War Risk Insurance

Federal RegisterJan 16, 1996

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DEPARTMENT OF TRANSPORTATION

Maritime Administration

46 CFR Part 308

[Docket No. R-164]

RIN 2133-AB23

War Risk Insurance

AGENCY: Maritime Administration.

ACTION: Final rule.

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SUMMARY: The Maritime Administration (MARAD) is revising its war risk

regulations to remove voluminous forms that may be obtained from MARAD

and to make minor nonsubstantive changes regarding agency organization

and procedure with respect to application for war risk insurance,

payment of premiums and payment for loss claims. This rulemaking is the

result of the President's Regulatory Reinvention Initiative.

EFFECTIVE DATE: January 16, 1996.

FOR FURTHER INFORMATION CONTACT: Edmond J. Fitzgerald, Director, Office

of Subsidy and Insurance, 400 Seventh Street SW, Washington, DC 20590,

Tel. (202)366-2400.

SUPPLEMENTARY INFORMATION: Pursuant to the President's Regulatory

Reinvention Initiative announced on March 4, 1995, which included a

page-by-page review of all regulations, MARAD is amending its war risk

insurance regulations with respect to MARAD's procedures for

application for war risk insurance and the payment of premiums and

claims. It was determined that the existing regulations are cumbersome

and excessive in content because of the inclusion of many lengthy

forms. As revised, the part provides a general description of the

content of the various forms which may be obtained from MARAD.

As authorized by Title XII of the Merchant Marine Act of 1936, as

amended (46 App. U.S.C. 1283), the Secretary may provide war risk

insurance adequate for the needs of the waterborne commerce of the

United States, if such insurance coverage cannot be obtained on

reasonable terms and conditions from companies authorized to conduct an

insurance business in a state of the United States. This U.S.

Government war risk insurance program is a standby emergency program.

It becomes effective simultaneously with the automatic termination of

ocean marine commercial war risk insurance policies. Those policies are

terminated automatically upon the outbreak of war, whether declared or

not, between any of the five great powers (United States, United

Kingdom, France, People's Republic of China or Russia) or upon the

hostile detonation of a weapon of war employing atomic or nuclear

fission and/or fusion or other like reaction or radioactive force or

matter.

This program makes it possible for applicants to obtain war risk

insurance from the U.S. Government when such insurance is unavailable

on reasonable terms and conditions in the commercial market. The

program is mutually beneficial to the United States and to the

shipowner in that it assures continued flow of essential U.S. trade and

protection of the shipowner from loss by risks of war.

While authority to issue war risk insurance expired on June 30,

1995, these amendments to 46 CFR Part 308 are being issued under

MARAD's general rulemaking authority found in 46 App. U.S.C. 1114 in

anticipation that pending legislation will be enacted to reauthorize

the program and in order that there be no unnecessary impairment to the

continuity of this emergency program.

Rulemaking Analyses and Notices

Executive Order 12866 (Regulatory Planning and Review) and DOT

Regulatory Policies and Procedures

This rulemaking is not considered to be an economically significant

regulatory action under section 3(f) of E.O. 12866, and is not

considered to be a significant rule under the

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Department's Regulatory Policies and Procedures (44 FR 11034, February

26, 1979). Accordingly, it was not reviewed by the Office of Management

and Budget. A full regulatory evaluation is not required because the

rule has no mandatory effects and imposes no regulatory costs.

MARAD has determined that this rulemaking presents no substantive

issue which it could reasonably expect would produce meaningful public

comment since it eliminates forms, which are described and may be

obtained from MARAD or its agent, makes other conforming amendments and

reflects MARAD organizational changes. Accordingly, pursuant to the

Administrative Procedure Act, 5 U.S.C. 553(c) and (d), MARAD finds that

good cause exists to publish this as a final rule, without opportunity

for public comment, and to make it effective on the date of

publication.

Federalism

The Maritime Administration has analyzed this rulemaking in

accordance with the principles and criteria contained in Executive

order 12612, and has determined that it does not have sufficient

federalism implications to warrant the preparation of a Federalism

Assessment.

Regulatory Flexibility Act

The Maritime Administration certifies that this rulemaking will not

have a significant economic impact on a substantial number of small

entities.

Environmental Assessment

The Maritime Administration has considered the environmental impact

of this rulemaking and has concluded that an environmental impact

statement is not required under the National Environmental Policy Act

of 1969.

Paperwork Reduction Act

This rulemaking contains an information collection that has been

approved by OMB under 5 CFR part 1320, pursuant to the Paperwork

Reduction Act of 1980 (44 U.S.C. 3501, et seq.). Approval number 2133-

0011 has been assigned to the collection requirement.

List of Subjects in 46 CFR Part 308

Cargo vessels, Maritime carriers, Reporting requirements, War risk

insurance.

Accordingly, 46 CFR part 308 is revised to read as follows:

Part 308--War Risk Insurance

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 Amount 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.

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-

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.

308.537 Effective date of endorsement.

III--Facultative War Risk Cargo Insurance

308.538 General.

308.539 Application.

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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.

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).

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 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).

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 in Sec. 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 under Sec. 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 in Sec. 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.

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, N.Y. 10005.

(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

[[Page 1133]]

vessels described in Sec. 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, N.Y.

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 of Sec. 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 in Sec. 308.1(a). Applications for war risk

insurance on a vessel described in Sec. 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 in Sec. 308.1(b). Applications for war risk

insurance on a vessel described in Sec. 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 in Sec. 308.1(c). Applications for war risk

insurance on a vessel described in Sec. 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 in

Sec. 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 in Sec. 308.2(c) of this section.

insurance on a vessel shall be made to the American War Risk Agency, 14

Wall Street, New York, New York 10005, underwriting agent for the

Maritime Administration.

(d) Required submissions with--(1) In general. An application for

insurance on a vessel described in Sec. 308.1(b) shall be accompanied

by:

(i) A contract of commitment, in the form prescribed in Sec. 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

[[Page 1134]]

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.

(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 in Sec. 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 by Sec. 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.

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 in Sec. 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 in Sec. 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

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 Amounts.

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

in Sec. 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 in

Sec. 308.103(c).

Sec. 308.101 [Reserved]

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

Upon acceptance of an application, an interim binder in the form

set forth in Sec. 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 in Sec. 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.''

[[Page 1135]]

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 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 in Sec. 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.

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.

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 in Sec. 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 in Sec. 308.3) and the standard war risk

protection and indemnity insurance policy (set forth in Sec. 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.''

[[Page 1136]]

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 in

Sec. 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 in Sec. 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 in Sec. 308.3) and the Second Seamen's War Risk

Policy (1955) (set forth in Sec. 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 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.

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.

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.

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

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

[[Page 1137]]

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, D.C. 20590.

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;

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 1138]]

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 in Sec. 308.501.

The policy will be in the standard form of War Risk Open Cargo Policy,

Form MA-300, prescribed in Sec. 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 in Sec. 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 in

Sec. 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 in Sec. 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 Secs. 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 Secs. 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 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 to Sec. 308.507 shall comply with the provisions

of this section and Clause 21 of the Open Cargo Policy, Form MA-300,

prescribed in Sec. 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 in Sec. 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.

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

[[Page 1139]]

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 in Sec. 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 in Sec. 308.525. The decrease shall 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 in

Sec. 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 in

Sec. 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 with Sec. 308.510.

Sec. 308.510 Surety bond.

(a) Requirements. An assured electing to post a surety bond

pursuant to Sec. 308.507 shall comply with the provisions of this

section and Clause 21 of the Open Cargo Policy, Form MA-300, prescribed

in Sec. 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 in Sec. 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.

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