Maritime Security Program

DEPARTMENT OF TRANSPORTATION

Maritime Administration

46 CFR Part 295

[Docket No. R-163]

RIN 2133-AB24

Maritime Security Program

AGENCY: Maritime Administration, Department of Transportation.

ACTION: Interim final rule and request for comments.

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SUMMARY: The Maritime Administration (MARAD) is issuing this interim

final rule to provide procedures to implement the provisions of the

Maritime Security Act of 1996 (the MSA). The MSA establishes a new 10-

year Maritime Security Program (MSP), commencing in Fiscal Year (FY)

1996. The MSP supports the operations of U.S.-flag vessels in the

foreign commerce of the United States through assistance payments.

Participating vessel operators are required to make their ships and

other commercial transportation resources available to the Government

during times of war or national emergency.

DATES: This interim final rule is effective October 18, 1996. Comments

are requested and must be received on or before November 15, 1996.

ADDRESSES: To be considered, comments shall be mailed, delivered in

person or telefaxed (in which case an original must subsequently be

forwarded) to the Secretary, Maritime Administration, Room 7210,

Department of Transportation, 400 Seventh Street, SW, Washington, DC

20590. All comments will be made available for inspection during normal

business hours at the above address. Commentors wishing MARAD to

acknowledge receipt of comments should enclose a stamped self-addressed

envelope or postcard.

FOR FURTHER INFORMATION CONTACT: Raymond R. Barberesi, Director, Office

of Sealift Support, Telephone 202-366-2323.

SUPPLEMENTARY INFORMATION:

Background

Title VI of the Merchant Marine Act of 1936, as amended, 46 App.

U.S.C. 1171 et seq. (Act), authorized the Secretary of Transportation

(Secretary) to provide operating-differential subsidy (ODS) to U.S.-

flag ship operators for the operation of their vessels in essential

services in the foreign commerce of the United States. These long-term

ODS payments are generally based on the difference between U.S.

operating costs, primarily wages, and those of principal foreign

competitors. The ODS program helped to maintain a U.S.-flag merchant

fleet to serve both the commercial and national security needs of the

United States.

Section 2 of the MSA amends Title VI of the Act. The current ODS

program is retained as Subtitle A, and current ODS contracts with U.S.-

flag operators will be honored until they expire under their own terms.

The MSA adds a new Subtitle B, authorizing a MSP, which provides

assistance for U.S.-flag operators and vessels that meet certain

qualifications. It requires the Secretary to encourage the

establishment of a fleet of active, militarily useful, privately-owned

vessels to meet national defense and other security requirements, while

also maintaining an American presence in international commercial

shipping. The MSA establishes a new 10-year program which is intended

to support the operations of up to 47 U.S.-flag vessels in the foreign

commerce of the United States. Payments to the operators start at $2.3

million per ship in FY 1996, and decrease to $2.1 million per ship per

year thereafter.

Participating operators are required to make their ships and other

commercial resources available upon request by the Secretary of Defense

during time of war or national emergency. Unlike the ODS program, the

MSP has few restrictions on vessels operating in the U.S. foreign

commerce and eligible vessels may be built in foreign shipyards.

This rule adds a new 46 CFR Part 295 to provide the procedures to

implement the MSA with respect to the application for, and award of,

MSP operating agreements that provide financial assistance to operators

of vessels enrolled in the program, subject to acceptance of statutory

conditions incorporated therein.

The 10-year program will be administered on the basis of one-year

renewable contracts, provided funding is available in subsequent years.

Participating operators will be required to operate eligible vessels in

the foreign commerce of the United States, and certain domestic areas

such as Guam, with a minimum of operating restrictions, for at least

320 days in any fiscal year. Payments will be reduced for each day any

vessel carries civilian bulk preference cargoes in excess of 7,500

tons.

Rulemaking Analysis and Notices

Executive Order 12866 (Regulatory Planning and Review), and Department

of Transportation (DOT) Regulatory Policies

This rulemaking is not considered to be an economically significant

regulatory action under section 3(f) of E.O. 12866. This interim final

rule also is not considered a major rule for purposes of Congressional

review under P.L. 104-121. Since the program is designed to support 47

vessels in FY 1997, each receiving up to $2.1 million annually, the

Maritime Administrator finds that the program will not have an annual

effect on the economy of $100 million or more. However, it is

considered to be a significant rule under DOT's Regulatory Policies and

Procedures (44 FR 11034, February 26, 1979). Accordingly, it has been

reviewed by the Office of Management and Budget.

The program will be subject to annual appropriations to provide

payments to the participants of $2.3 million for each Agreement Vessel

for fiscal year 1996 and $2.1 million for each fiscal year thereafter

in which the agreement is in effect. These payments are up to 50

percent less, per vessel, than payments made under the existing ODS

program. A full regulatory evaluation is not necessary since this rule

only

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establishes the procedures to implement the Act which imposes

conditions for enrollment of vessels in the MSP.

Pursuant to authority granted by section 8 of the Act, MARAD is

publishing this rule as an interim final rule ``excepted from

compliance with the notice and comment requirements of section 553 of

title 5, United States Code.'' This will facilitate establishment of

the MSP as early as possible. A final rule will be published in the

Federal Register after MARAD has had an opportunity to consider all

comments on this interim final rule.

Federalism

MARAD has analyzed this rulemaking in accordance with principles

and criteria contained in E.O. 12612 and has determined that these

regulations do not have sufficient federalism implications to warrant

the preparation of a Federalism Assessment.

Regulatory Flexibility

Although the Regulatory Flexibility Act of 1980, 5 U.S.C. 601 et

seq., does not apply to final rules for which a proposed rulemaking was

not required, MARAD has evaluated this rule under that Act and

certifies that this rule will not have a significant economic impact on

a substantial number of small entities. The participants in this

program are not small entities.

Environmental Assessment

MARAD has concluded that this interim final rule falls into a class

of actions that are categorically excluded from review under the

National Environmental Policy Act of 1969 (NEPA) because they would not

individually or cumulatively have a significant impact on the human

environment, as determined by Sec. 4.05 and Appendices 1 and 2 of

Maritime Administrative Order MAO-600-1, which contains MARAD

Procedures for Considering Environmental Impacts (50 FR 11606, March

22, 1985) implementing NEPA. The interim final rule does not change the

environmental effect of the current ODS program, which the MSP

supersedes (and which is currently under a categorical exclusion

pursuant to MAO-600-1), because the vessels eligible for the MSP (1)

will continue to operate under the U.S. flag, and will continue to be

governed by U.S.-flag state control while operating in the global

commons; (2) are and will continue to be designed, constructed,

equipped and operated in accordance with stringent United States Coast

Guard and International Maritime Organization standards for maritime

safety and marine environmental protection; and (3) when in waters

subject to the port-state, will continue to be governed by port-state

control. Therefore, this rule does not require an environmental impact

statement or an environmental assessment pursuant to NEPA.

Paperwork Reduction

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.

3507 et seq.), this rulemaking contains new information collection or

record keeping requirements, which have been approved by OMB (approval

number 2133-0525). These have been approved under emergency approval

authority until November 30, 1996. The Maritime Administration has

requested that this approval be extended for three years. Any comments

concerning the application and other information requirements contained

in this rule should be submitted to the above address.

This rule does not impose any unfunded mandates.

List of Subjects in 46 CFR Part 295

Assistance payments, Maritime carriers, Reporting and record

keeping requirements.

Accordingly, Part 295 is added to 46 CFR chapter II, subchapter C,

to read as follows:

PART 295--MARITIME SECURITY PROGRAM (MSP)

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 Termination of authority.

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.

Authority: 46 App. U.S.C. 1171 et seq., 49 CFR 1.66.

Subpart A--Introduction

Sec. 295.1 Purpose.

This part prescribes regulations implementing the provisions of

Subpart B 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 (46 App. U.S.C. 1101 et seq.).

(b) Administrator, means the Maritime Administrator, Maritime

Administration, U.S. Department of Transportation, to whom the

authority to administer Title VI of the Act has been delegated, with

the exception of entering into, amending and terminating subsidy

contracts.

(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, Maritime Administration.

(i) Contractor, means the owner or operator of a vessel that enters

into a MSP Operating Agreement for the vessel with the Maritime

Administration under 46 CFR 295.20.

(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 Contractor, means a Contractor, as defined in this

section, who has a completed application for participation in the MSP

on file with MARAD.

(m) Eligible Vessel, means a vessel that meets the requirements of

46 CFR 295.10(b), as added below.

(n) Emergency Preparedness Program Agreement, means the agreement,

required by section 653 of the Act, between a Contractor and the

Secretary of Defense to make certain commercial transportation

resources available during time of war or national emergency.

(o) Enrollment, means the entry into a MSP Operating Agreement with

the

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Maritime Administration to operate a vessel(s) in the MSP Fleet in

accordance with 46 CFR 295.20.

(p) Fiscal Year, means any annual period beginning on October 1 and

ending on September 30.

(q) LASH Vessel, means a lighter aboard ship vessel.

(r) Maritime Subsidy Board, means the Maritime Subsidy Board which

is constituted by 46 CFR 1.67 and delegated authority to enter into,

amend and terminate contracts.

(s) Militarily Useful, means a measure of utility applicable only

for deliberate planning. As applied to dry cargo vessels it means dry

cargo ships, including integrated tug/barges, with a minimum capacity

of 6,000 (DWT) capable of carrying, without significant modification,

any of the following cargoes: unit equipment, ammunition, or sustaining

supplies.

(t) MSP Fleet, means the fleet of vessels operating under MSP

Operating Agreements.

(u) MSP Operating Agreement, means the MSP Operating Agreement,

providing for MSP payments entered into by a Contractor and the

Maritime Administration.

(v) MSP Payments, means the payments made for the operation of

U.S.-flag vessels 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, to maintain intermodal shipping

capability and to meet national defense and security requirements in

accordance with the terms and conditions of a MSP Operating Agreement.

(w) Ocean Common Carrier, means a carrier that meets the

requirements of 46 U.S.C. App. 1702(3)(6).

(x) ODS, means Operating-differential Subsidy provided by Subtitle

A, Title VI, of the Act.

(y) Operating Day, means any day during which a vessel is operated

in accordance with the terms and conditions of a MSP Operating

Agreement.

(z) 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.

(aa) Secretary, means the Secretary of Transportation.

(bb) 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 the Maritime Administration

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

the Applicant in its capacity 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 Maritime Administration 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, the Maritime Administration is authorized to waive the application

of paragraph (2)(ii) of this section if the Maritime Administration, 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) Maritime Administration's determination. The Maritime

Administration determines that the vessel is necessary to maintain a

United States presence in international commercial shipping and the

Contractor possesses the ability, experience, resources and other

qualifications necessary to execute the obligations of the MSP

Operating Agreement, or the Maritime Administration, 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 the Maritime Administration. Not later than 30 days

after the enactment of the Maritime Security Act, the Maritime

Administration shall accept applications for Enrollment of vessels in

the MSP Fleet. Within 90 days after receipt of a completed application,

the Maritime Administration shall enter into a MSP Operating Agreement

with the applicant or provide in writing the reason for denial of that

application.

(b) Action by the Applicant. Applicants for MSP Payments shall

submit information on the following:

(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)

Sec. 295.12 Priority for awarding agreements.

Subject to the availability of appropriations, the Maritime

Administration 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:

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(1) U.S. citizen ownership. Vessels owned and operated by persons

or related parties who are Citizens of the United States as defined in

section 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.

(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 (including mixed noncontiguous domestic and foreign commerce,

but excluding mixed coastwise and foreign commerce) on May 17, 1995;

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), 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 Maritime Administration 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

section 295.2, 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--(1) General rule.

If appropriated funds are not sufficient for MSP Operating Agreements

within a first, second or third priority set forth herein, the Maritime

Administration shall award a number of Operating Agreements to each

applicant, so that the number of Operating Agreements awarded within

such priority to that applicant bears approximately the same ratio to

the total number of Operating Agreements in the priority 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.

(2) Limited term MSP Operating Agreements. To the extent that funds

are available prior to the effective dates of MSP Operating Agreements

awarded under section 295.20(b)(2), the Maritime Administration may

award limited term MSP Operating Agreements for periods terminating

prior to those effective dates under section 295.20(b)(2), in

accordance with section 295.12(d).

Subpart C--Maritime Security Program Operating Agreements

Sec. 295.20 General conditions.

(a) Approval. The Maritime Administration 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 for

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 the Maritime Administration.

(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, 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. The Maritime Administration may approve

the replacement of an Eligible Vessel in a MSP Operating Agreement

provided the replacement vessel is eligible under section 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 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 the Maritime

Administration. Within 5 business days of the receipt of such

notification, the Maritime Administration shall issue a notice in the

Federal Register of the Contractor's intent. The Contractor is

prohibited from entering into any such contract until 5 business days

after 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 the

Maritime Administration 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 contained in section 652(m) of the Act.

(f) Termination 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, the Maritime Administration 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 in section 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 the Maritime Administration. In

the event that no funds are appropriated, then all MSP Operating

Agreements

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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 with section 295.30. To the

extent that funds are appropriated in a subsequent fiscal year, the

Maritime Administration shall enter into new MSP Operating Agreements

in accordance with the applicable provisions contained in this part.

(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, and section 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 under a

Operating Agreement shall notify the Maritime Administration of its

intention to transfer the agreement (including all rights and

obligations under the agreement) to any Eligible Contractor or related

party. The proposed transfer shall become effective within 90 days

unless disapproved by the Maritime Administration.

Sec. 295.21 MSP assistance conditions.

(a) Term of MSP Operating Agreement. The Maritime Administration is

authorized to enter into MSP Operating Agreements commencing in FY

1996. 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 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 are void and the

Contractor may request termination of the MSP Operating Agreement in

accordance with section 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. 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) 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 Termination of authority.

(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 the Maritime

Administration within 30 days of the Contractor's intent; or

(2) Newbuilding. 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 the Maritime Administration.

Sec. 295.23 Reporting requirements.

The Contractor shall submit to the Director, Office of Financial

Approvals, Maritime Administration, 400 Seventh St., S.W. Washington,

D.C. 20590, 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; and

(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.

(Approved by the Office of Management and Budget under control

number 2133-0525)

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

$2,300,000 for fiscal year 1996, and $2,100,000 for each fiscal year

thereafter. 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 section

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 which the vessel is operated, provided the total of such days

within a fiscal year does not exceed 30 days.

(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

[[Page 53866]]

pursuant to section 901(a), 901(b), or 901b, 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 with Sec. 295.21(d),

and consideration shall be given to reductions in amounts payable as

set forth in section 295.30. All submissions shall be forwarded to the

Director, Office of Accounting, MAR-330 Room 7325, Maritime

Administration, 400 Seventh Street S.W., Washington, D.C. 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, as follows:

FY 1996--$191,666.66

FY 1997--$175,000.00

FY 1998--$175,000.00

FY 1999--$175,000.00

FY 2000--$175,000.00

FY 2001--$175,000.00

FY 2002--$175,000.00

FY 2003--$175,000.00

FY 2004--$175,000.00

FY 2005--$175,000.00

(2) To the extent that reductions under Sec. 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

Sec. 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 1996--$6,284.15

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) The Maritime Administration may require, for good cause, that a

portion not to exceed 10% of the funds payable under this section be

withheld until final review of the current billing period is completed.

(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 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.

(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 other proceedings appropriate in the

circumstances. The decision of the Maritime Administrator shall be

final.

Dated: October 10, 1996.

By order of the Maritime Administration.

Joel C. Richard,

Secretary, Maritime Administration.

[FR Doc. 96-26502 Filed 10-15-96; 8:45 am]

BILLING CODE 4910-81-P