Criteria for Granting Waivers of the Requirement for Exclusive U.S.-Flag Vessel Carriage, of Certain Cargo Covered by Public Resolution 17 (PR 17), 73rd Congress

Federal RegisterJul 2, 1997

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DEPARTMENT OF TRANSPORTATION

Maritime Administration

Criteria for Granting Waivers of the Requirement for Exclusive

U.S.-Flag Vessel Carriage, of Certain Cargo Covered by Public

Resolution 17 (PR 17), 73rd Congress

AGENCY: Maritime Administration, DOT.

ACTION: Policy revision.

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SUMMARY: This policy statement revises an existing Maritime

Administration policy in effect since 1959 regarding criteria

considered in granting waivers of the requirement for exclusive U.S.-

flag carriage of certain cargo covered by PR 17. Revision of this

policy, following public notice and comment, is deemed necessary to

suit the changing market environment in the maritime industry.

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EFFECTIVE DATE: June 30, 1997.

FOR FURTHER INFORMATION CONTACT:

Thomas Harrelson, Director, Office of Cargo Preference, Phone: (202)

366-5515, Lester Levay, Chief, Division of Civilian Agencies, Phone:

(202) 366-5512.

SUPPLEMENTARY INFORMATION: Promulgation of this statement of policy

follows publication of advance notices of proposed rulemaking on

October 28, 1996 (61 FR 55614) and December 24, 1996 (61 FR 67764), the

receipt of comments in response, as well as, a public forum held on May

29, 1997, which afforded interested parties an opportunity to address

oral and written comments to the Maritime Administration and Export-

Import Bank officials. Based on the positions enunciated by ocean

carriers and shippers, reflecting their divergent interests, MARAD

concluded that the circumstances which lead to grant of waivers to

allow use of foreign-flag vessels to carry PR 17 cargo when U.S.-flag

vessels are not available are such that discrete rules of general

applicability are not necessary or feasible. Accordingly, the grant of

waivers will continue on the basis of the long held policy of case-by-

case determinations. Approval to amend the current information

collection requirement (OMB No. 2133-0013) regarding Public Resolution

17 is pending.

Statement of Policy on Public Resolution 17--73rd Congress

The Maritime Administrator has authorized the following statement

describing the policies and procedures in administration of Public

Resolution 17, 73rd Congress, 48 Stat. 500, 46 App. U.S.C. 1241-1, as

applies to credits of the Export-Import Bank of the United States. A

statement of policies and procedures with respect to other agencies of

the Government will be issued as required.

1. Scope of Applicability

Public Resolution No. 17 provides that where loans are made by an

instrumentality of the Government to foster the exporting of

agricultural or other products, provision shall be made that such

products be carried exclusively in vessels of the United States unless

the Maritime Administration shall certify to the lending agency that

such vessels are not available as to numbers, tonnage capacity, sailing

schedule or at reasonable rates. The Resolution is applicable to

credits of the Export-Import Bank for the purpose of financing the

acquisition and shipment of United States products or services. The

Bank includes in any such credit agreement a requirement that shipments

be made in United States flag vessels, except to the extent a waiver of

that requirement may be granted by the Maritime Administration, as

outlined hereinafter. The Bank refers to the Maritime Administration

any requests for waivers received by it and follows the decisions of

the Maritime Administration with respect thereto.

2. Types of Waivers

The general process for all waiver requests are is set forth in

Appendix A, attached hereto. Guidelines for the information to be

included in the waiver request set forth in Appendix B, attached

hereto.

(A) Non-Availability Waivers

When it appears that U.S. vessels will not be available from the

port or area of shipment to the foreign destination within a reasonable

time or at reasonable rates, foreign borrowers, public or private, or

their representatives in the United States may apply directly to the

Maritime Administration, Office of Cargo Preference, for waiver of the

U.S. flag requirement. Requests for waivers shall be in writing. The

Maritime Administration will make such investigation as appears

warranted to determine whether U.S. flag vessels are available and will

reply in writing with approval or denial of the waiver or may request

additional information. Copies of approved waivers or denials will be

sent to the Export-Import Bank.

Such waivers shall apply to the specific cargo movements occurring

during the period of U.S. flag non-availability as approved and the

name of the ship, date of sailing, load and discharge ports, ocean

freight and weight of cargo shall be reported to the Maritime

Administration with a rated copy of the bill of lading.

Those foreign borrowers, public or private, and/or their United

States representatives and exporters who know their credit will involve

more than one shipment of cargo are strongly encouraged to meet with

the U.S. flag carriers and then meet separately with the Maritime

Administration, Office of Cargo Preference staff to provide full and

complete information regarding the project, specifically identifying

those cargoes on which a waiver might be sought. The information to be

presented to the carriers and to the Maritime Administration is listed

in Appendix C attached hereto.

(B) General Waivers

In certain circumstances, notwithstanding the availability of U.S.

flag vessels, recipient nation vessels may be authorized to share in

the ocean carriage of Export-Import Bank financed movements, but not in

excess of fifty percent of the total movement under the credit. Such

participation, representing a reduction of the U.S. flag share, may be

granted when the Maritime Administration is satisfied that parity of

treatment is extended to U.S. vessels in the trade of the foreign

nation. When foreign borrowers, public or private, or the primary U.S.

exporter desire such general waivers in order to make partial use of

their own national flag vessels, application must be made to the

Maritime Administration, Office of Cargo Preference, for a General

Waiver applicable to the particular credit. When application is made by

private interests, sponsorship by an official of the foreign government

may be requested in order to obtain satisfactory understanding that the

recipient nation undertakes to maintain conditions of the fair and

equitable treatment for U.S. flag shipping.

(1) Such waivers, if granted, shall apply only to vessels of

recipient nation registry to the extent of their capacity to carry the

cargo, based on normal flow of the traffic from interior through ports

of shipment, but not in excess of fifty percent of the total movement

under the credit.

(2) General Waivers will normally apply throughout the life of the

credit, but may be reconsidered at any time by the Maritime

Administration or the Export-Import Bank in the light of altered

circumstances.

(3) The record of flag distribution between U.S. and recipient

national flag vessels shall be based on (a) both manifest weight and

ocean freight revenue; and/or (b) such other units as may be found

suitable in exceptional circumstances.

(4) Applicants or their representatives in the United States shall

provide reports of movements to the Maritime Administration, Office of

Cargo Preference, at monthly or other intervals as arranged, in the

general form of Appendix D, attached hereto. The data to be included on

these reports may be varied by the Maritime Administration to meet

specific circumstances of the movements from time to time.

(5) The granting of a General Waiver will not take place until the

Maritime Administration, Office of Cargo Preference, has received

written confirmation of the applicant's agreement to the foregoing

terms and

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conditions and has been advised of the name and address of the designee

located in the United States who will be responsible for controlling

the routing of the cargo and providing the required monthly reports.

When a foreign borrower, public or private, or their

representatives in the United States, prior to the Export-Import Bank

credit agreement or in honest error, moves cargo on a foreign flag

vessel and subsequently determines a waiver is needed to meet Export-

Import Bank financing requirements, said exporter may apply directly to

the Maritime Administration, Office of Cargo Preference, for a

Compensatory Waiver. The Maritime Administration, after investigation,

may grant a Compensatory Waiver whereby the exporter contracts in

writing with the Maritime Administration to move an equivalent amount

of ocean freight revenue of non-government impelled cargo on U.S. flag

vessels within a specified time period.

(D) Extended Waivers

If a foreign borrower, public or private, or their representatives

in the United States, believes that an Extended Waiver is necessary to

best serve the exports of United States products or services related to

the Export-Import Bank credit, said exporter may apply to the Maritime

Administration, Office of Cargo Preference, for up to a six month

waiver of the U.S. flag requirement. A condition precedent to the

Maritime Administration granting an Extended Waiver is that the

exporter shall meet with the U.S. flag carriers and then shall meet

separately with the Maritime Administration, Office of Cargo Preference

staff to provide full and complete information regarding the project,

specifically identifying those cargoes on which the waiver is sought.

The information to be presented to the carriers and to the Maritime

Administration is listed in Appendix C, attached hereto.

After investigation, the Maritime Administration may grant a waiver

for a period of time not to exceed six months to cover specific

identified cargoes. Depending on investigations of reasons cited by the

exporter, and after consultation with the U.S. flag carriers, the

Maritime Administration may grant up to a three month extension of the

waiver on such specific identified cargoes.

3. Considerations Influencing Approval of Applications for Waivers

(A) In the disposition of applications for General Waivers under

Paragraph 2(B) the Maritime Administration will take into

consideration:

(1) The treatment accorded U.S. flag vessels in the trade with the

recipient nation, particularly whether U.S. flag vessels have parity of

opportunity vis-a-vis national flag or other foreign flag vessels to

solicit and participate in movements controlled in the foreign nation;

parity in the application of consular invoice fees, port charges and

facilities; also parity of exchange treatment including the privilege

of converting freight collections to dollars as needed. Information

will be sought from U.S. ship owners and other sources as to their

experiences in the particular trade;

(2) The national policy of the United States, including the

Merchant Marine Act of 1936, as well as the purpose of the Export-

Import Bank in authorizing the credit.

(B) In the disposition of applications for non-availability waivers

under Paragraph 2(A) or 2(D), the Maritime Administration will take

into consideration:

(1) If the applicant followed the process set forth in Appendix A

and provided the waiver information in Appendix B and met with the U.S.

flag carriers and with the Maritime Administration at the beginning of

the project to provide the information listed in Appendix C;

(2) The national policy of the United States, including the

Merchant Marine Act of 1936, as well as the purpose of the Export-

Import Bank in authorizing the credit.

Attachments

Appendix A: Waiver Request Procedures

Appendix B: Waiver Request Required Information

Appendix C: Information and Communication Guide

Appendix D: Movement Reports Guide

Appendix A--(OMB No. 2133-0013 Applies to This Collection of

Information)

Waiver Request Procedures

A. Non-Availability Waivers

STEP:

1. The foreign borrowers, public or private, or their United States

representative receives or expects to receive Export-Import Bank credit

approval. (Note: Shipments could commence prior to the credit approval.

See the section on Compensatory Waivers.) In the early stages of the

project, either prior to or when the credit is approved, the shipper

should meet with the U.S.-flag carriers and the Maritime Administration

and discuss the project cargoes detailing the information suggested in

Appendix C.

2. The shipper must present its Request for Quotation (RFQ) for

ocean service to the carriers at least forty-five (45) calendar days in

advance of the intended shipping date. For efficiency, the RFQ also

should be sent to the Maritime Administration. The RFQ should be

presented at the same time and with the same information to all

carriers, both U.S. and foreign. The RFQ must be given to all U.S.-flag

carriers who may have service or could initiate service and should

contain the most detailed information available regarding the

commodities, sizes and weights. The shipper must give carriers at least

fourteen (14) calendar days in which to respond.

3. The U.S.-flag carriers must respond to the RFQ within fourteen

(14) calendar days either declining the cargo or providing an offer

addressing both the rate quotations and the logistical needs expressed

in the RFQ.

4. If the shipper cannot find a U.S.-flag carrier to handle the

cargo, the shipper must present a waiver request to the Maritime

Administration at least thirty (30) calendar days in advance of the

intended shipping date. The request must contain all the required

information as shown in Appendix B.

5. The Maritime Administration will review the application, verify

the waiver documentation provided by the shipper, make such

investigations or request further information as needed, and canvass

the market for U.S.-flag carriers to handle the cargo.

6. The Maritime Administration will reply in writing either

approving or denying the waiver.

B. General Waivers

1. As set forth in Policy Statement paragraph 2(B), if a foreign

borrower or primary U.S. exporter desires to make partial use of

registered vessels of the recipient nation for a specific Export-Import

Bank credit, a written request must be made to the Maritime

Administration, Office of Cargo Preference.

2. The Maritime Administration will make such investigations as

needed, including consultations with U.S.-flag carriers, to determine

that parity of treatment is extended to U.S.-flag vessels in the trade

of that foreign nation.

3. If the Maritime Administration does not find discrimination, it

will

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advise the applicant that a General Waiver may be granted at such time

as the Maritime Administration receives written confirmation of the

applicant's agreement to the terms and conditions set forth in Policy

Statement paragraph 2(B). When such written confirmation is received,

the Maritime Administration will grant the General Waiver in writing

with a copy to the Export-Import Bank.

C. Compensatory Waivers

1. If a Compensatory Waiver is needed (Policy Statement paragraph

2(C)), the shipper should make a written application to the Maritime

Administration, stating the reasons, identifying the Export-Import Bank

credit number and country, and attaching freighted copies of the ocean

bill of lading covering the erroneously shipped cargoes.

2. After investigation, if the Maritime Administration decides to

grant a Compensatory Waiver, the shipper will be notified of the

requirements and will have to execute a written agreement to meet those

requirements.

3. Upon receipt of the written contract from the shipper, the

Maritime Administration will issue the waiver.

D. Extended Waivers

1. If an Extended Waiver (Policy Statement paragraph 2(D)) is

desired, this should be made known during both the meeting with the

U.S. carriers and the meeting with the Maritime Administration and the

specific cargoes to be moved during said waiver time period should be

identified. Subsequently, the shipper will canvass the market for U.S.-

flag carriers to handle the identified cargoes. If none can be found

the shipper will make written application to the Maritime

Administration detailing the information as required in Appendix B and

stating the requested beginning and ending dates of the extended waiver

period. The application must be received by the Maritime Administration

at least forty-five (45) calendar days prior to the intended

commencement of the requested Extended Waiver period.

2. The Maritime Administration will review the application in light

of the information presented at the earlier meeting and will also

consult with the U.S. carriers. If necessary, additional information

may be requested.

3. If no U.S.-flag carrier can be found, an Extended Waiver for the

agreed time period, conditions and specific identified cargoes will be

granted.

4. Should there be a delay in the availability for shipment of the

identified cargo under an Extended Waiver, the Maritime Administration

may consider an extension of time sufficient to ship said cargoes but

not to exceed three months. In this event, the shipper should notify

the Maritime Administration as soon as possible but at least 30 days

prior to the end of the Extended Waiver period, documenting the reasons

for the delay and requesting the extension. After investigation and

consultation with the U.S. carriers, the Maritime Administration may

grant an extension.

5. To meet the needs of the Export-Import Bank, once an Extended

Waiver is granted by the Maritime Administration, the shipper will have

to provide the Maritime Administration the Export-Import Bank credit

number and country, vessel name, registry, sailing date, load port,

discharge port, weight in pounds, FAS value of cargo, ocean freight,

list of cargoes shipped and a freighted copy of the bill of lading for

each voyage made under the terms of the Extended Waiver. This

information must be provided within thirty (30) days of the date of

loading. The Maritime Administration will then issue a standard waiver

letter for each voyage for presentation to the Export-Import Bank. This

resulting standard waiver letter will only cover those cargoes

specifically identified and previously agreed under the Extended

Waiver. If a shipper wishes to place any additional cargoes on the same

voyage, they must utilize the standard waiver procedure, detailed in

Appendix A paragraph A, with appropriate notice to the U.S. carriers.

Appendix B--(OMB No. 2133-0013 Applies to This Collection of

Information)

PR-17 Statutory Waiver Request--Format

The below information is required to process a statutory waiver

request. This information should be mailed or faxed to Office of Cargo

Preference, Room 8118, Maritime Administration, 400 Seventh Street,

SW., Washington, DC 20590. Fax number is 202-366-5522.

RE: Eximbank Credit No. (Enter the number)-Country (Enter Country

name).

Applicant: (Name of company seeking the waiver. Should be the cargo

shipper or beneficial owner. If a freight forwarder or other party

makes the application, it must clearly state on whose behalf they are

seeking the waiver and that they legally represent said party.).

Vessel: (Name of vessel you propose to use. Enter ``To Be Named''

if unknown. Note that actual vessel must be named prior to a final

waiver being issued.).

Registry: (Nation of registry of vessel).

Commodity: (Short one line description similar to Acquisition List

line items. Attach detailed description as part of packing list or