreign ports or 
vessels which may be at sea, shall instruct the Master of the respective 
vessel to forward the information with respect to defects and 
deficiencies in the Contractor's work to the General Agent's home office 
by the most expeditious manner of communication.
    (f) In connection with all deficiencies and defects, referred to in 
paragraph (d) of this section, the General Agent shall immediately 
notify the Contractor and the local Ship Repair and Maintenance Office 
Head in the vessel's port of call with copies of such notification to 
the Chief, Division of Ship Repair and Maintenance in Washington, DC, in 
all cases and to the Chairman, Trial and Guarantee Survey Boards, if the 
total contract price is equal to or in excess of $100,000. If 
practicable, the local Ship Repair and Maintenance Office Head shall 
arrange to view the defective or deficient work in question and, if 
possible, shall secure the correction of such defects or deficiencies by 
the Contractor in question.
    (g) The General Agent, and the representative of the local Ship 
Repair and Maintenance staff, who acted under the provisions of 
paragraph (e) of this section promptly shall file with the Chief, 
Division of Ship Repair and Maintenance in Washington, DC, and also with 
the Chairman, Trial and Guarantee Survey Boards, if the total contract 
price equals or exceeds $100,000, separate or concurring reports setting 
out the defects and deficiencies, describing the actual conditions 
found, causes of failure, and the disposition of each defect or 
deficiency item.



Sec. 12  Disposition of removed equipment and scrap.

    (a) Article 8 of the NSA-LUMPSUMREP Contract provides that any ship 
equipment, fuel, lube oil, supplies, stores, furniture, fixtures, 
salvage and other movable property removed from the vessel is the 
property of the United States and shall be disposed of in such manner as 
the Authority may direct within sixty (60) days from the date of the 
completion of the work. The representative of the Authority, by 
appropriate item in the specifications, shall cause the Contractor to 
segregate all equipment, salvageable material and scrap, removed from a 
vessel in the performance of repairs, in such a manner as to be readily 
identifiable, and shall submit a list thereof to the local Property and 
Supply office which is responsible for arranging for retention, 
disposal, etc., of said equipment, material, and scrap. A copy of the 
listing is to be attached as a support to the Ship Repair Summary (MA-
159).
    (b) After the 60-day period, if no direction for disposal is given 
the Contractor, the Contractor shall store and protect, in the shipyard 
or outside of the shipyard at its election, such property of the United 
States, for the additional period directed by said local Property and 
Supply office who shall furnish a copy of such written direction to the 
representative of the Authority. The increased contract price for the 
cost of the storage for such additional period shall be covered by 
purchase order prepared by the local Property and Supply office.
    (c) All scrap removed from the vessel shall be the property of the 
United States and shall be handled as provided in paragraph (b) of this 
section: Provided, however, That any scrap or salvage may, upon the 
written approval of the local Property and Supply office,

[[Page 252]]

be purchased or disposed of by the Contractor at the prevailing market 
price, or at not less than the fair value thereof in the absence of an 
established market therefor. The net sales price of the scrap or salvage 
disposed of by the Contractor shall be promptly paid to the office of 
the District Finance Officer, or at the option of the office of the 
District Finance Officer, shall be credited against the moneys due or to 
become due the Contractors.

[SRM-5, Rev., 18 FR 5035, Aug. 22, 1953, as amended at 33 FR 5952, Apr. 
18, 1968. Redesignated at 45 FR 44587, July 1, 1980]



Sec. 13  Insurance.

    Article 9 of the NSA-LUMPSUMREP Contract sets forth the Contractor's 
liabilities and obligations with respect to awarded work. Said Article 9 
requires that the Contractor shall maintain insurance to cover such 
liabilities and obligations. Evidence of such insurance shall be 
submitted to the Chief, Division of Insurance, Washington, DC, by the 
contractors for approval.



Sec. 14  Anti-Kickback and Davis-Bacon Acts.

    (a) All work awarded under the NSA-LUMPSUMREP Contract is subject to 
the provisions of the Anti-Kickback Act, and is also subject to the 
provisions of the Davis-Bacon Act (except in those cases where the 
Invitations for Bids or job order state that the work covered thereby is 
not subject to the Davis-Bacon Act). Article 24 of the NSA-LUMPSUMREP 
Contract requires the compliance of Contractor and its subcontractors 
with the applicable provisions of said acts. In this respect the 
Contractor agrees in the NSA-LUMPSUMREP Contract to comply with the 
regulations of the Secretary of Labor made pursuant to the Anti-Kickback 
Act.
    (b) The Contractor shall, as provided in Article 24(a) of the NSA-
LUMPSUMREP Contract, post at the site of the work the wage determination 
decision of the Secretary of Labor as provided in said Article 24(a).
    (c) It shall be the responsibility of the representative of the 
Authority awarding the work to determine that the Contractor has made 
the postings required by Article 24(a) of the NSA-LUMPSUMREP Contract.
    (d) In lieu of submitting weekly certified copies of all payrolls to 
the Authority, as provided in Article 24(d) of the Master LUMPSUMREP 
Contract the Contractor shall maintain his weekly payrolls for a period 
of three years and submit weekly an affidavit that the payrolls of the 
Contractor for the preceding week are correct and complete, that the 
wage rates contained therein are not less than those determined by the 
Secretary of Labor and that the classifications set forth for each labor 
mechanic conforms with the work he performed. The Contractor shall also 
submit, and shall be responsible for the submission by its 
subcontractors of the Anti-Kickback Act affidavits as provided in 
Article 24(f) of the Master LUMPSUMREP Contract. The Contractor shall 
submit one copy of each of the weekly payroll and Anti-Kickback Act 
affidavits to the Records Administration Section, Maritime 
Administration, Washington 25, DC.
    (e) The representative of the Authority shall require Contractors, 
pursuant to the provisions of Article 24(d) of the NSA-LUMPSUMREP 
Contract, to classify or reclassify any class of laborers or mechanics 
employed on National Shipping Authority contract work and not listed in 
the Secretary of Labor's decision (schedule of wages). A report of such 
cases shall be forwarded to the District Ship Repair and Maintenance 
office for transmittal to the Office of Maritime Labor Policy.
    (f) The representatives of the Authority shall be responsible for 
establishing procedures insuring that Contractors are complying with the 
Davis-Bacon Act and in cases of non-compliance withhold payment of 
contractors' invoices.
    (g) The following certification shall be inserted by all contractors 
on all invoices rendered covering work awarded under the Master Repair 
Contract subject to the Anti-Kickback and Davis-Bacon Acts.

I hereby certify that in performing the work for which the invoice was 
rendered that all applicable terms and conditions of the Anti-Kickback 
and Davis-Bacon Acts as provided

[[Page 253]]

in the Master Repair Contract and regulations of the Department of Labor 
have been complied with.



Sec. 15  Subcontracts.

    Under Article 29 of the NSA-LUMPSUMREP Contract, the Contractor is 
authorized to subcontract portions of the work. However, the Contractor 
must obtain prior approval from the representative of the Authority, 
awarding the work, for each subcontract in an amount exceeding 10 
percent of the contract price for the work covered by a job order or 
supplemental job order.



Sec. 16  Liquidated damages.

    (a) The liquidated damages payable for each calendar day of delay 
shall be placed on each job order and supplemental job order whether 
awarded on a competitive bid or negotiated basis.
    (b) The completion certificates are to contain the date on which 
work is actually completed, whereas the job order and supplemental job 
orders are to contain a completion date based on a fair and reasonable 
estimate of time to be allowed the contractor to perform the work. Thus, 
the difference between the completion date specified on the job order or 
supplemental job orders and on the completion certificates will be the 
period for which liquidated damages are assessed. If an extension of an 
original completion date is considered justifiable, the completion 
certificates are to bear in detail in the space provided for 
``exceptions'' the reasons why the completion dates were extended beyond 
that specified in the original job orders. The face of the Ship Repair 
Summaries (MA-159) shall reflect the amounts of liquidated damages. The 
penalty amount shall be deducted from the invoice prior to payment for 
the work involved.

[18 FR 5035, Aug. 22, 1953; 18 FR 5294, Sept. 2, 1953. Redesignated at 
45 FR 44587, July 1, 1980]



Sec. 17  Performance of work resulting from damage sustained while
undergoing repairs.

    (a) When damage is sustained by a vessel during performance of 
repairs under the NSA Master Contract, negotiations for accomplishment 
of work necessary to correct such damage are to be made with the repair 
contractor involved, if practicable, and a job order issued to the 
contractor for the repair of damage. Such job orders are to be assigned 
a new number and are not to be supplemental to the original award. The 
following ``without prejudice'' clause is to be made a part of and place 
on each job order issued for the performance of work discussed in this 
section.

It is understood and agreed that the work covered by this job order is 
awarded and accepted without prejudice to, or waiver of, any rights of 
the United States or the Contractor.

    (b) If it is determined that the contractor is at fault and the 
contractor refuses to accept the responsibility, the procedure outlined 
in Article 27 of the master repair contract shall be followed. It is to 
be understood that the payment of this type of account is to be withheld 
pending establishment that the contractor involved is relieved of all 
responsibility for the damage.
    (c) In the event other than the original contractor effects the 
damage repairs immediate arrangements are to be made by and through the 
General Agent to collect from the contractor considered responsible for 
the damages.
    (d) A damage survey is to be conducted in all such cases and a 
report thereon submitted to the Chief, Division of Ship Repair and 
Maintenance, Washington, DC.



Sec. 18  Group classification.

    In the preparation of specifications, Job Orders, Supplemental Job 
Orders and WORKSMALREP Contracts costs by Group Numbers as set forth and 
described below are to be inserted thereon:

------------------------------------------------------------------------
 Number                           Classification
------------------------------------------------------------------------
     41  Maintenance Repairs (deck, engine and stewards department
          repairs resulting from wear and tear).
     42  Original installation of, repairs to, and removal of national
          defense features.
     44  Conversions (conversion of vessels to troop carriers, hospital
          ships, and for other special purposes).
     51  Alterations, Additions and Betterments (additional equipment,
          such as, spar decks, heavy lift equipment, change of cargo or
          passenger space, increasing speed of vessel, and structural
          changes).

[[Page 254]]

 
     52  Strengthening of Newly Constructed Vessels (strengthening of
          vessels according to program).
     54  Damage Repairs (claimed as a result of enemy action, heavy
          weather, stranding, collision, fire, stevedore damage, ice
          damage, and other damages).
          Note: All items chargeable to each separate casualty to be
          properly identified and segregated both with respect to
          casualty and cost.
     63  Builders' and Vendors' Guaranty Work (repairs and replacements
          chargeable to builders and vendors of equipment--separate cost
          to be furnished for each item).
     64  Repair Contractors' Guarantee Items (repairs to correct
          deficiencies due to faulty workmanship and/or materials
          incident to prior repairs performed under provisions of Master
          Repair Contract where responsible contractor did not effect
          the necessary corrections).
     65  Other Costs (temporary lights, garbage disposal, tugs to shift
          vessel while in contractors' yard, and other miscellaneous
          work requiring distribution of costs over more than one
          group).
     66  Miscellaneous Expenses Applicable to Voyage Operating Expense
          (removal of cargo debris, fresh water when not required for
          testing purposes, cleaning cargo and other tanks where no
          repairs or alterations are involved, and other similar
          expenses).
     67  Preparation of Vessels for Lay-up (stripping, draining and
          preservation. No repairs to be included in this grouping).
------------------------------------------------------------------------



Sec. 19  Ship Repair Summaries.

    (a) Ship Repair Summaries shall be prepared on Form MA-159 by the 
General Agents and local offices of the Authority covering all work 
performed under their respective jurisdiction and submitted to the 
District Ship Repair and Maintenance office involved. The summaries must 
be properly identified and contain the correct cost breakdown as set 
forth in this order. If the summary covers work other than repairs 
related to a voyage, the summary must so state, e.g., reactivation, lay-
up, idle status, etc. The District Ship Repair and Maintenance office 
shall review the summaries and supports to ascertain that they have been 
properly prepared in all respects. The originals of all summaries 
unsupported shall be forwarded by the District offices to the Chief, 
Operating Cost Control Branch, Office of Ship Operations, National 
Shipping Authority, Washington, DC, and t